HOPE BANCORP INC Q3 FY2026 earnings call

• Acquisition Integration: Completed the acquisition of SMBC Manubank's commercial banking unit on October 1, 2026, strengthening the commercial franchise in Southern California and enhancing capabilities for Korean and Japanese businesses.
• Balance Sheet Growth: Gross loans grew to $15.1 billion (up 1% QoQ) and total deposits reached $16.1 billion (up 1.5% QoQ). The funding mix improved as non-maturity deposits increased by 6%, offsetting a 5% decrease in higher-cost time deposits.
• Capital Management: Common equity Tier 1 ratio stood at 12.25% pre-acquisition; expected to be approximately 10.2% post-acquisition. Board declared a quarterly dividend of $0.14 per share.
• Asset Quality: Criticized loans remained stable at $335 million, while non-performing assets declined to $108 million. Net charge-offs were $7 million (annualized 19 basis points), and provisions for credit losses increased to $9 million.
• Operational Efficiency: Reported efficiency ratio improved to 65.3%. Excluding notable items, it improved to 63.6%, reflecting positive operating leverage.
• Manubank Specifics: Acquired $2.2 billion in loans and $2.6 billion in deposits. Sold acquired SBA loans ($191 million proceeds) to optimize yield. Expected fully phased-in cost savings of over 40% off Manubank’s starting expense run rate of $136 million.

Total revenue for Q3 2026 was $157 million, representing a 7% quarter-over-quarter increase and an 11% year-over-year increase. Net interest income totaled $135 million, up 5% sequentially and 7% year-over-year, with a net interest margin of 3.02%, expanding six basis points from the prior quarter. Non-interest income was $22 million, up 17% sequentially and 44% year-over-year, driven by customer-related fees and SBA loan sale gains. Pre-provision net revenue reached $55 million, up 11% from the previous quarter and 21% from the prior year. Diluted earnings per share were $0.28, up 7% sequentially and 16% year-over-year.

• Full-Year 2026 Loan Growth: Excluding acquired Manubank balances and net of SBA loan sales, management expects period-end loan growth of approximately 15% year-over-year.
• Revenue Growth: Full-year revenue growth is expected in the range of 16% to 18% (excluding notable items).
• Pre-Provision Net Revenue: Expected growth in the range of 23% to 25% for the full year 2026.
• Cost Savings Timing: Fully phased-in cost savings are expected later than originally estimated due to core conversion scheduling, but savings are projected to exceed original estimates.

• Interest Rate Volatility: Market conditions have shifted from forecasting rate cuts to projecting three rate increases in 2027, impacting forward estimates and fair value of securities.
• Integration Execution: Core conversion timing delays may impact book value through contract breakage fees, though management views this as a net positive to avoid excessive costs.
• Asset Quality Uncertainty: While current metrics are strong, the acquired portfolio includes marks for credit losses, and future performance depends on economic conditions and credit fundamentals.

Q: Analyst asked about the percentage of the loan book that floats/benefits from rate hikes and the composition of the $90M purchase accounting accretion. / A: CFO stated variable rate loans comprise 48% of the portfolio, with an additional 27% hybrid. This is higher than past cycles due to a strategic shift toward variable-rate CRE originations. The $90M accretion is front-weighted over ~5 years, with the ACL portion estimated around $30M.

Q: Analyst inquired about deposit betas given recent rate hikes and the addition of Manubank/Territorial. / A: CFO reported a beta of under 24% for interest-bearing non-maturity deposits, one of the best ever, aided by Territorial’s <5% beta. Manubank’s beta was also low. Excess liquidity from the deal allows the bank to let high-cost wholesale funding reprice naturally rather than chasing rates, further improving beta performance.

Q: Analyst questioned why Manubank’s initial expense run rate appeared high relative to assets compared to Hope’s efficient model. / A: CFO explained Manubank operated as a subsidiary of a global institution (SMBC), bearing embedded costs associated with being perceived as part of a large bank. Hope can absorb these operations without duplicating functions sized to its own balance sheet, allowing for significant synergies once fully integrated.

Q: Analyst asked about the outlook for fee income, specifically regarding SBA premiums and other loan sales. / A: CFO clarified that the SBA team continues to generate strong volume in originations, distinct from the purchased SBA portfolio sold earlier. Other loan sales provided gains, but the focus remains on organic SBA strength and selective asset growth supported by the new liquidity position.