Hope Bancorp Stock

Hope Bancorp, Inc. (Hope Bancorp) operates as the bank holding company for Bank of Hope that offers commercial and retail banking loan and deposit products.

The company serves a multi-ethnic population of customers around the United States. The company’s network of branches and loan production offices includes locations in California, New York, Texas, Washington, Illinois, New Jersey, Virginia, Georgia, Florida, Alabama, Colorado, and Oregon; and includes a representative office in Seoul, South Korea.

The company’s principal business activities are conducted through the bank and primarily consist of earning interest on loans and investment securities, which are primarily funded by customer deposits and other borrowings.

The company offers a full suite of commercial, corporate and consumer loan, deposit and fee-based products and services, including commercial and commercial real estate lending, Small Business Administration (‘SBA’) lending, residential mortgage and other consumer lending, treasury management services, foreign currency exchange solutions, interest rate risk hedging products, and other and international trade financing, among others. The company’s website at www.bankofhope.com offers internet banking services and applications in both English and Korean.

Lending Activities

Commercial and Industrial Loans

The company provides commercial and industrial (‘C&I’) loans to small business, middle market, corporate and institutional borrowers through the company’s branch network, loan production offices, and specialized industry lending teams. These C&I loans are provided for various purposes, such as for working capital, purchasing inventory, debt refinancing, business acquisitions, and other business-related financing needs. C&I loans are typically classified as (1) short-term loans (or lines of credit) or (2) long-term loans (or term loans to businesses). Short-term loans are often used to finance business working capital needs, collateralized with current assets, and typically have terms of one year with interest paid monthly on the outstanding balance with the principal balance due at maturity. Long-term loans typically have terms of three to five years with principal and interest paid monthly. The credit worthiness of the company’s borrowers is evaluated before a loan is originated through financial spread and collateral analysis and, if large enough, with financial projections to cover both base and downside case cash flow scenarios; and are largely reviewed quarterly to address potential borrower covenant defaults/appropriate borrower action plans, as well as loan risk grading. The company seeks to establish full banking relationships for all its commercial customers that include all of the bank’s financing, deposit and fee-based products and services. The company also offers C&I loans under the SBA 504, SBA 7(a) and SBA Express Loan (‘EZ’) programs.

Commercial Real Estate Loans

Commercial real estate (‘CRE’) loans cover a broad array of commercial real estate segments, including retail, industrial, multi-family, gas stations & car washes, mixed-use facilities, hotels/motels, office and other. CRE loans are extended for the purchase and refinance of real estate and are generally secured by first deeds of trust. The maturities on the majority of such loans are generally five to seven years with a 25-year principal amortization schedule and a balloon payment due at maturity. The company offers both fixed and floating rate CRE loans in addition to offering clients interest rate hedging options.

The company also originates loans to finance CRE construction projects, including one-to-four family residences, multifamily residences, senior housing, and commercial projects. As construction loans make up only a small percentage of the total loan portfolio, these loans are not further broken down into classes.

Small Business Administration Loans

The company extends loans partially guaranteed by the SBA. The company primarily extends SBA loans known as SBA 7(a) loans, SBA 504 loans and SBA EZ loans. SBA 7(a) loans are typically extended for working capital needs, purchase of inventory, purchase of machinery and equipment, debt refinance, business acquisitions, start-up financing, or to purchase or construct owner-occupied commercial property. SBA 7(a) loans are typically term loans with maturities up to 10 years for loans not secured by real estate and up to 25 years for real estate secured loans. SBA loans are fully amortizing with monthly payments of principal and interest. SBA 7(a) loans are typically floating rate loans that are secured by business assets and/or real estate.

The company is generally able to sell the guaranteed portion of the SBA 7(a) loans in the secondary market at a premium while earning servicing fee income on the sold portion over the remaining life of the loan. In addition to the interest yield earned on the unguaranteed portion of the SBA 7(a) loans that are not sold, the company can recognize income from gains on sales and from loan servicing on the SBA 7(a) loans that are sold.

SBA 504 loans are typically extended for the purpose of purchasing owner-occupied commercial real estate or long-term capital equipment. SBA 504 loans are typically extended for up to 20 years or the life of the asset being financed. SBA 504 loans are financed as a participation loan between the bank and the SBA through a Certified Development Company (‘CDC’).

SBA EZ loans are C&I loans that are unsecured term loans extended for business purposes. These loans are below $500 thousand and are processed based on the company’s credit scoring program.

The company’s SBA loans are originated through its SBA loan department, the company’s SBA loan production offices, or referred through the company’s branch network. All of the company’s SBA loans are originated through its SBA loan departments and certain loan production offices. The SBA loan departments are staffed by loan officers who provide assistance to qualified businesses. The bank has been designated as an SBA Preferred Lender, which is the highest designation awarded by the SBA. This designation generally facilitates a more efficient marketing and approval process for SBA loans. The company has attained SBA Preferred Lender status nationwide.

Consumer and Other Loans

The company’s consumer loans primarily consist of single-family mortgages. The company also offers home equity, credit card loans, and personal loans. The company’s single-family mortgages are secured by a first deed of trust on single family residences under a variety of loan products, including fixed-rate and adjustable-rate mortgages with either 30-year or 15-year terms. Adjustable rate mortgage loans are also offered with flexible initial and periodic adjustments ranging from five to seven years.

Investing Activities

The company’s investments include equity investments, and available for sale and held to maturity investment portfolios, which consist of the U.S. Treasury securities, government sponsored agency bonds, mortgage-backed securities, collateralized mortgage obligations (‘CMOs’), asset-backed securities, corporate securities, and municipal securities.

Deposit Activities

The company attracts both short-term and long-term deposits from the general public by offering a wide range of deposit products and services. Through the company’s branch network, the company provides its banking customers with personal and business checking accounts, money market accounts, savings accounts, time deposit accounts, individual retirement accounts, 24-hour ATMs, internet banking and bill-pay, remote deposit capture, lock boxes, and ACH origination services. In addition to the company’s consumer and commercial deposits, the company obtain both secured and unsecured wholesale deposits, including public deposits, such as State of California Treasurer’s time deposits; brokered demand deposits, money market, and time deposits, as well as deposits gathered from outside of the bank’s normal market area through deposit listing services and the company’s online banking platform.

Supervision and Regulation

Hope Bancorp is a registered bank holding company under the Bank Holding Company Act. As a bank holding company, Hope Bancorp is subject to regulation, supervision and regular examination by the FRB and is required to file periodic reports of its operations with the FRB and other such reports as the FRB may require.

Under the Bank Merger Act, the prior approval of the FDIC is required for the bank to merge with another bank or purchase all or substantially all of the assets or assume any of the deposits of another FDIC-insured depository institution. Bank of Hope’s deposits are insured by the Federal Deposit Insurance Corporation (the ‘FDIC’), up to applicable limits.

The company is also a bank holding company within the meaning of Section 3700 of the California Financial Code. Therefore, the company and its subsidiaries are subject to examination by, and may be required to file reports with, the California Department of Financial Protection and Innovation (the ‘DFPI’).

The bank is a California state-chartered bank whose deposit accounts are insured by the FDIC, up to applicable limits. As such, the bank is subject to regulation, supervision and regular examination by the DFPI and the FDIC. The bank is also subject to regulation, supervision and examination by the Consumer Finance Protection Bureau (‘CFPB’) with respect to federal consumer financial laws. While the bank is not a member of the FRB, the bank is also subject to certain regulations of the FRB. The bank is also subject to capital adequacy requirements under the California Financial Code.

The company is subject to heightened supervision and regulation imposed by the Dodd-Frank Act. The company is subject to periodic examination by the CFPB with respect to compliance with federal consumer financial laws. The company is subject to the ‘Volcker Rule,’ which generally restricts the company from engaging in activities that are considered proprietary trading and from sponsoring or investing in certain entities, including hedge or private equity funds that are considered covered funds.

The bank must comply with numerous federal and state consumer protection statutes and implementing regulations, including, but not limited to, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act, the California Homeowner Bill of Rights and various federal and state privacy protection laws, including the Telephone Consumer Protection Act, and CAN-SPAM Act.

The bank is subject to the CRA, which requires federal banking regulators to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low and moderate income neighborhoods.

The FDIC insures the company’s customer deposits through the DIF up to prescribed limits, $250 thousand per customer. The bank is subject to examination by the CFPB.

History

Hope Bancorp, Inc. was founded in 1986. The company was incorporated in Delaware in 2000.