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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Hope Bancorp Inc | NASDAQ:HOPE | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.52 | -3.85% | 13.00 | 12.00 | 13.00 | 13.59 | 12.925 | 13.46 | 1,864,266 | 00:59:59 |
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 six-month periods ended June 30, 2020.
For the three months ended June 30, 2020, net income totaled $26.8 million, or $0.22 per diluted common share, compared with $26.0 million, or $0.21 per diluted common share for the 2020 first quarter. In the year-ago second quarter, net income totaled $42.7 million, or $0.34 per diluted common share.
“The second quarter of 2020 represented the most challenging operating environment in the history of our Bank, with the COVID-19 crisis exacerbated by the aggregate 150 basis point reduction in the Fed Funds rate in March and the mounting social justice movement across the nation,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “Notwithstanding these strong headwinds, I am proud of how the entire Bank of Hope team came together and has been managing through this difficult period. We delivered solid loan production, significant core deposit growth and positive deposit cost trends, as well as meaningful cost reductions. We also supported many of our customers impacted by COVID-19 with modifications under the CARES Acts during the quarter and maintained relatively stable asset quality metrics. While our net interest margin was heavily impacted by the rate cuts, as well as a buildup of our liquidity and resulting excess cash balances, we believe this quarter represents the trough. Going forward, we expect stable loan yields, continued reductions in our deposit costs and the deployment of excess cash balances will lead to an expansion of our net interest margin in the coming quarters.
“We are in the late stages of developing additional initiatives in light of the new normal designed to restructure our balance sheet and contain expenses to further optimize our operational performance. We believe the near-term implementation of these initiatives will lead to improved profitability as we progress through the year and beyond. With our robust capital and liquidity positions, as well as the successes achieved to date with our deposit initiatives, we have great confidence in our ability to navigate through this new landscape and emerge as an even stronger regional bank to support the financial needs of our customers and communities and deliver greater value to our shareholders.”
Q2 2020 Highlights
Financial Highlights
(dollars in thousands, except per share data) (unaudited)
At or for the Three Months Ended
6/30/2020
3/31/2020
6/30/2019
Net income
$
26,753
$
25,953
$
42,681
Diluted earnings per share
$
0.22
$
0.21
$
0.34
Net interest income before provision for credit losses
$
109,814
$
119,291
$
117,221
Net interest margin
2.79
%
3.31
%
3.31
%
Noninterest income
$
11,240
$
13,264
$
12,287
Noninterest expense
$
67,030
$
72,140
$
71,371
Net loans receivable
$
12,710,063
$
12,438,493
$
11,883,068
Deposits
$
14,123,532
$
12,836,567
$
12,172,384
Total cost of deposits
0.87
%
1.34
%
1.62
%
Nonaccrual loans (1) (2)
$
82,137
$
72,639
$
64,934
Nonperforming loans to loans receivable (1) (2)
1.06
%
0.93
%
0.89
%
ACL to loans receivable (3)
1.26
%
1.15
%
0.79
%
ACL to nonaccrual loans (1) (2) (3)
196.95
%
199.51
%
144.86
%
ACL to nonperforming assets (1) (2) (3)
102.95
%
103.62
%
84.24
%
Provision for credit losses
$
17,500
$
28,000
$
1,200
Net charge offs
$
652
$
3,421
$
1,351
Return on average assets (“ROA”)
0.64
%
0.67
%
1.12
%
Return on average equity (“ROE”)
5.31
%
5.12
%
8.71
%
Return on average tangible common equity (“ROTCE”) (4)
6.94
%
6.69
%
11.51
%
Noninterest expense / average assets
1.60
%
1.87
%
1.88
%
Efficiency ratio
55.37
%
54.42
%
55.11
%
(1)
Excludes delinquent SBA loans that are guaranteed and currently in liquidation.
(2)
Excludes purchased credit impaired (“PCI”) loans for June 30, 2019.
(3)
Allowance for credit losses for current-year periods were calculated under the CECL methodology while allowance for loan losses for the prior-year period was calculated under the incurred loss methodology.
(4)
Return on average tangible common equity is a non-GAAP financial measure. A reconciliation of the Company’s return on average tangible common equity is provided in the accompanying financial information on Table Page 10.
Operating Results for the 2020 Second Quarter
Net interest income before provision for credit losses for the 2020 second quarter totaled $109.8 million, compared with $119.3 million in the 2020 first quarter. The decrease primarily reflects a full quarter’s impact of the aggregate 150 basis point decrease in the Fed Funds rate in March 2020, along with a large payoff of an acquired loan that contributed $5.6 million in purchase accounting discount accretion in the first quarter of 2020. Net interest income before provision for credit losses amounted to $117.2 million in the year-ago second quarter.
The net interest margin for the 2020 second quarter decreased 52 basis points to 2.79% from 3.31% in the preceding first quarter and was primarily impacted by the Fed Funds rate reductions and a significant increase in lower-yielding cash balances as the Company temporarily increased its excess liquidity as a precautionary measure in light of the COVID-19 pandemic. In addition, the large payoff mentioned above benefited the 2020 first quarter net interest margin by 16 basis points. The net interest margin for the 2019 second quarter was 3.31%.
The weighted average yield on loans for the 2020 second quarter decreased 83 basis points to 4.23% from 5.06% in the 2020 first quarter, reflecting the repricing of variable rate loans in the Company’s portfolio as a result of the 150 basis point reduction in the Fed Funds rate. In the year-ago second quarter, the weighted average yield on loans was 5.32%.
The weighted average cost of deposits for the 2020 second quarter decreased 47 basis points to 0.87% from 1.34% for the 2020 first quarter and decreased 75 basis points from 1.62% for the year-ago second quarter. The significant improvements in the weighted average cost of deposits reflects the Company’s ongoing success with its initiative to enhance its deposit mix to favor lower-cost core deposits.
Noninterest income totaled $11.2 million for the 2020 second quarter, compared with $13.3 million for the preceding first quarter and $12.3 million for the 2019 second quarter. The Company noted a 38% reduction in service fees on deposit accounts as transaction volumes decreased significantly in the midst of the COVID-19 related lockdowns. In addition, the net gains on sales of other loans in the preceding first quarter included gains from a bulk sale of residential mortgage loans, together with sales of new residential mortgage originations.
Noninterest expense for the 2020 second quarter declined 7% to $67.0 million from $72.1 million in the preceding first quarter, with reductions in compensation expense and professional fees being the largest factors driving the improvement. In the year-ago second quarter, noninterest expense totaled $71.4 million. Noninterest expense as a percentage of average assets for the 2020 second quarter improved to 1.60% from 1.87% for the 2020 first quarter and 1.88% for the 2019 second quarter.
Salaries and employee benefits expense for the 2020 second quarter decreased 9% to $38.9 million from $42.5 million for the 2020 first quarter. The Company noted that PPP loan origination costs of $5.2 million was a material factor in the reduced compensation expense for the current quarter. In the 2019 second quarter, salaries and employee benefits expense totaled $39.3 million.
The effective tax rate for the 2020 second quarter was 26.8%, compared with 19.9% for the preceding first quarter, reflecting the Company’s projections for increased pretax income in the second half of 2020 than previously budgeted. In the year-ago second quarter, the effective tax rate was 25.0%.
Balance Sheet Summary
New loan originations funded during the 2020 second quarter totaled $832.0 million and included SBA PPP loan originations of $480.1 million, traditional SBA loan production of $5.9 million and residential mortgage loan originations of $72.3 million. This compares with 2020 first quarter originations of $624.5 million, including traditional SBA loan production of $49.8 million and residential mortgage loan originations of $37.4 million. In the year-ago second quarter, new loan originations funded totaled $503.9 million, including SBA loan production of $37.2 million and residential mortgage loan originations of $74.0 million.
At June 30, 2020, loans receivable increased 2.3% to $12.87 billion from $12.58 billion at March 31, 2020 and increased 7.5% from $11.98 billion at June 30, 2019.
Total deposits at June 30, 2020 increased by $1.29 billion, or 10.0% quarter-over-quarter, to $14.12 billion from $12.84 billion at March 31, 2020, with $1.03 billion of the increase in noninterest bearing demand deposits, of which approximately $326 million is identified as being related to PPP loans that the Company originated. Total deposits at June 30, 2019 amounted to $12.17 billion. The increases in total deposits versus the comparable periods reflect a continuation of a positive shift in the mix of deposits favoring core deposits over the last year.
Following is the deposit composition as of June 30, 2020, March 31, 2020 and June 30, 2019:
(dollars in thousands) (unaudited)
6/30/2020
3/31/2020
% change
6/30/2019
% change
Noninterest bearing demand deposits
$
4,036,383
$
3,010,143
34
%
$
3,009,218
34
%
Money market and other
4,831,679
4,851,000
—
%
3,238,947
49
%
Saving deposits
296,614
272,577
9
%
243,859
22
%
Time deposits
4,958,856
4,702,847
5
%
5,680,360
(13
)%
Total deposit balances
$
14,123,532
$
12,836,567
10
%
$
12,172,384
16
%
Reflecting the continued favorable mix-shift in deposits, total cost of deposits decreased 47 basis points to 0.87% from 1.34% for the 2020 first quarter and decreased 75 basis points from 1.62% for the 2019 second quarter.
Allowance for Credit Losses
The 2020 second quarter provision for credit losses under the CECL methodology was $17.5 million, compared with $28.0 million for the preceding first quarter. This compares with a provision for loan losses under the prior incurred loss methodology of $1.2 million for the 2019 second quarter.
The provision for credit losses for the 2020 second quarter reflects updated macroeconomic variables incorporating the Moody’s Analytics Baseline scenario published June 2020, enhanced qualitative factors in the Company’s ACL methodology, relatively stable asset quality metrics and minimal credit losses, as well as an additional Management overlay to accounts related to COVID-19 modifications.
The ACL as of June 30, 2020 increased to $161.8 million from $144.9 million at March 31, 2020 and from $94.1 million at June 30, 2019. As a percentage of loans receivable (excluding loans held for sale), the ACL rose to 1.26% at June 30, 2020 from 1.15% at March 31, 2020 and from 0.79% at June 30, 2019. The coverage ratio of the ACL to nonperforming loans was 118.82%, 124.06% and 88.73% at June 30, 2020, March 31, 2020 and June 30, 2019, respectively.
(unaudited)
(dollars in thousands)
Allowance for loan losses - Dec 31, 2019
$
94,144
CECL day 1 adoption impact
26,200
Allowance for credit losses - Jan 1, 2020
120,344
Provision for credit losses
28,000
Recoveries
2,536
Charge offs
(5,957
)
Allowance for credit losses - Mar 31, 2020
$
144,923
Provision for credit losses
17,500
Recoveries
252
Charge offs
(904
)
Allowance for credit losses - June 30, 2020
$
161,771
Credit Quality
Following are the components of nonperforming assets as of June 30, 2020, March 31, 2020 and June 30, 2019:
(dollars in thousands) (unaudited)
6/30/2020
3/31/2020
6/30/2019
Loans on nonaccrual status (1)
$
82,137
$
72,639
$
64,934
Delinquent loans 90 days or more on accrual status (2)
9,986
387
353
Accruing troubled debt restructured loans
44,026
43,789
40,731
Total nonperforming loans
136,149
116,815
106,018
Other real estate owned
20,983
23,039
5,644
Total nonperforming assets
$
157,132
$
139,854
$
111,662
(1)
Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $30.3 million, $28.8 million and $32.1 million, at June 30, 2020, March 31, 2020 and June 30, 2019, respectively.
(2)
Excludes PCI loans totaling $17.6 million at June 30, 2019.
Following are the components of criticized loan balances as of June 30, 2020, March 31, 2020 and June 30, 2019:
(dollars in thousands) (unaudited)
6/30/2020
3/31/2020
6/30/2019
Special Mention
$
127,149
$
122,279
$
186,485
Classified
299,368
278,783
323,842
Criticized
$
426,517
$
401,062
$
510,327
During the 2020 second quarter, net charge offs were minimal at $652,000, or 0.02% of average loans receivable on an annualized basis. This compares with net charge offs of $3.4 million, or 0.11% of average loans receivable on an annualized basis for the 2020 first quarter and net charge offs for the 2019 second quarter of $1.4 million, or 0.05% of average loans receivable on an annualized basis.
Individually evaluated loans (previously referred to as impaired loans prior to the adoption of CECL) totaled $116.1 million at June 30, 2020. This compares with individually evaluated loans of $118.7 million at March 31, 2020 and impaired loans of $106.0 million at June 30, 2019. The Company attributed $22.2 million of the increase in individually evaluated loans in the 2020 first quarter to the reclassification of PCD (formerly purchased credit-impaired loans) due to the implementation of the new CECL accounting standards.
Capital
At June 30, 2020, the Company and the Bank continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” financial institution. Following are capital ratios for the Company as of June 30, 2020, March 31, 2020 and June 30, 2019:
Hope Bancorp, Inc. (unaudited)
6/30/2020
3/31/2020
6/30/2019
Minimum Guideline for “Well-Capitalized” Bank
Common Equity Tier 1 Capital
11.50
%
11.44
%
11.90
%
6.50
%
Tier 1 Leverage Ratio
10.08
%
10.88
%
10.94
%
5.00
%
Tier 1 Risk-Based Ratio
12.24
%
12.19
%
12.67
%
8.00
%
Total Risk-Based Ratio
13.23
%
13.06
%
13.42
%
10.00
%
As previously announced, the Company has elected to defer the impact of the adoption of CECL for two years, at which time the impact will be phased-in over a three year period. Therefore, the Day 1 CECL adjustment has not had an impact to the Company’s regulatory capital ratios as of June 30, 2020.
Following are tangible common equity (“TCE”) per share and TCE as a percentage of tangible assets as of June 30, 2020, March 31, 2020 and June 30, 2019:
(unaudited)
6/30/2020
3/31/2020
6/30/2019
Tangible common equity per share (1)
$12.62
$12.52
$11.98
Tangible common equity to tangible assets (2)
9.32%
9.92%
10.21%
(1)
Tangible common equity represents common equity less goodwill and net other intangible assets. Tangible common equity per share represents tangible common equity divided by the number of shares issued and outstanding. Both tangible common equity and tangible common equity per share are non-GAAP financial measures. A reconciliation of the Company’s total stockholders’ equity to tangible common equity is provided in the accompanying financial information on Table Page 10.
(2)
Tangible assets represent total assets less goodwill and net other intangible assets. Tangible common equity to tangible assets is the ratio of tangible common equity over tangible assets. Tangible common equity to tangible assets is a non-GAAP financial measure. A reconciliation of the Company’s total assets to tangible assets is provided in the accompanying financial information on Table Page 10.
Management reviews tangible common equity to tangible assets ratio in evaluating the Company’s and the Bank’s capital levels and has included these figures and tangible common equity per share figures in response to market participant interest in tangible common equity as a measure of capital. A reconciliation of the GAAP to non-GAAP financial measures is provided in the accompanying financial information.
Investor Conference Call
The Company previously announced that it will host an investor conference call on Friday, July 31, 2020 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its second quarter ended June 30, 2020. Investors and analysts are invited to access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103 (international) and asking for the “Hope Bancorp Call.” A presentation to accompany the earnings call will be available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of Hope Bancorp’s website. After the live webcast, a replay will remain available in the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through August 7, 2020, replay access code 10146201.
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 $17.2 billion in total assets as of June 30, 2020. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 58 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia, Georgia and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.
Forward-Looking Statements
Some statements in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for credit losses, regulatory risks associated with current and future regulations, and the COVID-19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)
Assets:
6/30/2020
3/31/2020
% change
12/31/2019
% change
6/30/2019
% change
Cash and due from banks
$
1,468,949
$
802,033
83
%
$
698,567
110
%
$
609,795
141
%
Securities available for sale, at fair value
1,887,604
1,718,702
10
%
1,715,987
10
%
1,826,903
3
%
Federal Home Loan Bank (“FHLB”) stock and other investments
98,357
96,956
1
%
97,659
1
%
100,962
(3
)%
Loans held for sale, at the lower of cost or fair value
11,350
8,281
37
%
54,271
(79
)%
6,426
77
%
Loans receivable
12,871,834
12,583,416
2
%
12,276,007
5
%
11,977,134
7
%
Allowance for credit losses
(161,771
)
(144,923
)
12
%
(94,144
)
72
%
(94,066
)
72
%
Net loans receivable
12,710,063
12,438,493
2
%
12,181,863
4
%
11,883,068
7
%
Accrued interest receivable
52,859
30,450
74
%
30,772
72
%
33,980
56
%
Premises and equipment, net
51,029
51,392
(1
)%
52,012
(2
)%
52,552
(3
)%
Bank owned life insurance
77,050
76,429
1
%
76,339
1
%
75,963
1
%
Goodwill
464,450
464,450
—
%
464,450
—
%
464,450
—
%
Servicing assets
14,164
14,847
(5
)%
16,417
(14
)%
19,997
(29
)%
Other intangible assets, net
10,770
11,302
(5
)%
11,833
(9
)%
12,947
(17
)%
Other assets
322,417
308,099
5
%
267,270
21
%
251,784
28
%
Total assets
$
17,169,062
$
16,021,434
7
%
$
15,667,440
10
%
$
15,338,827
12
%
Liabilities:
Deposits
$
14,123,532
$
12,836,567
10
%
$
12,527,364
13
%
$
12,172,384
16
%
FHLB advances
500,000
675,000
(26
)%
625,000
(20
)%
695,000
(28
)%
Convertible notes, net
201,987
200,716
1
%
199,458
1
%
196,977
3
%
Subordinated debentures
103,602
103,318
—
%
103,035
1
%
102,477
1
%
Accrued interest payable
26,093
30,436
(14
)%
33,810
(23
)%
36,987
(29
)%
Other liabilities
183,072
157,309
16
%
142,762
28
%
139,830
31
%
Total liabilities
$
15,138,286
$
14,003,346
8
%
$
13,631,429
11
%
$
13,343,655
13
%
Stockholders’ Equity:
Common stock, $0.001 par value
$
136
$
136
—
%
$
136
—
%
$
136
—
%
Capital surplus
1,430,757
1,429,275
—
%
1,428,066
—
%
1,425,262
—
%
Retained earnings
761,734
752,228
1
%
762,480
—
%
712,351
7
%
Treasury stock, at cost
(200,000
)
(200,000
)
—
%
(163,820
)
(22
)%
(150,000
)
(33
)%
Accumulated other comprehensive gain (loss), net
38,149
36,449
5
%
9,149
317
%
7,423
414
%
Total stockholders’ equity
2,030,776
2,018,088
1
%
2,036,011
—
%
1,995,172
2
%
Total liabilities and stockholders’ equity
$
17,169,062
$
16,021,434
7
%
$
15,667,440
10
%
$
15,338,827
12
%
Common stock shares - authorized
150,000,000
150,000,000
150,000,000
150,000,000
Common stock shares - outstanding
123,239,276
123,169,404
125,756,543
126,673,822
Treasury stock shares
12,661,581
12,661,581
9,945,547
9,002,453
Table Page 1
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
Three Months Ended
Six Months Ended
6/30/2020
3/31/2020
% change
6/30/2019
% change
6/30/2020
6/30/2019
% change
Interest and fees on loans
$
134,190
$
154,230
(13
)%
$
158,627
(15
)%
$
288,420
$
316,763
(9
)%
Interest on securities
9,891
10,609
(7
)%
11,866
(17
)%
20,500
24,185
(15
)%
Interest on federal funds sold and other investments
980
2,029
(52
)%
2,973
(67
)%
3,009
5,648
(47
)%
Total interest income
145,061
166,868
(13
)%
173,466
(16
)%
311,929
346,596
(10
)%
Interest on deposits
29,451
41,113
(28
)%
48,826
(40
)%
70,564
95,673
(26
)%
Interest on other borrowings and convertible notes
5,796
6,464
(10
)%
7,419
(22
)%
12,260
14,094
(13
)%
Total interest expense
35,247
47,577
(26
)%
56,245
(37
)%
82,824
109,767
(25
)%
Net interest income before provision for credit losses
109,814
119,291
(8
)%
117,221
(6
)%
229,105
236,829
(3
)%
Provision for credit losses
17,500
28,000
(38
)%
1,200
1,358
%
45,500
4,200
983
%
Net interest income after provision for credit losses
92,314
91,291
1
%
116,021
(20
)%
183,605
232,629
(21
)%
Service fees on deposit accounts
2,583
4,133
(38
)%
4,416
(42
)%
6,716
8,733
(23
)%
International service fees
667
790
(16
)%
1,020
(35
)%
1,456
1,953
(25
)%
Loan servicing fees, net
1,106
365
203
%
738
50
%
1,471
1,467
—
%
Wire transfer fees
820
998
(18
)%
1,311
(37
)%
1,818
2,400
(24
)%
Net gains on sales of other loans
1,678
1,855
(10
)%
1,066
57
%
3,533
1,807
96
%
Net gains on sales of securities available for sale
—
—
100
%
129
100
%
—
129
(100
)%
Other income and fees
4,386
5,123
(14
)%
3,607
22
%
9,510
7,220
32
%
Total noninterest income
11,240
13,264
(15
)%
12,287
(9
)%
24,504
23,709
3
%
Salaries and employee benefits
38,850
42,502
(9
)%
39,297
(1
)%
81,352
79,726
2
%
Occupancy
7,043
7,410
(5
)%
7,839
(10
)%
14,453
15,516
(7
)%
Furniture and equipment
4,654
4,259
9
%
4,026
16
%
8,913
7,472
19
%
Advertising and marketing
1,315
1,673
(21
)%
2,245
(41
)%
2,988
4,307
(31
)%
Data processing and communications
2,274
2,631
(14
)%
2,587
(12
)%
4,905
5,543
(12
)%
Professional fees
1,510
3,300
(54
)%
5,959
(75
)%
4,810
11,339
(58
)%
FDIC assessment
1,652
1,559
6
%
1,559
6
%
3,211
3,110
3
%
Credit related expenses
1,361
1,662
(18
)%
1,549
(12
)%
3,023
2,227
36
%
OREO expense (income), net
1,338
843
59
%
83
1,512
%
2,181
(69
)
N/A
Other
7,033
6,301
12
%
6,227
13
%
13,334
13,033
2
%
Total noninterest expense
67,030
72,140
(7
)%
71,371
(6
)%
139,170
142,204
(2
)%
Income before income taxes
36,524
32,415
13
%
56,937
(36
)%
68,939
114,134
(40
)%
Income tax provision
9,771
6,462
51
%
14,256
(31
)%
16,233
28,695
(43
)%
Net income
$
26,753
$
25,953
3
%
$
42,681
(37
)%
$
52,706
$
85,439
(38
)%
Earnings Per Common Share:
Basic
$
0.22
$
0.21
$
0.34
$
0.43
$
0.67
Diluted
$
0.22
$
0.21
$
0.34
$
0.42
$
0.67
Weighted Average Shares Outstanding:
Basic
123,200,127
124,295,327
126,658,509
123,747,727
126,649,536
Diluted
123,430,891
124,676,296
126,870,455
124,054,291
126,842,870
Table Page 2
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
For the Three Months Ended (Annualized)
For the Six Months Ended (Annualized)
Profitability measures:
6/30/2020
3/31/2020
6/30/2019
6/30/2020
6/30/2019
ROA
0.64
%
0.67
%
1.12
%
0.65
%
1.12
%
ROE
5.31
%
5.12
%
8.71
%
5.21
%
8.81
%
ROTCE (1)
6.94
%
6.69
%
11.51
%
6.82
%
11.68
%
Net interest margin
2.79
%
3.31
%
3.31
%
3.04
%
3.35
%
Efficiency ratio
55.37
%
54.42
%
55.11
%
54.88
%
54.58
%
Noninterest expense / average assets
1.60
%
1.87
%
1.88
%
1.73
%
1.87
%
(1) Average tangible equity is calculated by subtracting average goodwill and average core deposit intangible assets from average stockholders’ equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position.
Three Months Ended
Six Months Ended
Pre-tax acquisition accounting adjustments and merger-related expenses:
6/30/2020
3/31/2020
6/30/2019
6/30/2020
6/30/2019
Accretion on purchased non-impaired loans
$
658
$
1,059
$
1,799
$
1,717
$
3,965
Accretion on purchased credit deteriorated/purchased credit impaired loans
3,046
9,449
6,848
12,495
12,682
Amortization of premium on low income housing tax credits
(70
)
(71
)
(76
)
(141
)
(152
)
Amortization of premium on acquired FHLB borrowings
—
—
—
—
1,280
Accretion of discount on acquired subordinated debt
(284
)
(283
)
(275
)
(567
)
(548
)
Amortization of core deposit intangibles
(532
)
(531
)
(557
)
(1,063
)
(1,114
)
Total acquisition accounting adjustments
$
2,818
$
9,623
$
7,739
$
12,441
$
16,113
Table Page 3
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Three Months Ended
6/30/2020
3/31/2020
6/30/2019
Interest
Annualized
Interest
Annualized
Interest
Annualized
Average
Income/
Average
Average
Income/
Average
Average
Income/
Average
Balance
Expense
Yield/Cost
Balance
Expense
Yield/Cost
Balance
Expense
Yield/Cost
INTEREST EARNING ASSETS:
Loans, including loans held for sale
$
12,755,088
$
134,190
4.23
%
$
12,259,848
$
154,230
5.06
%
$
11,959,920
$
158,627
5.32
%
Securities available for sale
1,750,156
9,891
2.27
%
1,712,033
10,609
2.49
%
1,804,677
11,866
2.64
%
FHLB stock and other investments
1,317,049
980
0.30
%
519,309
2,029
1.57
%
460,623
2,973
2.59
%
Total interest earning assets
$
15,822,293
$
145,061
3.69
%
$
14,491,190
$
166,868
4.63
%
$
14,225,220
$
173,466
4.89
%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing
$
4,903,786
$
7,563
0.62
%
$
4,204,406
$
14,880
1.42
%
$
3,094,179
$
14,019
1.82
%
Savings
284,050
862
1.22
%
274,075
808
1.19
%
225,978
608
1.08
%
Time deposits
4,954,446
21,026
1.71
%
4,900,405
25,425
2.09
%
5,784,980
34,199
2.37
%
Total interest bearing deposits
10,142,282
29,451
1.17
%
9,378,886
41,113
1.76
%
9,105,137
48,826
2.15
%
FHLB advances
593,407
2,238
1.52
%
594,890
2,647
1.79
%
706,044
3,384
1.92
%
Convertible notes, net
201,169
2,358
4.64
%
199,960
2,346
4.64
%
196,244
2,310
4.66
%
Subordinated debentures
99,534
1,200
4.77
%
99,252
1,471
5.86
%
98,406
1,725
6.93
%
Total interest bearing liabilities
$
11,036,392
$
35,247
1.28
%
$
10,272,988
$
47,577
1.86
%
$
10,105,831
$
56,245
2.23
%
Noninterest bearing demand deposits
3,510,783
2,963,136
2,947,476
Total funding liabilities/cost of funds
$
14,547,175
0.97
%
$
13,236,124
1.45
%
$
13,053,307
1.73
%
Net interest income/net interest spread
$
109,814
2.41
%
$
119,291
2.77
%
$
117,221
2.66
%
Net interest margin
2.79
%
3.31
%
3.31
%
Cost of deposits:
Noninterest bearing demand deposits
$
3,510,783
$
—
—
%
$
2,963,136
$
—
—
%
$
2,947,476
$
—
—
%
Interest bearing deposits
10,142,282
29,451
1.17
%
9,378,886
41,113
1.76
%
9,105,137
48,826
2.15
%
Total deposits
$
13,653,065
$
29,451
0.87
%
$
12,342,022
$
41,113
1.34
%
$
12,052,613
$
48,826
1.62
%
Table Page 4
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Six Months Ended
6/30/2020
6/30/2019
Interest
Annualized
Interest
Annualized
Average
Income/
Average
Average
Income/
Average
Balance
Expense
Yield/Cost
Balance
Expense
Yield/Cost
INTEREST EARNING ASSETS:
Loans, including loans held for sale
$
12,507,468
$
288,420
4.64
%
$
12,023,690
$
316,763
5.31
%
Securities available for sale
1,731,094
20,500
2.38
%
1,816,081
24,185
2.69
%
FHLB stock and other investments
918,179
3,009
0.66
%
433,293
5,648
2.63
%
Total interest earning assets
$
15,156,741
$
311,929
4.14
%
$
14,273,064
$
346,596
4.90
%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing
$
4,554,096
$
22,443
0.99
%
$
3,068,494
$
27,005
1.77
%
Savings
279,063
1,670
1.20
%
224,761
1,173
1.05
%
Time deposits
4,927,425
46,451
1.90
%
5,860,492
67,495
2.32
%
Total interest bearing deposits
9,760,584
70,564
1.45
%
9,153,747
95,673
2.11
%
FHLB advances
594,148
4,885
1.65
%
758,161
5,998
1.60
%
Convertible notes, net
200,565
4,704
4.64
%
195,610
4,609
4.69
%
Subordinated debentures
99,393
2,671
5.32
%
98,267
3,487
7.06
%
Total interest bearing liabilities
$
10,654,690
$
82,824
1.56
%
$
10,205,785
$
109,767
2.17
%
Noninterest bearing demand deposits
3,236,960
2,917,279
Total funding liabilities/cost of funds
$
13,891,650
1.20
%
$
13,123,064
1.69
%
Net interest income/net interest spread
$
229,105
2.58
%
$
236,829
2.73
%
Net interest margin
3.04
%
3.35
%
Cost of deposits:
Noninterest bearing demand deposits
$
3,236,960
$
—
—
%
$
2,917,279
$
—
—
%
Interest bearing deposits
9,760,584
70,564
1.45
%
9,153,747
95,673
2.11
%
Total deposits
$
12,997,544
$
70,564
1.09
%
$
12,071,026
$
95,673
1.60
%
Table Page 5
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Three Months Ended
Six Months Ended
AVERAGE BALANCES:
6/30/2020
3/31/2020
% change
6/30/2019
% change
6/30/2020
6/30/2019
% change
Loans receivable, including loans held for sale
$
12,755,088
$
12,259,848
4
%
$
11,959,920
7
%
$
12,507,468
$
12,023,690
4
%
Investments
3,067,205
2,231,342
37
%
2,265,300
35
%
2,649,273
2,249,374
18
%
Interest earning assets
15,822,293
14,491,190
9
%
14,225,220
11
%
15,156,741
14,273,064
6
%
Total assets
16,759,147
15,446,807
8
%
15,185,495
10
%
16,102,977
15,237,627
6
%
Interest bearing deposits
10,142,282
9,378,886
8
%
9,105,137
11
%
9,760,584
9,153,747
7
%
Interest bearing liabilities
11,036,392
10,272,988
7
%
10,105,831
9
%
10,654,690
10,205,785
4
%
Noninterest bearing demand deposits
3,510,783
2,963,136
18
%
2,947,476
19
%
3,236,960
2,917,279
11
%
Stockholders’ equity
2,016,947
2,027,595
(1
)%
1,960,500
3
%
2,022,271
1,940,606
4
%
Net interest earning assets
4,785,901
4,218,202
13
%
4,119,389
16
%
4,502,051
4,067,279
11
%
LOAN PORTFOLIO COMPOSITION:
6/30/2020
3/31/2020
% change
12/31/2019
% change
6/30/2019
% change
Commercial loans
$
3,415,111
$
3,067,132
11
%
$
2,719,818
26
%
$
2,432,164
40
%
Real estate loans
8,686,939
8,681,222
—
%
8,666,901
—
%
8,630,538
1
%
Consumer and other loans
769,784
835,062
(8
)%
889,288
(13
)%
914,432
(16
)%
Loans, net of deferred loan fees and costs
12,871,834
12,583,416
2
%
12,276,007
5
%
11,977,134
7
%
Allowance for credit losses
(161,771
)
(144,923
)
12
%
(94,144
)
72
%
(94,066
)
72
%
Loan receivable, net
$
12,710,063
$
12,438,493
2
%
$
12,181,863
4
%
$
11,883,068
7
%
REAL ESTATE LOANS BY PROPERTY TYPE:
6/30/2020
3/31/2020
% change
12/31/2019
% change
6/30/2019
% change
Retail buildings
$
2,278,448
$
2,314,885
(2
)%
$
2,298,872
(1
)%
$
2,295,485
(1
)%
Hotels/motels
1,701,909
1,706,082
—
%
1,709,189
—
%
1,670,697
2
%
Gas stations/car washes
836,314
852,077
(2
)%
844,081
(1
)%
953,942
(12
)%
Mixed-use facilities
706,827
770,825
(8
)%
785,882
(10
)%
739,440
(4
)%
Warehouses
1,040,303
1,024,832
2
%
1,030,876
1
%
936,900
11
%
Multifamily
497,948
481,425
3
%
465,397
7
%
460,555
8
%
Other
1,625,190
1,531,096
6
%
1,532,604
6
%
1,573,519
3
%
Total
$
8,686,939
$
8,681,222
—
%
$
8,666,901
—
%
$
8,630,538
1
%
DEPOSIT COMPOSITION
6/30/2020
3/31/2020
% change
12/31/2019
% change
6/30/2019
% change
Noninterest bearing demand deposits
$
4,036,383
$
3,010,143
34
%
$
3,108,687
30
%
$
3,009,218
34
%
Money market and other
4,831,679
4,851,000
—
%
3,985,556
21
%
3,238,947
49
%
Saving deposits
296,614
272,577
9
%
274,151
8
%
243,859
22
%
Time deposits
4,958,856
4,702,847
5
%
5,158,970
(4
)%
5,680,360
(13
)%
Total deposit balances
$
14,123,532
$
12,836,567
10
%
$
12,527,364
13
%
$
12,172,384
16
%
DEPOSIT COMPOSITION (%)
6/30/2020
3/31/2020
12/31/2019
6/30/2019
Noninterest bearing demand deposits
28.6
%
23.5
%
24.8
%
24.7
%
Money market and other
34.2
%
37.8
%
31.8
%
26.6
%
Saving deposits
2.1
%
2.1
%
2.2
%
2.0
%
Time deposits
35.1
%
36.6
%
41.2
%
46.7
%
Total deposit balances
100.0
%
100.0
%
100.0
%
100.0
%
Table Page 6
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
CAPITAL RATIOS:
6/30/2020
3/31/2020
12/31/2019
6/30/2019
Total stockholders’ equity
$
2,030,776
$
2,018,088
$
2,036,011
$
1,995,172
Common equity tier 1 ratio
11.50
%
11.44
%
11.76
%
11.90
%
Tier 1 risk-based capital ratio
12.24
%
12.19
%
12.51
%
12.67
%
Total risk-based capital ratio
13.23
%
13.06
%
13.23
%
13.42
%
Tier 1 leverage ratio
10.08
%
10.88
%
11.22
%
10.94
%
Total risk weighted assets
$
13,388,522
$
13,348,162
$
13,208,299
$
12,715,685
Book value per common share
$
16.48
$
16.38
$
16.19
$
15.75
Tangible common equity to tangible assets 1
9.32
%
9.92
%
10.27
%
10.21
%
Tangible common equity per share 1
$
12.62
$
12.52
$
12.40
$
11.98
1 Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and core deposit intangible assets, net divided by total assets less goodwill and core deposit intangible assets, net. Management reviews tangible common equity to tangible assets in evaluating the Company’s capital levels and has included this ratio in response to market participant interest in tangible common equity as a measure of capital.
Three Months Ended
Six Months Ended
ALLOWANCE FOR CREDIT LOSSES CHANGES:
6/30/2020
3/31/2020
12/31/2019
9/30/2019
6/30/2019
6/30/2020
6/30/2019
Balance at beginning of period
$
144,923
$
94,144
$
93,882
$
94,066
$
94,217
$
94,144
$
92,557
CECL day 1 adoption impact
—
26,200
—
—
—
26,200
—
Provision for credit losses
17,500
28,000
1,000
2,100
1,200
45,500
4,200
Recoveries
252
2,536
939
780
725
2,788
2,017
Charge offs
(904
)
(5,957
)
(1,677
)
(2,602
)
(2,076
)
(6,861
)
(3,830
)
PCI allowance adjustment
—
—
—
(462
)
—
—
(878
)
Balance at end of period
$
161,771
$
144,923
$
94,144
$
93,882
$
94,066
$
161,771
$
94,066
Net charge offs/average loans receivable (annualized)
0.02
%
0.11
%
0.02
%
0.06
%
0.05
%
0.07
%
0.03
%
Three Months Ended
Six Months Ended
NET LOAN CHARGE OFFS (RECOVERIES):
6/30/2020
3/31/2020
12/31/2019
9/30/2019
6/30/2019
6/30/2020
6/30/2019
Real estate loans
$
148
$
2,230
$
203
$
951
$
(388
)
$
2,378
$
(1,455
)
Commercial loans
240
676
245
596
1,399
916
2,649
Consumer loans
264
515
290
275
340
779
619
Total net charge offs
$
652
$
3,421
$
738
$
1,822
$
1,351
$
4,073
$
1,813
Table Page 7
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
NONPERFORMING ASSETS:
6/30/2020
3/31/2020
12/31/2019
9/30/2019
6/30/2019
Loans on nonaccrual status 3
$
82,137
$
72,639
$
54,785
$
42,235
$
64,934
Delinquent loans 90 days or more on accrual status
9,986
387
7,547
398
353
Accruing troubled debt restructured loans
44,026
43,789
35,709
34,717
40,731
Total nonperforming loans
136,149
116,815
98,041
77,350
106,018
Other real estate owned
20,983
23,039
24,091
19,374
5,644
Total nonperforming assets
$
157,132
$
139,854
$
122,132
$
96,724
$
111,662
Nonperforming assets/total assets
0.92
%
0.87
%
0.78
%
0.63
%
0.73
%
Nonperforming assets/loans receivable & OREO
1.22
%
1.11
%
0.99
%
0.80
%
0.93
%
Nonperforming assets/total capital
7.74
%
6.93
%
6.00
%
4.76
%
5.60
%
Nonperforming loans/loans receivable
1.06
%
0.93
%
0.80
%
0.64
%
0.89
%
Nonaccrual loans/loans receivable
0.64
%
0.58
%
0.45
%
0.35
%
0.54
%
Allowance for credit losses/loans receivable
1.26
%
1.15
%
0.77
%
0.78
%
0.79
%
Allowance for credit losses/nonaccrual loans
196.95
%
199.51
%
171.84
%
222.28
%
144.86
%
Allowance for credit losses/nonperforming loans
118.82
%
124.06
%
96.03
%
121.37
%
88.73
%
Allowance for credit losses/nonperforming assets
102.95
%
103.62
%
77.08
%
97.06
%
84.24
%
3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $30.3 million, $28.8 million, $28.1 million, $37.3 million, and $32.1 million at June 30, 2020, March 31, 2020,
December 31, 2019, September 30, 2019, and June 30, 2019, respectively.
NONACCRUAL LOANS BY TYPE:
6/30/2020
3/31/2020
12/31/2019
9/30/2019
6/30/2019
Real estate loans
$
64,060
$
56,787
$
40,935
$
27,920
$
42,921
Commercial loans
12,079
12,747
10,893
11,242
18,997
Consumer loans
5,998
3,105
2,957
3,073
3,016
Total nonaccrual loans
$
82,137
$
72,639
$
54,785
$
42,235
$
64,934
BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS:
6/30/2020
3/31/2020
12/31/2019
9/30/2019
6/30/2019
Retail buildings
$
5,526
$
5,014
$
4,215
$
3,221
$
2,919
Gas stations/car washes
1,789
1,675
—
233
241
Mixed-use facilities
3,583
3,157
3,175
3,200
3,223
Warehouses
13,433
13,381
10,381
10,449
11,246
Other 5
19,695
20,562
17,938
17,614
23,102
Total
$
44,026
$
43,789
$
35,709
$
34,717
$
40,731
5 Includes commercial business, consumer, and other loans
Table Page 8
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE:
6/30/2020
3/31/2020
12/31/2019
9/30/2019
6/30/2019
30 - 59 days
$
18,857
$
37,866
$
14,433
$
25,281
$
17,913
60 - 89 days
29,975
2,605
4,712
4,535
1,295
Total
$
48,832
$
40,471
$
19,145
$
29,816
$
19,208
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE:
6/30/2020
3/31/2020
12/31/2019
9/30/2019
6/30/2019
Real estate loans
$
27,245
$
23,753
$
7,689
$
20,572
$
9,794
Commercial loans
5,987
4,583
692
2,282
1,832
Consumer loans
15,600
12,135
10,764
6,962
7,582
Total
$
48,832
$
40,471
$
19,145
$
29,816
$
19,208
CRITICIZED LOANS:
6/30/2020
3/31/2020
12/31/2019
9/30/2019
6/30/2019
Special mention
$
127,149
$
122,279
$
141,452
$
139,848
$
186,485
Substandard
299,357
278,771
259,278
268,605
323,841
Doubtful/Loss
11
12
13
17
1
Total criticized loans
$
426,517
$
401,062
$
400,743
$
408,470
$
510,327
Table Page 9
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)
Reconciliation of GAAP financial measures to non-GAAP financial measures:
Three Months Ended
Six Months Ended
6/30/2020
3/31/2020
6/30/2019
6/30/2020
6/30/2019
RETURN ON AVERAGE TANGIBLE COMMON EQUITY
Average stockholders’ equity
$
2,016,947
$
2,027,595
$
1,960,500
$
2,022,271
$
1,940,606
Less: Goodwill and core deposit intangible assets, net
(475,534
)
(476,053
)
(477,736
)
(475,793
)
(478,021
)
Average tangible common equity
$
1,541,413
$
1,551,542
$
1,482,764
$
1,546,478
$
1,462,585
Net income
$
26,753
$
25,953
$
42,681
$
52,706
$
85,439
Return on average tangible common equity (annualized)
6.94
%
6.69
%
11.51
%
6.82
%
11.68
%
Three Months Ended
6/30/2020
3/31/2020
12/31/2019
6/30/2019
TANGIBLE COMMON EQUITY
Total stockholders’ equity
$
2,030,776
$
2,018,088
$
2,036,011
$
1,995,172
Less: Goodwill and core deposit intangible assets, net
(475,220
)
(475,752
)
(476,283
)
(477,397
)
Tangible common equity
$
1,555,556
$
1,542,336
$
1,559,728
$
1,517,775
Total assets
$
17,169,062
$
16,021,434
$
15,667,440
$
15,338,827
Less: Goodwill and core deposit intangible assets, net
(475,220
)
(475,752
)
(476,283
)
(477,397
)
Tangible assets
$
16,693,842
$
15,545,682
$
15,191,157
$
14,861,430
Common shares outstanding
123,239,276
123,169,404
125,756,543
126,673,822
Tangible common equity to tangible assets
9.32
%
9.92
%
10.27
%
10.21
%
Tangible common equity per share
$
12.62
$
12.52
$
12.40
$
11.98
Three Months Ended
Six Months Ended
6/30/2020
3/31/2020
6/30/2019
6/30/2020
6/30/2019
PRE-TAX PRE-PROVISION INCOME
Net income
$
26,753
$
25,953
$
42,681
$
52,706
$
85,439
Add back - tax provision
9,771
6,462
14,256
16,233
28,695
Add back - provision for credit losses
17,500
28,000
1,200
45,500
4,200
Pre-tax pre-provision income
$
54,024
$
60,415
$
58,137
$
114,439
$
118,334
Table Page 10
View source version on businesswire.com: https://www.businesswire.com/news/home/20200730006030/en/
Alex Ko EVP & Chief Financial Officer 213-427-6560 alex.ko@bankofhope.com
Angie Yang SVP, Director of Investor Relations & Corporate Communications 213-251-2219 angie.yang@bankofhope.com
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