HOPE BANCORP INC [HOPE] Filings

10-Q 1 hope-20240630.htm 10-Q hope-20240630

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, 2024

☐ 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)

Delaware

95-4849715

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

3200 Wilshire Boulevard, Suite 1400

Los Angeles, California 90010

(Address of principal executives offices, including zip code)

(213) 639-1700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.001 per share

HOPE

NASDAQ Global Select Market

(Title of class)

(Trading Symbol)

(Name of exchange on which registered)

______________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At July 31, 2024, there were 120,731,627 shares of Hope Bancorp, Inc. common stock outstanding.

Table of Contents








		Page
PART I - FINANCIAL INFORMATION

Item 1.	FINANCIAL STATEMENTS
	Consolidated Statements of Financial Condition (Unaudited)	4
	Consolidated Statements of Income (Unaudited)	6
	Consolidated Statements of Comprehensive Income (Unaudited)	7
	Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	8
	Consolidated Statements of Cash Flows (Unaudited)	10
	Notes to Consolidated Financial Statements (Unaudited)
	1. Hope Bancorp, Inc.	11
	2. Basis of Presentation	12
	3. Earnings Per Share (“EPS”)	13
	4. Equity Investments	14
	5. Investment Securities	15
	6. Loans Receivable and Allowance for Credit Losses	19
	7. Leases	30
	8. Deposits	32
	9. Borrowings	33
	10. Convertible Notes and Subordinated Debentures	34
	11. Derivative Financial Instruments	36
	12. Commitments and Contingencies	39
	13. Goodwill, Intangible Assets, and Servicing Assets	40
	14. Income Taxes	42
	15. Fair Value Measurements	43
	16. Stockholders’ Equity	50
	17. Stock-Based Compensation	51
	18. Regulatory Matters	53
	19. Revenue Recognition	55

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	56
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	78
Item 4.	CONTROLS AND PROCEDURES	80

PART II - OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS	81
Item 1A.	RISK FACTORS	81
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	82
Item 3.	DEFAULTS UPON SENIOR SECURITIES	82
Item 4.	MINE SAFETY DISCLOSURES	82
Item 5.	OTHER INFORMATION	82
Item 6.	EXHIBITS	82

INDEX TO EXHIBITS		83

SIGNATURES		84

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q 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,” “projects,” “forecasts,” “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 known and unknown risks, trends, uncertainties, and factors that are beyond the Company’s control or ability to predict. 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: possible further deterioration in economic conditions in our areas of operation; 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; geopolitical instability or unrest; regulatory risks associated with current and future regulations; and risks associated with the execution of our organizational restructuring and failing to achieve its anticipated results. In addition, there are risks and uncertainties related to our proposed merger with Territorial Bancorp Inc., including, among others, the risk that the proposed merger will be consummated within the expected time frame, or at all; the risk that any announcements relating to the proposed merger could have adverse effects on the market price of the Company’s common stock; diversion of management’s attention from ongoing business operations and opportunities; required governmental approvals of the merger may not be obtained on its proposed terms and schedule, or without regulatory constraints that may limit growth; difficulties and delays in integrating Hope Bancorp, Inc. and Territorial Bancorp Inc. 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. For additional information concerning these and other risk factors, see Part I, Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024.

Due to the risks and uncertainties we face, readers are cautioned not to place undue reliance on the forward-looking statements contained in this report, which speak only as of the date of this report, or to make predictions about future performance based solely on historical financial information. 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.

PART I

FINANCIAL INFORMATION

Item 1.Financial Statements

HOPE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



	(Unaudited)
	June 30, 2024		December 31, 2023
ASSETS	(Dollars in thousands, except share data)
Cash and cash equivalents:
Cash and due from banks	$	187,817	$	172,813
Interest earning cash in other banks	466,227		1,756,154

Total cash and cash equivalents	654,044		1,928,967

Investment securities available for sale (“AFS”), at fair value	1,914,791		2,145,059
Investment securities held to maturity (“HTM”), at amortized cost; fair value of $237,621 and $250,518 at June 30, 2024 and December 31, 2023, respectively	258,068		263,912
Equity investments	44,278		43,750
Loans held for sale, at lower of cost or fair value	68,316		3,408
Loans receivable, net of allowance for credit losses of $156,019 and $158,694 at June 30, 2024 and December 31, 2023, respectively	13,410,983		13,694,925
Other real estate owned (“OREO”), net	—		63
Federal Home Loan Bank (“FHLB”) stock, at cost	17,250		17,250
Premises and equipment, net	50,919		50,611
Accrued interest receivable	57,645		61,720
Deferred tax assets, net	143,343		135,215

Bank owned life insurance (“BOLI”)	89,917		89,061
Investments in affordable housing partnerships	50,057		54,474
Operating lease right-of-use assets (“ROU”), net	41,922		46,611
Goodwill	464,450		464,450
Core deposit intangible assets, net	3,133		3,935
Servicing assets, net	8,984		9,631
Other assets	96,991		118,480
Total assets	$	17,375,091	$	19,131,522

(Continued)

HOPE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



	(Unaudited)
	June 30, 2024		December 31, 2023
LIABILITIES AND STOCKHOLDERS’ EQUITY	(Dollars in thousands, except share data)
LIABILITIES:
Deposits:
Noninterest bearing	$	3,671,192	$	3,914,967
Interest bearing:
Money market and NOW accounts	4,118,651		4,169,543
Savings deposits	789,209		702,486
Time deposits	6,132,419		5,966,757
Total deposits	14,711,471		14,753,753
FHLB and Federal Reserve Bank (“FRB”) borrowings	170,000		1,795,726



Convertible notes and subordinated debentures, net	108,918		108,269
Accrued interest payable	86,779		168,174

Operating lease liabilities	47,104		52,670
Commitments to fund investments in affordable housing partnerships	18,345		21,017
Other liabilities	121,192		110,670
Total liabilities	$	15,263,809	$	17,010,279
Commitments and contingent liabilities (Note 12)

STOCKHOLDERS’ EQUITY:
Common stock, $0.001 par value; 300,000,000 and 150,000,000 authorized shares at June 30, 2024 and December 31, 2023, respectively: issued and outstanding 138,114,177 and 120,731,342 shares, respectively, at June 30, 2024, and issued and outstanding 137,509,621 and 120,126,786 shares, respectively, at December 31, 2023	$	138	$	138
Additional paid-in capital	1,440,963		1,439,963
Retained earnings	1,167,978		1,150,547
Treasury stock, at cost; 17,382,835 and 17,382,835 shares at June 30, 2024 and December 31, 2023, respectively	(264,667)		(264,667)
Accumulated other comprehensive loss, net	(233,130)		(204,738)
Total stockholders’ equity	2,111,282		2,121,243
Total liabilities and stockholders’ equity	$	17,375,091	$	19,131,522

See accompanying Notes to Consolidated Financial Statements (Unaudited)

HOPE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Dollars in thousands, except per share data)
INTEREST INCOME:
Interest and fees on loans	$	209,683	$	225,671	$	423,309	$	441,606
Interest on investment securities	16,829		15,534		34,878		30,659
Interest on cash and deposits at other banks	5,284		25,295		32,467		30,217
Interest on other investments	805		684		1,621		1,379
Total interest income	232,601		267,184		492,275		503,861
INTEREST EXPENSE:
Interest on deposits	122,577		109,724		246,610		202,072
Interest on FHLB and FRB borrowings	1,430		23,622		19,283		30,320
Interest on other borrowings and debt	2,734		3,149		5,475		6,902
Total interest expense	126,741		136,495		271,368		239,294
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES	105,860		130,689		220,907		264,567
PROVISION FOR CREDIT LOSSES	1,400		9,010		4,000		12,330
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	104,460		121,679		216,907		252,237
NONINTEREST INCOME:
Service fees on deposit accounts	2,681		2,325		5,268		4,546
International service fees	696		854		1,730		1,942
Wire transfer and foreign currency fees	974		850		1,786		1,623
Swap fees	25		674		168		716
Net gains on sales of SBA loans	1,980		1,872		1,980		4,097


Net gains on sales of investment securities AFS	425		—		425		—
Other income and fees	4,290		10,439		8,000		15,068
Total noninterest income	11,071		17,014		19,357		27,992
NONINTEREST EXPENSE:
Salaries and employee benefits	44,107		52,305		91,684		109,474
Occupancy	6,906		6,967		13,692		14,488
Furniture and equipment	5,475		5,393		10,815		10,451
Data processing and communications	2,997		2,917		5,987		5,739
Professional fees	2,191		1,416		4,710		2,959
Amortization of investments in affordable housing partnerships	2,284		1,912		4,417		3,628
FDIC assessments	3,003		4,691		5,929		6,472
FDIC special assessment	(309)		—		691		—
Earned interest credit expense	6,139		5,090		11,973		9,517
Restructuring-related costs	576		—		978		—
Merger-related costs	1,589		—		2,633		—
Other noninterest expense	6,029		6,532		12,317		13,229
Total noninterest expense	80,987		87,223		165,826		175,957
INCOME BEFORE INCOME TAXES	34,544		51,470		70,438		104,272
INCOME TAX PROVISION	9,274		13,448		19,304		27,129
NET INCOME	$	25,270	$	38,022	$	51,134	$	77,143

EARNINGS PER COMMON SHARE
Basic	$	0.21	$	0.32	$	0.42	$	0.64
Diluted	$	0.21	$	0.32	$	0.42	$	0.64

See accompanying Notes to Consolidated Financial Statements (Unaudited)

HOPE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Dollars in thousands)
Net income	$	25,270	$	38,022	$	51,134	$	77,143
Other comprehensive (loss) income:
Change in unrealized net holding (losses) gains on securities AFS	(9,381)		(31,071)		(23,115)		144

Change in unrealized net holding (losses) gains on interest rate contracts used in cash flow hedges	(2,750)		13,653		(10,936)		7,715
Reclassification adjustments for net gains realized in net income	(3,241)		(3,322)		(6,172)		(5,060)
Tax effect	4,520		6,113		11,831		(826)
Other comprehensive (loss) income, net of tax	(10,852)		(14,627)		(28,392)		1,973
Total comprehensive income	$	14,418	$	23,395	$	22,742	$	79,116

See accompanying Notes to Consolidated Financial Statements (Unaudited)

HOPE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)



	Common stock			Additional paid-in capital		Retained earnings		Treasury stock		Accumulated other comprehensive loss, net		Total stockholders’ equity
	Shares	Amount
	(Dollars in thousands, except share and per share data)
BALANCE, MARCH 31, 2023	119,865,732	$	137	$	1,430,977	$	1,106,390	$	(264,667)	$	(214,257)	$	2,058,580


Issuance of shares pursuant to various stock plans, net of forfeitures and tax withholding cancellations	149,156											—
Stock-based compensation, net of tax settlements				2,811								2,811
Cash dividends declared on common stock ($0.14 per share)						(16,788)						(16,788)
Comprehensive income:
Net income						38,022						38,022
Other comprehensive loss										(14,627)		(14,627)

BALANCE, JUNE 30, 2023	120,014,888	$	137	$	1,433,788	$	1,127,624	$	(264,667)	$	(228,884)	$	2,067,998

BALANCE, MARCH 31, 2024	120,610,029	$	138	$	1,439,484	$	1,159,593	$	(264,667)	$	(222,278)	$	2,112,270


Issuance of shares pursuant to various stock plans, net of forfeitures and tax withholding cancellations	121,313											—
Stock-based compensation, net of tax settlements				1,479								1,479
Cash dividends declared on common stock ($0.14 per share)						(16,885)						(16,885)
Comprehensive income:
Net income						25,270						25,270
Other comprehensive loss										(10,852)		(10,852)

BALANCE, JUNE 30, 2024	120,731,342	$	138	$	1,440,963	$	1,167,978	$	(264,667)	$	(233,130)	$	2,111,282



	Common stock			Additional paid-in capital		Retained earnings		Treasury stock		Accumulated other comprehensive loss, net		Total stockholders’ equity
	Shares	Amount
	(Dollars in thousands, except share and per share data)
BALANCE, DECEMBER 31, 2022	119,495,209	$	137	$	1,431,003	$	1,083,712	$	(264,667)	$	(230,857)	$	2,019,328
Adoption of ASU 2022-02						407						407
Adoption of ASU 2022-02 tax adjustment						(120)						(120)
Issuance of shares pursuant to various stock plans, net of forfeitures and tax withholding cancellations	519,679											—
Stock-based compensation, net of tax settlements				2,785								2,785
Cash dividends declared on common stock ($0.28 per share)						(33,518)						(33,518)
Comprehensive income:
Net income						77,143						77,143
Other comprehensive income										1,973		1,973

BALANCE, JUNE 30, 2023	120,014,888	$	137	$	1,433,788	$	1,127,624	$	(264,667)	$	(228,884)	$	2,067,998

BALANCE, DECEMBER 31, 2023	120,126,786	$	138	$	1,439,963	$	1,150,547	$	(264,667)	$	(204,738)	$	2,121,243


Issuance of shares pursuant to various stock plans, net of forfeitures and tax withholding cancellations	604,556											—
Stock-based compensation, net of tax settlements				1,000								1,000
Cash dividends declared on common stock ($0.28 per share)						(33,703)						(33,703)
Comprehensive income:
Net income						51,134						51,134
Other comprehensive loss										(28,392)		(28,392)

BALANCE, JUNE 30, 2024	120,731,342	$	138	$	1,440,963	$	1,167,978	$	(264,667)	$	(233,130)	$	2,111,282

See accompanying Notes to Consolidated Financial Statements (Unaudited)

HOPE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six Months Ended June 30,
	2024		2023
	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	51,134	$	77,143
Adjustments to reconcile net income to net cash from operating activities:
Discount accretion, net of depreciation and amortization	18,085		17,802
Stock-based compensation expense	4,424		5,734


Provision for credit losses	4,000		12,330



Distribution gain from investment in affordable housing partnerships	—		(5,819)
Net gains on sales of loans	(2,190)		(4,018)

Net change in fair value of derivatives	(8,162)		(6,919)





Gain on debt extinguishment	—		(405)


Net change in deferred income taxes	3,701		3,164
Proceeds from sales of loans held for sale	46,372		57,348
Originations of loans held for sale	(49,577)		(46,732)
Originations of servicing assets	(749)		(1,849)
Net change in accrued interest receivable	4,075		(6,239)
Net change in other assets	10,512		(484)
Net change in accrued interest payable	(81,395)		82,568
Net change in other liabilities	3,815		18,794
Net cash provided by operating activities	4,045		202,418

CASH FLOWS FROM INVESTING ACTIVITIES

Redemption of interest earning deposits in other financial institutions	—		735
Investment securities available for sale:
Purchase of securities	(80,291)		(180,758)
Proceeds from matured, called, or paid-down securities	193,610		234,135
Proceeds from sales and calls of securities available for sale	92,587		—
Investment securities held to maturity:
Purchase of securities	—		(5,545)
Proceeds from matured, called, or paid-down securities	7,834		8,680

Purchase of equity investments	(779)		(569)
Proceeds from sales of other loans held for sale previously classified as held for investment	21,412		206,993

Net change in loans receivable	199,050		325,044
Proceeds from sales of OREO	63		1,209
Purchase of FHLB stock	—		(4,650)
Redemption of FHLB stock	—		6,030
Purchase of premises and equipment	(4,647)		(7,719)

Purchase of BOLI policy	—		(11,000)
Proceeds from BOLI death benefits	—		587
Investments in affordable housing partnerships	(2,672)		(2,470)
Net cash provided by investing activities	426,167		570,702





CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	(42,282)		(119,449)
Proceeds from FHLB advances	300,000		5,250,000
Repayment of FHLB advances	(300,000)		(5,750,000)
Proceeds from FRB borrowings	786,100		35,896,000
Repayment of FRB borrowings	(2,411,826)		(34,001,000)



Repurchase of convertible notes	—		(19,534)
Repayment of convertible notes	—		(197,107)

Cash dividends paid on common stock	(33,703)		(33,518)
Taxes paid in net settlement of restricted stock	(3,424)		(2,949)

Net cash (used in) provided by financing activities	(1,705,135)		1,022,443

NET CHANGE IN CASH AND CASH EQUIVALENTS	(1,274,923)		1,795,563
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1,928,967		506,776
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	654,044	$	2,302,339




SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	352,114	$	155,761
Income taxes paid	20,632		5,069

SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES

Transfer from loans receivable to loans held for sale	$	81,130	$	237,259
Transfer from loans held for sale to loans receivable	—		22,400


Lease liabilities arising from obtaining ROU assets	2,058		6,113

See accompanying Notes to Consolidated Financial Statements (Unaudited)

HOPE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Hope Bancorp, Inc.

Hope Bancorp, Inc. (“Hope Bancorp” on a parent-only basis and the “Company” on a consolidated basis), headquartered in Los Angeles, California, is the holding company for Bank of Hope (the “Bank”). At June 30, 2024, the Bank had 48 branches and nine loan production offices in California, New York, Texas, Washington, Illinois, New Jersey, Virginia, Georgia, Alabama, Colorado and Oregon, as well a representative office in Seoul, South Korea. The Company is a corporation organized under the laws of the state of Delaware and a bank holding company registered under the Bank Holding Company Act of 1956, as amended.

On March 28, 2024, the Bank entered into a Purchase and Assumption Agreement with PromiseOne Bank, a Georgia state bank, to sell the deposits, other liabilities and certain physical assets of the Bank’s two branches located in Virginia (Annandale and Centreville). The transaction is expected to be completed in the second half of 2024, subject to regulatory approvals and other customary closing conditions.

On April 26, 2024, the Company entered into a merger agreement with Territorial Bancorp Inc. (“Territorial”), headquartered in Honolulu, Hawaii. Under the terms of the merger agreement, Territorial will merge with and into the Company, immediately followed by the merger of Territorial’s subsidiary bank, Territorial Savings Bank, with and into the Company’s subsidiary bank, Bank of Hope. Upon completion of the transaction, Territorial shareholders will receive a fixed exchange ratio of 0.8048 shares of the Company’s common stock in exchange for each share of Territorial common stock they own. Based on the closing price of the Company’s common stock on April 26, 2024, this represented a value of $8.82 per share of Territorial common stock, although the actual value will be determined upon the completion of the merger.

The transaction is expected to close by year-end 2024, subject to regulatory approvals, the approval of Territorial shareholders, and the satisfaction of other customary closing conditions. Following the completion of the transaction, the legacy Territorial franchise in Hawaii will continue to do business under the Territorial Savings Bank brand, as a trade name of Bank of Hope.

2.Basis of Presentation

The consolidated financial statements included herein have been prepared without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), except for the Consolidated Statement of Financial Condition at December 31, 2023, which was from the audited financial statements included in the Company’s 2023 Annual Report on Form 10-K. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such SEC rules and regulations.

The consolidated financial statements include the accounts of Hope Bancorp and its wholly owned subsidiaries, principally the Bank. All intercompany transactions and balances have been eliminated in consolidation. The Company has made all adjustments, that, in the opinion of management, are necessary to fairly present the Company’s financial position at June 30, 2024 and December 31, 2023, and the results of operations for the three and six months ended June 30, 2024 and 2023. Certain reclassifications have been made to prior period amounts to conform to the current year presentation. The results of operations for the interim periods are not necessarily indicative of results to be anticipated for the full year.

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

These unaudited consolidated financial statements should be read along with the audited consolidated financial statements and accompanying notes included in the Company’s 2023 Annual Report on Form 10-K.

Significant Accounting Policies

The Company’s accounting policies are described in Note 1—“Summary of Significant Accounting Policies”, of its audited consolidated financial statements included in its 2023 Annual Report Form 10-K. Significant changes to accounting policies from those disclosed in the Company’s audited consolidated financial statements included in its 2023 Annual Report Form 10-K are presented below.

The allowance for unfunded commitments is recognized as a liability (other liabilities in the Consolidated Statements of Financial Condition), with adjustments to the allowance for unfunded commitments recognized through provision for credit losses in the Consolidated Statements of Income.

Recently Issued Accounting Pronouncements Not Yet Adopted

There were no recently issued accounting pronouncements not yet adopted that are expected to have a material impact on the Company’s consolidated financial statements.

3. Earnings Per Share (“EPS”)

Earnings per share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Basic EPS does not reflect the possibility of dilution that could result from the issuance of additional shares of common stock upon exercise or conversion of outstanding equity awards or convertible notes. Diluted EPS reflects the potential dilution that could occur if stock options, convertible notes, employee stock purchase program (“ESPP”) shares, or other contracts to issue common stock were exercised or converted to common stock that would then share in earnings. For the three months ended June 30, 2024 and 2023, stock options and restricted share awards of 527,936 and 2,626,620 shares of common stock, respectively, were excluded in computing diluted earnings per common share because they were anti-dilutive. For the six months ended June 30, 2024 and 2023, stock options and restricted share awards of 517,628 and 1,290,587 shares of common stock, respectively, were excluded in computing diluted earnings per common share because they were anti-dilutive.

The Company previously issued $217.5 million in convertible senior notes maturing on May 15, 2038, of which $444 thousand remained outstanding at June 30, 2024. The convertible notes can be converted into the Company’s shares of common stock at an initial rate of 45.0760 shares per $1,000 principal amount of the notes (See Note 10—“Convertible Notes and Subordinated Debentures” for additional information regarding convertible notes issued). Under the required if-converted method for calculating dilutive EPS for convertible instruments, the denominator of the diluted EPS calculation is adjusted to reflect the full number of common shares issuable upon conversion, while the numerator is adjusted to add back after-tax interest expense for the period. For the three and six months ended June 30, 2024 and 2023, shares related to the convertible notes issued were not included in the Company’s diluted EPS calculation. In accordance with the terms of the convertible notes and settlement options available to the Company, no shares would have been delivered to investors of the convertible notes based on the Company’s common stock price during the three and six months ended June 30, 2024 and 2023, as the conversion price exceeded the market price of the Company’s stock.

The following tables present computations of basic and diluted EPS for the three and six months ended June 30, 2024 and 2023.


	Three Months Ended June 30,
	2024					2023
	Net Income (Numerator)		Weighted-Average Shares (Denominator)	Earnings Per Share		Net Income (Numerator)		Weighted-Average Shares (Denominator)	Earnings Per Share
	(Dollars in thousands, except share and per share data)
Basic EPS - common stock	$	25,270	120,664,472	$	0.21	$	38,022	119,953,174	$	0.32
Effect of dilutive securities:
Stock options and restricted stock			274,957					176,185
Diluted EPS - common stock	$	25,270	120,939,429	$	0.21	$	38,022	120,129,359	$	0.32

	Six Months Ended June 30,
	2024					2023
	Net Income (Numerator)		Weighted-Average Shares (Denominator)	Earnings Per Share		Net Income (Numerator)		Weighted-Average Shares (Denominator)	Earnings Per Share
	(Dollars in thousands, except share and per share data)
Basic EPS - common stock	$	51,134	120,425,886	$	0.42	$	77,143	119,753,321	$	0.64
Effect of dilutive securities:
Stock options and restricted stock			538,263					426,122
Diluted EPS - common stock	$	51,134	120,964,149	$	0.42	$	77,143	120,179,443	$	0.64

4. Equity Investments

Equity investments with readily determinable fair values at June 30, 2024 and December 31, 2023, consisted of mutual funds in the amounts of $4.3 million and $4.4 million, respectively, and were included in “Equity investments” on the Consolidated Statements of Financial Condition.

The changes in fair value for equity investments with readily determinable fair values for the three and six months ended June 30, 2024 and 2023, were recorded in other noninterest income and fees as summarized in the table below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Dollars in thousands)
Net change in fair value recorded during the period on equity investments with readily determinable fair value	$	(19)	$	(69)	$	(65)	$	—
Less: Net change in fair value recorded on equity investments sold during the period	—		—		—		—
Net change in fair value on equity investments with readily determinable fair values held at the end of the period	$	(19)	$	(69)	$	(65)	$	—

At June 30, 2024 and December 31, 2023, the Company also had equity investments without readily determinable fair values, which are carried at cost less any determined impairment. The balance of these investments is adjusted for changes in subsequent observable prices. At June 30, 2024, the total balance of equity investments without readily determinable fair values included in “Equity investments” on the Consolidated Statements of Financial Condition was $40.0 million, consisting of $370 thousand in correspondent bank stock, $1.0 million in Community Development Financial Institutions (“CDFI”) investments, and $38.6 million in Community Reinvestment Act (“CRA”) investments. At December 31, 2023, the total balance of equity investments without readily determinable fair values was $39.4 million, consisting of $370 thousand in correspondent bank stock, $1.0 million in CDFI investments, and $38.0 million in CRA investments.

The Company had no impairments or subsequent observable price changes for equity investments without readily determinable fair values for the three and six months ended June 30, 2024 and 2023.

5. Investment Securities

The following is a summary of investment securities as of the dates indicated:



	June 30, 2024						December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Dollars in thousands)
Debt securities AFS:
U.S. Treasury securities	$	—	$	—	$	—	$	—	$	103,691	$	21	$	(35)	$	103,677
U.S. Government agency and U.S. Government sponsored enterprises:
Agency securities	4,000		—		(104)		3,896		4,000		—		(100)		3,900
Collateralized mortgage obligations (“CMO”)	854,271		341		(149,036)		705,576		888,631		367		(141,279)		747,719
Mortgage-backed securities (“MBS”):
Residential	478,806		—		(85,468)		393,338		499,431		—		(79,133)		420,298
Commercial	489,824		14		(56,912)		432,926		445,207		113		(53,432)		391,888
Asset-backed securities	139,300		527		(1)		139,826		150,992		—		(1,322)		149,670
Corporate securities	23,278		—		(3,688)		19,590		23,302		—		(3,868)		19,434
Municipal securities	233,601		724		(14,686)		219,639		314,554		5,698		(11,779)		308,473
Total investment securities AFS	$	2,223,080	$	1,606	$	(309,895)	$	1,914,791	$	2,429,808	$	6,199	$	(290,948)	$	2,145,059

Debt securities HTM:
U.S. Government agency and U.S. Government sponsored enterprises:
MBS:
Residential	$	146,133	$	—	$	(11,785)	$	134,348	$	150,369	$	—	$	(6,663)	$	143,706
Commercial	111,935