Press Release

Hope Bancorp Reports 2018 Second Quarter Financial Results

Company Release - 7/17/2018 4:30 PM ET

Q2 2018 Highlights:

  • New loan disbursements of $792.3 million, with more diversified mix of CRE, C&I and consumer loans
  • Loans receivable of $11.67 billion reflects a 3% increase over Q1 2018
  • Total deposits of $11.73 billion reflects a 2% increase over Q1 2018
  • Total assets increase to $14.87 billion, up 3% over Q1 2018
  • Q2 net income totals $47.5 million, or $0.36 per diluted common share
  • Improved asset quality with nonperforming loans down 7% linked quarter and net recoveries of $1.1 million
  • Completed $217.5 million convertible senior notes offering
  • Share repurchases totaling $79.0 million reduces shares outstanding by 4.4 million shares

LOS ANGELES, July 17, 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 the three and six months ended June 30, 2018. Net income for the 2018 second quarter totaled $47.5 million, or $0.36 per diluted common share, based on 133,352,841 weighted averaged diluted common shares outstanding. This compares with net income for the 2018 first quarter of $51.2 million, or $0.38 per diluted common share, based on 135,815,262 weighted averaged diluted common shares outstanding. For the 2017 second quarter, net income totaled $40.7 million, or $0.30 per diluted common share, based on 135,613,181 weighted averaged diluted common shares outstanding.

As previously announced on May 11, 2018, the Company completed the sale of $200 million aggregate principal amount of 2.00% convertible senior notes due 2038 (the “Notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.  The initial purchaser of the Notes exercised in part its over-allotment option and purchased an additional $17.5 million aggregate principal amount of the Notes. In aggregate, the Company received net proceeds from the offering of approximately $213.15 million, after deducting the initial purchaser’s discount but before estimated offering expenses payable by the Company.

Under the board approved share repurchase program to buy back up to $100 million of its common stock, the Company repurchased an aggregate $79.0 million of its common stock at an average repurchase price of $18.10 through June 30, 2018, thereby reducing the number of shares outstanding by 4,361,740 shares. More detailed information regarding the Notes offering and share repurchase program may be accessed in the Company’s Form 8-Ks furnished to the SEC on May 7, 2018, May 9, 2018, May 11, 2018 and June 8, 2018.

“This was a solid quarter for Bank of Hope with positive performance on nearly all fronts,” said Kevin S. Kim, President and Chief Executive Officer. “Loan originations of $792 million were strong again this quarter, and we continued to see a more balanced mix with commercial real estate loans accounting for 41%, C&I 36% and consumer 23% of new loan production.  Loans receivable increased by 13% on an annualized basis, and all of the growth came in our C&I and consumer portfolios. While deposit pricing continues to be a challenge in the current environment, the strong loan growth and higher average loan yields largely offset the impact of rising deposit costs. This contributed to a relatively stable net interest margin, excluding the impact of the recently issued convertible debt interest expense. We also saw positive asset quality trends across the portfolio with meaningful declines in criticized loans and nonperforming assets, as well as realizing $1.1 million in net recoveries for the quarter.

“Our commitment to enhancing shareholder value is exemplified by our recent convertible notes offering coupled with the meaningful share buyback program and our sixth consecutive annual increase in our cash dividend. We believe that we are only beginning to unlock the synergies of our organization, and we look forward to keeping our stakeholders apprised of our progress,” said Kim.

Financial Highlights

(dollars in thousands, except per share data) (unaudited)At or for the Three Months Ended
 6/30/2018 3/31/2018 6/30/2017
Net income$47,530  $51,232  $40,687 
Diluted earnings per share$0.36  $0.38  $0.30 
Net interest income before provision for loan losses$122,819  $120,068  $116,820 
Net interest margin 3.61%  3.66%  3.75%
Noninterest income$15,269  $19,850  $16,115 
Noninterest expense$71,629  $68,453  $64,037 
Net loans receivable$11,581,559  $11,206,022  $10,736,345 
Deposits$11,734,595  $11,510,569  $10,955,101 
Nonaccrual loans (1)$68,226  $68,152  $47,361 
ALLL to loans receivable 0.77%  0.77%  0.74%
ALLL to nonaccrual loans (1) (2) 131.74%  126.86%  169.07%
ALLL to nonperforming assets (1) (2) 69.60%  62.70%  64.40%
Provision for loan losses$2,300  $2,500  $2,760 
Net (recoveries) charge offs$(1,120) $580  $1,345 
Return on average assets (“ROA”) 1.30%  1.44%  1.21%
Return on average equity (“ROE”) 9.89%  10.61%  8.60%
Efficiency ratio 51.87%  48.92%  48.17%

(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation
(2) Excludes purchased credit-impaired loans

Operating Results for the 2018 Second 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 June 30, 2018, March 31, 2018 and June 30, 2017 included the following pre-tax acquisition accounting adjustments and merger-related expenses associated with past acquisitions:

(dollars in thousands) (unaudited)Three Months Ended
 6/30/2018 3/31/2018 6/30/2017
Accretion on purchased non-impaired loans$3,189  $3,197  $3,501 
Accretion on purchased credit-impaired loans 5,959   5,772   5,212 
Amortization of premium on low income housing tax credits (85)  (84)  (85)
Amortization of premium on acquired FHLB borrowings 352   347   446 
Accretion of discount on acquired subordinated debt (269)  (264)  (261)
Amortization of premium on acquired time deposits and savings    1   1,218 
Amortization of core deposit intangibles (615)  (616)  (676)
Total acquisition accounting adjustments$8,531  $8,353  $9,355 
Merger-related expenses    7   (562)
Total$8,531  $8,360  $8,793 
            

Net Interest Income.  Net interest income before provision for loan losses for the 2018 second quarter increased to $122.8 million from $120.1 million in the 2018 first quarter and $116.8 million in the year-ago second quarter. The Company attributed the increase in net interest income before provision for loan losses to higher levels of interest-earning assets and improved yields.

The net interest margin (net interest income divided by average interest earning assets) for the 2018 second quarter declined 5 basis points to 3.61% from 3.66% in the preceding 2018 first quarter, of which 4 basis points of the decline is attributed to the convertible debt interest expense. In the year-ago second quarter, the net interest margin was 3.75%. Excluding the impact of the recently issued convertible debt, the net interest margin was relatively stable as the strong growth in the loan portfolio and higher weighted average loan yields largely offset the impact of higher weighted average cost of deposits.

The weighted average yield on loans for the 2018 second quarter increased to 5.16%, up 12 basis points from 5.04% in the 2018 first quarter and up 27 basis points from 4.89% in the year-ago second quarter. The increase in the weighted average yield on loans largely reflects the benefits to the variable rate portion of the Company’s loan portfolio resulting from the increases in the fed funds rate in March, June and December of 2017 and March and June 2018 of 25 basis points each.

The weighted average cost of deposits for the 2018 second quarter increased to 1.06%, up 15 basis points from 0.91% in the 2018 first quarter and up 38 basis points from 0.68% in the year-ago second quarter. The increase in the weighted average cost of deposits reflects the extremely competitive deposit market, as well as an increase in the higher-rate time deposit balances in the rising interest rate environment.

Noninterest Income.  Noninterest income for the 2018 second quarter decreased to $15.3 million from $19.9 million in the 2018 first quarter, largely reflecting the $3.5 million of income in the preceding first quarter recorded on certain equity investments held by the Company and lower gains on sales of residential mortgage loans.  For the 2017 second quarter, noninterest income totaled $16.1 million. Net gains on sales of SBA loans amounted to $3.5 million, $3.5 million and $3.3 million in the 2018 second quarter, 2018 first quarter and 2017 second quarter, respectively. Net gains on sales of residential mortgage loans amounted to $431,000, $1.2 million and $352,000 for the 2018 second quarter, 2018 first quarter and 2017 second quarter, respectively.

Noninterest Expense.  Noninterest expense for the 2018 second quarter increased to $71.6 million from $68.5 million in the preceding first quarter and $64.0 million in the year-ago second quarter, largely reflecting higher levels of compensation expense and professional fees.

Salaries and employee benefits expense totaled $40.6 million for the 2018 second quarter, compared with $39.4 million for the 2018 first quarter and $34.9 million in the prior-year second quarter. The total number of FTEs, excluding employees on leave, as of June 30, 2018 was 1,491, compared with 1,502 as of March 31, 2018 and 1,378 as of June 30, 2017. The increase in compensation expense from the 2018 first quarter to the second quarter reflects higher group insurance costs and a full quarter’s impact from the FTE increase during the 2018 first quarter.

Income Tax Provision.  The effective tax rate for the 2018 second quarter was 25.9%, compared with 25.7% in the preceding 2018 first quarter and 38.5% in the 2017 second quarter. The 2018 effective tax rates reflect the enactment of the Tax Cuts and Jobs Act on December 22, 2017, which lowered the corporate federal tax rate from 35% to 21% effective January 1, 2018.

Balance Sheet Summary

Loans receivable increased 3% to $11.67 billion at June 30, 2018 from $11.29 billion at March 31, 2018, reflecting a 13% annualized growth rate. Year-over-year, loans receivable increased 8% from $10.82 billion at June 30, 2017.

New loan originations funded during the 2018 second quarter totaled $792.3 million and included SBA loan production of $87.0 million and residential mortgage loan originations of $182.1 million. This compares with 2018 first quarter originations of $764.3 million, including SBA loan production of $78.2 million and residential mortgage loan originations of $179.2 million. In the year-ago second quarter, new loans originations funded totaled $725.1 million, including SBA loan production of $109.4 million and residential mortgage loan originations of $70.8 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 totaled $65.8 million for the 2018 second quarter, compared with $73.9 million for the first quarter of 2018 and $65.5 million for the year-ago second quarter. During the 2018 second quarter, the Company sold $52.5 million of its SBA loans held for sale, compared with $48.6 million in the immediately preceding first quarter and $46.1 million in the second quarter a year ago.

Aggregate loan pay offs and pay downs in the 2018 second quarter totaled $435.1 million, compared with $411.6 million for the immediately preceding first quarter and $432.1 million in the year-ago second quarter.

Total deposits at June 30, 2018 amounted to $11.73 billion, up 2% from $11.51 at March 31, 2018 and up 7% from $10.96 billion at June 30, 2017. Noninterest bearing demand deposits accounted for 25.9%, 26.5% and 27.5% of total deposits as of June 30, 2018, March 31, 2018 and June 30, 2017, respectively.

Credit Quality

The provision for loan and lease losses for the 2018 second quarter was $2.3 million, compared with $2.5 million for the immediately preceding 2018 first quarter and $2.8 million for the year-ago second 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 June 30, 2018, March 31, 2018 and June 30, 2017 is as follows:

(dollars in thousands) (unaudited)6/30/2018 3/31/2018 6/30/2017
Legacy loans (1)$76,048 $72,065 $65,255
Purchased non-impaired loans (2) 2,467  2,581  2,753
Purchased credit-impaired loans (2) 11,366  11,815  12,066
Total ALLL$89,881 $86,461 $80,074
         
Loans receivable$11,671,440 $11,292,483 $10,816,419
ALLL coverage ratio (excluding loans held for sale) 0.77%  0.77%  0.74%

(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 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 were stable at $68.2 million at June 30, 2018 and March 31, 2018, but declined as a percentage of loans receivable to 0.58% from 0.60%.  At June 30, 2017, nonaccrual loans amounted to $47.4 million, or 0.44% of loans receivable.  Accruing restructured loans at June 30, 2018 totaled $49.2 million, down 17% from $59.6 million at March 31, 2018 and down 8% from $53.3 million at June 30, 2017.  Total nonperforming loans amounted to $120.5 million at June 30, 2018, or 1.03% of loans receivable, compared with $129.6 million, or 1.15% of loans receivable, at March 31, 2018 and $102.5 million, or 0.95% of loans receivable, at June 30, 2017.

Nonperforming assets, including nonperforming loans and OREO, totaled $129.1 million at June 30, 2018, compared with $137.9 million at March 31, 2018 and $124.3 million June 30, 2017.  As a percentage of total assets, nonperforming assets declined to 0.87% at June 30, 2018 from 0.95% at March 31, 2018 and 0.90% at June 30, 2017.

Following are the components of criticized loan balances as of June 30, 2018, March 31, 2018 and June 30, 2017:

(dollars in thousands) (unaudited)6/30/2018 3/31/2018 6/30/2017
Special Mention (1)$139,494 $196,082 $251,057
Classified (1) 357,671  344,647  315,440
Criticized$497,165 $540,729 $566,497
         

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

For the 2018 second quarter, the Company realized a net recovery of $1.1 million, or 0.04% of average loans receivable on an annualized basis. This compares with 2018 first quarter net charge offs of $580,000, or 0.02% of average loans receivable on an annualized basis, and 2017 second quarter net charge offs of $1.3 million, or 0.05% of average loans receivable on an annualized basis.

The ALLL at June 30, 2018 was $89.9 million, or 0.77% of loans receivable (excluding loans held for sale), compared with $86.5 million, or 0.77% of loans receivable (excluding loans held for sale), at March 31, 2018 and $80.1 million, or 0.74% of loans receivable (excluding loans held for sale), at June 30, 2017.  The coverage ratio of the ALLL to nonperforming loans (excluding purchased credit-impaired loans) was 74.61% at June 30, 2018, 66.69% at March 31, 2018 and 78.12% at June 30, 2017.

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 $117.8 at June 30, 2018, compared with $128.1 at March 31, 2018 and $100.7 million at June 30, 2017.


Capital

At June 30, 2018, the Company and the Bank continued to exceed all regulatory capital requirements to be generally classified as a “well-capitalized” financial institution, as summarized in the following table:

 6/30/2018 3/31/2018 6/30/2017 Minimum Guideline
for “Well-Capitalized”
Institution
Common Equity Tier 1 Capital11.74% 12.35% 12.18% 6.50%
Tier 1 Leverage Ratio11.06% 11.61% 11.80% 5.00%
Tier 1 Risk-based Ratio12.52% 13.15% 13.00% 8.00%
Total Risk-based Ratio13.24% 13.86% 13.70% 10.00%

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

 6/30/2018 3/31/2018 6/30/2017
Tangible common equity per share (1)$10.87  $10.81  $10.52 
Tangible common equity to tangible assets (2) 9.91%   10.44%   10.64% 

(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. The accompanying financial information includes a reconciliation of the Company’s total stockholders’ equity to tangible common equity, including and excluding tax reform adjustments.
(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. The accompanying financial information includes a reconciliation of the Company’s total assets to tangible assets, including and excluding tax reform adjustments.

Management reviews tangible common equity per share and the tangible common equity to tangible assets ratio in evaluating the Company’s and the Bank’s capital levels and has included these figures in response to market participant interest in tangible common equity as a measure of capital. A reconciliation of the GAAP to non-GAAP financial measures is provided in the accompanying financial information.

Investor Conference Call

The Company previously announced that it will host an investor conference call on Wednesday, July 18, 2018 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its second quarter ended June 30, 2018. 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 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 July 25, 2018, replay access code 10121593.

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 $14.9 billion in total assets as of June 30, 2018. 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, 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; 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.

Contact:
Angie Yang
SVP, Director of Investor Relations &
Corporate Communications
213-251-2219
angie.yang@bankofhope.com 

(tables follow)

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
 
Assets:6/30/2018 3/31/2018 % change 12/31/2017 % change 6/30/2017 % change
Cash and due from banks$466,364  $612,353  (24)% $492,000  (5)% $446,415  4%
Securities available for sale, at fair value1,835,106  1,699,315  8% 1,720,257  7% 1,680,382  9%
Federal Home Loan Bank (“FHLB”) stock and other investments104,764  107,906  (3)% 83,142  26% 66,313  58%
Loans held for sale, at the lower of cost or fair value26,866  33,689  (20)% 29,661  (9)% 16,927  59%
Loans receivable11,671,440  11,292,483  3% 11,102,575  5% 10,816,419  8%
Allowance for loan losses(89,881) (86,461) (4)% (84,541) (6)% (80,074) (12)%
Net loans receivable11,581,559  11,206,022  3% 11,018,034  5% 10,736,345  8%
Accrued interest receivable30,954  29,154  6% 29,979  3% 25,640  21%
Premises and equipment, net56,242  56,564  (1)% 56,714  (1)% 52,565  7%
Bank owned life insurance75,693  75,302  1% 74,915  1% 74,113  2%
Goodwill464,450  464,450  % 464,450  % 464,450  %
Servicing assets25,050  24,866  1% 24,710  1% 25,338  (1)%
Other intangible assets, net15,292  15,907  (4)% 16,523  (7)% 17,874  (14)%
Other assets187,668  181,598  3% 196,332  (4)% 252,855  (26)%
Total assets$14,870,008  $14,507,126  3% $14,206,717  5% $13,859,217  7%
                     
Liabilities:                    
Deposits$11,734,595  $11,510,569  2% $10,846,609  8% $10,955,101  7%
FHLB advances and fed funds purchased836,994  862,346  (3)% 1,227,593  (32)% 793,403  5%
Convertible debt192,120    100%   100%   100%
Subordinated debentures101,386  101,117  % 100,853  1% 100,328  1%
Accrued interest payable24,594  19,614  25% 15,961  54% 11,855  107%
Other liabilities74,643  68,147  10% 87,446  (15)% 92,236  (19)%
Total liabilities12,964,332  12,561,793  3% 12,278,462  6% 11,952,923  8%
                     
Stockholders’ Equity:                    
Common stock, $0.001 par value$136  $136  % $136  % $135  1%
Capital surplus1,421,679  1,405,806  1% 1,405,014  1% 1,402,303  1%
Retained earnings607,944  578,031  5% 544,886  12% 513,945  18%
Treasury stock, at cost(78,961)   100%   100%   100%
Accumulated other comprehensive loss, net(45,122) (38,640) (17)% (21,781) (107)% (10,089) (347)%
Total stockholders’ equity1,905,676  1,945,333  (2)% 1,928,255  (1)% 1,906,294  %
Total liabilities and stockholders’ equity$14,870,008  $14,507,126  3% $14,206,717  5% $13,859,217  7%
              
Common stock shares - authorized150,000,000  150,000,000    150,000,000    150,000,000   
Common stock shares - outstanding131,167,705  135,516,119    135,511,891    135,297,678   
Treasury stock shares4,361,740             


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
 
 Three Months Ended Six Months Ended
 6/30/2018 3/31/2018 % change 6/30/2017 % change 6/30/2018 6/30/2017 % change
Interest income:               
Interest and fees on loans$146,188  $137,943  6% $128,515  14% $284,131  $251,809  13%
Interest on securities10,899  10,101  8% 8,741  25% 21,000  16,854  25%
Interest on federal funds sold and other investments2,823  2,366  19% 1,277  121% 5,189  2,613  99%
Total interest income159,910  150,410  6% 138,533  15% 310,320  271,276  14%
                         
Interest expense:                        
Interest on deposits30,610  24,849  23% 18,114  69% 55,459  32,625  70%
Interest on other borrowings and convertible debt6,481  5,493  18% 3,599  80% 11,974  6,926  73%
Total interest expense37,091  30,342  22% 21,713  71% 67,433  39,551  70%
                         
Net interest income before provision for loan losses122,819  120,068  2% 116,820  5% 242,887  231,725  5%
Provision for loan losses2,300  2,500  (8)% 2,760  (17)% 4,800  8,360  (43)%
Net interest income after provision for loan losses120,519  117,568  3% 114,060  6% 238,087  223,365  7%
                         
Noninterest income:                        
Service fees on deposit accounts4,613  4,801  (4)% 5,179  (11)% 9,414  10,517  (10)%
Net gains on sales of SBA loans3,480  3,450  1% 3,267  7% 6,930  6,517  6%
Net gains on sales of other loans431  1,196  (64)% 352  22% 1,627  772  111%
Other income and fees6,745  10,403  (35)% 7,317  (8)% 17,148  15,912  8%
Total noninterest income15,269  19,850  (23)% 16,115  (5)% 35,119  33,718  4%
                         
Noninterest expense:                        
Salaries and employee benefits40,575  39,385  3% 34,946  16% 79,960  69,112  16%
Occupancy7,418  7,239  2% 7,154  4% 14,657  14,348  2%
Furniture and equipment4,023  3,721  8% 3,556  13% 7,744  6,969  11%
Advertising and marketing2,737  2,299  19% 2,394  14% 5,036  5,818  (13)%
Data processing and communications3,574  3,495  2% 2,676  34% 7,069  6,282  13%
Professional fees4,474  3,106  44% 3,260  37% 7,580  7,162  6%
FDIC assessment1,611  1,767  (9)% 1,004  60% 3,378  2,014  68%
Credit related expenses926  772  20% 113  719% 1,698  1,996  (15)%
Other real estate owned (“OREO”) expense, net45  (104) N/A  1,188  (96)% (59) 2,185  N/A 
Merger-related expenses  (7) (100)% 562  (100)% (7) 1,509  N/A 
Other6,246  6,780  (8)% 7,184  (13)% 13,026  14,341  (9)%
Total noninterest expense71,629  68,453  5% 64,037  12% 140,082  131,736  6%
Income before income taxes64,159  68,965  (7)% 66,138  (3)% 133,124  125,347  6%
Income tax provision16,629  17,733  (6)% 25,451  (35)% 34,362  48,450  (29)%
Net income$47,530  $51,232  (7)% $40,687  17% $98,762  $76,897  28%
                
Earnings Per Common Share:               
Basic$0.36  $0.38    $0.30    $0.74  $0.57   
Diluted$0.36  $0.38    $0.30    $0.73  $0.57   
                
Average Shares Outstanding:               
Basic133,061,304  135,518,705    135,257,044    134,283,216  135,252,556   
Diluted133,352,841  135,815,262    135,613,181    134,576,744  135,685,064   


Hope Bancorp, Inc.
Selected Financial Data
Unaudited
 
 For the Three Months Ended
(Annualized)
 For the Six Months Ended
(Annualized)
Profitability measures:6/30/2018 3/31/2018 6/30/2017 6/30/2018 6/30/2017
ROA1.30% 1.44% 1.21% 1.37% 1.15%
ROE9.89% 10.61% 8.60% 10.25% 8.18%
Return on average tangible equity 113.18% 14.13% 11.54% 13.66% 11.00%
Net interest margin3.61% 3.66% 3.75% 3.64% 3.76%
Efficiency ratio51.87% 48.92% 48.17% 50.39% 49.63%
          
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
 6/30/2018 3/31/2018 6/30/2017
   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$11,364,229  $146,188  5.16% $11,095,864  $137,943  5.04% $10,536,428  $128,515  4.89%
Securities available for sale1,732,908  10,899  2.52% 1,673,122  10,101  2.45% 1,609,310  8,741  2.18%
FHLB stock and other investments561,230  2,823  2.02% 517,572  2,366  1.85% 364,906  1,277  1.40%
Total interest earning assets$13,658,367  $159,910  4.70% $13,286,558  $150,410  4.59% $12,510,644  $138,533  4.44%
                             
INTEREST BEARING LIABILITIES:                            
Deposits:                            
Demand, interest bearing$3,342,685  $10,438  1.25% $3,402,760  $8,864  1.06% $3,457,412  $7,974  0.93%
Savings228,381  442  0.78% 236,216  424  0.73% 280,188  279  0.40%
Time deposits4,919,465  19,730  1.61% 4,525,813  15,561  1.39% 4,012,838  9,861  0.99%
Total interest bearing deposits8,490,531  30,610  1.45% 8,164,789  24,849  1.23% 7,750,438  18,114  0.94%
FHLB advances846,014  3,681  1.75% 974,071  4,069  1.69% 713,858  2,338  1.31%
Convertible debt102,979  1,198  4.60%            %
Subordinated debentures97,315  1,602  6.51% 97,049  1,424  5.87% 96,218  1,261  5.18%
Total interest bearing liabilities9,536,839  $37,091  1.56% 9,235,909  $30,342  1.33% 8,560,514  $21,713  1.02%
Noninterest bearing demand deposits3,053,338       2,941,577       2,929,656      
Total funding liabilities/cost of funds$12,590,177    1.18% $12,177,486    1.01% $11,490,170    0.76%
Net interest income/net interest spread  $122,819  3.14%   $120,068  3.26%   $116,820  3.42%
Net interest margin    3.61%     3.66%     3.75%
                             
Cost of deposits:                            
Noninterest bearing demand deposits$3,053,338       $2,941,577       $2,929,656      
Interest bearing deposits8,490,531  30,610  1.45% 8,164,789  24,849  1.23% 7,750,438  18,114  0.94%
Total deposits$11,543,869  $30,610  1.06% $11,106,366  $24,849  0.91% $10,680,094  $18,114  0.68%
                                 


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
 
 Six Months Ended
 6/30/2018 6/30/2017
   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$11,230,788  284,131  5.10% $10,459,527  $251,809  4.85%
Securities available for sale1,703,180  21,000  2.49% 1,588,519  16,854  2.14%
FRB and FHLB stock and other investments539,522  $5,189  1.94% 394,267  2,613  1.34%
Total interest earning assets$13,473,490  $310,320  4.64% $12,442,313  $271,276  4.40%
                  
INTEREST BEARING LIABILITIES:                 
Deposits:                 
Demand, interest bearing$3,372,556  $19,302  1.15% $3,447,254  $15,164  0.89%
Savings232,277  865  0.75% 286,862  567  0.40%
Time deposits4,723,726  35,292  1.51% 4,011,019  16,894  0.85%
Total interest bearing deposits8,328,559  55,459  1.34% 7,745,135  32,625  0.85%
FHLB advances909,689  $7,750  1.72% 688,307  4,477  1.31%
Convertible debt51,774  1,198  4.60%     %
Other borrowings97,183  3,026  6.19% 96,065  2,449  5.07%
Total interest bearing liabilities9,387,205  $67,433  1.45% 8,529,507  $39,551  0.94%
Noninterest bearing demand deposits2,997,766       2,899,167      
Total funding liabilities/cost of funds$12,384,971    1.10% $11,428,674    0.70%
Net interest income/net interest spread  $242,887  3.19%   $231,725  3.46%
Net interest margin    3.64%     3.76%
              
Cost of deposits:             
Noninterest bearing demand deposits$2,997,766       $2,899,167      
Interest bearing deposits8,328,559  55,459  1.34% 7,745,135  32,625  0.85%
Total deposits$11,326,325  $55,459  0.99% $10,644,302  $32,625  0.62%
                      


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
 
  Three Months Ended Six Months Ended
AVERAGE BALANCES:6/30/2018 3/31/2018 % change 6/30/2017 % change 6/30/2018 6/30/2017 % change
Loans receivable, including loans held for sale$11,364,229  $11,095,864  2% $10,536,428  8% $11,230,788  $10,459,527  7%
Investments2,294,138  2,190,694  5% 1,974,216  16% 2,242,702  1,982,786  13%
Interest earning assets13,658,367  13,286,558  3% 12,510,644  9% 13,473,490  12,442,313  8%
Total assets14,596,963  14,214,250  3% 13,470,745  8% 14,406,664  13,403,609  7%
                         
Interest bearing deposits8,490,531  8,164,789  4% 7,750,438  10% 8,328,559  7,745,135  8%
Interest bearing liabilities9,536,839  9,235,909  3% 8,560,514  11% 9,387,205  8,529,507  10%
Noninterest bearing demand deposits3,053,338  2,941,577  4% 2,929,656  4% 2,997,766  2,899,167  3%
Stockholders’ equity1,922,290  1,931,290  % 1,892,126  2% 1,926,766  1,880,626  2%
Net interest earning assets4,121,528  4,050,649  2% 3,950,130  4% 4,086,285  3,912,806  4%
                
LOAN PORTFOLIO COMPOSITION:6/30/2018 3/31/2018 % change 12/31/2017 % change 6/30/2017 % change  
Commercial loans$2,287,482  $2,007,686  14% $1,947,533  17% $1,925,503  19%  
Real estate loans8,512,740  8,529,153  % 8,508,222  % 8,432,395  1%  
Consumer and other loans872,562  755,621  15% 647,102  35% 460,446  90%  
Loans outstanding11,672,784  11,292,460  3% 11,102,857  5% 10,818,344  8%  
Unamortized deferred loan fees - net of costs(1,344) 23  N/A  (282) 377% (1,925) (30)%  
Loans, net of deferred loan fees and costs11,671,440  11,292,483  3% 11,102,575  5% 10,816,419  8%  
Allowance for loan losses(89,881) (86,461) 4% (84,541) 6% (80,074) 12%  
Loan receivable, net$11,581,559  $11,206,022  3% $11,018,034  5% $10,736,345  8%  
                
REAL ESTATE LOANS BY PROPERTY TYPE:6/30/2018 3/31/2018 % change 12/31/2017 % change 6/30/2017 % change  
Retail buildings$2,319,429  $2,342,086  (1)% $2,375,588  (2)% $2,260,091  3%  
Hotels/motels1,628,890  1,637,416  (1)% 1,631,314  % 1,606,334  1%  
Gas stations/car washes970,094  978,454  (1)% 964,246  1% 973,266  %  
Mixed-use facilities659,949  651,473  1% 624,401  6% 605,379  9%  
Warehouses929,089  934,389  (1)% 915,465  1% 929,034  %  
Multifamily440,130  445,930  (1)% 455,463  (3)% 433,414  2%  
Other1,565,159  1,539,405  2% 1,541,745  2% 1,624,877  (4)%  
Total$8,512,740  $8,529,153  % $8,508,222  % $8,432,395  1%  
                
DEPOSIT COMPOSITION6/30/2018 3/31/2018 % change 12/31/2017 % change 6/30/2017 % change  
Noninterest bearing demand deposits$3,038,265  $3,048,181  % $2,998,734  1% $3,016,538  1%  
Money market and other3,282,642  3,454,660  (5)% 3,332,703  (2)% 3,563,404  (8)%  
Saving deposits229,746  233,014  (1)% 240,509  (4)% 275,272  (17)%  
Time deposits5,183,942  4,774,714  9% 4,274,663  21% 4,099,887  26%  
Total deposit balances$11,734,595  $11,510,569  2% $10,846,609  8% $10,955,101  7%  
                
DEPOSIT COMPOSITION (%)6/30/2018 3/31/2018   12/31/2017   6/30/2017    
Noninterest bearing demand deposits25.9% 26.5%   27.6%   27.5%    
Money market and other28.0% 30.0%   30.7%   32.5%    
Saving deposits1.9% 2.0%   2.2%   2.5%    
Time deposits44.2% 41.5%   39.5%   37.5%    
Total deposit balances100.0% 100.0%   100.0%   100.0%    
                    


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
      
       
CAPITAL RATIOS:6/30/2018 3/31/2018 12/31/2017 6/30/2017      
Total stockholders’ equity$1,905,676  $1,945,333  $1,928,255  $1,906,294       
Common Equity Tier 1 ratio11.74% 12.35% 12.30% 12.18%      
Tier 1 risk-based capital ratio12.52% 13.15% 13.11% 13.00%      
Total risk-based capital ratio13.24% 13.86% 13.82% 13.70%      
Tier 1 leverage ratio11.06% 11.61% 11.54% 11.80%      
Total risk weighted assets$12,527,248  $12,172,708  11,965,215  11,814,607       
Book value per common share$14.53  $14.35  $14.23  $14.09       
Tangible common equity to tangible assets 29.91% 10.44% 10.54% 10.64%      
Tangible common equity per share 2$10.87  $10.81  $10.68  $10.52       
              
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            
 6/30/2018 3/31/2018 12/31/2017 6/30/2017      
TANGIBLE COMMON EQUITY             
Total stockholders’ equity$1,905,676  $1,945,333  $1,928,255  $1,906,294       
Less:  Goodwill and core deposit intangible assets, net(479,742) (480,357) (480,973) (482,324)      
Tangible common equity$1,425,934  $1,464,976  $1,447,282  $1,423,970       
              
Total assets$14,870,008  $14,507,126  $14,206,717  $13,859,217       
Less:  Goodwill and core deposit intangible assets, net(479,742) (480,357) (480,973) (482,324)      
Tangible assets$14,390,266  $14,026,769  $13,725,744  $13,376,893       
              
Common shares outstanding131,167,705  135,516,119  135,511,891  135,297,678       
              
Tangible common equity to tangible assets9.91% 10.44% 10.54% 10.64%      
Tangible common equity per share$10.87  $10.81  $10.68  $10.52       
              
 Three Months Ended Six Months Ended
ALLOWANCE FOR LOAN LOSSES:6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 6/30/2018 6/30/2017
Balance at beginning of period$86,461  $84,541  $83,633  $80,074  $78,659  $84,541  $79,343 
Provision for loan losses2,300  2,500  3,600  5,400  2,760  4,800  8,360 
Recoveries2,383  488  1,078  3,072  777  2,871  1,098 
Charge offs(1,263) (1,068) (3,770) (4,913) (2,122) (2,331) (8,727)
Balance at end of period$89,881  $86,461  $84,541  $83,633  $80,074  $89,881  $80,074 
Net charge offs/average loans receivable (annualized)(0.04)% 0.02% 0.10% 0.07% 0.05% (0.01)% 0.15%
              
 Three Months Ended Six Months Ended
NET CHARGED OFF (RECOVERED) LOANS  BY TYPE:6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 6/30/2018 6/30/2017
Real estate loans$(390) $(37) $342  $314  $830  $(427) $2,274 
Commercial loans(949) 291  2,170  1,293  276  (658) 4,840 
Consumer loans219  326  180  234  239  545  515 
Total net charge offs$(1,120) $580  $2,692  $1,841  $1,345  $(540) $7,629 
              


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
 
NONPERFORMING ASSETS6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Loans on nonaccrual status 3$68,226  $68,152  $46,775  $43,323  $47,361 
Delinquent loans 90 days or more on accrual status 43,030  1,894  407  407  1,850 
Accruing troubled debt restructured loans49,219  59,596  67,250  64,807  53,290 
Total nonperforming loans120,475  129,642  114,432  108,537  102,501 
Other real estate owned8,656  8,261  10,787  17,208  21,839 
Total nonperforming assets$129,131  $137,903  $125,219  $125,745  $124,340 
Nonperforming assets/total assets0.87% 0.95% 0.88% 0.89% 0.90%
Nonperforming assets/loans receivable & OREO1.11% 1.22% 1.13% 1.15% 1.15%
Nonperforming assets/total capital6.78% 7.09% 6.49% 6.50% 6.52%
Nonperforming loans/loans receivable1.03% 1.15% 1.03% 0.99% 0.95%
Nonaccrual loans/loans receivable0.58% 0.60% 0.42% 0.40% 0.44%
Allowance for loan losses/loans receivable0.77% 0.77% 0.76% 0.76% 0.74%
Allowance for loan losses/nonaccrual loans131.74% 126.86% 180.74% 193.05% 169.07%
Allowance for loan losses/nonperforming loans74.61% 66.69% 73.88% 77.05% 78.12%
Allowance for loan losses/nonperforming assets69.60% 62.70% 67.51% 66.51% 64.40%
          
3  Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $26.0 million, $21.9 million, $22.1 million, $21.5 million, and $15.5 million at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017, and June 30, 2017, respectively.
4  Excludes Acquired Credit Impaired Loans that are delinquent 90 or more days totaling $17.8 million, $17.0 million, $18.1 million, $20.4 million, and $16.3 million at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017, and June 30, 2017, respectively.
          
BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS BY TYPE:6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Retail buildings$3,138  $8,034  $8,183  $6,807  $6,396 
Hotels/motels  1,265  1,273  1,279  1,287 
Gas stations/car washes         
Mixed-use facilities6,026  2,852  129  131  133 
Warehouses7,462  7,615  5,577  5,185  5,253 
Other 532,593  39,830  52,088  51,405  40,221 
Total$49,219  $59,596  $67,250  $64,807  $53,290 
          
Includes commercial business and other loans         
          
          
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Legacy         
30 - 59 days$11,872  $22,126  $16,092  $8,857  $5,910 
60 - 89 days8,542  2,102  1,724  3,572  11,740 
Total$20,414  $24,228  $17,816  $12,429  $17,650 
          
Acquired         
30 - 59 days$5,911  $9,158  $4,242  $1,429  $6,373 
60 - 89 days124  1,011  1,895  1,687  996 
Total$6,035  $10,169  $6,137  $3,116  $7,369 
          
Total accruing delinquent loans 30-89 days past due$26,449  $34,397  $23,953  $15,545  $25,019 
          


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
          
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Legacy         
Real estate loans$10,153  $12,272  $9,008  $7,850  $14,126 
Commercial loans7,380  1,994  1,302  3,771  3,333 
Consumer loans2,881  9,962  7,506  808  191 
Total$20,414  $24,228  $17,816  $12,429  $17,650 
          
Acquired         
Real estate loans$4,849  $7,537  $3,937  $2,323  $5,786 
Commercial loans338  2,280  1,244  793  1,519 
Consumer loans848  352  956    64 
Total$6,035  $10,169  $6,137  $3,116  $7,369 
          
Total accruing delinquent loans 30-89 days past due$26,449  $34,397  $23,953  $15,545  $25,019 
          
          
NONACCRUAL LOANS  BY TYPE6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Real estate loans$34,537  $37,093  $22,194  $31,453  $33,503 
Commercial loans31,250  29,446  23,099  10,682  12,874 
Consumer loans2,439  1,613  1,482  1,188  984 
Total nonaccrual loans$68,226  $68,152  $46,775  $43,323  $47,361 
          
CRITICIZED LOANS6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Legacy         
Special mention$101,435  $140,588  $151,413  $131,785  $152,373 
Substandard191,787  180,631  179,795  197,993  177,097 
Doubtful5,852  108    216  2,208 
Loss