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
July 30, 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 July 30, 2020, Hope Bancorp, Inc. (“HOPE” or the “Company”) issued a news release concerning its results of operations and financial condition for the second quarter and six-month periods ended and as of June 30, 2020. A copy of the July 30, 2020 press release is attached hereto as Exhibit 99.1.
Item 8.01 Other Events.
On July 30, 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 August 24, 2020 to all stockholders of record as of the close of business on August 10, 2020. A copy of the July 30, 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 Wednesday, July 31, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its second quarter and six-month periods ended June 30, 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 July 30, 2020, concerning the results of operations and financial condition for the second quarter ended and as of June 30, 2020. |
| 99.2 | News release, dated July 30, 2020, announcing the declaration of a quarter cash dividend. |
| 99.3 | Presentation Materials, dated July31, 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: July 31, 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 July 30, 2020, concerning the results of operations and financial condition for the second quarter ended and as of June 30, 2020. |
| 99.2 | News release, dated July 30, 2020, announcing the declaration of a quarterly cash dividend. |
| 99.3 | Presentation Materials, dated July 31, 2020. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Document
News Release
HOPE BANCORP REPORTS 2020 SECOND QUARTER FINANCIAL RESULTS
LOS ANGELES - July 30, 2020 - Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its three and six-month periods ended June 30, 2020.
For the three months ended June 30, 2020, net income totaled $26.8 million, or $0.22 per diluted common share, compared with $26.0 million, or $0.21 per diluted common share for the 2020 first quarter. In the year-ago second quarter, net income totaled $42.7 million, or $0.34 per diluted common share.
“The second quarter of 2020 represented the most challenging operating environment in the history of our Bank, with the COVID-19 crisis exacerbated by the aggregate 150 basis point reduction in the Fed Funds rate in March and the mounting social justice movement across the nation,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “Notwithstanding these strong headwinds, I am proud of how the entire Bank of Hope team came together and has been managing through this difficult period. We delivered solid loan production, significant core deposit growth and positive deposit cost trends as well as meaningful cost reductions. We also supported many of our customers impacted by COVID-19 with modifications under the CARES Acts during the quarter and maintained relatively stable asset quality metrics. While our net interest margin was heavily impacted by the rate cuts as well as a buildup of our liquidity and resulting excess cash balances, we believe this quarter represents the trough. Going forward, we expect stable loan yields, continued reductions in our deposit costs and the deployment of excess cash balances will lead to an expansion of our net interest margin in the coming quarters.
“We are in the late stages of developing additional initiatives in light of the new normal designed to restructure our balance sheet and contain expenses to further optimize our operational performance. We believe the near-term implementation of these initiatives will lead to improved profitability as we progress through the year and beyond. With our robust capital and liquidity positions as well as the successes achieved to date with our deposit initiatives, we have great confidence in our ability to navigate through this new landscape and emerge as an even stronger regional bank to support the financial needs of our customers and communities and deliver greater value to our shareholders.”
Q2 2020 Highlights
•New loan originations totaled $832 million, including $480 million of PPP loans, which led to a 2.3% increase in loans receivable quarter-over-quarter, or 9% annualized.
•Total deposits increased 10.0% quarter-over-quarter, of which the vast majority of the growth was in noninterest bearing demand deposits.
•Continuation of favorable mix-shift to lower-cost core deposits contributed to a 47 basis point reduction quarter-over-quarter in total deposit costs.
•NIM compression of 52 basis points represents the trough, with expansion expected going forward from stable loan yields, continued reduction in deposit costs and deployment of excess cash.
•Strategic reductions in noninterest expenses contributed to an improved 1.60% ratio as a percentage of average assets, versus 1.87% in the preceding first quarter.
•Continued buildup of reserves with allowance for credit losses as a percentage of loans receivable increasing to 1.26% at June 30, 2020 from 1.15% at March 31, 2020.
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Financial Highlights
| (dollars in thousands, except per share data) (unaudited) | At or for the Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 6/30/2020 | 3/31/2020 | 6/30/2019 | ||||||||
| Net income | $ | 26,753 | $ | 25,953 | $ | 42,681 | ||||
| Diluted earnings per share | $ | 0.22 | $ | 0.21 | $ | 0.34 | ||||
| Net interest income before provision for credit losses | $ | 109,814 | $ | 119,291 | $ | 117,221 | ||||
| Net interest margin | 2.79 | % | 3.31 | % | 3.31 | % | ||||
| Noninterest income | $ | 11,240 | $ | 13,264 | $ | 12,287 | ||||
| Noninterest expense | $ | 67,030 | $ | 72,140 | $ | 71,371 | ||||
| Net loans receivable | $ | 12,710,063 | $ | 12,438,493 | $ | 11,883,068 | ||||
| Deposits | $ | 14,123,532 | $ | 12,836,567 | $ | 12,172,384 | ||||
| Total cost of deposits | 0.87 | % | 1.34 | % | 1.62 | % | ||||
| Nonaccrual loans ^(1) (2)^ | $ | 82,137 | $ | 72,639 | $ | 64,934 | ||||
| Nonperforming loans to loans receivable ^(1) (2)^ | 1.06 | % | 0.93 | % | 0.89 | % | ||||
| ACL to loans receivable^(3)^ | 1.26 | % | 1.15 | % | 0.79 | % | ||||
| ACL to nonaccrual loans ^(1) (2) (3)^ | 196.95 | % | 199.51 | % | 144.86 | % | ||||
| ACL to nonperforming assets ^(1) (2) (3)^ | 102.95 | % | 103.62 | % | 84.24 | % | ||||
| Provision for credit losses | $ | 17,500 | $ | 28,000 | $ | 1,200 | ||||
| Net charge offs | $ | 652 | $ | 3,421 | $ | 1,351 | ||||
| Return on average assets (“ROA”) | 0.64 | % | 0.67 | % | 1.12 | % | ||||
| Return on average equity (“ROE”) | 5.31 | % | 5.12 | % | 8.71 | % | ||||
| Return on average tangible common equity (“ROTCE”) ^(4)^ | 6.94 | % | 6.69 | % | 11.51 | % | ||||
| Noninterest expense / average assets | 1.60 | % | 1.87 | % | 1.88 | % | ||||
| Efficiency ratio | 55.37 | % | 54.42 | % | 55.11 | % |
^(1)^ Excludes delinquent SBA loans that are guaranteed and currently in liquidation.
^(2)^ Excludes purchased credit impaired (“PCI”) loans for June 30, 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 Second Quarter
Net interest income before provision for credit losses for the 2020 second quarter totaled $109.8 million, compared with $119.3 million in the 2020 first quarter. The decrease primarily reflects a full quarter’s impact of the aggregate 150 basis point decrease in the Fed Funds rate in March 2020, along with a large payoff of an acquired loan that contributed $5.6 million in purchase accounting discount accretion in the first quarter of 2020. Net interest income before provision for credit losses amounted to $117.2 million in the year-ago second quarter.
The net interest margin for the 2020 second quarter decreased 52 basis points to 2.79% from 3.31% in the preceding first quarter and was primarily impacted by the Fed Funds rate reductions and a significant increase in lower-yielding cash balances as the Company temporarily increased its excess liquidity as a precautionary measure in light of the COVID-19 pandemic. In addition, the large payoff mentioned above benefited the 2020 first quarter net interest margin by 16 basis points. The net interest margin for the 2019 second quarter was 3.31%.
The weighted average yield on loans for the 2020 second quarter decreased 83 basis points to 4.23% from 5.06% in the 2020 first quarter, reflecting the repricing of variable rate loans in the Company’s portfolio as a result of the 150 basis point reduction in the Fed Funds rate. In the year-ago second quarter, the weighted average yield on loans was 5.32%.
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The weighted average cost of deposits for the 2020 second quarter decreased 47 basis points to 0.87% from 1.34% for the 2020 first quarter and decreased 75 basis points from 1.62% for the year-ago second quarter. The significant improvements in the weighted average cost of deposits reflects the Company’s ongoing success with its initiative to enhance its deposit mix to favor lower-cost core deposits.
Noninterest income totaled $11.2 million for the 2020 second quarter, compared with $13.3 million for the preceding first quarter and $12.3 million for the 2019 second quarter. The Company noted a 38% reduction in service fees on deposit accounts as transaction volumes decreased significantly in the midst of the COVID-19 related lockdowns. In addition, the net gains on sales of other loans in the preceding first quarter included gains from a bulk sale of residential mortgage loans, together with sales of new residential mortgage originations.
Noninterest expense for the 2020 second quarter declined 7% to $67.0 million from $72.1 million in the preceding first quarter, with reductions in compensation expense and professional fees being the largest factors driving the improvement. In the year-ago second quarter, noninterest expense totaled $71.4 million. Noninterest expense as a percentage of average assets for the 2020 second quarter improved to 1.60% from 1.87% for the 2020 first quarter and 1.88% for the 2019 second quarter.
Salaries and employee benefits expense for the 2020 second quarter decreased 9% to $38.9 million from $42.5 million for the 2020 first quarter. The Company noted that PPP loan origination costs of $5.2 million was a material factor in the reduced compensation expense for the current quarter. In the 2019 second quarter, salaries and employee benefits expense totaled $39.3 million.
The effective tax rate for the 2020 second quarter was 26.8%, compared with 19.9% for the preceding first quarter, reflecting the Company’s projections for increased pretax income in the second half of 2020 than previously budgeted. In the year-ago second quarter, the effective tax rate was 25.0%.
Balance Sheet Summary
New loan originations funded during the 2020 second quarter totaled $832.0 million and included SBA PPP loan originations of $480.1 million, traditional SBA loan production of $5.9 million and residential mortgage loan originations of $72.3 million. This compares with 2020 first quarter originations of $624.5 million, including traditional SBA loan production of $49.8 million and residential mortgage loan originations of $37.4 million. In the year-ago second quarter, new loan originations funded totaled $503.9 million, including SBA loan production of $37.2 million and residential mortgage loan originations of $74.0 million.
At June 30, 2020, loans receivable increased 2.3% to $12.87 billion from $12.58 billion at March 31, 2020 and increased 7.5% from $11.98 billion at June 30, 2019.
Total deposits at June 30, 2020 increased by $1.29 billion, or 10.0% quarter-over-quarter, to $14.12 billion from $12.84 billion at March 31, 2020, with $1.03 billion of the increase in noninterest bearing demand deposits, of which approximately $326 million is identified as being related to PPP loans that the Company originated. Total deposits at June 30, 2019 amounted to $12.17 billion. The increases in total deposits versus the comparable periods reflect a continuation of a positive shift in the mix of deposits favoring core deposits over the last year.
Following is the deposit composition as of June 30, 2020, March 31, 2020 and June 30, 2019:
| (dollars in thousands) (unaudited) | 6/30/2020 | 3/31/2020 | % change | 6/30/2019 | % change | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Noninterest bearing demand deposits | $ | 4,036,383 | $ | 3,010,143 | 34 | % | $ | 3,009,218 | 34 | % |
| Money market and other | 4,831,679 | 4,851,000 | — | % | 3,238,947 | 49 | % | |||
| Saving deposits | 296,614 | 272,577 | 9 | % | 243,859 | 22 | % | |||
| Time deposits | 4,958,856 | 4,702,847 | 5 | % | 5,680,360 | (13) | % | |||
| Total deposit balances | $ | 14,123,532 | $ | 12,836,567 | 10 | % | $ | 12,172,384 | 16 | % |
Reflecting the continued favorable mix-shift in deposits, total cost of deposits decreased 47 basis points to 0.87% from 1.34% for the 2020 first quarter and decreased 75 basis points from 1.62% for the 2019 second quarter.
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Allowance for Credit Losses
The 2020 second quarter provision for credit losses under the CECL methodology was $17.5 million, compared with $28.0 million for the preceding first quarter. This compares with a provision for loan losses under the prior incurred loss methodology of $1.2 million for the 2019 second quarter.
The provision for credit losses for the 2020 second quarter reflects updated macroeconomic variables incorporating the Moody’s Analytics Baseline scenario published June 2020, enhanced qualitative factors in the Company’s ACL methodology, relatively stable asset quality metrics and minimal credit losses, as well as an additional Management overlay to accounts related to COVID-19 modifications.
The ACL as of June 30, 2020 increased to $161.8 million from $144.9 million at March 31, 2020 and from $94.1 million at June 30, 2019. As a percentage of loans receivable (excluding loans held for sale), the ACL rose to 1.26% at June 30, 2020 from 1.15% at March 31, 2020 and from 0.79% at June 30, 2019. The coverage ratio of the ACL to nonperforming loans was 118.82%, 124.06% and 88.73% at June 30, 2020, March 31, 2020 and June 30, 2019, respectively.
| (unaudited) | (dollars in thousands) | |
|---|---|---|
| Allowance for loan losses - Dec 31, 2019 | $ | 94,144 |
| CECL day 1 adoption impact | 26,200 | |
| Allowance for credit losses - Jan 1, 2020 | 120,344 | |
| Provision for credit losses | 28,000 | |
| Recoveries | 2,536 | |
| Charge offs | (5,957) | |
| Allowance for credit losses - Mar 31, 2020 | $ | 144,923 |
| Provision for credit losses | 17,500 | |
| Recoveries | 252 | |
| Charge offs | (904) | |
| Allowance for credit losses - June 30, 2020 | $ | 161,771 |
Credit Quality
Following are the components of nonperforming assets as of June 30, 2020, March 31, 2020 and June 30, 2019:
| (dollars in thousands) (unaudited) | 6/30/2020 | 3/31/2020 | 6/30/2019 | ||||
|---|---|---|---|---|---|---|---|
| Loans on nonaccrual status ^(1)^ | $ | 82,137 | $ | 72,639 | $ | 64,934 | |
| Delinquent loans 90 days or more on accrual status ^(2)^ | 9,986 | 387 | 353 | ||||
| Accruing troubled debt restructured loans | 44,026 | 43,789 | 40,731 | ||||
| Total nonperforming loans | 136,149 | 116,815 | 106,018 | ||||
| Other real estate owned | 20,983 | 23,039 | 5,644 | ||||
| Total nonperforming assets | $ | 157,132 | $ | 139,854 | $ | 111,662 |
^(1)^ Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $30.3 million, $28.8 million and $32.1 million, at June 30, 2020, March 31, 2020 and June 30, 2019, respectively.
^(2)^ Excludes PCI loans totaling $17.6 million at June 30, 2019.
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Following are the components of criticized loan balances as of June 30, 2020, March 31, 2020 and June 30, 2019:
| (dollars in thousands) (unaudited) | 6/30/2020 | 3/31/2020 | 6/30/2019 | ||||
|---|---|---|---|---|---|---|---|
| Special Mention | $ | 127,149 | $ | 122,279 | $ | 186,485 | |
| Classified | 299,368 | 278,783 | 323,842 | ||||
| Criticized | $ | 426,517 | $ | 401,062 | $ | 510,327 |
During the 2020 second quarter, net charge offs were minimal at $652,000, or 0.02% of average loans receivable on an annualized basis. This compares with net charge offs of $3.4 million, or 0.11% of average loans receivable on an annualized basis for the 2020 first quarter and net charge offs for the 2019 second quarter of $1.4 million, or 0.05% of average loans receivable on an annualized basis.
Individually evaluated loans (previously referred to as impaired loans prior to the adoption of CECL) totaled $116.1 million at June 30, 2020. This compares with individually evaluated loans of $118.7 million at March 31, 2020 and impaired loans of $106.0 million at June 30, 2019. The Company attributed $22.2 million of the increase in individually evaluated loans in the 2020 first quarter to the reclassification of PCD (formerly purchased credit-impaired loans) due to the implementation of the new CECL accounting standards.
Capital
At June 30, 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 June 30, 2020, March 31, 2020 and June 30, 2019:
| Hope Bancorp, Inc. (unaudited) | 6/30/2020 | 3/31/2020 | 6/30/2019 | Minimum Guideline for “Well-Capitalized” Bank |
|---|---|---|---|---|
| Common Equity Tier 1 Capital | 11.50% | 11.44% | 11.90% | 6.50% |
| Tier 1 Leverage Ratio | 10.08% | 10.88% | 10.94% | 5.00% |
| Tier 1 Risk-Based Ratio | 12.24% | 12.19% | 12.67% | 8.00% |
| Total Risk-Based Ratio | 13.23% | 13.06% | 13.42% | 10.00% |
As previously announced, the Company has elected to defer the impact of the adoption of CECL for two years, at which time the impact will be phased-in over a three year period. Therefore, the Day 1 CECL adjustment has not had an impact to the Company’s regulatory capital ratios as of June 30, 2020.
Following are tangible common equity (“TCE”) per share and TCE as a percentage of tangible assets as of June 30, 2020, March 31, 2020 and June 30, 2019:
| (unaudited) | 6/30/2020 | 3/31/2020 | 6/30/2019 |
|---|---|---|---|
| Tangible common equity per share ^(1)^ | $12.62 | $12.52 | $11.98 |
| Tangible common equity to tangible assets ^(2)^ | 9.32% | 9.92% | 10.21% |
^(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.
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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 Friday, July 31, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its second quarter ended June 30, 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 August 7, 2020, replay access code 10146201.
About Hope Bancorp, Inc.
Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $17.2 billion in total assets as of June 30, 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, Georgia and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.
Forward-Looking Statements
Some statements in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; 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.
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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: | 6/30/2020 | 3/31/2020 | % change | 12/31/2019 | % change | 6/30/2019 | % change | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash and due from banks | $ | 1,468,949 | $ | 802,033 | 83 | % | $ | 698,567 | 110 | % | $ | 609,795 | 141 | % |
| Securities available for sale, at fair value | 1,887,604 | 1,718,702 | 10 | % | 1,715,987 | 10 | % | 1,826,903 | 3 | % | ||||
| Federal Home Loan Bank (“FHLB”) stock and other investments | 98,357 | 96,956 | 1 | % | 97,659 | 1 | % | 100,962 | (3) | % | ||||
| Loans held for sale, at the lower of cost or fair value | 11,350 | 8,281 | 37 | % | 54,271 | (79) | % | 6,426 | 77 | % | ||||
| Loans receivable | 12,871,834 | 12,583,416 | 2 | % | 12,276,007 | 5 | % | 11,977,134 | 7 | % | ||||
| Allowance for credit losses | (161,771) | (144,923) | 12 | % | (94,144) | 72 | % | (94,066) | 72 | % | ||||
| Net loans receivable | 12,710,063 | 12,438,493 | 2 | % | 12,181,863 | 4 | % | 11,883,068 | 7 | % | ||||
| Accrued interest receivable | 52,859 | 30,450 | 74 | % | 30,772 | 72 | % | 33,980 | 56 | % | ||||
| Premises and equipment, net | 51,029 | 51,392 | (1) | % | 52,012 | (2) | % | 52,552 | (3) | % | ||||
| Bank owned life insurance | 77,050 | 76,429 | 1 | % | 76,339 | 1 | % | 75,963 | 1 | % | ||||
| Goodwill | 464,450 | 464,450 | — | % | 464,450 | — | % | 464,450 | — | % | ||||
| Servicing assets | 14,164 | 14,847 | (5) | % | 16,417 | (14) | % | 19,997 | (29) | % | ||||
| Other intangible assets, net | 10,770 | 11,302 | (5) | % | 11,833 | (9) | % | 12,947 | (17) | % | ||||
| Other assets | 322,417 | 308,099 | 5 | % | 267,270 | 21 | % | 251,784 | 28 | % | ||||
| Total assets | $ | 17,169,062 | $ | 16,021,434 | 7 | % | $ | 15,667,440 | 10 | % | $ | 15,338,827 | 12 | % |
| Liabilities: | ||||||||||||||
| Deposits | $ | 14,123,532 | $ | 12,836,567 | 10 | % | $ | 12,527,364 | 13 | % | $ | 12,172,384 | 16 | % |
| FHLB advances | 500,000 | 675,000 | (26) | % | 625,000 | (20) | % | 695,000 | (28) | % | ||||
| Convertible notes, net | 201,987 | 200,716 | 1 | % | 199,458 | 1 | % | 196,977 | 3 | % | ||||
| Subordinated debentures | 103,602 | 103,318 | — | % | 103,035 | 1 | % | 102,477 | 1 | % | ||||
| Accrued interest payable | 26,093 | 30,436 | (14) | % | 33,810 | (23) | % | 36,987 | (29) | % | ||||
| Other liabilities | 183,072 | 157,309 | 16 | % | 142,762 | 28 | % | 139,830 | 31 | % | ||||
| Total liabilities | $ | 15,138,286 | $ | 14,003,346 | 8 | % | $ | 13,631,429 | 11 | % | $ | 13,343,655 | 13 | % |
| Stockholders’ Equity: | ||||||||||||||
| Common stock, $0.001 par value | $ | 136 | $ | 136 | — | % | $ | 136 | — | % | $ | 136 | — | % |
| Capital surplus | 1,430,757 | 1,429,275 | — | % | 1,428,066 | — | % | 1,425,262 | — | % | ||||
| Retained earnings | 761,734 | 752,228 | 1 | % | 762,480 | — | % | 712,351 | 7 | % | ||||
| Treasury stock, at cost | (200,000) | (200,000) | — | % | (163,820) | (22) | % | (150,000) | (33) | % | ||||
| Accumulated other comprehensive gain (loss), net | 38,149 | 36,449 | 5 | % | 9,149 | 317 | % | 7,423 | 414 | % | ||||
| Total stockholders’ equity | 2,030,776 | 2,018,088 | 1 | % | 2,036,011 | — | % | 1,995,172 | 2 | % | ||||
| Total liabilities and stockholders’ equity | $ | 17,169,062 | $ | 16,021,434 | 7 | % | $ | 15,667,440 | 10 | % | $ | 15,338,827 | 12 | % |
| Common stock shares - authorized | 150,000,000 | 150,000,000 | 150,000,000 | 150,000,000 | ||||||||||
| Common stock shares - outstanding | 123,239,276 | 123,169,404 | 125,756,543 | 126,673,822 | ||||||||||
| Treasury stock shares | 12,661,581 | 12,661,581 | 9,945,547 | 9,002,453 |
Table Page 1
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| Three Months Ended | Six Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 6/30/2020 | 3/31/2020 | % change | 6/30/2019 | % change | 6/30/2020 | 6/30/2019 | % change | ||||||||||
| Interest and fees on loans | $ | 134,190 | $ | 154,230 | (13) | % | $ | 158,627 | (15) | % | $ | 288,420 | $ | 316,763 | (9) | % | |
| Interest on securities | 9,891 | 10,609 | (7) | % | 11,866 | (17) | % | 20,500 | 24,185 | (15) | % | ||||||
| Interest on federal funds sold and other investments | 980 | 2,029 | (52) | % | 2,973 | (67) | % | 3,009 | 5,648 | (47) | % | ||||||
| Total interest income | 145,061 | 166,868 | (13) | % | 173,466 | (16) | % | 311,929 | 346,596 | (10) | % | ||||||
| Interest on deposits | 29,451 | 41,113 | (28) | % | 48,826 | (40) | % | 70,564 | 95,673 | (26) | % | ||||||
| Interest on other borrowings and convertible notes | 5,796 | 6,464 | (10) | % | 7,419 | (22) | % | 12,260 | 14,094 | (13) | % | ||||||
| Total interest expense | 35,247 | 47,577 | (26) | % | 56,245 | (37) | % | 82,824 | 109,767 | (25) | % | ||||||
| Net interest income before provision for credit losses | 109,814 | 119,291 | (8) | % | 117,221 | (6) | % | 229,105 | 236,829 | (3) | % | ||||||
| Provision for credit losses | 17,500 | 28,000 | (38) | % | 1,200 | 1,358 | % | 45,500 | 4,200 | 983 | % | ||||||
| Net interest income after provision for credit losses | 92,314 | 91,291 | 1 | % | 116,021 | (20) | % | 183,605 | 232,629 | (21) | % | ||||||
| Service fees on deposit accounts | 2,583 | 4,133 | (38) | % | 4,416 | (42) | % | 6,716 | 8,733 | (23) | % | ||||||
| International service fees | 667 | 790 | (16) | % | 1,020 | (35) | % | 1,456 | 1,953 | (25) | % | ||||||
| Loan servicing fees, net | 1,106 | 365 | 203 | % | 738 | 50 | % | 1,471 | 1,467 | — | % | ||||||
| Wire transfer fees | 820 | 998 | (18) | % | 1,311 | (37) | % | 1,818 | 2,400 | (24) | % | ||||||
| Net gains on sales of other loans | 1,678 | 1,855 | (10) | % | 1,066 | 57 | % | 3,533 | 1,807 | 96 | % | ||||||
| Net gains on sales of securities available for sale | — | — | 100 | % | 129 | 100 | % | — | 129 | (100) | % | ||||||
| Other income and fees | 4,386 | 5,123 | (14) | % | 3,607 | 22 | % | 9,510 | 7,220 | 32 | % | ||||||
| Total noninterest income | 11,240 | 13,264 | (15) | % | 12,287 | (9) | % | 24,504 | 23,709 | 3 | % | ||||||
| Salaries and employee benefits | 38,850 | 42,502 | (9) | % | 39,297 | (1) | % | 81,352 | 79,726 | 2 | % | ||||||
| Occupancy | 7,043 | 7,410 | (5) | % | 7,839 | (10) | % | 14,453 | 15,516 | (7) | % | ||||||
| Furniture and equipment | 4,654 | 4,259 | 9 | % | 4,026 | 16 | % | 8,913 | 7,472 | 19 | % | ||||||
| Advertising and marketing | 1,315 | 1,673 | (21) | % | 2,245 | (41) | % | 2,988 | 4,307 | (31) | % | ||||||
| Data processing and communications | 2,274 | 2,631 | (14) | % | 2,587 | (12) | % | 4,905 | 5,543 | (12) | % | ||||||
| Professional fees | 1,510 | 3,300 | (54) | % | 5,959 | (75) | % | 4,810 | 11,339 | (58) | % | ||||||
| FDIC assessment | 1,652 | 1,559 | 6 | % | 1,559 | 6 | % | 3,211 | 3,110 | 3 | % | ||||||
| Credit related expenses | 1,361 | 1,662 | (18) | % | 1,549 | (12) | % | 3,023 | 2,227 | 36 | % | ||||||
| OREO expense (income), net | 1,338 | 843 | 59 | % | 83 | 1,512 | % | 2,181 | (69) | N/A | |||||||
| Other | 7,033 | 6,301 | 12 | % | 6,227 | 13 | % | 13,334 | 13,033 | 2 | % | ||||||
| Total noninterest expense | 67,030 | 72,140 | (7) | % | 71,371 | (6) | % | 139,170 | 142,204 | (2) | % | ||||||
| Income before income taxes | 36,524 | 32,415 | 13 | % | 56,937 | (36) | % | 68,939 | 114,134 | (40) | % | ||||||
| Income tax provision | 9,771 | 6,462 | 51 | % | 14,256 | (31) | % | 16,233 | 28,695 | (43) | % | ||||||
| Net income | $ | 26,753 | $ | 25,953 | 3 | % | $ | 42,681 | (37) | % | $ | 52,706 | $ | 85,439 | (38) | % | |
| Earnings Per Common Share: | |||||||||||||||||
| Basic | $ | 0.22 | $ | 0.21 | $ | 0.34 | $ | 0.43 | $ | 0.67 | |||||||
| Diluted | $ | 0.22 | $ | 0.21 | $ | 0.34 | $ | 0.42 | $ | 0.67 | |||||||
| Weighted Average Shares Outstanding: | |||||||||||||||||
| Basic | 123,200,127 | 124,295,327 | 126,658,509 | 123,747,727 | 126,649,536 | ||||||||||||
| Diluted | 123,430,891 | 124,676,296 | 126,870,455 | 124,054,291 | 126,842,870 |
Table Page 2
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| For the Three Months Ended <br>(Annualized) | For the Six Months Ended<br>(Annualized) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Profitability measures: | 6/30/2020 | 3/31/2020 | 6/30/2019 | 6/30/2020 | 6/30/2019 | |||||||||||
| ROA | 0.64 | % | 0.67 | % | 1.12 | % | 0.65 | % | 1.12 | % | ||||||
| ROE | 5.31 | % | 5.12 | % | 8.71 | % | 5.21 | % | 8.81 | % | ||||||
| ROTCE ^(1)^ | 6.94 | % | 6.69 | % | 11.51 | % | 6.82 | % | 11.68 | % | ||||||
| Net interest margin | 2.79 | % | 3.31 | % | 3.31 | % | 3.04 | % | 3.35 | % | ||||||
| Efficiency ratio | 55.37 | % | 54.42 | % | 55.11 | % | 54.88 | % | 54.58 | % | ||||||
| Noninterest expense / average assets | 1.60 | % | 1.87 | % | 1.88 | % | 1.73 | % | 1.87 | % | ||||||
| ^(1)^Average tangible equity is calculated by subtracting average goodwill and average core deposit intangible assets from average stockholders’ equity. This is a non-GAAP measure that we<br><br>believe provides investors with information that is useful in understanding our financial performance and position. | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| Pre-tax acquisition accounting adjustments and merger-related expenses: | 6/30/2020 | 3/31/2020 | 6/30/2019 | 6/30/2020 | 6/30/2019 | |||||||||||
| Accretion on purchased non-impaired loans | $ | 658 | $ | 1,059 | $ | 1,799 | $ | 1,717 | $ | 3,965 | ||||||
| Accretion on purchased credit deteriorated/purchased credit impaired loans | 3,046 | 9,449 | 6,848 | 12,495 | 12,682 | |||||||||||
| Amortization of premium on low income housing tax credits | (70) | (71) | (76) | (141) | (152) | |||||||||||
| Amortization of premium on acquired FHLB borrowings | — | — | — | — | 1,280 | |||||||||||
| Accretion of discount on acquired subordinated debt | (284) | (283) | (275) | (567) | (548) | |||||||||||
| Amortization of core deposit intangibles | (532) | (531) | (557) | (1,063) | (1,114) | |||||||||||
| Total acquisition accounting adjustments | $ | 2,818 | $ | 9,623 | $ | 7,739 | $ | 12,441 | $ | 16,113 |
Table Page 3
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 6/30/2020 | 3/31/2020 | 6/30/2019 | |||||||||||||||||
| 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 | $ | 12,755,088 | $ | 134,190 | 4.23 | % | $ | 12,259,848 | $ | 154,230 | 5.06 | % | $ | 11,959,920 | $ | 158,627 | 5.32 | % | |
| Securities available for sale | 1,750,156 | 9,891 | 2.27 | % | 1,712,033 | 10,609 | 2.49 | % | 1,804,677 | 11,866 | 2.64 | % | |||||||
| FHLB stock and other investments | 1,317,049 | 980 | 0.30 | % | 519,309 | 2,029 | 1.57 | % | 460,623 | 2,973 | 2.59 | % | |||||||
| Total interest earning assets | $ | 15,822,293 | $ | 145,061 | 3.69 | % | $ | 14,491,190 | $ | 166,868 | 4.63 | % | $ | 14,225,220 | $ | 173,466 | 4.89 | % | |
| INTEREST BEARING LIABILITIES: | |||||||||||||||||||
| Deposits: | |||||||||||||||||||
| Demand, interest bearing | $ | 4,903,786 | $ | 7,563 | 0.62 | % | $ | 4,204,406 | $ | 14,880 | 1.42 | % | $ | 3,094,179 | $ | 14,019 | 1.82 | % | |
| Savings | 284,050 | 862 | 1.22 | % | 274,075 | 808 | 1.19 | % | 225,978 | 608 | 1.08 | % | |||||||
| Time deposits | 4,954,446 | 21,026 | 1.71 | % | 4,900,405 | 25,425 | 2.09 | % | 5,784,980 | 34,199 | 2.37 | % | |||||||
| Total interest bearing deposits | 10,142,282 | 29,451 | 1.17 | % | 9,378,886 | 41,113 | 1.76 | % | 9,105,137 | 48,826 | 2.15 | % | |||||||
| FHLB advances | 593,407 | 2,238 | 1.52 | % | 594,890 | 2,647 | 1.79 | % | 706,044 | 3,384 | 1.92 | % | |||||||
| Convertible notes, net | 201,169 | 2,358 | 4.64 | % | 199,960 | 2,346 | 4.64 | % | 196,244 | 2,310 | 4.66 | % | |||||||
| Subordinated debentures | 99,534 | 1,200 | 4.77 | % | 99,252 | 1,471 | 5.86 | % | 98,406 | 1,725 | 6.93 | % | |||||||
| Total interest bearing liabilities | $ | 11,036,392 | $ | 35,247 | 1.28 | % | $ | 10,272,988 | $ | 47,577 | 1.86 | % | $ | 10,105,831 | $ | 56,245 | 2.23 | % | |
| Noninterest bearing demand deposits | 3,510,783 | 2,963,136 | 2,947,476 | ||||||||||||||||
| Total funding liabilities/cost of funds | $ | 14,547,175 | 0.97 | % | $ | 13,236,124 | 1.45 | % | $ | 13,053,307 | 1.73 | % | |||||||
| Net interest income/net interest spread | $ | 109,814 | 2.41 | % | $ | 119,291 | 2.77 | % | $ | 117,221 | 2.66 | % | |||||||
| Net interest margin | 2.79 | % | 3.31 | % | 3.31 | % | |||||||||||||
| Cost of deposits: | |||||||||||||||||||
| Noninterest bearing demand deposits | $ | 3,510,783 | $ | — | — | % | $ | 2,963,136 | $ | — | — | % | $ | 2,947,476 | $ | — | — | % | |
| Interest bearing deposits | 10,142,282 | 29,451 | 1.17 | % | 9,378,886 | 41,113 | 1.76 | % | 9,105,137 | 48,826 | 2.15 | % | |||||||
| Total deposits | $ | 13,653,065 | $ | 29,451 | 0.87 | % | $ | 12,342,022 | $ | 41,113 | 1.34 | % | $ | 12,052,613 | $ | 48,826 | 1.62 | % |
Table Page 4
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Six Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 6/30/2020 | 6/30/2019 | |||||||||||
| Interest | Annualized | Interest | Annualized | |||||||||
| Average | Income/ | Average | Average | Income/ | Average | |||||||
| Balance | Expense | Yield/Cost | Balance | Expense | Yield/Cost | |||||||
| INTEREST EARNING ASSETS: | ||||||||||||
| Loans, including loans held for sale | $ | 12,507,468 | $ | 288,420 | 4.64 | % | $ | 12,023,690 | $ | 316,763 | 5.31 | % |
| Securities available for sale | 1,731,094 | 20,500 | 2.38 | % | 1,816,081 | 24,185 | 2.69 | % | ||||
| FHLB stock and other investments | 918,179 | 3,009 | 0.66 | % | 433,293 | 5,648 | 2.63 | % | ||||
| Total interest earning assets | $ | 15,156,741 | $ | 311,929 | 4.14 | % | $ | 14,273,064 | $ | 346,596 | 4.90 | % |
| INTEREST BEARING LIABILITIES: | ||||||||||||
| Deposits: | ||||||||||||
| Demand, interest bearing | $ | 4,554,096 | $ | 22,443 | 0.99 | % | $ | 3,068,494 | $ | 27,005 | 1.77 | % |
| Savings | 279,063 | 1,670 | 1.20 | % | 224,761 | 1,173 | 1.05 | % | ||||
| Time deposits | 4,927,425 | 46,451 | 1.90 | % | 5,860,492 | 67,495 | 2.32 | % | ||||
| Total interest bearing deposits | 9,760,584 | 70,564 | 1.45 | % | 9,153,747 | 95,673 | 2.11 | % | ||||
| FHLB advances | 594,148 | 4,885 | 1.65 | % | 758,161 | 5,998 | 1.60 | % | ||||
| Convertible notes, net | 200,565 | 4,704 | 4.64 | % | 195,610 | 4,609 | 4.69 | % | ||||
| Subordinated debentures | 99,393 | 2,671 | 5.32 | % | 98,267 | 3,487 | 7.06 | % | ||||
| Total interest bearing liabilities | $ | 10,654,690 | $ | 82,824 | 1.56 | % | $ | 10,205,785 | $ | 109,767 | 2.17 | % |
| Noninterest bearing demand deposits | 3,236,960 | 2,917,279 | ||||||||||
| Total funding liabilities/cost of funds | $ | 13,891,650 | 1.20 | % | $ | 13,123,064 | 1.69 | % | ||||
| Net interest income/net interest spread | $ | 229,105 | 2.58 | % | $ | 236,829 | 2.73 | % | ||||
| Net interest margin | 3.04 | % | 3.35 | % | ||||||||
| Cost of deposits: | ||||||||||||
| Noninterest bearing demand deposits | $ | 3,236,960 | $ | — | — | % | $ | 2,917,279 | $ | — | — | % |
| Interest bearing deposits | 9,760,584 | 70,564 | 1.45 | % | 9,153,747 | 95,673 | 2.11 | % | ||||
| Total deposits | $ | 12,997,544 | $ | 70,564 | 1.09 | % | $ | 12,071,026 | $ | 95,673 | 1.60 | % |
Table Page 5
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AVERAGE BALANCES: | 6/30/2020 | 3/31/2020 | % change | 6/30/2019 | % change | 6/30/2020 | 6/30/2019 | % change | ||||||||||||||
| Loans receivable, including loans held for sale | $ | 12,755,088 | $ | 12,259,848 | 4 | % | $ | 11,959,920 | 7 | % | $ | 12,507,468 | $ | 12,023,690 | 4 | % | ||||||
| Investments | 3,067,205 | 2,231,342 | 37 | % | 2,265,300 | 35 | % | 2,649,273 | 2,249,374 | 18 | % | |||||||||||
| Interest earning assets | 15,822,293 | 14,491,190 | 9 | % | 14,225,220 | 11 | % | 15,156,741 | 14,273,064 | 6 | % | |||||||||||
| Total assets | 16,759,147 | 15,446,807 | 8 | % | 15,185,495 | 10 | % | 16,102,977 | 15,237,627 | 6 | % | |||||||||||
| Interest bearing deposits | 10,142,282 | 9,378,886 | 8 | % | 9,105,137 | 11 | % | 9,760,584 | 9,153,747 | 7 | % | |||||||||||
| Interest bearing liabilities | 11,036,392 | 10,272,988 | 7 | % | 10,105,831 | 9 | % | 10,654,690 | 10,205,785 | 4 | % | |||||||||||
| Noninterest bearing demand deposits | 3,510,783 | 2,963,136 | 18 | % | 2,947,476 | 19 | % | 3,236,960 | 2,917,279 | 11 | % | |||||||||||
| Stockholders’ equity | 2,016,947 | 2,027,595 | (1) | % | 1,960,500 | 3 | % | 2,022,271 | 1,940,606 | 4 | % | |||||||||||
| Net interest earning assets | 4,785,901 | 4,218,202 | 13 | % | 4,119,389 | 16 | % | 4,502,051 | 4,067,279 | 11 | % | |||||||||||
| LOAN PORTFOLIO COMPOSITION: | 6/30/2020 | 3/31/2020 | % change | 12/31/2019 | % change | 6/30/2019 | % change | |||||||||||||||
| Commercial loans | $ | 3,415,111 | $ | 3,067,132 | 11 | % | $ | 2,719,818 | 26 | % | $ | 2,432,164 | 40 | % | ||||||||
| Real estate loans | 8,686,939 | 8,681,222 | — | % | 8,666,901 | — | % | 8,630,538 | 1 | % | ||||||||||||
| Consumer and other loans | 769,784 | 835,062 | (8) | % | 889,288 | (13) | % | 914,432 | (16) | % | ||||||||||||
| Loans, net of deferred loan fees and costs | 12,871,834 | 12,583,416 | 2 | % | 12,276,007 | 5 | % | 11,977,134 | 7 | % | ||||||||||||
| Allowance for credit losses | (161,771) | (144,923) | 12 | % | (94,144) | 72 | % | (94,066) | 72 | % | ||||||||||||
| Loan receivable, net | $ | 12,710,063 | $ | 12,438,493 | 2 | % | $ | 12,181,863 | 4 | % | $ | 11,883,068 | 7 | % | ||||||||
| REAL ESTATE LOANS BY PROPERTY TYPE: | 6/30/2020 | 3/31/2020 | % change | 12/31/2019 | % change | 6/30/2019 | % change | |||||||||||||||
| Retail buildings | $ | 2,278,448 | $ | 2,314,885 | (2) | % | $ | 2,298,872 | (1) | % | $ | 2,295,485 | (1) | % | ||||||||
| Hotels/motels | 1,701,909 | 1,706,082 | — | % | 1,709,189 | — | % | 1,670,697 | 2 | % | ||||||||||||
| Gas stations/car washes | 836,314 | 852,077 | (2) | % | 844,081 | (1) | % | 953,942 | (12) | % | ||||||||||||
| Mixed-use facilities | 706,827 | 770,825 | (8) | % | 785,882 | (10) | % | 739,440 | (4) | % | ||||||||||||
| Warehouses | 1,040,303 | 1,024,832 | 2 | % | 1,030,876 | 1 | % | 936,900 | 11 | % | ||||||||||||
| Multifamily | 497,948 | 481,425 | 3 | % | 465,397 | 7 | % | 460,555 | 8 | % | ||||||||||||
| Other | 1,625,190 | 1,531,096 | 6 | % | 1,532,604 | 6 | % | 1,573,519 | 3 | % | ||||||||||||
| Total | $ | 8,686,939 | $ | 8,681,222 | — | % | $ | 8,666,901 | — | % | $ | 8,630,538 | 1 | % | ||||||||
| DEPOSIT COMPOSITION | 6/30/2020 | 3/31/2020 | % change | 12/31/2019 | % change | 6/30/2019 | % change | |||||||||||||||
| Noninterest bearing demand deposits | $ | 4,036,383 | $ | 3,010,143 | 34 | % | $ | 3,108,687 | 30 | % | $ | 3,009,218 | 34 | % | ||||||||
| Money market and other | 4,831,679 | 4,851,000 | — | % | 3,985,556 | 21 | % | 3,238,947 | 49 | % | ||||||||||||
| Saving deposits | 296,614 | 272,577 | 9 | % | 274,151 | 8 | % | 243,859 | 22 | % | ||||||||||||
| Time deposits | 4,958,856 | 4,702,847 | 5 | % | 5,158,970 | (4) | % | 5,680,360 | (13) | % | ||||||||||||
| Total deposit balances | $ | 14,123,532 | $ | 12,836,567 | 10 | % | $ | 12,527,364 | 13 | % | $ | 12,172,384 | 16 | % | ||||||||
| DEPOSIT COMPOSITION (%) | 6/30/2020 | 3/31/2020 | 12/31/2019 | 6/30/2019 | ||||||||||||||||||
| Noninterest bearing demand deposits | 28.6 | % | 23.5 | % | 24.8 | % | 24.7 | % | ||||||||||||||
| Money market and other | 34.2 | % | 37.8 | % | 31.8 | % | 26.6 | % | ||||||||||||||
| Saving deposits | 2.1 | % | 2.1 | % | 2.2 | % | 2.0 | % | ||||||||||||||
| Time deposits | 35.1 | % | 36.6 | % | 41.2 | % | 46.7 | % | ||||||||||||||
| Total deposit balances | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Table Page 6
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| CAPITAL RATIOS: | 6/30/2020 | 3/31/2020 | 12/31/2019 | 6/30/2019 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 2,030,776 | $ | 2,018,088 | $ | 2,036,011 | $ | 1,995,172 | ||||||||||||||
| Common equity tier 1 ratio | 11.50 | % | 11.44 | % | 11.76 | % | 11.90 | % | ||||||||||||||
| Tier 1 risk-based capital ratio | 12.24 | % | 12.19 | % | 12.51 | % | 12.67 | % | ||||||||||||||
| Total risk-based capital ratio | 13.23 | % | 13.06 | % | 13.23 | % | 13.42 | % | ||||||||||||||
| Tier 1 leverage ratio | 10.08 | % | 10.88 | % | 11.22 | % | 10.94 | % | ||||||||||||||
| Total risk weighted assets | $ | 13,388,522 | $ | 13,348,162 | $ | 13,208,299 | $ | 12,715,685 | ||||||||||||||
| Book value per common share | $ | 16.48 | $ | 16.38 | $ | 16.19 | $ | 15.75 | ||||||||||||||
| Tangible common equity to tangible assets ^1^ | 9.32 | % | 9.92 | % | 10.27 | % | 10.21 | % | ||||||||||||||
| Tangible common equity per share ^1^ | $ | 12.62 | $ | 12.52 | $ | 12.40 | $ | 11.98 | ||||||||||||||
| ^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 | Six Months Ended | |||||||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES CHANGES: | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 6/30/2020 | 6/30/2019 | |||||||||||||||
| Balance at beginning of period | $ | 144,923 | $ | 94,144 | $ | 93,882 | $ | 94,066 | $ | 94,217 | $ | 94,144 | $ | 92,557 | ||||||||
| CECL day 1 adoption impact | — | 26,200 | — | — | — | 26,200 | — | |||||||||||||||
| Provision for credit losses | 17,500 | 28,000 | 1,000 | 2,100 | 1,200 | 45,500 | 4,200 | |||||||||||||||
| Recoveries | 252 | 2,536 | 939 | 780 | 725 | 2,788 | 2,017 | |||||||||||||||
| Charge offs | (904) | (5,957) | (1,677) | (2,602) | (2,076) | (6,861) | (3,830) | |||||||||||||||
| PCI allowance adjustment | — | — | — | (462) | — | — | (878) | |||||||||||||||
| Balance at end of period | $ | 161,771 | $ | 144,923 | $ | 94,144 | $ | 93,882 | $ | 94,066 | $ | 161,771 | $ | 94,066 | ||||||||
| Net charge offs/average loans receivable (annualized) | 0.02 | % | 0.11 | % | 0.02 | % | 0.06 | % | 0.05 | % | 0.07 | % | 0.03 | % | ||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| NET LOAN CHARGE OFFS (RECOVERIES): | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 6/30/2020 | 6/30/2019 | |||||||||||||||
| Real estate loans | $ | 148 | $ | 2,230 | $ | 203 | $ | 951 | $ | (388) | $ | 2,378 | $ | (1,455) | ||||||||
| Commercial loans | 240 | 676 | 245 | 596 | 1,399 | 916 | 2,649 | |||||||||||||||
| Consumer loans | 264 | 515 | 290 | 275 | 340 | 779 | 619 | |||||||||||||||
| Total net charge offs | $ | 652 | $ | 3,421 | $ | 738 | $ | 1,822 | $ | 1,351 | $ | 4,073 | $ | 1,813 |
Table Page 7
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| NONPERFORMING ASSETS: | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans on nonaccrual status 3 | 82,137 | $ | 72,639 | $ | 54,785 | $ | 42,235 | $ | 64,934 | |||||
| Delinquent loans 90 days or more on accrual status | 387 | 7,547 | 398 | 353 | ||||||||||
| Accruing troubled debt restructured loans | 43,789 | 35,709 | 34,717 | 40,731 | ||||||||||
| Total nonperforming loans | 116,815 | 98,041 | 77,350 | 106,018 | ||||||||||
| Other real estate owned | 23,039 | 24,091 | 19,374 | 5,644 | ||||||||||
| Total nonperforming assets | 157,132 | $ | 139,854 | $ | 122,132 | $ | 96,724 | $ | 111,662 | |||||
| Nonperforming assets/total assets | % | 0.87 | % | 0.78 | % | 0.63 | % | 0.73 | % | |||||
| Nonperforming assets/loans receivable & OREO | % | 1.11 | % | 0.99 | % | 0.80 | % | 0.93 | % | |||||
| Nonperforming assets/total capital | % | 6.93 | % | 6.00 | % | 4.76 | % | 5.60 | % | |||||
| Nonperforming loans/loans receivable | % | 0.93 | % | 0.80 | % | 0.64 | % | 0.89 | % | |||||
| Nonaccrual loans/loans receivable | % | 0.58 | % | 0.45 | % | 0.35 | % | 0.54 | % | |||||
| Allowance for credit losses/loans receivable | % | 1.15 | % | 0.77 | % | 0.78 | % | 0.79 | % | |||||
| Allowance for credit losses/nonaccrual loans | % | 199.51 | % | 171.84 | % | 222.28 | % | 144.86 | % | |||||
| Allowance for credit losses/nonperforming loans | % | 124.06 | % | 96.03 | % | 121.37 | % | 88.73 | % | |||||
| Allowance for credit losses/nonperforming assets | % | 103.62 | % | 77.08 | % | 97.06 | % | 84.24 | % | |||||
| 3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling 30.3 million, 28.8 million,28.1 million, 37.3 million, and 32.1 million at June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, and June 30, 2019, respectively. | ||||||||||||||
| NONACCRUAL LOANS BY TYPE: | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | ||||||||||
| Real estate loans | 64,060 | $ | 56,787 | $ | 40,935 | $ | 27,920 | $ | 42,921 | |||||
| Commercial loans | 12,747 | 10,893 | 11,242 | 18,997 | ||||||||||
| Consumer loans | 3,105 | 2,957 | 3,073 | 3,016 | ||||||||||
| Total nonaccrual loans | 82,137 | $ | 72,639 | $ | 54,785 | $ | 42,235 | $ | 64,934 | |||||
| BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS: | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | ||||||||||
| Retail buildings | 5,526 | $ | 5,014 | $ | 4,215 | $ | 3,221 | $ | 2,919 | |||||
| Gas stations/car washes | 1,675 | — | 233 | 241 | ||||||||||
| Mixed-use facilities | 3,157 | 3,175 | 3,200 | 3,223 | ||||||||||
| Warehouses | 13,381 | 10,381 | 10,449 | 11,246 | ||||||||||
| Other 5 | 20,562 | 17,938 | 17,614 | 23,102 | ||||||||||
| Total | 44,026 | $ | 43,789 | $ | 35,709 | $ | 34,717 | $ | 40,731 | |||||
| 5 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: | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 - 59 days | $ | 18,857 | $ | 37,866 | $ | 14,433 | $ | 25,281 | $ | 17,913 |
| 60 - 89 days | 29,975 | 2,605 | 4,712 | 4,535 | 1,295 | |||||
| Total | $ | 48,832 | $ | 40,471 | $ | 19,145 | $ | 29,816 | $ | 19,208 |
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE: | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | |||||
| Real estate loans | $ | 27,245 | $ | 23,753 | $ | 7,689 | $ | 20,572 | $ | 9,794 |
| Commercial loans | 5,987 | 4,583 | 692 | 2,282 | 1,832 | |||||
| Consumer loans | 15,600 | 12,135 | 10,764 | 6,962 | 7,582 | |||||
| Total | $ | 48,832 | $ | 40,471 | $ | 19,145 | $ | 29,816 | $ | 19,208 |
| CRITICIZED LOANS: | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | |||||
| Special mention | $ | 127,149 | $ | 122,279 | $ | 141,452 | $ | 139,848 | $ | 186,485 |
| Substandard | 299,357 | 278,771 | 259,278 | 268,605 | 323,841 | |||||
| Doubtful/Loss | 11 | 12 | 13 | 17 | 1 | |||||
| Total criticized loans | $ | 426,517 | $ | 401,062 | $ | 400,743 | $ | 408,470 | $ | 510,327 |
Table Page 9
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| Reconciliation of GAAP financial measures to non-GAAP financial measures: | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Six Months Ended | |||||||||||||||
| 6/30/2020 | 3/31/2020 | 6/30/2019 | 6/30/2020 | 6/30/2019 | ||||||||||||
| RETURN ON AVERAGE TANGIBLE COMMON EQUITY | ||||||||||||||||
| Average stockholders’ equity | $ | 2,016,947 | $ | 2,027,595 | $ | 1,960,500 | $ | 2,022,271 | $ | 1,940,606 | ||||||
| Less: Goodwill and core deposit intangible assets, net | (475,534) | (476,053) | (477,736) | (475,793) | (478,021) | |||||||||||
| Average tangible common equity | $ | 1,541,413 | $ | 1,551,542 | $ | 1,482,764 | $ | 1,546,478 | $ | 1,462,585 | ||||||
| Net income | $ | 26,753 | $ | 25,953 | $ | 42,681 | $ | 52,706 | $ | 85,439 | ||||||
| Return on average tangible common equity (annualized) | 6.94 | % | 6.69 | % | 11.51 | % | 6.82 | % | 11.68 | % | ||||||
| Three Months Ended | ||||||||||||||||
| 6/30/2020 | 3/31/2020 | 12/31/2019 | 6/30/2019 | |||||||||||||
| TANGIBLE COMMON EQUITY | ||||||||||||||||
| Total stockholders’ equity | $ | 2,030,776 | $ | 2,018,088 | $ | 2,036,011 | $ | 1,995,172 | ||||||||
| Less: Goodwill and core deposit intangible assets, net | (475,220) | (475,752) | (476,283) | (477,397) | ||||||||||||
| Tangible common equity | $ | 1,555,556 | $ | 1,542,336 | $ | 1,559,728 | $ | 1,517,775 | ||||||||
| Total assets | $ | 17,169,062 | $ | 16,021,434 | $ | 15,667,440 | $ | 15,338,827 | ||||||||
| Less: Goodwill and core deposit intangible assets, net | (475,220) | (475,752) | (476,283) | (477,397) | ||||||||||||
| Tangible assets | $ | 16,693,842 | $ | 15,545,682 | $ | 15,191,157 | $ | 14,861,430 | ||||||||
| Common shares outstanding | 123,239,276 | 123,169,404 | 125,756,543 | 126,673,822 | ||||||||||||
| Tangible common equity to tangible assets | 9.32 | % | 9.92 | % | 10.27 | % | 10.21 | % | ||||||||
| Tangible common equity per share | $ | 12.62 | $ | 12.52 | $ | 12.40 | $ | 11.98 | ||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| 6/30/2020 | 3/31/2020 | 6/30/2019 | 6/30/2020 | 6/30/2019 | ||||||||||||
| PRE-TAX PRE-PROVISION INCOME | ||||||||||||||||
| Net income | $ | 26,753 | $ | 25,953 | $ | 42,681 | $ | 52,706 | $ | 85,439 | ||||||
| Add back - tax provision | 9,771 | 6,462 | 14,256 | 16,233 | 28,695 | |||||||||||
| Add back - provision for credit losses | 17,500 | 28,000 | 1,200 | 45,500 | 4,200 | |||||||||||
| Pre-tax pre-provision income | $ | 54,024 | $ | 60,415 | $ | 58,137 | $ | 114,439 | $ | 118,334 |
Table Page 10
Document
News Release
HOPE BANCORP DECLARES QUARTERLY CASH DIVIDEND OF $0.14 PER SHARE
LOS ANGELES - July 30, 2020 - 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 August 24, 2020 to all stockholders of record as of the close of business on August 10, 2020.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Friday, July 31, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its second quarter ended June 30, 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 August 7, 2020, replay access code 10146201.
About Hope Bancorp, Inc.
Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $17.2 billion in total assets as of June 30, 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, Georgia and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.
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-2020q2earningsconfe
2020 Second Quarter Earnings Conference Call Friday, July 31 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, 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. 2
Q2 2020 Financial Highlights Net income of $26.8 million, or $0.22 per diluted common share, compared with $26.0 million, or Net $0.21 per diluted common share for Q1 2020 Provision for credit losses of $17.5 million, vs. $28.0 million for Q1 2020 Income Net interest income before provision decreased to $109.8 million from $119.3 million for Q1 2020, $26.8MM Earnings & reflecting full quarter’s impact of aggregate 150bps decrease in Fed Funds rate in March 2020 Noninterest expense declined 7% Q‐o‐Q reflecting reductions in compensation and professional Profitability fees and improved as a percentage of average assets to 1.60% from 1.87% in Q1 2020 Net interest margin of 2.79% represents trough and reflects reductions in Fed Fund rate, significant increase in lower‐yielding cash balances, as well as large payoff of acquired loan in Q1 2020 Diluted ROE and ROTCE improved to 5.31% and 6.94%, respectively from 5.12% and 6.69% in Q1 2020 EPS $0.22 Loan New loan originations funded of $832 million, including PPP originations of $480 million Production Loans receivable increased 2.3%, or 9% annualized Total deposits increased by $1.29 billion, or 10% Q‐o‐Q, and continued the trend of favorable mix Record shift to lower‐cost deposits Gross Noninterest bearing deposits increased $1.0 billion Q‐o‐Q and represented 28.6% of total deposits, Deposits up from 23.5% in Q1 2020; approximately $326 million identified as PPP‐related Loans Cost of deposits decreased 47bps Q‐o‐Q Company continued to benefit from CD repricing gap as time deposits renewed at significantly $12.9B lower rates Overall asset quality trends remain stable Modest increases in delinquent loans, criticized loans and nonperforming loans reflect ability to Record Asset Quality work with COVID‐19 impacted borrowers under CARES Act Deposits Modifications under CARES Act total $3.1 billion at June 30, 2020, equal to 24.2% of loan portfolio Net charge offs were minimal at $652,000, or 0.02% of average loans receivable annualized $14.1B 3
Loan Production & Portfolio Trends New Loan Originations Funded 5.46% New loan originations funded of $832 million 4.72% 4.37% resulted in 2.3% growth in loans receivable Q‐o‐Q, 3.98% or 9% annualized 3.39%1 ($ millions) $847.6 $832.0 New loans included $480 million of SBA PPP originations, which are categorized as C&I loans $693.9 $69 $74 $624.5 $61 $62 $266 $42 Aggregate payoffs and paydowns declined to $484 $503.9 million from higher‐than‐usual amount of $624 $75 $283 $234 2 $480 million 1Q20 $176 $513 $349 $348 $253 $216 Diversified mix of loan originations including PPP loan originations categorized as C&I loans 2Q19 3Q19 4Q19 1Q20 2Q20 26% CRE / 65% C&I / 9% Consumer CRE PPP C&I Consumer Average Rate Decrease in average rate on new loan production reflects 150bps decrease in Fed Funds rate in March Loan Portfolio Composition 2020 Traditional SBA loan production of $6 million, 7% 7% 6% excluding PPP, reflects market’s focus on PPP relief 22% 24% 27% in midst of COVID‐19 pandemic crisis 71% 69% 67% 1 Including fees on PPP loans, average rate on new loan originations funded for 2Q20 of 3.39% 12/31/2019 3/31/2020 6/30/2020 2 PPP loans are categorized as C&I loans. 4
PPP Loan Originations ($ thousands) $ Amount # Loans Lender’s Fees 63,036 13% 2,850 60% 63,818 13% 892 19% 96% 5% $13,612 74,657 16% 529 11% 70,555 15% 275 6% 96,082 20% 171 4% $3% <5% $4,583 56,692 12% 43 1% 1% 49,111 10% 17 0% $491 Total Balance $473,9501 (Avg $99,215) 4,777 $18,686 1 Reflects total PPP originations of $480 million offset by $6 million in early payoffs 5
COVID-19 Loan Modifications Modification Type & Duration ($ thousands) COVID‐19 Modifications % 2M‐3M Interest Only Amount # of Total Loans As of June 30, 2020 Modified $ 264.8 MM 8.5% Modified Loans Other1 4M‐6M Pmt Def $ 23.9 MM CRE $ 2,817,516 976 $ 8,686,939 32.4% $ 109.0 MM 0.8% Retail $ 809,024 308 $ 2,267,050 35.7% 3.5% Hotel/Motel $ 1,012,434 206 $ 1,654,389 61.2% Gas Station & Car Wash $ 134,480 53 $ 833,194 16.1% Mixed Use $ 207,155 110 $ 657,281 31.5% Industrial & Warehouse $ 239,943 100 $ 1,040,221 23.1% Other CRE $ 414,480 199 $ 2,234,804 18.5% 3M Pmt Def C&I $ 150,978 294 $ 3,415,111 4.4% $ 2,718.3 MM 87.2% Consumer (predominantly $ 147,325 195 $ 769,784 19.1% residential mortgage) Total $ 3,115,819 1,465 $ 12,871,834 24.2% 1 Other Modifications includes Payment Deferment of 1M‐ 2M; Interest Only Payments of 4M‐6M; Full Payment Modifications by Week Ending Deferment of 1M, 2M and 9M; and other variations of Full Payment Deferment and Interest Only, Principal Only and Fixed Monthly Payment for 3M $457,905 $380,630 $373,411 $314,910 $311,950 $261,933 $222,029 $108,090 $102,108 $88,507 $34,669 $73,418 $57,551 $3,300 Apr 3Apr 10 Apr 17 Apr 24 May 1 May 15 May 8 May 15 May 22 May 29 Jun 5Jun 12 Jun 19 Jun 30 Peak of Modification Grants 6
COVID-19 Impacted Portfolios Hotel/Motel CRE Properties Retail CRE Properties • Majority of Hotel/Motel properties are limited service facilities • Retail portfolio largely represents “strip mall” type of properties (not shopping malls) • Less impacted by lockdowns than full‐service hotel properties • Majority of tenants comprised of service oriented businesses • Expected to rebound earlier than full‐service hotel properties – traditionally less impacted by e‐commerce • 73% of Hotel/Motel portfolio represented by flagged properties • Representative anchor tenants of larger strip mall properties = • 95%+ of Hotel/Motel exposure located in major MSAs or regions Local supermarket where the Bank has presence and knowledge of the market • 95%+ of retail CRE exposure located in major MSAs or regions • Majority of the portfolio with personal guarantees where the Bank has presence and knowledge of the market • Approximately 300 PPP loans aggregating more than $28 million • 35.7%, or $809.0 million, of retail CRE portfolio modified under to hotel/motel customers CARES Act • 61.2%, or $1.0 billion, of hotel/motel portfolio modified under • ACL coverage ratio of 1.46% for Retail CRE portfolio, compared CARES Act with 1.15% as of 3/31/20 • ACL coverage ratio of 1.23% for Hotel/Motel CRE portfolio, compared with 1.04% as of 3/31/20 $2.27 million Average Loan Size $1.55 million 52.9% Weighted Average LTV 51.4% 1.76 Weighted Average DCR 1.47 7
Net Interest Income and Margin Average Loan Yield & Average 1M LIBOR Rate Net Interest Income & NIM 5.32% ($ millions) 5.27% 5.04% 5.06% 4.23% $117.2 $116.3 $113.5 $119.3 2.44% $109.8 2.18% 1.79% 3.31% 3.31% 3.25% 3.16% 1.41% 2.79% 0.35% 2Q19 3Q19 4Q19 1Q20 2Q20 2Q19 3Q19 4Q19 1Q20 2Q20 Net Interest Income NIM Avg Loan Yield Avg 1M LIBOR Rate Average Interest Bearing Deposits & 2Q20 net interest margin decreased 52bps Q‐o‐Q reflecting Cost of Deposits ($ billions) ‐ 45 bps Impact of 150bps rate decline on average loan yields $10.1 $9.4 ‐18 bps Q‐o‐Q accretion difference (Q1 impacted by large payoff) $9.1 $9.1 $9.1 +1 bps SBA PPP loan production 2.15% 2.15% 1.98% 1.76% ‐22 bps Temporarily increased excess liquidity due to COVID‐19 1.17% ‐3 bps Other changes 1.62% 1.62% 1.49% 1.34% 0.87% + 35 bps Reduction in cost of funds 2Q19 3Q19 4Q19 1Q20 2Q20 Core net interest margin (excluding acquisition accounting Average Interest Bearing Deposits adjustments) decreased 33bps Q‐o‐Q Total Cost of Deposits Cost of Interest Bearing Deposits NIM expansion expected in 2H20 with stable loan yields, continued reduction in deposit costs and deployment of excess liquidity 8
Noninterest Income Noninterest Income Noninterest income decreased to $11.2 million ($ millions) Q‐o‐Q largely reflecting lower fee income due to $13.0 $13.0 $13.3 reduced business activity as a result of COVID‐ $12.3 19 lockdowns $11.2 $4.1 Decrease in service fees reflect reduction in $3.6 $4.9 $5.1 NSF and analysis fees $4.4 Reduction in international service fees $0.1 $1.1 $0.2 $1.9 $0.8 Decline in wire transfer fees $1.9 $1.3 $1.1 $1.1 Declines partially offset by 3‐fold increase in $0.2 $1.7 $0.7 $0.7 $1.0 loan servicing fees $1.2 $0.4 $1.0 $0.8 $0.8 $0.8 Sold $67.4 million in residential loans and $1.1 $0.7 recognized gain on sale income of $1.68 million $4.4 $4.7 $4.5 $4.1 Other income and fees decreased modestly to $2.6 $4.39 million due to normal variances in other line items 2Q19 3Q19 4Q19 1Q20 2Q20 Service fees on dep accts International service fees Loan servicing fees, net Wire transfer fees Gain on sale of other loans Gain on sale of securities Other income and fees 9
Noninterest Expense and Efficiency Noninterest Expense, Efficiency Ratio & Breakdown of Noninterest Expense & FTE ($ millions) NIE/AA $71.4 $70.0 $70.4 $72.1 $72.1 $67.0 $71.4 $70.0 $70.4 $67.0 $7.9 $6.4 $7.2 $8.8 $1.6 $0.8 $1.6 $9.7 55.11% 54.15% 55.68% 54.42% 55.37% $5.2 $6.0 $5.9 $3.3 $2.8 $2.6 $1.7 $2.6 $2.4 $1.7 $1.5 $2.4 $2.5 $2.3 $2.2 $1.3 $11.6 $11.7 $11.9 $11.8 $11.7 1.88% 1.85% 1.85% 1.87% 1.60% $41.6 $42.5 $39.3 $39.8 $38.9 2Q19 3Q19 4Q19 1Q20 2Q20 Noninterest Expense Efficiency Ratio NIE/AA 1,474 NIE/AA = Noninterest expense as a percentage of average assets 1,446 1,439 1,441 1,458 Noninterest expense decreased to $67.0 million in 2Q20 from $72.1 million in 1Q20 2Q19 3Q19 4Q19 1Q20 2Q20 – Compensation expense decreased 9%Q‐o‐Q Other FDIC assessment – Professional fees decreased 54% Q‐o‐Q. Professional fees reflecting second consecutive quarter of Data processing & communications considerable reductions Adv/Marketing Occupancy & equipment Compensation FTE 10
Deposit Trends Q‐o‐Q deposit growth annualized Total end‐of‐period (“EOP) deposits increased $1.3 billion, Deposit Composition ($ billions) equal to 10% Q‐o‐Q, or 40% annualized $14.12 – Growth driven by 34% increase in noninterest bearing DDA Q‐ $12.53 $12.53 $12.84 +40% $12.23 +10% o‐Q or $1.0 billion ‐9% +10% $5.0 – Noninterest bearing demand deposits represented 28.6% of $4.7 $5.2 $5.2 $5.2 total deposits, up from 23.5% at 3/31/2020 $0.3 $0.3 – $0.3 $0.3 Time deposits represented 35.1% of total deposits, down $0.3 $4.8 from 36.6% at 3/31/2020 $4.0 $3.8 $4.0 $4.9 Total cost of deposits decreased 47bps from 1Q20 and total cost of interest bearing deposits decreased 59bps from 1Q20 $3.1 $3.0 $3.1 $3.0 $4.0 EOP Net Loan‐to‐Deposit ratio of 89.99% as of 6/30/2020 vs. 6/30/19 9/30/19 12/31/19 3/31/20 6/30/20 96.90% as of 3/31/2020 DDA MMA/NOW Savings Time Continued mix‐shift favoring lower‐cost core deposits Deposit Cost Trend CD Originations & Maturity Schedule 1.65% 1.62% 1.58% 1.54% Average 1.49% 1.44% 1.43% 1.42% ($ millions) Amount Blended 1.18% Rate 0.95% Apr 2020 $816 0.84% 1.62% 0.87% CD Originations and 0.79% May 2020 $639 0.47% 3Q19 1.49% Renewals 4Q19 1.34% Jun 2020 $355 0.63% 1Q20 0.87% 2Q 2020 $1,810 0.67% 2Q20 Q3 2020 $1,626 1.81% Q4 2020 $1,112 1.53% CD Maturity Schedule Jul‐19 Aug‐19 Sep‐19 Oct‐19 Nov‐19 Dec‐19 Jan‐20 Feb‐20 Mar‐20 Apr‐20 May‐20 Jun‐20 Q1 2021 $1,056 1.56% Quarterly Cost of Deposits Monthly Cost of Deposits Q2 2021 $1,073 0.85% DDA = Noninterest bearing demand deposits MMA/NOW = Money market and NOW deposits NOW = Negotiable Order of Withdrawal 11
Asset Quality Nonperforming Assets Provision Expense & Net Charge Offs ($ millions) ($ millions) $157.1 $139.9 $28.0 $122.1 $21.0 $111.7 $23.0 $136.1 $5.6 $96.7 $24.1 0.11% $116.8 0.05% 0.06% 0.02% $17.5 $106.0 $19.4 $98.0 0.92% $77.4 0.87% 0.02% 0.73% 0.78% 0.63% $1.2 $2.1 $1.0 2Q19 3Q19 4Q19 1Q20 2Q20 2Q19 3Q19 4Q19 1Q20 2Q20 NPLs OREO NPAs/Total Assets Provision Expense Net Charge Offs (Recoveries) (annualized) Criticized Loans ($ millions) Modest Q‐o‐Q increases in nonaccrual loans and delinquent loans primarily reflects loans $510.3 currently in modification pipeline $408.5 $400.7 $401.1 $426.5 $323.8 General asset quality trends remain stable as of $268.6 $259.3 $278.8 $299.4 6/30/2020 4.26% 3.37% 3.26% 3.19% 3.31% $186.5 $139.8 $141.5 $122.3 $127.1 Credit losses continued to be nominal, with net charge offs of $652,000, or 2bps of average 2Q19 3Q19 4Q19 1Q20 2Q20 loans on an annualized basis Classified Special Mention Total Criticized Loans as a % of Gross Loans 12
Allowance for Credit Losses Moody’s Baseline Scenario Assumptions • U.S. Growth –GDP forecast to decline 33% annualized for 2Q20 and decline 5.6% for FY2020 $161,771 • Inflation –Y‐o‐Y growth in CPI inflation to decelerate ($ thousands) through remainder of 2020 and into 2021 • Employment –Unemployment rate forecast to $144,923 average 14% in 2Q20 and remain above 8% through 2021 • Monetary Policy –Fed not raising interest rates any time soon; 10‐year Treasury yield expected to 1.26% gradually increase but remain below 1.5% until late Coverage 2021 • CRE –2Q20 CREPi forecast to decline 16% Y‐o‐Y and Ratio 22% for FY2020 • Corporate –2Q20 corporate profits forecast to 1.15% decline 22% Y‐o‐Y and 20% for FY2020 • Residential –2Q20 housing price index forecast to Coverage increase modestly at 3.4% Y‐o‐Y and 2.4% for FY2020 Ratio • Consumer –2Q retail sales forecast to decrease 12% Y‐o‐Y and 5.6% for FY2020 0.77% 2Q20 Provision for Credit Loss Factors Coverage Ratio • Updated macroeconomic factors • Enhanced qualitative factors, including additional reserve for hospitality portfolios • Relatively stable asset quality metrics with minimal credit losses • Additional management overlay to COVID‐19 ACL 3/31/20 ACL 6/30/20 modifications 13
Allocation of Allowance by Loan Type Allowance of Loan & Allocation for Credit Losses ($ thousands) Lease Losses (ALLL) for Current Expected Credit Loss (CECL) January 1, 2020 December 31, 2019 CECL Adoption ‐ Day 1March 31, 2020 June 30, 2020 Coverage Coverage Coverage Coverage Loan Type Amount Amount Amount Amount Ratio Ratio Ratio Ratio Commercial Real Estate $ 53,593 0.62% $ 81,385 0.94% $ 94,645 1.09% $ 119,030 1.37% Residential $ 204 0.39% $ 227 0.43% $ 399 0.70% $ 460 0.84% Commercial $ 51,712 0.62% $ 79,194 0.95% $ 92,560 1.11% $ 114,668 1.37% Construction $ 1,677 0.57% $ 1,964 0.66% $ 1,686 0.60% $ 3,902 1.35% Commercial & Industry $ 33,032 1.21% $ 32,010 1.18% $ 42,883 1.40% $ 35,493 1.04% Residential Mortgage $ 5,925 0.71% $ 5,387 0.65% $ 5,779 0.73% $ 5,868 0.81% Consumer $ 1,594 2.89% $ 1,563 2.85% $ 1,616 3.35% $ 1,380 3.04% Total Allowance $ 94,144 $ 120,345 $ 144,923 $ 161,771 Coverage Ratio to Loans Receivable 0.77% 0.98% 1.15% 1.26% Excluding PPP 1.31% Including Accretion Discount 1.14% 1.52% 1.54% Excluding PPP & 1.60% Including Accretion Discount 14
Strong Capital & Liquidity Positions Sufficient Liquidity Sources Robust Capital Position 13.23% 13.06% 12.24% Available 12.19% 11.44% 11.50% 6/30/2020 ($ Thousands) Borrowing 10.88% Capacity 10.08% FHLB Remaining Capacity $ 3,455,575 10.00% FRB Discount Window $ 726,639 8.00% Unsecured lines with other banks $ 306,180 6.50% Total Borrowing Capacity $ 4,488,394 5.00% Brokered Deposit Availability $ 702,203 (internal policy limit 15% of Total Assets) 5.00% Investment Repo Line $ 1,464,479 (unpledged securities 95%) Total Risk‐Based Tier 1 Leverage Ratio Tier 1 Common Tier 1 Capital Ratio Capital Ratio Equity Ratio Min. Guideline Well Capitalized Institution 3/31/2020 6/30/2020 Significant increase in primary source of liquidity since COVID‐ Building capital ratios with Total Risk‐Based, Tier 1 Common and Tier 1 Capital 19 Pandemic ratios all increasing Q‐o‐Q Participation in FRB’s PPP lending facility in 2H 2020 will Growing equity with Book Value per share of $16.48 and Tangible Common minimize use of other secondary liquidity sources Equity per share of $12.62, each up 1% Q‐o‐Q and 5% Y‐o‐Y Returning Capital to shareholders with quarterly common stock dividend of $0.14 per share 15
Near-Term Outlook Meaningful loan growth for 2020 driven in 2H by corporate banking, warehouse line and residential mortgage refinancings Anticipating net interest margin expansion going forward as a result of stable loan yields, decreasing deposit costs and deployment of excess liquidity Residential mortgage originations to drive higher levels of gain‐on‐sale of other loans fee income Right sizing overall cost structure in line with current business environment Managing capital position to maintain sufficient capital to support clients and communities 16
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2020 Second Quarter Earnings Conference Call Q&A 18