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
October 20, 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 October 20, 2020, Hope Bancorp, Inc. (“HOPE” or the “Company”) issued a news release concerning its results of operations and financial condition for the third quarter and nine months ended and as of September 30, 2020. A copy of the October 20, 2020 press release is attached hereto as Exhibit 99.1.
Item 8.01 Other Events.
On October 20, 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 November 13, 2020 to all stockholders of record as of the close of business on October 30, 2020. A copy of the October 20, 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, October 21, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its third quarter and nine-month periods ended September 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, datedOctober 20, 2020, concerning the results of operations and financial condition for thethirdquarterand nine monthsended and as ofSeptember30, 2020. |
| 99.2 | News release, datedOctober 20, 2020, announcing the declaration of a quarterlycash dividend. |
| 99.3 | Presentation Materials, datedOctober 21, 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: October 21, 2020 | By: | /s/ Kevin S. Kim |
| Kevin S. Kim | ||
| Chairman, President and Chief Executive Officer |
Document
News Release
HOPE BANCORP REPORTS 2020 THIRD QUARTER FINANCIAL RESULTS
LOS ANGELES - October 20, 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 nine-month periods ended September 30, 2020.
For the three months ended September 30, 2020, net income totaled $30.5 million, or $0.25 per diluted common share, compared with $26.8 million, or $0.22 per diluted common share for the 2020 second quarter. In the year-ago third quarter, net income totaled $42.6 million, or $0.34 per diluted common share.
“We continue to manage our business well in this most challenging operating environment as evidenced by the many positive trends in our 2020 third quarter,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “The continued success we are having in reducing our deposit costs resulted in a 7% quarter-over-quarter increase in net interest income and a 12 basis point expansion in our net interest margin. Contributing to a 23 basis point reduction in our cost of deposits, noninterest bearing demand deposits increased 11% quarter-over-quarter and accounted for 32% of total deposits at quarter end. We also made significant progress during the quarter redeploying the excess liquidity that was built up as a precautionary measure in light of COVID-19. Altogether with our cost containment efforts, we saw improvement in our efficiency ratio.
“Asset quality remains top of mind as we continue to help our borrowers manage through the impact of the pandemic. Overall, credit trends remain stable with meaningful reductions in nonaccrual loans and restructured loans. Underscoring the protracted impact COVID-19 is having on the economy, we further increased our allowance for credit losses to 1.37% of total loans at September 30, 2020 from 1.26% at June 30, 2020. We believe we are taking appropriate mitigating actions for the current environment and remain confident in our ability to continue supporting our customers and communities while delivering solid financial performance for our shareholders.”
Q3 2020 Highlights
•Net interest income before provision for credit losses increased 7% to $117.6 million from Q2 2020, largely benefiting from meaningful reductions in interest expense due to lower cost of deposits.
•Net interest margin expanded 12 basis points quarter-over-quarter benefiting from continued reduction in deposit costs and redeployment of excess liquidity.
•Noninterest bearing deposits increased 11% by $452 million quarter-over-quarter and accounted for 32% of total deposits at quarter end.
•Favorable mix-shift to lower-cost core deposits continued and total deposit costs decreased 23 basis points quarter-over-quarter.
•Loan originations of $782 million included $301 million in utilization of new warehouse mortgage lines and contributed to a 2% increase in loans receivable quarter-over-quarter, or 8% annualized.
•Noninterest expenses were well contained, and efficiency ratio improved to 54.31% from 55.37% in Q2 2020.
•ROA and ROTCE improved to 0.72% and 7.80%, respectively, from 0.64% and 6.94% in Q2 2020.
•Nonperforming loans decreased 16% quarter-over-quarter to $106.2 million, or 0.81% of loans receivable.
•Allowance for credit losses increased to 1.37% of loans receivable at September 30, 2020 from 1.26% at June 30, 2020.
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Financial Highlights
| (dollars in thousands, except per share data) (unaudited) | At or for the Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 9/30/2020 | 6/30/2020 | 9/30/2019 | ||||||||
| Net income | $ | 30,490 | $ | 26,753 | $ | 42,592 | ||||
| Diluted earnings per share | $ | 0.25 | $ | 0.22 | $ | 0.34 | ||||
| Net interest income before provision for credit losses | $ | 117,637 | $ | 109,814 | $ | 116,258 | ||||
| Net interest margin | 2.91 | % | 2.79 | % | 3.25 | % | ||||
| Noninterest income | $ | 17,513 | $ | 11,240 | $ | 12,995 | ||||
| Noninterest expense | $ | 73,406 | $ | 67,030 | $ | 69,995 | ||||
| Net loans receivable | $ | 12,940,376 | $ | 12,710,063 | $ | 12,010,800 | ||||
| Deposits | $ | 14,008,356 | $ | 14,123,532 | $ | 12,234,750 | ||||
| Total cost of deposits | 0.64 | % | 0.87 | % | 1.62 | % | ||||
| Nonaccrual loans ^(1) (2)^ | $ | 69,205 | $ | 82,137 | $ | 42,235 | ||||
| Nonperforming loans to loans receivable ^(1) (2)^ | 0.81 | % | 0.98 | % | 0.64 | % | ||||
| ACL to loans receivable^(3)^ | 1.37 | % | 1.26 | % | 0.78 | % | ||||
| ACL to nonaccrual loans ^(1) (2) (3)^ | 259.88 | % | 196.95 | % | 222.28 | % | ||||
| ACL to nonperforming assets ^(1) (2) (3)^ | 144.36 | % | 109.62 | % | 97.06 | % | ||||
| Provision for credit losses | $ | 22,000 | $ | 17,500 | $ | 2,100 | ||||
| Net charge offs | $ | 3,922 | $ | 652 | $ | 1,822 | ||||
| Return on average assets (“ROA”) | 0.72 | % | 0.64 | % | 1.12 | % | ||||
| Return on average equity (“ROE”) | 5.98 | % | 5.31 | % | 8.47 | % | ||||
| Return on average tangible common equity (“ROTCE”) ^(4)^ | 7.80 | % | 6.94 | % | 11.11 | % | ||||
| Noninterest expense / average assets | 1.73 | % | 1.60 | % | 1.85 | % | ||||
| Efficiency ratio | 54.31 | % | 55.37 | % | 54.15 | % |
^(1)^ Excludes delinquent SBA loans that are guaranteed and currently in liquidation.
^(2)^ Excludes purchased credit impaired (“PCI”) loans for September 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 Third Quarter
Net interest income before provision for credit losses for the 2020 third quarter increased 7% to $117.6 million from $109.8 million in the 2020 second quarter and increased 1% from $116.3 million in the 2019 third quarter. The Company attributed the increases to significant reductions in interest expense predominantly as a result of meaningful decreases in its total cost of deposits each period over the past four quarters. In addition, the Company reduced its FHLB borrowings by $300 million, or 60%, during the 2020 third quarter as part of an initiative to deploy excess liquidity built up in the early stages of the COVID-19 pandemic, which further reduced interest expense.
The net interest margin for the 2020 third quarter increased 12 basis points to 2.91% from 2.79% in the preceding second quarter. The primary factor contributing to the margin expansion was a 23 basis point reduction in total cost of deposits, which benefited net interest margin by approximately 15 basis points in the 2020 third quarter. The net interest margin for the 2019 third quarter was 3.25%.
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The weighted average yield on loans for the 2020 third quarter was generally stable, decreasing 3 basis points to 4.20% from 4.23% in the 2020 second quarter. In the year-ago third quarter, the weighted average yield on loans was 5.27%.
The weighted average cost of deposits for the 2020 third quarter decreased 23 basis points to 0.64% from 0.87% for the 2020 second quarter and decreased 98 basis points from 1.62% for the year-ago third quarter. The significant improvements in the weighted average cost of deposits reflects in part the Company’s ongoing success with its initiative to enhance its deposit mix to favor lower-cost core deposits, as well as strategic reductions in the offering rates on its interest bearing deposit accounts over the past four quarters.
Noninterest income for the 2020 third quarter increased 56% to $17.5 million from $11.2 million for the preceding second quarter and $13.0 million for the 2019 third quarter. The largest factor contributing to the increase was a $7.5 million net gain on the sale of $161 million of available-for-sale investment securities. This compares with zero in the 2020 second quarter and $153,000 in the 2019 third quarter. In addition, net gains on sales of other loans from sales of new residential mortgage originations increased to $2.9 million in the 2020 third quarter from $1.7 million in the preceding second quarter and $804,000 in the 2019 third quarter. These increases were partially offset by a reduction in other income and fees, which amounted to $1.7 million in the 2020 third quarter, compared with $4.4 million in the 2020 second quarter, largely reflecting a fair value change in derivatives as well as lower swap fee income. In the 2019 third quarter, other income and fees amounted to $4.9 million.
Noninterest expense for the 2020 third quarter totaled $73.4 million, compared with $67.0 million for the preceding second quarter and $70.0 million for the 2019 third quarter. During the 2020 third quarter, the Company incurred a $3.6 million prepayment penalty related to the early payoff of $300 million in FHLB borrowings discussed above. There were no such fees in the preceding second quarter or 2019 third quarter.
Salaries and employee benefits expense totaled $40.7 million, $38.9 million and $41.6 million for the 2020 third quarter, 2020 second quarter and 2019 third quarter. As disclosed last quarter, PPP loan origination costs of $5.2 million were deferred in the 2020 second quarter and materially reduced compensation expense for that quarter alone. Excluding the impact of the PPP loan origination costs in the 2020 second quarter, salaries and employee benefits expense declined quarter-over-quarter, as the 4% workforce reduction at the beginning of the third quarter reduced base salary and benefits expense by $1.6 million in the 2020 third quarter.
Noninterest expense as a percentage of average assets was 1.73% for the 2020 third quarter, 1.60% for the 2020 second quarter and 1.85% for the 2019 third quarter. Excluding the FHLB prepayment penalty, noninterest expense as a percentage of average assets for the 2020 third quarter was 1.64%.
The effective tax rate for the 2020 third quarter was 23.3%, compared with 26.8% for the preceding second quarter and 25.5% in the year-ago third quarter. The decrease in the effective tax rate for 2020 third quarter reflects projected annual income for 2020.
Balance Sheet Summary
New loan originations funded during the 2020 third quarter totaled $782.4 million and included non-PPP traditional SBA loan production of $48.2 million and residential mortgage loan originations of $102.3 million. In addition, four new warehouse mortgage lines of credit aggregating $500 million were booked during the 2020 third quarter, of which $301 million was funded as of September 30, 2020 and included in new loan originations for the 2020 third quarter. For the preceding 2020 second quarter, new loan originations funded totaled $832.0 million, including 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. In the year-ago third quarter, new loan originations funded totaled $693.9 million, including SBA loan production of $53.8 million and residential mortgage loan originations of $58.5 million. There were no new warehouse mortgage lines of credit established in the 2020 second quarter and 2019 third quarter.
At September 30, 2020, loans receivable increased 1.9% to $13.12 billion from $12.87 billion at June 30, 2020 and increased 8.4% from $12.10 billion at September 30, 2019.
Total deposits at September 30, 2020 decreased 0.8% quarter-over-quarter to $14.01 billion from $14.12 billion at June 30, 2020, reflecting a continuing positive shift in the mix of deposits. An increase of $452.1 million in noninterest bearing
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demand deposits during the 2020 third quarter and a decrease of $511.9 million in time deposits were the primary factors contributing to the quarter-over-quarter change in total deposits.
Following is the deposit composition as of September 30, 2020, June 30, 2020 and September 30, 2019:
| (dollars in thousands) (unaudited) | 9/30/2020 | 6/30/2020 | % change | 9/30/2019 | % change | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Noninterest bearing demand deposits | $ | 4,488,529 | $ | 4,036,383 | 11 | % | $ | 3,033,371 | 48 | % |
| Money market and other | 4,763,893 | 4,831,679 | (1) | % | 3,752,274 | 27 | % | |||
| Saving deposits | 308,943 | 296,614 | 4 | % | 259,454 | 19 | % | |||
| Time deposits | 4,446,991 | 4,958,856 | (10) | % | 5,189,651 | (14) | % | |||
| Total deposit balances | $ | 14,008,356 | $ | 14,123,532 | (1) | % | $ | 12,234,750 | 14 | % |
Following is the deposit composition as a percentage of total deposits as of September 30, 2020, June 30, 2020 and September 30, 2019 and a breakdown of cost of deposits for the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019:
| Deposit Breakdown | Cost of Deposits | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (dollars in thousands) (unaudited) | 9/30/2020 | 6/30/2020 | 9/30/2019 | Q3 2020 | Q2 2020 | Q3 2019 | ||||||
| Noninterest bearing demand deposits | 32.1 | % | 28.6 | % | 24.8 | % | — | % | — | % | — | % |
| Money market and other | 34.0 | % | 34.2 | % | 30.7 | % | 0.53 | % | 0.62 | % | 1.82 | % |
| Saving deposits | 2.2 | % | 2.1 | % | 2.1 | % | 1.19 | % | 1.22 | % | 1.06 | % |
| Time deposits | 31.7 | % | 35.1 | % | 42.4 | % | 1.30 | % | 1.71 | % | 2.41 | % |
| Total deposit balances | 100.0 | % | 100.0 | % | 100.0 | % | 0.64 | % | 0.87 | % | 1.62 | % |
At September 30, 2020, cash and due from banks totaled $629.1 million, a 57% reduction from $1.47 billion at June 30, 2020. During the 2020 third quarter, the Company made significant progress in redeploying excess liquidity on its balance sheet, which included an early payoff of $300 million in Federal Home Loan Borrowings, which had the positive effect of increasing net interest income by $503,000 and enhancing net interest margin by approximately 3.5 basis points in the 2020 third quarter. Other excess liquidity redeployment initiatives included further reduction of higher-cost time deposits and funding new loan growth for the quarter.
Allowance for Credit Losses
The 2020 third quarter provision for credit losses under the CECL methodology was $22.0 million, compared with $17.5 million for the preceding second quarter. This compares with a provision for loan losses under the prior incurred loss methodology of $2.1 million for the 2019 third quarter.
The provision for credit losses for the 2020 third quarter reflects updated macroeconomic variables incorporating the Moody’s Analytics Baseline scenario published September 2020, updated qualitative factors in the Company’s ACL methodology, relatively stable asset quality metrics and a low level of credit losses, as well as additional management overlays related to COVID-19 modifications and the recognition of risk from granting longer term modifications.
Following is the Allowance for Credit Losses as of September 30, 2020, June 30, 2020 and September 30, 2019:
| (dollars in thousands) (unaudited) | 9/30/2020 | 6/30/2020 | 9/30/2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Allowance for credit losses | $ | 179,849 | $ | 161,771 | $ | 93,882 | ||||
| Allowance for credit loss/loans receivable | 1.37 | % | 1.26 | % | 0.78 | % | ||||
| Allowance for credit losses/nonperforming loans | 169.40 | % | 127.79 | % | 121.37 | % |
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Credit Quality
Following are the components of nonperforming assets as of September 30, 2020, June 30, 2020 and September 30, 2019:
| (dollars in thousands) (unaudited) | 9/30/2020 | 6/30/2020 | 9/30/2019 | ||||
|---|---|---|---|---|---|---|---|
| Loans on nonaccrual status ^(1)^ | $ | 69,205 | $ | 82,137 | $ | 42,235 | |
| Delinquent loans 90 days or more on accrual status ^(2)^ | 1,537 | 430 | 398 | ||||
| Accruing troubled debt restructured loans | 35,429 | 44,026 | 34,717 | ||||
| Total nonperforming loans | 106,171 | 126,593 | 77,350 | ||||
| Other real estate owned | 18,410 | 20,983 | 19,374 | ||||
| Total nonperforming assets | $ | 124,581 | $ | 147,576 | $ | 96,724 |
^(1)^ Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $26.2 million, $30.3 million and $37.3 million, at September 30, 2020, June 30, 2020 and September 30, 2019, respectively.
^(2)^ Excludes PCI loans totaling $15.5 million at September 30, 2019.
Following are the components of criticized loan balances as of September 30, 2020, June 30, 2020 and September 30, 2019:
| (dollars in thousands) (unaudited) | 9/30/2020 | 6/30/2020 | 9/30/2019 | ||||
|---|---|---|---|---|---|---|---|
| Special Mention | $ | 153,388 | $ | 127,149 | $ | 139,848 | |
| Classified | 318,542 | 299,368 | 268,622 | ||||
| Criticized | $ | 471,930 | $ | 426,517 | $ | 408,470 |
During the 2020 third quarter, net charge offs totaled $3.9 million, or 0.12% of average loans receivable on an annualized basis. This compares with net charge offs of $652,000, or 0.02% of average loans receivable on an annualized basis for the 2020 second quarter and net charge offs for the 2019 third quarter of $1.8 million, or 0.06% of average loans receivable on an annualized basis.
Capital
At September 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 September 30, 2020, June 30, 2020 and September 30, 2019:
| Hope Bancorp, Inc. (unaudited) | 9/30/2020 | 6/30/2020 | 9/30/2019 | Minimum Guideline for “Well-Capitalized” Bank |
|---|---|---|---|---|
| Common Equity Tier 1 Capital | 11.36% | 11.50% | 11.89% | 6.50% |
| Tier 1 Leverage Ratio | 10.02% | 10.08% | 11.18% | 5.00% |
| Tier 1 Risk-Based Ratio | 12.09% | 12.24% | 12.65% | 8.00% |
| Total Risk-Based Ratio | 13.19% | 13.23% | 13.38% | 10.00% |
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Following are tangible common equity (“TCE”) per share and TCE as a percentage of tangible assets as of September 30, 2020, June 30, 2020 and September 30, 2019:
| (unaudited) | 9/30/2020 | 6/30/2020 | 9/30/2019 |
|---|---|---|---|
| Tangible common equity per share ^(1)^ | $12.70 | $12.62 | $12.27 |
| Tangible common equity to tangible assets ^(2)^ | 9.63% | 9.32% | 10.43% |
^(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.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Wednesday, October 21, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its third quarter ended September 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 October 28, 2020, replay access code 10148641.
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 $16.7 billion in total assets as of September 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 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.
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Forward-Looking Statements
Some statements in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for credit losses, regulatory risks associated with current and future regulations, and the COVID-19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
Contacts:
| Alex Ko<br><br>EVP & Chief Financial Officer<br><br>213-427-6560<br><br>alex.ko@bankofhope.com | Angie Yang<br><br>SVP, Director of Investor Relations &<br><br>Corporate Communications<br><br>213-251-2219<br><br>angie.yang@bankofhope.com |
|---|
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Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
| Assets: | 9/30/2020 | 6/30/2020 | % change | 12/31/2019 | % change | 9/30/2019 | % change | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash and due from banks | $ | 629,133 | $ | 1,468,949 | (57) | % | $ | 698,567 | (10) | % | $ | 549,356 | 15 | % |
| Securities available for sale, at fair value | 2,060,991 | 1,887,604 | 9 | % | 1,715,987 | 20 | % | 1,772,322 | 16 | % | ||||
| Federal Home Loan Bank (“FHLB”) stock and other investments | 97,305 | 98,357 | (1) | % | 97,659 | — | % | 98,848 | (2) | % | ||||
| Loans held for sale, at the lower of cost or fair value | 9,170 | 11,350 | (19) | % | 54,271 | (83) | % | 29,627 | (69) | % | ||||
| Loans receivable | 13,120,225 | 12,871,834 | 2 | % | 12,276,007 | 7 | % | 12,104,682 | 8 | % | ||||
| Allowance for credit losses | (179,849) | (161,771) | 11 | % | (94,144) | 91 | % | (93,882) | 92 | % | ||||
| Net loans receivable | 12,940,376 | 12,710,063 | 2 | % | 12,181,863 | 6 | % | 12,010,800 | 8 | % | ||||
| Accrued interest receivable | 57,989 | 52,859 | 10 | % | 30,772 | 88 | % | 29,743 | 95 | % | ||||
| Premises and equipment, net | 49,552 | 51,029 | (3) | % | 52,012 | (5) | % | 52,604 | (6) | % | ||||
| Bank owned life insurance | 77,388 | 77,050 | — | % | 76,339 | 1 | % | 75,968 | 2 | % | ||||
| Goodwill | 464,450 | 464,450 | — | % | 464,450 | — | % | 464,450 | — | % | ||||
| Servicing assets | 13,718 | 14,164 | (3) | % | 16,417 | (16) | % | 17,865 | (23) | % | ||||
| Other intangible assets, net | 10,239 | 10,770 | (5) | % | 11,833 | (13) | % | 12,390 | (17) | % | ||||
| Other assets | 323,456 | 322,417 | — | % | 267,270 | 21 | % | 265,905 | 22 | % | ||||
| Total assets | $ | 16,733,767 | $ | 17,169,062 | (3) | % | $ | 15,667,440 | 7 | % | $ | 15,379,878 | 9 | % |
| Liabilities: | ||||||||||||||
| Deposits | $ | 14,008,356 | $ | 14,123,532 | (1) | % | $ | 12,527,364 | 12 | % | $ | 12,234,750 | 14 | % |
| FHLB advances | 200,000 | 500,000 | (60) | % | 625,000 | (68) | % | 625,000 | (68) | % | ||||
| Convertible notes, net | 203,270 | 201,987 | 1 | % | 199,458 | 2 | % | 198,211 | 3 | % | ||||
| Subordinated debentures | 103,889 | 103,602 | — | % | 103,035 | 1 | % | 102,755 | 1 | % | ||||
| Accrued interest payable | 21,991 | 26,093 | (16) | % | 33,810 | (35) | % | 38,197 | (42) | % | ||||
| Other liabilities | 155,700 | 183,072 | (15) | % | 142,762 | 9 | % | 149,681 | 4 | % | ||||
| Total liabilities | $ | 14,693,206 | $ | 15,138,286 | (3) | % | $ | 13,631,429 | 8 | % | $ | 13,348,594 | 10 | % |
| Stockholders’ Equity: | ||||||||||||||
| Common stock, $0.001 par value | $ | 136 | $ | 136 | — | % | $ | 136 | — | % | $ | 136 | — | % |
| Capital surplus | 1,432,773 | 1,430,757 | — | % | 1,428,066 | — | % | 1,426,666 | — | % | ||||
| Retained earnings | 774,970 | 761,734 | 2 | % | 762,480 | 2 | % | 737,209 | 5 | % | ||||
| Treasury stock, at cost | (200,000) | (200,000) | — | % | (163,820) | 22 | % | (150,000) | 33 | % | ||||
| Accumulated other comprehensive gain, net | 32,682 | 38,149 | (14) | % | 9,149 | 257 | % | 17,273 | 89 | % | ||||
| Total stockholders’ equity | 2,040,561 | 2,030,776 | — | % | 2,036,011 | — | % | 2,031,284 | — | % | ||||
| Total liabilities and stockholders’ equity | $ | 16,733,767 | $ | 17,169,062 | (3) | % | $ | 15,667,440 | 7 | % | $ | 15,379,878 | 9 | % |
| Common stock shares - authorized | 150,000,000 | 150,000,000 | 150,000,000 | 150,000,000 | ||||||||||
| Common stock shares - outstanding | 123,260,760 | 123,239,276 | 125,756,543 | 126,697,925 | ||||||||||
| 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 | Nine Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 9/30/2020 | 6/30/2020 | % change | 9/30/2019 | % change | 9/30/2020 | 9/30/2019 | % change | ||||||||||
| Interest and fees on loans | $ | 134,430 | $ | 134,190 | — | % | $ | 158,115 | (15) | % | $ | 422,850 | $ | 474,878 | (11) | % | |
| Interest on securities | 9,848 | 9,891 | — | % | 11,373 | (13) | % | 30,348 | 35,558 | (15) | % | ||||||
| Interest on federal funds sold and other investments | 942 | 980 | (4) | % | 2,929 | (68) | % | 3,951 | 8,577 | (54) | % | ||||||
| Total interest income | 145,220 | 145,061 | — | % | 172,417 | (16) | % | 457,149 | 519,013 | (12) | % | ||||||
| Interest on deposits | 22,871 | 29,451 | (22) | % | 49,057 | (53) | % | 93,435 | 144,730 | (35) | % | ||||||
| Interest on other borrowings and convertible notes | 4,712 | 5,796 | (19) | % | 7,102 | (34) | % | 16,972 | 21,196 | (20) | % | ||||||
| Total interest expense | 27,583 | 35,247 | (22) | % | 56,159 | (51) | % | 110,407 | 165,926 | (33) | % | ||||||
| Net interest income before provision for credit losses | 117,637 | 109,814 | 7 | % | 116,258 | 1 | % | 346,742 | 353,087 | (2) | % | ||||||
| Provision for credit losses | 22,000 | 17,500 | 26 | % | 2,100 | 948 | % | 67,500 | 6,300 | 971 | % | ||||||
| Net interest income after provision for credit losses | 95,637 | 92,314 | 4 | % | 114,158 | (16) | % | 279,242 | 346,787 | (19) | % | ||||||
| Service fees on deposit accounts | 2,736 | 2,583 | 6 | % | 4,690 | (42) | % | 9,452 | 13,423 | (30) | % | ||||||
| International service fees | 987 | 667 | 48 | % | 1,193 | (17) | % | 2,443 | 3,146 | (22) | % | ||||||
| Loan servicing fees, net | 772 | 1,106 | (30) | % | 189 | 308 | % | 2,243 | 1,656 | 35 | % | ||||||
| Wire transfer fees | 892 | 820 | 9 | % | 1,058 | (16) | % | 2,710 | 3,458 | (22) | % | ||||||
| Net gains on sales of other loans | 2,853 | 1,678 | 70 | % | 804 | 255 | % | 6,386 | 2,611 | 145 | % | ||||||
| Net gains on sales of securities available for sale | 7,531 | — | 100 | % | 153 | 4,822 | % | 7,531 | 282 | 2,571 | % | ||||||
| Other income and fees | 1,742 | 4,386 | (60) | % | 4,908 | (65) | % | 11,252 | 12,128 | (7) | % | ||||||
| Total noninterest income | 17,513 | 11,240 | 56 | % | 12,995 | 35 | % | 42,017 | 36,704 | 14 | % | ||||||
| Salaries and employee benefits | 40,659 | 38,850 | 5 | % | 41,607 | (2) | % | 122,011 | 121,333 | 1 | % | ||||||
| Occupancy | 7,264 | 7,043 | 3 | % | 7,703 | (6) | % | 21,717 | 23,219 | (6) | % | ||||||
| Furniture and equipment | 4,513 | 4,654 | (3) | % | 3,851 | 17 | % | 13,426 | 11,323 | 19 | % | ||||||
| Advertising and marketing | 1,601 | 1,315 | 22 | % | 2,377 | (33) | % | 4,589 | 6,684 | (31) | % | ||||||
| Data processing and communications | 2,204 | 2,274 | (3) | % | 2,821 | (22) | % | 7,109 | 8,364 | (15) | % | ||||||
| Professional fees | 1,513 | 1,510 | — | % | 5,241 | (71) | % | 6,323 | 16,580 | (62) | % | ||||||
| FDIC assessment | 1,167 | 1,652 | (29) | % | — | 100 | % | 4,378 | 3,110 | 41 | % | ||||||
| Credit related expenses | 1,793 | 1,361 | 32 | % | 1,031 | 74 | % | 4,816 | 3,258 | 48 | % | ||||||
| OREO expense (income), net | 1,770 | 1,338 | 32 | % | (743) | N/A | 3,951 | (812) | N/A | ||||||||
| FHLB prepayment fee | 3,584 | — | 100 | % | — | 100 | % | 3,584 | — | 100 | % | ||||||
| Other | 7,338 | 7,033 | 4 | % | 6,107 | 20 | % | 20,672 | 19,140 | 8 | % | ||||||
| Total noninterest expense | 73,406 | 67,030 | 10 | % | 69,995 | 5 | % | 212,576 | 212,199 | — | % | ||||||
| Income before income taxes | 39,744 | 36,524 | 9 | % | 57,158 | (30) | % | 108,683 | 171,292 | (37) | % | ||||||
| Income tax provision | 9,254 | 9,771 | (5) | % | 14,566 | (36) | % | 25,487 | 43,261 | (41) | % | ||||||
| Net income | $ | 30,490 | $ | 26,753 | 14 | % | $ | 42,592 | (28) | % | $ | 83,196 | $ | 128,031 | (35) | % | |
| Earnings Per Common Share: | |||||||||||||||||
| Basic | $ | 0.25 | $ | 0.22 | $ | 0.34 | $ | 0.67 | $ | 1.01 | |||||||
| Diluted | $ | 0.25 | $ | 0.22 | $ | 0.34 | $ | 0.67 | $ | 1.01 | |||||||
| Weighted Average Shares Outstanding: | |||||||||||||||||
| Basic | 123,251,336 | 123,200,127 | 126,685,921 | 123,581,055 | 126,661,798 | ||||||||||||
| Diluted | 123,536,765 | 123,430,891 | 127,007,469 | 123,895,084 | 126,895,970 |
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 Nine Months Ended<br>(Annualized) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Profitability measures: | 9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | |||||||||||
| ROA | 0.72 | % | 0.64 | % | 1.12 | % | 0.68 | % | 1.12 | % | ||||||
| ROE | 5.98 | % | 5.31 | % | 8.47 | % | 5.47 | % | 8.69 | % | ||||||
| ROTCE ^(1)^ | 7.80 | % | 6.94 | % | 11.11 | % | 7.14 | % | 11.48 | % | ||||||
| Net interest margin | 2.91 | % | 2.79 | % | 3.25 | % | 2.99 | % | 3.31 | % | ||||||
| Efficiency ratio | 54.31 | % | 55.37 | % | 54.15 | % | 54.68 | % | 54.44 | % | ||||||
| Noninterest expense / average assets | 1.73 | % | 1.60 | % | 1.85 | % | 1.73 | % | 1.86 | % | ||||||
| ^(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 | Nine Months Ended | |||||||||||||||
| Pre-tax acquisition accounting adjustments and merger-related expenses: | 9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | |||||||||||
| Accretion on purchased non-impaired loans | $ | 747 | $ | 658 | $ | 2,046 | $ | 2,464 | $ | 6,011 | ||||||
| Accretion on purchased credit deteriorated/purchased credit impaired loans | 4,584 | 3,046 | 5,234 | 17,079 | 17,916 | |||||||||||
| Amortization of premium on low income housing tax credits | (71) | (70) | (75) | (212) | (227) | |||||||||||
| Amortization of premium on acquired FHLB borrowings | — | — | — | — | 1,280 | |||||||||||
| Accretion of discount on acquired subordinated debt | (287) | (284) | (278) | (854) | (826) | |||||||||||
| Amortization of core deposit intangibles | (531) | (532) | (557) | (1,594) | (1,671) | |||||||||||
| Total acquisition accounting adjustments | $ | 4,442 | $ | 2,818 | $ | 6,370 | $ | 16,883 | $ | 22,483 |
Table Page 3
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 9/30/2020 | 6/30/2020 | 9/30/2019 | |||||||||||||||||
| 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 | $ | 12,728,558 | $ | 134,430 | 4.20 | % | $ | 12,755,088 | $ | 134,190 | 4.23 | % | $ | 11,911,658 | $ | 158,115 | 5.27 | % | |
| Securities available for sale | 2,010,907 | 9,848 | 1.95 | % | 1,750,156 | 9,891 | 2.27 | % | 1,798,239 | 11,373 | 2.51 | % | |||||||
| FHLB stock and other investments | 1,342,641 | 942 | 0.28 | % | 1,317,049 | 980 | 0.30 | % | 482,952 | 2,929 | 2.41 | % | |||||||
| Total interest earning assets | $ | 16,082,106 | $ | 145,220 | 3.59 | % | $ | 15,822,293 | $ | 145,061 | 3.69 | % | $ | 14,192,849 | $ | 172,417 | 4.82 | % | |
| INTEREST BEARING LIABILITIES: | |||||||||||||||||||
| Deposits: | |||||||||||||||||||
| Demand, interest bearing | $ | 4,895,101 | $ | 6,546 | 0.53 | % | $ | 4,903,786 | $ | 7,563 | 0.62 | % | $ | 3,450,749 | $ | 15,802 | 1.82 | % | |
| Savings | 302,882 | 907 | 1.19 | % | 284,050 | 862 | 1.22 | % | 252,780 | 675 | 1.06 | % | |||||||
| Time deposits | 4,703,640 | 15,418 | 1.30 | % | 4,954,446 | 21,026 | 1.71 | % | 5,368,753 | 32,580 | 2.41 | % | |||||||
| Total interest bearing deposits | 9,901,623 | 22,871 | 0.92 | % | 10,142,282 | 29,451 | 1.17 | % | 9,072,282 | 49,057 | 2.15 | % | |||||||
| FHLB advances | 353,587 | 1,323 | 1.49 | % | 593,407 | 2,238 | 1.52 | % | 632,500 | 3,112 | 1.95 | % | |||||||
| Convertible notes, net | 202,470 | 2,370 | 4.58 | % | 201,169 | 2,358 | 4.64 | % | 197,410 | 2,322 | 4.60 | % | |||||||
| Subordinated debentures | 99,819 | 1,019 | 3.99 | % | 99,534 | 1,200 | 4.77 | % | 98,690 | 1,668 | 6.61 | % | |||||||
| Total interest bearing liabilities | $ | 10,557,499 | $ | 27,583 | 1.04 | % | $ | 11,036,392 | $ | 35,247 | 1.28 | % | $ | 10,000,882 | $ | 56,159 | 2.23 | % | |
| Noninterest bearing demand deposits | 4,239,108 | 3,510,783 | 2,958,233 | ||||||||||||||||
| Total funding liabilities/cost of funds | $ | 14,796,607 | 0.74 | % | $ | 14,547,175 | 0.97 | % | $ | 12,959,115 | 1.72 | % | |||||||
| Net interest income/net interest spread | $ | 117,637 | 2.55 | % | $ | 109,814 | 2.41 | % | $ | 116,258 | 2.59 | % | |||||||
| Net interest margin | 2.91 | % | 2.79 | % | 3.25 | % | |||||||||||||
| Cost of deposits: | |||||||||||||||||||
| Noninterest bearing demand deposits | $ | 4,239,108 | $ | — | — | % | $ | 3,510,783 | $ | — | — | % | $ | 2,958,233 | $ | — | — | % | |
| Interest bearing deposits | 9,901,623 | 22,871 | 0.92 | % | 10,142,282 | 29,451 | 1.17 | % | 9,072,282 | 49,057 | 2.15 | % | |||||||
| Total deposits | $ | 14,140,731 | $ | 22,871 | 0.64 | % | $ | 13,653,065 | $ | 29,451 | 0.87 | % | $ | 12,030,515 | $ | 49,057 | 1.62 | % |
Table Page 4
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Nine Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 9/30/2020 | 9/30/2019 | |||||||||||
| 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 | $ | 12,581,703 | $ | 422,850 | 4.49 | % | $ | 11,985,936 | $ | 474,878 | 5.30 | % |
| Securities available for sale | 1,825,046 | 30,348 | 2.22 | % | 1,810,068 | 35,558 | 2.63 | % | ||||
| FHLB stock and other investments | 1,060,699 | 3,951 | 0.50 | % | 450,028 | 8,577 | 2.55 | % | ||||
| Total interest earning assets | $ | 15,467,448 | $ | 457,149 | 3.95 | % | $ | 14,246,032 | $ | 519,013 | 4.87 | % |
| INTEREST BEARING LIABILITIES: | ||||||||||||
| Deposits: | ||||||||||||
| Demand, interest bearing | $ | 4,668,594 | $ | 28,988 | 0.83 | % | $ | 3,197,313 | $ | 42,807 | 1.79 | % |
| Savings | 287,060 | 2,578 | 1.20 | % | 234,203 | 1,848 | 1.05 | % | ||||
| Time deposits | 4,852,286 | 61,869 | 1.70 | % | 5,694,778 | 100,075 | 2.35 | % | ||||
| Total interest bearing deposits | 9,807,940 | 93,435 | 1.27 | % | 9,126,294 | 144,730 | 2.12 | % | ||||
| FHLB advances | 513,376 | 6,208 | 1.62 | % | 715,814 | 9,110 | 1.70 | % | ||||
| Convertible notes, net | 201,204 | 7,074 | 4.62 | % | 196,217 | 6,930 | 4.66 | % | ||||
| Subordinated debentures | 99,536 | 3,690 | 4.87 | % | 98,410 | 5,156 | 6.91 | % | ||||
| Total interest bearing liabilities | $ | 10,622,056 | $ | 110,407 | 1.39 | % | $ | 10,136,735 | $ | 165,926 | 2.19 | % |
| Noninterest bearing demand deposits | 3,573,448 | 2,931,080 | ||||||||||
| Total funding liabilities/cost of funds | $ | 14,195,504 | 1.04 | % | $ | 13,067,815 | 1.70 | % | ||||
| Net interest income/net interest spread | $ | 346,742 | 2.56 | % | $ | 353,087 | 2.68 | % | ||||
| Net interest margin | 2.99 | % | 3.31 | % | ||||||||
| Cost of deposits: | ||||||||||||
| Noninterest bearing demand deposits | $ | 3,573,448 | $ | — | — | % | $ | 2,931,080 | $ | — | — | % |
| Interest bearing deposits | 9,807,940 | 93,435 | 1.27 | % | 9,126,294 | 144,730 | 2.12 | % | ||||
| Total deposits | $ | 13,381,388 | $ | 93,435 | 0.93 | % | $ | 12,057,374 | $ | 144,730 | 1.60 | % |
Table Page 5
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AVERAGE BALANCES: | 9/30/2020 | 6/30/2020 | % change | 9/30/2019 | % change | 9/30/2020 | 9/30/2019 | % change | ||||||||||||||
| Loans receivable, including loans held for sale | $ | 12,728,558 | $ | 12,755,088 | — | % | $ | 11,911,658 | 7 | % | $ | 12,581,703 | $ | 11,985,936 | 5 | % | ||||||
| Investments | 3,353,548 | 3,067,205 | 9 | % | 2,281,191 | 47 | % | 2,885,745 | 2,260,096 | 28 | % | |||||||||||
| Interest earning assets | 16,082,106 | 15,822,293 | 2 | % | 14,192,849 | 13 | % | 15,467,448 | 14,246,032 | 9 | % | |||||||||||
| Total assets | 17,020,795 | 16,759,147 | 2 | % | 15,154,661 | 12 | % | 16,411,150 | 15,209,668 | 8 | % | |||||||||||
| Interest bearing deposits | 9,901,623 | 10,142,282 | (2) | % | 9,072,282 | 9 | % | 9,807,940 | 9,126,294 | 7 | % | |||||||||||
| Interest bearing liabilities | 10,557,499 | 11,036,392 | (4) | % | 10,000,882 | 6 | % | 10,622,056 | 10,136,735 | 5 | % | |||||||||||
| Noninterest bearing demand deposits | 4,239,108 | 3,510,783 | 21 | % | 2,958,233 | 43 | % | 3,573,448 | 2,931,080 | 22 | % | |||||||||||
| Stockholders’ equity | 2,039,555 | 2,016,947 | 1 | % | 2,010,458 | 1 | % | 2,028,074 | 1,964,146 | 3 | % | |||||||||||
| Net interest earning assets | 5,524,607 | 4,785,901 | 15 | % | 4,191,967 | 32 | % | 4,845,392 | 4,109,297 | 18 | % | |||||||||||
| LOAN PORTFOLIO COMPOSITION: | 9/30/2020 | 6/30/2020 | % change | 12/31/2019 | % change | 9/30/2019 | % change | |||||||||||||||
| Commercial loans | $ | 3,700,020 | $ | 3,415,111 | 8 | % | $ | 2,719,818 | 36 | % | $ | 2,645,770 | 40 | % | ||||||||
| Real estate loans | 8,713,536 | 8,686,939 | — | % | 8,666,901 | 1 | % | 8,586,989 | 1 | % | ||||||||||||
| Consumer and other loans | 706,669 | 769,784 | (8) | % | 889,288 | (21) | % | 871,923 | (19) | % | ||||||||||||
| Loans, net of deferred loan fees and costs | 13,120,225 | 12,871,834 | 2 | % | 12,276,007 | 7 | % | 12,104,682 | 8 | % | ||||||||||||
| Allowance for credit losses | (179,849) | (161,771) | 11 | % | (94,144) | 91 | % | (93,882) | 92 | % | ||||||||||||
| Loan receivable, net | $ | 12,940,376 | $ | 12,710,063 | 2 | % | $ | 12,181,863 | 6 | % | $ | 12,010,800 | 8 | % | ||||||||
| REAL ESTATE LOANS BY PROPERTY TYPE: | 9/30/2020 | 6/30/2020 | % change | 12/31/2019 | % change | 9/30/2019 | % change | |||||||||||||||
| Retail buildings | $ | 2,311,516 | $ | 2,278,448 | 1 | % | $ | 2,298,872 | 1 | % | $ | 2,304,346 | — | % | ||||||||
| Hotels/motels | 1,675,960 | 1,701,909 | (2) | % | 1,709,189 | (2) | % | 1,664,311 | 1 | % | ||||||||||||
| Gas stations/car washes | 824,378 | 836,314 | (1) | % | 844,081 | (2) | % | 911,494 | (10) | % | ||||||||||||
| Mixed-use facilities | 754,096 | 706,827 | 7 | % | 785,882 | (4) | % | 743,428 | 1 | % | ||||||||||||
| Warehouses | 1,022,657 | 1,040,303 | (2) | % | 1,030,876 | (1) | % | 949,336 | 8 | % | ||||||||||||
| Multifamily | 518,295 | 497,948 | 4 | % | 465,397 | 11 | % | 473,640 | 9 | % | ||||||||||||
| Other | 1,606,634 | 1,625,190 | (1) | % | 1,532,604 | 5 | % | 1,540,434 | 4 | % | ||||||||||||
| Total | $ | 8,713,536 | $ | 8,686,939 | — | % | $ | 8,666,901 | 1 | % | $ | 8,586,989 | 1 | % | ||||||||
| DEPOSIT COMPOSITION | 9/30/2020 | 6/30/2020 | % change | 12/31/2019 | % change | 9/30/2019 | % change | |||||||||||||||
| Noninterest bearing demand deposits | $ | 4,488,529 | $ | 4,036,383 | 11 | % | $ | 3,108,687 | 44 | % | $ | 3,033,371 | 48 | % | ||||||||
| Money market and other | 4,763,893 | 4,831,679 | (1) | % | 3,985,556 | 20 | % | 3,752,274 | 27 | % | ||||||||||||
| Saving deposits | 308,943 | 296,614 | 4 | % | 274,151 | 13 | % | 259,454 | 19 | % | ||||||||||||
| Time deposits | 4,446,991 | 4,958,856 | (10) | % | 5,158,970 | (14) | % | 5,189,651 | (14) | % | ||||||||||||
| Total deposit balances | $ | 14,008,356 | $ | 14,123,532 | (1) | % | $ | 12,527,364 | 12 | % | $ | 12,234,750 | 14 | % | ||||||||
| DEPOSIT COMPOSITION (%) | 9/30/2020 | 6/30/2020 | 12/31/2019 | 9/30/2019 | ||||||||||||||||||
| Noninterest bearing demand deposits | 32.1 | % | 28.6 | % | 24.8 | % | 24.8 | % | ||||||||||||||
| Money market and other | 34.0 | % | 34.2 | % | 31.8 | % | 30.7 | % | ||||||||||||||
| Saving deposits | 2.2 | % | 2.1 | % | 2.2 | % | 2.1 | % | ||||||||||||||
| Time deposits | 31.7 | % | 35.1 | % | 41.2 | % | 42.4 | % | ||||||||||||||
| 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: | 9/30/2020 | 6/30/2020 | 12/31/2019 | 9/30/2019 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 2,040,561 | $ | 2,030,776 | $ | 2,036,011 | $ | 2,031,284 | ||||||||||||||
| Common equity tier 1 ratio | 11.36 | % | 11.50 | % | 11.76 | % | 11.89 | % | ||||||||||||||
| Tier 1 risk-based capital ratio | 12.09 | % | 12.24 | % | 12.51 | % | 12.65 | % | ||||||||||||||
| Total risk-based capital ratio | 13.19 | % | 13.23 | % | 13.23 | % | 13.38 | % | ||||||||||||||
| Tier 1 leverage ratio | 10.02 | % | 10.08 | % | 11.22 | % | 11.18 | % | ||||||||||||||
| Total risk weighted assets | $ | 13,691,823 | $ | 13,388,522 | $ | 13,208,299 | $ | 12,951,936 | ||||||||||||||
| Book value per common share | $ | 16.55 | $ | 16.48 | $ | 16.19 | $ | 16.03 | ||||||||||||||
| Tangible common equity to tangible assets ^1^ | 9.63 | % | 9.32 | % | 10.27 | % | 10.43 | % | ||||||||||||||
| Tangible common equity per share ^1^ | $ | 12.70 | $ | 12.62 | $ | 12.40 | $ | 12.27 | ||||||||||||||
| ^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 | Nine Months Ended | |||||||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES CHANGES: | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 9/30/2020 | 9/30/2019 | |||||||||||||||
| Balance at beginning of period | $ | 161,771 | $ | 144,923 | $ | 94,144 | $ | 93,882 | $ | 94,066 | $ | 94,144 | $ | 92,557 | ||||||||
| CECL day 1 adoption impact | — | — | 26,200 | — | — | 26,200 | — | |||||||||||||||
| Provision for credit losses | 22,000 | 17,500 | 28,000 | 1,000 | 2,100 | 67,500 | 6,300 | |||||||||||||||
| Recoveries | 2,428 | 252 | 2,536 | 939 | 780 | 5,216 | 2,797 | |||||||||||||||
| Charge offs | (6,350) | (904) | (5,957) | (1,677) | (2,602) | (13,211) | (6,432) | |||||||||||||||
| PCI allowance adjustment | — | — | — | — | (462) | — | (1,340) | |||||||||||||||
| Balance at end of period | $ | 179,849 | $ | 161,771 | $ | 144,923 | $ | 94,144 | $ | 93,882 | $ | 179,849 | $ | 93,882 | ||||||||
| Net charge offs/average loans receivable (annualized) | 0.12 | % | 0.02 | % | 0.11 | % | 0.02 | % | 0.06 | % | 0.08 | % | 0.04 | % | ||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| NET LOAN CHARGE OFFS (RECOVERIES): | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 9/30/2020 | 9/30/2019 | |||||||||||||||
| Real estate loans | $ | 5,154 | $ | 148 | $ | 2,230 | $ | 203 | $ | 951 | $ | 7,532 | $ | (504) | ||||||||
| Commercial loans | (1,451) | 240 | 676 | 245 | 596 | (535) | 3,245 | |||||||||||||||
| Consumer loans | 219 | 264 | 515 | 290 | 275 | 998 | 894 | |||||||||||||||
| Total net charge offs | $ | 3,922 | $ | 652 | $ | 3,421 | $ | 738 | $ | 1,822 | $ | 7,995 | $ | 3,635 |
Table Page 7
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| NONPERFORMING ASSETS: | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans on nonaccrual status 3 | 69,205 | $ | 82,137 | $ | 72,639 | $ | 54,785 | $ | 42,235 | |||||
| Delinquent loans 90 days or more on accrual status | 430 | 387 | 7,547 | 398 | ||||||||||
| Accruing troubled debt restructured loans | 44,026 | 43,789 | 35,709 | 34,717 | ||||||||||
| Total nonperforming loans | 126,593 | 116,815 | 98,041 | 77,350 | ||||||||||
| Other real estate owned | 20,983 | 23,039 | 24,091 | 19,374 | ||||||||||
| Total nonperforming assets | 124,581 | $ | 147,576 | $ | 139,854 | $ | 122,132 | $ | 96,724 | |||||
| Nonperforming assets/total assets | % | 0.86 | % | 0.87 | % | 0.78 | % | 0.63 | % | |||||
| Nonperforming assets/loans receivable & OREO | % | 1.14 | % | 1.11 | % | 0.99 | % | 0.80 | % | |||||
| Nonperforming assets/total capital | % | 7.27 | % | 6.93 | % | 6.00 | % | 4.76 | % | |||||
| Nonperforming loans/loans receivable | % | 0.98 | % | 0.93 | % | 0.80 | % | 0.64 | % | |||||
| Nonaccrual loans/loans receivable | % | 0.64 | % | 0.58 | % | 0.45 | % | 0.35 | % | |||||
| Allowance for credit losses/loans receivable | % | 1.26 | % | 1.15 | % | 0.77 | % | 0.78 | % | |||||
| Allowance for credit losses/nonaccrual loans | % | 196.95 | % | 199.51 | % | 171.84 | % | 222.28 | % | |||||
| Allowance for credit losses/nonperforming loans | % | 127.79 | % | 124.06 | % | 96.03 | % | 121.37 | % | |||||
| Allowance for credit losses/nonperforming assets | % | 109.62 | % | 103.62 | % | 77.08 | % | 97.06 | % | |||||
| 3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling 26.2 million, 30.3 million, 28.8 million, 28.1 million, and 37.3 million at September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019, respectively. | ||||||||||||||
| NONACCRUAL LOANS BY TYPE: | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | ||||||||||
| Real estate loans | 51,739 | $ | 64,060 | $ | 56,787 | $ | 40,935 | $ | 27,920 | |||||
| Commercial loans | 12,079 | 12,747 | 10,893 | 11,242 | ||||||||||
| Consumer loans | 5,998 | 3,105 | 2,957 | 3,073 | ||||||||||
| Total nonaccrual loans | 69,205 | $ | 82,137 | $ | 72,639 | $ | 54,785 | $ | 42,235 | |||||
| BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS: | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | ||||||||||
| Retail buildings | 5,451 | $ | 5,526 | $ | 5,014 | $ | 4,215 | $ | 3,221 | |||||
| Gas stations/car washes | 1,789 | 1,675 | — | 233 | ||||||||||
| Mixed-use facilities | 3,583 | 3,157 | 3,175 | 3,200 | ||||||||||
| Warehouses | 13,433 | 13,381 | 10,381 | 10,449 | ||||||||||
| Other 5 | 19,695 | 20,562 | 17,938 | 17,614 | ||||||||||
| Total | 35,429 | $ | 44,026 | $ | 43,789 | $ | 35,709 | $ | 34,717 | |||||
| 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: | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 - 59 days | $ | 5,962 | $ | 18,857 | $ | 37,866 | $ | 14,433 | $ | 25,281 |
| 60 - 89 days | 58,065 | 29,975 | 2,605 | 4,712 | 4,535 | |||||
| Total | $ | 64,027 | $ | 48,832 | $ | 40,471 | $ | 19,145 | $ | 29,816 |
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE: | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | |||||
| Real estate loans | $ | 60,510 | $ | 27,245 | $ | 23,753 | $ | 7,689 | $ | 20,572 |
| Commercial loans | 624 | 5,987 | 4,583 | 692 | 2,282 | |||||
| Consumer loans | 2,893 | 15,600 | 12,135 | 10,764 | 6,962 | |||||
| Total | $ | 64,027 | $ | 48,832 | $ | 40,471 | $ | 19,145 | $ | 29,816 |
| CRITICIZED LOANS: | 9/30/2020 | 6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | |||||
| Special mention | $ | 153,388 | $ | 127,149 | $ | 122,279 | $ | 141,452 | $ | 139,848 |
| Substandard | 311,902 | 299,357 | 278,771 | 259,278 | 268,605 | |||||
| Doubtful/Loss | 6,640 | 11 | 12 | 13 | 17 | |||||
| Total criticized loans | $ | 471,930 | $ | 426,517 | $ | 401,062 | $ | 400,743 | $ | 408,470 |
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 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Management reviews select non-GAAP financial measures in evaluating the Company’s and the Bank’s financial performance and in response to market participant interest. A reconciliation of the GAAP to non-GAAP financial measures utilized by management is provided below. | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | ||||||||||||
| RETURN ON AVERAGE TANGIBLE COMMON EQUITY | ||||||||||||||||
| Average stockholders’ equity | $ | 2,039,555 | $ | 2,016,947 | $ | 2,010,458 | $ | 2,028,074 | $ | 1,964,146 | ||||||
| Less: Goodwill and core deposit intangible assets, net | (475,010) | (475,534) | (477,159) | (475,530) | (477,730) | |||||||||||
| Average tangible common equity | $ | 1,564,545 | $ | 1,541,413 | $ | 1,533,299 | $ | 1,552,544 | $ | 1,486,416 | ||||||
| Net income | $ | 30,490 | $ | 26,753 | $ | 42,592 | $ | 83,196 | $ | 128,031 | ||||||
| Return on average tangible common equity (annualized) | 7.80 | % | 6.94 | % | 11.11 | % | 7.14 | % | 11.48 | % | ||||||
| Three Months Ended | ||||||||||||||||
| 9/30/2020 | 6/30/2020 | 12/31/2019 | 9/30/2019 | |||||||||||||
| TANGIBLE COMMON EQUITY | ||||||||||||||||
| Total stockholders’ equity | $ | 2,040,561 | $ | 2,030,776 | $ | 2,036,011 | $ | 2,031,284 | ||||||||
| Less: Goodwill and core deposit intangible assets, net | (474,689) | (475,220) | (476,283) | (476,840) | ||||||||||||
| Tangible common equity | $ | 1,565,872 | $ | 1,555,556 | $ | 1,559,728 | $ | 1,554,444 | ||||||||
| Total assets | $ | 16,733,767 | $ | 17,169,062 | $ | 15,667,440 | $ | 15,379,878 | ||||||||
| Less: Goodwill and core deposit intangible assets, net | (474,689) | (475,220) | (476,283) | (476,840) | ||||||||||||
| Tangible assets | $ | 16,259,078 | $ | 16,693,842 | $ | 15,191,157 | $ | 14,903,038 | ||||||||
| Common shares outstanding | 123,260,760 | 123,239,276 | 125,756,543 | 126,697,925 | ||||||||||||
| Tangible common equity to tangible assets | 9.63 | % | 9.32 | % | 10.27 | % | 10.43 | % | ||||||||
| Tangible common equity per share | $ | 12.70 | $ | 12.62 | $ | 12.40 | $ | 12.27 |
Table Page 10
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| Three Months Ended | Nine Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | |||||||
| PRE-TAX PRE-PROVISION INCOME | |||||||||||
| Net income | $ | 30,490 | $ | 26,753 | $ | 42,592 | $ | 83,196 | $ | 128,031 | |
| Add back - tax provision | 9,254 | 9,771 | 14,566 | 25,487 | 43,261 | ||||||
| Add back - provision for credit losses | 22,000 | 17,500 | 2,100 | 67,500 | 6,300 | ||||||
| Pre-tax pre-provision income | $ | 61,744 | $ | 54,024 | $ | 59,258 | $ | 176,183 | $ | 177,592 | |
| Three Months Ended | Nine Months Ended | ||||||||||
| 9/30/2020 | 6/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | |||||||
| PRE-PROVISION NET REVENUE | |||||||||||
| Net interest income before provision for credit losses | $ | 117,637 | $ | 109,814 | $ | 116,258 | $ | 346,742 | $ | 353,087 | |
| Noninterest income | 17,513 | 11,240 | 12,995 | 42,017 | 36,704 | ||||||
| Pre-Provision Net Revenue | $ | 135,150 | $ | 121,054 | $ | 129,253 | $ | 388,759 | $ | 389,791 |
Table Page 11
Document
News Release
HOPE BANCORP DECLARES QUARTERLY CASH DIVIDEND OF $0.14 PER SHARE
LOS ANGELES - October 20, 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 November 13, 2020 to all stockholders of record as of the close of business on October 30, 2020.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Wednesday, October 21, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its third quarter ended September 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 October 28, 2020, replay access code 10148641.
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 $16.7 billion in total assets as of September 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 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-2020q3earningsconfe
2020 Third Quarter Earnings Conference Call Wednesday, October 21, 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
Q3 2020 Financial Highlights Net interest income before provision for credit loss increased 7% to $117.6 million from $109.8 Net million for Q2 2020, reflecting meaningful reductions in interest expense from lower cost of deposits Income Net interest margin expanded 12bps Q‐o‐Q benefiting from continued reduction in deposit costs and deployment of excess liquidity $30.5MM Earnings & Net income increased 14% to $30.5 million, or $0.25 per diluted common share, compared with $26.8 million, or $0.22 per diluted common share for Q2 2020 Profitability Pre‐tax pre‐provision income increased 14% to $61.7 million from $54.0 million for Q2 2020 Provision for credit losses of $22.0 million vs. $17.5 million for Q2 2020 Noninterest expense well contained and amounted to $1.73% of average assets, well below 2019 Diluted trends EPS ROE and ROTCE improved to 5.98% and 7.80%, respectively from 5.31% and 6.94% in Q2 2020 $0.25 Loan New loan originations funded of $782 million Production Loans receivable increased 2%, or 8% annualized Record Noninterest bearing deposits increased $452 million Q‐o‐Q and represented 32% of total deposits, up from 29% at 6/30/2020 Gross Deposits $512 million reduction in time deposits continues shift in mix to lower‐cost deposits Loans Cost of deposits decreased 23bps Q‐o‐Q $13.1B Overall asset quality trends remain stable Nonperforming loans decreased 16% Q‐o‐Q to $106.2 million, or 0.81% of loans receivable Criticized and classified loans increased 11% Q‐o‐Q reflecting downgrades of 3 commercial credits Asset Quality impacted by COVID‐19 Total Modifications under CARES Act total $1.1 billion at September 30, 2020, equal to 8.8% of loan portfolio Deposits Net charge offs remain low at $3.9 million, or 0.12% of average loans receivable annualized $14.0B 3
Loan Production & Portfolio Trends New Loan Originations Funded New loan originations funded of $782 million 4.72% 4.37% resulted in 2% growth in loans receivable Q‐o‐Q, or 3.98% 3.39%1 8% annualized 2.88% ($ millions) $847.6 $832.0 New loan originations included $301 million $782.4 $693.9 $69 $74 funded for new warehouse mortgage lines $624.5 $61 $105 $62 $266 $42 Aggregate payoffs and paydowns declined to $420 $283 $234 $4802 $433 million from $484 million in Q2 2020 $513 $349 $348 Well diversified mix of loan originations $216 $244 3Q19 4Q19 1Q20 2Q20 3Q20 31% CRE / 55% C&I / 13% Consumer CRE PPP C&I Consumer Average Rate Traditional SBA loan originations of $49 million, including $34.0 million in 7(a) production Loan Portfolio Composition Residential mortgage originations increased to $102 million vs. $74 million in Q2 2020 7% 6% 5% 22% 27% 28% Concentration of C&I loans increased to 28% of 71% 67% 67% total portfolio Y‐o‐Y 1 Including fees on PPP loans, average rate on new loan originations funded for 2Q20 was 2.01% 9/30/2019 6/30/2020 9/30/2020 2 PPP loans are categorized as C&I loans. 4
Phase II COVID-19 Loan Modifications • Phase II modifications granted as of 9/30/2020 totaled $1.1 billion, or 8.8% of total loan portfolio • Additional documentation, covenants, and in some cases collateral required to qualify for Phase II modifications ($ millions) % of % of All Modified Loans All Loans Amount Respective Total Loans Modified Booked Loan Loans DCR LTV DCR LTV (As of September 30, 2020) Portfolio Real Estate $ 8,713 $ 1,019 11.7% 88.7% 1.63 55.0% 1.93 50.0% Retail $ 2,312 $ 236 10.2% 20.5% 1.60 57.2% 1.75 50.2% Hotel/Motel $ 1,676 $ 474 28.3% 41.3% 1.74 55.2% 2.07 52.0% Mixed Use $ 754 $ 92 12.2% 8.0% 1.22 51.3% 1.67 48.0% Industrial & Warehouse $ 1,022 $ 71 6.9% 6.2% 1.50 55.6% 2.18 52.1% Other Real Estate $ 2,949 $ 146 5.0% 12.7% 1.61 51.2% 1.96 49.5% C&I $ 3,700 $ 31 0.8% 2.7% Consumer (predominantly $ 707 $ 99 14.0% 8.6% residential mortgage) Total $ 13,120 $ 1,149 8.8% 100.0% 5
COVID-19 Modification Type & Duration Modification Type & Duration Modification Type 3M Int Only, 1.58% 10‐12M Pmt Other, Def, 2.77% 6.47% 10‐12M Int 3M Pmt Def, Only, 4.60% 17.41% 10‐12M Hybrid, 6.61% 1.06% 6M Int Only, 4.71% 9M Pmt Def, 16.70% 6M Pmt Def, Modification Duration 5.21% 6M Hybrid, 7.34% 9M Hybrid, 9M Int Only, 15.83% 10.50% 1.10% 1 Other Modifications includes Payment Deferments, Mixed and Interest Only payments of other durations; Fixed payments; Maturity extensions; and Others Note: “Hybrid” represents modifications that include deferments for a period of time followed by a period of interest only payments. 6
COVID-19 Impacted Portfolios - Hotel/Motel CRE - Hotel/Motel CRE Property Characteristics Hotel/Motel CRE Modification Type • Majority of Hotel/Motel properties are limited service facilities 6M Int Only, 5M Hybrid, Other, 3.66% • Less impacted by lockdowns than full‐service hotel properties 3.24% 2.99% • 73% of Hotel/Motel portfolio represented by flagged properties 6M Pmt Def, 4.50% • 95%+ of Hotel/Motel exposure located in major MSAs or regions where the Bank has presence and knowledge of the market 12M Pmt Def, 9M Hybrid, 6.09% 25.70% • Vast majority of the portfolio supported by personal guarantees 9M Pmt Def, • 9.96% 28%, or $474 million, of hotel/motel portfolio modified under 9M Int Only, CARES Act in Phase II 18.99% 12M Hybrid, 6M Hybrid, 14.40% 10.45% Average Loan Size $2.4 million Geographic Location of Modified Hotel/Motel CRE Weighted Average LTV 52.0% Other, 0.72% New York, 5.71% Weighted Average DCR 2.07 Arizona, 6.50% Texas, 7.74% ACL Coverage Ratio 3.01% PNW, 9.71% California, 69.62% Note: “Hybrid” represents modifications that include deferments for a period of time followed by a period of interest only payments. 7
COVID-19 Impacted Portfolios - Retail CRE - Retail CRE Property Characteristics Retail CRE Modification Type • Retail portfolio largely represents “strip mall” type of properties (not shopping malls) Other, 7.59% 6M Hybrid, • Majority of tenants comprised of service oriented businesses – 3.53% traditionally less impacted by e‐commerce 11M Hybrid, • Local supermarkets are representative anchor tenants of larger 3.70% strip mall properties 6M Pmt Def, 9M Int Only, 4.58% 31.02% • 95%+ of retail CRE exposure located in major MSAs or regions where the Bank has presence and knowledge of the market 9M Hybrid, • 10% of retail CRE portfolio, or $236 million, modified under 12.54% 9M Pmt Def, CARES Act in Phase II 23.94% 3M Pmt Def, 13.10% Average Loan Size $1.55 million Geographic Location of Modified Retail CRE Weighted Average LTV 50.2% Other, 9.25% Weighted Average DCR 1.75 ACL Coverage Ratio NY/NJ, 28.09% California, 1.17% 62.66% Note: “Hybrid” represents modifications that include deferments for a period of time followed by a period of interest only payments. 8
Net Interest Income and Margin Average Loan Yield & Average 1M LIBOR Rate Net Interest Income & NIM ($ millions) 5.27% 5.04% 5.06% $116.3 $119.3 $117.6 4.23% 4.20% $113.5 $109.8 3.31% 2.18% 3.25% 1.79% 1.41% 3.16% 2.79% 2.91% 0.35% 0.16% 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 Net Interest Income NIM Avg Loan Yield Avg 1M LIBOR Rate Average Interest Bearing Deposits & 3Q20 net interest margin increased 12bps Q‐o‐Q reflecting Cost of Deposits ($ billions) ‐ 6 bps Loan yield reduction $10.1 $9.9 $9.4 ‐5 bps Average investment balance increase $9.1 $9.1 2.15% 1.98% ‐1 bps Average cash balance increase 1.76% +3bps Additional PCD accretion for payoffs 1.17% 0.92% 1.62% +4 bps FHLB payoff 1.49% 1.34% 0.87% 0.64% +15 bps Reduction in cost of deposits 3Q19 4Q19 1Q20 2Q20 3Q20 +1 bps Sub‐debt rate reduction +1 bps Decline in average deposit balance Average Interest Bearing Deposits Total Cost of Deposits Cost of Interest Bearing Deposits NIM expansion expected to continue and exceed 3.0% for 4Q20 9
Noninterest Income Noninterest Income Noninterest income increased 56% to $17.5 ($ millions) million Q‐o‐Q largely reflecting $7.5 million net $17.5 gain on sale of $161 million of available‐for‐sale investment securities $1.7 Service fees on deposit accounts, international $13.0 $13.0 $13.3 service fees and wire transfers increased Q‐o‐Q as transaction volumes trended higher post re‐ $11.2 $7.5 opening of pandemic lockdowns $4.9 $4.1 $5.1 Loan servicing fees normalized $4.4 $0.2 $1.9 Net gain on sale of other loans increased to $2.9 $0.8 $1.9 $1.1 $1.1 $2.9 million from $1.7 million in 2Q20 reflecting $0.2 $0.7 $1.0 $1.7 $1.2 $0.4 $0.9 $0.8 $0.8 $0.8 higher volumes of residential mortgage $1.1 $0.8 $0.7 $1.0 originations and sales $4.7 $4.5 $4.1 $2.6 $2.7 Other income and fees decreased 60% reflecting FV change in derivatives and lower swap fee 3Q19 4Q19 1Q20 2Q20 3Q20 income Service fees on dep accts International service fees Loan servicing fees, net Wire transfer fees Gain on sale of other loans Gain on sale of securities Other income and fees 10
Noninterest Expense and Efficiency ($ millions) Breakdown of Noninterest Expense & FTE Efficiency Ratio & Noninterest Expense to Average Assets 55.68% $72.1 $73.4 55.37% $70.0 $70.4 54.15% 54.42% 54.31% $67.0 $6.4 $7.2 $8.8 $10.9 $0.8 $1.6 $9.7 $5.2 $3.3 $3.6 $5.9 $1.2 $2.8 $2.6 $1.7 $1.5 $2.4 $1.7 $1.5 $2.2 $2.4 $2.5 $2.3 $1.6 $1.3 1.85% 1.85% 1.87% $11.7 $11.6 $11.8 1.73% $11.8 $11.7 1.60% $42.5 $41.6 $40.7 $39.8 $38.9 3Q19 4Q19 1Q20 2Q20 3Q20 1,458 1,474 Efficiency Ratio NIE/AA 1,439 1,441 1,416 NIE/AA = Noninterest expense as a percentage of average assets Noninterest expense increased to $73.4 million vs. $67.0 million in 2Q20 – Excluding non‐core FHLB prepayment fee of $3.6 million, noninterest expense of $69.8 million below recent trends 3Q19 4Q19 1Q20 2Q20 3Q20 – Excluding impact of PPP loan origination deferment fees in 2Q20, compensation expense declined Q‐o‐Q Other FHLB Prepayment Fee – Professional fees of $1.5 million reflects second FDIC assessment Professional fees consecutive quarter of considerable reductions Data processing & communications Adv/Marketing – FDIC assessment fee decreased to $1.2 million from $1.7 million for 2Q20 reflecting reduction in brokered time Occupancy & equipment Compensation deposits FTE 3Q20 FTE reflects 4% workforce reduction in early 3Q20 11
Deposit Trends Q‐o‐Q growth annualized Deposit Composition ($ billions) Noninterest bearing demand deposits increased $452 million $14.12 $14.01 Q‐o‐Q and increase to 32% of total deposits from 29% as of $12.84 $12.23 $12.53 +40% ‐4% 6/30/20 +10% +10% $5.0 $4.4 $4.7 Time deposits decreased $512 million Q‐o‐Q and decline to $5.2 $5.2 $0.3 $0.3 32% of total deposits from 35% as of 6/30/20 $0.3 $0.3 $0.3 $4.8 Decrease in time deposits reflects reduction of brokered CDs $4.8 to $500.6 million as of 9/30/20 from $1.03 billion as of $4.0 $4.9 $3.8 6/30/20 $4.5 Total cost of deposits decreased 23bps from 2Q20 and total $3.0 $3.1 $3.0 $4.0 cost of interest bearing deposits decreased 24bps 9/30/19 12/31/19 3/31/20 6/30/20 9/30/20 EOP Net Loan‐to‐Deposit ratio of 92.44% as of 9/30/2020 vs. DDA MMA/NOW Savings Time 90.07% as of 6/30/2020 Deposit Cost Trend CD Originations & Maturity Schedule 1.65%1.62% 1.58%1.54% Average 1.49%1.44% 1.43%1.42% ($ millions) Amount Blended 1.18% Rate 0.95% Jul 2020 $309 0.72% 1.62% 0.87% CD Originations and 3Q19 1.49% 0.79%0.73% Aug 2020 $639 0.44% 0.64% Renewals 4Q19 1.34% 0.56% Sep 2020 $253 0.29% 1Q20 0.87% 3Q 2020 $1,201 0.48% 2Q20 0.64% 3Q20 Q4 2020 $1,629 1.15% Q1 2021 $1,050 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 Jul‐20 Aug‐20 Sep‐20 Q2 2021 $1,033 0.86% Quarterly Cost of Deposits Monthly Cost of Deposits Q3 2021 $655 0.62% DDA = Noninterest bearing demand deposits MMA/NOW = Money market and NOW deposits NOW = Negotiable Order of Withdrawal 12
Asset Quality Nonperforming Assets Provision for Credit Losses & ($ millions) ($ millions) Net Charge Offs $139.9 $147.6 $28.0 $122.1 $21.0 $124.6 $23.0 $22.0 $96.7 $24.1 $126.6 $18.4 0.11% $17.5 $116.8 0.06% 0.02% $106.2 $19.4 $98.0 0.12% $77.4 0.87% 0.86% 0.78% 0.74% 0.02% 0.63% $2.1 $1.0 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 NPLs OREO NPAs/Total Assets Provision Expense Net Charge Offs (Recoveries) (annualized) Criticized Loans General asset quality trends remain stable as of ($ millions) 9/30/2020 $471.9 Nonperforming loans decreased 16% Q‐o‐Q to $106.2 $408.5 $400.7 $401.1 $426.5 million, or 0.81% of loans receivable $318.5 $268.6 $259.3 $278.8 $299.4 Criticized and classified loans increased 11% Q‐o‐Q reflecting downgrades of 3 shared national credits 3.37% 3.26% 3.19% 3.31% 3.60% $139.8 $141.5 $122.3 $127.1 $153.4 impacted by COVID‐19 Credit losses continued to remain low, with net charge 3Q19 4Q19 1Q20 2Q20 3Q20 offs of $3.9 million, or 12bps of average loans on an Classified annualized basis Special Mention Total Criticized Loans as a % of Gross Loans 13
Allowance for Credit Losses ($ thousands) $179,849 • Updated macroeco‐ • Recognition of • Aggregate changes to • Relatively stability in nomic factors increased risk from the loan portfolio, asset quality metrics reflecting improved granting longer‐term including net charge 1.37% conditions vs. June modifications under offs of $3.9 million 1.26% 2020 Phase II deferment program Coverage Ratio Coverage Ratio • Additional reserve for hospitality portfolio Changes 14
Allocation of Allowance by Loan Type Allowance of Loan & Allocation for Credit Losses ($ thousands) Lease Losses (ALLL) for Current Expected Credit Loss (CECL) December 31, 2019 March 31, 2020 June 30, 2020 September 30, 2020 Coverage Coverage Coverage Coverage Loan Type Amount Amount Amount Amount Ratio Ratio Ratio Ratio Commercial Real Estate $ 53,593 0.62% $ 94,645 1.09% $ 119,030 1.37% $ 129,624 1.51% Residential $ 204 0.39% $ 399 0.70% $ 460 0.84% $ 208 0.38% Commercial $ 51,712 0.62% $ 92,560 1.11% $ 114,668 1.37% $ 127,483 1.55% Hotel/Motel $ 8,315 0.49% $ 15,739 1.04% $ 18,475 1.23% $ 44,619 3.01% Retail CRE $ 17,955 0.81% $ 18,461 0.82% $ 32,157 1.46% $ 26,153 1.17% Construction $ 1,677 0.57% $ 1,686 0.60% $ 3,902 1.35% $ 1,933 0.62% Commercial & Industry $ 33,032 1.21% $ 42,883 1.40% $ 35,493 1.04% $ 44,209 1.40% Residential Mortgage $ 5,925 0.71% $ 5,779 0.73% $ 5,868 0.81% $ 4,699 0.71% Consumer $ 1,594 2.89% $ 1,616 3.35% $ 1,380 3.04% $ 1,317 2.92% Total Allowance $ 94,144 $ 144,923 $ 161,771 $ 179,849 Coverage Ratio to Loans Receivable 0.77% 1.15% 1.26% 1.37% Including Accretion Discount 1.14% 1.52% 1.54% 1.58% Including Accretion Discount & 1.60% 1.63% Excluding PPP 15
Strong Capital & Liquidity Positions Sufficient Liquidity Sources Robust Capital Position 13.23%13.19% Available 12.24% 12.09% 11.50% 11.36% 9/30/2020 ($ Thousands) Borrowing Capacity 10.08% 10.02% FHLB Remaining Capacity $ 4,053,152 10.00% FRB Discount Window $ 631,527 8.00% Unsecured lines with other banks $ 306,180 6.50% Total Borrowing Capacity $ 4,990,859 5.00% Brokered Deposit Availability $ 1,507,732 (internal policy limit 15% of Total Assets) 5.00% Investment Repo Line $ 1,604,928 (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 6/30/2020 9/30/2020 Significant increase in primary source of liquidity since COVID‐ Growing equity with Book Value per share of $16.55 vs. $16.48 for 2Q20 19 Pandemic and Tangible Common Equity per share of $12.70 vs. $12.62 Secondary liquidity sources increased more than 10% Q‐o‐Q Returning Capital to shareholders with quarterly common stock dividend maintained at $0.14 per share Participation in FRB’s PPP lending facility in 4Q20 expected to further minimize use of other secondary liquidity sources 16
Near-Term Outlook Meaningful loan growth for 2020 driven by corporate banking, warehouse mortgage line and residential mortgage refinancings Anticipating net interest margin expansion going forward as a result of stable loan yields and decreasing deposit costs Residential mortgage originations to support current levels of gain‐on‐sale of other loans fee income Right sizing overall cost structure in line with current business environment Branch rationalization plan expected to result in one‐time pre‐tax charge of $3.1 million in 4Q 2020 and projected savings of $2.6 million pre‐tax on an annual basis beginning in 1Q 2021 Managing capital position to maintain sufficient capital to support clients and communities 17
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2020 Third Quarter Earnings Conference Call Q&A 19