Hope Bancorp (HOPE) Q3 Earnings call transcript Oct 28, 2024
2min read In the recent earnings call, Hope Bancorp provided a comprehensive update on its financial performance and strategic initiatives for the third quarter of 2024. The call, led by Kevin Kim, Hope Bancorp's Chairman, President, and CEO, and Julianna Balicka, Chief Financial Officer, highlighted several key themes and trends, offering valuable insights into the company's current state and future outlook.
Financial Performance
Hope Bancorp reported a net income of $24.2 million for the third quarter of 2024, reflecting a turnaround in loan growth and continued success in core deposit growth. The company's total deposits stood at $14.7 billion, essentially stable quarter-over-quarter, with robust growth in customer deposits offsetting a planned reduction in brokered deposits. Loans receivable, excluding loans held for sale, increased by 2%, indicating higher balances of residential mortgage and commercial loans. The bank's risk-based capital ratios were at their highest since merging with Wilshire in 2016, positioning the company well for future growth and merger activity.
Strategic Initiatives
One of the significant strategic initiatives discussed was the sale of two branches in Virginia, totaling approximately $129 million of deposits, which will be offset by organic customer deposit growth from elsewhere in the network. This move is part of the bank's ongoing efforts to manage its deposit mix and reduce reliance on brokered deposits. The sale of SBA loans for a gain of $2.7 million in the third quarter is another strategic move, demonstrating the bank's focus on leveraging its loan portfolio for profitability.
Outlook
Looking ahead, Hope Bancorp expects average loans to grow at a percentage rate in the low single digits quarter-over-quarter, with net interest income expected to grow in the low single digits as well. The bank is also focused on managing interest rates, with an expectation of a similar level of gain on sale of SBA loans in the fourth quarter. Operating expenses are projected to be essentially stable quarter-over-quarter, with a focus on positive operating leverage.
Credit Quality and Risk Management
Julianna Balicka, the Chief Financial Officer, provided an update on credit quality and risk management, reporting a moderate and manageable level of net charge-offs for the third quarter. The bank's allowance for credit losses was $153 million, representing 113 basis points of loans receivable. The bank continues to work on problem loans, with favorable resolutions expected before year-end.
Investor Questions
During the Q&A session, investors inquired about loan portfolio composition, deposit betas, and credit quality. The bank provided detailed responses, highlighting its focus on managing interest rates, maintaining a diversified loan portfolio, and proactively managing credit risks.
Conclusion
Hope Bancorp's third quarter earnings call provided a comprehensive update on the company's financial performance and strategic initiatives. The bank's focus on core deposit growth, loan growth, and risk management positions it well for future growth and competitiveness in the market. The pending merger with Territorial Bancorp was not discussed in detail, but it is expected to create value for the combined entity. Overall, the call conveyed a sense of confidence and strategic focus, underscoring Hope Bancorp's commitment to delivering value to its shareholders.
