Hope Bancorp Reports 2025 First Quarter Financial Results

Hope Bancorp, Inc. (the "Company") (NASDAQ:HOPE), the holding company of Bank of Hope (the "Bank"), today reported unaudited financial results for its first quarter ended March 31, 2025. For the three months ended March 31, 2025, net income totaled $21.1 million, or $0.17 per diluted common share. Excluding notable items⁽¹⁾, net income for the first quarter of 2025 was $22.9 million, or $0.19 per diluted common share. In the fourth quarter of 2024, net income was $24.3 million, or $0.20 per diluted common share.

The Company completed its acquisition of Honolulu-based Territorial Bancorp Inc. ("Territorial"), the holding company of Territorial Savings Bank, effective April 2, 2025.

"We ended the 2025 first quarter with all capital ratios increasing quarter-over-quarter and our tangible common equity ratio⁽²⁾ up 15 basis points to 10.20% as of March 31, 2025," said Kevin S. Kim, Chairman, President and Chief Executive Officer. "We continued to focus on enhancing our deposit mix, and growth in customer deposits more than offset planned reductions in brokered time deposits.

"Capitalizing on our position of strength, we completed the merger of Territorial Bancorp Inc. following the close of the quarter, effectively becoming the largest regional bank that caters to multicultural customers across the continental United States and Hawaii," continued Kim. "This acquisition bolsters our balance sheet with the addition of approximately $1.7 billion of core, low-cost deposits and $1.0 billion of residential mortgage loans, after preliminary acquisition accounting adjustments. I would like to thank all our teammates at both Territorial Savings and Bank of Hope for their dedication and hard work in bringing this merger to fruition. We are excited about this combination and look forward to preserving and building upon the 100-plus year legacy of the Territorial brand, culture and commitment to local communities as Territorial Savings, a division of Bank of Hope.

"Our healthy levels of capital and ample liquidity provide us a robust cushion to support prudent growth opportunities, navigate emerging macroeconomic and geopolitical volatility, and continue investing in our organization," said Kim.

Operating Results for the 2025 First Quarter

Net interest income and net interest margin. Net interest income before provision for credit losses for the 2025 first quarter totaled $100.8 million, a decrease of $1.3 million, or 1%, from $102.1 million in the immediately preceding fourth quarter, primarily driven by the impact of lower interest rates on floating rate loans, lower average loan balances and two fewer days in the quarter, partially offset by a lower cost of interest bearing deposits. Net interest margin for the 2025 first quarter expanded by four basis points to 2.54%, up from 2.50% in the 2024 fourth quarter. The Federal Funds target rate was cut by an aggregate 50 basis points during the 2024 fourth quarter, impacting average yields and rates during the 2025 first quarter.

Noninterest income. Noninterest income for the 2025 first quarter totaled $15.7 million, compared with $15.9 million in the immediately preceding fourth quarter. The 2024 fourth quarter noninterest income included a one-time net gain of $1.0 million related to the sale of two branches in Virginia. Excluding the gain on sale of branches, noninterest income for the 2025 first quarter was up 5% from $14.9 million in the fourth quarter of 2024. The Company recorded net gains on the sale of SBA loans of $3.1 million in each of the 2025 first and 2024 fourth quarters. In the first quarter of 2025, the Company sold $49.9 million of SBA loans, compared with $48.4 million in the immediately preceding fourth quarter.

Noninterest expense. Noninterest expense for the 2025 first quarter totaled $83.9 million, compared with $77.6 million in the immediately preceding fourth quarter and $84.8 million in the year-ago first quarter. Excluding notable items, which consisted primarily of merger-related expenses in the first quarter of 2025, noninterest expense for the 2025 first quarter was $81.3 million, up 6% compared with $77.0 million for the 2024 fourth quarter and down 1% compared with $82.4 million for the 2024 first quarter. The quarter-over-quarter increase in noninterest expense primarily reflected payroll taxes, bonus expense true-ups and vacation accrual payouts, all of which are typically higher in the first quarter of the year. This was partially offset by a quarter-over-quarter decrease in earned interest credit expense, which was driven by a lower average balance of related deposits and the cumulative impact of Federal Funds target rate cuts in 2024.

Tax rate. The effective tax rate for the 2025 first quarter was 24.2%, compared with 20.0% in the fourth quarter of 2024 and 27.9% in the year-ago first quarter. The effective tax rate in both the first quarter of 2025 and the fourth quarter of 2024 reflected the positive impact of investments in renewable energy tax credits. For the 2024 full year, the effective tax rate was 25.1%.

Balance Sheet Summary

Cash and investment securities. At March 31, 2025, cash and due from banks totaled $733.5 million, compared with $458.2 million at December 31, 2024. Investment securities totaled $2.09 billion at March 31, 2025, and $2.08 billion at December 31, 2024.

As of the close of the Territorial merger, Territorial had $86.8 million in cash and cash equivalents. Territorial's investment securities portfolio was sold effective April 2, 2025, at a market value of $531.1 million. The Company notes that this news release presents preliminary, unaudited financial information for Territorial, which may be subject to change.

Loans. At March 31, 2025, loans receivable, which excludes loans held for sale, totaled $13.34 billion, a decrease of 2% from $13.62 billion at December 31, 2024. Compared with December 31, 2024, residential mortgage loans increased 7%, offset by a 5% decrease in commercial and industrial loans and a 2% decrease in commercial real estate loans.

The following table sets forth the loan portfolio composition at March 31, 2025, December 31, 2024, and March 31, 2024:

As of the close of the Territorial merger, Territorial's loans receivable totaled approximately $1.06 billion after preliminary acquisition accounting discounts.

Deposits. Total deposits of $14.49 billion at March 31, 2025, increased 1% from $14.33 billion at December 31, 2024. The quarter-over-quarter increase in deposits primarily reflected a 5% increase in money market deposits. Customer deposits increased quarter-over-quarter, offsetting a planned reduction in brokered time deposits.

The following table sets forth the deposit composition at March 31, 2025, December 31, 2024, and March 31, 2024:

As of the close of the Territorial merger, Territorial's deposits totaled $1.67 billion after preliminary acquisition accounting adjustments; the weighted average cost of deposits was 1.96%.

Borrowings. Federal Home Loan Bank and Federal Reserve Bank borrowings decreased to $100.0 million at March 31, 2025 from $239.0 million at December 31, 2024.

As of the close of the Territorial merger, Territorial's Federal Home Loan Bank borrowings totaled $160.8 million, of which $125.0 million was paid off effective April 2, 2025.

Credit Quality and Allowance for Credit Losses

Nonperforming assets. Nonperforming assets were $83.9 million, or 0.49% of total assets, at March 31, 2025, a quarter-over-quarter decrease of 8% from $90.8 million, or 0.53% of total assets, at December 31, 2024, and a year-over-year decrease of 21% from $106.8 million, or 0.59% of total assets, at March 31, 2024.

The following table sets forth the components of nonperforming assets at March 31, 2025, December 31, 2024, and March 31, 2024:

As of the close of the Territorial merger, Territorial's nonperforming assets amounted to $1.9 million, before acquisition accounting adjustments.

Net charge offs. The Company recorded net charge offs of $8.3 million in the 2025 first quarter, equivalent to 0.25%, annualized, of average loans. This compares with net charge offs of $12.8 million, or 0.38%, annualized, of average loans in the immediately preceding fourth quarter.

The following table sets forth net charge offs and annualized net charge off ratios for the three months ended March 31, 2025, December 31, 2024, and March 31, 2024:

Allowance for credit losses and provision for credit losses. The allowance for credit losses totaled $147.4 million at March 31, 2025, compared with $150.5 million at December 31, 2024. The allowance coverage ratio was 1.11% of loans receivable at March 31, 2025, unchanged from 1.11% at December 31, 2024.

The following table sets forth the allowance for credit losses and the coverage ratios at March 31, 2025, December 31, 2024, and March 31, 2024:

For the 2025 first quarter, the Company recorded a provision for credit losses of $4.8 million, compared with $10.0 million in the immediately preceding fourth quarter. The quarter-over-quarter change in the provision for credit losses primarily reflected the sequential reduction in net charge offs.

Capital

At March 31, 2025, the Company and the Bank continued to exceed all regulatory capital requirements generally required to meet the definition of a "well-capitalized" financial institution. All regulatory capital ratios increased quarter-over-quarter and year-over-year.

The following table sets forth the capital ratios for the Company at March 31, 2025, December 31, 2024, and March 31, 2024:

At March 31, 2025, total stockholders' equity was $2.16 billion, or $17.84 per common share, an increase of 1% when compared with $2.13 billion, or $17.68 per common share, at December 31, 2024. Tangible common equity ("TCE") per share⁽³⁾ increased to $13.99 at March 31, 2025, up from $13.81 at December 31, 2024. The TCE ratio was 10.20% at March 31, 2025, up 15 basis points from 10.05% at December 31, 2024, and up 87 basis points from 9.33% at March 31, 2024.

The following table sets forth the TCE per share and the TCE ratio at March 31, 2025, December 31, 2024, and March 31, 2024:

Pursuant to the Territorial merger agreement, on April 2, 2025, Territorial shareholders received 0.8048 shares of Hope Bancorp common stock in exchange for each share of Territorial common stock; accordingly, the Company issued 6,976,754 shares, or $73.3 million of equity, as part of the transaction.

Investor Conference Call

The Company previously announced that it will host an investor conference call on Tuesday, April 22, 2025, at 9:30 a.m. Pacific Time / 12:30 p.m. Eastern Time to review unaudited financial results for its first quarter ended March 31, 2025. 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 at least 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 April 29, 2025, replay access code 1111094.

Non-GAAP Financial Metrics

This news release and accompanying financial tables contain certain non-GAAP financial measure disclosures, including net income excluding notable items, earnings per share excluding notable items, PPNR, PPNR excluding notable items, noninterest expense excluding notable items, TCE per share, TCE ratio, ROA excluding notable items, ROE excluding notable items, ROTCE, ROTCE excluding notable items, and efficiency ratio excluding notable items. Management believes these non-GAAP financial measures provide meaningful supplemental information regarding the Company's operational performance and the Company's capital levels and has included these figures in response to market participant interest in these financial metrics. Quantitative reconciliations of the most directly comparable GAAP to non-GAAP financial measures are provided in the accompanying financial information on Table Pages 9 through 11.

About Hope Bancorp, Inc.

Hope Bancorp, Inc. (NASDAQ:HOPE) is the holding company of Bank of Hope, the only regional Korean American bank in the United States with $17.07 billion in total assets as of March 31, 2025. With the addition of Territorial Savings, a division of Bank of Hope, effective April 2, 2025, the Company became the largest regional bank catering to multicultural customers across the continental United States and Hawaii. Headquartered in Los Angeles, the Bank provides a full suite of commercial, corporate and consumer loans, deposit and fee-based products and services, including commercial and commercial real estate lending, SBA lending, residential mortgage and other consumer lending; treasury management services, foreign currency exchange solutions, interest rate derivative products, and international trade financing, among others. The Bank operates 46 full-service branches in California, New York, New Jersey, Washington, Texas, Illinois, New York, New Jersey, Alabama and Georgia under the Bank of Hope banner, and 29 branches in Hawaii under the Territorial Savings banner. The Bank also operates SBA loan production offices, commercial loan production offices, and residential mortgage loan production offices throughout the United States, and a representative office in Seoul, South Korea. 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 www.bankofhope.com for Bank of Hope and www.tsbhawaii.bank for Territorial Savings, a division of Bank of Hope. By including the foregoing website address links, 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 news 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. 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" and similar expressions. With respect to any such forward-looking statements, Hope Bancorp claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. Hope Bancorp's actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. With the consummation of the merger of Territorial Bancorp, factors that may cause actual outcomes to differ from what is expressed or forecasted in these forward-looking statements include, among things: difficulties and delays in integrating Hope Bancorp and Territorial Bancorp and achieving anticipated synergies, cost savings and other benefits from the transaction; higher than anticipated transaction costs; and deposit attrition, operating costs, customer loss and business disruption following the merger, including difficulties in maintaining relationships with employees and customers, may be greater than expected. Other risks and uncertainties include, but are not limited to: possible renewed deterioration in economic conditions in Hope Bancorp's areas of operation or elsewhere; 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 Hope Bancorp's allowances for credit losses; potential increases in deposit insurance assessments and regulatory risks associated with current and future regulations; the outcome of any legal proceedings that may be instituted against Hope Bancorp; the impact of U.S. and global trade policies and tensions, including changes in, or the imposition of, tariffs and/or trade barriers and the economic impacts, volatility and uncertainty resulting therefrom, and geopolitical instability; and risks from natural disasters. For additional information concerning these and other risk factors, see Hope Bancorp's most recent Annual Report on Form 10-K. Hope Bancorp 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.