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
January 26, 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 January 26, 2021, Hope Bancorp, Inc. (“HOPE” or the “Company”) issued a news release concerning its results of operations and financial condition for the fourth quarter and full year ended and as of December 31, 2020. A copy of the January 26, 2021 press release is attached hereto as Exhibit 99.1.
Item 8.01 Other Events.
On January 26, 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 February 19, 2021 to all stockholders of record as of the close of business on February 5, 2021. A copy of the January 26, 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, January 27, 2021 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its third quarter and full year ended December 31, 2020. 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 dated January 26, 2021 concerning the results of operations and financial condition for the fourth quarter and year ended and as of December 31, 2020. |
| 99.2 | News release dated January 26, 2021 announcing the declaration of a quarterly cash dividend. |
| 99.3 | Presentation Materials, dated January 27, 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: January 27, 2021 | By: | /s/ Kevin S. Kim |
| Kevin S. Kim | ||
| Chairman, President and Chief Executive Officer |
Document
News Release
HOPE BANCORP REPORTS 2020 FOURTH QUARTER FINANCIAL RESULTS
LOS ANGELES - January 26, 2021 - Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its fourth quarter and year ended December 31, 2020.
For the three months ended December 31, 2020, net income totaled $28.3 million, or $0.23 per diluted common share. This compares with net income of $30.5 million, or $0.25 per diluted common share, in the third quarter of 2020 and $43.0 million, or $0.34 per diluted common share, in the fourth quarter of 2019. For the year ended December 31, 2020, net income totaled $111.5 million, or $0.90 per diluted common share, compared with net income of $171.0 million, or $1.35 per diluted common share for the year ended December 31, 2019.
“Fourth quarter results represent a continuation of the many positive trends we have delivered in 2020 and underscore how well we have been able to manage through a year that has been plagued by a global pandemic,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “Notwithstanding the challenging business environment, we recorded very strong loan originations of $844 million during the quarter. We are also extremely pleased with the success of our expanded commercial lending capabilities, with commercial loans accounting for 52% of new loan production during the fourth quarter of 2020. New commercial customer relationships that we have won during the year have been valuable contributors to our deposit achievements as well, with total deposits increasing 2% quarter-over-quarter and noninterest bearing deposits expanding to a record 34% of total deposits at the end of 2020. The improved mix in our deposit composition and reductions in deposit costs led to a second consecutive quarter of margin expansion with our net interest margin increasing 11 basis points quarter-over-quarter to 3.02% for the fourth quarter. We also continued to maintain a tight grip on expenses with our efficiency ratio improving to 53.77% for the 2020 fourth quarter.
“With the highly effective vaccines in distribution and the support of additional government stimulus programs, it appears the groundwork for a faster economic recovery is being paved, and we believe we are well positioned with a stronger allowance coverage ratio that we have prudently built to date,” said Kim. “2020 required more commitment and dedication from our employees than any period in the history of our Bank, and I am extremely proud of how we, as a team, adapted and succeeded this last year. As a result of all of the challenges we have successfully endured this year, I have great conviction that we are a stronger franchise today than ever before, and we move forward in 2021 with cautious optimism that we will indeed get through this unprecedented period of time together and deliver increased value to all the stakeholders of Bank of Hope.”
Q4 2020 Highlights
•Net interest income before provision for credit losses increased 3% quarter-over-quarter to $120.8 million, largely reflecting reduced interest expense due to lower cost of deposits.
•Net interest margin expanded 11 basis points quarter-over-quarter.
•Noninterest bearing demand deposits increased 7% quarter-over-quarter and accounted for 34% of total deposits at year-end.
•Total cost of deposits decreased 16 basis points quarter-over-quarter benefiting from an on going positive mix-shift to lower-cost core deposits.
•Loan originations totaled $844.2 million and contributed to a 3.4% increase in loans receivable quarter-over-quarter, or 13.5% annualized.
•Noninterest expenses continued to be well managed with efficiency ratio improving to 53.77% from 54.31% quarter-over-quarter and noninterest expense to average assets improving to 1.69% from 1.73%
(more)
Page 2-2-2 NASDAQ: HOPE
Financial Highlights
| (dollars in thousands, except per share data) (unaudited) | At or for the Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 12/31/2020 | 9/30/2020 | 12/31/2019 | |||||||
| Net income | $ | 28,319 | $ | 30,490 | $ | 43,009 | |||
| Diluted earnings per share | $ | 0.23 | $ | 0.25 | $ | 0.34 | |||
| Net interest income before provision for loan losses | $ | 120,756 | $ | 117,637 | $ | 113,508 | |||
| Net interest margin | 3.02 | % | 2.91 | % | 3.16 | % | |||
| Noninterest income | $ | 11,415 | $ | 17,513 | $ | 12,979 | |||
| Noninterest expense | $ | 71,063 | $ | 73,406 | $ | 70,429 | |||
| Net loans receivable | $ | 13,356,472 | $ | 12,940,376 | $ | 12,181,863 | |||
| Deposits | $ | 14,333,912 | $ | 14,008,356 | $ | 12,527,364 | |||
| Total cost of deposits | 0.48 | % | 0.64 | % | 1.49 | % | |||
| Nonaccrual loans (1) (2) | $ | 85,238 | $ | 69,205 | $ | 54,785 | |||
| Nonperforming loans to loans receivable (1) (2) | 0.91 | % | 0.81 | % | 0.80 | % | |||
| ACL to loans receivable (3) | 1.52 | % | 1.37 | % | 0.77 | % | |||
| ACL to nonaccrual loans (1) (2)(3) | 242.55 | % | 259.88 | % | 171.84 | % | |||
| ACL to nonperforming assets (1) (2)(3) | 144.24 | % | 144.36 | % | 77.08 | % | |||
| Provision for credit losses | $ | 27,500 | $ | 22,000 | $ | 1,000 | |||
| Net charge offs | $ | 608 | $ | 3,922 | $ | 738 | |||
| Return on average assets (“ROA”) | 0.67 | % | 0.72 | % | 1.13 | % | |||
| Return on average equity (“ROE”) | 5.54 | % | 5.98 | % | 8.46 | % | |||
| Return on average tangible common equity (“ROTCE”) (4) | 7.21 | % | 7.80 | % | 11.04 | % | |||
| Noninterest expense / average assets | 1.69 | % | 1.73 | % | 1.85 | % | |||
| Efficiency ratio | 53.77 | % | 54.31 | % | 55.68 | % |
(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation
(2) Excludes purchased credit-impaired loans for December 31, 2019
(3) Allowance for credit losses for current-year periods were calculated under the CECL methodology while allowance for loan losses for the
prior-year period was calculated under the incurred loss methodology.
(4) 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 10.
Operating Results for the 2020 Fourth Quarter
Net interest income before provision for credit losses for the 2020 fourth quarter increased 3% to $120.8 million from $117.6 million in the 2020 third quarter and increased 6% from $113.5 million in the year-ago fourth quarter. As with the preceding third quarter, the Company attributed the increases primarily to meaningful reductions in interest expense due to lower cost of deposits and lower average FHLB borrowing balances.
The net interest margin for the 2020 fourth quarter increased 11 basis points to 3.02% from 2.91% in the preceding third quarter, reflecting the benefits of lower deposit costs and reductions in cash on the Company’s balance sheet, partially offset by lower weighted average yield on loans. The net interest margin in the prior-year fourth quarter was 3.16%.
The weighted average yield on loans for the 2020 fourth quarter was 4.03%, compared with 4.20% in the preceding third quarter, largely reflecting a significant increase in the lower-yielding warehouse line balances during the quarter and lower accretion income. The weighted average yield on loans for the 2019 fourth quarter was 5.04%.
(more)
Page 3-3-3 NASDAQ: HOPE
The weighted average cost of deposits for the 2020 fourth quarter decreased for the fifth consecutive quarter to 0.48%, representing a 16 basis point decrease from 0.64% for the 2020 third quarter and a 101 basis point decrease from 1.49% for the 2019 fourth 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 time deposits. Noninterest bearing demand deposits increased 7% quarter-over-quarter and increased 55% year-over-year and accounted for 34%, 32% and 25% of total deposits at December 31, 2020, September 30, 2020 and December 31, 2019, respectively.
Noninterest income totaled $11.4 million for the 2020 fourth quarter, compared with $17.5 million in the preceding third quarter. The largest factor contributing to the decrease was a $7.5 million net gain on the sale of $161 million of available-for-sale investment securities in the preceding third quarter, compared with zero in the 2020 fourth quarter. In addition, net gains on sales of other loans decreased to $1.6 million for the 2020 fourth quarter from $2.9 million for the preceding third quarter. These decreases were partially offset by an increase in other income and fees in the 2020 fourth quarter, reflecting higher levels of swap fee income and a gain in the fair value change in derivatives. Noninterest income in the 2019 fourth quarter totaled $13.0 million.
Noninterest expense for the 2020 fourth quarter decreased to $71.1 million from $73.4 million for the preceding third quarter. Noninterest expense for the 2020 fourth quarter included $2.4 million in branch restructuring costs while the 2020 third quarter included a $3.6 million FHLB prepayment penalty. For the 2019 fourth quarter, noninterest expense totaled $70.4 million.
Salaries and employee benefits expense totaled $40.9 million, $40.7 million and $39.8 million for the 2020 fourth quarter,
2020 third quarter and 2019 fourth quarter.
Noninterest expense as a percentage of average assets improved to 1.69% for the 2020 fourth quarter from 1.73% for the 2020 third quarter and from 1.85% for the 2019 fourth quarter.
The effective tax rate for the 2020 fourth quarter was 15.74%, compared with 23.3% for the preceding third quarter and
21.9% in the year-ago fourth quarter. The decrease in the effective tax rate for 2020 fourth quarter reflects lower tax provision based on adjustments to the applicable state apportionment factors.
Balance Sheet Summary
New loan originations funded during the 2020 fourth quarter totaled $844.2 million and included SBA loan production of $25.5 million and residential mortgage loan originations of $62.5 million. In addition, two new warehouse mortgage lines of credit were booked during the 2020 fourth quarter, of which $106.8 million was funded as of December 31, 2020. For the preceding 2020 third quarter, new loan originations funded totaled $782.4 million, including SBA loan originations of $33.3 million, residential mortgage loan originations of $102.3 million and four new warehouse mortgages lines of credit, of which $301 million was funded as of September 30, 2020. In the year-ago fourth quarter, new loan originations funded totaled $847.6 million, including SBA loan production of $61.8 million and residential mortgage loan originations of $64.2 million. There were no new warehouse mortgage lines of credit established in the 2019 fourth quarter.
At December 31, 2020, loans receivable increased 3.4% to $13.56 billion from $13.12 billion at September 30, 2020 and increased 10.5% from $12.28 billion at December 31, 2019.
Total deposits at December 31, 2020 increased 2.3% to $14.33 billion from $14.01 billion at September 30, 2020 and increased 14.4% from $12.53 billion at December 31, 2019.
(more)
Page 4-4-4 NASDAQ: HOPE
Following is the deposit composition as of December 31, 2020, September 30, 2020 and December 31, 2019:
| (dollars in thousands) (unaudited) | 12/31/2020 | 9/30/2020 | % change | 12/31/2019 | % change | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Noninterest bearing demand deposits | $ | 4,814,254 | $ | 4,488,529 | 7 | % | $ | 3,108,687 | 55 | % |
| Money market and other | 5,232,413 | 4,763,893 | 10 | % | 3,985,556 | 31 | % | |||
| Saving deposits | 300,770 | 308,943 | (3) | % | 274,151 | 10 | % | |||
| Time deposits | 3,986,475 | 4,446,991 | (10) | % | 5,158,970 | (23) | % | |||
| Total deposit balances | $ | 14,333,912 | $ | 14,008,356 | 2 | % | $ | 12,527,364 | 14 | % |
Following is the deposit composition as a percentage of total deposits as of December 31, 2020, September 30, 2020 and December 31, 2019 and a breakdown of cost of deposits for the quarters ended December 31, 2020, September 30, 2020 and December 31, 2019:
| Deposit Breakdown | Cost of Deposits | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) (unaudited) | 12/31/2020 | 9/30/2020 | 12/31/2019 | Q4 2020 | Q3 2020 | Q4 2019 | ||||||
| Noninterest bearing demand deposits | 33.6 | % | 32.1 | % | 24.8 | % | — | % | — | % | — | % |
| Money market and other | 36.5 | % | 34.0 | % | 31.8 | % | 0.45 | % | 0.53 | % | 1.61 | % |
| Saving deposits | 2.1 | % | 2.2 | % | 2.2 | % | 1.17 | % | 1.19 | % | 1.12 | % |
| Time deposits | 27.8 | % | 31.7 | % | 41.2 | % | 0.98 | % | 1.30 | % | 2.29 | % |
| Total deposit balances | 100.0 | % | 100.0 | % | 100.0 | % | 0.48 | % | 0.64 | % | 1.49 | % |
Allowance for Credit Losses
The 2020 fourth quarter provision for credit losses under the CECL methodology was $27.5 million, compared with $22.0 million for the preceding third quarter. This compares with a provision for loan losses under the prior incurred loss methodology of $1.0 million for the 2019 fourth quarter.
The provision for credit losses for the 2020 fourth quarter generally utilizes the most recent available Moody’s Analytics Baseline scenario, as well as more specific information, including updated CRE market data which reflects deterioration primarily in the hospitality industry, updated qualitative factors in the Company’s ACL methodology, and downgrades following the receipt of updated financial statements of the borrowers. As such, the buildup of the reserves in the 2020 fourth quarter was largely driven by additional allocations made to the hotel and motel portfolio as the Company continued to assess the full impact of the pandemic on this sector of its portfolio.
Following is the Allowance for Credit Losses as of December 31, 2020, September 30, 2020 and December 31, 2019:
| (dollars in thousands) (unaudited) | 12/31/2020 | 9/30/2020 | 12/31/2019 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Allowance for credit losses | $ | 206,741 | $ | 179,849 | $ | 94,144 | |||
| Allowance for credit loss/loans receivable | 1.52 | % | 1.37 | % | 0.77 | % | |||
| Allowance for credit losses/nonperforming loans | 167.80 | % | 169.40 | % | 96.03 | % |
(more)
Page 5-5-5 NASDAQ: HOPE
Credit Quality
Following are the components of nonperforming assets as of December 31, 2020, September 30, 2020 and December 31, 2019:
| (dollars in thousands) (unaudited) | 12/31/2020 | 9/30/2020 | 12/31/2019 | |||
|---|---|---|---|---|---|---|
| Loans on nonaccrual status (1) | $ | 85,238 | $ | 69,205 | $ | 54,785 |
| Delinquent loans 90 days or more on accrual status (2) | 614 | 1,537 | 7,547 | |||
| Accruing troubled debt restructured loans | 37,354 | 35,429 | 35,709 | |||
| Total nonperforming loans | 123,206 | 106,171 | 98,041 | |||
| Other real estate owned | 20,121 | 18,410 | 24,091 | |||
| Total nonperforming assets | $ | 143,327 | $ | 124,581 | $ | 122,132 |
(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $26.5 million, $26.2 million, and $28.1 million, at December 31, 2020, September 30, 2020, and December 31, 2019, respectively.
(2) Excludes PCI loans totaling $13.2 million at December 31, 2019.
Following are the components of criticized loan balances as of December 31, 2020, September 30, 2020 and December 31, 2019:
| (dollars in thousands) (unaudited) | 12/31/2020 | 9/30/2020 | 12/31/2019 | |||
|---|---|---|---|---|---|---|
| Special Mention (3) | $ | 184,941 | $ | 153,388 | $ | 141,452 |
| Classified (3) | 366,557 | 318,542 | 259,291 | |||
| Criticized | $ | 551,498 | $ | 471,930 | $ | 400,743 |
(3) Balances include purchased loans which were marked to fair value on the date of acquisition.
During the 2020 fourth quarter, net charge offs totaled $608,000, or 0.02% of average loans receivable on an annualized basis. This compares with net charge offs of $3.9 million, or 0.12% of average loans receivable on an annualized
basis for the 2020 third quarter and net charge offs for the 2019 fourth quarter of $738,000, or 0.02% of average loans
receivable on an annualized basis.
Capital
At December 31, 2020, 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 December 31, 2020, September 30, 2020 and December 31, 2019:
| (unaudited) | 12/31/2020 | 9/30/2020 | 12/31/2019 | Minimum Guideline for “Well-Capitalized” Bank |
|---|---|---|---|---|
| Common Equity Tier 1 Capital | 10.94% | 11.36% | 11.76% | 6.50% |
| Tier 1 Leverage Ratio | 10.22% | 10.02% | 11.22% | 5.00% |
| Tier 1 Risk-Based Ratio | 11.64% | 12.09% | 12.51% | 8.00% |
| Total Risk-Based Ratio | 12.87% | 13.19% | 13.23% | 10.00% |
(more)
Page 6-6-6 NASDAQ: HOPE
Following are tangible common equity (“TCE”) per share and TCE as a percentage of tangible assets as of December 31, 2020, September 30, 2020 and December 31, 2019:
| (unaudited) | 12/31/2020 | 9/30/2020 | 12/31/2019 |
|---|---|---|---|
| Tangible common equity per share (1) | $12.81 | $12.70 | $12.40 |
| Tangible common equity to tangible assets (2) | 9.50% | 9.63% | 10.27% |
(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 10.
(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 10.
Management reviews tangible common equity to tangible assets ratio in evaluating the Company’s and the Bank’s capital levels and has included these figures and tangible common equity per share 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, January 27, 2021 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its fourth quarter ended December 31, 2020 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 February 3, 2021, replay access code 10150976.
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 $17.1 billion in total assets as of December 31, 2020. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 58 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.
(more)
Page 7-7-7 NASDAQ: HOPE
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 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.
Contacts:
| Alex Ko<br><br>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 |
|---|
#
(tables follow)
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
| Assets | 12/31/2020 | 9/30/2020 | % change | 12/31/2019 | % change | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Cash and due from banks | $ | 350,579 | $ | 629,133 | (44) | % | $ | 698,567 | (50) | % |
| Securities available for sale, at fair value | 2,285,611 | 2,060,991 | 11 | % | 1,715,987 | 33 | % | |||
| Federal Home Loan Bank (“FHLB”) stock and other investments | 105,591 | 97,305 | 9 | % | 97,659 | 8 | % | |||
| Loans held for sale, at the lower of cost or fair value | 17,743 | 9,170 | 93 | % | 54,271 | (67) | % | |||
| Loans receivable | 13,563,213 | 13,120,225 | 3 | % | 12,276,007 | 10 | % | |||
| Allowance for credit losses | (206,741) | (179,849) | (15) | % | (94,144) | (120) | % | |||
| Net loans receivable | 13,356,472 | 12,940,376 | 3 | % | 12,181,863 | 10 | % | |||
| Accrued interest receivable | 59,430 | 57,989 | 2 | % | 30,772 | 93 | % | |||
| Premises and equipment, net | 48,409 | 49,552 | (2) | % | 52,012 | (7) | % | |||
| Bank owned life insurance | 76,765 | 77,388 | (1) | % | 76,339 | 1 | % | |||
| Goodwill | 464,450 | 464,450 | — | % | 464,450 | — | % | |||
| Servicing assets | 12,692 | 13,718 | (7) | % | 16,417 | (23) | % | |||
| Other intangible assets, net | 9,708 | 10,239 | (5) | % | 11,833 | (18) | % | |||
| Other assets | 319,214 | 323,456 | (1) | % | 267,270 | 19 | % | |||
| Total assets | $ | 17,106,664 | $ | 16,733,767 | 2 | % | $ | 15,667,440 | 9 | % |
| Liabilities | ||||||||||
| Deposits | $ | 14,333,912 | $ | 14,008,356 | 2 | % | $ | 12,527,364 | 14 | % |
| FHLB advances | 250,000 | 200,000 | 25 | % | 625,000 | (60) | % | |||
| Convertible notes, net | 204,565 | 203,270 | 1 | % | 199,458 | 3 | % | |||
| Subordinated debentures | 104,178 | 103,889 | — | % | 103,035 | 1 | % | |||
| Accrued interest payable | 14,706 | 21,991 | (33) | % | 33,810 | (57) | % | |||
| Other liabilities | 145,558 | 155,700 | (7) | % | 142,762 | 2 | % | |||
| Total liabilities | 15,052,919 | 14,693,206 | 2 | % | 13,631,429 | 10 | % | |||
| Stockholders’ Equity | ||||||||||
| Common stock, $0.001 par value | 136 | 136 | — | % | 136 | — | % | |||
| Capital surplus | 1,434,916 | 1,432,773 | — | % | 1,428,066 | — | % | |||
| Retained earnings | 785,940 | 774,970 | 1 | % | 762,480 | 3 | % | |||
| Treasury stock, at cost | (200,000) | (200,000) | — | % | (163,820) | (22) | % | |||
| Accumulated other comprehensive gain, net | 32,753 | 32,682 | — | % | 9,149 | 258 | % | |||
| Total stockholders’ equity | 2,053,745 | 2,040,561 | 1 | % | 2,036,011 | 1 | % | |||
| Total liabilities and stockholders’ equity | $ | 17,106,664 | $ | 16,733,767 | 2 | % | $ | 15,667,440 | 9 | % |
| Common stock shares - authorized | 150,000,000 | 150,000,000 | 150,000,000 | |||||||
| Common stock shares - outstanding | 123,264,864 | 123,260,760 | 125,756,543 | |||||||
| Treasury stock shares | 12,661,581 | 12,661,581 | 9,945,547 |
Table Page 1
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2020 | 9/30/2020 | % change | 12/31/2019 | % change | 12/31/2020 | 12/31/2019 | % change | |||||||||
| Interest and fees on loans | $ | 132,117 | $ | 134,430 | (2) | % | $ | 152,795 | (14) | % | $ | 554,967 | $ | 627,673 | (12) | % |
| Interest on securities | 9,014 | 9,848 | (8) | % | 10,737 | (16) | % | 39,362 | 46,295 | (15) | % | |||||
| Interest on federal funds sold and other investments | 598 | 942 | (37) | % | 2,241 | (73) | % | 4,549 | 10,818 | (58) | % | |||||
| Total interest income | 141,729 | 145,220 | (2) | % | 165,773 | (15) | % | 598,878 | 684,786 | (13) | % | |||||
| Interest on deposits | 16,934 | 22,871 | (26) | % | 45,428 | (63) | % | 110,369 | 190,158 | (42) | % | |||||
| Interest on other borrowings and convertible notes | 4,039 | 4,712 | (14) | % | 6,837 | (41) | % | 21,011 | 28,033 | (25) | % | |||||
| Total interest expense | 20,973 | 27,583 | (24) | % | 52,265 | (60) | % | 131,380 | 218,191 | (40) | % | |||||
| Net interest income before provision for credit losses | 120,756 | 117,637 | 3 | % | 113,508 | 6 | % | 467,498 | 466,595 | — | % | |||||
| Provision for credit losses | 27,500 | 22,000 | 25 | % | 1,000 | 2,650 | % | 95,000 | 7,300 | 1,201 | % | |||||
| Net interest income after provision for credit losses | 93,256 | 95,637 | (2) | % | 112,508 | (17) | % | 372,498 | 459,295 | (19) | % | |||||
| Service fees on deposit accounts | 2,991 | 2,736 | 9 | % | 4,510 | (34) | % | 12,443 | 17,933 | (31) | % | |||||
| International service fees | 696 | 987 | (29) | % | 780 | (11) | % | 3,139 | 3,926 | (20) | % | |||||
| Loan servicing fees, net | 566 | 772 | (27) | % | 660 | (14) | % | 2,809 | 2,316 | 21 | % | |||||
| Wire transfer fees | 867 | 892 | (3) | % | 1,100 | (21) | % | 3,577 | 4,558 | (22) | % | |||||
| Net gains on sales of other loans | 1,618 | 2,853 | (43) | % | 1,876 | (14) | % | 8,004 | 4,487 | 78 | % | |||||
| Net gains on sales of securities available for sale | — | 7,531 | (100) | % | — | — | % | 7,531 | 282 | 2,571 | % | |||||
| Other income and fees | 4,677 | 1,742 | 168 | % | 4,053 | 15 | % | 15,929 | 16,181 | (2) | % | |||||
| Total noninterest income | 11,415 | 17,513 | (35) | % | 12,979 | (12) | % | 53,432 | 49,683 | 8 | % | |||||
| Salaries and employee benefits | 40,911 | 40,659 | 1 | % | 39,841 | 3 | % | 162,922 | 161,174 | 1 | % | |||||
| Occupancy | 7,200 | 7,264 | (1) | % | 7,516 | (4) | % | 28,917 | 30,735 | (6) | % | |||||
| Furniture and equipment | 4,122 | 4,513 | (9) | % | 4,260 | (3) | % | 17,548 | 15,583 | 13 | % | |||||
| Advertising and marketing | 1,695 | 1,601 | 6 | % | 2,462 | (31) | % | 6,284 | 9,146 | (31) | % | |||||
| Data processing and communications | 2,235 | 2,204 | 1 | % | 2,416 | (7) | % | 9,344 | 10,780 | (13) | % | |||||
| Professional fees | 1,847 | 1,513 | 22 | % | 5,948 | (69) | % | 8,170 | 22,528 | (64) | % | |||||
| FDIC assessment | 1,166 | 1,167 | — | % | 772 | 51 | % | 5,544 | 3,882 | 43 | % | |||||
| Credit related expenses | 2,001 | 1,793 | 12 | % | 1,717 | 17 | % | 6,817 | 4,975 | 37 | % | |||||
| OREO (income) expense, net | (86) | 1,770 | N/A | (122) | (30) | % | 3,865 | (934) | N/A | |||||||
| FHLB prepayment fee | — | 3,584 | (100) | % | — | — | % | 3,584 | — | 100 | % | |||||
| Branch restructuring costs | 2,367 | — | 100 | % | — | 100 | % | 2,367 | — | 100 | % | |||||
| Other | 7,605 | 7,338 | 4 | % | 5,619 | 35 | % | 28,277 | 24,759 | 14 | % | |||||
| Total noninterest expense | 71,063 | 73,406 | (3) | % | 70,429 | 1 | % | 283,639 | 282,628 | — | % | |||||
| Income before income taxes | 33,608 | 39,744 | (15) | % | 55,058 | (39) | % | 142,291 | 226,350 | (37) | % | |||||
| Income tax provision | 5,289 | 9,254 | (43) | % | 12,049 | (56) | % | 30,776 | 55,310 | (44) | % | |||||
| Net income | $ | 28,319 | $ | 30,490 | (7) | % | $ | 43,009 | (34) | % | $ | 111,515 | $ | 171,040 | (35) | % |
| Earnings per Common Share: | ||||||||||||||||
| Basic | $ | 0.23 | $ | 0.25 | $ | 0.34 | $ | 0.90 | $ | 1.35 | ||||||
| Diluted | $ | 0.23 | $ | 0.25 | $ | 0.34 | $ | 0.90 | $ | 1.35 | ||||||
| Average Shares Outstanding: | ||||||||||||||||
| Basic | 123,264,172 | 123,251,336 | 126,410,924 | 123,501,401 | 126,598,564 | |||||||||||
| Diluted | 123,874,229 | 123,536,765 | 126,835,273 | 123,889,343 | 126,875,320 |
Table Page 2
Hope Bancorp, Inc.
Selected Financial Data
Unaudited
| At or for the Three Months Ended <br>(Annualized) | At or for the Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Profitability measures: | 12/31/2020 | 9/30/2020 | 12/31/2019 | 12/31/2020 | 12/31/2019 | ||||||||||
| ROA | 0.67 | % | 0.72 | % | 1.13 | % | 0.68 | % | 1.12 | % | |||||
| ROE | 5.54 | % | 5.98 | % | 8.46 | % | 5.49 | % | 8.63 | % | |||||
| ROTCE (1) | 7.21 | % | 7.80 | % | 11.04 | % | 7.16 | % | 11.37 | % | |||||
| Net interest margin | 3.02 | % | 2.91 | % | 3.16 | % | 3.00 | % | 3.27 | % | |||||
| Efficiency ratio | 53.77 | % | 54.31 | % | 55.68 | % | 54.45 | % | 54.74 | % | |||||
| Noninterest expense / average assets | 1.69 | % | 1.73 | % | 1.85 | % | 1.72 | % | 1.86 | % | |||||
| 1 Average tangible equity is calculated by subtracting average goodwill and average core deposit intangibles assets from average stockholders’ equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position. | |||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| Pre-tax acquisition accounting adjustments | 12/31/2020 | 9/30/2020 | 12/31/2019 | 12/31/2020 | 12/31/2019 | ||||||||||
| Accretion on acquired non-impaired loans | $ | 452 | $ | 747 | $ | 1,945 | $ | 2,916 | $ | 7,956 | |||||
| Accretion on acquired credit deteriorated/purchased credit impaired loans | 3,064 | 4,584 | 5,958 | 20,143 | 23,874 | ||||||||||
| Amortization of premium on low income housing tax credits | (71) | (71) | (76) | (283) | (303) | ||||||||||
| Amortization of premium on acquired FHLB borrowings | — | — | — | — | 1,280 | ||||||||||
| Accretion of discount on acquired subordinated debt | (289) | (287) | (281) | (1,143) | (1,107) | ||||||||||
| Amortization of core deposit intangibles | (531) | (531) | (557) | (2,125) | (2,228) | ||||||||||
| Total acquisition accounting adjustments | $ | 2,625 | $ | 4,442 | $ | 6,989 | $ | 19,508 | $ | 29,472 |
Table Page 3
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2020 | 9/30/2020 | 12/31/2019 | ||||||||||||||||
| 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 | $ | 13,046,443 | $ | 132,117 | 4.03 | % | $ | 12,728,558 | $ | 134,430 | 4.20 | % | $ | 12,036,477 | $ | 152,795 | 5.04 | % |
| Securities available for sale | 2,123,025 | 9,014 | 1.69 | % | 2,010,907 | 9,848 | 1.95 | % | 1,755,887 | 10,737 | 2.43 | % | ||||||
| FHLB stock and other investments | 749,281 | 598 | 0.32 | % | 1,342,641 | 942 | 0.28 | % | 463,615 | 2,241 | 1.92 | % | ||||||
| Total interest earning assets | $ | 15,918,749 | $ | 141,729 | 3.54 | % | $ | 16,082,106 | $ | 145,220 | 3.59 | % | $ | 14,255,979 | $ | 165,773 | 4.61 | % |
| INTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Demand, interest bearing | $ | 4,910,649 | $ | 5,541 | 0.45 | % | $ | 4,895,101 | $ | 6,546 | 0.53 | % | $ | 3,682,300 | $ | 14,924 | 1.61 | % |
| Savings | 305,341 | 898 | 1.17 | % | 302,882 | 907 | 1.19 | % | 265,008 | 748 | 1.12 | % | ||||||
| Time deposits | 4,240,500 | 10,495 | 0.98 | % | 4,703,640 | 15,418 | 1.30 | % | 5,148,092 | 29,756 | 2.29 | % | ||||||
| Total interest bearing deposits | 9,456,490 | 16,934 | 0.71 | % | 9,901,623 | 22,871 | 0.92 | % | 9,095,400 | 45,428 | 1.98 | % | ||||||
| FHLB advances | 204,900 | 657 | 1.28 | % | 353,587 | 1,323 | 1.49 | % | 608,052 | 2,921 | 1.91 | % | ||||||
| Convertible notes, net | 203,807 | 2,383 | 4.58 | % | 202,470 | 2,370 | 4.58 | % | 198,669 | 2,334 | 4.60 | % | ||||||
| Subordinated debentures | 100,118 | 999 | 3.90 | % | 99,819 | 1,019 | 3.99 | % | 98,972 | 1,582 | 6.25 | % | ||||||
| Total interest bearing liabilities | 9,965,315 | $ | 20,973 | 0.84 | % | 10,557,499 | $ | 27,583 | 1.04 | % | 10,001,093 | $ | 52,265 | 2.07 | % | |||
| Noninterest bearing demand deposits | 4,637,584 | 4,239,108 | 2,999,048 | |||||||||||||||
| Total funding liabilities/cost of funds | $ | 14,602,899 | 0.57 | % | $ | 14,796,607 | 0.74 | % | $ | 13,000,141 | 1.60 | % | ||||||
| Net interest income/net interest spread | $ | 120,756 | 2.70 | % | $ | 117,637 | 2.55 | % | $ | 113,508 | 2.54 | % | ||||||
| Net interest margin | 3.02 | % | 2.91 | % | 3.16 | % | ||||||||||||
| Cost of deposits: | ||||||||||||||||||
| Noninterest bearing demand deposits | $ | 4,637,584 | $ | — | — | % | $ | 4,239,108 | $ | — | — | % | $ | 2,999,048 | $ | — | — | % |
| Interest bearing deposits | 9,456,490 | 16,934 | 0.71 | % | 9,901,623 | 22,871 | 0.92 | % | 9,095,400 | 45,428 | 1.98 | % | ||||||
| Total deposits | $ | 14,094,074 | $ | 16,934 | 0.48 | % | $ | 14,140,731 | $ | 22,871 | 0.64 | % | $ | 12,094,448 | $ | 45,428 | 1.49 | % |
Table Page 4
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Twelve Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2020 | 12/31/2019 | |||||||||||
| Interest | Interest | |||||||||||
| Average | Income/ | Average | Average | Income/ | Average | |||||||
| Balance | Expense | Yield/Cost | Balance | Expense | Yield/Cost | |||||||
| INTEREST EARNING ASSETS: | ||||||||||||
| Loans, including loans held for sale | $ | 12,698,523 | $ | 554,967 | 4.37 | % | $ | 11,998,675 | $ | 627,673 | 5.23 | % |
| Securities available for sale | 1,899,948 | 39,362 | 2.07 | % | 1,796,412 | 46,295 | 2.58 | % | ||||
| FHLB stock and other investments | 982,419 | 4,549 | 0.46 | % | 453,452 | 10,818 | 2.39 | % | ||||
| Total interest earning assets | $ | 15,580,890 | $ | 598,878 | 3.84 | % | $ | 14,248,539 | $ | 684,786 | 4.81 | % |
| INTEREST BEARING LIABILITIES: | ||||||||||||
| Deposits: | ||||||||||||
| Demand, interest bearing | $ | 4,729,438 | $ | 34,529 | 0.73 | % | $ | 3,319,556 | $ | 57,731 | 1.74 | % |
| Savings | 291,655 | 3,475 | 1.19 | % | 241,968 | 2,596 | 1.07 | % | ||||
| Time deposits | 4,698,503 | 72,365 | 1.54 | % | 5,556,983 | 129,831 | 2.34 | % | ||||
| Total interest bearing deposits | 9,719,596 | 110,369 | 1.14 | % | 9,118,507 | 190,158 | 2.09 | % | ||||
| FHLB advances | 435,836 | 6,865 | 1.58 | % | 688,652 | 12,031 | 1.75 | % | ||||
| Convertible notes, net | 201,859 | 9,457 | 4.61 | % | 196,835 | 9,264 | 4.64 | % | ||||
| Subordinated debentures | 99,682 | 4,689 | 4.63 | % | 98,551 | 6,738 | 6.74 | % | ||||
| Total interest bearing liabilities | 10,456,973 | $ | 131,380 | 1.26 | % | 10,102,545 | $ | 218,191 | 2.16 | % | ||
| Noninterest bearing demand deposits | 3,840,935 | 2,948,212 | ||||||||||
| Total funding liabilities/cost of funds | $ | 14,297,908 | 0.92 | % | $ | 13,050,757 | 1.67 | % | ||||
| Net interest income/net interest spread | $ | 467,498 | 2.58 | % | $ | 466,595 | 2.65 | % | ||||
| Net interest margin | 3.00 | % | 3.27 | % | ||||||||
| Cost of deposits: | ||||||||||||
| Noninterest bearing demand deposits | $ | 3,840,935 | $ | — | — | % | $ | 2,948,212 | $ | — | — | % |
| Interest bearing deposits | 9,719,596 | 110,369 | 1.14 | % | 9,118,507 | 190,158 | 2.09 | % | ||||
| Total deposits | $ | 13,560,531 | $ | 110,369 | 0.81 | % | $ | 12,066,719 | $ | 190,158 | 1.58 | % |
Table Page 5
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AVERAGE BALANCES: | 12/31/2020 | 9/30/2020 | % change | 12/31/2019 | % change | 12/31/2020 | 12/31/2019 | % change | |||||||||||
| Loans receivable, including loans held for sale | $ | 13,046,443 | $ | 12,728,558 | 2 | % | $ | 12,036,477 | 8 | % | $ | 12,698,523 | $ | 11,998,675 | 6 | % | |||
| Investments | 2,872,306 | 3,353,548 | (14) | % | 2,219,502 | 29 | % | 2,882,367 | 2,249,864 | 28 | % | ||||||||
| Interest earning assets | 15,918,749 | 16,082,106 | (1) | % | 14,255,979 | 12 | % | 15,580,890 | 14,248,539 | 9 | % | ||||||||
| Total assets | 16,824,700 | 17,020,795 | (1) | % | 15,228,488 | 10 | % | 16,515,102 | 15,214,412 | 9 | % | ||||||||
| Interest bearing deposits | 9,456,490 | 9,901,623 | (4) | % | 9,095,400 | 4 | % | 9,719,596 | 9,118,507 | 7 | % | ||||||||
| Interest bearing liabilities | 9,965,315 | 10,557,499 | (6) | % | 10,001,093 | — | % | 10,456,973 | 10,102,545 | 4 | % | ||||||||
| Noninterest bearing demand deposits | 4,637,584 | 4,239,108 | 9 | % | 2,999,048 | 55 | % | 3,840,935 | 2,948,212 | 30 | % | ||||||||
| Stockholders’ equity | 2,045,959 | 2,039,555 | — | % | 2,034,231 | 1 | % | 2,032,570 | 1,981,811 | 3 | % | ||||||||
| Net interest earning assets | 5,953,434 | 5,524,607 | 8 | % | 4,254,886 | 40 | % | 5,123,917 | 4,145,994 | 24 | % | ||||||||
| LOAN PORTFOLIO COMPOSITION: | 12/31/2020 | 9/30/2020 | % change | 12/31/2019 | % change | ||||||||||||||
| Commercial loans | $ | 4,157,787 | $ | 3,700,020 | 12 | % | $ | 2,719,818 | 53 | % | |||||||||
| Real estate loans | 8,772,134 | 8,713,536 | 1 | % | 8,666,901 | 1 | % | ||||||||||||
| Consumer and other loans | 633,292 | 706,669 | (10) | % | 889,288 | (29) | % | ||||||||||||
| Loans, net of deferred loan fees and costs | 13,563,213 | 13,120,225 | 3 | % | 12,276,007 | 10 | % | ||||||||||||
| Allowance for credit losses | (206,741) | (179,849) | (15) | % | (94,144) | (120) | % | ||||||||||||
| Loans receivable, net | $ | 13,356,472 | $ | 12,940,376 | 3 | % | $ | 12,181,863 | 10 | % | |||||||||
| REAL ESTATE LOANS BY PROPERTY TYPE: | 12/31/2020 | 9/30/2020 | % change | 12/31/2019 | % change | ||||||||||||||
| Retail buildings | $ | 2,293,396 | $ | 2,311,516 | (1) | % | $ | 2,298,872 | — | % | |||||||||
| Hotels/motels | 1,634,287 | 1,675,960 | (2) | % | 1,709,189 | (4) | % | ||||||||||||
| Gas stations/car washes | 892,110 | 824,378 | 8 | % | 844,081 | 6 | % | ||||||||||||
| Mixed-use facilities | 750,867 | 754,096 | — | % | 785,882 | (4) | % | ||||||||||||
| Warehouses | 1,091,389 | 1,022,657 | 7 | % | 1,030,876 | 6 | % | ||||||||||||
| Multifamily | 518,498 | 518,295 | — | % | 465,397 | 11 | % | ||||||||||||
| Other | 1,591,587 | 1,606,634 | (1) | % | 1,532,604 | 4 | % | ||||||||||||
| Total | $ | 8,772,134 | $ | 8,713,536 | 1 | % | $ | 8,666,901 | 1 | % | |||||||||
| DEPOSIT COMPOSITION: | 12/31/2020 | 9/30/2020 | % change | 12/31/2019 | % change | ||||||||||||||
| Noninterest bearing demand deposits | $ | 4,814,254 | $ | 4,488,529 | 7 | % | $ | 3,108,687 | 55 | % | |||||||||
| Money market and other | 5,232,413 | 4,763,893 | 10 | % | 3,985,556 | 31 | % | ||||||||||||
| Saving deposits | 300,770 | 308,943 | (3) | % | 274,151 | 10 | % | ||||||||||||
| Time deposits | 3,986,475 | 4,446,991 | (10) | % | 5,158,970 | (23) | % | ||||||||||||
| Total deposit balances | $ | 14,333,912 | $ | 14,008,356 | 2 | % | $ | 12,527,364 | 14 | % | |||||||||
| DEPOSIT COMPOSITION (%): | 12/31/2020 | 9/30/2020 | 12/31/2019 | ||||||||||||||||
| Noninterest bearing demand deposits | 33.6 | % | 32.1 | % | 24.8 | % | |||||||||||||
| Money market and other | 36.5 | % | 34.0 | % | 31.8 | % | |||||||||||||
| Saving deposits | 2.1 | % | 2.2 | % | 2.2 | % | |||||||||||||
| Time deposits | 27.8 | % | 31.7 | % | 41.2 | % | |||||||||||||
| Total deposit balances | 100.0 | % | 100.0 | % | 100.0 | % |
Table Page 6
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)
| CAPITAL RATIOS: | 12/31/2020 | 9/30/2020 | 12/31/2019 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 2,053,745 | $ | 2,040,561 | $ | 2,036,011 | |||||||||||||||
| Common equity tier 1 ratio | 10.94 | % | 11.36 | % | 11.76 | % | |||||||||||||||
| Tier 1 risk-based capital ratio | 11.64 | % | 12.09 | % | 12.51 | % | |||||||||||||||
| Total risk-based capital ratio | 12.87 | % | 13.19 | % | 13.23 | % | |||||||||||||||
| Tier 1 leverage ratio | 10.22 | % | 10.02 | % | 11.22 | % | |||||||||||||||
| Total risk weighted assets | $ | 14,341,456 | $ | 13,691,823 | $ | 13,208,299 | |||||||||||||||
| Book value per common share | $ | 16.66 | $ | 16.55 | $ | 16.19 | |||||||||||||||
| Tangible common equity to tangible assets 1 | 9.50 | % | 9.63 | % | 10.27 | % | |||||||||||||||
| Tangible common equity per share 1 | $ | 12.81 | $ | 12.70 | $ | 12.40 | |||||||||||||||
| 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 | Twelve Months Ended | ||||||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES CHANGES: | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | 12/31/2020 | 12/31/2019 | ||||||||||||||
| Balance at beginning of period | $ | 179,849 | $ | 161,771 | $ | 144,923 | $ | 94,144 | $ | 93,882 | $ | 94,144 | $ | 92,557 | |||||||
| CECL day 1 adoption impact | — | — | — | 26,200 | — | 26,200 | — | ||||||||||||||
| Provision for credit losses | 27,500 | 22,000 | 17,500 | 28,000 | 1,000 | 95,000 | 7,300 | ||||||||||||||
| Recoveries | 2,207 | 2,428 | 252 | 2,536 | 939 | 7,423 | 3,736 | ||||||||||||||
| Charge offs | (2,815) | (6,350) | (904) | (5,957) | (1,677) | (16,026) | (8,109) | ||||||||||||||
| PCI allowance adjustment | — | — | — | — | — | — | (1,340) | ||||||||||||||
| Balance at end of period | $ | 206,741 | $ | 179,849 | $ | 161,771 | $ | 144,923 | $ | 94,144 | $ | 206,741 | $ | 94,144 | |||||||
| Net charge offs/average loans receivable (annualized) | 0.02 | % | 0.12 | % | 0.02 | % | 0.11 | % | 0.02 | % | 0.07 | % | 0.04 | % | |||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
| NET CHARGE OFFS (RECOVERIES) BY TYPE: | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | 12/31/2020 | 12/31/2019 | ||||||||||||||
| Real estate loans | $ | (726) | $ | 5,154 | $ | 148 | $ | 2,230 | $ | 203 | $ | 6,806 | $ | (301) | |||||||
| Commercial loans | 1,167 | (1,451) | 240 | 676 | 245 | 632 | 3,490 | ||||||||||||||
| Consumer loans | 167 | 219 | 264 | 515 | 290 | 1,165 | 1,184 | ||||||||||||||
| Total net charge offs | $ | 608 | $ | 3,922 | $ | 652 | $ | 3,421 | $ | 738 | $ | 8,603 | $ | 4,373 |
Table Page 7
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| NONPERFORMING ASSETS: | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans on nonaccrual status 1 | 85,238 | $ | 69,205 | $ | 82,137 | $ | 72,639 | $ | 54,785 | |||||
| Delinquent loans 90 days or more on accrual status | 1,537 | 430 | 387 | 7,547 | ||||||||||
| Accruing troubled debt restructured loans | 35,429 | 44,026 | 43,789 | 35,709 | ||||||||||
| Total nonperforming loans | 106,171 | 126,593 | 116,815 | 98,041 | ||||||||||
| Other real estate owned | 18,410 | 20,983 | 23,039 | 24,091 | ||||||||||
| Total nonperforming assets | 143,327 | $ | 124,581 | $ | 147,576 | $ | 139,854 | $ | 122,132 | |||||
| Nonperforming assets/total assets | % | 0.74 | % | 0.86 | % | 0.87 | % | 0.78 | % | |||||
| Nonperforming assets/loans receivable & OREO | % | 0.95 | % | 1.14 | % | 1.11 | % | 0.99 | % | |||||
| Nonperforming assets/total capital | % | 6.11 | % | 7.27 | % | 6.93 | % | 6.00 | % | |||||
| Nonperforming loans/loans receivable | % | 0.81 | % | 0.98 | % | 0.93 | % | 0.80 | % | |||||
| Nonaccrual loans/loans receivable | % | 0.53 | % | 0.64 | % | 0.58 | % | 0.45 | % | |||||
| Allowance for credit losses/loans receivable | % | 1.37 | % | 1.26 | % | 1.15 | % | 0.77 | % | |||||
| Allowance for credit losses/nonaccrual loans | % | 259.88 | % | 196.95 | % | 199.51 | % | 171.84 | % | |||||
| Allowance for credit losses/nonperforming loans | % | 169.40 | % | 127.79 | % | 124.06 | % | 96.03 | % | |||||
| Allowance for credit losses/nonperforming assets | % | 144.36 | % | 109.62 | % | 103.62 | % | 77.08 | % | |||||
| 1 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling 26.5 million, 26.2 million, 30.3 million, 28.8 million, and 28.1 million, at December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020, and December 31, 2019, respectively. | ||||||||||||||
| NONACCRUAL LOANS BY TYPE: | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | ||||||||||
| Real estate loans | 67,450 | $ | 51,739 | $ | 64,060 | $ | 56,787 | $ | 40,935 | |||||
| Commercial loans | 13,022 | 12,079 | 12,747 | 10,893 | ||||||||||
| Consumer loans | 4,444 | 5,998 | 3,105 | 2,957 | ||||||||||
| Total nonaccrual loans | 85,238 | $ | 69,205 | $ | 82,137 | $ | 72,639 | $ | 54,785 | |||||
| BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS: | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | ||||||||||
| Retail buildings | 5,408 | $ | 5,451 | $ | 5,526 | $ | 5,014 | $ | 4,215 | |||||
| Gas stations/car washes | 224 | 1,789 | 1,675 | — | ||||||||||
| Mixed-use facilities | 4,323 | 3,583 | 3,157 | 3,175 | ||||||||||
| Warehouses | 7,320 | 13,433 | 13,381 | 10,381 | ||||||||||
| Other 2 | 18,111 | 19,695 | 20,562 | 17,938 | ||||||||||
| Total | 37,354 | $ | 35,429 | $ | 44,026 | $ | 43,789 | $ | 35,709 | |||||
| 2 Includes commercial business, consumer and other loans |
All values are in US Dollars.
Table Page 8
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE: | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 - 59 days | $ | 11,347 | $ | 5,962 | $ | 18,857 | $ | 37,866 | $ | 14,433 |
| 60 - 89 days | 16,826 | 58,065 | 29,975 | 2,605 | 4,712 | |||||
| Total | $ | 28,173 | $ | 64,027 | $ | 48,832 | $ | 40,471 | $ | 19,145 |
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE: | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | |||||
| Real estate loans | $ | 15,689 | $ | 60,510 | $ | 27,245 | $ | 23,753 | $ | 7,689 |
| Commercial loans | 3,393 | 624 | 5,987 | 4,583 | 692 | |||||
| Consumer loans | 9,091 | 2,893 | 15,600 | 12,135 | 10,764 | |||||
| Total | $ | 28,173 | $ | 64,027 | $ | 48,832 | $ | 40,471 | $ | 19,145 |
| CRITICIZED LOANS: | 12/31/2020 | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | |||||
| Special mention | $ | 184,941 | $ | 153,388 | $ | 127,149 | $ | 122,279 | $ | 141,452 |
| Substandard | 366,556 | 311,902 | 299,357 | 278,771 | 259,278 | |||||
| Doubtful/Loss | 1 | 6,640 | 11 | 12 | 13 | |||||
| Total criticized loans | $ | 551,498 | $ | 471,930 | $ | 426,517 | $ | 401,062 | $ | 400,743 |
Table Page 9
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| 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 | Twelve Months Ended | ||||||||||||||
| 12/31/2020 | 9/30/2020 | 12/31/2019 | 12/31/2020 | 12/31/2019 | |||||||||||
| RETURN ON AVERAGE TANGIBLE COMMON EQUITY | |||||||||||||||
| Average stockholders’ equity | $ | 2,045,959 | $ | 2,039,555 | $ | 2,034,231 | $ | 2,032,570 | $ | 1,981,811 | |||||
| Less: Goodwill and core deposit intangible assets, net | (474,467) | (475,010) | (476,596) | (475,263) | (477,444) | ||||||||||
| Average tangible common equity | $ | 1,571,492 | $ | 1,564,545 | $ | 1,557,635 | $ | 1,557,307 | $ | 1,504,367 | |||||
| Net Income | $ | 28,319 | $ | 30,490 | $ | 43,009 | $ | 111,515 | $ | 171,040 | |||||
| Return on average tangible common equity (annualized) | 7.21 | % | 7.80 | % | 11.04 | % | 7.16 | % | 11.37 | % | |||||
| TANGIBLE COMMON EQUITY | 12/31/2020 | 9/30/2020 | 12/31/2019 | ||||||||||||
| Total stockholders’ equity | $ | 2,053,745 | $ | 2,040,561 | $ | 2,036,011 | |||||||||
| Less: Goodwill and core deposit intangible assets, net | (474,158) | (474,689) | (476,283) | ||||||||||||
| Tangible common equity | $ | 1,579,587 | $ | 1,565,872 | $ | 1,559,728 | |||||||||
| Total assets | $ | 17,106,664 | $ | 16,733,767 | $ | 15,667,440 | |||||||||
| Less: Goodwill and core deposit intangible assets, net | (474,158) | (474,689) | (476,283) | ||||||||||||
| Tangible assets | $ | 16,632,506 | $ | 16,259,078 | $ | 15,191,157 | |||||||||
| Common shares outstanding | 123,264,864 | 123,260,760 | 125,756,543 | ||||||||||||
| Tangible common equity to tangible assets | 9.50 | % | 9.63 | % | 10.27 | % | |||||||||
| Tangible common equity per share | $ | 12.81 | $ | 12.70 | $ | 12.40 | |||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| 12/31/2020 | 9/30/2020 | 12/31/2019 | 12/31/2020 | 12/31/2019 | |||||||||||
| PRE-TAX PRE-PROVISION INCOME | |||||||||||||||
| Net income | $ | 28,319 | $ | 30,490 | $ | 43,009 | $ | 111,515 | $ | 171,040 | |||||
| Add back - tax provision | 5,289 | 9,254 | 12,049 | 30,776 | 55,310 | ||||||||||
| Add back - provision for credit losses | 27,500 | 22,000 | 1,000 | 95,000 | 7,300 | ||||||||||
| Pre-tax pre-provision income | $ | 61,108 | $ | 61,744 | $ | 56,058 | $ | 237,291 | $ | 233,650 |
Table Page 10
Document
News Release
HOPE BANCORP DECLARES QUARTERLY CASH DIVIDEND OF $0.14 PER SHARE
LOS ANGELES - January 26, 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 February 19, 2021 to all stockholders of record as of the close of business on February 5, 2021.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Wednesday, January 27, 2021 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its fourth quarter ended December 31, 2020 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 February 3, 2021, replay access code 10150976.
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 $17.1 billion in total assets as of December 31, 2020. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 58 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>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 |
|---|
#
hope-2020earningsconfere
1 2020 Fourth Quarter Earnings Conference Call Wednesday, January 27, 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 Q4 2020 Financial Highlights Earnings & Profitability Loan Production Asset Quality Net interest income before provision for credit loss increased 3% to $120.8 million from $117.6 million for 3Q20, largely reflecting benefit of lower cost of deposits Net interest margin expanded 11bps Q-o-Q benefiting from continued reduction in deposit costs and deployment of excess liquidity Net income totaled $28.3 million, or $0.23 per diluted common share, compared with $30.5 million, or $0.25 per diluted common share, for 3Q20 Provision for credit losses of $27.5 million vs. $22.0 million for 3Q20, largely reflecting additional reserve build for hospitality portfolio Noninterest expenses decreased 3% Q-o-Q and decreased as a percentage of average asset to 1.69% from $1.73% for 3Q20 New loan originations funded of $844 million in 4Q20, the highest quarterly production of 2020 Well diversified mix of originations with C&I representing 52%, CRE 40% and Consumer 8% Loans receivable increased 3%, or 13.5% annualized Nonperforming loans increased $17 million Q-o-Q, reflecting migration of 2 construction loans near completion, but exhibiting weakened conditions due in part to the pandemic Criticized and classified loans increased $80 million Q-o-Q largely reflecting proactive identification of deteriorating financials of previously modified loans, as well as a $20 million relationship which the bank is exiting due to non-financial reasons Net charge offs were minimal at $608,000, or 0.02% of average loans receivable annualized Deposits Noninterest bearing deposits increased $326 million Q-o-Q and increased to 34% of total deposits from 32% at 9/30/2020 MMAs and NOW accounts increased by $469 million Q-o-Q and increased to 37% of total deposits from 34% at 9/30/2020 $461 million reduction in time deposits, or 10% Q-o-Q, continues favorable mix shift to lower-cost deposits Cost of deposits decreased for the 5th consecutive quarter, down 16bps Q-o-Q Net Income $28.3MM Diluted EPS $0.23 Record Gross Loans $13.56B Record Total Deposits $14.33B
4 $513 $348 $216 $244 $340 $266 $234 $61 $433 $439 $69 $42 $74 $105 $65 4.37% 3.98% 3.39%1 2.88% 3.27% 4Q19 1Q20 2Q20 3Q20 4Q20 New Loan Originations Funded CRE PPP C&I Consumer Average Rate Loan Production & Portfolio Trends New loan originations funded of $844 million resulted in 3.4% growth in loans receivable Q-o-Q, or 13.5% annualized New loan originations included $107 million funded for new warehouse mortgage lines Aggregate payoffs and paydowns totaled $619 million vs. $420 million in Q3 2020 Well diversified mix of loan originations 40% CRE / 52% C&I / 8% Consumer Traditional SBA loan originations of $25.5 million, including $17.3 million in 7(a) production Residential mortgage originations of $62.5 million vs. $102.3 million in Q3 2020 Strong C&I originations throughout 2020 resulted in more diversified loan portfolio CRE loans decreased to 65% of total portfolio from 71% at 12/31/19 C&I loans increased to 30% of total portfolio from 22% at 12/31/19 Consumer loans decreased to 5% of total loans from 7% at 12/31/1967% 28% 5% 65% 30% 5% 12/31/20209/30/2020 Loan Portfolio Composition ($ millions) $782.4 $844.2$847.6 $832.0 $624.5 71% 22% 7% 12/31/2019 1 Including fees on PPP loans, average rate on new loan originations funded for 2Q20 was 2.01% $480
5 Phase II COVID-19 Loan Modifications • Phase II modifications granted as of 12/31/2020 totaled $1.79 billion, or 13.2% of the total loan portfolio • Additional documentation, covenants, and in some cases collateral required to qualify for Phase II modifications ($ millions) (As of December 31, 2020) Total Loans Amount Booked % of Respective Loan Portfolio % of All Modified Loans Modified Loans All Loans DCR LTV DCR LTV Real Estate $ 8,772 $ 1,606 18.3% 89.9% 1.61 54.1% 1.94 50.2% Retail $ 2,293 $ 354 15.4% 19.8% 1.50 54.8% 1.75 50.1% Hotel/Motel $ 1,634 $ 817 50.0% 45.7% 1.74 54.5% 1.96 52.1% Mixed Use $ 751 $ 124 16.5% 6.9% 1.26 52.6% 1.69 47.2% Industrial & Warehouse $ 1,091 $ 81 7.4% 4.5% 1.33 56.6% 2.15 52.4% Other Real Estate $ 3,003 $ 230 7.7% 12.9% 1.62 50.4% 2.09 49.1% C&I $ 4,158 $ 58 1.39% 3.2% Consumer (predominantly residential mortgage) $ 633 $ 122 19.3% 6.8% Total $ 13,563 $ 1,786 13.2% 100.0%
6 Hotel/Motel CRE Property Characteristics • 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 • 50%, or $817 million, of hotel/motel portfolio modified under CARES Act in Phase II, which represents a decrease from 61% in Phase I COVID-19 Impacted Portfolios - Hotel/Motel CRE - $2.4 million 52.1% 1.96 Average Loan Size Weighted Average LTV Weighted Average DCR 9M Hybrid, 25.22% 9M Int Only, 14.68% 6M Hybrid, 11.18% 6M Pmt Def, 10.24% 6M Int Only, 8.57% 9M Pmt Def, 8.44% 12M Hybrid, 7.89% 12M Int Only, 7.04% 12M Pmt Def, 4.06% Other, 2.70% California, 59.88% PNW, 16.42% Texas, 7.68% Arizona, 9.27% New York, 3.87% Other, 2.87% Hotel/Motel CRE Modification Type Geographic Location of Modified Hotel/Motel CRE 3.86%ACL Coverage Ratio Note: “Hybrid” represents modifications that include deferments for a period of time followed by a period of interest only payments.
7 Retail CRE Property Characteristics • Retail portfolio 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 • 15% of retail CRE portfolio, or $354 million, modified under CARES Act in Phase II, which represents a significant decrease from 36% in Phase I COVID-19 Impacted Portfolios - Retail CRE - $1.55 million 50.1% 1.75 Average Loan Size Weighted Average LTV Weighted Average DCR 9M Int Only, 33.41% 6M Pmt Def, 19.87% 9M Pmt Def, 18.61% 6M Int Only, 8.83% 12M Pmt Def, 6.01% 6M Hybrid, 4.63% 9M Hybrid, 4.14% 12M Hybrid, 3.02% Other, 1.49% California, 71.65% NY/NJ, 20.57% Other, 7.78% Retail CRE Modification Type Geographic Location of Modified Retail CRE 1.50%ACL Coverage Ratio Note: “Hybrid” represents modifications that include deferments for a period of time followed by a period of interest only payments.
8 $113.5 $119.3 $109.8 $117.6 $120.8 3.16% 3.31% 2.79% 2.91% 3.02% 4Q19 1Q20 2Q20 3Q20 4Q20 Net Interest Income & NIM Net Interest Income NIM Net Interest Income and Margin 5.04% 5.06% 4.23% 4.20% 4.03% 1.79% 1.41% 0.35% 0.16% 0.15% 4Q19 1Q20 2Q20 3Q20 4Q20 Average Loan Yield & Average 1M LIBOR Rate Avg Loan Yield Avg 1M LIBOR Rate Net interest income increased 3% primarily due to lower deposit costs, redeployment of excess liquidity and higher average loan balances 4Q20 net interest margin increased 11bps Q-o-Q reflecting Net interest margin excluding purchase accounting adjustments, expanded 15bps Q-o-Q from 3Q20 Net interest margin expected to continue expansion through 1H 2021 as a benefit of decreasing deposit costs $9.1 $9.4 $10.1 $9.9 $9.5 1.49% 1.34% 0.87% 0.64% 0.48% 1.98% 1.76% 1.17% 0.92% 0.71% 4Q19 1Q20 2Q20 3Q20 4Q20 Average Interest Bearing Deposits & Cost of Deposits Average Interest Bearing Deposits Total Cost of Deposits Cost of Interest Bearing Deposits ($ millions) ($ billions) -9 bps Loan yield reduction -4 bps Accretion decline -3 bps Investment yield decline +11bps Average cash balance decrease +13 bps Deposit cost decline +2bps Average deposit balance decline +1 bps Average FHLB balance decline
9 $4.5 $4.1 $2.6 $2.7 $3.0 $0.8 $0.8 $0.7 $1.0 $0.7 $0.7 $0.4 $1.1 $0.8 $0.6 $1.1 $1.0 $0.8 $0.9 $0.9 $1.9 $1.9 $1.7 $2.9 $1.6 $7.5 $4.1 $5.1 $4.4 $1.7 $4.7 4Q19 1Q20 2Q20 3Q20 4Q20 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 $11.4 million Q-o-Q largely reflecting a $7.5 million net gain on sale of available-for-sale investment securities in 3Q20 vs. zero in 4Q20 Excluding securities gains in 3Q20, noninterest income increased $1.4 million Q-o-Q Net gain on sale of mortgage loans decreased to $1.6 million from $2.9 million in 3Q20 reflecting lower volumes of residential mortgage originations and sales Other income and fees increased to $4.7 million from $1.7 million in 3Q20 reflecting higher swap fee income and a positive fair value adjustment in derivatives $17.5 $11.4 $13.0 $13.3 $11.2 ($ millions)
10 Noninterest Expense and Efficiency 55.68% 54.42% 55.37% 54.31% 53.77% 1.85% 1.87% 1.60% 1.73% 1.69% 4Q19 1Q20 2Q20 3Q20 4Q20 Efficiency Ratio & Noninterest Expense to Average Assets Efficiency Ratio Noninterest Expense/Avg Assets Noninterest expense decreased 3% to $71.1 million from $73.4 million in 3Q20 – 4Q20 noninterest expense included non-core $2.4 million branch restructuring cost – 3Q20 noninterest expense included non-core FHLB prepayment fee of $3.6 million – Excluding these two non-core items, noninterest expense decreased $1.1 million Q-o-Q Cost management initiatives led to 54bps improvement in efficiency ratio and noninterest expense to average assets improved to 1.69% from 1.73% in 3Q20 ($ millions) $39.8 $42.5 $38.9 $40.7 $40.9 $11.8 $11.7 $11.7 $11.8 $11.3 $2.5 $1.7 $1.3 $1.6 $1.7 $2.4 $2.6 $2.3 $2.2 $2.2 $5.9 $3.3 $1.5 $1.5 $1.8 $0.8 $1.6 $1.7 $1.2 $1.2 $1.6 $2.5 $2.7 $3.6 $1.2 $3.6 $2.4 $5.6 $6.3 $7.0 $7.3 $7.6 1,441 1,458 1,474 1,416 1,408 4Q19 1Q20 2Q20 3Q20 4Q20 Breakdown of Noninterest Expense & FTE Other Branch restructuring costs FHLB Prepayment Fee Credit related & OREO FDIC assessment Professional fees Data processing & communications Adv/Marketing Occupancy & equipment Compensation FTE $73.4 $71.1$70.4 $72.1 $67.0 NIE/AA = Noninterest expense as a percentage of average assets
11 $3.1 $3.0 $4.0 $4.5 $4.8 $4.0 $4.9 $4.8 $4.8 $5.2$0.3 $0.3 $0.3 $0.3 $0.3$5.2 $4.7 $5.0 $4.4 $4.0 12/31/19 3/31/20 6/30/20 9/30/20 12/31/20 Deposit Composition DDA MMA/NOW Savings Time Deposit Trends Noninterest bearing demand deposits increased 7% Q-o-Q and increased to 34% of total deposits from 32% as of 9/30/20 MMA & NOW accounts increased 10% Q-o-Q and increased to 37% of total deposits from 34% as of 9/30/20 Time deposits decreased 10% Q-o-Q and declined to 28% of total deposits from 32% as of 9/30/20 Total cost of deposits decreased 16bps from 3Q20 and total cost of interest bearing deposits decreased 21bps from 3Q20 Net Loan-to-Deposit ratio at 12/31/2020 was 93.18% vs. 92.38% as of 9/30/2020 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 Oct 2020 $470 0.34% Nov 2020 $451 0.34% Dec 2020 $341 0.29% 4Q 2020 $1,262 0.33% CD Maturity Schedule Q1 2021 $1,612 1.07% Q2 2021 $1,095 0.80% Q3 2021 $624 0.63% Q4 2021 $554 0.36% 1.54%1.49%1.44%1.43%1.42% 1.18% 0.95% 0.87% 0.79%0.73% 0.64% 0.56%0.51%0.48%0.44% Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Deposit Cost Trend Quarterly Cost of Deposits Monthly Cost of Deposits 0.87% 2Q20 1.34% 1Q20 1.49% 4Q19 0.48% 4Q20 $12.84$12.53 $14.33$14.01 +10% -3% +9%+40% ($ billions) Q-o-Q growth annualized 0.64% 3Q20
12 $1.0 $28.0 $17.5 $22.0 $27.5 0.02% 0.11% 0.02% 0.12% 0.02% 4Q19 1Q20 2Q20 3Q20 4Q20 Provision for Credit Losses & Net Charge Offs Provision Expense Net Charge Offs (Recoveries) (annualized) ($ millions) Asset Quality Nonperforming loans increased $17 million Q-o-Q, reflecting migration of 2 construction loans experiencing weakened conditions due in part to the pandemic Criticized and classified loans increased $80 million Q-o- Q largely reflecting proactive identification of deteriorating financials of previously modified loans, as well as a $20 million relationship which the bank is exiting due to non-financial reasons Credit losses continued to be minimal, with net charge offs of $608,000, or 2bps of average loans on an annualized basis $98.0 $116.8 $126.6 $106.2 $123.2$24.1 $23.0 $21.0 $18.4 $20.1 0.78% 0.87% 0.86% 0.74% 0.84% 4Q19 1Q20 2Q20 3Q20 4Q20 Nonperforming Assets NPLs OREO NPAs/Total Assets $141.5 $122.3 $127.1 $153.4 $184.9 $259.3 $278.8 $299.4 $318.5 $366.6 3.26% 3.19% 3.31% 3.60% 4.06% 4Q19 1Q20 2Q20 3Q20 4Q20 Criticized Loans Classified Special Mention Total Criticized Loans as a % of Gross Loans ($ millions) ($ millions) $147.6 $124.6 $143.3 $122.1 $139.9 $426.5 $471.9 $551.5 $400.7 $401.1
13 Allocation of Allowance by Loan Type ($ thousands) Allowance of Loan & Lease Losses (ALLL) Allocation for Credit Losses for Current Expected Credit Loss (CECL) Quarter-over- Quarter Change 4Q20 from 3Q20 Dec 31, 2019 Sep 30, 2020 Dec 31, 2020 Loan Type Amount Coverage Ratio Amount Coverage Ratio Amount Coverage Ratio Amount Coverage Ratio Commercial Real Estate $ 53,593 0.62% $ 129,624 1.51% $ 162,197 1.85% $ 32,573 0.34% Residential $ 204 0.39% $ 208 0.38% $ 391 0.71% $ 183 0.33% Commercial $ 51,712 0.62% $ 127,483 1.55% $ 159,528 1.89% $ 32,045 0.34% Hotel/Motel $ 8,315 0.49% $ 44,619 3.01% $ 62,419 3.86% $ 17,800 0.85% Retail CRE $ 17,955 0.81% $ 26,153 1.17% $ 34,256 1.50% $ 8,103 0.33% Construction $ 1,677 0.57% $ 1,933 0.62% $ 2,278 0.78% $ 345 0.16% Commercial & Industry $ 33,032 1.21% $ 44,209 1.40% $ 39,155 0.94% $ -5,054 -0.46% Residential Mortgage $ 5,925 0.71% $ 4,699 0.71% $ 4,277 0.73% $ -422 0.02% Consumer $ 1,594 2.89% $ 1,317 2.92% $ 1,163 2.27% $ -154 -0.65% Total Allowance $ 94,144 $ 179,849 $ 206,741 Coverage Ratio to Loans Receivable 0.77% 1.37% 1.52% Including Accretion Discount 1.14% 1.58% 1.70% Including Accretion Discount & Excluding PPP 1.63% 1.76%
14 Strong Capital & Liquidity Positions 5.00% 12/31/2020 ($ Thousands) Available Borrowing Capacity FHLB Remaining Capacity $ 3,918,238 FRB Discount Window $ 616,001 Unsecured lines with other banks $ 306,180 Total Borrowing Capacity $ 4,840,419 Brokered Deposit Availability (internal policy limit 15% of Total Assets) $ 1,430,092 Investment Repo Line (unpledged securities 95%) $ 1,814,061 Sufficient Liquidity Sources 10.00% 5.00% 6.50% 8.00% 13.19% 10.02% 11.36% 12.09% 12.87% 10.22% 10.94% 11.64% 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 9/30/2020 12/31/2020 Growing equity with Book Value per share of $16.66 vs. $16.55 for 3Q20 and Tangible Common Equity per share of $12.81 vs. $12.70 for 3Q20 Returning Capital to shareholders with quarterly common stock dividend maintained at $0.14 per share
15 2020 Achievements Stronger, More Diversified, Relationship Bank Enhanced Deposit Franchise Expense Management Profitable Organic Loan Growth Strong Capital Management CECL Implementation & Reserve Build
16 Near-Term Outlook Mid- to high-single digit loan growth projected for 2021 driven by growth in non-CRE loans Higher trending gain on sale income from growth in residential mortgage origination volumes Continuation of cost management in line with current business environment Net interest margin expansion at least through first half of 2021 due to decreasing deposit costs Meaningful declines in COVID-19 modifications and lower provisioning in 2021 expected to result in enhanced profitability trends Sound management of credit, capital, liquidity and reserves
17 2020 Fourth Quarter Earnings Conference Call Q&A