Press Release

Hope Bancorp Reports 2017 Fourth Quarter and Full-Year Financial Results

Company Release - 1/30/2018 4:30 PM ET

Q4 2017 Highlights:

  • Q4 net income totals $18.0 million, or $0.13 per diluted common share
  • One-time incremental tax expense of $25.4 million as a result of the enactment of the Tax Cuts and Jobs Act; excluding one-time tax charge, net income would have been $43.4 million, or $0.32 per diluted common share(1)
  • Residential mortgage operations originate record $193 million in new loans in Q4
  • Total new loan originations of $664 million in Q4, up 9% over Q3
  • Improvement in asset quality with nonaccrual loans decreasing 23% from Q3
  • Total assets increase to $14.21 billion, up 6% over 2016

(1)  Net income and diluted earnings per share excluding tax reform adjustments are non-GAAP financial measures. See the reconciliation of the GAAP to non-GAAP financial measures in the accompanying financial information.

LOS ANGELES, Jan. 30, 2018 (GLOBE NEWSWIRE) -- Hope Bancorp, Inc. (the “Company”) (NASDAQ:HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its three months and full year ended December 31, 2017.

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 companies commenced operations under the new banners of Hope Bancorp, Inc. and Bank of Hope, respectively, effective July 30, 2016. The 2017 financial results reflect four full quarters and a full year of combined operations. While the 2016 fourth quarter financial results reflect a full quarter of combined operations, the 2016 full-year results reflect seven months of stand-alone operations of the former BBCN and five months of combined operations. As a result, the Company’s financial results for the 2017 full year may not be comparable to financial results for the corresponding 2016 full year.

Fourth quarter 2017 financial results include a one-time, non-cash, incremental income tax expense in the Company’s consolidated statements of income of $25.4 million resulting from the revaluation of its deferred tax assets and liabilities (the “DTA”) and low income housing tax credit (the “LIHTC”) investments due to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017. This one-time, non-cash charge adversely impacted the Company’s diluted earnings per share for the fourth quarter by $0.19 per share and its tangible book value by $0.19 per share. The estimates of the impact of the Tax Act on the Company are preliminary and subject to additional procedures and analyses.

For the three months ended December 31, 2017, net income totaled $18.0 million, or $0.13 per diluted common share. Excluding the one-time, non-cash tax expense noted above, net income totaled $43.4 million, or $0.32 per diluted common share. This compares with 2017 third quarter net income of $44.6 million, or $0.33 per diluted common share, and 2016 fourth quarter net income of $40.6 million, or $0.30 per diluted common share.

Net income for 2017 totaled a record $139.4 million, or $1.03 per diluted common share, based on weighted average diluted shares of 135,684,969. Excluding the one-time, non-cash tax expense, net income totaled $164.9 million, or $1.22 per diluted common share. This compares with 2016 net income of $113.7 million, or $1.10 per diluted common share, based on weighted average diluted shares of 103,530,318.

There were no Tax Act-related adjustments to the Company’s 2017 third quarter, 2016 fourth quarter and 2016 full-year financial results. Net income and diluted earnings per share excluding tax reform adjustments are non-GAAP financial measures. See the reconciliation of the GAAP to non-GAAP financial measures in the accompanying financial information.

“We completed our first full year of operations as the representative bank of the Korean-American community with a solid performance on numerous fronts,” said Kevin S. Kim, President and Chief Executive Officer. “New loan originations topped the preceding quarter totaling $664 million and included another record performance from our residential mortgage operations with $193 million in new production. We saw a significant decline in nonaccrual loans during the quarter, and our outlook for asset quality remains strong. With the steady growth in our loan portfolio and improved yields for our interest-earning assets, our net interest income before provision for loan losses continued to trend positively, up 3% from the preceding quarter. While our deposit balances dipped temporarily at year-end, our average deposit balances continued to hold strong notwithstanding the extremely competitive deposit market.

“Although the 2017 fourth quarter included several non-core items that impacted our bottom line results, most notably due to the enactment of the Tax Act, we anticipate recovering the one-time, non-cash charge by approximately the end of the third quarter of 2018 through lower quarterly tax provision expenses. We are making significant enhancements to our overall enterprise risk infrastructure, and believe Bank of Hope is well positioned to benefit from the recent tax reforms and deliver even greater returns to our shareholders, customers and employees in 2018 and beyond,” said Kim.

Financial Highlights

  
(dollars in thousands, except per share data) (unaudited)At or for the Three Months Ended
 12/31/2017 9/30/2017 12/31/2016
Net income$17,984  $44,564  $40,630 
Diluted earnings per share$0.13  $0.33  $0.30 
Tax reform adjustments:        
Deferred tax asset$23,835  $  $ 
Investments in affordable housing partnerships$1,588  $  $ 
Net income, excluding tax reform adjustments (1)$43,407  $44,564  $40,630 
Diluted earnings per share, excluding tax reform adjustments (1)$0.32  $0.33  $0.30 
Net interest income before provision for loan losses$126,392  $123,263  $117,209 
Net interest margin 3.84%  3.83%  3.75%
Noninterest income$16,451  $16,246  $18,192 
Noninterest expense$73,028  $61,837  $66,731 
Net loans receivable$11,018,034  $10,879,341  $10,463,989 
Deposits$10,846,609  $10,993,320  $10,642,035 
Nonaccrual loans (2)$33,247  $43,323  $40,074 
ALLL to loans receivable 0.76%  0.76%  0.75%
ALLL to nonaccrual loans (2) 254.28%  193.05%  197.99%
ALLL to nonperforming assets (2) (3) 75.69%  66.51%  71.32%
Provision for loan losses$3,600  $5,400  $800 
Net charge offs$2,692  $1,841  $1,433 
Return on assets (“ROA”) 0.51%  1.30%  1.20%
Return on equity (“ROE”) 3.70%  9.26%  8.72%
Efficiency ratio 51.12%  44.32%  49.28%
            

(1) Net income and diluted earnings per share excluding tax reform adjustments are non-GAAP financial measures. See the Company’s reconciliation of the GAAP to non-GAAP financial measures in the accompanying financial information.
(2) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $22.1 million, $21.5 million and $15.9 million at December 31, 2017, September 30, 2017 and December 31, 2016, respectively.
(3) Nonperforming assets exclude purchased credit-impaired loans totaling $18.1 million, $20.4 million and $19.6 million at December 31, 2017, September 30, 2017 and December 31, 2016, respectively.

Operating Results for the 2017 Fourth Quarter

The comparability of the Company’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 December 31, 2017, September 30, 2017 and December 31, 2016 included the following pre-tax acquisition accounting adjustments and merger-related expenses associated with past and current acquisitions:

  
(dollars in thousands) (unaudited)Three Months Ended
 12/31/2017 9/30/2017 12/31/2016
Accretion on purchased non-impaired loans$7,629  $4,566  $3,355 
Accretion on purchased credit-impaired loans 5,167   5,815   5,591 
Amortization of premium on low income housing tax credits (85)  (84)  (84)
Amortization of premium on acquired FHLB borrowings 354   357   449 
Accretion of discount on acquired subordinated debt (263)  (262)  (260)
Amortization of premium on acquired time deposits and savings 3   206   3,478 
Amortization of core deposit intangibles (676)  (676)  (742)
Total acquisition accounting adjustments$12,129  $9,922  $11,787 
Merger-related expenses (12)  (260)  (2,952)
Total$12,117  $9,662  $8,835 
            

Net Interest Income.  Net interest income before provision for loan losses for the 2017 fourth quarter increased to $126.4 million from $123.3 million in the immediately preceding third quarter and from $117.2 million in the year-ago fourth quarter.

The net interest margin (net interest income divided by average interest earning assets) for the 2017 fourth quarter increased 1 basis point to 3.84% from 3.83% in the 2017 third quarter and increased 9 basis points from 3.75% in the year-ago fourth quarter. The increases in the Company’s weighted average yield on loans were largely offset by increases in the weighted average cost of deposits.

The weighted average yield on loans for the 2017 fourth quarter increased 5 basis points to 5.12% from 5.07% in the 2017 third quarter and increased 32 basis points from 4.80% in the 2016 fourth quarter. The weighted average yield on new loans originated for the 2017 fourth quarter increased 2 basis points to 4.42% from 4.40% in the 2017 third quarter and increased 27 basis points from 4.15% in the year-ago fourth quarter.

The weighted average cost of deposits for the 2017 fourth quarter increased 5 basis points to 0.80% from 0.75% in the 2017 third quarter and increased 25 basis points from 0.55% in the year-ago fourth quarter.

Noninterest Income.  Noninterest income for the 2017 fourth quarter increased 1% to $16.5 million from $16.2 million in the 2017 third quarter. Compared with the 2017 third quarter, the net gain on sale of SBA loans decreased to $2.6 million from $3.6 million, while the net gain on sale of residential mortgage loans increased to $1.3 million from $847,000. During the 2017 fourth quarter, the Company sold $131.2 million in securities available for sale and posted a gain of $301,000, compared with a gain on sale of securities available for sale of $0 and $2,000 for the 2017 third quarter and 2016 fourth quarter, respectively. Noninterest income for the 2016 fourth quarter totaled $18.2 million and included a $3.7 million gain on sale of SBA loan and a $1.4 million gain on sale of residential mortgage loans.

Noninterest Expense.  Noninterest expense increased 18% to $73.0 million in the 2017 fourth quarter from $61.8 million in the 2017 third quarter and increased 9% from $66.7 million in the year-ago fourth quarter. The 2017 fourth quarter reflected elevated levels of noninterest expense due to several items, which were one-time or non-core in nature. Following an analysis of its LIHTC investments on an individual investment basis as a result of the passage of the Tax Act, the Company recognized a $3.3 million LIHTC impairment during the 2017 fourth quarter. 2017 fourth quarter noninterest expense also included $2.2 million of expenses related to special projects, as well as $1.0 million in expenses following an annual reassessment of the Company’s BOLI liabilities. In addition, noninterest expense for the preceding 2017 third quarter benefited from a $2.8 million reversal of an off-balance sheet provision for unfunded loan commitments, as previously announced. The Company had no such benefit in the 2017 fourth quarter.

Salaries and employee benefits expense for the 2017 fourth quarter increased 10% to $39.6 million from $36.0 million for the immediately preceding third quarter and increased 16% from $34.2 million for the year-ago fourth quarter. In addition to the BOLI expense noted above, salaries and employee benefits expense reflected higher costs associated with an increase in FTEs. The total number of FTEs, excluding employees on leave, as of December 31, 2017 was 1,470, up from 1,463 as of September 30, 2017 and 1,382 as of December 31, 2016.

Income Tax Provision.  The effective tax rate for the 2017 fourth quarter was 72.8%, compared with 38.3% for the 2017 third quarter and 40.1% for the fourth quarter a year ago. Excluding the $25.4 million charge related to the revaluation of the Company’s DTA and LIHTC investments, the effective tax rate for the 2017 fourth quarter would have been 34.4%.

As a result of the tax reform which lowered the corporate federal tax rate from 35% to 21%, the Company expects its effective tax rate for 2018 will be in the range of 25%.

Balance Sheet Summary

Loans receivable increased to $11.10 billion at December 31, 2017 from $10.96 billion at September 30, 2017, reflecting a 5% annualized growth rate. At December 31, 2016, loans receivable totaled $10.54 billion.

Total new loan originations during the 2017 fourth quarter amounted to $663.5 million and included SBA loan production of $66.7 million and residential mortgage loan originations of $193.0 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. SBA 7(a) loan originations represented 100% of SBA production for the 2017 fourth quarter and totaled $66.7 million. This compares with SBA 7(a) loan production of $67.9 million for the third quarter of 2017 and $62.5 million for the year-ago fourth quarter. During the 2017 fourth quarter, the Company sold $36.6 million of its SBA loans held for sale, compared with $49.9 million in the immediately preceding third quarter and $50.3 million in the fourth quarter a year ago.

Aggregate loan pay offs and pay downs in the 2017 fourth quarter declined to $380.9 million from $447.6 million for the immediately preceding third quarter and from $417.3 million in the year-ago fourth quarter.

Total deposits at December 31, 2017 decreased to $10.85 billion from $10.99 billion at September 30, 2017, while average balances of interest bearing deposits and noninterest bearing deposits were higher for the 2017 fourth quarter when compared with the preceding third quarter. At December 31, 2016, total deposits amounted to $10.64 billion. Noninterest bearing demand deposits accounted for 27.6%, 27.7% and 27.3% of total deposits as of December 31, 2017, September 30, 2017 and December 31, 2016, respectively.

Credit Quality

The provision for loan and lease losses for the 2017 fourth quarter was $3.6 million, compared with $5.4 million for the immediately preceding third quarter and $800,000 for the year-ago fourth 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 December 31, 2017, September 30, 2017 and December 31, 2016 is as follows:

      
(dollars in thousands) (unaudited)12/31/2017 9/30/2017 12/31/2016
Legacy loans (1)$67,648 $70,282 $66,399
Purchased non-impaired loans (2) 4,853  2,740  814
Purchased credit-impaired loans (2) 12,040  10,611  12,130
Total ALLL$84,541 $83,633 $79,343
         
Loans receivable$11,102,575 $10,962,974 $10,543,332
ALLL coverage ratio 0.76%  0.76%  0.75%
         

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

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 December 31, 2017 declined to $33.2 million, or 0.30% of loans receivable, from $43.3 million, or 0.40% of loans receivable, at September 30, 2017 and $40.1 million, or 0.38% of loans receivable at December 31, 2016. Accruing restructured loans totaled $67.3 million at December 31, 2017, compared with $64.8 million at September 30, 2017 and $48.9 million at December 31, 2016. Total nonperforming loans at December 31, 2017 decreased to $100.9 million, or 0.91% of loans receivable, from $108.5 million, or 0.99% of loans receivable, at September 30, 2017. At December 31, 2016, total nonperforming loans amounted to $89.3 million, or 0.85% of loans receivable.

Nonperforming assets, including nonperforming loans and OREO, decreased to $111.7 million at December 31, 2017 from $125.7 million at September 30, 2017. At December 31, 2016, nonperforming assets totaled $111.2 million.  As a percentage of total assets, nonperforming assets was 0.79% at December 31, 2017, 0.89% at September 30, 2017 and 0.83% at December 31, 2016.

Following are the components of criticized loan balances as of December 31, 2017, September 30, 2017 and December 31, 2016:

      
(dollars in thousands) (unaudited)12/31/2017 9/30/2017 12/31/2016
Special Mention (1)$214,891 $225,228 $243,656
Classified (1) 353,613  348,109  313,055
Criticized$568,504 $573,337 $556,711
         

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

For the 2017 fourth quarter, net charge offs totaled $2.7 million, or 0.10% of average loans receivable on an annualized basis. This compares with 2017 third quarter net charge offs of $1.8 million, or 0.07% of average loans receivable on an annualized basis, and $1.4 million, or 0.05% of average loans receivable on an annualized basis, for the year-ago fourth quarter.

The ALLL at December 31, 2017 was $84.5 million, or 0.76% of loans receivable (excluding loans held for sale), compared with $83.6 million, or 0.76% of loans receivable (excluding loans held for sale), at September 30, 2017 and $79.3 million, or 0.75% of loans receivable (excluding loans held for sale), at December 31, 2016. The coverage ratio of the ALLL to nonperforming loans (excluding purchased credit-impaired loans) was 83.78% at December 31, 2017, compared with 77.05% at September 30, 2017 and 88.90% at December 31, 2016.

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 $100.8 million at December 31, 2017, compared with $108.5 million at September 30, 2017 and $140.4 million at December 31, 2016.

Capital

At December 31, 2017, the Company continued to exceed all regulatory capital requirements to be generally classified as a “well-capitalized” financial institution, as summarized in the following table:

        
 12/31/2017(1) 9/30/2017 12/31/2016 Minimum Guideline
for “Well-Capitalized”
Institution
Common Equity Tier 1 Capital12.27% 12.29% 12.10% 6.50%
Tier 1 Leverage Ratio11.52% 11.78% 11.49% 5.00%
Tier 1 Risk-based Ratio13.08% 13.10% 12.92% 8.00%
Total Risk-based Ratio13.79% 13.81% 13.64% 10.00%
            

(1)  The Company’s regulatory capital ratios for December 31, 2017 may change with the proposed Accounting Standard Update, which will require certain disproportionate tax effects in accumulated other comprehensive income that resulted from the Tax Act to be reclassified to retained earnings.  Formal guidance on the proposed Accounting Standard Update is expected to be adopted prior to the Company’s filing of its Annual Report on Form 10-K.

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

      
 12/31/2017 9/30/2017 12/31/2016
Tangible common equity per share (1)$10.68  $10.72  $10.15 
Tangible common equity per share, excluding tax reform adjustments (1)$10.87  $10.72  $10.15 
Tangible common equity to tangible assets (1) 10.54%  10.63%  10.60%
            

(1)  Tangible common equity as a percentage of equity and tangible assets, are non-GAAP financial measures that represents common equity less goodwill and net other intangible assets divided by equity and total assets less goodwill and net other intangible assets, respectively.  Management reviews tangible common equity to equity and tangible assets in evaluating the Company’s capital levels and has included these figures 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 equity and tangible assets with stockholders’ equity to total assets and a reconciliation of tangible common equity per share, excluding tax reform adjustments.

Investor Conference Call

The Company will host an investor conference call on Wednesday, January 31, 2018 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for the fourth quarter ended December 31, 2017. 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. By including the foregoing website address, the Company does not intend to and shall not be deemed to incorporate by reference any material contained therein. 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 February 7, 2018, replay access code 10115513.

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 $14.2 billion in total assets as of December 31, 2017. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 63 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. By including the foregoing website address, the registrant does not intend to and shall not be deemed to incorporate by reference any material contained 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, the Company’s outlook and expectations with respect to the implementation of the Tax Act, effective January 1, 2018, including the impact of the Tax Act on the Company’s DTA and investments in LIHTC, the impact of the revaluation on the Company’s 2017 fourth quarter results and the anticipated impact of the Tax Act on the Company’s future earnings 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: the Company’s inability to remediate its presently identified material weaknesses or to do so in a timely manner, the possibility that additional material weaknesses may arise in the future, and that a material weakness may have an impact on our reported financial results; 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; and regulatory risks associated with current and future regulations. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. 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.

(tables follow)

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)

          
Assets12/31/2017 9/30/2017 % change 12/31/2016 % change
Cash and due from banks$492,000  $405,296  21% $437,334  12%
Securities available for sale, at fair value1,720,257  1,868,309  (8)% 1,556,740  11%
Federal Home Loan Bank (“FHLB”) stock and other investments83,142  82,141  1% 66,166  26%
Loans held for sale, at the lower of cost or fair value29,661  11,425  160% 22,785  30%
Loans receivable11,102,575  10,962,974  1% 10,543,332  5%
Allowance for loan losses(84,541) (83,633) (1)% (79,343) (7)%
Net loans receivable11,018,034  10,879,341  1% 10,463,989  5%
Accrued interest receivable29,979  29,145  3% 26,880  12%
Premises and equipment, net56,714  55,838  2% 55,316  3%
Bank owned life insurance74,915  74,514  1% 73,696  2%
Goodwill464,450  464,450  % 462,997  %
Servicing assets24,710  25,079  (1)% 26,457  (7)%
Other intangible assets, net16,523  17,198  (4)% 19,226  (14)%
Other assets196,332  237,285  (17)% 229,836  (15)%
Total assets$14,206,717  $14,150,021  % $13,441,422  6%
          
Liabilities         
Deposits$10,846,609  $10,993,320  (1)% $10,642,035  2%
Borrowings from FHLB & fed funds purchased1,227,593  1,018,046  21% 754,290  63%
Subordinated debentures100,853  100,590  % 99,808  1%
Accrued interest payable15,961  13,740  16% 10,863  47%
Other liabilities87,446  89,894  (3)% 78,953  11%
Total liabilities12,278,462  12,215,590  1% 11,585,949  6%
          
Stockholders’ Equity         
Common stock, $0.001 par value; authorized, 150,000,000 shares at December, 31, 2017, September, 30,
2017, and December, 31, 2016;  issued and outstanding, 135,511,891, 135,467,176, and 135,240,079 at
December, 31, 2017, September, 30, 2017, and December, 31, 2016, respectively
136  135  1% 135  1%
Capital surplus1,405,014  1,403,586  % 1,400,490  %
Retained earnings541,289  540,921  % 469,505  15%
Accumulated other comprehensive loss(18,184) (10,211) (78)% (14,657) 24%
Total stockholders’ equity1,928,255  1,934,431  % 1,855,473  4%
Total liabilities and stockholders’ equity$14,206,717  $14,150,021  % $13,441,422  6%
                  

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)

    
 Three Months Ended Twelve Months Ended
 12/31/2017 9/30/2017 % change 12/31/2016 % change 12/31/2017 12/31/2016 % change
Interest income:               
Interest and fees on loans$141,129  $136,822  3% $125,791  12% $529,760  $392,127  35%
Interest on securities10,523  9,540  10% 7,391  42% 36,917  25,442  45%
Interest on federal funds sold and other investments1,533  1,281  20% 2,205  (30)% 5,427  4,365  24%
Total interest income153,185  147,643  4% 135,387  13% 572,104  421,934  36%
                
Interest expense:               
Interest on deposits21,901  20,376  7% 14,815  48% 74,902  48,091  56%
Interest on other borrowings4,892  4,004  22% 3,363  45% 15,822  10,488  51%
Total interest expense26,793  24,380  10% 18,178  47% 90,724  58,579  55%
                
Net interest income before provision for loan losses126,392  123,263  3% 117,209  8% 481,380  363,355  32%
Provision for loan losses3,600  5,400  (33)% 800  350% 17,360  9,000  93%
Net interest income after provision for loan losses122,792  117,863  4% 116,409  5% 464,020  354,355  31%
                
Noninterest income:               
Service fees on deposit accounts4,951  5,151  (4)% 5,601  (12)% 20,619  15,964  29%
Net gains on sales of SBA loans2,626  3,631  (28)% 3,660  (28)% 12,774  8,750  46%
Net gains on sales of other loans1,308  847  54% 1,401  (7)% 2,927  2,920  %
Net gains on sales of securities available for sale301    100% 2  14,950% 301  950  (68)%
Other income and fees7,265  6,617  10% 7,528  (3)% 29,794  23,235  28%
Total noninterest income16,451  16,246  1% 18,192  (10)% 66,415  51,819  28%
                
Noninterest expense:               
Salaries and employee benefits39,570  35,987  10% 34,162  16% 144,669  107,944  34%
Occupancy7,108  7,131  % 7,948  (11)% 28,587  24,574  16%
Furniture and equipment4,032  3,642  11% 3,805  6% 14,643  11,726  25%
Advertising and marketing2,246  2,217  1% 2,475  (9)% 10,281  7,320  40%
Data processing and communications2,676  3,221  (17)% 3,904  (31)% 12,179  11,403  7%
Professional fees4,553  3,239  41% 2,301  98% 14,954  6,556  128%
FDIC assessment1,897  1,262  50% 468  305% 5,173  4,165  24%
Credit related expenses1,073  (2,487) N/A 812  32% 582  2,954  (80)%
Other real estate owned (“OREO”) expense, net237  678  (65)% 1,354  (82)% 3,100  2,492  24%
Merger-related expenses12  260  (95)% 2,952  (100)% 1,781  16,914  (89)%
Other9,624  6,687  44% 6,550  47% 30,652  18,927  62%
Total noninterest expense73,028  61,837  18% 66,731  9% 266,601  214,975  24%
Income before income taxes66,215  72,272  (8)% 67,870  (2)% 263,834  191,199  38%
Income tax provision48,231  27,708  74% 27,240  77% 124,389  77,452  61%
Net income$17,984  $44,564  (60)% $40,630  (56)% $139,445  $113,747  23%
                
Earnings Per Common Share:               
Basic$0.13  $0.33    $0.30    $1.03  $1.10   
Diluted$0.13  $0.33    $0.30    $1.03  $1.10   
                
Average Shares Outstanding:               
Basic135,505,041  135,382,457    135,238,928    135,348,938  103,289,059   
Diluted135,752,978  135,630,912    135,585,561    135,684,969  103,530,318   
                     

Hope Bancorp, Inc.
Selected Financial Data
Unaudited

    
 At or for the Three Months Ended
(Annualized)
 At or for the Twelve Months
Ended
Profitability measures:12/31/2017 9/30/2017 12/31/2016 12/31/2017 12/31/2016
ROA0.51% 1.30% 1.20% 1.02% 1.10%
ROE3.70% 9.26% 8.72% 7.31% 8.47%
Return on average tangible equity 14.92% 12.36% 11.77% 9.78% 10.59%
Net interest margin3.84% 3.83% 3.75% 3.80% 3.75%
Efficiency ratio51.12% 44.32% 49.28% 48.67% 51.78%
          
Average tangible equity is calculated by subtracting average goodwill and average core deposit intangibles 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, except share data)

      
 Three Months Ended Three Months Ended Three Months Ended
 12/31/2017 9/30/2017 12/31/2016
   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$10,931,523  $141,129  5.12% $10,712,856  $136,822  5.07% $10,427,538  $125,791  4.80%
Securities available for sale1,794,260  10,523  2.33% 1,743,610  9,540  2.17% 1,586,560  7,391  1.86%
FRB and FHLB stock and other investments345,363  1,533  1.76% 299,305  1,281  1.70% 433,212  2,205  2.02%
Total interest earning assets$13,071,146  $153,185  4.65% $12,755,771  $147,643  4.59% $12,447,310  $135,387  4.33%
                  
INTEREST BEARING LIABILITIES:                 
Deposits:                 
Demand, interest bearing$3,538,995  $8,564  0.96% $3,526,846  $8,127  0.91% $3,414,158  $7,054  0.82%
Savings241,667  439  0.72% 258,383  348  0.53% 303,064  319  0.42%
Time deposits4,072,565  12,898  1.26% 4,053,577  11,901  1.16% 4,120,753  7,442  0.72%
Total interest bearing deposits7,853,227  21,901  1.11% 7,838,806  20,376  1.03% 7,837,975  14,815  0.75%
FHLB advances & fed funds purchased1,003,951  3,531  1.40% 764,691  2,698  1.40% 681,757  2,190  1.28%
Other borrowings96,786  1,361  5.50% 96,524  1,306  5.29% 95,650  1,173  4.80%
Total interest bearing liabilities8,953,964  $26,793  1.19% 8,700,021  $24,380  1.11% 8,615,382  $18,178  0.84%
Noninterest bearing demand deposits3,029,958      2,993,441      2,918,156     
Total funding liabilities/cost of funds$11,983,922    0.89% $11,693,462    0.83% $11,533,538    0.63%
Net interest income/net interest spread  $126,392  3.46%   $123,263  3.48%   $117,209  3.49%
Net interest margin    3.84%     3.83%     3.75%
Cost of deposits:                 
Noninterest bearing demand deposits$3,029,958  $    $2,993,441  $    $2,918,156  $   
Interest bearing deposits7,853,227  21,901  1.11% 7,838,806  20,376  1.03% 7,837,975  14,815  0.75%
Total deposits$10,883,185  $21,901  0.80% $10,832,247  $20,376  0.75% $10,756,131  $14,815  0.55%
                                 

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)

    
 Twelve Months Ended  Twelve Months Ended
 12/31/2017 12/31/2016
   Interest      Interest  
 Average Income/ Average Average  Income/ Average
 Balance Expense Yield/Cost Balance  Expense Yield/Cost
INTEREST EARNING ASSETS:           
Loans receivable, including loans held for sale$10,642,349  $529,760  4.98% $8,121,897  $392,127  4.83%
Securities available for sale1,679,468  36,917  2.20% 1,276,068  25,442  1.99%
FRB and FHLB stock and other investments360,086  5,427  1.51% 281,824  4,365  1.55%
Total interest earning assets$12,681,903  $572,104  4.51% $9,679,789  $421,934  4.36%
            
INTEREST BEARING LIABILITIES:           
Deposits:           
Demand, interest bearing$3,490,440  $31,856  0.91% $2,587,548  $21,136  0.82%
Savings268,292  1,354  0.50% 234,332  1,282  0.55%
Time deposits4,037,259  41,692  1.03% 3,219,484  25,673  0.80%
Total interest bearing deposits7,795,991  74,902  0.96% 6,041,364  48,091  0.80%
FHLB advances & fed funds purchased787,119  10,706  1.36% 619,557  7,560  1.22%
Other borrowings96,363  5,116  5.24% 64,165  2,928  4.49%
Total interest bearing liabilities8,679,473  $90,724  1.05% 6,725,086  $58,579  0.87%
Noninterest bearing demand deposits2,955,895      2,191,620     
Total funding liabilities/cost of funds$11,635,368    0.78% $8,916,706    0.66%
Net interest income/net interest spread  $481,380  3.46%   $363,355  3.49%
Net interest margin    3.80%     3.75%
Cost of deposits:           
Noninterest bearing demand deposits$2,955,895  $    $2,191,620  $   
Interest bearing deposits7,795,991  74,902  0.96% 6,041,364  48,091  0.80%
Total deposits$10,751,886  $74,902  0.70% $8,232,984  $48,091  0.58%
                      

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

    
  Three Months Ended  Twelve Months Ended
AVERAGE BALANCES:12/31/2017 9/30/2017 % change 12/31/2016 % change 12/31/2017 12/31/2016 % change
Loans receivable, including loans held for sale$10,931,523  $10,712,856  2% $10,427,538  5% $10,642,349  $8,121,897  31%
Investments2,139,623  2,042,915  5% 2,019,772  6% 2,039,554  1,557,892  31%
Interest earning assets13,071,146  12,755,771  2% 12,447,310  5% 12,681,903  9,679,789  31%
Total assets14,043,102  13,737,532  2% 13,506,836  4% 13,648,963  10,342,063  32%
                
Interest bearing deposits7,853,227  7,838,806  % 7,837,975  % 7,795,991  6,041,364  29%
Interest bearing liabilities8,953,964  8,700,021  3% 8,615,382  4% 8,679,473  6,725,086  29%
Noninterest bearing demand deposits3,029,958  2,993,441  1% 2,918,156  4% 2,955,895  2,191,620  35%
Stockholders’ equity1,944,404  1,924,444  1% 1,864,766  4% 1,907,746  1,342,954  42%
Net interest earning assets4,117,182  4,055,750  2% 3,831,928  7% 4,002,430  2,954,703  35%
                
LOAN PORTFOLIO COMPOSITION:12/31/2017 9/30/2017 % change 12/31/2016 % change      
Commercial loans$1,947,533  $2,005,290  (3)% $1,986,949  (2)%      
Real estate loans8,508,222  8,438,064  1% 8,154,570  4%      
Consumer and other loans647,102  521,459  24% 403,470  60%      
Loans outstanding11,102,857  10,964,813  1% 10,544,989  5%      
Unamortized deferred loan fees - net of costs(282) (1,839) 85% (1,657) 83%      
Loans, net of deferred loan fees and costs11,102,575  10,962,974  1% 10,543,332  5%      
Allowance for loan losses(84,541) (83,633) (1)% (79,343) (7)%      
Loan receivable, net$11,018,034  $10,879,341  1% $10,463,989  5%      
                
REAL ESTATE LOANS BY PROPERTY TYPE:12/31/2017 9/30/2017 % change 12/31/2016 % change      
Retail buildings$2,375,588  $2,314,867  3% $2,163,075  10%      
Hotels/motels1,631,314  1,595,787  2% 1,605,787  2%      
Gas stations/car washes964,246  979,378  (2)% 946,364  2%      
Mixed-use facilities624,401  614,255  2% 563,484  11%      
Warehouses915,465  913,217  % 892,100  3%      
Multifamily455,463  435,088  5% 423,084  8%      
Other1,541,745  1,585,472  (3)% 1,560,676  (1)%      
Total$8,508,222  $8,438,064  1% $8,154,570  4%      
                
DEPOSIT COMPOSITION12/31/2017 9/30/2017 % change 12/31/2016 % change      
Noninterest bearing demand deposits$2,998,734  $3,049,998  (2)% $2,900,241  3%      
Money market and other3,332,703  3,685,973  (10)% 3,401,446  (2)%      
Saving deposits240,509  243,042  (1)% 301,906  (20)%      
Time deposits of more than $250,0001,279,108  1,252,747  2% 1,077,024  19%      
Other time deposits2,995,555  2,761,560  8% 2,961,418  1%      
Total deposit balances$10,846,609  $10,993,320  (1)% $10,642,035  2%      
                
DEPOSIT COMPOSITION (%)12/31/2017 9/30/2017   12/31/2016        
Noninterest bearing demand deposits27.6% 27.7%   27.3%        
Money market and other30.7% 33.5%   32.0%        
Saving deposits2.2% 2.2%   2.8%        
Time deposits of more than $250,00011.8% 11.4%   10.1%        
Other time deposits27.7% 25.2%   27.8%        
Total deposit balances100.0% 100.0%   100.0%        
                   

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)

           
CAPITAL RATIOS:12/31/2017 9/30/2017 12/31/2016     
Total stockholders’ equity$1,928,255  $1,934,431  $1,855,473      
Common equity tier 1 ratio12.27% 12.29% 12.10%     
Tier 1 risk-based capital ratio13.08% 13.10% 12.92%     
Total risk-based capital ratio13.79% 13.81% 13.64%     
Tier 1 leverage ratio11.52% 11.78% 11.49%     
Total risk weighted assets$11,966,785  $11,935,561  $11,575,944      
Book value per common share$14.23  $14.28  $13.72      
Tangible common equity to tangible assets 210.54% 10.63% 10.60%     
Tangible common equity per share 2$10.68  $10.72  $10.15      
           
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:     
           
TANGIBLE COMMON EQUITY (“TCE”)12/31/2017 9/30/2017 12/31/2016     
Total stockholders’ equity$1,928,255  $1,934,431  $1,855,473      
Less goodwill and core deposit intangible assets, net(480,973) (481,648) (482,223)     
Tangible common equity$1,447,282  $1,452,783  $1,373,250      
           
Total assets$14,206,717  $14,150,021  $13,441,422      
Less:  Goodwill and core deposit intangible assets, net(480,973) (481,648) (482,223)     
Tangible assets$13,725,744  $13,668,373  $12,959,199      
           
Common shares outstanding135,511,891  135,467,176  135,240,079      
           
Tangible common equity to tangible assets10.54% 10.63% 10.60%     
Tangible common equity per share$10.68  $10.72  $10.15      
           
           
PROFITABILITY AND PROFITABILITY MEASURES EXCLUDING TAX REFORM ADJUSTMENTSThree Months Ended Twelve Months Ended 
12/31/2017 9/30/2017 12/31/2016 12/31/2017 12/31/2016 
Income before income taxes$66,215  $72,272  $67,870  $263,834  $191,199  
Income tax provision48,231  27,708  27,240  124,389  77,452  
Less tax reform adjustments:          
Deferred tax asset23,835      23,835    
Investments in affordable housing partnerships1,588      1,588    
Income tax provision, excluding tax reform adjustments22,808  27,708  27,240  98,966  77,452  
Net income, excluding tax reform adjustments43,407  44,564  40,630  164,868  113,747  
           
Effective tax rate, excluding tax reform adjustments34.45% 38.34% 40.14% 37.51% 40.51% 
           
Weighted average diluted common shares135,752,978  135,630,912  135,585,561  135,684,969  103,530,318  
Diluted EPS, excluding tax reform adjustments$0.32  $0.33  $0.30  $1.22  $1.10  
           
Average assets, excluding tax reform adjustments$14,043,378  $13,737,532  $13,506,836  $13,649,032  $10,342,063  
ROA, excluding tax reform adjustments (annualized)1.24% 1.30% 1.20% 1.21% 1.10% 
           
Average equity, excluding tax reform adjustments$1,944,680  $1,924,444  $1,864,766  $1,907,815  $1,342,954  
ROE, excluding tax reform adjustments (annualized)8.93% 9.26% 8.72% 8.64% 8.47% 
           
TCE PER SHARE EXCLUDING TAX REFORM ADJUSTMENTS12/31/2017 9/30/2017 12/31/2016     
TCE$1,447,282  $1,452,783  $1,373,250      
Add back tax reform adjustments:          
Deferred tax asset23,835          
Investments in affordable housing partnerships1,588          
TCE, excluding tax reform adjustments$1,472,705  $1,452,783  $1,373,250      
           
Common shares outstanding135,511,891  135,467,176  135,240,079      
TCE per share, excluding tax reform adjustments$10.87  $10.72  $10.15      
                 

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)

    
  Three Months Ended  Twelve Months Ended
ALLOWANCE FOR LOAN LOSSES:12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016 12/31/2017 12/31/2016
Balance at beginning of period$83,633  $80,074  $78,659  $79,343  $79,976  $79,343  $76,408 
Provision for loan losses3,600  5,400  2,760  5,600  800  17,360  9,000 
Recoveries1,078  3,072  777  321  452  5,248  2,895 
Charge offs(3,770) (4,913) (2,122) (6,605) (1,885) (17,410) (8,960)
Balance at end of period$84,541  $83,633  $80,074  $78,659  $79,343  $84,541  $79,343 
Net charge offs/average loans receivable (annualized)0.10% 0.07% 0.05% 0.24% 0.05% 0.10% 0.07%
              
 Three Months Ended  Twelve Months Ended
NET CHARGED OFF/(RECOVERED) LOANS BY TYPE12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016 12/31/2017 12/31/2016
Real estate loans$342  $314  $830  $1,444  $(45) $2,930  $(665)
Commercial loans2,170  1,293  276  4,564  1,375  8,303  6,066 
Consumer loans180  234  239  276  478  929  664 
Charge offs excluding Acquired Credit Impaired Loans2,692  1,841  1,345  6,284  1,808  12,162  6,065 
Charge offs on Acquired Credit Impaired Loans        (375)    
Total net charge offs / (recoveries)$2,692  $1,841  $1,345  $6,284  $1,433  $12,162  $6,065 
                            

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

          
NONPERFORMING ASSETS12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Delinquent loans on nonaccrual status 3$33,247  $43,323  $47,361  $37,009  $40,074 
Delinquent loans 90 days or more on accrual status407  407  1,850  275  305 
Accruing restructured loans 467,250  64,807  53,290  48,984  48,874 
Total nonperforming loans100,904  108,537  102,501  86,268  89,253 
Other real estate owned10,787  17,208  21,839  19,096  21,990 
Total nonperforming assets$111,691  $125,745  $124,340  $105,364  $111,243 
Nonperforming assets/total assets0.79% 0.89% 0.90% 0.78% 0.83%
Nonperforming assets/loans receivable & OREO1.01% 1.15% 1.15% 1.00% 1.05%
Nonperforming assets/total capital5.79% 6.50% 6.52% 5.61% 5.99%
Nonperforming loans/loans receivable0.91% 0.99% 0.95% 0.82% 0.85%
Nonaccrual loans/loans receivable0.30% 0.40% 0.44% 0.35% 0.38%
Allowance for loan losses/loans receivable0.76% 0.76% 0.74% 0.75% 0.75%
Allowance for loan losses/nonaccrual loans254.28% 193.05% 169.07% 212.54% 197.99%
Allowance for loan losses/nonperforming loans83.78% 77.05% 78.12% 91.18% 88.90%
Allowance for loan losses/nonperforming assets75.69% 66.51% 64.40% 74.65% 71.32%
          
3  Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $22.1 million, $21.5 million, $15.5 million, $15.2 million, and $15.9 million, at December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016, respectively.
4  Excludes Acquired Credit Impaired Loans totaling $18.1 million, $20.4 million, $16.3 million, $17.3 million, and $19.6 million at December 31, 2017, September 30, 2017, June 30, 2017, March 31, 2017, and December 31, 2016, respectively.
          
BREAKDOWN OF ACCRUING RESTRUCTURED LOANS BY TYPE:12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Retail buildings$8,183  $6,807  $6,396  $5,794  $5,832 
Hotels/motels1,273  1,279  1,287  1,300  1,305 
Mixed-use facilities129  131  133  134  889 
Warehouses5,577  5,185  5,253  5,321  5,379 
Other 552,088  51,405  40,221  36,435  35,469 
Total$67,250  $64,807  $53,290  $48,984  $48,874 
          
Includes commercial business and other loans         
          
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Legacy         
30 - 59 days$16,092  $8,857  $5,910  $10,198  $6,253 
60 - 89 days1,724  3,572  11,740  3,978  6,720 
Total delinquent loans less than 90 days past due - legacy$17,816  $12,429  $17,650  $14,176  $12,973 
          
Acquired         
30 - 59 days$4,242  $1,429  $6,373  $5,249  $4,015 
60 - 89 days1,895  1,687  996  1,007  1,049 
Total delinquent loans less than 90 days past due - acquired$6,137  $3,116  $7,369  $6,256  $5,064 
          
Total delinquent loans less than 90 days past due$23,953  $15,545  $25,019  $20,432  $18,037 
                    

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

          
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE BY TYPE12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Legacy         
Real estate loans$9,008  $7,850  $14,126  $12,575  $10,896 
Commercial loans1,302  3,771  3,333  1,404  2,010 
Consumer loans7,506  808  191  198  67 
Total delinquent loans less than 90 days past due - legacy$17,816  $12,429  $17,650  $14,177  $12,973 
          
Acquired         
Real estate loans$3,937  $2,323  $5,786  $5,211  $2,721 
Commercial loans1,244  793  1,519  360  1,987 
Consumer loans956    64  684  356 
Total delinquent loans less than 90 days past due - acquired$6,137  $3,116  $7,369  $6,255  $5,064 
          
Total delinquent loans less than 90 days past due$23,953  $