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HOPE BANCORP INC (HOPE)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net income was $24.3M ($0.20 diluted EPS) on revenue of $118.0M; pre-provision net revenue (PPNR) rose 14% QoQ to $40.4M as noninterest income increased and expenses fell .
  • Net interest margin compressed 5 bps QoQ to 2.50% (2.54% excluding $1.7M interest income reversal from loans moving to nonaccrual), while average cost of total deposits declined 12 bps QoQ to 3.32% and average cost of interest-bearing deposits fell 21 bps to 4.38% .
  • Asset quality improved: nonperforming assets fell 13% QoQ to $90.8M (0.53% of assets); criticized loans declined 11% QoQ to $450.0M (3.30% of loans), though net charge-offs were elevated at $12.8M (0.38% annualized) due to problem loan resolutions .
  • Board declared a $0.14 quarterly dividend, and management guided 2025 to high single-digit loan growth, low double-digit NII growth (~$15M loan accretion), mid-teen noninterest income growth, low double-digit OpEx growth ex-notables, ~$30M one-time integration costs, and ~20% ETR; Territorial Bancorp merger expected to close in Q1 2025, pending approvals .
  • Potential stock catalysts include merger-close timing/accretion visibility, deposit beta execution toward ~80% goal, and sustained PPNR growth from fee income and expense discipline .

What Went Well and What Went Wrong

What Went Well

  • PPNR rose 14% QoQ to $40.4M on higher noninterest income (+34% QoQ) and lower noninterest expense (−5% QoQ); efficiency ratio improved to 65.75% from 69.67% .
  • Noninterest income strength: SBA gains were $3.1M on $48.4M sold; swap fee income surged to $1.4M; $1.0M net gain from VA branch sale; management: “Quarter-over-quarter, revenue grew and expenses decreased” .
  • Asset quality: NPAs fell 13% QoQ to $90.8M; criticized loans fell 11% QoQ to $450.0M; management cited payoffs, workouts, and note sales driving improvement .

Quotes

  • “Our pre-provision net revenue increased 14%…our asset quality improved with an 11% decrease in criticized loans and nonperforming assets down 13%” – Kevin S. Kim, CEO .
  • “Our weighted average cost of interest-bearing deposits…was 4.38%, down 21 bps…Spot rate 4.21%…cumulative beta of 42%” – Julianna Balicka, CFO .

What Went Wrong

  • NIM decreased 5 bps QoQ to 2.50% as lower loan yields and $1.7M interest income reversal from nonaccrual migration offset deposit-cost relief .
  • Net charge-offs rose to $12.8M (0.38% annualized), reflecting active resolution of problem loans; provision increased to $10.0M .
  • Deposits fell 3% QoQ to $14.33B driven by VA branch sale ($128.1M), typical Q4 outflows in residential mortgage industry, and strategic runoff of higher-cost deposits; gross loan-to-deposit ratio rose to 95.2% .

Analyst concerns

  • Downward pressure on NII/NIM trajectory amid loan yield compression and nonaccrual reversals; clarity on deposit beta path and integration costs (cost saves lower than initial deal planning) sought by analysts .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$135.196 $116.648 $118.016
Net Income ($USD Millions)$26.481 $24.159 $24.337
Diluted EPS ($)$0.22 $0.20 $0.20
Net Interest Margin (%)2.70% 2.55% 2.50%
Efficiency Ratio (%)73.37% 69.67% 65.75%
PPNR ($USD Millions)$36.005 $35.380 $40.426

Segment and Balance Composition

Loans by Type ($USD Thousands)

Segment12/31/20239/30/202412/31/2024
CRE Loans$8,797,884 $8,630,757 $8,527,008
C&I Loans$4,135,044 $3,901,368 $3,967,596
Residential Mortgage & Other$920,691 $1,085,863 $1,123,668
Loans Receivable$13,853,619 $13,617,988 $13,618,272
Loans Held for Sale$3,408 $25,714 $14,491
Gross Loans$13,857,027 $13,643,702 $13,632,763

Deposits by Type ($USD Thousands)

Segment12/31/20239/30/202412/31/2024
Noninterest-Bearing DDA$3,914,967 $3,722,985 $3,377,950
Money Market/IBD/Savings$4,872,029 $5,013,305 $5,175,735
Time Deposits$5,966,757 $5,993,208 $5,773,804
Total Deposits$14,753,753 $14,729,498 $14,327,489
Gross Loan-to-Deposit Ratio (%)93.9% 92.6% 95.2%

KPIs

KPIQ4 2023Q3 2024Q4 2024
Avg Cost of Total Deposits (%)3.15% 3.44% 3.32%
Avg Cost of IB Deposits (%)4.32% 4.59% 4.38%
Interest Income Reversal ($USD Millions)——$1.7 (impact noted)
Nonperforming Assets ($USD Millions)$45.528 $103.828 $90.793
NPAs / Total Assets (%)0.24% 0.60% 0.53%
Criticized Loans ($USD Millions)$322.441 $505.726 $449.969
Net Charge-Offs ($USD Millions)$1.815 $5.749 $12.843
Provision for Credit Losses ($USD Millions)$2.400 $3.280 $10.000
ACL / Loans Receivable (%)1.15% 1.13% 1.11%
TCE Ratio (%)8.86% 10.08% 10.05%

Estimate Comparison

  • Wall Street consensus EPS/revenue estimates for Q4 2024 were unavailable at time of analysis due to S&P Global data access limits. No beat/miss assessment provided (consensus unavailable).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loan GrowthFY2025Not provided (2025 outlook deferred to Q4 call)High single-digit % growth (includes Territorial; moderate organic growth at HOPE) New
Net Interest IncomeFY2025—Low double-digit % growth (includes ~$15M loan accretion; assumes two 25 bp Fed cuts in May/Oct) New
Noninterest IncomeFY2025—Mid-teen % growth (full year SBA sales; fee lines like swaps/FX) New
Noninterest Expense (ex-notables)FY2025—Low double-digit % increase (Territorial OpEx + disciplined investment) New
One-time Integration CostsFY2025—~$30M (Territorial close-related) New
Effective Tax RateFY2024~26% (prior-year context) FY2025 ~20% (via LIHTC/investment credits) Lowered
DividendOngoing$0.14 declared quarterly in prior periods $0.14 declared 1/27/25, payable ~2/20/25 Maintained
Near-term Q4 2024 OutlookQ4 2024 vs Q3 2024NII low single-digit growth; OpEx ex-notables stable; similar SBA gains Actuals showed NII −3% QoQ; SBA gains $3.1M; OpEx ex-notables −4% QoQ Delivered mixed (NII below guide; OpEx better)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Deposit pricing/betasDecelerating deposit cost increases; spot total deposit cost 3.43% at 6/30 Average total deposit cost up 5 bps QoQ; full-cycle IB beta modeled high-60% Avg IB deposit cost down 21 bps QoQ to 4.38%; spot IB 4.21%; cumulative beta 42% since Aug Improving cost trajectory
NIM/NII trajectoryNIM expanded +7 bps; NII down on BTFP payoff; guided Q4 NII −~10% YoY NIM −7 bps; guided Q4 NII low single-digit QoQ growth NIM −5 bps; NII −3% QoQ; 2.54% NIM ex $1.7M reversal Mixed; compounding loan yield pressure
SBA loan salesResumed, $30M sold, $2.0M gains $41.4M sold, $2.7M gains $48.4M sold, $3.1M gains; 2025 to continue Building run-rate
Asset qualityNPAs down 37% QoQ; ACL 1.15% NPA uptick from 1 CRE relationship; criticized loans up; resolutions expected in Q4 NPAs −13% QoQ; criticized loans −11%; net charge-offs higher from resolutions; ACL 1.11% Stabilizing with active resolutions
CRE portfolioWeighted avg LTV ~47%; pass-graded ~98% Weighted avg LTV ~47%; stable profile Weighted avg LTV ~47%; office <3% of loans, no CBD exposure (deck) Stable risk metrics
Territorial Bancorp mergerIntegration planning; expected year-end close Pending; limited discussion Anticipate Q1 2025 close; $15M accretion; cost saves lower than initial pencil; maintain branches Near-term closing focus
Taxes2024 ETR ~26% YTD ETR 26.6%; FY 2024 ~26% Q4 ETR 20% (solar credit); 2025 ETR ~20% Lower via credits
Technology/talentInvesting to support growth —Continued disciplined investment in talent/technology Sustained investment

Management Commentary

  • “We focused on strengthening our deposit base, reducing brokered deposits to 7%…loan growth inflected…With ample liquidity and a tangible common equity ratio over 10%…well positioned to support growth” – Kevin S. Kim .
  • “Net interest margin declined…we reversed $1.7 million of interest income due to loans moving to nonaccrual…excluding this impact, NIM would have been 2.54%” – Julianna Balicka .
  • “We expect net interest income growth in the low double-digit percentage range…assuming approximately $15 million of accretion income in 2025…noninterest income to grow in the mid-teen percentage range” – Kevin S. Kim .
  • “Cost saves…coming in lower than initially penciled…we’re conscientious about a well-thought-out transition plan…and maintaining branch network and customer-facing employees” – Julianna Balicka .

Q&A Highlights

  • Deposit betas: Management aims to achieve better down-cycle IB deposit beta than past cycles; aspirational toward ~80% as rate cuts proceed; achieved 42% cumulative spot beta since Aug 31 on IB deposit costs .
  • Expenses/integration: 2025 OpEx run-rate includes Territorial for ~3 quarters; 2026 exit run-rate expected lower post integration; cost saves lower than initial at announcement due to customer experience priorities .
  • Accretion & portfolio actions: ~$15M loan accretion assumed in 2025; securities accretion not specified and subject to potential repositioning post-close .
  • Capital deployment: Buybacks considered premature pre-close; Board to evaluate post-merger .
  • SBA gains run-rate: Q4 viewed as a good run-rate with continued sales expected in 2025 .
  • Loan growth mix: Expect majority from C&I; CRE growth nominal; organic low single-digit growth before Territorial addition .
  • Credit normalization: Q4 net charge-offs elevated from resolutions; full-year 2024 NCO ratio 19 bps; anticipate manageable 2025 levels .

Estimates Context

  • Wall Street consensus EPS and revenue estimates for Q4 2024 were unavailable due to S&P Global access limits at time of writing; as a result, beat/miss vs consensus cannot be assessed. We will update when consensus becomes available.

Key Takeaways for Investors

  • PPNR and efficiency improved meaningfully QoQ; fee income momentum (SBA and swaps) provides diversification to earnings and supports operating leverage. Monitor durability into 2025 .
  • Deposit cost relief is visible; execution on down-cycle deposit betas remains a key lever for NIM stabilization/expansion alongside improved funding mix (brokered down to 7%) .
  • Credit metrics improved (NPAs, criticized loans), but elevated Q4 net charge-offs reflect proactive problem-loan resolutions; watch nonaccrual migration and any CRE office spillovers despite small exposure .
  • 2025 guidance implies earnings acceleration with loan accretion/merger synergies and mid-teen noninterest income growth; integration costs (~$30M) and lower-than-initial cost saves temper near-term OpEx; path to medium-term ROA ≥1.2% depends on NIM and efficiency delivery .
  • Dividend maintained at $0.14; capital ratios remain well above “well-capitalized” thresholds, offering flexibility post-close as management evaluates capital deployment .
  • Short-term: Trading sensitivity to merger-close timing, accretion disclosure, and deposit beta progression; Medium-term: Thesis hinges on deposit mix improvement, fee income scaling, and achieving ~50% efficiency ratio target .