Hope Bancorp, Inc. Q4 FY2025 earnings call

• Kevin Kim reported strong earnings growth in the fourth quarter of 2025, with net income up 42% year-over-year and 12% quarter-over-quarter, driven by growth in net interest income, customer fee income, lower provision for credit losses, and lower tax expense, partially offset by higher operating expense.
• The company significantly lowered cost of deposits, reduced reliance on broker deposits, enhanced earning assets mix, added senior leadership and talent, strengthened asset quality with decreasing criticized loans, and expanded banking footprint via Territorial Bancorp acquisition in April 2025.
• All capital ratios increased quarter-over-quarter and remained well above requirements for well-capitalized financial institutions. Board declared quarterly common stock dividend of $0.14 per share and reinstated share purchase authorization with $35 million available.
• At December 31, 2025, gross loans totaled $14.8 billion, up 1% quarter-over-quarter, driven by broad-based growth across commercial real estate, residential mortgage, and commercial and industrial loans. Deposits totaled $15.6 billion, up 9% year-over-year, primarily due to Territorial acquisition.
• Julianna Balicka detailed net interest income, net interest margin, noninterest income, noninterest expense, asset quality, with criticized loans decreasing sequentially, net charge-offs and provision for credit losses changing quarter-over-quarter.

Net income for the fourth quarter of 2025 totaled $34 million, up 42% year-over-year from $24 million in the year-ago fourth quarter. Quarter-over-quarter, net income rose 12% from $31 million in the third quarter. Net interest income totaled $127 million for the fourth quarter of 2025, an increase of 1% from the prior quarter and up 25% from the fourth quarter of 2024. The fourth quarter 2025 net interest margin was 2.90%, up 1 basis point from the third quarter. Noninterest income saw growth across fee income lines, with customer level swap fees $6 million for the full year of 2025, an increase of 270% from $1.6 million in 2024. Noninterest expense totaled $99 million in the fourth quarter of 2025, up from $97 million in the third quarter. At December 31, 2025, gross loans totaled $14.8 billion, up 1% quarter-over-quarter, equivalent to 4% annualized. Deposits totaled $15.6 billion, up 9% year-over-year, primarily due to the Territorial acquisition and down 1% from September 30.

• Expect year-over-year loan growth in the high single-digit range in 2026, year-over-year revenue growth in the range of 15% to 20% driven by loan growth, net interest margin expansion, and strong fee income growth.
• Budget assumes two Fed funds target rate cuts of 25 basis points each in June and September 2026, with tailwinds from downward repricing of time deposits and upward repricing of maturing commercial real estate loans.
• Outlook for year-over-year pre-provision net revenue growth, excluding notable items, in the range of 25% to 30% for 2026, with noninterest expense level in fourth quarter 2025 as reasonable starting quarterly run rate for 2026.
• Medium-term financial targets include return on average assets of approximately 1.2%, loan growth in the high single-digit percentage range, revenue growth over 10% on an annual normalized basis, and efficiency ratio in the mid-50 percentage range.

Q: On for Gary Tenner here. Can I quickly just get the PAA accretion number?

A: I'm sorry, we don't disclose that number separately.

Q: And then maybe can I get your thoughts on deposit costs from here in terms of pricing? And do you guys disclose the spot rate for deposit costs?

A: We did not provide the spot rate for deposit costs on this call. I can look that up momentarily. One second. Our spot rate on total deposits was 2.68% as of December 31, 2025. And in terms of deposit costs going forward, as we mentioned in our remarks, the continued downward repricing of the CD portfolio as it turns over will continue to lower our deposit costs in the future. And then we reduced our non-maturity deposit rates alongside Fed fund cuts. So to the extent that there are future cuts, we will continue that practice, of course. And then thirdly, in our outlook embedded, there's also in terms of behind the DDA growth that we are anticipating and planning for in this year, we have been investing in strengthening our TMS treasury management products and services infrastructure and teams in order to be able to expand our customer relationships and capture more of the operating deposit wallet share. So an improved deposit mix will be the third factor in helping to reduce our deposit costs in 2026.

Q: You guys mentioned new hiring as a potential lever for loan growth in your outlook slide. How should we think about new hiring going forward in 2026? Any sort of new hire targets you guys can give out?

A: Not specific new hire targets, but our business plan does have very specific roles outlined in the hiring that we are bringing on board. Our hiring is focused on supporting revenue generation and the capabilities related to that as well, obviously, frontline and related support. And so in terms of thinking about that from your perspective, I would say that if you start with the fourth quarter run rate that you saw that already has embedded in it, the hiring that we've made in 2025. And then from here on out, when you think about 2026, we're going to continue to add to the hiring. But I would think about it as an OpEx growth rate in the low single digits, sub-5%.

Q: This is Charlie on for Kelly Motta. I just wanted to dig into what the CD repricing looks like, as you mentioned, that down and repricing is a core driver of the NIM going forward. So any detail you can provide about the CD schedule and repricing there going forward into 2026?

A: So in terms of our CDs in 2026, we're looking at a repricing of $6.3 billion. So obviously, a lot of it reprices quickly. I mean CDs are by nature, 12 months or less. And so maybe for the near term, in the first quarter, we've got a total of $2.5 billion of CDs repricing and that weighted average rate that they're repricing from is 3.99%. And the new CDs have been coming in at -- one second, I'll tell you. The new CDs have been coming in at somewhere between 3.90%. Well, actually, I'll take that back. The branch CDs were coming in at that 3.90% kind of percent level. So there's a little bit more competitive, but we also are benefiting from repricing of institutional CDs, and those are coming in at more kind of lower pricing. And so that kind of pricing has been coming in at 3.70%. So it's going to be a blend of both kind of going forward.

Q: I guess, the overall margin dynamics and any sensitivity to cuts and how you view kind of the margin expansion from here heading into 2026?

A: Actually, I need to make a correction. The 3.90s that I quoted you from the branch CDs, I was reading from the roll-off WACC column. So I'm very sorry, let me correct that. The new roll-on from branch CDs has been in the 3.75% to 3.80% range. Let me make that correction. And the sensitivity of our margin to the rate cuts, I would probably take a look at the third quarter and the fourth quarter margin relative to rate cuts you've seen in this half of the year and extrapolate from that. I mean, at this point in time, margin -- the rate cuts are expected in the second half of next year. So a lot can change between now and then. So I'll just extrapolate from recent trends.

Q: And I guess from a high level, like looking back on the year, you guys entered Hawaii, just an update on the operations there and the strategy there, if you're hiring teams are still stabilizing operations.

A: Yes. Our focus in '25 in Hawaii was to ensure the successful integration of the teams and add resources as necessary. And during the transition period in 2025, we were pleased to see that we did not experience any meaningful deposit fluctuations and the reception by our customer base in Hawaii was pretty positive. In 2026, we are looking forward to generating growth from the strategically attractive market in Hawaii.