×

Hope Bancorp Reports 2016 Third Quarter Financial Results

-- Third Quarter Results Reflect One Month of Stand-Alone BBCN and Two Months of Combined Operations --

Q3 2016 Summary:

  • Completes merger of equals creating the only super regional Korean-American bank in the United States
  • Loans receivable increase 60% quarter-over-quarter to $10.56 billion
  • Total deposits increase 61% quarter-over-quarter to $10.70 billion
  • Total assets increase 62% quarter-over-quarter to $13.51 billion
  • Net income totals $26.1 million, or $0.22 per diluted common share, including merger-related expenses of $11.2 million
  • New loan originations amount to $559 million

LOS ANGELES, Oct. 18, 2016 (GLOBE NEWSWIRE) -- Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported financial results for its three and nine-month periods ended September 30, 2016.

The mergers of Wilshire Bancorp, Inc. (“Wilshire”) with and into BBCN Bancorp, Inc. (“BBCN”) and Wilshire Bank with and into BBCN Bank were completed on July 29, 2016, and the combined company began operations under the new banners of Hope Bancorp, Inc. and Bank of Hope effective July 30, 2016. The 2016 third quarter financial results reflect approximately one month of stand-alone operations of the former BBCN and two months of combined operations following the completion of the merger. As a result, the Company’s 2016 third quarter financial results may not be comparable to financial results in prior periods.

For the three months ended September 30, 2016, net income totaled $26.1 million, or $0.22 per diluted common share based on 116,653,168 weighted average diluted shares outstanding, and included merger-related expenses of $11.2 million before tax. This compares with net income of $23.4 million, or $0.29 per diluted common share based on 79,634,762 weighted average diluted shares outstanding, for the three months ended June 30, 2016 and $25.1 million, or $0.32 per diluted common share based on 79,584,536 weight average diluted shares outstanding, for the three months ended September 30, 2015. Merger-related expenses for the 2016 second quarter and 2015 third quarter amounted to $1.5 million and $24,000, respectively.

“It has certainly been an exciting and busy quarter for our new company as we merged the former BBCN and Wilshire to form the only Korean-American super regional bank in the United States,” said Kevin S. Kim, President and Chief Executive Officer of Hope Bancorp, Inc. “We are very pleased with the progress made to date, and believe our past experience with mergers and acquisitions has been invaluable in helping us anticipate potential issues and effectively plan and execute the integration. I believe we are off to a very good start in leveraging the strengths of our organization, and clearly anticipate our financial performance will improve as merger-related costs dissipate and we begin to realize the cost savings and other synergies that we expect from the merger. Despite the significant time and resources dedicated to completing the merger and integrating the two banks, new loan volumes were solid. We are particularly pleased with the improved mix of loan originations with commercial and industrial loans accounting for 31% of total loan originations for the quarter and commercial real estate 52%.

“With the strong momentum we have built from the merger, we are very optimistic about the future of our organization and the value proposition that we provide to our customers, employees and shareholders. Given the significantly enhanced scale, convenience and brand recognition that we have as the definitive leader in our community, we believe we are well positioned to capture additional market share in both well established and newly developing markets. We look forward to keeping everyone apprised of our ongoing achievements,” said Kim.

Financial Highlights

(dollars in thousands, except per share data)At or for the Three Months Ended
9/30/2016 6/30/2016 9/30/2015
Net income$26,105 $23,390 $25,092
Diluted earnings per share$0.22 $0.29 $0.32
Net interest income before provision for loan losses$103,474 $71,064 $68,761
Net interest margin 3.77% 3.67% 3.87%
Noninterest income$14,146 $10,707 $11,183
Noninterest expense$67,846 $40,348 $36,755
Net loans receivable$10,481,221 $6,507,812 $6,171,933
Deposits$10,702,505 $6,637,522 $6,340,976
Nonaccrual loans (1)$40,602 $42,398 $32,446
ALLL to loans receivable 0.76% 1.16% 1.19%
ALLL to nonaccrual loans (1) 196.98% 180.26% 219.16%
ALLL to nonperforming assets (1) (2) 68.38% 69.62% 65.80%
Provision for loan losses$6,500 $1,200 $600
Net charge offs (recoveries)$2,574 $1,631 $(392)
ROA 0.89% 1.15% 1.35%
ROE 6.60% 9.67% 10.96%
Efficiency ratio 57.68% 49.34% 45.98%

(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $14.1 million, $15.5 million and $19.9 million at September 30, 2016, June 30, 2016, and September 30, 2015, respectively.
(2) Nonperforming assets exclude purchased credit-impaired loans totaling $16.4 million, $13.8 million and $18.5 million at September 30, 2016, June 30, 2016, and September 30, 2015, respectively.

Operating Results for the 2016 Third Quarter

The comparability of Hope Bancorp’s operating results with past performance is impacted by acquisition accounting adjustments and merger-related expenses associated with past and current acquisitions. The Company provides the following supplemental information to facilitate a better understanding of financial performance. Net interest income and operating income for the three months ended September 30, 2016, June 30, 2016, and September 30, 2015 include the following pre-tax acquisition accounting adjustments and merger-related expenses associated with past and current acquisitions:

(dollars in thousands)Three Months Ended
9/30/2016 6/30/2016 9/30/2015
Accretion on purchased non-impaired loans$3,111 $898 $2,496
Accretion on purchased credit-impaired loans 1,673 1,436 1,723
Amortization of premium on low income housing tax credits (54)
Amortization of premium on acquired FHLB borrowings 330 97 97
Accretion of discount on acquired subordinated debt (190) (44) (43)
Amortization of premium on acquired time deposits and savings 2,336 19 24
Total acquisition accounting adjustments$7,206 $2,406 $4,008
Merger-related expenses (11,222) (1,533) (24)
Total$(4,016) $873 $3,984

Net Interest Income and Net Interest Margin. Net interest income before provision for loan losses for the 2016 third quarter totaled $103.5 million, an increase of 46% over $71.1 million in the preceding 2016 second quarter and an increase of 50% over $68.8 million in the prior-year third quarter. The increase in net interest income is primarily attributable to the significantly higher level of interest earning assets following the merger.

The net interest margin (net interest income divided by average interest earning assets) and the impact of acquisition accounting adjustments are summarized in the following table:

Three Months Ended
9/30/2016 6/30/2016 change 9/30/2015 change
Net interest margin, excluding the effect of acquisition accounting adjustments3.48% 3.53% (0.05) 3.60% (0.12)
Acquisition accounting adjustments0.29% 0.14% 0.15 0.27% 0.02
Net interest margin3.77% 3.67% 0.10 3.87% (0.10)

The net interest margin for the 2016 third quarter was 3.77%, up 10 basis points from the preceding second quarter, but down 10 basis points when compared with the year-ago third quarter. On a core basis, excluding the effect of acquisition accounting adjustments, the net interest margin for the 2016 third quarter declined by 5 basis points from the preceding second quarter and 12 basis points from the third quarter a year ago.

The weighted average yield on loans and the impact of acquisition accounting adjustments are summarized in the following table:

Three Months Ended
9/30/2016 6/30/2016 change 9/30/2015 change
Weighted average yield on loans, excluding the effect of acquisition accounting adjustments4.55% 4.63% (0.08) 4.62% (0.07)
Acquisition accounting adjustments0.25% 0.17% 0.08 0.32% (0.07)
Weighted average yield on loans4.80% 4.80% 4.94% (0.14)

The weighted average yield on loans for the 2016 third quarter was steady when compared with the preceding 2016 second quarter, but declined 14 basis points from the year-ago third quarter. On a core basis, excluding the effect of acquisition accounting adjustments, the weighted average yield on loans declined by 8 basis points from the preceding second quarter and 7 basis points from the 2015 third quarter.

The weighted average yield on new loans originated during the 2016 third quarter was 4.03%, compared with 4.28% in the preceding 2016 second quarter and 4.23% in the year-ago third quarter.

The weighted average cost of deposits and the impact of acquisition accounting adjustments are summarized in the following table:

Three Months Ended
9/30/2016 6/30/2016 change 9/30/2015 change
Weighted average cost of deposits, excluding the effect of acquisition accounting adjustments0.64% 0.64% 0.57% 0.07
Acquisition accounting adjustments(0.08)% % (0.08) % (0.08)
Weighted average cost of deposits0.56% 0.64% (0.08) 0.57% (0.01)

The weighted average cost of deposits for the 2016 third quarter decreased 8 basis points from the preceding second quarter and 1 basis point from the year-ago third quarter. On a core basis, excluding the effect of premium amortization on time deposits assumed in acquisitions, the weighted average cost of deposits was stable compared with the preceding second quarter and increased 7 basis points when compared with the 2015 third quarter.

Noninterest Income. Noninterest income for the 2016 third quarter totaled $14.1 million, compared with $10.7 million in the preceding 2016 second quarter and $11.2 million in the year-ago third quarter. The Company noted that the increase is largely attributed to the completion of the merger during the quarter, which positively impacted service fees on deposit accounts and other income and fees. In addition, the Company posted a $948,000 net gain on the sale of securities available-for-sale after restructuring its investment portfolio post-merger, and recorded a $1.5 million gain on sale of other loans from its combined mortgage operations. Offsetting these increases was a gain on sales of Small Business Administration (“SBA”) loans of just $230,000 in the 2016 third quarter.

In comparison, gains on sales of SBA loans amounted to $3.0 million in the 2016 second quarter and $3.4 million in the 2015 third quarter. The Company did not recognize any gain on sales of securities available-for-sale in the 2016 second quarter and 2015 third quarter, but recorded $43,000 and $26,000 in gains on sales of other loans in the comparable quarters, respectively.

Noninterest Expense. Total noninterest expense for the 2016 third quarter, 2016 second quarter and 2015 third quarter amounted to $67.8 million, $40.3 million and $36.8 million, respectively. The Company noted that the increase in the current quarter is largely attributed to the combination of the two predecessor companies during the quarter and merger-related expenses. Excluding merger-related expenses of $11.2 million, $1.5 million and $24,000 for the 2016 third quarter, 2016 second quarter and 2015 third quarter, respectively, total noninterest expense would have been $56.6 million, $38.8 million and $36.7 million. Noninterest expense excluding merger-related expenses is a non-GAAP financial measure. Management believes total noninterest expense excluding merger-related expenses more accurately reflects the Company’s results of operations in the overall evaluation of its performance. A reconciliation of the noninterest expense excluding merger-related expenses is included in the accompanying financial tables.

Salaries and employee benefits expense totaled $30.5 million for the 2016 third quarter, $21.8 million for the 2016 second quarter and $21.5 million for the year-ago third quarter. The total number of FTEs for the combined company as of September 30, 2016 was 1,400. At June 30, 2016, the total number of FTEs was 918 for former BBCN and 549 for former Wilshire, aggregating to 1,467. The total number of FTEs a year earlier at September 30, 2015 was 941 for former BBCN.

As previously reported, the Company announced its branch optimization plan that includes a first phase of branch consolidations to be completed by year-end 2016. These branch consolidations are expected to result in costs savings of approximately $11 million pre-tax on an annual basis beginning in 2017. During the 2016 third quarter, the Company recorded $1.9 million in one-time charges pre-tax related to the branch consolidations.

Income Tax Provision. The effective tax rate for the 2016 third quarter was 39.7%, compared with 41.8% for the preceding 2016 second quarter and 41.1% for the 2015 third quarter.

Balance Sheet Summary

Loans receivable totaled $10.56 billion at September 30, 2016, reflecting a 60% increase over $6.58 billion at June 30, 2016, and a 77% increase over $5.97 billion at September 30, 2015.

Total new loan originations during the 2016 third quarter amounted to $559.5 million, including warehouse lines of credit of $99.9 million and SBA loan originations of $80.7 million. On a pro forma basis including the former Wilshire’s loan production of $57.9 million during July 2016 that is not included in the combined company’s originations, aggregate new loan originations would have amounted to $617.4 million, including SBA loan originations of $89.9 million.

Sales of SBA loans to the secondary market and gains derived from those sales are based substantially on the production of SBA 7(a) loans. Production of SBA 7(a) loans totaled $50.2 million for the third quarter of 2016, compared with $56.7 million for the preceding 2016 second quarter and $46.1 million for the 2015 third quarter. During the 2016 third quarter, the Company sold just $2.4 million of its SBA loans held for sale, compared with $39.6 million in the preceding second quarter and $42.4 million in the year-ago third quarter. The decision to retain or sell SBA loans is made on a quarter-to-quarter basis, depending on prevailing pricing in the secondary market and the Company’s liquidity needs.

Aggregate pay offs and pay downs for the combined company in the 2016 third quarter amounted to $357.0 million, compared with $235.6 million for the preceding 2016 second quarter and $267.1 million for the year-ago third quarter.

Total deposits increased to $10.7 billion at September 30, 2016, up 61% over $6.64 billion at June 30, 2016 and up 78% over $6.03 billion at September 30, 2015.

Credit Quality

The provision for loan losses for the 2016 third quarter was $6.5 million, compared with $1.2 million for the preceding 2016 second quarter and $600,000 for the prior-year third quarter.

For a more detailed understanding of the changes in the Allowance for Loan and Lease Losses (“ALLL”), the composition of the ALLL has been segmented for disclosure purposes between loans accounted for under the amortized cost method (referred to as “legacy loans”) and loans acquired through the Wilshire Bancorp, Center Financial, Pacific International and Foster Bankshares transactions (referred to as “purchased loans”). The purchased loans are further segregated between non-impaired and credit-impaired loans.

The composition of the ALLL as of September 30, 2016, June 30, 2016 and September 30, 2015 is as follows:

(dollars in thousands)9/30/2016 6/30/2016 9/30/2015
Legacy loans (1)$66,986 $63,616 $57,200
Purchased non-impaired loans (2) 938 860 1,418
Purchased credit-impaired loans (2) 12,052 11,949 12,492
Total ALLL$79,976 $76,425 $71,110
Loans receivable$10,561,197 $6,584,237 $5,972,724
ALLL coverage ratio 0.76% 1.16% 1.19%

(1) Legacy loans include loans originated by the Bank’s predecessor bank, loans originated by Bank of Hope and loans that were acquired and that have been refinanced as new loans.
(2) Purchased loans were marked to fair value at acquisition date, and the allowance for loan losses reflect provisions for credit deterioration since the acquisition date.

Following are the components of criticized loan balances as of September 30, 2016, June 30, 2016 and September 30, 2015:

(dollars in thousands)9/30/2016 6/30/2016 9/30/2015
Special Mention (1)$308,893 $100,370 $141,655
Classified (1) 259,268 198,857 178,720
Criticized$568,161 $299,227 $320,375

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

The Company defines nonperforming loans to include delinquent loans past due 90 days or more 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 at September 30, 2016 totaled $40.6 million, or 0.38% of loans receivable. This compares with nonaccrual loans of $42.4 million, or 0.64% of loans receivable, at June 30, 2016 and $32.4 million, or 0.54% of loans receivable, at September 30, 2015. Accruing restructured loans declined to $48.7 million at September 30, 2016, from $50.8 million at June 30, 2016 and $54.3 million at September 30, 2015. Total nonperforming loans at September 30, 2016 amounted to $89.5 million, or 0.85% of loans receivable. This compares with total nonperforming loans of $93.4 million, or 1.42% of loans receivable, at June 30, 2016 and $86.7 million, or 1.45% of loans receivable, at September 30, 2015.

Nonperforming assets, including nonperforming loans and other real estate owned, increased to $117.0 million at September 30, 2016 from $109.8 million at June 30, 2016 and $108.1 million at September 30, 2015. As a percentage of total assets, nonperforming assets declined to 0.87% at September 30, 2016 from 1.32% at June 30, 2016 and 1.43% at September 30, 2015, reflecting the merger completion.

For the 2016 third quarter, the Company recorded net charge offs of $2.9 million, or 0.13% of average loans receivable on an annualized basis. This compares with net charge offs of $1.6 million, or 0.10% of average loans receivable on an annualized basis for the 2016 second quarter and net recoveries of $392,000, or 0.03% of average loans receivable on an annualized basis, for the 2015 third quarter.

The allowance for loan losses at September 30, 2016 was $80.0 million, or 0.76% of loans receivable (excluding loans held for sale), compared with $76.4 million, or 1.16%, at June 30, 2016 and $71.1 million, or 1.19%, at September 30, 2015. The coverage ratio of the allowance for loan losses to nonperforming loans (excluding purchased credit-impaired loans) was 89.36% at September 30, 2016, versus 81.84% at June 30, 2016 and 82.00% at September 30, 2015.

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 $128.1 million at September 30, 2016, compared with $136.6 million at June 30, 2016 and $119.5 million at September 30, 2015.

Capital

At September 30, 2016, the Company continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” institution, as summarized in the following table:

9/30/2016 6/30/2016 9/30/2015 Minimum Guideline
for “Well-Capitalized”
Institution
Common Equity Tier 1 Capital 11.92% 11.66% 12.34% 6.50%
Leverage Ratio 12.97% 11.14% 11.76% 5.00%
Tier 1 Risk-based Ratio 12.75% 12.22% 12.95% 8.00%
Total Risk-based Ratio 13.47% 13.28% 14.05% 10.00%

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

9/30/2016 6/30/2016 9/30/2015
Tangible common equity per share (1)$10.12 $10.85 $10.32
Tangible common equity to tangible assets (1) 10.50% 10.50% 10.99%

(1) Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and net other intangible assets divided by total assets less goodwill and net other intangible assets. 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. The accompanying financial information includes a reconciliation of the ratio of tangible common equity to tangible assets with stockholders’ equity and total assets.

Investor Conference Call

The Company will host an investor conference call on Wednesday, October 19, 2016 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for the 2016 third quarter. 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.” 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 at www.ir-hopebancorp.com. After the live webcast, a replay will remain available in the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through October 26, 2016, replay access code 10093351.

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 $13.5 billion in total assets as of September 30, 2016. Formed through the merger of BBCN Bank and Wilshire Bank, the top two commercial lenders in the market, Bank of Hope is headquartered in Los Angeles and serves a multi-ethnic population of customers across the nation. Bank of Hope operates 85 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, and Portland, Oregon; a commercial loan production office in Fremont, California; residential mortgage loan production offices in 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.

Forward-Looking Statements

This press release may contain forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections and management assumptions about the future performance of the combined company, as well as the businesses and markets in which the combined company operates and is expected to operate. These statements constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, involve certain risks, uncertainties and assumptions that are difficult to assess and are not guarantees of future performance and. Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Readers should carefully review the risk factors and the information that could materially affect the Company’s financial results and business, described in documents the Company files from time to time with the Securities and Exchange Commission, including its quarterly reports on Form 10-Q and Annual Reports on Form 10-K, and particularly the discussions of business considerations and certain factors that may affect results of operations and stock price set forth therein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

(tables follow)

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
Assets9/30/2016 6/30/2016 % change 12/31/2015 % change 9/30/2015 % change
Cash and due from banks$443,903 $286,173 55% $298,389 49% $278,375 59%
Securities available for sale, at fair value1,558,719 1,099,944 42% 1,010,556 54% 972,962 60%
Federal Home Loan Bank (“FHLB”), Federal Reserve Bank (“FRB”) stock and other investments69,119 63,429 9% 66,859 3% 63,674 9%
Loans held for sale, at the lower of cost or fair value58,186 14,323 306% 8,273 603% 25,103 132%
Loans receivable10,561,197 6,584,237 60% 6,248,341 69% 5,972,724 77%
Allowance for loan losses(79,976) (76,425) (5)% (76,408) (5)% (71,110) (12)%
Net loans receivable10,481,221 6,507,812 61% 6,171,933 70% 5,901,614 78%
Accrued interest receivable24,165 15,787 53% 15,195 59% 13,981 73%
Premises and equipment, net53,966 37,663 43% 34,575 56% 34,798 55%
Bank owned life insurance73,290 47,562 54% 47,018 56% 46,741 57%
Goodwill463,964 105,401 340% 105,401 340% 105,401 340%
Servicing assets26,529 12,193 118% 12,000 121% 11,505 131%
Other intangible assets, net19,968 2,395 734% 2,820 608% 3,086 547%
Other assets234,534 144,144 63% 139,629 68% 125,762 86%
Total assets$13,507,564 $8,336,826 62% $7,912,648 71% $7,583,002 78%
Liabilities
Deposits$10,702,505 $6,637,522 61% $6,340,976 69% $6,028,865 78%
Borrowings from FHLB754,739 610,398 24% 530,591 42% 530,689 42%
Subordinated debentures99,548 42,415 135% 42,327 135% 42,284 135%
Accrued interest payable9,708 7,164 36% 6,007 62% 6,231 56%
Other liabilities89,863 67,587 33% 54,652 64% 45,364 98%
Total liabilities11,656,363 7,365,086 58% 6,974,553 67% 6,653,433 75%
Stockholders’ Equity
Common stock, $0.001 par value; authorized, 150,000,000 shares at September 30, 2016, June 30, 2016, December 31, 2015, and September 30, 2015; issued and outstanding, 135,109,641, 79,606,821, 79,566,356, and 79,553,460 shares at September 30, 2016, June 30, 2016, December 31, 2015, and September 30, 2015, respectively.$853,018 $80 1,066,173% $80 1,066,173% $80 1,066,173%
Capital surplus544,662 541,688 1% 541,596 1% 541,349 1%
Retained earnings445,104 418,998 6% 398,251 12% 384,133 16%
Accumulated other comprehensive income (loss), net8,417 10,974 (23)% (1,832) 559% 4,007 110%
Total stockholders’ equity1,851,201 971,740 91% 938,095 97% 929,569 99%
Total liabilities and stockholders’ equity$13,507,564 $8,336,826 62% $7,912,648 71% $7,583,002 78%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
9/30/2016 6/30/2016 % change 9/30/2015 % change 9/30/2016 9/30/2015 % change
Interest income:
Interest and fees on loans$112,132 $77,086 45% $73,650 52% $266,336 $214,537 24%
Interest on securities6,645 5,729 16% 4,658 43% 18,051 13,067 38%
Interest on federal funds sold and other investments775 719 8% 751 3% 2,160 3,084 (30)%
Total interest income119,552 83,534 43% 79,059 51% 286,547 230,688 24%
Interest expense:
Interest on deposits13,017 10,352 26% 8,390 55% 33,276 24,115 38%
Interest on other borrowings3,061 2,118 45% 1,908 60% 7,125 5,298 34%
Total interest expense16,078 12,470 29% 10,298 56% 40,401 29,413 37%
Net interest income before provision for loan losses103,474 71,064 46% 68,761 50% 246,146 201,275 22%
Provision for loan losses6,500 1,200 442% 600 983% 8,200 3,100 165%
Net interest income after provision for loan losses96,974 69,864 39% 68,161 42% 237,946 198,175 20%
Noninterest income:
Service fees on deposit accounts4,778 2,902 65% 3,170 51% 10,363 9,261 12%
Net gains on sales of SBA loans230 3,035 (92)% 3,390 (93)% 5,090 9,553 (47)%
Net gains on sales of other loans1,476 43 3,333% 26 5,577% 1,519 253 500%
Net gains on sales of securities available for sale948 100% 100% 948 424 124%
Other income and fees6,714 4,727 42% 4,597 46% 15,707 13,223 19%
Total noninterest income14,146 10,707 32% 11,183 26% 33,627 32,714 3%
Noninterest expense:
Salaries and employee benefits30,456 21,757 40% 21,457 42% 73,782 63,570 16%
Occupancy6,889 4,920 40% 4,941 39% 16,626 14,443 15%
Furniture and equipment3,297 2,337 41% 2,329 42% 7,921 6,915 15%
Advertising and marketing2,306 1,402 64% 1,309 76% 4,845 4,184 16%
Data processing and communications3,199 2,129 50% 2,192 46% 7,499 7,004 7%
Professional fees1,898 1,273 49% 1,289 47% 4,255 3,966 7%
FDIC assessment1,564 1,095 43% 1,027 52% 3,697 3,048 21%
Credit related expenses810 911 (11)% 75 980% 2,142 1,600 34%
Other real estate owned (“OREO”) expense, net(423) 133 (418)% (721) 41% 1,138 1,677 (32)%
Merger-related expenses11,222 1,533 632% 24 46,658% 13,962 102 13,588%
Other6,628 2,858 132% 2,833 134% 12,377 7,937 56%
Total noninterest expense67,846 40,348 68% 36,755 85% 148,244 114,446 30%
Income before income taxes43,274 40,223 8% 42,589 2% 123,329 116,443 6%
Income tax provision17,169 16,833 2% 17,497 (2)% 50,212 47,053 7%
Net income$26,105 $23,390 12% $25,092 4% $73,117 $69,390 5%
Earnings Per Common Share:
Basic$0.22 $0.29 $0.32 $0.80 $0.87
Diluted$0.22 $0.29 $0.32 $0.80 $0.87
Average Shares Outstanding:
Basic116,622,920 79,604,673 79,552,873 91,940,070 79,545,681
Diluted116,653,166 79,634,762 79,584,536 91,970,163 79,606,224


Hope Bancorp, Inc.
Selected Financial Data
Unaudited
For the Three Months Ended
(Annualized)
For the Nine Months Ended
(Annualized)
Profitability measures:9/30/2016 6/30/2016 9/30/2015 9/30/2016 9/30/2015
ROA0.89% 1.15% 1.35% 1.05% 1.27%
ROE6.60% 9.67% 10.96% 8.35% 10.23%
Return on average tangible equity 18.61% 10.88% 12.44% 10.04% 11.63%
Net interest margin3.77% 3.67% 3.87% 3.76% 3.88%
Efficiency ratio57.68% 49.34% 45.98% 52.99% 48.91%
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.


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Three Months Ended Three Months Ended Three Months Ended
9/30/2016 6/30/2016 9/30/2015
Interest Annualized Interest Annualized Interest Annualized
Average Income/ Average Average Income/ Average Average Income/ Average
Balance Expense Yield/Cost Balance Expense Yield/Cost Balance Expense Yield/Cost
INTEREST EARNING ASSETS:
Loans receivable, including loans held for sale$9,292,814 $112,132 4.80% $6,457,883 $77,086 4.80% $5,918,005 $73,650 4.94%
Securities available for sale1,406,919 6,645 1.89% 1,089,080 5,729 2.10% 877,054 4,658 2.12%
FRB and FHLB stock and other investments237,981 775 1.30% 237,872 719 1.20% 265,044 751 1.11%
Total interest earning assets$10,937,714 $119,552 4.35% $7,784,835 $83,534 4.31% $7,060,103 $79,059 4.44%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing$2,924,340 $5,932 0.81% $2,030,272 $4,147 0.82% $1,695,709 $3,141 0.73%
Savings268,424 311 0.46% 178,249 285 0.64% 196,090 419 0.85%
Time deposits:
$100,000 or more2,687,108 4,913 0.73% 1,890,891 4,240 0.90% 1,677,861 3,450 0.82%
Other913,292 1,861 0.81% 745,761 1,680 0.91% 677,338 1,380 0.81%
Total time deposits3,600,400 6,774 0.75% 2,636,652 5,920 0.90% 2,355,199 4,830 0.81%
Total interest bearing deposits6,793,164 13,017 0.76% 4,845,173 10,352 0.86% 4,246,998 8,390 0.78%
FHLB advances698,081 2,161 1.23% 564,637 1,686 1.20% 532,926 1,514 1.13%
Other borrowings78,828 900 4.47% 40,861 432 4.18% 40,716 394 3.79%
Total interest bearing liabilities7,570,073 $16,078 0.84% 5,450,671 $12,470 0.92% 4,820,640 $10,298 0.85%
Noninterest bearing demand deposits2,535,015 1,671,986 1,630,633
Total funding liabilities/cost of funds$10,105,088 0.63% $7,122,657 0.70% $6,451,273 0.63%
Net interest income/net interest spread $103,474 3.51% $71,064 3.39% $68,761 3.60%
Net interest margin 3.77% 3.67% 3.87%
Net interest margin, excluding effect of nonaccrual loan income (expense) 3.77% 3.67% 3.87%
Net interest margin, excluding effect of nonaccrual loan income (expense) and prepayment fee income 3.73% 3.64% 3.85%
Nonaccrual loan income reversed $(147) $(21) $
Prepayment fee income received 1,015 528 333
Net $868 $507 $333
Cost of deposits:
Noninterest bearing demand deposits$2,535,015 $ $1,671,986 $ $1,630,633 $
Interest bearing deposits6,793,164 13,017 0.76% 4,845,173 10,352 0.86% 4,246,998 8,390 0.78%
Total deposits$9,328,179 $13,017 0.56% $6,517,159 $10,352 0.64% $5,877,631 $8,390 0.57%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Nine Months Ended Nine Months Ended
9/30/2016 9/30/2015
Interest Annualized Interest Annualized
Average Income/ Average Average Income/ Average
Balance Expense Yield/Cost Balance Expense Yield/Cost
INTEREST EARNING ASSETS:
Loans receivable, including loans held for sale$7,347,740 $266,336 4.84% $5,760,376 $214,537 4.98%
Securities available for sale1,171,816 18,051 2.05% 824,088 13,067 2.11%
FRB and FHLB stock and other investments230,993 2,160 1.25% 343,686 3,084 1.18%
Total interest earning assets$8,750,549 $286,547 5.44% $6,928,150 $230,688 4.45%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing$2,310,000 $14,083 0.81% $1,643,539 $8,779 0.71%
Savings211,255 962 0.61% 195,072 1,260 0.86%
Time deposits:
$100,000 or more2,130,243 13,210 0.83% 1,713,631 10,340 0.81%
Other786,625 5,021 0.85% 637,916 3,736 0.78%
Total time deposits2,916,868 18,231 0.83% 2,351,547 14,076 0.80%
Total interest bearing deposits5,438,123 33,276 0.82% 4,190,158 24,115 0.77%
FHLB advances598,672 5,370 1.20% 498,795 4,138 1.11%
Other borrowings53,593 1,755 4.30% 40,670 1,160 3.76%
Total interest bearing liabilities6,090,388 $40,401 0.84% 4,729,623 $29,413 0.83%
Noninterest bearing demand deposits1,947,673 1,599,554
Total funding liabilities/cost of funds$8,038,061 0.63% $6,329,177 0.62%
Net interest income/net interest spread $246,146 4.59% $201,275 3.62%
Net interest margin 3.76% 3.88%
Net interest margin, excluding effect of nonaccrual loan income (expense) 3.76% 3.88%
Net interest margin, excluding effect of nonaccrual loan income (expense) and prepayment fee income 3.73% 3.86%
Nonaccrual loan income reversed $(290) $(45)
Prepayment fee income received 2,174 1,300
Net $1,884 $1,255
Cost of deposits:
Noninterest bearing demand deposits$1,947,673 $ $1,599,554 $
Interest bearing deposits5,438,123 33,276 0.82% 4,190,158 24,115 0.77%
Total deposits$7,385,796 $33,276 0.60% $5,789,712 $24,115 0.56%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Three Months Ended Nine Months Ended
AVERAGE BALANCES:9/30/2016 6/30/2016 % change 9/30/2015 % change 9/30/2016 9/30/2015 % change
Loans receivable, including loans held for sale$9,292,814 $6,457,883 44% $5,918,005 57% $7,347,740 $5,760,376 28%
Investments1,644,900 1,326,952 24% 1,142,098 44% 1,402,809 1,167,774 20%
Interest earning assets10,937,714 7,784,835 41% 7,060,103 55% 8,750,549 6,928,150 26%
Total assets11,775,431 8,157,358 44% 7,424,598 59% 9,278,722 7,284,661 27%
Interest bearing deposits6,793,164 4,845,173 40% 4,246,998 60% 5,438,123 4,190,158 30%
Interest bearing liabilities7,570,073 5,450,671 39% 4,820,640 57% 6,090,388 4,729,623 29%
Noninterest bearing demand deposits2,535,015 1,671,986 52% 1,630,633 55% 1,947,673 1,599,554 22%
Stockholders’ equity1,582,756 967,919 64% 915,702 73% 1,166,959 904,166 29%
Net interest earning assets3,367,641 2,334,164 44% 2,239,463 50% 2,660,161 2,198,527 21%
LOAN PORTFOLIO COMPOSITION:9/30/2016 6/30/2016 % change 12/31/2015 % change 9/30/2015 % change
Commercial loans$2,015,870 $1,111,219 81% $1,079,316 87% $1,060,618 90%
Real estate loans8,358,990 5,331,015 57% 5,069,482 65% 4,827,281 73%
Consumer and other loans188,532 145,182 30% 102,573 84% 88,092 114%
Loans outstanding10,563,392 6,587,416 60% 6,251,371 69% 5,975,991 77%
Unamortized deferred loan fees - net of costs(2,195) (3,179) 31% (3,030) 28% (3,267) 33%
Loans, net of deferred loan fees and costs10,561,197 6,584,237 60% 6,248,341 69% 5,972,724 77%
Allowance for loan losses(79,976) (76,425) (5)% (76,408) (5)% (71,110) (12)%
Loan receivable, net$10,481,221 $6,507,812 61% $6,171,933 70% $5,901,614 78%
REAL ESTATE LOANS BY PROPERTY TYPE:9/30/2016 6/30/2016 % change 12/31/2015 % change 9/30/2015 % change
Retail buildings$2,136,128
$1,365,808 56
% $1,326,516 61
% $1,236,686 73
%
Hotels/motels1,599,985 1,155,928 38% 1,061,111 51% 1,031,931 55%
Gas stations/car washes962,643 704,334 37% 667,496 44% 648,759 48%
Mixed-use facilities546,177 400,559 36% 369,425 48% 349,097 56%
Warehouses912,818 543,270 68% 529,255 72% 500,747 82%
Multifamily426,257 260,708 63% 245,532 74% 222,047 92%
Other1,774,982
900,408 97% 870,147 104
% 838,014 112
%
Total$8,358,990 $5,331,015 57% $5,069,482 65% $4,827,281 73%
DEPOSIT COMPOSITION9/30/2016 6/30/2016 % change 12/31/2015 % change 9/30/2015 % change
Noninterest bearing demand deposits$2,903,658 $1,717,045 69% $1,694,427 71% $1,631,672 78%
Money market and other3,318,728 2,176,978 52% 1,983,250 67% 1,783,760 86%
Saving deposits304,719 173,549 76% 187,498 63% 193,895 57%
Time deposits of $100,000 or more3,077,629 1,828,649 68% 1,772,984 74% 1,716,267 79%
Other time deposits1,097,771 741,301 48% 702,817 56% 703,271 56%
Total deposit balances$10,702,505 $6,637,522 61% $6,340,976 69% $6,028,865 78%
DEPOSIT COMPOSITION (%)9/30/2016 6/30/2016 12/31/2015 9/30/2015
Noninterest bearing demand deposits27.1% 25.9% 26.7% 27.1%
Money market and other31.0% 32.8% 31.3% 29.6%
Saving deposits2.8% 2.6% 3.0% 3.2%
Time deposits of $100,000 or more28.8% 27.6% 28.0% 28.5%
Other time deposits10.3% 11.1% 11.0% 11.6%
Total deposit balances100.0% 100.0% 100.0% 100.0%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
CAPITAL RATIOS:9/30/2016 6/30/2016 12/31/2015 9/30/2015
Total stockholders’ equity$1,851,201 $971,740 $938,095 $929,569
Common Equity Tier 1 ratio11.92% 11.66% 12.08% 12.34%
Tier 1 risk-based capital ratio12.75% 12.22% 12.67% 12.95%
Total risk-based capital ratio13.47% 13.28% 13.80% 14.05%
Tier 1 leverage ratio12.97% 11.14% 11.53% 11.76%
Total risk weighted assets$11,473,003 $7,329,696 $6,905,154 $6,641,660
Book value per common share$13.70 $12.21 $11.79 $11.68
Tangible common equity to tangible assets 210.50% 10.50% 10.63% 10.99%
Tangible common equity per share 2$10.12 $10.85 $10.43 $10.32
2 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 Nine Months Ended
NONINTEREST EXPENSE BEFORE MERGER-RELATED COSTS9/30/2016 6/30/2016 9/30/2015 9/30/2016 9/30/2015
Total noninterest expense$67,846 $40,348 $36,755 $148,244 $114,446
Less: merger-related costs(11,222) (1,533) (24) (13,962) (102)
Total noninterest expense, excluding merger-related expense$56,624 $38,815 $36,731 $134,282 $114,344
9/30/2016 6/30/2016 12/31/2015 9/30/2015
Total stockholders’ equity$1,851,201 $971,740 $938,095 $929,569
Less: Goodwill and core deposit intangible assets, net(483,931) (107,796) (108,221) (108,487)
Tangible common equity$1,367,270 $863,944 $829,874 $821,082
Total assets$13,507,564 $8,336,826 $7,912,648 $7,583,002
Less: Goodwill and core deposit intangible assets, net(483,931) (107,796) (108,221) (108,487)
Tangible assets$13,023,633 $8,229,030 $7,804,427 $7,474,515
Common shares outstanding135,109,641 79,606,821 79,566,356 79,553,460
Tangible common equity to tangible assets10.50% 10.50% 10.63% 10.99%
Tangible common equity per share$10.12 $10.85 $10.43 $10.32
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Three Months Ended Nine Months Ended
ALLOWANCE FOR LOAN LOSSES:9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 9/30/2016 9/30/2015
Balance at beginning of period$76,425 $76,856 $76,408 $71,110 $70,118 $76,408 $67,758
Provision for loan losses6,500 1,200 500 4,900 600 8,200 3,100
Recoveries1,010 664 769 955 2,171 2,443 4,607
Charge offs(3,959) (2,295) (821) (557) (1,779) (7,075) (4,355)
Balance at end of period$79,976 $76,425 $76,856 $76,408 $71,110 $79,976 $71,110
Net annualized charge offs (recoveries) / average gross loans0.13% 0.10% % (0.03)% (0.03)% 0.13% (0.01)%
Three Months Ended Nine Months Ended
NET CHARGED OFF (RECOVERED) LOANS BY TYPE:9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 9/30/2016 9/30/2015
Real estate loans$(248) $18 $(390) $(254) $(505) $(620) $(952)
Commercial loans2,663 1,649 379 (127) (25) 4,691 646
Consumer loans159 (36) 63 (17) 138 186 54
Charge offs (recoveries) excluding Acquired Credit Impaired Loans2,574 1,631 52 (398) (392) 4,257 (252)
Charge offs on Acquired Credit Impaired Loans375
Total net charge offs (recoveries)$2,949 $1,631 $52 $(398) $(392) $4,257 $(252)


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
NONPERFORMING ASSETS:9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
Delinquent loans on nonaccrual status 3$40,602 $42,398 $43,548 $40,801 $32,446
Delinquent loans 90 days or more on accrual status 4192 147 45 375
Accruing restructured loans48,701 50,837 52,760 47,984 54,274
Total nonperforming loans89,495 93,382 96,353 89,160 86,720
Other real estate owned27,457 16,392 19,794 21,035 21,350
Total nonperforming assets$116,952 $109,774 $116,147 $110,195 $108,070
Nonperforming assets/total assets0.87% 1.32% 1.44% 1.39% 1.43%
Nonperforming assets/loans receivable & OREO1.10% 1.66% 1.82% 1.76% 1.80%
Nonperforming assets/total capital6.32% 11.30% 12.07% 11.75% 11.63%
Nonperforming loans/loans receivable0.85% 1.42% 1.51% 1.43% 1.45%
Nonaccrual loans/loans receivable0.38% 0.64% 0.68% 0.65% 0.54%
Allowance for loan losses/loans receivable0.76% 1.16% 1.21% 1.22% 1.19%
Allowance for loan losses/nonaccrual loans196.98% 180.26% 176.49% 187.27% 219.16%
Allowance for loan losses/nonperforming loans89.36% 81.84% 79.77% 85.70% 82.00%
Allowance for loan losses/nonperforming assets68.38% 69.62% 66.17% 69.34% 65.80%
3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $14.1 million, $15.5 million, $15.4 million, $18.7 million, and $19.9 million at September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, respectively.
4 Excludes Acquired Credit Impaired Loans totaling $16.4 million, $13.8 million, $13.1 million, $12.2 million, and $18.5 million at September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, and September 30, 2015, respectively.
BREAKDOWN OF ACCRUING RESTRUCTURED LOANS BY TYPE:9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
Retail buildings$5,876 $4,565 $4,598 $5,593 $5,631
Hotels/motels1,315 1,324 1,336 1,342 7,632
Gas stations/car washes829 835 840 845
Mixed-use facilities895 1,111 1,117 1,124 775
Warehouses5,449 5,512 5,575 5,635 5,698
Other 534,337 37,490 39,294 33,445 34,538
Total$48,701 $50,837 $52,760 $47,984 $54,274
5 Includes commercial business and other loans
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE:9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
Legacy
30 - 59 days$3,580 $2,920 $4,488 $3,104 $4,380
60 - 89 days1,100 1,427 1,510 1,678 2,874
Total delinquent loans less than 90 days past due - legacy$4,680 $4,347 $5,998 $4,782 $7,254
Acquired
30 - 59 days$3,451 $2,735 $1,456 $3,170 $2,382
60 - 89 days1,168 345 47 39 147
Total delinquent loans less than 90 days past due - acquired$4,619 $3,080 $1,503 $3,209 $2,529
Total delinquent loans less than 90 days past due$9,299 $7,427 $7,501 $7,991 $9,783


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE BY TYPE:9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
Legacy
Real estate loans$2,678 $2,047 $1,624 $2,179 $2,467
Commercial loans1,866 2,215 1,441 1,676 4,737
Consumer loans136 85 2,933 927 50
Total delinquent loans less than 90 days past due - legacy$4,680 $4,347 $5,998 $4,782 $7,254
Acquired
Real estate loans$3,761 $2,557 $1,189 $2,572 $2,335
Commercial loans858 211 314 349 164
Consumer loans 312 288 30
Total delinquent loans less than 90 days past due - acquired$4,619 $3,080 $1,503 $3,209 $2,529
Total delinquent loans less than 90 days past due$9,299 $7,427 $7,501 $7,991 $9,783
NONACCRUAL LOANS BY TYPE:9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
Real estate loans$24,055 $25,306 $26,123 $24,375 $23,361
Commercial loans15,742 16,270 16,842 15,600 7,995
Consumer loans805 822 583 826 1,090
Total nonaccrual loans$40,602 $42,398 $43,548 $40,801 $32,446
CRITICIZED LOANS:9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
Legacy
Special mention$168,289 $80,923 $87,025 $85,945 $116,267
Substandard124,938 128,885 129,314 126,880 97,225
Doubtful441 108 133 20 184
Loss
Total criticized loans - legacy$293,668 $209,916 $216,472 $212,845 $213,676
Acquired
Special mention$140,604 $19,447 $17,017 $18,241 $25,388
Substandard131,398 67,261 71,954 74,482 79,774
Doubtful2,624 2,603 1,997 2,194 1,537
Loss(133)
Total criticized loans - acquired$274,493 $89,311 $90,968 $94,917 $106,699
Total criticized loans$568,161 $299,227 $307,440 $307,762 $320,375


Contact: Angie Yang SVP, Director of Investor Relations & Corporate Communications 213-251-2219 angie.yang@bankofhope.com

Source:Hope Bancorp, Inc.