Hope Bancorp Reports 2021 Second Quarter Financial Results

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Price: $11.07 --0%

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Dividend Yield: 5.3%
EPS Growth %: -21.2%

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LOS ANGELES--(BUSINESS WIRE)-- Hope Bancorp, Inc. (the “Company”) (NASDAQ: HOPE), the holding company of Bank of Hope (the “Bank”), today reported unaudited financial results for its second quarter and six months ended June 30, 2021.

For the three months ended June 30, 2021, net income increased 23% to $53.8 million, or $0.43 per diluted common share, from $43.7 million, or $0.35 per diluted common share, in the preceding first quarter and increased 101% from $26.8 million, or $0.22 per diluted common share, in the year-ago second quarter.

“Second quarter results underscore the sound management of our operations as the economy gradually recovers from the impact of the COVID-19 pandemic,” said Kevin S. Kim, Chairman, President and Chief Executive Officer of Hope Bancorp, Inc. “The composition of our deposits continued to improve with meaningful increases in our lower-cost deposit categories, and our cost of interest bearing deposits declined another 8 basis points quarter-over-quarter. Together with higher average yield on loans, this supported another quarter of net interest margin expansion. After five quarters of significant reserve build under the CECL methodology, we recorded a negative provision for credit losses of $7.0 million driven largely by the improved macroeconomic factors. We also sold $30 million of SBA 7(a) loans given the near record-high premiums available in the secondary markets, and recorded a gain on sale of $2.4 million. All of these factors contributed to a 23% quarter-over-quarter increase in net income of $53.8 million for the 2021 second quarter.

“Loan originations for the quarter were also strong at a record high $894 million and reflected a 61% increase from the preceding first quarter when excluding the second round of PPP originations. However, a considerable decrease in warehouse line utilizations reflecting industry trends, a strategic sale of $119 million of higher-risk hotel/motel loans, PPP loan forgiveness of $164 million, and residential mortgage and SBA 7(a) loan sales contributed to a 2% quarter-over-quarter decrease in loans receivable. While some of these headwinds to net loan growth are expected to persist near-term, we have a robust loan pipeline supported by strong macroeconomic forecasts, and we believe we are well positioned to deliver enhanced profitability for 2021,” said Kim.

Q2 2021 Highlights

Net interest income before provision for credit losses increased 3% quarter-over-quarter to $126.6 million.
Net interest margin expanded 5 basis points quarter-over-quarter, largely reflecting an increase in the average yield on loans and lower cost of deposits.
Noninterest bearing demand deposits increased 4% quarter-over-quarter and accounted for 38% of total deposits.
Cost of interest bearing deposits decreased 8 basis points and total cost of deposits decreased 6 basis points quarter-over-quarter marking the seventh consecutive quarter of declining deposit costs.
Company recorded a negative provision for credit losses of $7.0 million.
Net income increased 23% quarter-over-quarter and totaled $53.8 million, or $0.43 per diluted common share.
Pre-tax pre-provision income increased 6% quarter-over-quarter to $64.5 million.
Return on average assets increased to 1.25% from 1.02% in Q1 2021, and return on average equity increased to 10.41% from 8.53%.
Loan originations increased to a record high $894.1 million from $847.1 million in the first quarter of 2021.
Loans receivable decreased 2% to $13.42 billion, reflecting decreases in warehouse line utilizations, the sales of $30.0 million of SBA loans, $42.6 million of residential mortgage loans and an aggregate $119.3 million of hotel/motel loans, along with payoffs and pay downs.

Financial Highlights

(dollars in thousands, except per share data) (unaudited)	At or for the Three Months Ended
	6/30/2021			3/31/2021			6/30/2020
Net income	$	53,763		$	43,687		$	26,753
Diluted earnings per share	$	0.43		$	0.35		$	0.22
Net interest income before provision (credit) for credit losses	$	126,577		$	122,579		$	109,814
Net interest margin		3.11	%		3.06	%		2.79	%
Noninterest income	$	11,076		$	8,804		$	11,240
Noninterest expense	$	73,123		$	70,431		$	67,030
Net loans receivable	$	13,234,849		$	13,494,686		$	12,710,063
Deposits	$	14,726,230		$	14,301,269		$	14,123,532
Total cost of deposits		0.30	%		0.36	%		0.87	%
Nonaccrual loans(1)	$	111,008		$	109,858		$	82,137
Nonperforming loans to loans receivable(1)		1.24	%		1.11	%		0.98	%
ACL to loans receivable		1.41	%		1.52	%		1.26	%
ACL to nonaccrual loans(1)		170.67	%		189.28	%		196.95	%
ACL to nonperforming assets(1)		103.11	%		121.94	%		109.62	%
Provision (credit) for credit losses	$	(7,000	)	$	3,300		$	17,500
Net charge offs	$	11,491		$	2,098		$	652
Return on average assets (“ROA”)		1.25	%		1.02	%		0.64	%
Return on average equity (“ROE”)		10.41	%		8.53	%		5.31	%
Return on average tangible common equity (“ROTCE”)(2)		13.50	%		11.11	%		6.94	%
Noninterest expense / average assets		1.70	%		1.65	%		1.60	%
Efficiency ratio		53.12	%		53.61	%		55.37	%

(1)		Excludes delinquent SBA loans that are guaranteed and currently in liquidation.
(2)		Return on average tangible common equity is a non-GAAP financial measure. A reconciliation of the Company’s return on average tangible common equity is provided in the accompanying financial information on Table Page 10.

Operating Results for the 2021 Second Quarter

Net interest income before the negative provision for credit losses for the 2021 second quarter increased 3% to $126.6 million from $122.6 million in the 2021 first quarter and increased 15% from $109.8 million in the 2020 second quarter. The Company attributed the increase in net interest income primarily to meaningful reductions in interest expense due to lower trending cost of deposits and higher interest income on average loans.

The net interest margin for the 2021 second quarter increased 5 basis points to 3.11% from 3.06% in the preceding 2021 first quarter, reflecting the benefits of lower deposit costs and higher average yield on loans. The net interest margin in the prior-year second quarter was 2.79%.

The weighted average yield on loans for the 2021 second quarter increased 4 basis points to 3.98% from 3.94% in the 2021 first quarter, reflecting the accelerated recognition of net fees due to PPP loan forgiveness. For the 2020 second quarter, the weighted average yield on loans was 4.23%.

The weighted average cost of deposits for the 2021 second quarter decreased for the seventh consecutive quarter to 0.30%, representing a 6 basis point decrease from 0.36% for the 2021 first quarter and a 57 basis point decrease from 0.87% for the 2020 second quarter. The Company attributed the significant improvements in the weighted average cost of deposits to a continuing shift in its deposit mix to lower-cost core deposits and the ongoing downward repricing of interest bearing deposits. The cost of interest bearing deposits was 0.48%, 0.56% and 1.17% for the quarters ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.

Noninterest income for the 2021 second quarter increased to $11.1 million from $8.8 million for the 2021 first quarter. In response to the significantly increased premiums available in the secondary market for SBA 7(a) loans, the Company sold $30.0 million of the guaranteed portfolio of its SBA 7(a) loans during the 2021 second quarter and recorded $2.4 million in net gains on sales of SBA loans, versus none in the preceding first quarter. This was partially offset by a reduction in net gains on sales of other loans, representing residential mortgage loans of $1.0 million for the 2021 second quarter, compared with $2.1 million in the preceding first quarter. Noninterest income in the year-ago second quarter totaled $11.2 million.

Noninterest expense for the 2021 second quarter increased to $73.1 million from $70.4 million in the preceding first quarter and $67.0 million in the year-ago second quarter.

Salaries and employee benefits expense for the 2021 second quarter increased to $42.3 million from $41.2 million in the preceding first quarter, largely reflecting annual merit increases effective at the beginning of the second quarter.

Professional fees for the three months ended June 30, 2021 increased $1.5 million quarter-over-quarter reflecting higher litigation expenses related to existing cases. The Company recorded a one-time $2.1 million impairment during the 2021 second quarter related to the disposition of a licensed software platform. These factors which contributed to higher noninterest expense for the 2021 second quarter were partially offset by a $2.2 million reduction in credit related expenses quarter-over-quarter.

The Company’s efficiency ratio for the 2021 second quarter improved to 53.12% from 53.61% for the preceding first quarter and from 55.37% for the year-ago second quarter. Noninterest expense as a percentage of average assets increased to 1.70% for the 2021 second quarter from 1.65% for the 2021 first quarter and from 1.60% for the 2020 second quarter.

The effective tax rate for the 2021 second quarter increased to 24.8% from 24.2% in the preceding quarter, reflecting the Company’s updated projection for increased annual pretax income than previously budgeted. In the year-ago quarter, the effective tax rate was 26.8%.

Balance Sheet Summary

New loan originations funded during the 2021 second quarter increased to $894.1 million from $847.1 million in the preceding first quarter and $832.0 million in the 2020 second quarter. Following are the components of new loan production for the quarters ended June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)	For the Three Months Ended
	6/30/2021		3/31/2021		6/30/2020
Commercial real estate	$	454,857	$	277,704	$	213,246
Commercial		288,726		156,622		58,458
SBA		77,652		36,802		5,901
SBA PPP		19,816		304,727		480,141
Consumer		275		1,473		1,920
Residential mortgage		52,766		69,784		72,343
Total new loan originations	$	894,092	$	847,112	$	832,009

During the 2021 second quarter, the Company acquired $95.6 million of 30-year fixed rate residential mortgage loans. In addition to the sale of $42.6 million in residential mortgage loans and $30.0 million of SBA 7(a) loans during the 2021 second quarter, the Company completed an aggregate $119.3 million in sales of loans from its hotel/motel portfolio that were viewed to be higher risk requiring a longer recovery period from the impact of the COVID-19 pandemic.

Altogether with aggregate payoffs and pay downs, first round PPP loan forgiveness of $164.5 million and a $231.0 million quarter-over-quarter decrease in warehouse line utilizations, loans receivable at June 30, 2021 decreased 2% to $13.42 billion from $13.70 billion at March 31, 2021. Loans receivable at June 30, 2020 amounted to $12.87 billion.

Total deposits at June 30, 2021 increased 3% to $14.73 billion from $14.30 billion at March 31, 2021 and increased 4% from $14.12 billion at June 30, 2020. Quarter-over-quarter, noninterest bearing demand deposits as of June 30, 2021 increased 4% and money market and other interest bearing demand deposit balances increased 16%, while time deposits decreased 16%. On a year-over-year basis, noninterest bearing demand deposits as of June 30, 2021 increased 40% and money market and NOW account balances increased 20%, while time deposits decreased 40%.

Following is the deposit composition as of June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)	6/30/2021		3/31/2021		% change		6/30/2020		% change
Noninterest bearing demand deposits	$	5,638,115	$	5,427,174	4	%	$	4,036,383	40	%
Money market and other	5,786,697		5,009,419		16	%	4,831,679		20	%
Saving deposits	308,651		305,326		1	%	296,614		4	%
Time deposits	2,992,767		3,559,350		(16	)%	4,958,856		(40	)%
Total deposit balances	$	14,726,230	$	14,301,269	3	%	$	14,123,532	4	%

Following is the deposit composition as a percentage of total deposits and a breakdown of cost of deposits as of and for the quarters ended June 30, 2021, March 31, 2021 and June 30, 2020:

	Deposit Breakdown						Cost of Deposits
(unaudited)	6/30/2021		3/31/2021		6/30/2020		Q2 2021		Q1 2021		Q2 2020
Noninterest bearing demand deposits	38.3	%	38.0	%	28.6	%	—	%	—	%	—	%
Money market and other	39.2	%	35.0	%	34.2	%	0.43	%	0.42	%	0.62	%
Saving deposits	2.1	%	2.1	%	2.1	%	1.15	%	1.17	%	1.22	%
Time deposits	20.4	%	24.9	%	35.1	%	0.49	%	0.69	%	1.71	%
Total deposit balances	100.0	%	100.0	%	100.0	%	0.30	%	0.36	%	0.87	%

Allowance for Credit Losses

For the 2021 second quarter, the Company recorded a negative provision for credit losses of $7.0 million compared with provision for credit losses of $3.3 million in the preceding first quarter and $17.5 million for the 2020 second quarter. The allowance release in the 2021 second quarter largely reflects improved macroeconomic forecasts, together with the reduction in its loan portfolio and the $119.3 million in sales from the hotel/motel portfolio.

Following is the allowance for credit losses and allowance coverage ratios as of June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)	6/30/2021			3/31/2021			6/30/2020
Allowance for credit losses	$	189,452		$	207,943		$	161,771
Allowance for credit loss/loans receivable		1.41	%		1.52	%		1.26	%
Allowance for credit losses/nonperforming loans		113.36	%		136.79	%		127.79	%

Credit Quality

Following are the components of nonperforming assets as of June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)	6/30/2021		3/31/2021		6/30/2020
Loans on nonaccrual status (1)	$	111,008	$	109,858	$	82,137
Delinquent loans 90 days or more on accrual status		4,759		384		430
Accruing troubled debt restructured loans		51,360		41,773		44,026
Total nonperforming loans		167,127		152,015		126,593
Other real estate owned		16,619		18,515		20,983
Total nonperforming assets	$	183,746	$	170,530	$	147,576

(1)

Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $23.6 million, $25.0 million and $30.3 million, at June 30, 2021, March 31, 2021 and June 30, 2020, respectively.

The increase in delinquent loans 90 days or more on accrual status as of June 30, 2021 largely reflects one loan which matured during the 2021 second quarter. This loan was renewed early in the third quarter of 2021 and is currently performing. The increase in accruing troubled debt restructured loans largely reflects maturity concessions for two credit relationships.

Following are the components of criticized loan balances as of June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)	6/30/2021		3/31/2021		6/30/2020
Special mention	$	294,559	$	280,974	$	127,149
Substandard		380,955		379,048		299,357
Doubtful/loss		—		—		11
Total criticized loans	$	675,514	$	660,022	$	427,517

The modest increase in special mention loans quarter-over-quarter primarily reflects the addition of two large credit relationships. The first is a hotel/motel relationship that was downgraded from the COVID-watch grade to Special Mention following the expiration of the modification. The second is a construction loan that is taking longer to stabilize following the completion of the project due to the pandemic-related environment.

Following are net charge offs and net charge offs to average loans receivable on an annualized basis for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020:

(dollars in thousands) (unaudited)	For the Three Months Ended
	6/30/2021			3/31/2021			6/30/2020
Net charge offs	$	11,491		$	2,098		$	652
Net charge offs/average loans receivable (annualized)		0.35	%		0.06	%		0.02	%

Net charge offs for the 2021 second quarter includes charge offs of $11.8 million, all of which was previously reserved, from the sale of $119.3 million in hotel/motel loans during the 2021 second quarter.

Capital

At June 30, 2021, the Company and the Bank continued to exceed all regulatory capital requirements to be classified as a “well-capitalized” financial institution. Following are capital ratios for the Company as of June 30, 2021, March 31, 2021 and June 30, 2020:

Hope Bancorp, Inc. (unaudited)	6/30/2021	3/31/2021	6/30/2020	Minimum Guideline for “Well-Capitalized” Bank
Common Equity Tier 1 Capital	11.32%	11.08%	11.50%	6.50%
Tier 1 Leverage Ratio	10.34%	10.15%	10.08%	5.00%
Tier 1 Risk-Based Ratio	12.02%	11.78%	12.24%	8.00%
Total Risk-Based Ratio	13.16%	13.03%	13.23%	10.00%

Following are tangible common equity (“TCE”) per share and TCE as a percentage of tangible assets as of June 30, 2021, March 31, 2021 and June 30, 2020:

(unaudited)	6/30/2021	3/31/2021	6/30/2020
Tangible common equity per share (1)	$13.10	$12.73	$12.62
Tangible common equity to tangible assets (2)	9.53%	9.40%	9.32%

(1)		Tangible common equity represents common equity less goodwill and net other intangible assets. Tangible common equity per share represents tangible common equity divided by the number of shares issued and outstanding. Both tangible common equity and tangible common equity per share are non-GAAP financial measures. A reconciliation of the Company’s total stockholders’ equity to tangible common equity is provided in the accompanying financial information on Table Page 10.
(2)		Tangible assets represent total assets less goodwill and net other intangible assets. Tangible common equity to tangible assets is the ratio of tangible common equity over tangible assets. Tangible common equity to tangible assets is a non-GAAP financial measure. A reconciliation of the Company’s total assets to tangible assets is provided in the accompanying financial information on Table Page 10.

Investor Conference Call

The Company previously announced that it will host an investor conference call on Wednesday, July 21, 2021 at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review financial results for its second quarter ended June 30, 2021. Investors and analysts are invited to access the conference call by dialing 866-235-9917 (domestic) or 412-902-4103 (international) and asking for the “Hope Bancorp Call.” A presentation to accompany the earnings call will be available at the Investor Relations section of Hope Bancorp’s website at www.ir-hopebancorp.com. Other interested parties are invited to listen to a live webcast of the call available at the Investor Relations section of Hope Bancorp’s website. After the live webcast, a replay will remain available at the Investor Relations section of Hope Bancorp’s website for one year. A telephonic replay of the call will be available at 877-344-7529 (domestic) or 412-317-0088 (international) for one week through July 28, 2021, replay access code 10158798.

About Hope Bancorp, Inc.

Hope Bancorp, Inc. is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $17.47 billion in total assets as of June 30, 2021. Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 53 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia and Alabama. The Bank also operates SBA loan production offices in Seattle, Denver, Dallas, Atlanta, Portland, Oregon, New York City, Northern California and Houston; commercial loan production offices in Northern California and Seattle; residential mortgage loan production offices in Southern California; and a representative office in Seoul, Korea. Bank of Hope specializes in core business banking products for small and medium-sized businesses, with an emphasis in commercial real estate and commercial lending, SBA lending and international trade financing. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender. For additional information, please go to bankofhope.com. By including the foregoing website address link, the Company does not intend to and shall not be deemed to incorporate by reference any material contained or accessible therein.

Forward-Looking Statements

Some statements in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company’s actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for credit losses, regulatory risks associated with current and future regulations; and the COVID-19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company’s most recent Annual Report on Form 10-K. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share data)

Assets:	6/30/2021			3/31/2021			% change		6/30/2020			% change
Cash and due from banks	$	836,957		$	376,666		122	%	$	1,468,949		(43	)%
Securities available for sale, at fair value	2,274,170			2,233,744			2	%	1,887,604			20	%
Federal Home Loan Bank (“FHLB”) stock and other investments	94,550			102,242			(8	)%	98,357			(4	)%
Loans held for sale, at the lower of cost or fair value	54,245			19,672			176	%	11,350			378	%
Loans receivable	13,424,301			13,702,629			(2	)%	12,871,834			4	%
Allowance for credit losses	(189,452		)	(207,943		)	(9	)%	(161,771		)	17	%
Net loans receivable	13,234,849			13,494,686			(2	)%	12,710,063			4	%
Accrued interest receivable	51,886			60,498			(14	)%	52,859			(2	)%
Premises and equipment, net	45,302			47,918			(5	)%	51,029			(11	)%
Bank owned life insurance	76,428			77,089			(1	)%	77,050			(1	)%
Goodwill	464,450			464,450			—	%	464,450			—	%
Servicing assets	11,566			12,084			(4	)%	14,164			(18	)%
Other intangible assets, net	8,689			9,198			(6	)%	10,770			(19	)%
Other assets	316,535			300,613			5	%	322,417			(2	)%
Total assets	$	17,469,627		$	17,198,860		2	%	$	17,169,062		2	%

Liabilities:
Deposits	$	14,726,230		$	14,301,269		3	%	$	14,123,532		4	%
FHLB advances	200,000			400,000			(50	)%	500,000			(60	)%
Convertible notes, net	215,739			215,504			—	%	201,987			7	%
Subordinated debentures	104,762			104,469			—	%	103,602			1	%
Accrued interest payable	4,946			8,611			(43	)%	26,093			(81	)%
Other liabilities	125,080			123,426			1	%	183,072			(32	)%
Total liabilities	$	15,376,757		$	15,153,279		1	%	$	15,138,286		2	%

Stockholders’ Equity:
Common stock, $0.001 par value	$	136		$	136		—	%	$	136		—	%
Capital surplus	1,418,135			1,417,137			—	%	1,430,757			(1	)%
Retained earnings	859,548			823,085			4	%	761,734			13	%
Treasury stock, at cost	(200,000		)	(200,000		)	—	%	(200,000		)	—	%
Accumulated other comprehensive gain, net	15,051			5,223			188	%	38,149			(61	)%
Total stockholders’ equity	2,092,870			2,045,581			2	%	2,030,776			3	%
Total liabilities and stockholders’ equity	$	17,469,627		$	17,198,860		2	%	$	17,169,062		2	%

Common stock shares - authorized	150,000,000			150,000,000					150,000,000
Common stock shares - outstanding	123,673,832			123,480,494					123,239,276
Treasury stock shares	12,661,581			12,661,581					12,661,581

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)

	Three Months Ended											Six Months Ended
	6/30/2021			3/31/2021		% change		6/30/2020		% change		6/30/2021			6/30/2020		% change

Interest and fees on loans	$	131,823		$	129,736	2	%	$	134,190	(2	)%	$	261,559		$	288,420	(9	)%
Interest on securities	7,713			7,915		(3	)%	9,891		(22	)%	15,628			20,500		(24	)%
Interest on federal funds sold and other investments	668			642		4	%	980		(32	)%	1,310			3,009		(56	)%
Total interest income	140,204			138,293		1	%	145,061		(3	)%	278,497			311,929		(11	)%

Interest on deposits	10,696			12,770		(16	)%	29,451		(64	)%	23,466			70,564		(67	)%
Interest on other borrowings and convertible notes	2,931			2,944		—	%	5,796		(49	)%	5,875			12,260		(52	)%
Total interest expense	13,627			15,714		(13	)%	35,247		(61	)%	29,341			82,824		(65	)%

Net interest income before provision (credit) for credit losses	126,577			122,579		3	%	109,814		15	%	249,156			229,105		9	%
Provision (credit) for credit losses	(7,000		)	3,300		N/A		17,500		N/A		(3,700		)	45,500		N/A
Net interest income after provision for credit losses	133,577			119,279		12	%	92,314		45	%	252,856			183,605		38	%

Service fees on deposit accounts	1,777			1,790		(1	)%	2,583		(31	)%	3,567			6,716		(47	)%
International service fees	795			841		(5	)%	667		19	%	1,636			1,456		12	%
Loan servicing fees, net	934			1,044		(11	)%	1,106		(16	)%	1,978			1,471		34	%
Wire transfer fees	923			844		9	%	820		13	%	1,767			1,818		(3	)%
Net gains on sales of SBA loans	2,375			—		100	%	—		100	%	2,375			—		100	%
Net gains on sales of other loans	1,028			2,096		(51	)%	1,678		(39	)%	3,124			3,533		(12	)%
Other income and fees	3,244			2,189		48	%	4,386		(26	)%	5,433			9,510		(43	)%
Total noninterest income	11,076			8,804		26	%	11,240		(1	)%	19,880			24,504		(19	)%

Salaries and employee benefits	42,309			41,216		3	%	38,850		9	%	83,525			81,352		3	%
Occupancy	7,067			6,967		1	%	7,043		—	%	14,034			14,453		(3	)%
Furniture and equipment	4,822			4,186		15	%	4,654		4	%	9,008			8,913		1	%
Advertising and marketing	2,097			1,625		29	%	1,315		59	%	3,722			2,988		25	%
Data processing and communications	2,411			2,737		(12	)%	2,274		6	%	5,148			4,905		5	%
Professional fees	4,395			2,903		51	%	1,510		191	%	7,298			4,810		52	%
FDIC assessment	1,284			1,255		2	%	1,652		(22	)%	2,539			3,211		(21	)%
Credit related expenses	43			2,218		(98	)%	1,361		(97	)%	2,261			3,023		(25	)%
OREO expense, net	298			281		6	%	1,338		(78	)%	579			2,181		(73	)%
Software impairment	2,146			—		100	%	—		100	%	2,146			—		100	%
Other	6,251			7,043		(11	)%	7,033		(11	)%	13,294			13,334		—	%
Total noninterest expense	73,123			70,431		4	%	67,030		9	%	143,554			139,170		3	%
Income before income taxes	71,530			57,652		24	%	36,524		96	%	129,182			68,939		87	%
Income tax provision	17,767			13,965		27	%	9,771		82	%	31,732			16,233		95	%
Net income	$	53,763		$	43,687	23	%	$	26,753	101	%	$	97,450		$	52,706	85	%

Earnings Per Common Share:
Basic	$	0.44		$	0.35			$	0.22			$	0.79		$	0.43
Diluted	$	0.43		$	0.35			$	0.22			$	0.78		$	0.42

Weighted Average Shares Outstanding:
Basic	123,592,695			123,324,745				123,200,127				123,459,461			123,747,727
Diluted	124,323,888			124,336,130				123,430,891				124,334,227			124,054,291

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)

	For the Three Months Ended (Annualized)									For the Six Months Ended (Annualized)
Profitability measures:	6/30/2021			3/31/2021			6/30/2020			6/30/2021			6/30/2020
ROA	1.25		%	1.02		%	0.64		%	1.14		%	0.65		%
ROE	10.41		%	8.53		%	5.31		%	9.48		%	5.21		%
ROTCE (1)	13.50		%	11.11		%	6.94		%	12.31		%	6.82		%
Net interest margin	3.11		%	3.06		%	2.79		%	3.09		%	3.04		%
Efficiency ratio	53.12		%	53.61		%	55.37		%	53.36		%	54.88		%
Noninterest expense / average assets	1.70		%	1.65		%	1.60		%	1.68		%	1.73		%

(1) Average tangible equity is calculated by subtracting average goodwill and average core deposit intangible assets from average stockholders’ equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position.


	Three Months Ended									Six Months Ended
Pre-tax acquisition accounting adjustments:	6/30/2021			3/31/2021			6/30/2020			6/30/2021			6/30/2020
Accretion on purchased non-impaired loans	$	366		$	705		$	658		$	1,071		$	1,717
Accretion on purchased credit deteriorated/purchased credit impaired loans	2,188			2,255			3,046			4,443			12,495
Amortization of premium on low income housing tax credits	(74		)	(73		)	(70		)	(147		)	(141		)
Accretion of discount on acquired subordinated debt	(293		)	(291		)	(284		)	(584		)	(567		)
Amortization of core deposit intangibles	(509		)	(509		)	(532		)	(1,018		)	(1,063		)
Total acquisition accounting adjustments	$	1,678		$	2,087		$	2,818		$	3,765		$	12,441

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

	Three Months Ended
	6/30/2021						3/31/2021						6/30/2020
			Interest		Annualized				Interest		Annualized				Interest		Annualized
	Average		Income/		Average		Average		Income/		Average		Average		Income/		Average
	Balance		Expense		Yield/Cost		Balance		Expense		Yield/Cost		Balance		Expense		Yield/Cost
INTEREST EARNING ASSETS:
Loans, including loans held for sale	$	13,293,591	$	131,823	3.98	%	$	13,346,264	$	129,736	3.94	%	$	12,755,088	$	134,190	4.23	%
Securities available for sale	2,253,135		7,713		1.37	%	2,267,409		7,915		1.42	%	1,750,156		9,891		2.27	%
FHLB stock and other investments	759,182		668		0.35	%	640,392		642		0.41	%	1,317,049		980		0.30	%
Total interest earning assets	$	16,305,908	$	140,204	3.45	%	$	16,254,065	$	138,293	3.45	%	$	15,822,293	$	145,061	3.69	%

INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing	$	5,484,047	$	5,909	0.43	%	$	5,256,579	$	5,490	0.42	%	$	4,903,786	$	7,563	0.62	%
Savings	308,530		887		1.15	%	301,184		870		1.17	%	284,050		862		1.22	%
Time deposits	3,222,457		3,900		0.49	%	3,767,109		6,410		0.69	%	4,954,446		21,026		1.71	%
Total interest bearing deposits	9,015,034		10,696		0.48	%	9,324,872		12,770		0.56	%	10,142,282		29,451		1.17	%
FHLB advances	202,198		631		1.25	%	215,889		642		1.21	%	593,407		2,238		1.52	%
Convertible notes, net	215,599		1,323		2.43	%	215,002		1,322		2.46	%	201,169		2,358		4.64	%
Subordinated debentures	100,701		977		3.84	%	100,392		980		3.90	%	99,534		1,200		4.77	%
Total interest bearing liabilities	$	9,533,532	$	13,627	0.57	%	$	9,856,155	$	15,714	0.65	%	$	11,036,392	$	35,247	1.28	%
Noninterest bearing demand deposits	5,445,457						5,052,532						3,510,783
Total funding liabilities/cost of funds	$	14,978,989			0.36	%	$	14,908,687			0.43	%	$	14,547,175			0.97	%
Net interest income/net interest spread			$	126,577	2.88	%			$	122,579	2.80	%			$	109,814	2.41	%
Net interest margin					3.11	%					3.06	%					2.79	%

Cost of deposits:
Noninterest bearing demand deposits	$	5,445,457	$	—	—	%	$	5,052,532	$	—	—	%	$	3,510,783	$	—	—	%
Interest bearing deposits	9,015,034		10,696		0.48	%	9,324,872		12,770		0.56	%	10,142,282		29,451		1.17	%
Total deposits	$	14,460,491	$	10,696	0.30	%	$	14,377,404	$	12,770	0.36	%	$	13,653,065	$	29,451	0.87	%

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

	Six Months Ended
	6/30/2021						6/30/2020
			Interest		Annualized				Interest		Annualized
	Average		Income/		Average		Average		Income/		Average
	Balance		Expense		Yield/Cost		Balance		Expense		Yield/Cost
INTEREST EARNING ASSETS:
Loans, including loans held for sale	$	13,319,782	$	261,559	3.96	%	$	12,507,468	$	288,420	4.64	%
Securities available for sale	2,260,233		15,628		1.39	%	1,731,094		20,500		2.38	%
FHLB stock and other investments	700,115		1,310		0.38	%	918,179		3,009		0.66	%
Total interest earning assets	$	16,280,130	$	278,497	3.45	%	$	15,156,741	$	311,929	4.14	%

INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing	$	5,370,941	$	11,399	0.43	%	$	4,554,096	$	22,443	0.99	%
Savings	304,877		1,757		1.16	%	279,063		1,670		1.20	%
Time deposits	3,493,278		10,310		0.60	%	4,927,425		46,451		1.90	%
Total interest bearing deposits	9,169,096		23,466		0.52	%	9,760,584		70,564		1.45	%
FHLB advances	209,006		$	1,273	1.23	%	594,148		4,885		1.65	%
Convertible notes, net	215,302		2,645		2.44	%	200,565		4,704		4.64	%
Subordinated debentures	100,547		1,957		3.87	%	99,393		2,671		5.32	%
Total interest bearing liabilities	$	9,693,951	$	29,341	0.61	%	$	10,654,690	$	82,824	1.56	%
Noninterest bearing demand deposits	5,250,080						3,236,960
Total funding liabilities/cost of funds	$	14,944,031			0.40	%	$	13,891,650			1.20	%
Net interest income/net interest spread			$	249,156	2.84	%			$	229,105	2.58	%
Net interest margin					3.09	%					3.04	%

Cost of deposits:
Noninterest bearing demand deposits	$	5,250,080	$	—	—	%	$	3,236,960	$	—	—	%
Interest bearing deposits	9,169,096		23,466		0.52	%	9,760,584		70,564		1.45	%
Total deposits	$	14,419,176	$	23,466	0.33	%	$	12,997,544	$	70,564	1.09	%

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

	Three Months Ended													Six Months Ended
AVERAGE BALANCES:	6/30/2021			3/31/2021			% change		6/30/2020			% change		6/30/2021			6/30/2020			% change
Loans receivable, including loans held for sale	$	13,293,591		$	13,346,264		—	%	$	12,755,088		4	%	$	13,319,782		$	12,507,468		6	%
Investments	3,012,317			2,907,801			4	%	3,067,205			(2	)%	2,960,348			2,649,273			12	%
Interest earning assets	16,305,908			16,254,065			—	%	15,822,293			3	%	16,280,130			15,156,741			7	%
Total assets	17,164,893			17,115,407			—	%	16,759,147			2	%	17,140,286			16,102,977			6	%

Interest bearing deposits	9,015,034			9,324,872			(3	)%	10,142,282			(11	)%	9,169,096			9,760,584			(6	)%
Interest bearing liabilities	9,533,532			9,856,155			(3	)%	11,036,392			(14	)%	9,693,951			10,654,690			(9	)%
Noninterest bearing demand deposits	5,445,457			5,052,532			8	%	3,510,783			55	%	5,250,080			3,236,960			62	%
Stockholders’ equity	2,066,016			2,047,506			1	%	2,016,947			2	%	2,056,812			2,022,271			2	%
Net interest earning assets	6,772,376			6,397,910			6	%	4,785,901			42	%	6,586,179			4,502,051			46	%

LOAN PORTFOLIO COMPOSITION:	6/30/2021			3/31/2021			% change		12/31/2020			% change		6/30/2020			% change
Commercial loans	$	4,001,423		$	4,346,244		(8	)%	$	4,157,787		(4	)%	$	3,415,111		17		%
Real estate loans	8,832,276			8,811,423			—	%	8,772,134			1	%	8,686,939			2		%
Consumer and other loans	590,602			544,962			8	%	633,292			(7	)%	769,784			(23		)%
Loans, net of deferred loan fees and costs	13,424,301			13,702,629			(2	)%	13,563,213			(1	)%	12,871,834			4		%
Allowance for credit losses	(189,452		)	(207,943		)	(9	)%	(206,741		)	(8	)%	(161,771		)	17		%
Loan receivable, net	$	13,234,849		$	13,494,686		(2	)%	$	13,356,472		(1	)%	$	12,710,063		4		%

REAL ESTATE LOANS BY PROPERTY TYPE:	6/30/2021			3/31/2021			% change		12/31/2020			% change		6/30/2020			% change
Retail buildings	$	2,361,891		$	2,317,017		2	%	$	2,293,396		3	%	$	2,278,448		4		%
Hotels/motels	1,439,770			1,619,661			(11	)%	1,634,287			(12	)%	1,701,909			(15		)%
Gas stations/car washes	954,394			913,176			5	%	892,110			7	%	836,314			14		%
Mixed-use facilities	798,373			752,729			6	%	750,867			6	%	706,827			13		%
Warehouses	1,149,393			1,092,549			5	%	1,091,389			5	%	1,040,303			10		%
Multifamily	575,943			531,306			8	%	518,498			11	%	497,948			16		%
Other	1,552,512			1,584,985			(2	)%	1,591,587			(2	)%	1,625,190			(4		)%
Total	$	8,832,276		$	8,811,423		—	%	$	8,772,134		1	%	$	8,686,939		2		%

DEPOSIT COMPOSITION	6/30/2021			3/31/2021			% change		12/31/2020			% change		6/30/2020			% change
Noninterest bearing demand deposits	$	5,638,115		$	5,427,174		4	%	$	4,814,254		17	%	$	4,036,383		40		%
Money market and other	5,786,697			5,009,419			16	%	5,232,413			11	%	4,831,679			20		%
Saving deposits	308,651			305,326			1	%	300,770			3	%	296,614			4		%
Time deposits	2,992,767			3,559,350			(16	)%	3,986,475			(25	)%	4,958,856			(40		)%
Total deposit balances	$	14,726,230		$	14,301,269		3	%	$	14,333,912		3	%	$	14,123,532		4		%

DEPOSIT COMPOSITION (%)	6/30/2021			3/31/2021					12/31/2020					6/30/2020
Noninterest bearing demand deposits	38.3		%	38.0		%			33.6		%			28.6		%
Money market and other	39.2		%	35.0		%			36.5		%			34.2		%
Saving deposits	2.1		%	2.1		%			2.1		%			2.1		%
Time deposits	20.4		%	24.9		%			27.8		%			35.1		%
Total deposit balances	100.0		%	100.0		%			100.0		%			100.0		%

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)

CAPITAL RATIOS:	6/30/2021			3/31/2021			6/30/2020
Total stockholders’ equity	$	2,092,870		$	2,045,581		$	2,030,776
Common equity tier 1 ratio	11.32		%	11.08		%	11.50		%
Tier 1 risk-based capital ratio	12.02		%	11.78		%	12.24		%
Total risk-based capital ratio	13.16		%	13.03		%	13.23		%
Tier 1 leverage ratio	10.34		%	10.15		%	10.08		%
Total risk weighted assets	$	14,354,682		$	14,338,828		$	13,388,522
Book value per common share	$	16.92		$	16.57		$	16.48
Tangible common equity to tangible assets 1	9.53		%	9.40		%	9.32		%
Tangible common equity per share 1	$	13.10		$	12.73		$	12.62

1 Tangible common equity to tangible assets is a non-GAAP financial measure that represents common equity less goodwill and core deposit intangible assets, net divided by total assets less goodwill and core deposit intangible assets, net. Management reviews tangible common equity to tangible assets in evaluating the Company’s capital levels and has included this ratio in response to market participant interest in tangible common equity as a measure of capital.

	Three Months Ended															Six Months Ended
ALLOWANCE FOR CREDIT LOSSES CHANGES:	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020			6/30/2021			6/30/2020
Balance at beginning of period	$	207,943		$	206,741		$	179,849		$	161,771		$	144,923		$	206,741		$	94,144
CECL day 1 adoption impact	—			—			—			—			—			—			26,200
Provision (credit) for credit losses	(7,000		)	3,300			27,500			22,000			17,500			(3,700		)	45,500
Recoveries	1,301			1,423			2,207			2,428			252			2,724			2,788
Charge offs	(12,792		)	(3,521		)	(2,815		)	(6,350		)	(904		)	(16,313		)	(6,861		)
Balance at end of period	$	189,452		$	207,943		$	206,741		$	179,849		$	161,771		$	189,452		$	161,771
Net charge offs/average loans receivable (annualized)	0.35		%	0.06		%	0.02		%	0.12		%	0.02		%	0.20		%	0.07		%

	Three Months Ended															Six Months Ended
NET LOAN CHARGE OFFS (RECOVERIES):	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020			6/30/2021			6/30/2020
Real estate loans	$	11,281		$	2,234		$	(726	)	$	5,154		$	148		$	13,515		$	2,378
Commercial loans	181			(80		)	1,167			(1,451		)	240			101			916
Consumer loans	29			(56		)	167			219			264			(27		)	779
Total net charge offs	$	11,491		$	2,098		$	608		$	3,922		$	652		$	13,589		$	4,073

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

NONPERFORMING ASSETS:	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020
Loans on nonaccrual status 3	$	111,008		$	109,858		$	85,238		$	69,205		$	82,137
Delinquent loans 90 days or more on accrual status	4,759			384			614			1,537			430
Accruing troubled debt restructured loans	51,360			41,773			37,354			35,429			44,026
Total nonperforming loans	167,127			152,015			123,206			106,171			126,593
Other real estate owned	16,619			18,515			20,121			18,410			20,983
Total nonperforming assets	$	183,746		$	170,530		$	143,327		$	124,581		$	147,576
Nonperforming assets/total assets	1.05		%	0.99		%	0.84		%	0.74		%	0.86		%
Nonperforming assets/loans receivable & OREO	1.37		%	1.24		%	1.06		%	0.95		%	1.14		%
Nonperforming assets/total capital	8.78		%	8.34		%	6.98		%	6.11		%	7.27		%
Nonperforming loans/loans receivable	1.24		%	1.11		%	0.91		%	0.81		%	0.98		%
Nonaccrual loans/loans receivable	0.83		%	0.80		%	0.63		%	0.53		%	0.64		%
Allowance for credit losses/loans receivable	1.41		%	1.52		%	1.52		%	1.37		%	1.26		%
Allowance for credit losses/nonaccrual loans	170.67		%	189.28		%	242.55		%	259.88		%	196.95		%
Allowance for credit losses/nonperforming loans	113.36		%	136.79		%	167.80		%	169.40		%	127.79		%
Allowance for credit losses/nonperforming assets	103.11		%	121.94		%	144.24		%	144.36		%	109.62		%

3 Excludes delinquent SBA loans that are guaranteed and currently in liquidation totaling $23.6 million, $25.0 million, $26.5 million, $26.2 million and $30.3 million at June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020, and June 30, 2020, respectively.


NONACCRUAL LOANS BY TYPE:	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020
Real estate loans	$	95,622		$	91,940		$	67,450		$	51,739		$	64,060
Commercial loans	12,217			14,080			13,911			13,022			12,079
Consumer loans	3,169			3,838			3,877			4,444			5,998
Total nonaccrual loans	$	111,008		$	109,858		$	85,238		$	69,205		$	82,137

BREAKDOWN OF ACCRUING TROUBLED DEBT RESTRUCTURED LOANS:	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020
Retail buildings	$	12,110		$	6,319		$	5,408		$	5,451		$	5,526
Gas stations/car washes	206			210			219			224			1,789
Mixed-use facilities	7,967			3,377			3,521			4,323			3,583
Warehouses	14,099			14,124			7,296			7,320			13,433
Other 5	16,978			17,743			20,910			18,111			19,695
Total	$	51,360		$	41,773		$	37,354		$	35,429		$	44,026

5 Includes commercial business, consumer, and other loans

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands)

ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE:	6/30/2021		3/31/2021		12/31/2020		9/30/2020		6/30/2020
30 - 59 days	$	22,466	$	18,175	$	11,347	$	5,962	$	18,857
60 - 89 days	6,987		8,314		16,826		58,065		29,975
Total	$	29,453	$	26,489	$	28,173	$	64,027	$	48,832


ACCRUING DELINQUENT LOANS 30-89 DAYS PAST DUE BY TYPE:	6/30/2021		3/31/2021		12/31/2020		9/30/2020		6/30/2020
Real estate loans	$	21,432	$	18,331	$	15,689	$	60,510	$	27,245
Commercial loans	560		1,002		3,393		624		5,987
Consumer loans	7,461		7,156		9,091		2,893		15,600
Total	$	29,453	$	26,489	$	28,173	$	64,027	$	48,832


CRITICIZED LOANS:	6/30/2021		3/31/2021		12/31/2020		9/30/2020		6/30/2020
Special mention	$	294,559	$	280,974	$	184,941	$	153,388	$	127,149
Substandard	380,955		379,048		366,556		311,902		299,357
Doubtful/loss	—		—		1		6,640		11
Total criticized loans	$	675,514	$	660,022	$	551,498	$	471,930	$	426,517

Hope Bancorp, Inc.
Selected Financial Data
Unaudited (dollars in thousands, except share and per share data)

Reconciliation of GAAP financial measures to non-GAAP financial measures

Management reviews select non-GAAP financial measures in evaluating the Company’s and the Bank’s financial performance and in response to market participant interest. A reconciliation of the GAAP to non-GAAP financial measures utilized by management is provided below.


	Three Months Ended									Six Months Ended
	6/30/2021			3/31/2021			6/30/2020			6/30/2021			6/30/2020
RETURN ON AVERAGE TANGIBLE COMMON EQUITY
Average stockholders’ equity	$	2,066,016		$	2,047,506		$	2,016,947		$	2,056,812		$	2,022,271
Less: Goodwill and core deposit intangible assets, net	(473,445		)	(473,961		)	(475,534		)	(473,702		)	(475,793		)
Average tangible common equity	$	1,592,571		$	1,573,545		$	1,541,413		$	1,583,110		$	1,546,478

Net income	$	53,763		$	43,687		$	26,753		$	97,450		$	52,706
Return on average tangible common equity (annualized)	13.50		%	11.11		%	6.94		%	12.31		%	6.82		%


	6/30/2021			3/31/2021			12/31/2020			6/30/2020
TANGIBLE COMMON EQUITY
Total stockholders’ equity	$	2,092,870		$	2,045,581		$	2,053,745		$	2,030,776
Less: Goodwill and core deposit intangible assets, net	(473,139		)	(473,648		)	(474,158		)	(475,220		)
Tangible common equity	$	1,619,731		$	1,571,933		$	1,579,587		$	1,555,556

Total assets	$	17,469,627		$	17,198,860		$	17,106,664		$	17,169,062
Less: Goodwill and core deposit intangible assets, net	(473,139		)	(473,648		)	(474,158		)	(475,220		)
Tangible assets	$	16,996,488		$	16,725,212		$	16,632,506		$	16,693,842

Common shares outstanding	123,673,832			123,480,494			123,264,864			123,239,276

Tangible common equity to tangible assets	9.53		%	9.40		%	9.50		%	9.32		%
Tangible common equity per share	$	13.10		$	12.73		$	12.81		$	12.62

	Three Months Ended							Six Months Ended
	6/30/2021			3/31/2021		6/30/2020		6/30/2021			6/30/2020
PRE-TAX PRE-PROVISION INCOME
Net income	$	53,763		$	43,687	$	26,753	$	97,450		$	52,706
Add back - tax provision	17,767			13,965		9,771		31,732			16,233
Add back - provision (credit) for credit losses	(7,000		)	3,300		17,500		(3,700		)	45,500
Pre-tax pre-provision income	$	64,530		$	60,952	$	54,024	$	125,482		$	114,439