Financial Performance - GAAP Net Income for 3Q25 was $30.8 million, or $0.24 per diluted common share[4] - Net Income excluding notable items for 3Q25 was $31.6 million, or $0.25 per diluted common share, up 29% QoQ[4] - Net interest income for 3Q25 was $127 million, up 8% QoQ[21] - Noninterest income totaled $15.4 million in 3Q25[33] Balance Sheet & Capital - Total deposits were $15.8 billion at 9/30/25, a decrease of 1% QoQ[4, 15] - Gross loans totaled $14.6 billion at 9/30/25, up 1.2% QoQ (5% annualized)[4, 18] - Total capital ratio was 13.83% and TCE ratio was 9.63% at 9/30/25[4] Asset Quality - Nonperforming assets (NPA) were $112 million, representing 0.61% of total assets at 9/30/25[4] - Classified loans at 9/30/25 were down 13% QoQ, representing 1.66% of total loans[4] - Net charge-offs (NCO) were $5 million in 3Q25, or 14bps of average loans, annualized, down 57% QoQ[46] Outlook - The company anticipates approximately 10% growth in net interest income for the full year 2025[47] - The company anticipates approximately 30% growth in noninterest income (excluding notable items) for the full year 2025[47]

Core Insights - Hope Bancorp reported revenue of $142.03 million for Q3 2025, a year-over-year increase of 21.8% and exceeding the Zacks Consensus Estimate of $139.15 million by 2.07% [1] - The company's EPS for the quarter was $0.25, compared to $0.21 a year ago, but fell short of the consensus estimate of $0.26, resulting in an EPS surprise of -3.85% [1] Financial Performance Metrics - Efficiency Ratio was reported at 68.2%, higher than the two-analyst average estimate of 66.4% [4] - Net Interest Margin stood at 2.9%, slightly above the two-analyst average estimate of 2.8% [4] - Net charge-offs to average loans were 0.1%, better than the estimated 0.2% by two analysts [4] - Net Interest Income (before provision) was $126.64 million, exceeding the average estimate of $123.93 million [4] - Total noninterest income reached $15.39 million, surpassing the average estimate of $15.22 million [4] - Net gains on sales of SBA loans were $2.77 million, below the two-analyst average estimate of $3.28 million [4] Stock Performance - Over the past month, shares of Hope Bancorp returned -0.3%, while the Zacks S&P 500 composite increased by 3.6% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Insights - Hope Bancorp reported quarterly earnings of $0.25 per share, missing the Zacks Consensus Estimate of $0.26 per share, but showing an increase from $0.21 per share a year ago, resulting in an earnings surprise of -3.85% [1] - The company posted revenues of $142.03 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 2.07%, and up from $116.65 million year-over-year [2] - Hope Bancorp shares have declined approximately 13.1% year-to-date, contrasting with the S&P 500's gain of 16.9% [3] Earnings Outlook - The earnings outlook for Hope Bancorp is uncertain, with current consensus EPS estimates at $0.26 for the upcoming quarter and $0.89 for the current fiscal year, with revenues expected to be $139.9 million and $528.5 million respectively [7] - The trend of estimate revisions prior to the earnings release was unfavorable, leading to a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Banks - West industry, to which Hope Bancorp belongs, is currently ranked in the top 12% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Net income for Q3 2025 was $30.8 million, a 28% increase year-over-year from $24.2 million in Q3 2024[2] - Excluding notable items, net income was $31.6 million, up 26% from $25.2 million year-over-year[3] - Noninterest income for Q3 2025 was $15.4 million, a significant recovery from a net loss of $23.0 million in Q2 2025[7] - The company reported net income of $30,843 million for the three months ended September 30, 2025, compared to a net loss of $27,881 million in the previous quarter[46] - Net income excluding notable items for the three months ended September 30, 2025, was $31,593, compared to $24,531 in the previous quarter and $25,171 year-over-year[50] Interest Income and Margin - Net interest income for Q3 2025 totaled $126.6 million, an 8% increase from $117.5 million in Q2 2025[5] - The net interest margin expanded by 20 basis points to 2.89% in Q3 2025, the widest since 2012[3] - Total interest income for the three months ended September 30, 2025, was $244,785, reflecting a 2% increase from $239,170 in the prior quarter[28] - Net interest income for the three months ended September 30, 2025, was $126,642, reflecting a net interest margin of 2.89%[32] - The company reported a net interest spread of 1.85% for the three months ended September 30, 2025[32] Assets and Loans - Total assets as of September 30, 2025, were $18.51 billion, slightly down from $18.55 billion at June 30, 2025[9] - Gross loans increased to $14.62 billion, up 1.2% from $14.45 billion at June 30, 2025[9] - Total assets were $18.51 billion as of September 30, 2025, showing a 7% increase from $17.35 billion a year earlier[26] - Gross loans, including loans held for sale, rose by 1% to $14.62 billion at September 30, 2025, compared to $14.45 billion at June 30, 2025[26] - The average balance of loans for the nine months ended September 30, 2025, was $14,136,511, generating interest income of $623,261 at a yield of 5.89%[34] Deposits - Total deposits decreased by 1% to $15.83 billion, reflecting a decrease in brokered deposits[9] - Deposits decreased by 1% to $15.83 billion at September 30, 2025, from $15.94 billion at June 30, 2025[26] - Total deposits as of September 30, 2025, were $15,911,601, with an interest expense of $115,425 and an average cost of 2.88%[34] - Total deposits decreased by 1% to $15,831,262 compared to the previous quarter, but increased by 7% from the same period last year[36] Credit Losses and Allowance - The allowance for credit losses was $152.5 million as of September 30, 2025, up from $149.5 million at June 30, 2025, with a coverage ratio of 1.05% of loans receivable[15] - The provision for credit losses for Q3 2025 was $8.7 million, a decrease from $15.0 million in Q2 2025, primarily due to lower net charge-offs[15] - The provision for credit losses decreased by 42% to $8,710 from $15,000 in the previous quarter[28] - The allowance for credit losses to loans receivable ratio was 1.05% as of September 30, 2025, with an allowance for credit losses to nonperforming loans ratio of 135.98%[40] Equity and Capital Ratios - Total stockholders' equity increased by 1% to $2.26 billion at September 30, 2025, compared to $2.22 billion at June 30, 2025[17] - The Common Equity Tier 1 Capital Ratio was 12.12% as of September 30, 2025, up from 12.06% at June 30, 2025, exceeding the minimum guideline of 6.50%[17] - The common equity tier 1 ratio stood at 12.12%, slightly up from 12.06% in the previous quarter but down from 13.07% a year ago[38] - The total capital ratio was 13.83%, slightly up from 13.76% in the previous quarter but down from 14.82% a year ago[38] Efficiency and Expenses - The efficiency ratio, excluding notable items, improved to 67.5% in Q3 2025 from 69.1% in Q2 2025[7] - Total noninterest expense decreased by 12% to $96,861 from $109,473 in the previous quarter[28] - The efficiency ratio (not annualized) improved to 68.20% for the three months ended September 30, 2025, from 115.75% in the previous quarter[30] - The efficiency ratio excluding notable items improved to 67.52% for the three months ended September 30, 2025, from 69.09% in the previous quarter[50] Nonperforming Assets - Total nonperforming assets as of September 30, 2025, were $112,157 million, maintaining a nonperforming assets to total assets ratio of 0.61%[40] - Nonaccrual loans totaled $110,008 million as of September 30, 2025, with commercial real estate (CRE) loans accounting for $54,016 million[40] - Total accruing delinquent loans 30-89 days past due increased to $20,903 million as of September 30, 2025, from $7,750 million in the previous quarter[42] Upcoming Events - The investor conference call to discuss Q3 2025 results is scheduled for October 28, 2025, at 9:30 a.m. Pacific Time[19]

Core Points - Hope Bancorp, Inc. declared a quarterly cash dividend of $0.14 per common share [1] - The dividend is scheduled to be payable on or about November 21, 2025, to stockholders of record as of the close of business on November 7, 2025 [1] - Hope Bancorp, Inc. is the holding company of Bank of Hope, which is the only regional Korean American bank in the United States with total assets of $18.51 billion [1]

Group 1 - Hope Bancorp, Inc. reported a loss for the second quarter of 2025, attributed to one-time merger-related expenses from the acquisition of Territorial Bancorp [1] - The company's earnings were negatively impacted in the second quarter [1]

Group 1 - The stock of Hope Bancorp, Inc. (HOPE) is experiencing significant attention due to high implied volatility in the options market, particularly the Sept. 19, 2025 $7.5 Call option [1] - Implied volatility indicates the market's expectation of future price movement, suggesting that investors anticipate a significant change in the stock's price, potentially due to an upcoming event [2] - Hope Bancorp currently holds a Zacks Rank 3 (Hold) in the Banks – West industry, which is in the top 28% of the Zacks Industry Rank, indicating a relatively stable outlook [3] Group 2 - Over the past 60 days, there has been mixed sentiment among analysts regarding earnings estimates for Hope Bancorp, with one analyst increasing and another decreasing their estimates, resulting in a slight increase in the Zacks Consensus Estimate from 25 cents to 26 cents per share [3] - The high implied volatility may indicate a developing trading opportunity, as options traders often seek to sell premium on options with high implied volatility, hoping the stock does not move as much as expected by expiration [4]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) Presents unaudited consolidated financial statements and notes for Q2 2025, including impact from Territorial Bancorp acquisition [Consolidated Statements of Financial Condition (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition%20(Unaudited)) Consolidated Financial Condition Summary | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | Change (Thousands) | % Change | | :----------------------------------- | :-------------------------- | :---------------------------- | :----------------- | :------- | | Total assets | $18,547,017 | $17,054,008 | $1,493,009 | 8.75% | | Total liabilities | $16,322,900 | $14,919,503 | $1,403,397 | 9.41% | | Total stockholders' equity | $2,224,117 | $2,134,505 | $89,612 | 4.20% | | Loans receivable, net | $14,285,282 | $13,467,745 | $817,537 | 6.07% | | Total deposits | $15,943,355 | $14,327,489 | $1,615,866 | 11.28% | - The increase in total assets was primarily due to the acquisition of Territorial Bancorp Inc., which contributed **$1.93 billion** in identifiable assets[142](index=142&type=chunk)[279](index=279&type=chunk) [Consolidated Statements of (Loss) Income (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20(Loss)%20Income%20(Unaudited)) Consolidated Income Statement Summary | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------ | :------------------------------------ | | Total interest income | $239,170 | $232,601 | $456,336 | $492,275 | | Total interest expense | $121,637 | $126,741 | $237,986 | $271,368 | | Net interest income before provision for credit losses | $117,533 | $105,860 | $218,350 | $220,907 | | Provision for credit losses | $15,000 | $1,400 | $19,800 | $4,000 | | Total noninterest income | $(22,956) | $11,071 | $(7,268) | $19,357 | | Total noninterest expense | $109,473 | $80,987 | $193,334 | $165,826 | | Net (loss) income | $(27,881) | $25,270 | $(6,785) | $51,134 | | Basic (Losses) Earnings Per Common Share | $(0.22) | $0.21 | $(0.05) | $0.42 | | Diluted (Losses) Earnings Per Common Share | $(0.22) | $0.21 | $(0.05) | $0.42 | - The Company reported a net loss for Q2 2025 and YTD 2025, primarily due to **$38.9 million** in net losses on sales of investment securities AFS as part of a strategic repositioning and **$17.3 million** in merger and restructuring-related costs from the Territorial acquisition[15](index=15&type=chunk)[231](index=231&type=chunk)[260](index=260&type=chunk)[262](index=262&type=chunk) [Consolidated Statements of Comprehensive Income (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) Consolidated Comprehensive Income Summary | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :------------------------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------ | :------------------------------------ | | Net (loss) income | $(27,881) | $25,270 | $(6,785) | $51,134 | | Other comprehensive income (loss), net of tax | $34,908 | $(10,852) | $56,468 | $(28,392) | | Total comprehensive income | $7,027 | $14,418 | $49,683 | $22,742 | - Other comprehensive income (loss) significantly improved in 2025, primarily due to a **$43.2 million** change in unrealized net holding gains on AFS securities for the six months ended June 30, 2025, compared to a **$23.1 million** loss in the prior year[17](index=17&type=chunk)[114](index=114&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Unaudited)) Consolidated Stockholders' Equity Summary | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | Change (Thousands) | | :--------------------------------- | :-------------------------- | :---------------------------- | :----------------- | | Total stockholders' equity | $2,224,117 | $2,134,505 | $89,612 | | Common stock | $146 | $138 | $8 | | Additional paid-in capital | $1,520,129 | $1,445,373 | $74,756 | | Retained earnings | $1,139,913 | $1,181,533 | $(41,620) | | Accumulated other comprehensive loss, net | $(171,404) | $(227,872) | $56,468 | - Stockholders' equity increased by **$89.6 million**, driven by the issuance of **6,976,754** common shares (**$73.3 million**) for the Territorial acquisition and a **$56.5 million** decrease in accumulated other comprehensive loss, partially offset by a net loss and cash dividends[18](index=18&type=chunk)[19](index=19&type=chunk)[112](index=112&type=chunk)[323](index=323&type=chunk) [Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Consolidated Cash Flow Summary | Cash Flow Activity | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $36,048 | $4,045 | | Net cash provided by investing activities | $656,016 | $426,167 | | Net cash used in financing activities | $(460,529) | $(1,705,135) | | Net change in cash and cash equivalents | $231,535 | $(1,274,923) | | Cash and cash equivalents, beginning of period | $458,199 | $1,928,967 | | Cash and cash equivalents, end of period | $689,734 | $654,044 | - Net cash provided by operating activities increased significantly to **$36.0 million** for the six months ended June 30, 2025, from **$4.0 million** in the prior year, while net cash used in financing activities decreased substantially, reflecting reduced repayments of FRB borrowings[21](index=21&type=chunk) - Non-cash activities for the six months ended June 30, 2025, included the merger with Territorial, acquiring **$1.84 billion** in identifiable assets (net of cash) and assuming **$1.87 billion** in liabilities, with **$73.3 million** in common stock issued as consideration[21](index=21&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) [1. Basis of Presentation](index=13&type=section&id=1.%20Basis%20of%20Presentation) - Hope Bancorp, Inc. (the 'Company') is the holding company for Bank of Hope, operating 46 full-service branches and nine loan production offices across multiple states, and 29 branches in Hawaii under the trade name Territorial Savings following the acquisition of Territorial Bancorp Inc. on April 2, 2025[23](index=23&type=chunk)[30](index=30&type=chunk) - The consolidated financial statements are unaudited, prepared in accordance with SEC rules, and include all necessary adjustments for fair presentation, with certain reclassifications made to prior period amounts[24](index=24&type=chunk)[25](index=25&type=chunk) [2. Investment Securities](index=14&type=section&id=2.%20Investment%20Securities) Investment Securities Portfolio Summary | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----------------------------------- | :-------------------------- | :---------------------------- | | Investment securities AFS, at fair value | $2,021,643 | $1,823,243 | | Investment securities HTM, at amortized cost | $247,246 | $252,385 | | Total investment securities | $2,268,889 | $2,075,628 | | Gross unrealized losses on AFS securities | $(221,043) | $(299,774) | | Net (losses) gain on sales of AFS securities (3 months) | $(38,856) | $425 | | Net (losses) gain on sales of AFS securities (6 months) | $(38,856) | $425 | - In June 2025, the Company sold **$417.9 million** of lower-yielding AFS securities, resulting in **$38.9 million** in realized losses, to redeploy proceeds into higher-yielding investments[34](index=34&type=chunk)[260](index=260&type=chunk) - The Company acquired **$18.5 million** in AFS and **$516.7 million** in HTM investment securities as part of the Territorial Merger, which were immediately categorized as AFS and sold for **$535.2 million** with no gain or loss impact[33](index=33&type=chunk)[283](index=283&type=chunk) - No allowance for credit losses was required for investment securities AFS or HTM at June 30, 2025, as the majority are U.S. Government agency securities with zero loss expectation, and other securities are expected to be paid in full[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[285](index=285&type=chunk) [3. Equity Investments](index=18&type=section&id=3.%20Equity%20Investments) Equity Investments Summary | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----------------------------------------- | :-------------------------- | :---------------------------- | | Total equity investments | $88,152 | $39,946 | | Equity investments with readily determinable fair values | $50,500 | $4,300 | | Equity investments without readily determinable fair values | $37,600 | $35,600 | | Net gains from changes in fair value (6 months) | $743 | $(65) | - Equity investments increased by **120.7%** to **$88.2 million** at June 30, 2025, primarily due to **$45.5 million** in purchases of Community Reinvestment Act (CRA) mutual funds[47](index=47&type=chunk)[286](index=286&type=chunk) [4. Loans Receivable and Allowance for Credit Losses](index=19&type=section&id=4.%20Loans%20Receivable%20and%20Allowance%20for%20Credit%20Losses) Loan Portfolio Composition | Loan Portfolio Composition | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | % of Total (June 30, 2025) | | :------------------------- | :-------------------------- | :---------------------------- | :------------------------- | | Commercial real estate (CRE) loans | $8,385,764 | $8,527,008 | 58% | | Commercial and industrial (C&I) loans | $3,725,295 | $3,967,596 | 26% | | Residential mortgage loans | $2,273,427 | $1,082,459 | 16% | | Consumer and other loans | $50,301 | $41,209 | 0% | | Total loans receivable, net of deferred costs and fees | $14,434,787 | $13,618,272 | 100% | | Allowance for credit losses (ACL) | $(149,505) | $(150,527) | N/A | - Loans receivable increased by **6.0%** to **$14.43 billion**, primarily due to **$1.07 billion** in loans acquired from the Territorial Merger, significantly increasing residential mortgage loans' share of the portfolio[54](index=54&type=chunk)[290](index=290&type=chunk) ACL Activity | ACL Activity | Three Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Balance, beginning of period | $147,412 | $150,527 | | Provision for credit loss on loans | $14,000 | $19,200 | | Net loan charge-offs | $(11,970) | $(20,285) | | Balance, end of period | $149,505 | $149,505 | | ACL to loans receivable | 1.04% | 1.04% | | Nonaccrual loans | $110,739 | $110,739 | | Nonperforming assets | $112,888 | $112,888 | | ACL to nonaccrual loans | 135.01% | 135.01% | - The provision for credit losses increased to **$15.0 million** for Q2 2025 (from **$1.4 million** in Q2 2024), including **$4.5 million** of merger-related provision expenses, driven by increases in C&I and residential mortgage loan provisions[74](index=74&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk) - Nonperforming assets increased by **24.3%** to **$112.9 million** at June 30, 2025, primarily due to the migration of a well-secured CRE loan[296](index=296&type=chunk) [5. Goodwill, Intangible Assets, and Servicing Assets](index=30&type=section&id=5.%20Goodwill,%20Intangible%20Assets,%20and%20Servicing%20Assets) Goodwill, Intangible Assets, and Servicing Assets Summary | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :-------------------------- | :-------------------------- | :---------------------------- | | Goodwill | $478,104 | $464,450 | | Core deposit intangible assets, net | $47,324 | $2,331 | | Servicing assets, net | $11,822 | $10,051 | - Goodwill increased by **$13.7 million** due to the Territorial Merger, with no impairment recorded. A core deposit intangible asset of **$46.5 million** was also recorded from the merger, amortizing over 15 years[83](index=83&type=chunk)[86](index=86&type=chunk) - Servicing assets, primarily SBA and mortgage-related, increased to **$11.8 million** at June 30, 2025, from **$10.1 million** at December 31, 2024, with no valuation allowance for impairment[88](index=88&type=chunk)[89](index=89&type=chunk) [6. Deposits](index=32&type=section&id=6.%20Deposits) Deposit Composition | Deposit Type | June 30, 2025 (Thousands) | % of Total | December 31, 2024 (Thousands) | % of Total | | :-------------------------- | :-------------------------- | :--------- | :---------------------------- | :--------- | | Noninterest bearing | $3,485,502 | 22% | $3,377,950 | 24% | | Money market and NOW accounts | $4,910,645 | 31% | $4,515,251 | 31% | | Savings deposits | $1,192,354 | 7% | $660,484 | 5% | | Time deposits | $6,354,854 | 40% | $5,773,804 | 40% | | Total deposits | $15,943,355 | 100% | $14,327,489 | 100% | - Total deposits increased by **11.3%** to **$15.94 billion**, primarily due to **$1.67 billion** in deposits assumed from the Territorial Merger[93](index=93&type=chunk)[307](index=307&type=chunk) - Brokered deposits decreased to **$797.1 million** at June 30, 2025, from **$1.06 billion** at December 31, 2024, reflecting planned reductions[95](index=95&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Estimated insured deposits were approximately **62%** of total deposits at June 30, 2025, with uninsured deposits totaling **$6.15 billion (38%)**[309](index=309&type=chunk) [7. Borrowings](index=33&type=section&id=7.%20Borrowings) Borrowings Summary | Borrowing Type | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :-------------------------- | :-------------------------- | :---------------------------- | | FHLB and FRB borrowings | $29,752 | $239,000 | | Total borrowing capacity | $5,826,036 | $6,200,266 | | Available borrowing capacity | $5,796,036 | $5,961,266 | | Weighted average effective rate (June 30, 2025) | 1.72% | N/A | | Weighted average effective rate (Dec 31, 2024) | N/A | 4.66% | - Total borrowings significantly decreased to **$29.8 million** at June 30, 2025, from **$239.0 million** at December 31, 2024, consisting entirely of FHLB borrowings[97](index=97&type=chunk)[311](index=311&type=chunk) - The Company assumed **$160.0 million** in FHLB advances from the Territorial acquisition, of which **$125.0 million** was paid off immediately[98](index=98&type=chunk)[312](index=312&type=chunk) [8. Convertible Notes and Subordinated Debentures](index=34&type=section&id=8.%20Convertible%20Notes%20and%20Subordinated%20Debentures) Convertible Notes and Subordinated Debentures Summary | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :-------------------------- | :-------------------------- | :---------------------------- | | Convertible notes, net | $444 | $444 | | Subordinated debentures, net | $109,819 | $109,140 | | Total | $110,263 | $109,584 | - The Company had **$444 thousand** in convertible senior notes outstanding at June 30, 2025, with an initial conversion price of **$22.18** per share, which was anti-dilutive for EPS calculations[101](index=101&type=chunk)[103](index=103&type=chunk)[119](index=119&type=chunk) - Subordinated debentures totaled **$109.8 million** at June 30, 2025, with variable interest rates tied to the three-month SOFR rate, and are treated as capital for regulatory purposes[104](index=104&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk)[244](index=244&type=chunk)[315](index=315&type=chunk) [9. Commitments and Contingencies](index=36&type=section&id=9.%20Commitments%20and%20Contingencies) Commitments and Contingencies Summary | Commitment Type | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :------------------------------------------------- | :-------------------------- | :---------------------------- | | Commitments to extend credit | $2,239,010 | $2,255,785 | | Standby letters of credit | $129,138 | $134,548 | | Other letters of credit | $36,791 | $22,874 | | Commitments to fund affordable housing partnerships and CRA investments | $29,902 | $18,845 | | Reserve for unfunded loan commitments | $3,300 | $2,700 | - Loss contingencies for all legal claims totaled **$302 thousand** at June 30, 2025, with management believing no material adverse effect on financial condition[110](index=110&type=chunk)[348](index=348&type=chunk) [10. Stockholders' Equity](index=37&type=section&id=10.%20Stockholders'%20Equity) Stockholders' Equity Summary | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :-------------------------- | :-------------------------- | :---------------------------- | | Total stockholders' equity | $2,224,117 | $2,134,505 | | Accumulated other comprehensive loss, net | $(171,404) | $(227,872) | | Cash dividends declared per common share (Q2) | $0.14 | $0.14 | | Cash dividends declared per common share (YTD) | $0.28 | $0.28 | - Stockholders' equity increased by **$89.6 million**, primarily due to the issuance of **6,976,754** common shares (**$73.3 million**) for the Territorial acquisition and a **$56.5 million** decrease in accumulated other comprehensive loss[111](index=111&type=chunk)[112](index=112&type=chunk)[323](index=323&type=chunk) - The Company has **$35.3 million** remaining under its **$50.0 million** share repurchase program approved in January 2022[113](index=113&type=chunk)[324](index=324&type=chunk)[352](index=352&type=chunk) [11. (Losses) Earnings Per Share ("EPS")](index=38&type=section&id=11.%20(Losses)%20Earnings%20Per%20Share%20(%22EPS%22)) Earnings Per Share Summary | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Basic (Losses) EPS | $(0.22) | $0.21 | $(0.05) | $0.42 | | Diluted (Losses) EPS | $(0.22) | $0.21 | $(0.05) | $0.42 | | Weighted-Average Shares – Basic | 128,001,605 | 120,664,472 | 124,426,400 | 120,425,886 | | Weighted-Average Shares – Diluted | 128,223,991 | 120,939,429 | 124,859,880 | 120,964,149 | - Diluted EPS for Q2 2025 was **$(0.22)**, down from **$0.21** in Q2 2024, reflecting the net loss. Stock options and restricted share awards were anti-dilutive and excluded from diluted EPS calculations for both periods[15](index=15&type=chunk)[118](index=118&type=chunk)[121](index=121&type=chunk) - Shares related to convertible notes were not included in diluted EPS as the conversion price exceeded the market price of the Company's stock[119](index=119&type=chunk) [12. Segment Reporting](index=39&type=section&id=12.%20Segment%20Reporting) - The Company operates as a single reportable segment, primarily banking operations, with the CEO as the chief operating decision maker (CODM) evaluating performance based on revenue streams, comparative product pricing, and significant expenses[122](index=122&type=chunk)[123](index=123&type=chunk) - The Territorial Merger did not result in additional operating segments, as Territorial branches integrated into the Company's existing single segment[123](index=123&type=chunk) [13. Revenue Recognition](index=40&type=section&id=13.%20Revenue%20Recognition) - Revenue recognition primarily follows ASC 606 for noninterest revenue streams like deposit-related fees and wire transfer fees, with performance obligations satisfied over time for service charges and at a point in time for transaction-based fees[125](index=125&type=chunk)[126](index=126&type=chunk) Revenue Streams Summary | Revenue Stream | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------ | :------------------------------------ | | Total service fees on deposit accounts | $3,106 | $2,681 | $6,027 | $5,268 | | Total wire transfer and foreign currency fees | $1,058 | $974 | $2,044 | $1,786 | [14. Stock-Based Compensation](index=41&type=section&id=14.%20Stock-Based%20Compensation) - The 2024 Equity Incentive Plan, approved in May 2024, reserved **4,500,000 shares** for grants, with **2,555,341 shares** remaining available at June 30, 2025[128](index=128&type=chunk)[129](index=129&type=chunk) Stock-Based Compensation Summary | Metric | Six Months Ended June 30, 2025 (Thousands) | | :----------------------------------------- | :--------------------------------------- | | Total charged against income | $3,600 | | Income tax benefit recognized | $1,100 | | Unrecognized compensation expense (restricted stock/performance units) | $16,800 | | Weighted average vesting period (restricted stock/performance units) | 2.38 years | [15. Income Taxes](index=43&type=section&id=15.%20Income%20Taxes) Income Tax Summary | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------ | :------------------------------------ | | Pretax (loss) income | $(29,896) | $34,544 | $(2,052) | $70,438 | | Income tax (benefit) provision | $(2,015) | $9,274 | $4,733 | $19,304 | | Effective tax rate | 6.74% | 26.85% | (230.65)% | 27.41% | - The effective tax rate changes were significantly impacted by merger-related expenses, securities portfolio sales, and a **$4.9 million** incremental tax expense due to a change in California's state tax apportionment law, effective January 1, 2025[137](index=137&type=chunk)[272](index=272&type=chunk)[275](index=275&type=chunk) - The Company recorded an income tax provision of **$4.7 million** on a pretax loss of **$2.1 million** for the six months ended June 30, 2025, resulting in a negative effective tax rate[136](index=136&type=chunk) [16. Business Combinations](index=42&type=section&id=16.%20Business%20Combinations) - On April 2, 2025, the Company completed the acquisition of Territorial Bancorp Inc. in an all-stock transaction, issuing **6,976,754 shares** of common stock valued at **$73.3 million**[30](index=30&type=chunk)[112](index=112&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - The acquisition expanded the Company's domestic presence to Hawaii, increased its low-cost deposit base, and diversified its loan portfolio, adding **$1.07 billion** in loans and assuming **$1.67 billion** in deposits[142](index=142&type=chunk)[145](index=145&type=chunk) Territorial Acquisition Financial Impact | Acquired Assets / Assumed Liabilities (April 2, 2025) | Amount (Thousands) | | :---------------------------------------------------- | :----------------- | | Total consideration paid | $73,331 | | Cash and cash equivalents acquired | $86,701 | | Investment securities acquired | $535,195 | | Loans receivable acquired | $1,067,238 | | Deposits assumed | $(1,670,633) | | Borrowings assumed | $(160,770) | | Goodwill recognized | $13,654 | | Core deposit intangible recognized | $46,520 | - Merger-related provision for credit losses was **$4.46 million** and merger-related expenses were **$17.14 million** for the three months ended June 30, 2025[162](index=162&type=chunk) [17. Derivative Financial Instruments](index=48&type=section&id=17.%20Derivative%20Financial%20Instruments) Derivative Financial Instruments Summary | Derivative Type | Notional Amount (June 30, 2025, Thousands) | Fair Value (Other Assets, Thousands) | Fair Value (Other Liabilities, Thousands) | | :----------------------------------- | :--------------------------------------- | :----------------------------------- | :-------------------------------------- | | Derivatives designated as cash flow hedges | $1,125,000 | $291 | $0 | | Derivatives not designated as hedges | $2,728,493 | $38,226 | $(39,401) | - The Company uses interest rate swaps, collars, caps, floors, foreign exchange contracts, and risk participation agreements for interest rate risk management and customer services[164](index=164&type=chunk) - During the six months ended June 30, 2025, the Company terminated **$600.0 million** in notional value of receive fixed swaps to reduce exposure to higher interest rates, resulting in **$6.5 million** in pre-tax losses in AOCI to be amortized[169](index=169&type=chunk) [18. Fair Value Measurements](index=51&type=section&id=18.%20Fair%20Value%20Measurements) - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs requiring significant management judgment)[177](index=177&type=chunk)[183](index=183&type=chunk) Fair Value Measurements by Level | Asset/Liability | June 30, 2025 (Thousands) | Level 1 (Thousands) | Level 2 (Thousands) | Level 3 (Thousands) | | :----------------------------------------- | :-------------------------- | :------------------ | :------------------ | :------------------ | | Investment securities AFS | $2,021,643 | $0 | $2,020,836 | $807 | | Equity investments with readily determinable fair value | $50,538 | $50,538 | $0 | $0 | | Interest rate contracts (assets) | $38,198 | $0 | $38,198 | $0 | | Interest rate contracts (liabilities) | $38,872 | $0 | $38,872 | $0 | | Collateral-dependent loans receivable at fair value | $49,818 | $0 | $0 | $49,818 | | Loans held for sale, net | $6,329 | $0 | $0 | $6,329 | - Loans receivable, net, and subordinated debentures are primarily classified as Level 3 fair value measurements due to the use of unobservable inputs like discounted cash flow analysis and credit risk assessments[194](index=194&type=chunk)[195](index=195&type=chunk) [19. Leases](index=59&type=section&id=19.%20Leases) - The Company's operating leases primarily consist of real estate for bank branches and offices, with terms ranging from 1 to 13 years. No finance leases were held at June 30, 2025[197](index=197&type=chunk) Lease Metrics Summary | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----------------------------------- | :-------------------------- | :---------------------------- | | Operating lease ROU assets | $58,372 | $39,432 | | Long-term lease liabilities | $44,217 | $30,113 | | Net lease cost (6 months) | $10,403 | $8,789 | | Weighted-average remaining lease term | 5.3 years | 3.8 years | | Weighted-average discount rate | 3.87% | 2.91% | - The Territorial acquisition added **$22.7 million** in ROU assets and **$21.1 million** in related lease liabilities, including 26 real estate and 1 equipment leases[198](index=198&type=chunk) [20. Investments in Tax Credit Structures](index=61&type=section&id=20.%20Investments%20in%20Tax%20Credit%20Structures) - The Company invests in affordable housing partnerships and renewable solar energy projects, generating low-income housing tax credits (LIHTC) and other tax benefits[203](index=203&type=chunk) Tax Credit Investments Summary | Investment Type | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----------------------------------------- | :-------------------------- | :---------------------------- | | Investments in solar tax credit (PAM) | $2,787 | $3,425 | | Investments in affordable housing partnerships (Equity method) | $30,848 | $32,354 | | Unfunded commitments (solar tax credit) | $2,758 | $2,758 | | Unfunded commitments (affordable housing) | $23,726 | $11,283 | | Total tax credits and benefits (6 months) | $6,397 | $5,534 | | Total amortization (6 months) | $5,029 | $4,417 | [21. Regulatory Matters](index=62&type=section&id=21.%20Regulatory%20Matters) - Both Hope Bancorp, Inc. and Bank of Hope exceeded all regulatory minimum capital ratios, including the conservation buffer, at June 30, 2025[209](index=209&type=chunk)[212](index=212&type=chunk) - The Bank was categorized as 'well-capitalized' under regulatory frameworks at June 30, 2025, and December 31, 2024[210](index=210&type=chunk)[325](index=325&type=chunk) Regulatory Capital Ratios | Capital Ratio (Company) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Common equity Tier 1 capital ratio | 12.06% | 13.06% | | Tier 1 capital ratio | 12.76% | 13.79% | | Total capital ratio | 13.76% | 14.78% | | Leverage capital ratio | 10.57% | 11.83% | | Capital Conservation Buffer (Required) | 7.00% (CET1), 8.50% (Tier 1), 10.50% (Total) | 7.00% (CET1), 8.50% (Tier 1), 10.50% (Total) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Analyzes Q2 2025 financial condition and results, including Territorial acquisition and non-GAAP reconciliation [GENERAL](index=64&type=section&id=GENERAL) - Hope Bancorp, Inc. is the holding company of Bank of Hope, with **$18.55 billion** in total assets at June 30, 2025. The acquisition of Territorial Savings expanded its presence to Hawaii, making it the largest regional bank serving multicultural customers across the U.S. and Hawaii[215](index=215&type=chunk) - The Bank's principal business involves earning interest on loans and investment securities, funded by deposits and borrowings, and generating income from fee-based products and loan sales. Major expenses include interest on deposits/borrowings, credit loss provisions, and operating expenses[216](index=216&type=chunk) [Selected Financial Data](index=65&type=section&id=Selected%20Financial%20Data) Selected Financial Performance Data | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :----------------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Net (loss) income (GAAP) | $(27,881) | $25,270 | $(6,785) | $51,134 | | Net income, excluding notable items (Non-GAAP) | $24,531 | $26,579 | $47,405 | $54,170 | | Diluted EPS (GAAP) | $(0.22) | $0.21 | $(0.05) | $0.42 | | Diluted EPS, excluding notable items (Non-GAAP) | $0.19 | $0.22 | $0.38 | $0.45 | | ROA (GAAP) | (0.60)% | 0.59% | (0.08)% | 0.56% | | ROA, excluding notable items (Non-GAAP) | 0.52% | 0.62% | 0.53% | 0.60% | | Efficiency ratio (GAAP) | 115.75% | 69.26% | 91.59% | 69.02% | | Efficiency ratio, excluding notable items (Non-GAAP) | 69.09% | 67.67% | 69.43% | 67.23% | - Notable items for Q2 2025 totaled **$52.4 million** after tax, including **$30.5 million** from investment securities repositioning losses, **$17.1 million** in merger-related costs, and a **$4.9 million** impact from a California state tax apportionment law change[231](index=231&type=chunk)[225](index=225&type=chunk) Selected Balance Sheet Data | Balance Sheet Data | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----------------------------------- | :-------------------------- | :---------------------------- | | Total assets | $18,547,017 | $17,054,008 | | Total loans receivable | $14,434,787 | $13,618,272 | | Total deposits | $15,943,355 | $14,327,489 | | Stockholders' equity | $2,224,117 | $2,134,505 | | Tangible Common Equity (TCE) | $1,698,689 | $1,643,699 | | TCE ratio | 9.43% | 9.72% | [Results of Operations](index=69&type=section&id=Results%20of%20Operations) [Overview](index=69&type=section&id=Overview) - Net loss for Q2 2025 was **$27.9 million**, or **$(0.22)** per diluted share, a **$53.2 million** decrease YoY, primarily due to **$52.4 million** in notable items including investment securities losses and merger-related costs[230](index=230&type=chunk)[231](index=231&type=chunk) - Excluding notable items, Q2 2025 net income was **$24.5 million**, or **$0.19** per diluted share, down from **$26.6 million**, or **$0.22** per diluted share, in Q2 2024, mainly due to lower noninterest income and higher noninterest expense and provision for loan losses[232](index=232&type=chunk) [Net Interest Income and Net Interest Margin](index=69&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net Interest Income and Margin Trends | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :----------------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Net interest income before provision for credit losses | $117,533 | $105,860 | $218,350 | $220,907 | | Net interest margin | 2.69% | 2.62% | 2.62% | 2.58% | | Weighted average yield on loans | 5.88% | 6.20% | 5.88% | 6.23% | | Weighted average cost of deposits | 2.96% | 3.39% | 3.07% | 3.37% | - Q2 2025 net interest income increased by **11.0%** YoY to **$117.5 million**, driven by lower cost of deposits and increased average interest-earning assets, despite lower loan yields[235](index=235&type=chunk) - The net interest margin for Q2 2025 increased to **2.69%** (from **2.62%** in Q2 2024), primarily due to lower weighted average costs of interest-bearing deposits and increased average loan balances[238](index=238&type=chunk) - Accretion of discount on acquired loans from the Territorial Merger contributed **$4.1 million** to net interest income for the three and six months ended June 30, 2025[237](index=237&type=chunk) [Provision for Credit Losses](index=74&type=section&id=Provision%20for%20Credit%20Losses) Provision for Credit Losses Summary | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :----------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Provision for credit losses | $15,000 | $1,400 | $19,800 | $4,000 | | Merger-related provision for credit losses | $4,461 | $0 | $4,461 | $0 | | Provision for unfunded loan commitments | $1,000 | $(300) | $600 | $(1,300) | - The Q2 2025 provision for credit losses increased by **$13.6 million** YoY to **$15.0 million**, including **$4.5 million** from merger-related expenses, driven by higher provisions for C&I and residential mortgage loans[252](index=252&type=chunk)[253](index=253&type=chunk) - Net loan charge-offs as a percentage of average loans (annualized) increased to **0.33%** in Q2 2025 from **0.13%** in Q2 2024, primarily due to C&I loan charge-offs[301](index=301&type=chunk) [Noninterest Income](index=75&type=section&id=Noninterest%20Income) Noninterest Income Summary | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :----------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Total noninterest income | $(22,956) | $11,071 | $(7,268) | $19,357 | | Net losses on sales of investment securities AFS | $(38,856) | $425 | $(38,856) | $425 | | Net gains on sales of SBA loans | $3,998 | $1,980 | $7,129 | $1,980 | | Swap fees | $1,662 | $25 | $2,307 | $168 | | Other income and fees | $5,544 | $4,290 | $12,582 | $8,000 | - Total noninterest income decreased by **$34.0 million** YoY to **$(23.0) million** in Q2 2025, primarily due to **$38.9 million** in net losses from the strategic repositioning of AFS investment securities[256](index=256&type=chunk)[260](index=260&type=chunk) - Offsetting the decline, net gains on SBA loan sales increased by **101.9%** YoY to **$4.0 million** in Q2 2025, and swap fees surged by **6,548%** due to increased loan originations[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) [Noninterest Expense](index=77&type=section&id=Noninterest%20Expense) Noninterest Expense Summary | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :----------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Total noninterest expense | $109,473 | $80,987 | $193,334 | $165,826 | | Merger and restructuring-related costs | $17,281 | $2,165 | $19,800 | $3,611 | | Salaries and employee benefits | $52,834 | $44,107 | $101,294 | $91,684 | | Occupancy expense | $8,884 | $6,906 | $16,050 | $13,692 | | Furniture and equipment | $7,817 | $5,475 | $13,530 | $10,815 | | Earned interest credit expense | $3,310 | $6,139 | $6,397 | $11,973 | - Total noninterest expense increased by **35.2%** YoY to **$109.5 million** in Q2 2025, primarily driven by **$17.3 million** in merger and restructuring-related costs from the Territorial acquisition[262](index=262&type=chunk)[268](index=268&type=chunk) - Salaries and employee benefits increased by **19.8%** YoY due to higher headcount from the Territorial acquisition, while occupancy and furniture/equipment expenses also rose due to increased Bank locations and depreciation[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk) - Earned interest credit expense decreased by **46.1%** YoY due to reductions in the Federal Funds rate[267](index=267&type=chunk) [Provision for Income Taxes](index=78&type=section&id=Provision%20for%20Income%20Taxes) Income Tax Provision Summary | Metric | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :----------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Income tax (benefit) provision | $(2,015) | $9,274 | $4,733 | $19,304 | | Effective tax rate | 6.74% | 26.85% | (230.65)% | 27.41% | | Total tax credits (6 months) | $6,397 | $5,534 | | Amortization on renewable energy investment (6 months) | $638 | $0 | - The effective tax rate for Q2 2025 was **6.74%** (on a pretax loss), significantly lower than **26.85%** in Q2 2024, influenced by merger-related expenses, securities sales, and a California state tax apportionment law change[270](index=270&type=chunk)[272](index=272&type=chunk)[275](index=275&type=chunk) - The Company recorded an incremental tax expense of **$4.9 million** in Q2 2025 due to the change in California's state tax apportionment law[275](index=275&type=chunk) [Financial Condition](index=80&type=section&id=Financial%20Condition) [Cash and Cash Equivalents](index=80&type=section&id=Cash%20and%20Cash%20Equivalents) Cash and Cash Equivalents Balances | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :-------------------------- | :-------------------------- | :---------------------------- | | Cash and cash equivalents | $689,734 | $458,199 | - Cash and cash equivalents increased to **$689.7 million** at June 30, 2025, from **$458.2 million** at December 31, 2024, partly due to **$86.7 million** acquired in the Territorial acquisition[280](index=280&type=chunk) [Investment Securities Portfolio](index=80&type=section&id=Investment%20Securities%20Portfolio) Investment Securities Portfolio Balances | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----------------------------------- | :-------------------------- | :---------------------------- | | Investment securities AFS, at fair value | $2,021,643 | $1,823,243 | | Investment securities HTM, at amortized cost | $247,246 | $252,385 | | Net unrealized loss on AFS securities | $(217,400) | $(299,400) | - The net unrealized loss on AFS securities decreased to **$217.4 million** at June 30, 2025, from **$299.4 million** at December 31, 2024, reflecting market interest rate movements and Q2 sales[281](index=281&type=chunk) - The Company purchased **$686.7 million**, sold **$953.1 million**, and had **$84.3 million** in pay-downs and **$35.1 million** in calls of investment securities during the six months ended June 30, 2025[282](index=282&type=chunk) [Equity Investments](index=80&type=section&id=Equity%20Investments) Equity Investments Balances | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----------------------------------------- | :-------------------------- | :---------------------------- | | Total equity investments | $88,152 | $39,946 | | Equity investments with readily determinable fair values | $50,500 | $4,300 | | Equity investments without readily determinable fair values | $37,600 | $35,600 | - Equity investments increased by **120.7%** to **$88.2 million**, primarily driven by **$45.5 million** in purchases of CRA mutual funds[286](index=286&type=chunk) [Loans Held For Sale](index=81&type=section&id=Loans%20Held%20For%20Sale) Loans Held For Sale Balances | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :-------------------------- | :-------------------------- | :---------------------------- | | Loans held for sale | $12,051 | $14,491 | | SBA loans sold (YTD) | $117,300 | N/A | | Residential mortgage loans sold (YTD) | $7,900 | N/A | | C&I loans sold (YTD) | $60,000 | N/A | - Loans held for sale decreased by **16.8%** to **$12.1 million**, consisting of C&I, residential mortgage, and consumer credit card loans[289](index=289&type=chunk) [Loans Receivable](index=81&type=section&id=Loans%20Receivable) Loans Receivable Composition | Loan Portfolio Composition | June 30, 2025 (Thousands) | % of Total | December 31, 2024 (Thousands) | % of Total | | :------------------------- | :-------------------------- | :--------- | :---------------------------- | :--------- | | CRE loans | $8,385,764 | 58% | $8,527,008 | 63% | | C&I loans | $3,725,295 | 26% | $3,967,596 | 29% | | Residential mortgage loans | $2,273,427 | 16% | $1,082,459 | 8% | | Consumer and other loans | $50,301 | 0% | $41,209 | 0% | | Total loans receivable | $14,434,787 | 100% | $13,618,272 | 100% | - Loans receivable increased by **6.0%** to **$14.43 billion**, primarily due to **$1.07 billion** in loans acquired from the Territorial Merger, which significantly increased residential mortgage loans' share of the portfolio to **16%**[290](index=290&type=chunk) CRE Loan Portfolio Breakdown | CRE Loan Type (June 30, 2025) | Amount (Thousands) | % | Weighted Average LTV | | :---------------------------- | :----------------- | :- | :------------------- | | Multi-tenant retail | $1,589,994 | 19% | 41% | | Industrial warehouses | $1,260,991 | 15% | 40% | | Multifamily | $1,211,785 | 14% | 59% | | Gas stations and car washes | $1,106,007 | 13% | 49% | | Hotels/motels | $754,449 | 9% | 41% | | Office | $340,329 | 4% | 56% | | Total CRE loans | $8,385,764 | 100% | 46% | [Nonperforming Assets](index=83&type=section&id=Nonperforming%20Assets) Nonperforming Assets Summary | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----------------------------------- | :-------------------------- | :---------------------------- | | Nonaccrual loans | $110,739 | $90,564 | | Accruing delinquent loans past due 90 days or more | $2,149 | $229 | | Total nonperforming loans | $112,888 | $90,793 | | Total nonperforming assets | $112,888 | $90,793 | | Nonperforming assets to total assets | 0.61% | 0.53% | | Nonaccrual loans to loans receivable | 0.77% | 0.67% | - Nonperforming assets increased by **24.3%** to **$112.9 million** at June 30, 2025, primarily due to the migration of a well-secured CRE loan[296](index=296&type=chunk) [Allowance for Credit Losses](index=83&type=section&id=Allowance%20for%20Credit%20Losses) Allowance for Credit Losses by Loan Segment | Loan Segment | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :-------------------------- | :-------------------------- | :---------------------------- | | CRE loans | $77,300 | $88,374 | | C&I loans | $62,547 | $57,243 | | Residential mortgage loans | $9,113 | $4,438 | | Consumer and other loans | $545 | $472 | | Total ACL | $149,505 | $150,527 | | ACL to loans receivable | 1.04% | 1.11% | - The ACL decreased slightly to **$149.5 million** at June 30, 2025, from **$150.5 million** at December 31, 2024, with the coverage ratio decreasing to **1.04%** from **1.11%**[298](index=298&type=chunk) - The decrease in ACL was primarily due to a decline in CRE loan ACL, offset by increases in C&I and residential mortgage loan ACLs, the latter driven by the Territorial acquisition[300](index=300&type=chunk) [Investments in Tax Credit Structures](index=85&type=section&id=Investments%20in%20Tax%20Credit%20Structures) Tax Credit Investments and Commitments | Investment Type | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----------------------------------------- | :-------------------------- | :---------------------------- | | Investments in affordable housing partnerships | $30,800 | $32,400 | | Investments in solar tax credits | $2,800 | $3,400 | | Unfunded commitments (affordable housing) | $23,700 | $11,300 | | Unfunded commitments (solar tax credits) | $2,800 | $2,800 | - Investments in affordable housing partnerships decreased to **$30.8 million** due to amortization, while unfunded commitments for these partnerships more than doubled to **$23.7 million**[305](index=305&type=chunk) [Deposits, Borrowings, Convertible Notes, and Subordinated Debentures](index=85&type=section&id=Deposits,%20Borrowings,%20Convertible%20Notes,%20and%20Subordinated%20Debentures) Deposits, Borrowings, and Debentures Summary | Deposit Type | June 30, 2025 (Thousands) | % of Total | December 31, 2024 (Thousands) | % of Total | | :-------------------------- | :-------------------------- | :--------- | :---------------------------- | :--------- | | Demand, noninterest bearing | $3,485,502 | 22% | $3,377,950 | 24% | | Money market, interest bearing demand and savings | $6,102,999 | 38% | $5,175,735 | 36% | | Time deposits | $6,354,854 | 40% | $5,773,804 | 40% | | Total deposits | $15,943,355 | 100% | $14,327,489 | 100% | | Brokered deposits | $797,100 | N/A | $1,060,000 | N/A | | FHLB and FRB borrowings | $29,800 | N/A | $239,000 | N/A | | Convertible notes, net | $444 | N/A | $444 | N/A | | Subordinated debentures | $109,800 | N/A | $109,100 | N/A | - Total deposits increased by **11.3%** to **$15.94 billion**, primarily due to **$1.67 billion** from the Territorial acquisition, while brokered deposits decreased due to planned reductions[307](index=307&type=chunk)[308](index=308&type=chunk) - Borrowings significantly decreased to **$29.8 million** (all FHLB) from **$239.0 million**, with **$125.0 million** of assumed FHLB advances from Territorial paid off immediately[311](index=311&type=chunk)[312](index=312&type=chunk) [Off-Balance-Sheet Activities and Contractual Obligations](index=86&type=section&id=Off-Balance-Sheet%20Activities%20and%20Contractual%20Obligations) - The Company engages in traditional off-balance-sheet credit-related financial instruments (commitments to extend credit, standby letters of credit), interest rate swap contracts, foreign exchange contracts, and commitments related to affordable housing partnership investments[316](index=316&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) - These activities are part of normal business to meet customer financing needs and manage risk, with no anticipated material impact on future operations or financial condition[317](index=317&type=chunk)[322](index=322&type=chunk) [Stockholders' Equity and Regulatory Capital](index=87&type=section&id=Stockholders'%20Equity%20and%20Regulatory%20Capital) Stockholders' Equity and Capital Summary | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | | :----------------------------------- | :-------------------------- | :---------------------------- | | Total stockholders' equity | $2,224,117 | $2,134,505 | | Common stock issued (Territorial acquisition) | $73,300 | N/A | | Decrease in AOCI | $56,500 | N/A | | Cash dividends paid | $(34,800) | N/A | | Net loss | $(6,800) | N/A | - Stockholders' equity increased by **$89.6 million**, driven by **$73.3 million** in common stock issued for the Territorial acquisition and a **$56.5 million** decrease in accumulated other comprehensive loss, partially offset by net loss and dividends[323](index=323&type=chunk) - The Bank was categorized as 'well-capitalized' at June 30, 2025, exceeding all regulatory minimum capital ratios[325](index=325&type=chunk)[326](index=326&type=chunk) [Liquidity Management](index=89&type=section&id=Liquidity%20Management) - The Company manages liquidity risk to meet obligations without unacceptable losses, considering deposit stability, marketability of investments, alternative funding sources, and credit demand[327](index=327&type=chunk) - Primary liquidity sources include deposits, federal funds facilities, and FHLB/FRB borrowings, augmented by loan/securities payments and sales[328](index=328&type=chunk) - At June 30, 2025, total borrowing capacity, cash, and unpledged securities amounted to **$8.44 billion**, including **$5.80 billion** in available borrowing capacity from FHLB and FRB, and **$1.95 billion** in unpledged AFS securities[329](index=329&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=88&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Details market risk, primarily interest rate risk, and management strategies, including NII and EVE sensitivity [Interest Rate Risk](index=90&type=section&id=Interest%20Rate%20Risk) - Interest rate risk is the most significant market risk, measured by potential changes in Net Interest Income (NII) and Economic Value of Equity (EVE), encompassing repricing, basis, yield curve, and options risk[332](index=332&type=chunk)[336](index=336&type=chunk) - The Asset and Liability Management Committee (ALM) manages interest rate risk, aiming to reduce earnings sensitivity to rate fluctuations while maintaining liquidity and capital[333](index=333&type=chunk)[334](index=334&type=chunk) [Net Interest Income Sensitivity Simulation](index=91&type=section&id=Net%20Interest%20Income%20Sensitivity%20Simulation) Net Interest Income Sensitivity Analysis | Interest Rate Change (basis points) | June 30, 2025 NII Sensitivity | June 30, 2024 NII Sensitivity | | :---------------------------------- | :---------------------------- | :---------------------------- | | (300) | (5.7)% | (5.5)% | | (200) | (4.0)% | (3.3)% | | (100) | (2.0)% | (1.0)% | | +100 | 1.9% | (0.2)% | | +200 | 4.0% | (2.3)% | | +300 | 5.8% | (4.3)% | - The NII sensitivity profile shows increased positive sensitivity to rising rates and reduced negative sensitivity to falling rates at June 30, 2025, compared to June 30, 2024[339](index=339&type=chunk) - This change is attributed to the termination of the receive fixed swap portfolio and growth in time deposit balances, partially offset by increased fixed-rate mortgage balances from the Territorial acquisition[339](index=339&type=chunk) [Economic Value of Equity Sensitivity](index=91&type=section&id=Economic%20Value%20of%20Equity%20Sensitivity) Economic Value of Equity Sensitivity Analysis | Interest Rate Change (basis points) | June 30, 2025 EVE Sensitivity | June 30, 2024 EVE Sensitivity | | :---------------------------------- | :---------------------------- | :---------------------------- | | (300) | 6.7% | 3.2% | | (200) | 6.6% | 3.9% | | (100) | 4.2% | 2.7% | | +100 | (5.0)% | (5.5)% | | +200 | (10.6)% | (12.0)% | | +300 | (16.6)% | (19.0)% | - The EVE profile at June 30, 2025, shows increased positive sensitivity to falling rates and reduced negative sensitivity to rising rates compared to the prior year[341](index=341&type=chunk) - These changes are due to the active reduction of the investment portfolio duration, termination of receive fixed swaps, and an increase in low-beta, long-duration retail deposits, partially offset by fixed-rate residential mortgage loans from the Territorial acquisition[341](index=341&type=chunk) [Item 4. Controls and Procedures](index=91&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Confirms effective disclosure controls and procedures, with no material changes to internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=92&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, and determined they were effective[344](index=344&type=chunk) [Changes in Internal Control over Financial Reporting](index=92&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There have been no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[345](index=345&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=93&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) Details legal claims and accrued loss contingencies, with management expecting no material adverse financial impact - Accrued loss contingencies for all legal claims totaled approximately **$302 thousand** at June 30, 2025[348](index=348&type=chunk) - Management believes that none of these legal claims, individually or in the aggregate, will have a material adverse effect on the results of operations or financial condition of the Company[348](index=348&type=chunk) [Item 1A. Risk Factors](index=93&type=section&id=Item%201A.%20RISK%20FACTORS) No material changes to risk factors from the prior Annual Report on Form 10-K were identified - No material changes to risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2024, were identified[349](index=349&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=94&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered equity sales occurred; **$35.3 million** remains in the **$50.0 million** share repurchase program - No unregistered sales of equity securities occurred during the three months ended June 30, 2025[351](index=351&type=chunk) - The Company's **$50.0 million** stock repurchase program had **$35.3 million** remaining as of June 30, 2025, with no shares repurchased during the quarter[352](index=352&type=chunk)[353](index=353&type=chunk) [Item 3. Defaults Upon Senior Securities](index=94&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The Company reported no defaults upon senior securities during the period - None[354](index=354&type=chunk) [Item 4. Mine Safety Disclosures](index=94&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the Company - Not Applicable[355](index=355&type=chunk) [Item 5. Other Information](index=94&type=section&id=Item%205.%20OTHER%20INFORMATION) No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[356](index=356&type=chunk) [Item 6. Exhibits](index=94&type=section&id=Item%206.%20EXHIBITS) Lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications and XBRL data - The exhibits include certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2), corporate governance documents (3.1, 3.2), and Inline XBRL Taxonomy Extension documents (101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[360](index=360&type=chunk)

Financial Data and Key Metrics Changes - Net income for Q2 2025, excluding notable items, totaled $24.5 million, up 7% from $22.9 million in Q1 2025 [5] - Reported a net loss of $27.9 million for Q2 2025 due to one-time losses from selling lower-yielding legacy securities and merger-related items [5] - Pretax pre-provision net revenue, excluding notable items, grew to $41.2 million in Q2 2025, up 17% from $35.2 million in Q1 2025 [6] Business Line Data and Key Metrics Changes - Total deposits grew to $15.9 billion, an increase of 10% from the prior quarter, driven by the acquisition of Territorial Bancorp [8] - Loans receivable increased to $14.4 billion, up 8% from the end of the prior quarter, reflecting the addition of Territorial's loan portfolio [9] - Organic loan production increased by 57% from Q1 2025, contributing to modest net growth in the legacy portfolio [10] Market Data and Key Metrics Changes - Average cost of interest-bearing deposits declined by 37 basis points quarter over quarter, and average cost of total deposits decreased by 22 basis points [8] - Broker deposits decreased by $183 million or 19% quarter over quarter, with the broker deposits ratio declining to 5% of total deposits [9] Company Strategy and Development Direction - The acquisition of Territorial Bancorp is seen as a strategic move to enter the Hawaii market, enhancing growth opportunities [4] - Strengthening the deposit franchise remains a key priority, with a focus on reducing broker deposit exposure and improving the cost of funds [8] Management's Comments on Operating Environment and Future Outlook - Management expects loan growth in 2025 to be at a high single-digit percentage rate, driven by improved frontline productivity and hiring [24] - The company anticipates net interest income growth in the high single-digit percentage range for 2025, despite the negative impact of delayed Fed rate cuts [25] Other Important Information - The company declared a quarterly common stock dividend of $0.14 per share, payable on August 15, 2025 [7] - The effective tax rate is expected to be approximately 14% for the third and fourth quarters, reflecting changes in California state tax apportionment law [26] Q&A Session Summary Question: Any updates on fee income expectations for the second half of the year? - Management highlighted positive drivers for fee income growth, including customer swap fee income and loan-related fees [30] Question: What is the average yield on new loan production? - The average yield on new production was approximately 6.76% [67] Question: What is the expected impact of the Territorial acquisition on cost savings? - Management indicated that there are still integration and cost savings expected in the second half of the year, but specifics will be shared later [35] Question: How is the company viewing asset quality in the current environment? - Management expressed cautious optimism regarding asset quality, noting a decline in criticized loans and stable overall credit quality [50] Question: What is the target loan-to-deposit ratio? - The target loan-to-deposit ratio is up to 95%, with current levels below 91% [57]

Financial Data and Key Metrics Changes - Net income for the second quarter of 2025, excluding notable items, totaled $24,500,000, up 7% from $22,900,000 in the preceding first quarter [5] - Reported a net loss of $27,900,000 for the second quarter due to one-time losses from selling lower yielding legacy securities and merger-related items [5] - Pretax pre-provision net revenue excluding notable items grew to $41,200,000, up 17% from $35,200,000 in the first quarter [6] - Net interest income totaled $118,000,000 for the second quarter, an increase of 17% from the prior quarter [11] - Net interest margin increased by 15 basis points quarter over quarter to 2.69 for the second quarter [14] Business Line Data and Key Metrics Changes - Total deposits grew to $15,900,000,000, an increase of 10% from the end of the prior quarter [7] - Loans receivable of $14,400,000,000 were up 8% from the end of the prior quarter, reflecting the addition of Territorial's loan portfolio [8] - Organic loan production increased 57% from the first quarter level [8] - Noninterest income of $15,900,000, excluding notable losses, was up 44% year over year [15] Market Data and Key Metrics Changes - Broker deposits decreased by $183,000,000 or 19% quarter over quarter, with the broker deposits ratio declining to 5% of total deposits [8] - Criticized loans declined by $34,000,000 or 8% quarter over quarter [19] - Non-performing assets totaled $113,000,000, representing 61 basis points of total assets, up from 49 basis points as of March 31 [19] Company Strategy and Development Direction - The acquisition of Territorial Bancorp is seen as a strategic move to enter the important Hawaii market [4] - Strengthening the deposit franchise remains a key priority, with a focus on reducing broker deposits and improving the cost of funds [7] - The company expects loan growth at a high single-digit percentage rate for 2025, driven by improved frontline productivity and hiring [22] Management Comments on Operating Environment and Future Outlook - Management remains cautiously optimistic about asset quality, despite some uncertainties in the macroeconomic environment [51] - The company anticipates net interest income growth in the high single-digit percentage range for 2025, despite the negative impact of fewer Fed funds rate cuts [22] - The effective tax rate is expected to be approximately 14% in the third and fourth quarters due to changes in California state tax apportionment law [24] Other Important Information - The Board of Directors declared a quarterly common stock dividend of $0.14 per share [6] - The company plans to continue recognizing pretax acquisition accounting adjustments associated with the Territorial transaction on a quarterly basis [12] Q&A Session Summary Question: Fee income guidance for the second half of the year - Management highlighted positive drivers such as customer swap fee income growth and improved loan-related fee income [30] Question: Spot rate on deposits and assumptions for the outlook - The spot rate at June was 2.93%, with expectations for higher betas on deposit products during upcoming rate cuts [31][32] Question: Cost savings from the Territorial acquisition - Management indicated that there are still more integration and cost savings expected in the second half of the year, but specifics will be shared later [35] Question: Loan growth expectations and hiring impact - Management confirmed ongoing hiring of experienced bankers to drive loan production, with expectations for increased loan growth in the latter half of the year [47] Question: Asset quality and credit outlook - Management expressed cautious optimism regarding asset quality, noting a decline in criticized assets and manageable levels of problem loans [51] Question: One-time costs related to the acquisition - Management indicated there will be a couple million more in one-time costs in the third and fourth quarters [65] Question: Average yield on new loan production - The average yield on new production was approximately 6.76% [68]