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 22, 2020
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 22, 2020, 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, 2019. A copy of the January 22, 2020 press release is attached hereto as Exhibit 99.1.
Item 8.01 Other Events.
On January 22, 2020, 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 21, 2020 to all stockholders of record as of the close of business on February 7, 2020. A copy of the January 22, 2020 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 Thursday, January 23, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its fourth quarter and full year ended and as of December 31, 2019. 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.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description of Exhibit |
|---|---|
| 99.1 | News release, dated January 22, 2020, concerning the results of operations and financial condition for the fourth quarter and full year ended and as of December 31, 2019. |
| 99.2 | News release, dated January 22, 2020, announcing the declaration of a quarterly cash dividend. |
| 99.3 | Presentation Materials, dated January 23, 2020. |
| 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 23, 2020 | By: | /s/ Kevin S. Kim |
| Kevin S. Kim | ||
| Chairman, President and Chief Executive Officer |
EXHIBIT INDEX
| Exhibit No. | Description of Exhibit |
|---|---|
| 99.1 | News release, dated January 22, 2020, concerning the results of operations and financial condition for the fourth quarter and full year ended and as of December 31, 2019. |
| 99.2 | News release, dated January 22, 2020, announcing the declaration of a quarterly cash dividend. |
| 99.3 | Presentation Materials, dated January 23, 2020. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Exhibit
Page 1-1-1 NASDAQ: HOPE
News Release
HOPE BANCORP REPORTS 2019 FOURTH QUARTER FINANCIAL RESULTS
LOS ANGELES - January 22, 2020 - 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, 2019.
For the three months ended December 31, 2019, net income totaled $43.0 million, or $0.34 per diluted common share. This compares with net income of $42.6 million, or $0.34 per diluted common share, in the 2019 third quarter and $44.4 million, or $0.35 per diluted common share, in the 2018 fourth quarter. For 2019, net income totaled $171.0 million, or $1.35 per diluted common share, compared with 2018 net income of $189.6 million, or $1.44 per diluted common share.
“We are pleased to have completed the year with another solid quarter that underscores the consistent progress we are making with our strategic initiatives,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “Most notably, we continued to see a favorable shift in our deposit base to lower costing core deposits, which contributed to a considerable reduction in our total cost of deposits, the first decrease we have seen in three years. We also originated a record level of $848 million in new loans, which continues to represent a well-balanced mix of commercial real estate, commercial and consumer loans and led to a second consecutive quarter of organic loan growth. Noninterest expenses remain well contained at 1.85% of total assets, notwithstanding the ongoing investments we continue to make in our organization. And our active buyback of 943,094 shares under our current share repurchase plan underscores our ongoing commitment to enhance shareholder returns.
“We move forward into 2020 with strong conviction that we have the right strategies in place given the current stage of the economic growth cycle and the lower interest rate environment that we are operating in. With the progress we have made in controlling our deposit costs, the growing contribution of the higher-rate SBA loans in our portfolio, and assuming no further changes in the Fed Funds rate this year, we believe we are positioned to begin seeing some margin expansion by the second half of the year, which will ultimately improve our ability to further enhance returns and profitability.”
Q4 2019 Highlights
| • | Record new loan originations of $847.6 million led to more than a 1% increase in loans receivable quarter-over-quarter, or 6% annualized. |
|---|---|
| • | Deposit initiatives contributed to a 13 basis point reduction quarter-over-quarter in total deposit costs, the first quarter-over-quarter decrease since Q4 2016. |
| --- | --- |
| • | Total deposits increased 2% quarter-over-quarter, reflecting a continuation of a favorable mix-shift to core deposits. |
| --- | --- |
| • | Total noninterest expenses well contained and remain at 1.85% of average assets. |
| --- | --- |
| • | Repurchased 943,094 shares at an average price of $14.62 during the 2019 fourth quarter. |
| --- | --- |
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Financial Highlights
| (dollars in thousands, except per share data) (unaudited) | At or for the Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 12/31/2019 | 9/30/2019 | 12/31/2018 | |||||||
| Net income | $ | 43,009 | $ | 42,592 | $ | 44,449 | |||
| Diluted earnings per share | $ | 0.34 | $ | 0.34 | $ | 0.35 | |||
| Net interest income before provision for loan losses | $ | 113,508 | $ | 116,258 | $ | 121,893 | |||
| Net interest margin | 3.16 | % | 3.25 | % | 3.41 | % | |||
| Noninterest income | $ | 12,979 | $ | 12,995 | $ | 11,614 | |||
| Noninterest expense | $ | 70,429 | $ | 69,995 | $ | 70,189 | |||
| Net loans receivable | $ | 12,181,863 | $ | 12,010,800 | $ | 12,005,558 | |||
| Deposits | $ | 12,527,364 | $ | 12,234,750 | $ | 12,155,656 | |||
| Nonaccrual loans ^(1) (2)^ | $ | 54,785 | $ | 42,235 | $ | 53,286 | |||
| Nonperforming loans to loans receivable ^(1) (2)^ | 0.80 | % | 0.64 | % | 0.87 | % | |||
| ALLL to loans receivable | 0.77 | % | 0.78 | % | 0.77 | % | |||
| ALLL to nonaccrual loans ^(1) (2)^ | 171.84 | % | 222.28 | % | 173.70 | % | |||
| ALLL to nonperforming assets ^(1) (2)^ | 77.08 | % | 97.06 | % | 81.92 | % | |||
| Provision for loan losses | $ | 1,000 | $ | 2,100 | $ | 2,800 | |||
| Net charge offs | $ | 738 | $ | 1,822 | $ | 872 | |||
| Return on average assets (“ROA”) | 1.13 | % | 1.12 | % | 1.17 | % | |||
| Return on average equity (“ROE”) | 8.46 | % | 8.47 | % | 9.42 | % | |||
| Return on average common tangible equity (“ROTCE”) ^(3)^ | 11.04 | % | 11.11 | % | 12.62 | % | |||
| Noninterest expense / average assets | 1.85 | % | 1.85 | % | 1.85 | % | |||
| Efficiency ratio | 55.68 | % | 54.15 | % | 52.57 | % |
^(1)^ Excludes delinquent SBA loans that are guaranteed and currently in liquidation
^(2)^ Excludes purchased credit-impaired loans
^(3)^ 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 7.
Operating Results for the 2019 Fourth Quarter
Net interest income before provision for loan losses for the 2019 fourth quarter totaled $113.5 million, compared with $116.3 million in the 2019 third quarter and $121.9 million in the year-ago fourth quarter.
The net interest margin for the 2019 fourth quarter declined 9 basis points to 3.16% from 3.25% in the 2019 third quarter, reflecting lower weighted average yield on loans, due to three decreases in the fed funds rate of 25 basis points each on July 31, September 18 and October 30, 2019, partially offset by lower deposit costs. The net interest margin in the prior-year fourth quarter was 3.41%.
The weighted average yield on loans for the 2019 fourth quarter was 5.04%, compared with 5.27% in the preceding third quarter and 5.21% in the year-ago fourth quarter.
The Company continued to see benefits from its deposit initiatives with a favorable shift in the mix of deposits. This contributed to a quarter-over-quarter decrease in the weighted average cost of deposits, which was 1.49% for the 2019 fourth quarter, compared with 1.62% for the third quarter of 2019. In the 2018 fourth quarter, the weighted average cost of deposits was 1.40%.
Noninterest income totaled $13.0 million for the 2019 fourth quarter and preceding third quarter. Net gains on sales of other loans, predominantly from the sale of residential mortgage loans, increased to $1.9 million for the 2019 fourth quarter from $804,000 in the preceding third quarter. This increase was largely offset by lower levels of swap fee income versus the preceding quarter. In the 2018 fourth quarter, noninterest income totaled $11.6 million and included a $447,000 net gain on sales of SBA loans to the secondary market and $381,000 net gain on the sale of other loans. Since
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Page 3-3-3 NASDAQ: HOPE
the middle of the 2018 fourth quarter, the Company has discontinued its practice of regularly selling SBA loans to the secondary market.
Noninterest expense was stable at $70.4 million for the 2019 fourth quarter, compared with $70.0 million for the preceding third quarter and $70.2 million for the year-ago fourth quarter. Noninterest expense as a percentage of average assets amounted to 1.85% for the 2019 fourth quarter, 2019 third quarter and 2018 fourth quarter.
The slight increase in noninterest expense quarter-over-quarter reflects an increase in professional fees, FDIC assessment, and credit and OREO related expenses. The preceding third quarter included FDIC assessment credits which reduced the FDIC assessment expense for the quarter to zero, compared with minimal credit applied for the fourth quarter of 2019. These increases were offset by lower compensation costs in the 2019 fourth quarter.
Salaries and employee benefits expense decreased to $39.8 million for the 2019 fourth quarter from $41.6 million for the 2019 third quarter, largely reflecting reduced expenses related to the Company’s 401(k) and insurance programs. In the 2018 fourth quarter, salaries and employee benefits expense totaled $36.6 million.
The effective tax rate for the 2019 fourth quarter was 21.9%, compared with 25.5% in the preceding 2019 third quarter and 26.6% in the 2018 fourth quarter. The Company attributed the reduction of the effective tax rate for the 2019 fourth quarter mainly due to adjustments related to FASB Interpretation No. 48 (“FIN 48”), which lowered the tax provision for the quarter by approximately $1.8 million, net of Federal and State tax.
Balance Sheet Summary
New loan originations funded during the 2019 fourth quarter totaled a record $847.6 million and included SBA loan production of $61.8 million and residential mortgage loan originations of $64.2 million. This compares with 2019 third quarter originations of $693.9 million, including SBA loan production of $53.8 million and residential mortgage loan originations of $58.5 million. In the year-ago fourth quarter, new loan originations funded totaled $667.3 million, including SBA loan production of $81.5 million and residential mortgage loan originations of $162.3 million.
SBA 7(a) loan originations totaled $46.1 million for the 2019 fourth quarter, compared with $34.4 million for the third quarter of 2019 and $44.7 million for the year-ago fourth quarter. There were no sales of SBA 7(a) loans to the secondary market during 2019. In contrast, the Company sold $10.2 million of its SBA 7(a) loans during the 2018 fourth quarter prior to its decision to retain the loans in its portfolio.
At December 31, 2019, loans receivable increased 1% to $12.28 billion from $12.10 billion at September 30, 2019 and increased 1% from $12.10 billion at December 31, 2018.
Total deposits at December 31, 2019 increased 2% to $12.53 billion from $12.23 billion at September 30, 2019 and increased 3% from $12.16 billion at December 31, 2018. During the 2019 fourth quarter, the Company continued to see a favorable shift in the mix of deposits marked by higher core deposits, particularly in money market account balances, and decreases in higher-cost time deposits. Noninterest bearing demand deposits at year-end 2019 increased 2% from September 30, 2019 and increased 3% from December 31, 2018. Money market and other deposits at year-end 2019 increased 6% and 31% from September 30, 2019 and December 31, 2018, respectively, and rose as a percentage of total deposits to 32% at December 31, 2019 from 31% at September 30, 2019 and 25% at December 31, 2018.
Reflecting the continued favorable mix-shift in deposits, total cost of deposits decreased 13 basis points to 1.49% from 1.62% for the 2019 third quarter. In the fourth quarter of 2018, total cost of deposits was 1.40%.
Credit Quality
The provision for loan and lease losses for the 2019 fourth quarter was $1.0 million, compared with $2.1 million for the preceding 2019 third quarter and $2.8 million for the year-ago fourth quarter.
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Following are the components of nonperforming assets as of December 31, 2019, September 30, 2019, and December 31, 2018:
| (dollars in thousands) (unaudited) | 12/31/2019 | 9/30/2019 | 12/31/2018 | |||
|---|---|---|---|---|---|---|
| Loans on nonaccrual status ^(1)^ | $ | 54,785 | $ | 42,235 | $ | 53,286 |
| Delinquent loans 90 days or more on accrual status ^(2)^ | 7,547 | 398 | 1,529 | |||
| Accruing troubled debt restructured loans | 35,709 | 34,717 | 50,410 | |||
| Total nonperforming loans | 98,041 | 77,350 | 105,225 | |||
| Other real estate owned | 24,091 | 19,374 | 7,754 | |||
| Total nonperforming assets | $ | 122,132 | $ | 96,724 | $ | 112,979 |
| ^(1)^ | Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $28.1 million, $37.3 million, and $29.2 million, at December 31, 2019, September 30, 2019, and December 31, 2018, respectively. | |||||
| --- | --- | |||||
| ^(2)^ | Excludes Acquired Credit Impaired Loans totaling $13.2 million, $15.5 million, and $14.1 million, at December 31, 2019, September 30, 2019, and December 31, 2018, respectively. | |||||
| --- | --- |
Following are the components of criticized loan balances as of December 31, 2019, September 30, 2019, and December 31, 2018:
| (dollars in thousands) (unaudited) | 12/31/2019 | 9/30/2019 | 12/31/2018 | |||
|---|---|---|---|---|---|---|
| Special Mention ^(3)^ | $ | 141,452 | $ | 139,848 | $ | 163,089 |
| Classified ^(3)^ | 259,291 | 268,622 | 318,327 | |||
| Criticized | $ | 400,743 | $ | 408,470 | $ | 481,416 |
| ^(3)^ | Balances include purchased loans which were marked to fair value on the date of acquisition. | |||||
| --- | --- |
The Company recorded net charge offs of $738,000 during the 2019 fourth quarter, or 0.02% of average loans receivable on an annualized basis. This compares with net charge offs of $1.8 million, or 0.06% of average loans receivable on an annualized basis, during the 2019 third quarter. In the 2018 fourth quarter, the Company recorded net charge offs of $872,000, or 0.03% of average loans receivable on an annualized basis.
The allowance for loan and lease losses (“ALLL”) was $94.1 million, $93.9 million, and $92.6 million at December 31, 2019, September 30, 2019 and December 31, 2018, respectively. As a percentage of loans receivable (excluding loans held for sale), the ALLL was 0.77%, 0.78% and 0.77% at December 31, 2019, September 30, 2019 and December 31, 2018, respectively. The coverage ratio of the ALLL to nonperforming loans (excluding purchased credit-impaired loans) was 96.03% at December 31, 2019, 121.37% at September 30, 2019 and 87.96% at December 31, 2018.
Impaired loans (defined as loans for which it is probable that not all principal and interest payments due will be collected in accordance with the contractual terms) totaled $90.5 million at December 31, 2019, $77.3 million at September 30, 2019 and $104.0 million at December 31, 2018.
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Capital
At December 31, 2019, the Company and the Bank continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” financial institution, as summarized in the following table:
| (unaudited) | 12/31/2019 | 9/30/2019 | 12/31/2018 | Minimum Guideline for “Well-Capitalized” Bank |
|---|---|---|---|---|
| Common Equity Tier 1 Capital | 11.76% | 11.89% | 11.44% | 6.50% |
| Tier 1 Leverage Ratio | 11.22% | 11.18% | 10.55% | 5.00% |
| Tier 1 Risk-Based Ratio | 12.51% | 12.65% | 12.21% | 8.00% |
| Total Risk-Based Ratio | 13.23% | 13.38% | 12.94% | 10.00% |
Tangible common equity per share and as a percentage of tangible assets are summarized in the following table:
| (unaudited) | 12/31/2019 | 9/30/2019 | 12/31/2018 |
|---|---|---|---|
| Tangible common equity per share ^(1)^ | $12.40 | $12.27 | $11.25 |
| Tangible common equity to tangible assets ^(2)^ | 10.27% | 10.43% | 9.61% |
| ^(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 7. | ||
| --- | --- | ||
| ^(2)^ | Tangible assets represent total assets less goodwill and net other intangible assets. Tangible common equity to tangible assets is the ratio of tangible common equity over tangible assets. Tangible common equity to tangible assets is a non-GAAP financial measure. A reconciliation of the Company’s total assets to tangible assets is provided in the accompanying financial information on Table Page 7. | ||
| --- | --- |
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.
Stock Repurchase Plan
Under the Company’s $50 million stock repurchase program announced on July 16, 2019, the Company repurchased 943,094 shares at an average price of $14.62 during the 2019 fourth quarter. As of December 31, 2019, $36.2 million of the plan remained available.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Thursday, January 23, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its fourth quarter ended December 31, 2019. 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 January 30, 2020, replay access code 10137771.
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About Hope Bancorp, Inc.
Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $15.7 billion in total assets as of December 31, 2019. 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.
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 loan 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. 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 |
|---|
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Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
| Assets | 12/31/2019 | 9/30/2019 | % change | 12/31/2018 | % change | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash and due from banks | $ | 698,567 | $ | 549,356 | 27 | % | $ | 459,606 | 52 | % | |||
| Securities available for sale, at fair value | 1,715,987 | 1,772,322 | (3 | )% | 1,846,265 | (7 | )% | ||||||
| Federal Home Loan Bank (“FHLB”) stock and other investments | 97,659 | 98,848 | (1 | )% | 104,705 | (7 | )% | ||||||
| Loans held for sale, at the lower of cost or fair value | 54,271 | 29,627 | 83 | % | 25,128 | 116 | % | ||||||
| Loans receivable | 12,276,007 | 12,104,682 | 1 | % | 12,098,115 | 1 | % | ||||||
| Allowance for loan losses | (94,144 | ) | (93,882 | ) | — | % | (92,557 | ) | (2 | )% | |||
| Net loans receivable | 12,181,863 | 12,010,800 | 1 | % | 12,005,558 | 1 | % | ||||||
| Accrued interest receivable | 30,772 | 29,743 | 3 | % | 32,225 | (5 | )% | ||||||
| Premises and equipment, net | 52,012 | 52,604 | (1 | )% | 53,794 | (3 | )% | ||||||
| Bank owned life insurance | 76,339 | 75,968 | — | % | 75,219 | 1 | % | ||||||
| Goodwill | 464,450 | 464,450 | — | % | 464,450 | — | % | ||||||
| Servicing assets | 16,417 | 17,865 | (8 | )% | 23,132 | (29 | )% | ||||||
| Other intangible assets, net | 11,833 | 12,390 | (4 | )% | 14,061 | (16 | )% | ||||||
| Other assets | 267,270 | 265,905 | 1 | % | 201,809 | 32 | % | ||||||
| Total assets | $ | 15,667,440 | $ | 15,379,878 | 2 | % | $ | 15,305,952 | 2 | % | |||
| Liabilities | |||||||||||||
| Deposits | $ | 12,527,364 | $ | 12,234,750 | 2 | % | $ | 12,155,656 | 3 | % | |||
| FHLB advances | 625,000 | 625,000 | — | % | 821,280 | (24 | )% | ||||||
| Convertible notes, net | 199,458 | 198,211 | 1 | % | 194,543 | 3 | % | ||||||
| Subordinated debentures | 103,035 | 102,755 | — | % | 101,929 | 1 | % | ||||||
| Accrued interest payable | 33,810 | 38,197 | (11 | )% | 31,374 | 8 | % | ||||||
| Other liabilities | 142,762 | 149,681 | (5 | )% | 97,959 | 46 | % | ||||||
| Total liabilities | 13,631,429 | 13,348,594 | 2 | % | 13,402,741 | 2 | % | ||||||
| Stockholders’ Equity | |||||||||||||
| Common stock, $0.001 par value | 136 | 136 | — | % | 136 | — | % | ||||||
| Capital surplus | 1,428,066 | 1,426,666 | — | % | 1,423,405 | — | % | ||||||
| Retained earnings | 762,480 | 737,209 | 3 | % | 662,375 | 15 | % | ||||||
| Treasury stock, at cost | (163,820 | ) | (150,000 | ) | (9 | )% | (150,000 | ) | (9 | )% | |||
| Accumulated other comprehensive gain (loss) | 9,149 | 17,273 | (47 | )% | (32,705 | ) | 128 | % | |||||
| Total stockholders’ equity | 2,036,011 | 2,031,284 | — | % | 1,903,211 | 7 | % | ||||||
| Total liabilities and stockholders’ equity | $ | 15,667,440 | $ | 15,379,878 | 2 | % | $ | 15,305,952 | 2 | % | |||
| Common stock shares - authorized | 150,000,000 | 150,000,000 | 150,000,000 | ||||||||||
| Common stock shares - outstanding | 125,756,543 | 126,697,925 | 126,639,912 | ||||||||||
| Treasury stock shares | 9,945,547 | 9,002,453 | 9,002,453 |
Table Page 1
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2019 | 9/30/2019 | % change | 12/31/2018 | % change | 12/31/2019 | 12/31/2018 | % change | ||||||||||||
| Interest income: | |||||||||||||||||||
| Interest and fees on loans | $ | 152,795 | $ | 158,115 | (3 | )% | $ | 156,606 | (2 | )% | $ | 627,673 | $ | 594,103 | 6 | % | |||
| Interest on securities | 10,737 | 11,373 | (6 | )% | 12,385 | (13 | )% | 46,295 | 45,342 | 2 | % | ||||||||
| Interest on federal funds sold and other investments | 2,241 | 2,929 | (23 | )% | 3,035 | (26 | )% | 10,818 | 10,727 | 1 | % | ||||||||
| Total interest income | 165,773 | 172,417 | (4 | )% | 172,026 | (4 | )% | 684,786 | 650,172 | 5 | % | ||||||||
| Interest expense: | |||||||||||||||||||
| Interest on deposits | 45,428 | 49,057 | (7 | )% | 42,477 | 7 | % | 190,158 | 134,958 | 41 | % | ||||||||
| Interest on other borrowings and convertible notes | 6,837 | 7,102 | (4 | )% | 7,656 | (11 | )% | 28,033 | 27,287 | 3 | % | ||||||||
| Total interest expense | 52,265 | 56,159 | (7 | )% | 50,133 | 4 | % | 218,191 | 162,245 | 34 | % | ||||||||
| Net interest income before provision for loan losses | 113,508 | 116,258 | (2 | )% | 121,893 | (7 | )% | 466,595 | 487,927 | (4 | )% | ||||||||
| Provision for loan losses | 1,000 | 2,100 | (52 | )% | 2,800 | (64 | )% | 7,300 | 14,900 | (51 | )% | ||||||||
| Net interest income after provision for loan losses | 112,508 | 114,158 | (1 | )% | 119,093 | (6 | )% | 459,295 | 473,027 | (3 | )% | ||||||||
| Noninterest income: | |||||||||||||||||||
| Service fees on deposit accounts | 4,510 | 4,690 | (4 | )% | 4,568 | (1 | )% | 17,933 | 18,551 | (3 | )% | ||||||||
| Net gains on sales of SBA loans | — | — | — | % | 447 | (100 | )% | — | 9,708 | (100 | )% | ||||||||
| Net gains on sales of other loans | 1,876 | 804 | 133 | % | 381 | 392 | % | 4,487 | 2,485 | 81 | % | ||||||||
| Net gains on sales of securities available for sale | — | 153 | (100 | )% | — | — | % | 282 | — | 100 | % | ||||||||
| Other income and fees | 6,593 | 7,348 | (10 | )% | 6,218 | 6 | % | 26,981 | 29,436 | (8 | )% | ||||||||
| Total noninterest income | 12,979 | 12,995 | — | % | 11,614 | 12 | % | 49,683 | 60,180 | (17 | )% | ||||||||
| Noninterest expense: | |||||||||||||||||||
| Salaries and employee benefits | 39,841 | 41,607 | (4 | )% | 36,594 | 9 | % | 161,174 | 153,523 | 5 | % | ||||||||
| Occupancy | 7,516 | 7,703 | (2 | )% | 7,877 | (5 | )% | 30,735 | 30,371 | 1 | % | ||||||||
| Furniture and equipment | 4,260 | 3,851 | 11 | % | 3,448 | 24 | % | 15,583 | 14,902 | 5 | % | ||||||||
| Advertising and marketing | 2,462 | 2,377 | 4 | % | 2,392 | 3 | % | 9,146 | 9,414 | (3 | )% | ||||||||
| Data processing and communications | 2,416 | 2,821 | (14 | )% | 3,650 | (34 | )% | 10,780 | 14,232 | (24 | )% | ||||||||
| Professional fees | 5,948 | 5,241 | 13 | % | 4,756 | 25 | % | 22,528 | 16,286 | 38 | % | ||||||||
| FDIC assessment | 772 | — | 100 | % | 1,406 | (45 | )% | 3,882 | 6,572 | (41 | )% | ||||||||
| Credit related expenses | 1,717 | 1,031 | 67 | % | 507 | 239 | % | 4,975 | 2,863 | 74 | % | ||||||||
| OREO (income) expense, net | (122 | ) | (743 | ) | (84 | )% | 302 | N/A | (934 | ) | 187 | N/A | |||||||
| Branch restructuring costs | — | — | — | % | 1,674 | (100 | )% | — | 1,674 | (100 | )% | ||||||||
| Other | 5,619 | 6,107 | (8 | )% | 7,583 | (26 | )% | 24,759 | 27,702 | (11 | )% | ||||||||
| Total noninterest expense | 70,429 | 69,995 | 1 | % | 70,189 | — | % | 282,628 | 277,726 | 2 | % | ||||||||
| Income before income taxes | 55,058 | 57,158 | (4 | )% | 60,518 | (9 | )% | 226,350 | 255,481 | (11 | )% | ||||||||
| Income tax provision | 12,049 | 14,566 | (17 | )% | 16,069 | (25 | )% | 55,310 | 65,892 | (16 | )% | ||||||||
| Net income | $ | 43,009 | $ | 42,592 | 1 | % | $ | 44,449 | (3 | )% | $ | 171,040 | $ | 189,589 | (10 | )% | |||
| Earnings per Common Share: | |||||||||||||||||||
| Basic | $ | 0.34 | $ | 0.34 | $ | 0.35 | $ | 1.35 | $ | 1.44 | |||||||||
| Diluted | $ | 0.34 | $ | 0.34 | $ | 0.35 | $ | 1.35 | $ | 1.44 | |||||||||
| Average Shares Outstanding: | |||||||||||||||||||
| Basic | 126,410,924 | 126,685,921 | 128,115,170 | 126,598,564 | 131,716,726 | ||||||||||||||
| Diluted | 126,835,273 | 127,007,469 | 128,261,998 | 126,875,320 | 131,954,192 |
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: | 12/31/2019 | 9/30/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||
| ROA | 1.13 | % | 1.12 | % | 1.17 | % | 1.12 | % | 1.29 | % |
| ROE | 8.46 | % | 8.47 | % | 9.42 | % | 8.63 | % | 9.92 | % |
| Return on average tangible equity ^1^ | 11.04 | % | 11.11 | % | 12.62 | % | 11.37 | % | 13.25 | % |
| Net interest margin | 3.16 | % | 3.25 | % | 3.41 | % | 3.27 | % | 3.53 | % |
| Efficiency ratio | 55.68 | % | 54.15 | % | 52.57 | % | 54.74 | % | 50.67 | % |
| Noninterest expense / average assets | 1.85 | % | 1.85 | % | 1.85 | % | 1.86 | % | 1.88 | % |
| ^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. |
Table Page 3
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2019 | 9/30/2019 | 12/31/2018 | ||||||||||||||||
| Interest | Annualized | Interest | Annualized | Interest | Annualized | |||||||||||||
| Average | Income/ | Average | Average | Income/ | Average | Average | Income/ | Average | ||||||||||
| Balance | Expense | Yield/Cost | Balance | Expense | Yield/Cost | Balance | Expense | Yield/Cost | ||||||||||
| INTEREST EARNING ASSETS: | ||||||||||||||||||
| Loans receivable, including loans held for sale | $ | 12,036,477 | $ | 152,795 | 5.04 | % | $ | 11,911,658 | $ | 158,115 | 5.27 | % | $ | 11,935,109 | $ | 156,606 | 5.21 | % |
| Securities available for sale | 1,755,887 | 10,737 | 2.43 | % | 1,798,239 | 11,373 | 2.51 | % | 1,835,218 | 12,385 | 2.68 | % | ||||||
| FHLB stock and other investments | 463,615 | 2,241 | 1.92 | % | 482,952 | 2,929 | 2.41 | % | 431,901 | 3,035 | 2.79 | % | ||||||
| Total interest earning assets | $ | 14,255,979 | $ | 165,773 | 4.61 | % | $ | 14,192,849 | $ | 172,417 | 4.82 | % | $ | 14,202,228 | $ | 172,026 | 4.81 | % |
| INTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Demand, interest bearing | $ | 3,682,300 | $ | 14,924 | 1.61 | % | $ | 3,450,749 | $ | 15,802 | 1.82 | % | $ | 3,127,598 | $ | 12,425 | 1.58 | % |
| Savings | 265,008 | 748 | 1.12 | % | 252,780 | 675 | 1.06 | % | 225,746 | 537 | 0.94 | % | ||||||
| Time deposits | 5,148,092 | 29,756 | 2.29 | % | 5,368,753 | 32,580 | 2.41 | % | 5,626,355 | 29,515 | 2.08 | % | ||||||
| Total interest bearing deposits | 9,095,400 | 45,428 | 1.98 | % | 9,072,282 | 49,057 | 2.15 | % | 8,979,699 | 42,477 | 1.88 | % | ||||||
| FHLB advances & fed funds purchased | 608,052 | 2,921 | 1.91 | % | 632,500 | 3,112 | 1.95 | % | 824,995 | 3,674 | 1.77 | % | ||||||
| Convertible notes, net | 198,669 | 2,334 | 4.60 | % | 197,410 | 2,322 | 4.60 | % | 193,749 | 2,299 | 4.64 | % | ||||||
| Subordinated debentures | 98,972 | 1,582 | 6.25 | % | 98,690 | 1,668 | 6.61 | % | 97,856 | 1,683 | 6.73 | % | ||||||
| Total interest bearing liabilities | 10,001,093 | $ | 52,265 | 2.07 | % | 10,000,882 | $ | 56,159 | 2.23 | % | 10,096,299 | $ | 50,133 | 1.97 | % | |||
| Noninterest bearing demand deposits | 2,999,048 | 2,958,233 | 3,018,672 | |||||||||||||||
| Total funding liabilities/cost of funds | $ | 13,000,141 | 1.60 | % | $ | 12,959,115 | 1.72 | % | $ | 13,114,971 | 1.52 | % | ||||||
| Net interest income/net interest spread | $ | 113,508 | 2.54 | % | $ | 116,258 | 2.59 | % | $ | 121,893 | 2.84 | % | ||||||
| Net interest margin | 3.16 | % | 3.25 | % | 3.41 | % | ||||||||||||
| Cost of deposits: | ||||||||||||||||||
| Noninterest bearing demand deposits | $ | 2,999,048 | $ | — | — | % | $ | 2,958,233 | $ | — | — | % | $ | 3,018,672 | $ | — | — | % |
| Interest bearing deposits | 9,095,400 | 45,428 | 1.98 | % | 9,072,282 | 49,057 | 2.15 | % | 8,979,699 | 42,477 | 1.88 | % | ||||||
| Total deposits | $ | 12,094,448 | $ | 45,428 | 1.49 | % | $ | 12,030,515 | $ | 49,057 | 1.62 | % | $ | 11,998,371 | $ | 42,477 | 1.40 | % |
Table Page 4
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Twelve Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2019 | 12/31/2018 | |||||||||||
| Interest | Interest | |||||||||||
| Average | Income/ | Average | Average | Income/ | Average | |||||||
| Balance | Expense | Yield/Cost | Balance | Expense | Yield/Cost | |||||||
| INTEREST EARNING ASSETS: | ||||||||||||
| Loans receivable, including loans held for sale | $ | 11,998,675 | $ | 627,673 | 5.23 | % | $ | 11,547,022 | $ | 594,103 | 5.15 | % |
| Securities available for sale | 1,796,412 | 46,295 | 2.58 | % | 1,772,080 | 45,342 | 2.56 | % | ||||
| FHLB stock and other investments | 453,452 | 10,818 | 2.39 | % | 487,922 | 10,727 | 2.20 | % | ||||
| Total interest earning assets | $ | 14,248,539 | $ | 684,786 | 4.81 | % | $ | 13,807,024 | $ | 650,172 | 4.71 | % |
| INTEREST BEARING LIABILITIES: | ||||||||||||
| Deposits: | ||||||||||||
| Demand, interest bearing | $ | 3,319,556 | $ | 57,731 | 1.74 | % | $ | 3,276,815 | $ | 43,252 | 1.32 | % |
| Savings | 241,968 | 2,596 | 1.07 | % | 229,608 | 1,889 | 0.82 | % | ||||
| Time deposits | 5,556,983 | 129,831 | 2.34 | % | 5,107,698 | 89,817 | 1.76 | % | ||||
| Total interest bearing deposits | 9,118,507 | 190,158 | 2.09 | % | 8,614,121 | 134,958 | 1.57 | % | ||||
| FHLB advances & fed funds purchased | 688,652 | 12,031 | 1.75 | % | 870,124 | 15,127 | 1.74 | % | ||||
| Convertible notes, net | 196,835 | 9,264 | 4.64 | % | 123,040 | 5,797 | 4.65 | % | ||||
| Subordinated debentures | 98,551 | 6,738 | 6.74 | % | 97,455 | 6,363 | 6.44 | % | ||||
| Total interest bearing liabilities | 10,102,545 | $ | 218,191 | 2.16 | % | 9,704,740 | $ | 162,245 | 1.67 | % | ||
| Noninterest bearing demand deposits | 2,948,212 | 3,014,056 | ||||||||||
| Total funding liabilities/cost of funds | $ | 13,050,757 | 1.67 | % | $ | 12,718,796 | 1.28 | % | ||||
| Net interest income/net interest spread | $ | 466,595 | 2.65 | % | $ | 487,927 | 3.04 | % | ||||
| Net interest margin | 3.27 | % | 3.53 | % | ||||||||
| Cost of deposits: | ||||||||||||
| Noninterest bearing demand deposits | $ | 2,948,212 | $ | — | — | % | $ | 3,014,056 | $ | — | — | % |
| Interest bearing deposits | 9,118,507 | 190,158 | 2.09 | % | 8,614,121 | 134,958 | 1.57 | % | ||||
| Total deposits | $ | 12,066,719 | $ | 190,158 | 1.58 | % | $ | 11,628,177 | $ | 134,958 | 1.16 | % |
Table Page 5
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AVERAGE BALANCES: | 12/31/2019 | 9/30/2019 | % change | 12/31/2018 | % change | 12/31/2019 | 12/31/2018 | % change | |||||||||||
| Loans receivable, including loans held for sale | $ | 12,036,477 | $ | 11,911,658 | 1 | % | $ | 11,935,109 | 1 | % | $ | 11,998,675 | $ | 11,547,022 | 4 | % | |||
| Investments | 2,219,502 | 2,281,191 | (3 | )% | 2,267,119 | (2 | )% | 2,249,864 | 2,260,002 | — | % | ||||||||
| Interest earning assets | 14,255,979 | 14,192,849 | — | % | 14,202,228 | — | % | 14,248,539 | 13,807,024 | 3 | % | ||||||||
| Total assets | 15,228,488 | 15,154,661 | — | % | 15,152,946 | — | % | 15,214,412 | 14,749,166 | 3 | % | ||||||||
| Interest bearing deposits | 9,095,400 | 9,072,282 | — | % | 8,979,699 | 1 | % | 9,118,507 | 8,614,121 | 6 | % | ||||||||
| Interest bearing liabilities | 10,001,093 | 10,000,882 | — | % | 10,096,299 | (1 | )% | 10,102,545 | 9,704,740 | 4 | % | ||||||||
| Noninterest bearing demand deposits | 2,999,048 | 2,958,233 | 1 | % | 3,018,672 | (1 | )% | 2,948,212 | 3,014,056 | (2 | )% | ||||||||
| Stockholders’ equity | 2,034,231 | 2,010,458 | 1 | % | 1,888,053 | 8 | % | 1,981,811 | 1,910,224 | 4 | % | ||||||||
| Net interest earning assets | 4,254,886 | 4,191,967 | 2 | % | 4,105,929 | 4 | % | 4,145,994 | 4,102,284 | 1 | % | ||||||||
| LOAN PORTFOLIO COMPOSITION: | 12/31/2019 | 9/30/2019 | % change | 12/31/2018 | % change | ||||||||||||||
| Commercial loans | $ | 2,719,210 | $ | 2,643,836 | 3 | % | $ | 2,324,820 | 17 | % | |||||||||
| Real estate loans | 8,664,965 | 8,587,943 | 1 | % | 8,721,600 | (1 | )% | ||||||||||||
| Consumer and other loans | 889,090 | 870,734 | 2 | % | 1,051,486 | (15 | )% | ||||||||||||
| Loans outstanding | 12,273,265 | 12,102,513 | 1 | % | 12,097,906 | 1 | % | ||||||||||||
| Unamortized deferred loan fees - net of costs | 2,742 | 2,169 | 26 | % | 209 | 1,212 | % | ||||||||||||
| Loans, net of deferred loan fees and costs | 12,276,007 | 12,104,682 | 1 | % | 12,098,115 | 1 | % | ||||||||||||
| Allowance for loan losses | (94,144 | ) | (93,882 | ) | — | % | (92,557 | ) | (2 | )% | |||||||||
| Loans receivable, net | $ | 12,181,863 | $ | 12,010,800 | 1 | % | $ | 12,005,558 | 1 | % | |||||||||
| REAL ESTATE LOANS BY PROPERTY TYPE: | 12/31/2019 | 9/30/2019 | % change | 12/31/2018 | % change | ||||||||||||||
| Retail buildings | $ | 2,298,872 | $ | 2,304,346 | — | % | $ | 2,379,589 | (3 | )% | |||||||||
| Hotels/motels | 1,709,189 | 1,664,311 | 3 | % | 1,694,696 | 1 | % | ||||||||||||
| Gas stations/car washes | 844,081 | 911,494 | (7 | )% | 980,619 | (14 | )% | ||||||||||||
| Mixed-use facilities | 785,882 | 743,428 | 6 | % | 698,779 | 12 | % | ||||||||||||
| Warehouses | 1,030,876 | 949,336 | 9 | % | 966,413 | 7 | % | ||||||||||||
| Multifamily | 465,397 | 473,640 | (2 | )% | 453,555 | 3 | % | ||||||||||||
| Other | 1,530,668 | 1,541,388 | (1 | )% | 1,547,949 | (1 | )% | ||||||||||||
| Total | $ | 8,664,965 | $ | 8,587,943 | 1 | % | $ | 8,721,600 | (1 | )% | |||||||||
| DEPOSIT COMPOSITION: | 12/31/2019 | 9/30/2019 | % change | 12/31/2018 | % change | ||||||||||||||
| Noninterest bearing demand deposits | $ | 3,108,687 | $ | 3,033,371 | 2 | % | $ | 3,022,633 | 3 | % | |||||||||
| Money market and other | 3,985,556 | 3,752,274 | 6 | % | 3,036,653 | 31 | % | ||||||||||||
| Saving deposits | 274,151 | 259,454 | 6 | % | 225,746 | 21 | % | ||||||||||||
| Time deposits | 5,158,970 | 5,189,651 | (1 | )% | 5,870,624 | (12 | )% | ||||||||||||
| Total deposit balances | $ | 12,527,364 | $ | 12,234,750 | 2 | % | $ | 12,155,656 | 3 | % | |||||||||
| DEPOSIT COMPOSITION (%): | 12/31/2019 | 9/30/2019 | 12/31/2018 | ||||||||||||||||
| Noninterest bearing demand deposits | 24.8 | % | 24.8 | % | 24.9 | % | |||||||||||||
| Money market and other | 31.8 | % | 30.7 | % | 25.0 | % | |||||||||||||
| Saving deposits | 2.2 | % | 2.1 | % | 1.8 | % | |||||||||||||
| Time deposits | 41.2 | % | 42.4 | % | 48.3 | % | |||||||||||||
| 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: | 12/31/2019 | 9/30/2019 | 12/31/2018 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 2,036,011 | $ | 2,031,284 | $ | 1,903,211 | |||||||||
| Common equity tier 1 ratio | 11.76 | % | 11.89 | % | 11.44 | % | |||||||||
| Tier 1 risk-based capital ratio | 12.51 | % | 12.65 | % | 12.21 | % | |||||||||
| Total risk-based capital ratio | 13.23 | % | 13.38 | % | 12.94 | % | |||||||||
| Tier 1 leverage ratio | 11.22 | % | 11.18 | % | 10.55 | % | |||||||||
| Total risk weighted assets | $ | 13,208,299 | $ | 12,951,936 | $ | 12,749,403 | |||||||||
| Book value per common share | $ | 16.19 | $ | 16.03 | $ | 15.03 | |||||||||
| Tangible common equity to tangible assets ^1^ | 10.27 | % | 10.43 | % | 9.61 | % | |||||||||
| Tangible common equity per share ^1^ | $ | 12.40 | $ | 12.27 | $ | 11.25 | |||||||||
| ^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. | |||||||||||||||
| Reconciliation of GAAP financial measures to non-GAAP financial measures: | |||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| 12/31/2019 | 9/30/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||
| RETURN ON AVERAGE TANGIBLE COMMON EQUITY | |||||||||||||||
| Average stockholders’ equity | $ | 2,034,231 | $ | 2,010,458 | $ | 1,888,053 | $ | 1,981,811 | $ | 1,910,224 | |||||
| Less goodwill and core deposit intangible assets, net | (476,596 | ) | (477,159 | ) | (478,897 | ) | (477,444 | ) | (479,811 | ) | |||||
| Average tangible common equity | $ | 1,557,635 | $ | 1,533,299 | $ | 1,409,156 | $ | 1,504,367 | $ | 1,430,413 | |||||
| Net Income | $ | 43,009 | $ | 42,592 | $ | 44,449 | $ | 171,040 | $ | 189,589 | |||||
| Return on average tangible common equity | 11.04 | % | 11.11 | % | 12.62 | % | 11.37 | % | 13.25 | % | |||||
| TANGIBLE COMMON EQUITY | 12/31/2019 | 9/30/2019 | 12/31/2018 | ||||||||||||
| Total stockholders’ equity | $ | 2,036,011 | $ | 2,031,284 | $ | 1,903,211 | |||||||||
| Less goodwill and core deposit intangible assets, net | (476,283 | ) | (476,840 | ) | (478,511 | ) | |||||||||
| Tangible common equity | $ | 1,559,728 | $ | 1,554,444 | $ | 1,424,700 | |||||||||
| Total assets | $ | 15,667,440 | $ | 15,379,878 | $ | 15,305,952 | |||||||||
| Less goodwill and core deposit intangible assets, net | (476,283 | ) | (476,840 | ) | (478,511 | ) | |||||||||
| Tangible assets | $ | 15,191,157 | $ | 14,903,038 | $ | 14,827,441 | |||||||||
| Common shares outstanding | 125,756,543 | 126,697,925 | 126,639,912 | ||||||||||||
| Tangible common equity to tangible assets | 10.27 | % | 10.43 | % | 9.61 | % | |||||||||
| Tangible common equity per share | $ | 12.40 | $ | 12.27 | $ | 11.25 |
Table Page 7
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ALLOWANCE FOR LOAN LOSSES CHANGE: | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | ||||||||||||||
| Balance at beginning of period | $ | 93,882 | $ | 94,066 | $ | 94,217 | $ | 92,557 | $ | 90,629 | $ | 92,557 | $ | 84,541 | |||||||
| Provision for loan losses | 1,000 | 2,100 | 1,200 | 3,000 | 2,800 | 7,300 | 14,900 | ||||||||||||||
| Recoveries | 939 | 780 | 725 | 1,292 | 805 | 3,736 | 3,991 | ||||||||||||||
| Charge offs | (1,677 | ) | (2,602 | ) | (2,076 | ) | (1,754 | ) | (1,677 | ) | (8,109 | ) | (10,875 | ) | |||||||
| PCI allowance adjustment | — | (462 | ) | — | (878 | ) | — | (1,340 | ) | — | |||||||||||
| Balance at end of period | $ | 94,144 | $ | 93,882 | $ | 94,066 | $ | 94,217 | $ | 92,557 | $ | 94,144 | $ | 92,557 | |||||||
| Net charge offs/average loans receivable (annualized) | 0.02 | % | 0.06 | % | 0.05 | % | 0.02 | % | 0.03 | % | 0.04 | % | 0.06 | % | |||||||
| ALLOWANCE FOR LOAN LOSSES COMPOSITION: | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | ||||||||||||||||
| Legacy loans ^1^ | $ | 82,898 | $ | 82,267 | $ | 81,606 | $ | 80,953 | $ | 78,259 | |||||||||||
| Purchased non-impaired loans ^2^ | 3,168 | 3,239 | 3,376 | 2,948 | 2,135 | ||||||||||||||||
| Purchased credit-impaired loans ^2^ | 8,078 | 8,376 | 9,084 | 10,316 | 12,163 | ||||||||||||||||
| Total allowance for loan losses | $ | 94,144 | $ | 93,882 | $ | 94,066 | $ | 94,217 | $ | 92,557 | |||||||||||
| ^1^ Legacy loans include loans originated by the Bank’s predecessor banks, loans originated by Bank of Hope and loans that were acquired that have been refinanced as new loans. | |||||||||||||||||||||
| ^2^ Purchased loans were marked to fair value at acquisition date, and the allowance for loan losses reflects provisions for credit deterioration since the acquisition date. | |||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
| NET CHARGED OFF (RECOVERED) LOANS BY TYPE: | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | ||||||||||||||
| Real estate loans | $ | 203 | $ | 951 | $ | (388 | ) | $ | (1,067 | ) | $ | 123 | $ | (301 | ) | $ | 5,700 | ||||
| Commercial loans | 245 | 596 | 1,399 | 1,250 | 436 | 3,490 | 8 | ||||||||||||||
| Consumer loans | 290 | 275 | 340 | 279 | 313 | 1,184 | 1,176 | ||||||||||||||
| Total net charge offs | $ | 738 | $ | 1,822 | $ | 1,351 | $ | 462 | $ | 872 | $ | 4,373 | $ | 6,884 |
Table Page 8
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| NONPERFORMING ASSETS: | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans on nonaccrual status 3 | 54,785 | $ | 42,235 | $ | 64,934 | $ | 86,637 | $ | 53,286 | |||||
| Delinquent loans 90 days or more on accrual status 4 | 398 | 353 | 387 | 1,529 | ||||||||||
| Accruing troubled debt restructured loans | 34,717 | 40,731 | 45,204 | 50,410 | ||||||||||
| Total nonperforming loans | 77,350 | 106,018 | 132,228 | 105,225 | ||||||||||
| Other real estate owned | 19,374 | 5,644 | 6,258 | 7,754 | ||||||||||
| Total nonperforming assets | 122,132 | $ | 96,724 | $ | 111,662 | $ | 138,486 | $ | 112,979 | |||||
| Nonperforming assets/total assets | % | 0.63 | % | 0.73 | % | 0.90 | % | 0.74 | % | |||||
| Nonperforming assets/loans receivable & OREO | % | 0.80 | % | 0.93 | % | 1.15 | % | 0.93 | % | |||||
| Nonperforming assets/total capital | % | 4.76 | % | 5.60 | % | 7.12 | % | 5.94 | % | |||||
| Nonperforming loans/loans receivable | % | 0.64 | % | 0.89 | % | 1.10 | % | 0.87 | % | |||||
| Nonaccrual loans/loans receivable | % | 0.35 | % | 0.54 | % | 0.72 | % | 0.44 | % | |||||
| Allowance for loan losses/loans receivable | % | 0.78 | % | 0.79 | % | 0.78 | % | 0.77 | % | |||||
| Allowance for loan losses/nonaccrual loans | % | 222.28 | % | 144.86 | % | 108.75 | % | 173.70 | % | |||||
| Allowance for loan losses/nonperforming loans | % | 121.37 | % | 88.73 | % | 71.25 | % | 87.96 | % | |||||
| Allowance for loan losses/nonperforming assets | % | 97.06 | % | 84.24 | % | 68.03 | % | 81.92 | % | |||||
| 3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling 28.1 million, 37.3 million, 32.1 million, 30.5 million, and 29.2 million, at December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018, respectively. | ||||||||||||||
| 4 Excludes Acquired Credit Impaired Loans totaling 13.2 million, 15.5 million, 17.6 million, 18.4 million, and 14.1 million, at December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018, respectively. | ||||||||||||||
| NONACCRUAL LOANS BY TYPE: | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | ||||||||||
| Real estate loans | 40,935 | $ | 27,920 | $ | 42,921 | $ | 58,030 | $ | 33,719 | |||||
| Commercial loans | 11,242 | 18,997 | 27,042 | 18,128 | ||||||||||
| Consumer loans | 3,073 | 3,016 | 1,565 | 1,439 | ||||||||||
| Total nonaccrual loans | 54,785 | $ | 42,235 | $ | 64,934 | $ | 86,637 | $ | 53,286 | |||||
| BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS: | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | ||||||||||
| Retail buildings | 4,215 | $ | 3,221 | $ | 2,919 | $ | 2,965 | $ | 3,085 | |||||
| Gas stations/car washes | 233 | 241 | 255 | 267 | ||||||||||
| Mixed-use facilities | 3,200 | 3,223 | 3,254 | 5,956 | ||||||||||
| Warehouses | 10,449 | 11,246 | 11,315 | 7,188 | ||||||||||
| Other 5 | 17,614 | 23,102 | 27,415 | 33,914 | ||||||||||
| Total | 35,709 | $ | 34,717 | $ | 40,731 | $ | 45,204 | $ | 50,410 | |||||
| 5 Includes commercial business and other loans |
All values are in US Dollars.
Table Page 9
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE: | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Legacy | ||||||||||
| 30 - 59 days | $ | 11,975 | $ | 14,229 | $ | 16,405 | $ | 30,971 | $ | 23,846 |
| 60 - 89 days | 4,447 | 4,164 | 718 | 1,227 | 218 | |||||
| Total delinquent loans less than 90 days past due - legacy | $ | 16,422 | $ | 18,393 | $ | 17,123 | $ | 32,198 | $ | 24,064 |
| Acquired | ||||||||||
| 30 - 59 days | $ | 2,458 | $ | 11,052 | $ | 1,508 | $ | 2,717 | $ | 1,094 |
| 60 - 89 days | 265 | 371 | 577 | — | 406 | |||||
| Total delinquent loans less than 90 days past due - acquired | $ | 2,723 | $ | 11,423 | $ | 2,085 | $ | 2,717 | $ | 1,500 |
| Total delinquent loans less than 90 days past due | $ | 19,145 | $ | 29,816 | $ | 19,208 | $ | 34,915 | $ | 25,564 |
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE: | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | |||||
| Legacy | ||||||||||
| Real estate loans | $ | 6,224 | $ | 9,707 | $ | 9,580 | $ | 12,324 | $ | 2,352 |
| Commercial loans | 415 | 2,004 | 1,755 | 2,711 | 5,159 | |||||
| Consumer loans | 9,783 | 6,682 | 5,788 | 17,163 | 16,553 | |||||
| Total delinquent loans less than 90 days past due - legacy | $ | 16,422 | $ | 18,393 | $ | 17,123 | $ | 32,198 | $ | 24,064 |
| Acquired | ||||||||||
| Real estate loans | $ | 1,465 | $ | 10,865 | $ | 214 | $ | 1,371 | $ | 905 |
| Commercial loans | 277 | 278 | 77 | 374 | 595 | |||||
| Consumer loans | 981 | 280 | 1,794 | 972 | — | |||||
| Total delinquent loans less than 90 days past due - acquired | $ | 2,723 | $ | 11,423 | $ | 2,085 | $ | 2,717 | $ | 1,500 |
| Total delinquent loans less than 90 days past due | $ | 19,145 | $ | 29,816 | $ | 19,208 | $ | 34,915 | $ | 25,564 |
| CRITICIZED LOANS: | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | |||||
| Legacy | ||||||||||
| Special mention | $ | 120,620 | $ | 101,892 | $ | 147,050 | $ | 154,671 | $ | 121,622 |
| Substandard | 164,131 | 184,518 | 202,676 | 223,511 | 193,494 | |||||
| Doubtful / Loss | 13 | 17 | — | 351 | — | |||||
| Total criticized loans - legacy | $ | 284,764 | $ | 286,427 | $ | 349,726 | $ | 378,533 | $ | 315,116 |
| Acquired | ||||||||||
| Special mention | $ | 20,832 | $ | 37,956 | $ | 39,435 | $ | 50,702 | $ | 41,467 |
| Substandard | 95,147 | 84,087 | 121,165 | 129,122 | 124,421 | |||||
| Doubtful / Loss | — | — | 1 | 218 | 412 | |||||
| Total criticized loans - acquired | $ | 115,979 | $ | 122,043 | $ | 160,601 | $ | 180,042 | $ | 166,300 |
| Total criticized loans | $ | 400,743 | $ | 408,470 | $ | 510,327 | $ | 558,575 | $ | 481,416 |
Table Page 10
Exhibit
News Release
HOPE BANCORP DECLARES QUARTERLY CASH DIVIDEND OF $0.14 PER SHARE
LOS ANGELES - January 22, 2019 - 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 21, 2020 to all stockholders of record as of the close of business on February 7, 2020.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Thursday, January 23, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its fourth quarter and full year ended December 31, 2019. 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 January 30, 2020, replay access code 10137771.
About Hope Bancorp, Inc.
Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $15.7 billion in total assets as of December 31, 2019. 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.
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 |
|---|
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hope2019q4earningsconfer
2019 Fourth Quarter Earnings Conference Call Thursday, January 23, 2020 1
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 loan 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. 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. 2
Q4 2019 Financial Highlights Net income of $43.0 million, or $0.34 per diluted common share Earnings & Net interest margin compression of 9bps Q‐o‐Q in line with management guidance of 5‐7bps initial Net Profitability impact from each 25bps reduction in Fed Funds Rate Income Noninterest expense well contained and representing a stable 1.85% of average assets $43.0MM Record new loan originations funded of $848 million reflects well‐balanced mix of loans Loan CRE loans accounted for 61% of new loan production; C&I 31%; and residential mortgage 8% Diluted Average rate on new loans declined to 4.37%, reflecting the impact of two 25bps decreases in Fed Production Funds Rate in September and October 2019 EPS $0.34 Total deposits increased 2% Q‐o‐Q and continued the trend of favorable mix shift to lower‐cost deposits Increases in noninterest bearing demand deposits, savings and MMAs, offset by decreases in Gross Deposits higher‐cost time deposits Loans Cost of deposits decreased 13bps Q‐o‐Q and represents the first decrease since 4Q16 CD repricing gap continues to trend positive with time deposit renewals lower than maturing rate $12.3B Overall asset quality remains healthy Deposits Total criticized loans down 2% Q‐o‐Q to lowest level since MOE Asset Quality Nonperforming loans increased by $20.7 million vs. 3Q19 reflecting the inflow of $10 million $12.5B construction loan that was not extended and temporary delays in renewals Credit losses remain minimal with net charge offs of $738,000, or 2bps of average loans annualized 3
Loan Production & Portfolio Trends New Loan Originations Funded Record new loan originations funded of $848 million 5.52% 5.46% resulting in 1.4% net loan growth, or 5.7% annualized 5.22% ($ millions) 4.97% 4.64% 4.79% 4.72% 4.42% 4.37% Aggregate payoffs and paydowns remained at higher‐ than‐usual levels at $668 million, versus $633 million in $847.6 $764.3 $792.3 $784.1 3Q19 $693.9 $69 $663.5 $182 $168 $667.3 $181 $62 $266 Largely driven by higher payoffs, reflecting $194 $167 $503.9 $138 $442.0 $236 $285 $75 $283 competitive business environment $85 $155 $71 $135 $176 $478 $513 Well diversified mix of loan originations representing $385 $347 $325 $346 $349 $236 $253 targeted mix of higher‐yielding loans 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 61% CRE / 31% C&I / 8% Consumer CRE C&I Consumer Average Rate Decrease in average rate on new loan production reflects 25bps rate cuts in September and October 2019 Loan Portfolio Composition CRE production of $513 million reflects modest 4% 7% 7% 19% increase in demand for CRE loans 22% 22% 77% 71% 71% C&I production of $265 million reflects continued success in banking middle‐market commercial borrowers 9/30/2016 9/30/2019 12/31/2019 (First quarter after MOE) SBA loan production of $62 million of which $46 million was 7(a) 4
Net Interest Income and Margin Key Net Interest Income Drivers Net Interest Income & NIM Average Loans & Yield ($ millions) ($ billions) $12.1 $12.0 $126.4 $11.9 $12.0 $11.9 $11.8 $122.8 $123.1 $121.9 $11.4 $120.1 $119.6 $117.2 $11.1 5.31% 5.32% 5.27% $116.3 $10.9 5.21% 5.16% 5.04% $113.5 3.84% 3.61% 3.66% 3.47% 3.41% 3.39% 5.16% 3.31% 3.25% 5.12% 5.04% 3.16% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 Avg Loans Yield Net Interest Income NIM Average Interest Bearing Deposits & 4Q19 NII decreased modestly Q‐o‐Q reflecting the impact of the Cost of Deposits interest rate cuts in September and October 2019 $9.2 $9.1 $9.1 $9.1 ($ millions) $8.8 $9.0 Net interest margin compression of 9bps in line with management $8.5 $8.2 guidance of 5‐7bps impact for each 25bps decrease in Fed Funds $7.9 1.57% 1.62% 1.62% 1.40% 1.49% Rate 1.24% 1.06% 0.91% 0.80% Decline in loan yields driven by the repricing of variable rate loans following the September and October 2019 rate cuts, payoff of higher‐yielding loans and lower rate on new originations 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 Decline in loan yields partially offset by substantial decrease Average Interest Bearing Deposits Cost of Deposits in cost of deposits Expectation for margin compression of 2‐3bps in 1Q20 5
Noninterest Income Noninterest Income Noninterest income stable at $13.0 million, unchanged ($ millions) $19.9 from preceding quarter Quarter‐over‐Quarter Gain‐on Sale Variance $16.5 $15.3 $1.1 million increase Q‐o‐Q in gain on sale of other loans $10.4 $13.4 $13.0 $13.0 Reflects $35.5 million total sales of mortgage loans vs. $12.3 $7.3 $11.6 $30.9 in 3Q19 $6.7 $11.4 $911,000 decrease Q‐o‐Q in swap fee income $6.1 $7.3 $6.6 $0.3 $1.2 $6.7 $1.3 $0.4 $6.2 $6.4 $0.5 $2.6 $3.5 $3.5 $2.3 $0.4 $0.1 $0.2 $1.9 $0.4 $0.7 $1.1 $0.8 $5.0 $4.8 $4.6 $4.6 $4.6 $4.3 $4.4 $4.7 $4.5 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 Service fees on dep accts Gain on sale of SBA loans Gain on sale of other loans Gain on sale of securities Other income and fees 6
Noninterest Expense and Efficiency Noninterest Expense and Efficiency Ratio Breakdown of Noninterest Expense and FTE ($ millions) ($ millions) $73.0 $71.6 $70.8 $71.4 $68.5 $67.5 $70.2 $70.0 $70.4 $33.3 $31.1 $32.1 $29.1 $30.5 $33.6 $30.4 $28.4 $30.6 54.06% 55.11% 54.15% 55.68% 51.12% 51.87% 52.57% 48.92% 49.38% 1,502 1,491 1,512 1,494 1,470 1,468 1,446 1,441 FTE FTE FTE FTE 1,439 FTE FTE FTE FTE FTE $39.7 $39.4 $40.6 $37.0 $36.6 $40.4 $39.3 $41.6 $39.8 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 Noninterest Expense Efficiency Ratio Compensation Other FTE Noninterest Expense to Average Assets Noninterest expense increased modestly to $70.4 million in ($ billions) $15.3 4Q19 from $70.0 million in 3Q19 $15.0 $15.2 $15.2 $15.2 $15.2 $14.6 – $772,000 FDIC assessment in 4Q19 vs. $0 in 3Q19 due to $14.0 $14.2 assessment credits for small banks – Professional fees up $707,000 Q‐o‐Q – Higher credit related costs and lower OREO credits in 4Q19 2.08% vs. 3Q19 1.96% 1.93% 1.88% – $1.8 million decrease in compensation expense primarily 1.80% 1.85% 1.85% 1.85% 1.85% reflects fluctuations in retirement plan and self‐funded group insurance expenses Annualized noninterest expense to average assets stable at 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1.85% in 4Q19 and 3Q19 Average Assets NIE to Avg Assets Annualized 7
Deposit Trends Deposit Composition Total end‐of‐period deposits increased 2% Q‐o‐Q Favorable shift in deposit mix continued with increases in lower‐ cost deposits and decreases in time deposits $12.16 Billion $12.23 Billion $12.53 Billion – 2% increase in noninterest bearing deposits Q‐o‐Q – 6% increase in MMA & NOW balances Q‐o‐Q – 1% decreased in time deposits Q‐o‐Q 24.9% 24.8% 24.8% 41. 48. 42. Total cost of deposits decreased 13bps in 4Q19 from 3Q19 and 4% 2% 3% have trended downward since the peak in July 2019 25.0% 30.7% 31.8% 1.8% 2.1% 2.2% Repricing gap on time deposit renewals continued to improve with repricing reduction of 59bps in 4Q19, in contrast with 12/31/2018 9/30/2019 12/31/2019 18bps reduction in 3Q19 Deposit gathering and cost containment strategies remain a top DDA MMA/NOW Savings Time priority Deposit Cost Trend CD Renewal Repricing Gap 0.25% 0.22% 0.22% 0.19% 0.13% 1.64% 1.65% 0.10% 0.85% 0.10% 1.63% 1.62% 1.60% 1.61% 0.65% 0.69% 1.58% 1.58% 0.51% 0.50% 0.04% 1.53% 1.54% 0.33% 0.18% 1.49% ‐0.18% 1.44% ‐0.59% ‐0.12% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 Cost of Deposits CD Renewal Repricing Gap QTD Change in Avg CD Rate DDA = Noninterest bearing demand deposits MMA/NOW = Money market and NOW deposits CD Renewal Repricing Gap = the difference between a CD’s expiring rate and the renewal rate NOW = Negotiable Order of Withdrawal 8
Asset Quality Nonperforming Assets Provision Expense & Net Charge Offs ($ millions) ($ millions) $7.3 $137.9 $138.5 $125.2 $8.3 $129.1 $6.3 $122.1 $10.8 $8.7 $118.2 $113.0 $111.7 $3.6 $129.6 $9.0 $7.8 $132.2 $5.6 $96.7 $24.1 0.22% $114.4 $120.4 $2.8 $3.0 $109.2 $106.0 $2.5 $2.3 $105.2 $19.4 $98.0 $2.1 $1.2 0.95% 0.03% $1.0 0.88% $77.4 0.02% 0.02% 0.87% 0.78% 0.90% 0.10% 0.06% 0.74% 0.73% 0.78% ‐0.04% 0.05% 0.02% 0.63% 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 Provision Expense NPLs OREO NPAs/Total Assets Net Charge Offs (Recoveries) (annualized) Criticized Loans Underlying health of broader portfolio remains solid ($ millions) Total criticized loans down 2% Q‐o‐Q to lowest level $568.5 since MOE $540.7 $520.5 $558.6 $497.2 $481.4 $510.3 Nonperforming loans increased by $20.7 million vs. $353.6 $353.2 $344.6 $302.7 $408.5 $400.7 $357.7 $318.3 $323.8 3Q19 reflecting proactive identification and $268.6 $259.3 management of potentially problematic credits and a 5.12% 4.79% 4.63% 4.26% 4.36% 3.98% 4.26% temporary delay in renewals 3.37% 3.26% $214.9 $196.1 $139.5 $217.8 $163.1 $205.4 $186.5 $139.8 $141.5 – $10 million construction project moved to nonaccrual during 4Q19 is well secured with no impairment; 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 management expects the borrower will be refinanced Classified by another lender Special Mention Credit losses continued to be minimal, with net charge Total Criticized Loans as a % of Gross Loans offs of $738,000, or 2bps of average loans on an annualized basis 9
Near-Term Outlook & Strategies 2020 Key Priorities Profitable Growth – Better deposit cost management Profitable Growth – Better loan yields Profitable Growth – Better efficiencies Capital Management Continuation of positive trends from 2019 Favorable shift in mix of deposits to lower‐cost core deposits and decreasing deposit costs Early identification and management strategy to protect solid asset quality Well‐balanced mix of new loan production favoring higher‐yielding loans and less reliant on CRE Concentrated focus on expense management leading to improving efficiencies Full‐year loan growth guidance of low to mid‐single digit organic growth for 2020 amidst strong headwinds of fierce competitive landscape and higher‐than‐usual payoff activity NIM guidance of 2bps ‐ 3bps compression in 1Q20 Committed to Building on Strong Foundation and Enhancing Long‐Term Shareholder Value 10
2019 Fourth Quarter Earnings Conference Call Q&A 11
Appendix – Pre-Tax Acquisition Accounting Adjustments and Merger-Related Expenses Q4 Q1 Q2 Q3 Q4 ($ thousands) 2018 2019 2019 2019 2019 Accretion of discount on acquired performing loans $2,360 $2,166 $1,799 $2,046 $1,945 Accretion of discount on acquired credit impaired loans 4,867 5,834 6,848 5,234 5,958 Amortization of low income housing tax credits (85) (76) (76) (75) (76) Amortization of premium on acquired FHLB borrowings 357 1,280 — — — Accretion of discount on acquired subordinated debt (272) (273) (275) (278) (281) Amortization of premium on acquired time deposits————— Amortization of core deposit intangibles (616) (557) (557) (557) (557) Total acquisition accounting adjustments $6,611 $8,374 $7,739 $6,370 $6,989 12