Hope Bancorp Q3 2026 Earnings Call Transcript

Hope Bancorp (NASDAQ:HOPE) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

View the webcast at https://events.q4inc.com/attendee/346676611

Summary

Hope Bancorp reported strong financial performance in Q3 2026, with revenue totaling $157 million, up 7% quarter over quarter and 11% year over year. Pre-provision net revenue increased by 11% from the prior quarter, and diluted earnings per share rose to $0.28.

The company completed the acquisition of SMBC MANUBANK’s commercial banking unit, enhancing its commercial banking franchise and expanding its presence in Southern California. This acquisition is expected to strengthen Hope Bancorp’s growth capabilities and optimize its capital position.

Hope Bancorp maintained stable regulatory capital ratios, but anticipates a decrease in its common equity tier 1 ratio to approximately 10.2% post-acquisition. The company continues to focus on prudent capital management and has declared a consistent quarterly dividend of $0.14 per share.

Loan growth was primarily driven by commercial and industrial lending and residential mortgages, while the funding mix improved with a shift from time deposits to nonmaturity deposits, reducing overall deposit costs.

The company anticipates full-year 2026 revenue growth of 16% to 18% and pre-provision net revenue growth of 23% to 25%, with a focus on selective loan growth and maintaining sound credit fundamentals.

Full Transcript

OPERATOR

Good day and welcome to the Hope Bancorp third quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal an operator by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. We do ask that you please limit yourself to two questions. Please also note today’s event is being recorded. I would now like to turn the conference over to Maxime Olivan, Investor Relations Manager. Please go ahead.

Maxime Olivan (Investor Relations Manager)

Thank you. Good morning everyone and thank you for joining us for the Hope Bancorp investor conference call for the third quarter of 2026. As usual, we will be using a slide presentation to accompany our discussion this morning, which is available on the presentations page of our investor relations website. Beginning on slide 2, let me start with a brief statement regarding forward-looking remarks. Today’s call contains forward-looking statements and projections regarding the future financial performance of the company and future events. Forward-looking statements are not guarantees of future performance. Actual outcomes and results may differ materially. Hope Bancorp assumes no obligation to revise any forward-looking projections that may be made on today’s call.

In addition, some of the information referenced during today’s call includes non-GAAP financial measures. For a more detailed description of the risk factors and a reconciliation of GAAP to non-GAAP financial measures, please refer to the company’s filings with the SEC as well as the safe harbor statements in our earnings press release. Presenting from management today will be Kevin Kim, Hope Bancorp Chairman, President and CEO; Julian Ibaliska, Hope Bancorp Chief Financial Officer; and Peter Koh, Bank of Hope President and Chief Operating Officer is also here with us as usual and will be available for the Q&A session. With that, let me turn the call over to Kevin Kim.

Kevin Kim (Chairman, President and Chief Executive Officer)

Thank you, Maxime. Good morning everyone and thank you for joining us today. Beginning with slide 3, I will provide an overview of our third quarter results. Bank of Hope’s positive earnings momentum in the first half of the year continued in the third quarter, supported by revenue growth, positive operating leverage, and stable asset quality with continued improvements in key asset quality metrics. Third quarter revenue growth was driven by loan growth, net interest margin expansion, and increased noninterest income, and once again revenue growth outpaced expense growth.

As a result, we delivered strong sequential and year-over-year growth in pre-provision net revenue and after-tax net income. Third quarter 2026 revenue totaled $157 million, an increase of 7% quarter over quarter and 11% year over year. Pre-provision net revenue increased to $55 million, up 11% from the prior quarter and up 21% from the prior year. Reported diluted earnings for the third quarter were $0.28 per share, up 7% from $0.26 in the prior quarter and up 16% from $0.24 in the year-ago quarter. Excluding notable items, which consisted of merger-related costs, diluted earnings for the third quarter were $0.29 per share, up from $0.27 sequentially and $0.25 a year ago.

Our balance sheet grew in the third quarter with gross loans of $15.1 billion and total deposits of $16.1 billion as of September 30, 2026. Alongside that growth, our funding mix improved with growth in nonmaturity deposits offsetting continued planned decreases in higher-cost time deposits. This shift helped lower our overall deposit costs. The positive trends in our third quarter results are a sound foundation from which to enter a new chapter for Bank of Hope following the completion of our acquisition of SMBC MANUBANK’s commercial banking unit on October 1, 2026. The transaction strengthens our commercial banking franchise, expands our presence in Southern California, and enhances our ability to serve Korean and Japanese businesses. Our partnership and collaboration agreement with SMBC also provides opportunities to develop relationships with multinational companies operating in the United States.

With the transaction closed, our focus is on serving our expanded customer base, integrating our teams and operations, and building on the organic progress we have made over the past several quarters to strengthen our earnings. We are pleased to welcome our new colleagues to Bank of Hope and look forward to combining the strengths of our organization. Turning to capital on slide 4, our regulatory capital ratios remained essentially stable quarter over quarter. At September 30, 2026, our common equity tier 1 capital ratio was 12.25% and our total capital ratio was 13.92%. Higher long-term U.S. Treasury yields in the third quarter had a negative impact on the fair value of securities available for sale and caused a decrease in accumulated other comprehensive income, which impacted our tangible common equity ratio by 31 basis points, or $59 million, quarter over quarter.

Following the MANUBANK acquisition, we expect our common equity tier 1 ratio to be approximately 10.2%, down about 200 basis points from September 30, 2026. The transaction optimizes our capital position, and we remain focused on prudent capital management. Lastly, our Board of Directors has declared a quarterly common stock dividend of $0.14 per share, consistent with previous quarters and reflecting our continued commitment to returning capital to stockholders.

Continuing to slide 5, gross loans totaled $15.1 billion as of September 30, 2026, up 1% quarter over quarter and up 3% year over year. Third quarter loan growth was primarily driven by commercial and industrial lending and residential mortgage loans. We remain selective in our approach to loan growth, focusing on opportunities that meet our risk-adjusted return expectations and support a diversified portfolio while ensuring that new lending is backed by optimal funding sources.

On the deposit side, total deposits were $16.1 billion as of September 30, 2026, up 1.5% quarter over quarter and up 2% year over year. Quarter over quarter, nonmaturity deposits increased 6% and time deposits decreased 5%, reflecting our continued efforts to strengthen our funding mix by reducing the share of time deposits. As of September 30, 2026, time deposits were 37% of our total deposits compared with 40% a year ago. This shift away from time deposits has continued to help lower our overall cost of funds.

Quarter over quarter on an average basis, noninterest-bearing demand deposits grew 4%, money market, interest-bearing demand, and savings deposits increased 5% in aggregate, and time deposits decreased 3%. With that, I will turn the call over to Juliana to review our financial performance for the third quarter in more detail.

Julian Ibaliska (Chief Financial Officer)

Thank you, Kevin, and good morning everyone. Beginning on slide 6, our net interest income totaled $135 million for the third quarter of 2026, up $6 million, or 5%, from the prior quarter and up $9 million, or 7%, from the year-ago quarter. The sequential increase reflected average earning asset growth, higher NIM, and lower deposit costs. Average loans grew 1% from the prior quarter, equivalent to 5% annualized. Our net interest margin has continued to expand; third quarter 2026 net interest margin was 3.02%, up 6 basis points from 2.96% in the prior quarter and up 13 basis points from 2.89% in the year-ago quarter. The sequential quarter-over-quarter improvement reflected higher earning asset yields, including a 5 basis point increase in loan yields, as well as a favorable shift in our funding mix.

On to slide 7, we provide more detail on balance trends, yields, and rates for our average loans and deposits. On to slide 8, for the third quarter of 2026, noninterest income totaled $22 million, up $3 million, or 17%, from the prior quarter and up $7 million, or 44%, from the year-ago quarter. The sequential quarter increase reflected growth in customer-related income and fees and higher SBA loan sale gains. In addition, we booked $3 million in net gains on sales of other loans, partially offset by a $1 million decrease in gains on sale of investment securities.

During the third quarter we sold $72 million of SBA loans for a net gain of $4.7 million, compared with $68 million sold for a net gain of $4.4 million in the second quarter. Moving on to noninterest expense in slide 9, noninterest expense totaled $103 million in the third quarter of 2026, up $4 million, or 4%, from $99 million for the second quarter and up $6 million, or 6%, from $97 million for the third quarter of 2025. Excluding merger-related notable items, noninterest expense in the third quarter was $100 million. Our reported efficiency ratio improved to 65.3% for the third quarter of 2026. Excluding notable items, our efficiency ratio improved to 63.6% for the third quarter 2026, down from 65.2% in the second quarter and 67.6% for the year-ago quarter.

Our efficiency ratio improvement reflects incremental positive operating leverage achieved each quarter of the year. Next, on to slide 10. Our asset quality metrics reflect proactive portfolio management and attention to sound credit fundamentals. Criticized loans totaled $335 million at September 30, 2026, essentially unchanged from the prior quarter and down $38 million, or 10%, from a year ago. The criticized loan ratio was 222 basis points on September 30 compared to 224 basis points last quarter and 256 basis points a year ago. Nonperforming assets declined both quarter over quarter and year over year to $108 million, and the nonperforming asset ratio improved to 57 basis points of total assets at September 30, 2026.

Third quarter 2026 net charge-offs were $7 million, or an annualized 19 basis points of average loans, compared to 24 basis points annualized in the prior quarter. The third quarter provision for credit losses increased to $9 million compared with $7 million in the second quarter, primarily reflecting loan growth partially offset by lower net charge-offs. The allowance for credit losses totaled $154 million on September 30, 2026, with the allowance coverage ratio remaining stable at 1.03% of loans receivable on slide 11.

I will provide an update on the financial aspects of the MANUBANK transaction. We will provide detailed guidance for 2027 with fourth quarter earnings, but there are a few items we want to walk through here regarding the MANUBANK acquisition. From the transaction we received approximately $307 million of cash from the net settlement, and we did not pay a deposit fee. We also received $65 million of interest-bearing fed funds, plus the proceeds from the SBA loan sale that we executed in October.

As of the acquisition date, loans acquired from MANUBANK totaled approximately $2.2 billion before purchase accounting adjustments consisting of $1.3 billion. …of real estate loans and $0.9 billion of commercial loans. We estimate the discount on the acquired loans to be approximately $90 million, comprising the interest rate mark, the accretable credit mark, and the non-accretable credit mark, which is equivalent to the allowance for credit losses. The commercial portfolio included $0.2 billion of SBA loans purchased by SMBC MANUBANK in the secondary market. These loans would have had a relatively low effective yield for Hope Bancorp after the acquisition.

Therefore, on October 21st, we sold the SMBC MANUBANK SBA loan portfolio for total proceeds of $191 million, with no gain or loss recognized on the sale. Excluding the SBA loans sold, the acquired loan portfolio had a weighted average coupon of 5.69% at September 30 before purchase and other accounting adjustments. Deposits acquired from SMBC MANUBANK totaled $2.6 billion before purchase and other accounting adjustments, consisting of $0.6 billion of noninterest-bearing demand deposits, $1.8 billion of interest-bearing non-maturity deposits, and $0.2 billion of time deposits pro forma. With the SMBC MANUBANK deposits, the share of time deposits in our mix decreased to 33%, compared with 37% at September 30, 2026. The acquired deposits had a weighted average cost of 2.22% at September 30 before purchase and other accounting adjustments pro forma.

The impact of the SMBC MANUBANK deposits would reduce our cost of deposits by 5 basis points. The deposits acquired from SMBC MANUBANK exceeded acquired loan balances, resulting in an estimated pro forma loan-to-deposit ratio of 91% and providing flexibility to optimize our overall funding profile. Total loans at closing were below what they were at the deal announcement and customer deposits were largely stable. Combined with the SBA loan sale, this provides us additional flexibility to reduce maturing highest-cost funding in the near term or to grow assets, which we plan on doing in the fourth quarter and throughout 2027.

We believe this positions our balance sheet very well into a higher-for-longer interest rate environment and prioritizes profitability and profitable growth. Market conditions and interest rate expectations have changed meaningfully since announcement. We have gone from an interest rate environment that was forecasting three rate cuts through 2027 at the start of the year, to flat rates at deal announcement, and now the market projects three rate increases in 2027, so all that would need to be reflected in forward estimates.

Overall, the addition of the new deposit segments from SMBC MANUBANK, namely the Japanese Banking Division and Specialty Deposits, enhances our funding base with which to support profitable loan growth in a range of operating environments. The acquired loan portfolio and the banking teams that join us from SMBC MANUBANK strengthen our growth capabilities for next year and beyond. In terms of cost savings, we expect fully phased-in cost savings of over 40% off of SMBC MANUBANK’s starting operating expense run rate of $136 million.

Overall, we expect cost savings to come in better than originally estimated, and this will help offset some of the impact of the lower loan balances once fully phased in relative to original expectations. Fully phased-in timing is later, and this is due to the scheduled timing of the core conversion. With that, let me turn the call back to Kevin.

Kevin Kim (Chairman, President and Chief Executive Officer)

Thank you, Juliana. Moving to the 2026 outlook on Slide 13. With the close of the SMBC MANUBANK acquisition and two months left in 2026, we updated our full-year 2026 management outlook. Including the acquired SMBC MANUBANK balances and net of the SBA loan sale, we expect end-of-period loan growth of approximately 15% year over year, excluding notable items. We expect full-year revenue growth in the range of approximately 16% to 18%, and pre-provision net revenue growth in the range of approximately 23% to 25%, reflecting year-to-date organic trends from Hope Bancorp plus the impact of SMBC MANUBANK for the fourth quarter.

Our third quarter results reflected the continued improvement in Hope Bancorp fundamentals throughout 2026. With the SMBC MANUBANK transaction complete, we are well positioned to build on this momentum. With an active loan pipeline, we see opportunities to grow selectively while maintaining close credit oversight and prudent capital management. Our priority now is execution to build a more profitable and resilient Hope Bancorp for a range of operating environments and to deliver long-term value for our stockholders.

With that, operator, please open up the call for questions.

OPERATOR

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you’re using a speakerphone, we ask that you please pick up your handset before pressing keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Once again, we do ask that you please limit yourself to two questions. And today’s first question comes from Matthew Clark at Piper Sandler.

Please go ahead.

Matthew Clark (Analyst)

Hey, thank you. Good morning, everyone. Just putting the two banks together, thinking about, you know, the Fed potentially hiking here again. What’s kind of a good— I guess, what percentage of your loan book will truly float or, you know, benefit from the rate hikes?

Julian Ibaliska (Chief Financial Officer)

One second. We will get you that number in terms of the floating/fixed mix.

Matthew Clark (Analyst)

Okay. And then just—

Kevin Kim (Chairman, President and Chief Executive Officer)

Yeah, go ahead.

Matthew Clark (Analyst)

Yeah, maybe another one. Juliana, while you’re looking through, you may know the number off the top of your head, but in terms of the purchase accounting accretion, the $90 million, I think there’s a portion in there that is non-accretable tied to the reserve. Just— do you have the reserve amount so we can deduct that? And the life— the life of that $90 million?

Julian Ibaliska (Chief Financial Officer)

Yeah, the life of that $90 million is pretty short, about five years overall. But there is a big portion of it that’s pretty short, like two years or so. Maybe— it’s very front-weighted because it’s on the variable-rate loans on what we acquired. And let me just get back to you on the— And then on the piece that is the ACL equivalent, we’re still finalizing our estimate on that ACL portion, and it’s probably going to be— oh, I want to say around $30 million.

And then back to the variable question. The variable-rate loans— straight variable-rate loans on our loan portfolio at September 30 were 48%. And then we have a further 27% of loans that are hybrid.

Matthew Clark (Analyst)

Okay. Okay. So the full— Got it. Okay.

Kevin Kim (Chairman, President and Chief Executive Officer)

I would like to actually add a remark, Matt, since you asked this question. For those that have been following Hope for a long time, this is a higher percentage than in past cycles because we have been focusing our originations for the last couple years on variable-rate loans, particularly in CRE. For those that have been following Hope for a long time, you may recall that CRE originations used to be largely fixed and/or hybrid, and for the last couple years they have been predominantly variable rate.

So that is a shift into a new rising-rate environment vis-à-vis past cycles. All right, I’ll turn the call back to the operator for the queue.

Matthew Clark (Analyst)

Got it. Okay,

OPERATOR

Thank you. And our next question today comes from Gary Tenner at D.A. Davidson. Please go ahead.

Gary Tenner (Analyst)

Thanks. Good morning. Just following up on that comment, Juliana, on differences— kind of the balance sheet this rate cycle versus past, you know, with adding Territorial a couple years ago and now with SMBC MANUBANK. Can you talk about thoughts around deposit betas, you know, as we go over the next several months?

Julian Ibaliska (Chief Financial Officer)

Yeah, so great question. I can share with you the beta that we’ve had thus far, so maybe as a starting point. And for Hope Bancorp, including Territorial and excluding CDs— because as you know, those lag— our beta on our interest-bearing non-maturity deposits from this most recent hike was a little under 24%. That’s one of our best betas ever. And the beta at SMBC MANUBANK was similarly very low. Obviously, it’s a balance between providing exception pricing to your most valuable customers and holding the line across the board overall.

And when we think about betas for future hikes, obviously we expect that the betas will accelerate with each incremental hike. But overall, I think that with the approach that we have taken to managing pricing over the last couple years, and the addition of Territorial to our mix, and now the addition of SMBC MANUBANK to our mix, I think we’ll position ourselves well to continue to have a relatively better performance on beta. Just for your context, the interest-bearing non-maturity deposit beta at Territorial was less than 5%. Okay, so that’s a nice benefit. So I think that overall will be a positive also. Another thing that I would like to highlight on this beta question is the excess liquidity that we picked up with the SMBC MANUBANK transaction. That’s important because when you think about the highest-cost funding, some of which is wholesale, market-rate linked, that funding would reprice at 4.4% in the fourth quarter, and we no longer need to chase that kind of price.

And that will help the beta overall through the cycle.

Gary Tenner (Analyst)

Thanks very much for that. And then I just wanted to also ask on the kind of expense add from SMBC MANUBANK, are there incremental cost saves out of the gate before the, you know, full cost saves are recognized later in 2027? It just feels like adding the kind of, you know, annualized expense, you know, to the fourth quarter run rate pushes the expense level quite a bit above where consensus is, and I just wanted to make sure that that’s the appropriate method to follow.

Julian Ibaliska (Chief Financial Officer)

I would say that the expense kind of curve is a barbell— is that the right word? We have expense cost savings that we are realizing up front this quarter, and then there’ll be a period of time where there’ll be less incremental realization, and then with the core conversion, there’s going to be the next phase of cost savings.

OPERATOR

Thank you. Our next question today comes from Andrew Leisch with Stonex Financial. Please go ahead.

Andrew Leisch (Analyst)

Thanks. Good morning everyone. Just sticking with the expense question here. Looks like they’re operating maybe over 5% of assets that are coming on. I guess what’s different from their operating model versus Hope’s? Because even with the cost saves, they’ll be about a little over 3% of assets, but your efficiency is outstanding and closer to 2%. What’s different with what you’re acquiring and legacy Hope, please?

Julian Ibaliska (Chief Financial Officer)

Let me phrase your question back to you. So you’re asking why is their expense run rate higher relative to their asset base than ours?

Andrew Leisch (Analyst)

Yeah, that expense number just took me by surprise for both.

Julian Ibaliska (Chief Financial Officer)

Yes. No, understood. It’s a good question. Thank you for asking that. I would say that the reason that their expense base starting out of the gate relative to their assets is higher is— I think a lot of it had to do with the fact that they were a subsidiary of a global institution, SMBC. And as you can imagine, regardless of the size of the subsidiary, you were held to the standard of the parent. And so there were a lot of costs embedded in the run rate and operations at SMBC MANUBANK itself that really reflected the fact that they were perceived to be part of a very large bank, and that is the difference between independent banks and the run rates of larger. And then when it comes to the ratio, as you’re pointing out, they’ve got that higher expense burden but they don’t have the assets with which to spread it out. So the math ends up not working very well.

And so in our case, we’re able to absorb the SMBC MANUBANK operations, and we don’t need to duplicate certain functions because we already have it, and our functions are sized to our balance sheet size.

Andrew Leisch (Analyst)

Got it. All right, that’s helpful. But it sounds like then the expense run rate is going to be a little bit higher here, like you mentioned in Gary’s question—some cost saves right off the bat, but really it’s going to be 2028 that we’ll see the full cost save number.

Julian Ibaliska (Chief Financial Officer)

That’s fair. 2028 is going to be the fully in cost saves. And as I mentioned in my remarks, that is related to timing of when the core conversion is scheduled for. We had hoped that we would be able to schedule it for earlier. But of course core conversions are not just dependent on the bank doing the conversion, but also on the core providers. So at the end of the day, this is actually better for our book value because we avoid some excessive contract breakage fees that would otherwise impact the bottom line, even if they’re notable items.

So net-net, it’s a good outcome.

Andrew Leisch (Analyst)

Got it. Very helpful. Thanks for the color. I’ll step back.

OPERATOR

Thank you. And our next question comes from Kelly Motta at KBW. Please go ahead.

Kelly Motta (Analyst)

Hey, good morning. Thanks for the question. I guess to kick it off—and you alluded to it in your prepared remarks—but one of the benefits of Manu Bank is it gives you a lot of liquidity and a lot of flexibility with how to profitably fund ahead. You have some borrowings. Just wondering, as this closes, if there’s any incremental action here with reducing higher-cost borrowings close to day one and, with this level of liquidity, how you’re managing it near term.

Julian Ibaliska (Chief Financial Officer)

Thank you, Kelly. Great question. My treasurer has already given me his wish list of highest-cost funding that we can now reduce as it matures in the fourth quarter. So I would say a lot of that half billion dollars plus of excess liquidity that we gained, we can find very good use for it to avoid, as I mentioned in my other Q&A, 4.4% funding.

Kelly Motta (Analyst)

Okay, got it. That’s helpful. And then in Q3, you had really nice fees. Part of that, you sold a portfolio of other loans. I’m hoping to get a bit more color on that, as well as on SBA where we’re hearing premiums have come in, although you guys got some nice gains. So just wondering about the outlook for that portion of the business.

Julian Ibaliska (Chief Financial Officer)

So let’s answer the SBA question, because in the SBA question—just for clarity—you’re talking about our SBA originations from our team, as opposed to what we purchased from Manu Bank that was directly related to purchase accounting marks and discounts on those loans. So our SBA originations are holding up well, and our SBA team is able to continue to generate great volume in SBA originations.

OPERATOR

Thank you. That concludes our question-and-answer session. I’d like to turn the conference back over to the management team for any closing remarks.

Kevin Kim (Chairman, President and Chief Executive Officer)

Thank you. In closing, I want to extend my sincere appreciation to our colleagues for their dedication and the care that they bring to work every day. We are grateful for all they do for Hope Bancorp and warmly welcome our new Manu Bank colleagues to our team. Thank you all for joining us today and for your continued interest and support. We look forward to speaking with you again next quarter.

OPERATOR

Thank you. Let us conclude our conference call for today. We thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.