EX-99.1 2 hope-09302021ex991.htm EX-99.1 Document

hopebancorp5a03.jpg
News Release


HOPE BANCORP REPORTS 2021 THIRD QUARTER FINANCIAL RESULTS


LOS ANGELES - October 25, 2021 - Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its third quarter and nine months ended September 30, 2021.

For the three months ended September 30, 2021, net income increased 3% to $55.5 million, or $0.45 per diluted common share, from $53.8 million, or $0.43 per diluted common share, in the preceding second quarter and increased 82% from $30.5 million, or $0.25 per diluted common share, in the year-ago third quarter.

“We continued to deliver improved operational performance and profitability in the third quarter of 2021, but more importantly, we took strategic actions to de-risk the loan portfolio which led to significant improvements in asset quality and positioned the Company for a return to organic loan growth in the quarters ahead,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “Business development was the strongest it has ever been topping a record $1.0 billion in new loan production and included record high SBA origination volumes of $115.0 million. While SBA PPP loan forgiveness and strategic loan sales of higher-risk credits mitigated loan growth again this quarter, we believe these headwinds are now largely behind us and have renewed our focus on growth and expansion. Deposits at quarter-end totaled a record high $15.1 billion driven primarily by growth in noninterest bearing demand deposits, which led to an eighth consecutive quarter of declining deposit costs. Benefiting from the strategic actions taken during the quarter, we posted meaningful improvements in our credit quality with nonaccrual loans decreasing 51% and criticized assets declining 19% quarter-over-quarter.

“With the significant improvements in asset quality this quarter, together with our track record of robust loan production and positive core deposit growth, we believe we are well positioned to drive even stronger performance in the years ahead,” said Kim.

Q3 2021 Highlights
•Loan originations increased 13% quarter-over-quarter to a record high $1.01 billion from $894.1 million in the second quarter of 2021.
•Loans receivable remained at $13.42 billion, as record originations were offset by loan sales, SBA PPP loan forgiveness, other payoffs and pay downs and decreases in mortgage warehouse line utilizations.
•Excluding SBA PPP loan forgiveness and strategic loan sales and transfers to held-for-sale of potentially problematic loans, loans receivable would have increased 3% quarter-over-quarter or 12% on an annualized basis.
•Noninterest bearing demand deposits increased 7% quarter-over-quarter and accounted for a record 40% of total deposits, contributing to record high deposits of $15.06 billion.
•Cost of interest bearing deposits decreased 6 basis points and total cost of deposits decreased 4 basis points quarter-over-quarter marking the eighth consecutive quarter of declining deposit costs.
•Interest income increased 2% quarter-over-quarter while interest expense declined 8%, resulting in a 3% increase in pre-provision net interest income.
•Net interest margin declined 4 basis points quarter-over-quarter, as the benefit of lower cost of deposits was more than offset by the impact of excess liquidity on the balance sheet.
•The Company recorded a negative provision for credit losses of $10.0 million.
•Net income increased 3% quarter-over-quarter and totaled $55.5 million, or $0.45 per diluted common share.
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•Pre-provision net revenue(1) (“PPNR”) increased 1% quarter-over-quarter and totaled $65.4 million.
•Net charge offs of $42.7 million reflects strategic actions to eliminate potentially problematic assets and resulted in significantly improved asset quality metrics.
•Nonaccrual loans decreased 51% quarter-over-quarter and total criticized loans decreased 19%.
•Return on average assets remained unchanged at 1.25%, while return on average equity increased to 10.61% from 10.41% in the second quarter of 2021.
•Announced new $50 million share buyback program on July 26, 2021 and repurchased 3,487,426 shares as of September 30, 2021, totaling $47.2 million.
(1)    PPNR is a non-GAAP financial measure, a reconciliation of which is provided in the accompanying financial information on Table Page 10.

Financial Highlights
(dollars in thousands, except per share data) (unaudited)At or for the Three Months Ended
9/30/20216/30/20219/30/2020
Net income$55,499 $53,763 $30,490 
Diluted earnings per share$0.45 $0.43 $0.25 
Net interest income before provision (credit) for credit losses$130,296 $126,577 $117,637 
Net interest margin3.07 %3.11 %2.91 %
Noninterest income$10,617 $11,076 $17,513 
Noninterest expense$75,502 $73,123 $73,406 
Net loans receivable$13,281,917 $13,234,849 $12,940,376 
Deposits$15,062,527 $14,726,230 $14,008,356 
Total cost of deposits0.26 %0.30 %0.64 %
Nonaccrual loans(1)
$54,380 $111,008 $69,205 
Nonperforming loans to loans receivable(1)
0.73 %1.24 %0.81 %
ACL to loans receivable
1.02 %1.41 %1.37 %
ACL to nonaccrual loans(1)
251.52 %170.67 %259.88 %
ACL to nonperforming assets(1)
120.33 %103.11 %144.36 %
Provision (credit) for credit losses$(10,000)$(7,000)$22,000 
Net charge offs$42,678 $11,491 $3,922 
Return on average assets (“ROA”)1.25 %1.25 %0.72 %
Return on average equity (“ROE”)10.61 %10.41 %5.98 %
Return on average tangible common equity (“ROTCE”)(2)
13.71 %13.50 %7.80 %
Noninterest expense / average assets1.70 %1.70 %1.73 %
Efficiency ratio53.58 %53.12 %54.31 %

(1) Excludes delinquent SBA loans that are guaranteed and currently in liquidation.
(2) 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.



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Operating Results for the 2021 Third Quarter
Net interest income before the provision (credit) for credit losses for the 2021 third quarter increased 3% to $130.3 million from $126.6 million in the 2021 second quarter and increased 11% from $117.6 million in the 2020 third quarter. The Company attributed the increase to higher interest income on investment securities and loans, as well as lower interest expense on deposits.

The net interest margin for the 2021 third quarter decreased 4 basis points to 3.07% from 3.11% in the preceding 2021 second quarter. The Company noted that excess liquidity on the balance sheet adversely impacted net interest margin by 8 basis points, which more than offset the benefits of lower deposit costs. The net interest margin in the prior-year third quarter was 2.91%.

The weighted average yield on loans for the 2021 third quarter was relatively stable quarter-over-quarter, decreasing 1 basis point to 3.97% from 3.98% in the 2021 second quarter, but declined by 23 basis points from 4.20% in the year-ago third quarter.

The weighted average cost of deposits for the 2021 third quarter decreased for the eighth consecutive quarter to 0.26%, representing a 4 basis point decrease from 0.30% for the 2021 second quarter and a 38 basis point decrease from 0.64% for the 2020 third quarter. The Company attributed the improvements in the weighted average cost of deposits to a continuing shift in its deposit mix to lower-cost core deposits and the ongoing downward repricing of interest bearing deposits. The cost of interest bearing deposits was 0.42%, 0.48% and 0.92% for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

Noninterest income for the 2021 third quarter decreased to $10.6 million from $11.1 million for the 2021 second quarter. During the 2021 third quarter, the Company sold $40.2 million in retail mortgage loans and $31.3 million of the guaranteed portion of SBA 7(a) loans, compared with $42.6 million and $30.0 million, respectively, in the preceding second quarter. Noninterest income in the year-ago third quarter totaled $17.5 million, during which quarter the Company recognized $7.5 million in net gains on sales of securities available for sale.

Noninterest expense for the 2021 third quarter increased to $75.5 million from $73.1 million in the preceding second quarter and $73.4 million in the year-ago third quarter.

Salaries and employee benefits expense for the 2021 third quarter increased to $47.0 million from $42.3 million in the preceding second quarter, reflecting a number of factors. The Company increased its bonus reserve for the year to reflect the higher-than-expected financial performance. In addition, employee base salaries increased meaningfully quarter-over-quarter, predominantly reflecting new frontline hires, including a new multi-family lending team recruited from a large money center bank, as well as wage increases necessary to retain existing employees. The Company’s self-funded group insurance expense for the 2021 third quarter was also significantly higher quarter-over-quarter.

In addition, credit related expenses for the 2021 third quarter increased by $1.2 million quarter-over-quarter, but this fluctuation was within normal levels. Altogether, these increases in noninterest expense were partially offset by a $2.0 million quarter-over-quarter decrease in professional fees for the three months ended September 30, 2021, reflecting a favorable outcome and closure of a litigation case.

The Company’s efficiency ratio for the 2021 third quarter was fairly stable at 53.58%, compared with 53.12% for the preceding second quarter and 54.31% for the year-ago third quarter. Noninterest expense as a percentage of average assets remained at 1.70% for the 2021 third quarter but improved from 1.73% in the year-ago third quarter.

The effective tax rate for the 2021 third quarter increased to 26.4% from 24.8% in the preceding quarter. The quarter-over-quarter increase reflects an increase in the Company’s projected annual pretax income compared with previous estimates, combined with the benefit of affordable housing partnership investment tax credits having a smaller effect on the larger annual pretax income. In the year-ago quarter, the effective tax rate was 23.3%.


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Balance Sheet Summary
New loan originations funded during the 2021 third quarter increased to a record high $1.01 billion from $894.1 million in the preceding second quarter and $782.4 million in the 2020 third quarter. Following are the components of new loan production for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020:

(dollars in thousands) (unaudited)For the Three Months Ended
9/30/20216/30/20219/30/2020
Commercial real estate$488,969 $454,857 $215,099 
Commercial329,702 288,726 429,136 
SBA115,023 77,652 33,262 
SBA PPP— 19,816 26 
Residential mortgage75,007 52,766 102,312 
Consumer500 275 2,607 
Total new loan originations$1,009,201 $894,092 $782,442 

During the 2021 third quarter, the Company also acquired $113.9 million of 30-year adjustable-rate residential mortgage loans. New loan production and loan purchases during the 2021 third quarter were offset by a number of factors. In addition to the sale of $40.2 million in residential mortgage loans and $31.3 million of SBA 7(a) loans during the 2021 third quarter, the Company completed loan sales of $29.6 million and transferred $131.2 million to loans held-for-sale, de-risking the loan portfolio of potentially problematic assets. Altogether with aggregate payoffs and pay downs, which included SBA PPP loan forgiveness of $235.6 million and a $61.4 million quarter-over-quarter decrease in warehouse line utilizations, loans receivable at September 30, 2021 was flat at $13.42 billion versus $13.42 billion at June 30, 2021. Excluding SBA PPP loan forgiveness and loan sales and transfers of potentially problematic assets to held-for-sale, loans receivable at September 30, 2021 would have increased by approximately $401.7 million, or 3.0% quarter-over-quarter. Loans receivable a year ago at September 30, 2020 totaled $13.12 billion.

During the 2021 third quarter, the Company deployed a portion of its excess cash balances and purchased $571.3 million of investment securities. Securities available for sale totaled $2.67 billion at September 30, 2021, up 17% from $2.27 billion at June 30, 2021.

Total deposits at September 30, 2021 increased 2% to $15.06 billion from $14.73 billion at June 30, 2021 and increased 8% from $14.01 billion at September 30, 2020. Quarter-over-quarter, noninterest bearing demand deposits as of September 30, 2021 increased 7% and money market and other interest bearing demand deposit balances increased 1%, while time deposits decreased 4%. On a year-over-year basis, noninterest bearing demand deposits as of September 30, 2021 increased 34% and money market and NOW account balances increased 23%, while time deposits decreased 35%.

Following is the deposit composition as of September 30, 2021, June 30, 2021 and September 30, 2020:
(dollars in thousands) (unaudited)9/30/20216/30/2021% change9/30/2020% change
  Noninterest bearing demand deposits$6,007,586 $5,638,115 7 %$4,488,529 34 %
  Money market and other5,871,567 5,786,697 1 %4,763,893 23 %
  Saving deposits314,603 308,651 2 %308,943 2 %
  Time deposits 2,868,771 2,992,767 (4)%4,446,991 (35)%
    Total deposit balances$15,062,527 $14,726,230 2 %$14,008,356 8 %

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Following is the deposit composition as a percentage of total deposits and a breakdown of cost of deposits as of and for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020:
Deposit BreakdownCost of Deposits
(unaudited)9/30/20216/30/20219/30/2020Q3 2021Q2 2021Q3 2020
  Noninterest bearing demand deposits39.9 %38.3 %32.1 %— %— %— %
  Money market and other39.0 %39.2 %34.0 %0.40 %0.43 %0.53 %
  Saving deposits2.1 %2.1 %2.2 %1.18 %1.15 %1.19 %
  Time deposits 19.0 %20.4 %31.7 %0.38 %0.49 %1.30 %
    Total deposit balances100.0 %100.0 %100.0 %0.26 %0.30 %0.64 %

Allowance for Credit Losses
In the 2021 third quarter, the Company recorded a negative provision for credit losses of $10.0 million, compared with a negative provision for credit losses of $7.0 million in the preceding second quarter. In the year-ago third quarter, the Company recorded a provision for credit losses of $22.0 million. The allowance release in the 2021 third quarter reflects improvements in macroeconomic forecasts and the Company’s asset quality.

Following is the allowance for credit losses and allowance coverage ratios as of September 30, 2021, June 30, 2021 and September 30, 2020:

(dollars in thousands) (unaudited)9/30/20216/30/20219/30/2020
Allowance for credit losses$136,774$189,452$179,849
Allowance for credit loss/loans receivable1.02 %1.41 %1.37 %
Allowance for credit losses/nonperforming loans138.92 %113.36 %169.40 %


Credit Quality
Following are the components of nonperforming assets as of September 30, 2021, June 30, 2021 and September 30, 2020:
(dollars in thousands) (unaudited)9/30/20216/30/20219/30/2020
Loans on nonaccrual status (1)
$54,380 $111,008 $69,205 
Delinquent loans 90 days or more on accrual status
4,567 4,759 1,537 
Accruing troubled debt restructured loans39,509 51,360 35,429 
Total nonperforming loans98,456 167,127 106,171 
Other real estate owned15,213 16,619 18,410 
Total nonperforming assets$113,669 $183,746 $124,581 

(1)     Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $20.6 million, $23.6 million and $26.2 million, at September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

The significant reductions in nonperforming loans quarter-over-quarter were due to a number of factors, including strategic loan sales and transfers to held-for sale of potentially problematic loans. The loans transferred to held-for-sale are expected to be sold during the fourth quarter of 2021. In addition, one large relationship that was moved to nonaccrual status in the first quarter of 2021 was charged off, and another large relationship on nonaccrual status was paid off in full.


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Following are net charge offs and net charge offs to average loans receivable on an annualized basis for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020:
(dollars in thousands) (unaudited)For the Three Months Ended
9/30/20216/30/20219/30/2020
Net charge offs$42,678$11,491$3,922
Net charge offs/average loans receivable (annualized)1.28 %0.35 %0.12 %

Net charge offs for the 2021 third quarter increased significantly from prior periods. This reflects decisive actions by the Company to eliminate potentially problematic assets from its loan portfolio and included charge offs related to the one large relationship that was moved to nonaccrual status in the first quarter of 2021, along with loan sales and transfers to held-for-sale.

Following are the components of criticized loan balances as of September 30, 2021, June 30, 2021 and September 30, 2020:
(dollars in thousands) (unaudited)9/30/20216/30/20219/30/2020
Special mention$306,766$294,559$153,388
Substandard243,684380,955311,902
Doubtful/loss— — 6,640 
     Total criticized loans$550,450$675,514$471,930

The significant reductions in total criticized loans quarter-over-quarter was due primarily to the strategic loan sales and transfers to held-for-sale, along with charge offs. As previously noted, loan sales totaled $29.6 million and transfers to held-for-sale amounted to $131.2 million, most of which were classified as substandard.


Capital
At September 30, 2021, the Company and the Bank continued to exceed all regulatory capital requirements generally required to meet the definition of a “well-capitalized” financial institution. Following are capital ratios for the Company as of September 30, 2021, June 30, 2021 and September 30, 2020:
Hope Bancorp, Inc. (unaudited)
9/30/20216/30/20219/30/2020Minimum Guideline for “Well-Capitalized” Bank
Common Equity Tier 1 Capital11.01%11.44%11.36%6.50%
Tier 1 Leverage Ratio9.98%10.43%10.02%5.00%
Tier 1 Risk-Based Ratio11.70%12.14%12.09%8.00%
Total Risk-Based Ratio12.42%13.16%13.19%10.00%
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Following are tangible common equity (“TCE”) per share and TCE as a percentage of tangible assets as of September 30, 2021, June 30, 2021 and September 30, 2020:
(unaudited)9/30/20216/30/20219/30/2020
Tangible common equity per share (1)
$13.33$13.10$12.70
Tangible common equity to tangible assets (2)
9.24%9.53%9.63%

(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.


Investor Conference Call

The Company previously announced that it will host an investor conference call on Tuesday, October 26, 2021 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its third quarter ended September 30, 2021. 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 at 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 2, 2021, replay access code 10161142.

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 $17.80 billion in total assets as of September 30, 2021. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 53 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia 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.

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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. 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.



Contacts:
Alex Ko
Senior 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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Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)

Assets:9/30/20216/30/2021% change9/30/2020% change
Cash and due from banks$627,352 $836,957 (25)%$629,133 — %
Securities available for sale, at fair value2,669,489 2,274,170 17 %2,060,991 30 %
Federal Home Loan Bank (“FHLB”) stock and other investments88,102 94,550 (7)%97,305 (9)%
Loans held for sale, at the lower of cost or fair value179,117 54,245 230 %9,170 1,853 %
Loans receivable13,418,691 13,424,301 — %13,120,225 2 %
Allowance for credit losses(136,774)(189,452)(28)%(179,849)(24)%
  Net loans receivable13,281,917 13,234,849 — %12,940,376 3 %
Accrued interest receivable47,102 51,886 (9)%57,989 (19)%
Premises and equipment, net45,307 45,302 — %49,552 (9)%
Bank owned life insurance76,756 76,428 — %77,388 (1)%
Goodwill464,450 464,450 — %464,450 — %
Servicing assets10,787 11,566 (7)%13,718 (21)%
Other intangible assets, net8,180 8,689 (6)%10,239 (20)%
Other assets300,467 316,535 (5)%323,456 (7)%
  Total assets$17,799,026 $17,469,627 2 %$16,733,767 6 %
Liabilities:
Deposits$15,062,527 $14,726,230 2 %$14,008,356 8 %
FHLB advances200,000 200,000 — %200,000 — %
Convertible notes, net215,974 215,739 — %203,270 6 %
Subordinated debentures105,057 104,762 — %103,889 1 %
Accrued interest payable5,367 4,946 9 %21,991 (76)%
Other liabilities135,703 125,080 8 %155,700 (13)%
  Total liabilities$15,724,628 $15,376,757 2 %$14,693,206 7 %
Stockholders’ Equity:
Common stock, $0.001 par value$136 $136 — %$136 — %
Capital surplus 1,420,151 1,418,135 — %1,432,773 (1)%
Retained earnings897,766 859,548 4 %774,970 16 %
Treasury stock, at cost(247,198)(200,000)(24)%(200,000)24 %
Accumulated other comprehensive gain, net3,543 15,051 (76)%32,682 (89)%
  Total stockholders’ equity2,074,398 2,092,870 (1)%2,040,561 2 %
  Total liabilities and stockholders’ equity$17,799,026 $17,469,627 2 %$16,733,767 6 %
Common stock shares - authorized150,000,000 150,000,000 150,000,000 
Common stock shares - outstanding120,198,061 123,673,832 123,260,760 
Treasury stock shares16,149,007 12,661,581 12,661,581 
Table Page 1
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)

Three Months EndedNine Months Ended
9/30/20216/30/2021% change9/30/2020% change9/30/20219/30/2020% change
  Interest and fees on loans$132,794 $131,823 1 %$134,430 (1)%$394,353 $422,850 (7)%
  Interest on securities9,207 7,713 19 %9,848 (7)%24,835 30,348 (18)%
  Interest on federal funds sold and other investments865 668 29 %942 (8)%2,175 3,951 (45)%
    Total interest income142,866 140,204 2 %145,220 (2)%421,363 457,149 (8)%
  Interest on deposits 9,640 10,696 (10)%22,871 (58)%33,106 93,435 (65)%
  Interest on other borrowings and convertible notes2,930 2,931 — %4,712 (38)%8,805 16,972 (48)%
    Total interest expense12,570 13,627 (8)%27,583 (54)%41,911 110,407 (62)%
Net interest income before provision (credit) for credit losses130,296 126,577 3 %117,637 11 %379,452 346,742 9 %
Provision (credit) for credit losses(10,000)(7,000)43 %22,000 N/A(13,700)67,500 N/A
Net interest income after provision (credit) for credit losses140,296 133,577 5 %95,637 47 %393,152 279,242 41 %
  Service fees on deposit accounts1,814 1,777 2 %2,736 (34)%5,381 9,452 (43)%
  International service fees889 795 12 %987 (10)%2,525 2,443 3 %
  Loan servicing fees, net 642 934 (31)%772 (17)%2,620 2,243 17 %
  Wire transfer fees 836 923 (9)%892 (6)%2,603 2,710 (4)%
  Net gains on sales of SBA loans2,459 2,375 4 %— 100 %4,834 — 100 %
  Net gains on sales of residential mortgage loans781 1,028 (24)%2,853 (73)%3,905 6,386 (39)%
  Net gains on sales of securities available for sale— — — %7,531 (100)%— 7,531 (100)%
  Other income and fees3,196 3,244 (1)%1,742 83 %8,629 11,252 (23)%
    Total noninterest income10,617 11,076 (4)%17,513 (39)%30,497 42,017 (27)%
  Salaries and employee benefits47,018 42,309 11 %40,659 16 %130,543 122,011 7 %
  Occupancy7,473 7,067 6 %7,264 3 %21,507 21,717 (1)%
  Furniture and equipment4,429 4,822 (8)%4,513 (2)%13,437 13,426 — %
  Advertising and marketing2,656 2,097 27 %1,601 66 %6,378 4,589 39 %
  Data processing and communications2,394 2,411 (1)%2,204 9 %7,542 7,109 6 %
  Professional fees2,431 4,395 (45)%1,513 61 %9,729 6,323 54 %
  FDIC assessment1,204 1,284 (6)%1,167 3 %3,743 4,378 (15)%
  Credit related expenses1,266 43 2,844 %1,793 (29)%3,527 4,816 (27)%
  OREO expense, net248 298 (17)%1,770 (86)%827 3,951 (79)%
  Software impairment— 2,146 (100)%— — %2,146 — 100 %
  FHLB advance prepayment fee— — — %3,584 (100)%— 3,584 (100)%
  Other6,383 6,251 2 %7,338 (13)%19,677 20,672 (5)%
    Total noninterest expense75,502 73,123 3 %73,406 3 %219,056 212,576 3 %
Income before income taxes75,411 71,530 5 %39,744 90 %204,593 108,683 88 %
Income tax provision19,912 17,767 12 %9,254 115 %51,644 25,487 103 %
Net income $55,499 $53,763 3 %$30,490 82 %$152,949 $83,196 84 %
Earnings Per Common Share - Basic$0.45 $0.44 $0.25 $1.24 $0.67 
Earnings Per Common Share - Diluted$0.45 $0.43 $0.25 $1.23 $0.67 
Weighted Average Shares Outstanding - Basic122,244,948 123,592,695 123,251,336 123,050,174 123,581,055 
Weighted Average Shares Outstanding - Diluted122,908,536 124,323,888 123,536,765 123,848,512 123,895,084 
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 Nine Months Ended
(Annualized)
Profitability measures:9/30/20216/30/20219/30/20209/30/20219/30/2020
  ROA 1.25 %1.25 %0.72 %1.18 %0.68 %
  ROE 10.61 %10.41 %5.98 %9.86 %5.47 %
  ROTCE (1)
13.71 %13.50 %7.80 %12.78 %7.14 %
  Net interest margin3.07 %3.11 %2.91 %3.08 %2.99 %
  Efficiency ratio53.58 %53.12 %54.31 %53.43 %54.68 %
  Noninterest expense / average assets1.70 %1.70 %1.73 %1.68 %1.73 %
(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 EndedNine Months Ended
Pre-tax acquisition accounting adjustments:9/30/20216/30/20219/30/20209/30/20219/30/2020
Accretion on acquired non-impaired loans$368 $366 $747 $1,439 $2,464 
Accretion on acquired credit deteriorated/purchased credit impaired loans2,093 2,188 4,584 6,536 17,079 
Amortization of premium on low income housing tax credits(73)(74)(71)(220)(212)
Accretion of discount on acquired subordinated debt(295)(293)(287)(879)(854)
Amortization of core deposit intangibles(509)(510)(531)(1,528)(1,594)
     Total acquisition accounting adjustments$1,584 $1,677 $4,442 $5,348 $16,883 

Table Page 3
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Three Months Ended
9/30/20216/30/20219/30/2020
InterestAnnualizedInterestAnnualizedInterestAnnualized
AverageIncome/AverageAverageIncome/AverageAverageIncome/ Average
BalanceExpenseYield/CostBalanceExpenseYield/CostBalanceExpense Yield/Cost
INTEREST EARNING ASSETS:
    Loans, including loans held for sale $13,286,382 $132,794 3.97 %$13,293,591 $131,823 3.98 %$12,728,558 $134,430 4.20 %
    Securities available for sale 2,370,672 9,207 1.54 %2,253,135 7,713 1.37 %2,010,907 9,848 1.95 %
    FHLB stock and other investments 1,197,537 865 0.29 %759,182 668 0.35 %1,342,641 942 0.28 %
Total interest earning assets$16,854,591 $142,866 3.36 %$16,305,908 $140,204 3.45 %$16,082,106 $145,220 3.59 %
 
INTEREST BEARING LIABILITIES:
  Deposits:
    Demand, interest bearing $5,919,225 $5,946 0.40 %$5,484,047 $5,909 0.43 %$4,895,101 $6,546 0.53 %
    Savings 310,525 920 1.18 %308,530 887 1.15 %302,882 907 1.19 %
    Time deposits2,914,977 2,774 0.38 %3,222,457 3,900 0.49 %4,703,640 15,418 1.30 %
    Total interest bearing deposits9,144,727 9,640 0.42 %9,015,034 10,696 0.48 %9,901,623 22,871 0.92 %
    FHLB advances200,000 640 1.27 %202,198 631 1.25 %353,587 1,323 1.49 %
    Convertible notes, net215,840 1,321 2.39 %215,599 1,323 2.43 %202,470 2,370 4.58 %
    Subordinated debentures100,993 969 3.75 %100,701 977 3.84 %99,819 1,019 3.99 %
Total interest bearing liabilities$9,661,560 $12,570 0.52 %$9,533,532 $13,627 0.57 %$10,557,499 $27,583 1.04 %
Noninterest bearing demand deposits5,848,983 5,445,457 4,239,108 
Total funding liabilities/cost of funds$15,510,543 0.32 %$14,978,989 0.36 %$14,796,607 0.74 %
Net interest income/net interest spread$130,296 2.84 %$126,577 2.88 %$117,637 2.55 %
Net interest margin3.07 %3.11 %2.91 %
Cost of deposits:
    Noninterest bearing demand deposits$5,848,983 $— — %$5,445,457 $— — %$4,239,108 $— — %
    Interest bearing deposits9,144,727 9,640 0.42 %9,015,034 10,696 0.48 %9,901,623 22,871 0.92 %
Total deposits$14,993,710 $9,640 0.26 %$14,460,491 $10,696 0.30 %$14,140,731 $22,871 0.64 %
Table Page 4
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
Nine Months Ended
9/30/20219/30/2020
InterestAnnualizedInterestAnnualized
AverageIncome/AverageAverageIncome/Average
BalanceExpenseYield/CostBalanceExpenseYield/Cost
INTEREST EARNING ASSETS:
    Loans, including loans held for sale $13,308,526 $394,353 3.96 %$12,581,703 $422,850 4.49 %
    Securities available for sale 2,297,450 24,835 1.45 %1,825,046 30,348 2.22 %
    FHLB stock and other investments 867,745 2,175 0.34 %1,060,699 3,951 0.50 %
Total interest earning assets$16,473,721 $421,363 3.42 %$15,467,448 $457,149 3.95 %
INTEREST BEARING LIABILITIES:
  Deposits:
    Demand, interest bearing $5,555,711 $17,345 0.42 %$4,668,594 $28,988 0.83 %
    Savings 306,780 2,678 1.17 %287,060 2,578 1.20 %
    Time deposits3,298,393 13,083 0.53 %4,852,286 61,869 1.70 %
    Total interest bearing deposits9,160,884 33,106 0.48 %9,807,940 93,435 1.27 %
    FHLB advances205,971 1,913 1.24 %513,376 6,208 1.62 %
    Convertible notes, net215,483 3,967 2.43 %201,204 7,074 4.62 %
    Subordinated debentures100,697 2,925 3.83 %99,536 3,690 4.87 %
Total interest bearing liabilities$9,683,035 $41,911 0.58 %$10,622,056 $110,407 1.39 %
Noninterest bearing demand deposits5,451,908 3,573,448 
Total funding liabilities/cost of funds$15,134,943 0.37 %$14,195,504 1.04 %
Net interest income/net interest spread$379,452 2.84 %$346,742 2.56 %
Net interest margin3.08 %2.99 %
Cost of deposits:
    Noninterest bearing demand deposits$5,451,908 $— — %$3,573,448 $— — %
    Interest bearing deposits9,160,884 33,106 0.48 %9,807,940 93,435 1.27 %
Total deposits$14,612,792 $33,106 0.30 %$13,381,388 $93,435 0.93 %
Table Page 5
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
 Three Months Ended Nine Months Ended
AVERAGE BALANCES:9/30/20216/30/2021% change9/30/2020% change9/30/20219/30/2020% change
Loans receivable, including loans held for sale $13,286,382 $13,293,591 — %$12,728,558 4 %$13,308,526 $12,581,703 6 %
Investments3,568,209 3,012,317 18 %3,353,548 6 %3,165,195 2,885,745 10 %
Interest earning assets16,854,591 16,305,908 3 %16,082,106 5 %16,473,721 15,467,448 7 %
Total assets17,745,066 17,164,893 3 %17,020,795 4 %17,344,095 16,411,150 6 %
Interest bearing deposits9,144,727 9,015,034 1 %9,901,623 (8)%9,160,884 9,807,940 (7)%
Interest bearing liabilities9,661,560 9,533,532 1 %10,557,499 (8)%9,683,035 10,622,056 (9)%
Noninterest bearing demand deposits5,848,983 5,445,457 7 %4,239,108 38 %5,451,908 3,573,448 53 %
Stockholders’ equity2,092,018 2,066,016 1 %2,039,555 3 %2,068,676 2,028,074 2 %
Net interest earning assets7,193,031 6,772,376 6 %5,524,607 30 %6,790,686 4,845,392 40 %
LOAN PORTFOLIO COMPOSITION: 9/30/20216/30/2021% change12/31/2020% change9/30/2020% change
Commercial loans$3,857,879 $4,001,423 (4)%$4,157,787 (7)%$3,700,020 4 %
Real estate loans8,908,657 8,832,276 1 %8,772,134 2 %8,713,536 2 %
Consumer and other loans652,155 590,602 10 %633,292 3 %706,669 (8)%
    Loans, net of deferred loan fees and costs13,418,691 13,424,301 — %13,563,213 (1)%13,120,225 2 %
Allowance for credit losses(136,774)(189,452)(28)%(206,741)(34)%(179,849)(24)%
    Loan receivable, net$13,281,917 $13,234,849 — %$13,356,472 (1)%$12,940,376 3 %
REAL ESTATE LOANS BY PROPERTY TYPE:9/30/20216/30/2021% change12/31/2020% change9/30/2020% change
Retail buildings$2,466,881 $2,361,891 4 %$2,293,396 8 %$2,311,516 7 %
Hotels/motels1,385,003 1,439,770 (4)%1,634,287 (15)%1,675,960 (17)%
Gas stations/car washes999,069 954,394 5 %892,110 12 %824,378 21 %
Mixed-use facilities819,516 798,373 3 %750,867 9 %754,096 9 %
Warehouses1,160,863 1,149,393 1 %1,091,389 6 %1,022,657 14 %
Multifamily691,262 575,943 20 %518,498 33 %518,295 33 %
Other1,386,063 1,552,512 (11)%1,591,587 (13)%1,606,634 (14)%
Total$8,908,657 $8,832,276 1 %$8,772,134 2 %$8,713,536 2 %
DEPOSIT COMPOSITION9/30/20216/30/2021% change12/31/2020% change9/30/2020% change
  Noninterest bearing demand deposits$6,007,586 $5,638,115 7 %$4,814,254 25 %$4,488,529 34 %
  Money market and other5,871,567 5,786,697 1 %5,232,413 12 %4,763,893 23 %
  Saving deposits314,603 308,651 2 %300,770 5 %308,943 2 %
  Time deposits 2,868,771 2,992,767 (4)%3,986,475 (28)%4,446,991 (35)%
    Total deposit balances$15,062,527 $14,726,230 2 %$14,333,912 5 %$14,008,356 8 %
DEPOSIT COMPOSITION (%)9/30/20216/30/202112/31/20209/30/2020
  Noninterest bearing demand deposits39.9 %38.3 %33.6 %32.1 %
  Money market and other39.0 %39.2 %36.5 %34.0 %
  Saving deposits2.1 %2.1 %2.1 %2.2 %
  Time deposits 19.0 %20.4 %27.8 %31.7 %
    Total deposit balances100.0 %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:9/30/20216/30/20219/30/2020
  Total stockholders’ equity$2,074,398 $2,092,870 $2,040,561 
  Common equity tier 1 ratio11.01 %11.44 %11.36 %
  Tier 1 risk-based capital ratio 11.70 %12.14 %12.09 %
  Total risk-based capital ratio 12.42 %13.16 %13.19 %
  Tier 1 leverage ratio 9.98 %10.43 %10.02 %
  Total risk weighted assets$14,737,809 $14,354,682 $13,691,823 
  Book value per common share$17.26 $16.92 $16.55 
  Tangible common equity to tangible assets 1
9.24 %9.53 %9.63 %
  Tangible common equity per share 1
$13.33 $13.10 $12.70 
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 EndedNine Months Ended
ALLOWANCE FOR CREDIT LOSSES CHANGES:9/30/20216/30/20213/31/202112/31/20209/30/20209/30/20219/30/2020
Balance at beginning of period$189,452 $207,943 $206,741 $179,849 $161,771 $206,741 $94,144 
CECL day 1 adoption impact— — — — — — 26,200 
Provision (credit) for credit losses(10,000)(7,000)3,300 27,500 22,000 (13,700)67,500 
Recoveries1,906 1,301 1,423 2,207 2,428 4,630 5,216 
Charge offs (44,584)(12,792)(3,521)(2,815)(6,350)(60,897)(13,211)
Balance at end of period$136,774 $189,452 $207,943 $206,741 $179,849 $136,774 $179,849 
Net charge offs/average loans receivable (annualized)1.28 %0.35 %0.06 %0.02 %0.12 %0.56 %0.08 %
Three Months EndedNine Months Ended
NET LOAN CHARGE OFFS (RECOVERIES):9/30/20216/30/20213/31/202112/31/20209/30/20209/30/20219/30/2020
Real estate loans$40,542 $11,281 $2,234 $(726)$5,154 $54,057 $7,532 
Commercial loans1,117 181 (80)1,167 (1,451)1,218 (535)
Consumer loans1,019 29 (56)167 219 992 998 
   Total net charge offs$42,678 $11,491 $2,098 $608 $3,922 $56,267 $7,995 

Table Page 7
Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)
NONPERFORMING ASSETS:9/30/20216/30/20213/31/202112/31/20209/30/2020
Loans on nonaccrual status 3
$54,380 $111,008 $109,858 $85,238 $69,205 
Delinquent loans 90 days or more on accrual status4,567 4,759 384 614 1,537 
Accruing troubled debt restructured loans39,509 51,360 41,773 37,354 35,429 
Total nonperforming loans98,456 167,127 152,015 123,206 106,171 
Other real estate owned15,213 16,619 18,515 20,121 18,410 
Total nonperforming assets$113,669 $183,746 $170,530 $143,327 $124,581 
Nonperforming assets/total assets0.64 %1.05 %0.99 %0.84 %0.74 %
Nonperforming assets/loans receivable & OREO0.85 %1.37 %1.24 %1.06 %0.95 %
Nonperforming assets/total capital5.48 %8.78 %8.34 %6.98 %6.11 %
Nonperforming loans/loans receivable0.73 %1.24 %1.11 %0.91 %0.81 %
Nonaccrual loans/loans receivable0.41 %0.83 %0.80 %0.63 %0.53 %
Allowance for credit losses/loans receivable1.02 %1.41 %1.52 %1.52 %1.37 %
Allowance for credit losses/nonaccrual loans251.52 %170.67 %189.28 %242.55 %259.88 %
Allowance for credit losses/nonperforming loans138.92 %113.36 %136.79 %167.80 %169.40 %
Allowance for credit losses/nonperforming assets120.33 %103.11 %121.94 %144.24 %144.36 %
3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $20.6 million, $23.6 million, $25.0 million, $26.5 million, and $26.2 million at September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020, and September 30, 2020, respectively.
NONACCRUAL LOANS BY TYPE:9/30/20216/30/20213/31/202112/31/20209/30/2020
Real estate loans$41,673 $95,622 $91,940 $67,450 $51,739 
Commercial loans10,991 12,217 14,080 13,911 13,022 
Consumer loans1,716 3,169 3,838 3,877 4,444 
   Total nonaccrual loans$54,380 $111,008 $109,858 $85,238 $69,205 
BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS:9/30/20216/30/20213/31/202112/31/20209/30/2020
Retail buildings$11,280 $12,110 $6,319 $5,408 $5,451 
Gas stations/car washes202 206 210 219 224 
Mixed-use facilities7,937 7,967 3,377 3,521 4,323 
Warehouses4,908 14,099 14,124 7,296 7,320 
Other 4
15,182 16,978 17,743 20,910 18,111 
Total$39,509 $51,360 $41,773 $37,354 $35,429 
4 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:9/30/20216/30/20213/31/202112/31/20209/30/2020
30 - 59 days$15,016 $22,466 $18,175 $11,347 $5,962 
60 - 89 days4,746 6,987 8,314 16,826 58,065 
   Total$19,762 $29,453 $26,489 $28,173 $64,027 
ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE:9/30/20216/30/20213/31/202112/31/20209/30/2020
Real estate loans$10,359 $21,432 $18,331 $15,689 $60,510 
Commercial loans9,377 560 1,002 3,393 624 
Consumer loans26 7,461 7,156 9,091 2,893 
   Total$19,762 $29,453 $26,489 $28,173 $64,027 
CRITICIZED LOANS:9/30/20216/30/20213/31/202112/31/20209/30/2020
Special mention$306,766 $294,559 $280,974 $184,941 $153,388 
Substandard243,684 380,955 379,048 366,556 311,902 
Doubtful/loss— — — 1 6,640 
   Total criticized loans$550,450 $675,514 $660,022 $551,498 $471,930 
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
Management reviews select non-GAAP financial measures in evaluating the Company’s and the Bank’s financial performance and in response to market participant interest. A reconciliation of the GAAP to non-GAAP financial measures utilized by management is provided below.
Three Months EndedNine Months Ended
9/30/20216/30/20219/30/20209/30/20219/30/2020
RETURN ON AVERAGE TANGIBLE COMMON EQUITY
Average stockholders’ equity$2,092,018 $2,066,016 $2,039,555 $2,068,676 $2,028,074 
Less: Goodwill and core deposit intangible assets, net(472,918)(473,445)(475,010)(473,438)(475,530)
Average tangible common equity$1,619,100 $1,592,571 $1,564,545 $1,595,238 $1,552,544 
Net income$55,499 $53,763 $30,490 $152,949 $83,196 
Return on average tangible common equity (annualized)13.71 %13.50 %7.80 %12.78 %7.14 %
9/30/20216/30/202112/31/20209/30/2020
TANGIBLE COMMON EQUITY
Total stockholders’ equity$2,074,398 $2,092,870 $2,053,745 $2,040,561 
Less: Goodwill and core deposit intangible assets, net(472,630)(473,139)(474,158)(474,689)
Tangible common equity$1,601,768 $1,619,731 $1,579,587 $1,565,872 
Total assets$17,799,026 $17,469,627 $17,106,664 $16,733,767 
Less: Goodwill and core deposit intangible assets, net(472,630)(473,139)(474,158)(474,689)
Tangible assets$17,326,396 $16,996,488 $16,632,506 $16,259,078 
Common shares outstanding120,198,061 123,673,832 123,264,864 123,260,760 
  Tangible common equity to tangible assets9.24 %9.53 %9.50 %9.63 %
  Tangible common equity per share$13.33 $13.10 $12.81 $12.70 
Three Months EndedNine Months Ended
9/30/20216/30/20219/30/20209/30/20219/30/2020
PRE-PROVISION NET REVENUE
Net interest income before provision (credit) for credit losses$130,296 $126,577 $117,637 $379,452 $346,742 
Noninterest income10,617 11,076 17,513 30,497 42,017 
Revenue140,913 137,653 135,150 409,949 388,759 
Noninterest expense75,502 73,123 73,406 219,056 212,576 
Pre-provision net revenue$65,411 $64,530 $61,744 $190,893 $176,183 
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