Hope Bancorp, Inc. Stock

Good day, and welcome to the Hope Bancorp Third Quarter 2026 Earnings Conference Call. [Operator Instructions] 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.

Thank you, Roco. 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's Chairman, President and CEO; Julianna Balicka, 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?

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. Bancorp post 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 at September 30, 2026. Alongside that growth, our funding mix improved with growth in non-maturity deposits offsetting continued planned decreases in higher-cost time deposits. This shift helped lower our overall deposit cost.

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 Manu banks 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 comprehensive other 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 at 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 at 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 Julianna to review our financial performance for the third quarter in more detail. Julianna?

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 volumes and lower deposit costs.

Average loans grew 1% from the prior quarter, equivalent to 5% anyway. 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 2.8% in the year ago quarter. The sequential 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. 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 $47 million compared with $68 million sold for a net gain of $4.4 million in the second quarter.

Moving on to noninterest expense on Slide 9. Noninterest expense totaled $103 million in the third quarter of 2026, up $4 million or 4% and $99 million for the second quarter and up $6 million or from 6% or $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% and for the third quarter of 2026. Excluding notable items, our efficiency ratio grew to 63.6% for the third quarter of 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 reflects [indiscernible] 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 at September 30 compared with 224 basis 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-off was $7 million or an annualized 19 basis points of average loans compared to 24 basis 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 at September 30, 2026, with the allowance coverage ratio remained 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 equity -- 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 second 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 and other accounting adjustments, consisting of $1.3 billion of real estate loans plus $0.9 billion of commercial loans. We estimate the discount on acquired loans to be approximately $90 million, comprising the interest rate mark, the accretable credit mark and the nonaccretable credit mark, which is equivalent to the allowance of credit losses -- for credit losses. The commercial portfolio included $0.2 billion of SBA loans purchased by MANUBANK in the secondary market. These loans would have had a relatively low effective yield for Hope after the acquisition. Therefore, on October 21, we sold the 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% on at September 30 before purchase and other accounting adjustments.

Deposits acquired from 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 nonmaturity deposits and $0.2 billion of time deposits. Pro forma with the 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 MANUBANK deposits would reduce our cost of deposits by 5 basis points. The deposits acquired from 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 higher -- 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 and since announcement. We have gone from an interest rate environment that was forecasting 3 rate cuts through 2027 at the start of the year with a flat rate at deal announcement, and now the market projects 3 rate increases in 2027. So all that would need to be reflected in forward estimates.

Overall, the addition of the new deposit segment from 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 team to join us from MANUBANK strengthened our growth capabilities for next year and beyond.

In terms of cost savings, we expect fully phased-in cost savings of over 40% up of 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.

Thank you, Julianna. Moving on to the 2026 outlook on Slide 13. With the close of the MANUBANK acquisition and 2 months left in 2026, we updated our full year 2026 management outlook. Including the acquired MANUBANK balances and net of BSK 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 Bank of Hope plus the impact of MANUBANK for the fourth quarter.

Our third quarter results reflected the continued improvement in Bank of Hope fundamentals throughout 2026. With the 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 Bank of Hope 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 Instructions] And today's first question comes from Matthew Clark at Piper Sandler.

Just putting the 2 banks together, thinking about the Fed potentially hiking here again, what's kind of a good -- I guess, what percentage of your loan book will truly float or benefit from the rate hikes?

One second, we will give you that number in terms of the floating fixed mix.

Okay. And then just...

Yes, go ahead.

Yes, maybe another one, Julian a lawyer 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 nonaccretable tied to the reserve. Just do you have the reserve amount so we can deduct that in the life of that $90 million.

Yes. The life of that $90 million is pretty short, about 5 years overall, but there is a big portion of it, that's pretty short, like 2 years or so maybe. It's very front-weighted because it's on the variable rate loans on -- what we acquired. The -- and let me just get back to you on that. Okay. And then on the piece that is the ACL equivalent, is it's going to be -- we're still finalizing our estimate on that ACL portion, and it's probably going to be all, I'm going to say around $30 million.

Okay.

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% loans at our hybrid.

Okay. Okay. So the -- got it. Okay.

I would 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 of 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 of years, they have been predominantly variable rate. So that is a shift into a new rising rate environment vis-a-vis past cycles.

All right. I'll turn the call back to the operator for the queue.

And our next question comes from Gary Tenner at D.A. Davidson.

Just following up on that comment, Julianna, on differences, kind of the balance sheet, this rate cycle versus past with adding territorial a couple of years ago and now with MANUBANK, do you talk about thoughts around deposit betas as we go over the next several months.

Yes. So great question. I can share with you the beta that we've had thus far. So maybe a lot as a starting point. And for Bank of Hope, including territorial and excluding CDs, because as you know, those lag, our beta on our interest-bearing nonmaturity deposits from this most recent hike was a little under 24%. That's one of our best betas ever. And so -- and the beta at MANUBANK was similarly very low. Obviously, it's a balance between providing exception pricing to your most valuable customers and holding the line on -- 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 of years. And the addition of territorial to our mix and now the addition of MANU to our mix, I think, will position us well to continue to have a relatively better performance on beta.

Just for your context, the interest-bearing nonmaturity deposit beta at the territorial was only 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 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 have to chase that kind of price, and that will help the beta overall through the cycle.

And then I just wanted to also ask on the kind of expense add from MANUBANK. Are there incremental cost saves out of the gate before the full cost saves are recognized later in 2027? It just feels like adding the kind of annualized expense 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.

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 upfront 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.

Our next question today comes from Andrew Lease with Stonex Financial.

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 Hopes because even with the cost saves it'll be a little over 3% of assets, but your efficiencies outstanding closer to 2%. I guess what's different with what you're acquiring and legacy Hope?

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

Yes. that expense number just took me by surprise for both what they're operating...

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 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 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 rate of larger -- and what -- and so that -- 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 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.

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

That's fair. 2028 [indiscernible] cost saves. And as I mentioned in my remarks, that is related to timing of when the core conversion is scheduled for. We have hopes that we will be able to schedule it for earlier. But of course, core conversions are not just dependent on the banks 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 there are notable items. So net-net, it's a good outcome.

And our next question comes from Kelly Motta at KBW.

I guess to kick it off, and you alluded to it in your prepared remarks, but what are the benefits of MANUBANK 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 kind of as this closes, if there's any incremental action here with kind of reducing higher cost borrowings close to day 1? And kind of with this level of liquidity, how you manage you get near term?

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 $0.5 billion 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.

Okay. Got it. That's helpful. And then in Q3, you had a really nice fees. Part of that, you had a -- 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 kind of the outlook for that portion of the business.

So let's answer the SBA question because in the FDA question, just for clarity, you're talking about our SBA originations from our team as opposed to what we purchased from MANUBANK 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.

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.

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 Bank of Hope and want me welcome our new MANUBANK 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.

Thank you. That does 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.

Good day and welcome to the Hope Bancorp 2026 Second Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. 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. please press star then two. Please note this event is being recorded. now like to turn the conference over to Maxime Olivan, Investor Relations Manager. Please go ahead.

Thank you, Drew. Good morning, everyone, and thank you for joining us for the Hope Bancorp Investor Conference Call for the second 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 two, let me start with a brief statement regarding forward-looking remarks. The call today contains forward-looking 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 Bank Corp. 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 this quote today includes non-GAAP financial measures. For a more detailed description of the risk factors and the 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 for management today will be Kevin Kim, Hope Bancorp Chairman, President and CEO, and Juliana Imbilisca, Hope Bancorp Chief Financial Officer. 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. Kevin. Thank you, Maxim. Good morning, everyone, and thank you for joining us today. Beginning with slide three, you will find a brief overview of our results. Overall, we delivered a strong second quarter and made solid progress during the first half of the year in executing against our key operating priorities. Second quarter 2026 revenue of $148 million drove reported diluted earnings per share of 26 cents up 12% quarter over quarter, or diluted earnings per share excluding notable items of 27 cents, up 17% sequentially from 23 cents in the first quarter of 2026. Year over year, earnings per share excluding notable items were up 40% from 19 cents in the year-ago quarter. On a sequential quarter basis, the strong earnings growth was driven by revenue growth of 5%, net interest margin expansion of six basis points, and positive operating leverage.

All our profitability ratios improved while loans and DEPOSITS GREW. PRE-PROVISION NET REVENUE FOR THE 2026 SECOND QUARTER TOTALED $49 MILLION, UP 6% SEQUENTIALLY FROM $47 MILLION IN THE FIRST QUARTER OF 2026, EXCLUDING NOTABLE ITEMS, WHICH WERE PRIMARILY MERGER Second quarter 2026 pre-provision net revenue was $51 million, up 10% from the prior quarter and up 25% year-over-year. Gross loans increased 2% or 8% annualized to $15 billion as of June 30, 2026, and deposits increased 1% or 4% annualized to $15.9 billion. Our deposit mix continues to grow. to move with growth in non-maturity deposits more than offsetting a planned decline in time deposits to continue lowering our cost of funds. Moving on to slide four, at June 30, 2026, our common equity tier one ratio was 12.27% and our total capital ratio was 13.95%. Our capital position is strong and enables us to support organic growth, complete the pending acquisition of the commercial banking unit of SMBC Manu Bank, and return capital to stockholders. Year to date in 2026, the company returned $45 million of capital to stockholders through cash dividends and common stock. stock repurchases.

Year to date in 2026, the company repurchased approximately 773,000 shares of common stock at an average price of $11.25 per share for a total of $9 million, pursuant to its existing $50 million share repurchase authorization. At June 30, 2026, $27 million remained available under the authorization, providing flexibility for future capital management. Our board of directors declared a quarterly common stock dividend of 14 cents per share payable on or around August 20 of 2026 to stockholders of record as of August 6, 2026. On March 31st, 2026, we announced our pending acquisition of the commercial banking unit of SMBC Manubank. We expect the transaction to close in the second half of 2026, subject to regulatory approvals and customary closing conditions. This transaction aligns with our priorities to expand our middle market and multinational banking capabilities, develop specialty deposit verticals, our presence in our core Southern California market and enhance our balance sheet with quality loans and attractive deposits. Based on June 30, 2026 balances and before-fail value marks, This all-cash transaction is anticipated to add approximately $2.3 billion in loans and $2.6 billion in deposits and result in net cash flowing to Bank of Hope.

We expect the transaction to enhance our core earnings and returns on tangible equity and to support efficient capital management. Alongside the Manu Bank acquisition, we will enter into a collaboration and partnership agreement with SMBC to support the local banking needs needs of their commercial and retail Japanese customers seeking to do business in the United States. Our partnership with SMBC will broaden our multinational client reach and contribute to differentiated long-term growth. Continuing to slide five, second quarter 2026 loan growth was led by commercial and industrial lending with additional contributions from commercial real estate and residential mortgage overall. loan growth is strengthening. At June 30, 2026, gross loans totaled $15 billion, up 2 percent quarter-over-quarter, equivalent to 8 percent annualized, and up 4 percent year-over-year. On the deposit side, deposits totaled $15.9 billion at June 30, 2026, up 1% quarter of a quarter, over 4% annualized. Non-interest-bearing demand deposits increased 5% from the prior quarter, and time deposits declined 1%. 1%.

Compared with the year-ago quarter, non-interest-bearing demand deposits increased 2%, while time deposits decreased 2%. Decreases in time deposits have been planned to help improve our deposit mix and lower our funding costs. In addition, we are benefiting from the addition of territorial savings, which operate in Hawaii, a market with lower deposit costs. Year to date, our customer retail deposits in Hawaii have grown 6%. With that, I will turn the call over to Juliana to review our financial performance for the second quarter in more detail. Thank you, Kevin, and good morning, everyone.

Beginning on slide six, our net interest income totaled $129 million for the second quarter of 2026, up $5 million, or 4%, from the first quarter of 2026, and up $12 million, or 10%, from the second quarter of 2025. Second quarter 2026 average of $14.8 billion grew 1% quarter over quarter and 3% year over year, and our net interest margin expanded. Second quarter, 2026 net interest margin was 2.96%, up six basis points from 2.90% in the prior quarter and up 27 basis points from 2.69% in the year-ago quarter. The sequential quarter net interest margin expansion was primarily driven by higher loan yields and a lower cost of funds. On slide seven, we provide more detail on balance trends, yields, and rates for our average loans and deposits. On to slide eight. For the second quarter of 2026, non-interest income totaled $19 million, up 11% from the prior quarter and up 19% from the year ago quarter, excluding notable items. The quarter-over-quarter increase in non-interest income was primarily due to growth in net gains on sales of SBA loans, growth in customer-related income and fees, and higher net gains on sales of available-for-sales securities.

During the second quarter, we sold $68 million of SBA loans for a net gain on sale of $4 million, compared with sales of $53 million in the first quarter for a net gain on sale of $3 million. This reflects both higher sale volume and higher sale premiums in the second quarter. Customer-related income and fees, including deposit service fees, grew 6% quarter-over-quarter and 18% year-over-year, reflecting higher customer activity across a number of fee income lines of business. Moving on to non-interest expense on slide nine. Non-interest expense totaled $98 million in the second quarter of 2026, up from $94 million in the first quarter. Excluding merger related costs, non-interest expense totaled $96 million, up 2% from the prior quarter and up 5% year-over-year, reflecting continued prudent expense management across all areas of operating expenses. 2026 second quarter revenue growth exceeded operating expense growth, resulting in positive operating leverage and improving our efficiency. Accordingly, our efficiency ratio, excluding notable items, improved to 65.2%, down from 66.9% in the prior quarter and down from 16.9% 39.1% in the year-ago quarter.

Next onto slide 10. I will review our asset quality. It remained broadly stable during the quarter and compared favorably with the year-ago period. Priority is early identification and problem loan resolution. Our credit trends remain healthy and criticized loans improved meaningfully from the year ago period. Criticized loans totaled $334 million at June 30th, 2026, up $9 million from March 31st, 2026, and meaningfully down by $80 million or 19% from June 30th, 2025. The criticized loan ratio was 2.24% of loans receivable at June 30th, 2020, improving 63 basis points from 2.87% a year ago. Non-performing assets were $113 million, or 59 basis points of total assets, at June 30, 2026, compared with 65 basis points at March 31, 2026, and 61 basis points at June 30, 2025.

Second quarter 2026 net charge-offs were $9 million, or annualized 24 basis points of average loans, down from $11 million, or annualized 29 basis points, in the prior quarter, and down from annualized 33 basis points in the year-ago quarter. Accordingly, the provision for credit losses was $7 million in the 2026 second quarter, compared with $9 million in the first quarter. June 30th, 2026, the allowance for credit losses totaled $153 million with a coverage ratio of 1.03% of loans receivable. With that, let me turn the call back to Kevin.

Thank you, Juliana. Moving on to the outlook on slide 11. Thank you. As we enter the second half of 2026, we believe Hope is well positioned to build on the progress made during the first half of the year. Our full year, 2026, management outlook is essentially unchanged. We continue to expect end of period loan growth of approximately 20%, including manual bank loan balances. We continue to expect revenue growth in the range of 15 to 20% and pre-provision net revenue growth in the range of 25 to 30%. both excluding notable items and including the impact of many banks' operations for the fourth quarter. Our priorities remain consistent. Prudent balance sheet growth, operating expense discipline, and active credit oversight all All in support of sustainable and profitable earnings growth and effective capital management across a range of operating environments. Our loan pipelines are active and we are pursuing opportunities that meet our pricing, structure, and credit standards.

On deposits, we continue to improve MIPS and manage funding costs in support of profitable growth. Our expenses, on expenses, we are balancing prudent expense control with targeted investments in technology, talent, risk management, and commercial banking capabilities. Finally, the pending Manubank transaction is closely aligned with our commercial banking strategy and long-term earnings objective. With that, operator, please open up the call for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Please limit yourself to two questions. At this time we will pause momentarily to assemble our roster. The first question comes from Matthew Clark with Piper Sandler.

Please go ahead.

Hey, good morning, everyone. To start on the margin, Julianna, if you had the spot rate on deposits at the end of June. the margin in the month of June, and then just thoughts around deposit costs in general from here.

So the spot rate on deposits at the end of June was 2.58%. And on interest-bearing deposits, it was 3.32%. And as we look forward in terms of our net interest margin for the rest of the year, We should have a few basis points increase each quarter, but it'll be much more much more. is much more much not as great as the first quarter to second quarter. But we're still looking for continuous margin expansion. Then that interest margin in June was 2.98%. And as you recall from prior conversations, we continue to benefit from the repricing of our CD portfolio.

which helps to bolster margin expansion. And just thoughts on deposit pricing in general from here and costs?.

I mean, we're working very hard to continue to improve it by improving our deposit mix, but I mean, it's competitive out there.

Yep, fair enough. And then just on the SBA, again, on sale, looked a lot stronger this quarter um just any commentary on the outlook there should we expect to reset maybe a little lower from here are you going to try to keep that pace.

Yes, the premiums in the secondary market remain healthy. And the current premium range from mid to low eights. We will continue our balance between gain on sales, economics with portfolio retention decisions and Although we will be flexible, our current outlook for 2026 will be around $16 to $17 million of SBA gains on sale.

Perfect. Thank you. Thank you. The next question comes from Gary Tenner with Yay Davidson. Please go ahead.

Thank you. Good morning. Just a follow-up question on time deposits. Kevin, I think you kind of talked about really working to... lower those further as a percentage of the overall portfolio. If you give us a sense of what that looks like, is there a target you're trying to get to or maybe what your longer term.

mix preferences would be. Hi Gary, this is Juliana. You know, longer term, we would like to continue to reduce our reliance on, or the mix of CDs in our overall deposit book, but it takes time to move the mix, even one percentage point, as you well know. and our core customer base is, CDs is a preferred product for our core customer base. So over time, we're continuing to diversify the franchise with, you know, the acquisition of Territorial Bank Corp last year, the pending acquisition of ManuBank, which will bring different sources of deposits to the mix, and that will overall help us lower the percentage of CDs in the total book. But as far as stating a particular target, just the reality is this will take time to reduce closer to.

industry norms. Yes, makes sense. And you also flag pretty good success year to date on growing deposits in the Hawaii franchise. Can you talk about the relative pricing of what you're seeing from that part of the franchise versus mainland deposits? Lower than mainland. Alright. Thank you.

Thank you. The next question comes from Kali Mata with KBW. Please go ahead.

Good morning. Thanks for the question. On the Pebbing Manubank transaction, do you have any updated insight in terms of time and close? I believe you're still waiting for regulatory approvals, but any help there as well as what's assumed in your guide would be helpful for modeling purposes. Thank you.

Kelly, we still expect the transaction to close in the second half of 2026. And I think our timeline is right on track. It ultimately depends upon the actual timing of the approvals. I think we are feeling pretty comfortable about the second half closing of this transaction.

Great. And, Juliana, do you... Because I believe your guide includes the...

some contribution from Manubank. Is that about a quarter? Yes. For modeling purposes, as you can see from Kevin's remarks on our outlook slide, we're assuming a quarter's worth of contribution from Manubank operations. But, I mean, that's just merely taking the midpoint of second half into a model. And as Kevin clearly stated, The timing is dependent on approvals and other factors rather than just, you know, a clean midpoint, you know? Yes. Understood, totally. That's helpful. And then in terms of,.

kind of the deposit competitive landscape, obviously, Monubank helped quite a bit with that. I'm wondering what the cost of new money is coming in at this stage. It seems rather competitive.

The cost of new money is ranging between 350 and 380 on the incremental interest-bearing deposits, depending on sub-market, sub-product, I would say. a range to say, you know, time deposits on the higher end of that range, money markets on the lower end of that range, and low-cost IB deposits, even lower than that range. But the incremental competitive deposit, I would say, is somewhere between 350 and 380, if that helps.

That's really helpful. And then closing the loop on deposits, you guys had some really nice non-interest bearing growth this quarter. I'm wondering, it looks like it's above the averages. If you could provide any color in terms of the drivers of that and if there was any sort of shorter-term fluctuations that we should be mindful of when thinking through the outlook ahead.

One driver I can point you to, or not driver, one item that I can highlight in DDA growth this quarter, I would say, is we saw an inflow of tariff refund money into a number of our commercial and small business customers.

So that helped with deposit growth this quarter. Thank you. The next question comes from Tim Coffey with Breen Capital. Please go ahead.

Thank you, everybody. I have some questions about the loan origination activity in the quarter and how that might have compared to the first quarter.

Well, our loan production was pretty robust in the second quarter, and our pipeline coming into the third quarter is also pretty solid. So we expect a robust loan origination again in the third quarter, but But what I want to point out is that we are continuing our efforts to prioritize the relationship economics structure and credit quality over headline growth.

Right. Okay. That's helpful. And then what were new low yields in the quarter?.

The new loan yields this quarter, they ranged from about 6% on commercial real estate, a little above 6% on commercial real estate, to close to 8% on SBA. So there was a full gamut of new loan yield range.

Okay, but all pretty much higher than the average yield for the quarter.

And then... AMY KASS- You can put it up to six and a quarter if you wanted to average it.

Okay, that's great, Jenna. Thanks. And then, does the company have a, on buybacks, does the company have a 10B5 or some other tools to continue to repurchase shares through the close of the transaction? Yes.

We do have a plan out there like that, yes. Okay, great.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you. As we look ahead, we remain committed to building a more profitable and resilient franchise and delivering sustainable long-term value for our stockholders. In closing, I want to thank our colleagues for their dedication and commitment. Their efforts essential to executing our strategy and strengthening our organization. Thank you all for joining us today and we look forward to speaking with you again next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Hello, and welcome to the Virtual 2026 Annual Meeting of Stockholders of Hope Bancorp, Inc. Please note that this meeting is being recorded. [Operator Instructions]

It is now my pleasure to turn this meeting over to the company's Chairman, President and Chief Executive Officer, Mr. Kevin S. Kim. Mr. Kim, the floor is yours.

Good morning, fellow stockholders, ladies and gentlemen. It is my great pleasure to welcome you to the Hope Bancorp, Inc. 2026 Annual Meeting of Stockholders. This year's annual meeting is being conducted slowly online via live webcast.

Joining me today are our Chief Financial Officer, Ms. Julianna Balicka; our General Counsel, Ms. Angelee Harris; and Mr. Maxime Olivan, Senior Manager of Strategic Finance and Investor Relations. On behalf of my colleagues on the Board of Directors, I would like to thank our stockholders, customers, employees and the communities we serve for their continued trust and support over the years.

Now let me begin by introducing our director nominees. Mr. Dale Zuehls is our Lead Independent Director; Mr. Donald Byun is an Independent Director; Mr. Jinho Doo is an Independent Director; Ms. Daisy Ha is an Independent Director; Mr. Joon Kyung Kim is our Deputy Lead Independent Director; Ms. Rachel Lee is an Independent Director; Mr. Takaaki Nakajima is an Independent Director; Mr. Guido Sacchi is an Independent Director. All of these directors as well as myself are standing for election to serve until our next Annual Meeting of Stockholders. Mr. Scott Yoon-Suk Whang; Mr. David Malone; and Ms. Lisa Pai, our independent directors who are retiring from our Board effective as of our Annual Stockholders Meeting today. We thank each of them for their valuable contributions and wish them all the best.

Our Board -- our director nominees represent a diverse group with broad background, experience and professional expertise that we believe strengthen the Board's oversight, decision-making and risk management capabilities. As a Board, we remain committed to serving the best interest of the company and its stockholders. Today, together with our executive management team, I am confident in our continued ability to advance the company's long-term success. I would also like to recognize Mr. Cliff Hong, who is attending from Crowe LLP, our independent registered public accounting firm.

It is now 10:34 a.m. Pacific Time. And as Chairman, President and CEO of Hope Bancorp, I would now like to call the Hope Bancorp 2026 Annual Meeting of Stockholders to order. At this point, I will ask Ms. Angelee Harris, who will serve as Secretary of this annual meeting, to conduct the formal business of the meeting.

Thank you, Chairman, Kim. Please be advised that following the formal business of the company's 2026 Annual Meeting of Stockholders, we will conduct a question-and-answer session. As noted by the operator at the beginning of this meeting, you may submit questions or comments at any time by clicking on the message icon.

Mr. Maxime Olivan has been selected by the Board to serve as the Inspector of Election for the meeting. As such, Mr. Olivan will count and certify the votes cast by proxy or in person via the Internet for the purpose of quorum and voting. It is currently 10:35 a.m. Pacific, and I declare that the polls are now officially open.

[Voting]

We will close the polls in a few minutes when all online votes cast have been received and counted. Most of you have already voted online or sent in your votes by proxy. If you have no intention to change your vote, no further action is required. If, however, you have not yet voted and wish to vote in person via the Internet at the meeting today, you may do so now by clicking on the link provided online. You must have logged in with your control number included in your notice or proxy card to cast your vote online. If you wish to change your vote, you may also do so by clicking on the link provided online.

The list of stockholders entitled to vote at the meeting is available on the meeting site. The minutes of last year's annual meeting are available to any stockholder that wishes to inspect it. To obtain access to the minutes, please send an e-mail request to me at [email protected]. We have not received notice from any stockholders as required under our bylaws of any other matter that is required to be considered at today's meeting. Therefore, no other proposals may be properly introduced by stockholders at this meeting.

It is now 10:36 a.m. Pacific Time, and the online polls for voting will now be closed. This meeting is being held pursuant to the call of the Board of Directors and the legal notice of the meeting, which was included as part of the notice of Internet availability of proxy materials and was delivered on or about April 10, 2026, along with the proxy card to each of our stockholders of record as of March 23, 2026, the record date for this year's annual meeting. A copy of the legal notice and the affidavit of mailing will be incorporated into the minutes of this meeting. All stockholders as of the meeting record date of March 23, 2026, are entitled to vote today.

We now need to establish that there is a quorum to start this meeting. A quorum is established by the presence at the meeting, either by proxy or in person via the Internet of more than 50% of the outstanding shares. Mr. Olivan, would you please report on the quorum?

Thank you, Ms. Harris. As the inspector of elections, I certify the following: the total number of outstanding shares as of March 23, 2026, and entitled to vote at this annual meeting is 127,946,655 and the preliminary count of shares voting at this meeting, either in person via Internet or cast by proxy, is at least 113,250,276 shares, representing approximately 88.5% of total shares outstanding and entitled to vote. Accordingly, we have a quorum for the transaction of business at today's meeting.

Thank you. Next, we will proceed with voting on each of the proposals that are described in the proxy statement. First proposal is the election of directors. The director nominees elected at this meeting will serve on the company's Board until the 2027 Annual Meeting of Stockholders and until their successors are duly elected and qualified. Mr. Olivan, please report on the votes for this proposal.

I certify that each of the following 9 director nominees have each received a majority of the votes cast: Mr. Kevin Kim, Mr. Dale Zuehls, Mr. Donald Byun, Mr. Jinho Doo, Ms. Daisy Ha, Mr. Joon Kyung Kim, Ms. Rachel Lee, Mr. Takaaki Nakajima and Mr. Guido Sacchi. Accordingly, all 9 director nominees have been elected to the Board of Directors to serve until the 2027 Annual Meeting of Stockholders.

Thank you, Mr. Olivan. The second proposal is the ratification of Crowe LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2026. Mr. Olivan, please report on the votes for this proposal.

I certify based on preliminary reports from a tabulating agent, we received 109,695,468 votes in favor of proposal 2, equaling approximately 96.9% of shares present and entitled to vote at this meeting. Accordingly, the selection of Crowe LLP has been ratified by the stockholders.

Thank you, Mr. Olivan. The third proposal is an advisory and nonbinding approval of the compensation paid to our named executive officers as described in the proxy statement. Mr. Olivan, please report on the votes for this proposal.

I certify that based on preliminary reports from a tabulating agent, 95,908,343 shares approved proposal 3, equaling approximately 89.4% of shares present and entitled to vote at this meeting. Accordingly, the stockholders have provided an advisory and nonbinding vote approving the executive compensation as described in the proxy statement.

Thank you, Mr. Olivan. As there is no further business to be brought before the meeting, we will now adjourn the Hope Bancorp 2026 Annual Meeting of Stockholders at 10:40 a.m.

Now I would like to turn it back to our Chairman, President and CEO, Mr. Kevin Kim; and our Chief Financial Officer, Ms. Julianna Balicka, for the question-and-answer session, which will be moderated by Mr. Maxime Olivan.

Thank you, Ms. Harris. If you are stockholders of Hope Bancorp, you may submit questions online by clicking on the Q&A tab in the upper right corner of the meeting center screen. We will wait just a moment for any questions.

Okay. Chairman, Kim, we have no questions submitted.

Thank you, Mr. Olivan. Since there are no questions, I would like to again thank you for joining us today for our 2026 Annual Meeting of Stockholders, and we look forward to seeing you at our next year's annual meeting.

This concludes the Hope Bancorp 2026 Annual Meeting of Stockholders. You may now disconnect.

Good day, and welcome to the Hope Bancorp 2026 First Quarter Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. Maxime Olivan, Investor Relations Manager. Thank you, and over to you.

Thank you, Mayank. Good morning, everyone, and thank you for joining us for the Hope Bancorp Investor Conference Call for the first 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. The call today contains forward-looking 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 this call today 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 press release issued this morning.

Presenting from management today will be: Kevin Kim, Hope Bancorp Chairman, President and CEO; and Julianna Balicka, Hope Bancorp Executive Vice President and Chief Financial Officer. 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?

Thank you, Maxime. Good morning, everyone, and thank you for joining us today. Our first quarter 2026 results reflected strong year-over-year growth in net income, revenue, loans and deposits, driven by organic growth and the strategic benefits of the Territorial Bancorp acquisition.

Quarter-over-quarter, our pre-provision net revenue grew, supported by improved efficiency and continued progress in lowering our cost of deposits.

Beginning with Slide 3. You will find a brief overview of our results. Net income for the first quarter of 2026 totaled $30 million, up 40% year-over-year from $21 million in the prior year period. Quarter-over-quarter, net income decreased from $34 million, reflecting higher provision for credit losses and income taxes partially offset by growth in pre-provision net revenue.

Pre-provision net revenue for the first quarter totaled $47 million up 43% year-over-year from $33 million and up 1% quarter-over-quarter from $46 million. The provision for credit losses increased in 2026 first quarter, primarily reflecting higher net charge-offs due to the successful resolution of problem loans. This quarter, criticized loans decreased $26 million or 7% from the prior quarter.

The effective tax rate was higher in the first quarter of 2026, as the 2025 fourth quarter tax provision benefited from true-up items. On March 31, 2026, we announced the accretive acquisition of the Commercial Banking unit of SMBC MANUBANK, which we will refer to as MANUBANK throughout this call. We expect the transaction to close in the second half of 2026, subject to regulatory approvals and the satisfaction of other customary closing conditions.

We are very excited about this transaction, which aligns with our key priorities of building our commercial banking capabilities, expanding our reach among middle market and multinational clients and growing our core deposit franchise. We believe MANUBANK will deepen our presence in the Greater Los Angeles market and a highly complementary commercial banking platform including diversified middle market lending, franchise finance and specialty deposit verticals such as trust and estate banking.

The pending transaction will bring a unique opportunity to combine SMBC MANUBANK's Japanese banking division with our established Korean subsidiary banking group, creating a differentiated, scaled platform to serve Asian multinational businesses operating in the United States.

From a financial perspective, the pending acquisition is expected to add approximately $2.5 billion in commercial and industrial and commercial real estate loans and $2.7 billion in deposits of which only approximately 3% are CDs and which we anticipate will contribute a lower overall cost of deposits, we project this transaction to be meaningfully accretive to earnings in 2027, strengthen our recurring core earnings power and improve our profitability, including returns on equity, through an efficient deployment of capital without the issuance of new shares.

In addition, we will establish a collaboration and partnership agreement with SMBC and which is expected to create meaningful opportunities to expand our services to a broader global multicultural customer base.

Overall, this is a highly attractive transaction that we believe will support our progress towards achieving our strategic objectives.

Moving on to Slide 4. During the quarter, we returned capital through a repurchase of approximately 604,000 common shares totaling $7 million and representing about 0.5% of total shares outstanding. We have $29 million of remaining capacity under our existing authorization, which we intend to deploy opportunistically.

Our Board of Directors declared a quarterly common stock dividend of $0.14 per share payable on or around May 22, 2026, to stockholders of record as of May 8, 2026. Under the terms of the definitive agreement, the pending MANUBANK acquisition will be settled in an all-cash transaction and is expected to result in a net cash benefit to Hope.

On this slide, you can see our optimized pro forma capital ratios, and we are anticipating a tangible book value earn-back period of approximately 2 years. The pro forma tangible book value dilution would come from the creation of the core deposit intangible and the net impact to equity from balance sheet marks and acquisition-related charges.

Continuing to Slide 5. Loan balances were essentially stable linked quarter. At March 31, 2026, gross loans totaled $14.74 billion compared with $14.79 billion in the prior quarter. Year-over-year, gross loans increased 10% from $13.34 billion at March 31, 2025, and reflecting the impact of the Territorial acquisition and organic residential mortgage growth.

As we enter the second quarter, our loan pipelines are strong and building, reflecting improving production trends and increased activity across our markets.

On the deposit side, Deposits were $15.73 billion at March 31, 2026, growing 1% quarter-over-quarter. Non-maturity interest-bearing deposits were up 3% and noninterest-bearing demand deposits were up 0.5%. Higher cost CDs were intentionally run off. Year-over-year, deposits increased 9%, primarily due to the Territorial Bancorp acquisition.

With that, I will ask Julianna to provide additional details on our financial performance for the first quarter. Julianna?

Thank you, Kevin, and good morning, everyone. Beginning on Slide 6. Our net interest income totaled $124 million for the first quarter of 2026, up 23% from the first quarter of 2025 and a decrease of 3% from the prior quarter.

Quarter-over-quarter, the decrease in net interest income reflected the impact of a lower day count in the first quarter and a modest decrease of 0.4% on average earning assets in which average loans were up but other earning assets declined.

The first quarter 2026 net interest margin was 2.90%, unchanged quarter-over-quarter, the impact from decreased loan yields was more than offset by lower deposit costs. Year-over-year, our net interest margin expanded 36 basis points from the first quarter of 2025. The increase was primarily driven by improvements in our funding costs. The cost of our average interest-bearing deposits decreased 77 basis points to 3.37% in the first quarter of 2026 and down from 4.14% in the first quarter of 2025, equivalent to a deposit beta of over 100% relative to the decline in the federal funds target rate over the same period.

The full impact of the Fed fund's target rate cuts is still benefiting us with the continued repricing of time deposits. In the first quarter of 2026, we originated time deposits at a blended rate of 3.62%, down from a blended rate of 3.99% on our maturing CDs.

On Slide 7. The we present the quarterly trends in our average loan and deposit balances and our weighted average yields and costs.

On to Slide 8, where we summarize our noninterest income. For the first quarter of 2026, noninterest income totaled $17 million, down $1 million compared with $18 million in the prior quarter and up $1 million compared with $16 million for the first quarter of 2025. The quarter-over-quarter decrease in noninterest income was primarily due to less gains on the sale of investment securities and lower customer level swap fee income, the latter of which reflected less underlying transaction activity in the first quarter.

During the first quarter of 2026, we sold $53 million of SBA loans compared with $46 million sold in the fourth quarter of 2025. Accordingly, we recognized SBA gains on sale of $3 million for the first quarter of 2026, up approximately $700,000 from the fourth quarter of 2025.

Moving on to noninterest expense on Slide 9. Our noninterest expense totaled $94 million in the first quarter of 2026, down from $99 million in the fourth quarter of 2025. The sequential quarter decrease reflected continued expense management discipline. Year-over-year, noninterest expense increased from $84 million in the first quarter of 2025, primarily due to the inclusion of Territorial's operating expenses.

The efficiency ratio for the first quarter of 2026 improved to 67% and down from 68.2% in the prior quarter and down from 72% in the year ago quarter, demonstrating continued positive operating leverage alongside disciplined expense management.

Next, on to Slide 10. I'll review our asset quality, which has continued to steadily improve and reflected a quarter-over-quarter reduction in nonperforming loans. This was primarily driven by successful resolutions of problem loans.

At March 31, 2026, criticized loans totaled $325 million, down 7% quarter-over-quarter and down 28% year-over-year. The sequential quarter improvement included a 23% reduction in special mention loans and a 2% reduction in classified loans. But the criticized loan ratio improved to 2.22% of total loans at March 31, 2026, down from 2.39% at December 31, 2025, and down from 3.36% at March 31, 2025. Net charge-offs were $11 million for the 2026 first quarter or annualized 29 basis points of average loans, compared with 10 basis points annualized for the prior quarter and 25 basis points annualized for the year ago quarter.

Reflecting the linked quarter change in net charge-offs, the 2026 first quarter provision for credit losses was $9 million up from $7 million for the '25 fourth quarter -- 2025 fourth quarter. The allowance for credit losses totaled $155 million and the coverage ratio was 1.06% at March 31, 2026, compared with $157 million and a coverage ratio of 1.07% at December 31, 2025.

With that, let me turn the call back to Kevin.

Thank you, Julianna. Moving on to the outlook on Slide 11. We present our updated management outlook for the full year 2026, including the preliminary impact of the pending MANUBANK transaction, which we expect to close in the second half of 2026, subject to regulatory approvals the satisfaction of other customary closing conditions.

Accordingly, we expect loan growth of over 20% between December 31, 2025, and December 31, 2026, reflecting the impact of the MANUBANK transaction and organic growth. Relative to our assumptions at the beginning of the year, we are moderating CRE loan growth ahead of the transaction close to manage pro forma loan concentration. Our current pipelines are strong and building, and we anticipate commercial and residential mortgage loan growth will continue to be robust in 2026.

We anticipate year-over-year total revenue growth to be at the higher end of our 15% to 20% range for the full year of 2026 assuming 1 quarter of contribution from the pending MANUBANK transaction. The incremental revenue from MANUBANK would be partially offset by the impact from the aforementioned slower commercial real estate loan growth. We assume no Fed funds target rate cuts in 2026. We anticipate unchanged pre-provision net revenue growth excluding notable items, at a range of 25% to 30% for the full year 2026. This includes a quarter's worth of impact of MANUBANK's operating expenses. We anticipate the benefits of cost savings from the Man Bank transaction will begin from 2027. Accordingly, we project the MANUBANK transaction to be meaningfully accretive in to 2027 earnings.

We continue to assume a steady asset quality backdrop and a full year effective tax rate between 20% and 25% in 2026. With that, operator, please open up the call for questions.

[Operator Instructions] We have the first question from the line of Gary Tenner from D.A. Davidson.

I wanted to ask about the repurchase activity in the quarter. Could you characterize the forward appetite here and whether you've got an updated target payout ratio or target capital levels we should be thinking about?

We -- that will depend on capital generation and growth opportunities. We will continue to evaluate opportunistic repurchases within that framework. We still have capacity under our share repurchase authorization. And we already purchased $7 million of shares since it was refreshed last quarter. So that's where we stand today, and we regularly review our capital allocation priorities. So our use of capital to repurchase our shares will be opportunistic.

Okay. Appreciate that. And then Julianna, can you provide the purchase accounting benefit for the quarter?

Not material.

Not materially different than last quarter or just in dollars, not material?

Not materially different quarter-over-quarter, it's about similar. It's $4 million.

I mean I told you last -- I believe I answered this question in prior quarters, it might have been even your question. With the territorial transaction, right, these residential mortgage loans are long dated loans, it's a long-term portfolio. So the purchase accounting benefit is going to be a steady benefit each quarter for a number of years as opposed to when you do commercial loan acquisition where it's a much shorter weighted average life of the portfolio. So it's a much more -- there's much more fluctuations to purchase accounting benefit.

We have the next question from the line of Matthew Clark from Piper Sandler.

Good morning, everyone. I want to start on expense run rate, some pretty good improvement here from the fourth quarter. Just wanted to get a sense for -- whether that's sustainable and what a normalized run rate might be here in the first quarter?

Thank you, Matt. So this quarter, you we saw some good expense management. And I would say I'll go back to our comments about expenses for the full year of 2026 relative to last quarter, when we gave -- we made comments around the fourth quarter as a jump-off point for a run rate. So the first quarter was a good quarter with some good expense control, but I would anticipate that as our production strengthens and our revenue growth strengthens throughout the year, the expenses will tick up from there. But overall, we'll stay within that original comments that we made for you last quarter with full year growth that we talked about.

Got it. Okay. And then are you opting out of the CECL double account with the acquisition?

We are still going to evaluate.

Okay. Okay. And then just the spot rate on deposits, if you have it. And I know there's going to be an incremental benefit from CD repricing, but just thoughts on deposit cost outlook with the Fed on hold?

Sorry, could you repeat the second part of your question?

Just the deposit cost outlook, with the Fed on hold and competitive pricing on the CD side?

Right. So our CDs are continuing to reprice as we quoted in our script about how much pickup we're getting each quarter. So when we look at our deposit cost outlook for the rest of the year, each quarter, we see about 5 to 7 basis points of interest-bearing deposit cost reduction just from the mathematics.

And then just giving refresh on the CECL double count in our 10-K and Q, you would have seen that we already adopted the ASU for Territorial transaction.

[Operator Instructions] We have the next question from the line of Kelly Motta from KBW.

Maybe to kick it off with loan growth. Your guidance implies some pullback in commercial real estate with an eye to manage those concentrations. Can you provide any color into, Q1 was down a little bit. I'm wondering if that was in anticipation of signing this deal, kind of what you were seeing in terms of payoffs and kind of strategically moving forward your organic outlook for resi and commercial as you manage ahead?

I think that for our outlook, organic outlook kind of looking forward, I would say on a full year basis, I would expect organic loan growth to be mid-single digits and it would come from C&I and residential mortgage. C&I of course, being the higher percentage loan grower, and I would expect flat CRE balances.

Okay. That's pretty helpful. And can you remind us your pro forma CRE concentrations for SMBC MANUBANK?

It will be something in the 320% range depending on where the final balances land.

Got it. That's helpful. And then just wanted...

If I could, we'll land at that pro forma concentration, but it is our belief, and we are planning for organically growing into that. So although we are slowing down CRE loan growth ahead of the transaction. We also don't foresee the closing to be anything disruptive and be able to grow into that concentration within a fairly reasonable time frame.

Got it. That's very helpful color. A point of clarification on your guidance. I believe you said that you have about 1/4 of SMBC MANUBANK, like a quarter's worth of results. I know the close is in the second half of the year. Could you just provide what's baked into the guidance in terms of how much timing versus earlier in the first half -- the second half of the year versus the I want to make sure I'm modeling that appropriately, right?

Nothing more complicated to that other than just plugging in a close at the midpoint of the second half of the year for simple arithmetic. The close will come when it comes in the second half of the year. Obviously, we would like to close earlier than later. But for the pure mathematics of an outlook, we're just doing it mid of second half.

Got it. That's helpful. Maybe last question for me, just slip it in. Net charge-offs were up a little bit, although you did have improvement in NPAs and I believe, criticized. Can you provide any color and overview as to what you guys are seeing in the book? And anything you're incrementally watching more?

Sure. This is Peter. Yes, net charge-offs, I think, are a little elevated this quarter. It's up and down a little bit, but still within kind of the reasonable range that we've been expecting. And a lot of these represent sort of previously identified credit concerns that we are cleaning up right now.

So overall, we feel very good about asset quality. I think you see continuing improvement in asset quality trends. I think NPLs were down and criticized assets have been coming down sequentially quarter-over-quarter. So overall, I think we're in good shape in terms of credit.

We have the next question from the line of Tim Coffey from Brean Capital.

Julianna, what were the new loan yields the yields on the new loans in the quarter?

The yields on the new loans were approximately 6.4%.

And then kind of on the organic margin, I think the conventional thinking was that we'd see expansion going into the back half of this year. Is that still a reasonable expectation?

Well, if the Fed fund stays flat and we continue to have improvement on our cost of deposits from the repricing of CDs. And if interest rates stay flat for loan yields, all else equal, then you would see margin expansion because the earning asset side would not come down with rate cuts, and in fact, it would benefit because the back book of our low-yielding CRE loans would continue to mature and reprice to market rates, and we're continuing to improve our cost of funds.

That was the last question. I would like to turn the conference back over to the management for any closing comments.

Thank you. In summary, with our continued progress across our key strategic priorities and the addition of a compelling strategic transaction we believe we are well positioned to continue building momentum and delivering long-term value for our stockholders.

In closing, I would also like to thank our colleagues for their ongoing dedication and commitment which remain critical to the execution of our strategy and the strength of our organization. Thank you all again for joining us today, and we look forward to speaking with you next quarter. Bye, everyone.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Hope Bancorp 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Maxime Olivan, Senior Strategic Finance Manager. Please go ahead.

Thank you, Drew. Good morning, everyone, and thank you for joining us for the Hope Bancorp Investor Conference Call for the fourth quarter of 2025. 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. The call today contains forward-looking 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 this call today 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 press release issued this morning.

Now we have allotted 1 hour for this call. Presenting from management today will be Kevin Kim, Hope Bancorp's Chairman, President and CEO; and Julianna Balicka, our Chief Financial Officer. Peter Koh, our 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?

Thank you, Maxime. Good morning, everyone, and thank you for joining us today. I'm very pleased to report that we ended 2025 on a positive note with strong earnings growth in the fourth quarter.

Beginning with Slide 3, you will find a brief overview of our results. 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, driven by growth in net interest income, strength in customer fee income, lower provision for credit losses, and a lower tax expense, partially offset by higher operating expense.

Looking back at the year as a whole, we significantly lowered our cost of deposits, reduced our reliance on broker deposits, enhanced our earning assets mix, added experienced senior leadership and talent to support our revenue-generating capabilities, and strengthened our asset quality with a steady decrease in criticized loans in each quarter of 2025. We also expanded our banking footprint to the strategically attractive market of Hawaii via the Territorial Bancorp acquisition, which closed in April 2025.

In sum, we were able to optimize our balance sheet and meaningfully improve our underlying core profitability metrics. As we look ahead, we are excited about the opportunities in 2026 and believe we are well positioned to continue making progress towards our medium-term financial goals. I want to express my sincere appreciation for the dedication of our colleagues at Bank of Hope. Their steadfast commitment to excellence has propelled our organization forward and strengthened our position as the leading regional bank serving multicultural communities across the Continental United States and Hawaii. As we navigate the path ahead, I am confident that our collective focus and hard work will drive even greater positive outcomes in the years to come.

Moving on to Slide 4. All our capital ratios increased quarter-over-quarter and remain well above the requirements for well-capitalized financial institutions. Our Board of Directors declared a quarterly common stock dividend of $0.14 per share payable on or around February 20 to stockholders of record as of February 6, 2026. Our Board of Directors also reinstated our prior share purchase authorization, which still has $35 million available. Our healthy capital ratios position us to selectively and prudently return capital to shareholders via a share buyback program while maintaining strong overall capital levels to support growth opportunities and common stock dividends.

Continuing to Slide 5. At December 31, 2025, gross loans totaled $14.8 billion, up 1% quarter-over-quarter, equivalent to 4% annualized, driven by broad-based growth across commercial real estate, residential mortgage, and commercial and industrial loans. Year-over-year, gross loans are up 8% largely reflecting the impact of the Territorial acquisition and organic residential mortgage growth.

Loan production momentum has improved throughout 2025 with fourth quarter 2025 production volumes up 39% relative to the year-ago quarter. At December 31, 2025, deposits totaled $15.6 billion, up 9% year-over-year, primarily due to the Territorial acquisition and down 1% from September 30, largely due to typical fourth quarter fund movements in certain commercial clients, which normally return in the first quarter of the year.

Our strategy is centered on building a durable deposit base by expanding primary customer relationships and improving funding efficiency through thoughtful mix management and pricing discipline. In 2025, we continue to reduce our reliance on broker deposits, which declined 15% year-over-year. Overall, we are pleased with the progress we are making in strengthening the organization. Our continued investments in people and capabilities are reinforcing disciplined growth, expanding our banking franchise, and deepening client engagements as we broaden our market footprint.

With that, I will ask Julianna to provide additional details on our financial performance for the quarter. Julianna?

Thank you, Kevin, and good morning, everyone. Beginning on Slide 6. Our 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, reflecting the positive impact of lower funding costs, which more than offset the headwind from lower earning asset yields.

Year-over-year, our net interest margin expanded by 40 basis points from the fourth quarter of 2024, primarily driven by lower cost of interest-bearing deposits and higher investment securities yields, the latter being partially repositioned in 2025.

On Slide 7, we present the quarterly trends in our average loan and deposit balances and our weighted average yields and costs. Reflecting the impact of Fed funds target rate cuts, our average loan yield declined by 12 basis points and the cost of average interest-bearing deposits decreased by 17 basis points from the previous quarter. In 2026, we expect to benefit from two ongoing tailwinds in our balance sheet, the upward repricing of maturing 5-year commercial real estate loans to current market rates and the downward repricing of time deposits.

On to Slide 8, where we summarize our noninterest income. In the fourth quarter of 2025, we realized growth across a number of fee income lines and strength in customer level swap fees was a highlight. Throughout 2025, management has been focused on improving fee income execution to diversify the bank's revenue streams. For example, customer level swap fees were $6 million for the full year of 2025, an increase of 270% from $1.6 million in 2024. During the fourth quarter, we sold $46 million of SBA loans compared with $48 million in the third quarter. Accordingly, we recognized SBA loan gain on sale of $2.6 million for the fourth quarter compared with $2.8 million for the third quarter.

Moving on to noninterest expense on Slide 9. Our noninterest expense totaled $99 million in the fourth quarter of 2025, up from $97 million in the third quarter. The sequential quarter increase was mainly driven by compensation-related costs, reflecting the impact of hiring to support the company's strategic initiatives and revenue-generating capabilities. The year-over-year increase in noninterest expense from $78 million in the fourth quarter of 2024 additionally reflected the inclusion of Territorial Savings Bank operating expenses. The fourth quarter 2025 efficiency ratio was essentially stable linked quarter at 68%, with revenue growth effectively absorbing the incremental investments that we have been making.

Next, on to Slide 10. I will review our asset quality, which steadily improved throughout the year with sequential quarterly balance decreases in criticized loans in each of the quarters of 2025. This reflected our disciplined and proactive approach to underlying -- underwriting and portfolio management as well as successful workouts of problem loans. At December 31, 2025, criticized loans were $351 million, down 6% quarter-over-quarter and down 22% year-over-year. The sequential quarter improvement included a 48% linked quarter decrease in C&I special mention loans. The criticized loan ratio improved to 2.39% of loans at December 31, 2025, down from 2.56% at September 30, 2025, and down from 3.30% at December 31, 2024.

Net charge-offs were $3.6 million for the fourth quarter of 2025 or annualized 10 basis points of average loans compared with $5.1 million or 14 basis points annualized in the third quarter. The fourth quarter of 2025 provision for credit losses was $7.2 million compared with $8.7 million for the third quarter of 2025. The quarter-over-quarter decrease in the provision for credit losses primarily reflected lower net charge-offs and the linked quarter change in the allowance for unfunded commitments.

The allowance for credit losses totaled $157 million at December 31, 2025, up from $152.5 million at September 30. The allowance coverage ratio was 1.07% of loans receivable at December 31, 2025, up 2 basis points compared with 1.05% at September 30. With that, let me turn the call back to Kevin.

Thank you, Julianna. Moving on to the outlook on Slide 11. We present our management outlook for the full year 2026. We expect to see year-over-year loan growth in the high single-digit range in 2026, continuing to build on the growth momentum from the second half of 2025 and supported by the hiring that we have been making in our frontline teams throughout 2025.

We expect year-over-year revenue growth in the range of 15% to 20% for 2026. This will be driven by our loan growth outlook, continued net interest margin expansion, and strong fee income growth. In terms of net interest income, our budget assumes two Fed funds target rate cuts, 25 basis points each in June and September 2026, in line with the current forward interest rate curve.

In addition, we anticipate a tailwind to net interest margin expansion from the downward repricing of time deposits as well as from the upward repricing of maturing commercial real estate loans to current rates. In terms of fee income, we expect to see a continuation of the strong customer fee income momentum that we delivered in 2025. Overall, our outlook is for year-over-year pre-provision net revenue growth, excluding notable items, to be in the range of 25% to 30% for the full year 2026.

This reflects the combination of our revenue growth outlook and positive operating leverage. The investments that the bank has been making in people and platforms to strengthen its franchise are anticipated to support our revenue growth outlook in 2026. Going forward, we would consider the fourth quarter 2025 noninterest expense level to be a reasonable starting quarterly run rate for 2026, factoring in ongoing plans to support revenue-generating hires, strengthen frontline capabilities as well as manage quarterly fluctuations. Our outlook assumes a steady asset quality backdrop and an effective tax rate between 20% and 25% on a full-year basis.

With that, I will briefly review our medium-term financial targets on Slide 12. We continue to make progress towards our medium-term financial targets and believe we are well positioned to achieve these goals. Our bottom line financial target continues to be a return on average assets of approximately 1.2%. To achieve this metric, we are targeting loan growth in the high single-digit percentage range and revenue growth over 10% on an annual normalized basis. The loan growth target is part of our outlook and plan for 2026 and is expected to drive our revenue growth alongside continued expansion of net interest margin and strong fee income growth. We expect to exceed our normalized revenue target this year.

Over the medium term, we are continuing to target an enhanced efficiency ratio. Our current target is for an efficiency ratio in the mid-50 percentage range which reflects our recent and planned strategic investments in the business and personnel to support the development of our commercial and corporate banking capabilities.

We believe that our efficiency enhancement will come from a combination of sustained strong revenue growth, disciplined expense management, and ongoing operational process improvement. Improved efficiency remains a medium-term target, and we expect to make progress on the efficiency ratio in 2026 through positive operating leverage, but achieving our target will likely take more than just one year. Ultimately, the combination of attractive revenue growth and positive operating leverage over the medium term is expected to improve our return on assets toward the 1.2% target.

In summary, building on the execution of our improved 2025 financial results, our stronger balance sheet positioning as well as targeted team and talent additions have enhanced our capacity to deliver disciplined, profitable, and sustainable growth, creating durable value for our stakeholders in the years ahead.

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

[Operator Instructions] The first question comes from Ahmad Hasan with D.A. Davidson.

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

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

All right. 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?

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.

Appreciate the color there. And then maybe last one for me. 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?

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%.

[Operator Instructions] The next question comes from Kelly Motta with KBW.

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?

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.

Awesome. And then I guess just following up on the overall margin dynamics. Can you remind us any sensitivity to cuts and how you view the overall margin expansion kind of heading into 2026?

Sorry, can you repeat your question?

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?

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.

Okay. 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.

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.

This concludes our question-and-answer session. I would like to turn the conference back over to Kevin Kim, CEO, for any closing remarks.

Thank you. Once again, thank you all for joining us today, and we look forward to speaking with you again next quarter. So long, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Hope Bancorp 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Maxime Olivan, Strategic Finance Manager. Please go ahead.

Thank you, Billy. Good morning, everyone, and thank you for joining us for the Hope Bancorp Investor Conference Call for the Third Quarter of 2025. As usual, we will be using a slide presentation to accompany our discussion this morning, which is available in the Presentations page of our Investor Relations website.

Beginning on Slide 2. Let me start with a brief statement regarding forward-looking remarks. The call today contains forward-looking 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 on this call today are 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 press release issued this morning.

Now we have allotted 1 hour for this call. Presenting from the management side today will be Kevin Kim, Hope Bancorp's Chairman, President and CEO; and Julianna Balicka, our Chief Financial Officer. Peter Koh, our 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?

Thank you, Maxime. Good morning, everyone, and thank you for joining us today. Let us begin on Slide 3 with a brief overview of the quarter. The third quarter of 2025 was a very positive one for Bank of Hope marked by continued progress across our strategic priorities to improve profitability and reflecting solid execution across the organization. Improvement in asset quality was a key highlight as was loan growth across all our major loan segments. Throughout the year, we have been making sustained investments in talent to support our growth, and I'm very pleased with the progress we have made so far.

Before we dive into this quarter's results, I want to extend my deepest gratitude to all the bankers at Bank of Hope for their unwavering dedication and commitment to excellence. Their hard work is the driving force behind our success, and I'm incredibly proud of what we are building together.

And now on to a discussion of our results. Net income for the third quarter of 2025 totaled $31 million, up 28% year-over-year from $24 million in the year ago quarter and up from a net loss of $28 million in the second quarter. Second quarter results were impacted by elevated notable items related to a securities portfolio repositioning, the close of the Territorial Bancorp acquisition on April 2, and impact from a California state tax law change. Excluding notable items, third quarter 2025 net income of $32 million was up 29% from net income of $24.5 million in the second quarter of 2025.

In the third quarter, we saw loan growth across all our major loan portfolio segments of C&I, commercial real estate and residential mortgage. Our net interest margin expanded 20 basis points, which was our best linked quarter expansion since 2012. And importantly, our asset quality improved, led by our disciplined approach to credit management, which resulted in a 57% reduction in net charge-offs and noticeable improvement in classified and special mention loans including a 17% reduction in C&I criticized loans.

Moving on to Slide 4. All our capital ratios increased quarter-over-quarter and remain well above the requirements for well-capitalized financial institutions, providing us with a healthy cushion to support growth and navigate an evolving macroeconomic environment. Our Board of Directors declared a quarterly common stock dividend of $0.14 per share payable on November 21, to stockholders of record as of November 7, 2025.

Continuing to Slide 5. We continue to be focused on strengthening our deposit franchise, deepening primary banking relationships with our customers and lowering deposit costs through ongoing optimization of our deposit mix and disciplined pricing. As of September 30, 2025, deposits totaled $15.8 billion, reflecting a 1% decrease from $15.9 billion as of June 30, primarily driven by a $139.5 million reduction in broker deposits, partially offset by growth in customer deposits. Noninterest-bearing deposits totaled $3.5 billion at September 30, up 1% quarter-over-quarter.

Moving on to Slide 6. At September 30, 2025, gross loans, including held for sale totaled $14.6 billion, up 1.2% quarter-over-quarter, equivalent to 5% annualized with growth across all our major loan segments. Year-over-year, production has been strengthening while maintaining disciplined underwriting and pricing standards. Loan growth this quarter also benefited from lower levels of payoffs and pay downs. Across the organization, we have been investing in talent to drive sustainable prudent growth and enhance our corporate and commercial banking capabilities. As a bank, we are focused on driving business development and deepening client relationships to expand market presence.

With that, I will ask Julianna to provide additional details on our financial performance for the third quarter. Julianna?

Thank you, Kevin, and good morning, everyone. Beginning on Slide 7. Our net interest income totaled $127 million for the third quarter of 2025, an increase of 8% from the prior quarter and up 21% from the third quarter of 2024. This reflects loan growth, improved yields on earning assets and lower cost of interest-bearing deposits. Overall, our net interest margin increased 20 basis points quarter-over-quarter to 2.89% for the third quarter of 2025, up from 2.69% from the prior quarter. 9 basis points of the linked quarter expansion came from higher earning asset yields, 6 basis points came from lower funding costs and 5 basis points came from a favorable shift in balance sheet mix.

On Slide 8, we present the quarterly trends in our average loan and deposit balances and our weighted average yields and costs. The cost of average interest-bearing deposits and the cost of average total deposits for the third quarter each declined by 8 basis points from the previous quarter. The acquisition of Territorial has enhanced our deposit position and renewals of CDs at lower rates provides a tailwind for continued cost reductions. With the September Fed funds target rate cut of 25 basis points, we realized an approximate 85% spot beta and reducing money market deposit rates.

On to Slide 9, where we summarize our noninterest income. I will highlight quarter-over-quarter growth in service fees on deposit accounts, international banking fees, foreign exchange and wire transfer fees. During the third quarter, we sold $48 million of SBA loans compared with $67 million in the second quarter. Accordingly, we recognized gains from sale of $3 million for the third quarter compared with $4 million for the second quarter.

Moving on to noninterest expense on Slide 10. Our noninterest expense totaled $97 million in the third quarter. Excluding notable items such as merger-related costs, noninterest expense was $96 million in the third quarter compared with $92 million in the second quarter. This quarter-over-quarter increase was mainly driven by higher compensation-related costs reflecting the company's sustained investment in talent to support growth. Importantly, revenue growth outpaced expense growth in the third quarter, generating positive operating leverage. For the third quarter of 2025, our efficiency ratio, excluding notable items, improved to 67.5% compared with 69.1% for the second quarter of 2025.

Next, on to Slide 11. I will review our asset quality, the improvement in which was a highlight this quarter. Criticized loans declined $42 million or 10% quarter-over-quarter to $373 million at September 30, with decreases in both special mention and classified loans, and including a 17% linked quarter decrease in C&I criticized loans. The criticized loan ratio improved to 2.56% of total loans at September 30, down from 2.87% at June 30. Net charge-offs totaled $5 million for the third quarter or annualized 14 basis points of average loans, down 57% from $12 million or 33 basis points annualized in the second quarter. The quarter-over-quarter drop in net charge-offs reflected lower charge-offs in C&I loans.

The third quarter 2025 provision for credit losses was $9 million. This compares favorably with a provision of poor credit losses of $15 million for the second quarter of 2025, which included $4.5 million of merger-related provision expenses that the company considered a notable item. Excluding notable items, the quarter-over-quarter decrease in the provision for credit losses, largely reflected lower net charge-offs.

Finally, allowance for credit losses totaled $152.5 million at September 30 compared with 159 -- excuse me, compared with $149.5 million at June 30. The allowance coverage ratio was 1.05% of loans receivable at September 30 compared with 1.04% at June 30.

With that, let me turn the call back to Kevin.

Thank you, Julianna. Moving on to the outlook on Slide 12. Our outlook for the full year 2025 is updated as follows: We remain on track to achieve high single-digit loan growth in 2025, continuing to build on the growth momentum from the third quarter. We expect net interest income growth of approximately 10% for 2025. For 2025, we expect noninterest income growth of approximately 30%, excluding the second quarter loss on the securities repositioning, reflecting the year-to-date momentum across various business lines.

We expect noninterest expenses, excluding notable items, to be up approximately 15% in 2025, reflecting the addition of Territorial's operations to our run rate and our investment in talent to enhance our production capabilities.

Throughout the year, we have been adding experienced bankers to our Corporate and Commercial Banking teams. In particular, in the third quarter, we hired a seasoned commercial banking team, which accelerated some of our hiring plans. A leading institution recently exited one of our core markets, and we had the opportunity to bring this group of professionals to Bank of Hope to support our continued expansion. Our hiring is driving improved revenue growth and we expect to see sequential positive operating leverage in the fourth quarter with an improvement to our efficiency ratio.

Lastly, we anticipate the fourth quarter 2025 effective tax rate to be approximately 14%, excluding the impact of notable items. With the improvement of our financial performance and strengthening of our balance sheet in the third quarter, along with the strategic additions to our banking teams, we believe we are well positioned to drive profitable growth and create long-term value for our stockholders.

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

[Operator Instructions] Our first question comes from Matthew Clark with Piper Sandler.

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?

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?

The average margin for the month of September, one second. The margin for the month of September was 2.96%.

Okay. Great. And then just on Territorial. Any update there on how things are progressing? Cost saves you may have extracted so far from that deal?

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.

Our next question comes from Gary Tenner with D.A. Davidson.

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.

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.

It was -- I'm sorry, how much?

$5 million.

$5 million was the loan accretion or the net benefit, overall?

The loan accretion. All other items were minimal. If you look at the table from last quarter, I mean, pretty much it was de minimis on each of those line items.

Yes, they were canceled out, I think, last quarter. Okay. And then 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?

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%.

Okay. I'm sorry, you're fading out. $2.2 billion, you said?

$2.3 billion at a rate of 4.08%.

[Operator Instructions] Our next question comes from Kelly Motta with KBW.

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?

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.

[Operator Instructions] Our next question comes from Tim Coffey with Janney.

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

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.

Okay. Great. That's excellent color. And then the other question I had was on the nonaccrual loans. Commercial real estate, I think about half of them right now. And in relation to the totality of the portfolio, it's a relatively small percentage, but they are up quarter or year-to-date rather. Can you kind of describe some of the challenges some of those loans are experiencing?

Yes, this is Peter. I think our NPLs have been relatively flat this quarter. Some of the CRE loans and actually for all the loans in that category, sometimes it just takes time to work out. And we feel good. I think there's a level of problem credits there that we are honed in on. And I think it's just a matter of time before we're able to come to resolutions there.

Our next question comes from Kelly Motta with KBW.

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?

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.

Got it. And I appreciate the color around both the deposit spot rates as well as the spot rate beta on the money market where it seems like you're being successful there. Just wondering, 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?

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.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you. Once again, thank you all for joining us today, and we look forward to speaking with you again in 3 months. So long, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.