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Hope Bancorp Reports Record Net Income of $44.6 Million, or $0.33 EPS, for 2017 Third Quarter

Q3 2017 Highlights:

  • Net income increases 10% to a record $44.6 million, or $0.33 per diluted common share
  • Net interest margin expands 8 basis points to 3.83%
  • Expands presence in Texas with opening of second full-service branch in Houston
  • Loans receivable increase organically by $147 million to $10.96 billion, or 5% on an annualized basis
  • Total assets increase 2% to $14.15 billion, or 8% on an annualized basis

LOS ANGELES, Oct. 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 three- and nine-month periods ended September 30, 2017.

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 companies commenced operations under the new banners of Hope Bancorp, Inc. and Bank of Hope, respectively, effective July 30, 2016. The 2017 financial results reflect full quarters of combined operations. The 2016 third quarter reflects one month of stand-alone operations of the former BBCN and two months of combined operations. As a result, the Company’s financial results for the 2017 periods may not be comparable to financial results for the corresponding 2016 periods.

For the three months ended September 30, 2017, net income increased 10% to a record $44.6 million, or $0.33 per diluted common share, from $40.7 million, or $0.30 per diluted common share, for the preceding 2017 second quarter. In the year-ago 2016 third quarter during which the mergers were completed, net income amounted to $26.1 million, or $0.22 per diluted common share, and included $11.2 million in pre-tax merger-related expenses.

“We are very pleased with the many positive trends in our financial performance that resulted in record earnings of $44.6 million for the 2017 third quarter,” said Kevin S. Kim, President and Chief Executive Officer. “Net interest income before provision for loan losses increased 6%, and our net interest margin increased by 8 basis points, reflecting a full quarter’s benefit of the June 2017 interest rate increase and the strong loan growth that occurred at the tail end of the preceding quarter. Notably, our residential mortgage operations delivered its strongest quarter since the merger with consumer residential mortgage originations of $119 million. The progress that our new institutional banking group is making with attracting a new customer base and deposit relationships also appears to be quite promising. Together with a concentrated focus on expense management and a non-core, credit-related benefit, we achieved an efficiency ratio of 44.32% for the 2017 third quarter.

“A full year following our transformational merger, Bank of Hope surpassed $14 billion in assets, and I am confident that the investments we are making in our organization today will support sustainable growth and profitability for many years to come,” said Kim.

Financial Highlights

(dollars in thousands, except per share data) (unaudited)At or for the Three Months Ended
9/30/2017 6/30/2017 9/30/2016
Net income$44,564 $40,687 $26,105
Diluted earnings per share$0.33 $0.30 $0.22
Net interest income before provision for loan losses$123,263 $116,820 $103,474
Net interest margin 3.83% 3.75% 3.77%
Noninterest income$16,246 $16,115 $14,146
Noninterest expense$61,837 $64,037 $67,846
Net loans receivable$10,879,341 $10,736,345 $10,481,221
Deposits$10,993,320 $10,955,101 $10,702,505
Nonaccrual loans (1)$43,323 $47,361 $40,602
ALLL to loans receivable 0.76% 0.74% 0.76%
ALLL to nonaccrual loans (1) 193.05% 169.07% 196.98%
ALLL to nonperforming assets (1) (2) 66.51% 64.40% 68.38%
Provision for loan losses$5,400 $2,760 $6,500
Net charge offs$1,841 $1,345 $2,949
Return on assets (“ROA”) 1.30% 1.21% 0.89%
Return on equity (“ROE”) 9.26% 8.60% 6.59%
Efficiency ratio 44.32% 48.17% 57.68%

(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $21.5 million, $15.5 million and $14.1 million at September 30, 2017, June 30, 2017 and September 30, 2016, respectively.
(2) Nonperforming assets exclude purchased credit-impaired loans totaling $20.4 million, $16.3 million and $16.4 million at September 30, 2017, June 30, 2017 and September 30, 2016, respectively.

Operating Results for the 2017 Third Quarter

The comparability of the Company’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, 2017, June 30, 2017 and September 30, 2016 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
9/30/2017 6/30/2017 9/30/2016
Accretion on purchased non-impaired loans$4,566 $3,501 $3,111
Accretion on purchased credit-impaired loans 5,389 5,212 1,673
Amortization of premium on low income housing tax credits (84) (85) (54)
Amortization of premium on acquired FHLB borrowings 357 446 1,940
Accretion of discount on acquired subordinated debt (262) (261) (190)
Amortization of premium on acquired time deposits and savings 206 1,218 2,336
Amortization of core deposit intangibles (676) (676) (565)
Total acquisition accounting adjustments$9,496 $9,355 $8,251
Merger-related expenses (260) (562) (11,222)
Total$9,236 $8,793 $(2,971)

Net Interest Income. Net interest income before provision for loan losses for the 2017 third quarter increased 6% to $123.3 million from $116.8 million in the immediately preceding second quarter, predominantly reflecting higher levels of interest and fee income on larger loan and securities portfolios, as well as an 18 basis point increase in the average loan yield. In the year-ago third quarter, net interest income before provision for loan losses amounted to$103.5 million.

The net interest margin (net interest income divided by average interest earning assets) for the 2017 third quarter increased 8 basis points to 3.83% from 3.75% in the 2017 second quarter and increased 6 basis points from 3.77% in the year-ago third quarter.

The weighted average yield on loans for the 2017 third quarter increased to 5.07% from 4.89% in the 2017 second quarter, reflecting a full quarter’s benefit from the June 2017 rate increase. Compared with the 2016 third quarter, the weighted average yield on loans increased 27 basis points.

The weighted average yield on new loans originated was 4.40% for the 2017 third quarter, compared with 4.56% in the preceding 2017 second quarter and 4.03% in the year-ago third quarter.

The weighted average cost of deposits for the 2017 third quarter increased 7 basis points to 0.75% from 0.68% in the 2017 second quarter and increased 19 basis points from the year-ago third quarter.

Noninterest Income. Noninterest income for the 2017 third quarter increased 1% to $16.2 million from $16.1 million in the 2017 second quarter. Compared with the immediately preceding 2017 second quarter, net gains on sales of SBA loans increased to $3.6 million from $3.3 million, and net gains on sales of residential mortgage loans increased to $847,000 from $352,000. These increases were largely offset by lower levels of swap fee income and recoveries on acquired charged off loans versus the 2017 second quarter. Compared with the 2016 third quarter, noninterest income increased 15% from $14.1 million, largely reflecting a nominal gain on sales of SBA loans of only $230,000.

Noninterest Expense. Noninterest expense declined 3% to $61.8 million in the 2017 third quarter from $64.0 million in the 2017 second quarter, largely reflecting a $2.8 million reversal of an off-balance sheet provision for unfunded loan commitments, partially offset by increased compensation expense. In the 2016 third quarter, total noninterest expense amounted to $67.8 million and included merger-related expenses of $11.2 million in the quarter that the merger of equals was completed.

Salaries and employee benefits expense for the 2017 third quarter increased 3% to $36.0 million from $34.9 million for the immediately preceding second quarter and increased 18% from $30.5 million in the year-ago third quarter. The total number of FTEs, excluding employees on leave, as of September 30, 2017 was 1,463, up from 1,378 as of June 30, 2017 and 1,400 as of September 30, 2016.

Income Tax Provision. The effective tax rate for the 2017 third quarter was 38.3%, compared with 38.5% for the preceding 2017 second quarter and 39.7% for the third quarter a year ago.

Balance Sheet Summary

Loans receivable increased by $146.6 million to $10.96 billion at September 30, 2017 from $10.82 billion at June 30, 2017, reflecting a 5% annualized growth rate. At September 30, 2016, loans receivable were $10.56 billion.

Total new loan originations during the 2017 third quarter amounted to $610.9 million and included SBA loan production of $67.9 million and residential mortgage loan originations of $119.9 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. SBA 7(a) loan originations totaled $49.7 million for the third quarter of 2017, compared with $65.5 million for the second quarter of 2017 and $50.2 million for the year-ago third quarter. During the 2017 third quarter, the Company sold $49.9 million of its SBA loans held for sale, compared with $46.1 million in the immediately preceding second quarter and $2.4 million in the third quarter a year ago.

Aggregate pay offs and pay downs in the 2017 third quarter amounted to $447.6 million, compared with $432.1 million for the immediately preceding second quarter. In the year-ago third quarter, aggregate pay offs and paydowns totaled $357.0 million.

Total deposits at September 30, 2017 increased to $10.99 billion from $10.95 billion at June 30, 2017 and from $10.70 billion at September 30, 2016. Noninterest bearing demand deposits trended positively and accounted for 27.7%, 27.5% and 27.1% of total deposits as of September 30, 2017, June 30, 2017 and September 30, 2016, respectively.

Credit Quality

The provision for loan and lease losses for the 2017 third quarter was $5.4 million, compared with $2.8 million for the immediately preceding second quarter and $6.5 million for the year-ago 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, 2017, June 30, 2017 and September 30, 2016 is as follows:

(dollars in thousands) (unaudited)9/30/2017 6/30/2017 9/30/2016
Legacy loans (1)$70,282 $65,255 $66,986
Purchased non-impaired loans (2) 2,740 2,753 938
Purchased credit-impaired loans (2) 10,611 12,066 12,052
Total ALLL$83,633 $80,074 $79,976
Loans receivable$10,962,974 $10,816,419 $10,561,197
ALLL coverage ratio 0.76% 0.74% 0.76%

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

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, 2017 declined to $43.3 million, or 0.40% of loans receivable, from $47.4 million, or 0.44% of loans receivable, at June 30, 2017. At September 30, 2016, nonaccrual loans amounted to $40.6 million, or 0.38% of loans receivable. Accruing restructured loans totaled $64.8 million at September 30, 2017, compared with $53.3 million at June 30, 2017 and $48.7 million at September 30, 2016. Total nonperforming loans at September 30, 2017 increased to $108.5 million, or 0.99% of loans receivable, from $102.5 million, or 0.95% of loans receivable, at June 30, 2017 and $89.5 million, or 0.85% of loans receivable, at September 30, 2016.

Nonperforming assets, including nonperforming loans and OREO, increased to $125.7 million at September 30, 2017 from $124.3 million at June 30, 2017 and $117.0 million at September 30, 2016. As a percentage of total assets, nonperforming assets was 0.89% at September 30, 2017, 0.90% at June 30, 2017 and 0.87% at September 30, 2016.

Following are the components of criticized loan balances as of September 30, 2017, June 30, 2017 and September 30, 2016:

(dollars in thousands) (unaudited)9/30/2017 6/30/2017 9/30/2016
Special Mention (1)$225,228 $251,056 $308,893
Classified (1) 348,109 315,441 259,268
Criticized$573,337 $566,498 $568,161

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

Criticized loan balances as of September 30, 2017 were relatively stable when compared with the preceding second quarter and year-ago third quarter. The variance in the criticized loan balance from the 2017 second quarter reflects the migration of loans from special mention to classified, which has been accounted for in the provision for loan losses for the 2017 third quarter.

For the 2017 third quarter, net charge offs totaled $1.8 million, or 0.07% of average loans receivable on an annualized basis. This compares with 2017 second quarter net charge offs of $1.3 million, or 0.05% of average loans receivable on an annualized basis, and $2.9 million, or 0.13% of average loans receivable on an annualized basis, for the year-ago third quarter.

The ALLL at September 30, 2017 was $83.6 million, or 0.76% of loans receivable (excluding loans held for sale), compared with $80.1 million, or 0.74% of loans receivable (excluding loans held for sale), at June 30, 2017 and $80.0 million, or 0.76% of loans receivable (excluding loans held for sale), at September 30, 2016. The coverage ratio of the ALLL to nonperforming loans (excluding purchased credit-impaired loans) was 77.05% at September 30, 2017, compared with 78.12% at June 30, 2017 and 89.36% at September 30, 2016.

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 $108.5 million at September 30, 2017, compared with $100.7 million at June 30, 2017 and $128.1 million at September 30, 2016.

Capital

At September 30, 2017, the Company continued to exceed all regulatory capital requirements to be generally classified as a “well-capitalized” financial institution, as summarized in the following table:

9/30/2017 6/30/2017 9/30/2016 Minimum Guideline
for “Well-Capitalized”
Institution
Common Equity Tier 1 Capital12.29% 12.18% 11.96% 6.50%
Tier 1 Leverage Ratio11.78% 11.80% 13.02% 5.00%
Tier 1 Risk-based Ratio13.10% 13.00% 12.79% 8.00%
Total Risk-based Ratio13.81% 13.70% 13.51% 10.00%

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

9/30/2017 6/30/2017 9/30/2016
Tangible common equity per share (1)$10.72 $10.52 $10.14
Tangible common equity to tangible assets (1) 10.63% 10.64% 10.52%

(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 to total assets.

Investor Conference Call

The Company will host an investor conference call on Wednesday, October 25, 2017 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for the third quarter ended September 30, 2017. 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. By including the foregoing website address, the Company does not intend to and shall not be deemed to incorporate by reference any material contained therein. 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 November 1, 2017, replay access code 10112701.

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 $14.2 billion in total assets as of September 30, 2017. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 64 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. By including the foregoing website address, the registrant does not intent to and shall not be deemed to incorporate by reference any material contained therein.

Forward-Looking Statements

Some statements in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market, and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. Our actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: the Company’s inability to remediate its presently identified material weaknesses or to do so in a timely manner, the possibility that additional material weaknesses may arise in the future, and that a material weakness may have an impact on our reported financial results; possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; and regulatory risks associated with current and future regulations. For additional information concerning these and other risk factors, see Part I, Item 1A. Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2016 and Part II, Item 1A., Risk Factors, contained in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017. The Company does not undertake, and specifically disclaims any obligation, to update any forward looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law

(tables follow)

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
Assets9/30/2017 6/30/2017 % change 12/31/2016 % change 9/30/2016 % change
Cash and due from banks$405,296 $446,415 (9)% $437,334 (7)% $443,903 (9)%
Securities available for sale, at fair value1,868,309 1,680,382 11% 1,556,740 20% 1,558,719 20%
Federal Home Loan Bank (“FHLB”), Federal Reserve Bank (“FRB”) stock and other investments82,141 66,313 24% 66,166 24% 69,119 19%
Loans held for sale, at the lower of cost or fair value11,425 16,927 (33)% 22,785 (50)% 58,186 (80)%
Loans receivable10,962,974 10,816,419 1% 10,543,332 4% 10,561,197 4%
Allowance for loan losses(83,633) (80,074) (4)% (79,343) (5)% (79,976) (5)%
Net loans receivable10,879,341 10,736,345 1% 10,463,989 4% 10,481,221 4%
Accrued interest receivable29,145 25,640 14% 26,880 8% 24,165 21%
Premises and equipment, net55,838 52,565 6% 55,316 1% 53,966 3%
Bank owned life insurance74,514 74,113 1% 73,696 1% 73,290 2%
Goodwill464,450 464,450 % 462,997 % 464,419 %
Servicing assets25,079 25,338 (1)% 26,457 (5)% 26,529 (5)%
Other intangible assets, net17,198 17,874 (4)% 19,226 (11)% 19,968 (14)%
Other assets237,285 252,855 (6)% 229,836 3% 237,144 %
Total assets14,150,021 13,859,217 2% 13,441,422 5% 13,510,629 5%
Liabilities
Deposits$10,993,320 $10,955,101 % $10,642,035 3% $10,702,505 3%
Borrowings from FHLB1,018,046 793,403 28% 754,290 35% 754,739 35%
Subordinated debentures100,590 100,328 % 99,808 1% 99,548 1%
Accrued interest payable13,740 11,855 16% 10,863 26% 9,708 42%
Other liabilities89,894 92,236 (3)% 78,953 14% 89,558 %
Total liabilities12,215,590 11,952,923 2% 11,585,949 5% 11,656,058 5%
Stockholders’ Equity
Common stock, $0.001 par value; authorized, 150,000,000 shares at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016$135 $135 % $135 % $135 %
Capital surplus1,403,586 1,402,303 % 1,400,490 % 1,400,915 %
Retained earnings540,921 513,945 5% 469,505 15% 445,104 22%
Accumulated other comprehensive income (loss), net(10,211) (10,089) (1)% (14,657) 30% 8,417 (221)%
Total stockholders’ equity1,934,431 1,906,294 1% 1,855,473 4% 1,854,571 4%
Total liabilities and stockholders’ equity$14,150,021 $13,859,217 2% $13,441,422 5% $13,510,629 5%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
Three Months Ended Nine Months Ended
9/30/2017 6/30/2017 % change 9/30/2016 % change 9/30/2017 9/30/2016 % change
Interest income:
Interest and fees on loans$136,822 $128,515 6% $112,132 22% $388,631 $266,336 46%
Interest on securities9,540 8,741 9% 6,645 44% 26,394 18,051 46%
Interest on federal funds sold and other investments1,281 1,277 % 775 65% 3,894 2,160 80%
Total interest income147,643 138,533 7% 119,552 23% 418,919 286,547 46%
Interest expense:
Interest on deposits20,376 18,114 12% 13,017 57% 53,001 33,276 59%
Interest on other borrowings4,004 3,599 11% 3,061 31% 10,930 7,125 53%
Total interest expense24,380 21,713 12% 16,078 52% 63,931 40,401 58%
Net interest income before provision for loan losses123,263 116,820 6% 103,474 19% 354,988 246,146 44%
Provision for loan losses5,400 2,760 96% 6,500 (17)% 13,760 8,200 68%
Net interest income after provision for loan losses117,863 114,060 3% 96,974 22% 341,228 237,946 43%
Noninterest income:
Service fees on deposit accounts5,151 5,179 (1)% 4,778 8% 15,668 10,363 51%
Net gains on sales of SBA loans3,631 3,267 11% 230 1,479% 10,148 5,090 99%
Net gains on sales of other loans847 352 141% 1,476 (43)% 1,619 1,519 7%
Net gains on sales of securities available for sale % 948 (100)% 948 (100)%
Other income and fees6,617 7,317 (10)% 6,714 (1)% 22,529 15,707 43%
Total noninterest income16,246 16,115 1% 14,146 15% 49,964 33,627 49%
Noninterest expense:
Salaries and employee benefits35,987 34,946 3% 30,456 18% 105,099 73,782 42%
Occupancy7,131 7,154 % 6,889 4% 21,479 16,626 29%
Furniture and equipment3,642 3,556 2% 3,297 10% 10,611 7,921 34%
Advertising and marketing2,217 2,394 (7)% 2,306 (4)% 8,035 4,845 66%
Data processing and communications3,221 2,676 20% 3,199 1% 9,503 7,499 27%
Professional fees3,239 3,260 (1)% 1,898 71% 10,401 4,255 144%
FDIC assessment1,262 1,004 26% 1,564 (19)% 3,276 3,697 (11)%
Credit related expenses(2,487) 113 N/A 810 N/A (491) 2,142 N/A
Other real estate owned (“OREO”) expense, net678 1,188 (43)% (423) N/A 2,863 1,138 152%
Merger-related expenses260 562 (54)% 11,222 (98)% 1,769 13,962 (87)%
Other6,687 7,184 (7)% 6,628 1% 21,028 12,377 70%
Total noninterest expense61,837 64,037 (3)% 67,846 (9)% 193,573 148,244 31%
Income before income taxes72,272 66,138 9% 43,274 67% 197,619 123,329 60%
Income tax provision27,708 25,451 9% 17,169 61% 76,158 50,212 52%
Net income$44,564 $40,687 10% $26,105 71% $121,461 $73,117 66%
Earnings Per Common Share:
Basic$0.33 $0.30 $0.22 $0.90 $0.80
Diluted$0.33 $0.30 $0.22 $0.90 $0.79
Average Shares Outstanding:
Basic135,382,457 135,257,044 116,622,920 135,296,332 91,940,070
Diluted135,630,912 135,613,181 116,951,074 135,661,965 92,266,245


Hope Bancorp, Inc.
Selected Financial Data
Unaudited
For the Three Months Ended
(Annualized)
For the Nine Months Ended
(Annualized)
Profitability measures:9/30/2017 6/30/2017 9/30/2016 9/30/2017 9/30/2016
ROA1.30% 1.21% 0.89% 1.20% 1.05%
ROE9.26% 8.60% 6.59% 8.54% 8.35%
Return on average tangible equity 112.36% 11.54% 8.59% 11.46% 10.03%
Net interest margin3.83% 3.75% 3.77% 3.78% 3.76%
Efficiency ratio44.32% 48.17% 57.68% 47.80% 52.99%
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
9/30/2017 6/30/2017 9/30/2016
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$10,712,856 $136,822 5.07% $10,536,428 $128,515 4.89% $9,292,814 $112,132 4.80%
Securities available for sale1,743,610 9,540 2.17% 1,609,310 8,741 2.18% 1,406,919 6,645 1.89%
FRB and FHLB stock and other investments299,305 1,281 1.70% 364,906 1,277 1.40% 237,981 775 1.30%
Total interest earning assets$12,755,771 $147,643 4.59% $12,510,644 $138,533 4.44% $10,937,714 $119,552 4.35%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing$3,526,846 $8,127 0.91% $3,457,412 $7,974 0.93% $2,924,340 $5,932 0.81%
Savings258,383 348 0.53% 280,188 279 0.40% 268,424 311 0.46%
Time deposits4,053,577 11,901 1.16% 4,012,838 9,861 0.99% 3,600,400 6,774 0.75%
Total interest bearing deposits7,838,806 20,376 1.03% 7,750,438 18,114 0.94% 6,793,164 13,017 0.76%
FHLB advances764,691 2,698 1.40% 713,858 2,338 1.31% 698,081 2,161 1.23%
Other borrowings96,524 1,306 5.29% 96,218 1,261 5.18% 78,828 900 4.47%
Total interest bearing liabilities8,700,021 $24,380 1.11% 8,560,514 $21,713 1.02% 7,570,073 $16,078 0.84%
Noninterest bearing demand deposits2,993,441 2,929,656 2,535,015
Total funding liabilities/cost of funds$11,693,462 0.83% $11,490,170 0.76% $10,105,088 0.63%
Net interest income/net interest spread $123,263 3.48% $116,820 3.42% $103,474 3.51%
Net interest margin 3.83% 3.75% 3.77%
Cost of deposits:
Noninterest bearing demand deposits$2,993,441 $2,929,656 $2,535,015
Interest bearing deposits7,838,806 20,376 1.03% 7,750,438 18,114 0.94% 6,793,164 13,017 0.76%
Total deposits$10,832,247 $20,376 0.75% $10,680,094 $18,114 0.68% $9,328,179 $13,017 0.56%

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Nine Months Ended Nine Months Ended
9/30/2017 9/30/2016
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$10,544,898 $388,631 4.93% $7,347,740 $266,336 4.84%
Securities available for sale1,640,784 26,394 2.15% 1,171,816 18,051 2.06%
FRB and FHLB stock and other investments362,265 3,894 1.44% 230,993 2,160 1.25%
Total interest earning assets$12,547,947 $418,919 4.46% $8,750,549 $286,547 4.37%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing$3,474,077 $23,291 0.90% $2,310,000 $14,083 0.81%
Savings277,264 914 0.44% 211,255 962 0.61%
Time deposits4,025,360 28,796 0.96% 2,916,868 18,231 0.83%
Total interest bearing deposits7,776,701 53,001 0.91% 5,438,123 33,276 0.82%
FHLB advances714,048 $7,176 1.34% 598,672 5,370 1.20%
Other borrowings96,220 3,754 5.14% 53,593 1,755 4.30%
Total interest bearing liabilities8,586,969 $63,931 1.00% 6,090,388 $40,401 0.89%
Noninterest bearing demand deposits2,930,937 1,947,673
Total funding liabilities/cost of funds$11,517,906 0.74% $8,038,061 0.67%
Net interest income/net interest spread $354,988 3.46% $246,146 3.48%
Net interest margin 3.78% 3.76%
Cost of deposits:
Noninterest bearing demand deposits$2,930,937 $1,947,673
Interest bearing deposits7,776,701 53,001 0.91% 5,438,123 33,276 0.82%
Total deposits$10,707,638 $53,001 0.66% $7,385,796 $33,276 0.60%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Three Months Ended Nine Months Ended
AVERAGE BALANCES:9/30/2017 6/30/2017 % change 9/30/2016 % change 9/30/2017 9/30/2016 % change
Loans receivable, including loans held for sale$10,712,856 $10,536,428 2% $9,292,814 15% $10,544,898 $7,347,740 44%
Investments2,042,915 1,974,216 3% 1,644,900 24% 2,003,049 1,402,809 43%
Interest earning assets12,755,771 12,510,644 2% 10,937,714 17% 12,547,947 8,750,549 43%
Total assets13,737,532 13,470,745 2% 11,777,564 17% 13,516,139 9,279,438 46%
Interest bearing deposits7,838,806 7,750,438 1% 6,793,164 15% 7,776,701 5,438,123 43%
Interest bearing liabilities8,700,021 8,560,514 2% 7,570,073 15% 8,586,969 6,090,388 41%
Noninterest bearing demand deposits2,993,441 2,929,656 2% 2,535,015 18% 2,930,937 1,947,673 50%
Stockholders’ equity1,924,444 1,892,126 2% 1,585,100 21% 1,895,393 1,167,747 62%
Net interest earning assets4,055,750 3,950,130 3% 3,367,641 20% 3,960,978 2,660,161 49%
LOAN PORTFOLIO COMPOSITION:9/30/2017 6/30/2017 % change 12/31/2016 % change 9/30/2016 % change
Commercial loans$2,005,290 $1,925,503 4% $1,986,949 (3)% $2,011,913 %
Real estate loans8,438,064 8,432,395 % 8,154,570 3% 8,158,871 3%
Consumer and other loans521,459 460,446 13% 403,470 14% 392,608 33%
Loans outstanding10,964,813 10,818,344 1% 10,544,989 3% 10,563,392 4%
Unamortized deferred loan fees - net of costs(1,839) (1,925) 4% (1,657) (11)% (2,195) 16%
Loans, net of deferred loan fees and costs10,962,974 10,816,419 1% 10,543,332 3% 10,561,197 4%
Allowance for loan losses(83,633) (80,074) (4)% (79,343) (5)% (79,976) (5)%
Loan receivable, net$10,879,341 $10,736,345 1% $10,463,989 3% $10,481,221 4%
REAL ESTATE LOANS BY PROPERTY TYPE:9/30/2017 6/30/2017 % change 12/31/2016 % change 9/30/2016 % change
Retail buildings$2,314,867 $2,260,091 2% $2,163,075 4% $2,136,128 8%
Hotels/motels1,595,787 1,606,334 (1)% 1,605,787 % 1,599,985 %
Gas stations/car washes979,378 973,266 1% 946,364 3% 962,643 2%
Mixed-use facilities614,255 605,379 1% 563,484 7% 546,177 12%
Warehouses913,217 929,034 (2)% 892,100 4% 912,818 %
Multifamily435,088 433,414 % 423,084 2% 426,257 2%
Other1,585,472 1,624,877 (2)% 1,560,676 4% 1,574,863 1%
Total$8,438,064 $8,432,395 % $8,154,570 3% $8,158,871 3%
DEPOSIT COMPOSITION9/30/2017 6/30/2017 % change 12/31/2016 % change 9/30/2016 % change
Noninterest bearing demand deposits$3,049,998 $3,016,538 1% $2,900,241 5% $2,903,658 5%
Money market and other3,685,973 3,563,404 3% 3,401,446 8% 3,318,728 11%
Saving deposits243,042 275,272 (12)% 301,906 (19)% 304,719 (20)%
Time deposits of $250,000 or more1,252,747 1,127,941 11% 1,077,024 16% 1,075,020 17%
Other time deposits2,761,560 2,971,946 (7)% 2,961,418 (7)% 3,100,380 (11)%
Total deposit balances$10,993,320 $10,955,101 % $10,642,035 3% $10,702,505 3%
DEPOSIT COMPOSITION (%)9/30/2017 6/30/2017 12/31/2016 9/30/2016
Noninterest bearing demand deposits27.7% 27.5% 27.3% 27.1%
Money market and other33.5% 32.5% 32.0% 31.0%
Saving deposits2.2% 2.5% 2.8% 2.9%
Time deposits of $250,000 or more11.4% 10.3% 10.1% 10.0%
Other time deposits25.2% 27.2% 27.8% 29.0%
Total deposit balances100.0% 100.0% 100.0% 100.0%


Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
CAPITAL RATIOS:9/30/2017 6/30/2017 12/31/2016 9/30/2016
Total stockholders’ equity$1,934,431 $1,906,294 $1,855,473 $1,854,571
Common Equity Tier 1 ratio12.29% 12.18% 12.10% 11.96%
Tier 1 risk-based capital ratio13.10% 13.00% 12.92% 12.79%
Total risk-based capital ratio13.81% 13.70% 13.64% 13.51%
Tier 1 leverage ratio11.78% 11.80% 11.49% 13.02%
Total risk weighted assets$11,935,561 $11,814,607 11,575,944 11,491,204
Book value per common share$14.28 $14.09 $13.72 $13.73
Tangible common equity to tangible assets 210.63% 10.64% 10.60% 10.52%
Tangible common equity per share 2$10.72 $10.52 $10.15 $10.14
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
9/30/2017 6/30/2017 9/30/2016
TANGIBLE COMMON EQUITY
Total stockholders’ equity$1,934,431 $1,906,294 $1,854,571
Less: Goodwill and core deposit intangible assets, net(481,648) (482,324) (484,387)
Tangible common equity$1,452,783 $1,423,970 $1,370,184
Total assets$14,150,021 $13,859,217 $13,510,629
Less: Goodwill and core deposit intangible assets, net(481,648) (482,324) (484,387)
Tangible assets$13,668,373 $13,376,893 $13,026,242
Common shares outstanding135,467,176 135,297,678 135,109,641
Tangible common equity to tangible assets10.63% 10.64% 10.52%
Tangible common equity per share10.72 $10.52 $10.14


Three Months Ended Nine Months Ended
ALLOWANCE FOR LOAN LOSSES:9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016 9/30/2017 9/30/2016
Balance at beginning of period$80,074 $78,659 $79,343 $79,976 $76,425 $79,343 $76,408
Provision for loan losses5,400 2,760 5,600 800 6,500 13,760 8,200
Recoveries3,072 777 321 452 1,009 4,170 2,443
Charge offs(4,913) (2,122) (6,605) (1,885) (3,958) (13,640) (7,075)
Balance at end of period$83,633 $80,074 $78,659 $79,343 $79,976 $83,633 $79,976
Net charge offs/average loans receivable (annualized)0.07% 0.05% 0.24% 0.05% 0.13% 0.07% 0.13%
Three Months Ended Nine Months Ended
NET CHARGED OFF (RECOVERED) LOANS BY TYPE:9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016 9/30/2017 9/30/2016
Real estate loans$314 $830 $1,444 $(45) $127 $2,588 $(245)
Commercial loans1,293 276 4,564 1,000 2,663 6,133 4,691
Consumer loans234 239 276 478 159 749 186
Total net charge offs$1,841 $1,345 $6,284 $1,433 $2,949 $9,470 $4,632

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
NONPERFORMING ASSETS9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Delinquent loans on nonaccrual status 3$43,323 $47,361 $37,009 $40,074 $40,602
Delinquent loans 90 days or more on accrual status 4407 1,850 275 305 192
Accruing troubled debt restructured loans64,807 53,290 48,984 48,874 48,701
Total nonperforming loans108,537 102,501 86,268 89,253 89,495
Other real estate owned17,208 21,839 19,096 21,990 27,457
Total nonperforming assets$125,745 $124,340 $105,364 $111,243 $116,952
Nonperforming assets/total assets0.89% 0.90% 0.78% 0.83% 0.87%
Nonperforming assets/loans receivable & OREO1.15% 1.15% 1.00% 1.05% 1.10%
Nonperforming assets/total capital6.50% 6.52% 5.61% 6.00% 6.31%
Nonperforming loans/loans receivable0.99% 0.95% 0.82% 0.85% 0.85%
Nonaccrual loans/loans receivable0.40% 0.44% 0.35% 0.38% 0.38%
Allowance for loan losses/loans receivable0.76% 0.74% 0.75% 0.75% 0.76%
Allowance for loan losses/nonaccrual loans193.05% 169.07% 212.54% 197.99% 196.98%
Allowance for loan losses/nonperforming loans77.05% 78.12% 91.18% 88.90% 89.36%
Allowance for loan losses/nonperforming assets66.51% 64.40% 74.65% 71.32% 68.38%
3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $21.5 million, $15.5 million, $15.2 million, $15.9 million, and $14.1 million, at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively.
4 Excludes Acquired Credit Impaired Loans that are delinquent 90 or more days totaling $20.4 million, $16.3 million, $17.3 million, $19.6 million, and $16.4 million, at September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016, and September 30, 2016, respectively.
BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS BY TYPE:9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Retail buildings$6,807 $6,396 $5,794 $5,832 $5,876
Hotels/motels1,279 1,287 1,300 1,305 1,315
Gas stations/car washes 829
Mixed-use facilities131 133 134 889 895
Warehouses5,185 5,253 5,321 5,379 5,449
Other 551,405 40,221 36,435 35,469 34,337
Total$64,807 $53,290 $48,984 $48,874 $48,701
5 Includes commercial business and other loans
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Legacy
30 - 59 days$8,857 $5,910 $10,198 $6,253 $3,580
60 - 89 days3,572 11,740 3,978 6,720 1,100
Total$12,429 $17,650 $14,176 $12,973 $4,680
Acquired
30 - 59 days$1,429 $6,373 $5,249 $4,015 $3,450
60 - 89 days1,687 996 1,007 1,049 1,169
Total$3,116 $7,369 $6,256 $5,064 $4,619
Total delinquent loans 30-89 days past due$15,545 $25,019 $20,432 $18,037 $9,299

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Legacy
Real estate loans$7,850 $14,126 $12,575 $10,896 $2,678
Commercial loans3,771 3,333 1,404 2,010 1,866
Consumer loans808 191 198 67 136
Total delinquent loans 30-89 days past due - legacy$12,429 $17,650 $14,177 $12,973 $4,680
Acquired
Real estate loans$2,323 $5,786 $5,211 $2,721 $3,761
Commercial loans793 1,519 360 1,987 858
Consumer loans 64 684 356
Total delinquent loans 30-89 days past due - acquired$3,116 $7,369 $6,255 $5,064 $4,619
Total delinquent loans 30-89 days past due$15,545 $25,019 $20,432 $18,037 $9,299
NONACCRUAL LOANS BY TYPE9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Real estate loans$31,453 $33,503 $26,550 $27,522 $24,055
Commercial loans10,682 12,874 10,117 11,773 15,742
Consumer loans1,188 984 342 779 805
Total nonaccrual loans$43,323 $47,361 $37,009 $40,074 $40,602
CRITICIZED LOANS9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Legacy
Special mention$131,785 $152,373 $127,431 $127,562 $168,289
Substandard197,993 177,097 167,748 162,942 124,938
Doubtful216 2,208 233 95 441
Loss
Total criticized loans - legacy$329,994 $331,678 $295,412 $290,599 $293,668
Acquired
Special mention$93,443 $98,684 $98,536 $116,094 $140,604
Substandard148,615 134,474 139,964 148,164 131,398
Doubtful1,285 1,660 2,051 1,854 2,624
Loss (133)
Total criticized loans - acquired$243,343 $234,818 $240,551 $266,112 $274,493
Total criticized loans$573,337 $566,496 $535,963 $556,711 $568,161


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

Source:Hope Bancorp, Inc.