Market Overview

Hope Bancorp Reports 2019 First Quarter Financial Results

Share:

Hope Bancorp, Inc. (the "Company") (NASDAQ:HOPE), the holding company
of Bank of Hope (the "Bank"), today reported unaudited financial results
for the three months ended March 31, 2019. Net income for the 2019 first
quarter totaled $42.8 million, or $0.34 per diluted common share. This
compares with net income for the preceding 2018 fourth quarter of $44.4
million, or $0.35 per diluted common share and $51.2 million, or $0.38
per diluted common share, for the 2018 first quarter.

"First quarter results underscore our 2019 strategic priorities focused
on driving profitable growth and protecting margins," said Kevin S. Kim,
President and Chief Executive Officer. "New loan production of $442
million reflects in part our more selective stance in the types of loans
and rates that we are bringing on to the balance sheet. As a result, our
average rate on new loan originations increased 30 basis points over the
preceding fourth quarter, up from an increase of 25 basis points in the
preceding quarter, and contributed to a 10 basis point increase in our
average loan yield. This helped to mitigate the impact of the highly
competitive and higher rate deposit environment, and our net interest
margin compression moderated to 2 basis points for the quarter. Our
commitment to managing our expense structure is also evident as we were
able to maintain our noninterest expense to average assets ratio in line
with the fourth quarter despite the normalized bonus accrual and
seasonally higher first quarter payroll tax expenses. Overall, we remain
confident that our strategic initiatives will deliver greater value to
our stakeholders as we progress through the year and beyond," said Kim.

Q1 2019 Highlights

  • 2019 first quarter net income totaled $42.8 million, or $0.34 per
    diluted common share.
  • Net interest margin stabilized, declining 2 basis points to 3.39% and
    reflecting an improvement from 6 basis points of compression in the
    preceding quarter.
  • The average rate on loans receivable increased 10 basis points,
    reflecting an improvement over the 5 basis point increase in the
    fourth quarter of 2018.
  • The increase in the cost of interest bearing deposits moderated, up 18
    basis points in the first quarter, versus 21 basis points in the
    preceding quarter.
  • An increase in nonaccrual and criticized loans was driven by
    downgrades of four credit relationships. The Company expects any
    potential loss exposure to be relatively small, given that the loans
    are well collateralized with properties in prime locations, secured by
    strong guarantors, or have strong parent company support.
  • Credit losses remained minimal with net charge offs of $462,000,
    versus $872,000 in the preceding quarter.
  • Noninterest expense to average assets was well contained at 1.85%, the
    same as in the 2018 fourth quarter.
  • Net loan-to-deposits (including HFS loans) as of March 31, 2019
    improved to 97.6% from 99.0% as of December 31, 2018.

Financial Highlights

(dollars in thousands, except per share data) (unaudited)   At or for the Three Months Ended
3/31/2019   12/31/2018   3/31/2018
Net income $ 42,758 $ 44,449 $ 51,232
Diluted earnings per share $ 0.34 $ 0.35 $ 0.38
Net interest income before provision for loan losses $ 119,608 $ 121,893 $ 120,068
Net interest margin 3.39 % 3.41 % 3.66 %
Noninterest income $ 11,422 $ 11,614 $ 19,850
Noninterest expense $ 70,833 $ 70,189 $ 68,453
Net loans receivable $ 11,959,787 $ 12,005,558 $ 11,206,022
Deposits $ 12,249,196 $ 12,155,656 $ 11,510,569
Nonaccrual loans (1) (2) $ 86,637 $ 53,286 $ 68,152
ALLL to loans receivable 0.78 % 0.77 % 0.77 %
ALLL to nonaccrual loans (1) (2) 108.75 % 173.70 % 126.86 %
ALLL to nonperforming assets (1) (2) 68.03 % 81.92 % 62.70 %
Provision for loan losses $ 3,000 $ 2,800 $ 2,500
Net charge offs $ 462 $ 872 $ 580
Return on average assets ("ROA") 1.12 % 1.17 % 1.44 %
Return on average equity ("ROE") 8.91 % 9.42 % 10.61 %
Noninterest expense / average assets 1.85 % 1.85 % 1.93 %
Efficiency ratio 54.06 % 52.57 % 48.92 %

(1)

  Excludes delinquent SBA loans that are guaranteed and currently in
liquidation

(2)

Excludes purchased credit-impaired loans
 

Operating Results for the 2019 First Quarter

Net Interest Income. Net interest income before provision
for loan losses for the 2019 first quarter totaled $119.6 million,
compared with $121.9 million in the 2018 fourth quarter and $120.1
million in the year-ago first quarter.

The net interest margin (net interest income divided by average interest
earning assets) for the 2019 first quarter decreased 2 basis points to
3.39% from 3.41% in the preceding 2018 fourth quarter. This reflects the
impact of higher deposit costs and larger balances of time deposits,
partially offset by higher trending loan yields, higher accretion income
and lower interest expense related to FHLB advances. Acquisition
accounting adjustments, as detailed on page 3 of the financial tables,
totaled $8.4 million for the 2019 first quarter and included $1.0
million of additional accretion income as a result of a payoff, compared
with $6.6 million in the preceding fourth quarter.

The weighted average yield on loans for the 2019 first quarter was
5.31%, up 10 basis points from 5.21% in the preceding fourth quarter and
up 27 basis points over 5.04% in the 2018 first quarter. The increases
in the weighted average yield on loans largely reflects the benefits to
the variable rate portion of the Company's loan portfolio resulting from
the increases in the fed funds rate in March, June, September and
December 2018 of 25 basis points each.

The weighted average cost of deposits for the 2019 first quarter
increased 17 basis points to 1.57% from 1.40% in the 2018 fourth quarter
and was up 66 basis points from 0.91% in the year-ago first quarter. The
increase in the weighted average cost of deposits reflects the highly
competitive deposit market, as well as an increase in the higher-rate
time deposit balances in the rising interest rate environment.

Noninterest Income. Noninterest income for the 2019 first
quarter totaled $11.4 million, compared with $11.6 million in the 2018
fourth quarter and $19.9 million in the 2018 first quarter. Noninterest
income for the year-ago first quarter included $3.5 million of income
recorded on certain equity investments held by the Company. The other
variances in noninterest income largely reflect the net gains on sales
of SBA and mortgage loans. As previously announced, the Company
discontinued its practice of regularly selling SBA loans to the
secondary market during the 2018 fourth quarter. Net gains on sales of
SBA loans amounted to $0 for the 2019 first quarter, $447,000 for the
2018 fourth quarter, and $3.5 million for the year-ago first quarter.
Net gains on sales of other loans, largely residential mortgage loans,
amounted to $741,000 for the 2019 first quarter, $381,000 for the 2018
fourth quarter, and $1.2 million for the year-ago first quarter.

Noninterest Expense. Noninterest expense for the 2019
first quarter totaled $70.8 million, compared with $70.2 million in the
preceding fourth quarter and $68.5 million in the 2018 first quarter.
Noninterest expense as a percentage of average assets amounted to 1.85%,
1.85% and 1.93% for the 2019 first quarter, 2018 fourth quarter and 2018
first quarter, respectively.

Salaries and employee benefits expense totaled $40.4 million for the
2019 first quarter, compared with $36.6 million for the 2018 fourth
quarter, reflecting normalized bonus accruals and the seasonally higher
first quarter payroll tax expense. In the year-ago first quarter,
salaries and employee benefits expense totaled $39.4 million.

Income Tax Provision. The effective tax rate for the 2019
first quarter was 25.2%, compared with 26.6% in the preceding 2018
fourth quarter and 25.7% in the 2018 first quarter.

Balance Sheet Summary

Loans receivable at March 31, 2019 totaled $12.05 billion, down slightly
from $12.10 billion at December 31, 2018, but up 7% from $11.29 million
at March 31, 2018.

New loan originations funded during the 2019 first quarter totaled
$442.0 million and included SBA loan production of $48.0 million and
residential mortgage loan originations of $64.3 million. This compares
with 2018 fourth quarter originations of $667.3 million, including SBA
loan production of $81.5 million and residential mortgage loan
originations of $162.3 million. In the year-ago first quarter, new loan
originations funded totaled $764.3 million, including SBA loan
production of $78.2 million and residential mortgage loan originations
of $179.2 million.

SBA 7(a) loan originations totaled $33.0 million for the 2019 first
quarter, compared with $44.7 million for the fourth quarter of 2018 and
$73.9 million for the year-ago first quarter. In accordance with the
Company's decision to retain SBA 7(a) loans in its portfolio, there were
no sales to the secondary market during the 2019 first quarter, versus
sales of $10.2 million during the 2018 fourth quarter and $48.6 million
during the year-ago first quarter.

Sales of residential mortgage loans to the secondary market totaled
$69.8 million in the 2019 first quarter and included $53.3 million of
sales from the Company's existing portfolio. This compares with sales of
$11.8 million in the 2018 fourth quarter and $45.9 million in the 2018
first quarter.

Aggregate loan pay offs and pay downs in the 2019 first quarter totaled
$364.0 million, compared with $431.6 million for the 2018 fourth quarter
and $411.6 million in the year-ago first quarter.

Total deposits at March 31, 2019 amounted to $12.25 billion, up 1% from
$12.16 billion at December 31, 2018 and up 6% from $11.51 billion at
March 31, 2018.

With the adoption of the new lease accounting standard ASC 842 effective
January 1, 2019, the Company now recognizes its lease liabilities and
right-of-use lease assets on its balance sheet. The total balance of
operating right-of-use assets included in other assets totaled $62.4
million and total operating lease liabilities included in other
liabilities totaled $62.8 million at March 31, 2019. Prior to January 1,
2019, lease assets and liabilities were not recorded on the Company's
balance sheet.

Credit Quality

The provision for loan and lease losses for the 2019 first quarter was
$3.0 million, compared with $2.8 million for the immediately preceding
2018 fourth quarter and $2.5 million for the year-ago first quarter.

The Company defines nonperforming loans to include delinquent loans on
nonaccrual status, delinquent loans past due 90 days or more on accrual
status (excluding purchased credit-impaired loans) and accruing
restructured loans. Nonaccrual loans totaled $86.6 million at March 31,
2019, compared with $53.3 million at December 31, 2018 and $68.2 million
at March 31, 2018 and represented 0.72%, 0.44% and 0.60% of loans
receivable, respectively. Accruing nonperforming loans totaled $387,000
at March 31, 2019, compared with $1.5 million at December 31, 2018 and
$1.9 million at March 31, 2018. Accruing restructured loans at March 31,
2019 totaled $45.2 million, compared with $50.4 million at December 31,
2018 and $59.6 million at March 31, 2018. Total nonperforming loans
amounted to $132.2 million, or 1.10% of loans receivable, at March 31,
2019, compared with $105.2 million, or 0.87% of loans receivable, at
December 31, 2018 and $129.6 million, or 1.15% of loans receivable, at
March 31, 2018.

Other real estate owned declined to $6.3 million at March 31, 2019 from
$7.8 million at December 31, 2018 and $8.3 million at March 31, 2018.

Following are the components of criticized loan balances as of March 31,
2019, December 31, 2018 and March 31, 2018:

(dollars in thousands) (unaudited)   3/31/2019   12/31/2018   3/31/2018
Special Mention (1) $ 205,373 $ 163,089 $ 196,082
Classified (1)   353,202   318,327   344,648
Criticized $ 558,575 $ 481,416 $ 540,730

(1)

  Balances include purchased loans which were marked to fair value on
the date of acquisition.
 

The increases in nonaccrual loans and total criticized loans in the 2019
first quarter were primarily driven by four unrelated credit
relationships. The Company expects any potential loss exposure to be
relatively small given that the loans are well collateralized with
properties in prime locations or secured by strong guarantors.

During the 2019 first quarter, the Company recorded net charge offs of
$462,000, or 0.02% of average loans receivable on an annualized basis.
This compares with net charge offs of $872,000, or 0.03% of average
loans receivable on an annualized basis, for the 2018 fourth quarter. In
the 2018 first quarter, the Company recorded net charge offs of
$580,000, or 0.02% of average loans receivable on an annualized basis.

The ALLL at March 31, 2019 was $94.2 million, or 0.78% of loans
receivable (excluding loans held for sale), compared with $92.6 million,
or 0.77% of loans receivable (excluding loans held for sale), at
December 31, 2018 and $86.5 million, or 0.77% of loans receivable
(excluding loans held for sale), at March 31, 2018. The coverage ratio
of the ALLL to nonperforming loans (excluding purchased credit-impaired
loans) was 71.25% at March 31, 2019, 87.96% at December 31, 2018 and
66.69% at March 31, 2018.

Impaired loans (defined as loans for which it is probable that not all
principal and interest payments due will be collected in accordance with
the contractual terms) totaled $132.1 million at March 31, 2019,
compared with $104.0 million at December 31, 2018 and $128.1 million at
March 31, 2018.

Capital

At March 31, 2019, the Company and the Bank continued to exceed all
regulatory capital requirements to be classified as a "well-capitalized"
financial institution, as summarized in the following table:

(unaudited)   3/31/2019   12/31/2018   3/31/2018  

Minimum Guideline
for "Well-Capitalized"

Bank

Common Equity Tier 1 Capital 11.60% 11.44% 12.35% 6.50%
Tier 1 Leverage Ratio 10.66% 10.55% 11.61% 5.00%
Tier 1 Risk-based Ratio 12.36% 12.21% 13.15% 8.00%
Total Risk-based Ratio 13.10% 12.94% 13.86% 10.00%
 

Tangible common equity per share and as a percentage of tangible assets
are summarized in the following table:

(unaudited)   3/31/2019   12/31/2018   3/31/2018
Tangible common equity per share (1) $11.59 $11.25 $10.81
Tangible common equity to tangible assets (2) 9.84% 9.61% 10.44%

(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 6.

(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 6.
 

Management reviews tangible common equity to tangible assets ratio in
evaluating the Company's and the Bank's capital levels and has included
these figures and tangible common equity per share figures in response
to market participant interest in tangible common equity as a measure of
capital. A reconciliation of the GAAP to non-GAAP financial measures is
provided in the accompanying financial information.

Investor Conference Call

The Company previously announced that it will host an investor
conference call on Wednesday, April 17, 2019 at 9:30 a.m. Pacific Time /
12:30 p.m. Eastern Time to review financial results for its first
quarter ended March 31, 2019. Investors and analysts are invited to
access the conference call by dialing 866-235-9917 (domestic) or
412-902-4103 (international), and asking for the "Hope Bancorp Call." A
presentation to accompany the earnings call will be available at the
Investor Relations section of Hope Bancorp's website at www.ir-hopebancorp.com.
Other interested parties are invited to listen to a live webcast of the
call available at the Investor Relations section of Hope Bancorp's
website. After the live webcast, a replay will remain available in the
Investor Relations section of Hope Bancorp's website for one year. A
telephonic replay of the call will be available at 877-344-7529
(domestic) or 412-317-0088 (international) for one week through April
24, 2019, replay access code 10130148.

About Hope Bancorp, Inc.

Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and
only super regional Korean-American bank in the United States with $15.4
billion in total assets as of March 31, 2019. Headquartered in Los
Angeles and serving a multi-ethnic population of customers across the
nation, Bank of Hope operates 63 full-service branches in California,
Washington, Texas, Illinois, New York, New Jersey, Virginia, Georgia and
Alabama. The Bank also operates SBA loan production offices in Seattle,
Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern
California and Houston; commercial loan production offices in Northern
California and Seattle; residential mortgage loan production offices in
Southern California; and a representative office in Seoul, Korea. Bank
of Hope specializes in core business banking products for small and
medium-sized businesses, with an emphasis in commercial real estate and
commercial lending, SBA lending and international trade financing. Bank
of Hope is a California-chartered bank, and its deposits are insured by
the FDIC to the extent provided by law. Bank of Hope is an Equal
Opportunity Lender. For additional information, please go
to bankofhope.com. By including the foregoing website address link, the
Company does not intend to and shall not be deemed to incorporate by
reference any material contained or accessible therein.

Forward-Looking Statements

Some statements in this press release may constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements relate to, among
other things, expectations regarding the business environment in which
we operate, projections of future performance, perceived opportunities
in the market and statements regarding our business strategies,
objectives and vision. Forward-looking statements include, but are not
limited to, statements preceded by, followed by or that include the
words "will," "believes," "expects," "anticipates," "intends," "plans,"
"estimates" or similar expressions. With respect to any such
forward-looking statements, the Company claims the protection provided
for in the Private Securities Litigation Reform Act of 1995. These
statements involve risks and uncertainties. The Company's actual
results, performance or achievements may differ significantly from the
results, performance or achievements expressed or implied in any
forward-looking statements. The risks and uncertainties include, but are
not limited to: possible deterioration in economic conditions in our
areas of operation; interest rate risk associated with volatile interest
rates and related asset-liability matching risk; liquidity risks; risk
of significant non-earning assets, and net credit losses that could
occur, particularly in times of weak economic conditions or times of
rising interest rates; and regulatory risks associated with current and
future regulations. For additional information concerning these and
other risk factors, see the Company's most recent Annual Report on Form
10-K and Quarterly Report on Form 10-Q. The Company does not undertake,
and specifically disclaims any obligation, to update any forward-looking
statements to reflect the occurrence of events or circumstances after
the date of such statements except as required by law.

         

Hope Bancorp, Inc.

Selected Financial Data

Unaudited (dollars in thousands, except share data)

 
Assets: 3/31/2019 12/31/2018 % change 3/31/2018 % change
Cash and due from banks $ 612,884 $ 459,606 33 % $ 612,353 %
Securities available for sale, at fair value 1,818,343 1,846,265 (2 )% 1,699,315 7 %
Federal Home Loan Bank ("FHLB") stock and other investments 102,594 104,705 (2 )% 107,906 (5 )%
Loans held for sale, at the lower of cost or fair value 921 25,128 (96 )% 33,689 (97 )%
Loans receivable 12,054,004 12,098,115 % 11,292,483 7 %
Allowance for loan losses (94,217 ) (92,557 ) (2 )% (86,461 ) (9 )%
Net loans receivable 11,959,787   12,005,558   % 11,206,022   7 %
Accrued interest receivable 34,831 32,225 8 % 29,154 19 %
Premises and equipment, net 53,218 53,794 (1 )% 56,564 (6 )%
Bank owned life insurance 75,586 75,219 % 75,302 %
Goodwill 464,450 464,450 % 464,450 %
Servicing assets 21,407 23,132 (7 )% 24,866 (14 )%
Other intangible assets, net 13,504 14,061 (4 )% 15,907 (15 )%
Other assets 241,144   201,809   19 % 181,598   33 %
Total assets $ 15,398,669   $ 15,305,952   1 % $ 14,507,126   6 %
 
Liabilities:
Deposits $ 12,249,196 $ 12,155,656 1 % $ 11,510,569 6 %
FHLB advances 720,000 821,280 (12 )% 862,346 (17 )%
Convertible notes, net 195,754 194,543 1 % 100 %
Subordinated debentures 102,201 101,929 % 101,117 1 %
Accrued interest payable 37,511 31,374 20 % 19,614 91 %
Other liabilities 147,796   97,959   51 % 68,147   117 %
Total liabilities $ 13,452,458   $ 13,402,741   % $ 12,561,793   7 %
 
Stockholders' Equity:
Common stock, $0.001 par value $ 136 $ 136 % $ 136 %
Capital surplus 1,424,029 1,423,405 % 1,405,806 1 %
Retained earnings 687,404 662,375 4 % 578,031 19 %
Treasury stock, at cost (150,000 ) (150,000 ) % 100 %
Accumulated other comprehensive loss, net (15,358 ) (32,705 ) 53 % (38,640 ) 60 %
Total stockholders' equity 1,946,211   1,903,211   2 % 1,945,333   %
Total liabilities and stockholders' equity $ 15,398,669   $ 15,305,952   1 % $ 14,507,126   6 %
 
Common stock shares - authorized 150,000,000 150,000,000 150,000,000
Common stock shares - outstanding 126,635,584 126,639,912 135,516,119
Treasury stock shares 9,002,453 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
3/31/2019   12/31/2018   % change   3/31/2018   % change
Interest income:
Interest and fees on loans $ 158,136 $ 156,606 1 % $ 137,943 15 %
Interest on securities 12,319 12,385 (1 )% 10,101 22 %
Interest on federal funds sold and other investments 2,675   3,035   (12 )% 2,366   13 %
Total interest income 173,130   172,026   1 % 150,410   15 %
 
Interest expense:
Interest on deposits 46,847 42,477 10 % 24,849 89 %
Interest on other borrowings and convertible notes 6,675   7,656   (13 )% 5,493   22 %
Total interest expense 53,522   50,133   7 % 30,342   76 %
 
Net interest income before provision for loan losses 119,608 121,893 (2 )% 120,068 %
Provision for loan losses 3,000   2,800   7 % 2,500   20 %
Net interest income after provision for loan losses 116,608   119,093   (2 )% 117,568   (1 )%
 
Noninterest income:
Service fees on deposit accounts 4,317 4,568 (5 )% 4,801 (10 )%
Net gains on sales of SBA loans 447 (100 )% 3,450 (100 )%
Net gains on sales of other loans 741 381 94 % 1,196 (38 )%
Other income and fees 6,364   6,218   2 % 10,403   (39 )%
Total noninterest income 11,422   11,614   (2 )% 19,850   (42 )%
 
Noninterest expense:
Salaries and employee benefits 40,429 36,594 10 % 39,385 3 %
Occupancy 7,677 7,877 (3 )% 7,239 6 %
Furniture and equipment 3,446 3,448 % 3,721 (7 )%
Advertising and marketing 2,062 2,392 (14 )% 2,299 (10 )%
Data processing and communications 2,956 3,650 (19 )% 3,495 (15 )%
Professional fees 5,380 4,756 13 % 3,106 73 %
FDIC assessment 1,551 1,406 10 % 1,767 (12 )%
Credit related expenses 678 507 34 % 772 (12 )%
Other real estate owned ("OREO") expense, net (152 ) 302 N/A (104 ) 46 %
Branch restructuring costs 1,674 (100 )% %
Other 6,806   7,583   (10 )% 6,773   %
Total noninterest expense 70,833   70,189   1 % 68,453   3 %
Income before income taxes 57,197 60,518 (5 )% 68,965 (17 )%
Income tax provision 14,439   16,069   (10 )% 17,733   (19 )%
Net income $ 42,758   $ 44,449   (4 )% $ 51,232   (17 )%
 
Earnings Per Common Share:
Basic $ 0.34 $ 0.35 $ 0.38
Diluted $ 0.34 $ 0.35 $ 0.38
 
Average Shares Outstanding:
Basic 126,640,464 128,115,170 135,518,705
Diluted 126,819,672 128,261,998 135,815,262
 

Table Page 2

 
 
Hope Bancorp, Inc.
Selected Financial Data

Unaudited (dollars in thousands)

 
For the Three Months Ended

(Annualized)

Profitability measures: 3/31/2019   12/31/2018   3/31/2018
ROA 1.12 % 1.17 % 1.44 %
ROE 8.91 % 9.42 % 10.61 %
Return on average tangible equity 1 11.86 % 12.62 % 14.13 %
Net interest margin 3.39 % 3.41 % 3.66 %
Efficiency ratio 54.06 % 52.57 % 48.92 %
Noninterest expense / average assets 1.85 % 1.85 % 1.93 %
 

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
believe provides investors with information that is useful in
understanding our financial performance and position.

 
 
Three Months Ended
Pre-tax acquisition accounting adjustments and merger-related
expenses:
3/31/2019 12/31/2018 3/31/2018
Accretion on purchased non-impaired loans $ 2,166 $ 2,360 $ 3,197
Accretion on purchased credit-impaired loans 5,833 4,867 5,772
Amortization of premium on low income housing tax credits (76 ) (84 ) (84 )
Amortization of premium on acquired FHLB borrowings 1,280 357 347
Accretion of discount on acquired subordinated debt (273 ) (272 ) (264 )
Amortization of premium on acquired time deposits and savings 1
Amortization of core deposit intangibles (557 ) (615 ) (615 )
Total acquisition accounting adjustments 8,373   6,613   8,354  
Merger-related expenses     7  
Total $ 8,373   $ 6,613   $ 8,361  
 

Table Page 3

 
 
Hope Bancorp, Inc.
Selected Financial Data

Unaudited (dollars in thousands)

 
Three Months Ended
3/31/2019   12/31/2018   3/31/2018
  Interest   Annualized   Interest   Annualized   Interest   Annualized
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Yield/Cost Balance Expense Yield/Cost Balance Expense Yield/Cost
INTEREST EARNING ASSETS:
Loans, including loans held for sale $ 12,088,169 $ 158,136 5.31 % $ 11,935,109 $ 156,606 5.21 % $ 11,095,864 $ 137,943 5.04 %
Securities available for sale 1,827,612 12,319 2.73 % 1,835,218 12,385 2.68 % 1,673,122 10,101 2.45 %
FHLB stock and other investments 405,660   2,675   2.68 % 431,901   3,035   2.79 % 517,572   2,366   1.85 %
Total interest earning assets $ 14,321,441   $ 173,130   4.90 % $ 14,202,228   $ 172,026   4.81 % $ 13,286,558   $ 150,410   4.59 %
 
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing $ 3,042,524 $ 12,987 1.73 % $ 3,127,598 $ 12,425 1.58 % $ 3,402,760 $ 8,864 1.06 %
Savings 223,531 565 1.03 % 225,746 537 0.94 % 236,216 424 0.73 %
Time deposits 5,936,842   33,295   2.27 % 5,626,355   29,515   2.08 % 4,525,813   15,561   1.39 %
Total interest bearing deposits 9,202,897   46,847   2.06 % 8,979,699   42,477   1.88 % 8,164,789   24,849   1.23 %
FHLB advances 810,857 2,614 1.31 % 824,995 3,674 1.77 % 974,071 4,069 1.69 %
Convertible debt 194,969 2,298 4.71 % 193,749 2,299 4.64 % %
Subordinated debentures 98,126   1,763   7.19 % 97,856   1,683   6.73 % 97,049   1,424   5.87 %
Total interest bearing liabilities 10,306,849   $ 53,522   2.11 % 10,096,299   $ 50,133   1.97 % 9,235,909   $ 30,342   1.33 %
Noninterest bearing demand deposits 2,886,746   3,018,672   2,941,577  
Total funding liabilities/cost of funds $ 13,193,595   1.65 % $ 13,114,971   1.52 % $ 12,177,486   1.01 %
Net interest income/net interest spread $ 119,608   2.79 % $ 121,893   2.84 % $ 120,068   3.26 %
Net interest margin 3.39 % 3.41 % 3.66 %
 
Cost of deposits:
Noninterest bearing demand deposits $ 2,886,746 $ % $ 3,018,672 $ % $ 2,941,577 $ %
Interest bearing deposits 9,202,897   46,847   2.06 % 8,979,699   42,477   1.88 % 8,164,789   24,849   1.23 %
Total deposits $ 12,089,643   $ 46,847   1.57 % $ 11,998,371   $ 42,477   1.40 % $ 11,106,366   $ 24,849   0.91 %
 

Table Page 4

 
 
Hope Bancorp, Inc.
Selected Financial Data

Unaudited (dollars in thousands)

 
Three Months Ended
AVERAGE BALANCES: 3/31/2019   12/31/2018   % change   3/31/2018   % change
Loans receivable, including loans held for sale $ 12,088,169 $ 11,935,109 1 % $ 11,095,864 9 %
Investments 2,233,272 2,267,119 (1 )% 2,190,694 2 %
Interest earning assets 14,321,441 14,202,228 1 % 13,286,558 8 %
Total assets 15,290,338 15,152,946 1 % 14,214,250 8 %
 
Interest bearing deposits 9,202,897 8,979,699 2 % 8,164,789 13 %
Interest bearing liabilities 10,306,849 10,096,299 2 % 9,235,909 12 %
Noninterest bearing demand deposits 2,886,746 3,018,672 (4 )% 2,941,577 (2 )%
Stockholders' equity 1,920,492 1,888,053 2 % 1,931,290 (1 )%
Net interest earning assets 4,014,592 4,105,929 (2 )% 4,050,649 (1 )%
 
LOAN PORTFOLIO COMPOSITION: 3/31/2019 12/31/2018 % change 3/31/2018 % change
Commercial loans $ 2,330,697 $ 2,324,820 % $ 2,007,686 16 %
Real estate loans 8,715,834 8,721,600 % 8,529,153 2 %
Consumer and other loans 1,007,067   1,051,486   (4 )% 755,621   33 %
Loans outstanding 12,053,598 12,097,906 % 11,292,460 7 %
Unamortized deferred loan fees - net of costs 406   209   94 % 23   1,665 %
Loans, net of deferred loan fees and costs 12,054,004 12,098,115 % 11,292,483 7 %
Allowance for loan losses (94,217 ) (92,557 ) 2 % (86,461 ) 9 %
Loan receivable, net $ 11,959,787   $ 12,005,558   % $ 11,206,022   7 %
 
REAL ESTATE LOANS BY PROPERTY TYPE: 3/31/2019 12/31/2018 % change 3/31/2018 % change
Retail buildings $ 2,345,411 $ 2,379,589 (1 )% $ 2,342,086 %
Hotels/motels 1,692,193 1,694,696 % 1,637,416 3 %
Gas stations/car washes 964,706 980,619 (2 )% 978,454 (1 )%
Mixed-use facilities 746,288 698,779 7 % 651,473 15 %
Warehouses 951,141 966,413 (2 )% 934,389 2 %
Multifamily 460,514 453,555 2 % 445,930 3 %
Other 1,555,581   1,547,949   % 1,539,405   1 %
Total $ 8,715,834   $ 8,721,600   % $ 8,529,153   2 %
 
DEPOSIT COMPOSITION 3/31/2019 12/31/2018 % change 3/31/2018 % change
Noninterest bearing demand deposits $ 2,948,751 $ 3,022,633 (2 )% $ 3,048,181 (3 )%
Money market and other 3,086,920 3,036,653 2 % 3,454,660 (11 )%
Saving deposits 223,562 225,746 (1 )% 233,014 (4 )%
Time deposits 5,989,963   5,870,624   2 % 4,774,714   25 %
Total deposit balances $ 12,249,196   $ 12,155,656   1 % $ 11,510,569   6 %
 
DEPOSIT COMPOSITION (%) 3/31/2019 12/31/2018 3/31/2018
Noninterest bearing demand deposits 24.1 % 24.9 % 26.5 %
Money market and other 25.2 % 25.0 % 30.0 %
Saving deposits 1.8 % 1.8 % 2.0 %
Time deposits 48.9 % 48.3 % 41.5 %
Total deposit balances 100.0 % 100.0 % 100.0 %
 

Table Page 5

 
 
Hope Bancorp, Inc.
Selected Financial Data

Unaudited (dollars in thousands, except share and per share
data)

     
 
CAPITAL RATIOS: 3/31/2019 12/31/2018 3/31/2018
Total stockholders' equity $ 1,946,211 $ 1,903,211 $ 1,945,333
Common Equity Tier 1 ratio 11.60 % 11.44 % 12.35 %
Tier 1 risk-based capital ratio 12.36 % 12.21 % 13.15 %
Total risk-based capital ratio 13.10 % 12.94 % 13.86 %
Tier 1 leverage ratio 10.66 % 10.55 % 11.61 %
Total risk weighted assets $ 12,813,576 $ 12,748,658 $ 12,172,708
Book value per common share $ 15.37 $ 15.03 $ 14.35
Tangible common equity to tangible assets 1 9.84 % 9.61 % 10.44 %
Tangible common equity per share 1 $ 11.59 $ 11.25 $ 10.81
 

1 Tangible common equity to tangible assets is a
non-GAAP financial measure that represents common equity less
goodwill and core deposit intangible assets, net divided by total
assets less goodwill and core deposit intangible assets, net.
Management reviews tangible common equity to tangible assets in
evaluating the Company's capital levels and has included this
ratio in response to market participant interest in tangible
common equity as a measure of capital.

 
 
 
Reconciliation of GAAP financial measures to non-GAAP financial
measures:
 
Three Months Ended
3/31/2019 12/31/2018 3/31/2018
TANGIBLE COMMON EQUITY
Total stockholders' equity $ 1,946,211 $ 1,903,211 $ 1,945,333
Less: Goodwill and core deposit intangible assets, net (477,954 ) (478,511 ) (480,357 )
Tangible common equity $ 1,468,257   $ 1,424,700   $ 1,464,976  
 
Total assets $ 15,398,669 $ 15,305,952 $ 14,507,126
Less: Goodwill and core deposit intangible assets, net (477,954 ) (478,511 ) (480,357 )
Tangible assets $ 14,920,715   $ 14,827,441   $ 14,026,769  
 
Common shares outstanding 126,635,584 126,639,912 135,516,119
 
Tangible common equity to tangible assets 9.84 % 9.61 % 10.44 %
Tangible common equity per share $ 11.59 $ 11.25 $ 10.81
 

Table Page 6

 
 
Hope Bancorp, Inc.
Selected Financial Data

Unaudited (dollars in thousands, except share and per share
data)

         
Three Months Ended
ALLOWANCE FOR LOAN LOSSES CHANGES: 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Balance at beginning of period $ 92,557 $ 90,629 $ 89,881 $ 86,461 $ 84,541
Provision for loan losses 2,122 2,800 7,300 2,300 2,500
Recoveries 1,292 805 315 2,383 488
Charge offs (1,754 ) (1,677 ) (6,867 ) (1,263 ) (1,068 )
Balance at end of period $ 94,217   $ 92,557   $ 90,629   $ 89,881   $ 86,461  
Net charge offs (recoveries)/average loans receivable (annualized) 0.02 % 0.03 % 0.22 % (0.04 )% 0.02 %
 
                 
Three Months Ended
ALLOWANCE FOR LOAN LOSSES COMPOSITION: 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Legacy loans 1 $ 80,953 $ 78,259 $ 75,364 $ 76,048 $ 72,065
Purchased non-impaired loans 2 2,948 2,135 2,411 2,467 2,581
Purchased credit-impaired loans 2 10,316   12,163   12,854   11,366   11,815  
Total allowance for loan losses $ 94,217   $ 92,557   $ 90,629   $ 89,881   $ 86,461  
 

1 Legacy loans include loans originated by the Bank's
predecessor banks, loans originated by Bank of Hope and loans that
were acquired that have been refinanced as new loans.

2 Purchased loans were marked to fair value at
acquisition date, and the allowance for loan losses reflects
provisions for credit deterioration since the acquisition date.

 
                 
Three Months Ended
NET CHARGED OFF (RECOVERED) LOANS BY TYPE: 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Real estate loans $ (1,067 ) $ 123 $ 6,004 $ (390 ) $ (37 )
Commercial loans 1,250 436 230 (949 ) 291
Consumer loans 279   313   318   219   326  
Total net charge offs (recoveries) $ 462   $ 872   $ 6,552   $ (1,120 ) $ 580  
 

Table Page 7

 
 
Hope Bancorp, Inc.
Selected Financial Data

Unaudited (dollars in thousands)

         
NONPERFORMING ASSETS 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Loans on nonaccrual status 3 $ 86,637 $ 53,286 $ 56,299 $ 68,226 $ 68,152
Delinquent loans 90 days or more on accrual status 4 387 1,529 401 3,030 1,894
Accruing troubled debt restructured loans 45,204   50,410   52,521   49,219   59,596  
Total nonperforming loans 132,228 105,225 109,221 120,475 129,642
Other real estate owned 6,258   7,754   8,981   8,656   8,261  
Total nonperforming assets $ 138,486   $ 112,979   $ 118,202   $ 129,131   $ 137,903  
Nonperforming assets/total assets 0.90 % 0.74 % 0.78 % 0.87 % 0.95 %
Nonperforming assets/loans receivable & OREO 1.15 % 0.93 % 0.99 % 1.11 % 1.22 %
Nonperforming assets/total capital 7.12 % 5.94 % 6.21 % 6.78 % 7.09 %
Nonperforming loans/loans receivable 1.10 % 0.87 % 0.92 % 1.03 % 1.15 %
Nonaccrual loans/loans receivable 0.72 % 0.44 % 0.47 % 0.58 % 0.60 %
Allowance for loan losses/loans receivable 0.78 % 0.77 % 0.76 % 0.77 % 0.77 %
Allowance for loan losses/nonaccrual loans 108.75 % 173.70 % 160.98 % 131.74 % 126.86 %
Allowance for loan losses/nonperforming loans 71.25 % 87.96 % 82.98 % 74.61 % 66.69 %
Allowance for loan losses/nonperforming assets 68.03 % 81.92 % 76.67 % 69.60 % 62.70 %
 

3 Excludes delinquent SBA loans that are guaranteed and
currently in liquidation totaling $30.5 million, $29.2 million,
$23.1 million, $26.0 million, and $21.9 million at March 31, 2019,
December 31, 2018, September 30, 2018, June 30, 2018, and March
31, 2018, respectively.

4 Excludes purchased credit impaired loans that are
delinquent 90 or more days totaling $18.4 million, $14.1 million,
$16.6 million, $17.8 million, and $17.0 million at March 31, 2019.
December 31, 2018, September 30, 2018, June 30, 2018, and March
31, 2018, respectively.

 
BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS: 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Retail buildings $ 2,965 $ 3,085 $ 3,112 $ 3,138 $ 8,034
Hotels/motels 1,265
Gas stations/car washes 255 267
Mixed-use facilities 3,254 5,956 5,994 6,026 2,852
Warehouses 11,315 7,188 7,219 7,462 7,615
Other 5 27,415   33,914   36,196   32,593   39,830  
Total $ 45,204   $ 50,410   $ 52,521   $ 49,219   $ 59,596  
 
5 Includes commercial business and other loans
 
 
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Legacy
30 - 59 days $ 30,971 $ 23,846 $ 26,872 $ 11,872 $ 22,126
60 - 89 days 1,227   218   2,773   8,542   2,102  
Total $ 32,198   $ 24,064   $ 29,645   $ 20,414   $ 24,228  
 
Acquired
30 - 59 days $ 2,717 $ 1,094 $ 5,240 $ 5,911 $ 9,158
60 - 89 days   406   18   124   1,011  
Total $ 2,717   $ 1,500   $ 5,258   $ 6,035   $ 10,169  
 
Total accruing delinquent loans 30-89 days past due $ 34,915   $ 25,564   $ 34,903   $ 26,449   $ 34,397  
 

Table Page 8

 
 
Hope Bancorp, Inc.
Selected Financial Data

Unaudited (dollars in thousands)

         
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Legacy
Real estate loans $ 12,324 $ 2,352 $ 13,275 $ 10,153 $ 12,272
Commercial loans 2,711 5,159 986 7,380 1,994
Consumer loans 17,163   16,553   15,384   2,881   9,962
Total $ 32,198   $ 24,064   $ 29,645   $ 20,414   $ 24,228
 
Acquired
Real estate loans $ 1,371 $ 905 $ 4,703 $ 4,849 $ 7,537
Commercial loans 374 595 555 338 2,280
Consumer loans 972       848   352
Total $ 2,717   $ 1,500   $ 5,258   $ 6,035   $ 10,169
 
Total accruing delinquent loans 30-89 days past due $ 34,915   $ 25,564   $ 34,903   $ 26,449   $ 34,397
 
 
NONACCRUAL LOANS BY TYPE 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Real estate loans $ 58,030 $ 33,719 $ 35,614 $ 34,537 $ 37,093
Commercial loans 27,042 18,128 19,119 31,250 29,446
Consumer loans 1,565   1,439   1,566   2,439   1,613
Total nonaccrual loans $ 86,637   $ 53,286   $ 56,299   $ 68,226   $ 68,152
 
CRITICIZED LOANS 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Legacy
Special mention $ 154,671 $ 121,622 $ 177,563 $ 101,435 $ 140,588
Substandard 223,511 193,494 171,767 191,787 180,631
Doubtful 429 5,852 108
Loss 351     1    
Total criticized loans - legacy $ 378,533   $ 315,116   $ 351,920   $ 299,074   $ 321,327
 

Acquired

Special mention $ 50,702 $ 41,467 $ 38,023 $ 38,059 $ 55,494
Substandard 129,122 124,421 130,078 159,613 163,429
Doubtful 218 377 444 419 477
Loss   35       3
Total criticized loans - acquired $ 180,042   $ 166,300   $ 168,545   $ 198,091   $ 219,403
 
Total criticized loans $ 558,575   $ 481,416   $ 520,465   $ 497,165   $ 540,730
 

Table Page 9

View Comments and Join the Discussion!
 
Lightning Fast
Market News Service
$199 Free 14 Day Trial