Hope Bancorp Reports 2023 First Quarter Financial Results

Rhea-AI Summary

Hope Bancorp, Inc. (NASDAQ: HOPE) reported its first quarter results for 2023, showing net income of $39.1 million or $0.33 per diluted share, a decline from $51.7 million ($0.43 per share) in Q4 2022 and $60.7 million ($0.50 per share) in Q1 2022. Deposits rose 1% quarter-over-quarter and 9% year-over-year, totaling $15.83 billion. The total risk-based capital ratio increased to 12.25%, up 28 basis points from Q4 2022. Cash and cash equivalents surged to $2.2 billion, bolstered by $1.4 billion borrowed through the Federal Reserve's Bank Term Funding Program. Loan originations totaled $568.7 million, a decrease from $793.4 million in Q4 2022. Noninterest income fell to $11.0 million, while noninterest expenses rose to $90.4 million, affecting the efficiency ratio, which climbed to 62.4%.

Positive

• Net income increased total deposits by 1% quarter-over-quarter and 9% year-over-year.
• Total risk-based capital ratio improved to 12.25%, up 28 basis points quarter-over-quarter.
• Cash and cash equivalents rose sharply to $2.2 billion, enhancing liquidity.

Negative

• Net income decreased from $51.7 million in Q4 2022 and $60.7 million in Q1 2022.
• Loan originations dropped to $568.7 million from $793.4 million in Q4 2022.
• Noninterest expense increased to $90.4 million, raising the efficiency ratio to 62.4%.

LOS ANGELES--(BUSINESS WIRE)-- Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its first quarter ended March 31, 2023.

For the three months ended March 31, 2023, net income totaled $39.1 million, or $0.33 per diluted common share. This compares with net income of $51.7 million, or $0.43 per diluted common share, in the preceding fourth quarter and $60.7 million, or $0.50 per diluted common share, in the year-ago first quarter.

“The focus this quarter was to maintain a strong balance sheet with high levels of capital and liquidity, and in this, we succeeded,” said Kevin S. Kim, Chairman, President and Chief Executive Officer. “At the close of the 2023 first quarter, total deposits grew 1% quarter-over-quarter and 9% year-over-year, underscoring the confidence that our customers have in our franchise as the largest Korean American bank in the country. Our capital levels continued to be strong and our total risk-based capital ratio increased to 12.25% at March 31, 2023. Asset quality continued to be healthy.

“From a risk management perspective, we fortified our liquidity to prudently manage through the current environment of heightened volatility due to the banking industry disruption in mid-March. We substantially increased the level of cash and cash equivalents on our balance sheet to $2.2 billion at March 31, 2023. At quarter-end, our available borrowing capacity, together with cash and cash equivalents, and unpledged investment securities, totaled $8.0 billion, equivalent to 50% of total deposits. At the same time, we continued to execute on initiatives designed to further strengthen our franchise, support long-term profitability, and create additional value for stockholders.”

Q1 2023 Highlights

• The Company’s total risk-based capital ratio was 12.25% at March 31, 2023, up 28 basis points quarter-over-quarter.

• Book value per common share increased to $17.17 and tangible common equity per share increased to $13.26 at March 31, 2023, both up 2% quarter-over-quarter.

• Total deposits of $15.83 billion at March 31, 2023, increased 1% quarter-over-quarter and 9% year-over-year.

• Available borrowing capacity, cash and cash equivalents, and unpledged investment securities totaled $7.99 billion, equivalent to 50% of total deposits, at March 31, 2023. This is up 11% from $7.23 billion, or 46% of total deposits, at December 31, 2022.

• During the first quarter, the Company fortified its on-balance sheet liquidity in response to industry disruption. Cash and cash equivalents increased to $2.21 billion at March 31, 2023, up from $506.8 million as of December 31, 2022. This increase in on-balance sheet liquidity reflects the Company’s conservative approach to risk management. It was largely funded through the Federal Reserve Bank’s Bank Term Funding Program (“BTFP”). BTFP borrowings were $1.40 billion at March 31, 2023, carrying a weighted average interest rate of 4.49%.

• The Bank’s insured or otherwise collateralized deposits totaled $9.91 billion at March 31, 2023. The Bank’s uninsured deposit ratio was 38% at March 31, 2023, a decrease from 41% at December 31, 2022. The available borrowing capacity, cash and cash equivalents, and unpledged investment securities well exceeded the Bank’s uninsured deposits at quarter-end.

• First quarter 2023 loan originations totaled $568.7 million, led by commercial loans and followed by commercial real estate. New commercial loans accounted for 61% of total originations for the first quarter of 2023. Loans receivable of $15.06 billion at March 31, 2023, decreased 2% quarter-over-quarter and increased 7% year-over-year.

Financial Summary

	At or for the Three Months Ended
(dollars in thousands, except per share data) (unaudited)	3/31/2023				12/31/2022				3/31/2022
Net income	$	39,121			$	51,703			$	60,738
Diluted earnings per share	$	0.33			$	0.43			$	0.50
Net interest income before provision (credit) for credit losses	$	133,878			$	150,521			$	133,176
Pre-provision net revenue (“PPNR”) (1)	$	54,502			$	78,113			$	70,989
Loans receivable	$	15,064,849			$	15,403,540			$	14,066,674
Deposits	$	15,828,209			$	15,738,801			$	14,515,128
Total assets	$	20,568,884			$	19,164,491			$	17,803,814
Total equity	$	2,058,580			$	2,019,328			$	2,041,057
Total risk-based capital ratio		12.25	%			11.97	%			12.49	%
Net charge offs (recoveries)	$	108			$	6,402			$	(17,900	)
Net charge offs (recoveries)/average loans receivable		—	%			0.17	%			(0.52	) %
Allowance for credit losses	$	163,544			$	162,359			$	147,450
Allowance for credit losses to loans receivable		1.09	%			1.05	%			1.05	%
Nonperforming assets to total assets (2)		0.39	%			0.36	%			0.58	%
Return on average assets (“ROA”)		0.82	%			1.10	%			1.37	%
Return on average equity (“ROE”)		7.65	%			10.35	%			11.62	%
Return on average tangible common equity (“ROTCE”) (1)		9.93	%			13.54	%			15.01	%
ROA (PPNR) (1)		1.14	%			1.66	%			1.60	%
ROE (PPNR) (1)		10.65	%			15.64	%			13.58	%
Net interest margin		3.02	%			3.36	%			3.21	%
Noninterest expense / average assets		1.89	%			1.79	%			1.70	%
Efficiency ratio		62.38	%			51.97	%			51.50	%

__________________

(1)		Pre-provision net revenue, ROA (PPNR), ROE (PPNR), and ROTCE are non-GAAP financial measures. Management’s reasons and purposes for using these non-GAAP financial measures are set forth on Table Page 9 of this earnings release. A quantitative reconciliation of the most directly comparable GAAP to non-GAAP financial measures are provided in the accompanying financial information on Table Page 9.
(2)		Excludes delinquent SBA loans that are guaranteed and currently in liquidation.

Operating Results for the 2023 First Quarter

Net interest income before provision (credit) for credit losses for the 2023 first quarter totaled $133.9 million, compared with $150.5 million in the 2022 fourth quarter and $133.2 million in the year-ago first quarter. The Company attributed the quarter-over-quarter decrease primarily to higher interest expense on deposits, partially offset by interest income growth due to expanding earning asset yields and a 1% increase in average interest earning assets.

The net interest margin for the 2023 first quarter decreased 34 basis points to 3.02% from 3.36% in the preceding fourth quarter as the increase in the cost of deposits outpaced the expansion of the yields on interest-earning assets. Compared with the year-ago first quarter, the net interest margin decreased 19 basis points.

The weighted average yield on loans for the 2023 first quarter was 5.75%, up 39 basis points from 5.36% in the 2022 fourth quarter and up 187 basis points from the year-ago first quarter. The Company attributed the yield expansion to the repricing of its variable-rate loans following increases in market interest rates, as well as a significant increase in the average rate on new loans originated during the last four quarters. The rate on new loans originated in the 2023 first quarter was 7.53%, up 82 basis points from 6.71% in the preceding fourth quarter, and up 399 basis points from 3.54% in the year-ago first quarter.

The weighted average cost of deposits for the 2023 first quarter increased 79 basis points to 2.41% from 1.62% in the 2022 fourth quarter, reflecting customer preferences for higher yields in a rising interest rate environment, as well as the banking industry disruption in mid-March of 2023. Compared with the year-ago first quarter, the weighted average cost of deposits for the 2023 first quarter increased 217 basis points from 0.24%.

Noninterest income for the 2023 first quarter totaled $11.0 million, compared with $12.1 million in the 2022 fourth quarter and $13.2 million in the year-ago first quarter. Quarter-over-quarter, deposit service fees and net gains on SBA loan sales increased, offset by decreases in other income and fees. During the 2023 first quarter, the Company sold $40.7 million of the guaranteed portion of SBA 7(a) loans and $7.3 million of residential mortgage loans, compared with $41.2 million and $3.5 million, respectively, sold in the preceding fourth quarter.

Noninterest expense for the 2023 first quarter totaled $90.4 million, compared with $84.5 million in the preceding fourth quarter and $75.4 million in the year-ago first quarter. The quarter-over-quarter increase in noninterest expense was primarily driven by higher salaries and employee benefits expense, which reflected payroll taxes and related expenses that are typically higher in the first quarter, as well as $1.7 million of severance charges. Included in other expenses is $1.6 million of provision for unfunded loan commitments.

The Company’s efficiency ratio for the 2023 first quarter was 62.4%, compared with 52.0% in the preceding fourth quarter and 51.5% in the year-ago first quarter. Noninterest expense as a percentage of average assets was 1.89% for the 2023 first quarter, compared with 1.79% for the 2022 fourth quarter and 1.70% for the 2022 first quarter.

The effective tax rate for the 2023 first quarter was 25.9%, compared with 26.1% for the preceding fourth quarter and 25.9% for the year-ago first quarter.

Balance Sheet Summary

New loan originations during the 2023 first quarter totaled $568.7 million, compared with $793.4 million in the preceding fourth quarter and $1.03 billion in the 2022 first quarter.

The following table sets forth the components of new loan production for the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022.

	For the Three Months Ended
(dollars in thousands) (unaudited)	3/31/2023			12/31/2022			3/31/2022
Commercial real estate	$	176,798		$	302,983		$	529,730
Commercial		344,194			424,340			335,756
SBA		29,977			28,825			56,602
Residential mortgage		14,317			36,720			103,473
Consumer		3,375			555			401
Total new loan originations	$	568,661		$	793,423		$	1,025,962

At March 31, 2023, loans receivable decreased 2% quarter-over-quarter to $15.06 billion from $15.40 billion at December 31, 2022, and increased 7% from $14.07 billion a year ago at March 31, 2022.

The following table sets forth the loan portfolio composition and percentage of total loans at March 31, 2023, December 31, 2022 and March 31, 2022:

(dollars in thousands) (unaudited)	3/31/2023						12/31/2022						3/31/2022
	Balance			Percentage			Balance			Percentage			Balance			Percentage
Commercial loans	$	4,821,270		32.0	%		$	5,109,532		33.2	%		$	4,124,715		29.3	%
Real estate loans		9,373,529		62.2	%			9,414,580		61.1	%			9,262,305		65.9	%
Consumer and other loans		870,050		5.8	%			879,428		5.7	%			679,654		4.8	%
Loans receivable	$	15,064,849		100.0	%		$	15,403,540		100.0	%		$	14,066,674		100.0	%

At March 31, 2023, total deposits increased 1% to $15.83 billion, up from $15.74 billion at December 31, 2022, and increased 9% year-over-year from $14.52 billion at March 31, 2022, reflecting growth in time deposits, partially offset by lower levels of noninterest-bearing demand, money market and savings deposits in a rising interest rate environment.

The following table sets forth the deposit composition and percentage of total deposits at March 31, 2023, December 31, 2022 and March 31, 2022:

(dollars in thousands) (unaudited)	3/31/2023						12/31/2022						3/31/2022
	Balance			Percentage			Balance			Percentage			Balance			Percentage
Noninterest bearing demand deposits	$	4,504,621		28.4	%		$	4,849,493		30.8	%		$	5,498,263		37.9	%
Money market and interest bearing demand deposits		4,331,998		27.4	%			5,615,784		35.7	%			6,484,677		44.7	%
Saving deposits		231,704		1.5	%			283,464		1.8	%			321,373		2.2	%
Time deposits		6,759,886		42.7	%			4,990,060		31.7	%			2,210,815		15.2	%
Total deposits	$	15,828,209		100.0	%		$	15,738,801		100.0	%		$	14,515,128		100.0	%

Allowance for Credit Losses

During the 2023 first quarter, the Company built its allowance for credit losses to $163.5 million at March 31, 2023, and increased the allowance coverage to 1.09% of loans receivable. For the 2023 first quarter, the Company recorded a provision for credit losses of $1.7 million, compared with $8.2 million in the preceding fourth quarter and a negative provision for credit losses of $11.0 million in the 2022 first quarter.

The following table sets forth the allowance for credit losses and allowance coverage ratios at March 31, 2023, December 31, 2022 and March 31, 2022:

(dollars in thousands) (unaudited)	3/31/2023				12/31/2022				3/31/2022
Allowance for credit losses	$	163,544			$	162,359			$	147,450
Allowance for credit loss/loans receivable		1.09	%			1.05	%			1.05	%

Credit Quality

Asset quality continued to be healthy in the 2023 first quarter. Net charge offs were only $108 thousand in the 2023 first quarter, representing an annualized net charge off ratio of 0.00% of average loans. The following table sets forth net charge offs (recoveries) and net charge offs (recoveries) to average loans receivable, annualized, for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022:

	For the Three Months Ended
(dollars in thousands) (unaudited)	3/31/2023				12/31/2022				3/31/2022
Net charge offs (recoveries)	$	108			$	6,402			$	(17,900	)
Net charge offs (recoveries)/average loans receivable (annualized)		—	%			0.17	%			(0.52	) %

Nonperforming assets represented 0.39% of total assets at March 31, 2023, compared with 0.36% as of December 31, 2022, and 0.58% as of March 31, 2022. Total nonperforming assets were $80.2 million at March 31, 2023, an increase of 15% quarter-over-quarter and a decrease of 22% year-over-year. Included in nonperforming assets were loans on nonaccrual status of $78.9 million at March 31, 2023, which increased from $49.7 million at December 31, 2022. This quarter-over-quarter change was primarily driven by one large nonaccrual loan, which is expected to be resolved by mid-year with a minimal risk of loss.

The following table sets forth the components of nonperforming assets at March 31, 2023, December 31, 2022 and March 31, 2022:

(dollars in thousands) (unaudited)	3/31/2023				12/31/2022				3/31/2022
Loans on nonaccrual status (1)	$	78,861			$	49,687			$	52,717
Delinquent loans 90 days or more on accrual status		364				401				3,090
Accruing troubled debt restructured loans (2)		—				16,931				44,555
Total nonperforming loans		79,225				67,019				100,362
Other real estate owned		938				2,418				2,010
Total nonperforming assets	$	80,163			$	69,437			$	102,372
Nonperforming assets/total assets		0.39	%			0.36	%			0.58	%

__________________

(1)		Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $7.6 million, $9.8 million and $17.0 million at March 31, 2023, December 31, 2022 and March 31, 2022, respectively.
(2)		The Company adopted ASU 2022-02 in 2023 which eliminated the concept of troubled debt restructured (“TDR”) loans from GAAP and therefore accruing TDR loans are no longer included in nonperforming loans

Total criticized loans were $304.7 million at March 31, 2023, up from $261.3 million at December 31, 2022. Year-over-year, total criticized loans decreased 23% from $393.6 million at March 31, 2022.

Capital

The Company’s capital ratios are strong. At March 31, 2023, the Company and the Bank continued to exceed all regulatory capital requirements generally required to meet the definition of a “well-capitalized” financial institution. The following table sets forth the capital ratios for the Company at March 31, 2023, December 31, 2022 and March 31, 2022:

(unaudited)	3/31/2023			12/31/2022			3/31/2022			Minimum Guideline for “Well-Capitalized” Bank
Common Equity Tier 1 Capital	10.75	%		10.55	%		11.02	%		6.50	%
Tier 1 Leverage Ratio	10.13	%		10.15	%		10.37	%		5.00	%
Tier 1 Risk-Based Ratio	11.36	%		11.15	%		11.68	%		8.00	%
Total Risk-Based Ratio	12.25	%		11.97	%		12.49	%		10.00	%

Following are the tangible common equity (“TCE”) per share and the TCE as a percentage of tangible assets at March 31, 2023, December 31, 2022 and March 31, 2022:

(unaudited)	3/31/2023		12/31/2022		3/31/2022
Tangible common equity per share (1)	$13.26		$12.96		$13.04
Tangible common equity to tangible assets (1)	7.91%		8.29%		9.05%

__________________

(1)

Tangible common equity represents common equity less goodwill and net other intangible assets. Tangible common equity per share represents tangible common equity divided by the number of shares issued and outstanding. Tangible assets represent total assets less goodwill and net other intangible assets. Tangible common equity to tangible assets is the ratio of tangible common equity over tangible assets. Tangible common equity, tangible common equity per share, tangible assets and tangible common equity to tangible assets are non-GAAP financial measures. Management’s reasons and purposes for using these non-GAAP financial measures are set forth in the accompanying financial information on Table Page 9. A quantitative reconciliation of the most directly comparable GAAP to non-GAAP financial measures is provided in the accompanying financial information on Table Page 9.

Convertible Senior Notes

At March 31, 2023, the net balance of the Company’s 2.00% Convertible Senior Notes due 2038 (the “Notes”) was $206.7 million, compared with $217.1 million at December 31, 2022. The Notes have an upcoming optional put date on May 15, 2023. During the 2023 first quarter, the Company made repurchases of its Notes in the aggregate principal amount of $10.7 million. The repurchased Notes were immediately cancelled subsequent to the repurchase. These repurchases are separate from the optional put and were made through a third-party broker.

Non-GAAP Financial Metrics

This news release contains certain non-GAAP financial measure disclosures, including pre-provision net revenue (“PPNR”), ROA (PPNR), ROE (PPNR), tangible common equity, tangible common equity per share, tangible assets and tangible common equity to tangible assets. Management believes these non-GAAP financial measures provide meaningful supplemental information regarding its operational performance and the Company’s and the Bank’s capital levels and has included these figures in response to market participant interest in these financial metrics. A reconciliation of the most directly comparable GAAP to non-GAAP financial measures is provided in the accompanying financial information on Table Page 9.

Investor Conference Call

The Company previously announced that it will host an investor conference call on Tuesday, April 25, 2023 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review unaudited financial results for its first quarter ended March 31, 2023. Investors and analysts are invited to access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103 (international) and asking for the “Hope Bancorp Call.” A presentation to accompany the earnings call will be available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of Hope Bancorp’s website. After the live webcast, a replay will remain available at the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through May 2, 2023, replay access code 9620853.

About Hope Bancorp, Inc.

Hope Bancorp, Inc. (NASDAQ: HOPE) is the holding company of Bank of Hope, the first and only super regional Korean American bank in the United States with $20.57 billion in total assets as of March 31, 2023. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 53 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia, Alabama and Georgia. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, New York City, Northern California and Houston; commercial loan production offices in Northern California, Seattle and Tampa, Fla.; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.

Forward-Looking Statements

Some statements in this news release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible further deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for credit losses; regulatory risks associated with current and future regulations; and the COVID-19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10-K. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands, except share and per share data)
Assets:	3/31/2023				12/31/2022				% change			3/31/2022				% change
Cash and due from banks	$	2,212,637			$	506,776			337	%		$	280,373			689	%
Investment securities		2,231,989				2,243,195			—	%			2,492,486			(10	)%
Federal Home Loan Bank (“FHLB”) stock and other investments		59,962				61,761			(3	)%			87,201			(31	)%
Loans held for sale, at the lower of cost or fair value		125,268				49,245			154	%			115,756			8	%
Loans receivable		15,064,849				15,403,540			(2	)%			14,066,674			7	%
Allowance for credit losses		(163,544	)			(162,359	)		1	%			(147,450	)		11	%
Net loans receivable		14,901,305				15,241,181			(2	)%			13,919,224			7	%
Accrued interest receivable		57,021				55,460			3	%			37,949			50	%
Premises and equipment, net		47,887				46,859			2	%			45,642			5	%
Bank owned life insurance		87,842				77,078			14	%			77,390			14	%
Goodwill		464,450				464,450			—	%			464,450			—	%
Servicing assets		11,628				11,628			—	%			10,874			7	%
Other intangible assets, net		5,278				5,726			(8	)%			7,184			(27	)%
Other assets		363,617				401,132			(9	)%			265,285			37	%
Total assets	$	20,568,884			$	19,164,491			7	%		$	17,803,814			16	%
Liabilities:
Deposits	$	15,828,209			$	15,738,801			1	%		$	14,515,128			9	%
FHLB and FRB borrowings		2,130,000				865,000			146	%			772,000			176	%
Convertible notes, net		206,658				217,148			(5	)%			216,444			(5	)%
Subordinated debentures		106,875				106,565			—	%			105,652			1	%
Accrued interest payable		53,818				26,668			102	%			4,826			1,015	%
Other liabilities		184,744				190,981			(3	)%			148,707			24	%
Total liabilities	$	18,510,304			$	17,145,163			8	%		$	15,762,757			17	%
Stockholders’ Equity:
Common stock, $0.001 par value	$	137			$	137			—	%		$	137			—	%
Capital surplus		1,430,977				1,431,003			—	%			1,422,602			1	%
Retained earnings		1,106,390				1,083,712			2	%			976,483			13	%
Treasury stock, at cost		(264,667	)			(264,667	)		—	%			(250,000	)		(6	)%
Accumulated other comprehensive loss, net		(214,257	)			(230,857	)		7	%			(108,165	)		(98	)%
Total stockholders’ equity		2,058,580				2,019,328			2	%			2,041,057			1	%
Total liabilities and stockholders’ equity	$	20,568,884			$	19,164,491			7	%		$	17,803,814			16	%
Common stock shares - authorized		150,000,000				150,000,000							150,000,000
Common stock shares - outstanding		119,865,732				119,495,209							120,327,689
Treasury stock shares		17,382,835				17,382,835							16,343,849

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands, except share and per share data)
	Three Months Ended
	3/31/2023			12/31/2022			% change			3/31/2022				% change
Interest and fees on loans	$	215,935		$	207,958		4	%		$	132,672			63	%
Interest on investment securities		15,125			14,758		2	%			11,656			30	%
Interest on cash and deposits at other banks		6,641			942		605	%			137			4,747	%
Interest on other investments		695			579		20	%			407			71	%
Total interest income		238,396			224,237		6	%			144,872			65	%
Interest on deposits		94,067			63,276		49	%			8,676			984	%
Interest on other borrowings and convertible notes		10,451			10,440		—	%			3,020			246	%
Total interest expense		104,518			73,716		42	%			11,696			794	%
Net interest income before provision (credit) for credit losses		133,878			150,521		(11	)%			133,176			1	%
Provision (credit) for credit losses		1,700			8,200		(79	)%			(11,000	)		N/A
Net interest income after provision (credit) for credit losses		132,178			142,321		(7	)%			144,176			(8	)%
Service fees on deposit accounts		2,221			2,159		3	%			1,974			13	%
Net gains on sales of SBA loans		2,225			2,154		3	%			5,603			(60	)%
Net gains on sales of residential mortgage loans		64			20		220	%			757			(92	)%
Other income and fees		6,468			7,777		(17	)%			4,852			33	%
Total noninterest income		10,978			12,110		(9	)%			13,186			(17	)%
Salaries and employee benefits		57,169			52,694		8	%			47,745			20	%
Occupancy		7,521			7,072		6	%			7,335			3	%
Furniture and equipment		5,058			5,045		—	%			4,644			9	%
Data processing and communications		2,822			2,860		(1	)%			2,461			15	%
FDIC assessment		1,781			1,596		12	%			1,569			14	%
Earnings credit rebates		4,427			5,002		(11	)%			476			830	%
Other		11,576			10,249		13	%			11,143			4	%
Total noninterest expense		90,354			84,518		7	%			75,373			20	%
Income before income taxes		52,802			69,913		(24	)%			81,989			(36	)%
Income tax provision		13,681			18,210		(25	)%			21,251			(36	)%
Net income	$	39,121		$	51,703		(24	)%		$	60,738			(36	)%
Earnings Per Common Share - Basic	$	0.33		$	0.43					$	0.51
Earnings Per Common Share - Diluted	$	0.33		$	0.43					$	0.50
Weighted Average Shares Outstanding - Basic		119,551,247			119,483,499						120,131,380
Weighted Average Shares Outstanding - Diluted		120,242,295			120,102,665						121,089,474

	For the Three Months Ended (Annualized)
Profitability measures:	3/31/2023			12/31/2022			3/31/2022
ROA	0.82	%		1.10	%		1.37	%
ROE	7.65	%		10.35	%		11.62	%
ROA (PPNR) (1)	1.14	%		1.66	%		1.60	%
ROE (PPNR) (1)	10.65	%		15.64	%		13.58	%
ROTCE (2)	9.93	%		13.54	%		15.01	%
Net interest margin	3.02	%		3.36	%		3.21	%
Efficiency ratio	62.38	%		51.97	%		51.50	%
Noninterest expense / average assets	1.89	%		1.79	%		1.70	%
(1) ROA (PPNR) and ROE (PPNR) are non-GAAP financial measures. Management’s reasons and purposes for using these non-GAAP financial measures are set forth on Table Page 9 of this earnings release. A quantitative reconciliation of the most directly comparable GAAP to non-GAAP financial measures are provided in the accompanying financial information on Table Page 9.
(2) Average tangible common equity is calculated by subtracting average goodwill and average core deposit intangible assets from average stockholders’ equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position. A quantitative reconciliation of the most directly comparable GAAP to non-GAAP financial measure is provided in the accompanying financial information on Table Page 9.

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands)
	Three Months Ended
	3/31/2023									12/31/2022									3/31/2022
				Interest			Annualized						Interest			Annualized						Interest			Annualized
	Average			Income/			Average			Average			Income/			Average			Average			Income/			Average
	Balance			Expense			Yield/Cost			Balance			Expense			Yield/Cost			Balance			Expense			Yield/Cost
INTEREST EARNING ASSETS:
Loans, including loans held for sale	$	15,235,386		$	215,935		5.75	%		$	15,393,843		$	207,958		5.36	%		$	13,871,974		$	132,672		3.88	%
Investment securities		2,248,479			15,125		2.73	%			2,254,678			14,758		2.60	%			2,621,220			11,656		1.80	%
Interest bearing cash and deposits at other banks		473,344			6,641		5.69	%			66,075			942		5.66	%			284,342			137		0.20	%
FHLB stock and other investments		47,043			695		5.99	%			48,002			579		4.79	%			68,432			407		2.41	%
Total interest earning assets	$	18,004,252		$	238,396		5.37	%		$	17,762,598		$	224,237		5.01	%		$	16,845,968		$	144,872		3.49	%
INTEREST BEARING LIABILITIES:
Deposits:
Money market and interest bearing demand	$	5,341,057		$	43,118		3.27	%		$	5,733,448		$	34,991		2.42	%		$	6,337,866		$	5,701		0.36	%
Savings		256,194			827		1.31	%			297,128			968		1.29	%			318,508			927		1.18	%
Time deposits		5,543,369			50,122		3.67	%			4,276,655			27,317		2.53	%			2,619,491			2,048		0.32	%
Total interest bearing deposits		11,140,620			94,067		3.42	%			10,307,231			63,276		2.44	%			9,275,865			8,676		0.38	%
FHLB and FRB borrowings		676,444			6,698		4.02	%			838,335			6,988		3.31	%			242,556			687		1.15	%
Convertible notes, net		217,114			1,322		2.44	%			217,002			1,322		2.38	%			216,305			1,323		2.45	%
Subordinated debentures		102,791			2,431		9.46	%			102,496			2,130		8.13	%			101,577			1,010		3.98	%
Total interest bearing liabilities	$	12,136,969		$	104,518		3.49	%		$	11,465,064		$	73,716		2.55	%		$	9,836,303		$	11,696		0.48	%
Noninterest bearing demand deposits		4,662,139									5,174,217									5,672,768
Total funding liabilities/cost of funds	$	16,799,108					2.52	%		$	16,639,281					1.76	%		$	15,509,071					0.31	%
Net interest income/net interest spread				$	133,878		1.88	%					$	150,521		2.46	%					$	133,176		3.01	%
Net interest margin							3.02	%								3.36	%								3.21	%
Cost of deposits:
Noninterest bearing demand deposits	$	4,662,139		$	—		—	%		$	5,174,217		$	—		—	%		$	5,672,768		$	—		—	%
Interest bearing deposits		11,140,620			94,067		3.42	%			10,307,231			63,276		2.44	%			9,275,865			8,676		0.38	%
Total deposits	$	15,802,759		$	94,067		2.41	%		$	15,481,448		$	63,276		1.62	%		$	14,948,633		$	8,676		0.24	%

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands)
	Three Months Ended
AVERAGE BALANCES:	3/31/2023				12/31/2022				% change			3/31/2022				% change
Loans, including loans held for sale	$	15,235,386			$	15,393,843			(1	) %		$	13,871,974			10	%
Investments		2,768,866				2,368,755			17	%			2,973,994			(7	) %
Interest earning assets		18,004,252				17,762,598			1	%			16,845,968			7	%
Total assets		19,087,170				18,863,726			1	%			17,742,402			8	%
Interest bearing deposits		11,140,620				10,307,231			8	%			9,275,865			20	%
Interest bearing liabilities		12,136,969				11,465,064			6	%			9,836,303			23	%
Noninterest bearing demand deposits		4,662,139				5,174,217			(10	) %			5,672,768			(18	) %
Stockholders’ equity		2,046,159				1,997,460			2	%			2,090,755			(2	) %
Net interest earning assets		5,867,283				6,297,534			(7	) %			7,009,665			(16	) %
LOAN PORTFOLIO COMPOSITION:	3/31/2023				12/31/2022				% change			3/31/2022				% change
Commercial loans	$	4,821,270			$	5,109,532			(6	) %		$	4,124,715			17	%
Real estate loans		9,373,529				9,414,580			—	%			9,262,305			1	%
Consumer and other loans		870,050				879,428			(1	) %			679,654			28	%
Loans, net of deferred loan fees and costs		15,064,849				15,403,540			(2	) %			14,066,674			7	%
Allowance for credit losses		(163,544	)			(162,359	)		1	%			(147,450	)		11	%
Loans receivable, net	$	14,901,305			$	15,241,181			(2	) %		$	13,919,224			7	%
REAL ESTATE LOANS BY PROPERTY TYPE:	3/31/2023				12/31/2022				% change			3/31/2022				% change
Multi-tenant retail	$	1,817,874			$	1,866,434			(3	) %		$	1,851,150			(2	) %
Hotels/motels		900,990				952,579			(5	) %			1,208,217			(25	) %
Gas stations and car washes		1,046,528				1,054,720			(1	) %			1,055,383			(1	) %
Mixed-use facilities		818,227				848,417			(4	) %			872,362			(6	) %
Industrial warehouses		1,309,763				1,294,893			1	%			1,263,791			4	%
Multifamily		1,302,597				1,295,644			1	%			841,316			55	%
Single-tenant retail		706,593				718,977			(2	)%			747,223			(5	)%
Office		464,703				473,459			(2	)%			442,944			5	%
All other		1,006,254				909,457			11	%			979,919			3	%
Total real estate loans	$	9,373,529			$	9,414,580			—	%		$	9,262,305			1	%
DEPOSIT COMPOSITION	3/31/2023				12/31/2022				% change			3/31/2022				% change
Noninterest bearing demand deposits	$	4,504,621			$	4,849,493			(7	) %		$	5,498,263			(18	) %
Money market and interest bearing demand		4,331,998				5,615,784			(23	) %			6,484,677			(33	) %
Saving deposits		231,704				283,464			(18	) %			321,373			(28	) %
Time deposits		6,759,886				4,990,060			35	%			2,210,815			206	%
Total deposits	$	15,828,209			$	15,738,801			1	%		$	14,515,128			9	%

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands, except share and per share data)
CAPITAL RATIOS:	3/31/2023				12/31/2022				3/31/2022
Total stockholders’ equity	$	2,058,580			$	2,019,328			$	2,041,057
Common equity tier 1 ratio		10.75	%			10.55	%			11.02	%
Tier 1 risk-based capital ratio		11.36	%			11.15	%			11.68	%
Total risk-based capital ratio		12.25	%			11.97	%			12.49	%
Tier 1 leverage ratio		10.13	%			10.15	%			10.37	%
Total risk weighted assets	$	16,886,343			$	17,049,410			$	15,393,639
Book value per common share	$	17.17			$	16.90			$	16.96
Tangible common equity to tangible assets (1)		7.91	%			8.29	%			9.05	%
Tangible common equity per share (1)	$	13.26			$	12.96			$	13.04
(1) Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and core deposit intangible assets, net divided by total assets less goodwill and core deposit intangible assets, net. Management reviews tangible common equity to tangible assets in evaluating the Company’s capital levels and has included this ratio in response to market participant interest in tangible common equity as a measure of capital. A quantitative reconciliation of the most directly comparable GAAP to non-GAAP financial measures are provided in the accompanying financial information on Table Page 10.
	Three Months Ended
ALLOWANCE FOR CREDIT LOSSES CHANGES:	3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022
Balance at beginning of period	$	162,359			$	160,561			$	151,580			$	147,450			$	140,550
ASU 2022-02 day 1 adoption impact		(407	)			—				—				—				—
Provision (credit) for credit losses		1,700				8,200				9,200				3,200				(11,000	)
Recoveries		387				3,222				331				1,642				19,403
Charge offs		(495	)			(9,624	)			(550	)			(712	)			(1,503	)
Balance at end of period	$	163,544			$	162,359			$	160,561			$	151,580			$	147,450
Net charge offs (recoveries)/average loans receivable (annualized)		—	%			0.17	%			0.01	%			(0.03	)%			(0.52	)%
	3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022
Allowance for unfunded loan commitments	$	2,971			$	1,351			$	1,231			$	1,481			$	1,301
	Three Months Ended
NET LOAN CHARGE OFFS (RECOVERIES):	3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022
Real estate loans	$	(109	)		$	2,022			$	9			$	(508	)		$	(16,418	)
Commercial loans		196				4,174				115				(461	)			(1,529	)
Consumer loans		21				206				95				39				47
Total net charge offs (recoveries)	$	108			$	6,402			$	219			$	(930	)		$	(17,900	)

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands)
NONPERFORMING ASSETS:	3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022
Loans on nonaccrual status (1)	$	78,861			$	49,687			$	64,571			$	69,522			$	52,717
Delinquent loans 90 days or more on accrual status		364				401				5,306				12,468				3,090
Accruing troubled debt restructured loans (2)		—				16,931				25,631				26,572				44,555
Total nonperforming loans		79,225				67,019				95,508				108,562				100,362
Other real estate owned		938				2,418				1,480				2,010				2,010
Total nonperforming assets	$	80,163			$	69,437			$	96,988			$	110,572			$	102,372
Nonperforming assets/total assets		0.39	%			0.36	%			0.51	%			0.61	%			0.58	%
Nonperforming assets/loans receivable & OREO		0.53	%			0.45	%			0.63	%			0.76	%			0.73	%
Nonperforming assets/total capital		3.89	%			3.44	%			4.91	%			5.53	%			5.02	%
Nonperforming loans/loans receivable		0.53	%			0.44	%			0.62	%			0.75	%			0.71	%
Nonaccrual loans/loans receivable		0.52	%			0.32	%			0.42	%			0.48	%			0.37	%
Allowance for credit losses/loans receivable		1.09	%			1.05	%			1.04	%			1.04	%			1.05	%
Allowance for credit losses/nonaccrual loans		207.38	%			326.76	%			248.66	%			218.03	%			279.70	%
Allowance for credit losses/nonperforming loans		206.43	%			242.26	%			168.11	%			139.63	%			146.92	%
Allowance for credit losses/nonperforming assets		204.01	%			233.82	%			165.55	%			137.09	%			144.03	%
(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $7.6 million, $9.8 million, $9.9 million, $13.2 million, and $17.0 million, at March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively.
(2) The Company adopted ASU 2022-02 in 2023 which eliminated the concept of TDR from GAAP and therefore accruing TDR loans are no longer included in nonperforming loans.
NONACCRUAL LOANS BY TYPE:	3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022
Real estate loans	$	44,376			$	33,915			$	47,807			$	53,966			$	36,655
Commercial loans		26,191				5,620				7,675				8,206				8,686
Consumer loans		8,294				10,152				9,089				7,350				7,376
Total	$	78,861			$	49,687			$	64,571			$	69,522			$	52,717

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands)
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE:	3/31/2023			12/31/2022			9/30/2022			6/30/2022			3/31/2022
30 - 59 days	$	7,662		$	7,049		$	13,092		$	10,090		$	12,439
60 - 89 days		249			2,243			4,933			6,354			3,090
Total	$	7,911		$	9,292		$	18,025		$	16,444		$	15,529
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE:	3/31/2023			12/31/2022			9/30/2022			6/30/2022			3/31/2022
Real estate loans	$	3,652		$	4,115		$	9,694		$	7,919		$	6,097
Commercial loans		419			3,300			6,165			3,397			5,003
Consumer loans		3,840			1,877			2,166			5,128			4,429
Total	$	7,911		$	9,292		$	18,025		$	16,444		$	15,529
CRITICIZED LOANS:	3/31/2023			12/31/2022			9/30/2022			6/30/2022			3/31/2022
Special mention	$	166,472		$	157,263		$	79,399		$	95,797		$	166,958
Substandard		138,224			104,073			204,713			244,748			226,661
Total criticized loans	$	304,696		$	261,336		$	284,112		$	340,545		$	393,619

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands, except share and per share data)
Reconciliation of GAAP financial measures to non-GAAP financial measures
Management reviews select non-GAAP financial measures in evaluating the Company’s and the Bank’s financial performance and in response to market participant interest. A reconciliation of the most directly comparable GAAP to non-GAAP financial measures utilized by management is provided below.
	Three Months Ended
RETURN ON AVERAGE TANGIBLE COMMON EQUITY	3/31/2023				12/31/2022				3/31/2022
Average stockholders’ equity	$	2,046,159			$	1,997,460			$	2,090,755
Less: Average goodwill and core deposit intangible assets, net		(469,992	)			(470,442	)			(471,921	)
Average tangible common equity	$	1,576,167			$	1,527,018			$	1,618,834
Net income	$	39,121			$	51,703			$	60,738
Return on average tangible common equity (annualized)		9.93	%			13.54	%			15.01	%
TANGIBLE COMMON EQUITY	3/31/2023				12/31/2022				3/31/2022
Total stockholders’ equity	$	2,058,580			$	2,019,328			$	2,041,057
Less: Goodwill and core deposit intangible assets, net		(469,728	)			(470,176	)			(471,634	)
Tangible common equity	$	1,588,852			$	1,549,152			$	1,569,423
Total assets	$	20,568,884			$	19,164,491			$	17,803,814
Less: Goodwill and core deposit intangible assets, net		(469,728	)			(470,176	)			(471,634	)
Tangible assets	$	20,099,156			$	18,694,315			$	17,332,180
Common shares outstanding		119,865,732				119,495,209				120,327,689
Tangible common equity to tangible assets		7.91	%			8.29	%			9.05	%
Tangible common equity per share	$	13.26			$	12.96			$	13.04
	Three Months Ended
PRE-PROVISION NET REVENUE	3/31/2023				12/31/2022				3/31/2022
Net interest income before provision (credit) for credit losses	$	133,878			$	150,521			$	133,176
Noninterest income		10,978				12,110				13,186
Revenue		144,856				162,631				146,362
Less noninterest expense		90,354				84,518				75,373
Pre-provision net revenue	$	54,502			$	78,113			$	70,989
Average assets	$	19,087,170			$	18,863,726			$	17,742,402
ROA (PPNR)		1.14	%			1.66	%			1.60	%
Average stockholders’ equity		2,046,159				1,997,460				2,090,755
ROE (PPNR)		10.65	%			15.64	%			13.58	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230424005850/en/

Julianna Balicka

EVP & Chief Financial Officer

213-235-3235

julianna.balicka@bankofhope.com

Angie Yang

SVP, Director of Investor Relations & Corporate Communications

213-251-2219

angie.yang@bankofhope.com

Source: Hope Bancorp, Inc.

FAQ

What were Hope Bancorp's Q1 2023 earnings results?

Hope Bancorp reported a net income of $39.1 million, or $0.33 per diluted share, for Q1 2023.

How did Hope Bancorp's total deposits change in Q1 2023?

Total deposits increased by 1% quarter-over-quarter and 9% year-over-year, reaching $15.83 billion.

What is Hope Bancorp's total risk-based capital ratio for Q1 2023?

The total risk-based capital ratio increased to 12.25% at the end of Q1 2023.

How did loan originations perform in Q1 2023 for Hope Bancorp?

Loan originations totaled $568.7 million in Q1 2023, down from $793.4 million in Q4 2022.

What was the impact of noninterest expense on Hope Bancorp's financial results in Q1 2023?

Noninterest expense increased to $90.4 million in Q1 2023, raising the efficiency ratio to 62.4%.