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Hope Bancorp Reports 2016 Fourth Quarter and Full-Year Financial Results

Q4 2016 Summary:

  • Loans receivable total $10.54 billion, reflecting a 69% increase year-over-year
  • Total deposits amount to $10.64 billion, reflecting a 68% increase year-over-year
  • Total assets amount to $13.44 billion, reflecting a 70% increase year-over-year
  • Net income totals $40.6 million, or $0.30 per diluted common share, including merger-related expenses of $3.0 million
  • New loan originations total $465 million

LOS ANGELES, Jan. 24, 2017 (GLOBE NEWSWIRE) -- Hope Bancorp, Inc. (the “Company”) (NASDAQ:HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its fourth quarter and full year ended December 31, 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 fourth quarter financial results reflect the first full quarter of combined operations following the completion of the merger. The full-year financial results reflect seven months of stand-alone operations of the former BBCN and five months of combined operations. As a result, the Company’s 2016 fourth quarter and full-year financial results may not be comparable to financial results in prior periods.

For the three months ended December 31, 2016, net income totaled $40.6 million, or $0.30 per diluted common share, based on 135,585,561 weighted average diluted shares outstanding, and included pre-tax merger-related expenses of $3.0 million. This compares with 2016 third quarter net income of $26.1 million, or $0.22 per diluted common share, based on 116,653,166 weighted average diluted shares outstanding, and included $11.2 million in merger-related expenses. For the 2015 fourth quarter, net income totaled $22.9 million, or $0.29 per diluted common share, based on 79,601,452 weight average diluted shares outstanding, and included merger-related expenses of $1.4 million. Excluding the merger-related expenses, core net income would have been $42.4 million, or $0.31 per diluted common share, for the 2016 fourth quarter, $32.9 million, or $0.28 per diluted common share, for the preceding 2016 third quarter, and $23.7 million, or $0.30 per diluted common share, for the 2015 fourth quarter.

For the full year, net income increased to $113.7 million, or $1.10 per diluted common share, based on 103,530,318 weighted average diluted shares outstanding. This compares with 2015 net income of $92.3 million, or $1.16 per diluted common share, based on 79,611,800 weighted average diluted shares outstanding. Excluding pre-tax merger-related expenses of $16.9 million in 2016 and $1.5 million in 2015, core net income would have been $123.8 million, or $1.20 per diluted common share, for 2016 and $93.2 million, or $1.17 per diluted common share, for 2015.

Net income excluding pre-tax merger-related expenses is a non-GAAP financial measure. Management reviews net income excluding merger-related expenses in evaluating the Company’s overall evaluation of its performance and has included this financial metric in response to market participant interest in the Company’s core earnings performance. The accompanying financial information includes a reconciliation of core net income and earnings per share excluding merger-related expenses.

“2016 was certainly a monumental year for our organization with the formation of the only super regional Korean-American bank in the United States and one that cannot be replicated by our niche peers in terms of size or market presence,” said Kevin S. Kim, President and Chief Executive Officer of Hope Bancorp, Inc. “We continue to make solid progress with the integration, having successfully completed the systems conversion and the first phase of branch consolidations during the fourth quarter. With these achievements behind us, we are well on track to achieve the anticipated cost saves from our merger and expect the benefits to be progressively evident in our financial results going forward. While loan originations were lighter than expected for the fourth quarter, we are in the final stage of a transitional period of combining two strong lending forces, which remains intact, and believe we are well positioned to deliver the synergies from the merger.

“Today, Bank of Hope enjoys a significantly stronger competitive position with unrivaled leadership and unparalleled opportunity to cross-sell the most diversified offering of financial products and services among our peers. The definitive agreement announced yesterday to acquire Seattle-based U & I Financial Corp. continues our momentum of establishing dominant leadership in the markets that we operate in. Looking into 2017, we have a clear vision of the bank that we want to become and are confident that we are moving in the right direction to maximize the value proposition that we provide to our customers, employees and shareholders,” said Kim.

Financial Highlights

(dollars in thousands, except per share data) (unaudited)At or for the Three Months Ended
12/31/2016 9/30/2016 12/31/2015
Net income$40,630 $26,105 $22,869
Diluted earnings per share$0.30 $0.22 $0.29
Net interest income before provision for loan losses$117,209 $103,474 $71,768
Net interest margin 3.75% 3.77% 3.88%
Noninterest income$18,192 $14,146 $10,977
Noninterest expense$66,731 $67,846 $38,938
Net loans receivable$10,463,989 $10,481,221 $6,171,933
Deposits$10,642,035 $10,702,505 $6,340,976
Nonaccrual loans (1)$40,074 $40,602 $40,801
ALLL to loans receivable 0.75% 0.76% 1.22%
ALLL to nonaccrual loans (1) 197.99% 196.98% 187.27%
ALLL to nonperforming assets (1) (2) 71.32% 68.38% 69.34%
Provision for loan losses$800 $6,500 $4,900
Net charge offs (recoveries)$1,433 $2,949 $(398)
ROA 1.20% 0.89% 1.19%
ROE 8.72% 6.59% 9.76%
Efficiency ratio 49.28% 57.68% 47.06%

(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $15.9 million, $14.1 million and $18.7 million at December 31, 2016, September 30, 2016, and December 31, 2015, respectively.
(2) Nonperforming assets exclude purchased credit-impaired loans totaling $19.6 million, $16.4 million and $12.2 million at December 31, 2016, September 30, 2016, and December 31, 2015, respectively.

Operating Results for the 2016 Fourth 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 December 31, 2016, September 30, 2016, and December 31, 2015 include the following pre-tax acquisition accounting adjustments and merger-related expenses associated with past and current acquisitions:

(dollars in thousands) (unaudited)Three Months Ended
12/31/2016 9/30/2016 12/31/2015
Accretion on purchased non-impaired loans$3,355 $3,111 $2,648
Accretion on purchased credit-impaired loans 2,182 1,673 2,206
Amortization of premium on low income housing tax credits (84) (54)
Amortization of premium on acquired FHLB borrowings 449 330 97
Accretion of discount on acquired subordinated debt (260) (190) (44)
Amortization of premium on acquired time deposits and savings 3,478 2,336 28
Total acquisition accounting adjustments$9,120 $7,206 $4,935
Merger-related expenses (2,952) (11,222) (1,438)
Total$6,168 $(4,016) $3,497

Net Interest Income and Net Interest Margin. Net interest income before provision for loan losses for the 2016 fourth quarter totaled $117.2 million, an increase of 13% over $103.5 million in the preceding 2016 third quarter and an increase of 63% over $71.8 million in the prior-year fourth quarter. The increase in net interest income is primarily attributable to the significantly higher level of interest earning assets following the merger. The 2016 fourth quarter included a full quarter of combined operations; the 2016 third quarter included two months of combined operations and one month of stand-alone BBCN operations; and the year-ago fourth quarter reflects stand-alone BBCN.

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
12/31/2016 9/30/2016 change 12/31/2015 change
Net interest margin, excluding the effect of acquisition accounting adjustments3.45% 3.48% (0.03) 3.59% (0.14)
Acquisition accounting adjustments0.30% 0.29% (0.01) 0.29% 0.01
Net interest margin3.75% 3.77% (0.02) 3.88% (0.13)

The net interest margin for the 2016 fourth quarter was 3.75%, down 2 basis points from the preceding third quarter, but down 13 basis points when compared with the year-ago fourth quarter. On a core basis, excluding the effect of acquisition accounting adjustments, the net interest margin for the 2016 fourth quarter declined by 3 basis points from the preceding third quarter and 14 basis points from the fourth 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
12/31/2016 9/30/2016 change 12/31/2015 change
Weighted average yield on loans, excluding the effect of acquisition accounting adjustments4.59% 4.55% 0.04 4.64% (0.05)
Acquisition accounting adjustments0.21% 0.25% (0.04) 0.35% (0.14)
Weighted average yield on loans4.80% 4.80% 4.99% (0.19)

The weighted average yield on loans for the 2016 fourth quarter was steady when compared with the preceding 2016 third quarter, but declined 19 basis points from the year-ago fourth quarter. On a core basis, excluding the effect of acquisition accounting adjustments, the weighted average yield on loans increased 4 basis points from the preceding third quarter, but decreased 5 basis points from the 2015 fourth quarter.

The weighted average yield on new loans originated during the 2016 fourth quarter was 4.15%, compared with 4.03% in the preceding 2016 third quarter and 4.24% in the year-ago fourth quarter.

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

Three Months Ended
12/31/2016 9/30/2016 change 12/31/2015 change
Weighted average cost of deposits, excluding the effect of acquisition accounting adjustments0.68% 0.64% 0.04 0.60% 0.08
Acquisition accounting adjustments(0.13)% (0.08)% (0.05) % (0.13)
Weighted average cost of deposits0.55% 0.56% (0.01) 0.60% (0.05)

The weighted average cost of deposits for the 2016 fourth quarter decreased 1 basis point from the preceding third quarter and 5 basis points from the year-ago fourth quarter. On a core basis, excluding the effect of premium amortization on time and savings deposits assumed in acquisitions, the weighted average cost of deposits increased 4 basis points from the preceding third quarter and increased 8 basis points when compared with the 2015 fourth quarter.

Noninterest Income. Noninterest income for the 2016 fourth quarter totaled $18.2 million, compared with $14.1 million in the preceding 2016 third quarter and $11.0 million in the year-ago fourth quarter. The Company noted that the increase reflects in part a full quarter of combined operations for the 2016 fourth quarter, versus the 2016 third quarter, which included two months of combined operations and one month of stand-alone BBCN, and the 2015 fourth quarter, which was stand-alone BBCN. In addition, noninterest income for the comparable periods reflect variations in gain on sale of Small Business Administration (“SBA”), gain on sale of other loans and gain on sale of securities available-for-sale. Noninterest income for the 2016 fourth quarter included a $3.7 million gain on sale of SBA loans and a $1.4 million gain on sale other loans from the combined mortgage operations platform. Noninterest income for the preceding 2016 third quarter included a $948,000 net gain on the sale of securities available-for-sale, a $1.5 million gain on sale of other loans, which was predominantly mortgage loans, and just $230,000 gain on sale of SBA loans. In the 2015 fourth quarter, noninterest income included a $3.1 million gain on sale of SBA loans and just $17,000 gain on sale of other loans.

Noninterest Expense. Total noninterest expense for the 2016 fourth quarter, 2016 third quarter and 2015 fourth quarter amounted to $66.7 million, $67.8 million and $38.9 million, respectively. The Company noted that total noninterest expense reflects the combination of the two predecessor companies as previously described and merger-related expenses of $3.0 million, $11.2 million and $1.4 million in the 2016 fourth quarter, 2016 third quarter and 2015 fourth quarter, respectively. Excluding merger-related expenses, total noninterest expense would have been $63.8 million, $56.6 million and $37.5 million for the 2016 fourth quarter, 2016 third quarter and 2015 fourth quarter, respectively.

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 $34.2 million for the 2016 fourth quarter, $30.5 million for the 2016 third quarter and $21.3 million for the year-ago fourth quarter. The total number of FTEs for the combined company as of December 31, 2016 was 1,382, down from 1,400 as of September 30, 2016. At December 31, 2015, the total number of FTEs for the former BBCN was 938.

As previously reported, the Company announced the second and final phase of its branch consolidation plan that will result in nine branch consolidations to be completed by the second quarter of 2017. These branch consolidations are expected to result in additional costs savings of approximately $5 million pre-tax on an annual basis beginning in 2017. During the 2016 fourth quarter, the Company recorded $1.3 million in one-time charges pre-tax related to branch consolidations.

Income Tax Provision. The effective tax rate for the 2016 fourth quarter was 40.1%, compared with 39.7% for the preceding 2016 third quarter and 41.2% for the 2015 fourth quarter.

Balance Sheet Summary

Loans receivable totaled $10.54 billion at December 31, 2016, compared with $10.56 billion at September 30, 2016, and $6.25 billion at December 31, 2015.

Total new loan originations during the 2016 fourth quarter amounted to $464.8 million, including warehouse lines of credit of $16.0 million, residential mortgage loans of $74.2 million and SBA loan originations of $62.5 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 $42.2 million for the fourth quarter of 2016, compared with $50.2 million for the preceding 2016 third quarter and $39.4 million for the 2015 fourth quarter. During the 2016 fourth quarter, the Company returned to its regular practice of selling the majority of its SBA 7(a) loans and sold $50.3 million, compared with just $2.4 million in the preceding third quarter and $41.9 million in the year-ago fourth 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 fourth quarter amounted to $417.3 million, compared with $357.0 million for the preceding 2016 third quarter, which included two months of combined operations and one month of stand-alone BBCN, and $267.1 million for the year-ago fourth quarter for BBCN alone.

Total deposits amounted to $10.64 billion at December 31, 2016, compared with $10.70 billion at September 30, 2016, and largely reflects increases in money market accounts, offset by outflows in time deposits. Total deposits increased 68% when compared with $6.34 billion at December 31, 2015, reflecting the merger completion on July 29, 2016.

Credit Quality

The provision for loan losses for the 2016 fourth quarter was $800,000, compared with $6.5 million for the preceding 2016 third quarter and $4.9 million for the prior-year fourth 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 December 31, 2016, September 30, 2016 and December 31, 2015 is as follows:

(dollars in thousands) (unaudited)12/31/2016 9/30/2016 12/31/2015
Legacy loans (1)$66,399 $66,986 $63,309
Purchased non-impaired loans (2) 814 938 1,117
Purchased credit-impaired loans (2) 12,130 12,052 11,982
Total ALLL$79,343 $79,976 $76,408
Loans receivable$10,543,332 $10,561,197 $6,248,341
ALLL coverage ratio 0.75% 0.76% 1.22%

(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 December 31, 2016, September 30, 2016 and December 31, 2015:

(dollars in thousands)12/31/2016 9/30/2016 12/31/2015
Special Mention (1)$243,656 $308,893 $104,186
Classified (1) 313,055 259,268 203,576
Criticized$556,711 $568,161 $307,762

(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 December 31, 2016 totaled $40.1 million, or 0.38% of loans receivable. This compares with nonaccrual loans of $40.6 million, or 0.38% of loans receivable, at September 30, 2016 and $40.8 million, or 0.65% of loans receivable, at December 31, 2015. Accruing restructured loans totaled $48.9 million at December 31, 2016, compared with $48.7 million at September 30, 2016 and $48.0 million at December 31, 2015. Total nonperforming loans at December 31, 2016 amounted to $89.3 million, or 0.85% of loans receivable. This compares with total nonperforming loans of $89.5 million, or 0.85% of loans receivable, at September 30, 2016 and $89.2 million, or 1.43% of loans receivable, at September 30, 2015.

Nonperforming assets, including nonperforming loans and other real estate owned, totaled $111.2 million at December 31, 2016, compared with $117.0 million at September 30, 2016 and $110.2 million at December 31, 2015. As a percentage of total assets, nonperforming assets declined to 0.83% at December 31, 2016 from 0.87% at September 30, 2016 and 1.39% at December 31, 2015.

For the 2016 fourth quarter, the Company recorded net charge offs of $1.4 million, or 0.05% of average loans receivable on an annualized basis. This compares with net charge offs of $2.9 million, or 0.13% of average loans receivable on an annualized basis for the 2016 third quarter and net recoveries of $398,000, or 0.03% of average loans receivable on an annualized basis, for the 2015 fourth quarter.

The allowance for loan losses at December 31, 2016 was $79.3 million, or 0.75% of loans receivable (excluding loans held for sale), compared with $80.0 million, or 0.76%, at September 30, 2016 and $76.4 million, or 1.22%, at December 31, 2015. The coverage ratio of the allowance for loan losses to nonperforming loans (excluding purchased credit-impaired loans) was 88.90% at December 31, 2016, versus 89.36% at September 30, 2016 and 85.70% at December 31, 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 $140.4 million at December 31, 2016, compared with $128.1 million at September 30, 2016 and $138.1 million at December 31, 2015.

Capital

At December 31, 2016, the Company continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” institution, as summarized in the following table:

12/31/2016 9/30/2016 12/31/2015 Minimum Guideline
for “Well-Capitalized”
Institution
Common Equity Tier 1 Capital12.10% 11.96% 12.08% 6.50%
Tier 1 Leverage Ratio11.49% 13.02% 11.53% 5.00%
Tier 1 Risk-based Ratio12.92% 12.79% 12.67% 8.00%
Total Risk-based Ratio13.64% 13.51% 13.80% 10.00%

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

12/31/2016 9/30/2016 12/31/2015
Tangible common equity per share (1)$10.15 $10.14 $10.43
Tangible common equity to tangible assets (1) 10.60% 10.52% 10.63%

(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, January 25, 2017 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for the fourth quarter ended December 31, 2016. 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 February 1, 2017, replay access code 10098630.

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 $13.4 billion in total assets as of December 31, 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 73 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)
Assets12/31/2016 9/30/2016 % change 12/31/2015 % change
Cash and due from banks$437,334 $443,903 (1)% $298,389 47%
Securities available for sale, at fair value1,556,740 1,558,719 % 1,010,556 54%
Federal Home Loan Bank (“FHLB”), Federal Reserve Bank (“FRB”) stock and other investments66,166 69,119 (4)% 66,859 (1)%
Loans held for sale, at the lower of cost or fair value22,785 58,186 (61)% 8,273 175%
Loans receivable10,543,332 10,561,197 % 6,248,341 69%
Allowance for loan losses(79,343) (79,976) 1% (76,408) (4)%
Net loans receivable10,463,989 10,481,221 % 6,171,933 70%
Accrued interest receivable26,880 24,165 11% 15,195 77%
Premises and equipment, net55,316 53,966 3% 34,575 60%
Bank owned life insurance73,696 73,290 1% 47,018 57%
Goodwill464,448 464,419 % 105,401 341%
Servicing assets26,457 26,529 % 12,000 120%
Other intangible assets, net19,226 19,968 (4)% 2,820 582%
Other assets229,451 237,144 (3)% 139,629 64%
Total assets$13,442,488 $13,510,629 (1)% $7,912,648 70%
Liabilities
Deposits$10,642,035 $10,702,505 (1)% $6,340,976 68%
Borrowings from FHLB754,290 754,739 % 530,591 42%
Subordinated debentures99,808 99,548 % 42,327 136%
Accrued interest payable10,863 9,708 12% 6,007 81%
Other liabilities78,599 89,558 (12)% 54,652 44%
Total liabilities11,585,595 11,656,058 (1)% 6,974,553 66%
Stockholders’ Equity
Common stock, $0.001 par value; authorized, 150,000,000 shares at December, 31, 2016, September, 30, 2016, and December, 31, 2015; issued and outstanding, 135,240,079, 135,109,641, and 79,566,356 at December, 31, 2016, September, 30, 2016, and December, 31, 2015, respectively
135 135 % 80 69%
Capital surplus1,401,911 1,400,915 % 541,596 159%
Retained earnings469,505 445,104 5% 398,251 18%
Accumulated other comprehensive income (loss), net(14,658) 8,417 (274)% (1,832) (700)%
Total stockholders’ equity1,856,893 1,854,571 % 938,095 98%
Total liabilities and stockholders’ equity$13,442,488 $13,510,629 (1)% $7,912,648 70%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except per share data)
Three Months Ended Twelve Months Ended
12/31/2016 9/30/2016 % change 12/31/2015 % change 12/31/2016 12/31/2015 % change
Interest income:
Interest and fees on loans$125,791 $112,132 12% $76,807 64% $392,127 $291,344 35%
Interest on securities7,391 6,645 11% 5,544 33% 25,442 18,611 37%
Interest on federal funds sold and other investments2,205 775 185% 622 255% 4,365 3,705 18%
Total interest income135,387 119,552 13% 82,973 63% 421,934 313,660 35%
Interest expense:
Interest on deposits14,815 13,017 14% 9,297 59% 48,091 33,412 44%
Interest on other borrowings3,363 3,061 10% 1,908 76% 10,488 7,206 46%
Total interest expense18,178 16,078 13% 11,205 62% 58,579 40,618 44%
Net interest income before provision for loan losses117,209 103,474 13% 71,768 63% 363,355 273,042 33%
Provision for loan losses800 6,500 (88)% 4,900 (84)% 9,000 8,000 13%
Net interest income after provision for loan losses116,409 96,974 20% 66,868 74% 354,355 265,042 34%
Noninterest income:
Service fees on deposit accounts5,601 4,778 17% 2,944 90% 15,964 12,206 31%
Net gains on sales of SBA loans3,660 230 1,491% 3,112 18% 8,750 12,665 (31)%
Net gains on sales of other loans1,401 1,476 (5)% 17 8,141% 2,920 270 981%
Net gains on sales of securities available for sale2 948 (100)% 100% 950 424 124%
Other income and fees7,528 6,714 12% 4,904 54% 23,235 18,126 28%
Total noninterest income18,192 14,146 29% 10,977 66% 51,819 43,691 19%
Noninterest expense:
Salaries and employee benefits34,162 30,456 12% 21,329 60% 107,944 84,899 27%
Occupancy7,948 6,889 15% 4,949 61% 24,574 19,391 27%
Furniture and equipment3,805 3,297 15% 2,330 63% 11,726 9,245 27%
Advertising and marketing2,475 2,306 7% 906 173% 7,320 5,090 44%
Data processing and communications3,904 3,199 22% 2,175 79% 11,403 9,179 24%
Professional fees2,301 1,898 21% 1,618 42% 6,556 5,585 17%
FDIC assessment468 1,564 (70)% 1,040 (55)% 4,165 4,088 2%
Credit related expenses812 810 % 324 151% 2,954 1,924 54%
Other real estate owned (“OREO”) expense, net1,354 (423) N/A (154) N/A 2,492 1,523 64%
Merger-related expenses2,952 11,222 (74)% 1,438 105% 16,914 1,540 998%
Other6,550 6,628 (1)% 2,983 120% 18,927 10,920 73%
Total noninterest expense66,731 67,846 (2)% 38,938 71% 214,975 153,384 40%
Income before income taxes67,870 43,274 57% 38,907 74% 191,199 155,349 23%
Income tax provision27,240 17,169 59% 16,038 70% 77,452 63,091 23%
Net income$40,630 $26,105 56% $22,869 78% $113,747 $92,258 23%
Earnings Per Common Share:
Basic$0.30 $0.22 $0.29 $1.10 $1.17
Diluted$0.30 $0.22 $0.29 $1.10 $1.16
Average Shares Outstanding:
Basic135,238,928 116,622,920 79,556,859 103,289,059 78,549,651
Diluted135,585,561 116,653,166 79,601,452 103,530,318 79,611,800


Hope Bancorp, Inc.
Selected Financial Data
Unaudited
At or for the Three Months Ended
(Annualized)
At or for the Twelve Months Ended
(Annualized)
Profitability measures:12/31/2016 9/30/2016 12/31/2015 12/31/2016 12/31/2015
ROA1.20% 0.89% 1.19% 1.10% 1.25%
ROE8.72% 6.59% 9.76% 8.47% 10.11%
Return on average tangible equity 111.77% 8.59% 11.03% 10.59% 11.48%
Net interest margin3.75% 3.77% 3.88% 3.75% 3.88%
Efficiency ratio49.28% 57.68% 47.06% 51.78% 48.43%
1 Average tangible equity is calculated by subtracting average goodwill and average core deposit intangibles 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
12/31/2016 9/30/2016 12/31/2015
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$10,427,538 $125,791 4.80% $9,292,814 $112,132 4.80% $6,102,693 $76,807 4.99%
Securities available for sale1,586,560 7,391 1.85% 1,406,919 6,645 1.89% 1,010,247 5,544 2.20%
FRB and FHLB stock and other investments433,212 2,205 2.02% 237,981 775 1.30% 225,529 622 1.09%
Total interest earning assets$12,447,310 $135,387 4.33% $10,937,714 $119,552 4.35% $7,338,469 $82,973 4.49%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing$3,414,158 $7,054 0.82% $2,924,340 $5,932 0.81% $1,855,772 $3,651 0.78%
Savings303,064 319 0.42% 268,424 311 0.46% 189,271 410 0.86%
Time deposits:
$100,000 or more3,035,499 5,325 0.70% 2,687,108 4,913 0.73% 1,752,429 3,764 0.85%
Other1,085,254 2,117 0.78% 913,292 1,861 0.81% 704,040 1,472 0.83%
Total time deposits4,120,753 7,442 0.72% 3,600,400 6,774 0.75% 2,456,469 5,236 0.85%
Total interest bearing deposits7,837,975 14,815 0.75% 6,793,164 13,017 0.76% 4,501,512 9,297 0.82%
FHLB advances681,757 2,190 1.28% 698,081 2,161 1.23% 515,981 1,507 1.16%
Other borrowings95,650 1,173 4.80% 78,828 900 4.47% 40,764 401 3.85%
Total interest bearing liabilities8,615,382 $18,178 0.84% 7,570,073 $16,078 0.84% 5,058,257 $11,205 0.88%
Noninterest bearing demand deposits2,918,156 2,535,015 1,645,237
Total funding liabilities/cost of funds$11,533,538 0.63% $10,105,088 0.63% $6,703,494 0.66%
Net interest income/net interest spread $117,209 $103,474 $71,768
Net interest margin 3.75% 3.77% 3.88%
Cost of deposits:
Noninterest bearing demand deposits$2,918,156 $ $2,535,015 $ $1,645,237 $
Interest bearing deposits7,837,975 14,815 0.75% 6,793,164 13,017 0.76% 4,501,512 9,297 0.82%
Total deposits$10,756,131 $14,815 0.55% $9,328,179 $13,017 0.56% $6,146,749 $9,297 0.60%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Twelve Months Ended Twelve Months Ended
12/31/2016 12/31/2015
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$8,121,897 $392,127 4.83% $5,846,658 $291,344 4.98%
Securities available for sale1,276,068 25,442 1.99% 871,010 18,611 2.14%
FRB and FHLB stock and other investments281,824 4,365 1.55% 313,904 3,705 1.18%
Total interest earning assets$9,679,789 $421,934 4.36% $7,031,572 $313,660 4.46%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing$2,587,548 $21,136 0.82% $1,697,033 $12,430 0.73%
Savings234,332 1,282 0.55% 193,610 1,670 0.86%
Time deposits:
$100,000 or more2,357,794 18,535 0.79% 1,723,410 14,105 0.82%
Other861,690 7,138 0.83% 654,583 5,207 0.80%
Total time deposits3,219,484 25,673 0.80% 2,377,993 19,312 0.81%
Total interest bearing deposits6,041,364 48,091 0.80% 4,268,636 33,412 0.78%
FHLB advances619,557 7,560 1.22% 503,127 5,645 1.12%
Other borrowings64,165 2,928 4.49% 40,694 1,561 3.78%
Total interest bearing liabilities6,725,086 $58,579 0.87% 4,812,457 $40,618 0.84%
Noninterest bearing demand deposits2,191,620 1,611,068
Total funding liabilities/cost of funds$8,916,706 0.66% $6,423,525 0.63%
Net interest income/net interest spread $363,355 3.49% $273,042 3.62%
Net interest margin 3.75% 3.88%
Cost of deposits:
Noninterest bearing demand deposits$2,191,620 $ $1,611,068 $
Interest bearing deposits6,041,364 48,091 0.80% 4,268,636 33,412 0.78%
Total deposits$8,232,984 $48,091 0.58% $5,879,704 $33,412 0.57%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Three Months Ended Twelve Months Ended
AVERAGE BALANCES:12/31/2016 9/30/2016 % change 12/31/2015 % change 12/31/2016 12/31/2015 % change
Loans receivable, including loans held for sale$10,427,538 $9,292,814 12% $6,102,693 71% $8,121,897 $5,846,658 39%
Investments2,019,772 1,644,900 23% 1,235,776 63% 1,557,892 1,184,914 31%
Interest earning assets12,447,310 10,937,714 14% 7,338,469 70% 9,679,789 7,031,572 38%
Total assets13,506,860 11,777,564 15% 7,700,716 75% 10,342,068 7,389,530 40%
Interest bearing deposits7,837,975 6,793,164 15% 4,501,512 74% 6,041,364 4,268,636 42%
Interest bearing liabilities8,615,382 7,570,073 14% 5,058,257 70% 6,725,086 4,812,457 40%
Noninterest bearing demand deposits2,918,156 2,535,015 15% 1,645,237 77% 2,191,620 1,611,068 36%
Stockholders’ equity1,864,797 1,585,100 18% 937,664 99% 1,342,962 912,609 47%
Net interest earning assets3,831,928 3,367,641 14% 2,280,212 68% 2,954,703 2,219,115 33%
LOAN PORTFOLIO COMPOSITION:12/31/2016 9/30/2016 % change 12/31/2015 % change
Commercial loans$1,986,949 $2,011,913 (1)% $1,079,316 84%
Real estate loans8,154,570 8,158,871 % 5,069,482 61%
Consumer and other loans403,470 392,608 3% 102,573 293%
Loans outstanding10,544,989 10,563,392 % 6,251,371 69%
Unamortized deferred loan fees - net of costs(1,657) (2,195) 25% (3,030) 45%
Loans, net of deferred loan fees and costs10,543,332 10,561,197 % 6,248,341 69%
Allowance for loan losses(79,343) (79,976) 1% (76,408) (4)%
Loan receivable, net$10,463,989 $10,481,221 % $6,171,933 70%
REAL ESTATE LOANS BY PROPERTY TYPE:12/31/2016 9/30/2016 % change 12/31/2015 % change
Retail buildings$2,163,075 $2,136,128 1% $1,326,516 63%
Hotels/motels1,605,787 1,599,985 % 1,061,111 51%
Gas stations/car washes946,364 962,643 (2)% 667,496 42%
Mixed-use facilities563,484 546,177 3% 369,425 53%
Warehouses892,100 912,818 (2)% 529,255 69%
Multifamily423,084 426,257 (1)% 245,532 72%
Other1,560,676 1,574,863 (1)% 870,147 79%
Total$8,154,570 $8,158,871 % $5,069,482 61%
DEPOSIT COMPOSITION12/31/2016 9/30/2016 % change 12/31/2015 % change
Noninterest bearing demand deposits$2,900,241 $2,903,658 % $1,694,427 71%
Money market and other3,401,446 3,318,728 2% 1,983,250 72%
Saving deposits301,906 304,719 (1)% 187,498 61%
Time deposits of $100,000 or more2,982,256 3,077,629 (3)% 1,772,975 68%
Other time deposits1,056,186 1,097,771 (4)% 702,826 50%
Total deposit balances$10,642,035 $10,702,505 (1)% $6,340,976 68%
DEPOSIT COMPOSITION (%)12/31/2016 9/30/2016 12/31/2015
Noninterest bearing demand deposits27.3% 27.1% 26.7%
Money market and other32.0% 31.0% 31.3%
Saving deposits2.8% 2.8% 3.0%
Time deposits of $100,000 or more28.0% 28.8% 28.0%
Other time deposits9.9% 10.3% 11.0%
Total deposit balances100.0% 100.0% 100.0%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
CAPITAL RATIOS:12/31/2016 9/30/2016 12/31/2015
Total stockholders’ equity$1,856,893 $1,854,571 $938,095
Common Equity Tier 1 ratio12.10% 11.96% 12.08%
Tier 1 risk-based capital ratio12.92% 12.79% 12.67%
Total risk-based capital ratio13.64% 13.51% 13.80%
Tier 1 leverage ratio11.49% 13.02% 11.53%
Total risk weighted assets$11,575,559 $11,491,204 $6,905,154
Book value per common share$13.73 $13.73 $11.79
Tangible common equity to tangible assets 210.60% 10.52% 10.63%
Tangible common equity per share 2$10.15 $10.14 $10.43
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 Twelve Months Ended
NONINTEREST EXPENSE BEFORE MERGER-RELATED COSTS12/31/2016 9/30/2016 12/31/2015 12/31/2016 12/31/2015
Total noninterest expense$66,731 $67,846 $38,938 $214,975 $153,384
Less: merger-related costs2,952 11,222 1,438 16,914 1,540
Total noninterest expense, excluding merger-related expense$63,779 $56,624 $37,500 $198,061 $151,844
CORE EPS LESS MERGER RELATED EXPENSES
Net income$40,630 $26,105 $22,869 $113,747 $92,258
Less: merger-related costs2,952 11,222 1,438 16,914 1,540
Tax provision adjustment(1,185) (4,452) (593) (6,852) (625)
Net income, excluding merger-related expense$42,397 $32,875 $23,714 $123,809 $93,173
Weighted average common shares diluted135,585,561 116,653,166 79,601,452 103,530,318 79,611,800
Core EPS excluding merger-related expenses$0.31 $0.28 $0.30 $1.20 $1.17
TANGIBLE COMMON EQUITY
Total stockholders’ equity$1,856,893 $1,854,571 $938,095
Less: Common stock warrant
Goodwill and core deposit intangible assets, net(483,674) (484,387) (108,221)
Tangible common equity$1,373,219 $1,370,184 $829,874
Total assets$13,442,488 $13,510,629 $7,912,648
Less: Goodwill and core deposit intangible assets, net(483,674) (484,387) (108,221)
Tangible assets$12,958,814 $13,026,242 $7,804,427
Common shares outstanding135,240,079 135,109,641 79,566,356
Tangible common equity to tangible assets10.60% 10.52% 10.63%
Tangible common equity per share$10.15 $10.14 $10.43


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Three Months Ended Twelve Months Ended
ALLOWANCE FOR LOAN LOSSES:12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015 12/31/2016 12/31/2015
Balance at beginning of period$79,976 $76,425 $76,856 $76,408 $71,110 $76,408 $67,758
Provision for loan losses800 6,500 1,200 500 4,900 9,000 8,000
Recoveries452 1,010 664 769 955 2,895 5,562
Charge offs(1,885) (3,959) (2,295) (821) (557) (8,960) (4,912)
Balance at end of period$79,343 $79,976 $76,425 $76,856 $76,408 $79,343 $76,408
Net charge offs/average loans receivable (annualized)0.05% 0.13% 0.10% % (0.03)% 0.07% (0.01)%
Three Months Ended Twelve Months Ended
NET CHARGED OFF/(RECOVERED) LOANS BY TYPE12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015 12/31/2016 12/31/2015
Real estate loans$(45) $(248) $18 $(390) $(254) $(665) $(1,206)
Commercial loans1,375 2,663 1,649 379 (127) 6,066 519
Consumer loans478 159 (36) 63 (17) 664 37
Charge offs excluding Acquired Credit Impaired Loans1,808 2,574 1,631 52 (398) 6,065 (650)
Charge offs on Acquired Credit Impaired Loans(375) 375
Total net charge offs / (recoveries)$1,433 $2,949 $1,631 $52 $(398) $6,065 $(650)


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
NONPERFORMING ASSETS12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Delinquent loans on nonaccrual status 3$40,074 $40,602 $42,398 $43,548 $40,801
Delinquent loans 90 days or more on accrual status 4305 192 147 45 375
Accruing restructured loans48,874 48,701 50,837 52,760 47,984
Total nonperforming loans89,253 89,495 93,382 96,353 89,160
Other real estate owned21,990 27,457 16,392 19,794 21,035
Total nonperforming assets$111,243 $116,952 $109,774 $116,147 $110,195
Nonperforming assets/total assets0.83% 0.87% 1.32% 1.44% 1.39%
Nonperforming assets/loans receivable & OREO1.05% 1.10% 1.66% 1.82% 1.76%
Nonperforming assets/total capital5.99% 6.31% 11.3% 12.07% 11.75%
Nonperforming loans/loans receivable0.85% 0.85% 1.42% 1.51% 1.43%
Nonaccrual loans/loans receivable0.38% 0.38% 0.64% 0.68% 0.65%
Allowance for loan losses/loans receivable0.75% 0.76% 1.16% 1.21% 1.22%
Allowance for loan losses/nonaccrual loans197.99% 196.98% 180.26% 176.49% 187.27%
Allowance for loan losses/nonperforming loans88.90% 89.36% 81.84% 79.77% 85.70%
Allowance for loan losses/nonperforming assets71.32% 68.38% 69.62% 66.17% 69.34%
3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $15.9 million, $14.1 million, $15.5 million, $15.4 million, and $18.7 million at December 31, 2016, September, 30, 2016, June 30, 2016, March 31, 2016, and December 31, 2015, respectively.
4 Excludes Acquired Credit Impaired Loans totaling $19.6 million, $16.4 million, $13.8 million, $13.1 million, and $12.2 million at December 31, 2016, September 30, 2016, June 30, 2016, March 31, 2016, and December 31, 2015, respectively.
BREAKDOWN OF ACCRUING RESTRUCTURED LOANS BY TYPE:12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Retail buildings$5,832 $5,876 $4,565 $4,598 $5,593
Hotels/motels1,305 1,315 1,324 1,336 1,342
Gas stations/car washes 829 835 840 845
Mixed-use facilities889 895 1,111 1,117 1,124
Warehouses5,379 5,449 5,512 5,575 5,635
Other 535,469 34,337 37,490 39,294 33,445
Total$48,874 $48,701 $50,837 $52,760 $47,984
5 Includes commercial business and other loans
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Legacy
30 - 59 days$6,254 $3,580 $2,920 $4,488 $3,104
60 - 89 days6,719 1,100 1,427 1,510 1,678
Total delinquent loans less than 90 days past due - legacy$12,973 $4,680 $4,347 $5,998 $4,782
Acquired
30 - 59 days$4,015 $3,451 $2,735 $1,456 $3,170
60 - 89 days1,049 1,168 345 47 39
Total delinquent loans less than 90 days past due - acquired$5,064 $4,619 $3,080 $1,503 $3,209
Total delinquent loans less than 90 days past due$18,037 $9,299 $7,427 $7,501 $7,991


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
DELINQUENT LOANS LESS THAN 90 DAYS PAST DUE BY TYPE12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Legacy
Real estate loans$10,896 $2,678 $2,047 $1,624 $2,179
Commercial loans2,010 1,866 2,215 1,441 1,676
Consumer loans67 136 85 2,933 927
Total delinquent loans less than 90 days past due - legacy$12,973 $4,680 $4,347 $5,998 $4,782
Acquired
Real estate loans$2,721 $3,761 $2,557 $1,189 $2,572
Commercial loans1,987 858 211 314 349
Consumer loans356 312 288
Total delinquent loans less than 90 days past due - acquired$5,064 $4,619 $3,080 $1,503 $3,209
Total delinquent loans less than 90 days past due$18,037 $9,299 $7,427 $7,501 $7,991
NONACCRUAL LOANS BY TYPE12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Real estate loans$27,523 $24,055 $25,306 $26,123 $24,375
Commercial loans11,773 15,742 16,270 16,842 15,600
Consumer loans779 805 822 583 826
Total nonaccrual loans$40,075 $40,602 $42,398 $43,548 $40,801
CRITICIZED LOANS12/31/2016 9/30/2016 6/30/2016 3/31/2016 12/31/2015
Legacy
Special mention$127,562 $168,289 $80,923 $87,025 $85,945
Substandard162,942 124,938 128,885 129,314 126,880
Doubtful95 441 108 133 20
Loss
Total criticized loans - legacy$290,599 $293,668 $209,916 $216,472 $212,845
Acquired
Special mention$116,094 $140,604 $19,447 $17,017 $18,241
Substandard148,164 131,398 67,261 71,954 74,482
Doubtful1,854 2,624 2,603 1,997 2,194
Loss (133)
Total criticized loans - acquired$266,112 $274,493 $89,311 $90,968 $94,917
Total criticized loans$556,711 $568,161 $299,227 $307,440 $307,762


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

Source:Hope Bancorp, Inc.