Hope Bancorp, Inc. Q3 FY2025 earnings call

• Third quarter was positive with progress across strategic priorities, including loan growth and improved asset quality.
• Net income up 28% YOY, and excluding notable items, net income was up 29% QOQ.
• Capital ratios increased QOQ and remain well above well-capitalized requirements.
• Board declared a quarterly common stock dividend of $0.14 per share.
• Focused on strengthening deposit franchise, lowering deposit costs, and investing in talent.
• Asset quality improved with reduced net charge-offs and criticized loans.

Net income for the third quarter of 2025 totaled $31 million, up 28% year-over-year. Loan growth was seen across all major loan segments: C&I, commercial real estate, and residential mortgage. Net interest income for the third quarter was $127 million, an increase of 8% from the prior quarter. Noninterest income had quarter-over-quarter growth in service fees on deposit accounts, international banking fees, etc. Noninterest expense was $97 million, with excluding notable items at $96 million. Asset quality improved with a 57% reduction in net charge-offs and a 17% decrease in C&I criticized loans. Deposits totaled $15.8 billion as of September 30, 2025, with noninterest-bearing deposits up 1% QOQ. Gross loans, including held for sale, totaled $14.6 billion, up 1.2% QOQ.

• Expect high single-digit loan growth in 2025.
• Anticipate net interest income growth of approximately 10% for 2025.
• Expect noninterest income growth of approximately 30% in 2025 (excluding Q2 securities repositioning loss).
• Noninterest expenses, excluding notable items, expected to be up ~15% in 2025.
• Anticipate fourth quarter 2025 effective tax rate to be approximately 14% (excluding notable items).

• Government shutdown impact on SBA loan sales (addressed in Q&A).
• Macroeconomic environment could affect performance.

Q: Just on the margin, do you have the spot rate on deposits, I didn't see in the deck at the end of September and maybe the average margin in the month of September?

A: One second. On the spot rate of deposits at the end of September, it was 2.82% for total deposits and 3.62% for interest-bearing costs. And the average of deposits you see in our earnings tables in the NIM table, yes. The average margin for the month of September was 2.96% Q: Any update there on how things are progressing with Territorial? Cost saves you may have extracted so far from that deal?

A: We are continuing to focus on stabilizing and expanding operations there. As we mentioned last quarter, following the acquisition, there's been some homework in terms of staffing up branches and just making sure that our products are rolled out to that platform. So we're continuing to incrementally see cost savings as we kind of align the operations there, but nothing headline grabbing to report this quarter.

Q: I wanted to ask, Julianna, if you could give us the purchase accounting impact this quarter. I think last quarter maybe in the deck, but I didn't see it. So the loan discount accretion and then kind of the net purchase accounting benefit as well.

A: So yes, last quarter was the acquisition quarter. So we had the accretion number last quarter. So last quarter, the accretion was $4 million. And this quarter, the accretion was $5 million.

Q: In terms of the CD maturities in the fourth quarter, can you give us the amount of maturing CDs and the rate they're rolling off at?

A: One second, let me grab that. Our CDs that are maturing in the fourth quarter, we've got $2.3 billion of maturity and an average rate of 4.08%.

Q: I would like to circle back to the expense side of things. You guys mentioned in your prepared remarks that you've made a number of frontline hires that increased the expense run rate. Can you remind us kind of where you are in the process? It seems like some of the better revenue growth is helping to offset some of these investments you're making. So what -- two-part question, where are you adding? And where do you stand in this process?

A: Well, Kelly, we have been adding new team members throughout the year. And the additions will strengthen our presence in strategic segments like lower middle markets, project finance, structured finance, entertainment, et cetera, as well as treasury management spread products and so on. Our focus remains on strengthening existing capabilities. And we are somewhat optimistic about the growth prospects with the addition of all these new people. I would say, if you think about it, in the beginning, you hire leadership and more senior positions and then you're kind of filling more mid-level after that. So we -- we've filled in all the key leadership positions, and we've made a number of senior RM hires than the team that we referenced. But I mean, in the fourth quarter, we have more hiring plans and in 2026, obviously, because we're in a great position to be in to expand our organic presence and growth.

Q: With the government shutdown, does that make it hard to predict revenue from the SBA loan on sale business line?

A: Yes. Well, first of all, outside of SBA, we do not really foresee any material impact to -- from the recent government shutdown. As to the SBA, as you may know, the U.S. Small Business Administration has suspended acceptance of new SBA loan applications and additionally, the secondary market for new SBA 7(a) loan sales has been halted. But -- from our side internally, there is no impact to the loans that have already received an SBA approval number. So in the meantime, while the government shutdown continues, we will continue to proceed business as usual for new applications so that these loans are fully prepared to submission to the U.S. SBA once operations resume. So hopefully, the government shutdown ends in a new future. But no matter what happens, I think we are in a good position in terms of our noninterest income in the fourth quarter and throughout 2025.

Q: I just wanted to ask a bit broader about kind of the loan growth ahead. I think you mentioned that growth this quarter was positively benefited by lower payoffs and paydowns. Just given the potential for rates to decrease here. Wondering how you guys are thinking through that impact and your ability to offset that with the pipeline ahead, both next quarter and beyond, if possible?

A: Yes. As to our current pipeline, we have a strong pipeline going into the fourth quarter. And we expect our strong pipeline will support our loan growth outlook for the rest of the year. And our fourth quarter loan pipeline is pretty comparable to what we had at the beginning of the third quarter. And we continue to see improvements in our C&I driven by recent frontline additions, as you said. And our CRE pipeline remains pretty, pretty stable. Although we -- in the past, we typically experienced some seasonal slowdown towards the year-end. We expect that our loan growth guideline for the entire 2025 will be a good number for us to share.

Q: In terms of the competitive environment for deposits, it seems like you're having success on the money market. Can you remind us where new CDs are coming on? And the beta was relatively high on the way up, how you guys are thinking about balancing beta with the outlook for a need for funding ahead?

A: Yes. So we reduced our CD pricing with the last Fed funds cut, right? And new CDs most recently have been coming on closer to 4% for the exceptions and below 4% for the non-exceptions. And so we're kind of continuing to think of deposit pricing as moving with Fed funds market pricing. And with the additional Territorial, we have been in a good position to where we can afford to be more price sensitive, if you will. And the beta was high on the way up because the balance sheet dynamics were different at that point in time. And I'll remind the analyst community that on the way down, right now, our loan-to-deposit ratio is in the low 90%, which is a much different starting point. And I'll also remind the analyst community that on the way up, we had a much higher percentage of broker deposits in our deposit mix. And today, we're sub-5%, around 5% kind of numbers that we shared with you previously. So we're in a much different position today than we were on the way up. So I am optimistic about our ability to have good deposit cost results.