Press Release

Hope Bancorp Reports 2016 Third Quarter Financial Results

Company Release - 10/18/2016 6:43 PM ET

-- Third Quarter Results Reflect One Month of Stand-Alone BBCN and Two Months of Combined Operations --

Q3 2016 Summary:

  • Completes merger of equals creating the only super regional Korean-American bank in the United States
  • Loans receivable increase 60% quarter-over-quarter to $10.56 billion
  • Total deposits increase 61% quarter-over-quarter to $10.70 billion
  • Total assets increase 62% quarter-over-quarter to $13.51 billion
  • Net income totals $26.1 million, or $0.22 per diluted common share, including merger-related expenses of $11.2 million
  • New loan originations amount to $559 million

LOS ANGELES, Oct. 18, 2016 (GLOBE NEWSWIRE) -- Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported financial results for its three and nine-month periods ended September 30, 2016.

The mergers of Wilshire Bancorp, Inc. (“Wilshire”) with and into BBCN Bancorp, Inc. (“BBCN”) and Wilshire Bank with and into BBCN Bank were completed on July 29, 2016, and the combined company began operations under the new banners of Hope Bancorp, Inc. and Bank of Hope effective July 30, 2016.  The 2016 third quarter financial results reflect approximately one month of stand-alone operations of the former BBCN and two months of combined operations following the completion of the merger.  As a result, the Company’s 2016 third quarter financial results may not be comparable to financial results in prior periods.

For the three months ended September 30, 2016, net income totaled $26.1 million, or $0.22 per diluted common share based on 116,653,168 weighted average diluted shares outstanding, and included merger-related expenses of $11.2 million before tax.  This compares with net income of $23.4 million, or $0.29 per diluted common share based on 79,634,762 weighted average diluted shares outstanding, for the three months ended June 30, 2016 and $25.1 million, or $0.32 per diluted common share based on 79,584,536 weight average diluted shares outstanding, for the three months ended September 30, 2015.  Merger-related expenses for the 2016 second quarter and 2015 third quarter amounted to $1.5 million and $24,000, respectively.

“It has certainly been an exciting and busy quarter for our new company as we merged the former BBCN and Wilshire to form the only Korean-American super regional bank in the United States,” said Kevin S. Kim, President and Chief Executive Officer of Hope Bancorp, Inc.  “We are very pleased with the progress made to date, and believe our past experience with mergers and acquisitions has been invaluable in helping us anticipate potential issues and effectively plan and execute the integration.  I believe we are off to a very good start in leveraging the strengths of our organization, and clearly anticipate our financial performance will improve as merger-related costs dissipate and we begin to realize the cost savings and other synergies that we expect from the merger.  Despite the significant time and resources dedicated to completing the merger and integrating the two banks, new loan volumes were solid.  We are particularly pleased with the improved mix of loan originations with commercial and industrial loans accounting for 31% of total loan originations for the quarter and commercial real estate 52%.

“With the strong momentum we have built from the merger, we are very optimistic about the future of our organization and the value proposition that we provide to our customers, employees and shareholders.  Given the significantly enhanced scale, convenience and brand recognition that we have as the definitive leader in our community, we believe we are well positioned to capture additional market share in both well established and newly developing markets.  We look forward to keeping everyone apprised of our ongoing achievements,” said Kim.

Financial Highlights

(dollars in thousands, except per share data)At or for the Three Months Ended
 9/30/2016 6/30/2016 9/30/2015
Net income$26,105  $23,390  $25,092 
Diluted earnings per share$0.22  $0.29  $0.32 
Net interest income before provision for loan losses$103,474  $71,064  $68,761 
Net interest margin 3.77%  3.67%  3.87%
Noninterest income$14,146  $10,707  $11,183 
Noninterest expense$67,846  $40,348  $36,755 
Net loans receivable$10,481,221  $6,507,812  $6,171,933 
Deposits$10,702,505  $6,637,522  $6,340,976 
Nonaccrual loans (1)$40,602  $42,398  $32,446 
ALLL to loans receivable 0.76%  1.16%  1.19%
ALLL to nonaccrual loans (1) 196.98%  180.26%  219.16%
ALLL to nonperforming assets (1) (2) 68.38%  69.62%  65.80%
Provision for loan losses$6,500  $1,200  $600 
Net charge offs (recoveries)$2,574  $1,631  $(392)
ROA 0.89%  1.15%  1.35%
ROE 6.60%  9.67%  10.96%
Efficiency ratio 57.68%  49.34%  45.98%

(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $14.1 million,  $15.5 million and $19.9 million at September 30, 2016, June 30, 2016, and September 30, 2015, respectively.
(2) Nonperforming assets exclude purchased credit-impaired loans totaling $16.4 million, $13.8 million and $18.5 million at September 30, 2016, June 30, 2016, and September 30, 2015, respectively.

Operating Results for the 2016 Third Quarter

The comparability of Hope Bancorp’s operating results with past performance is impacted by acquisition accounting adjustments and merger-related expenses associated with past and current acquisitions.  The Company provides the following supplemental information to facilitate a better understanding of financial performance.  Net interest income and operating income for the three months ended September 30, 2016, June 30, 2016, and September 30, 2015 include the following pre-tax acquisition accounting adjustments and merger-related expenses associated with past and current acquisitions:

(dollars in thousands)Three Months Ended
 9/30/2016 6/30/2016 9/30/2015
Accretion on purchased non-impaired loans$3,111  $898  $2,496 
Accretion on purchased credit-impaired loans 1,673   1,436   1,723 
Amortization of premium on low income housing tax credits (54)      
Amortization of premium on acquired FHLB borrowings 330   97   97 
Accretion of discount on acquired subordinated debt (190)  (44)  (43)
Amortization of premium on acquired time deposits and savings 2,336   19   24 
Total acquisition accounting adjustments$7,206  $2,406  $4,008 
Merger-related expenses (11,222)  (1,533)  (24)
Total$(4,016) $873  $3,984 

Net Interest Income and Net Interest Margin.  Net interest income before provision for loan losses for the 2016 third quarter totaled $103.5 million, an increase of 46% over $71.1 million in the preceding 2016 second quarter and an increase of 50% over $68.8 million in the prior-year third quarter.  The increase in net interest income is primarily attributable to the significantly higher level of interest earning assets following the merger.

The net interest margin (net interest income divided by average interest earning assets) and the impact of acquisition accounting adjustments are summarized in the following table:

 Three Months Ended
 9/30/2016 6/30/2016 change 9/30/2015 change
Net interest margin, excluding the effect of acquisition accounting adjustments3.48% 3.53% (0.05) 3.60% (0.12)
Acquisition accounting adjustments0.29% 0.14% 0.15  0.27% 0.02 
Net interest margin3.77% 3.67% 0.10  3.87% (0.10)

The net interest margin for the 2016 third quarter was 3.77%, up 10 basis points from the preceding second quarter, but down 10 basis points when compared with the year-ago third quarter.  On a core basis, excluding the effect of acquisition accounting adjustments, the net interest margin for the 2016 third quarter declined by 5 basis points from the preceding second quarter and 12 basis points from the third quarter a year ago.

The weighted average yield on loans and the impact of acquisition accounting adjustments are summarized in the following table:

 Three Months Ended
 9/30/2016 6/30/2016 change 9/30/2015 change
Weighted average yield on loans, excluding the effect of acquisition accounting adjustments4.55% 4.63% (0.08) 4.62% (0.07)
Acquisition accounting adjustments0.25% 0.17% 0.08  0.32% (0.07)
Weighted average yield on loans4.80% 4.80%   4.94% (0.14)

The weighted average yield on loans for the 2016 third quarter was steady when compared with the preceding 2016 second quarter, but declined 14 basis points from the year-ago third quarter.  On a core basis, excluding the effect of acquisition accounting adjustments, the weighted average yield on loans declined by 8 basis points from the preceding second quarter and 7 basis points from the 2015 third quarter.

The weighted average yield on new loans originated during the 2016 third quarter was 4.03%, compared with 4.28% in the preceding 2016 second quarter and 4.23% in the year-ago third quarter.

The weighted average cost of deposits and the impact of acquisition accounting adjustments are summarized in the following table:

 Three Months Ended
 9/30/2016 6/30/2016 change 9/30/2015 change
Weighted average cost of deposits, excluding the effect of acquisition accounting adjustments0.64% 0.64%   0.57% 0.07 
Acquisition accounting adjustments(0.08)% % (0.08) % (0.08)
Weighted average cost of deposits0.56% 0.64% (0.08) 0.57% (0.01)

The weighted average cost of deposits for the 2016 third quarter decreased 8 basis points from the preceding second quarter and 1 basis point from the year-ago third quarter.  On a core basis, excluding the effect of premium amortization on time deposits assumed in acquisitions, the weighted average cost of deposits was stable compared with the preceding second quarter and increased 7 basis points when compared with the 2015 third quarter.

Noninterest Income.   Noninterest income for the 2016 third quarter totaled $14.1 million, compared with $10.7 million in the preceding 2016 second quarter and $11.2 million in the year-ago third quarter.  The Company noted that the increase is largely attributed to the completion of the merger during the quarter, which positively impacted service fees on deposit accounts and other income and fees.  In addition, the Company posted a $948,000 net gain on the sale of securities available-for-sale after restructuring its investment portfolio post-merger, and recorded a $1.5 million gain on sale of other loans from its combined mortgage operations.  Offsetting these increases was a gain on sales of Small Business Administration (“SBA”) loans of just $230,000 in the 2016 third quarter.

In comparison, gains on sales of SBA loans amounted to $3.0 million in the 2016 second quarter and $3.4 million in the 2015 third quarter.  The Company did not recognize any gain on sales of securities available-for-sale in the 2016 second quarter and 2015 third quarter, but recorded $43,000 and $26,000 in gains on sales of other loans in the comparable quarters, respectively.

Noninterest Expense.  Total noninterest expense for the 2016 third quarter, 2016 second quarter and 2015 third quarter amounted to $67.8 million, $40.3 million and $36.8 million, respectively.  The Company noted that the increase in the current quarter is largely attributed to the combination of the two predecessor companies during the quarter and merger-related expenses.  Excluding merger-related expenses of $11.2 million, $1.5 million and $24,000 for the 2016 third quarter, 2016 second quarter and 2015 third quarter, respectively, total noninterest expense would have been $56.6 million, $38.8 million and $36.7 million.  Noninterest expense excluding merger-related expenses is a non-GAAP financial measure.  Management believes total noninterest expense excluding merger-related expenses more accurately reflects the Company’s results of operations in the overall evaluation of its performance.  A reconciliation of the noninterest expense excluding merger-related expenses is included in the accompanying financial tables.

Salaries and employee benefits expense totaled $30.5 million for the 2016 third quarter, $21.8 million for the 2016 second quarter and $21.5 million for the year-ago third quarter. The total number of FTEs for the combined company as of September 30, 2016 was 1,400.  At June 30, 2016, the total number of FTEs was 918 for former BBCN and 549 for former Wilshire, aggregating to 1,467.  The total number of FTEs a year earlier at September 30, 2015 was 941 for former BBCN.

As previously reported, the Company announced its branch optimization plan that includes a first phase of branch consolidations to be completed by year-end 2016.  These branch consolidations are expected to result in costs savings of approximately $11 million pre-tax on an annual basis beginning in 2017.  During the 2016 third quarter, the Company recorded $1.9 million in one-time charges pre-tax related to the branch consolidations.

Income Tax Provision.  The effective tax rate for the 2016 third quarter was 39.7%, compared with 41.8% for the preceding 2016 second quarter and 41.1% for the 2015 third quarter.

Balance Sheet Summary

Loans receivable totaled $10.56 billion at September 30, 2016, reflecting a 60% increase over $6.58 billion at June 30, 2016,  and a 77% increase over $5.97 billion at September 30, 2015.

Total new loan originations during the 2016 third quarter amounted to $559.5 million, including warehouse lines of credit of $99.9 million and SBA loan originations of $80.7 million.  On a pro forma basis including the former Wilshire’s loan production of $57.9 million during July 2016 that is not included in the combined company’s originations, aggregate new loan originations would have amounted to $617.4 million, including SBA loan originations of $89.9 million.

Sales of SBA loans to the secondary market and gains derived from those sales are based substantially on the production of SBA 7(a) loans.  Production of SBA 7(a) loans totaled $50.2 million for the third quarter of 2016, compared with $56.7 million for the preceding 2016 second quarter and $46.1 million for the 2015 third quarter.  During the 2016 third quarter, the Company sold just $2.4 million of its SBA loans held for sale, compared with $39.6 million in the preceding second quarter and $42.4 million in the year-ago third quarter.  The decision to retain or sell SBA loans is made on a quarter-to-quarter basis, depending on prevailing pricing in the secondary market and the Company’s liquidity needs.

Aggregate pay offs and pay downs for the combined company in the 2016 third quarter amounted to $357.0 million, compared with $235.6 million for the preceding 2016 second quarter and $267.1 million for the year-ago third quarter.

Total deposits increased to $10.7 billion at September 30, 2016, up 61% over $6.64 billion at June 30, 2016 and up 78% over $6.03 billion at September 30, 2015.

Credit Quality

The provision for loan losses for the 2016 third quarter was $6.5 million, compared with $1.2 million for the preceding 2016 second quarter and $600,000 for the prior-year third quarter.

For a more detailed understanding of the changes in the Allowance for Loan and Lease Losses (“ALLL”), the composition of the ALLL has been segmented for disclosure purposes between loans accounted for under the amortized cost method (referred to as “legacy loans”) and loans acquired through the Wilshire Bancorp, Center Financial, Pacific International and Foster Bankshares transactions (referred to as “purchased loans”).  The purchased loans are further segregated between non-impaired and credit-impaired loans.

The composition of the ALLL as of September 30, 2016, June 30, 2016 and September 30, 2015 is as follows:

(dollars in thousands)9/30/2016 6/30/2016 9/30/2015
Legacy loans (1)$66,986 $63,616 $57,200
Purchased non-impaired loans (2) 938  860  1,418
Purchased credit-impaired loans (2) 12,052  11,949  12,492
Total ALLL$79,976 $76,425 $71,110
         
Loans receivable$10,561,197 $6,584,237 $5,972,724
ALLL coverage ratio 0.76%  1.16%  1.19%

(1) Legacy loans include loans originated by the Bank’s predecessor bank, loans originated by Bank of Hope and loans that were acquired and that have been refinanced as new loans.
(2) Purchased loans were marked to fair value at acquisition date, and the allowance for loan losses reflect provisions for credit deterioration since the acquisition date.

Following are the components of criticized loan balances as of September 30, 2016, June 30, 2016 and September 30, 2015:

(dollars in thousands)9/30/2016 6/30/2016 9/30/2015
Special Mention (1)$308,893 $100,370 $141,655
Classified (1) 259,268  198,857  178,720
Criticized$568,161 $299,227 $320,375

(1) Balances include purchased loans which were marked to fair value on the date of acquisition.

The Company defines nonperforming loans to include delinquent loans past due 90 days or more on nonaccrual status, delinquent loans past due 90 days or more on accrual status (excluding purchased credit-impaired loans) and accruing restructured loans.  Nonaccrual loans at September 30, 2016 totaled $40.6 million, or 0.38% of loans receivable.   This compares with nonaccrual loans of $42.4 million, or 0.64% of loans receivable, at June 30, 2016 and $32.4 million, or 0.54% of loans receivable, at September 30, 2015.  Accruing restructured loans declined to $48.7 million at September 30, 2016, from $50.8 million at June 30, 2016 and $54.3 million at September 30, 2015.  Total nonperforming loans at September 30, 2016 amounted to $89.5 million, or 0.85% of loans receivable.  This compares with total nonperforming loans of $93.4 million, or 1.42% of loans receivable, at June 30, 2016 and $86.7 million, or 1.45% of loans receivable, at September 30, 2015.

Nonperforming assets, including nonperforming loans and other real estate owned, increased to $117.0 million at September 30, 2016 from $109.8 million at June 30, 2016 and $108.1 million at September 30, 2015.  As a percentage of total assets, nonperforming assets declined to 0.87% at September 30, 2016 from 1.32% at June 30, 2016 and 1.43% at September 30, 2015, reflecting the merger completion.

For the 2016 third quarter, the Company recorded net charge offs of $2.9 million, or 0.13% of average loans receivable on an annualized basis.  This compares with net charge offs of $1.6 million, or 0.10% of average loans receivable on an annualized basis for the 2016 second quarter and net recoveries of $392,000, or 0.03% of average loans receivable on an annualized basis, for the 2015 third quarter.

The allowance for loan losses at September 30, 2016 was $80.0 million, or 0.76% of loans receivable (excluding loans held for sale), compared with $76.4 million, or 1.16%, at June 30, 2016 and $71.1 million, or 1.19%, at September 30, 2015.   The coverage ratio of the allowance for loan losses to nonperforming loans (excluding purchased credit-impaired loans) was 89.36% at September 30, 2016, versus 81.84% at June 30, 2016 and 82.00% at September 30, 2015.

Impaired loans (defined as loans for which it is probable that not all principal and interest payments due will be collected in accordance with the contractual terms) totaled $128.1 million at September 30, 2016, compared with $136.6 million at June 30, 2016 and $119.5 million at September 30, 2015.

Capital

At September 30, 2016, the Company continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” institution, as summarized in the following table:

 9/30/2016 6/30/2016 9/30/2015 Minimum Guideline
for “Well-Capitalized”
Institution
Common Equity Tier 1 Capital 11.92%  11.66%  12.34%  6.50%
Leverage Ratio 12.97%  11.14%  11.76%  5.00%
Tier 1 Risk-based Ratio 12.75%  12.22%  12.95%  8.00%
Total Risk-based Ratio 13.47%  13.28%  14.05%  10.00%

Tangible common equity per share and as a percentage of tangible assets are summarized in the following table:

 9/30/2016 6/30/2016 9/30/2015
Tangible common equity per share (1)$10.12  $10.85  $10.32 
Tangible common equity to tangible assets (1) 10.50%  10.50%  10.99%

(1) Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and net other intangible assets divided by total assets less goodwill and net other intangible assets.  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.  The accompanying financial information includes a reconciliation of the ratio of tangible common equity to tangible assets with stockholders’ equity and total assets.

Investor Conference Call

The Company will host an investor conference call on Wednesday, October 19, 2016 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for the 2016 third quarter.  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.”  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 at www.ir-hopebancorp.com.   After the live webcast, a replay will remain available in 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 26, 2016, replay access code 10093351.

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 $13.5 billion in total assets as of September 30, 2016. Formed through the merger of BBCN Bank and Wilshire Bank, the top two commercial lenders in the market, Bank of Hope is headquartered in Los Angeles and serves a multi-ethnic population of customers across the nation. Bank of Hope operates 85 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia, Georgia and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, and Portland, Oregon; a commercial loan production office in Fremont, California; residential mortgage loan production offices in 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.

Forward-Looking Statements

This press release may contain forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections and management assumptions about the future performance of the combined company, as well as the businesses and markets in which the combined company operates and is expected to operate. These statements constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, involve certain risks, uncertainties and assumptions that are difficult to assess and  are not guarantees of future performance and.  Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Readers should carefully review the risk factors and the information that could materially affect the Company’s financial results and business, described in documents the Company files from time to time with the Securities and Exchange Commission, including its quarterly reports on Form 10-Q and Annual Reports on Form 10-K, and particularly the discussions of business considerations and certain factors that may affect results of operations and stock price set forth therein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

(tables follow)

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
 
Assets9/30/2016 6/30/2016 % change 12/31/2015 % change 9/30/2015 % change
Cash and due from banks$443,903  $286,173  55% $298,389  49% $278,375  59%
Securities available for sale, at fair value1,558,719  1,099,944  42% 1,010,556  54% 972,962  60%
Federal Home Loan Bank (“FHLB”), Federal Reserve Bank (“FRB”) stock and other investments69,119  63,429  9% 66,859  3% 63,674  9%
Loans held for sale, at the lower of cost or fair value58,186  14,323  306% 8,273  603% 25,103  132%
Loans receivable10,561,197  6,584,237  60% 6,248,341  69% 5,972,724  77%
Allowance for loan losses(79,976) (76,425) (5)% (76,408) (5)% (71,110) (12)%
Net loans receivable10,481,221  6,507,812  61% 6,171,933  70% 5,901,614  78%
Accrued interest receivable24,165  15,787  53% 15,195  59% 13,981  73%
Premises and equipment, net53,966  37,663  43% 34,575  56% 34,798  55%
Bank owned life insurance73,290  47,562  54% 47,018  56% 46,741  57%
Goodwill463,964  105,401  340% 105,401  340% 105,401  340%
Servicing assets26,529  12,193  118% 12,000  121% 11,505  131%
Other intangible assets, net19,968  2,395  734% 2,820  608% 3,086  547%
Other assets234,534  144,144  63% 139,629  68% 125,762  86%
Total assets$13,507,564  $8,336,826  62% $7,912,648  71% $7,583,002  78%
                  
Liabilities                 
Deposits$10,702,505  $6,637,522  61% $6,340,976  69% $6,028,865  78%
Borrowings from FHLB754,739  610,398  24% 530,591  42% 530,689  42%
Subordinated debentures99,548  42,415  135% 42,327  135% 42,284  135%
Accrued interest payable9,708  7,164  36% 6,007  62% 6,231  56%
Other liabilities89,863  67,587  33% 54,652  64% 45,364  98%
Total liabilities11,656,363  7,365,086  58% 6,974,553  67% 6,653,433  75%
                  
Stockholders’ Equity                 
Common stock, $0.001 par value; authorized, 150,000,000 shares at September 30, 2016, June 30, 2016, December 31, 2015, and September 30, 2015; issued and outstanding, 135,109,641, 79,606,821, 79,566,356, and 79,553,460 shares at September 30, 2016, June 30, 2016, December 31, 2015, and September 30, 2015, respectively.$853,018  $80  1,066,173% $80  1,066,173% $80  1,066,173%
Capital surplus544,662  541,688  1% 541,596  1% 541,349  1%
Retained earnings445,104  418,998  6% 398,251  12% 384,133  16%
Accumulated other comprehensive income (loss), net8,417  10,974  (23)% (1,832) 559% 4,007  110%
Total stockholders’ equity1,851,201  971,740  91% 938,095  97% 929,569  99%
Total liabilities and stockholders’ equity$13,507,564  $8,336,826  62% $7,912,648  71% $7,583,002  78%
              


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)
 
 Three Months Ended Nine Months Ended
 9/30/2016 6/30/2016 % change 9/30/2015 % change 9/30/2016 9/30/2015 % change
Interest income:               
Interest and fees on loans$112,132  $77,086  45% $73,650  52% $266,336  $214,537  24%
Interest on securities6,645  5,729  16% 4,658  43% 18,051  13,067  38%
Interest on federal funds sold and other investments775  719  8% 751  3% 2,160  3,084  (30)%
Total interest income119,552  83,534  43% 79,059  51% 286,547  230,688  24%
                             
Interest expense:                            
Interest on deposits13,017  10,352  26% 8,390  55% 33,276  24,115  38%
Interest on other borrowings3,061  2,118  45% 1,908  60% 7,125  5,298  34%
Total interest expense16,078  12,470  29% 10,298  56% 40,401  29,413  37%
                             
Net interest income before provision for loan losses103,474  71,064  46% 68,761  50% 246,146  201,275  22%
Provision for loan losses6,500  1,200  442% 600  983% 8,200  3,100  165%
Net interest income after provision for loan losses96,974  69,864  39% 68,161  42% 237,946  198,175  20%
                             
Noninterest income:                            
Service fees on deposit accounts4,778  2,902  65% 3,170  51% 10,363  9,261  12%
Net gains on sales of SBA loans230  3,035  (92)% 3,390  (93)% 5,090  9,553  (47)%
Net gains on sales of other loans1,476  43  3,333% 26  5,577% 1,519  253  500%
Net gains on sales of securities available for sale948    100%   100% 948  424  124%
Other income and fees6,714  4,727  42% 4,597  46% 15,707  13,223  19%
Total noninterest income14,146  10,707  32% 11,183  26% 33,627  32,714  3%
                             
Noninterest expense:                            
Salaries and employee benefits30,456  21,757  40% 21,457  42% 73,782  63,570  16%
Occupancy6,889  4,920  40% 4,941  39% 16,626  14,443  15%
Furniture and equipment3,297  2,337  41% 2,329  42% 7,921  6,915  15%
Advertising and marketing2,306  1,402  64% 1,309  76% 4,845  4,184  16%
Data processing and communications3,199  2,129  50% 2,192  46% 7,499  7,004  7%
Professional fees1,898  1,273  49% 1,289  47% 4,255  3,966  7%
FDIC assessment1,564  1,095  43% 1,027  52% 3,697  3,048  21%
Credit related expenses810  911  (11)% 75  980% 2,142  1,600  34%
Other real estate owned (“OREO”) expense, net(423) 133  (418)% (721) 41% 1,138  1,677  (32)%
Merger-related expenses11,222  1,533  632% 24  46,658% 13,962  102  13,588%
Other6,628  2,858  132% 2,833  134% 12,377  7,937  56%
Total noninterest expense67,846  40,348  68% 36,755  85% 148,244  114,446  30%
Income before income taxes43,274  40,223  8% 42,589  2% 123,329  116,443  6%
Income tax provision17,169  16,833  2% 17,497  (2)% 50,212  47,053  7%
Net income$26,105  $23,390  12% $25,092  4% $73,117  $69,390  5%
                
Earnings Per Common Share:               
Basic$0.22  $0.29    $0.32    $0.80  $0.87   
Diluted$0.22  $0.29    $0.32    $0.80  $0.87   
                
Average Shares Outstanding:               
Basic116,622,920  79,604,673    79,552,873    91,940,070  79,545,681   
Diluted116,653,166  79,634,762    79,584,536    91,970,163  79,606,224   
                     


Hope Bancorp, Inc.
Selected Financial Data
Unaudited
 
 For the Three Months Ended
(Annualized)
 For the Nine Months Ended
(Annualized)
Profitability measures:9/30/2016 6/30/2016 9/30/2015 9/30/2016 9/30/2015
ROA0.89% 1.15% 1.35% 1.05% 1.27%
ROE6.60% 9.67% 10.96% 8.35% 10.23%
Return on average tangible equity 18.61% 10.88% 12.44% 10.04% 11.63%
Net interest margin3.77% 3.67% 3.87% 3.76% 3.88%
Efficiency ratio57.68% 49.34% 45.98% 52.99% 48.91%
          
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.
 


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
 
 Three Months Ended Three Months Ended Three Months Ended
 9/30/2016 6/30/2016 9/30/2015
   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 receivable, including loans held for sale$9,292,814  $112,132  4.80% $6,457,883  $77,086  4.80% $5,918,005  $73,650  4.94%
Securities available for sale1,406,919  6,645  1.89% 1,089,080  5,729  2.10% 877,054  4,658  2.12%
FRB and FHLB stock and other investments237,981  775  1.30% 237,872  719  1.20% 265,044  751  1.11%
Total interest earning assets$10,937,714  $119,552  4.35% $7,784,835  $83,534  4.31% $7,060,103  $79,059  4.44%
                             
INTEREST BEARING LIABILITIES:                            
Deposits:                            
Demand, interest bearing$2,924,340  $5,932  0.81% $2,030,272  $4,147  0.82% $1,695,709  $3,141  0.73%
Savings268,424  311  0.46% 178,249  285  0.64% 196,090  419  0.85%
Time deposits:                            
$100,000 or more2,687,108  4,913  0.73% 1,890,891  4,240  0.90% 1,677,861  3,450  0.82%
Other913,292  1,861  0.81% 745,761  1,680  0.91% 677,338  1,380  0.81%
Total time deposits3,600,400  6,774  0.75% 2,636,652  5,920  0.90% 2,355,199  4,830  0.81%
Total interest bearing deposits6,793,164  13,017  0.76% 4,845,173  10,352  0.86% 4,246,998  8,390  0.78%
FHLB advances698,081  2,161  1.23% 564,637  1,686  1.20% 532,926  1,514  1.13%
Other borrowings78,828  900  4.47% 40,861  432  4.18% 40,716  394  3.79%
Total interest bearing liabilities7,570,073  $16,078  0.84% 5,450,671  $12,470  0.92% 4,820,640  $10,298  0.85%
Noninterest bearing demand deposits2,535,015       1,671,986       1,630,633      
Total funding liabilities/cost of funds$10,105,088    0.63% $7,122,657    0.70% $6,451,273    0.63%
Net interest income/net interest spread  $103,474  3.51%   $71,064  3.39%   $68,761  3.60%
Net interest margin    3.77%     3.67%     3.87%
Net interest margin, excluding effect of nonaccrual loan income (expense)    3.77%     3.67%     3.87%
Net interest margin, excluding effect of nonaccrual loan income (expense) and prepayment fee income    3.73%     3.64%     3.85%
Nonaccrual loan income reversed  $(147)      $(21)      $    
Prepayment fee income received  1,015       528       333    
Net  $868       $507       $333    
                     
Cost of deposits:                    
Noninterest bearing demand deposits$2,535,015  $     $1,671,986  $     $1,630,633  $    
Interest bearing deposits6,793,164  13,017  0.76% 4,845,173  10,352  0.86% 4,246,998  8,390  0.78%
Total deposits$9,328,179  $13,017  0.56% $6,517,159  $10,352  0.64% $5,877,631  $8,390  0.57%
                                 


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
 
 Nine Months Ended Nine Months Ended
 9/30/2016 9/30/2015
   Interest Annualized   Interest Annualized
 Average Income/ Average Average Income/ Average
 Balance Expense Yield/Cost Balance Expense Yield/Cost
INTEREST EARNING ASSETS:           
Loans receivable, including loans held for sale$7,347,740  $266,336  4.84% $5,760,376  $214,537  4.98%
Securities available for sale1,171,816  18,051  2.05% 824,088  13,067  2.11%
FRB and FHLB stock and other investments230,993  2,160  1.25% 343,686  3,084  1.18%
Total interest earning assets$8,750,549  $286,547  5.44% $6,928,150  $230,688  4.45%
                  
INTEREST BEARING LIABILITIES:                 
Deposits:                 
Demand, interest bearing$2,310,000  $14,083  0.81% $1,643,539  $8,779  0.71%
Savings211,255  962  0.61% 195,072  1,260  0.86%
Time deposits:                 
$100,000 or more2,130,243  13,210  0.83% 1,713,631  10,340  0.81%
Other786,625  5,021  0.85% 637,916  3,736  0.78%
Total time deposits2,916,868  18,231  0.83% 2,351,547  14,076  0.80%
Total interest bearing deposits5,438,123  33,276  0.82% 4,190,158  24,115  0.77%
FHLB advances598,672  5,370  1.20% 498,795  4,138  1.11%
Other borrowings53,593  1,755  4.30% 40,670  1,160  3.76%
Total interest bearing liabilities6,090,388  $40,401  0.84% 4,729,623  $29,413  0.83%
Noninterest bearing demand deposits1,947,673       1,599,554      
Total funding liabilities/cost of funds$8,038,061    0.63% $6,329,177    0.62%
Net interest income/net interest spread  $246,146  4.59%   $201,275  3.62%
Net interest margin    3.76%     3.88%
Net interest margin, excluding effect of nonaccrual loan income (expense)    3.76%     3.88%
Net interest margin, excluding effect of nonaccrual loan income (expense) and prepayment fee income    3.73%     3.86%
Nonaccrual loan income reversed  $(290)      $(45)   
Prepayment fee income received  2,174       1,300    
Net  $1,884       $1,255    
              
Cost of deposits:             
Noninterest bearing demand deposits$1,947,673  $     $1,599,554  $    
Interest bearing deposits5,438,123  33,276  0.82% 4,190,158  24,115  0.77%
Total deposits$7,385,796  $33,276  0.60% $5,789,712  $24,115  0.56%
                      


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
 
  Three Months Ended Nine Months Ended
AVERAGE BALANCES:9/30/2016 6/30/2016 % change 9/30/2015 % change 9/30/2016 9/30/2015 % change
Loans receivable, including loans held for sale$9,292,814  $6,457,883  44% $5,918,005  57% $7,347,740  $5,760,376  28%
Investments1,644,900  1,326,952  24% 1,142,098  44% 1,402,809  1,167,774  20%
Interest earning assets10,937,714  7,784,835  41% 7,060,103  55% 8,750,549  6,928,150  26%
Total assets11,775,431  8,157,358  44% 7,424,598  59% 9,278,722  7,284,661  27%
                         
Interest bearing deposits6,793,164  4,845,173  40% 4,246,998  60% 5,438,123  4,190,158  30%
Interest bearing liabilities7,570,073  5,450,671  39% 4,820,640  57% 6,090,388  4,729,623  29%
Noninterest bearing demand deposits2,535,015  1,671,986  52% 1,630,633  55% 1,947,673  1,599,554  22%
Stockholders’ equity1,582,756  967,919  64% 915,702  73% 1,166,959  904,166  29%
Net interest earning assets3,367,641  2,334,164  44% 2,239,463  50% 2,660,161  2,198,527  21%
                
LOAN PORTFOLIO COMPOSITION:9/30/2016 6/30/2016 % change 12/31/2015 % change 9/30/2015 % change  
Commercial loans$2,015,870  $1,111,219  81% $1,079,316  87% $1,060,618  90%  
Real estate loans8,358,990  5,331,015  57% 5,069,482  65% 4,827,281  73%  
Consumer and other loans188,532  145,182  30% 102,573  84% 88,092  114%  
Loans outstanding10,563,392  6,587,416  60% 6,251,371  69% 5,975,991  77%  
Unamortized deferred loan fees - net of costs(2,195) (3,179) 31% (3,030) 28% (3,267) 33%  
Loans, net of deferred loan fees and costs10,561,197  6,584,237  60% 6,248,341  69% 5,972,724  77%  
Allowance for loan losses(79,976) (76,425) (5)% (76,408) (5)% (71,110) (12)%  
Loan receivable, net$10,481,221  $6,507,812  61% $6,171,933  70% $5,901,614  78%  
                
REAL ESTATE LOANS BY PROPERTY TYPE:9/30/2016 6/30/2016 % change 12/31/2015 % change 9/30/2015 % change  
Retail buildings$2,136,128
  $1,365,808  56
% $1,326,516  61
% $1,236,686  73
%  
Hotels/motels1,599,985  1,155,928  38% 1,061,111  51% 1,031,931  55%  
Gas stations/car washes962,643  704,334  37% 667,496  44% 648,759  48%  
Mixed-use facilities546,177  400,559  36% 369,425  48% 349,097  56%  
Warehouses912,818  543,270  68% 529,255  72% 500,747  82%  
Multifamily426,257  260,708  63% 245,532  74% 222,047  92%  
Other1,774,982
  900,408  97% 870,147  104
% 838,014  112
%  
Total$8,358,990  $5,331,015  57% $5,069,482  65% $4,827,281  73%  
                
DEPOSIT COMPOSITION9/30/2016 6/30/2016 % change 12/31/2015 % change 9/30/2015 % change  
Noninterest bearing demand deposits$2,903,658  $1,717,045  69% $1,694,427  71% $1,631,672  78%  
Money market and other3,318,728  2,176,978  52% 1,983,250  67% 1,783,760  86%  
Saving deposits304,719  173,549  76% 187,498  63% 193,895  57%  
Time deposits of $100,000 or more3,077,629  1,828,649  68% 1,772,984  74% 1,716,267  79%  
Other time deposits1,097,771  741,301  48% 702,817  56% 703,271  56%  
Total deposit balances$10,702,505  $6,637,522  61% $6,340,976  69% $6,028,865  78%  
                
DEPOSIT COMPOSITION (%)9/30/2016 6/30/2016   12/31/2015   9/30/2015    
Noninterest bearing demand deposits27.1% 25.9%   26.7%   27.1%    
Money market and other31.0% 32.8%   31.3%   29.6%    
Saving deposits2.8% 2.6%   3.0%   3.2%    
Time deposits of $100,000 or more28.8% 27.6%   28.0%   28.5%    
Other time deposits10.3% 11.1%   11.0%   11.6%    
Total deposit balances100.0% 100.0%   100.0%   100.0%    
                    


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
 
CAPITAL RATIOS:9/30/2016 6/30/2016 12/31/2015 9/30/2015      
Total stockholders’ equity$1,851,201  $971,740  $938,095  $929,569       
Common Equity Tier 1 ratio11.92% 11.66% 12.08% 12.34%      
Tier 1 risk-based capital ratio12.75% 12.22% 12.67% 12.95%      
Total risk-based capital ratio13.47% 13.28% 13.80% 14.05%      
Tier 1 leverage ratio12.97% 11.14% 11.53% 11.76%      
Total risk weighted assets$11,473,003  $7,329,696  $6,905,154  $6,641,660       
Book value per common share$13.70  $12.21  $11.79  $11.68       
Tangible common equity to tangible assets 210.50% 10.50% 10.63% 10.99%      
Tangible common equity per share 2$10.12  $10.85  $10.43  $10.32       
              
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.
              
Reconciliation of GAAP financial measures to non-GAAP financial measures:        
 Three Months Ended Nine Months Ended    
NONINTEREST EXPENSE BEFORE MERGER-RELATED COSTS9/30/2016 6/30/2016 9/30/2015 9/30/2016 9/30/2015    
Total noninterest expense$67,846  $40,348  $36,755  $148,244  $114,446     
Less: merger-related costs(11,222) (1,533) (24) (13,962) (102)    
Total noninterest expense, excluding merger-related expense$56,624  $38,815  $36,731  $134,282  $114,344     
              
 9/30/2016 6/30/2016 12/31/2015 9/30/2015      
Total stockholders’ equity$1,851,201  $971,740  $938,095  $929,569       
Less:  Goodwill and core deposit intangible assets, net(483,931) (107,796) (108,221) (108,487)      
Tangible common equity$1,367,270  $863,944  $829,874  $821,082       
              
Total assets$13,507,564  $8,336,826  $7,912,648  $7,583,002       
Less:  Goodwill and core deposit intangible assets, net(483,931) (107,796) (108,221) (108,487)      
Tangible assets$13,023,633  $8,229,030  $7,804,427  $7,474,515       
              
Common shares outstanding135,109,641  79,606,821  79,566,356  79,553,460       
              
Tangible common equity to tangible assets10.50% 10.50% 10.63% 10.99%      
Tangible common equity per share$10.12  $10.85  $10.43  $10.32       
              
 
 
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
              
  Three Months Ended Nine Months Ended
ALLOWANCE FOR LOAN LOSSES:9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 9/30/2016 9/30/2015
Balance at beginning of period$76,425  $76,856  $76,408  $71,110  $70,118  $