Hope Bancorp Reports 2021 Second Quarter Financial Results

Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its second quarter and six months ended June 30, 2021.

For the three months ended June 30, 2021, net income increased 23% to $53.8 million, or $0.43 per diluted common share, from $43.7 million, or $0.35 per diluted common share, in the preceding first quarter and increased 101% from $26.8 million, or $0.22 per diluted common share, in the year-ago second quarter.

“Second quarter results underscore the sound management of our operations as the economy gradually recovers from the impact of the COVID-19 pandemic,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “The composition of our deposits continued to improve with meaningful increases in our lower-cost deposit categories, and our cost of interest bearing deposits declined another 8 basis points quarter-over-quarter. Together with higher average yield on loans, this supported another quarter of net interest margin expansion. After five quarters of significant reserve build under the CECL methodology, we recorded a negative provision for credit losses of $7.0 million driven largely by the improved macroeconomic factors. We also sold $30 million of SBA 7(a) loans given the near record-high premiums available in the secondary markets, and recorded a gain on sale of $2.4 million. All of these factors contributed to a 23% quarter-over-quarter increase in net income of $53.8 million for the 2021 second quarter.

“Loan originations for the quarter were also strong at a record high $894 million and reflected a 61% increase from the preceding first quarter when excluding the second round of PPP originations. However, a considerable decrease in warehouse line utilizations reflecting industry trends, a strategic sale of $119 million of higher-risk hotel/motel loans, PPP loan forgiveness of $164 million, and residential mortgage and SBA 7(a) loan sales contributed to a 2% quarter-over-quarter decrease in loans receivable. While some of these headwinds to net loan growth are expected to persist near-term, we have a robust loan pipeline supported by strong macroeconomic forecasts, and we believe we are well positioned to deliver enhanced profitability for 2021,” said Kim.

Q2 2021 Highlights

  • Net interest income before provision for credit losses increased 3% quarter-over-quarter to $126.6 million.
  • Net interest margin expanded 5 basis points quarter-over-quarter, largely reflecting an increase in the average yield on loans and lower cost of deposits.
  • Noninterest bearing demand deposits increased 4% quarter-over-quarter and accounted for 38% of total deposits.
  • Cost of interest bearing deposits decreased 8 basis points and total cost of deposits decreased 6 basis points quarter-over-quarter marking the seventh consecutive quarter of declining deposit costs.
  • Company recorded a negative provision for credit losses of $7.0 million.
  • Net income increased 23% quarter-over-quarter and totaled $53.8 million, or $0.43 per diluted common share.
  • Pre-tax pre-provision income increased 6% quarter-over-quarter to $64.5 million.
  • Return on average assets increased to 1.25% from 1.02% in Q1 2021, and return on average equity increased to 10.41% from 8.53%.
  • Loan originations increased to a record high $894.1 million from $847.1 million in the first quarter of 2021.
  • Loans receivable decreased 2% to $13.42 billion, reflecting decreases in warehouse line utilizations, the sales of $30.0 million of SBA loans, $42.6 million of residential mortgage loans and an aggregate $119.3 million of hotel/motel loans, along with payoffs and pay downs.

Financial Highlights

(dollars in thousands, except per share data) (unaudited)

At or for the Three Months Ended

6/30/2021

3/31/2021

6/30/2020

Net income

$

53,763

$

43,687

$

26,753

Diluted earnings per share

$

0.43

$

0.35

$

0.22

Net interest income before provision (credit) for credit losses

$

126,577

$

122,579

$

109,814

Net interest margin

3.11

%

3.06

%

2.79

%

Noninterest income

$

11,076

$

8,804

$

11,240

Noninterest expense

$

73,123

$

70,431

$

67,030

Net loans receivable

$

13,234,849

$

13,494,686

$

12,710,063

Deposits

$

14,726,230

$

14,301,269

$

14,123,532

Total cost of deposits

0.30

%

0.36

%

0.87

%

Nonaccrual loans(1)

$

111,008

$

109,858

$

82,137

Nonperforming loans to loans receivable(1)

1.24

%

1.11

%

0.98

%

ACL to loans receivable

1.41

%

1.52

%

1.26

%

ACL to nonaccrual loans(1)

170.67

%

189.28

%

196.95

%

ACL to nonperforming assets(1)

103.11

%

121.94

%

109.62

%

Provision (credit) for credit losses

$

(7,000

)

$

3,300

$

17,500

Net charge offs

$

11,491

$

2,098

$

652

Return on average assets (“ROA”)

1.25

%

1.02

%

0.64

%

Return on average equity (“ROE”)

10.41

%

8.53

%

5.31

%

Return on average tangible common equity (“ROTCE”)(2)

13.50

%

11.11

%

6.94

%

Noninterest expense / average assets

1.70

%

1.65

%

1.60

%

Efficiency ratio

53.12

%

53.61

%

55.37

%

(1)

Excludes delinquent SBA loans that are guaranteed and currently in liquidation.

(2)

Return on average tangible common equity is a non-GAAP financial measure. A reconciliation of the Company’s return on average tangible common equity is provided in the accompanying financial information on Table Page 10.

Operating Results for the 2021 Second Quarter

Net interest income before the negative provision for credit losses for the 2021 second quarter increased 3% to $126.6 million from $122.6 million in the 2021 first quarter and increased 15% from $109.8 million in the 2020 second quarter. The Company attributed the increase in net interest income primarily to meaningful reductions in interest expense due to lower trending cost of deposits and higher interest income on average loans.

The net interest margin for the 2021 second quarter increased 5 basis points to 3.11% from 3.06% in the preceding 2021 first quarter, reflecting the benefits of lower deposit costs and higher average yield on loans. The net interest margin in the prior-year second quarter was 2.79%.

The weighted average yield on loans for the 2021 second quarter increased 4 basis points to 3.98% from 3.94% in the 2021 first quarter, reflecting the accelerated recognition of net fees due to PPP loan forgiveness. For the 2020 second quarter, the weighted average yield on loans was 4.23%.

The weighted average cost of deposits for the 2021 second quarter decreased for the seventh consecutive quarter to 0.30%, representing a 6 basis point decrease from 0.36% for the 2021 first quarter and a 57 basis point decrease from 0.87% for the 2020 second quarter. The Company attributed the significant improvements in the weighted average cost of deposits to a continuing shift in its deposit mix to lower-cost core deposits and the ongoing downward repricing of interest bearing deposits. The cost of interest bearing deposits was 0.48%, 0.56% and 1.17% for the quarters ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.

Noninterest income for the 2021 second quarter increased to $11.1 million from $8.8 million for the 2021 first quarter. In response to the significantly increased premiums available in the secondary market for SBA 7(a) loans, the Company sold $30.0 million of the guaranteed portfolio of its SBA 7(a) loans during the 2021 second quarter and recorded $2.4 million in net gains on sales of SBA loans, versus none in the preceding first quarter. This was partially offset by a reduction in net gains on sales of other loans, representing residential mortgage loans of $1.0 million for the 2021 second quarter, compared with $2.1 million in the preceding first quarter. Noninterest income in the year-ago second quarter totaled $11.2 million.

Noninterest expense for the 2021 second quarter increased to $73.1 million from $70.4 million in the preceding first quarter and $67.0 million in the year-ago second quarter.

Salaries and employee benefits expense for the 2021 second quarter increased to $42.3 million from $41.2 million in the preceding first quarter, largely reflecting annual merit increases effective at the beginning of the second quarter.

Professional fees for the three months ended June 30, 2021 increased $1.5 million quarter-over-quarter reflecting higher litigation expenses related to existing cases. The Company recorded a one-time $2.1 million impairment during the 2021 second quarter related to the disposition of a licensed software platform. These factors which contributed to higher noninterest expense for the 2021 second quarter were partially offset by a $2.2 million reduction in credit related expenses quarter-over-quarter.

The Company’s efficiency ratio for the 2021 second quarter improved to 53.12% from 53.61% for the preceding first quarter and from 55.37% for the year-ago second quarter. Noninterest expense as a percentage of average assets increased to 1.70% for the 2021 second quarter from 1.65% for the 2021 first quarter and from 1.60% for the 2020 second quarter.

The effective tax rate for the 2021 second quarter increased to 24.8% from 24.2% in the preceding quarter, reflecting the Company’s updated projection for increased annual pretax income than previously budgeted. In the year-ago quarter, the effective tax rate was 26.8%.

Balance Sheet Summary

New loan originations funded during the 2021 second quarter increased to $894.1 million from $847.1 million in the preceding first quarter and $832.0 million in the 2020 second quarter. Following are the components of new loan production for the quarters ended June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)

For the Three Months Ended

6/30/2021

3/31/2021

6/30/2020

Commercial real estate

$

454,857

$

277,704

$

213,246

Commercial

288,726

156,622

58,458

SBA

77,652

36,802

5,901

SBA PPP

19,816

304,727

480,141

Consumer

275

1,473

1,920

Residential mortgage

52,766

69,784

72,343

Total new loan originations

$

894,092

$

847,112

$

832,009

During the 2021 second quarter, the Company acquired $95.6 million of 30-year fixed rate residential mortgage loans. In addition to the sale of $42.6 million in residential mortgage loans and $30.0 million of SBA 7(a) loans during the 2021 second quarter, the Company completed an aggregate $119.3 million in sales of loans from its hotel/motel portfolio that were viewed to be higher risk requiring a longer recovery period from the impact of the COVID-19 pandemic.

Altogether with aggregate payoffs and pay downs, first round PPP loan forgiveness of $164.5 million and a $231.0 million quarter-over-quarter decrease in warehouse line utilizations, loans receivable at June 30, 2021 decreased 2% to $13.42 billion from $13.70 billion at March 31, 2021. Loans receivable at June 30, 2020 amounted to $12.87 billion.

Total deposits at June 30, 2021 increased 3% to $14.73 billion from $14.30 billion at March 31, 2021 and increased 4% from $14.12 billion at June 30, 2020. Quarter-over-quarter, noninterest bearing demand deposits as of June 30, 2021 increased 4% and money market and other interest bearing demand deposit balances increased 16%, while time deposits decreased 16%. On a year-over-year basis, noninterest bearing demand deposits as of June 30, 2021 increased 40% and money market and NOW account balances increased 20%, while time deposits decreased 40%.

Following is the deposit composition as of June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)

6/30/2021

3/31/2021

% change

6/30/2020

% change

Noninterest bearing demand deposits

$

5,638,115

$

5,427,174

4

%

$

4,036,383

40

%

Money market and other

5,786,697

5,009,419

16

%

4,831,679

20

%

Saving deposits

308,651

305,326

1

%

296,614

4

%

Time deposits

2,992,767

3,559,350

(16

)%

4,958,856

(40

)%

Total deposit balances

$

14,726,230

$

14,301,269

3

%

$

14,123,532

4

%

Following is the deposit composition as a percentage of total deposits and a breakdown of cost of deposits as of and for the quarters ended June 30, 2021, March 31, 2021 and June 30, 2020:

Deposit Breakdown

Cost of Deposits

(unaudited)

6/30/2021

3/31/2021

6/30/2020

Q2 2021

Q1 2021

Q2 2020

Noninterest bearing demand deposits

38.3

%

38.0

%

28.6

%

%

%

%

Money market and other

39.2

%

35.0

%

34.2

%

0.43

%

0.42

%

0.62

%

Saving deposits

2.1

%

2.1

%

2.1

%

1.15

%

1.17

%

1.22

%

Time deposits

20.4

%

24.9

%

35.1

%

0.49

%

0.69

%

1.71

%

Total deposit balances

100.0

%

100.0

%

100.0

%

0.30

%

0.36

%

0.87

%

Allowance for Credit Losses

For the 2021 second quarter, the Company recorded a negative provision for credit losses of $7.0 million compared with provision for credit losses of $3.3 million in the preceding first quarter and $17.5 million for the 2020 second quarter. The allowance release in the 2021 second quarter largely reflects improved macroeconomic forecasts, together with the reduction in its loan portfolio and the $119.3 million in sales from the hotel/motel portfolio.

Following is the allowance for credit losses and allowance coverage ratios as of June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)

6/30/2021

3/31/2021

6/30/2020

Allowance for credit losses

$

189,452

$

207,943

$

161,771

Allowance for credit loss/loans receivable

1.41

%

1.52

%

1.26

%

Allowance for credit losses/nonperforming loans

113.36

%

136.79

%

127.79

%

Credit Quality

Following are the components of nonperforming assets as of June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)

6/30/2021

3/31/2021

6/30/2020

Loans on nonaccrual status (1)

$

111,008

$

109,858

$

82,137

Delinquent loans 90 days or more on accrual status

4,759

384

430

Accruing troubled debt restructured loans

51,360

41,773

44,026

Total nonperforming loans

167,127

152,015

126,593

Other real estate owned

16,619

18,515

20,983

Total nonperforming assets

$

183,746

$

170,530

$

147,576

(1)

Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $23.6 million, $25.0 million and $30.3 million, at June 30, 2021, March 31, 2021 and June 30, 2020, respectively.

The increase in delinquent loans 90 days or more on accrual status as of June 30, 2021 largely reflects one loan which matured during the 2021 second quarter. This loan was renewed early in the third quarter of 2021 and is currently performing. The increase in accruing troubled debt restructured loans largely reflects maturity concessions for two credit relationships.

Following are the components of criticized loan balances as of June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)

6/30/2021

3/31/2021

6/30/2020

Special mention

$

294,559

$

280,974

$

127,149

Substandard

380,955

379,048

299,357

Doubtful/loss

11

Total criticized loans

$

675,514

$

660,022

$

427,517

The modest increase in special mention loans quarter-over-quarter primarily reflects the addition of two large credit relationships. The first is a hotel/motel relationship that was downgraded from the COVID-watch grade to Special Mention following the expiration of the modification. The second is a construction loan that is taking longer to stabilize following the completion of the project due to the pandemic-related environment.

Following are net charge offs and net charge offs to average loans receivable on an annualized basis for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)

For the Three Months Ended

6/30/2021

3/31/2021

6/30/2020

Net charge offs

$

11,491

$

2,098

$

652

Net charge offs/average loans receivable (annualized)

0.35

%

0.06

%

0.02

%

Net charge offs for the 2021 second quarter includes charge offs of $11.8 million, all of which was previously reserved, from the sale of $119.3 million in hotel/motel loans during the 2021 second quarter.

Capital

At June 30, 2021, the Company and the Bank continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” financial institution. Following are capital ratios for the Company as of June 30, 2021, March 31, 2021 and June 30, 2020:

Hope Bancorp, Inc. (unaudited)

6/30/2021

3/31/2021

6/30/2020

Minimum Guideline for
“Well-Capitalized”
Bank

Common Equity Tier 1 Capital

11.32%

11.08%

11.50%

6.50%

Tier 1 Leverage Ratio

10.34%

10.15%

10.08%

5.00%

Tier 1 Risk-Based Ratio

12.02%

11.78%

12.24%

8.00%

Total Risk-Based Ratio

13.16%

13.03%

13.23%

10.00%

Following are tangible common equity (“TCE”) per share and TCE as a percentage of tangible assets as of June 30, 2021, March 31, 2021 and June 30, 2020:

(unaudited)

6/30/2021

3/31/2021

6/30/2020

Tangible common equity per share (1)

$13.10

$12.73

$12.62

Tangible common equity to tangible assets (2)

9.53%

9.40%

9.32%

(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. Both tangible common equity and tangible common equity per share are non-GAAP financial measures. A reconciliation of the Company’s total stockholders’ equity to tangible common equity is provided in the accompanying financial information on Table Page 10.

(2)

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 to tangible assets is a non-GAAP financial measure. A reconciliation of the Company’s total assets to tangible assets is 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 Wednesday, July 21, 2021 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its second quarter ended June 30, 2021. 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 July 28, 2021, replay access code 10158798.

About Hope Bancorp, Inc.

Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $17.47 billion in total assets as of June 30, 2021. 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 and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; 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 press 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 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:

6/30/2021

3/31/2021

% change

6/30/2020

% change

Cash and due from banks

$

836,957

$

376,666

122

%

$

1,468,949

(43

)%

Securities available for sale, at fair value

2,274,170

2,233,744

2

%

1,887,604

20

%

Federal Home Loan Bank (“FHLB”) stock and other investments

94,550

102,242

(8

)%

98,357

(4

)%

Loans held for sale, at the lower of cost or fair value

54,245

19,672

176

%

11,350

378

%

Loans receivable

13,424,301

13,702,629

(2

)%

12,871,834

4

%

Allowance for credit losses

(189,452

)

(207,943

)

(9

)%

(161,771

)

17

%

Net loans receivable

13,234,849

13,494,686

(2

)%

12,710,063

4

%

Accrued interest receivable

51,886

60,498

(14

)%

52,859

(2

)%

Premises and equipment, net

45,302

47,918

(5

)%

51,029

(11

)%

Bank owned life insurance

76,428

77,089

(1

)%

77,050

(1

)%

Goodwill

464,450

464,450

%

464,450

%

Servicing assets

11,566

12,084

(4

)%

14,164

(18

)%

Other intangible assets, net

8,689

9,198

(6

)%

10,770

(19

)%

Other assets

316,535

300,613

5

%

322,417

(2

)%

Total assets

$

17,469,627

$

17,198,860

2

%

$

17,169,062

2

%

Liabilities:

Deposits

$

14,726,230

$

14,301,269

3

%

$

14,123,532

4

%

FHLB advances

200,000

400,000

(50

)%

500,000

(60

)%

Convertible notes, net

215,739

215,504

%

201,987

7

%

Subordinated debentures

104,762

104,469

%

103,602

1

%

Accrued interest payable

4,946

8,611

(43

)%

26,093

(81

)%

Other liabilities

125,080

123,426

1

%

183,072

(32

)%

Total liabilities

$

15,376,757

$

15,153,279

1

%

$

15,138,286

2

%

Stockholders’ Equity:

Common stock, $0.001 par value

$

136

$

136

%

$

136

%

Capital surplus

1,418,135

1,417,137

%

1,430,757

(1

)%

Retained earnings

859,548

823,085

4

%

761,734

13

%

Treasury stock, at cost

(200,000

)

(200,000

)

%

(200,000

)

%

Accumulated other comprehensive gain, net

15,051

5,223

188

%

38,149

(61

)%

Total stockholders’ equity

2,092,870

2,045,581

2

%

2,030,776

3

%

Total liabilities and stockholders’ equity

$

17,469,627

$

17,198,860

2

%

$

17,169,062

2

%

Common stock shares - authorized

150,000,000

150,000,000

150,000,000

Common stock shares - outstanding

123,673,832

123,480,494

123,239,276

Treasury stock shares

12,661,581

12,661,581

12,661,581

Hope Bancorp, Inc.

Selected Financial Data

Unaudited (dollars in thousands, except share and per share data)

 

Three Months Ended

Six Months Ended

6/30/2021

3/31/2021

% change

6/30/2020

% change

6/30/2021

6/30/2020

% change

Interest and fees on loans

$

131,823

$

129,736

2

%

$

134,190

(2

)%

$

261,559

$

288,420

(9

)%

Interest on securities

7,713

7,915

(3

)%

9,891

(22

)%

15,628

20,500

(24

)%

Interest on federal funds sold and other investments

668

642

4

%

980

(32

)%

1,310

3,009

(56

)%

Total interest income

140,204

138,293

1

%

145,061

(3

)%

278,497

311,929

(11

)%

Interest on deposits

10,696

12,770

(16

)%

29,451

(64

)%

23,466

70,564

(67

)%

Interest on other borrowings and convertible notes

2,931

2,944

%

5,796

(49

)%

5,875

12,260

(52

)%

Total interest expense

13,627

15,714

(13

)%

35,247

(61

)%

29,341

82,824

(65

)%

Net interest income before provision (credit) for credit losses

126,577

122,579

3

%

109,814

15

%

249,156

229,105

9

%

Provision (credit) for credit losses

(7,000

)

3,300

N/A

17,500

N/A

(3,700

)

45,500

N/A

Net interest income after provision for credit losses

133,577

119,279

12

%

92,314

45

%

252,856

183,605

38

%

Service fees on deposit accounts

1,777

1,790

(1

)%

2,583

(31

)%

3,567

6,716

(47

)%

International service fees

795

841

(5

)%

667

19

%

1,636

1,456

12

%

Loan servicing fees, net

934

1,044

(11

)%

1,106

(16

)%

1,978

1,471

34

%

Wire transfer fees

923

844

9

%

820

13

%

1,767

1,818

(3

)%

Net gains on sales of SBA loans

2,375

100

%

100

%

2,375

100

%

Net gains on sales of other loans

1,028

2,096

(51

)%

1,678

(39

)%

3,124

3,533

(12

)%

Other income and fees

3,244

2,189

48

%

4,386

(26

)%

5,433

9,510

(43

)%

Total noninterest income

11,076

8,804

26

%

11,240

(1

)%

19,880

24,504

(19

)%

Salaries and employee benefits

42,309

41,216

3

%

38,850

9

%

83,525

81,352

3

%

Occupancy

7,067

6,967

1

%

7,043

%

14,034

14,453

(3

)%

Furniture and equipment

4,822

4,186

15

%

4,654

4

%

9,008

8,913

1

%

Advertising and marketing

2,097

1,625

29

%

1,315

59

%

3,722

2,988

25

%

Data processing and communications

2,411

2,737

(12

)%

2,274

6

%

5,148

4,905

5

%

Professional fees

4,395

2,903

51

%

1,510

191

%

7,298

4,810

52

%

FDIC assessment

1,284

1,255

2

%

1,652

(22

)%

2,539

3,211

(21

)%

Credit related expenses

43

2,218

(98

)%

1,361

(97

)%

2,261

3,023

(25

)%

OREO expense, net

298

281

6

%

1,338

(78

)%

579

2,181

(73

)%

Software impairment

2,146

100

%

100

%

2,146

100

%

Other

6,251

7,043

(11

)%

7,033

(11

)%

13,294

13,334

%

Total noninterest expense

73,123

70,431

4

%

67,030

9

%

143,554

139,170

3

%

Income before income taxes

71,530

57,652

24

%

36,524

96

%

129,182

68,939

87

%

Income tax provision

17,767

13,965

27

%

9,771

82

%

31,732

16,233

95

%

Net income

$

53,763

$

43,687

23

%

$

26,753

101

%

$

97,450

$

52,706

85

%

Earnings Per Common Share:

Basic

$

0.44

$

0.35

$

0.22

$

0.79

$

0.43

Diluted

$

0.43

$

0.35

$

0.22

$

0.78

$

0.42

Weighted Average Shares Outstanding:

Basic

123,592,695

123,324,745

123,200,127

123,459,461

123,747,727

Diluted

124,323,888

124,336,130

123,430,891

124,334,227

124,054,291

Hope Bancorp, Inc.

Selected Financial Data

Unaudited (dollars in thousands, except share and per share data)

 

For the Three Months Ended
(Annualized)

For the Six Months Ended
(Annualized)

Profitability measures:

6/30/2021

3/31/2021

6/30/2020

6/30/2021

6/30/2020

ROA

1.25

%

1.02

%

0.64

%

1.14

%

0.65

%

ROE

10.41

%

8.53

%

5.31

%

9.48

%

5.21

%

ROTCE (1)

13.50

%

11.11

%

6.94

%

12.31

%

6.82

%

Net interest margin

3.11

%

3.06

%

2.79

%

3.09

%

3.04

%

Efficiency ratio

53.12

%

53.61

%

55.37

%

53.36

%

54.88

%

Noninterest expense / average assets

1.70

%

1.65

%

1.60

%

1.68

%

1.73

%

(1) Average tangible 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.

Three Months Ended

Six Months Ended

Pre-tax acquisition accounting adjustments:

6/30/2021

3/31/2021

6/30/2020

6/30/2021

6/30/2020

Accretion on purchased non-impaired loans

$

366

$

705

$

658

$

1,071

$

1,717

Accretion on purchased credit deteriorated/purchased credit impaired loans

2,188

2,255

3,046

4,443

12,495

Amortization of premium on low income housing tax credits

(74

)

(73

)

(70

)

(147

)

(141

)

Accretion of discount on acquired subordinated debt

(293

)

(291

)

(284

)

(584

)

(567

)

Amortization of core deposit intangibles

(509

)

(509

)

(532

)

(1,018

)

(1,063

)

Total acquisition accounting adjustments

$

1,678

$

2,087

$

2,818

$

3,765

$

12,441

Hope Bancorp, Inc.

Selected Financial Data

Unaudited (dollars in thousands)

 

Three Months Ended

6/30/2021

3/31/2021

6/30/2020

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

$

13,293,591

$

131,823

3.98

%

$

13,346,264

$

129,736

3.94

%

$

12,755,088

$

134,190

4.23

%

Securities available for sale

2,253,135

7,713

1.37

%

2,267,409

7,915

1.42

%

1,750,156

9,891

2.27

%

FHLB stock and other investments

759,182

668

0.35

%

640,392

642

0.41

%

1,317,049

980

0.30

%

Total interest earning assets

$

16,305,908

$

140,204

3.45

%

$

16,254,065

$

138,293

3.45

%

$

15,822,293

$

145,061

3.69

%

INTEREST BEARING LIABILITIES:

Deposits:

Demand, interest bearing

$

5,484,047

$

5,909

0.43

%

$

5,256,579

$

5,490

0.42

%

$

4,903,786

$

7,563

0.62

%

Savings

308,530

887

1.15

%

301,184

870

1.17

%

284,050

862

1.22

%

Time deposits

3,222,457

3,900

0.49

%

3,767,109

6,410

0.69

%

4,954,446

21,026

1.71

%

Total interest bearing deposits

9,015,034

10,696

0.48

%

9,324,872

12,770

0.56

%

10,142,282

29,451

1.17

%

FHLB advances

202,198

631

1.25

%

215,889

642

1.21

%

593,407

2,238

1.52

%

Convertible notes, net

215,599

1,323

2.43

%

215,002

1,322

2.46

%

201,169

2,358

4.64

%

Subordinated debentures

100,701

977

3.84

%

100,392

980

3.90

%

99,534

1,200

4.77

%

Total interest bearing liabilities

$

9,533,532

$

13,627

0.57

%

$

9,856,155

$

15,714

0.65

%

$

11,036,392

$

35,247

1.28

%

Noninterest bearing demand deposits

5,445,457

5,052,532

3,510,783

Total funding liabilities/cost of funds

$

14,978,989

0.36

%

$

14,908,687

0.43

%

$

14,547,175

0.97

%

Net interest income/net interest spread

$

126,577

2.88

%

$

122,579

2.80

%

$

109,814

2.41

%

Net interest margin

3.11

%

3.06

%

2.79

%

Cost of deposits:

Noninterest bearing demand deposits

$

5,445,457

$

%

$

5,052,532

$

%

$

3,510,783

$

%

Interest bearing deposits

9,015,034

10,696

0.48

%

9,324,872

12,770

0.56

%

10,142,282

29,451

1.17

%

Total deposits

$

14,460,491

$

10,696

0.30

%

$

14,377,404

$

12,770

0.36

%

$

13,653,065

$

29,451

0.87

%

Hope Bancorp, Inc.

Selected Financial Data

Unaudited (dollars in thousands)

Six Months Ended

6/30/2021

6/30/2020

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

$

13,319,782

$

261,559

3.96

%

$

12,507,468

$

288,420

4.64

%

Securities available for sale

2,260,233

15,628

1.39

%

1,731,094

20,500

2.38

%

FHLB stock and other investments

700,115

1,310

0.38

%

918,179

3,009

0.66

%

Total interest earning assets

$

16,280,130

$

278,497

3.45

%

$

15,156,741

$

311,929

4.14

%

INTEREST BEARING LIABILITIES:

Deposits:

Demand, interest bearing

$

5,370,941

$

11,399

0.43

%

$

4,554,096

$

22,443

0.99

%

Savings

304,877

1,757

1.16

%

279,063

1,670

1.20

%

Time deposits

3,493,278

10,310

0.60

%

4,927,425

46,451

1.90

%

Total interest bearing deposits

9,169,096

23,466

0.52

%

9,760,584

70,564

1.45

%

FHLB advances

209,006

$

1,273

1.23

%

594,148

4,885

1.65

%

Convertible notes, net

215,302

2,645

2.44

%

200,565

4,704

4.64

%

Subordinated debentures

100,547

1,957

3.87

%

99,393

2,671

5.32

%

Total interest bearing liabilities

$

9,693,951

$

29,341

0.61

%

$

10,654,690

$

82,824

1.56

%

Noninterest bearing demand deposits

5,250,080

3,236,960

Total funding liabilities/cost of funds

$

14,944,031

0.40

%

$

13,891,650

1.20

%

Net interest income/net interest spread

$

249,156

2.84

%

$

229,105

2.58

%

Net interest margin

3.09

%

3.04

%

Cost of deposits:

Noninterest bearing demand deposits

$

5,250,080

$

%

$

3,236,960

$

%

Interest bearing deposits

9,169,096

23,466

0.52

%

9,760,584

70,564

1.45

%

Total deposits

$

14,419,176

$

23,466

0.33

%

$

12,997,544

$

70,564

1.09

%

Hope Bancorp, Inc.

Selected Financial Data

Unaudited (dollars in thousands)

 

Three Months Ended

Six Months Ended

AVERAGE BALANCES:

6/30/2021

3/31/2021

% change

6/30/2020

% change

6/30/2021

6/30/2020

% change

Loans receivable, including loans held for sale

$

13,293,591

$

13,346,264

%

$

12,755,088

4

%

$

13,319,782

$

12,507,468

6

%

Investments

3,012,317

2,907,801

4

%

3,067,205

(2

)%

2,960,348

2,649,273

12

%

Interest earning assets

16,305,908

16,254,065

%

15,822,293

3

%

16,280,130

15,156,741

7

%

Total assets

17,164,893

17,115,407

%

16,759,147

2

%

17,140,286

16,102,977

6

%

Interest bearing deposits

9,015,034

9,324,872

(3

)%

10,142,282

(11

)%

9,169,096

9,760,584

(6

)%

Interest bearing liabilities

9,533,532

9,856,155

(3

)%

11,036,392

(14

)%

9,693,951

10,654,690

(9

)%

Noninterest bearing demand deposits

5,445,457

5,052,532

8

%

3,510,783

55

%

5,250,080

3,236,960

62

%

Stockholders’ equity

2,066,016

2,047,506

1

%

2,016,947

2

%

2,056,812

2,022,271

2

%

Net interest earning assets

6,772,376

6,397,910

6

%

4,785,901

42

%

6,586,179

4,502,051

46

%

LOAN PORTFOLIO COMPOSITION:

6/30/2021

3/31/2021

% change

12/31/2020

% change

6/30/2020

% change

Commercial loans

$

4,001,423

$

4,346,244

(8

)%

$

4,157,787

(4

)%

$

3,415,111

17

%

Real estate loans

8,832,276

8,811,423

%

8,772,134

1

%

8,686,939

2

%

Consumer and other loans

590,602

544,962

8

%

633,292

(7

)%

769,784

(23

)%

Loans, net of deferred loan fees and costs

13,424,301

13,702,629

(2

)%

13,563,213

(1

)%

12,871,834

4

%

Allowance for credit losses

(189,452

)

(207,943

)

(9

)%

(206,741

)

(8

)%

(161,771

)

17

%

Loan receivable, net

$

13,234,849

$

13,494,686

(2

)%

$

13,356,472

(1

)%

$

12,710,063

4

%

REAL ESTATE LOANS BY PROPERTY TYPE:

6/30/2021

3/31/2021

% change

12/31/2020

% change

6/30/2020

% change

Retail buildings

$

2,361,891

$

2,317,017

2

%

$

2,293,396

3

%

$

2,278,448

4

%

Hotels/motels

1,439,770

1,619,661

(11

)%

1,634,287

(12

)%

1,701,909

(15

)%

Gas stations/car washes

954,394

913,176

5

%

892,110

7

%

836,314

14

%

Mixed-use facilities

798,373

752,729

6

%

750,867

6

%

706,827

13

%

Warehouses

1,149,393

1,092,549

5

%

1,091,389

5

%

1,040,303

10

%

Multifamily

575,943

531,306

8

%

518,498

11

%

497,948

16

%

Other

1,552,512

1,584,985

(2

)%

1,591,587

(2

)%

1,625,190

(4

)%

Total

$

8,832,276

$

8,811,423

%

$

8,772,134

1

%

$

8,686,939

2

%

DEPOSIT COMPOSITION

6/30/2021

3/31/2021

% change

12/31/2020

% change

6/30/2020

% change

Noninterest bearing demand deposits

$

5,638,115

$

5,427,174

4

%

$

4,814,254

17

%

$

4,036,383

40

%

Money market and other

5,786,697

5,009,419

16

%

5,232,413

11

%

4,831,679

20

%

Saving deposits

308,651

305,326

1

%

300,770

3

%

296,614

4

%

Time deposits

2,992,767

3,559,350

(16

)%

3,986,475

(25

)%

4,958,856

(40

)%

Total deposit balances

$

14,726,230

$

14,301,269

3

%

$

14,333,912

3

%

$

14,123,532

4

%

DEPOSIT COMPOSITION (%)

6/30/2021

3/31/2021

12/31/2020

6/30/2020

Noninterest bearing demand deposits

38.3

%

38.0

%

33.6

%

28.6

%

Money market and other

39.2

%

35.0

%

36.5

%

34.2

%

Saving deposits

2.1

%

2.1

%

2.1

%

2.1

%

Time deposits

20.4

%

24.9

%

27.8

%

35.1

%

Total deposit balances

100.0

%

100.0

%

100.0

%

100.0

%

Hope Bancorp, Inc.

Selected Financial Data

Unaudited (dollars in thousands, except share and per share data)

CAPITAL RATIOS:

6/30/2021

3/31/2021

6/30/2020

Total stockholders’ equity

$

2,092,870

$

2,045,581

$

2,030,776

Common equity tier 1 ratio

11.32

%

11.08

%

11.50

%

Tier 1 risk-based capital ratio

12.02

%

11.78

%

12.24

%

Total risk-based capital ratio

13.16

%

13.03

%

13.23

%

Tier 1 leverage ratio

10.34

%

10.15

%

10.08

%

Total risk weighted assets

$

14,354,682

$

14,338,828

$

13,388,522

Book value per common share

$

16.92

$

16.57

$

16.48

Tangible common equity to tangible assets 1

9.53

%

9.40

%

9.32

%

Tangible common equity per share 1

$

13.10

$

12.73

$

12.62

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.

Three Months Ended

Six Months Ended

ALLOWANCE FOR CREDIT LOSSES CHANGES:

6/30/2021

3/31/2021

12/31/2020

9/30/2020

6/30/2020

6/30/2021

6/30/2020

Balance at beginning of period

$

207,943

$

206,741

$

179,849

$

161,771

$

144,923

$

206,741

$

94,144

CECL day 1 adoption impact

26,200

Provision (credit) for credit losses

(7,000

)

3,300

27,500

22,000

17,500

(3,700

)

45,500

Recoveries

1,301

1,423

2,207

2,428

252

2,724

2,788

Charge offs

(12,792

)

(3,521

)

(2,815

)

(6,350

)

(904

)

(16,313

)

(6,861

)

Balance at end of period

$

189,452

$

207,943

$

206,741

$

179,849

$

161,771

$

189,452

$

161,771

Net charge offs/average loans receivable (annualized)

0.35

%

0.06

%

0.02

%

0.12

%

0.02

%

0.20

%

0.07

%

Three Months Ended

Six Months Ended

NET LOAN CHARGE OFFS (RECOVERIES):

6/30/2021

3/31/2021

12/31/2020

9/30/2020

6/30/2020

6/30/2021

6/30/2020

Real estate loans

$

11,281

$

2,234

$

(726

)

$

5,154

$

148

$

13,515

$

2,378

Commercial loans

181

(80

)

1,167

(1,451

)

240

101

916

Consumer loans

29

(56

)

167

219

264

(27

)

779

Total net charge offs

$

11,491

$

2,098

$

608

$

3,922

$

652

$

13,589

$

4,073

Hope Bancorp, Inc.

Selected Financial Data

Unaudited (dollars in thousands)

 

NONPERFORMING ASSETS:

6/30/2021

3/31/2021

12/31/2020

9/30/2020

6/30/2020

Loans on nonaccrual status 3

$

111,008

$

109,858

$

85,238

$

69,205

$

82,137

Delinquent loans 90 days or more on accrual status

4,759

384

614

1,537

430

Accruing troubled debt restructured loans

51,360

41,773

37,354

35,429

44,026

Total nonperforming loans

167,127

152,015

123,206

106,171

126,593

Other real estate owned

16,619

18,515

20,121

18,410

20,983

Total nonperforming assets

$

183,746

$

170,530

$

143,327

$

124,581

$

147,576

Nonperforming assets/total assets

1.05

%

0.99

%

0.84

%

0.74

%

0.86

%

Nonperforming assets/loans receivable & OREO

1.37

%

1.24

%

1.06

%

0.95

%

1.14

%

Nonperforming assets/total capital

8.78

%

8.34

%

6.98

%

6.11

%

7.27

%

Nonperforming loans/loans receivable

1.24

%

1.11

%

0.91

%

0.81

%

0.98

%

Nonaccrual loans/loans receivable

0.83

%

0.80

%

0.63

%

0.53

%

0.64

%

Allowance for credit losses/loans receivable

1.41

%

1.52

%

1.52

%

1.37

%

1.26

%

Allowance for credit losses/nonaccrual loans

170.67

%

189.28

%

242.55

%

259.88

%

196.95

%

Allowance for credit losses/nonperforming loans

113.36

%

136.79

%

167.80

%

169.40

%

127.79

%

Allowance for credit losses/nonperforming assets

103.11

%

121.94

%

144.24

%

144.36

%

109.62

%

3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $23.6 million, $25.0 million, $26.5 million, $26.2 million and $30.3 million at June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020, and June 30, 2020, respectively.

NONACCRUAL LOANS BY TYPE:

6/30/2021

3/31/2021

12/31/2020

9/30/2020

6/30/2020

Real estate loans

$

95,622

$

91,940

$

67,450

$

51,739

$

64,060

Commercial loans

12,217

14,080

13,911

13,022

12,079

Consumer loans

3,169

3,838

3,877

4,444

5,998

Total nonaccrual loans

$

111,008

$

109,858

$

85,238

$

69,205

$

82,137

BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS:

6/30/2021

3/31/2021

12/31/2020

9/30/2020

6/30/2020

Retail buildings

$

12,110

$

6,319

$

5,408

$

5,451

$

5,526

Gas stations/car washes

206

210

219

224

1,789

Mixed-use facilities

7,967

3,377

3,521

4,323

3,583

Warehouses

14,099

14,124

7,296

7,320

13,433

Other 5

16,978

17,743

20,910

18,111

19,695

Total

$

51,360

$

41,773

$

37,354

$

35,429

$

44,026

5 Includes commercial business, consumer, and other loans

Hope Bancorp, Inc.

Selected Financial Data

Unaudited (dollars in thousands)

 

ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE:

6/30/2021

3/31/2021

12/31/2020

9/30/2020

6/30/2020

30 - 59 days

$

22,466

$

18,175

$

11,347

$

5,962

$

18,857

60 - 89 days

6,987

8,314

16,826

58,065

29,975

Total

$

29,453

$

26,489

$

28,173

$

64,027

$

48,832

ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE:

6/30/2021

3/31/2021

12/31/2020

9/30/2020

6/30/2020

Real estate loans

$

21,432

$

18,331

$

15,689

$

60,510

$

27,245

Commercial loans

560

1,002

3,393

624

5,987

Consumer loans

7,461

7,156

9,091

2,893

15,600

Total

$

29,453

$

26,489

$

28,173

$

64,027

$

48,832

CRITICIZED LOANS:

6/30/2021

3/31/2021

12/31/2020

9/30/2020

6/30/2020

Special mention

$

294,559

$

280,974

$

184,941

$

153,388

$

127,149

Substandard

380,955

379,048

366,556

311,902

299,357

Doubtful/loss

1

6,640

11

Total criticized loans

$

675,514

$

660,022

$

551,498

$

471,930

$

426,517

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 GAAP to non-GAAP financial measures utilized by management is provided below.

Three Months Ended

Six Months Ended

6/30/2021

3/31/2021

6/30/2020

6/30/2021

6/30/2020

RETURN ON AVERAGE TANGIBLE COMMON EQUITY

Average stockholders’ equity

$

2,066,016

$

2,047,506

$

2,016,947

$

2,056,812

$

2,022,271

Less: Goodwill and core deposit intangible assets, net

(473,445

)

(473,961

)

(475,534

)

(473,702

)

(475,793

)

Average tangible common equity

$

1,592,571

$

1,573,545

$

1,541,413

$

1,583,110

$

1,546,478

Net income

$

53,763

$

43,687

$

26,753

$

97,450

$

52,706

Return on average tangible common equity (annualized)

13.50

%

11.11

%

6.94

%

12.31

%

6.82

%

6/30/2021

3/31/2021

12/31/2020

6/30/2020

TANGIBLE COMMON EQUITY

Total stockholders’ equity

$

2,092,870

$

2,045,581

$

2,053,745

$

2,030,776

Less: Goodwill and core deposit intangible assets, net

(473,139

)

(473,648

)

(474,158

)

(475,220

)

Tangible common equity

$

1,619,731

$

1,571,933

$

1,579,587

$

1,555,556

Total assets

$

17,469,627

$

17,198,860

$

17,106,664

$

17,169,062

Less: Goodwill and core deposit intangible assets, net

(473,139

)

(473,648

)

(474,158

)

(475,220

)

Tangible assets

$

16,996,488

$

16,725,212

$

16,632,506

$

16,693,842

Common shares outstanding

123,673,832

123,480,494

123,264,864

123,239,276

Tangible common equity to tangible assets

9.53

%

9.40

%

9.50

%

9.32

%

Tangible common equity per share

$

13.10

$

12.73

$

12.81

$

12.62

Three Months Ended

Six Months Ended

6/30/2021

3/31/2021

6/30/2020

6/30/2021

6/30/2020

PRE-TAX PRE-PROVISION INCOME

Net income

$

53,763

$

43,687

$

26,753

$

97,450

$

52,706

Add back - tax provision

17,767

13,965

9,771

31,732

16,233

Add back - provision (credit) for credit losses

(7,000

)

3,300

17,500

(3,700

)

45,500

Pre-tax pre-provision income

$

64,530

$

60,952

$

54,024

$

125,482

$

114,439

Contacts:

Alex Ko
Senior EVP & Chief Financial Officer
213-427-6560
alex.ko@bankofhope.com

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