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

Financial Performance - Net income for 3Q23 was $30 million, or $025 per diluted share[2] - Net interest income for 3Q23 was $135 million, a 4% increase QoQ, driven by net interest margin expansion of +13 bps QoQ[2] - Noninterest income for 3Q23 was $8 million, compared to $17 million in 2Q23[46, 60] Balance Sheet Strength - Total capital ratio was 1323% at 9/30/23[2] - Tangible common equity (TCE) ratio was 796% at 9/30/23[2] - Available borrowing capacity, cash & equivalents, & unpledged investment securities totaled $83 billion, representing 53% of deposits, at 9/30/23[2, 16, 21] - Total deposits were $157 billion at 9/30/23, a 1% increase QoQ, driven by a 3% QoQ growth in customer deposits[2, 26] - Gross loans were $143 billion at 9/30/23, a 4% decrease QoQ[2] Asset Quality - Nonperforming assets (NPA) were $62 million at 9/30/23, a 20% decrease QoQ[2] - NPAs represented 031% of total assets at 9/30/23, an improvement from 038% at 6/30/23[2] - Net charge-offs for 3Q23 were $31 million, including an idiosyncratic charge-off of $234 million[2, 70]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-50245 HOPE BANCORP, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identificati ...

Hope Bancorp, Inc. (NASDAQ:HOPE) Q2 2023 Earnings Conference Call July 24, 2023 12:30 PM ET Company Participants Angie Yang - Director, Investor Relations Kevin Kim - Chairman, President and Chief Executive Officer Julianna Balicka - Executive Vice President and Chief Financial Officer Peter Koh - Senior Executive Vice President and Chief Operating Officer Conference Call Participants Christopher McGratty - KBW Matthew Clark - Piper Sandler Gary Tenner - D.A. Davidson Operator Good morning and welcome to th ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-50245 HOPE BANCORP, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identificat ...

Financial Data and Key Metrics Changes - The company's total risk-based capital ratio increased to 12.25% at March 31, 2023, up 28 basis points quarter-over-quarter [3][9] - Net interest income totaled $134 million for Q1 2023, representing an 11% decrease from the preceding quarter, with a net interest margin of 3.02%, down 34 basis points quarter-over-quarter [12][34] - Non-interest income was $11 million for Q1, a decrease of 9% from the preceding quarter [6] Business Line Data and Key Metrics Changes - New loan production in Q1 was $569 million, lower than previous quarters, with commercial and industrial loans making up 61% of total loan production [33][80] - The average yield on the loan portfolio increased to 5.75%, up 39 basis points quarter-over-quarter [87] - Non-performing assets at March 31 were 39 basis points of total assets, compared to 36 basis points at December 31, 2022 [14] Market Data and Key Metrics Changes - Average deposits grew 2% quarter-over-quarter to $15.8 billion, with the average cost of deposits increasing to 2.41% [34] - The bank's uninsured deposit ratio improved to 38%, down from 41% at December 31, 2022 [4] Company Strategy and Development Direction - The company plans to focus on improving profitability and efficiency, expecting quarterly improvements in the efficiency ratio driven by cost savings from staffing rationalization [16] - Loan growth is expected to be in the low single-digit range for 2023, reflecting lower customer demand in a higher interest rate environment [90] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the balance sheet and capital positions, indicating that the financial institution serves as a source of strength and stability through economic cycles [91] - The company anticipates a decline in net interest income in Q2, followed by stabilization and modest growth in the second half of the year supported by loan growth [37] Other Important Information - The company repurchased $11 million of convertible senior notes and expects to pay off the remaining balance of $207 million in May with excess cash [85] - The Board of Directors declared a quarterly common stock dividend of $0.14 per share [32] Q&A Session Summary Question: What is the plan for the borrowings to fund cash? - Management indicated that they have enough liquidity to cover the borrowings and do not expect to raise funds to replace the convertible notes [28] Question: How much of the growth in time deposits was broker deposits? - Management noted that nearly $2 billion of growth in time deposits occurred towards the end of the quarter, with a shift in deposit mix due to industry disruptions [44][45] Question: What are the assumptions for net interest income stabilization in the back half of the year? - Projections incorporate conservative assumptions around deposit behaviors and are informed by trends from core relationship customers [55] Question: What is the outlook for loan demand in the current environment? - Management expects loan growth to be in the low single-digit range for 2023, with no drastic changes anticipated in loan demand [61]