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 19, 2022
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 19, 2022, 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 months ended and as of June 30, 2022. A copy of the July 19, 2022 news release is furnished as Exhibit 99.1 and incorporated herein by reference.
The information furnished under Item 2.02, Item 7.01 and certain exhibits under Item 9.01 of this Current Report on Form 8-K (including Exhibits 99.1 and 99.4 to this Current Report on Form 8-K) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933 or the Exchange Act, except as shall be set forth as a specific reference in such filing.
Item 7.01. Regulation FD Disclosure
The Company previously announced that it will host an investor conference call on Wednesday, July 20, 2022 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its second quarter ended June 30, 2022. 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 furnished as Exhibit 99.3 and incorporated herein by reference.
Item 8.01 Other Events.
On July 19, 2022, 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 12, 2022 to all stockholders of record as of the close of business on July 29, 2022. A copy of the July 19, 2022 news release is attached hereto as Exhibit 99.2.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description of Exhibit |
|---|---|
| 99.1 | News release, datedJuly 19, 2022, concerning the results of operations and financial condition for thesecondquarter ended and as ofJune30, 2022. |
| 99.2 | News release, datedJune 19, 2022, announcing the declaration of a quarterly cash dividend. |
| 99.3 | Presentation Materials, datedJuly19, 2022. |
| 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 19, 2022 | By: | /s/ Kevin S. Kim |
| Kevin S. Kim | ||
| Chairman, President and Chief Executive Officer |
Document
News Release
HOPE BANCORP REPORTS 2022 SECOND QUARTER FINANCIAL RESULTS
LOS ANGELES - July 19, 2022 - Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its second quarter and six months ended June 30, 2022.
For the three months ended June 30, 2022, net income totaled $52.1 million, or $0.43 per diluted common share, compared with $60.7 million, or $0.50 per diluted common share, in the preceding first quarter and $53.8 million, or $0.43 per diluted common share, in the year-ago second quarter.
“We continued the positive momentum from the beginning of the year and delivered another strong financial performance for the second quarter of 2022 with record loan production and enhanced pre-provision net revenue,” said Kevin S. Kim, Chairman, President and Chief Executive Officer. “We originated $1.29 billion in new loans, the highest level of production in the history of the Bank. This represented the fourth consecutive quarter of originations in excess of $1.0 billion, and exemplifies the benefits of the investments we have made in our business development platform. We are particularly pleased that our loan production was well diversified. Given our asset sensitive position, our weighted average loan yields increased 18 basis points quarter-over-quarter and contributed to a 15 basis point increase in our net interest margin. With the meaningful increases in loans outstanding contributing to a 6% quarter-over-quarter increase in net interest income, we delivered a 4% increase in our pre-provision net revenue, and our PPNR return on average equity improved 108 basis points to 14.66%.
“As we look ahead to the second half of the year, we remain confident that the investments made to strengthen and diversify our business model over the past few years will continue to generate solid loan and deposit growth, despite the challenges of the current economy. With a lower-risk, more diversified loan portfolio and enhanced credit administration framework, we believe we are well positioned to navigate the potential challenges of a recessionary environment while continuing to enhance our franchise value,” said Kim.
Q2 2022 Highlights
•Loan originations totaled a record $1.29 billion, up 25% over the preceding first quarter and representing a well-diversified mix of new loan production.
•Excluding PPP, loans receivable increased 16% quarter-over-quarter on an annualized basis.
•Company recorded net recoveries of $930 thousand, reflecting the third consecutive quarter of total net recoveries.
•Criticized loan balances decreased 13% quarter-over-quarter, contributing to stable asset quality metrics.
•Company recorded a provision for credit losses of $3.2 million, primarily reflecting loan growth and continued reductions in criticized loans.
•Net interest margin expanded 15 basis points from the preceding first quarter, largely benefiting from higher loan yields.
•Total deposits increased 3.5% quarter-over-quarter, reflecting higher balances of noninterest bearing demand deposits and strategic increases in time deposits.
•Total cost of deposits increased 9 basis points quarter-over-quarter, reflecting an aggregate 150 basis point increase in the Federal Funds target rate since March 2022.
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•Noninterest expenses were relatively well managed despite the higher compensation expense environment, with efficiency ratio of 52.09% versus 51.50% in the 2022 first quarter.
•Repurchased 1,038,986 shares of common stock of the Company during the second quarter, utilizing $14.7 million of the $50 million share repurchase program announced in January 2022.
Financial Highlights
| (dollars in thousands, except per share data) (unaudited) | At or for the Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 6/30/2022 | 3/31/2022 | 6/30/2021 | |||||||
| Net income | $ | 52,088 | $ | 60,738 | $ | 53,763 | |||
| Diluted earnings per share | $ | 0.43 | $ | 0.50 | $ | 0.43 | |||
| Pre-provision net revenue (“PPNR”) (1) | $ | 73,919 | $ | 70,989 | $ | 64,530 | |||
| Net interest income before provision (credit) for credit losses | $ | 141,538 | $ | 133,176 | $ | 126,577 | |||
| Net interest margin | 3.36 | % | 3.21 | % | 3.11 | % | |||
| Noninterest income | $ | 12,746 | $ | 13,186 | $ | 11,076 | |||
| Noninterest expense | $ | 80,365 | $ | 75,373 | $ | 73,123 | |||
| Net loans receivable | $ | 14,394,469 | $ | 13,919,224 | $ | 13,234,849 | |||
| Deposits | $ | 15,029,630 | $ | 14,515,128 | $ | 14,726,230 | |||
| Total cost of deposits | 0.33 | % | 0.24 | % | 0.30 | % | |||
| Nonaccrual loans(2) | $ | 69,522 | $ | 52,717 | $ | 111,008 | |||
| Nonperforming loans to loans receivable(2) | 0.75 | % | 0.71 | % | 1.24 | % | |||
| ACL to loans receivable | 1.04 | % | 1.05 | % | 1.41 | % | |||
| ACL to nonaccrual loans(2) | 218.03 | % | 279.70 | % | 170.67 | % | |||
| ACL to nonperforming assets(2) | 137.09 | % | 144.03 | % | 103.11 | % | |||
| Provision (credit) for credit losses | $ | 3,200 | $ | (11,000) | $ | (7,000) | |||
| Net (recoveries) charge offs | $ | (930) | $ | (17,900) | $ | 11,491 | |||
| Return on average assets (“ROA”) | 1.17 | % | 1.37 | % | 1.25 | % | |||
| Return on average equity (“ROE”) | 10.33 | % | 11.62 | % | 10.41 | % | |||
| ROA (PPNR) (1) | 1.65 | % | 1.60 | % | 1.50 | % | |||
| ROE (PPNR) (1) | 14.66 | % | 13.58 | % | 12.49 | % | |||
| Return on average tangible common equity (“ROTCE”)(1) | 13.48 | % | 15.01 | % | 13.50 | % | |||
| Noninterest expense / average assets | 1.80 | % | 1.70 | % | 1.70 | % | |||
| Efficiency ratio | 52.09 | % | 51.50 | % | 53.12 | % |
(1) Pre-provision net revenue, ROA (PPNR), ROE (PPNR), and return on average tangible common equity are non-GAAP financial measures. Management’s reasons and purposes for using these non-GAAP financial measures are set forth on Table Pages 10 and 11 of this earnings release. A quantitative reconciliation of the Company’s GAAP to non-GAAP financial measures are provided in the accompanying financial information on Table Pages 10 and 11.
(2) Excludes delinquent SBA loans that are guaranteed and currently in liquidation.
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Operating Results for the 2022 Second Quarter
Net interest income before provision for credit losses for the 2022 second quarter increased 6% to $141.5 million from $133.2 million in the 2022 first quarter and increased 12% from $126.6 million in the 2021 second quarter. The Company attributed the increase to higher interest income largely due to an increase in loan yields and higher average balances of loans receivable, partially offset by higher interest expense on deposits.
The net interest margin for the 2022 second quarter increased 15 basis points to 3.36% from 3.21% in the preceding first quarter and increased 25 basis points from 3.11% in the year-ago second quarter, primarily reflecting higher loan yields and improved mix of interest earning assets.
The weighted average yield on loans for the 2022 second quarter was 4.06%, up 18 basis points from 3.88% in the 2022 first quarter and up 8 basis points from the year-ago second quarter. The Company attributed the quarter-over-quarter increase in weighted average yield on loans to the repricing of its variable rate loans as a result of an aggregate 150 basis point increase in the Federal Funds target rate since March 2022 and a significant increase in the average rate of new loans originated during the quarter.
The weighted average cost of deposits for the 2022 second quarter increased by 9 basis points to 0.33% from 0.24% in the 2022 first quarter, primarily reflecting a 16 basis point increase in the cost of interest bearing deposits due to the Federal Funds target rate hikes since March 2022. Compared with the year-ago second quarter, the weighted average cost of deposits for the 2022 second quarter increased 3 basis points from 0.30%, reflecting a 6 basis point increase in the cost of interest bearing deposits.
Noninterest income for the 2022 second quarter decreased 3% to $12.7 million from $13.2 million in the 2022 first quarter. Increases in service fees on deposit accounts, net gains on sales of SBA loans and other income and fees were offset by lower levels of net gains on sales of residential mortgage loans. In addition, the Company recorded a loss of $547,000 related to the sale of $35.0 million in problem loans that had been transferred to held-for-sale as of March 31, 2022. During the 2022 second quarter, the Company sold $70.2 million in the guaranteed portion of SBA 7(a) loans and $4.1 million in retail mortgage loans, compared with $58.1 million and $37.8 million, respectively, in the preceding first quarter. Noninterest income for the 2022 second quarter increased 15% compared with $11.1 million in the second quarter of 2021, primarily reflecting higher net gains on sales of SBA loans and service fees on deposit accounts.
Noninterest expense for the 2022 second quarter increased 7% to $80.4 million from $75.4 million for the preceding first quarter, largely reflecting higher salaries and employee benefits, credit-related expenses, and advertising and marketing expenses. For the 2021 second quarter, noninterest expense totaled $73.1 million.
Salaries and employee benefits expense for the 2022 second quarter increased to $51.1 million from $47.7 million in the preceding first quarter, largely reflecting the impact of annual merit increases, higher costs associated with retaining staff in the extremely competitive staffing market, and increased FTE count to support continued growth. Salaries and employee benefits expense for the 2021 second quarter totaled $42.3 million.
The Company’s efficiency ratio for the 2022 second quarter was 52.09%, compared with 51.50% in the preceding first quarter and 53.12% in the year-ago second quarter. Noninterest expense as a percentage of average assets was 1.80% for the 2022 second quarter, compared with 1.70% for the 2022 first quarter and 1.70% for the 2021 second quarter.
The effective tax rate for the 2022 second quarter was 26.4%, compared with 25.9% for the preceding first quarter and 24.8% in the year-ago second quarter. The effective tax rate for the 2022 second quarter was higher than the year-ago second quarter mainly due to a decrease in affordable housing tax credits compared with the prior year.
Balance Sheet Summary
New loan originations funded during the 2022 second quarter totaled $1.29 billion, reflecting a 25% increase over the preceding first quarter and a 44% increase over the year-ago second quarter.
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Following are the components of new loan production for the quarters ended June 30, 2022, March 31, 2022, and June 30, 2021.
| (dollars in thousands) (unaudited) | For the Three Months Ended | |||||
|---|---|---|---|---|---|---|
| 6/30/2022 | 3/31/2022 | 6/30/2021 | ||||
| Commercial real estate | $ | 522,093 | $ | 529,730 | $ | 454,857 |
| Commercial | 544,639 | 335,756 | 288,726 | |||
| SBA | 35,085 | 56,602 | 77,652 | |||
| SBA PPP | — | — | 19,816 | |||
| Residential mortgage | 181,408 | 103,473 | 275 | |||
| Consumer | 2,770 | 401 | 52,766 | |||
| Total new loan originations | $ | 1,285,995 | $ | 1,025,962 | $ | 894,092 |
At June 30, 2022, loans receivable increased 3.4% to $14.55 billion from $14.07 billion at March 31, 2022 and increased 8.4% from $13.42 billion at June 30, 2021.
Total deposits at June 30, 2022 increased 3.5% to $15.03 billion from $14.52 billion at March 31, 2022, largely reflecting an increase in demand deposits and time deposits, and increased 2.1% year-over-year from $14.73 billion at June 30, 2021. Quarter-over-quarter, money market and NOW deposits decreased 2.2%, but this decrease was more than offset by a 3.5% increase in noninterest bearing demand deposits and a 20.9% increase in time deposits. On a year-over-year basis, noninterest bearing demand deposits at June 30, 2022 increased 0.9%, money market and NOW deposits increased 9.6%, and time deposits decreased 10.7%.
Following is the deposit composition as of June 30, 2022, March 31, 2022 and June 30, 2021:
| (dollars in thousands) (unaudited) | 6/30/2022 | 3/31/2022 | % change | 6/30/2021 | % change | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Noninterest bearing demand deposits | $ | 5,689,992 | $ | 5,498,263 | 3.5 | % | $ | 5,638,115 | 0.9 | % |
| Money market and other | 6,339,467 | 6,484,677 | (2.2) | % | 5,786,697 | 9.6 | % | |||
| Saving deposits | 326,927 | 321,373 | 1.7 | % | 308,651 | 5.9 | % | |||
| Time deposits | 2,673,244 | 2,210,815 | 20.9 | % | 2,992,767 | (10.7) | % | |||
| Total deposit balances | $ | 15,029,630 | $ | 14,515,128 | 3.5 | % | $ | 14,726,230 | 2.1 | % |
Following is the deposit composition as a percentage of total deposits and a breakdown of cost of deposits as of and for the quarters ended June 30, 2022, March 31, 2022 and June 30, 2021:
| Deposit Breakdown | Cost of Deposits | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | 6/30/2022 | 3/31/2022 | 6/30/2021 | Q2 2022 | Q1 2022 | Q2 2021 | ||||||
| Noninterest bearing demand deposits | 37.9 | % | 37.9 | % | 38.3 | % | — | % | — | % | — | % |
| Money market and other | 42.2 | % | 44.7 | % | 39.2 | % | 0.54 | % | 0.36 | % | 0.43 | % |
| Saving deposits | 2.1 | % | 2.2 | % | 2.1 | % | 1.16 | % | 1.18 | % | 1.15 | % |
| Time deposits | 17.8 | % | 15.2 | % | 20.4 | % | 0.46 | % | 0.32 | % | 0.49 | % |
| Total deposit balances | 100.0 | % | 100.0 | % | 100.0 | % | 0.33 | % | 0.24 | % | 0.30 | % |
Allowance for Credit Losses
For the 2022 second quarter, the Company recorded a provision for credit losses of $3.2 million, compared with a negative provision for credit losses of $11.0 million in the preceding first quarter and a negative provision for credit losses of $7.0 million in the 2021 second quarter.
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Following is the allowance for credit losses and allowance coverage ratios as of June 30, 2022, March 31, 2022 and June 30, 2021:
| (dollars in thousands) (unaudited) | 6/30/2022 | 3/31/2022 | 6/30/2021 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Allowance for credit losses | $ | 151,580 | $ | 147,450 | $ | 189,452 | |||
| Allowance for credit loss/loans receivable | 1.04 | % | 1.05 | % | 1.41 | % | |||
| Allowance for credit losses/nonperforming loans | 139.63 | % | 146.92 | % | 113.36 | % |
Credit Quality
Following are the components of nonperforming assets as of June 30, 2022, March 31, 2022 and June 30, 2021:
| (dollars in thousands) (unaudited) | 6/30/2022 | 3/31/2022 | 6/30/2021 | |||
|---|---|---|---|---|---|---|
| Loans on nonaccrual status (1) | $ | 69,522 | $ | 52,717 | $ | 111,008 |
| Delinquent loans 90 days or more on accrual status | 12,468 | 3,090 | 4,759 | |||
| Accruing troubled debt restructured loans | 26,572 | 44,555 | 51,360 | |||
| Total nonperforming loans | 108,562 | 100,362 | 167,127 | |||
| Other real estate owned | 2,010 | 2,010 | 16,619 | |||
| Total nonperforming assets | $ | 110,572 | $ | 102,372 | $ | 183,746 |
(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $13.2 million, $17.0 million and $23.6 million, at June 30, 2022, March 31, 2022 and June 30, 2021, respectively.
Total nonperforming assets at June 30, 2022 increased to $110.6 million from $102.4 million at March 31, 2022 but decreased from $183.7 million at June 30, 2021. Quarter-over-quarter, the increase in total nonperforming assets reflects higher balances of nonaccrual loans and delinquent loans 90 days or more on accrual status, partially offset by a reduction in accruing troubled debt restructured loans. During the quarter, an $18.6 million relationship migrated to nonaccrual status. Of the delinquent loans 90 days or more on accrual status as of June 30, 2022, $10.7 million represented loans that were addressed in the first week of July 2022 through renewals of maturing loans and pay offs. On a year-over-year basis, the decrease in total nonperforming assets reflects reductions in nonaccrual loans, accruing troubled debt restructured loans and other real estate owned, partially offset by an increase in delinquent loans 90 days or more on accrual status.
Following are net (recoveries) charge offs and net (recoveries) charge offs to average loans receivable on an annualized basis for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021:
| (dollars in thousands) (unaudited) | For the Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 6/30/2022 | 3/31/2022 | 6/30/2021 | |||||||
| Net (recoveries) charge offs | $ | (930) | $ | (17,900) | $ | 11,491 | |||
| Net (recoveries) charge offs/average loans receivable (annualized) | (0.03) | % | (0.52) | % | 0.35 | % |
Following are the components of criticized loan balances as of June 30, 2022, March 31, 2022 and June 30, 2021:
| (dollars in thousands) (unaudited) | 6/30/2022 | 3/31/2022 | 6/30/2021 | |||
|---|---|---|---|---|---|---|
| Special mention | $ | 95,797 | $ | 166,958 | $ | 294,559 |
| Substandard | 244,748 | 226,661 | 380,955 | |||
| Total criticized loans | $ | 340,545 | $ | 393,619 | $ | 675,514 |
The Company noted that the decreases in criticized loan balances at June 30, 2022 largely reflects previously COVID-19 modified loans that were upgraded following the receipt of updated financial statements.
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Capital
At June 30, 2022, the Company and the Bank continued to exceed all regulatory capital requirements generally required to meet the definition of a “well-capitalized” financial institution. Following are capital ratios for the Company as of June 30, 2022, March 31, 2022 and June 30, 2021:
| Hope Bancorp, Inc. (unaudited) | 6/30/2022 | 3/31/2022 | 6/30/2021 | Minimum Guideline for “Well-Capitalized” Bank |
|---|---|---|---|---|
| Common Equity Tier 1 Capital | 10.70% | 11.02% | 11.44% | 6.50% |
| Tier 1 Leverage Ratio | 10.32% | 10.37% | 10.43% | 5.00% |
| Tier 1 Risk-Based Ratio | 11.33% | 11.68% | 12.14% | 8.00% |
| Total Risk-Based Ratio | 12.14% | 12.49% | 13.16% | 10.00% |
Following are tangible common equity (“TCE”) per share and TCE as a percentage of tangible assets as of June 30, 2022, March 31, 2022 and June 30, 2021:
| (unaudited) | 6/30/2022 | 3/31/2022 | 6/30/2021 |
|---|---|---|---|
| Tangible common equity per share (1) | $12.80 | $13.04 | $13.10 |
| Tangible common equity to tangible assets (1) | 8.68% | 9.05% | 9.53% |
(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. 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, tangible common equity per share, tangible assets and tangible common equity to tangible assets are non-GAAP financial measures. Management’s reasons and purposes for using these non-GAAP financial measures are set forth in the following section. A quantitative reconciliation of the GAAP to non-GAAP financial measures is provided in the accompanying financial information on Table Pages 10 and 11.
Non-GAAP Financial Metrics
This news release contains certain non-GAAP financial measure disclosures, including pre-provision net revenue, ROA (PPNR), ROE (PPNR), tangible common equity, tangible common equity per share, tangible assets and tangible common equity to tangible assets. Management believes these non-GAAP financial measures provide meaningful supplemental information regarding its operational performance and the Company’s and the Bank’s capital levels and has included these figures in response to market participant interest in these financial metrics. A reconciliation of the GAAP to non-GAAP financial measures is provided in the accompanying financial information on Table Pages 10 and 11.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Wednesday, July 20, 2022 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its second quarter ended June 30, 2022. Investors and analysts are invited to access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103 (international) and asking for the “Hope Bancorp Call.” A presentation to accompany the earnings call will be available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of Hope Bancorp’s website. After the live webcast, a replay will remain available at the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through July 27, 2022, replay access code 7509556.
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About Hope Bancorp, Inc.
Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean American bank in the United States with $18.09 billion in total assets as of June 30, 2022. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 54 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia, Alabama and Georgia. 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 news release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for credit losses, regulatory risks associated with current and future regulations; and the COVID-19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10-K. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
Contacts:
| Alex Ko<br><br>Senior EVP & Chief Financial Officer<br><br>213-427-6560<br><br>alex.ko@bankofhope.com | Angie Yang<br><br>SVP, Director of Investor Relations &<br><br>Corporate Communications<br><br>213-251-2219<br><br>angie.yang@bankofhope.com |
|---|
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Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
| Assets: | 6/30/2022 | 3/31/2022 | % change | 6/30/2021 | % change | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Cash and due from banks | $ | 197,062 | $ | 280,373 | (30) | % | $ | 836,957 | (76) | % |
| Investment securities | 2,352,997 | 2,492,486 | (6) | % | 2,274,170 | 3 | % | |||
| Federal Home Loan Bank (“FHLB”) stock and other investments | 87,109 | 87,201 | — | % | 94,550 | (8) | % | |||
| Loans held for sale, at the lower of cost or fair value | 76,376 | 115,756 | (34) | % | 54,245 | 41 | % | |||
| Loans receivable | 14,546,049 | 14,066,674 | 3 | % | 13,424,301 | 8 | % | |||
| Allowance for credit losses | (151,580) | (147,450) | 3 | % | (189,452) | (20) | % | |||
| Net loans receivable | 14,394,469 | 13,919,224 | 3 | % | 13,234,849 | 9 | % | |||
| Accrued interest receivable | 37,845 | 37,949 | — | % | 51,886 | (27) | % | |||
| Premises and equipment, net | 46,093 | 45,642 | 1 | % | 45,302 | 2 | % | |||
| Bank owned life insurance | 77,692 | 77,390 | — | % | 76,428 | 2 | % | |||
| Goodwill | 464,450 | 464,450 | — | % | 464,450 | — | % | |||
| Servicing assets | 11,215 | 10,874 | 3 | % | 11,566 | (3) | % | |||
| Other intangible assets, net | 6,698 | 7,184 | (7) | % | 8,689 | (23) | % | |||
| Other assets | 337,056 | 265,285 | 27 | % | 316,535 | 6 | % | |||
| Total assets | $ | 18,089,062 | $ | 17,803,814 | 2 | % | $ | 17,469,627 | 4 | % |
| Liabilities: | ||||||||||
| Deposits | $ | 15,029,630 | $ | 14,515,128 | 4 | % | $ | 14,726,230 | 2 | % |
| FHLB and FRB borrowings | 573,000 | 772,000 | (26) | % | 200,000 | 187 | % | |||
| Convertible notes, net | 216,678 | 216,444 | — | % | 215,739 | — | % | |||
| Subordinated debentures | 105,953 | 105,652 | — | % | 104,762 | 1 | % | |||
| Accrued interest payable | 4,112 | 4,826 | (15) | % | 4,946 | (17) | % | |||
| Other liabilities | 159,320 | 148,707 | 7 | % | 125,080 | 27 | % | |||
| Total liabilities | $ | 16,088,693 | $ | 15,762,757 | 2 | % | $ | 15,376,757 | 5 | % |
| Stockholders’ Equity: | ||||||||||
| Common stock, $0.001 par value | $ | 137 | $ | 137 | — | % | $ | 136 | 1 | % |
| Capital surplus | 1,424,891 | 1,422,602 | — | % | 1,418,135 | — | % | |||
| Retained earnings | 1,011,715 | 976,483 | 4 | % | 859,548 | 18 | % | |||
| Treasury stock, at cost | (264,667) | (250,000) | (6) | % | (200,000) | (32) | % | |||
| Accumulated other comprehensive (loss) gain, net | (171,707) | (108,165) | (59) | % | 15,051 | N/A | ||||
| Total stockholders’ equity | 2,000,369 | 2,041,057 | (2) | % | 2,092,870 | (4) | % | |||
| Total liabilities and stockholders’ equity | $ | 18,089,062 | $ | 17,803,814 | 2 | % | $ | 17,469,627 | 4 | % |
| Common stock shares - authorized | 150,000,000 | 150,000,000 | 150,000,000 | |||||||
| Common stock shares - outstanding | 119,473,939 | 120,327,689 | 123,673,832 | |||||||
| Treasury stock shares | 17,382,835 | 16,343,849 | 12,661,581 |
Table Page 1
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 6/30/2022 | 3/31/2022 | % change | 6/30/2021 | % change | 6/30/2022 | 6/30/2021 | % change | |||||||||
| Interest and fees on loans | $ | 145,024 | $ | 132,672 | 9 | % | $ | 131,823 | 10 | % | $ | 277,696 | $ | 261,559 | 6 | % |
| Interest on investment securities | 12,308 | 11,656 | 6 | % | 7,713 | 60 | % | 23,964 | 15,628 | 53 | % | |||||
| Interest on federal funds sold and other investments | 492 | 544 | (10) | % | 668 | (26) | % | 1,036 | 1,310 | (21) | % | |||||
| Total interest income | 157,824 | 144,872 | 9 | % | 140,204 | 13 | % | 302,696 | 278,497 | 9 | % | |||||
| Interest on deposits | 12,220 | 8,676 | 41 | % | 10,696 | 14 | % | 20,896 | 23,466 | (11) | % | |||||
| Interest on other borrowings and convertible notes | 4,066 | 3,020 | 35 | % | 2,931 | 39 | % | 7,086 | 5,875 | 21 | % | |||||
| Total interest expense | 16,286 | 11,696 | 39 | % | 13,627 | 20 | % | 27,982 | 29,341 | (5) | % | |||||
| Net interest income before provision (credit) for credit losses | 141,538 | 133,176 | 6 | % | 126,577 | 12 | % | 274,714 | 249,156 | 10 | % | |||||
| Provision (credit) for credit losses | 3,200 | (11,000) | N/A | (7,000) | N/A | (7,800) | (3,700) | 111 | % | |||||||
| Net interest income after provision (credit) for credit losses | 138,338 | 144,176 | (4) | % | 133,577 | 4 | % | 282,514 | 252,856 | 12 | % | |||||
| Service fees on deposit accounts | 2,270 | 1,974 | 15 | % | 1,777 | 28 | % | 4,244 | 3,567 | 19 | % | |||||
| International service fees | 744 | 794 | (6) | % | 795 | (6) | % | 1,538 | 1,636 | (6) | % | |||||
| Loan servicing fees, net | 843 | 836 | 1 | % | 934 | (10) | % | 1,679 | 1,978 | (15) | % | |||||
| Wire transfer fees | 858 | 900 | (5) | % | 923 | (7) | % | 1,758 | 1,767 | (1) | % | |||||
| Net gains on sales of SBA loans | 5,804 | 5,603 | 4 | % | 2,375 | 144 | % | 11,407 | 2,375 | 380 | % | |||||
| Net gains on sales of residential mortgage loans | 76 | 757 | (90) | % | 1,028 | (93) | % | 833 | 3,124 | (73) | % | |||||
| Net losses on sales of other loans | (547) | — | 100 | % | — | 100 | % | (547) | — | 100 | % | |||||
| Other income and fees | 2,698 | 2,322 | 16 | % | 3,244 | (17) | % | 5,020 | 5,433 | (8) | % | |||||
| Total noninterest income | 12,746 | 13,186 | (3) | % | 11,076 | 15 | % | 25,932 | 19,880 | 30 | % | |||||
| Salaries and employee benefits | 51,058 | 47,745 | 7 | % | 42,309 | 21 | % | 98,803 | 83,525 | 18 | % | |||||
| Occupancy | 7,178 | 7,335 | (2) | % | 7,067 | 2 | % | 14,513 | 14,034 | 3 | % | |||||
| Furniture and equipment | 4,778 | 4,644 | 3 | % | 4,822 | (1) | % | 9,422 | 9,008 | 5 | % | |||||
| Advertising and marketing | 2,226 | 1,636 | 36 | % | 2,097 | 6 | % | 3,862 | 3,722 | 4 | % | |||||
| Data processing and communications | 2,893 | 2,461 | 18 | % | 2,411 | 20 | % | 5,354 | 5,148 | 4 | % | |||||
| Professional fees | 1,582 | 2,211 | (28) | % | 4,395 | (64) | % | 3,793 | 7,298 | (48) | % | |||||
| FDIC assessment | 1,450 | 1,569 | (8) | % | 1,284 | 13 | % | 3,019 | 2,539 | 19 | % | |||||
| Credit related expenses | 2,872 | 1,112 | 158 | % | 43 | 6,579 | % | 3,984 | 2,261 | 76 | % | |||||
| OREO expense | 5 | 357 | (99) | % | 298 | (98) | % | 362 | 579 | (37) | % | |||||
| Software impairment | — | — | — | % | 2,146 | (100) | % | — | 2,146 | (100) | % | |||||
| Other | 6,323 | 6,303 | — | % | 6,251 | 1 | % | 12,626 | 13,294 | (5) | % | |||||
| Total noninterest expense | 80,365 | 75,373 | 7 | % | 73,123 | 10 | % | 155,738 | 143,554 | 8 | % | |||||
| Income before income taxes | 70,719 | 81,989 | (14) | % | 71,530 | (1) | % | 152,708 | 129,182 | 18 | % | |||||
| Income tax provision | 18,631 | 21,251 | (12) | % | 17,767 | 5 | % | 39,882 | 31,732 | 26 | % | |||||
| Net income | $ | 52,088 | $ | 60,738 | (14) | % | $ | 53,763 | (3) | % | $ | 112,826 | $ | 97,450 | 16 | % |
| Earnings Per Common Share - Basic | $ | 0.43 | $ | 0.51 | $ | 0.44 | $ | 0.94 | $ | 0.79 | ||||||
| Earnings Per Common Share - Diluted | $ | 0.43 | $ | 0.50 | $ | 0.43 | $ | 0.93 | $ | 0.78 | ||||||
| Weighted Average Shares Outstanding - Basic | 120,219,919 | 120,131,380 | 123,592,695 | 120,175,894 | 123,459,461 | |||||||||||
| Weighted Average Shares Outstanding - Diluted | 120,699,638 | 121,089,474 | 124,323,888 | 120,898,605 | 124,334,227 |
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: | 6/30/2022 | 3/31/2022 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||
| ROA | 1.17 | % | 1.37 | % | 1.25 | % | 1.27 | % | 1.14 | % |
| ROE | 10.33 | % | 11.62 | % | 10.41 | % | 10.99 | % | 9.48 | % |
| ROA (PPNR) (1) | 1.65 | % | 1.60 | % | 1.50 | % | 1.63 | % | 1.46 | % |
| ROE (PPNR) (1) | 14.66 | % | 13.58 | % | 12.49 | % | 14.11 | % | 12.20 | % |
| ROTCE (2) | 13.48 | % | 15.01 | % | 13.50 | % | 14.27 | % | 12.31 | % |
| Net interest margin | 3.36 | % | 3.21 | % | 3.11 | % | 3.28 | % | 3.09 | % |
| Efficiency ratio | 52.09 | % | 51.50 | % | 53.12 | % | 51.80 | % | 53.36 | % |
| Noninterest expense / average assets | 1.80 | % | 1.70 | % | 1.70 | % | 1.75 | % | 1.68 | % |
| (1) ROA (PPNR) and ROE (PPNR) are non-GAAP financial measures. Management’s reasons and purposes for using these non-GAAP financial measures are set forth on Table Pages 10 and 11 of this earnings release. A quantitative reconciliation of the Company’s GAAP to non-GAAP financial measures are provided in the accompanying financial information on Table Pages 10 and 11. | ||||||||||
| (2) Average tangible common equity is calculated by subtracting average goodwill and average core deposit intangible assets from average stockholders’ equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position. |
Table Page 3
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 6/30/2022 | 3/31/2022 | 6/30/2021 | ||||||||||||||||
| 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 | $ | 14,327,476 | $ | 145,024 | 4.06 | % | $ | 13,871,974 | $ | 132,672 | 3.88 | % | $ | 13,293,591 | $ | 131,823 | 3.98 | % |
| Investment securities | 2,424,454 | 12,308 | 2.04 | % | 2,621,220 | 11,656 | 1.80 | % | 2,253,135 | 7,713 | 1.37 | % | ||||||
| FHLB stock and other investments | 134,055 | 492 | 1.47 | % | 352,774 | 544 | 0.63 | % | 759,182 | 668 | 0.35 | % | ||||||
| Total interest earning assets | $ | 16,885,985 | $ | 157,824 | 3.75 | % | $ | 16,845,968 | $ | 144,872 | 3.49 | % | $ | 16,305,908 | $ | 140,204 | 3.45 | % |
| INTEREST BEARING LIABILITIES: | ||||||||||||||||||
| Deposits: | ||||||||||||||||||
| Demand, interest bearing | $ | 6,487,890 | $ | 8,655 | 0.54 | % | $ | 6,337,866 | $ | 5,701 | 0.36 | % | $ | 5,484,047 | $ | 5,909 | 0.43 | % |
| Savings | 323,114 | 937 | 1.16 | % | 318,508 | 927 | 1.18 | % | 308,530 | 887 | 1.15 | % | ||||||
| Time deposits | 2,277,938 | 2,628 | 0.46 | % | 2,619,491 | 2,048 | 0.32 | % | 3,222,457 | 3,900 | 0.49 | % | ||||||
| Total interest bearing deposits | 9,088,942 | 12,220 | 0.54 | % | 9,275,865 | 8,676 | 0.38 | % | 9,015,034 | 10,696 | 0.48 | % | ||||||
| FHLB and FRB borrowings | 577,966 | 1,457 | 1.01 | % | 242,556 | 687 | 1.15 | % | 202,198 | 631 | 1.25 | % | ||||||
| Convertible notes, net | 216,540 | 1,322 | 2.42 | % | 216,305 | 1,323 | 2.45 | % | 215,599 | 1,323 | 2.43 | % | ||||||
| Subordinated debentures | 101,880 | 1,287 | 5.00 | % | 101,577 | 1,010 | 3.98 | % | 100,701 | 977 | 3.84 | % | ||||||
| Total interest bearing liabilities | $ | 9,985,328 | $ | 16,286 | 0.65 | % | $ | 9,836,303 | $ | 11,696 | 0.48 | % | $ | 9,533,532 | $ | 13,627 | 0.57 | % |
| Noninterest bearing demand deposits | 5,715,830 | 5,672,768 | 5,445,457 | |||||||||||||||
| Total funding liabilities/cost of funds | $ | 15,701,158 | 0.42 | % | $ | 15,509,071 | 0.31 | % | $ | 14,978,989 | 0.36 | % | ||||||
| Net interest income/net interest spread | $ | 141,538 | 3.10 | % | $ | 133,176 | 3.01 | % | $ | 126,577 | 2.88 | % | ||||||
| Net interest margin | 3.36 | % | 3.21 | % | 3.11 | % | ||||||||||||
| Cost of deposits: | ||||||||||||||||||
| Noninterest bearing demand deposits | $ | 5,715,830 | $ | — | — | % | $ | 5,672,768 | $ | — | — | % | $ | 5,445,457 | $ | — | — | % |
| Interest bearing deposits | 9,088,942 | 12,220 | 0.54 | % | 9,275,865 | 8,676 | 0.38 | % | 9,015,034 | 10,696 | 0.48 | % | ||||||
| Total deposits | $ | 14,804,772 | $ | 12,220 | 0.33 | % | $ | 14,948,633 | $ | 8,676 | 0.24 | % | $ | 14,460,491 | $ | 10,696 | 0.30 | % |
Table Page 4
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Six Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 6/30/2022 | 6/30/2021 | |||||||||||
| 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 | $ | 14,100,983 | $ | 277,696 | 3.97 | % | $ | 13,319,782 | $ | 261,559 | 3.96 | % |
| Investment securities | 2,522,293 | 23,964 | 1.92 | % | 2,260,233 | 15,628 | 1.39 | % | ||||
| FHLB stock and other investments | 242,810 | 1,036 | 0.86 | % | 700,115 | 1,310 | 0.38 | % | ||||
| Total interest earning assets | $ | 16,866,086 | $ | 302,696 | 3.62 | % | $ | 16,280,130 | $ | 278,497 | 3.45 | % |
| INTEREST BEARING LIABILITIES: | ||||||||||||
| Deposits: | ||||||||||||
| Demand, interest bearing | $ | 6,413,292 | $ | 14,355 | 0.45 | % | $ | 5,370,941 | $ | 11,399 | 0.43 | % |
| Savings | 320,824 | 1,865 | 1.17 | % | 304,877 | 1,757 | 1.16 | % | ||||
| Time deposits | 2,447,771 | 4,676 | 0.39 | % | 3,493,278 | 10,310 | 0.60 | % | ||||
| Total interest bearing deposits | 9,181,887 | 20,896 | 0.46 | % | 9,169,096 | 23,466 | 0.52 | % | ||||
| FHLB and FRB borrowings | 411,187 | 2,144 | 1.05 | % | 209,006 | 1,273 | 1.23 | % | ||||
| Convertible notes, net | 216,423 | 2,644 | 2.43 | % | 215,302 | 2,645 | 2.44 | % | ||||
| Subordinated debentures | 101,729 | 2,298 | 4.49 | % | 100,547 | 1,957 | 3.87 | % | ||||
| Total interest bearing liabilities | $ | 9,911,226 | $ | 27,982 | 0.57 | % | $ | 9,693,951 | $ | 29,341 | 0.61 | % |
| Noninterest bearing demand deposits | 5,694,418 | 5,250,080 | ||||||||||
| Total funding liabilities/cost of funds | $ | 15,605,644 | 0.36 | % | $ | 14,944,031 | 0.40 | % | ||||
| Net interest income/net interest spread | $ | 274,714 | 3.05 | % | $ | 249,156 | 2.84 | % | ||||
| Net interest margin | 3.28 | % | 3.09 | % | ||||||||
| Cost of deposits: | ||||||||||||
| Noninterest bearing demand deposits | $ | 5,694,418 | $ | — | — | % | $ | 5,250,080 | $ | — | — | % |
| Interest bearing deposits | 9,181,887 | 20,896 | 0.46 | % | 9,169,096 | 23,466 | 0.52 | % | ||||
| Total deposits | $ | 14,876,305 | $ | 20,896 | 0.28 | % | $ | 14,419,176 | $ | 23,466 | 0.33 | % |
Table Page 5
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| Three Months Ended | Six Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AVERAGE BALANCES: | 6/30/2022 | 3/31/2022 | % change | 6/30/2021 | % change | 6/30/2022 | 6/30/2021 | % change | ||||||||
| Loans, including loans held for sale | $ | 14,327,476 | $ | 13,871,974 | 3 | % | $ | 13,293,591 | 8 | % | $ | 14,100,983 | $ | 13,319,782 | 6 | % |
| Investments | 2,558,509 | 2,973,994 | (14) | % | 3,012,317 | (15) | % | 2,765,103 | 2,960,348 | (7) | % | |||||
| Interest earning assets | 16,885,985 | 16,845,968 | — | % | 16,305,908 | 4 | % | 16,866,086 | 16,280,130 | 4 | % | |||||
| Total assets | 17,876,945 | 17,742,402 | 1 | % | 17,164,893 | 4 | % | 17,810,045 | 17,140,286 | 4 | % | |||||
| Interest bearing deposits | 9,088,942 | 9,275,865 | (2) | % | 9,015,034 | 1 | % | 9,181,887 | 9,169,096 | — | % | |||||
| Interest bearing liabilities | 9,985,328 | 9,836,303 | 2 | % | 9,533,532 | 5 | % | 9,911,226 | 9,693,951 | 2 | % | |||||
| Noninterest bearing demand deposits | 5,715,830 | 5,672,768 | 1 | % | 5,445,457 | 5 | % | 5,694,418 | 5,250,080 | 8 | % | |||||
| Stockholders’ equity | 2,016,577 | 2,090,755 | (4) | % | 2,066,016 | (2) | % | 2,053,461 | 2,056,812 | — | % | |||||
| Net interest earning assets | 6,900,657 | 7,009,665 | (2) | % | 6,772,376 | 2 | % | 6,954,860 | 6,586,179 | 6 | % | |||||
| LOAN PORTFOLIO COMPOSITION: | 6/30/2022 | 3/31/2022 | % change | 6/30/2021 | % change | |||||||||||
| Commercial loans | $ | 4,395,738 | $ | 4,124,715 | 7 | % | $ | 4,001,423 | 10 | % | ||||||
| Real estate loans | 9,335,020 | 9,262,305 | 1 | % | 8,832,276 | 6 | % | |||||||||
| Consumer and other loans | 815,291 | 679,654 | 20 | % | 590,602 | 38 | % | |||||||||
| Loans, net of deferred loan fees and costs | 14,546,049 | 14,066,674 | 3 | % | 13,424,301 | 8 | % | |||||||||
| Allowance for credit losses | (151,580) | (147,450) | 3 | % | (189,452) | (20) | % | |||||||||
| Loans receivable, net | $ | 14,394,469 | $ | 13,919,224 | 3 | % | $ | 13,234,849 | 9 | % | ||||||
| REAL ESTATE LOANS BY PROPERTY TYPE: | 6/30/2022 | 3/31/2022 | % change | 6/30/2021 | % change | |||||||||||
| Retail buildings | $ | 2,603,516 | $ | 2,598,373 | — | % | $ | 2,361,891 | 10 | % | ||||||
| Hotels/motels | 1,143,982 | 1,208,217 | (5) | % | 1,439,770 | (21) | % | |||||||||
| Gas stations/car washes | 1,080,777 | 1,055,383 | 2 | % | 954,394 | 13 | % | |||||||||
| Mixed-use facilities | 833,342 | 872,362 | (4) | % | 798,373 | 4 | % | |||||||||
| Warehouses | 1,279,647 | 1,263,791 | 1 | % | 1,149,393 | 11 | % | |||||||||
| Multifamily | 989,840 | 841,316 | 18 | % | 575,943 | 72 | % | |||||||||
| Other | 1,403,916 | 1,422,863 | (1) | % | 1,552,512 | (10) | % | |||||||||
| Total | $ | 9,335,020 | $ | 9,262,305 | 1 | % | $ | 8,832,276 | 6 | % | ||||||
| DEPOSIT COMPOSITION | 6/30/2022 | 3/31/2022 | % change | 6/30/2021 | % change | |||||||||||
| Noninterest bearing demand deposits | $ | 5,689,992 | $ | 5,498,263 | 3 | % | $ | 5,638,115 | 1 | % | ||||||
| Money market and other | 6,339,467 | 6,484,677 | (2) | % | 5,786,697 | 10 | % | |||||||||
| Saving deposits | 326,927 | 321,373 | 2 | % | 308,651 | 6 | % | |||||||||
| Time deposits | 2,673,244 | 2,210,815 | 21 | % | 2,992,767 | (11) | % | |||||||||
| Total deposit balances | $ | 15,029,630 | $ | 14,515,128 | 4 | % | $ | 14,726,230 | 2 | % |
Table Page 6
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| CAPITAL RATIOS: | 6/30/2022 | 3/31/2022 | 6/30/2021 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 2,000,369 | $ | 2,041,057 | $ | 2,092,870 | |||||||||||||||
| Common equity tier 1 ratio | 10.70 | % | 11.02 | % | 11.44 | % | |||||||||||||||
| Tier 1 risk-based capital ratio | 11.33 | % | 11.68 | % | 12.14 | % | |||||||||||||||
| Total risk-based capital ratio | 12.14 | % | 12.49 | % | 13.16 | % | |||||||||||||||
| Tier 1 leverage ratio | 10.32 | % | 10.37 | % | 10.43 | % | |||||||||||||||
| Total risk weighted assets | $ | 16,059,739 | $ | 15,393,639 | $ | 14,354,682 | |||||||||||||||
| Book value per common share | $ | 16.74 | $ | 16.96 | $ | 16.92 | |||||||||||||||
| Tangible common equity to tangible assets (1) | 8.68 | % | 9.05 | % | 9.53 | % | |||||||||||||||
| Tangible common equity per share (1) | $ | 12.80 | $ | 13.04 | $ | 13.10 | |||||||||||||||
| (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: | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 6/30/2022 | 6/30/2021 | ||||||||||||||
| Balance at beginning of period | $ | 147,450 | $ | 140,550 | $ | 136,774 | $ | 189,452 | $ | 207,943 | $ | 140,550 | $ | 206,741 | |||||||
| Provision (credit) for credit losses | 3,200 | (11,000) | 1,500 | (10,000) | (7,000) | (7,800) | (3,700) | ||||||||||||||
| Recoveries | 1,642 | 19,403 | 3,615 | 1,906 | 1,301 | 21,045 | 2,724 | ||||||||||||||
| Charge offs | (712) | (1,503) | (1,339) | (44,584) | (12,792) | (2,215) | (16,313) | ||||||||||||||
| Balance at end of period | $ | 151,580 | $ | 147,450 | $ | 140,550 | $ | 136,774 | $ | 189,452 | $ | 151,580 | $ | 189,452 | |||||||
| Net (recoveries) charge offs/average loans receivable (annualized) | (0.03) | % | (0.52) | % | (0.07) | % | 1.28 | % | 0.35 | % | (0.27) | % | 0.20 | % | |||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| NET LOAN (RECOVERIES) CHARGE OFFS: | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 6/30/2022 | 6/30/2021 | ||||||||||||||
| Real estate loans | $ | (508) | $ | (16,418) | $ | (2,352) | $ | 40,542 | $ | 11,281 | $ | (16,926) | $ | 13,515 | |||||||
| Commercial loans | (461) | (1,529) | 144 | 1,117 | 181 | (1,990) | 101 | ||||||||||||||
| Consumer loans | 39 | 47 | (68) | 1,019 | 29 | 86 | (27) | ||||||||||||||
| Total net (recoveries) charge offs | $ | (930) | $ | (17,900) | $ | (2,276) | $ | 42,678 | $ | 11,491 | $ | (18,830) | $ | 13,589 |
Table Page 7
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| NONPERFORMING ASSETS: | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans on nonaccrual status (1) | 69,522 | $ | 52,717 | $ | 54,616 | $ | 54,380 | $ | 111,008 | |||||
| Delinquent loans 90 days or more on accrual status | 3,090 | 2,131 | 4,567 | 4,759 | ||||||||||
| Accruing troubled debt restructured loans | 44,555 | 52,418 | 39,509 | 51,360 | ||||||||||
| Total nonperforming loans | 100,362 | 109,165 | 98,456 | 167,127 | ||||||||||
| Other real estate owned | 2,010 | 2,597 | 15,213 | 16,619 | ||||||||||
| Total nonperforming assets | 110,572 | $ | 102,372 | $ | 111,762 | $ | 113,669 | $ | 183,746 | |||||
| Nonperforming assets/total assets | % | 0.58 | % | 0.62 | % | 0.64 | % | 1.05 | % | |||||
| Nonperforming assets/loans receivable & OREO | % | 0.73 | % | 0.80 | % | 0.85 | % | 1.37 | % | |||||
| Nonperforming assets/total capital | % | 5.02 | % | 5.34 | % | 5.48 | % | 8.78 | % | |||||
| Nonperforming loans/loans receivable | % | 0.71 | % | 0.78 | % | 0.73 | % | 1.24 | % | |||||
| Nonaccrual loans/loans receivable | % | 0.37 | % | 0.39 | % | 0.41 | % | 0.83 | % | |||||
| Allowance for credit losses/loans receivable | % | 1.05 | % | 1.01 | % | 1.02 | % | 1.41 | % | |||||
| Allowance for credit losses/nonaccrual loans | % | 279.70 | % | 257.34 | % | 251.52 | % | 170.67 | % | |||||
| Allowance for credit losses/nonperforming loans | % | 146.92 | % | 128.75 | % | 138.92 | % | 113.36 | % | |||||
| Allowance for credit losses/nonperforming assets | % | 144.03 | % | 125.76 | % | 120.33 | % | 103.11 | % | |||||
| (1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling 13.2 million, 17.0 million, 19.5 million, 20.6 million, and 23.6 million, at June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021, and June 30, 2021, respectively. | ||||||||||||||
| NONACCRUAL LOANS BY TYPE: | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | ||||||||||
| Real estate loans | 53,966 | $ | 36,655 | $ | 39,756 | $ | 41,673 | $ | 95,622 | |||||
| Commercial loans | 8,686 | 11,025 | 10,991 | 12,217 | ||||||||||
| Consumer loans | 7,376 | 3,835 | 1,716 | 3,169 | ||||||||||
| Total nonaccrual loans | 69,522 | $ | 52,717 | $ | 54,616 | $ | 54,380 | $ | 111,008 | |||||
| ACCRUING TROUBLED DEBT RESTRUCTURED LOANS: | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | ||||||||||
| Retail buildings | 6,337 | $ | 24,356 | $ | 28,483 | $ | 11,280 | $ | 12,110 | |||||
| Hotels/motels | — | 472 | — | — | ||||||||||
| Gas stations/car washes | 193 | 197 | 202 | 206 | ||||||||||
| Mixed-use facilities | 2,836 | 2,846 | 7,937 | 7,967 | ||||||||||
| Warehouses | 5,321 | 5,366 | 4,908 | 14,099 | ||||||||||
| Other (2) | 11,849 | 15,054 | 15,182 | 16,978 | ||||||||||
| Total | 26,572 | $ | 44,555 | $ | 52,418 | $ | 39,509 | $ | 51,360 | |||||
| (2) Includes commercial business, consumer, and other loans |
All values are in US Dollars.
Table Page 8
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE: | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 - 59 days | $ | 10,090 | $ | 12,439 | $ | 29,723 | $ | 15,016 | $ | 22,466 |
| 60 - 89 days | 6,354 | 3,090 | 10,345 | 4,746 | 6,987 | |||||
| Total | $ | 16,444 | $ | 15,529 | $ | 40,068 | $ | 19,762 | $ | 29,453 |
| ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE: | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | |||||
| Real estate loans | $ | 7,919 | $ | 6,097 | $ | 20,232 | $ | 10,359 | $ | 21,432 |
| Commercial loans | 3,397 | 5,003 | 3,057 | 9,377 | 560 | |||||
| Consumer loans | 5,128 | 4,429 | 16,779 | 26 | 7,461 | |||||
| Total | $ | 16,444 | $ | 15,529 | $ | 40,068 | $ | 19,762 | $ | 29,453 |
| CRITICIZED LOANS: | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | |||||
| Special mention | $ | 95,797 | $ | 166,958 | $ | 257,194 | $ | 306,766 | $ | 294,559 |
| Substandard | 244,748 | 226,661 | 242,397 | 243,684 | 380,955 | |||||
| Total criticized loans | $ | 340,545 | $ | 393,619 | $ | 499,591 | $ | 550,450 | $ | 675,514 |
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 | Six Months Ended | ||||||||||||||
| 6/30/2022 | 3/31/2022 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||||||||
| RETURN ON AVERAGE TANGIBLE COMMON EQUITY | |||||||||||||||
| Average stockholders’ equity | $ | 2,016,577 | $ | 2,090,755 | $ | 2,066,016 | $ | 2,053,461 | $ | 2,056,812 | |||||
| Less: Goodwill and core deposit intangible assets, net | (471,421) | (471,921) | (473,445) | (471,669) | (473,702) | ||||||||||
| Average tangible common equity | $ | 1,545,156 | $ | 1,618,834 | $ | 1,592,571 | $ | 1,581,792 | $ | 1,583,110 | |||||
| Net income | $ | 52,088 | $ | 60,738 | $ | 53,763 | $ | 112,826 | $ | 97,450 | |||||
| Return on average tangible common equity (annualized) | 13.48 | % | 15.01 | % | 13.50 | % | 14.27 | % | 12.31 | % | |||||
| 6/30/2022 | 3/31/2022 | 6/30/2021 | |||||||||||||
| TANGIBLE COMMON EQUITY | |||||||||||||||
| Total stockholders’ equity | $ | 2,000,369 | $ | 2,041,057 | $ | 2,092,870 | |||||||||
| Less: Goodwill and core deposit intangible assets, net | (471,148) | (471,634) | (473,139) | ||||||||||||
| Tangible common equity | $ | 1,529,221 | $ | 1,569,423 | $ | 1,619,731 | |||||||||
| Total assets | $ | 18,089,062 | $ | 17,803,814 | $ | 17,469,627 | |||||||||
| Less: Goodwill and core deposit intangible assets, net | (471,148) | (471,634) | (473,139) | ||||||||||||
| Tangible assets | $ | 17,617,914 | $ | 17,332,180 | $ | 16,996,488 | |||||||||
| Common shares outstanding | 119,473,939 | 120,327,689 | 123,673,832 | ||||||||||||
| Tangible common equity to tangible assets | 8.68 | % | 9.05 | % | 9.53 | % | |||||||||
| Tangible common equity per share | $ | 12.80 | $ | 13.04 | $ | 13.10 |
Table Page 10
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
| Three Months Ended | Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 6/30/2022 | 3/31/2022 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||||||||
| PRE-PROVISION NET REVENUE | |||||||||||||||
| Net interest income before provision (credit) for credit losses | $ | 141,538 | $ | 133,176 | $ | 126,577 | $ | 274,714 | $ | 249,156 | |||||
| Noninterest income | 12,746 | 13,186 | 11,076 | 25,932 | 19,880 | ||||||||||
| Revenue | 154,284 | 146,362 | 137,653 | 300,646 | 269,036 | ||||||||||
| Noninterest expense | 80,365 | 75,373 | 73,123 | 155,738 | 143,554 | ||||||||||
| Pre-provision net revenue | $ | 73,919 | $ | 70,989 | $ | 64,530 | $ | 144,908 | $ | 125,482 | |||||
| Average assets | $ | 17,876,945 | $ | 17,742,402 | $ | 17,164,893 | $ | 17,810,045 | $ | 17,140,286 | |||||
| ROA (PPNR) | 1.65 | % | 1.60 | % | 1.50 | % | 1.63 | % | 1.46 | % | |||||
| Average stockholders’ equity | 2,016,577 | 2,090,755 | 2,066,016 | 2,053,461 | 2,056,812 | ||||||||||
| ROE (PPNR) | 14.66 | % | 13.58 | % | 12.49 | % | 14.11 | % | 12.20 | % |
Table Page 11
Document
News Release
HOPE BANCORP DECLARES QUARTERLY CASH DIVIDEND OF $0.14 PER SHARE
LOS ANGELES - July 19, 2022 - 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 12, 2022 to all stockholders of record as of the close of business on July 29, 2022.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Wednesday, July 20, 2022 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its second quarter ended June 30, 2022. Investors and analysts are invited to access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103 (international) and asking for the “Hope Bancorp Call.” A presentation to accompany the earnings call will be available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of Hope Bancorp’s website. After the live webcast, a replay will remain available at the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through July 27, 2022, replay access code 7509556.
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 $18.09 billion in total assets as of June 30, 2022. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 54 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia, Alabama and Georgia. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.
Contacts:
| Alex Ko<br><br>Senior EVP & Chief Financial Officer<br><br>213-427-6560<br><br>alex.ko@bankofhope.com | Angie Yang<br><br>SVP, Director of Investor Relations &<br><br>Corporate Communications<br><br>213-251-2219<br><br>angie.yang@bankofhope.com |
|---|
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hope-q22022earningsconfe
2022 Second Quarter Earnings Conference Call Wednesday, July 20, 2022
Forward Looking Statements & Additional Disclosures This presentation may contain statements regarding future events or the future financial performance of the Company that constitute forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market, and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward- looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for credit losses, including the effects of the implementation of the current expected credit losses model; 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.
Strong Quarter Highlighted by Record Loan Production & Expanding NIM Earnings & Profitability • Net interest margin expanded 15bps Q-o-Q largely reflecting an 18bps increase in weighted average loan yields and improved mix of interest earning assets • Pre-provision net revenue (“PPNR”) increased 4% Q-o-Q • PPNR ROA and ROE increased to 1.65% and 14.66%, respectively, from 1.60% and 13.58% for 1Q22 Loans • Record new loan production of $1.29 billion, up 25% Q-o-Q and up 44% Y-o-Y • Mix of new originations well diversified with C&I 43%, CRE 42% and Mortgage and Consumer 14% • Excluding PPP loans, loans receivable increased 4.0% Q-o-Q, or 15.9% annualized Deposits • Deposits increased 3.5% Q-o-Q, driven by higher balances of noninterest bearing demand deposits and strategic increases in time deposits • Total cost of deposits increased 9bps Q-o-Q, reflecting aggregate 150bps increase in Fed Funds rate since March 2022 Asset Quality • Criticized loans decreased 13.5% Q-o-Q or 49.6% Y-o-Y, representing 4th consecutive quarter of reductions • Losses remain low with net recoveries of $930,000, representing 3rd consecutive quarter of net recoveries Q2 2022 Financial Highlights 3 Net Income $52.1M Diluted EPS $0.43 Gross Loans $14.55B Total Deposits $15.03B 1 PPNR (pre-provision net revenue) is a non-GAAP financial measure. A quantitative reconciliation of the GAAP to non-GAAP financial measure is provided on Slide 15.
Loan Production & Portfolio Trends New Loan Originations Funded ($ Millions) 1 Represents average rate on new loans excluding PPP loans. Including PPP loans, the average rate on new loan originations was 3.32% for 2Q21 $520 $590 $623 $578 $545 $20 $301 $344 $539 $344 $557 $53 $75 $81 $104 $184 2Q21 3Q21 4Q21 1Q22 2Q22 $1,243 $1,026 $1,286 $1,009 $894 CRE SBA PPP C&I Mortgage and Consumer Q-o-Q change • Total loans receivable, excluding SBA PPP, increased 4.0% Q-o-Q, or 15.9% annualized • Aggregate payoffs and paydowns increased to $870.0 vs. $674.0 million in 1Q22 • CRE loans declined to 64% of loans receivable as of 6/30/22 from 66% as of 3/31/22 +25%+23% -17% +13% $12.86 $13.08 $13.72 $13.95 $14.51 12 .25 12 .75 13 .25 13 .75 14 .25 14 .75 06/30/21 09/30/21 12/31/21 03/31/22 06/30/22 Loans Receivable (Excluding PPP) • Record new loans funded of $1.29 billion, representing 25% increase Q-o-Q and 44% Y-o-Y • Originations reflect well balanced mix of 43% C&I, 42% CRE and 14% Mortgage and Consumer loans • Average rate on new loans increased 72bps Q-o-Q Loans Receivable (Excluding SBA PPP) ($ Billions) Q-o-Q change +2% +2% +4% +5% Average Rate of New Loans (Excluding PPP) 2Q21 3Q21 4Q21 1Q22 2Q22 3.37%1 3.36% 3.38% 3.54% 4.26% 4
Net Interest Income and Margin 5 • Net interest income before provision for credit losses increased 6% Q-o-Q and 12% Y-o-Y • Increase attributed to higher loan yields and average balances of loans receivable, partially offset by higher interest expense on deposits Net Interest Income & NIM ($ Millions) $126.6 $130.3 $133.3 $133.2 $141.5 3.11% 3.07% 3.13% 3.21% 3.36% 2Q21 3Q21 4Q21 1Q22 2Q22 3.21% 3.36%Cash reduction & yield increase Loan yield increase + loan balance increase Borrowings + cost increase +18bps +5bps 2Q22 net interest margin increased 15bps Q-o-Q Net Interest Income NIM Increase Decrease Total Q-o-Q increase +3% +2% -0% +6% Net Interest Margin 1Q22 2Q22 -9bps • 15bps Q-o-Q increase in net interest margin primarily reflected increases in loan yield (+15bps) and average loan balance (+3bps) partially offset by higher interest bearing deposit costs (-9bps) Inv securities decrease + yield increase +4bps Interest bearing deposit cost increase -3bps
95% 14% 99% 59% 5% 86% 100% 1% 41% 0% 20 % 40 % 60 % 80 % 10 0% 12 0% CRE Commercial SBA Mortgage Consumer Total Origination Fixed/Hybrid Variable Loan Portfolio Interest Rate Breakdown Variable 44% @4.44% 2 Fixed 26% @3.79% 2,3 Hybrid 1 30% @3.96% 2 Fixed/Variable & Average Rate of New Loan Originations (As of 6/30/2022) Fixed / Variable Breakdown of Total Loan Portfolio (As of 6/30/2022) 1 Hybrid loans have fixed interest rates for a specified period and then convert to variable rates (fixed as of 6/30/2022) 2 The weighted average rate represents coupon rate and excludes loan discount accretion and interest on nonaccrual loans 3 Excluding PPP loans, average yield for fixed rate loans is 3.82% • Variable rate loans as percentage of total new loan originations represented 41% of new production • As of 6/30/2022, variable rate loans accounted for 44% of total loan portfolio • Positioned as asset sensitive at 6/30/2022 and expect net interest income to increase as interest rates rise • $498 million in hybrid interest rate loans will change from fixed to variable rate within the next 12 months 6 4.06% 4.61% 5.10% 3.60% 4.26% 1 Hybrid loans have fixed interest rates for a specified period and then convert to variable rates (fixed as of 6/30/2022) 1
Noninterest Income 7 • Noninterest income decreased 3% Q-o-Q to $12.7 million vs. $13.2 million in 1Q22 – Primary customer-related service fees, gain on sale of SBA loans and other income and fees all increased Q-o-Q – These increases were offset by a loss on sale of other loans of $547,000 related to a loss on the sale of a $35.0 million relationship transferred to HFS during 1Q22 • Sold $70.2 million of the guaranteed portion of SBA 7(a) loans to the secondary market in 2Q22 vs. $58.1 million in 1Q22 • Sold $4.1 million of residential mortgage loans vs. $37.8 million in 1Q22 1 Gain on Sale of Other Loans includes net gains on sales of residential mortgage loans, as well as other loans 2 Primary Customer-Related Service Fees include service fees on deposit accounts, international service fees, loan servicing fees, and wire transfer fees $4.4 $4.2 $4.6 $4.5 $4.7 $1.0 $0.8 $0.5 $0.8 -$0.5 $3.2 $3.2 $4.3 $2.3 $2.7 $2.4 $2.5 $3.6 $5.6 $5.8 2Q21 3Q21 4Q21 1Q22 2Q22 Other Income and Fees Gain on Sale of Other Loans Gain on Sale of SBA Loans Primary Customer-Related Service Fees $13.1 $13.2 $12.7 $11.1 $10.6 Noninterest Income ($ Millions) 1 2
• Noninterest expense increased to $80.4 million from $75.4 million in 1Q22 • Q-o-Q increase in salaries and benefits for 2Q22 largely reflects increased FTE count and annual merit increases Efficiency Ratio & Noninterest Expense to Average Assets 4 1.70% 1.70% 1.67% 1.70% 1.80% 53.12% 53.58% 50.70% 51.50% 52.09% 2Q21 3Q21 4Q21 1Q22 2Q22 Efficiency Ratio Noninterest Expense/Avg Assets 8 $42.3 $47.0 $44.6 $47.7 $51.1 $22.1 $20.6 $21.0 $19.9 $20.1 $0.3 $1.5 $1.7 $1.5 $2.8 $8.4 1 $6.4 $7.0 $6.3 $6.3 1,438 1,449 1,476 1,509 1,537 2Q21 3Q21 4Q21 1Q22 2Q22 Compensation Other core operating expenses Credit related & OREO Other Full-time employee (FTE) $75.4 $80.4 $73.1 $75.5 $74.2 Noninterest Expense and Efficiency Noninterest Expense & FTE ($ Millions) 1. 2Q21 included software charge off expense of $2.1MM 2. Other core operating expenses include:Occupancy & equipment, Advertising & marketing, Data & communications, Professional fees and FDIC assessment • Increase in efficiency ratio to 52.09% for 2Q22 primarily reflects higher salaries and employee benefits expense 2
Deposit Trends 9 Deposit Composition ($ Billions) Deposit Cost Trend Average Deposits and Cost of Interest-Bearing Deposits ($ Billions) • Total cost of deposits increased 9bps Q-o-Q reflecting aggregate 150bps increase in Fed Funds rate since March 2022 0.31%0.30%0.28% 0.27% 0.25%0.24%0.24%0.23%0.23%0.23%0.23% 0.25%0.26% 0.32% 0.41% $9.0 $9.1 $9.1 $9.3 $9.1 $5.4 $5.8 $6.0 $5.7 $5.7 0.48% 0.42% 0.39% 0.38% 0.54% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 2Q21 3Q21 4Q21 1Q22 2Q22 Average Noninterest Bearing Deposits Average Interest Bearing Deposits Cost of Interest Bearing Deposits $5.6 $6.0 $5.8 $5.5 $5.7 $5.8 $5.9 $6.2 $6.5 $6.3 $0.3 $0.3 $0.3 $0.3 $0.3 $3.0 $2.9 $2.8 $2.2 $2.7 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 $15.06$14.73 $15.03 $14.52 $15.04 +4%-3% 0%+2% Q-o-Q growth annualized Quarterly Cost of Deposits Monthly Cost of Deposits DDA MMA/NOW Savings Time 0.26% 3Q21 0.30% 2Q21 0.33% 2Q220.24% 1Q22 0.23% 4Q21 • Average interest bearing deposits decreased 2% Q- o-Q • Total cost of interest-bearing deposits increased 16bps Q-o-Q • Noninterest bearing demand deposits (“DDA”) increased 3% Q-o-Q and accounted for 38% of total deposits at 6/30/22 • 21% increase in time deposits Q-o-Q reflects strategic additions of deposits ahead of additional rate hikes expected in 2H22 $14.99$14.46 $14.80$14.95$15.07
Asset Quality Nonperforming Assets ($ Millions) Total Criticized Loans ($ Millions) 10 $167.1 $98.5 $109.2 $100.4 $108.6 $16.6 $15.2 $2.6 $2.0 $2.0 1.05% 0.64% 0.62% 0.58% 0.61% 2Q21 3Q21 4Q21 1Q22 2Q22 NPLs OREO NPAs/Total Assets $294.6 $306.8 $257.2 $167.0 $95.8 $381.0 $243.7 $242.4 $226.7 $244.7 5.03% 4.10% 3.58% 2.80% 2.34% 2Q21 3Q21 4Q21 1Q22 2Q22 Substandard & Doubtful Special Mention Total Criticized Loans as a % of Total Loans -$7.0 -$10.0 $1.5 -$11.0 $3.2 0.35% 1.28% -0.07% -0.52% -0.03% 2Q21 3Q21 4Q21 1Q22 2Q22 Provision for Credit Losses Net (Recoveries) Charge Offs (annualized) (Credit) for Credit Losses • Special mention loans decreased by $71.2 million Q-o-Q reflecting ongoing upgrades from updated financials of borrowers post COVID modifications • Total criticized loans declined 13% to 2.34% of loans receivable vs. 2.80% at 3/31/22 • Provision for credit losses of $3.2 million reflects increased recessionary concerns, loan growth and reductions in criticized loan balances • Net recoveries of $930,000, or -0.03% of average loans receivable, annualized, reflecting 3rd consecutive quarter of net recoveries • Increase in total nonperforming assets reflected higher nonaccrual and delinquent loans offset by reductions in accruing TDR loans – Fluctuations in nonaccrual and TDR loans largely reflects the transfer of a $18.6 mill ion TDR loan to nonaccrual status – Of delinquent loans, $10.7 million addressed in July 2022 $111.8 $102.4 $110.6 $183.7 $113.7 $499.6 $393.6 $340.5 $675.5 $550.5 Provision (Credit) for Credit Losses & Net (Recoveries) Charge Offs ($ Millions)
12.49% 10.37% 11.02% 11.68% $13.04 12.14% 10.32% 10.70% 11.33% $12.80 Total Risk-Based Capital Ratio Tier 1 Leverage Ratio Tier 1 Common Equity Ratio Tier 1 Capital Ratio Tangible Common Equity per Share 3/31/2022 6/30/2022 $17.3 $17.3 $16.8 $16.8 $16.9 $47.2 $2.8 $14.7 2Q21 3Q21 4Q21 1Q22 2Q22 Dividends Buybacks Strong Capital Position & Returns Capital Positions Dividends & Buybacks ($ Millions) Maintaining strong levels of capital • All regulatory capital ratios remain at strong levels • Tangible common equity per share decreased Q-o-Q to $12.80 reflecting impact to AOCI from industry-wide marks on securities portfolios Enhancing shareholder returns • Quarterly common stock dividend maintained at $0.14 per share • Board authorized $50 million stock repurchase program in 1Q22; $35.3 million remaining as of 6/30/22 • Dividend yield: 4.05% (6/30/22) | Dividend payout ratio: 30.9% (TTM) 11 1 Tangible common equity per share is a non-GAAP financial measure. A quantitative reconciliation of the GAAP to non-GAAP financial measure is provided on Slide 15. 1
2022 Full-Year Outlook Loan Growth: Recent business development performance and robust loan pipeline support cautious optimism for achieving high single-digit to low double-digit loan growth for 2022, excluding PPP Noninterest Expenses: Noninterest expense to average assets expected to be approximately 1.70% Net Interest Margin: Relatively stable net interest margin for Q2 2022 Asset Quality: Anticipate improving asset quality metrics with criticized balances trending down an additional 10-20% for the balance of 2022, resulting in approximately 30-40% reduction for the full year Profitability: Enhanced profitability metrics expected to be driven by increasing earning assets and improving asset quality metrics Current outlook as of 2Q22 Loan Growth: A greater level of confidence for achieving the higher end of 2022 full-year guidance of high single-digit to low double-digit loan growth, excluding SBA PPP Noninterest Expenses: Noninterest expense to average assets expected to be approximately 1.75%- 1.78% for 2022 full-year Net Interest Margin: Expect continued margin expansion for 2H 2022, but at a lower magnitude of expansion than Q2 2022 Asset Quality: Anticipate improving asset quality metrics with criticized balances continuing downward trend in 2H 2022, resulting in approximately 30-40% reduction for 2022 full-year Profitability: Net interest income expansion driven by rising interest rates and earnings asset growth Previous outlook as of 1Q22
Q&A 2022 Second Quarter Earnings Conference Call
Appendix 14
Appendix: Non-GAAP Financials Management reviews select non-GAAP financial measures in evaluating the Company’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. 15 Pre-provision Net Revenue (PPNR), ROA and ROE ($ in thousands) 2Q21 1Q22 2Q22 Net interest income before provision (credit) for credit losses $ 126,577 $ 133,176 $ 141,538 Noninterest income 11,076 13,186 12,746 Revenue 137,653 146,362 154,284 Less: noninterest expense 73,123 75,373 80,365 Pre-provision net revenue $ 64,530 $ 70,989 $ 73,919 Average assets $ 17,164,893 $ 17,742,402 $ 17,876,945 ROA (PPNR) 1.50% 1.60% 1.65% Average stockholders’ equity $ 2,066,016 $ 2,090,755 $ 2,016,577 ROE (PPNR) 12.49% 13.58% 14.66% Tangible Common Equity Per Share ($ in thousands) 2Q21 1Q22 2Q22 Total stockholders’ equity $ 2,092,870 $ 2,041,057 $ 2,000,369 Less: Goodwill and core deposit intangible assets, net (473,139) (471,634) (471,148) Tangible common equity 1,619,731 1,569,423 1,529,221 Common shares outstanding 123,673,832 120,327,689 119,473,939 Tangible common equity per share $ 13.10 $ 13.04 $ 12.80