8-K
HOPE BANCORP INC (HOPE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
April 27, 2021
Date of Report (Date of earliest event reported)
| HOPE BANCORP INC | ||||
|---|---|---|---|---|
| (Exact name of registrant as specified in its charter) | Delaware | 000-50245 | 95-4849715 | |
| --- | --- | --- | ||
| (State of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
3200 Wilshire Boulevard, Suite 1400
Los Angeles, California 90010
(Address of principal executives offices, including zip code)
(213) 639-1700
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Common Stock | , | par value $0.001 per share | HOPE | NASDAQ Global Select Market |
|---|---|---|---|---|
| (Title of class) | (Trading Symbol) | (Name of exchange on which registered) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On April 27, 2021, Hope Bancorp, Inc. (“HOPE” or the “Company”) issued a news release concerning its results of operations and financial condition for the first quarter ended and as of March 31, 2021. A copy of the April 27, 2021 press release is attached hereto as Exhibit 99.1.
Item 8.01 Other Events.
On April 27, 2021, the Company issued a news release announcing that its Board of Directors declared a quarterly cash dividend of $0.14 per common share. The cash dividend is payable on or about May 21, 2021 to all stockholders of record as of the close of business on May 7, 2021. A copy of the April 27, 2021 press release is attached hereto as Exhibit 99.2.
Item 7.01. Regulation FD Disclosure
The Company previously announced that it will host an investor conference call on Wednesday, April 28, 2021 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its first quarter ended March 31, 2021. A presentation to accompany the conference call, which contains certain historical and forward-looking information relating to the Company (the “Presentation Materials”), has been made available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. A copy of the Presentation Materials is attached hereto as Exhibit 99.3.
The information included in this report pursuant to Item 2.02, Item 8.01 and Item 7.01 of Form 8-K (including Exhibit 99.1, Exhibit 99.2 and Exhibit 99.3) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.
The following risk factor supplements the “Risk Factors” section in our 2019 Form 10-K.
The COVID-19 pandemic has had a material and adverse impact on our business, financial condition and results of operations, and the further impact will depend on future developments that cannot be predicted, including the scope and duration of the pandemic, the economic implications of the same, and the actions taken by governmental authorities in response to the pandemic.
The novel COVID-19 pandemic has substantially and negatively impacted the United States economy, disrupted global supply chains, considerably lowered equity market valuations, created significant volatility and disruption in financial markets, and materially increased unemployment levels. In addition, the pandemic has resulted in temporary closures of countless businesses and the institution of social distancing and sheltering in place requirements in most states and communities. As a result, the demand for our products and services has been and likely will continue to be significantly adversely impacted, which could materially and adversely affect our financial condition and results of operations. Furthermore, the pandemic could result in the recognition of amplified credit losses in our loan portfolios and increases in our allowance for loan losses, particularly if businesses remain closed and our customers draw on their lines of credit. Similarly, because of changing economic and market conditions, we may be required to recognize impairments on goodwill or the securities we hold. Our business operations may also be further disrupted if significant portions of our workforce are unable to work effectively, including because of challenges arising as a result of circumstances related to working from home, illness, quarantines, government actions, or other restrictions in connection with the pandemic, and we have already temporarily closed certain of our branches. In response to the pandemic, we have also suspended residential property foreclosure sales, evictions, and involuntary automobile repossessions, and are offering payment deferrals and other expanded assistance for credit card, mortgage and small business lending customers, and future governmental actions may require these and other types of customer-related responses. In addition, we may take capital actions in response to the COVID-19 pandemic. The extent to which the COVID-19 pandemic continues to impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments that cannot be predicted, including the scope and duration of the pandemic, the economic implications of the same and actions taken by governmental authorities and other third parties in response to the pandemic.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description of Exhibit |
|---|---|
| 99.1 | News release, datedApril 27, 2021, concerning the results of operations and financial condition for thefirst quarterended and as ofMarch 31, 2021. |
| 99.2 | News release, datedApril 27, 2021, announcing the declaration of a quarterly cash dividend. |
| 99.3 | Presentation Materials, datedApril 28, 2021. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HOPE BANCORP, INC. | ||
|---|---|---|
| Date: April 28, 2021 | By: | /s/ Kevin S. Kim |
| Kevin S. Kim | ||
| Chairman, President and Chief Executive Officer |
Document
News Release
HOPE BANCORP REPORTS 2021 FIRST QUARTER FINANCIAL RESULTS
LOS ANGELES - April 27, 2021 - Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its first quarter ended March 31, 2021.
For the three months ended March 31, 2021, net income totaled $43.7 million, or $0.35 per diluted common share, representing an increase of 54% from $28.3 million, or $0.23 per diluted common share in the fourth quarter of 2020 and an increase of 68% from $26.0 million, or $0.21 per diluted common share, in the year-ago first quarter.
“First quarter results were solid, reflecting the continued benefits of the operational improvements that we implemented in 2020,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “We continued to support our customers in this pandemic-challenged business environment by providing $305 million in the second round of PPP funding, which contributed to new loan originations totaling $847 million in the first quarter. Noninterest bearing deposits increased 13% from year-end and accounted for a record high 38% of total deposits at March 31, 2021. This contributed to a sixth consecutive quarter of declining cost of deposits, which supported another quarter of net interest margin expansion for the Company. Additionally, we continued to proactively manage our expenses which resulted in noninterest expense to average assets improving to 1.65% from 1.69% in the preceding quarter.
“During the first quarter, we saw an expected increase in our criticized assets due to the impact COVID-19 has had on the travel industry, but remain well reserved given the considerable build up of our allowance for credit losses last year in anticipation of the eventual migration of these credits in the normal course of the credit administration process. We are, however, pleased to see the continued improvements in the economy, which supported a significantly lower provision expense this quarter and contributed to a 54% increase in net income quarter-over-quarter. With the vaccination campaign in the U.S. well underway and the COVID-related restrictions gradually being lifted, we have greater confidence in our ability to deliver enhanced performance as the year proceeds.”
Q1 2021 Highlights
•Net interest income before provision for credit losses increased 2% quarter-over-quarter to $122.6 million, benefiting from reduced interest expense due to lower cost of deposits.
•Net interest margin expanded 4 basis points quarter-over-quarter.
•Noninterest bearing demand deposits increased 13% quarter-over-quarter and increased as a percentage of total deposits to 38% from 34% at year-end 2020.
•Cost of interest bearing deposits decreased 15 basis points and total cost of deposits decreased 12 basis points quarter-over-quarter continuing a six-quarter trend of declining deposit costs.
•Loan originations totaled $847.1 million, including a second round of PPP fundings of $304.7 million, and contributed to a 1.0% increase in loans receivable quarter-over-quarter, or 4.1% annualized.
•Efficiency ratio improved to 53.61% from 53.77% quarter-over-quarter and noninterest expense to average assets improved to 1.65% from 1.69%.
•Net income increased 54% quarter-over-quarter and totaled $43.7 million, or $0.35 per diluted common share.
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Financial Highlights
| (dollars in thousands, except per share data) (unaudited) | At or for the Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 3/31/2021 | 12/31/2020 | 3/31/2020 | |||||||
| Net income | $ | 43,687 | $ | 28,319 | $ | 25,953 | |||
| Diluted earnings per share | $ | 0.35 | $ | 0.23 | $ | 0.21 | |||
| Net interest income before provision for credit losses | $ | 122,579 | $ | 120,756 | $ | 119,291 | |||
| Net interest margin | 3.06 | % | 3.02 | % | 3.31 | % | |||
| Noninterest income | $ | 8,804 | $ | 11,415 | $ | 13,264 | |||
| Noninterest expense | $ | 70,431 | $ | 71,063 | $ | 72,140 | |||
| Net loans receivable | $ | 13,494,686 | $ | 13,356,472 | $ | 12,438,493 | |||
| Deposits | $ | 14,301,269 | $ | 14,333,912 | $ | 12,836,567 | |||
| Total cost of deposits | 0.36 | % | 0.48 | % | 1.34 | % | |||
| Nonaccrual loans(1) | $ | 109,858 | $ | 85,238 | $ | 72,639 | |||
| Nonperforming loans to loans receivable(1) | 1.11 | % | 0.91 | % | 0.93 | % | |||
| ACL to loans receivable | 1.52 | % | 1.52 | % | 1.15 | % | |||
| ACL to nonaccrual loans(1) | 189.28 | % | 242.55 | % | 199.51 | % | |||
| ACL to nonperforming assets(1) | 121.94 | % | 144.24 | % | 103.62 | % | |||
| Provision for credit losses | $ | 3,300 | $ | 27,500 | $ | 28,000 | |||
| Net charge offs | $ | 2,098 | $ | 608 | $ | 3,421 | |||
| Return on average assets (“ROA”) | 1.02 | % | 0.67 | % | 0.67 | % | |||
| Return on average equity (“ROE”) | 8.53 | % | 5.54 | % | 5.12 | % | |||
| Return on average tangible common equity (“ROTCE”)(2) | 11.11 | % | 7.21 | % | 6.69 | % | |||
| Noninterest expense / average assets | 1.65 | % | 1.69 | % | 1.87 | % | |||
| Efficiency ratio | 53.61 | % | 53.77 | % | 54.42 | % |
(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation.
(2) Return on average tangible common equity is a non-GAAP financial measure. A reconciliation of the Company’s return on average tangible common equity is provided in the accompanying financial information on Table Page 9.
Operating Results for the 2021 First Quarter
Net interest income before provision for credit losses for the 2021 first quarter increased 2% to $122.6 million from $120.8 million in the 2020 fourth quarter and increased 3% from $119.3 million in the 2020 first quarter. The Company attributed the increase in net interest income primarily to meaningful reductions in interest expense due to lower trending cost of deposits.
The net interest margin for the 2021 first quarter increased 4 basis points to 3.06% from 3.02% in the preceding 2020 fourth quarter, reflecting the benefits of lower deposit costs, partially offset by lower weighted average yield on loans. The net interest margin in the prior-year first quarter was 3.31%.
The weighted average yield on loans for the 2021 first quarter was 3.94%, compared with 4.03% in the preceding fourth quarter and 5.06% in the year-ago first quarter.
The weighted average cost of deposits for the 2021 first quarter decreased for the sixth consecutive quarter to 0.36%, representing a 12 basis point decrease from 0.48% for the 2020 fourth quarter and a 98 basis point decrease from 1.34% for the 2020 first quarter. The Company attributed the significant improvements in the weighted average cost of deposits to a continuing shift in its deposit mix to lower-cost core deposits and the ongoing downward repricing of interest bearing deposits. The cost of interest bearing deposits was 0.56%, 0.71% and 1.76% at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.
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Noninterest income totaled $8.8 million for the 2021 first quarter, compared with $11.4 million in the preceding fourth quarter. The largest factors contributing to the decrease included a $1.5 million decline in quarter-over-quarter swap fee income and a $1.2 million reduction in deposit service fees which was largely attributable to the Company’s exiting certain money service business accounts. These decreases were partially offset by increases in loan servicing fees and gain on sales of residential mortgage loans. Noninterest income in the year-ago first quarter totaled $13.3 million.
Noninterest expense for the 2021 first quarter decreased to $70.4 million from $71.1 million in the preceding fourth quarter and $72.1 million in the year-ago first quarter.
Salaries and employee benefits expense for the 2021 first quarter increased 1% to $41.2 million from $40.9 million in the preceding fourth quarter and included higher payroll taxes and 401k contributions partially offset by an increase in loan origination costs of $1.4 million related to the second round of PPP funding. On a year-over-year basis, salaries and employee benefits expense decreased 3% from $42.5 million in the 2020 first quarter.
The Company’s efficiency ratio for the 2021 first quarter improved to 53.61% from 53.77% for the preceding fourth quarter and from 54.42% for the year-ago first quarter. Noninterest expense as a percentage of average assets improved to 1.65% for the 2021 first quarter from 1.69% for the 2020 fourth quarter and from 1.87% for the 2020 first quarter.
The effective tax rate for the 2021 first quarter was 24.2%, compared with 15.7% for the preceding fourth quarter and 19.9% in the year-ago first quarter. The Company noted that its effective tax rate for 2020 fourth quarter reflected a lower tax provision based on adjustments to applicable state apportionment factors.
Balance Sheet Summary
New loan originations funded during the 2021 first quarter totaled $847.1 million and included second round PPP funding of $304.7 million, traditional SBA loan production of $36.8 million and residential mortgage loan originations of $69.8 million. For the preceding 2020 fourth quarter, new loan originations funded totaled $844.2 million, including SBA loan production of $25.5 million, residential mortgage loan originations of $62.5 million and fundings related to two new warehouse mortgage lines of credit of $106.8 million. In the year-ago first quarter, new loan originations funded totaled $624.5 million, including SBA loan production of $49.8 million and residential mortgage loan originations of $37.4 million. There were no new warehouse mortgage lines of credit established in the 2021 and 2020 first quarters.
At March 31, 2021, loans receivable increased 1% to $13.70 billion from $13.56 billion at December 31, 2020 and increased 9% from $12.58 billion at March 31, 2020.
Total deposits at March 31, 2021 amounted to $14.30 billion, down slightly from $14.33 billion at December 31, 2020 but up 11% from $12.84 billion a year ago at March 31, 2020. Reflecting a continuing positive shift in the mix of deposits, noninterest bearing demand deposits increased 13% quarter-over-quarter and increased 80% year-over-year and accounted for 38%, 34% and 24% of total deposits at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.
Following is the deposit composition as of March 31, 2021, December 31, 2020 and March 31, 2020:
| (dollars in thousands) (unaudited) | 3/31/2021 | 12/31/2020 | % change | 3/31/2020 | % change | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Noninterest bearing demand deposits | $ | 5,427,174 | $ | 4,814,254 | 13 | % | $ | 3,010,143 | 80 | % |
| Money market and other | 5,009,419 | 5,232,413 | (4) | % | 4,851,000 | 3 | % | |||
| Saving deposits | 305,326 | 300,770 | 2 | % | 272,577 | 12 | % | |||
| Time deposits | 3,559,350 | 3,986,475 | (11) | % | 4,702,847 | (24) | % | |||
| Total deposit balances | $ | 14,301,269 | $ | 14,333,912 | — | % | $ | 12,836,567 | 11 | % |
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Following is the deposit composition as a percentage of total deposits and a breakdown of cost of deposits as of and for the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020:
| Deposit Breakdown | Cost of Deposits | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) (unaudited) | 3/31/2021 | 12/31/2020 | 3/31/2020 | Q1 2021 | Q4 2020 | Q1 2020 | ||||||
| Noninterest bearing demand deposits | 38.0 | % | 33.6 | % | 23.5 | % | — | % | — | % | — | % |
| Money market and other | 35.0 | % | 36.5 | % | 37.8 | % | 0.42 | % | 0.45 | % | 1.42 | % |
| Saving deposits | 2.1 | % | 2.1 | % | 2.1 | % | 1.17 | % | 1.17 | % | 1.19 | % |
| Time deposits | 24.9 | % | 27.8 | % | 36.6 | % | 0.69 | % | 0.98 | % | 2.09 | % |
| Total deposit balances | 100.0 | % | 100.0 | % | 100.0 | % | 0.36 | % | 0.48 | % | 1.34 | % |
Allowance for Credit Losses
The 2021 first quarter provision for credit losses under the CECL methodology was $3.3 million, compared with $27.5 million for the preceding fourth quarter and $28.0 million for the 2020 first quarter. The provision for credit losses for the 2021 first quarter reflects updated macroeconomic variables incorporating the Moody’s Analytics Consensus scenario that continue to show improving trends that support a strong economic recovery and taking into account the Company’s significant buildup in reserves in prior periods in consideration of the pandemic’s expected impact on its loan portfolio, as well as its low level of credit losses.
Following is the Allowance for Credit Losses as of March 31, 2021, December 31, 2020 and March 31, 2020:
| (dollars in thousands) (unaudited) | 3/31/2021 | 12/31/2020 | 3/31/2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Allowance for credit losses | $ | 207,943 | $ | 206,741 | $ | 144,923 | |||
| Allowance for credit loss/loans receivable | 1.52 | % | 1.52 | % | 1.15 | % | |||
| Allowance for credit losses/nonperforming loans | 136.79 | % | 167.80 | % | 124.06 | % |
Credit Quality
Following are the components of nonperforming assets as of March 31, 2021, December 31, 2020 and March 31, 2020:
| (dollars in thousands) (unaudited) | 3/31/2021 | 12/31/2020 | 3/31/2020 | |||
|---|---|---|---|---|---|---|
| Loans on nonaccrual status (1) | $ | 109,858 | $ | 85,238 | $ | 72,639 |
| Delinquent loans 90 days or more on accrual status | 384 | 614 | 387 | |||
| Accruing troubled debt restructured loans | 41,773 | 37,354 | 43,789 | |||
| Total nonperforming loans | 152,015 | 123,206 | 116,815 | |||
| Other real estate owned | 18,515 | 20,121 | 23,039 | |||
| Total nonperforming assets | $ | 170,530 | $ | 143,327 | $ | 139,854 |
(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $25.0 million, $26.5 million and $28.8 million, at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.
The $24.6 million increase in loans on nonaccrual status largely reflects the addition of a $23.5 million retail commercial real estate loan. The Company noted that this was a unique situation due to the borrower’s involvement in a legal dispute and not reflective of any systemic deterioration for these property types.
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Following are the components of criticized loan balances as of March 31, 2021, December 31, 2020 and March 31, 2020:
| (dollars in thousands) (unaudited) | 3/31/2021 | 12/31/2020 | 3/31/2020 | |||
|---|---|---|---|---|---|---|
| Special Mention | $ | 280,974 | $ | 184,941 | $ | 122,279 |
| Classified | 379,048 | 366,557 | 278,783 | |||
| Criticized | $ | 660,022 | $ | 551,498 | $ | 401,062 |
The increase in criticized loans quarter-over-quarter primarily reflects downgrades in the Company’s hotel/motel portfolio to the Special Mention category. The Company noted that the performance of these loans was consistent with expectations when reserves were increased in 2020 and that no new issues for these borrowers have emerged.
Net charge offs in the 2021 first quarter totaled $2.1 million, or 0.06% of average loans receivable on an annualized basis. This compares with net charge offs of $608,000, or 0.02% of average loans receivable on an annualized basis for the 2020 fourth quarter and $3.4 million, or 0.11% of average loans receivable on an annualized basis for the 2020 first quarter.
Capital
At March 31, 2021, the Company and the Bank continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” financial institution. Following are capital ratios for the Company as of March 31, 2021, December 31, 2020 and March 31, 2020:
| Hope Bancorp, Inc. (unaudited) | 3/31/2021 | 12/31/2020 | 3/31/2020 | Minimum Guideline for “Well-Capitalized” Bank |
|---|---|---|---|---|
| Common Equity Tier 1 Capital | 11.08% | 10.94% | 11.44% | 6.50% |
| Tier 1 Leverage Ratio | 10.15% | 10.22% | 10.88% | 5.00% |
| Tier 1 Risk-Based Ratio | 11.78% | 11.64% | 12.19% | 8.00% |
| Total Risk-Based Ratio | 13.03% | 12.87% | 13.08% | 10.00% |
Following are tangible common equity (“TCE”) per share and TCE as a percentage of tangible assets as of March 31, 2021, December 31, 2020 and March 31, 2020:
| (unaudited) | 3/31/2021 | 12/31/2020 | 3/31/2020 |
|---|---|---|---|
| Tangible common equity per share (1) | $12.73 | $12.81 | $12.52 |
| Tangible common equity to tangible assets (2) | 9.40% | 9.50% | 9.92% |
(1) Tangible common equity represents common equity less goodwill and net other intangible assets. Tangible common equity per share represents tangible common equity divided by the number of shares issued and outstanding. Both tangible common equity and tangible common equity per share are non-GAAP financial measures. A reconciliation of the Company’s total stockholders’ equity to tangible common equity is provided in the accompanying financial information on Table Page 9.
(2) Tangible assets represent total assets less goodwill and net other intangible assets. Tangible common equity to tangible assets is the ratio of tangible common equity over tangible assets. Tangible common equity to tangible assets is a non-GAAP financial measure. A reconciliation of the Company’s total assets to tangible assets is provided in the accompanying financial information on Table Page 9.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Wednesday, April 28, 2021 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its first quarter ended March 31, 2021. Investors and analysts are invited to access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103
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(international) and asking for the “Hope Bancorp Call.” A presentation to accompany the earnings call will be available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of Hope Bancorp’s website. After the live webcast, a replay will remain available at the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through May 5, 2021, replay access code 10154357.
About Hope Bancorp, Inc.
Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $17.2 billion in total assets as of March 31, 2021. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 53 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.
Forward-Looking Statements
Some statements in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for credit losses, regulatory risks associated with current and future regulations; and the COVID-19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10-K. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
Contacts:
| Alex Ko<br><br>Senior EVP & Chief Financial Officer<br><br>213-427-6560<br><br>alex.ko@bankofhope.com | Angie Yang<br><br>SVP, Director of Investor Relations &<br><br>Corporate Communications<br><br>213-251-2219<br><br>angie.yang@bankofhope.com |
|---|
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Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
| Assets: | 3/31/2021 | 12/31/2020 | % change | 3/31/2020 | % change | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Cash and due from banks | $ | 376,666 | $ | 350,579 | 7 | % | $ | 802,033 | (53) | % |
| Securities available for sale, at fair value | 2,233,744 | 2,285,611 | (2) | % | 1,718,702 | 30 | % | |||
| Federal Home Loan Bank (“FHLB”) stock and other investments | 102,242 | 105,591 | (3) | % | 96,956 | 5 | % | |||
| Loans held for sale, at the lower of cost or fair value | 19,672 | 17,743 | 11 | % | 8,281 | 138 | % | |||
| Loans receivable | 13,702,629 | 13,563,213 | 1 | % | 12,583,416 | 9 | % | |||
| Allowance for credit losses | (207,943) | (206,741) | 1 | % | (144,923) | 43 | % | |||
| Net loans receivable | 13,494,686 | 13,356,472 | 1 | % | 12,438,493 | 8 | % | |||
| Accrued interest receivable | 60,498 | 59,430 | 2 | % | 30,450 | 99 | % | |||
| Premises and equipment, net | 47,918 | 48,409 | (1) | % | 51,392 | (7) | % | |||
| Bank owned life insurance | 77,089 | 76,765 | — | % | 76,429 | 1 | % | |||
| Goodwill | 464,450 | 464,450 | — | % | 464,450 | — | % | |||
| Servicing assets | 12,084 | 12,692 | (5) | % | 14,847 | (19) | % | |||
| Other intangible assets, net | 9,198 | 9,708 | (5) | % | 11,302 | (19) | % | |||
| Other assets | 300,613 | 319,214 | (6) | % | 308,099 | (2) | % | |||
| Total assets | $ | 17,198,860 | $ | 17,106,664 | 1 | % | $ | 16,021,434 | 7 | % |
| Liabilities: | ||||||||||
| Deposits | $ | 14,301,269 | $ | 14,333,912 | — | % | $ | 12,836,567 | 11 | % |
| FHLB advances | 400,000 | 250,000 | 60 | % | 675,000 | (41) | % | |||
| Convertible notes, net | 215,504 | 204,565 | 5 | % | 200,716 | 7 | % | |||
| Subordinated debentures | 104,469 | 104,178 | — | % | 103,318 | 1 | % | |||
| Accrued interest payable | 8,611 | 14,706 | (41) | % | 30,436 | (72) | % | |||
| Other liabilities | 123,426 | 145,558 | (15) | % | 157,309 | (22) | % | |||
| Total liabilities | $ | 15,153,279 | $ | 15,052,919 | 1 | % | $ | 14,003,346 | 8 | % |
| Stockholders’ Equity: | ||||||||||
| Common stock, $0.001 par value | $ | 136 | $ | 136 | — | % | $ | 136 | — | % |
| Capital surplus | 1,417,137 | 1,434,916 | (1) | % | 1,429,275 | (1) | % | |||
| Retained earnings | 823,085 | 785,940 | 5 | % | 752,228 | 9 | % | |||
| Treasury stock, at cost | (200,000) | (200,000) | — | % | (200,000) | — | % | |||
| Accumulated other comprehensive gain, net | 5,223 | 32,753 | (84) | % | 36,449 | (86) | % | |||
| Total stockholders’ equity | 2,045,581 | 2,053,745 | — | % | 2,018,088 | 1 | % | |||
| Total liabilities and stockholders’ equity | $ | 17,198,860 | $ | 17,106,664 | 1 | % | $ | 16,021,434 | 7 | % |
| Common stock shares - authorized | 150,000,000 | 150,000,000 | 150,000,000 | |||||||
| Common stock shares - outstanding | 123,480,494 | 123,264,864 | 123,169,404 | |||||||
| Treasury stock shares | 12,661,581 | 12,661,581 | 12,661,581 |
Table Page 1
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| Three Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2021 | 12/31/2020 | % change | 3/31/2020 | % change | ||||||
| Interest and fees on loans | $ | 129,736 | $ | 132,117 | (2) | % | $ | 154,230 | (16) | % |
| Interest on securities | 7,915 | 9,014 | (12) | % | 10,609 | (25) | % | |||
| Interest on federal funds sold and other investments | 642 | 598 | 7 | % | 2,029 | (68) | % | |||
| Total interest income | 138,293 | 141,729 | (2) | % | 166,868 | (17) | % | |||
| Interest on deposits | 12,770 | 16,934 | (25) | % | 41,113 | (69) | % | |||
| Interest on other borrowings and convertible notes | 2,944 | 4,039 | (27) | % | 6,464 | (54) | % | |||
| Total interest expense | 15,714 | 20,973 | (25) | % | 47,577 | (67) | % | |||
| Net interest income before provision for credit losses | 122,579 | 120,756 | 2 | % | 119,291 | 3 | % | |||
| Provision for credit losses | 3,300 | 27,500 | (88) | % | 28,000 | (88) | % | |||
| Net interest income after provision for credit losses | 119,279 | 93,256 | 28 | % | 91,291 | 31 | % | |||
| Service fees on deposit accounts | 1,790 | 2,991 | (40) | % | 4,133 | (57) | % | |||
| International service fees | 841 | 696 | 21 | % | 790 | 6 | % | |||
| Loan servicing fees, net | 1,044 | 566 | 84 | % | 365 | 186 | % | |||
| Wire transfer fees | 844 | 867 | (3) | % | 998 | (15) | % | |||
| Net gains on sales of other loans | 2,096 | 1,618 | 30 | % | 1,855 | 13 | % | |||
| Other income and fees | 2,189 | 4,677 | (53) | % | 5,123 | (57) | % | |||
| Total noninterest income | 8,804 | 11,415 | (23) | % | 13,264 | (34) | % | |||
| Salaries and employee benefits | 41,216 | 40,911 | 1 | % | 42,502 | (3) | % | |||
| Occupancy | 6,967 | 7,200 | (3) | % | 7,410 | (6) | % | |||
| Furniture and equipment | 4,186 | 4,122 | 2 | % | 4,259 | (2) | % | |||
| Advertising and marketing | 1,625 | 1,695 | (4) | % | 1,673 | (3) | % | |||
| Data processing and communications | 2,737 | 2,235 | 22 | % | 2,631 | 4 | % | |||
| Professional fees | 2,903 | 1,847 | 57 | % | 3,300 | (12) | % | |||
| FDIC assessment | 1,255 | 1,166 | 8 | % | 1,559 | (19) | % | |||
| Credit related expenses | 2,218 | 2,001 | 11 | % | 1,662 | 33 | % | |||
| OREO expense (income), net | 281 | (86) | N/A | 843 | (67) | % | ||||
| Branch restructuring costs | — | 2,367 | (100) | % | — | — | % | |||
| Other | 7,043 | 7,605 | (7) | % | 6,301 | 12 | % | |||
| Total noninterest expense | 70,431 | 71,063 | (1) | % | 72,140 | (2) | % | |||
| Income before income taxes | 57,652 | 33,608 | 72 | % | 32,415 | 78 | % | |||
| Income tax provision | 13,965 | 5,289 | 164 | % | 6,462 | 116 | % | |||
| Net income | $ | 43,687 | $ | 28,319 | 54 | % | $ | 25,953 | 68 | % |
| Earnings Per Common Share: | ||||||||||
| Basic | $ | 0.35 | $ | 0.23 | $ | 0.21 | ||||
| Diluted | $ | 0.35 | $ | 0.23 | $ | 0.21 | ||||
| Weighted Average Shares Outstanding: | ||||||||||
| Basic | 123,324,745 | 123,264,172 | 124,295,327 | |||||||
| Diluted | 124,336,130 | 123,874,229 | 124,676,296 |
Table Page 2
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| For the Three Months Ended <br>(Annualized) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Profitability measures: | 3/31/2021 | 12/31/2020 | 3/31/2020 | ||||||
| ROA | 1.02 | % | 0.67 | % | 0.67 | % | |||
| ROE | 8.53 | % | 5.54 | % | 5.12 | % | |||
| ROTCE (1) | 11.11 | % | 7.21 | % | 6.69 | % | |||
| Net interest margin | 3.06 | % | 3.02 | % | 3.31 | % | |||
| Efficiency ratio | 53.61 | % | 53.77 | % | 54.42 | % | |||
| Noninterest expense / average assets | 1.65 | % | 1.69 | % | 1.87 | % | |||
| (1) Average tangible equity is calculated by subtracting average goodwill and average core deposit intangible assets from average stockholders’ equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position. | |||||||||
| Three Months Ended | |||||||||
| Pre-tax acquisition accounting adjustments: | 3/31/2021 | 12/31/2020 | 3/31/2020 | ||||||
| Accretion on purchased non-impaired loans | $ | 705 | $ | 452 | $ | 1,059 | |||
| Accretion on purchased credit deteriorated/purchased credit impaired loans | 2,255 | 3,064 | 9,449 | ||||||
| Amortization of premium on low income housing tax credits | (73) | (71) | (71) | ||||||
| Accretion of discount on acquired subordinated debt | (290) | (289) | (283) | ||||||
| Amortization of core deposit intangibles | (509) | (531) | (531) | ||||||
| Total acquisition accounting adjustments | $ | 2,088 | $ | 2,625 | $ | 9,623 |
Table Page 3
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2021 | 12/31/2020 | 3/31/2020 | ||||||||||||||||
| Interest | Annualized | Interest | Annualized | Interest | Annualized | |||||||||||||
| Average | Income/ | Average | Average | Income/ | Average | Average | Income/ | Average | ||||||||||
| Balance | Expense | Yield/Cost | Balance | Expense | Yield/Cost | Balance | Expense | Yield/Cost | ||||||||||
| INTEREST EARNING ASSETS: | ||||||||||||||||||
| Loans, including loans held for sale | $ | 13,346,264 | $ | 129,736 | 3.94 | % | $ | 13,046,443 | $ | 132,117 | 4.03 | % | $ | 12,259,848 | $ | 154,230 | 5.06 | % |
| Securities available for sale | 2,267,409 | 7,915 | 1.42 | % | 2,123,025 | 9,014 | 1.69 | % | 1,712,033 | 10,609 | 2.49 | % | ||||||
| FHLB stock and other investments | 640,392 | 642 | 0.41 | % | 749,281 | 598 | 0.32 | % | 519,309 | 2,029 | 1.57 | % | ||||||
| Total interest earning assets | $ | 16,254,065 | $ | 138,293 | 3.45 | % | $ | 15,918,749 | $ | 141,729 | 3.54 | % | $ | 14,491,190 | $ | 166,868 | 4.63 | % |
| INTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Demand, interest bearing | $ | 5,256,579 | $ | 5,490 | 0.42 | % | $ | 4,910,649 | $ | 5,541 | 0.45 | % | $ | 4,204,406 | $ | 14,880 | 1.42 | % |
| Savings | 301,184 | 870 | 1.17 | % | 305,341 | 898 | 1.17 | % | 274,075 | 808 | 1.19 | % | ||||||
| Time deposits | 3,767,109 | 6,410 | 0.69 | % | 4,240,500 | 10,495 | 0.98 | % | 4,900,405 | 25,425 | 2.09 | % | ||||||
| Total interest bearing deposits | 9,324,872 | 12,770 | 0.56 | % | 9,456,490 | 16,934 | 0.71 | % | 9,378,886 | 41,113 | 1.76 | % | ||||||
| FHLB advances | 215,889 | 642 | 1.21 | % | 204,900 | 657 | 1.28 | % | 594,890 | 2,647 | 1.79 | % | ||||||
| Convertible notes, net | 215,002 | 1,322 | 2.46 | % | 203,807 | 2,383 | 4.58 | % | 199,960 | 2,346 | 4.64 | % | ||||||
| Subordinated debentures | 100,392 | 980 | 3.90 | % | 100,118 | 999 | 3.90 | % | 99,252 | 1,471 | 5.86 | % | ||||||
| Total interest bearing liabilities | $ | 9,856,155 | $ | 15,714 | 0.65 | % | $ | 9,965,315 | $ | 20,973 | 0.84 | % | $ | 10,272,988 | $ | 47,577 | 1.86 | % |
| Noninterest bearing demand deposits | 5,052,532 | 4,637,584 | 2,963,136 | |||||||||||||||
| Total funding liabilities/cost of funds | $ | 14,908,687 | 0.43 | % | $ | 14,602,899 | 0.57 | % | $ | 13,236,124 | 1.45 | % | ||||||
| Net interest income/net interest spread | $ | 122,579 | 2.80 | % | $ | 120,756 | 2.70 | % | $ | 119,291 | 2.77 | % | ||||||
| Net interest margin | 3.06 | % | 3.02 | % | 3.31 | % | ||||||||||||
| Cost of deposits: | ||||||||||||||||||
| Noninterest bearing demand deposits | $ | 5,052,532 | $ | — | — | % | $ | 4,637,584 | $ | — | — | % | $ | 2,963,136 | $ | — | — | % |
| Interest bearing deposits | 9,324,872 | 12,770 | 0.56 | % | 9,456,490 | 16,934 | 0.71 | % | 9,378,886 | 41,113 | 1.76 | % | ||||||
| Total deposits | $ | 14,377,404 | $ | 12,770 | 0.36 | % | $ | 14,094,074 | $ | 16,934 | 0.48 | % | $ | 12,342,022 | $ | 41,113 | 1.34 | % |
Table Page 4
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AVERAGE BALANCES: | 3/31/2021 | 12/31/2020 | % change | 3/31/2020 | % change | ||||||||
| Loans receivable, including loans held for sale | $ | 13,346,264 | $ | 13,046,443 | 2 | % | $ | 12,259,848 | 9 | % | |||
| Investments | 2,907,801 | 2,872,306 | 1 | % | 2,231,342 | 30 | % | ||||||
| Interest earning assets | 16,254,065 | 15,918,749 | 2 | % | 14,491,190 | 12 | % | ||||||
| Total assets | 17,115,407 | 16,824,700 | 2 | % | 15,446,807 | 11 | % | ||||||
| Interest bearing deposits | 9,324,872 | 9,456,490 | (1) | % | 9,378,886 | (1) | % | ||||||
| Interest bearing liabilities | 9,856,155 | 9,965,315 | (1) | % | 10,272,988 | (4) | % | ||||||
| Noninterest bearing demand deposits | 5,052,532 | 4,637,584 | 9 | % | 2,963,136 | 71 | % | ||||||
| Stockholders’ equity | 2,047,506 | 2,045,959 | — | % | 2,027,595 | 1 | % | ||||||
| Net interest earning assets | 6,397,910 | 5,953,434 | 7 | % | 4,218,202 | 52 | % | ||||||
| LOAN PORTFOLIO COMPOSITION: | 3/31/2021 | 12/31/2020 | % change | 3/31/2020 | % change | ||||||||
| Commercial loans | $ | 4,346,244 | $ | 4,157,787 | 5 | % | $ | 3,067,132 | 42 | % | |||
| Real estate loans | 8,811,423 | 8,772,134 | — | % | 8,681,222 | 1 | % | ||||||
| Consumer and other loans | 544,962 | 633,292 | (14) | % | 835,062 | (35) | % | ||||||
| Loans, net of deferred loan fees and costs | 13,702,629 | 13,563,213 | 1 | % | 12,583,416 | 9 | % | ||||||
| Allowance for credit losses | (207,943) | (206,741) | 1 | % | (144,923) | 43 | % | ||||||
| Loan receivable, net | $ | 13,494,686 | $ | 13,356,472 | 1 | % | $ | 12,438,493 | 8 | % | |||
| REAL ESTATE LOANS BY PROPERTY TYPE: | 3/31/2021 | 12/31/2020 | % change | 3/31/2020 | % change | ||||||||
| Retail buildings | $ | 2,317,017 | $ | 2,293,396 | 1 | % | $ | 2,314,885 | — | % | |||
| Hotels/motels | 1,619,661 | 1,634,287 | (1) | % | 1,706,082 | (5) | % | ||||||
| Gas stations/car washes | 913,176 | 892,110 | 2 | % | 852,077 | 7 | % | ||||||
| Mixed-use facilities | 752,729 | 750,867 | — | % | 770,825 | (2) | % | ||||||
| Warehouses | 1,092,549 | 1,091,389 | — | % | 1,024,832 | 7 | % | ||||||
| Multifamily | 531,306 | 518,498 | 2 | % | 481,425 | 10 | % | ||||||
| Other | 1,584,985 | 1,591,587 | — | % | 1,531,096 | 4 | % | ||||||
| Total | $ | 8,811,423 | $ | 8,772,134 | — | % | $ | 8,681,222 | 1 | % | |||
| DEPOSIT COMPOSITION | 3/31/2021 | 12/31/2020 | % change | 3/31/2020 | % change | ||||||||
| Noninterest bearing demand deposits | $ | 5,427,174 | $ | 4,814,254 | 13 | % | $ | 3,010,143 | 80 | % | |||
| Money market and other | 5,009,419 | 5,232,413 | (4) | % | 4,851,000 | 3 | % | ||||||
| Saving deposits | 305,326 | 300,770 | 2 | % | 272,577 | 12 | % | ||||||
| Time deposits | 3,559,350 | 3,986,475 | (11) | % | 4,702,847 | (24) | % | ||||||
| Total deposit balances | $ | 14,301,269 | $ | 14,333,912 | — | % | $ | 12,836,567 | 11 | % | |||
| DEPOSIT COMPOSITION (%) | 3/31/2021 | 12/31/2020 | 3/31/2020 | ||||||||||
| Noninterest bearing demand deposits | 38.0 | % | 33.6 | % | 23.5 | % | |||||||
| Money market and other | 35.0 | % | 36.5 | % | 37.8 | % | |||||||
| Saving deposits | 2.1 | % | 2.1 | % | 2.1 | % | |||||||
| Time deposits | 24.9 | % | 27.8 | % | 36.6 | % | |||||||
| Total deposit balances | 100.0 | % | 100.0 | % | 100.0 | % |
Table Page 5
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| CAPITAL RATIOS: | 3/31/2021 | 12/31/2020 | 3/31/2020 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 2,045,581 | $ | 2,053,745 | $ | 2,018,088 | |||||||||
| Common equity tier 1 ratio | 11.08 | % | 10.94 | % | 11.44 | % | |||||||||
| Tier 1 risk-based capital ratio | 11.78 | % | 11.64 | % | 12.19 | % | |||||||||
| Total risk-based capital ratio | 13.03 | % | 12.87 | % | 13.08 | % | |||||||||
| Tier 1 leverage ratio | 10.15 | % | 10.22 | % | 10.88 | % | |||||||||
| Total risk weighted assets | $ | 14,338,828 | $ | 14,341,456 | $ | 13,348,162 | |||||||||
| Book value per common share | $ | 16.57 | $ | 16.66 | $ | 16.38 | |||||||||
| Tangible common equity to tangible assets 1 | 9.40 | % | 9.50 | % | 9.92 | % | |||||||||
| Tangible common equity per share 1 | $ | 12.73 | $ | 12.81 | $ | 12.52 | |||||||||
| 1 Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and core deposit intangible assets, net divided by total assets less goodwill and core deposit intangible assets, net. Management reviews tangible common equity to tangible assets in evaluating the Company’s capital levels and has included this ratio in response to market participant interest in tangible common equity as a measure of capital. | |||||||||||||||
| Three Months Ended | |||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES CHANGES: | 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | ||||||||||
| Balance at beginning of period | $ | 206,741 | $ | 179,849 | $ | 161,771 | $ | 144,923 | $ | 94,144 | |||||
| CECL day 1 adoption impact | — | — | — | — | 26,200 | ||||||||||
| Provision for credit losses | 3,300 | 27,500 | 22,000 | 17,500 | 28,000 | ||||||||||
| Recoveries | 1,423 | 2,207 | 2,428 | 252 | 2,536 | ||||||||||
| Charge offs | (3,521) | (2,815) | (6,350) | (904) | (5,957) | ||||||||||
| Balance at end of period | $ | 207,943 | $ | 206,741 | $ | 179,849 | $ | 161,771 | $ | 144,923 | |||||
| Net charge offs/average loans receivable (annualized) | 0.06 | % | 0.02 | % | 0.12 | % | 0.02 | % | 0.11 | % | |||||
| Three Months Ended | |||||||||||||||
| NET LOAN CHARGE OFFS (RECOVERIES): | 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | ||||||||||
| Real estate loans | $ | 2,234 | $ | (726) | $ | 5,154 | $ | 148 | $ | 2,230 | |||||
| Commercial loans | (80) | 1,167 | (1,451) | 240 | 676 | ||||||||||
| Consumer loans | (56) | 167 | 219 | 264 | 515 | ||||||||||
| Total net charge offs | $ | 2,098 | $ | 608 | $ | 3,922 | $ | 652 | $ | 3,421 |
Table Page 6
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| NONPERFORMING ASSETS: | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans on nonaccrual status 3 | 109,858 | $ | 85,238 | $ | 69,205 | $ | 82,137 | $ | 72,639 | |||||
| Delinquent loans 90 days or more on accrual status | 614 | 1,537 | 430 | 387 | ||||||||||
| Accruing troubled debt restructured loans | 37,354 | 35,429 | 44,026 | 43,789 | ||||||||||
| Total nonperforming loans | 123,206 | 106,171 | 126,593 | 116,815 | ||||||||||
| Other real estate owned | 20,121 | 18,410 | 20,983 | 23,039 | ||||||||||
| Total nonperforming assets | 170,530 | $ | 143,327 | $ | 124,581 | $ | 147,576 | $ | 139,854 | |||||
| Nonperforming assets/total assets | % | 0.84 | % | 0.74 | % | 0.86 | % | 0.87 | % | |||||
| Nonperforming assets/loans receivable & OREO | % | 1.06 | % | 0.95 | % | 1.14 | % | 1.11 | % | |||||
| Nonperforming assets/total capital | % | 6.98 | % | 6.11 | % | 7.27 | % | 6.93 | % | |||||
| Nonperforming loans/loans receivable | % | 0.91 | % | 0.81 | % | 0.98 | % | 0.93 | % | |||||
| Nonaccrual loans/loans receivable | % | 0.63 | % | 0.53 | % | 0.64 | % | 0.58 | % | |||||
| Allowance for credit losses/loans receivable | % | 1.52 | % | 1.37 | % | 1.26 | % | 1.15 | % | |||||
| Allowance for credit losses/nonaccrual loans | % | 242.55 | % | 259.88 | % | 196.95 | % | 199.51 | % | |||||
| Allowance for credit losses/nonperforming loans | % | 167.80 | % | 169.40 | % | 127.79 | % | 124.06 | % | |||||
| Allowance for credit losses/nonperforming assets | % | 144.24 | % | 144.36 | % | 109.62 | % | 103.62 | % | |||||
| 3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling 25.0 million, 26.5 million, 26.2 million, 30.3 million, and 28.8 million at March 31, 2021, December 31, 2020, September 30, 2020, June 30, 2020, and March 31, 2020, respectively. | ||||||||||||||
| NONACCRUAL LOANS BY TYPE: | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | ||||||||||
| Real estate loans | 91,940 | $ | 67,450 | $ | 51,739 | $ | 64,060 | $ | 56,787 | |||||
| Commercial loans | 13,911 | 13,022 | 12,079 | 12,747 | ||||||||||
| Consumer loans | 3,877 | 4,444 | 5,998 | 3,105 | ||||||||||
| Total nonaccrual loans | 109,858 | $ | 85,238 | $ | 69,205 | $ | 82,137 | $ | 72,639 | |||||
| BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS: | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | ||||||||||
| Retail buildings | 6,319 | $ | 5,408 | $ | 5,451 | $ | 5,526 | $ | 5,014 | |||||
| Gas stations/car washes | 219 | 224 | 1,789 | 1,675 | ||||||||||
| Mixed-use facilities | 3,521 | 4,323 | 3,583 | 3,157 | ||||||||||
| Warehouses | 7,296 | 7,320 | 13,433 | 13,381 | ||||||||||
| Other 5 | 20,910 | 18,111 | 19,695 | 20,562 | ||||||||||
| Total | 41,773 | $ | 37,354 | $ | 35,429 | $ | 44,026 | $ | 43,789 | |||||
| 5 Includes commercial business, consumer, and other loans |
All values are in US Dollars.
Table Page 7
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE: | 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 - 59 days | $ | 18,175 | $ | 11,347 | $ | 5,962 | $ | 18,857 | $ | 37,866 |
| 60 - 89 days | 8,314 | 16,826 | 58,065 | 29,975 | 2,605 | |||||
| Total | $ | 26,489 | $ | 28,173 | $ | 64,027 | $ | 48,832 | $ | 40,471 |
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE: | 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | |||||
| Real estate loans | $ | 18,331 | $ | 15,689 | $ | 60,510 | $ | 27,245 | $ | 23,753 |
| Commercial loans | 1,002 | 3,393 | 624 | 5,987 | 4,583 | |||||
| Consumer loans | 7,156 | 9,091 | 2,893 | 15,600 | 12,135 | |||||
| Total | $ | 26,489 | $ | 28,173 | $ | 64,027 | $ | 48,832 | $ | 40,471 |
| CRITICIZED LOANS: | 3/31/2021 | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | |||||
| Special mention | $ | 280,974 | $ | 184,941 | $ | 153,388 | $ | 127,149 | $ | 122,279 |
| Substandard | 379,048 | 366,556 | 311,902 | 299,357 | 278,771 | |||||
| Doubtful/Loss | — | 1 | 6,640 | 11 | 12 | |||||
| Total criticized loans | $ | 660,022 | $ | 551,498 | $ | 471,930 | $ | 426,517 | $ | 401,062 |
Table Page 8
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| Reconciliation of GAAP financial measures to non-GAAP financial measures | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Management reviews select non-GAAP financial measures in evaluating the Company’s and the Bank’s financial performance and in response to market participant interest. A reconciliation of the GAAP to non-GAAP financial measures utilized by management is provided below. | |||||||||
| Three Months Ended | |||||||||
| 3/31/2021 | 12/31/2020 | 3/31/2020 | |||||||
| RETURN ON AVERAGE TANGIBLE COMMON EQUITY | |||||||||
| Average stockholders’ equity | $ | 2,047,506 | $ | 2,045,959 | $ | 2,027,595 | |||
| Less: Goodwill and core deposit intangible assets, net | (473,961) | (474,467) | (476,053) | ||||||
| Average tangible common equity | $ | 1,573,545 | $ | 1,571,492 | $ | 1,551,542 | |||
| Net income | $ | 43,687 | $ | 28,319 | $ | 25,953 | |||
| Return on average tangible common equity (annualized) | 11.11 | % | 7.21 | % | 6.69 | % | |||
| Three Months Ended | |||||||||
| 3/31/2021 | 12/31/2020 | 3/31/2020 | |||||||
| TANGIBLE COMMON EQUITY | |||||||||
| Total stockholders’ equity | $ | 2,045,581 | $ | 2,053,745 | $ | 2,018,088 | |||
| Less: Goodwill and core deposit intangible assets, net | (473,648) | (474,158) | (475,752) | ||||||
| Tangible common equity | $ | 1,571,933 | $ | 1,579,587 | $ | 1,542,336 | |||
| Total assets | $ | 17,198,860 | $ | 17,106,664 | $ | 16,021,434 | |||
| Less: Goodwill and core deposit intangible assets, net | (473,648) | (474,158) | (475,752) | ||||||
| Tangible assets | $ | 16,725,212 | $ | 16,632,506 | $ | 15,545,682 | |||
| Common shares outstanding | 123,480,494 | 123,264,864 | 123,169,404 | ||||||
| Tangible common equity to tangible assets | 9.40 | % | 9.50 | % | 9.92 | % | |||
| Tangible common equity per share | $ | 12.73 | $ | 12.81 | $ | 12.52 | |||
| Three Months Ended | |||||||||
| --- | --- | --- | --- | --- | --- | --- | |||
| 3/31/2021 | 12/31/2020 | 3/31/2020 | |||||||
| PRE-TAX PRE-PROVISION INCOME | |||||||||
| Net income | $ | 43,687 | $ | 28,319 | $ | 25,953 | |||
| Add back - tax provision | 13,965 | 5,289 | 6,462 | ||||||
| Add back - provision for credit losses | 3,300 | 27,500 | 28,000 | ||||||
| Pre-tax pre-provision income | $ | 60,952 | $ | 61,108 | $ | 60,415 |
Table Page 9
Document
News Release
HOPE BANCORP DECLARES QUARTERLY CASH DIVIDEND OF $0.14 PER SHARE
LOS ANGELES - April 27, 2021 - Hope Bancorp, Inc. (NASDAQ: HOPE) today announced that its Board of Directors declared a quarterly cash dividend of $0.14 per common share. The dividend is payable on or about May 21, 2021 to all stockholders of record as of the close of business on May 7, 2021.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Wednesday, April 28, 2021 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its first quarter ended March 31, 2021. Investors and analysts are invited to access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103 (international) and asking for the “Hope Bancorp Call.” A presentation to accompany the earnings call will be available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of Hope Bancorp’s website. After the live webcast, a replay will remain available at the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through May 5, 2021, replay access code 10154357.
About Hope Bancorp, Inc.
Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $17.2 billion in total assets as of March 31, 2021. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 53 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.
Contacts:
| Alex Ko<br><br>Senior EVP & Chief Financial Officer<br><br>213-427-6560<br><br>alex.ko@bankofhope.com | Angie Yang<br><br>SVP, Director of Investor Relations &<br><br>Corporate Communications<br><br>213-251-2219<br><br>angie.yang@bankofhope.com |
|---|
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1 2021 First Quarter Earnings Conference Call Wednesday, April 28, 2021
2 Forward Looking Statements & Additional Disclosures This presentation may contain statements regarding future events or the future financial performance of the Company that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market, and statements regarding our business strategies, objectives and vision. Forward- looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for credit losses, including the timing and effects of the implementation of the current expected credit losses model; and regulatory risks associated with current and future regulations, and the COVID-19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10-K. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
3 Q1 2021 Financial Highlights Net Income $43.7MM EPS (diluted) $0.35 Gross Loans $13.70B Total Deposits $14.30B • Net interest income before provision for credit loss increased 2% to $122.6 million, largely reflecting benefit of lower cost of deposits – 3rd consecutive Q-o-Q increase • Net interest margin expanded 4bps Q-o-Q benefiting from continued reduction in deposit costs – 3rd consecutive quarter of margin expansion • Net income increased 54% Q-o-Q to $43.7 million, or $0.35 per diluted common share • Noninterest expenses decreased 1% Q-o-Q • Efficiency ratio improved 16bps to 53.61% Q-o-Q and noninterest expenses as a percentage of total assets improved by 4bps to 1.65% • New loan originations funded of $847.1 million, including 2nd round of PPP fundings of $304.7 million • Well diversified mix of originations with C&I representing 55%, CRE 37% and Consumer 8% • Loans receivable increased 1%, or 4% annualized • Noninterest bearing deposits increased 13% Q-o-Q to a record high and accounted for a record high 38% of total deposits, compared with 34% as of 12/31/20 • Time deposits decreased 11% Q-o-Q and declined to 25% of total deposits from 28% as of 12/31/20 • Cost of deposits decreased for the 6th consecutive quarter, down 12bps Q-o-Q • Nonperforming loans increased $29 million Q-o-Q, reflecting addition of one large loan unrelated to hotel/motel industry • Special Mention loans increased $96 million Q-o-Q largely reflecting migration of modified hotel/motel loans • Credit losses continued to be minimal with net charge offs of $2.1 million, or 0.06% of average loans receivable annualized • Provision for credit losses of $3.3 million, reflecting improving macroeconomic variables, strong reserve build in 2020 and low level of losses Loan Production Asset Quality Deposit TrendsEarnings & Profitability
4 $348 $216 $244 $340 $311 $480 $305 $234 $61 $433 $439 $160 $42 $74 $105 $65 $71 3.98% 3.39%1 2.88% 3.27% 3.44%1 1Q20 2Q20 3Q20 4Q20 1Q21 New Loan Originations Funded CRE PPP C&I Consumer Average Rate Loan Production & Portfolio Trends New loan originations funded of $847 million resulted in 1% growth in loans receivable Q-o-Q, or 4% annualized New loan originations included $305 million of second round PPP funding Aggregate payoffs and paydowns totaled $572 million vs. $619 million in Q4 2020 Well diversified mix of loan originations 55% C&I / 37% CRE / 8% Consumer Traditional SBA loan originations of $36.8 million, all of which was 7(a) production Residential mortgage originations of $69.8 million vs. $62.5 million in Q4 2020 Strong C&I originations driving meaningful shift in composition of loan portfolio Y-o-Y CRE loans decreased to 64% of total portfolio from 69% C&I loans increased to 32% from 24% Consumer loans decreased to 4% from 7% 65%30% 5% 64% 32% 4% 3/31/202112/31/2020 Loan Portfolio Composition ($ millions) $782.4 $844.2 $847.1$832.0 $624.5 69% 24% 7% 3/31/2020 1 Including PPP loans, the average rate on new loan originations was 2.56% for 1Q21 and 2.01% for 2Q20 (Excluding PPP loans)
5 Active COVID-19 Loan Modifications & Expiration Schedule • Active modifications outstanding as of 3/31/2021 totaled $949 million, or 6.9% of total loan portfolio • Based on modifications expiration schedule, active modifications outstanding expected to decrease substantially to approximately 2-3% of total loans as of 6/30/2021 assuming no new modifications • Substantially all expired modifications current and performing as of 3/31/2021 Active COVID-19 Modifications ($ millions) (As of March 31, 2021) Total Loans Active Mods Outstanding % of Respective Loan Portfolio % of All Mod Loans Real Estate $ 8,812 $ 889 10.1% 93.7% Retail $ 2,317 $ 189 8.2% 19.9% Hotel/Motel $ 1,620 $ 535 33.0% 56.4% Mixed Use $ 753 $ 47 6.2% 5.0% Industrial & Warehouse $ 1,093 $ 24 2.2% 2.5% Other Real Estate $ 3,029 $ 94 3.0% 9.9% C&I $ 4,346 $ 18 0.4% 1.9% Consumer (predominantly residential mortgage) $ 545 $ 42 7.7% 4.4% Total $ 13,703 $ 949 6.9% 100.0% COVID-19 Modifications Expiration Schedule Date Amount of Active Mods Scheduled to Expire ($ millions) Mods Expiring as % of Active Mods at 3/31/2021 Active Mods Outstanding as % of Total Loans at 3/31/2021* Apr-21 $173 18.2% 5.7% May-21 $247 26.0% 3.9% Jun-21 $172 18.1% 2.6% Jul-21 $109 11.5% 1.8% Aug-21 $21 2.3% 1.7% Sep-21 $90 9.5% 1.0% Oct-21 $15 1.6% 0.9% Nov-21 $28 3.0% 0.7% Dec-21 $77 8.1% 0.1% * Percentages in this column depicts the decline in active modifications outstanding at month end as a percentage of total loans at March 31, 2021, assuming no new modifications.
6 • Majority of Hotel/Motel properties are limited service facilities • Less impacted by lockdowns than full-service hotel properties • 73% of Hotel/Motel portfolio represented by flagged properties • 95%+ of Hotel/Motel exposure located in major MSAs or regions where the Bank has presence and knowledge of the market • Vast majority of the portfolio supported by personal guarantees COVID-19 Impacted Portfolios - Hotel/Motel and Retail CRE - $2.3 million 47.8% 1.95 Average Loan Size Weighted Average LTV Weighted Average DCR 4.29% ACL Coverage Ratio • Largely represents “strip mall” type of properties (not shopping malls) • Majority of tenants comprised of service oriented businesses – traditionally less impacted by e-commerce • Local supermarkets are representative anchor tenants of larger strip mall properties • 95%+ of retail CRE exposure located in major MSAs or regions where the Bank has presence and knowledge of the market $1.6 million 48.4% 1.76 1.67% Hotel/Motel CRE Property Characteristics Retail CRE Property Characteristics Active Modifications 2Q21 Expirations • 33% of hotel/motel portfolio, or $535 million, modified as of 3/31/21, a decrease from approximately 45% as 12/31/20 • 8% of retail CRE portfolio, or $189 million, modified as of 3/31/21, a decrease from approximately 13% as of 12/31/20 • $381 million of hotel/motel COVID-19 modifications scheduled to expire during 2Q21 • $115 million of retail CRE COVID-19 modifications scheduled to expire during 2Q21
7 $119.3 $109.8 $117.6 $120.8 $122.6 3.31% 2.79% 2.91% 3.02% 3.06% 1Q20 2Q20 3Q20 4Q20 1Q21 Net Interest Income & NIM Net Interest Income NIM Net Interest Income and Margin 5.06% 4.23% 4.20% 4.03% 3.94% 1.41% 0.35% 0.16% 0.15% 0.12% 1Q20 2Q20 3Q20 4Q20 1Q21 Average Loan Yield & Average 1M LIBOR Rate Avg Loan Yield Avg 1M LIBOR Rate Net interest income increased 2% primarily due to lower deposit costs, redeployment of excess liquidity and higher average loan balances 1Q21 net interest margin increased 4bps Q-o-Q reflecting Net interest margin excluding purchase accounting adjustments, expanded 5bps Q-o-Q from 4Q20 Net interest margin expected to continue expansion through 1H 2021 as a benefit of decreasing deposit costs $9.4 $10.1 $9.9 $9.5 $9.3 1.34% 0.87% 0.64% 0.48% 0.36% 1.76% 1.17% 0.92% 0.71% 0.56% 1Q20 2Q20 3Q20 4Q20 1Q21 Average Interest Bearing Deposits & Cost of Deposits Average Interest Bearing Deposits Total Cost of Deposits Cost of Interest Bearing Deposits ($ millions) ($ billions) -5 bps Loan yield reduction -4 bps Investment yield decline -1 bps Accretion decline +9 bps Deposit cost decline +2 bps Average cash balance decrease +2 bps Convertible notes accounting change +1 bps Average loan balance increase
8 $4.1 $2.6 $2.7 $3.0 $1.8 $0.8 $0.7 $1.0 $0.7 $0.8 $0.4 $1.1 $0.8 $0.6 $1.0 $1.0 $0.8 $0.9 $0.9 $0.8 $1.9 $1.7 $2.9 $1.6 $2.1 $7.5 $5.1 $4.4 $1.7 $4.7 $2.2 1Q20 2Q20 3Q20 4Q20 1Q21 Noninterest Income Service fees on dep accts International service fees Loan servicing fees, net Wire transfer fees Gain on sale of other loans Gain on sale of securities Other income and fees Noninterest Income Noninterest income decreased to $8.8 million in 1Q21 vs. $11.4 million in 4Q20 driven largely by: $1.5 million reduction in SWAP fee income $1.2 million decrease in deposit service fees related to exit of check cashing industry deposit relationships Net gain on sale of mortgage loans increased to $2.1 million in 1Q21 vs. $1.6 million in 4Q20 Net loan servicing fees increased $478 thousand Q-o-Q to $1.0 million $17.5 $11.4 $8.8 $13.3 $11.2 ($ millions)
9 Noninterest Expense and Efficiency 54.42% 55.37% 54.31% 53.77% 53.61% 1.87% 1.60% 1.73% 1.69% 1.65% 1Q20 2Q20 3Q20 4Q20 1Q21 Efficiency Ratio & Noninterest Expense to Average Assets Efficiency Ratio Noninterest Expense/Avg Assets Noninterest expense decreased 1% to $70.4 million from $71.1 million in 4Q20 – 1Q21 salaries and benefits expense reflects seasonally higher payroll taxes and 401k contribution expense, partially offset by $1.4 million increase in deferred loan origination costs due to 2nd round of PPP funding – Lower occupancy expense reflects cost savings from branch consolidations effective Jan 2021 Noninterest expense to average assets improved to 1.65% from 1.69% in 4Q20 ($ millions) $42.5 $38.9 $40.7 $40.9 $41.2 $11.7 $11.7 $11.8 $11.3 $11.2 $4.3 $3.6 $3.8 $3.9 $4.4 $3.3 $1.5 $1.5 $1.8 $2.9 $1.6 $1.7 $1.2 $1.2 $1.3 $2.5 $2.7 $3.6 $1.9 $2.5 $6.3 $7.0 $7.3 $7.6 $7.0 $3.61 $2.42 1,458 1,474 1,416 1,408 1,444 1Q20 2Q20 3Q20 4Q20 1Q21 Breakdown of Noninterest Expense & FTE Compensation Occupancy & equipment Adv/Marketing/Data/Comm Professional fees FDIC assessment Credit related & OREO Other Other non-core FTE $73.4 $71.1 $70.4 $72.1 $67.0 1 3Q20 noninterest expenses included FHLB prepayment fee of $3.6 million 2 4Q20 noninterest expenses included branch restructuring costs of $2.4 million
10 $3.0 $4.0 $4.5 $4.8 $5.4 $4.9 $4.8 $4.8 $5.2 $5.0$0.3 $0.3 $0.3 $0.3 $0.3$4.7 $5.0 $4.4 $4.0 $3.6 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 Deposit Composition DDA MMA/NOW Savings Time Deposit Trends Noninterest bearing demand deposits increased 13% Q-o-Q and increased to 38% of total deposits from 34% as of 12/31/20 MMA & NOW accounts decreased 4% Q-o-Q and accounted for 35% of total deposits vs. 37% as of 12/31/20 Time deposits decreased 11% Q-o-Q and declined to 25% of total deposits from 28% as of 12/31/20 Total cost of deposits decreased 12bps from 4Q20 and total cost of interest bearing deposits decreased 15bps Net Loan-to-Deposit ratio at 3/31/2021 was 94.36% vs. 93.18% as of 12/31/2020 DDA = Noninterest bearing demand deposits MMA/NOW = Money market and NOW deposits NOW = Negotiable Order of Withdrawal $14.12 CD Originations & Maturity Schedule ($ millions) Amount Average Blended Rate CD Originations and Renewals Jan 2021 $566 0.35% Feb 2021 $425 0.32% Mar 2021 $301 0.28% 1Q 2021 $1,292 0.32% CD Maturity Schedule Q2 2021 $1,625 0.65% Q3 2021 $748 0.54% Q4 2021 $518 0.36% Q1 2022 $607 0.41% 1.43%1.42% 1.18% 0.95% 0.87% 0.79% 0.73% 0.64% 0.56%0.51%0.48%0.44%0.40%0.36%0.32% Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Deposit Cost Trend Quarterly Cost of Deposits Monthly Cost of Deposits 0.87% 2Q20 1.34% 1Q20 0.36% 1Q21 0.48% 4Q20 $12.84 $14.30$14.33$14.01 0%-3% +9%+40% ($ billions) Q-o-Q growth annualized 0.64% 3Q20
11 $28.0 $17.5 $22.0 $27.5 $3.3 0.11% 0.02% 0.12% 0.02% 0.06% 1Q20 2Q20 3Q20 4Q20 1Q21 Provision for Credit Losses & Net Charge Offs Provision Expense Net Charge Offs (annualized) ($ millions) Asset Quality $116.8 $126.6 $106.2 $123.2 $152.0$23.0 $21.0 $18.4 $20.1 $18.5 0.87% 0.86% 0.74% 0.84% 0.99% 1Q20 2Q20 3Q20 4Q20 1Q21 Nonperforming Assets NPLs OREO NPAs/Total Assets $122.3 $127.1 $153.4 $184.9 $281.0 $278.8 $299.4 $318.5 $366.6 $379.0 3.19% 3.31% 3.60% 4.07% 4.82% 1Q20 2Q20 3Q20 4Q20 1Q21 Criticized Loans Classified Special Mention Total Criticized Loans as a % of Gross Loans ($ millions) ($ millions) $147.6 $124.6 $143.3 $170.5 $139.9 $426.5 $471.9 $551.5 $660.0 $401.1 Nonperforming loans increased $29 million Q-o-Q, primarily due to the addition of one commercial real estate loan Unique situation with borrower involved in legal dispute; not reflective of any broader deterioration Special Mention loans increased $96 million Q-o-Q largely reflecting migration of modified hotel/motel loans Performance of these loans consistent with expectations when reserves were increased in 2020 No new issues for these borrowers have emerged Credit losses continued to be minimal, with net charge offs of $2.1 million, or 6bps of average loans on an annualized basis
12 Allocation of Allowance by Loan Type ($ thousands) Allocation of Allowance for Credit Losses under Current Expected Credit Loss (CECL) Methodology Quarter-over- Quarter Change 1Q21 from 4Q20 Mar 31, 2020 Dec 31, 2020 Mar 31, 2021 Loan Type Amount Coverage Ratio Amount Coverage Ratio Amount Coverage Ratio Amount Coverage Ratio Commercial RE $ 94,645 1.09% $ 162,196 1.85% $ 162,307 1.84% $ 110 -0.01% Residential $ 399 0.70% $ 391 0.71% $ 267 0.51% $ -124 -0.20% Commercial $ 92,560 1.11% $ 159,527 1.89% $ 160,376 1.89% $ 849 0.00% Hotel/Motel $ 15,739 0.95% $ 62,419 3.86% $ 69,440 4.34% $ 7,021 0.48% Retail CRE $ 25,866 1.12% $ 34,256 1.50% $ 38,548 1.67% $ 4,292 0.17% Construction $ 1,686 0.60% $ 2,278 0.78% $ 1,664 0.62% $ -614 -0.16% Commercial Business $ 42,883 1.40% $ 39,155 0.94% $ 41,860 0.96% $ 2,705 0.02% Residential Mortgage $ 5,779 0.73% $ 4,277 0.73% $ 2,735 0.55% $ -1,542 -0.18% Consumer $ 1,616 3.35% $ 1,163 2.28% $ 1,041 2.37% $ -122 0.10% Total Allowance $ 144,923 $ 206,741 $ 206,943 Coverage Ratio to Loans Receivable 1.15% 1.52% 1.52% Excluding PPP n/a 1.58% 1.60% Excluding PPP & Including Discount on Acquired Loans 1.44% 1.76% 1.76%
13 Strong Capital & Liquidity Positions 5.00% 3/31/2021 ($ Thousands) Available Borrowing Capacity FHLB Remaining Capacity $ 3,861,438 FRB Discount Window Capacity $ 667,371 Unsecured lines with other banks $ 436,180 Total Borrowing Capacity $ 4,964,959 Brokered Deposit Availability (internal policy limit 15% of Total Assets) $ 1,859,220 Investment Repo Line (unpledged securities 95%) $ 1,813,298 Sufficient Liquidity Sources 10.00% 5.00% 6.50% 8.00% 12.87% 10.22% 10.94% 11.64% 13.03% 10.15% 11.08% 11.78% Total Risk-Based Capital Ratio Tier 1 Leverage Ratio Tier 1 Common Equity Ratio Tier 1 Capital Ratio Robust Capital Position Min. Guideline Well Capitalized Institution 12/31/2020 3/31/2021 Maintaining strong level of capital return to shareholders with quarterly common stock dividend of $0.14 per share
14 Near-Term Outlook Loan Growth: Mid- to high-single digit growth projected for 2021 primarily driven by growth in non-CRE loans (excluding PPP loans) Gain-on-Sale Income: Higher trending from growth in residential mortgage origination volumes Noninterest Expenses: Continuation of cost management in line with current business environment Net Interest Margin: Expansion through at least 2Q21 driven by decreasing deposit costs COVID-19 Modifications: Vast majority expiring by 2Q21 Provision for Credit Losses: Significantly lower Y-o-Y provisioning in 2021 expected to result in enhanced profitability Sound Management of credit, capital, liquidity and reserves
15 2021 First Quarter Earnings Conference Call Q&A