10-K: Hope Bancorp Reports Profit Decline Amid Acquisition & Repositioning

Sentiment:

Annual Report 25 February 2026 5:12 PM

Hope Bancorp, Inc. reported a significant decrease in net income for 2025, primarily driven by losses from investment securities repositioning and merger-related costs, despite an increase in net interest income.

Capital raiseThe company periodically evaluates opportunities to access capital markets, considering financial condition, regulatory capital ratios, business strategies, and anticipated asset growth.Future acquisitions, organic growth, or changes in regulatory capital requirements could necessitate an increase in the amount or change in the composition of current capital, including common equity.The company may issue additional shares of common stock or other capital securities in public or private transactions, which could be substantially dilutive to existing common stock holders.

Worse than expectedNet income decreased by 38% year-over-year, and diluted EPS fell from $0.82 to $0.49.Return on average assets (ROA) and return on average stockholders' equity (ROE) significantly declined.The efficiency ratio worsened considerably to 78.13%, indicating higher operating costs relative to revenue.Noninterest income saw a substantial decrease due to significant losses from investment securities repositioning.Nonperforming assets increased by 50%, and net charge-offs to average loans also rose, signaling a deterioration in asset quality.

Summary

Net income for 2025 was $61.6 million, a 38% decrease from $99.6 million in 2024, and significantly lower than $133.7 million in 2023.
Diluted earnings per common share decreased to $0.49 in 2025 from $0.82 in 2024 and $1.11 in 2023.
Excluding notable items, net income for 2025 was $113.3 million, up from $103.4 million in 2024, but still below $144.6 million in 2023.
Return on average assets (ROA) was 0.34% in 2025, down from 0.56% in 2024 and 0.67% in 2023.
Net interest income increased by 10% to $472.2 million in 2025 from $427.9 million in 2024, but was lower than $525.9 million in 2023.
Net interest margin improved to 2.76% in 2025 from 2.55% in 2024, but remained below 2.81% in 2023.
Provision for credit losses increased to $31.8 million in 2025 from $17.3 million in 2024.
Noninterest income decreased significantly to $26.5 million in 2025 from $47.1 million in 2024, primarily due to $38.9 million in net losses from investment securities repositioning.
Noninterest expense increased by 20% to $389.6 million in 2025, largely due to the Territorial acquisition and related restructuring costs of $21.5 million.
The efficiency ratio worsened to 78.13% in 2025 from 68.36% in 2024 and 63.34% in 2023.
Total assets grew by 8.7% to $18.53 billion at December 31, 2025, from $17.05 billion at December 31, 2024, driven by the Territorial acquisition.
Loans receivable, net, increased to $14.54 billion at December 31, 2025, from $13.47 billion at December 31, 2024, including $1.07 billion in loans acquired from Territorial.
Deposits increased by 8.9% to $15.60 billion at December 31, 2025, from $14.33 billion at December 31, 2024, including $1.67 billion assumed from Territorial.
Nonperforming assets increased to $136.1 million at December 31, 2025, from $90.8 million at December 31, 2024, primarily due to a few large commercial real estate (CRE) loans.
The allowance for credit losses coverage ratio decreased slightly to 1.07% of loans receivable at December 31, 2025, from 1.11% at December 31, 2024.
Net charge-offs to average loans increased to 0.20% in 2025 from 0.13% in 2024, driven by C&I loans.
The company completed the acquisition of Territorial Bancorp Inc. on April 2, 2025, expanding its presence to Hawaii and diversifying its loan portfolio with residential mortgage loans.
A strategic repositioning of the investment securities portfolio in June 2025 involved selling $417.9 million of lower-yielding securities and reinvesting in higher-yielding ones, resulting in $38.9 million in realized losses.
The company exited its consumer credit cards line of business in 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative report. While the acquisition expands market presence and net interest income saw a modest increase, the significant decline in overall profitability, worsening efficiency, and increase in non-performing assets are concerning. The large losses from investment repositioning and higher credit provisions overshadow the strategic growth.

Positives

Net interest income increased by 10% in 2025 compared to 2024, reaching $472.2 million.
Net interest margin improved to 2.76% in 2025 from 2.55% in 2024.
Total assets increased by 8.7% to $18.53 billion, and total deposits increased by 8.9% to $15.60 billion, largely due to the acquisition of Territorial Bancorp Inc.
The Territorial acquisition added $1.07 billion in loans and $1.67 billion in deposits, expanding the company's domestic presence to Hawaii and diversifying its loan portfolio with residential mortgage loans.
The strategic repositioning of investment securities in June 2025, despite initial losses, aimed to redeploy funds into higher-yielding investment securities, which could benefit future interest income.
The company recorded a reversal of $691 thousand in FDIC special assessment expense in 2025, indicating a positive adjustment from prior estimates.
The company's capital ratios (Common Equity Tier 1, Tier 1, Total Capital, and Leverage) exceeded all regulatory minimums, including the capital conservation buffer, at December 31, 2025.
The company realized positive impacts from renewable energy tax credit investments and investments in affordable housing partnerships, reducing its effective income tax rate to 20.30% in 2025 from 25.07% in 2024.
The company maintains a robust cybersecurity program aligned with industry standards and undergoes regular audits and assessments.

Negatives

Net income decreased significantly by 38% to $61.6 million in 2025 from $99.6 million in 2024, and was also lower than $133.7 million in 2023.
Diluted earnings per common share fell to $0.49 in 2025 from $0.82 in 2024 and $1.11 in 2023.
Return on average assets (ROA) and return on average stockholders' equity (ROE) continued to decline in 2025, reaching 0.34% and 2.77% respectively.
The efficiency ratio worsened considerably to 78.13% in 2025 from 68.36% in 2024, indicating higher operating costs relative to revenue.
Noninterest income decreased by 44% in 2025, primarily due to $38.9 million in net losses from the strategic repositioning of investment securities.
Noninterest expense increased by 20% to $389.6 million in 2025, driven by higher salaries and employee benefits, occupancy, and furniture/equipment/software expenses related to the Territorial acquisition, as well as $21.5 million in merger and restructuring-related costs.
Provision for credit losses increased by $14.5 million to $31.8 million in 2025, mainly due to residential mortgage loans and C&I loans.
Nonperforming assets increased by 50% to $136.1 million at December 31, 2025, from $90.8 million at December 31, 2024, largely due to a few large CRE loans migrating to non-accrual status.
Net charge-offs to average loans receivable increased to 0.20% in 2025 from 0.13% in 2024.
The allowance for credit losses coverage ratio decreased slightly to 1.07% of loans receivable at December 31, 2025, from 1.11% at December 31, 2024.
The effective income tax rate was impacted by a $4.8 million expense in 2025 due to a change in California's state tax apportionment law.

Risks

Deterioration of economic conditions in operating areas and the U.S. generally, including impacts from interest rates, supply chain disruptions, tariffs, inflation, labor shortages, and real estate markets.
Adverse economic or political conditions in South Korea, potentially leading to economic and transfer risk or deposit outflows.
Interest rate risk associated with volatile interest rates and related asset-liability matching risk, affecting profitability.
Potential increases in deposit insurance assessments.
Liquidity risks, including an inability to raise funds through deposits, borrowings, or loan sales, which could impair funding operations.
Risk of significant non-earning assets and net credit losses, particularly in weak economic conditions.
Failure of or changes to assumptions and estimates underlying the allowance for credit losses.
Geopolitical instability or unrest.
Risk of natural disasters, especially given the concentration of operations in earthquake and fire-prone Southern California.
Risk of cybersecurity incidents, fraudulent activity, and breaches or failures of information system controls, leading to financial losses, litigation, or reputational damage.
Regulatory risks associated with current and future regulations, including increased costs, limitations on activities, or competitive disadvantages.
Impact of U.S. and global trade policies and tensions, including tariffs, which could adversely affect customer revenues and ability to service debt.
Adverse effects from acquisitions, including integration difficulties, higher transaction costs, deposit attrition, and business disruption.
The development and use of artificial intelligence (AI) presents risks and challenges, including regulatory uncertainty, potential for incorrect or biased output, and intellectual property infringement.
Diverse views, increasing scrutiny, and evolving expectations from stakeholders regarding environmental, social, and governance (ESG) practices may impose additional costs or risks.
Damage to business reputation from regulatory actions, financial reporting issues, negative publicity, or business conduct.
Additional risks encountered when expanding outside traditional geographic markets, such as unfamiliarity with new markets and increased expenses.
Changes in accounting standards may affect how financial condition and results of operations are recorded and reported.
Potential reduction or discontinuation of common stock dividends due to legal or regulatory restrictions, or insufficient earnings.
Decline in the value of securities in the investment portfolio due to market conditions or issuer-specific events.
Failure to maintain an effective system of internal controls and disclosure controls and procedures, potentially leading to inaccurate financial reporting or fraud.
Anti-takeover provisions in charter documents and applicable law may limit the ability of another party to acquire the company.
Common stock is not insured, and investors could lose the entire value of their investment.
Potential for dilution of existing common stock holders if additional capital is raised through equity issuances.
Climate change concerns could adversely affect the business and customers, leading to new regulations, cost increases, or asset value reductions.
Adverse effects from the lack of soundness of other financial institutions, potentially causing deposit outflows or market-wide liquidity problems.

Future Outlook

The company expects to continue paying quarterly cash dividends, though no assurance can be given as future payments depend on earnings, capital requirements, and financial condition. Management believes its liquidity sources are stable and adequate for day-to-day cash flow, and is not aware of any material adverse effects on liquidity or material capital expenditure commitments in the foreseeable future. The company is evaluating the impact of new accounting guidance on derivatives and interim reporting.

Management Comments

Management believes that as of December 31, 2025, Hope Bancorp and the Bank met all requirements under the Basel III Capital Rules applicable to them on a fully phased-in basis, including the capital conservation buffer.
Management believes that its relations with its employees are good.
Management believes that none of these legal claims, individually or in the aggregate, will have a material adverse effect on the results of operations or financial condition of the Company.
At December 31, 2025, management is not aware of any demands, commitments, trends, events, or uncertainties that will or are reasonably likely to have a material or adverse effect on our liquidity position.
At December 31, 2025, we are not aware of any material commitments for capital expenditures in the foreseeable future.

Industry Context

StockSavvy.ai notes that Hope Bancorp operates in a highly competitive banking and financial services industry, influenced by general economic conditions, interest rate fluctuations, and monetary policies of the Federal Reserve. The company, as a banking organization with consolidated assets exceeding $10 billion, is subject to heightened supervision and regulation under the Dodd-Frank Act and Basel III Capital Rules. The industry faces ongoing challenges from changes in regulations, technology, and consolidation. The company's expansion into Hawaii through the Territorial acquisition aligns with a strategy to diversify and grow its customer base in a multi-ethnic population, a trend seen in regional banking to seek new growth avenues.

Comparison to Industry Standards

The company's efficiency ratio of 78.13% in 2025 is significantly higher than the industry average for regional banks, which typically aim for ratios below 60%, indicating less efficient operations compared to peers.
The decline in Return on Average Assets (ROA) to 0.34% and Return on Average Equity (ROE) to 2.77% in 2025 places Hope Bancorp well below the performance of many well-capitalized regional banks, which often report ROA in the 1.0-1.5% range and ROE in the 10-15% range.
The increase in nonperforming assets to $136.1 million and net charge-offs to 0.20% of average loans suggests a potential weakening in asset quality compared to some industry leaders who have maintained tighter credit controls amidst economic shifts.
While the company's capital ratios exceed regulatory minimums, the decrease in Common Equity Tier 1 ratio to 12.27% and Tangible Common Equity ratio to 9.76% from the previous year indicates a slight erosion of capital strength, though still robust compared to the minimum requirements for 'well-capitalized' status.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Equity Incentive Plan Adoption	Stockholders approved the 2024 Equity Incentive Plan in May 2024, reserving 4,500,000 shares for grants of stock options, SARs, restricted stock, performance shares, and performance units to non-employee directors and employees.	May 2024	Aims to attract and retain qualified personnel, motivate performance, and align interests with stockholders through equity-based awards.
Share Repurchase Program Reaffirmation	The Board of Directors reaffirmed a share repurchase program in December 2025, authorizing the company to repurchase up to $50.0 million of its common stock, with $35.3 million remaining available.	December 2025	Indicates management's confidence in the company's value and a commitment to returning capital to shareholders, potentially supporting share price.
Insider Trading Policy Adoption	The Joint Insider Trading and Disclosure Policy was approved by the Nomination and Governance Committee on August 18, 2025, and adopted by the Board of Directors on August 20, 2025.	August 20, 2025	Enhances compliance with securities laws, prevents insider trading, and protects the company's reputation for integrity and ethical conduct.
Code of Ethics	The company has adopted a code of ethics applicable to all employees, including principal executive, financial, and accounting officers.	Ongoing	Promotes ethical conduct and compliance with legal and regulatory requirements across the organization.

Legal Proceedings

Loss contingencies for all legal claims totaled approximately $484 thousand at December 31, 2025.
The company is currently under examination by the New York City Department of Finance for the 2016, 2017, and 2018 tax years, with no material adjustments expected.
The company was contacted by the state of Ohio regarding an examination of financial institutions tax returns for the tax year from 2022 to 2024, with no material adjustments expected.

Related Party Transactions

The company engages in loan transactions with certain directors, executives, or their associates (Related Parties) in the ordinary course of business.
All loans to Related Parties were made at substantially the same terms and conditions as other originated loans to unaffiliated borrowers at the time of origination.
All loans to Related Parties were current at December 31, 2025 and 2024.
The outstanding principal balance of loans to Related Parties was $82.4 million at December 31, 2025, compared with $84.0 million at December 31, 2024.
Loans to Related Parties consisted of $80.9 million in CRE loans and $1.5 million in C&I loans at December 31, 2025.

Stakeholder Impact

**Shareholders**: Experienced a significant decline in net income and diluted EPS, but the company reaffirmed its share repurchase program and expects to continue quarterly dividends. Potential for dilution from future capital raises.
**Employees**: Headcount increased due to the Territorial acquisition, but previous restructuring in 2023 involved a 13% workforce reduction. The company offers competitive compensation, benefits, and professional development opportunities.
**Customers**: Expanded branch network and loan production offices, particularly with the entry into the Hawaii market, offering a full suite of commercial and retail banking products. Deposit insurance by FDIC up to applicable limits.
**Suppliers/Vendors**: Reliance on third-party vendors for information systems and data processing, with cybersecurity risk management processes in place for vendor oversight.
**Creditors**: Subordinated debentures and convertible notes are outstanding, with the company's capital ratios exceeding regulatory minimums, providing a buffer for creditors.
**Regulators**: Subject to extensive regulation and supervision by federal and state banking agencies, with ongoing compliance requirements for capital adequacy, consumer protection, and anti-money laundering.

Next Steps

File definitive proxy statement for the 2026 annual meeting of stockholders within 120 days of fiscal year-end.
Continue to assess any potential impact of the One Big Beautiful Bill Act (OBBBA) on consolidated financial statements.
Evaluate the impact of ASU 2025-09 (Hedge Accounting Improvements) on consolidated financial statements, effective for fiscal years beginning after December 15, 2026.
Evaluate the impact of ASU 2025-11 (Interim Reporting Improvements) on consolidated financial statements, effective for interim periods within annual reporting periods beginning after December 15, 2027.
Evaluate the impact of ASU 2025-12 (Codification Improvements) on consolidated financial statements, effective for annual reporting periods beginning after December 15, 2026.

Key Dates

Date	Description
2000	Hope Bancorp was incorporated in Delaware.
2001	Establishment of the Hope Scholarship Foundation, which has received over $3.15 million in contributions.
June 5, 2003	Issuance date of Nara Capital Trust III subordinated debentures.
July 30, 2003	Date of Wilshire State Bank Directors' Survivor Income Plan and Executive Survivor Income Plan.
December 17, 2003	Issuance date of Nara Statutory Trust V subordinated debentures.
December 22, 2003	Issuance date of Nara Statutory Trust IV subordinated debentures.
December 30, 2003	Issuance date of Center Capital Trust I subordinated debentures.
2004	Center Bank's Survivor Income Plan adopted.
March 17, 2005	Issuance date of Wilshire Statutory Trust II subordinated debentures.
July 1, 2005	Date of Wilshire State Bank Directors' Survivor Income Plan and Executive Survivor Income Plan.
September 15, 2005	Issuance date of Wilshire Statutory Trust III subordinated debentures.
March 22, 2007	Issuance date of Nara Statutory Trust VI subordinated debentures.
March 30, 2007	Issuance date of Saehan Capital Trust I subordinated debentures.
July 10, 2007	Issuance date of Wilshire Statutory Trust IV subordinated debentures.
2007	Deferred compensation plan amended to comply with IRC 409(A) regulations.
2008	Housing and Economic Recovery Act enacted, capping government support for GSEs.
2011	Company assumed Center Bank's Survivor Income Plan.
July 29, 2016	Wilshire Bancorp underwent a Section 382 Ownership Change due to an acquisition.
2018	Company issued $217.5 million aggregate principal amount of 2.00% convertible senior notes maturing on May 15, 2038.
May 11, 2018	Date of Indenture for convertible senior notes.
2020	California Assembly Bill 85 (A.B. 85) signed into law, suspending NOL use for 2020-2022 tax years.
January 2021	Anti-Money Laundering Act of 2020 (AMLA) enacted.
May 7, 2021	Registration Statement on Form S-8 filed for 2016 Incentive Compensation Plan.
February 9, 2022	Senate Bill 113 (S.B. 113) signed into law, reinstating California NOL deductions for tax years beginning in 2022.
January 2022	Board approved a share repurchase program of up to $50.0 million.
April 22, 2022	Date of Fourth Amended and Restated Employment Agreement with Kevin S. Kim.
January 1, 2023	Company adopted ASU 2022-02, eliminating the concept of TDR loans from GAAP.
May 15, 2023	Most holders of convertible notes exercised their put right, leading to a $197.1 million cash payoff.
October 2023	Company announced a strategic reorganization, including a 13% workforce reduction.
November 2023	FDIC approved a special assessment at approximately 13.4 basis points per year, to be paid in eight quarterly installments starting Q1 2024.
December 2023	FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures.
February 2024	FDIC informed banks of an increase to the special assessment, paid in two additional quarterly installments at 9.4 basis points per year.
April 26, 2024	Agreement and Plan of Merger entered into between Hope Bancorp and Territorial Bancorp Inc.
May 2024	Company's stockholders approved the 2024 Equity Incentive Plan.
August 18, 2025	Nomination and Governance Committee approved the Joint Insider Trading and Disclosure Policy.
August 20, 2025	Board of Directors adopted the Joint Insider Trading and Disclosure Policy.
April 2, 2025	Company completed the acquisition of Territorial Bancorp Inc. and its subsidiary, Territorial Savings Bank.
June 2025	Company executed a strategic repositioning of its investment securities portfolio, selling $417.9 million in AFS securities and reinvesting proceeds.
June 27, 2025	California Senate Bill 132 signed into law, changing state tax apportionment for banks to a single-sales-factor formula, effective January 1, 2025.
July 4, 2025	The One Big Beautiful Bill Act (OBBBA) was enacted in the U.S.
November 2025	FASB issued ASU 2025-08, Financial Instruments—Credit Losses (Topic 326): Purchased Loans, which the company early adopted prospectively effective January 1, 2025.
November 2025	FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements.
December 2025	Board of Directors reaffirmed the $50.0 million share repurchase program.
December 2025	FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements.
December 2025	FASB issued ASU 2025-12, Codification Improvements.
February 18, 2026	Closing sale price of common stock was $12.10 per share; 128,203,739 shares outstanding.
February 25, 2026	Date of the Annual Report on Form 10-K filing.

Recommendation

hold

Hope Bancorp's 2025 results show a mixed picture. While the Territorial acquisition and strategic investment repositioning are positive long-term moves for growth and yield, the immediate impact of significant losses from securities sales and increased operating expenses led to a sharp decline in net income and efficiency. The rise in nonperforming assets and credit provisions is a concern. Despite strong capital ratios, the overall profitability metrics are under pressure. A 'hold' recommendation is appropriate as investors should monitor the successful integration of Territorial, the realization of benefits from the investment repositioning, and trends in asset quality before considering further investment.

Keywords

Banking, Financial Services, Commercial Real Estate, Commercial & Industrial Loans, Residential Mortgage Loans, Deposits, Net Interest Income, Credit Losses, Acquisition, Territorial Bancorp, Hawaii Market, SEC Filing, 10-K, Bank Holding Company, Capital Ratios, Nonperforming Assets, Cybersecurity, ESG, Interest Rate Risk, Loan Portfolio, Investment Securities

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