Hope Bancorp(HOPE) - 2025 Q2 - Quarterly Results

Company Overview and Highlights Hope Bancorp reported a net loss in Q2 2025 due to significant items, but saw growth in net interest income and expanded its market presence through acquisition Second Quarter 2025 Financial Highlights Hope Bancorp recorded a $27.9 million net loss in Q2 2025, or $0.22 diluted EPS, driven by significant items, but adjusted net income was $24.5 million, or $0.19 diluted EPS Financial Performance Summary | Metric | Q2 2025 (GAAP) | Q2 2025 (Adjusted) | Q1 2025 (GAAP) | Q1 2025 (Adjusted) | | :--------------------- | :----------------------- | :------------------------------- | :----------------------- | :------------------------------- | | Net Income / (Loss) | $(27.9) million USD | $24.5 million USD | $21.1 million USD | $22.9 million USD | | Diluted EPS / (Loss) | $(0.22) | $0.19 | $0.17 | $0.19 | - Significant items totaled $52.4 million (after-tax), including net loss on securities sales, M&A-related expenses, and a one-time impact from California tax law changes[3] CEO Commentary CEO Kevin S. Kim highlighted Q2 2025 as a milestone with the successful Territorial Bancorp acquisition, driving net interest income growth and net interest margin expansion - Completed the acquisition of Territorial Bancorp Inc., expanding operations into the Hawaii market[4] Key Performance Indicators | Metric | Q2 2025 QoQ Change | | :----------------- | :--------------------- | | Net Interest Income | Increased 17% | | Net Interest Margin | Expanded 15 bps | | Adjusted Net Income | Increased 7% | - Strategically sold a portion of the legacy investment securities portfolio, projected to increase annual interest income by approximately $12 million to enhance future profitability[5] About Hope Bancorp, Inc. Hope Bancorp, Inc., the holding company for Bank of Hope, is the largest regional Korean-American bank in the U.S., with $18.55 billion in total assets as of June 30, 2025 - Total assets of $18.55 billion as of June 30, 2025[31] - Became the largest regional bank serving diverse multicultural customers across the U.S. mainland and Hawaii through the acquisition of Territorial Savings[31] - Operates 46 Bank of Hope full-service branches and 29 Territorial Savings branches, along with loan production offices across the U.S[31] Operating Results for the 2025 Second Quarter Hope Bancorp's Q2 2025 operating results show significant growth in net interest income and margin, alongside impacts from acquisition-related expenses and tax law changes Net interest income and net interest margin Net interest income increased 17% to $117.5 million in Q2 2025, with net interest margin expanding 15 basis points to 2.69%, driven by loan growth and lower deposit costs Net Interest Income and Margin Trends | Metric | Q2 2025 | Q1 2025 | QoQ Change | | :----------------- | :------------- | :------------- | :------- | | Net Interest Income | $117.5 million USD | $100.8 million USD | Increased 17% | | Net Interest Margin | 2.69% | 2.54% | Expanded 15 bps | | Average Loan Growth | 7% | - | - | | Average Cost of Interest-Bearing Deposits | 3.77% | 4.14% | Decreased 37 bps | Noninterest income Noninterest income was negative $23.0 million in Q2 2025 due to a $38.9 million net loss on securities sales, but adjusted noninterest income remained stable at $15.9 million Noninterest Income Breakdown | Metric | Q2 2025 | Q1 2025 | QoQ Change | | :--------------------- | :------------- | :------------- | :------- | | Noninterest Income (GAAP) | $(23.0) million USD | $15.7 million USD | N/A | | Net Loss on Securities Sales | $(38.9) million USD | $0 million USD | N/A | | Noninterest Income (Adjusted) | $15.9 million USD | $15.7 million USD | Increased | | Net Gains on SBA Loan Sales | $4.0 million USD | $3.1 million USD | Increased 28% | Noninterest expense Total noninterest expense was $109.5 million in Q2 2025, with adjusted expenses rising to $92.2 million due to the Territorial acquisition, while the adjusted efficiency ratio improved to 69.1% Noninterest Expense and Efficiency | Metric | Q2 2025 (GAAP) | Q2 2025 (Adjusted) | Q1 2025 (GAAP) | Q1 2025 (Adjusted) | | :--------------------- | :----------------------- | :------------------------------- | :----------------------- | :------------------------------- | | Noninterest Expense | $109.5 million USD | $92.2 million USD | $83.9 million USD | $81.3 million USD | | Efficiency Ratio (Adjusted) | 69.1% | - | 69.8% | - | - The quarter-over-quarter increase in noninterest expense primarily reflects the integration of Territorial's operations[10] Income tax provision (benefit) and tax rate Hope Bancorp recognized a $2.0 million income tax benefit in Q2 2025 due to GAAP net loss, with the effective tax rate (adjusted) at 20.1%, down from 24.2% in Q1 Income Tax and Effective Tax Rate | Metric | Q2 2025 (GAAP) | Q2 2025 (Adjusted) | Q1 2025 (GAAP) | | :--------------------- | :----------------------- | :------------------------------- | :----------------------- | | Income Tax Provision (Benefit) | $(2.0) million USD | - | $6.7 million USD | | Effective Tax Rate | 6.7% | 20.1% | 24.2% | - California tax law changes resulted in a $4.9 million deferred tax asset revaluation, expected to reduce the company's ongoing effective tax rate by approximately 1%[10] Balance Sheet Summary Hope Bancorp's balance sheet as of June 30, 2025, reflects growth in loans and deposits driven by the Territorial acquisition, alongside strategic adjustments in investment securities and reduced borrowings Cash and investment securities Cash and due from banks decreased to $689.7 million, while investment securities increased 9% to $2.27 billion as of June 30, 2025, following the Territorial acquisition and portfolio reallocation Cash and Investment Securities Overview | Metric | June 30, 2025 | March 31, 2025 | QoQ Change | | :----------------- | :------------- | :------------- | :------- | | Cash and Due from Banks | $689.7 million USD | $733.5 million USD | Decreased (6)% | | Investment Securities | $2.27 billion USD | $2.09 billion USD | Increased 9% | - Sold $417.9 million of legacy AFS investment securities with an average weighted book yield of 2.33%, and reinvested proceeds into higher-yielding securities with an average current market yield of 5.42%[13] Loans Total loans (excluding held for sale) grew 8% to $14.43 billion as of June 30, 2025, with the Territorial acquisition contributing $1.07 billion and residential mortgage loans increasing significantly Loan Growth and Composition | Metric | June 30, 2025 | March 31, 2025 | QoQ Change | | :--------------------- | :------------- | :------------- | :------- | | Total Loans (excluding loans held for sale) | $14.43 billion USD | $13.34 billion USD | Increased 8% | | Territorial Acquisition Loan Contribution | $1.07 billion USD | - | - | | Residential Mortgage and Other Loans | Increased 96% | - | - | | Residential Mortgage Loan % of Total | 16% | 9% | Increased 7% | Loan Portfolio Composition (June 30, 2025) | Loan Type | Balance (in thousands USD) | Percentage | | :----------------- | :-------------- | :--- | | Commercial Real Estate (CRE) Loans | $8,385,764 | 58.0% | | Commercial and Industrial (C&I) Loans | $3,725,295 | 25.8% | | Residential Mortgage and Other | $2,323,728 | 16.1% | | Total Loans | $14,434,787 | 99.9% | Deposits Total deposits increased 10% to $15.94 billion as of June 30, 2025, largely due to the Territorial acquisition, while brokered deposits decreased 19% to $797.1 million, representing 5% of total deposits Deposit Trends and Composition | Metric | June 30, 2025 | March 31, 2025 | QoQ Change | | :----------------- | :------------- | :------------- | :------- | | Total Deposits | $15.94 billion USD | $14.49 billion USD | Increased 10% | | Territorial Acquisition Deposit Contribution | $1.67 billion USD | - | - | | Brokered Deposits | $797.1 million USD | $980.3 million USD | Decreased 19% | | Brokered Deposits % of Total Deposits | 5% | 7% | Decreased 2% | Deposit Portfolio Composition (June 30, 2025) | Deposit Type | Balance (in thousands USD) | Percentage | | :--------------------- | :-------------- | :--- | | Noninterest-Bearing Demand Deposits | $3,485,502 | 21.9% | | Money Market, Interest-Bearing Demand and Savings Deposits | $6,102,999 | 38.3% | | Time Deposits | $6,354,854 | 39.8% | | Total Deposits | $15,943,355 | 100.0% | Borrowings FHLB and FRB borrowings decreased significantly to $29.8 million as of June 30, 2025, from $100.0 million in Q1, reflecting repayment of maturing obligations and post-acquisition adjustments Borrowings Overview | Metric | June 30, 2025 | March 31, 2025 | QoQ Change | | :--------------------- | :------------- | :------------- | :------- | | FHLB and FRB Borrowings | $29.8 million USD | $100.0 million USD | Decreased (70)% | Credit Quality and Allowance for Credit Losses Hope Bancorp's credit quality saw a reduction in criticized loans but an increase in nonperforming assets due to a specific CRE loan, with net charge-offs rising and allowance coverage slightly decreasing post-acquisition Criticized loans Criticized loans decreased by $34.0 million (8%) to $414.7 million as of June 30, 2025, with special mention loans declining 26% quarter-over-quarter, improving the criticized loans to total loans ratio to 2.87% Criticized Loans Performance | Metric | June 30, 2025 | March 31, 2025 | QoQ Change | | :----------------- | :------------- | :------------- | :------- | | Criticized Loans | $414.7 million USD | $448.7 million USD | Decreased (8)% | | Special Mention Loans | Decreased 26% | - | - | | Criticized Loans / Total Loans Ratio | 2.87% | 3.36% | Improved | Nonperforming assets Nonperforming assets increased to $112.9 million, or 0.61% of total assets, as of June 30, 2025, primarily due to the migration of one commercial real estate loan Nonperforming Assets Overview | Metric | June 30, 2025 | March 31, 2025 | QoQ Change | | :----------------- | :------------- | :------------- | :------- | | Nonperforming Assets | $112.9 million USD | $83.9 million USD | Increased | | Nonperforming Assets / Total Assets Ratio | 0.61% | 0.49% | Increased | - The increase in nonperforming assets was primarily driven by the migration of one commercial real estate loan[19] Net charge offs Net charge-offs rose to $12.0 million in Q2 2025, representing an annualized 0.33% of average loans, up from $8.3 million (0.25% annualized) in the prior quarter Net Charge-offs Performance | Metric | Q2 2025 | Q1 2025 | QoQ Change | | :--------------------- | :------------- | :------------- | :------- | | Net Charge-offs | $12.0 million USD | $8.3 million USD | Increased | | Net Charge-offs / Average Loans (Annualized) | 0.33% | 0.25% | Increased | Allowance for credit losses Total allowance for credit losses was $149.5 million as of June 30, 2025, with the coverage ratio decreasing to 1.04% of total loans, reflecting the impact of the Territorial acquisition Allowance for Credit Losses | Metric | June 30, 2025 | March 31, 2025 | QoQ Change | | :--------------------- | :------------- | :------------- | :------- | | Allowance for Credit Losses | $149.5 million USD | $147.4 million USD | Increased | | Allowance Coverage / Loans Receivable | 1.04% | 1.11% | Decreased | - The decrease in allowance coverage primarily reflects the impact of high-quality loans acquired through the Territorial acquisition[21] Provision for credit losses Provision for credit losses was $15.0 million in Q2 2025, including $4.5 million in M&A-related provisions, with the adjusted provision rising to $10.5 million due to increased net charge-offs and unfunded commitments Provision for Credit Losses | Metric | Q2 2025 (GAAP) | Q2 2025 (Adjusted) | Q1 2025 (GAAP) | | :--------------------- | :----------------------- | :------------------------------- | :----------------------- | | Provision for Credit Losses | $15.0 million USD | $10.5 million USD | $4.8 million USD | | M&A-Related Provision Expense | $4.5 million USD | - | - | - The increase in adjusted provision primarily reflects higher net charge-offs and an increase in the reserve for unfunded loan commitments[23] Capital Hope Bancorp and Bank of Hope maintained capital ratios above all 'well-capitalized' regulatory requirements as of June 30, 2025, despite some quarter-over-quarter adjustments due to the Territorial acquisition Capital Ratios Both the company and the bank exceeded all 'well-capitalized' regulatory capital requirements as of June 30, 2025, with quarter-over-quarter changes reflecting the Territorial acquisition Hope Bancorp Capital Ratios (June 30, 2025) | Capital Ratio | June 30, 2025 | March 31, 2025 | 'Well-Capitalized' Minimum Requirement | | :--------------------- | :------------- | :------------- | :------------------- | | Common Equity Tier 1 Capital Ratio | 12.06% | 13.28% | 6.50% | | Tier 1 Capital Ratio | 12.76% | 14.02% | 8.00% | | Total Capital Ratio | 13.76% | 15.06% | 10.00% | | Leverage Ratio | 10.57% | 11.92% | 5.00% | - All capital ratios exceeded regulatory requirements, meeting 'well-capitalized' thresholds[25] Stockholders' Equity and Tangible Common Equity Total stockholders' equity increased 3% to $2.22 billion as of June 30, 2025, while tangible common equity (TCE) per share and TCE ratio decreased, reflecting the Territorial acquisition Stockholders' Equity and TCE | Metric | June 30, 2025 | March 31, 2025 | QoQ Change | | :--------------------- | :------------- | :------------- | :------- | | Total Stockholders' Equity | $2.22 billion USD | $2.16 billion USD | Increased 3% | | TCE per Share | $13.26 | $13.99 | Decreased | | TCE Ratio | 9.43% | 10.20% | Decreased | - Issued 6,976,754 shares of common stock valued at $73.3 million for the Territorial acquisition[27] Additional Information This section provides details on the upcoming investor conference call, clarifies the use of non-GAAP financial metrics, and outlines forward-looking statements and contact information Investor Conference Call Hope Bancorp announced an investor conference call on July 22, 2025, to review Q2 2025 unaudited financial results, accessible via phone or the company's investor relations website - The investor conference call is scheduled for July 22, 2025, at 9:30 AM Pacific Time / 12:30 PM Eastern Time[28] - Conference presentation and webcast are available on the Hope Bancorp Investor Relations website[28] Non-GAAP Financial Metrics This release includes non-GAAP financial metrics such as adjusted net income, EPS, noninterest income/expense, and TCE ratios, which management believes provide meaningful supplemental information, with GAAP reconciliations provided - Various non-GAAP financial metrics are used, including adjusted net income, EPS, noninterest income, noninterest expense, provision for credit losses, efficiency ratio, effective tax rate, PPNR, ROA, ROE, ROTCE, TCE per share, and TCE ratio[30] - Management believes these non-GAAP metrics provide meaningful supplemental information, and quantitative reconciliations to GAAP measures are provided in the accompanying financial information[30] Forward-Looking Statements This press release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially, including integration challenges, economic conditions, and regulatory risks - Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from expectations[33] - Key risks include difficulties integrating Territorial Bancorp, transaction costs, deposit attrition, operating costs, customer retention, deteriorating economic conditions, interest rate risk, liquidity risk, credit loss risk, regulatory risk, and natural disasters[33] Contacts Contact information for investor relations is provided, including Julianna Balicka (EVP & CFO) and Angie Yang (SVP, Director of Investor Relations), with their respective phone numbers and email addresses - Investor Relations contacts: Julianna Balicka (EVP & Chief Financial Officer) and Angie Yang (SVP, Director of Investor Relations)[34]