Part I - Financial Information [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) This section provides the unaudited consolidated financial statements and comprehensive notes for Hope Bancorp, Inc. and its subsidiaries, detailing financial position, performance, and related accounting policies and disclosures [Consolidated Statements of Financial Condition (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition%20%28Unaudited%29) This section presents the unaudited consolidated statements of financial condition, detailing assets, liabilities, and stockholders' equity at quarter-end **Key Data from Consolidated Statements of Financial Condition (As of March 31, 2024 and December 31, 2023):** | Metric | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | **Assets:** | | | | Cash and Cash Equivalents | 1,185,296 | 1,928,967 | | Available-for-Sale Investment Securities (Fair Value) | 2,016,389 | 2,145,059 | | Held-to-Maturity Investment Securities (Amortized Cost) | 261,601 | 263,912 | | Loans Receivable, Net | 13,560,420 | 13,694,925 | | Total Assets | 18,088,214 | 19,131,522 | | **Liabilities:** | | | | Total Deposits | 14,753,417 | 14,753,753 | | FHLB and FRB Borrowings | 795,634 | 1,795,726 | | Total Liabilities | 15,975,944 | 17,010,279 | | **Stockholders' Equity:** | | | | Total Stockholders' Equity | 2,112,270 | 2,121,243 | | Total Liabilities and Stockholders' Equity | 18,088,214 | 19,131,522 | [Consolidated Statements of Income (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Income%20%28Unaudited%29) This section presents the unaudited consolidated statements of income, detailing revenues, expenses, and net income for the reporting periods **Key Data from Consolidated Statements of Income (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (Thousands of USD) | 2023 (Thousands of USD) | | :--- | :--- | :--- | | Total Interest Income | 259,674 | 236,677 | | Total Interest Expense | 144,627 | 102,799 | | Net Interest Income Before Provision for Credit Losses | 115,047 | 133,878 | | Provision for Credit Losses | 2,600 | 3,320 | | Net Interest Income After Provision for Credit Losses | 112,447 | 130,558 | | Total Noninterest Income | 8,286 | 10,978 | | Total Noninterest Expense | 84,839 | 88,734 | | Income Before Income Tax Provision | 35,894 | 52,802 | | Income Tax Provision | 10,030 | 13,681 | | Net Income | 25,864 | 39,121 | | Basic Earnings Per Share | 0.22 | 0.33 | | Diluted Earnings Per Share | 0.21 | 0.33 | [Consolidated Statements of Comprehensive Income (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Unaudited%29) This section presents the unaudited consolidated statements of comprehensive income, detailing net income and other comprehensive income components **Key Data from Consolidated Statements of Comprehensive Income (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (Thousands of USD) | 2023 (Thousands of USD) | | :--- | :--- | :--- | | Net Income | 25,864 | 39,121 | | Other Comprehensive (Loss) Income, Net of Tax | (17,540) | 16,600 | | Total Comprehensive Income | 8,324 | 55,721 | [Consolidated Statements of Changes in Stockholders' Equity (Unaudited)](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20%28Unaudited%29) This section presents the unaudited consolidated statements of changes in stockholders' equity, detailing equity movements over the reporting periods **Key Data from Consolidated Statements of Changes in Stockholders' Equity (As of March 31, 2024 and March 31, 2023):** | Metric | March 31, 2024 (Thousands of USD) | March 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Beginning Balance of Stockholders' Equity | 2,121,243 | 2,019,328 | | Net Income | 25,864 | 39,121 | | Other Comprehensive Loss (Income) | (17,540) | 16,600 | | Cash Dividends | (16,818) | (16,730) | | Ending Balance of Stockholders' Equity | 2,112,270 | 2,058,580 | [Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29) This section presents the unaudited consolidated statements of cash flows, detailing cash movements from operating, investing, and financing activities **Key Data from Consolidated Statements of Cash Flows (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (Thousands of USD) | 2023 (Thousands of USD) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 29,619 | 76,144 | | Net Cash Provided by Investing Activities | 247,124 | 304,906 | | Net Cash (Used in) Provided by Financing Activities | (1,020,414) | 1,324,811 | | Net Change in Cash and Cash Equivalents | (743,671) | 1,705,861 | | Ending Balance of Cash and Cash Equivalents | 1,185,296 | 2,212,637 | [Notes to Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section provides detailed notes to the unaudited consolidated financial statements, offering further insights into the company's financial position and performance [1. Hope Bancorp, Inc.](index=12&type=section&id=1.%20Hope%20Bancorp%2C%20Inc.) Hope Bancorp, Inc. is the holding company for Bank of Hope, headquartered in Los Angeles, with a network of branches and lending offices across several states and a representative office in Seoul, Korea - Hope Bancorp, Inc. is the holding company for Bank of Hope, headquartered in Los Angeles, with **48 branches** and **9 loan production offices** across multiple states and a representative office in Seoul, Korea as of March 31, 2024[24](index=24&type=chunk) - The company has signed an agreement to sell deposits, other liabilities, and certain physical assets of two Virginia branches, with completion expected in the second half of 2024[25](index=25&type=chunk) [2. Basis of Presentation](index=12&type=section&id=2.%20Basis%20of%20Presentation) This section outlines the basis of preparation for the unaudited consolidated financial statements, emphasizing adherence to SEC rules and the adoption of new accounting standards - The consolidated financial statements are unaudited and condensed in accordance with SEC rules[26](index=26&type=chunk) - The company has adopted ASU 2023-07, which expands segment disclosure requirements, and is currently evaluating its impact, with effectiveness for interim periods within fiscal years beginning after December 15, 2024[32](index=32&type=chunk) - The SEC's final rule on climate-related disclosures, adopted on March 6, 2024, has been stayed, and the company is evaluating its impact[34](index=34&type=chunk) [3. Earnings Per Share ("EPS")](index=15&type=section&id=3.%20Earnings%20Per%20Share%20%28%22EPS%22%29) This section details the calculation of basic and diluted earnings per share, noting the impact of convertible notes on dilution **Basic and Diluted Earnings Per Share (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net Income (Thousands of USD) | 25,864 | 39,121 | | Basic Earnings Per Share (USD) | 0.22 | 0.33 | | Diluted Earnings Per Share (USD) | 0.21 | 0.33 | | Basic Weighted-Average Shares Outstanding | 120,187,300 | 119,551,247 | | Diluted Weighted-Average Shares Outstanding | 121,020,292 | 120,242,295 | - Convertible notes were excluded from diluted EPS calculation as their conversion price exceeded the company's stock market price, rendering them antidilutive[36](index=36&type=chunk) [4. Equity Investments](index=16&type=section&id=4.%20Equity%20Investments) This section describes the company's equity investment portfolio, distinguishing between investments with and without readily determinable fair values **Equity Investment Composition (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Equity Investments with Readily Determinable Fair Value | 4,300 | 4,400 | | Total Equity Investments without Readily Determinable Fair Value | 39,600 | 39,400 | | - Banker's Bank Stock | 370 | 370 | | - CDFI Investments | 1,000 | 1,000 | | - CRA Investments | 38,200 | 38,000 | - Equity investments without readily determinable fair value experienced no impairment or observable price changes for the three months ended March 31, 2024 and 2023[43](index=43&type=chunk) [5. Investment Securities](index=17&type=section&id=5.%20Investment%20Securities) This section details the company's investment securities portfolio, including available-for-sale and held-to-maturity debt securities, and their associated unrealized gains and losses **Investment Securities Summary (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | **Available-for-Sale Debt Securities (AFS):** | | | | Amortized Cost | 2,314,872 | 2,429,808 | | Fair Value | 2,016,389 | 2,145,059 | | Gross Unrealized Gains | 4,828 | 6,199 | | Gross Unrealized Losses | (303,311) | (290,948) | | **Held-to-Maturity Debt Securities (HTM):** | | | | Amortized Cost | 261,601 | 263,912 | | Fair Value | 242,717 | 250,518 | | Gross Unrealized Gains | — | — | | Gross Unrealized Losses | (18,884) | (13,394) | - As of March 31, 2024, **79.4%** of the company's investment portfolio consisted of securities issued by U.S. government agencies and government-sponsored enterprises[55](index=55&type=chunk) - The company recorded **no allowance for credit losses** on available-for-sale or held-to-maturity investment securities as of March 31, 2024 and December 31, 2023[57](index=57&type=chunk)[58](index=58&type=chunk) [6. Loans Receivable and Allowance for Credit Losses](index=21&type=section&id=6.%20Loans%20Receivable%20and%20Allowance%20for%20Credit%20Losses) This section provides an overview of the loan portfolio, changes in the allowance for credit losses, and trends in nonaccrual and past due loans **Loan Portfolio Composition (As of March 31, 2024 and December 31, 2023):** | Loan Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Commercial Real Estate (CRE) Loans | 8,707,673 | 8,797,884 | | Commercial and Industrial (C&I) Loans | 4,041,063 | 4,135,044 | | Residential Mortgage Loans | 936,035 | 883,687 | | Consumer and Other Loans | 34,407 | 37,004 | | Total Loans Receivable (Net of Deferred Costs and Fees) | 13,719,178 | 13,853,619 | | Allowance for Credit Losses | (158,758) | (158,694) | | Loans Receivable, Net (Net of Allowance for Credit Losses) | 13,560,420 | 13,694,925 | - Total loans receivable decreased by **1.0%** to **$13.72 billion** as of March 31, 2024, primarily due to decreases in C&I and CRE loans, partially offset by an increase in residential mortgage loans[62](index=62&type=chunk) **Allowance for Credit Losses Activity (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (Thousands of USD) | 2023 (Thousands of USD) | | :--- | :--- | :--- | | Beginning Balance | 158,694 | 162,359 | | Provision for Loan Credit Losses (Credit) | 3,600 | 1,700 | | Loan Charge-offs | (4,720) | (495) | | Recoveries of Charge-offs | 1,184 | 387 | | Ending Balance | 158,758 | 163,544 | **Nonaccrual and Past Due Loans (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Total Nonaccrual Loans | 59,526 | 45,204 | | Loans 90 Days or More Past Due and Still Accruing | 47,290 | 261 | | **Total** | **106,816** | **45,465** | - The company uses a combination of model-based and non-model-based approaches to estimate expected losses for collectively evaluated loans, incorporating current and future economic conditions and qualitative adjustments based on a credit risk matrix[77](index=77&type=chunk)[80](index=80&type=chunk) [7. Leases](index=31&type=section&id=7.%20Leases) This section details the company's operating lease arrangements for bank branches and office spaces, including right-of-use assets and lease liabilities **Operating Lease Supplemental Balance Sheet Information (As of March 31, 2024 and December 31, 2023):** | Metric | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Operating Lease Right-of-Use Assets | 43,849 | 46,611 | | Current Portion of Long-Term Lease Liabilities | 14,128 | 14,287 | | Long-Term Lease Liabilities | 35,621 | 38,383 | **Net Operating Lease Cost (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (Thousands of USD) | 2023 (Thousands of USD) | | :--- | :--- | :--- | | Operating Lease Cost | 3,606 | 3,841 | | Variable Lease Cost | 808 | 783 | | Sublease Income | (39) | (42) | | Net Lease Cost | 4,375 | 4,582 | - As of March 31, 2024, the company had **no unrecognized operating lease commitments** for leases not yet commenced and **no finance leases**[95](index=95&type=chunk)[96](index=96&type=chunk) [8. Deposits](index=33&type=section&id=8.%20Deposits) This section outlines the composition of the company's deposit base, including noninterest-bearing, interest-bearing, and time deposits, and changes in brokered deposits **Deposit Composition (As of March 31, 2024 and December 31, 2023):** | Deposit Category | March 31, 2024 (Thousands of USD) | % of Total | December 31, 2023 (Thousands of USD) | % of Total | | :--- | :--- | :--- | :--- | :--- | | Noninterest-Bearing Demand Deposits | 3,652,592 | 25 % | 3,914,967 | 27 % | | Money Market and NOW Accounts | 4,393,971 | 30 % | 4,169,543 | 28 % | | Savings Deposits | 919,093 | 6 % | 702,486 | 5 % | | Time Deposits | 5,787,761 | 39 % | 5,966,757 | 40 % | | **Total Deposits** | **14,753,417** | **100 %** | **14,753,753** | **100 %** | - Brokered deposits decreased from **$1.54 billion** to **$1.42 billion** as of March 31, 2024, reflecting the company's planned reduction in brokered time deposits[100](index=100&type=chunk) - Time deposits over **$250,000** totaled **$2.29 billion**, and California State Treasurer deposits were **$300 million** as of March 31, 2024[99](index=99&type=chunk) [9. Borrowings](index=34&type=section&id=9.%20Borrowings) This section details the company's borrowing activities, including FHLB and FRB borrowings, and significant repayments during the period **Borrowings Summary (As of March 31, 2024 and December 31, 2023):** | Borrowing Category | March 31, 2024 (Thousands of USD) | Weighted-Average Rate (%) | December 31, 2023 (Thousands of USD) | Weighted-Average Rate (%) | | :--- | :--- | :--- | :--- | :--- | | FHLB Borrowings | 100,000 | 5.59 % | 100,000 | 5.73 % | | FRB Bank Term Funding Program (BTFP) | 695,634 | 4.61 % | 1,695,726 | 4.47 % | | **Total Borrowings** | **795,634** | **4.73 %** | **1,795,726** | **4.54 %** | - All borrowings had maturities within **12 months** as of March 31, 2024[102](index=102&type=chunk) - The FRB Bank Term Funding Program (BTFP) ceased offering new advances in March 2024[104](index=104&type=chunk) [10. Convertible Notes and Subordinated Debentures](index=35&type=section&id=10.%20Convertible%20Notes%20and%20Subordinated%20Debentures) This section describes the company's convertible notes and subordinated debentures, including their book values and interest rate characteristics **Convertible Notes and Subordinated Debentures (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Convertible Notes, Net | 444 | 444 | | Subordinated Debentures, Net | 108,148 | 107,825 | - On May 15, 2023, the company repaid **$197.1 million** in principal of convertible notes and repurchased **$19.9 million** of notes during 2023[107](index=107&type=chunk) - Subordinated debentures bear a floating interest rate tied to the three-month SOFR, leading to increased costs with rising market rates[111](index=111&type=chunk)[212](index=212&type=chunk) [11. Derivative Financial Instruments](index=37&type=section&id=11.%20Derivative%20Financial%20Instruments) This section details the company's use of derivative financial instruments to manage interest rate risk, including those designated as cash flow hedges and those not designated as hedges **Fair Value of Derivative Financial Instruments (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | **Designated as Cash Flow Hedges:** | | | | Notional Amount | 2,225,000 | 2,225,000 | | Fair Value of Other Assets | 281 | 10,960 | | Fair Value of Other Liabilities | 11,290 | 1,149 | | **Not Designated as Hedges:** | | | | Notional Amount | 2,345,395 | 2,336,809 | | Fair Value of Other Assets | 62,486 | 54,370 | | Fair Value of Other Liabilities | 63,929 | 55,869 | - The company expects to reclassify approximately **$5.2 million** (net of tax) from accumulated other comprehensive income (AOCI) as an increase to net interest income over the next 12 months[119](index=119&type=chunk) - The company offers loan hedging programs and foreign exchange contracts to customers and participates in risk-sharing agreements, with these non-designated derivatives intended to offset risks or provide credit protection[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) [12. Commitments and Contingencies](index=40&type=section&id=12.%20Commitments%20and%20Contingencies) This section outlines the company's off-balance-sheet commitments, such as credit lines and letters of credit, and discusses potential legal liabilities **Commitments Summary (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Commitments to Extend Credit | 2,105,176 | 2,274,239 | | Standby Letters of Credit | 132,811 | 132,132 | | Other Letters of Credit | 30,645 | 51,983 | | Commitments to Invest in Affordable Housing Partnerships | 20,675 | 21,017 | - Total accrued loss contingencies for all legal claims were approximately **$450,000** as of March 31, 2024, which management believes will not have a material adverse effect on the company's operating results or financial condition[129](index=129&type=chunk) [13. Goodwill, Intangible Assets, and Servicing Assets](index=41&type=section&id=13.%20Goodwill%2C%20Intangible%20Assets%2C%20and%20Servicing%20Assets) This section details the company's goodwill, core deposit intangible assets, and servicing assets, including their book values and impairment assessments - The carrying value of goodwill was **$464.5 million** as of March 31, 2024, with no impairment recorded during the quarter[131](index=131&type=chunk) **Core Deposit Intangible Assets (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Amortization Expense | 401 | 448 | | Carrying Value | 3,534 | 3,935 | **Servicing Assets (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | SBA Servicing Assets | 7,000 | 7,600 | | Mortgage Loan Related Servicing Assets | 1,900 | 2,100 | | **Total Servicing Assets** | **8,900** | **9,600** | - The company recorded **no valuation allowance** for servicing assets as of March 31, 2024 and December 31, 2023[136](index=136&type=chunk) [14. Income Taxes](index=43&type=section&id=14.%20Income%20Taxes) This section provides an overview of the company's income tax provision and effective tax rate, highlighting the impact of affordable housing partnership investments **Income Tax Data (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (Thousands of USD) | 2023 (Thousands of USD) | | :--- | :--- | :--- | | Income Before Income Tax Provision | 35,900 | 52,800 | | Income Tax Provision | 10,000 | 13,700 | | Effective Tax Rate | 27.94 % | 25.91 % | - Total unrecognized tax benefits were **$807,000** as of March 31, 2024, with a potential reduction of **$269,000** within the next 12 months[142](index=142&type=chunk) - The company invests in affordable housing partnerships to generate CRA credits and tax credits, which reduce the overall effective tax rate, with approximately **$2.1 million** in tax credits recognized in Q1 2024[232](index=232&type=chunk) [15. Fair Value Measurements](index=44&type=section&id=15.%20Fair%20Value%20Measurements) This section defines fair value measurement levels and details the valuation methodologies and assumptions used for various assets and liabilities - Fair value measurements are categorized into three levels: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs), and **Level 3** (unobservable inputs)[146](index=146&type=chunk) **Assets and Liabilities Measured at Fair Value by Level (As of March 31, 2024):** | Category | Total Fair Value (Thousands of USD) | Level 1 (Thousands of USD) | Level 2 (Thousands of USD) | Level 3 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | **Assets:** | | | | | | Available-for-Sale Investment Securities | 2,016,389 | 3,990 | 2,011,580 | 819 | | Equity Investments with Readily Determinable Fair Value | 4,317 | 4,317 | — | — | | Interest Rate Contracts | 62,351 | — | 62,351 | — | | Mortgage Banking Derivatives | 7 | — | 7 | — | | Other Derivatives | 409 | — | 409 | — | | **Liabilities:** | | | | | | Interest Rate Contracts | 63,903 | — | 63,903 | — | | Mortgage Banking Derivatives | 6 | — | 6 | — | | Other Derivatives | 11,310 | — | 11,297 | 13 | **Assets Measured at Fair Value on a Nonrecurring Basis (As of March 31, 2024):** | Category | Total Fair Value (Thousands of USD) | Level 3 (Thousands of USD) | | :--- | :--- | :--- | | Mortgage-Dependent Loans Receivable: | | | | CRE Loans | 5,095 | 5,095 | | C&I Loans | 13,924 | 13,924 | - Fair value measurements for loans receivable, servicing assets, and subordinated debentures primarily rely on **unobservable inputs (Level 3)** as of March 31, 2024[162](index=162&type=chunk) [16. Stockholders' Equity](index=51&type=section&id=16.%20Stockholders%27%20Equity) This section details the changes in stockholders' equity, including the impact of net income, comprehensive losses, and dividend payments, along with stock repurchase program information **Stockholders' Equity Changes (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (Thousands of USD) | 2023 (Thousands of USD) | | :--- | :--- | :--- | | Beginning Balance | (204,738) | (230,857) | | Net Unrealized (Loss) Gain on Available-for-Sale Securities | (13,734) | 31,215 | | Net Unrealized Loss on Cash Flow Hedge Interest Rate Contracts | (8,186) | (5,938) | | Reclassification Adjustments | (2,931) | (1,738) | | Tax Impact | 7,311 | (6,939) | | Other Comprehensive (Loss) Income, Net of Tax | (17,540) | 16,600 | | Ending Balance | (222,278) | (214,257) | - Total stockholders' equity was **$2.112 billion** as of March 31, 2024, a decrease of **$9 million** from **$2.121 billion** as of December 31, 2023[165](index=165&type=chunk)[273](index=273&type=chunk) - The company did not repurchase any shares in Q1 2024 and had **$35.3 million** remaining under its stock repurchase program authorization[166](index=166&type=chunk)[274](index=274&type=chunk) [17. Stock-Based Compensation](index=52&type=section&id=17.%20Stock-Based%20Compensation) This section describes the company's stock-based compensation plans, including grants of restricted stock and performance units, and associated compensation expenses - As of March 31, 2024, **96,233 shares** remained available for future grants, excluding **150,000 shares** reserved for new hire incentives[172](index=172&type=chunk) **Restricted Stock and Performance Unit Activity (For the Three Months Ended March 31, 2024):** | Metric | Number of Shares | Weighted-Average Grant Date Fair Value (USD) | | :--- | :--- | :--- | | Unvested Balance at Beginning of Period | 2,043,621 | 12.09 | | Granted | 34,634 | 15.49 | | Vested | (771,422) | 12.82 | | Forfeited | (70,622) | 15.04 | | Unvested Balance at End of Period | 1,236,211 | 11.56 | - Stock-based compensation expense was **$2.7 million** for the three months ended March 31, 2024, with a total fair value of **$8.5 million** for vested restricted stock and performance units[175](index=175&type=chunk) - Unrecognized compensation cost for restricted stock and performance units was **$8.5 million** as of March 31, 2024, expected to be recognized over a weighted-average vesting period of **1.45 years**[176](index=176&type=chunk) [18. Regulatory Matters](index=54&type=section&id=18.%20Regulatory%20Matters) This section confirms the company's and its bank's compliance with regulatory capital requirements, noting capital ratios exceed minimum thresholds - As of March 31, 2024, the company and the Bank's capital ratios exceeded all regulatory minimum capital ratios, including the capital conservation buffer[179](index=179&type=chunk) - The company has elected to use a **five-year transition period** to phase in the cumulative impact of the CECL methodology on regulatory capital[180](index=180&type=chunk) **Company and Bank Regulatory Capital Ratios (As of March 31, 2024):** | Capital Ratio | Company Actual Ratio (%) | Bank Actual Ratio (%) | Bank "Well Capitalized" Requirement (%) | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 Capital Ratio | 12.47 | 12.99 | 6.50 | | Tier 1 Capital Ratio | 13.17 | 12.99 | 8.00 | | Total Capital Ratio | 14.19 | 14.01 | 10.00 | | Leverage Capital Ratio | 10.42 | 10.27 | 5.00 | [19. Revenue Recognition](index=56&type=section&id=19.%20Revenue%20Recognition) This section explains the company's revenue recognition policies for non-interest income, such as deposit account service fees and wire transfer fees - ASU 2014-09 (Topic 606) does not apply to revenue from financial instruments but applies to noninterest income such as deposit-related fees and wire transfer fees[184](index=184&type=chunk) **Deposit Account Service Fees and Wire Transfer Fees (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Category | 2024 (Thousands of USD) | 2023 (Thousands of USD) | | :--- | :--- | :--- | | Total Noninterest-Bearing Deposit Account Income | 2,560 | 2,197 | | Interest-Bearing Deposit Account Monthly Service Fees | 27 | 24 | | **Total Deposit Account Service Fees** | **2,587** | **2,221** | | Wire Transfer Fee Income | 263 | 406 | | Foreign Exchange Fees | 549 | 367 | | **Total Wire Transfer Fees** | **812** | **773** | [20. Subsequent Events](index=57&type=section&id=20.%20Subsequent%20Events) This section discloses significant events occurring after the reporting period, specifically the merger agreement with Territorial Bancorp Inc - On April 26, 2024, the company entered into a merger agreement with Territorial Bancorp Inc[187](index=187&type=chunk) - Territorial shareholders will receive **0.8048 shares** of company common stock for each share of Territorial common stock[187](index=187&type=chunk) - The transaction is expected to close in late 2024, with Territorial Savings Bank continuing to operate as a division of Bank of Hope[188](index=188&type=chunk) [Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=58&type=section&id=Item%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's detailed analysis of Hope Bancorp, Inc.'s financial condition and operating results for the three months ended March 31, 2024, highlighting key performance drivers and financial trends [GENERAL](index=58&type=section&id=GENERAL) This section provides a general overview of Hope Bancorp, Inc. and its primary subsidiary, Bank of Hope, detailing their operations and business model - Hope Bancorp, Inc. is the holding company for Bank of Hope, with **$18.09 billion** in total assets as of March 31, 2024, headquartered in Los Angeles[192](index=192&type=chunk) - Bank of Hope operates **48 full-service branches** and loan production offices across multiple states and a representative office in Seoul, Korea, offering comprehensive consumer and commercial banking products and services[193](index=193&type=chunk) - The company's primary business involves earning interest from loans and investment securities, funded mainly by deposits and borrowings[194](index=194&type=chunk) [Selected Financial Data](index=59&type=section&id=Selected%20Financial%20Data) This section presents key financial metrics and ratios for the reporting periods, offering a snapshot of the company's performance and financial health **Selected Financial Data (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Net Income (Thousands of USD) | 25,864 | 39,121 | | Diluted Earnings Per Share (USD) | 0.21 | 0.33 | | Return on Average Assets (%) | 0.54 | 0.82 | | Return on Average Stockholders' Equity (%) | 4.87 | 7.65 | | Net Interest Margin (%) | 2.55 | 3.02 | | Efficiency Ratio (%) | 68.79 | 61.26 | | Allowance for Credit Losses to Loans Receivable (%) | 1.16 | 1.09 | | Nonaccrual Loans to Loans Receivable (%) | 0.43 | 0.52 | | Nonperforming Assets to Total Assets (%) | 0.59 | 0.39 | [Non-GAAP Financial Measurements](index=61&type=section&id=Non-GAAP%20Financial%20Measurements) This section provides a reconciliation and discussion of non-GAAP financial measures used by management to evaluate the company's performance **Non-GAAP Financial Measurements (As of March 31, 2024 and March 31, 2023):** | Metric | March 31, 2024 (Thousands of USD) | March 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Tangible Common Equity (TCE) | 1,644,286 | 1,588,852 | | Tangible Assets | 17,620,230 | 20,099,156 | | TCE Per Share (USD) | 13.63 | 13.26 | | TCE Ratio (%) | 9.33 | 7.91 | | Return on Average Tangible Equity (Annualized, %) | 6.24 | 9.93 | [Results of Operations](index=62&type=section&id=Results%20of%20Operations) This section analyzes the company's operating performance, focusing on net income, net interest income, noninterest income, and expenses for the reporting period [Overview](index=62&type=section&id=Overview) This section provides a high-level summary of the company's net income and diluted earnings per share for the quarter, noting key drivers of change **Net Income Overview (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (Thousands of USD) | 2023 (Thousands of USD) | Year-over-Year Change (%) | | :--- | :--- | :--- | :--- | | Net Income | 25,900 | 39,100 | (33.9) | | Diluted Earnings Per Share (USD) | 0.21 | 0.33 | (36.4) | [Net Interest Income and Net Interest Margin](index=62&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) This section analyzes the components of net interest income and net interest margin, detailing the impact of interest rates on assets and liabilities **Net Interest Income and Net Interest Margin (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income Before Provision for Credit Losses (Thousands of USD) | 115,000 | 133,900 | (14.1)% | | Net Interest Margin (%) | 2.55 | 3.02 | (47) bps | | Weighted-Average Yield on Loans (%) | 6.25 | 5.75 | 50 bps | | Weighted-Average Yield on Investment Securities (%) | 3.13 | 2.73 | 40 bps | | Weighted-Average Yield on Interest-Bearing Cash and Deposits (%) | 5.41 | 4.22 | 119 bps | | Weighted-Average Cost of Deposits (%) | 3.36 | 2.37 | 99 bps | | Weighted-Average Cost of FHLB and FRB Borrowings (%) | 4.27 | 4.02 | 25 bps | - Floating-rate loans constituted **45%** of the loan portfolio as of March 31, 2024[206](index=206&type=chunk) - The weighted-average rate on new loan originations in Q1 2024 was **8.27%**, up from **7.53%** in Q1 2023[206](index=206&type=chunk) [Provision for Credit Losses](index=65&type=section&id=Provision%20for%20Credit%20Losses) This section discusses the provision for credit losses, explaining changes due to loan portfolio adjustments and specific credit events **Provision for Credit Losses (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (Thousands of USD) | 2023 (Thousands of USD) | Year-over-Year Change (Thousands of USD) | | :--- | :--- | :--- | :--- | | Total Provision for Credit Losses | 2,600 | 3,320 | (720) | | (Recovery of) Provision for Unfunded Loan Commitments | (1,000) | 1,600 | (2,600) | | Provision for Loan Credit Losses | 3,600 | 1,700 | 1,900 | - The allowance for credit losses coverage ratio was **1.16%** of loans receivable as of March 31, 2024, up from **1.09%** as of March 31, 2023[220](index=220&type=chunk) [Noninterest Income](index=66&type=section&id=Noninterest%20Income) This section details the components of noninterest income, highlighting changes in revenue streams such as SBA loan sales and service fees **Noninterest Income Composition (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Category | 2024 (Thousands of USD) | 2023 (Thousands of USD) | Year-over-Year Change (%) | | :--- | :--- | :--- | :--- | | Deposit Account Service Charges | 2,587 | 2,221 | 16.5 | | International Service Fees | 1,035 | 1,088 | (4.9) | | Wire Transfer Fees | 812 | 773 | 5.0 | | Swap Fees | 143 | 42 | 240.5 | | Net Gains on SBA Loan Sales | — | 2,225 | (100.0) | | Net Gains on Residential Mortgage Loan Sales | 73 | 64 | 14.1 | | Other Income and Fees | 3,636 | 4,565 | (20.4) | | **Total Noninterest Income** | **8,286** | **10,978** | **(24.5)** | - The company did not sell any SBA guaranteed loans in Q1 2024, compared to **$40.7 million** in sales and **$2.2 million** in net gains in Q1 2023[222](index=222&type=chunk) - Other income and fees in Q1 2023 included **$500,000** in investment service fees and **$236,000** in debt extinguishment gains, which did not recur in the current quarter[224](index=224&type=chunk) [Noninterest Expense](index=67&type=section&id=Noninterest%20Expense) This section analyzes noninterest expenses, focusing on changes in compensation, occupancy costs, and other operating expenditures **Noninterest Expense Composition (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Category | 2024 (Thousands of USD) | 2023 (Thousands of USD) | Year-over-Year Change (%) | | :--- | :--- | :--- | :--- | | Salaries and Employee Benefits | 47,836 | 57,169 | (16.3) | | Occupancy Expense | 6,786 | 7,521 | (9.8) | | Furniture and Equipment | 5,340 | 5,058 | 5.6 | | Data Processing and Communications | 2,990 | 2,822 | 6.0 | | Professional Fees | 2,518 | 1,543 | 63.2 | | Amortization of Affordable Housing Partnership Investments | 2,134 | 1,716 | 24.4 | | FDIC Assessment Expense | 2,926 | 1,781 | 64.3 | | FDIC Special Assessment | 1,000 | — | 100.0 | | Earned Interest Credit | 5,834 | 4,427 | 31.8 | | Restructuring Costs | 143 | — | 100.0 | | Merger-Related Costs | 1,044 | — | 100.0 | | Other | 6,288 | 6,697 | (6.1) | | **Total Noninterest Expense** | **84,839** | **88,734** | **(4.4)** | - Salaries and employee benefits decreased by **$9.3 million**, reflecting cost savings from a reduction in full-time equivalent employees from 1,467 to 1,227 following 2023 restructuring[227](index=227&type=chunk) - FDIC assessment expense increased due to industry-wide assessment rate increases and a **$1.0 million** FDIC special assessment[228](index=228&type=chunk) - Merger-related costs of **$1.0 million** were primarily associated with the merger agreement with Territorial Bancorp, Inc[230](index=230&type=chunk) [Provision for Income Taxes](index=68&type=section&id=Provision%20for%20Income%20Taxes) This section discusses the income tax provision and effective tax rate, including the impact of tax credits from affordable housing investments **Income Tax Data (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (Thousands of USD) | 2023 (Thousands of USD) | | :--- | :--- | :--- | | Income Before Income Tax Provision | 35,900 | 52,800 | | Income Tax Provision | 10,000 | 13,700 | | Effective Tax Rate (%) | 27.94 | 25.91 | - Tax credits related to affordable housing partnership investments amounted to approximately **$2.1 million** in Q1 2024, reducing the tax provision[232](index=232&type=chunk) [Financial Condition](index=69&type=section&id=Financial%20Condition) This section provides an in-depth analysis of the company's balance sheet, including assets, liabilities, and equity, and their respective changes [Cash and Cash Equivalents](index=69&type=section&id=Cash%20and%20Cash%20Equivalents) This section details the company's cash and cash equivalents, explaining significant changes due to financing activities **Cash and Cash Equivalents (As of March 31, 2024 and December 31, 2023):** | Metric | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 1,190,000 | 1,930,000 | - The decrease in cash and cash equivalents primarily reflects the repayment of **$1.0 billion** in FRB Bank Term Funding Program (BTFP) borrowings during the quarter[236](index=236&type=chunk) [Investment Securities Portfolio](index=69&type=section&id=Investment%20Securities%20Portfolio) This section describes the company's investment securities portfolio, including unrealized gains and losses and credit impairment assessments **Investment Securities Portfolio (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Available-for-Sale Investment Securities (AFS) | 2,020,000 | 2,150,000 | | Held-to-Maturity Investment Securities (HTM) | 261,600 | 263,900 | | Net Unrealized Losses on AFS Securities | (298,500) | (284,700) | - The company performed a credit analysis on investment securities in an unrealized loss position and found no credit loss allowance was required[239](index=239&type=chunk) [Equity Investments](index=69&type=section&id=Equity%20Investments) This section details the company's equity investment holdings, including those with and without readily determinable fair values **Equity Investments (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Total Equity Investments | 43,900 | 43,800 | | Equity Investments with Readily Determinable Fair Value | 4,300 | 4,400 | | Equity Investments without Readily Determinable Fair Value | 39,600 | 39,400 | - Equity investments without readily determinable fair value include **$38.2 million** in CRA investments, **$1.0 million** in CDFI investments, and **$370,000** in banker's bank stock[242](index=242&type=chunk) [Loans Held For Sale](index=70&type=section&id=Loans%20Held%20For%20Sale) This section provides information on loans held for sale, including their composition and sales activity during the period **Loans Held For Sale (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Total Loans Held For Sale | 2,800 | 3,400 | | CRE Loans | 2,300 | 2,300 | | Residential Mortgage Loans | 476 | 1,100 | - The company sold **$6.2 million** in residential mortgage loans during Q1 2024[244](index=244&type=chunk) [Loans Receivable](index=70&type=section&id=Loans%20Receivable) This section analyzes the composition and changes in the company's loan portfolio, including commercial real estate, commercial and industrial, and residential mortgage loans **Loan Portfolio Composition (As of March 31, 2024 and December 31, 2023):** | Loan Category | March 31, 2024 (Thousands of USD) | % of Total | December 31, 2023 (Thousands of USD) | % of Total | | :--- | :--- | :--- | :--- | :--- | | CRE Loans | 8,707,673 | 64 | 8,797,884 | 64 | | C&I Loans | 4,041,063 | 29 | 4,135,044 | 30 | | Residential Mortgage Loans | 936,035 | 7 | 883,687 | 6 | | Consumer and Other Loans | 34,407 | — | 37,004 | — | | **Total Loans Receivable** | **13,719,178** | **100** | **13,853,619** | **100** | - The decrease in total loans receivable was primarily due to reductions in CRE and C&I loans, partially offset by an increase in residential mortgage loans[245](index=245&type=chunk) **Loan Commitments and Letters of Credit (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Commitments to Extend Credit | 2,105,176 | 2,274,239 | | Standby Letters of Credit | 132,811 | 132,132 | | Other Commercial Letters of Credit | 30,645 | 51,983 | | **Total** | **2,268,632** | **2,458,354** | [Nonperforming Assets](index=71&type=section&id=Nonperforming%20Assets) This section details the company's nonperforming assets, including nonaccrual loans and past due loans, and their impact on asset quality **Nonperforming Asset Composition (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Nonaccrual Loans | 59,526 | 45,204 | | Loans 90 Days or More Past Due and Still Accruing | 47,290 | 261 | | **Total Nonperforming Loans** | **106,816** | **45,465** | | OREO | — | 63 | | **Total Nonperforming Assets** | **106,816** | **45,528** | **Nonperforming Asset Ratios (As of March 31, 2024 and December 31, 2023):** | Ratio | March 31, 2024 (%) | December 31, 2023 (%) | | :--- | :--- | :--- | | Nonaccrual Loans to Loans Receivable | 0.43 | 0.33 | | Nonperforming Loans to Loans Receivable | 0.78 | 0.33 | | Nonperforming Assets to Total Assets | 0.59 | 0.24 | - The increase in nonperforming assets was primarily driven by a single commercial real estate loan relationship comprising three loans, which are fully collateralized and subject to sales agreements[247](index=247&type=chunk) [Allowance for Credit Losses](index=71&type=section&id=Allowance%20for%20Credit%20Losses) This section discusses the allowance for credit losses, its coverage ratio, and the factors influencing its changes during the period **Allowance for Credit Losses (ACL) (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | CRE Loans | 90,823 | 93,940 | | C&I Loans | 55,465 | 51,291 | | Residential Mortgage Loans | 11,942 | 12,838 | | Consumer and Other Loans | 528 | 625 | | **Total** | **158,758** | **158,694** | | ACL to Loans Receivable (%) | 1.16 | 1.15 | - The increase in ACL was primarily due to increases in ACL for C&I and residential mortgage loans, partially offset by a decrease in ACL for CRE loans due to lower balances[252](index=252&type=chunk) **Net Loan Charge-off Rate (For the Three Months Ended March 31, 2024 and March 31, 2023):** | Metric | 2024 (%) | 2023 (%) | | :--- | :--- | :--- | | Net Loan Charge-offs to Average Loans (Annualized) | 0.10 | 0.00 | [Investments in Affordable Housing Partnerships](index=73&type=section&id=Investments%20in%20Affordable%20Housing%20Partnerships) This section details the company's investments in affordable housing partnerships, including their book value and associated commitments **Investments in Affordable Housing Partnerships (As of March 31, 2024 and December 31, 2023):** | Metric | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Investment Amount | 52,300 | 54,500 | | Committed Investment Amount | 20,700 | 21,000 | [OREO](index=73&type=section&id=OREO) This section provides information on other real estate owned (OREO), including changes due to sales and new transfers **Other Real Estate Owned (OREO), Net (As of March 31, 2024 and December 31, 2023):** | Metric | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | OREO, Net | 0 | 63 | - The company sold an OREO property with a book value of **$63,000** during the quarter, with no new loans transferred to OREO[257](index=257&type=chunk) [Deposits, Borrowings, and Convertible Notes](index=73&type=section&id=Deposits%2C%20Borrowings%2C%20and%20Convertible%20Notes) This section details the company's funding sources, including deposits, FHLB and FRB borrowings, and convertible notes, and their respective changes **Deposit Composition (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Total Deposits | 14,753,417 | 14,753,753 | | Noninterest-Bearing Demand Deposits (%) | 24.7 | 26.5 | | Time Deposits (%) | 39.3 | 40.5 | | Interest-Bearing Money Market, NOW, and Savings Deposits (%) | 36.0 | 33.0 | - Brokered deposits were **$1.42 billion**, and California State Treasurer deposits were **$300 million** as of March 31, 2024[260](index=260&type=chunk) **Borrowings and Convertible Notes (As of March 31, 2024 and December 31, 2023):** | Category | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Total Borrowings | 795,600 | 1,800,000 | | FHLB Borrowings | 100,000 | 100,000 | | FRB Borrowings | 695,600 | 1,700,000 | | Convertible Notes, Net | 444 | 444 | | Subordinated Debentures | 108,100 | 107,800 | - Total borrowings decreased significantly due to the repayment of **$1.0 billion** in FRB Bank Term Funding Program (BTFP) borrowings[263](index=263&type=chunk) [Off-Balance-Sheet Activities and Contractual Obligations](index=74&type=section&id=Off-Balance-Sheet%20Activities%20and%20Contractual%20Obligations) This section describes the company's off-balance-sheet activities and contractual obligations, including loan commitments and derivative instruments - The company's off-balance-sheet activities include commitments to extend credit, standby letters of credit, interest rate swap contracts, foreign exchange contracts, and risk-sharing agreements[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk) - The company does not anticipate that its off-balance-sheet activities will have a material adverse effect on future operating results or financial condition[272](index=272&type=chunk) [Stockholders' Equity and Regulatory Capital](index=75&type=section&id=Stockholders%27%20Equity%20and%20Regulatory%20Capital) This section details changes in stockholders' equity and confirms the company's compliance with regulatory capital requirements **Stockholders' Equity (As of March 31, 2024 and December 31, 2023):** | Metric | March 31, 2024 (Thousands of USD) | December 31, 2023 (Thousands of USD) | | :--- | :--- | :--- | | Total Stockholders' Equity | 2,112,270 | 2,121,243 | | Increase in Accumulated Other Comprehensive Loss | (17,500) | (9,000) | | Dividends Paid | (16,800) | (16,800) | | Net Income | 25,900 | 25,900 | | Increase in Stock-Based Compensation | 479 | 479 | - The company did not repurchase any shares in Q1 2024 and had **$35.3 million** remaining under its stock repurchase program authorization[274](index=274&type=chunk) **Bank Regulatory Capital Ratios (As of March 31, 2024 and December 31, 2023):** | Capital Ratio | March 31, 2024 (%) | December 31, 2023 (%) | "Well Capitalized" Requirement (%) | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 Capital Ratio | 12.99 | 12.75 | 6.50 | | Tier 1 Capital Ratio | 12.99 | 12.75 | 8.00 | | Total Capital Ratio | 14.01 | 13.71 | 10.00 | | Leverage Capital Ratio | 10.27 | 9.94 | 5.00 | [Liquidity Management](index=77&type=section&id=Liquidity%20Management) This section outlines the company's liquidity management strategy, sources of liquidity, and assessment of its ability to meet financial obligations - The company's liquidity management aims to optimize earnings while maintaining adequate liquidity and an acceptable level of interest rate risk exposure[278](index=278&type=chunk) - As of March 31, 2024, total borrowing capacity, cash and cash equivalents, and unpledged securities amounted to **$7.69 billion**, with **$5.07 billion** in available borrowing capacity[280](index=280&type=chunk) - The company believes its liquidity sources are sufficient to meet all reasonably foreseeable short-term and intermediate-term needs[280](index=280&type=chunk) [Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=78&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section provides quantitative and qualitative disclosures regarding the company's exposure to market risks, primarily focusing on interest rate risk [Interest Rate Risk](index=78&type=section&id=Interest%20Rate%20Risk) This section describes the company's approach to managing interest rate risk, which arises from mismatches in the repricing of interest-sensitive assets and liabilities - Interest rate risk is the most significant market risk affecting the company, arising when interest-sensitive assets and liabilities reprice at different times or in different amounts[283](index=283&type=chunk) - The Asset/Liability Management (ALM) Committee regularly monitors interest rate risk to mitigate the sensitivity of earnings to interest rate fluctuations[284](index=284&type=chunk) [Interest Rate Sensitivity](index=78&type=section&id=Interest%20Rate%20Sensitivity) This section presents the results of interest rate sensitivity analyses, including the impact of hypothetical rate changes on net interest income and economic value - The company uses net interest income simulation modeling and economic value analysis to monitor interest rate risk, assessing sensitivity to various interest rate scenarios[285](index=285&type=chunk)[286](index=286&type=chunk) **Impact of Parallel Interest Rate Shifts on Net Interest Income and Economic Value (As of March 31, 2024 and March 31, 2023):** | Hypothetical Rate Change | Estimated Net Interest Income Sensitivity as of March 31, 2024 (%) | Economic Value Volatility as of March 31, 2024 (%) | Estimated Net Interest Income Sensitivity as of March 31, 2023 (%) | Economic Value Volatility as of March 31, 2023 (%) | | :--- | :--- | :--- | :--- | :--- | | +300 bps | 0.80 | (19.70) | 16.00 | (7.30) | | +100 bps | 0.60 | (5.90) | 5.20 | (1.50) | | -100 bps | (2.10) | 2.70 | (5.40) | 0.20 | | -300 bps | (6.80) | 2.30 | (16.60) | (5.00) | [Item 4. CONTROLS AND PROCEDURES](index=80&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) This section details management's assessment of the effectiveness of the company's disclosure controls and procedures and any changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=80&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms management's assessment of the effectiveness of the company's disclosure controls and procedures as of the reporting date - As of March 31, 2024, the company's management evaluated and concluded that its disclosure controls and procedures were effective[292](index=292&type=chunk) [Changes in Internal Control over Financial Reporting](index=80&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes in the company's internal control over financial reporting during the quarter - There were no material changes in the company's internal control over financial reporting during the quarter ended March 31, 2024[293](index=293&type=chunk) Part II - Other Information [Item 1. LEGAL PROCEEDINGS](index=81&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) This section discusses the company's involvement in legal proceedings and management's assessment of their potential financial impact - Total accrued loss contingencies for all legal claims were approximately **$450,000** as of March 31, 2024, which management believes will not have a material adverse effect on the company's operating results or financial condition[296](index=296&type=chunk) [Item 1A. RISK FACTORS](index=81&type=section&id=Item%201A.%20RISK%20FACTORS) This section refers to the risk factors previously disclosed in the company's annual report, noting no material changes during the current period - Management identified no material changes to the risk factors discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2023[297](index=297&type=chunk) - Investors should carefully consider the risk factors discussed in the Annual Report, along with other unknown or immaterial risks that could materially affect the company's business, financial condition, operating results, and stock price[297](index=297&type=chunk) [Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=82&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section reports on any unregistered sales of equity securities and the status of the company's authorized stock repurchase program - The company did not engage in any unregistered sales of equity securities during the three months ended March 31, 2024[299](index=299&type=chunk) - A stock repurchase program authorized in January 2022 for up to **$50 million** of common stock had **$35.3 million** remaining as of March 31, 2024, with no repurchases made during the quarter[300](index=300&type=chunk)[301](index=301&type=chunk) [Item 3. DEFAULTS UPON SENIOR SECURITIES](index=82&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section confirms the absence of any defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the quarter[302](index=302&type=chunk) [Item 4. MINE SAFETY DISCLOSURES](index=82&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to the company's operations - Not applicable[303](index=303&type=chunk) [Item 5. OTHER INFORMATION](index=82&type=section&id=Item%205.%20OTHER%20INFORMATION) This section reports on any adoption or termination of Rule 10b5-1 trading arrangements by directors or officers during the quarter - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the three months ended March 31, 2024[304](index=304&type=chunk) [Item 6. EXHIBITS](index=82&type=section&id=Item%206.%20EXHIBITS) This section lists all exhibits filed with the quarterly report, including certifications and XBRL taxonomy files - This section lists all exhibits filed with the quarterly report, including CEO and CFO Sarbanes-Oxley Act certifications and XBRL taxonomy files[305](index=305&type=chunk)[307](index=307&type=chunk) [INDEX TO EXHIBITS](index=83&type=section&id=INDEX%20TO%20EXHIBITS) This section provides a comprehensive list of all exhibits included in the quarterly report, detailing their descriptions and types **Index to Exhibits:** | Exhibit Number | Description | | :--- | :--- | | 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 101.INS | Instance Document (the XBRL tags are embedded within the Inline XBRL document) | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | [SIGNATURES](index=84&type=section&id=SIGNATURES) This section contains the official signatures of the company's principal executive and financial officers, certifying the quarterly report - This quarterly report was duly signed on May 7, 2024, by Kevin S. Kim, Chairman, President, and Chief Executive Officer, and Julianna Balicka, Executive Vice President and Chief Financial Officer of Hope Bancorp, Inc[309](index=309&type=chunk)[311](index=311&type=chunk)

The Company's tier one leverage and risk-based capital ratios were 11.58% and 28.84%, respectively, and the Company is considered to be "well-capitalized" at March 31, 2024.Ratio of non-performing assets to total assets of 0.10% at March 31, 2024.Strong liquidity position with $90 million in cash balances and access to liquidity totaling $901.70 million as of March 31, 2024. HONOLULU, Hawaii, May 03, 2024 (GLOBE NEWSWIRE) -- Territorial Bancorp Inc. (NASDAQ:TBNK) (the "Company"), headquartered in Honolulu, ...

2024 First Quarter Earnings Conference Call Forward Looking Statements & Additional Disclosures Additional Information and Where to Find It Q1 2024 Financial Overview Total Deposits at 3/31/24 Gross Loans at 3/31/24 NPA/Total Assets at 3/31/24 1Q24 Net Income & EPS $27.4MM / $0.23 Excl. notable items • Total capital ratio was 14.19% at 3/31/24, +27bps QoQ. All regulatory capital ratios expanded QoQ • Tangible common equity ("TCE") ratio(1) was 9.33% at 3/31/24, +47bps QoQ • Announced signing of definitive m ...

Financial Data and Key Metrics Changes - For Q1 2024, the company reported net income of $25.9 million or $0.20 per diluted share, a decrease from $38.3 million or $0.32 per diluted share in Q4 2023 [47][48] - The allowance for credit losses was $159 million, representing 116 basis points of loans receivable, up from 115 basis points as of December 31, 2023 [3] - The tangible common equity ratio was 9.33%, an increase of 47 basis points from year-end 2023 [26] Business Line Data and Key Metrics Changes - Net interest income totaled $115 million for Q1 2024, a decrease of 9% from Q4 2023 [28] - Average loans decreased by 2% quarter-over-quarter to $13.7 billion, while the average yield on the loan portfolio increased by 1 basis point to 6.25% [53] - Non-interest income was $8 million for Q1 2024, down from $9 million in Q4 2023, with a decrease in other non-interest income offsetting growth in deposit service fees [12] Market Data and Key Metrics Changes - Total deposits were $14.8 billion as of March 31, 2024, stable quarter-over-quarter [50] - The gross loan-to-deposit ratio was 93% as of March 31, 2024 [50] - Non-performing assets increased to $107 million compared to $46 million as of December 31, 2023 [55] Company Strategy and Development Direction - The company announced a definitive agreement to acquire Territorial Bancorp, which is expected to close by year-end 2024, creating the largest U.S. regional bank catering to multi-ethnic customers [48][49] - The merger is seen as a strategic market expansion transaction, focusing on improving market share growth opportunities in Hawaii [84] - The transaction is expected to be immediately accretive to earnings at a double-digit percentage growth rate [49][36] Management's Comments on Operating Environment and Future Outlook - Management expects net interest income for Q4 2024 to decline between 5% and 7% from $126 million in Q4 2023, factoring in one Fed fund's target rate cut [57] - The company anticipates maintaining a stable coverage ratio of allowance for credit losses to loans [13] - Management expressed confidence in the integration process with Territorial, emphasizing a seamless transition for customers and employees [39] Other Important Information - The company declared a quarterly common stock dividend of $0.14 per share payable on May 23, 2024 [26] - The expected one-time merger expenses are estimated to be in the range of $25 million to $30 million, with cost savings projected at 75% in the first year [82] Q&A Session Summary Question: What are the expectations for one-time merger expenses and cost savings? - The expected one-time merger expenses are in the range of $25 million to $30 million, with cost savings projected at 75% in the first year and 100% in the subsequent year [82] Question: How did the deal with Territorial come about? - The strategic partnership was concluded after serious discussions towards the end of 2023, with Territorial concluding that Hope would be the most ideal deal partner [90] Question: What is the outlook for the Territorial franchise in the long term? - Management believes that Territorial's long legacy in Hawaii provides a good market presence, and with a larger balance sheet, there are significant market share expansion opportunities [84]

For the quarter ended March 2024, Hope Bancorp (HOPE) reported revenue of $123.33 million, down 14.9% over the same period last year. EPS came in at $0.23, compared to $0.33 in the year-ago quarter.The reported revenue represents a surprise of -6.35% over the Zacks Consensus Estimate of $131.7 million. With the consensus EPS estimate being $0.27, the EPS surprise was -14.81%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine ...

Hope Bancorp (HOPE) came out with quarterly earnings of $0.23 per share, missing the Zacks Consensus Estimate of $0.27 per share. This compares to earnings of $0.33 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -14.81%. A quarter ago, it was expected that this bank holding company would post earnings of $0.28 per share when it actually produced earnings of $0.32, delivering a surprise of 14.29%.Over the last four quarters, t ...

"The strength of our balance sheet positioned us well to capitalize on strategic opportunities in the market. This morning, we announced the signing of a definitive merger agreement with Territorial Bancorp, the stock holding company of Territorial Savings Bank, a $2.2 billion savings bank headquartered in Hawai'i," continued Kim. "Territorial has a stable, low-cost core deposit base, excellent asset quality, and provides us an entry point to the attractive Hawai'i market, which has a large Asian American a ...

Financial Performance and Capital Management - The investment portfolio aims to provide on-balance sheet liquidity and manage interest rate risk, including $126.0 million in pooled trust preferred securities[27][34]. - The company issued $217.5 million in convertible senior notes in 2018, with $197.1 million paid off in cash by May 15, 2023, reflecting a significant reduction in debt[35]. - The profitability is influenced by interest rate differentials, with a focus on managing the cost of funds through deposit maturities and interest rates[38]. - As of December 31, 2023, Hope Bancorp and the Bank met all Basel III Capital Rules requirements, including a common equity Tier 1 capital ratio of 7.0%, a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%[55]. - The minimum capital ratios under Basel III include a capital conservation buffer of 2.5% of risk-weighted assets, which if not maintained, could restrict the ability to pay dividends and repurchase shares[54]. - The Bank must maintain a minimum Tier 1 leverage ratio of at least 5.0% to be considered well-capitalized under the Prompt Corrective Action framework[61]. - The implementation of Basel III Capital Rules may adversely impact the Company's net income and return on equity, potentially requiring the raising of additional capital[55]. - Future changes in FDIC insurance assessments could materially affect the Company's earnings and the market value of its common stock[75]. Regulatory Environment and Compliance - The company is subject to extensive regulation under state and federal banking laws, emphasizing the importance of compliance and risk management[41]. - The Bank is subject to heightened supervision and regulation due to having consolidated assets exceeding $10 billion, including the requirement to establish board-level risk committees and perform annual stress tests[57]. - The Dodd-Frank Act mandates that banks with consolidated assets over $10 billion must comply with various consumer protection laws and regulations, impacting operational practices[63]. Community Engagement and Investment - The company funded approximately $1.70 billion in loans in 2023, demonstrating its commitment to community investment[90]. - The company had approximately 616 reportable small business loans totaling $205.3 million in CRA-reportable small business lending in 2023[90]. - The company awarded 60 students grants of $2,500 each in 2023, contributing over $2.8 million to the Hope Scholarship Foundation since its establishment in 2001[90]. - Approximately 43% of the bank's branches are located in low-to-moderate income areas, reflecting its focus on community service[90]. - The Bank received a "Satisfactory" rating in its most recent Community Reinvestment Act performance evaluation, indicating compliance in meeting the credit needs of local communities[65]. Operational Structure and Workforce - As of December 31, 2023, the company had 54 branches across the U.S., with 29 located in California, indicating a strong regional presence[36]. - The company has nine loan production offices in multiple states, enhancing its market reach and operational capabilities[36]. - As of December 31, 2023, the company had 1,244 full-time equivalent employees, a decrease from 1,549 employees at the end of 2022[85]. - The company’s employee diversity includes women making up 64% of the total workforce and 32% of senior vice president positions and above[86]. - The company’s benefits package includes medical, dental, vision healthcare, and 401(k) benefits, emphasizing employee well-being[84]. - The company’s strategic reorganization in Q3 2023 is expected to generate cost savings through increased efficiencies, including branch consolidations[85]. Competitive Landscape - The company competes with various financial institutions, including larger banks and non-bank financial service providers, highlighting a highly competitive environment[37]. - The Federal Reserve's monetary policies significantly impact the company's performance, particularly regarding interest rates and loan growth[39]. - The company has access to borrowing programs from the Federal Home Loan Bank with terms ranging from one day to thirty years at competitive market rates[31]. Financial Obligations - The company’s contractual obligations and commitments totaled $10.73 billion as of December 31, 2023, with significant amounts in time deposits and unfunded commitments to extend credit[349]. - The Bank's ability to make loans is limited to 25% of unimpaired capital for secured loans and 15% for unsecured loans, ensuring prudent lending practices[71]. - A special FDIC assessment of approximately 13.4 basis points per year was approved in November 2023, with an estimated total expense of $4.0 million recorded for 2023[74].

Efficiency Ratio Return on Avg Assets Anticipated positive impact from strategic reorganization expected to drive operational efficiencies and greater returns in the medium term. High single-digit % growth Targeting balanced growth across all business lines in normalized operating environment Planning to maintain loan-todeposit ratio <95% Loan Growth >10% Targeting medium-term annual revenue growth to outpace loan growth • Loan growth • Accelerated fee income growth • Expanding net interest margin due to im ...

PART I - FINANCIAL INFORMATION [Item 1. FINANCIAL STATEMENTS](index=4&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) Presents unaudited consolidated financial statements for Hope Bancorp, Inc., detailing financial condition, income, comprehensive income, equity changes, and cash flows with notes [Consolidated Statements of Financial Condition (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition%20(Unaudited)) Details assets, liabilities, and equity, highlighting key changes from December 2022 to September 2023 **Consolidated Statements of Financial Condition (Unaudited) - Key Changes (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | **Assets:** | | | | | | Total cash and cash equivalents | $2,500,323 | $506,776 | $1,993,547 | 393.3% | | Loans receivable, net | $14,147,384 | $15,241,181 | $(1,093,797) | -7.2% | | Total assets | $20,076,364 | $19,164,491 | $911,873 | 4.8% | | **Liabilities:** | | | | | | Total deposits | $15,739,859 | $15,738,801 | $1,058 | 0.01% | | FHLB and FRB borrowings | $1,795,726 | $865,000 | $930,726 | 107.6% | | Convertible notes, net | $444 | $217,148 | $(216,704) | -99.8% | | Total liabilities | $18,045,940 | $17,145,163 | $900,777 | 5.3% | | **Stockholders' Equity:** | | | | | | Total stockholders' equity | $2,030,424 | $2,019,328 | $11,096 | 0.5% | - The significant increase in cash and cash equivalents was primarily due to bolstering on-balance sheet liquidity through drawdowns of available borrowing capacity, mainly via the FRB's Bank Term Funding Program (BTFP), in response to banking industry disruptions in March 2023[237](index=237&type=chunk)[264](index=264&type=chunk) - Loans receivable, net, decreased by **$1.09 billion**, or **7.2%**, reflecting a decline in C&I and CRE loans where paydowns and sales outpaced new originations, and an intentional decrease in mortgage warehouse lines of credit[59](index=59&type=chunk)[245](index=245&type=chunk) [Consolidated Statements of Income (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20(Unaudited)) Presents revenues, expenses, and net income for the three and nine months ended September 30, 2023 and 2022 **Consolidated Statements of Income (Unaudited) - Key Performance (Three Months Ended September 30, 2023 vs. 2022):** | Item | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :--------------------- | :--------------------- | :-------------------- | :------- | | Total interest income | $275,793 | $189,182 | $86,611 | 45.8% | | Total interest expense | $140,415 | $35,996 | $104,419 | 290.1% | | Net interest income before provision | $135,378 | $153,186 | $(17,808) | -11.6% | | Provision for credit losses | $16,800 | $9,200 | $7,600 | 82.6% | | Total noninterest income | $8,305 | $13,355 | $(5,050) | -37.8% | | Total noninterest expense | $86,873 | $83,914 | $2,959 | 3.5% | | Net income | $30,049 | $53,748 | $(23,699) | -44.1% | | Basic EPS | $0.25 | $0.45 | $(0.20) | -44.4% | | Diluted EPS | $0.25 | $0.45 | $(0.20) | -44.4% | **Consolidated Statements of Income (Unaudited) - Key Performance (Nine Months Ended September 30, 2023 vs. 2022):** | Item | YTD Sep 30, 2023 (in thousands) | YTD Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :------------------------------ | :------------------------------ | :-------------------- | :------- | | Total interest income | $779,654 | $491,878 | $287,776 | 58.5% | | Total interest expense | $379,709 | $63,978 | $315,731 | 493.5% | | Net interest income before provision | $399,945 | $427,900 | $(27,955) | -6.5% | | Provision for credit losses | $27,400 | $1,400 | $26,000 | 1857.1% | | Total noninterest income | $36,297 | $39,287 | $(2,990) | -7.6% | | Total noninterest expense | $264,560 | $239,652 | $24,908 | 10.4% | | Net income | $107,192 | $166,574 | $(59,382) | -35.6% | | Basic EPS | $0.89 | $1.39 | $(0.50) | -36.0% | | Diluted EPS | $0.89 | $1.38 | $(0.49) | -35.5% | [Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Unaudited)) Details net income and other comprehensive income (loss) components, reflecting market interest rate impacts **Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Key Changes (Three Months Ended September 30, 2023 vs. 2022):** | Item | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | | :------------------------------------------------ | :--------------------- | :--------------------- | :-------------------- | | Net income | $30,049 | $53,748 | $(23,699) | | Other comprehensive loss, net of tax | $(53,801) | $(64,828) | $11,027 | | Total comprehensive (loss) income | $(23,752) | $(11,080) | $(12,672) | **Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Key Changes (Nine Months Ended September 30, 2023 vs. 2022):** | Item | YTD Sep 30, 2023 (in thousands) | YTD Sep 30, 2022 (in thousands) | Change (in thousands) | | :------------------------------------------------ | :------------------------------ | :------------------------------ | :-------------------- | | Net income | $107,192 | $166,574 | $(59,382) | | Other comprehensive loss, net of tax | $(51,828) | $(225,123) | $173,295 | | Total comprehensive (loss) income | $55,364 | $(58,549) | $113,913 | - The change in unrealized net holding losses on securities AFS significantly impacted other comprehensive loss, with a decrease of **$68.1 million** for the nine months ended September 30, 2023, compared to a decrease of **$309.0 million** in the prior year, reflecting market interest rate movements[18](index=18&type=chunk)[274](index=274&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Unaudited)) Outlines changes in stockholders' equity, including net income, dividends, and other comprehensive income impacts **Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - Key Changes (Nine Months Ended September 30, 2023):** | Item | Amount (in thousands) | | :------------------------------------ | :-------------------- | | Balance, December 31, 2022 | $2,019,328 | | Adoption of ASU 2022-02 (net of tax) | $287 | | Stock-based compensation | $5,766 | | Cash dividends declared | $(50,321) | | Net income | $107,192 | | Other comprehensive loss | $(51,828) | | Balance, September 30, 2023 | $2,030,424 | - Total stockholders' equity increased by **$11.1 million** during the nine months ended September 30, 2023, primarily driven by net income and stock-based compensation, partially offset by other comprehensive loss and cash dividends[160](index=160&type=chunk)[274](index=274&type=chunk) - Cash dividends declared on common stock remained consistent at **$0.14 per share** for both the three and nine months ended September 30, 2023 and 2022[162](index=162&type=chunk) [Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Summarizes cash flows from operating, investing, and financing activities, detailing changes in cash equivalents **Consolidated Statements of Cash Flows (Unaudited) - Key Activities (Nine Months Ended September 30, 2023 vs. 2022):** | Cash Flow Activity | YTD Sep 30, 2023 (in thousands) | YTD Sep 30, 2022 (in thousands) | Change (in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------ | :-------------------- | | Net cash provided by operating activities | $395,218 | $367,247 | $27,971 | | Net cash provided by (used in) investing activities | $936,508 | $(1,517,942) | $2,454,450 | | Net cash provided by financing activities | $661,821 | $1,165,765 | $(503,944) | | Net change in cash and cash equivalents | $1,993,547 | $15,070 | $1,978,477 | | Cash and cash equivalents, end of period | $2,500,323 | $331,336 | $2,168,987 | - Net cash provided by investing activities significantly increased, primarily driven by a net change in loans receivable from a net outflow of **$1.68 billion** in 2022 to a net inflow of **$710.3 million** in 2023, and proceeds from sales of other loans held for sale[23](index=23&type=chunk) - Net cash provided by financing activities decreased due to higher repayments of FHLB and FRB borrowings and the repayment of convertible notes, despite an increase in proceeds from FRB borrowings[23](index=23&type=chunk) [1. Hope Bancorp, Inc.](index=12&type=section&id=1.%20Hope%20Bancorp%2C%20Inc.) Overview of Hope Bancorp, Inc. as Bank of Hope's holding company, detailing operations and geographic presence - Hope Bancorp, Inc. is the holding company for Bank of Hope, headquartered in Los Angeles, California, operating **53 full-service branches** across nine states and various loan production offices, including a representative office in Seoul, Korea[26](index=26&type=chunk) [2. Basis of Presentation](index=12&type=section&id=2.%20Basis%20of%20Presentation) Explains the basis for unaudited consolidated financial statements and new accounting standard adoption - The consolidated financial statements are unaudited, prepared in accordance with SEC rules, and include Hope Bancorp and its wholly-owned subsidiaries, with all intercompany transactions eliminated[27](index=27&type=chunk)[28](index=28&type=chunk) - Effective January 1, 2023, the Company adopted ASU 2022-02, eliminating troubled debt restructuring (TDR) accounting prospectively and requiring evaluation of loan modifications under ASC 310-20[32](index=32&type=chunk) [3. Earnings Per Share ("EPS")](index=13&type=section&id=3.%20Earnings%20Per%20Share%20(%22EPS%22)) Presents basic and diluted earnings per share for common stock, including factors affecting calculation **Basic and Diluted EPS (Three Months Ended September 30):** | Item | 2023 | 2022 | | :------------------------------------ | :--- | :--- | | Basic EPS - common stock | $0.25 | $0.45 | | Diluted EPS - common stock | $0.25 | $0.45 | **Basic and Diluted EPS (Nine Months Ended September 30):** | Item | 2023 | 2022 | | :------------------------------------ | :--- | :--- | | Basic EPS - common stock | $0.89 | $1.39 | | Diluted EPS - common stock | $0.89 | $1.38 | - Stock options and restricted share awards were excluded from diluted EPS calculations for both periods as they were anti-dilutive. Shares related to convertible notes were also excluded as the conversion price exceeded the market price of the Company's stock[34](index=34&type=chunk)[35](index=35&type=chunk) [4. Equity Investments](index=14&type=section&id=4.%20Equity%20Investments) Details equity investment composition and fair value, categorized by determinable fair values **Equity Investments (September 30, 2023 vs. December 31, 2022):** | Type of Investment | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------------ | :-------------------------- | :-------------------------- | | Equity investments with readily determinable fair values (mutual funds) | $4,200 | $4,300 | | Equity investments without readily determinable fair values (cost less impairment) | $39,000 | $38,100 | | - CRA investments | $37,600 | $36,700 | | - CDFI investments | $1,000 | $1,000 | | - Correspondent bank stock | $370 | $370 | | Total Equity Investments | $43,183 | $42,396 | - The Company had no impairments or subsequent observable price changes for equity investments without readily determinable fair values for the three and nine months ended September 30, 2023 and 2022[40](index=40&type=chunk) [5. Investment Securities](index=15&type=section&id=5.%20Investment%20Securities) Breaks down investment securities (AFS and HTM portfolios) and associated unrealized losses **Investment Securities Available for Sale (AFS) - Fair Value (September 30, 2023 vs. December 31, 2022):** | Security Type | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | U.S. Treasury securities | $102,287 | $3,886 | | Agency securities | $3,812 | $3,867 | | Collateralized mortgage obligations | $711,324 | $793,699 | | Residential mortgage-backed securities | $401,779 | $453,177 | | Commercial mortgage-backed securities | $355,993 | $368,287 | | Asset-backed securities | $150,580 | $147,604 | | Corporate securities | $18,297 | $18,857 | | Municipal securities | $250,156 | $182,752 | | **Total AFS** | **$1,994,228** | **$1,972,129** | | **Total HTM** | **$239,773** | **$258,407** | | **Total Investment Securities** | **$2,234,001** | **$2,230,536** | **Gross Unrealized Losses on AFS Securities (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Total gross unrealized losses (AFS) | $(385,423) | $(318,082) | | Unrealized losses on AFS, net of taxes (included in AOCI) | $(271,200) | $(223,100) | - The Company did not have an allowance for credit losses on investment securities AFS or HTM at September 30, 2023, or December 31, 2022, as the majority of the portfolio consists of U.S. Government agency securities with a zero loss expectation, and other securities were assessed as not credit-impaired[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) [6. Loans Receivable and Allowance for Credit Losses](index=19&type=section&id=6.%20Loans%20Receivable%20and%20Allowance%20for%20Credit%20Losses) Analyzes loan receivable composition, ACL changes, and trends in nonaccrual and past due loans **Loans Receivable Composition (September 30, 2023 vs. December 31, 2022):** | Loan Segment | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Commercial real estate ("CRE") loans | $8,972,886 | $9,414,580 | $(441,694) | -4.7% | | Commercial and industrial ("C&I") loans | $4,450,341 | $5,109,532 | $(659,191) | -12.9% | | Residential mortgage loans | $843,410 | $846,080 | $(2,670) | -0.3% | | Consumer and other loans | $39,556 | $33,348 | $6,208 | 18.6% | | **Total loans receivable, net of deferred costs and fees** | **$14,306,193** | **$15,403,540** | **$(1,097,347)** | **-7.1%** | | Allowance for credit losses | $(158,809) | $(162,359) | $3,550 | -2.2% | | **Loans receivable, net of allowance for credit losses** | **$14,147,384** | **$15,241,181** | **$(1,093,797)** | **-7.2%** | **Allowance for Credit Losses (ACL) Activity (Nine Months Ended September 30, 2023 vs. 2022):** | Item | YTD Sep 30, 2023 (in thousands) | YTD Sep 30, 2022 (in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------ | | Balance, beginning of period | $162,359 | $140,550 | | ASU 2022-02 day 1 adoption adjustment | $(407) | — | | Provision for credit losses | $27,400 | $1,400 | | Total loan charge offs | $(35,399) | $(2,765) | | Total loan recoveries | $4,856 | $21,376 | | Balance, end of period | $158,809 | $160,561 | | ACL to loans receivable | 1.11% | 1.04% | - The provision for credit losses significantly increased to **$27.4 million** for the nine months ended September 30, 2023, from **$1.4 million** in the prior year, primarily due to increased net charge-offs, including an idiosyncratic **$23.4 million** charge-off related to a borrower in Chapter 7 liquidation[219](index=219&type=chunk)[254](index=254&type=chunk) **Nonaccrual Loans and Past Due Loans (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Total nonaccrual loans | $39,081 | $49,687 | | Accruing loans past due 90 days or more | $21,579 | $401 | | Total nonperforming loans | $60,660 | $67,019 | | Nonperforming assets to total assets | 0.31% | 0.36% | | ACL to nonaccrual loans | 406.36% | 326.76% | - The Company adopted ASU 2022-02, eliminating the concept of Troubled Debt Restructurings (TDRs) from GAAP, resulting in a positive cumulative effect adjustment to retained earnings of **$287 thousand**, net of tax[84](index=84&type=chunk) [7. Leases](index=29&type=section&id=7.%20Leases) Presents operating lease balances, net costs, and key terms including weighted-average lease term and discount rate **Operating Lease Balances (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Right-of-use (ROU) assets, net | $51,769 | $55,034 | | Operating lease liabilities | $55,873 | $59,088 | | - Short-term operating lease liability | $14,400 | $13,800 | | - Long-term operating lease liability | $41,500 | $45,300 | **Net Operating Lease Cost (Nine Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Operating lease cost | $11,518 | $11,623 | | Variable lease cost | $2,549 | $2,434 | | Sublease income | $(121) | $(312) | | Net lease cost | $13,946 | $13,745 | - The weighted-average remaining lease term for operating leases was **4.2 years** at September 30, 2023, with a weighted-average discount rate of **2.75%**[92](index=92&type=chunk) [8. Deposits](index=31&type=section&id=8.%20Deposits) Examines deposit composition, shifts to higher-cost time deposits, and uninsured/uncollateralized deposit levels **Deposit Composition (September 30, 2023 vs. December 31, 2022):** | Deposit Type | Sep 30, 2023 (in thousands) | % of Total | Dec 31, 2022 (in thousands) | % of Total | | :----------------------------------- | :-------------------------- | :--------- | :-------------------------- | :--------- | | Noninterest bearing | $4,249,788 | 27% | $4,849,493 | 31% | | Money market and NOW accounts | $4,424,918 | 28% | $5,615,784 | 36% | | Savings deposits | $430,765 | 3% | $283,464 | 2% | | Time deposits | $6,634,388 | 42% | $4,990,060 | 31% | | **Total deposits** | **$15,739,859** | **100%** | **$15,738,801** | **100%** | - Total deposits remained largely unchanged at **$15.74 billion**. However, there was a significant shift in deposit mix towards higher-cost time deposits (up **$1.64 billion**) and savings deposits (up **$147.3 million**), while noninterest-bearing demand deposits (down **$599.7 million**) and money market/NOW accounts (down **$1.19 billion**) decreased, reflecting customer preferences in a high interest rate environment[95](index=95&type=chunk)[259](index=259&type=chunk) **Brokered and Large Time Deposits (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Brokered deposits | $1,960,000 | $1,180,000 | | Time deposits > $250k | $2,390,000 | $2,390,000 | | California State Treasurer's deposits | $300,000 | $300,000 | - The Bank's estimated uninsured and uncollateralized deposits decreased to **$5.85 billion** (**37%** of total deposits) at September 30, 2023, from **$6.48 billion** (**41%** of total deposits) at December 31, 2022[262](index=262&type=chunk) [9. Borrowings](index=32&type=section&id=9.%20Borrowings) Details outstanding borrowings (FHLB, FRB facilities), weighted average rates, and available capacity **Borrowings Outstanding (September 30, 2023 vs. December 31, 2022):** | Borrowing Source | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | FHLB borrowings | $100,000 | $600,000 | | FRB Discount Window | — | $265,000 | | FRB Bank Term Funding Program (BTFP) | $1,695,726 | — | | **Total Borrowings Outstanding** | **$1,795,726** | **$865,000** | | Weighted Average Rate (Total) | 4.53% | 3.74% | | Available Borrowing Capacity (Total) | $5,487,967 | $4,839,515 | - Total borrowings increased significantly to **$1.80 billion** at September 30, 2023, from **$865.0 million** at December 31, 2022, primarily driven by the utilization of the FRB's Bank Term Funding Program (BTFP) for **$1.70 billion** to bolster liquidity in response to banking industry disruptions[99](index=99&type=chunk)[101](index=101&type=chunk)[264](index=264&type=chunk) - All borrowings at September 30, 2023, had maturities of less than **12 months**, with the BTFP borrowings maturing in the first half of 2024 at an average weighted rate of **4.47%**[99](index=99&type=chunk)[264](index=264&type=chunk) [10. Convertible Notes and Subordinated Debentures](index=33&type=section&id=10.%20Convertible%20Notes%20and%20Subordinated%20Debentures) Reports on convertible notes (repayments, extinguishment gains) and the cost of subordinated debentures **Convertible Notes (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Convertible notes principal balance | $444 | $217,500 | | Carrying balance of convertible notes | $444 | $217,148 | | Interest expense (Q3) | $2 | $1,300 | | Interest expense (YTD) | $1,900 | $4,000 | - On May 15, 2023, most holders of the convertible notes exercised their optional put right, leading the Company to pay off **$197.1 million** principal amount in cash. Additionally, the Company repurchased **$19.9 million** in notes during the nine months ended September 30, 2023, resulting in a **$405 thousand** gain on debt extinguishment[104](index=104&type=chunk)[267](index=267&type=chunk) **Subordinated Debentures (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Carrying value of subordinated debentures | $107,505 | $106,565 | | Remaining discounts | $22,400 | $23,300 | | Total trust preferred securities | $126,000 | $126,000 | | Weighted average cost (Q3) | 10.36% | 6.18% | | Weighted average cost (YTD) | 9.87% | 5.06% | - The weighted average cost of subordinated debentures increased significantly due to their variable interest rates being tied to the rising three-month SOFR rate (and LIBOR prior to cessation)[209](index=209&type=chunk) [11. Derivative Financial Instruments](index=35&type=section&id=11.%20Derivative%20Financial%20Instruments) Details fair value and notional amounts of derivative instruments, categorized by hedge designation **Fair Value of Derivative Financial Instruments (September 30, 2023):** | Derivative Type | Notional Amount (in thousands) | Fair Value (Other Assets) (in thousands) | Fair Value (Other Liabilities) (in thousands) | | :------------------------------------ | :----------------------------- | :--------------------------------------- | :---------------------------------------- | | **Designated as cash flow hedges:** | | | | | Interest rate swaps | $725,000 | — | — | | Forward interest rate contracts | $1,000,000 | — | $11,319 | | Forward interest rate collars | $500,000 | — | $7,496 | | **Total cash flow hedges** | **$2,225,000** | **—** | **$18,815** | | **Not designated as hedges:** | | | | | Interest rate contracts with correspondent banks | $1,104,518 | $82,604 | — | | Interest rate contracts with customers | $1,104,518 | — | $84,586 | | Foreign exchange contracts (total) | $8,821 | $139 | $28 | | Risk participation agreement | $131,296 | — | $11 | | Mortgage banking derivatives | $500 | $7 | $8 | | **Total non-hedges** | **$2,349,653** | **$82,750** | **$84,633** | - The Company reclassified gains of **$11.6 million** from accumulated other comprehensive income to interest expense for the nine months ended September 30, 2023, related to interest rate contracts designated as cash flow hedges[116](index=116&type=chunk)[163](index=163&type=chunk) - Derivatives not designated as hedges, such as back-to-back interest rate swaps and foreign exchange contracts, are used to provide services to customers and manage the Company's own foreign exchange risk, with changes in fair value recognized in other income and fees[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) [12. Commitments and Contingencies](index=38&type=section&id=12.%20Commitments%20and%20Contingencies) Outlines off-balance-sheet commitments (loan commitments, letters of credit) and accrued legal loss contingencies **Commitments and Contingencies (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Commitments to extend credit | $2,719,613 | $2,856,263 | | Standby letters of credit | $130,742 | $132,538 | | Other letters of credit | $28,487 | $22,376 | | Commitments to fund investments in affordable housing partnerships | $8,940 | $11,792 | | Reserve for unfunded loan commitments | $3,100 | $1,400 | | Accrued loss contingencies for legal claims | $325 | $229 | - The Company's exposure to credit loss from off-balance-sheet commitments is represented by their notional amount, with an estimated exposure included in the reserve for unfunded loan commitments[124](index=124&type=chunk) - Management believes that none of the legal claims, individually or in the aggregate, will have a material adverse effect on the Company's results of operations or financial condition, though additional losses are reasonably possible[125](index=125&type=chunk)[300](index=300&type=chunk) [13. Goodwill, Intangible Assets, and Servicing Assets](index=39&type=section&id=13.%20Goodwill%2C%20Intangible%20Assets%2C%20and%20Servicing%20Assets) Reports on goodwill, core deposit intangibles, and servicing assets, including amortization and impairment assessments **Goodwill and Intangible Assets (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Goodwill | $464,450 | $464,450 | | Core deposit intangible assets, net | $4,382 | $5,726 | | Servicing assets, net | $10,457 | $11,628 | - An interim goodwill assessment as of September 30, 2023, triggered by a significant decline in bank stock prices in March 2023, concluded that goodwill was not impaired[128](index=128&type=chunk) **Amortization Expense (Nine Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Core deposit intangible assets | $1,300 | $1,500 | | Servicing assets | $3,056 | $3,045 | [14. Income Taxes](index=41&type=section&id=14.%20Income%20Taxes) Presents income tax provision, effective tax rates, and unrecognized tax benefits **Income Tax Provision and Effective Tax Rate (Three Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Income tax provision | $10,000 | $19,700 | | Pretax income | $40,000 | $73,400 | | Effective tax rate | 24.90% | 26.80% | **Income Tax Provision and Effective Tax Rate (Nine Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Income tax provision | $37,100 | $59,600 | | Pretax income | $144,300 | $226,100 | | Effective tax rate | 25.71% | 26.34% | - The Company had total unrecognized tax benefits of **$1.7 million** at September 30, 2023, and expects a possible decrease of **$1.2 million** in the next twelve months due to the expiration of the statute of limitations[137](index=137&type=chunk) [15. Fair Value Measurements](index=42&type=section&id=15.%20Fair%20Value%20Measurements) Categorizes fair value measurements for assets and liabilities into Level 1, 2, and 3 inputs - 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)[141](index=141&type=chunk)[146](index=146&type=chunk) **Assets Measured at Fair Value on a Recurring Basis (September 30, 2023, in thousands):** | Asset Type | Total Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------------------ | :--------------- | :------ | :------ | :------ | | Investment securities available for sale | $1,994,228 | $102,287 | $1,891,088 | $853 | | Equity investments with readily determinable fair value | $4,169 | $4,169 | — | — | | Interest rate contracts | $82,604 | — | $82,604 | — | | Mortgage banking derivatives | $7 | — | $7 | — | | Other derivatives | $139 | — | $139 | — | **Liabilities Measured at Fair Value on a Recurring Basis (September 30, 2023, in thousands):** | Liability Type | Total Fair Value | Level 1 | Level 2 | Level 3 | | :------------------------------------ | :--------------- | :------ | :------ | :------ | | Interest rate contracts | $84,586 | — | $84,586 | — | | Mortgage banking derivatives | $8 | — | $8 | — | | Other derivatives | $18,854 | — | $18,843 | $11 | - Collateral-dependent loans, loans held for sale, and OREO are measured at fair value on a non-recurring basis, primarily using Level 3 inputs such as appraisals and independent valuations less costs to sell[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk)[156](index=156&type=chunk) [16. Stockholders' Equity](index=49&type=section&id=16.%20Stockholders'%20Equity) Summarizes changes in stockholders' equity, including net income, dividends, and accumulated other comprehensive loss **Stockholders' Equity (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Total stockholders' equity | $2,030,424 | $2,019,328 | | Accumulated other comprehensive loss, net | $(282,685) | $(230,857) | - The Company paid cash dividends of **$0.14 per common share** for the three months ended September 30, 2023 and 2022, and **$0.42 per common share** for the nine months ended September 30, 2023 and 2022[162](index=162&type=chunk) - The accumulated other comprehensive loss, net, increased by **$51.8 million** during the nine months ended September 30, 2023, primarily due to unrealized net losses on securities available for sale, partially offset by reclassification adjustments for net gains on interest rate contracts[162](index=162&type=chunk)[163](index=163&type=chunk) - The Company had **$35.3 million** remaining under its **$50.0 million** share repurchase program as of September 30, 2023, with no shares repurchased during the nine months ended September 30, 2023[161](index=161&type=chunk)[275](index=275&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk) [17. Stock-Based Compensation](index=50&type=section&id=17.%20Stock-Based%20Compensation) Reports on stock-based compensation expense, unrecognized compensation, and shares available for future grants **Stock-Based Compensation Expense (Three and Nine Months Ended September 30):** | Item | Q3 2023 (in thousands) | Q3 2022 (in thousands) | YTD Sep 30, 2023 (in thousands) | YTD Sep 30, 2022 (in thousands) | | :------------------------------------ | :--------------------- | :--------------------- | :------------------------------ | :------------------------------ | | Total amounts charged against income | $3,000 | $3,200 | $8,800 | $9,300 | | Income tax benefit recognized | $755 | $865 | $2,300 | $2,400 | - Unrecognized compensation expense related to non-vested restricted stock and performance units was **$16.4 million** at September 30, 2023, expected to be recognized over a weighted average vesting period of **1.69 years**[172](index=172&type=chunk) - The 2019 stock-based incentive plan had **156,212 shares** available for future grants at September 30, 2023, including an additional **150,000 shares** made available in September 2023 for inducement awards[166](index=166&type=chunk) [18. Regulatory Matters](index=52&type=section&id=18.%20Regulatory%20Matters) Presents regulatory capital ratios, confirming the Bank's 'well-capitalized' status and CECL transition election **Consolidated Regulatory Capital Ratios (September 30, 2023):** | Capital Ratio | Company Actual | Bank Actual | Required for Well-Capitalized | Excess Over Well-Capitalized | | :------------------------------------ | :------------- | :---------- | :---------------------------- | :--------------------------- | | Common equity Tier 1 capital ratio | 11.67% | 12.08% | 6.50% | 5.58% | | Total capital ratio | 13.23% | 13.00% | 10.00% | 3.00% | | Tier 1 capital ratio | 12.32% | 12.08% | 8.00% | 4.08% | | Leverage capital ratio | 9.83% | 9.65% | 5.00% | 4.65% | - At September 30, 2023, both the Company and the Bank exceeded all regulatory minimum capital ratios, including the conservation buffer, and the Bank was categorized as 'well-capitalized' under regulatory frameworks[175](index=175&type=chunk)[177](index=177&type=chunk)[277](index=277&type=chunk) - The Company elected the five-year transition period for the cumulative effect of CECL adoption on regulatory capital, consistent with federal regulatory agencies' final rule[176](index=176&type=chunk) [19. Revenue Recognition](index=54&type=section&id=19.%20Revenue%20Recognition) Explains revenue recognition policies, primarily for noninterest revenue streams not covered by Topic 606 - The Company recognizes revenue when obligations under customer contracts are satisfied, primarily for noninterest revenue streams like deposit-related fees and wire transfer fees, as Topic 606 does not apply to financial instruments[180](index=180&type=chunk) **Service Fees on Deposit Accounts (Three and Nine Months Ended September 30):** | Item | Q3 2023 (in thousands) | Q3 2022 (in thousands) | YTD Sep 30, 2023 (in thousands) | YTD Sep 30, 2022 (in thousands) | | :------------------------------------ | :--------------------- | :--------------------- | :------------------------------ | :------------------------------ | | Total service fees on deposit accounts | $2,415 | $2,535 | $6,961 | $6,779 | | Total wire transfer fees | $806 | $856 | $2,429 | $2,614 | [20. Subsequent Events](index=55&type=section&id=20.%20Subsequent%20Events) Reports on significant post-period events, including a strategic reorganization and headcount reduction - On October 20, 2023, the Company announced a strategic reorganization, including a **13% reduction** in total headcount, with associated one-time costs expected in Q4 2023[184](index=184&type=chunk) [Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=56&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Analyzes Hope Bancorp's financial condition and operating results, covering performance drivers, asset/liability, credit, and capital [GENERAL](index=56&type=section&id=GENERAL) Provides a general overview of Hope Bancorp, Inc., its business model, and primary income and funding sources - Hope Bancorp, Inc. is the holding company for Bank of Hope, a multi-regional bank with **$20.08 billion** in total assets at September 30, 2023, serving a multi-ethnic customer base across nine states and operating a representative office in Seoul, Korea[187](index=187&type=chunk)[188](index=188&type=chunk) - The principal business involves earning interest on loans and investment securities, primarily funded by deposits and borrowings, with operating income also derived from fee-based products and services and loan sales[189](index=189&type=chunk) [Selected Financial Data](index=57&type=section&id=Selected%20Financial%20Data) Presents key income statement and balance sheet data for current and prior periods, highlighting core financial metrics **Selected Financial Data - Income Statement (Three Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Net interest income | $135,378 | $153,186 | | Provision for credit losses | $16,800 | $9,200 | | Net income | $30,049 | $53,748 | | Diluted EPS | $0.25 | $0.45 | | Net interest margin | 2.83% | 3.49% | | Efficiency ratio | 60.46% | 50.39% | **Selected Financial Data - Income Statement (Nine Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Net interest income | $399,945 | $427,900 | | Provision for credit losses | $27,400 | $1,400 | | Net income | $107,192 | $166,574 | | Diluted EPS | $0.89 | $1.38 | | Net interest margin | 2.84% | 3.36% | | Efficiency ratio | 60.65% | 51.30% | **Selected Financial Data - Balance Sheet (September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Total Assets | $20,076,364 | $19,083,388 | | Loans receivable | $14,306,193 | $15,491,187 | | Deposits | $15,739,859 | $15,502,209 | | Stockholders' equity | $2,030,424 | $1,975,725 | | Nonperforming assets to total assets | 0.31% | 0.51% | | Allowance for credit losses to loans receivable | 1.11% | 1.04% | [Results of Operations](index=60&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, including net income, net interest income, provision for credit losses, and noninterest income/expense [Overview](index=60&type=section&id=Overview) Summarizes overall financial performance, highlighting changes in net income and diluted EPS - Net income for Q3 2023 decreased by **44.1%** year-over-year to **$30.0 million**, or **$0.25 diluted EPS**, primarily due to lower net interest income and noninterest income, and an increased provision for credit losses[197](index=197&type=chunk) - For the nine months ended September 30, 2023, net income decreased by **35.6%** to **$107.2 million**, or **$0.89 diluted EPS**, driven by higher provision for credit losses and noninterest expense, and lower net interest income[198](index=198&type=chunk) [Net Interest Income and Net Interest Margin](index=60&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Examines trends in net interest income and net interest margin, driven by asset yields and funding costs **Net Interest Income (NII) and Net Interest Margin (NIM) (Three Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Net interest income before provision | $135,378 | $153,186 | $(17,808) | -11.6% | | Net interest margin | 2.83% | 3.49% | -66 bps | | | Weighted average yield on loans | 6.27% | 4.65% | +162 bps | | | Weighted average cost of deposits | 2.98% | 0.79% | +219 bps | | **Net Interest Income (NII) and Net Interest Margin (NIM) (Nine Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Net interest income before provision | $399,945 | $427,900 | $(27,955) | -6.5% | | Net interest margin | 2.84% | 3.36% | -52 bps | | | Weighted average yield on loans | 6.00% | 4.21% | +179 bps | | | Weighted average cost of deposits | 2.72% | 0.46% | +226 bps | | - The decrease in net interest income and net interest margin was primarily driven by a significantly higher cost of funds and increased average interest-bearing deposits and short-term borrowings, partially offset by expanding yields on interest-earning assets[200](index=200&type=chunk)[202](index=202&type=chunk) - The weighted average cost of FHLB and FRB borrowings increased by **223 basis points** (QoQ) and **287 basis points** (YoY) due to rising market interest rates, while the cost of subordinated debentures also rose significantly due to variable rates tied to SOFR[207](index=207&type=chunk)[209](index=209&type=chunk) [Provision for Credit Losses](index=65&type=section&id=Provision%20for%20Credit%20Losses) Analyzes the provision for credit losses, highlighting net charge-offs and specific loan events **Provision for Credit Losses (Three and Nine Months Ended September 30):** | Item | Q3 2023 (in thousands) | Q3 2022 (in thousands) | YTD Sep 30, 2023 (in thousands) | YTD Sep 30, 2022 (in thousands) | | :------------------------------------ | :--------------------- | :--------------------- | :------------------------------ | :------------------------------ | | Provision for credit losses | $16,800 | $9,200 | $27,400 | $1,400 | | Net loan charge-offs to average loans (annualized) | 0.85% | 0.01% | 0.27% | (0.17)% | - The substantial increase in provision for credit losses in 2023 was largely due to increased net charge-offs, including an idiosyncratic **$23.4 million** full charge-off related to a borrower entering Chapter 7 liquidation in Q3 2023[219](index=219&type=chunk)[254](index=254&type=chunk) - In the prior year (YTD Sep 30, 2022), a large recovery of **$17.3 million** on a previously charged-off loan significantly reduced the required provision for credit losses[219](index=219&type=chunk)[254](index=254&type=chunk) [Noninterest Income](index=66&type=section&id=Noninterest%20Income) Reviews noninterest income components, including service fees, swap fees, and loan sale gains, and their changes **Noninterest Income (Three Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Service fees on deposit accounts | $2,415 | $2,535 | $(120) | -4.7% | | Swap fees | $(61) | $1,193 | $(1,254) | N/A | | Net gains on sales of SBA loans | — | $2,782 | $(2,782) | -100.0% | | Other income and fees | $4,287 | $5,126 | $(839) | -16.4% | | **Total noninterest income** | **$8,305** | **$13,355** | **$(5,050)** | **-37.8%** | **Noninterest Income (Nine Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Service fees on deposit accounts | $6,961 | $6,779 | $182 | 2.7% | | Swap fees | $655 | $2,153 | $(1,498) | -69.6% | | Net gains on sales of SBA loans | $4,097 | $14,189 | $(10,092) | -71.1% | | Other income and fees | $19,209 | $10,318 | $8,891 | 86.2% | | **Total noninterest income** | **$36,297** | **$39,287** | **$(2,990)** | **-7.6%** | - The year-over-year decrease in noninterest income was primarily due to lower net gains on sales of SBA loans (Company elected not to sell SBA 7(a) loans in Q3 2023) and a decline in swap fee income[224](index=224&type=chunk)[225](index=225&type=chunk) - Other income and fees for the nine months ended September 30, 2023, included a **$5.8 million** gain from a cash distribution from an affordable housing partnership, which was not present in the prior year[227](index=227&type=chunk) [Noninterest Expense](index=67&type=section&id=Noninterest%20Expense) Analyzes noninterest expense, focusing on salaries, FDIC assessments, earned interest credits, and their drivers **Noninterest Expense (Three Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Salaries and employee benefits | $51,033 | $53,222 | $(2,189) | -4.1% | | FDIC assessments | $3,683 | $1,633 | $2,050 | 125.5% | | Earned interest credit | $6,377 | $4,685 | $1,692 | 36.1% | | **Total noninterest expense** | **$86,873** | **$83,914** | **$2,959** | **3.5%** | **Noninterest Expense (Nine Months Ended September 30):** | Item | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Salaries and employee benefits | $160,507 | $152,025 | $8,482 | 5.6% | | FDIC assessments | $10,155 | $4,652 | $5,503 | 118.3% | | Earned interest credit | $15,894 | $5,996 | $9,898 | 165.1% | | **Total noninterest expense** | **$264,560** | **$239,652** | **$24,908** | **10.4%** | - The increase in noninterest expense was primarily driven by higher earned interest credits (due to rising short-term interest rates) and increased FDIC assessment expense (due to an industry-wide rate increase and a proposed special assessment)[228](index=228&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) - Salaries and employee benefits increased year-to-date due to inflation and higher compensation rates, including **$1.7 million** in severance costs, despite a decrease in full-time equivalent employees to **1,446**[229](index=229&type=chunk) [Provision for Income Taxes](index=68&type=section&id=Provision%20for%20Income%20Taxes) Reports on the income tax provision and effective tax rate, noting the impact of tax credits **Income Tax Provision and Effective Tax Rate (Three and Nine Months Ended September 30):** | Item | Q3 2023 (in thousands) | Q3 2022 (in thousands) | YTD Sep 30, 2023 (in thousands) | YTD Sep 30, 2022 (in thousands) | | :------------------------------------ | :--------------------- | :--------------------- | :------------------------------ | :------------------------------ | | Income tax provision | $10,000 | $19,700 | $37,100 | $59,600 | | Effective income tax rate | 24.90% | 26.80% | 25.71% | 26.34% | - The effective tax rate is reduced by CRA credits and tax credits from investments in affordable housing partnerships, which totaled approximately **$6.0 million** for the nine months ended September 30, 2023[233](index=233&type=chunk) [Financial Condition](index=69&type=section&id=Financial%20Condition) Analyzes the balance sheet, including cash, investment securities, loans, nonperforming assets, and funding sources [Cash and Cash Equivalents](index=69&type=section&id=Cash%20and%20Cash%20Equivalents) Details the significant increase in cash and cash equivalents, primarily driven by strategic liquidity bolstering **Cash and Cash Equivalents (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $2,500,323 | $506,776 | $1,993,547 | 393.3% | - The significant increase in cash and cash equivalents was a strategic response to banking industry disruptions in March 2023, bolstering on-balance sheet liquidity primarily through the FRB's BTFP[237](index=237&type=chunk) [Investment Securities Portfolio](index=69&type=section&id=Investment%20Securities%20Portfolio) Reviews the investment securities portfolio (AFS and HTM) and associated unrealized losses **Investment Securities (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Investment securities AFS | $1,994,228 | $1,972,129 | | Investment securities HTM | $266,609 | $271,066 | | Net unrealized loss on AFS | $(385,400) | $(317,300) | - The net unrealized loss on AFS securities increased to **$385.4 million** at September 30, 2023, from **$317.3 million** at December 31, 2022, reflecting movements in market interest rates[238](index=238&type=chunk) - No allowance for credit losses was required for investment securities AFS or HTM, as the majority are U.S. Government agency securities with zero loss expectation, and other securities were assessed as not credit-impaired[240](index=240&type=chunk) [Equity Investments](index=69&type=section&id=Equity%20Investments) Summarizes total equity investments, categorized by determinable and non-determinable fair values **Equity Investments (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Total equity investments | $43,200 | $42,400 | | - With readily determinable fair values | $4,200 | $4,300 | | - Without readily determinable fair values | $39,000 | $38,100 | [Loans Held For Sale](index=70&type=section&id=Loans%20Held%20For%20Sale) Reports on the balance of loans held for sale and the volume of loan sales during the period **Loans Held For Sale (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Loans held for sale | $19,502 | $49,245 | | - C&I loans | $19,500 | N/A | | - CRE loans | N/A | $48,800 | | - Residential mortgage loans | N/A | $450 | - During the nine months ended September 30, 2023, the Company sold **$399.0 million** in loans, including **$295.7 million** in CRE and C&I loans, **$79.1 million** in SBA loans, and **$24.2 million** in residential mortgage loans[244](index=244&type=chunk) [Loans Receivable](index=70&type=section&id=Loans%20Receivable) Analyzes loan receivable composition and changes, including commitments and letters of credit **Loans Receivable Composition (September 30, 2023 vs. December 31, 2022):** | Loan Segment | Sep 30, 2023 (in thousands) | % of Total | Dec 31, 2022 (in thousands) | % of Total | | :----------------------------------- | :-------------------------- | :--------- | :-------------------------- | :--------- | | CRE loans | $8,972,886 | 63% | $9,414,580 | 61% | | C&I loans | $4,450,341 | 31% | $5,109,532 | 33% | | Residential mortgage loans | $843,410 | 6% | $846,080 | 6% | | Consumer and other loans | $39,556 | 0% | $33,348 | 0% | | **Total loans receivable** | **$14,306,193** | **100%** | **$15,403,540** | **100%** | - Total loans receivable decreased by **$1.10 billion**, or **7.1%**, primarily due to decreases of **$659.2 million** in C&I loans and **$441.7 million** in CRE loans, as principal paydowns and loan sales exceeded new production[59](index=59&type=chunk)[245](index=245&type=chunk) **Loan Commitments and Letters of Credit (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Commitments to extend credit | $2,719,613 | $2,856,263 | | Standby letters of credit | $130,742 | $132,538 | | Other commercial letters of credit | $28,487 | $22,376 | | **Total loan commitments and letters of credit** | **$2,878,842** | **$3,011,177** | [Nonperforming Assets](index=71&type=section&id=Nonperforming%20Assets) Details nonperforming asset trends (nonaccrual loans, OREO) and the impact of accounting standard changes **Nonperforming Assets (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Nonaccrual loans | $39,081 | $49,687 | | Accruing delinquent loans past due 90 days or more | $21,579 | $401 | | Accruing troubled debt restructured loans | — | $16,931 | | Total nonperforming loans | $60,660 | $67,019 | | OREO | $1,043 | $2,418 | | **Total nonperforming assets** | **$61,703** | **$69,437** | | Nonperforming assets to total assets | 0.31% | 0.36% | | Nonaccrual loans to loans receivable | 0.27% | 0.32% | - Total nonperforming assets decreased to **$61.7 million** at September 30, 2023, from **$69.4 million** at December 31, 2022, partly due to the elimination of TDR loans from GAAP following the adoption of ASU 2022-02[247](index=247&type=chunk)[249](index=249&type=chunk) [Allowance for Credit Losses](index=72&type=section&id=Allowance%20for%20Credit%20Losses) Examines ACL by loan segment and factors influencing changes, including economic forecasts **Allowance for Credit Losses (ACL) (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | CRE loans ACL | $96,736 | $95,884 | | C&I loans ACL | $49,422 | $56,872 | | Residential mortgage loans ACL | $11,996 | $8,920 | | Consumer and other loans ACL | $655 | $683 | | **Total ACL** | **$158,809** | **$162,359** | | ACL to loans receivable | 1.11% | 1.05% | - The ACL decreased slightly to **$158.8 million**, but the ACL coverage ratio increased to **1.11%** due to a decline in total loans receivable and a worsened economic forecast (lower GDP growth, lower CRE price index, higher unemployment) used in the calculation[251](index=251&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk) - The decline in C&I ACL was primarily due to a decrease in C&I loan balances, while ACL for CRE and residential mortgage loans increased due to the decline in projected macroeconomic variables[253](index=253&type=chunk) [Investments in Affordable Housing Partnerships](index=74&type=section&id=Investments%20in%20Affordable%20Housing%20Partnerships) Reports on the Company's investments and commitments in affordable housing partnerships **Investments in Affordable Housing Partnerships (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Investments in affordable housing partnerships | $42,094 | $47,711 | | Commitments to fund investments | $8,940 | $11,792 | - The decrease in investments was a result of amortization during the nine months ended September 30, 2023[257](index=257&type=chunk) [OREO](index=74&type=section&id=OREO) Details the net balance of Other Real Estate Owned (OREO) and the impact of property sales **Other Real Estate Owned (OREO) (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | OREO, net | $1,043 | $2,418 | | OREO valuation allowance | $0 | $1,400 | - The decrease in OREO, net, was due to the sale of one OREO property with a carrying balance of **$1.5 million** during the nine months ended September 30, 2023[258](index=258&type=chunk) [Deposits, Borrowings, and Convertible Notes](index=74&type=section&id=Deposits%2C%20Borrowings%2C%20and%20Convertible%20Notes) Analyzes changes in deposit mix, borrowings, and convertible notes, reflecting funding strategies **Deposit Mix (September 30, 2023 vs. December 31, 2022):** | Deposit Type | Sep 30, 2023 % | Dec 31, 2022 % | | :------------------------------------ | :------------- | :------------- | | Noninterest bearing demand deposits | 27.0% | 30.8% | | Time deposits | 42.1% | 31.7% | | Interest bearing money market, NOW, and savings | 30.9% | 37.5% | - Total deposits remained stable, but a significant shift occurred from noninterest-bearing and money market/NOW accounts to higher-yielding time and savings deposits, reflecting customer preferences in a high interest rate environment[259](index=259&type=chunk) **Borrowings (September 30, 2023 vs. December 31, 2022):** | Borrowing Source | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | FHLB borrowings | $100,000 | $600,000 | | FRB borrowings (including BTFP) | $1,700,000 | $265,000 | | Convertible notes, net | $444 | $217,148 | | Subordinated debentures | $107,505 | $106,565 | - The Company significantly increased FRB borrowings, primarily through the BTFP (**$1.70 billion**), to enhance liquidity in response to banking industry disruptions, while convertible notes outstanding dramatically decreased due to put options exercised by holders[264](index=264&type=chunk)[267](index=267&type=chunk) [Off-Balance-Sheet Activities and Contractual Obligations](index=75&type=section&id=Off-Balance-Sheet%20Activities%20and%20Contractual%20Obligations) Describes off-balance-sheet financial instruments and their potential impact on financial condition - 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 risk participation agreements[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk) - These activities involve credit and interest rate risk but are not anticipated to have a material impact on future results of operations or financial condition[124](index=124&type=chunk)[273](index=273&type=chunk) [Stockholders' Equity and Regulatory Capital](index=76&type=section&id=Stockholders'%20Equity%20and%20Regulatory%20Capital) Reviews changes in stockholders' equity and confirms regulatory capital compliance for Company and Bank **Stockholders' Equity (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Total stockholders' equity | $2,030,424 | $2,019,328 | | Accumulated other comprehensive income (loss), net | $(282,685) | $(230,857) | - Stockholders' equity increased by **$11.1 million**, driven by net income and stock-based compensation, partially offset by an increase in accumulated other comprehensive loss due to unrealized losses on AFS securities and dividend payments[274](index=274&type=chunk) - Both Hope Bancorp and Bank of Hope maintained capital ratios well above regulatory minimums, with the Bank categorized as 'well capitalized' at September 30, 2023[179](index=179&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) [Liquidity Management](index=78&type=section&id=Liquidity%20Management) Outlines liquidity sources and management strategies to meet short-term and intermediate-term funding needs - The Company's primary liquidity sources include deposits, federal funds facilities, and borrowings from FHLB and FRB (including BTFP), augmented by loan and securities payments and sales[280](index=280&type=chunk) **Liquidity Sources (September 30, 2023 vs. December 31, 2022):** | Item | Sep 30, 2023 (in billions) | Dec 31, 2022 (in billions) | | :------------------------------------ | :------------------------- | :------------------------- | | Total borrowing capacity, cash, and unpledged securities | $8.29 | $7.23 | | Available borrowing capacity (FHLB, FRB, Fed funds) | $5.49 | $4.84 | | Cash and cash equivalents | $2.50 | $0.51 | | Unpledged investment securities AFS | $0.2995 | N/A | - Management believes current liquidity sources are sufficient to meet all reasonably foreseeable short-term and intermediate-term needs[281](index=281&type=chunk) [Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=78&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Details market risk management, primarily interest rate risk, through ALM activities, including NII and EVE sensitivity [Interest Rate Risk](index=79&type=section&id=Interest%20Rate%20Risk) Discusses interest rate risk management, its significance, and impact on net interest income and economic value of equity - Interest rate risk is the most significant market risk, managed by the Asset and Liability Management Committee (ALM) to optimize earnings while maintaining adequate liquidity and acceptable exposure to interest rate fluctuations[284](index=284&type=chunk)[285](index=285&type=chunk) **Hypothetical Impacts on Net Interest Income (NII) and Economic Value of Equity (EVE) (September 30):** | Simulated Rate Changes | Sep 30, 2023 Estimated NII Sensitivity | Sep 30, 2023 EVE Volatility | Sep 30, 2022 Estimated NII Sensitivity | Sep 30, 2022 EVE Volatility | | :------------------------------------ | :------------------------------------- | :-------------------------- | :------------------------------------- | :-------------------------- | | +200 basis points | 2.14% | (10.56)% | 5.18% | (5.61)% | | +100 basis points | 1.21% | (4.91)% | 2.77% | (2.36)% | | -100 basis points | (3.28)% | 1.92% | (2.06)% | 1.38% | | -200 basis points | (6.73)% | 2.60% | (4.47)% | 0.67% | - The simulation results indicate that the Company's net interest income is more sensitive to falling interest rates than rising rates at September 30, 2023, compared to the prior year[290](index=290&type=chunk) [LIBOR Transition](index=81&type=section&id=LIBOR%20Transition) Reports on the successful transition from LIBOR-indexed financial instruments to alternative benchmark rates - The Company has substantially completed its efforts to modify financial instruments tied to LIBOR by establishing an alternative benchmark rate, with no material impact on consolidated financial statements[292](index=292&type=chunk) [Item 4. CONTROLS AND PROCEDURES](index=81&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Management confirmed effective disclosure controls and procedures as of September 30, 2023, with no material internal control changes - The Company's disclosure controls and procedures were determined to be effective as of September 30, 2023[296](index=296&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the quarter ended September 30, 2023[297](index=297&type=chunk) PART II - OTHER INFORMATION [Item 1. LEGAL PROCEEDINGS](index=83&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) Details legal claims and accrued loss contingencies, with management assessing no material adverse effect - Accrued loss contingencies for all legal claims totaled approximately **$325 thousand** at September 30, 2023[300](index=300&type=chunk) - Management believes that none of the legal claims, individually or in the aggregate, will have a material adverse effect on the Company's results of operations or financial condition, although additional losses are reasonably possible[300](index=300&type=chunk) [Item 1A. RISK FACTORS](index=83&type=section&id=Item%201A.%20RISK%20FACTORS) No material changes to previously disclosed risk factors were identified in the current period - No material changes to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2022, or subsequent Quarterly Reports on Form 10-Q, were identified[301](index=301&type=chunk) [Item 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=84&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%2C%20USE%20OF%20PROCEEDS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Reports no unregistered equity sales or share repurchases during the quarter, with remaining repurchase capacity - No unregistered sales of equity securities occurred during the three months ended September 30, 2023[302](index=302&type=chunk) - The Company did not repurchase any shares under its **$50.0 million** share repurchase program during the thre