HOPE BANCORP INC Q4 FY2024 earnings call

• Expressed commitment to helping with Los Angeles area fires with a cash donation to the United Way of Greater Los Angeles Wildfire Response Fund.
• Q4 2024 net income was $24.3 million, or $0.20 per diluted share. Pre-provision net revenue was $40 million, up 14% from Q3 2024.
• Strengthened deposit base with broker deposits down to 7% of total deposits. Loan growth in the second half of 2024, with loans receivable at $13.6 billion as of Dec 31, 2024.
• Strong capital ratios: tangible common equity ratio over 10% and total capital ratio nearly 15% as of Dec 31, 2024.
• Pending transaction with Territorial Bancorp expected to close in Q1 2025 subject to regulatory approvals. Declared quarterly common stock dividend of $0.14 per share.
• Asset quality metrics: non-performing assets down 13% QoQ to $91 million, criticized loans down 11% QoQ to $450 million.

For the fourth quarter of 2024, net interest income totaled $102 million, a decrease of $3 million or 3% from the third quarter. Non-interest income was $16 million, an increase of $4.1 million or 34% from the third quarter. Non-interest expense was $78 million in the fourth quarter, down 5% from the prior quarter. Loans receivable were $13.6 billion as of December 31, 2024. Total deposits were $14.3 billion as of December 31, 2024, down 3% from the end of the prior quarter. Broker deposits were 7% of total deposits as of December 31, 2024, down from 10% as of December 31, 2023 and 15% in April 2023.

• 2025 loan growth expected in high single-digit percentage range, including Territorial. Net interest income growth in low double-digit percentage range, with $15 million accretion from loans.
• Non-interest income growth in mid-teen percentage range. Non-interest expenses, excluding notable items, expected to increase in low double-digit percentage range.
• One-time expenses related to Territorial transaction ~$30 million in 2025. Effective tax rate expected to be ~20% in 2025.
• Medium-term targets: return on average assets 1.2% and higher, efficiency ratio ~50%.

• Regulatory approvals needed for the Territorial Bancorp transaction.
• Impact of market interest rate changes on net interest margin.
• Potential fluctuations in loan charge-offs.
• Integration risks related to the Territorial Bancorp transaction.

Q: On the outlook on the deposit beta, what are the updated thoughts?

A: Julianna Balicka mentioned they are looking to achieve a better beta than past cycles, aiming for higher than the current 42% on interest-bearing deposits and hoping to reach 80% with rate cuts.

Q: On the expense run rate related to Territorial, can you speak to it?

A: Julianna Balicka said 2025 includes a transition period of operating costs from Territorial, with the annualized run rate in 2026 being lower. Hope standalone also has moderate expense growth due to investment in franchise, talent, and technology.

Q: On the Territorial accretion, what about securities accretion?

A: Julianna Balicka said securities income is in the low double digit guidance and they are evaluating which securities to keep or reposition.

Q: On accelerating transition to ROA goals, any considerations?

A: Julianna Balicka said discussing activity related to the balance sheet before the transaction is pending is premature.

Q: On buybacks post-closed, any thoughts?

A: Kevin Kim said it's premature to comment before the merger consummation, but the Board will evaluate capital deployment.

Q: On deposit trends and competitive pricing in the Korean American space?

A: Julianna Balicka said Q4 deposit trends are typical with outflows in certain areas, and deposit pricing is competitive, with a 42% beta on interest-bearing deposits a good result for Hope.

Q: On fee income guide related to SBA loan sales?

A: Kevin Kim said Q4 is a good run rate and they expect to continue selling SBA loans in 2025.

Q: On loan growth outlook and CRE portfolio?

A: Kevin Kim said Hope organic loan portfolio expects moderate low single-digit growth, majority from C&I, and CRE growth if any would be nominal.

Q: On net charge-offs this quarter and normalized run rate?

A: Kevin Kim said Q4 charge-offs were a bit elevated but 2024 full year was 19 basis points, manageable, and 2025 charge-offs expected to be manageable.