Hope Bancorp(US:HOPE)2025-05-08 20:28PART I Financial Statements This section presents Hope Bancorp, Inc.'s unaudited consolidated financial statements, including the balance sheet, income statement, comprehensive income, equity changes, and cash flows, with supporting notes Consolidated Statements of Financial Condition (Unaudited) Hope Bancorp's total assets slightly increased to $17.07 billion as of March 31, 2025, driven by higher cash and lower net loans, with total equity rising to $2.16 billion Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Total cash and cash equivalents | $733,482 | $458,199 | | Investment securities (AFS & HTM) | $2,088,586 | $2,075,628 | | Loans receivable, net | $13,187,882 | $13,467,745 | | Goodwill | $464,450 | $464,450 | | Total assets | $17,068,316 | $17,054,008 | | Liabilities & Equity | | | | Total deposits | $14,488,319 | $14,327,489 | | FHLB and FRB borrowings | $100,000 | $239,000 | | Total liabilities | $14,908,283 | $14,919,503 | | Total stockholders' equity | $2,160,033 | $2,134,505 | Consolidated Statements of Income (Unaudited) Net income for Q1 2025 decreased to $21.1 million, primarily due to lower net interest income, partially offset by increased noninterest income and reduced noninterest expense Income Statement Summary (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $100,817 | $115,047 | | Provision for Credit Losses | $4,800 | $2,600 | | Noninterest Income | $15,688 | $8,286 | | Noninterest Expense | $83,861 | $84,839 | | Net Income | $21,096 | $25,864 | | Diluted EPS | $0.17 | $0.21 | Consolidated Statements of Comprehensive Income (Unaudited) Total comprehensive income significantly increased to $42.7 million in Q1 2025, driven by net income and a positive unrealized gain on available-for-sale securities Comprehensive Income Summary (in thousands) | Component | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $21,096 | $25,864 | | Change in unrealized gains on securities AFS | $32,705 | $(13,734) | | Other comprehensive income (loss), net of tax | $21,560 | $(17,540) | | Total Comprehensive Income | $42,656 | $8,324 | Consolidated Statements of Changes in Stockholders' Equity (Unaudited) Stockholders' equity increased to $2.16 billion by March 31, 2025, primarily due to net income and other comprehensive income, partially offset by cash dividends - Key drivers for the change in stockholders' equity in Q1 2025 were net income of $21.1 million and other comprehensive income of $21.6 million, which were partially offset by cash dividends of $16.9 million18 Consolidated Statements of Cash Flows (Unaudited) Net cash provided by operating, investing, and financing activities led to a $275.3 million increase in cash and cash equivalents during Q1 2025 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $26,667 | $29,619 | | Net cash provided by investing activities | $245,800 | $247,124 | | Net cash provided by (used in) financing activities | $2,816 | $(1,020,414) | | Net Change in Cash and Cash Equivalents | $275,283 | $(743,671) | Notes to Consolidated Financial Statements (Unaudited) This section provides detailed disclosures on accounting policies, financial statement line items, regulatory matters, commitments, and subsequent events, supporting the primary financial statements Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, highlighting decreased net income due to lower net interest income, alongside analysis of loan and deposit portfolios, asset quality, capital, and liquidity Results of Operations Net income for Q1 2025 decreased to $21.1 million due to lower net interest income, partially offset by a significant increase in noninterest income and a slight decrease in noninterest expense Key Performance Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $21.1M | $25.9M | | Diluted EPS | $0.17 | $0.21 | | Net Interest Income | $100.8M | $115.0M | | Net Interest Margin | 2.54% | 2.55% | | Provision for Credit Losses | $4.8M | $2.6M | | Noninterest Income | $15.7M | $8.3M | | Noninterest Expense | $83.9M | $84.8M | - The decrease in net interest income was primarily driven by a lower average balance of interest-earning cash and lower yields on loans, reflecting benchmark interest rate cuts in the second half of 2024202 - Noninterest income saw a significant increase, mainly due to $3.1 million in net gains on sales of SBA loans, a practice resumed in Q2 2024, and a $0.5 million increase in swap fees219220221 - Noninterest expense decreased, largely due to lower earned interest credit expense ($2.7 million decrease) and the absence of the prior year's $1.0 million FDIC special assessment, partially offset by a $1.3 million increase in merger-related costs224 Financial Condition As of March 31, 2025, total assets remained stable at $17.07 billion, with decreased loans and increased deposits, while asset quality improved and stockholders' equity rose to $2.16 billion Loan Portfolio Composition (in billions) | Loan Type | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Commercial real estate (CRE) | $8.38 | $8.53 | | Commercial and industrial (C&I) | $3.76 | $3.97 | | Residential mortgage | $1.16 | $1.08 | | Total Loans Receivable | $13.34 | $13.62 | Asset Quality Metrics | Metric | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Nonperforming Assets | $83.9M | $90.8M | | Nonperforming Assets / Total Assets | 0.49% | 0.53% | | Allowance for Credit Losses (ACL) | $147.4M | $150.5M | | ACL / Loans Receivable | 1.11% | 1.11% | - Total deposits increased by $160.8 million to $14.49 billion, with growth in customer deposits offsetting planned reductions in brokered deposits261 - Stockholders' equity increased by $25.5 million, primarily due to net income and a decrease in accumulated other comprehensive loss277 Liquidity and Capital Resources The Company maintained strong liquidity with $8.41 billion in available sources and remained well-capitalized under regulatory standards, with $35.3 million remaining for stock repurchases - Total available liquidity sources stood at $8.41 billion as of March 31, 2025, with an available borrowing capacity of $5.84 billion from the FHLB and FRB284 Bank of Hope Capital Ratios (March 31, 2025) | Ratio | Actual | Required to be Well-Capitalized | | :--- | :--- | :--- | | Common Equity Tier 1 Capital | 13.80% | 6.50% | | Tier 1 Capital | 13.80% | 8.00% | | Total Capital | 14.85% | 10.00% | | Leverage Capital | 11.73% | 5.00% | - The Company's stock repurchase program, approved in January 2022, had $35.3 million remaining available for repurchases as of March 31, 2025278 Quantitative and Qualitative Disclosures About Market Risk The Company manages interest rate risk, with sensitivity analysis showing NII and EVE changes under various rate scenarios, influenced by swap terminations and funding mix shifts Net Interest Income (NII) Sensitivity (12-Month Ramp) | Interest Rate Change (bps) | -300 | -200 | -100 | +100 | +200 | +300 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | NII % Change (Mar 31, 2025) | (6.6)% | (4.5)% | (2.3)% | 2.5% | 4.8% | 6.8% | Economic Value of Equity (EVE) Sensitivity (Immediate Shock) | Interest Rate Change (bps) | -300 | -200 | -100 | +100 | +200 | +300 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | EVE % Change (Mar 31, 2025) | 3.7% | 4.5% | 3.0% | (3.8)% | (8.3)% | (13.6)% | - Changes in the interest rate sensitivity profile compared to the prior year are attributed to the termination of the receive-fixed swap portfolio and a shift in funding mix, including growth in time deposits294296 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025299 - No material changes to the internal control over financial reporting occurred during the first quarter of 2025300 PART II Legal Proceedings The Company is involved in various legal claims with accrued loss contingencies of approximately $305,000, which management does not expect to have a material adverse effect - Accrued loss contingencies for legal claims were approximately $305,000 at March 31, 2025303 Risk Factors No material changes to the risk factors previously disclosed in the Company's 2024 Annual Report on Form 10-K were reported - No material changes to risk factors from the 2024 Form 10-K were reported304 Unregistered Sales of Equity Securities and Use of Proceeds The Company had no unregistered sales of equity securities or repurchase activity in Q1 2025, with $35.3 million remaining available under the stock repurchase program - The Company did not repurchase any shares of its common stock during the three months ended March 31, 2025307 - As of March 31, 2025, $35.3 million remained available for future repurchases under the existing stock repurchase program307 Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading plan in Q1 2025311