Hope Bancorp : Fourth Quarter 2020 Earnings Conference Presentation

2020 Fourth Quarter Earnings Conference Call

Wednesday, January 27, 2021

Forward Looking Statements &

Additional Disclosures

This presentation may contain statements regarding future events or the future financial performance of the Company that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market, and statements regarding our business strategies, objectives and vision. Forward- looking statements include, but are not limited to, statements preceded by, followed by or that include the words "will," "believes," "expects," "anticipates," "intends," "plans," "estimates" or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. The Company's actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; the failure of or changes to assumptions and estimates underlying the Company's allowances for credit losses, including the timing and effects of the implementation of the current expected credit losses model; and regulatory risks associated with current and future regulations, and the COVID-19 pandemic and its impact on our financial position, results of operations, liquidity, and capitalization. For additional information concerning these and other risk factors, see the Company's most recent Annual Report on Form 10-K. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

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Q4 2020 Financial Highlights

Earnings & Profitability

Loan

Production

Deposits

Asset Quality

• Net interest income before provision for credit loss increased 3% to $120.8 million from $117.6 million for 3Q20, largely reflecting benefit of lower cost of deposits
• Net interest margin expanded 11bps Q-o-Q benefiting from continued reduction in deposit costs and deployment of excess liquidity
• Net income totaled $28.3 million, or $0.23 per diluted common share, compared with $30.5 million, or $0.25 per diluted common share, for 3Q20
• Provision for credit losses of $27.5 million vs. $22.0 million for 3Q20, largely reflecting additional reserve build for hospitality portfolio
• Noninterest expenses decreased 3% Q-o-Q and decreased as a percentage of average asset to 1.69% from $1.73% for 3Q20
• New loan originations funded of $844 million in 4Q20, the highest quarterly production of 2020
• Well diversified mix of originations with C&I representing 52%, CRE 40% and Consumer 8%
• Loans receivable increased 3%, or 13.5% annualized
• Noninterest bearing deposits increased $326 million Q-o-Q and increased to 34% of total deposits from 32% at 9/30/2020
• MMAs and NOW accounts increased by $469 million Q-o-Q and increased to 37% of total deposits from 34% at 9/30/2020
• $461 million reduction in time deposits, or 10% Q-o-Q, continues favorable mix shift to lower-cost deposits
• Cost of deposits decreased for the 5th consecutive quarter, down 16bps Q-o-Q
• Nonperforming loans increased $17 million Q-o-Q, reflecting migration of 2 construction loans near completion, but exhibiting weakened conditions due in part to the pandemic
• Criticized and classified loans increased $80 million Q-o-Q largely reflecting proactive identification of deteriorating financials of previously modified loans, as well as a $20 million relationship which the bank is exiting due to non-financial reasons
• Net charge offs were minimal at $608,000, or 0.02% of average loans receivable annualized

Net

Income

$28.3MM

Diluted

EPS

$0.23

Record

Gross

Loans

$13.56B

Record

Total

Deposits

$14.33B

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Loan Production & Portfolio Trends

New Loan Originations Funded

($ millions)
4.37%	3.98%
	3.39%1
		2.88%	3.27%
$847.6		$832.0	$782.4	$844.2
$69		$74	$65
$266	$624.5	$61	$105
$42			$439
		$480
	$234	$433
$513	$348			$340
	$216	$244
4Q19	1Q20	2Q20	3Q20	4Q20

CRE PPP C&I Consumer Average Rate

Loan Portfolio Composition

7%		5%		5%
22%	28%	67%	30%	65%
71%
12/31/2019	9/30/2020	12/31/2020

• New loan originations funded of $844 million resulted in 3.4% growth in loans receivable Q-o-Q, or 13.5% annualized
• • New loan originations included $107 million funded for new warehouse mortgage lines
• Aggregate payoffs and paydowns totaled $619 million vs. $420 million in Q3 2020
• Well diversified mix of loan originations
• • 40% CRE / 52% C&I / 8% Consumer
• Traditional SBA loan originations of $25.5 million, including $17.3 million in 7(a) production
• Residential mortgage originations of $62.5 million vs. $102.3 million in Q3 2020
• Strong C&I originations throughout 2020 resulted in more diversified loan portfolio
• • CRE loans decreased to 65% of total portfolio from 71% at 12/31/19
  • C&I loans increased to 30% of total portfolio from 22% at 12/31/19
  • Consumer loans decreased to 5% of total loans from 7% at 12/31/19

• Including fees on PPP loans, average rate on new loan originations funded for 2Q20 was 2.01%

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