Hope Bancorp (NASDAQ:HOPE) reported higher second-quarter earnings and revenue as net interest margin expanded, loan growth accelerated and the company continued to improve its deposit mix ahead of its planned acquisition of SMBC MANUBANK’s commercial banking unit.
The company reported second-quarter revenue of $148 million and diluted earnings per share of $0.26, up 12% from the first quarter. Earnings per share excluding notable items, primarily merger-related costs, were $0.27, up 17% sequentially from $0.23 and 40% from $0.19 a year earlier.
“Overall, we delivered a strong second quarter and made solid progress during the first half of the year in executing against our key operating priorities,” Kim said.
Margin Expansion and Operating Leverage
Net interest income totaled $129 million, increasing $5 million, or 4%, from the first quarter and $12 million, or 10%, from the second quarter of 2025. Chief Financial Officer Julianna Balicka said the company’s net interest margin rose to 2.96% from 2.90% in the prior quarter and 2.69% a year earlier.
The margin improvement was primarily driven by higher loan yields and lower funding costs. Balicka said the June net interest margin was 2.98%, while the end-of-June deposit spot rate was 2.58% and the spot rate on interest-bearing deposits was 3.32%.
Management expects continued margin expansion through the remainder of 2026, though Balicka said quarterly improvement is expected to be more modest than the increase recorded from the first to second quarter. The company continues to benefit from repricing within its certificate of deposit portfolio, she said.
Non-interest income was $19 million, up 11% from the prior quarter and 19% year over year excluding notable items. The increase reflected higher gains on sales of Small Business Administration loans, customer-related income and fees, and gains on available-for-sale securities.
Hope sold $68 million of SBA loans during the quarter, generating a $4 million gain on sale, compared with $53 million of sales and a $3 million gain in the first quarter. Kim said secondary-market premiums remained healthy, in the mid- to low-8% range, and the company’s current outlook calls for $16 million to $17 million in SBA gains on sale for the full year.
Non-interest expense totaled $98 million, up from $94 million in the first quarter. Excluding merger-related costs, expenses were $96 million, a 2% sequential increase and a 5% increase from a year earlier. Revenue growth outpaced expense growth, bringing the efficiency ratio excluding notable items to 65.2%, compared with 66.9% in the first quarter and 69.1% a year earlier.
Loan and Deposit Trends
Gross loans increased 2% sequentially, or 8% on an annualized basis, to $15 billion at June 30. Loan growth was led by commercial and industrial lending, with additional contributions from commercial real estate and residential mortgage lending. Average loans totaled $14.8 billion during the quarter, up 1% from the first quarter and 3% from a year earlier.
Kim said loan production was “pretty robust” during the second quarter and that the pipeline entering the third quarter remained solid. He said the company is prioritizing relationship economics, loan structure and credit quality over headline growth.
Balicka said new loan yields ranged from a little above 6% for commercial real estate loans to close to 8% for SBA lending, with an overall average of roughly 6%.
Deposits rose 1% sequentially, or 4% annualized, to $15.9 billion. Non-interest-bearing demand deposits increased 5% from the prior quarter, while time deposits declined 1% as the company sought to reduce funding costs and improve its deposit composition.
Balicka said the company saw tariff refund funds flow into accounts held by some commercial and small-business customers during the quarter, helping support demand-deposit growth. She added that incremental interest-bearing deposit costs were generally between 3.50% and 3.80%, depending on product and market.
Management said it intends to reduce the proportion of CDs in the deposit base over time, although Balicka said the shift will take time because CDs remain a preferred product among the company’s core customers. She said the prior acquisition of Territorial Bancorp and the pending MANUBANK transaction are expected to broaden deposit sources. Customer retail deposits in Hawaii grew 6% year to date, with pricing lower than mainland deposits, according to management.
Credit Quality and Capital
Asset quality remained broadly stable, according to the company. Criticized loans totaled $334 million at June 30, up $9 million from the prior quarter but down $80 million, or 19%, from a year earlier. The criticized loan ratio improved to 2.24% of loans receivable from 2.87% a year ago.
Non-performing assets were $113 million, or 59 basis points of total assets, compared with 65 basis points in the first quarter and 61 basis points a year earlier. Net charge-offs were $9 million, or an annualized 24 basis points of average loans, down from $11 million, or 29 basis points, in the first quarter.
The provision for credit losses declined to $7 million from $9 million in the prior quarter. The allowance for credit losses totaled $153 million, representing 1.03% of loans receivable.
Hope reported a common equity Tier 1 ratio of 12.27% and a total capital ratio of 13.95% at June 30. Year to date, the company returned $45 million to shareholders through dividends and common-stock repurchases, including approximately 773,000 shares repurchased for $9 million at an average price of $11.25 per share. About $27 million remained available under its existing repurchase authorization at quarter-end.
MANUBANK Transaction and Outlook
The company continues to expect its acquisition of SMBC MANUBANK’s commercial banking unit to close during the second half of 2026, subject to regulatory approvals and customary closing conditions. Based on June 30 balances and before fair-value marks, the all-cash transaction is expected to add approximately $2.3 billion in loans and $2.6 billion in deposits.
Management’s full-year outlook was unchanged. Hope expects approximately 20% end-of-period loan growth, including MANUBANK loan balances, along with revenue growth of 15% to 20% and pre-provision net revenue growth of 25% to 30%. The revenue and pre-provision outlook excludes notable items and includes an assumed quarter of MANUBANK operations in the fourth quarter.
The board declared a quarterly dividend of $0.14 per share, payable on or around Aug. 20 to shareholders of record as of Aug. 6.
About Hope Bancorp (NASDAQ:HOPE)
Hope Bancorp, Inc operates as the bank holding company for Hope Bank, a California-chartered financial institution serving small and middle-market businesses, professionals and affluent individuals. The company’s principal activities include accepting a variety of deposit products—such as checking accounts, savings and money market accounts, and time deposits—and extending commercial credit facilities. With a focus on community banking, Hope Bancorp tailors its offerings to meet the needs of clients in diverse industries, including real estate, professional services and import/export trade.
In its lending business, Hope Bancorp provides commercial real estate loans, construction financing, working capital lines of credit and equipment financing.
