Press Release

Hope Bancorp Reports 2018 Third Quarter Financial Results

Company Release - 10/16/2018 4:30 PM ET

Q3 2018 Highlights:

  • New loan disbursements of $784.1 million
  • Loans receivable of $11.93 billion reflects a 2% increase over Q2 2018; 7% year-to-date
  • Total deposits of $12.05 billion reflects a 3% increase over Q2 2018; 11% year-to-date
  • Q3 net income totals $46.4 million, or $0.36 per diluted common share
  • Completed $100 million share buyback plan on July 26, 2018, with an aggregate 5,565,696 shares repurchased since Q2 2018
  • Board authorization of new $50 million share repurchase program

LOS ANGELES--(BUSINESS WIRE)-- Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for the three and nine months ended September 30, 2018. Net income for the 2018 third quarter totaled $46.4 million, or $0.36 per diluted common share. This compares with net income for the 2018 second quarter of $47.5 million, or $0.36 per diluted common share and $44.6 million, or $0.33 per diluted common share, for the 2017 third quarter.

“Bank of Hope delivered a successful quarter in terms of business development with loan originations of $784 million, resulting in a 7% increase in loans receivable year-to-date,” said Kevin S. Kim, President and Chief Executive Officer. “At the same time, the deposit environment has become increasingly more challenging, which impacted our bottom line results. We have implemented a number of initiatives to enhance our deposit mix and the value of our overall franchise. While we recognize that any deposit strategy will take time to deliver results, we believe our efforts will improve our sensitivity to market rates and lead to enhanced profitability longer term. The Board and management remain confident about the prospects of Bank of Hope and will continue to focus on driving value creation for all of our stakeholders,” said Kim.

Financial Highlights

(dollars in thousands, except per share data) (unaudited)   At or for the Three Months Ended
9/30/2018     6/30/2018   9/30/2017
Net income $ 46,378 $ 47,530 $ 44,564
Diluted earnings per share $ 0.36 $ 0.36 $ 0.33
Net interest income before provision for loan losses $ 123,147 $ 122,819 $ 123,263
Net interest margin 3.47 % 3.61 % 3.83 %
Noninterest income $ 13,447 $ 15,269 $ 16,246
Noninterest expense $ 67,455 $ 71,629 $ 61,837
Net loans receivable $ 11,836,553 $ 11,581,559 $ 10,879,341
Deposits $ 12,045,619 $ 11,734,595 $ 10,993,320
Nonaccrual loans (1) (2) $ 56,299 $ 68,226 $ 43,323
ALLL to loans receivable 0.76 % 0.77 % 0.76 %
ALLL to nonaccrual loans (1) (2) 160.98 % 131.74 % 193.05 %
ALLL to nonperforming assets (1) (2) 76.67 % 69.60 % 66.51 %
Provision for loan losses $ 7,300 $ 2,300 $ 5,400
Net charge offs (recoveries) $ 6,552 $ (1,120 ) $ 1,841
Return on average assets (“ROA”) 1.24 % 1.30 % 1.30 %
Return on average equity (“ROE”) 9.76 % 9.89 % 9.26 %
Noninterest expense / average assets 1.80 % 1.96 % 1.80 %
Efficiency ratio 49.38 % 51.87 % 44.32 %

(1)

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

Operating Results for the 2018 Third 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 September 30, 2018, June 30, 2018 and September 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
9/30/2018     6/30/2018     9/30/2017
Accretion on purchased non-impaired loans $ 2,969 $ 3,189 $ 4,566
Accretion on purchased credit-impaired loans 5,239 5,959 5,815
Amortization of premium on low income housing tax credits (84 ) (85 ) (84 )
Amortization of premium on acquired FHLB borrowings 356 352 357
Accretion of discount on acquired subordinated debt (271 ) (269 ) (262 )
Amortization of premium on acquired time deposits and savings 206
Amortization of core deposit intangibles   (615 )   (615 )   (676 )
Total acquisition accounting adjustments $ 7,594   $ 8,531   $ 9,922  
Merger-related expenses           (260 )
Total $ 7,594   $ 8,531   $ 9,662  
 

Net Interest Income. Net interest income before provision for loan losses for the 2018 third quarter totaled $123.1 million, compared with $122.8 million in the 2018 second quarter and $123.3 million in the year-ago third quarter.

The net interest margin (net interest income divided by average interest earning assets) for the 2018 third quarter declined 14 basis points to 3.47% from 3.61% in the preceding 2018 second quarter, reflecting the impact of higher deposit costs and a stable loan yield. In the year-ago third quarter, the net interest margin was 3.83%.

The weighted average yield on loans for the 2018 third quarter was flat with the preceding second quarter at 5.16% but increased 9 basis points from 5.07% in the year-ago third quarter. The year-over-year 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 December of 2017 and March, June and September 2018 of 25 basis points each.

The weighted average cost of deposits for the 2018 third quarter increased to 1.24%, up 18 basis points from 1.06% in the 2018 second quarter and up 49 basis points from 0.75% in the year-ago third quarter. The increase in the weighted average cost of deposits reflects the 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 third quarter decreased to $13.4 million from $15.3 million in the 2018 second quarter and $16.2 million in the year-ago third quarter, largely reflecting lower levels of net gains on sales of SBA loans and fluctuations in the gain on sale of residential mortgage loans. Net gains on sales of SBA loans for the 2018 third quarter decreased to $2.3 million from $3.5 million and $3.6 million for the 2018 second quarter and 2017 third quarter, respectively, reflecting a reduction in the premiums on SBA loans. Net gains on sales of residential mortgage loans amounted to $477,000 for the 2018 third quarter, compared with $431,000 and $847,000 for the 2018 second quarter and 2017 third quarter, respectively. In addition, the Company recorded a $1.6 million reduction to other noninterest income to record the fair value reduction on its equity investments for the 2018 third quarter compared with a $1 thousand fair value reduction on equity investments for the 2018 second quarter. There were no fair adjustments recorded on equity investment for the 2017 third quarter.

Noninterest Expense. Noninterest expense for the 2018 third quarter decreased to $67.5 million from $71.6 million in the preceding second quarter, largely reflecting lower levels of compensation expense. For the year-ago third quarter, the Company reported total noninterest expense of $61.8 million, which included the benefit of a $2.8 million reversal of an off-balance sheet provision for unfunded loan commitments.

Salaries and employee benefits expense decreased to $37.0 million for the 2018 third quarter, compared with $40.6 million for the 2018 second quarter and $36.0 million in the prior-year third quarter. The decrease in compensation expense from the 2018 second quarter to the third quarter reflects a proactive management of employee related costs.

Income Tax Provision. The effective tax rate for the 2018 third quarter was 25.0%, compared with 25.9% in the preceding 2018 second quarter and 38.3% in the 2017 third 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 2% to $11.9 billion at September 30, 2018 from $11.67 billion at June 30, 2018, reflecting a 9% annualized growth rate. Year-over-year, loans receivable increased 9% from $10.96 billion at September 30, 2017.

New loan originations funded during the 2018 third quarter totaled $784.1 million and included SBA loan production of $71.4 million and residential mortgage loan originations of $165.6 million. This compares with 2018 second quarter originations of $792.3 million, including SBA loan production of $87.0 million and residential mortgage loan originations of $182.1 million. In the year-ago third quarter, new loan originations funded totaled $610.9 million, including SBA loan production of $67.9 million and residential mortgage loan originations of $119.9 million.

Sales of SBA loans to the secondary market and gains derived from those sales are based substantially on the production of SBA 7(a) loans. SBA 7(a) loan originations totaled $52.5 million for the 2018 third quarter, compared with $65.8 million for the second quarter of 2018 and $49.7 million for the year-ago third quarter. During the 2018 third quarter, the Company sold $48.5 million of its SBA loans held for sale, compared with $52.5 million in the immediately preceding second quarter and $49.9 million in the third quarter a year ago.

Aggregate loan pay offs and pay downs in the 2018 third quarter totaled $495.3 million, compared with $435.1 million for the immediately preceding second quarter and $447.6 million in the year-ago third quarter.

Total deposits at September 30, 2018 amounted to $12.05 billion, up 3% from $11.73 billion at June 30, 2018 and up 11% from $10.99 billion at September 30, 2017.

Credit Quality

The provision for loan and lease losses for the 2018 third quarter was $7.3 million, compared with $2.3 million for the immediately preceding 2018 second quarter and $5.4 million for the year-ago third quarter.

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

The composition of the ALLL as of September 30, 2018, June 30, 2018 and September 30, 2017 is as follows:

(dollars in thousands) (unaudited)   9/30/2018   6/30/2018   9/30/2017
Legacy loans (1) $ 75,364 $ 76,048 $ 70,282
Purchased non-impaired loans (2) 2,411 2,467 2,740
Purchased credit-impaired loans (2)   12,854   11,366   10,611
Total ALLL $ 90,629 $ 89,881 $ 83,633
 
Loans receivable $ 11,927,182 $ 11,671,440 $ 10,962,974
ALLL coverage ratio (excluding loans held for sale) 0.76 % 0.77 % 0.76 %
(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 declined 17% to $56.3 million at September 30, 2018 from $68.2 million at June 30, 2018 and decreased as a percentage of loans receivable to 0.47% from 0.58%, respectively. At September 30, 2017, nonaccrual loans amounted to $43.3 million, or 0.40% of loans receivable. Accruing restructured loans at September 30, 2018 totaled $52.5 million, compared with $49.2 million at June 30, 2018 and $64.8 million at September 30, 2017. Total nonperforming loans amounted to $109.2 million, or 0.92% of loans receivable, at September 30, 2018, compared with $120.5 million, or 1.03% of loans receivable, at June 30, 2018 and $108.5 million, or 0.99% of loans receivable, at September 30, 2017.

Nonperforming assets, including nonperforming loans and OREO, decreased to $118.2 million at September 30, 2018, from $129.1 million at June 30, 2018 and $125.7 million September 30, 2017. As a percentage of total assets, nonperforming assets declined to 0.78% at September 30, 2018, from 0.87% at June 30, 2018 and 0.89% at September 30, 2017.

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

(dollars in thousands) (unaudited)     9/30/2018   6/30/2018   9/30/2017
Special Mention (1) $ 217,746 $ 139,494 $ 225,228
Classified (1)   302,719   357,671   348,109
Criticized $ 520,465 $ 497,165 $ 573,337
(1)   Balances include purchased loans which were marked to fair value on the date of acquisition.

For the 2018 third quarter, the Company recorded net charge offs of $6.6 million, or 0.22% of average loans receivable on an annualized basis, primarily attributed to the charge off of one large relationship that was fully reserved for in a prior quarter. This compares with net recoveries of $1.1 million, or 0.04% of average loans receivable on an annualized basis, for the 2018 second quarter. In the 2017 third quarter, the Company recorded net charge offs of $1.8 million, or 0.07% of average loans receivable on an annualized basis.

The ALLL at September 30, 2018 was $90.6 million, or 0.76% of loans receivable (excluding loans held for sale), compared with $89.9 million, or 0.77% of loans receivable (excluding loans held for sale), at June 30, 2018 and $83.6 million, or 0.76% of loans receivable (excluding loans held for sale), at September 30, 2017. The coverage ratio of the ALLL to nonperforming loans (excluding purchased credit-impaired loans) was 82.98% at September 30, 2018, 74.61% at June 30, 2018 and 77.05% at September 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 $109.2 million at September 30, 2018, compared with $117.8 million at June 30, 2018 and $108.5 million at September 30, 2017.

Capital

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

  9/30/2018     6/30/2018     9/30/2017     Minimum Guideline for “Well-Capitalized” Institution
Common Equity Tier 1 Capital 11.61% 11.74% 12.29% 6.50%
Tier 1 Leverage Ratio 10.13% 11.06% 11.78% 5.00%
Tier 1 Risk-based Ratio 11.61% 12.52% 13.10% 8.00%
Total Risk-based Ratio 13.09% 13.24% 13.81% 10.00%

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

  9/30/2018     6/30/2018     9/30/2017
Tangible common equity per share (1) $ 10.96 $ 10.87 $ 10.72
Tangible common equity to tangible assets (2) 9.66 % 9.91 % 10.63 %
(1)   Tangible common equity represents common equity less goodwill and net other intangible assets. Tangible common equity per share represents tangible common equity divided by the number of shares issued and outstanding. Both tangible common equity and tangible common equity per share are non-GAAP financial measures. A reconciliation of the Company’s total stockholders’ equity to tangible common equity, including and excluding tax reform adjustments, is provided in the accompanying financial information on Table Page 7.
(2) Tangible assets represent total assets less goodwill and net other intangible assets. Tangible common equity to tangible assets is the ratio of tangible common equity over tangible assets. Tangible common equity to tangible assets is a non-GAAP financial measure. A reconciliation of the Company’s total assets to tangible assets, including and excluding tax reform adjustments, is provided in the accompanying financial information on Table Page 7.

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, October 17, 2018 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its third quarter ended September 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 October 24, 2018, replay access code 10124319.

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 $15.2 billion in total assets as of September 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.

 

Selected Financial Data

Unaudited (dollars in thousands, except share data)

             
 
Assets: 9/30/2018 6/30/2018 % change 12/31/2017 % change 9/30/2017 % change
Cash and due from banks $ 522,710 $ 466,364 12 % $ 492,000 6 % $ 405,296 29 %
Securities available for sale, at fair value 1,854,250 1,835,106 1 % 1,720,257 8 % 1,868,309 (1 )%
Federal Home Loan Bank (“FHLB”) stock and other investments 106,243 104,764 1 % 83,142 28 % 82,141 29 %
Loans held for sale, at the lower of cost or fair value 15,023 26,866 (44 )% 29,661 (49 )% 11,425 31 %
Loans receivable 11,927,182 11,671,440 2 % 11,102,575 7 % 10,962,974 9 %
Allowance for loan losses (90,629 ) (89,881 ) (1 )% (84,541 ) (7 )% (83,633 ) (8 )%
Net loans receivable 11,836,553   11,581,559   2 % 11,018,034   7 % 10,879,341   9 %
Accrued interest receivable 33,338 30,954 8 % 29,979 11 % 29,145 14 %
Premises and equipment, net 55,178 56,242 (2 )% 56,714 (3 )% 55,838 (1 )%
Bank owned life insurance 76,081 75,693 1 % 74,915 2 % 74,514 2 %
Goodwill 464,450 464,450 % 464,450 % 464,450 %
Servicing assets 24,354 25,050 (3 )% 24,710 (1 )% 25,079 (3 )%
Other intangible assets, net 14,677 15,292 (4 )% 16,523 (11 )% 17,198 (15 )%
Other assets 226,638   187,668   21 % 196,332   15 % 237,285   (4 )%
Total assets $ 15,229,495   $ 14,870,008   2 % $ 14,206,717   7 % $ 14,150,021   8 %
 
Liabilities:
Deposits $ 12,045,619 $ 11,734,595 3 % $ 10,846,609 11 % $ 10,993,320 10 %
FHLB advances and fed funds purchased 836,637 836,994 % 1,227,593 (32 )% 1,018,046 (18 )%
Convertible debt 193,332 192,120 1 % 100 % 100 %
Subordinated debentures 101,657 101,386 % 100,853 1 % 100,590 1 %
Accrued interest payable 31,717 24,594 29 % 15,961 99 % 13,740 131 %
Other liabilities 115,953   74,643   55 % 87,446   33 % 89,894   29 %
Total liabilities 13,324,915   12,964,332   3 % 12,278,462   9 % 12,215,590   9 %
 
Stockholders’ Equity:
Common stock, $0.001 par value $ 136 $ 136 % $ 136 % $ 135 1 %
Capital surplus 1,422,685 1,421,679 % 1,405,014 1 % 1,403,586 1 %
Retained earnings 636,080 607,944 5 % 544,886 17 % 540,921 18 %
Treasury stock, at cost (100,000 ) (78,961 ) (27 )% 100 % 100 %
Accumulated other comprehensive loss, net (54,321 ) (45,122 ) (20 )% (21,781 ) (149 )% (10,211 ) (432 )%
Total stockholders’ equity 1,904,580   1,905,676   % 1,928,255   (1 )% 1,934,431   (2 )%
Total liabilities and stockholders’ equity $ 15,229,495   $ 14,870,008   2 % $ 14,206,717   7 % $ 14,150,021   8 %
 
Common stock shares - authorized 150,000,000 150,000,000 150,000,000 150,000,000
Common stock shares - outstanding 130,074,103 131,167,705 135,511,891 135,467,176
Treasury stock shares 5,565,696 4,361,740
 
 

Selected Financial Data

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

 
  Three Months Ended   Nine Months Ended
9/30/2018   6/30/2018   % change   9/30/2017   % change 9/30/2018   9/30/2017   % change
Interest income:
Interest and fees on loans $ 153,366 $ 146,188 5 % $ 136,822 12 % $ 437,497 $ 388,631 13 %
Interest on securities 11,957 10,899 10 % 9,540 25 % 32,957 26,394 25 %
Interest on federal funds sold and other investments 2,503   2,823   (11 )% 1,281   95 % 7,692   3,894   98 %
Total interest income 167,826   159,910   5 % 147,643   14 % 478,146   418,919   14 %
 
Interest expense:
Interest on deposits 37,022 30,610 21 % 20,376 82 % 92,481 53,001 74 %
Interest on other borrowings and convertible debt 7,657   6,481   18 % 4,004   91 % 19,631   10,930   80 %
Total interest expense 44,679   37,091   20 % 24,380   83 % 112,112   63,931   75 %
 
Net interest income before provision for loan losses 123,147 122,819 % 123,263 % 366,034 354,988 3 %
Provision for loan losses 7,300   2,300   217 % 5,400   35 % 12,100   13,760   (12 )%
Net interest income after provision for loan losses 115,847   120,519   (4 )% 117,863   (2 )% 353,934   341,228   4 %
 
Noninterest income:
Service fees on deposit accounts 4,569 4,613 (1 )% 5,151 (11 )% 13,983 15,668 (11 )%
Net gains on sales of SBA loans 2,331 3,480 (33 )% 3,631 (36 )% 9,261 10,148 (9 )%
Net gains on sales of other loans 477 431 11 % 847 (44 )% 2,104 1,619 30 %
Other income and fees 6,070   6,745   (10 )% 6,617   (8 )% 23,218   22,529   3 %
Total noninterest income 13,447   15,269   (12 )% 16,246   (17 )% 48,566   49,964   (3 )%
 
Noninterest expense:
Salaries and employee benefits 36,969 40,575 (9 )% 35,987 3 % 116,929 105,099 11 %
Occupancy 7,837 7,418 6 % 7,131 10 % 22,494 21,479 5 %
Furniture and equipment 3,710 4,023 (8 )% 3,642 2 % 11,454 10,611 8 %
Advertising and marketing 1,986 2,737 (27 )% 2,217 (10 )% 7,022 8,035 (13 )%
Data processing and communications 3,513 3,574 (2 )% 3,221 9 % 10,582 9,503 11 %
Professional fees 3,950 4,474 (12 )% 3,239 22 % 11,530 10,401 11 %
FDIC assessment 1,788 1,611 11 % 1,262 42 % 5,166 3,276 58 %
Credit related expenses 658 926 (29 )% (2,487 ) N/A 2,356 (491 ) N/A
Other real estate owned (“OREO”) expense, net (56 ) 45 N/A 678 N/A (115 ) 2,863 N/A
Merger-related expenses % 260 (100 )% (7 ) 1,769 N/A
Other 7,100   6,246   14 % 6,687   6 % 20,126   21,028   (4 )%
Total noninterest expense 67,455   71,629   (6 )% 61,837   9 % 207,537   193,573   7 %
Income before income taxes 61,839 64,159 (4 )% 72,272 (14 )% 194,963 197,619 (1 )%
Income tax provision 15,461   16,629   (7 )% 27,708   (44 )% 49,823   76,158   (35 )%
Net income $ 46,378   $ 47,530   (2 )% $ 44,564   4 % $ 145,140   $ 121,461   19 %
 
Earnings Per Common Share:
Basic $ 0.36 $ 0.36 $ 0.33 $ 1.09 $ 0.90
Diluted $ 0.36 $ 0.36 $ 0.33 $ 1.09 $ 0.90
 
Average Shares Outstanding:
Basic 130,268,992 133,061,304 135,382,457 132,930,437 135,296,332
Diluted 130,525,474 133,352,841 135,630,912 133,214,069 135,661,965
 

Selected Financial Data

Unaudited

   
For the Three Months Ended

(Annualized)

For the Nine Months Ended

(Annualized)

Profitability measures: 9/30/2018   6/30/2018   9/30/2017 9/30/2018   9/30/2017
ROA 1.24 % 1.30 % 1.30 % 1.32 % 1.20 %
ROE 9.76 % 9.89 % 9.26 % 10.09 % 8.54 %
Return on average tangible equity 1 13.06 % 13.18 % 12.36 % 13.46 % 11.46 %
Net interest margin 3.47 % 3.61 % 3.83 % 3.58 % 3.78 %
Efficiency ratio 49.38 % 51.87 % 44.32 % 50.06 % 47.80 %
Noninterest expense / average assets 1.80 % 1.96 % 1.80 % 1.89 % 1.91 %
1   Average tangible equity is calculated by subtracting average goodwill and average core deposit intangible assets from average stockholders’ equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position.
 
Selected Financial Data

Unaudited (dollars in thousands)

 
    Three Months Ended
9/30/2018   6/30/2018   9/30/2017
  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 $ 11,781,091 $ 153,366 5.16 % $ 11,364,229 $ 146,188 5.16 % $ 10,712,856 $ 136,822 5.07 %
Securities available for sale 1,844,493 11,957 2.57 % 1,732,908 10,899 2.52 % 1,743,610 9,540 2.17 %
FHLB stock and other investments 446,390   2,503   2.22 % 561,230   2,823   2.02 % 299,305   1,281   1.70 %
Total interest earning assets $ 14,071,974   $ 167,826   4.73 % $ 13,658,367   $ 159,910   4.70 % $ 12,755,771   $ 147,643   4.59 %
 
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing $ 3,237,673 $ 11,526 1.41 % $ 3,342,685 $ 10,438 1.25 % $ 3,526,846 $ 8,127 0.91 %
Savings 228,218 486 0.84 % 228,381 442 0.78 % 258,383 348 0.53 %
Time deposits 5,344,464   25,010   1.86 % 4,919,465   19,730   1.61 % 4,053,577   11,901   1.16 %
Total interest bearing deposits 8,810,355   37,022   1.67 % 8,490,531   30,610   1.45 % 7,838,806   20,376   1.03 %
FHLB advances 837,412 3,703 1.75 % 846,014 3,681 1.75 % 764,691 2,698 1.40 %
Convertible debt 192,541 2,299 4.67 % 102,979 1,198 4.60 % %
Subordinated debentures 97,589   1,655   6.64 % 97,315   1,602   6.51 % 96,524   1,306   5.29 %
Total interest bearing liabilities 9,937,897   $ 44,679   1.78 % 9,536,839   $ 37,091   1.56 % 8,700,021   $ 24,380   1.11 %
Noninterest bearing demand deposits 3,041,489   3,053,338   2,993,441  
Total funding liabilities/cost of funds $ 12,979,386   1.37 % $ 12,590,177   1.18 % $ 11,693,462   0.83 %
Net interest income/net interest spread $ 123,147   2.95 % $ 122,819   3.14 % $ 123,263   3.48 %
Net interest margin 3.47 % 3.61 % 3.83 %
 
Cost of deposits:
Noninterest bearing demand deposits $ 3,041,489 $   % $ 3,053,338 $   % $ 2,993,441 $   %
Interest bearing deposits 8,810,355   37,022   1.67 % 8,490,531   30,610   1.45 % 7,838,806   20,376   1.03 %
Total deposits $ 11,851,844   $ 37,022   1.24 % $ 11,543,869   $ 30,610   1.06 % $ 10,832,247   $ 20,376   0.75 %
 
 

Selected Financial Data

Unaudited (dollars in thousands)

 
  Nine Months Ended
9/30/2018   9/30/2017
  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 $ 11,416,238 $ 437,497 5.12 % $ 10,544,898 $ 388,631 4.93 %
Securities available for sale 1,750,802 32,957 2.52 % 1,640,784 26,394 2.15 %
FRB and FHLB stock and other investments 506,802   7,692   2.03 % 362,265   3,894   1.44 %
Total interest earning assets $ 13,673,842   $ 478,146   4.68 % $ 12,547,947   $ 418,919   4.46 %
 
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing $ 3,327,101 $ 30,828 1.24 % $ 3,474,077 $ 23,291 0.90 %
Savings 230,909 1,352 0.78 % 277,264 914 0.44 %
Time deposits 4,932,912   60,301   1.63 % 4,025,360   28,796   0.96 %
Total interest bearing deposits 8,490,922   92,481   1.46 % 7,776,701   53,001   0.91 %
FHLB advances 885,332 $ 11,453 1.73 % 714,048 7,176 1.34 %
Convertible debt 99,212 3,498 4.65 % %
Other borrowings 97,320   4,680   6.34 % 96,220   3,754   5.14 %
Total interest bearing liabilities 9,572,786   $ 112,112   1.57 % 8,586,969   $ 63,931   1.00 %
Noninterest bearing demand deposits 3,012,501   2,930,937  
Total funding liabilities/cost of funds $ 12,585,287   1.19 % $ 11,517,906   0.74 %
Net interest income/net interest spread $ 366,034   3.11 % $ 354,988   3.46 %
Net interest margin 3.58 % 3.78 %
 
Cost of deposits:
Noninterest bearing demand deposits $ 3,012,501 $   % $ 2,930,937 $   %
Interest bearing deposits 8,490,922   92,481   1.46 % 7,776,701   53,001   0.91 %
Total deposits $ 11,503,423   $ 92,481   1.07 % $ 10,707,638   $ 53,001   0.66 %
 
 

Selected Financial Data

Unaudited (dollars in thousands)

   
Three Months Ended Nine Months Ended
AVERAGE BALANCES: 9/30/2018   6/30/2018   % change   9/30/2017   % change 9/30/2018   9/30/2017   % change
Loans receivable, including loans held for sale $ 11,781,091 $ 11,364,229 4 % $ 10,712,856 10 % $ 11,416,238 $ 10,544,898 8 %
Investments 2,290,883 2,294,138 % 2,042,915 12 % 2,257,604 2,003,049 13 %
Interest earning assets 14,071,974 13,658,367 3 % 12,755,771 10 % 13,673,842 12,547,947 9 %
Total assets 15,019,224 14,596,963 3 % 13,737,532 9 % 14,613,094 13,516,139 8 %
 
Interest bearing deposits 8,810,355 8,490,531 4 % 7,838,806 12 % 8,490,922 7,776,701 9 %
Interest bearing liabilities 9,937,897 9,536,839 4 % 8,700,021 14 % 9,572,786 8,586,969 11 %
Noninterest bearing demand deposits 3,041,489 3,053,338 % 2,993,441 2 % 3,012,501 2,930,937 3 %
Stockholders’ equity 1,899,853 1,922,290 (1 )% 1,924,444 (1 )% 1,917,696 1,895,393 1 %
Net interest earning assets 4,134,077 4,121,528 % 4,055,750 2 % 4,101,056 3,960,978 4 %
 
LOAN PORTFOLIO COMPOSITION: 9/30/2018 6/30/2018 % change 12/31/2017 % change 9/30/2017 % change
Commercial loans $ 2,318,213 $ 2,287,482 1 % $ 1,947,533 19 % $ 2,005,290 16 %
Real estate loans 8,639,857 8,512,740 1 % 8,508,222 2 % 8,438,064 2 %
Consumer and other loans 969,835   872,562   11 % 647,102   50 % 521,459   86 %
Loans outstanding 11,927,905 11,672,784 2 % 11,102,857 7 % 10,964,813 9 %
Unamortized deferred loan fees - net of costs (723 ) (1,344 ) (46 )% (282 ) 156 % (1,839 ) (61 )%
Loans, net of deferred loan fees and costs 11,927,182 11,671,440 2 % 11,102,575 7 % 10,962,974 9 %
Allowance for loan losses (90,629 ) (89,881 ) 1 % (84,541 ) 7 % (83,633 ) 8 %
Loan receivable, net $ 11,836,553   $ 11,581,559   2 % $ 11,018,034   7 % $ 10,879,341   9 %
 
REAL ESTATE LOANS BY PROPERTY TYPE: 9/30/2018 6/30/2018 % change 12/31/2017 % change 9/30/2017 % change
Retail buildings $ 2,388,343 $ 2,319,429 3 % $ 2,375,588 1 % $ 2,314,867 3 %
Hotels/motels 1,663,543 1,628,890 2 % 1,631,314 2 % 1,595,787 4 %
Gas stations/car washes 964,019 970,094 (1 )% 964,246 % 979,378 (2 )%
Mixed-use facilities 694,961 659,949 5 % 624,401 11 % 614,255 13 %
Warehouses 927,767 929,089 % 915,465 1 % 913,217 2 %
Multifamily 457,282 440,130 4 % 455,463 % 435,088 5 %
Other 1,543,942   1,565,159   (1 )% 1,541,745   % 1,585,472   (3 )%
Total $ 8,639,857   $ 8,512,740   1 % $ 8,508,222   2 % $ 8,438,064   2 %
 
DEPOSIT COMPOSITION 9/30/2018 6/30/2018 % change 12/31/2017 % change 9/30/2017 % change
Noninterest bearing demand deposits $ 3,020,819 $ 3,038,265 (1 )% $ 2,998,734 1 % $ 3,049,998 (1 )%
Money market and other 3,247,420 3,282,642 (1 )% 3,332,703 (3 )% 3,685,973 (12 )%
Saving deposits 229,081 229,746 % 240,509 (5 )% 243,042 (6 )%
Time deposits 5,548,299   5,183,942   7 % 4,274,663   30 % 4,014,307   38 %
Total deposit balances $ 12,045,619   $ 11,734,595   3 % $ 10,846,609   11 % $ 10,993,320   10 %
 
DEPOSIT COMPOSITION (%) 9/30/2018 6/30/2018 12/31/2017 9/30/2017
Noninterest bearing demand deposits 25.1 % 25.9 % 27.6 % 27.7 %
Money market and other 27.0 % 28.0 % 30.7 % 33.5 %
Saving deposits 1.9 % 1.9 % 2.2 % 2.2 %
Time deposits 46.0 % 44.2 % 39.5 % 36.6 %
Total deposit balances 100.0 % 100.0 % 100.0 % 100.0 %
 
 

Selected Financial Data

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

         
CAPITAL RATIOS: 9/30/2018 6/30/2018 12/31/2017 9/30/2017
Total stockholders’ equity $ 1,904,580 $ 1,905,676 $ 1,928,255 $ 1,934,431
Common Equity Tier 1 ratio 11.61 % 11.74 % 12.30 % 12.29 %
Tier 1 risk-based capital ratio 11.61 % 12.52 % 13.11 % 13.10 %
Total risk-based capital ratio 13.09 % 13.24 % 13.82 % 13.81 %
Tier 1 leverage ratio 10.13 % 11.06 % 11.54 % 11.78 %
Total risk weighted assets $ 12,747,343 $ 12,527,248 $ 11,965,215 $ 11,935,561
Book value per common share $ 14.64 $ 14.53 $ 14.23 $ 14.28
Tangible common equity to tangible assets 2 9.66 % 9.91 % 10.54 % 10.63 %
Tangible common equity per share 2 $ 10.96 $ 10.87 $ 10.68 $ 10.72
 

2

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
9/30/2018 6/30/2018 12/31/2017 9/30/2017
TANGIBLE COMMON EQUITY
Total stockholders’ equity $ 1,904,580 $ 1,905,676 $ 1,928,255 $ 1,934,431
Less: Goodwill and core deposit intangible assets, net (479,127 ) (479,742 ) (480,973 ) (481,648 )
Tangible common equity $ 1,425,453   $ 1,425,934   $ 1,447,282   $ 1,452,783  
 
Total assets $ 15,229,495 $ 14,870,008 $ 14,206,717 $ 14,150,021
Less: Goodwill and core deposit intangible assets, net (479,127 ) (479,742 ) (480,973 ) (481,648 )
Tangible assets $ 14,750,368   $ 14,390,266   $ 13,725,744   $ 13,668,373  
 
Common shares outstanding 130,074,103 131,167,705 135,511,891 135,467,176
 
Tangible common equity to tangible assets 9.66 % 9.91 % 10.54 % 10.63 %
Tangible common equity per share $ 10.96 $ 10.87 $ 10.68 $ 10.72
 

Selected Financial Data

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

 
 
             
Three Months Ended Nine Months Ended
ALLOWANCE FOR LOAN LOSSES: 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017 9/30/2018 9/30/2017
Balance at beginning of period $ 89,881 $ 86,461 $ 84,541 $ 83,633 $ 80,074 $ 84,541 $ 79,343
Provision for loan losses 7,300 2,300 2,500 3,600 5,400 12,100 13,760
Recoveries 315 2,383 488 1,078 3,072 3,186 4,170
Charge offs (6,867 ) (1,263 ) (1,068 ) (3,770 ) (4,913 ) (9,198 ) (13,640 )
Balance at end of period $ 90,629   $ 89,881   $ 86,461   $ 84,541   $ 83,633   $ 90,629   $ 83,633  
Net charge offs/average loans receivable (annualized) 0.22 % (0.04 )% 0.02 % 0.10 % 0.07 % 0.07 %
 
Three Months Ended Nine Months Ended
NET CHARGED OFF (RECOVERED) LOANS BY TYPE: 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017 9/30/2018 9/30/2017
Real estate loans $ 6,004 $ (390 ) $ (37 ) $ 342 $ 314 $ 5,577 $ 2,588
Commercial loans 230 (949 ) 291 2,170 1,293 (428 ) 6,133
Consumer loans 318   219   326   180   234   863   749  
Total net charge offs (recoveries) $ 6,552   $ (1,120 ) $ 580   $ 2,692   $ 1,841   $ 6,012   $ 9,470  
 

Selected Financial Data

Unaudited (dollars in thousands)

         
NONPERFORMING ASSETS 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017
Loans on nonaccrual status 3 $ 56,299 $ 68,226 $ 68,152 $ 46,775 $ 43,323
Delinquent loans 90 days or more on accrual status 4 401 3,030 1,894 407 407
Accruing troubled debt restructured loans 52,521   49,219   59,596   67,250   64,807  
Total nonperforming loans 109,221 120,475 129,642 114,432 108,537
Other real estate owned 8,981   8,656   8,261   10,787   17,208  
Total nonperforming assets $ 118,202   $ 129,131   $ 137,903   $ 125,219   $ 125,745  
Nonperforming assets/total assets 0.78 % 0.87 % 0.95 % 0.88 % 0.89 %
Nonperforming assets/loans receivable & OREO 0.99 % 1.11 % 1.22 % 1.13 % 1.15 %
Nonperforming assets/total capital 6.21 % 6.78 % 7.09 % 6.49 % 6.50 %
Nonperforming loans/loans receivable 0.92 % 1.03 % 1.15 % 1.03 % 0.99 %
Nonaccrual loans/loans receivable 0.47 % 0.58 % 0.60 % 0.42 % 0.40 %
Allowance for loan losses/loans receivable 0.76 % 0.77 % 0.77 % 0.76 % 0.76 %
Allowance for loan losses/nonaccrual loans 160.98 % 131.74 % 126.86 % 180.74 % 193.05 %
Allowance for loan losses/nonperforming loans 82.98 % 74.61 % 66.69 % 73.88 % 77.05 %
Allowance for loan losses/nonperforming assets 76.67 % 69.60 % 62.70 % 67.51 % 66.51 %
 

3

Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $23.1 million, $26.0 million, $21.9 million, $22.1 million, and $21.5 million at September 30, 2018, June 30, 2018, March 31, 2018, December 31, 2017, and September 30, 2017, respectively.

4

Excludes purchased credit impaired loans that are delinquent 90 or more days totaling $16.6 million, $17.8 million, $17.0 million, $18.1 million, and $20.4 million at September 30, 2018. June 30, 2018, March 31, 2018, December 31, 2017, and September 30, 2017, respectively.

 
BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS BY TYPE: 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017
Retail buildings $ 3,112 $ 3,138 $ 8,034 $ 8,183 $ 6,807
Hotels/motels 1,265 1,273 1,279
Mixed-use facilities 5,994 6,026 2,852 129 131
Warehouses 7,219 7,462 7,615 5,577 5,185
Other 5 36,196   32,593   39,830   52,088   51,405  
Total $ 52,521   $ 49,219   $ 59,596   $ 67,250   $ 64,807  
 

5

Includes commercial business and other loans

 
 
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017
Legacy
30 - 59 days $ 26,872 $ 11,872 $ 22,126 $ 16,092 $ 8,857
60 - 89 days 2,773   8,542   2,102   1,724   3,572  
Total $ 29,645   $ 20,414   $ 24,228   $ 17,816   $ 12,429  
 
Acquired
30 - 59 days $ 5,240 $ 5,911 $ 9,158 $ 4,242 $ 1,429
60 - 89 days 18   124   1,011   1,895   1,687  
Total $ 5,258   $ 6,035   $ 10,169   $ 6,137   $ 3,116  
 
Total accruing delinquent loans 30-89 days past due $ 34,903   $ 26,449   $ 34,397   $ 23,953   $ 15,545  
 
 
Selected Financial Data

Unaudited (dollars in thousands)

 
           
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017
Legacy
Real estate loans $ 13,275 $ 10,153 $ 12,272 $ 9,008 $ 7,850
Commercial loans 986 7,380 1,994 1,302 3,771
Consumer loans 15,384   2,881   9,962   7,506   808
Total $ 29,645   $ 20,414   $ 24,228   $ 17,816   $ 12,429
 
Acquired
Real estate loans $ 4,703 $ 4,849 $ 7,537 $ 3,937 $ 2,323
Commercial loans 555 338 2,280 1,244 793
Consumer loans   848   352   956  
Total $ 5,258   $ 6,035   $ 10,169   $ 6,137   $ 3,116
 
Total accruing delinquent loans 30-89 days past due $ 34,903   $ 26,449   $ 34,397   $ 23,953   $ 15,545
 
 
NONACCRUAL LOANS BY TYPE 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017
Real estate loans $ 35,614 $ 34,537 $ 37,093 $ 22,194 $ 31,453
Commercial loans 19,119 31,250 29,446 23,099 10,682
Consumer loans 1,566   2,439   1,613   1,482   1,188
Total nonaccrual loans $ 56,299   $ 68,226   $ 68,152   $ 46,775   $ 43,323
 
CRITICIZED LOANS 9/30/2018 6/30/2018 3/31/2018 12/31/2017 9/30/2017
Legacy
Special mention $ 179,723 $ 101,435 $ 140,588 $ 151,413 $ 131,785
Substandard 171,767 191,787 180,631 179,795 197,993
Doubtful 429 5,852 108 216
Loss 1        
Total criticized loans - legacy $ 351,920   $ 299,074   $ 321,327   $ 331,208   $ 329,994
 
Acquired