Hope Bancorp Q3 Profit Rises 16% on Margin Expansion

Hope Bancorp (NASDAQ: HOPE) reported higher third-quarter 2026 earnings as net interest margin expansion, lower funding costs and stronger fee income lifted revenue faster than expenses. The bank also outlined the expected financial impact of its MANUBANK commercial banking acquisition, completed immediately after the quarter, which is included in its full-year outlook.

Net income rose 16% from a year earlier and 8% from the second quarter to $35.6 million, or $0.28 per diluted share. Excluding merger-related and other notable items, net income increased 19% year over year to $37.5 million, or $0.29 per diluted share.

Pre-provision net revenue was $54.7 million, up 21% year over year and 11% sequentially. Excluding notable items, the non-GAAP measure was $57.3 million.

Margin expansion and fee growth support revenue

Net interest income increased 7% year over year and 5% from the prior quarter to $135.4 million. Net interest margin reached 3.02%, up six basis points sequentially and 13 basis points from a year earlier, supported by higher earning-asset yields and a more favorable funding mix. The yield on average loans rose five basis points from the second quarter to 5.78%, while the cost of total deposits declined to 2.58% from 2.60%.

Noninterest income climbed 44% year over year and 17% sequentially to $22.1 million. The increase reflected higher customer-related fees, gains from Small Business Administration loan sales and $3.1 million of net gains on other loan sales, partly offset by a $1.2 million sequential decrease in gains from available-for-sale securities sales. Hope Bancorp sold $72 million of SBA loans during the quarter and recorded a $4.7 million net gain.

GAAP noninterest expense rose 4% from the second quarter and 6% year over year to $102.8 million, including $2.7 million of merger-related costs. Excluding notable items, expenses were $100.1 million, up 4% on both comparisons. The adjusted efficiency ratio improved to 63.6% from 65.2% in the prior quarter and 67.6% a year earlier. The company said it generated positive operating leverage in each quarter of 2026 through September.

Deposits grow as time deposits decline

Total deposits were $16.1 billion at September 30, up 1.5% sequentially and 2% year over year. Average noninterest-bearing demand deposits increased 4% from the prior quarter, while average interest-bearing nonmaturity deposits rose 5% and time deposits declined 3%.

On an end-of-period basis, all nonmaturity deposits grew 6% sequentially and time deposits fell 5%. Time deposits represented 37% of total deposits, down from 40% a year earlier, reflecting the bank’s planned reduction of higher-cost funding.

Gross loans increased 1% sequentially and 3% year over year to $15.1 billion. Commercial-and-industrial and residential mortgage lending led the growth, partly offset by lower commercial real estate balances. The loan-to-deposit ratio declined to 93.8% from 94.7% at the end of the second quarter.

Credit metrics remain stable

Nonperforming assets declined 4% sequentially to $108 million, equal to 0.57% of total assets. Criticized loans were broadly unchanged from the prior quarter at $335 million, or 2.22% of loans receivable, but fell 10% from a year earlier.

Net charge-offs decreased to $7 million, or an annualized 0.19% of average loans, from $9 million and 0.24% in the second quarter. The provision for credit losses increased to $8.6 million from $6.8 million, primarily reflecting loan growth. The allowance for credit losses was $154.3 million, with coverage holding at 1.03% of loans receivable.

Commercial real estate loans totaled $8.5 billion and had a weighted average loan-to-value ratio of 47%. The presentation said most CRE loans carry full recourse and personal guarantees.

MANUBANK acquisition expands deposits and liquidity

Hope Bancorp completed its acquisition of the Commercial Banking Unit of SMBC MANUBANK on October 1. After a subsequent SBA loan sale, the acquired business contributed $2.0 billion of loans and $2.6 billion of deposits. The bank also received an estimated $307 million net cash settlement, subject to adjustment, and acquired a $65 million interest-bearing federal funds account.

On a pro forma basis, the combined company had $17.1 billion of loans and $18.7 billion of deposits, producing a 91.5% loan-to-deposit ratio. The transaction would reduce time deposits to 33% of combined deposits from 37% for Hope Bancorp on a standalone basis and lower the combined deposit cost by an estimated five basis points.

Management estimated MANUBANK’s annualized noninterest expense at $136 million and expects a run rate of about $78 million after cost savings are fully phased in, equivalent to savings of more than 40%. Hope Bancorp expects approximately $8 million of after-tax merger costs in the fourth quarter of 2026 and about $7 million in 2027. A core systems conversion is planned for the fourth quarter of 2027.

The acquisition is expected to reduce the common equity Tier 1 capital ratio by approximately 200 basis points, resulting in a pro forma ratio of about 10.20% relative to Hope Bancorp’s September 30 standalone position. Before the transaction, the CET1 ratio was 12.25%, the total capital ratio was 13.92% and the non-GAAP tangible common equity ratio was 9.28%. The bank maintained its quarterly common dividend of $0.14 per share.

Full-year outlook includes acquired operations

For full-year 2026, management expects end-of-period gross loans to grow approximately 15% from the $14.8 billion reported at the end of 2025, reflecting both organic growth and acquired MANUBANK balances.

Total revenue, defined as net interest income plus noninterest income excluding notable items, is expected to increase approximately 16% to 18% from 2025. Pre-provision net revenue excluding notable items is projected to grow approximately 23% to 25%. Both forecasts include the anticipated contribution from MANUBANK in the fourth quarter.

The outlook remains dependent on macroeconomic conditions, including changes in market interest rates, U.S. and global trade policies, geopolitical instability and international tensions. The company also identified integration delays, higher transaction costs, deposit attrition, customer losses and disruption to employee or customer relationships as risks to realizing the expected benefits of the MANUBANK acquisition.