Hope Bancorp's Russell 2500 Inclusion Signals Growth Momentum Amid Post-Merger Strength

The inclusion of Hope Bancorp (NASDAQ: HOPE) in the Russell 2500 Growth Index marks a pivotal milestone for the bank, underscoring its evolution into a mid-cap leader with strategic advantages in specialized lending and a strengthened balance sheet. With the completion of its merger with Territorial Bancorp in April 2025, Hope Bancorp now stands poised to capitalize on growth opportunities in healthcare, project finance, and multicultural banking—catalysts that align with its robust financial profile and disciplined execution.

Strategic Advantages from the Territorial Merger

The merger with Territorial Bancorp, finalized on April 2, 2025, delivered immediate benefits to Hope's deposit base and operational footprint. Territorial contributed $1.7 billion in low-cost deposits (weighted average cost of 1.96%), which now account for 12% of total deposits. This diversification has reduced reliance on volatile brokered CDs and fortified Hope's funding structure. The merger also added $1.06 billion in residential mortgages, boosting this segment by 7% as of March 2025 and positioning the bank as the largest regional lender to multicultural communities in the U.S. and Hawaii.

The combined entity's asset quality remains a standout strength. Nonperforming assets dropped to 0.49% of total assets in Q1 2025, a 35% decline in net charge-offs from the prior quarter. This stability, paired with a 13.28% Common Equity Tier 1 (CET1) ratio, provides ample capital to fuel growth while maintaining a “well-capitalized” regulatory standing.

Specialized Lending: Healthcare and Project Finance as Growth Drivers

Hope's strategic focus on specialized lending sectors—particularly healthcare and project finance—aligns with rising demand from Korean corporations expanding in the U.S. The bank's multicultural banking expertise, bolstered by Territorial's Hawaiian operations, positions it to capture loans tied to cross-border investments in manufacturing, infrastructure, and healthcare facilities.

CEO Kevin S. Kim emphasized in Q1 earnings that project finance pipelines are strengthening, driven by Korean firms' supply-chain diversification and U.S. infrastructure projects. While commercial real estate (CRE) and C&I loans dipped slightly due to competitive pricing, management remains confident in high single-digit annual loan growth, supported by $14 million in merger accretion and a 5%+ noninterest income expansion.

Healthcare lending, another priority, benefits from aging demographics and rising demand for medical facilities. Hope's ability to cross-sell foreign exchange and wealth management services to multicultural clients further enhances its competitive edge in these sectors.

Navigating Rate Cuts with Resilience

Hope's low-cost deposit mix—now 72% core deposits—provides a natural hedge against potential interest rate cuts. CFO Julianna Balicka noted that variable-rate loans and deposit costs will offset margin pressures, maintaining net interest income stability. This contrasts with peers reliant on higher-cost funding, making Hope's balance sheet a low-risk vehicle for income-focused investors.

Valuation and Investment Thesis

At a 10.2% tangible common equity (TCE) ratio and trading at 1.3x tangible book value—below its five-year average—Hope offers compelling valuation upside. With a 9.4% return on assets (ROA), the bank is among the most efficient in its peer group, while synergies from the merger could lift earnings further.

The Russell 2500 inclusion, effective June 2025, will draw passive inflows from index-tracking funds, potentially boosting liquidity and valuation multiples. Risks include macroeconomic headwinds and integration complexities, but Hope's strong capitalization and focus on disciplined growth mitigate these concerns.

Investor Takeaway

Hope Bancorp's inclusion in the Russell 2500 Growth Index is a validation of its post-merger transformation and growth trajectory. With a solid deposit base, pristine asset quality, and targeted lending in high-demand sectors, HOPE presents a buy opportunity at current levels. Investors seeking exposure to mid-cap banks with specialized niches and resilience in a shifting rate environment should consider adding HOPE to their portfolios.

In a market favoring companies with strong fundamentals and clear growth paths, Hope Bancorp checks all the boxes. The merger with Territorial has not only diversified its revenue streams but also set the stage for outperformance in a post-merger environment—a recipe for sustained success.