Hope Bancorp, Inc. · NASDAQ:HOPE
Hope Bancorp — D.A. Davidson & Co. West Coast Bank Tour 2020 Virtual Conference
42 slides from Hope Bancorp's conference presentation, Aug 26, 2020
Slide 1: D.A. Davidson & Co. West Coast Bank Tour 2020 Virtual Conference
D.A. Davidson & Co. West Coast Bank Tour 2020 Virtual Conference August 26, 2020 1
Slide 2: Forward Looking Statements & Additional Disclosures
Forward Looking Statements & Additional Disclosures This presentation may contain statements regarding future events or the future financial performance of the Company that constitute forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section
Slide 3: Presentation Index
Presentation Index Company Overview Slide 4 Financial Highlights & Earnings Performance Slide 10 Loan Growth Trends Slide 15 Stable Asset Quality Trends Slide 22 Favorable Deposit Trends Slide 29 Strong Franchise Value Slide 31 Appendix Slide 40 3
Slide 4: Company Overview
Company Overview 4
Slide 5: Bank of Hope's Roots
Bank of Hope’s Roots 40 Years of Service Beginning in Los Angeles Saehan Bank Nov 2013 Foster Bank Aug 2013 BankAsiana 2nd Merger of Equals Oct 2013 Pacific July 29, 2016 International Bank Feb 2013 1st Merger of Equals Nov 2011 Mirae Bank Jun 2009 Innovative Bank Apr 2010 Liberty Bank of New York A
Slide 6: Company Profile Today
Company Profile Today Only super regional Korean‐American bank in the nation . 3rd largest Asian‐American bank in the U.S.1 . 6th largest bank headquartered in Los Angeles1 . 93rd largest financial institution in the U.S.2 . 17th largest SBA lender in the country by volume3 . Only Korean‐American
Slide 7: National Geographic Presence
National Geographic Presence Nationwide footprint with meaningful presence, providing full banking services to the largest Asian‐American communities in the U.S. Seattle (4 branches + 1 SBA LPO + 1 commercial lending LPO) Portland New York/ SBA LPO New Jersey Illinois (10 branches + 1 Northern (5 br
Slide 8: Corporate Social Responsibility Highlights
Corporate Social Responsibility Highlights 1 OUT OF 2 1000 HOURS $2.49 BILLION 1 out of 2 Bank of Hope branches Nearly 1000 hours of $2.49 billion located in low‐to‐moderate CRA‐reportable of loans funded income areas volunteer hours in 2019 in 2019 $447 MILLION $10 MILLION $2.2 MILLION $447 million
Slide 9: Executive Leadership
Executive Leadership We are proud to have one of the strongest leadership teams among Leadership Asian‐American banks. Risk Operations Business Management Oversight Leadership Peter Koh Thomas Stenger Daniel H. Kim David P. Malone Kyu S. Kim David W. Kim Kevin S. Kim EVP, Chief Credit EVP, Chief Ris
Slide 10: Financial Highlights & Earnings Performance
Financial Highlights & Earnings Performance 10
Slide 11: Q2 2020 Financial Highlights
Q2 2020 Financial Highlights Net income of $26.8 million, or $0.22 per diluted common share, compared with $26.0 million, or Net $0.21 per diluted common share for Q1 2020 Provision for credit losses of $17.5 million, vs. $28.0 million for Q1 2020 Income Net interest income before provision de
Slide 12: Net Interest Income and Margin
Net Interest Income and Margin Average Loan Yield & Average 1M LIBOR Rate Net Interest Income & NIM 5.32% ($ millions) 5.27% 5.04% 5.06% 4.23% $117.2 $116.3 $113.5 $119.3 2.44% $109.8 2.18% 1.79% 3.31% 3.31% 3.25% 3.16% 1.41% 2.79% 0.35% 2Q19 3Q19 4Q19 1Q20 2Q20 2Q19 3Q19 4Q19 1Q20 2Q20 Net Interest
Slide 13: Noninterest Income
Noninterest Income Noninterest Income Noninterest income decreased to $11.2 million ($ millions) Q‐o‐Q largely reflecting lower fee income due to $13.0 $13.0 $13.3 reduced business activity as a result of COVID‐ $12.3 19 lockdowns $11.2 $4.1 Decrease in service fees reflect reduction in $3.6 $4.
Slide 14: Noninterest Expense and Efficiency
Noninterest Expense and Efficiency ($ millions) Breakdown of Noninterest Expense & FTE Noninterest Expense, Efficiency Ratio & NIE/AA $72.1 $71.4 $70.0 $70.4 55.11% 55.68% 55.37% $67.0 54.15% 54.42% $7.9 $6.4 $7.2 $8.8 $1.6 $0.8 $1.6 $5.2 $9.7 $6.0 $5.9 $3.3 $2.8 $2.6 $1.7 $2.6 $2.4 $1.7 $1.5 $2.4 $
Slide 15: Loan Growth Trends
Loan Growth Trends 15
Slide 16: Loan Production & Portfolio Trends
Loan Production & Portfolio Trends New Loan Originations Funded 5.46% New loan originations funded of $832 million 4.72% 4.37% resulted in 2.3% growth in loans receivable Q‐o‐Q, 3.98% or 9% annualized 3.39%1 ($ millions) $847.6 $832.0 New loans included $480 million of SBA PPP originations, whic
Slide 17: PPP Loan Originations
PPP Loan Originations ($ thousands) $ Amount # Loans Lender’s Fees 63,036 13% 2,850 60% 63,818 13% 892 19% 96% 5% $13,612 74,657 16% 529 11% 70,555 15% 275 6% 96,082 20% 171 4% $3% <5% $4,583 56,692 12% 43 1% 1% 49,111 10% 17 0% $491 Total Balance $473,9501 (Avg $99,215) 4,777 $18,686 1 Reflects tot
Slide 18: Loan Portfolio by Region
Loan Portfolio by Region $12.87 Billion (as of 6/30/2020) Southern California • 1986: Founded by Los Angeles‐based Korean‐ American investors Other States 13% Northern California Texas • 1997: Expanded de novo into Northern California; 4% Acquired Asiana Bank in 2003 Washington Eastern Region 3% • 1
Slide 19: Loan Portfolio Composition
Loan Portfolio Composition $12.87 Billion Total Portfolio (as of 6/30/2020) Consumer Outstanding $769.8B Consumer Average Size $680M 6% Average Yield 3.83% Owner‐ Occupied CRE 21% C & I CRE 27% C&I Outstanding $8,686.9B Outstanding $3,415.1B Average Size $1,597M Average Size $390M Average Yield 4.35
Slide 20: Portfolio Diversification as of 6/30/2020
Portfolio Diversification as of 6/30/2020 CRE Portfolio C&I Portfolio $8.69 Billion $3.42 Billion Wholesale Trade All Others Hotel & 16% 23% Motel All Others 20% (C&I) 29% Warehouse Line Office 16% 7% Retail ‐ Multi Gasoline 20% Stations 4% Mixed Use Restaurant Supermarkets Manufacturing 8% 8% 4% 13
Slide 21: Loan Portfolio Rate Mix as of 6/30/2020
Loan Portfolio Rate Mix as of 6/30/2020 Fixed / Variable Breakdown Variable Rate Loan Base Index Other 1 Variable Libor Based Hybrid 1 2% 38% 44% 33% 2 @3.16% 2 @3.43% 2 @2.51% @4.48% 2 Prime Based Fixed 54% 29% @4.19% 2 @3.90% 2,3 1Hybrid loans have fixed interest rates for a specified period and t
Slide 22: Stable Asset Quality Trends
Stable Asset Quality Trends 22
Slide 23: Asset Quality
Asset Quality Nonperforming Assets Provision Expense & Net Charge Offs ($ millions) ($ millions) $157.1 $139.9 $28.0 $122.1 $21.0 $111.7 $23.0 $136.1 $5.6 $96.7 $24.1 0.11% $116.8 0.05% 0.06% 0.02% $17.5 $106.0 $19.4 $98.0 0.92% $77.4 0.87% 0.02% 0.73% 0.78% 0.63% $1.2 $2.1 $1.0 2Q19 3Q19 4Q19 1Q20
Slide 24: Allowance for Credit Losses
Allowance for Credit Losses Moody’s Baseline Scenario Assumptions • U.S. Growth –GDP forecast to decline 33% annualized for 2Q20 and decline 5.6% for FY2020 $161,771 • Inflation –Y‐o‐Y growth in CPI inflation to decelerate ($ thousands) through remainder of 2020 and into 2021 • Employment –Unemploym
Slide 25: Allocation of Allowance by Loan Type
Allocation of Allowance by Loan Type Allowance of Loan & Allocation for Credit Losses ($ thousands) Lease Losses (ALLL) for Current Expected Credit Loss (CECL) January 1, 2020 December 31, 2019 CECL Adoption ‐ Day 1March 31, 2020 June 30, 2020 Coverage Coverage Coverage Coverage Loan Type Amount Amo
Slide 26: COVID-19 Impacted Portfolios
COVID-19 Impacted Portfolios Hotel/Motel CRE Properties Retail CRE Properties • Majority of Hotel/Motel properties are limited service facilities • Retail portfolio largely represents “strip mall” type of properties (not shopping malls) • Less impacted by lockdowns than full‐service hotel properties
Slide 27: COVID-19 Loan Modifications - As of June 30, 2020
COVID-19 Loan Modifications - As of June 30, 2020 - Modification Type & Duration ($ thousands) COVID‐19 Modifications % Total Loans 2M‐3M Interest Only Amount # of Modified $ 264.8 MM 8.5% Modified Loans Other1 4M‐6M Pmt Def $ 23.9 MM CRE $ 2,817,516 976 $ 8,686,939 32.4% $ 109.0 MM 0.8% Retail $ 80
Slide 28: Wave 2 COVID-19 Loan Modifications - Current Status
Wave 2 COVID-19 Loan Modifications - Current Status - • As of August 14, 2020, Wave 2 modification requests amounted to 12.5% of total portfolio • Additional documentation, covenants, and in some cases collateral required to qualify for Wave 2 modifications • Based on proactive communications with v
Slide 29: Favorable Deposit Trends
Favorable Deposit Trends 29
Slide 30: Deposit Trends
Deposit Trends Q‐o‐Q growth annualized Total end‐of‐period (“EOP) deposits increased $1.3 billion, Deposit Composition ($ billions) equal to 10% Q‐o‐Q, or 40% annualized $14.12 – Growth driven by 34% increase in noninterest bearing DDA Q‐ $12.53 $12.53 $12.84 +40% $12.23 +10% o‐Q or $1.0 billion ‐
Slide 31: Strong Franchise Value
LAT L Zs Z . = Strong Franchise Value
Slide 32: The Representative Bank of the Korean-American Community
The Representative Bank of the Korean-American Community Total Assets Total Loans Total Deposits $30.38 Billion $23.09 Billion $25.11 Billion As of 12/31/2019 As of 12/31/2019 As of 12/31/2019 52% 51% 50% Bank of Hope Hanmi Bank Pacific City Bank Metro City Bank Commonwealth Business Bank Open Bank
Slide 33: Strong Shareholder Returns
Strong Shareholder Returns Strong Dividend Current Yield: 6.47% $0.14 $0.14 $0.14 $0.14 $0.14 $0.14 $0.14 $0.14 LTM Payout Ratio: 50.45% $0.13 $0.13 $0.13 $0.13 $0.12 $0.12 $0.12 $0.11 $0.11 $0.11 $0.11 $0.11 $0.10 $0.10 $0.10 $0.10 $0.075 $0.075 $0.075 $0.075 $0.05 $0.05 $0.05 4Q12 1Q13 2Q13 3Q
Slide 34: Strong Capital & Liquidity Positions
Strong Capital & Liquidity Positions Sufficient Liquidity Sources Robust Capital Position 13.23% 13.06% 12.24% Available 12.19% 11.44% 11.50% 6/30/2020 ($ Thousands) Borrowing 10.88% Capacity 10.08% FHLB Remaining Capacity $ 3,455,575 10.00% FRB Discount Window $ 726,639 8.00% Unsecured lines with o
Slide 35: Unique Growth Opportunities
Unique Growth Opportunities South Korean Foreign Direct Investment South Korean Companies Among Top in the U.S. Foreign Investors in the U.S. ($ billions) $57,623 $50,633 • Hyundai Motor and Kia Motors announced Jan 2017 $37,900 $37,837 $41,243 plans to spend $3.1 billion in U.S. in the next 5 years
Slide 36: 2020 Key Strategic Priorities
2020 Key Strategic Priorities Profitable Profitable Growth Growth Better Deposit Better Efficiencies Gathering and Cost through Expense Management Containment Profitable Growth Strong Capital Better Loan Growth Management and Yield Focus 36
Slide 37: Near-Term Outlook
Near-Term Outlook Meaningful loan growth for 2020 driven in 2H by corporate banking, warehouse line and residential mortgage refinancings Anticipating net interest margin expansion going forward as a result of stable loan yields, decreasing deposit costs and deployment of excess liquidity Resi
Slide 38: Investment Opportunity
Investment Opportunity The Only Super Regional Korean‐American Bank in the Nation Definitive leadership position as the representative bank of the Korean‐American community and a leading Asian‐American bank National platform and solid presence across all geographic markets with largest populatio
Slide 39: With HOPE, we'll get through this Together.
With HOPE, we'll get through this Together. z= =~ Hope Bancorp
Slide 40: Appendix
Appendix 40
Slide 41: Appendix – Q2 2020 Financial Summary
Appendix – Q2 2020 Financial Summary ($ thousands) Q2 2020 Q1 2020 Q2 2019 Net income $ 26,753 $ 25,953 $ 42,681 Diluted earnings per share $ 0.22 $ 0.21 $ 0.34 Net interest income before provision for credit losses $ 109,814 $ 119,291 $ 117,221 Net interest margin 2.79% 3.31% 3.31% Noninterest inco
Slide 42: Appendix – Pre-Tax Acquisition Accounting Adjustments and Merger-Related Expenses
Appendix – Pre-Tax Acquisition Accounting Adjustments and Merger-Related Expenses Q2 Q3 Q4 Q1 Q2 ($ thousands) 2019 2019 2019 2020 2020 Accretion of discount on acquired performing loans $1,799 $2,046 $1,945 $1,059 $658 Accretion of discount on acquired credit impaired loans 6,848 5,234 5,958 9,449
Hope Bancorp — D.A. Davidson & Co. West Coast Bank Tour 2020 Virtual Conference on 6ix