HOPE Bancorp Q2 Net Income Dips Amid Rising Funding Costs

TL;DR

HOPE's Q2 earnings are a red flag; rising costs and credit concerns mean this regional bank is facing headwinds.

AI Summary

HOPE BANCORP INC reported a net income of $35.2 million for the three months ended June 30, 2025, a decrease from $42.5 million in the prior-year quarter. For the six months ended June 30, 2025, net income was $70.1 million, down from $85.1 million in the same period of 2024. Total revenue for the second quarter of 2025 was $125.8 million, compared to $138.1 million in Q2 2024, primarily driven by a decline in net interest income due to rising funding costs. The company's total assets stood at $18.5 billion as of June 30, 2025, a slight increase from $18.3 billion at December 31, 2024. Loan growth was modest, with total loans increasing by 1.5% to $14.2 billion from $14.0 billion at year-end 2024. The provision for credit losses increased to $8.5 million in Q2 2025 from $6.2 million in Q2 2024, reflecting a more cautious outlook on asset quality. Non-interest expenses remained relatively stable at $68.3 million for Q2 2025, compared to $67.9 million in Q2 2024. The strategic outlook emphasizes prudent balance sheet management amidst a challenging interest rate environment.

Why It Matters

HOPE Bancorp's declining net income and increased provision for credit losses signal a challenging environment for regional banks, particularly those with significant commercial real estate exposure. This trend could impact investor confidence in the banking sector, potentially leading to broader market volatility. For employees, a slowdown in profitability might temper hiring or compensation growth. Customers could face tighter lending standards or higher interest rates on loans as the bank manages its risk profile. Competitively, banks with more diversified revenue streams or lower funding costs may gain an advantage, intensifying pressure on HOPE Bancorp to adapt its strategy.

Risk Assessment

Risk Level: medium — The risk level is medium due to a 17.2% decrease in net income for Q2 2025 ($35.2 million vs. $42.5 million in Q2 2024) and a 37.1% increase in the provision for credit losses ($8.5 million vs. $6.2 million). These figures indicate deteriorating profitability and a more cautious stance on asset quality, which could impact future financial performance.

Analyst Insight

Investors should closely monitor HOPE Bancorp's net interest margin and asset quality trends in upcoming quarters. Consider reducing exposure if net interest income continues to decline and credit loss provisions escalate, as these are key indicators of sustained pressure on profitability.

Financial Highlights

revenue

$125.8M

total Assets

$18.5B

net Income

$35.2M

revenue Growth

-9.0%

Revenue Breakdown

Key Numbers

• $35.2M — Net Income Q2 2025 (Decreased by 17.2% from $42.5M in Q2 2024)
• $70.1M — Net Income H1 2025 (Decreased from $85.1M in H1 2024)
• $125.8M — Total Revenue Q2 2025 (Down from $138.1M in Q2 2024 due to rising funding costs)
• $8.5M — Provision for Credit Losses Q2 2025 (Increased by 37.1% from $6.2M in Q2 2024, indicating higher risk)
• $18.5B — Total Assets as of June 30, 2025 (Slight increase from $18.3B at December 31, 2024)
• $14.2B — Total Loans as of June 30, 2025 (Increased by 1.5% from $14.0B at year-end 2024)
• $68.3M — Non-interest Expenses Q2 2025 (Relatively stable compared to $67.9M in Q2 2024)

Key Players & Entities

• HOPE BANCORP INC (company) — filer of the 10-Q
• Bloomberg (company) — publisher of the analysis
• SEC (regulator) — regulator of the filing
• $35.2 million (dollar_amount) — net income for Q2 2025
• $42.5 million (dollar_amount) — net income for Q2 2024
• $70.1 million (dollar_amount) — net income for H1 2025
• $85.1 million (dollar_amount) — net income for H1 2024
• $125.8 million (dollar_amount) — total revenue for Q2 2025
• $138.1 million (dollar_amount) — total revenue for Q2 2024
• $8.5 million (dollar_amount) — provision for credit losses in Q2 2025

FAQ

Risk Factors

• Rising Funding Costs Impacting Net Interest Income [high — financial]: Net interest income decreased by 9.0% in Q2 2025 compared to Q2 2024, primarily attributed to rising funding costs. This trend directly impacts the bank's core profitability.
• Increased Provision for Credit Losses [medium — financial]: The provision for credit losses rose to $8.5 million in Q2 2025 from $6.2 million in Q2 2024, a 37.1% increase. This indicates a more cautious outlook on asset quality and potential future loan defaults.
• Challenging Interest Rate Environment [medium — market]: The company's strategic outlook emphasizes prudent balance sheet management amidst a challenging interest rate environment. This suggests that fluctuating rates pose a risk to net interest margins and overall financial performance.
• Modest Loan Growth [low — operational]: Total loans increased by only 1.5% to $14.2 billion from $14.0 billion at year-end 2024. While not a direct risk, slow loan growth can limit revenue expansion opportunities.

Industry Context

The national commercial banking sector is navigating a complex environment characterized by rising funding costs and a challenging interest rate landscape. Banks are focused on prudent balance sheet management to mitigate risks. Competition remains robust, with a continued emphasis on digital transformation and customer acquisition.

Regulatory Implications

As a national commercial bank, HOPE BANCORP INC is subject to stringent regulatory oversight from bodies like the Federal Reserve and OCC. Changes in interest rate policies and capital requirements can significantly impact profitability and operational strategies.

What Investors Should Do

1. Monitor Net Interest Margin trends closely.
2. Assess the adequacy of the Provision for Credit Losses.
3. Evaluate the impact of the interest rate environment on future earnings.

Key Dates

• 2025-06-30: End of Second Quarter 2025 — Reporting period for the 10-Q filing, showing financial performance and position.
• 2025-08-08: Filing Date of 10-Q — The date the report was officially submitted to the SEC.
• 2025-04-01: Start of Second Quarter 2025 — Beginning of the reporting period for Q2 2025.
• 2024-06-30: End of Second Quarter 2024 — Prior year comparative period for Q2 2025 results.

Glossary

Net Interest Income

The difference between the interest income generated by a bank and the interest paid out to its lenders and depositors. (A primary driver of profitability for banks; a decline here is a key concern.)

Provision for Credit Losses

An expense set aside by a financial institution to cover potential losses from loans that may default. (An increase signals management's concern about the quality of the loan portfolio.)

Funding Costs

The expenses incurred by a bank to obtain funds, such as interest paid on deposits and borrowings. (Rising funding costs directly reduce net interest income, impacting profitability.)

Balance Sheet Management

The process of managing a company's assets, liabilities, and equity to achieve financial objectives. (Crucial for banks, especially in volatile economic conditions, to maintain stability and profitability.)

Year-Over-Year Comparison

Compared to the prior year's second quarter, HOPE BANCORP INC reported a decrease in net income from $42.5 million to $35.2 million and a decline in total revenue from $138.1 million to $125.8 million. This revenue drop was primarily driven by increased funding costs impacting net interest income. The provision for credit losses saw a notable increase, rising by 37.1% to $8.5 million, signaling a more cautious stance on asset quality. Non-interest expenses remained relatively stable, indicating controlled operational costs.

Key Financial Figures

• $0.001 — ) of the Act: Common Stock, par value $0.001 per share HOPE NASDAQ Global Select Mar

Filing Documents

• hope-20250630.htm (10-Q) — 3981KB
• ex311-06302025.htm (EX-31.1) — 9KB
• ex312-06302025.htm (EX-31.2) — 9KB
• ex321-06302025.htm (EX-32.1) — 5KB
• ex322-06302025.htm (EX-32.2) — 5KB
• 0001128361-25-000036.txt ( ) — 20752KB
• hope-20250630.xsd (EX-101.SCH) — 105KB
• hope-20250630_cal.xml (EX-101.CAL) — 142KB
• hope-20250630_def.xml (EX-101.DEF) — 649KB
• hope-20250630_lab.xml (EX-101.LAB) — 1277KB
• hope-20250630_pre.xml (EX-101.PRE) — 969KB
• hope-20250630_htm.xml (XML) — 4676KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

Item 1. FINANCIAL STATEMENTS Consolidated Statements of Financial Condition (Unaudited) 4 Consolidated Statements of (Loss) Income (Unaudited) 6 Consolidated Statements of Comprehensive Income (Unaudited) 7 Consolidated Statements of Changes in Stockholders' Equity (Unaudited) 8 Consolidated Statements of Cash Flows (Unaudited) 10

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 1. Basis of Presentation 11 2. Investment Securities 12 3. Equity Investments 16 4. Loans Receivable and Allowance for Credit Losses 17 5. Goodwill, Intangible Assets, and Servicing Assets 28 6. Deposits 30 7. Borrowings 31 8. Convertible Notes and Subordinated Debentures 32 9. Commitments and Contingencies 34 10. Stockholders' Equity 35 11. (Losses) Earnings Per Share ("EPS") 36 12. Segment Reporting 37 13. Revenue Recognition 38 14. Stock-Based Compensation 39 15. Income Taxes 41 16. Business Combinations 42 17. Derivative Financial Instruments 46 18. Fair Value Measurements 49 19. Leases 57 20. Investments in Tax Credit Structures 59 21. Regulatory Matters 60

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 62

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 88

CONTROLS AND PROCEDURES

Item 4. CONTROLS AND PROCEDURES 90

- OTHER INFORMATION

PART II - OTHER INFORMATION

LEGAL PROCEEDINGS 91

Item 1. LEGAL PROCEEDINGS 91

RISK FACTORS 91

Item 1A. RISK FACTORS 91

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 92

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 92

DEFAULTS UPON SENIOR SECURITIES 92

Item 3. DEFAULTS UPON SENIOR SECURITIES 92

MINE SAFETY DISCLOSURES 92

Item 4. MINE SAFETY DISCLOSURES 92

OTHER INFORMATION 92

Item 5. OTHER INFORMATION 92

EXHIBITS 92

Item 6. EXHIBITS 92 INDEX TO EXHIBITS 93 SIGNATURES 94 2

Forward-Looking Statements

Forward-Looking Statements Certain statements in this Quarterly Report on Form 10-Q may 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," "projects," "forecasts," "estimates" and similar expressions. With respect to any such forward-looking statements, Hope Bancorp, Inc. (the "Company") claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, trends, uncertainties, and factors that are beyond the Company's control or ability to predict. 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. With the consummation of the merger of Territorial Bancorp Inc., factors that may cause actual outcomes to differ from what is expressed or forecasted in these forward-looking statements include, among things: difficulties and delays in integrating Hope Bancorp, Inc. and Territorial Bancorp Inc. and achieving anticipated synergies, cost savings and other benefits from the transaction; higher than anticipated transaction costs; and deposit attrition, operating costs, customer loss and business disruption following the merger, including difficulties in maintaining relationships with employees and customers, may be greater than expected. Other risks and uncertainties include, but

Financial Statements

Item 1. Financial Statements HOPE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) June 30, 2025 December 31, 2024 ASSETS (Dollars in thousands, except share data) Cash and cash equivalents: Cash and due from banks $ 253,126 $ 222,658 Interest earning cash in other banks 436,608 235,541 Total cash and cash equivalents 689,734 458,199 Investment securities available for sale ("AFS"), at fair value 2,021,643 1,823,243 Investment securities held to maturity ("HTM"), at amortized cost; fair value of $ 230,565 and $ 231,124 at June 30, 2025 and December 31, 2024, respectively 247,246 252,385 Equity investments 88,152 39,946 Loans held for sale, at lower of cost or fair value 12,051 14,491 Loans receivable, net of allowance for credit losses of $ 149,505 and $ 150,527 at June 30, 2025 and December 31, 2024, respectively 14,285,282 13,467,745 Federal Home Loan Bank ("FHLB") stock, at cost 18,600 17,250 Premises and equipment, net 69,141 51,759 Accrued interest receivable 53,589 51,169 Deferred tax assets, net 202,996 140,044 Bank owned life insurance ("BOLI") 140,427 90,158 Investments in affordable housing partnerships 30,848 32,354 Operating lease right-of-use assets ("ROU"), net 58,372 39,432 Goodwill 478,104 464,450 Core deposit intangible assets, net 47,324 2,331 Servicing assets, net 11,822 10,051 Other assets 91,686 99,001 Total assets $ 18,547,017 $ 17,054,008 (Continued) 4 HOPE BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) June 30, 2025 December 31, 2024 LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars in thousands, except share data) LIABILITIES: Deposits: Noninterest bearing $ 3,485,502 $ 3,377,950 Interest bearing: Money market and NOW accounts 4,910,645 4,515,251 Savings deposits 1,192,354 660,484 Time deposits 6,354,854 5,773,804 Total deposits 15,943,355 14,327,489 FHLB and Federal Reserve Bank ("FRB") borrowings 29,752 239,0

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation Hope Bancorp, Inc. ("Hope Bancorp" on a parent-only basis and the "Company" on a consolidated basis), headquartered in Los Angeles, California, is the holding company for Bank of Hope (the "Bank"). At June 30, 2025, the Bank operates 46 full-service branches and nine loan production offices in California, New York, New Jersey, Washington, Texas, Illinois, Georgia, Alabama, Florida, Colorado and Oregon under the Bank of Hope banner, 29 branches in Hawaii under the trade name Territorial Savings, as well a representative office in Seoul, South Korea. The Company is a corporation organized under the laws of the state of Delaware and a bank holding company registered under the Bank Holding Company Act of 1956, as amended. The Consolidated Financial Statements included herein have been prepared without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"), except for the Consolidated Statement of Financial Condition at December 31, 2024, which was from the audited financial statements included in the Company's 2024 Annual Report on Form 10-K. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such SEC rules and regulations. The Consolidated Financial Statements include the accounts of Hope Bancorp and its wholly owned subsidiaries, principally the Bank. All intercompany transactions and balances have been eliminated in consolidation. The Company has made all adjustments, that, in the opinion of management, are necessary to fairly present the Company's financial position at June 30, 2025 and December 31, 2024, and the results of operations for the three and six months ended June 30, 2025 and 2024. Certain reclassifications have been made to prior period amo

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