Sign in

You're signed outSign in or to get full access.

HB

HOPE BANCORP INC (HOPE)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 was transformative: HOPE closed the Territorial Bancorp acquisition and executed a $418M legacy AFS securities repositioning, producing a GAAP net loss of $27.9M (-$0.22 EPS) but non-GAAP net income of $24.5M ($0.19 EPS) with NIM up 15 bps QoQ to 2.69% .
  • Deposits rose 10% QoQ to $15.94B with the average cost of total deposits falling 22 bps QoQ to 2.96%; brokered deposits dropped to 5% of total (from 7% in Q1 and 9% YoY), strengthening the funding mix .
  • Management maintained 2025 guidance for high single-digit loan and NII growth, raised fee income growth to upper-20s%, and lowered the 2025 effective tax rate to ~21% (14% expected in Q3/Q4), framing positive exit-rate momentum into 2H25 .
  • Key catalysts: continued deposit cost tailwinds (spot deposit rate 2.93% exiting June), securities repositioning expected to add $12M annual interest income, and accretion from Territorial loans ($4M per quarter) .

What Went Well and What Went Wrong

What Went Well

  • Net interest income increased 17% QoQ to $117.5M; NIM expanded 15 bps to 2.69% on deposit cost reductions and Territorial’s low-cost base: “meaningful reductions in our cost of deposits” and “NIM expanded 15 basis points” .
  • Funding mix improved: brokered deposits fell to 5% of total, average cost of interest-bearing deposits declined 37 bps QoQ to 3.77%, and average total deposit cost fell 22 bps to 2.96% .
  • Strategic repositioning of legacy AFS securities redeployed $418M from a 2.33% book yield to ~5.42% market yield, expected to add ~$12M annual interest income; non-GAAP fee lines (SBA gains, swap fees) showed momentum .

What Went Wrong

  • GAAP noninterest income was -$23.0M due to a $38.9M pre-tax loss on legacy securities sales, driving GAAP net loss of $27.9M; nonperforming assets rose to 0.61% of assets on one CRE migration, and NCOs increased to 0.33% annualized .
  • GAAP noninterest expense rose to $109.5M on merger-related costs; provision increased to $15.0M (incl. $4.5M merger-related), reflecting higher NCOs and unfunded commitments provisioning .
  • California tax apportionment law change triggered a $4.9M discrete DTA remeasurement, depressing GAAP tax expense/benefit in the quarter (near-term headwind despite lowering the ongoing tax rate) .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$116.931 $116.505 $94.577
Net Interest Income before Provision ($USD Millions)$105.860 $100.817 $117.533
Noninterest Income (GAAP) ($USD Millions)$11.071 $15.688 $(22.956)
Diluted EPS (GAAP) ($USD)$0.21 $0.17 $(0.22)
Diluted EPS ex-notable items ($USD)$0.22 $0.19 $0.19
Net Interest Margin (%)2.62% 2.54% 2.69%
Efficiency Ratio ex-notable items (%)67.67% 69.82% 69.09%

Segment breakdown (Loans):

Loan Type ($USD Thousands)Q2 2025 BalanceQ1 2025 BalanceQ2 2024 Balance
CRE$8,385,764 (58.0%) $8,377,106 (62.8%) $8,679,515 (63.6%)
C&I$3,725,295 (25.8%) $3,756,046 (28.2%) $3,854,284 (28.3%)
Residential Mortgage & Other$2,323,728 (16.1%) $1,202,142 (9.0%) $1,033,203 (7.6%)
Loans Receivable$14,434,787 $13,335,294 $13,567,002

Deposit composition:

Deposit Type ($USD Thousands)Q2 2025 BalanceQ1 2025 BalanceQ2 2024 Balance
Noninterest Bearing DDA$3,485,502 (21.9%) $3,362,842 (23.2%) $3,671,192 (24.9%)
MM/IBD/Savings$6,102,999 (38.3%) $5,410,471 (37.3%) $4,907,860 (33.4%)
Time Deposits$6,354,854 (39.8%) $5,715,006 (39.5%) $6,132,419 (41.7%)
Total Deposits$15,943,355 $14,488,319 $14,711,471

KPIs

KPIQ2 2024Q1 2025Q2 2025
Avg Cost of Total Deposits (ann.)3.39% 3.18% 2.96%
Avg Cost of Interest-Bearing Deposits (ann.)4.54% 4.14% 3.77%
Brokered Deposits (% of total)9% 7% 5%
Gross Loan-to-Deposit Ratio92.7% 92.0% 90.6%
Criticized Loans (% of total)3.30% 3.36% 2.87%
NPA / Total Assets0.39% 0.49% 0.61%
Net Charge-offs (annualized)0.13% 0.25% 0.33%
ACL / Loans Receivable1.15% 1.11% 1.04%
CET1 Ratio12.70% 13.28% 12.06%
TCE Ratio9.72% 10.20% 9.43%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
End-of-Period Loans (incl. HFS)FY 2025 vs 2024 ($13.633B)High single-digit % growthHigh single-digit % growthMaintained
Net Interest IncomeFY 2025 vs 2024 ($428M)High single-digit % growthHigh single-digit % growth (drivers updated: fewer 2025 cuts; loan accretion ~$12M; legacy AFS repositioning +$6M 2H25)Maintained (drivers updated)
Noninterest Income (ex-notable items)FY 2025 vs 2024 ($47M)Prior viewUpper-20s % growthRaised
Noninterest Expense (ex-notable items)FY 2025 vs 2024 ($318M)Low double-digit % growthLow double-digit % growthMaintained
Effective Tax RateFY 2025 vs 2024 (25.1%)Prior view~21%; ~14% in Q3 & Q4Lowered
Dividend per shareQ3 2025$0.14$0.14 declared for Aug 15 pay dateMaintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Deposit costs & betasAvg total deposit cost fell in Q4 (3.32%); Q1 continued decline as funding mix improved .Spot deposit rate 2.93% end-June; plan 100%+ beta on next cut (timing now Oct/Dec) .Improving funding cost; readiness to capture rate cuts .
Securities repositioningNo repositioning noted; Q1 stable securities .Sold $418M legacy AFS (2.33% yield) redeployed at ~5.42%, adding ~$12M annual interest income .New strategic income tailwind .
Loan accretion from TerritorialTerritorial closed Apr 2; prelim $1.0B loans added .~$4M quarterly accretion; ~$12M 2025 vs ~$14M previously on slower prepayments .Ongoing accretion, slightly lower than initial .
Fee income momentumQ4 swap fees up; branch sale gain $1.0M . Q1 other income had $1.7M favorable mark .SBA gains $4.0M on $67.4M sold; swap fees +$1.0M QoQ; fee growth outlook raised to upper-20s% .Broad-based fee growth .
Brokered deposit reductionBrokered deposits fell to 7% by Q4; continued planned reductions in Q1 .Brokered deposits down to 5% (−19% QoQ) .Continued reduction .
Asset qualityQ4 criticized loans down 11%; NPAs down 13% QoQ . Q1 NPAs 0.49% and ACL ratio 1.11% .Criticized loans down 8% QoQ to 2.87% of loans; NPAs up to 0.61% on one well-secured CRE; NCOs 0.33% .Stable overall, some CRE migration .
Territorial integration & systemsMerger closed Apr 2 [14]; integration beginning.System conversion targeted by end of next year; cost saves to follow cadence; largest saves from executive comp .Integration in-progress .

Management Commentary

  • “Quarter-over-quarter, our net interest income grew 17%… net interest margin expanded 15 basis points… With the inclusion of Territorial’s lower-cost deposit base, we saw meaningful reductions in our cost of deposits.” — Kevin S. Kim, CEO .
  • “Accretion income from Territorial loans was $4 million in the second quarter… we are now expecting approximately $12 million of loan accretion income in 2025… In June, we sold… legacy AFS securities… expected to contribute approximately $12 million per year to interest income.” — Julianna Balicka, CFO .
  • “We are increasing our year-over-year fee income growth expectations to be in the high 20% range… our outlook… assumes Fed funds cuts in October and December 2025.” — Kevin S. Kim and Julianna Balicka .
  • “Spot rate at the end of June was 2.93%… for the coming cut… executing beta at a higher pace… 100% or better.” — Julianna Balicka .

Q&A Highlights

  • Fee income trajectory: Raised full-year outlook to upper-20s% growth; SBA sales/gains stronger in Q2; swap fees accelerating with product push and CRE underwriting practices .
  • Deposit costs/spot and betas: Spot deposit rate 2.93%; plan for ≥100% beta on next cut; ~42% of loans are truly floating, benefiting upon cuts .
  • Territorial integration: System conversion by end of next year; cost saves largely tied to executive compensation rather than IT/core costs .
  • One-time costs cadence: Expect “a couple million” more of one-time costs in each Q3 and Q4 2025 .
  • Production yields/tax rate: New production average yield ~6.76%; 2026 tax rate expected ~20–21% given state apportionment and tax credits (subject to future law changes) .

Estimates Context

MetricQ2 2024Q1 2025Q2 2025
Primary EPS Consensus Mean ($)0.220.1850.2075
Primary EPS Actual ($)0.220.190.19
Primary EPS - # of Estimates544
Revenue Consensus Mean ($USD)121,375,000114,966,670133,900,000
Revenue Actual ($USD)113,247,000109,744,00077,147,000
Values retrieved from S&P Global.*
  • EPS ex-notable items slightly missed consensus (0.19 vs 0.2075) as GAAP losses from securities repositioning masked core improvements; revenue under S&P’s definition missed, though company “Revenue excluding notable items” was $133.433M (closer to consensus), highlighting definitional differences for banks .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Core earnings power improved: NIM expansion, deposit cost tailwinds, and fee momentum should support 2H25 NII and revenue growth; securities repositioning provides a durable ~$12M annual interest income uplift .
  • Territorial acquisition adds low-cost deposits and residential mortgages with pristine credit, reducing brokered reliance and diversifying loans; accretion ~$4M per quarter enhances NII visibility .
  • Near-term GAAP optics are noisy (loss on AFS repositioning, merger/tax notable items), but non-GAAP profitability and efficiency improved QoQ, with efficiency ratio ex-notables at 69.1% .
  • Asset quality manageable: criticized loans fell to 2.87% of loans; NPA uptick tied to one well-secured CRE; provisioning reflects NCOs and unfunded commitments .
  • Guidance steady-to-better: loans/NII growth maintained, fees raised to upper-20s%, and tax rate guided down to ~21% (14% in Q3/Q4), supporting EPS trajectory into year-end .
  • Watch list: pace of deposit repricing (spot 2.93%; ≥100% beta planned), competitive loan pricing pressuring new production yields, and integration/timing of cost saves .
  • Dividend maintained at $0.14 per share, signaling capital strength (CET1 12.06%) post-merger and repositioning .

Estimates Comparison vs Results (detail)

  • EPS: Consensus $0.2075 vs actual $0.19 (ex-notables) — modest miss driven by lower-than-initial accretion (~$12M vs ~$14M for 2025) and timing of fewer rate cuts (Oct/Dec), partly offset by securities repositioning uplift .
    Values retrieved from S&P Global.*
  • Revenue: Under S&P’s definition, revenue missed; however, company “Revenue excluding notable items” ($133.433M) aligns more closely to consensus, indicating that the investment portfolio loss (notable) was the key delta to GAAP revenue .
    Values retrieved from S&P Global.*

Additional Data Points and Disclosures

  • Territorial’s deposits at close: $1.67B at 1.98% weighted average cost; loans receivable $1.07B after discounts .
  • Dividend declaration: $0.14 per share payable ~Aug 15, 2025; record date Aug 1, 2025 .

Bolded highlights:

  • GAAP loss driven by one-time repositioning/merger/tax items .
  • Fee income growth outlook raised to upper-20s% .
  • Brokered deposits cut to 5% .
  • NIM expanded 15 bps QoQ to 2.69% .