Hope Bancorp Reports 2023 Third Quarter Financial Results; Announces Strategic Reorganization

Rhea-AI Summary

Hope Bancorp, Inc. (NASDAQ: HOPE) reported unaudited financial results for Q3 2023. Net income declined compared to the previous quarter due to a provision for credit losses and the absence of certain one-time gains. However, net interest margin expanded and net interest income grew. The company also announced a strategic reorganization expected to generate over $40 million in cost savings. Total deposits and total capital ratio increased, positioning the company well for future growth opportunities.

Positive

• Net interest margin expanded 13 basis points in Q3 2023
• Net interest income grew 4% quarter-over-quarter
• Strategic reorganization expected to generate over $40 million in cost savings
• Total deposits grew to $15.7 billion, up 1% from the previous quarter
• Total capital ratio increased to 13.23% in Q3 2023

Negative

• Net income declined compared to the previous quarter
• Recorded a provision for credit losses of $17 million in Q3 2023
• Certain one-time gains in noninterest income did not reoccur

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 third quarter and nine months ended September 30, 2023. For the three months ended September 30, 2023, net income totaled $30.0 million, or $0.25 per diluted common share. This compares with net income of $38.0 million, or $0.32 per diluted common share, in the preceding second quarter.

“Our third quarter 2023 net interest margin expanded 13 basis points, and our net interest income grew 4% quarter-over-quarter,” stated Kevin S. Kim, Chairman, President and Chief Executive Officer. “We maintained disciplined expense control and our noninterest expenses decreased 1% over the same period. However, we recorded a provision for credit losses of $17 million for the third quarter, and certain one-time gains in the second quarter 2023 noninterest income did not reoccur. As a result, our net income declined compared with the prior quarter.”

“Our balance sheet continued to strengthen. Total deposits grew to $15.7 billion at September 30, 2023, up 1% from June 30, 2023, reflecting growth in customer deposits, partially offset by a planned reduction of brokered time deposits. Our total capital ratio increased to 13.23% as of September 30, 2023, and all our regulatory capital ratios expanded quarter-over-quarter,” continued Kim. “Our deposit growth, taken together with our expanding capital and ample liquidity, positions us well to take advantage of profitable growth opportunities going forward.”

Strategic Reorganization

The Company also announced today a strategic reorganization designed to enhance shareholder value over the long term. Accordingly, the Company realigned its structure around lines of business and product delivery channels, optimized its production capacity and reduced headcount. The restructuring is expected to generate over $40 million in estimated annualized cost savings, largely related to the reduction in staffing, savings from a planned branch rationalization, subject to customary notices and approvals, and operational process improvements. The Company expects to recognize one-time charges of approximately $12 million in the fourth quarter of 2023 related to the reorganization.

“As the largest Korean American bank in the United States, Bank of Hope has made great strides in transitioning from a traditional community bank into a regional bank serving a wide range of consumer, small business, commercial and corporate customers,” commented Kim. “Today’s strategic reorganization further evolves our business model. As a result, we expect to operate our Bank more efficiently, strengthen our franchise, enhance the customer experience and expand our customer relationships, benefiting all our stakeholders through sustainably improved profitability.”

Financial Summary

	At or for the Three Months Ended
(dollars in thousands, except per share data) (unaudited)	9/30/2023				6/30/2023				9/30/2022
Net income	$	30,049			$	38,022			$	53,748
Diluted earnings per share	$	0.25			$	0.32			$	0.45
Net interest income before provision for credit losses	$	135,378			$	130,689			$	153,186
Pre-provision net revenue (“PPNR”) (1)	$	56,810			$	60,370			$	82,627
Loans receivable	$	14,306,193			$	14,864,810			$	15,491,187
Deposits	$	15,739,859			$	15,619,352			$	15,502,209
Total assets	$	20,076,364			$	20,366,138			$	19,083,388
Total equity	$	2,030,424			$	2,067,998			$	1,975,725
Total capital ratio		13.23	%			12.64	%			11.72	%
Tangible common equity (“TCE”) ratio (1)		7.96	%			8.04	%			8.09	%
Allowance for credit losses to loans receivable		1.11	%			1.16	%			1.04	%
Nonperforming assets to total assets (2)		0.31	%			0.38	%			0.51	%
Return on average assets (“ROA”) (3)		0.60	%			0.74	%			1.17	%
Return on average equity (“ROE”) (3)		5.78	%			7.34	%			10.58	%
Return on average TCE (“ROTCE”) (1) (3)		7.47	%			9.49	%			13.77	%
ROA (PPNR) (1) (3)		1.13	%			1.18	%			1.79	%
Net interest margin (3)		2.83	%			2.70	%			3.49	%
Efficiency ratio		60.5	%			59.1	%			50.4	%

(1)		PPNR, TCE ratio, ROTCE, and ROA (PPNR) are non-GAAP financial measures. Quantitative reconciliations of the most directly comparable GAAP to non-GAAP financial measures are provided in the accompanying financial information on Table Page 10.
(2)		Excludes delinquent Small Business Administration (“SBA”) loans that are guaranteed and currently in liquidation.
(3)		Annualized.

Operating Results for the 2023 Third Quarter

Net interest income growth and net interest margin expansion. Net interest income before provision for credit losses for the 2023 third quarter totaled $135.4 million, growing 4% from $130.7 million in the preceding second quarter. Third quarter 2023 net interest margin expanded 13 basis points to 2.83%, up from 2.70% in the 2023 second quarter. The linked quarter net interest income growth and net interest margin expansion reflected higher yields on earning assets, a decrease in the average volume of borrowings and debt, and an increase in the average volume of interest-earning cash and deposits at other banks, partially offset by a higher cost of funds and a lower average volume of loans.

Third quarter 2023 weighted average yield on earning assets of 5.77% expanded 24 basis points quarter-over-quarter; the rate of change accelerated from the previous quarter. In comparison, the third quarter 2023 weighted average cost of funds of 3.16% increased 14 basis points quarter-over-quarter; the rate of change decelerated from the previous quarter.

Noninterest income. Noninterest income for the 2023 third quarter totaled $8.3 million, compared with $17.0 million in the preceding second quarter. Second quarter 2023 noninterest income included a one-time $5.8 million cash distribution from a gain on an investment in an affordable housing partnership and $1.9 million of gains on SBA loan sales. The Company did not sell any SBA 7(a) loans during the 2023 third quarter, retaining loan production on its balance sheet instead. In comparison, during the preceding 2023 second quarter, the Company sold $38.4 million of the guaranteed portion of SBA 7(a) loans for net gains on sale of $1.9 million.

Noninterest expense. Noninterest expense for the 2023 third quarter decreased 1% to $86.9 million, down from $87.3 million in the preceding second quarter. The linked quarter decrease was largely driven by lower salaries and employee benefits expense and lower FDIC assessment expense, partially offset by higher earned interest credit costs. Third quarter 2023 salaries and employee benefits expense decreased 2% to $51.0 million, down from $52.3 million in the 2023 second quarter. The Company’s efficiency ratio for the 2023 third quarter was 60.5%, compared with 59.1% in the preceding second quarter.

Tax rate. The effective tax rate for the 2023 third quarter was 24.9%, compared with 26.1% for the preceding second quarter. The year-to-date effective tax rate for the first nine months of 2023 was 25.7%.

Balance Sheet Summary

Strong Liquidity. At September 30, 2023, cash and cash equivalents increased to $2.50 billion, up from $2.30 billion at June 30, 2023, and up from $331.3 million at September 30, 2022. Available borrowing capacity, cash and cash equivalents, and unpledged investment securities totaled $8.29 billion at September 30, 2023, equivalent to 53% of total deposits and well exceeding the Bank’s uninsured deposit balances.

Loans. Loans receivable of $14.31 billion at September 30, 2023, decreased 4% from $14.86 billion at June 30, 2023, reflecting our prudent approach to loan growth, an intentional decrease in mortgage warehouse lines, and the impact of paydowns and payoffs in a high interest rate environment. Year-over-year, loans receivable decreased 8%. The following table sets forth the loan portfolio composition and percentage of total loans at September 30, 2023, June 30, 2023, and September 30, 2022:

(dollars in thousands) (unaudited)	9/30/2023							6/30/2023							9/30/2022
	Balance				Percentage			Balance				Percentage			Balance				Percentage
Commercial real estate (“CRE”) loans	$	8,972,886			62.7	%		$	9,192,160			61.9	%		$	9,504,893			61.3	%
Commercial and industrial (“C&I”) loans		4,450,341			31.1	%			4,805,126			32.3	%			5,124,421			33.1	%
Residential mortgage and other loans		882,966			6.2	%			867,524			5.8	%			861,873			5.6	%
Loans receivable	$	14,306,193			100.0	%		$	14,864,810			100.0	%		$	15,491,187			100.0	%

Deposits. Total deposits of $15.74 billion at September 30, 2023, grew 1% from $15.62 billion at June 30, 2023, reflecting growth in customer deposits, partially offset by a planned reduction of brokered time deposits. Year-over-year, total deposits increased 2%. The gross loan-to-deposit ratio was 91.0% at September 30, 2023, compared with 95.5% at June 30, 2023, and 100.2% a year ago at September 30, 2022. The following table sets forth the deposit composition and percentage of total deposits at September 30, 2023, June 30, 2023, and September 30, 2022:

(dollars in thousands) (unaudited)	9/30/2023							6/30/2023							9/30/2022
	Balance				Percentage			Balance				Percentage			Balance				Percentage
Noninterest bearing demand deposits	$	4,249,788			27.0	%		$	4,229,247			27.1	%		$	5,590,952			36.1	%
Money market and interest bearing demand deposits		4,424,918			28.1	%			4,188,584			26.8	%			5,885,093			38.0	%
Savings deposits		430,765			2.8	%			224,495			1.4	%			317,841			2.0	%
Time deposits		6,634,388			42.1	%			6,977,026			44.7	%			3,708,323			23.9	%
Total deposits	$	15,739,859			100.0	%		$	15,619,352			100.0	%		$	15,502,209			100.0	%
Gross loan-to-deposit ratio					91.0	%						95.5	%						100.2	%

Uninsured deposits at September 30, 2023, represented 37% of the Bank’s deposits.

Borrowings. Federal Home Loan Bank and Federal Reserve Bank borrowings totaled $1.80 billion at September 30, 2023, compared with $2.26 billion at June 30, 2023, and $1.07 billion at September 30, 2022. Linked quarter growth in deposits and decrease in loans reduced the need for borrowings in the 2023 third quarter.

Credit Quality and Allowance for Credit Losses

Nonperforming assets. Nonperforming assets totaled $61.7 million at September 30, 2023, a decrease of 20% from June 30, 2023. The quarter-over-quarter decrease in nonperforming assets reflects charge offs of nonaccrual loans, payoffs and workouts, partially offset by new inflows. The nonperforming assets ratio was 0.31% of total assets at September 30, 2023, an improvement from 0.38% at June 30, 2023.

The following table sets forth the components of nonperforming assets at September 30, 2023, June 30, 2023, and September 30, 2022:

(dollars in thousands) (unaudited)	9/30/2023				6/30/2023				9/30/2022
Loans on nonaccrual status (1)	$	39,081			$	61,252			$	64,571
Accruing delinquent loans past due 90 days or more		21,579				15,182				5,306
Accruing troubled debt restructured loans (2)		—				—				25,631
Total nonperforming loans		60,660				76,434				95,508
Other real estate owned		1,043				938				1,480
Total nonperforming assets	$	61,703			$	77,372			$	96,988
Nonperforming assets/total assets		0.31	%			0.38	%			0.51	%

(1)		Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $12.1 million, $11.9 million and $9.9 million at September 30, 2023, June 30, 2023, and September 30, 2022, respectively.
(2)		The Company adopted ASU 2022-02 in 2023, which eliminated the concept of troubled debt restructured (“TDR”) loans from GAAP; therefore, accruing TDR loans are no longer included in nonperforming loans.

Net charge offs. The Company recorded net charge offs of $31.0 million in the 2023 third quarter. This included an idiosyncratic full charge off of $23.4 million related to a borrower that entered into Chapter 7 liquidation in August 2023. Related to this credit, the Company had recorded impairment reserves of $9.6 million at June 30, 2023. For the 2023 third quarter, the Company recorded a provision for credit losses of $16.8 million, compared with $8.9 million in the preceding second quarter.

The following table sets forth net charge offs (recoveries) and net charge offs (recoveries) to average loans receivable, annualized, for the three months ended September 30, 2023, June 30, 2023, and September 30, 2022:

	For the Three Months Ended
(dollars in thousands) (unaudited)	9/30/2023				6/30/2023				9/30/2022
Net charge offs (recoveries)	$	30,987			$	(552	)		$	219
Net charge offs (recoveries)/average loans receivable (annualized)		0.85	%			(0.01	)%			0.01	%

Allowance for credit losses. The allowance for credit losses totaled $158.8 million at September 30, 2023, compared with $173.0 million at June 30, 2023. The allowance coverage ratio was 1.11% of loans receivable at September 30, 2023, compared with 1.16% at June 30, 2023. Excluding the $9.6 million of impairment reserves related to the aforementioned charged off credit, the allowance coverage ratio as of June 30, 2023, was 1.10%. Year-over-year, allowance coverage of loans receivable increased from 1.04% at September 30, 2022.

The following table sets forth the allowance for credit losses and allowance coverage ratios at September 30, 2023, June 30, 2023, and September 30, 2022:

(dollars in thousands) (unaudited)	9/30/2023				6/30/2023				9/30/2022
Allowance for credit losses	$	158,809			$	172,996			$	160,561
Allowance for credit losses/loans receivable		1.11	%			1.16	%			1.04	%

Capital

The Company’s capital ratios are strong and all regulatory capital ratios expanded quarter-over-quarter. At September 30, 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 September 30, 2023, June 30, 2023, and September 30, 2022:

(unaudited)	9/30/2023			6/30/2023			9/30/2022			Minimum Guideline for “Well-Capitalized”
Common Equity Tier 1 Capital Ratio	11.67	%		11.05	%		10.32	%		6.50	%
Tier 1 Capital Ratio	12.32	%		11.68	%		10.92	%		8.00	%
Total Capital Ratio	13.23	%		12.64	%		11.72	%		10.00	%
Leverage Ratio	9.83	%		9.57	%		10.25	%		5.00	%

At September 30, 2023, total stockholders’ equity was $2.03 billion, or $16.92 per share, tangible common equity per share was $13.01, and the tangible common equity ratio was 7.96%. Quarter-over-quarter, stockholders’ equity declined by 2%, or $37.6 million, primarily reflecting a negative change in accumulated other comprehensive income (“AOCI”) of $53.8 million and $16.8 million in common dividends declared, partially offset by $30.0 million in net income. The following table sets forth the TCE per share and the TCE ratio at September 30, 2023, June 30, 2023, and September 30, 2022:

(unaudited)	9/30/2023				6/30/2023				9/30/2022
TCE per share (1)	$	13.01			$	13.32			$	12.60
TCE ratio (1)		7.96	%			8.04	%			8.09	%

(1)

TCE per share and TCE ratio are non-GAAP financial measures. Quantitative reconciliations of the most directly comparable GAAP to non-GAAP financial measures are provided in the accompanying financial information on Table Page 10.

Investor Conference Call

The Company previously announced that it will host an investor conference call on Monday, October 23, 2023, at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review unaudited financial results for its third quarter ended September 30, 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 October 30, 2023, replay access code 5386919.

Non-GAAP Financial Metrics

This news release contains certain non-GAAP financial measure disclosures, including PPNR, TCE per share, TCE ratio, ROTCE, ROA (PPNR), and ROE (PPNR). Management believes these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s operational performance and the Company’s capital levels and has included these figures in response to market participant interest in these financial metrics. Quantitative reconciliations of the most directly comparable GAAP to non-GAAP financial measures are provided in the accompanying financial information on Table Page 10.

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 $20.08 billion in total assets as of September 30, 2023. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 54 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 lending, commercial and industrial 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, statements regarding our business strategies, objectives and vision, and statements about our strategic reorganization. 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 data)
Assets:	9/30/2023				6/30/2023				% change			9/30/2022				% change
Cash and due from banks	$	2,500,323			$	2,302,339			9	%		$	331,336			655	%
Investment securities		2,260,837				2,186,346			3	%			2,264,533			—	%
Federal Home Loan Bank (“FHLB”) stock and other investments		60,433				60,213			—	%			65,192			(7	)%
Loans held for sale, at the lower of cost or fair value		19,502				49,246			(60	)%			41,989			(54	)%
Loans receivable		14,306,193				14,864,810			(4	)%			15,491,187			(8	)%
Allowance for credit losses		(158,809	)			(172,996	)		(8	)%			(160,561	)		(1	)%
Net loans receivable		14,147,384				14,691,814			(4	)%			15,330,626			(8	)%
Accrued interest receivable		60,665				60,118			1	%			42,363			43	%
Premises and equipment, net		51,764				50,513			2	%			46,169			12	%
Bank owned life insurance		88,643				88,238			—	%			76,788			15	%
Goodwill		464,450				464,450			—	%			464,450			—	%
Servicing assets		10,457				11,532			(9	)%			11,601			(10	)%
Other intangible assets, net		4,382				4,830			(9	)%			6,212			(29	)%
Other assets		407,524				396,499			3	%			402,129			1	%
Total assets	$	20,076,364			$	20,366,138			(1	)%		$	19,083,388			5	%
Liabilities:
Deposits	$	15,739,859			$	15,619,352			1	%		$	15,502,209			2	%
FHLB and Federal Reserve Bank (“FRB”) borrowings		1,795,726				2,260,000			(21	)%			1,072,000			68	%
Convertible notes, net		444				444			—	%			216,913			(100	)%
Subordinated debentures		107,505				107,188			—	%			106,258			1	%
Accrued interest payable		166,831				109,236			53	%			11,713			1,324	%
Other liabilities		235,575				201,920			17	%			198,570			19	%
Total liabilities	$	18,045,940			$	18,298,140			(1	)%		$	17,107,663			5	%
Stockholders’ Equity:
Common stock, $0.001 par value	$	137			$	137			—	%		$	137			—	%
Additional paid-in capital		1,436,769				1,433,788			—	%			1,428,052			1	%
Retained earnings		1,140,870				1,127,624			1	%			1,048,738			9	%
Treasury stock, at cost		(264,667	)			(264,667	)		—	%			(264,667	)		—	%
Accumulated other comprehensive loss, net		(282,685	)			(228,884	)		(24	)%			(236,535	)		(20	)%
Total stockholders’ equity		2,030,424				2,067,998			(2	)%			1,975,725			3	%
Total liabilities and stockholders’ equity	$	20,076,364			$	20,366,138			(1	)%		$	19,083,388			5	%
Common stock shares - authorized		150,000,000				150,000,000							150,000,000
Common stock shares - outstanding		120,026,220				120,014,888							119,479,253
Treasury stock shares		17,382,835				17,382,835							17,382,835

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands, except share and per share data)
	Three Months Ended																		Nine Months Ended
	9/30/2023				6/30/2023				% change			9/30/2022				% change			9/30/2023				9/30/2022				% change
Interest and fees on loans	$	229,937			$	225,671			2	%		$	175,078			31	%		$	671,543			$	452,774			48	%
Interest on investment securities		17,006				15,534			9	%			13,498			26	%			47,665				37,462			27	%
Interest on cash and deposits at other banks		28,115				25,295			11	%			142			NM				58,332				352			NM
Interest on other investments		735				684			7	%			464			58	%			2,114				1,290			64	%
Total interest income		275,793				267,184			3	%			189,182			46	%			779,654				491,878			59	%
Interest on deposits		117,854				109,724			7	%			30,667			284	%			319,926				51,563			520	%
Interest on borrowings		22,561				26,771			(16	)%			5,329			323	%			59,783				12,415			382	%
Total interest expense		140,415				136,495			3	%			35,996			290	%			379,709				63,978			493	%
Net interest income before provision for credit losses		135,378				130,689			4	%			153,186			(12	)%			399,945				427,900			(7	)%
Provision for credit losses		16,800				8,900			89	%			9,200			83	%			27,400				1,400			1,857	%
Net interest income after provision for credit losses		118,578				121,789			(3	)%			143,986			(18	)%			372,545				426,500			(13	)%
Service fees on deposit accounts		2,415				2,325			4	%			2,535			(5	)%			6,961				6,779			3	%
Net gains on sales of SBA loans		—				1,872			(100	)%			2,782			(100	)%			4,097				14,189			(71	)%
Net gains on sales of residential mortgage loans		118				82			44	%			29			307	%			264				862			(69	)%
Other income and fees		5,772				12,735			(55	)%			8,009			(28	)%			24,975				17,457			43	%
Total noninterest income		8,305				17,014			(51	)%			13,355			(38	)%			36,297				39,287			(8	)%
Salaries and employee benefits		51,033				52,305			(2	)%			53,222			(4	)%			160,507				152,025			6	%
Occupancy		7,149				6,967			3	%			6,682			7	%			21,637				21,195			2	%
Furniture and equipment		5,625				5,393			4	%			4,967			13	%			16,076				14,389			12	%
Data processing and communications		2,891				2,917			(1	)%			2,469			17	%			8,630				7,823			10	%
FDIC assessment		3,683				4,691			(21	)%			1,633			126	%			10,155				4,652			118	%
Earned interest credit		6,377				5,090			25	%			4,685			36	%			15,894				5,996			165	%
Other		10,115				9,970			1	%			10,256			(1	)%			31,661				33,572			(6	)%
Total noninterest expense		86,873				87,333			(1	)%			83,914			4	%			264,560				239,652			10	%
Income before income taxes		40,010				51,470			(22	)%			73,427			(46	)%			144,282				226,135			(36	)%
Income tax provision		9,961				13,448			(26	)%			19,679			(49	)%			37,090				59,561			(38	)%
Net income	$	30,049			$	38,022			(21	)%		$	53,748			(44	)%		$	107,192			$	166,574			(36	)%
Earnings Per Common Share - Basic	$	0.25			$	0.32						$	0.45						$	0.89			$	1.39
Earnings Per Common Share - Diluted	$	0.25			$	0.32						$	0.45						$	0.89			$	1.38
Weighted Average Shares Outstanding - Basic		120,020,567				119,953,174							119,476,035							119,843,382				119,940,044
Weighted Average Shares Outstanding - Diluted		120,374,618				120,129,359							119,996,523							120,249,952				120,595,988

Hope Bancorp, Inc. Selected Financial Data Unaudited
	For the Three Months Ended									For the Nine Months Ended
Profitability measures (annualized):	9/30/2023			6/30/2023			9/30/2022			9/30/2023			9/30/2022
ROA	0.60	%		0.74	%		1.17	%		0.72	%		1.23	%
ROE	5.78	%		7.34	%		10.58	%		6.92	%		10.85	%
ROA (PPNR) (1)	1.13	%		1.18	%		1.79	%		1.15	%		1.68	%
ROE (PPNR) (1)	10.93	%		11.65	%		16.26	%		11.08	%		14.83	%
ROTCE (1)	7.47	%		9.49	%		13.77	%		8.95	%		14.10	%
Net interest margin	2.83	%		2.70	%		3.49	%		2.84	%		3.36	%
Efficiency ratio (not annualized)	60.46	%		59.13	%		50.39	%		60.65	%		51.30	%
Noninterest expense / average assets	1.73	%		1.71	%		1.82	%		1.77	%		1.77	%
(1) ROA (PPNR), ROE (PPNR), and ROTCE are non-GAAP financial measures. Quantitative reconciliations of the most directly comparable GAAP to non-GAAP financial measures are provided in the accompanying financial information on Table Page 10.

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands)
	Three Months Ended
	9/30/2023											6/30/2023											9/30/2022
					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	$	14,550,106			$	229,937			6.27	%		$	15,105,212			$	225,671			5.99	%		$	14,925,298			$	175,078			4.65	%
Investment securities		2,275,133				17,006			2.97	%			2,243,614				15,534			2.78	%			2,366,696				13,498			2.26	%
Interest earning cash and deposits at other banks		2,106,469				28,115			5.30	%			1,996,924				25,295			5.08	%			54,870				142			1.03	%
FHLB stock and other investments		47,316				735			6.16	%			47,044				684			5.83	%			52,854				464			3.48	%
Total interest earning assets	$	18,979,024			$	275,793			5.77	%		$	19,392,794			$	267,184			5.53	%		$	17,399,718			$	189,182			4.31	%
INTEREST BEARING LIABILITIES:
Deposits:
Money market and interest bearing demand	$	4,202,076			$	36,574			3.45	%		$	4,279,819			$	34,377			3.22	%		$	6,255,271			$	19,614			1.24	%
Savings deposits		331,354				2,240			2.68	%			216,060				674			1.25	%			324,487				969			1.18	%
Time deposits		6,862,038				79,040			4.57	%			6,890,035				74,673			4.35	%			3,146,432				10,084			1.27	%
Total interest bearing deposits		11,395,468				117,854			4.10	%			11,385,914				109,724			3.87	%			9,726,190				30,667			1.25	%
FHLB and FRB borrowings		1,809,322				19,821			4.35	%			2,177,264				23,622			4.35	%			448,837				2,393			2.12	%
Convertible notes, net		444				2			1.76	%			96,621				598			2.45	%			216,762				1,322			2.39	%
Subordinated debentures		103,429				2,738			10.36	%			103,123				2,551			9.79	%			102,182				1,614			6.18	%
Total interest bearing liabilities	$	13,308,663			$	140,415			4.19	%		$	13,762,922			$	136,495			3.98	%		$	10,493,971			$	35,996			1.36	%
Noninterest bearing demand deposits		4,312,117											4,366,868											5,719,213
Total funding liabilities/cost of funds	$	17,620,780							3.16	%		$	18,129,790							3.02	%		$	16,213,184							0.88	%
Net interest income/net interest spread					$	135,378			1.58	%						$	130,689			1.55	%						$	153,186			2.95	%
Net interest margin									2.83	%										2.70	%										3.49	%
Cost of deposits:
Noninterest bearing demand deposits	$	4,312,117			$	—			—	%		$	4,366,868			$	—			—	%		$	5,719,213			$	—			—	%
Interest bearing deposits		11,395,468				117,854			4.10	%			11,385,914				109,724			3.87	%			9,726,190				30,667			1.25	%
Total deposits	$	15,707,585			$	117,854			2.98	%		$	15,752,782			$	109,724			2.79	%		$	15,445,403			$	30,667			0.79	%

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands)
	Nine Months Ended
	9/30/2023											9/30/2022
					Interest				Annualized							Interest				Annualized
	Average				Income/				Average			Average				Income/				Average
	Balance				Expense				Yield/Cost			Balance				Expense				Yield/Cost
INTEREST EARNING ASSETS:
Loans, including loans held for sale	$	14,961,058			$	671,543			6.00	%		$	14,378,774			$	452,774			4.21	%
Investment securities		2,255,839				47,665			2.83	%			2,469,858				37,462			2.03	%
Interest earning cash and deposits at other banks		1,531,561				58,332			5.09	%			133,745				352			0.35	%
FHLB stock and other investments		47,135				2,114			6.00	%			63,542				1,290			2.71	%
Total interest earning assets	$	18,795,593			$	779,654			5.55	%		$	17,045,919			$	491,878			3.86	%
INTEREST BEARING LIABILITIES:
Deposits:
Money market and interest bearing demand	$	4,603,479			$	112,349			3.26	%		$	6,360,040			$	33,970			0.71	%
Savings deposits		268,145				3,741			1.87	%			322,058				2,834			1.18	%
Time deposits		6,436,645				203,836			4.23	%			2,683,217				14,759			0.74	%
Total interest bearing deposits		11,308,269				319,926			3.78	%			9,365,315				51,563			0.74	%
FHLB and FRB borrowings		1,558,493				50,141			4.30	%			423,875				4,537			1.43	%
Convertible notes, net		103,933				1,922			2.44	%			216,538				3,967			2.42	%
Subordinated debentures		103,117				7,720			9.87	%			101,882				3,911			5.06	%
Total interest bearing liabilities	$	13,073,812			$	379,709			3.88	%		$	10,107,610			$	63,978			0.85	%
Noninterest bearing demand deposits		4,445,740											5,702,734
Total funding liabilities/cost of funds	$	17,519,552							2.90	%		$	15,810,344							0.54	%
Net interest income/net interest spread					$	399,945			1.67	%						$	427,900			3.01	%
Net interest margin									2.84	%										3.36	%
Cost of deposits:
Noninterest bearing demand deposits	$	4,445,740			$	—			—	%		$	5,702,734			$	—			—	%
Interest bearing deposits		11,308,269				319,926			3.78	%			9,365,315				51,563			0.74	%
Total deposits	$	15,754,009			$	319,926			2.72	%		$	15,068,049			$	51,563			0.46	%

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands)
	Three Months Ended																		Nine Months Ended
AVERAGE BALANCES:	9/30/2023				6/30/2023				% change			9/30/2022				% change			9/30/2023				9/30/2022				% change
Loans, including loans held for sale	$	14,550,106			$	15,105,212			(4	)%		$	14,925,298			(3	)%		$	14,961,058			$	14,378,774			4	%
Investment securities		2,275,133				2,243,614			1	%			2,366,696			(4	)%			2,255,839				2,469,858			(9	)%
Interest earning cash and deposits at other banks		2,106,469				1,996,924			5	%			54,870			3739	%			1,531,561				133,745			1045	%
Interest earning assets		18,979,024				19,392,794			(2	)%			17,399,718			9	%			18,795,593				17,045,919			10	%
Total assets		20,059,304				20,468,810			(2	)%			18,428,874			9	%			19,875,322				18,018,588			10	%
Interest bearing deposits		11,395,468				11,385,914			—	%			9,726,190			17	%			11,308,269				9,365,315			21	%
Interest bearing liabilities		13,308,663				13,762,922			(3	)%			10,493,971			27	%			13,073,812				10,107,610			29	%
Noninterest bearing demand deposits		4,312,117				4,366,868			(1	)%			5,719,213			(25	)%			4,445,740				5,702,734			(22	)%
Stockholders’ equity		2,079,092				2,072,859			—	%			2,032,362			2	%			2,066,157				2,046,351			1	%
LOAN PORTFOLIO COMPOSITION:	9/30/2023				6/30/2023				% change			9/30/2022				% change
Commercial real estate (“CRE”) loans	$	8,972,886			$	9,192,160			(2	)%		$	9,504,893			(6	)%
Commercial and industrial (“C&I”) loans		4,450,341				4,805,126			(7	)%			5,124,421			(13	)%
Residential mortgage and other loans		882,966				867,524			2	%			861,873			2	%
Loans receivable		14,306,193				14,864,810			(4	)%			15,491,187			(8	)%
Allowance for credit losses		(158,809	)			(172,996	)		(8	)%			(160,561	)		(1	)%
Loans receivable, net	$	14,147,384			$	14,691,814			(4	)%		$	15,330,626			(8	)%
CRE LOANS BY PROPERTY TYPE:	9/30/2023				6/30/2023				% change			9/30/2022				% change
Multi-tenant retail	$	1,745,430			$	1,778,068			(2	)%		$	1,904,132			(8	)%
Hotels/motels		826,732				868,286			(5	)%			1,091,047			(24	)%
Gas stations and car washes		1,037,621				1,042,290			—	%			1,056,217			(2	)%
Mixed-use facilities		813,571				834,948			(3	)%			825,289			(1	)%
Industrial warehouses		1,254,643				1,301,075			(4	)%			1,271,104			(1	)%
Multifamily		1,234,934				1,257,971			(2	)%			1,199,320			3	%
Single-tenant retail		671,921				690,418			(3	)%			728,432			(8	)%
Office		454,695				463,998			(2	)%			432,586			5	%
All other		933,339				955,106			(2	)%			996,766			(6	)%
Total CRE loans	$	8,972,886			$	9,192,160			(2	)%		$	9,504,893			(6	)%
DEPOSIT COMPOSITION:	9/30/2023				6/30/2023				% change			9/30/2022				% change
Noninterest bearing demand deposits	$	4,249,788			$	4,229,247			—	%		$	5,590,952			(24	)%
Money market and interest bearing demand		4,424,918				4,188,584			6	%			5,885,093			(25	)%
Savings deposits		430,765				224,495			92	%			317,841			36	%
Time deposits		6,634,388				6,977,026			(5	)%			3,708,323			79	%
Total deposits	$	15,739,859			$	15,619,352			1	%		$	15,502,209			2	%

Hope Bancorp, Inc. Selected Financial Data Unaudited (dollars in thousands, except share and per share data)
	Three Months Ended
NEW LOAN ORIGINATIONS:	9/30/2023				6/30/2023				9/30/2022
CRE	$	46,011			$	115,444			$	500,826
C&I		201,420				318,063				732,341
SBA loans		48,987				38,051				47,428
Residential mortgage and other loans		32,920				19,016				68,099
Total new loan originations	$	329,338			$	490,574			$	1,348,694
CAPITAL & CAPITAL RATIOS:	9/30/2023				6/30/2023				9/30/2022
Total stockholders’ equity	$	2,030,424			$	2,067,998			$	1,975,725
Total capital	$	2,105,754			$	2,102,625			$	2,000,653
Common equity tier 1 ratio		11.67	%			11.05	%			10.32	%
Tier 1 capital ratio		12.32	%			11.68	%			10.92	%
Total capital ratio		13.23	%			12.64	%			11.72	%
Leverage ratio		9.83	%			9.57	%			10.25	%
Total risk weighted assets	$	15,912,742			$	16,640,323			$	17,065,355
Book value per common share	$	16.92			$	17.23			$	16.54
TCE per share (1)	$	13.01			$	13.32			$	12.60
TCE ratio (1)		7.96	%			8.04	%			8.09	%
(1) TCE per share and TCE ratio are non-GAAP financial measures. Quantitative reconciliations 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																				Nine Months Ended
ALLOWANCE FOR CREDIT LOSSES CHANGES:	9/30/2023				6/30/2023				3/31/2023				12/31/2022				9/30/2022				9/30/2023				9/30/2022
Balance at beginning of period	$	172,996			$	163,544			$	162,359			$	160,561			$	151,580			$	162,359			$	140,550
ASU 2022-02 day 1 adoption impact		—				—				(407	)			—				—				(407	)			—
Provision for credit losses		16,800				8,900				1,700				8,200				9,200				27,400				1,400
Recoveries		2,938				1,531				387				3,222				331				4,856				21,376
Charge offs		(33,925	)			(979	)			(495	)			(9,624	)			(550	)			(35,399	)			(2,765	)
Balance at end of period	$	158,809			$	172,996			$	163,544			$	162,359			$	160,561			$	158,809			$	160,561
	9/30/2023				6/30/2023				3/31/2023				12/31/2022				9/30/2022
Allowance for unfunded loan commitments	$	3,143			$	3,081			$	2,971			$	1,351			$	1,231
	Three Months Ended																				Nine Months Ended
NET LOAN CHARGE OFFS (RECOVERIES):	9/30/2023				6/30/2023				3/31/2023				12/31/2022				9/30/2022				9/30/2023				9/30/2022
CRE loans	$	(2,227	)		$	438			$	(109	)		$	2,022			$	9			$	(1,898	)		$	(16,917	)
C&I loans		33,145				(1,091	)			196				4,174				115				32,250				(1,875	)
Residential mortgage and other loans		69				101				21				206				95				191				181
Net loan charge offs (recoveries)	$	30,987			$	(552	)		$	108			$	6,402			$	219			$	30,543			$	(18,611	)
Net charge offs (recoveries)/average loans receivable (annualized)		0.85	%			(0.01	)%			—	%			0.17	%			0.01	%			0.27	%			(0.17	)%

NONPERFORMING ASSETS:	9/30/2023				6/30/2023				3/31/2023				12/31/2022				9/30/2022
Loans on nonaccrual status (1)	$	39,081			$	61,252			$	78,861			$	49,687			$	64,571
Accruing delinquent loans past due 90 days or more		21,579				15,182				364				401				5,306
Accruing troubled debt restructured loans (2)		—				—				—				16,931				25,631
Total nonperforming loans		60,660				76,434				79,225				67,019				95,508
Other real estate owned (“OREO”)		1,043				938				938				2,418				1,480
Total nonperforming assets	$	61,703			$	77,372			$	80,163			$	69,437			$	96,988
Nonperforming assets/total assets		0.31	%			0.38	%			0.39	%			0.36	%			0.51	%
Nonperforming assets/loans receivable & OREO		0.43	%			0.52	%			0.53	%			0.45	%			0.63	%
Nonperforming assets/total capital		3.04	%			3.74	%			3.89	%			3.44	%			4.91	%
Nonperforming loans/loans receivable		0.42	%			0.51	%			0.53	%			0.44	%			0.62	%
Nonaccrual loans/loans receivable		0.27	%			0.41	%			0.52	%			0.32	%			0.42	%
Allowance for credit losses/loans receivable		1.11	%			1.16	%			1.09	%			1.05	%			1.04	%
Allowance for credit losses/nonperforming loans		261.80	%			226.33	%			206.43	%			242.26	%			168.11	%
(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $12.1 million, $11.9 million, $7.6 million, $9.8 million, and $9.9 million, at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022, respectively.
(2) The Company adopted ASU 2022-02 in 2023, which eliminated the concept of TDR from GAAP; therefore, accruing TDR loans are no longer included in nonperforming loans.
NONACCRUAL LOANS BY TYPE:	9/30/2023				6/30/2023				3/31/2023				12/31/2022				9/30/2022
CRE loans	$	26,687			$	29,270			$	44,376			$	33,915			$	47,807
C&I loans		4,234				23,042				26,191				5,620				7,675
Residential mortgage and other loans		8,160				8,940				8,294				10,152				9,089
Total nonaccrual loans	$	39,081			$	61,252			$	78,861			$	49,687			$	64,571

ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE:	9/30/2023				6/30/2023				3/31/2023				12/31/2022				9/30/2022
30 - 59 days past due	$	2,906			$	9,295			$	7,662			$	7,049			$	13,092
60 - 89 days past due		506				178				249				2,243				4,933
Total accruing delinquent loans 30-89 days past due	$	3,412			$	9,473			$	7,911			$	9,292			$	18,025
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE:	9/30/2023				6/30/2023				3/31/2023				12/31/2022				9/30/2022
CRE loans	$	611			$	7,339			$	3,652			$	4,115			$	9,694
C&I loans		1,168				990				419				3,300				6,165
Residential mortgage and other loans		1,633				1,144				3,840				1,877				2,166
Total accruing delinquent loans 30-89 days past due	$	3,412			$	9,473			$	7,911			$	9,292			$	18,025
CRITICIZED LOANS:	9/30/2023				6/30/2023				3/31/2023				12/31/2022				9/30/2022
Special mention loans	$	186,600			$	210,806			$	166,472			$	157,263			$	79,399
Substandard loans		174,161				134,203				138,224				104,073				204,713
Total criticized loans	$	360,761			$	345,009			$	304,696			$	261,336			$	284,112

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. Reconciliations of the most directly comparable GAAP to non-GAAP financial measures utilized by management are provided below.
	Three Months Ended												Nine Months Ended
RETURN ON AVERAGE TANGIBLE COMMON EQUITY	9/30/2023				6/30/2023				9/30/2022				9/30/2023				9/30/2022
Average stockholders’ equity	$	2,079,092			$	2,072,859			$	2,032,362			$	2,066,157			$	2,046,351
Less: Average goodwill and core deposit intangible assets, net		(469,079	)			(469,515	)			(470,941	)			(469,525	)			(471,424	)
Average TCE	$	1,610,013			$	1,603,344			$	1,561,421			$	1,596,632			$	1,574,927
Net income	$	30,049			$	38,022			$	53,748			$	107,192			$	166,574
ROTCE (annualized)		7.47	%			9.49	%			13.77	%			8.95	%			14.10	%
TANGIBLE COMMON EQUITY	9/30/2023				6/30/2023				9/30/2022
Total stockholders’ equity	$	2,030,424			$	2,067,998			$	1,975,725
Less: Goodwill and core deposit intangible assets, net		(468,832	)			(469,280	)			(470,662	)
TCE	$	1,561,592			$	1,598,718			$	1,505,063
Total assets	$	20,076,364			$	20,366,138			$	19,083,388
Less: Goodwill and core deposit intangible assets, net		(468,832	)			(469,280	)			(470,662	)
Tangible assets	$	19,607,532			$	19,896,858			$	18,612,726
TCE ratio		7.96	%			8.04	%			8.09	%
Common shares outstanding		120,026,220				120,014,888				119,479,253
TCE per share	$	13.01			$	13.32			$	12.60
	Three Months Ended												Nine Months Ended
PRE-PROVISION NET REVENUE	9/30/2023				6/30/2023				9/30/2022				9/30/2023				9/30/2022
Net interest income before provision for credit losses	$	135,378			$	130,689			$	153,186			$	399,945			$	427,900
Noninterest income		8,305				17,014				13,355				36,297				39,287
Revenue		143,683				147,703				166,541				436,242				467,187
Less: Noninterest expense		86,873				87,333				83,914				264,560				239,652
PPNR	$	56,810			$	60,370			$	82,627			$	171,682			$	227,535
Average assets	$	20,059,304			$	20,468,810			$	18,428,874			$	19,875,322			$	18,018,588
ROA (PPNR) (annualized)		1.13	%			1.18	%			1.79	%			1.15	%			1.68	%
Average stockholders’ equity		2,079,092				2,072,859				2,032,362				2,066,157				2,046,351
ROE (PPNR) (annualized)		10.93	%			11.65	%			16.26	%			11.08	%			14.83	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231023356482/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 is the net interest margin in Q3 2023?

Net interest margin expanded by 13 basis points in Q3 2023.

What is the total capital ratio in Q3 2023?

The total capital ratio increased to 13.23% in Q3 2023.

What is the expected cost savings from the strategic reorganization?

The strategic reorganization is expected to generate over $40 million in cost savings.

What is the growth rate of total deposits?

Total deposits grew 1% to $15.7 billion in Q3 2023.

Why did net income decline compared to the previous quarter?

Net income declined due to a provision for credit losses and the absence of certain one-time gains.