Hope Bancorp Q3 2026 net income rises to $35.6M
Deposits rose 3.3% from year-end and loans receivable increased 2.4%; the company also repurchased 772,726 shares during the first nine months.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Hope Bancorp reported third-quarter 2026 net income of $35.577 million, compared with $30.776 million a year earlier. Net interest income was $135.365 million versus $126.557 million, and diluted earnings per share were $0.28 versus $0.24. For the nine months ended September 30, 2026, net income was $98.148 million, compared with $27.122 million in 2025.
At September 30, 2026, deposits were $16.12 billion, up 3.3% from December 31, 2025, and loans receivable were $15.05 billion, up 2.4%. Nine-month operating cash flow was $227.599 million, versus $88.052 million. Reported nonaccrual loans totaled $107.797 million, excluding $17.3 million in guaranteed SBA loans in liquidation; total loans past due were $164.694 million. Available-for-sale securities had $199.2 million of unrealized losses, net of tax, and the company reported no allowance for credit losses on those securities. It repurchased 772,726 shares for $8.7 million during the nine months and paid a $0.14-per-share dividend in the third quarter.
1 point · 0 major0 major · 0 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter net income: $35.577 million, versus $30.776 million a year earlier.
Negative
- None.
Filing Explained
Hope Bancorp’s unaudited 10-Q covers the quarter ended September 30, 2026; a dated company-news record says Bank of Hope completed its acquisition of SMBC MANUBANK’s commercial banking unit on October 1, adding that operation after the quarter-end reporting period.
Sources and calculations
- Hope Bancorp Form 10-Q (2026-09-30)
- Bank of Hope completes acquisition of SMBC MANUBANK commercial banking unit (2026-10-01)
Key Figures
Net income: $35.577 million
Net interest income: $135.365 million
Diluted earnings per share: $0.28 per share
+5 more
8 metrics
Net income
$35.577 million
Three months ended September 30, 2026; compared with $30.776 million in the same 2025 period.
Net interest income
$135.365 million
Three months ended September 30, 2026; compared with $126.557 million in the same 2025 period.
Diluted earnings per share
$0.28 per share
Three months ended September 30, 2026; compared with $0.24 in the same 2025 period.
Total deposits
$16.12 billion
At September 30, 2026; up 3.3% from December 31, 2025.
Loans receivable
$15.05 billion
At September 30, 2026; up 2.4% from December 31, 2025.
Nonaccrual loans
$107.797 million
At September 30, 2026; excludes $17.3 million in guaranteed SBA loans in liquidation.
Net cash provided by operating activities
$227.599 million
Nine months ended September 30, 2026; compared with $88.052 million in 2025.
Common stock repurchased
772,726 shares for $8.7 million
Nine months ended September 30, 2026.
Key Terms
allowance for credit losses, nonaccrual status, available-for-sale (“AFS”), collateral-dependent loans
4 terms
allowance for credit losses financial
"Allowance for credit losses on loans"
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
nonaccrual status financial
"Loans are placed on nonaccrual status if principal"
Nonaccrual status is when a lender stops recording interest income on a loan because payments are late or the borrower’s ability to pay is in serious doubt. For investors this is a red flag: it signals deteriorating loan quality, can reduce reported earnings and may require the lender to set aside more reserves, much like marking a damaged product off the books until its value is clear.
available-for-sale (“AFS”) financial
"Investment securities available-for-sale (“AFS”), at fair value"
collateral-dependent loans financial
"amortized cost of collateral-dependent loans"
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What was HOPE's net income in the third quarter of 2026?
Hope Bancorp reported $35.577 million in net income for the three months ended September 30, 2026, compared with $30.776 million a year earlier. Diluted earnings per share were $0.28, versus $0.24.
How much did HOPE report in nonaccrual loans?
Hope Bancorp reported $107.797 million in nonaccrual loans at September 30, 2026. The amount excludes the guaranteed portion of SBA loans in liquidation, which totaled $17.3 million.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For the quarterly period ended September 30, 2026
OR
Commission File Number: 000-50245
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
(Address of principal executive offices, including zip code)
(213 ) 639-1700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| (Title of class) | (Trading Symbol) | (Name of exchange on which registered) | ||||||||||||
______________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At October 30, 2026, there were 127,758,427 shares of Hope Bancorp, Inc. common stock outstanding.
Table of Contents
| Page | ||||||||
PART I - FINANCIAL INFORMATION | ||||||||
| Item 1. | FINANCIAL STATEMENTS | |||||||
| Consolidated Statements of Financial Condition (Unaudited) | 4 | |||||||
| Consolidated Statements of Income (Unaudited) | 6 | |||||||
| Consolidated Statements of Comprehensive (Loss) 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) | ||||||||
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 | 29 | |||||||
6. Deposits | 31 | |||||||
7. Borrowings | 32 | |||||||
8. Convertible Notes and Subordinated Debentures | 33 | |||||||
9. Commitments and Contingencies | 34 | |||||||
10. Stockholders’ Equity | 35 | |||||||
11. Earnings Per Share | 36 | |||||||
12. Segment Reporting | 37 | |||||||
13. Stock-Based Compensation | 38 | |||||||
14. Income Taxes | 40 | |||||||
15. Acquisitions | 41 | |||||||
16. Derivative Financial Instruments | 42 | |||||||
17. Fair Value Measurements | 45 | |||||||
18. Leases | 53 | |||||||
19. Investments in Tax Credit Structures | 55 | |||||||
20. Regulatory Matters | 56 | |||||||
21. Subsequent Events | 58 | |||||||
| Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 59 | ||||||
| Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 82 | ||||||
| Item 4. | CONTROLS AND PROCEDURES | 84 | ||||||
PART II - OTHER INFORMATION | ||||||||
| Item 1. | LEGAL PROCEEDINGS | 85 | ||||||
| Item 1A. | RISK FACTORS | 85 | ||||||
| Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 86 | ||||||
| Item 3. | DEFAULTS UPON SENIOR SECURITIES | 86 | ||||||
| Item 4. | MINE SAFETY DISCLOSURES | 86 | ||||||
| Item 5. | OTHER INFORMATION | 86 | ||||||
| Item 6. | EXHIBITS | 86 | ||||||
| INDEX TO EXHIBITS | 87 | |||||||
| SIGNATURES | 88 | |||||||
2
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”, “estimates”, “projects”, and similar expressions and statements. 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 risks and uncertainties. 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 respect to the acquisition of the Commercial Banking Unit of SMBC MANUBANK (“MANUBANK”), factors that may cause actual outcomes to differ from what is expressed or forecasted in these forward-looking statements include, among other things: difficulties and delays in integrating the Company and MANUBANK 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 acquisition, including difficulties in maintaining relationships with employees and customers, which may be greater than expected. Other risks and uncertainties include, but are not limited to: possible deterioration in economic conditions in the Company’s areas of operation and in the U.S. generally or elsewhere, including as a result of the interest rate environment, supply chain disruptions, inflation, labor shortages, changes in the housing and real estate markets, consumer confidence and spending habits; risk of adverse economic or political conditions in South Korea; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; the possibility that the Company may discontinue or otherwise limit repurchases of its common stock; risk of significant non-earning assets and net credit losses that could occur, particularly in times of weak economic conditions or rising interest rates; the failure of or changes to assumptions and estimates underlying the Company’s allowances for credit losses; risk of natural disasters; risk of cybersecurity incidents; potential increases in deposit insurance assessments and regulatory risks associated with current and future regulations; the outcome of any legal proceedings that may be instituted against the Company; and the impact of U.S. and global trade policies, including changes in, or the imposition of, tariffs and/or trade barriers and the economic impacts, volatility and uncertainty resulting therefrom including fluctuations in commodity prices such as oil, as well as geopolitical instability and international tensions. For additional information concerning these and other risk factors, see Part I, Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 25, 2026, as such information may be updated from time to time in subsequent Quarterly Reports on Form 10-Q that we file with the SEC.
Due to the risks and uncertainties we face, readers are cautioned not to place undue reliance on the forward-looking statements contained in this report, which speak only as of the date of this report, or to make predictions about future performance based solely on historical financial information. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
3
PART I
FINANCIAL INFORMATION
Item 1.Financial Statements
HOPE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
| (Unaudited) | |||||||||||
| September 30, 2026 | December 31, 2025 | ||||||||||
| ASSETS | (Dollars in thousands, except share data) | ||||||||||
| Cash and cash equivalents: | |||||||||||
| Cash and due from banks | $ | $ | |||||||||
| Interest earning cash in other banks | |||||||||||
| Total cash and cash equivalents | |||||||||||
| Interest earning deposits in other financial institutions | |||||||||||
| Investment securities available for sale (“AFS”), at fair value | |||||||||||
Investment securities held to maturity (“HTM”), at amortized cost; fair value of $ | |||||||||||
| Equity investments | |||||||||||
| Loans held for sale, at lower of cost or fair value | |||||||||||
Loans receivable, net of allowance for credit losses of $ | |||||||||||
| Federal Home Loan Bank (“FHLB”) stock, at cost | |||||||||||
| Premises and equipment, net | |||||||||||
| Accrued interest receivable | |||||||||||
| Deferred tax assets, net | |||||||||||
| Bank owned life insurance (“BOLI”) | |||||||||||
| Investments in affordable housing partnerships | |||||||||||
| Operating lease right-of-use assets (“ROU”), net | |||||||||||
| Goodwill | |||||||||||
| Core deposit intangible assets, net | |||||||||||
| Servicing assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
(Continued)
4
HOPE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
| (Unaudited) | |||||||||||
| September 30, 2026 | December 31, 2025 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | (Dollars in thousands, except share data) | ||||||||||
| LIABILITIES: | |||||||||||
| Deposits: | |||||||||||
| Noninterest bearing | $ | $ | |||||||||
| Interest bearing: | |||||||||||
| Money market and NOW accounts | |||||||||||
| Savings deposits | |||||||||||
| Time deposits | |||||||||||
| Total deposits | |||||||||||
| FHLB borrowings | |||||||||||
| Convertible notes and subordinated debentures, net | |||||||||||
| Accrued interest payable | |||||||||||
| Operating lease liabilities | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | $ | $ | |||||||||
Commitments and contingent liabilities (Note 9) | |||||||||||
| STOCKHOLDERS’ EQUITY: | |||||||||||
Common stock, $ | $ | $ | |||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
Treasury stock, at cost; | ( | ( | |||||||||
| Accumulated other comprehensive loss, net | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying Notes to Consolidated Financial Statements (Unaudited)
5
HOPE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||||||
| INTEREST INCOME: | |||||||||||||||||||||||
| Interest and fees on loans | $ | $ | $ | $ | |||||||||||||||||||
| Interest on investment securities | |||||||||||||||||||||||
| Interest on cash and deposits at other banks | |||||||||||||||||||||||
| Interest on other investments | |||||||||||||||||||||||
| Total interest income | |||||||||||||||||||||||
| INTEREST EXPENSE: | |||||||||||||||||||||||
| Interest on deposits | |||||||||||||||||||||||
| Interest on FHLB borrowings | |||||||||||||||||||||||
| Interest on other debt | |||||||||||||||||||||||
| Total interest expense | |||||||||||||||||||||||
| NET INTEREST INCOME | |||||||||||||||||||||||
| PROVISION FOR CREDIT LOSSES | |||||||||||||||||||||||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | |||||||||||||||||||||||
| NONINTEREST INCOME: | |||||||||||||||||||||||
| Service fees on deposit accounts | |||||||||||||||||||||||
| International service, wire transfer and foreign currency fees | |||||||||||||||||||||||
| Other customer-driven income and fees | |||||||||||||||||||||||
| Net gains on sales of SBA loans | |||||||||||||||||||||||
| Net gains (losses) on sales of investment securities AFS | ( | ||||||||||||||||||||||
| Other noninterest income | |||||||||||||||||||||||
| Total noninterest income | |||||||||||||||||||||||
| NONINTEREST EXPENSE: | |||||||||||||||||||||||
| Salaries and employee benefits | |||||||||||||||||||||||
| Occupancy, furniture and equipment | |||||||||||||||||||||||
| Software and subscriptions | |||||||||||||||||||||||
| Data and item processing | |||||||||||||||||||||||
| Amortization of investments in affordable housing partnerships | |||||||||||||||||||||||
| Federal Deposit Insurance Corporation (“FDIC”) assessments | |||||||||||||||||||||||
| FDIC special assessment (reversal) | ( | ||||||||||||||||||||||
| Earned interest credit expense | |||||||||||||||||||||||
| Merger-related costs | |||||||||||||||||||||||
| Other noninterest expense | |||||||||||||||||||||||
| Total noninterest expense | |||||||||||||||||||||||
| INCOME BEFORE INCOME TAXES | |||||||||||||||||||||||
| INCOME TAX PROVISION | |||||||||||||||||||||||
| NET INCOME | $ | $ | $ | $ | |||||||||||||||||||
| EARNINGS PER COMMON SHARE | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements (Unaudited)
6
HOPE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive (loss) income: | |||||||||||||||||||||||
| Change in unrealized net holding (losses) gains on securities AFS | ( | ( | |||||||||||||||||||||
| Change in unrealized net holding gains (losses) on interest rate contracts used in cash flow hedges | ( | ||||||||||||||||||||||
| Reclassification adjustments for net losses (gains) realized in net income | ( | ||||||||||||||||||||||
| Tax effect | ( | ( | |||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | ( | ( | |||||||||||||||||||||
| Total comprehensive (loss) income | $ | ( | $ | $ | $ | ||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements (Unaudited)
7
HOPE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Common stock | Additional paid-in capital | Retained earnings | Treasury stock | Accumulated other comprehensive loss, net | Total stockholders’ equity | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, JUNE 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to various stock plans, net of forfeitures and tax withholding cancellations | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net of tax settlements | ||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared on common stock ($ | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, SEPTEMBER 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| BALANCE, JUNE 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to various stock plans, net of forfeitures and tax withholding cancellations | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net of tax settlements | ||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared on common stock ($ | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| BALANCE, SEPTEMBER 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
(Continued)
8
HOPE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Common stock | Additional paid-in capital | Retained earnings | Treasury stock | Accumulated other comprehensive loss, net | Total stockholders’ equity | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands, except share and per share data) | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, DECEMBER 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to various stock plans, net of forfeitures and tax withholding cancellations | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net of tax settlements | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares in exchange for Territorial Bancorp Inc. (“Territorial”) common stock | ||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared on common stock ($ | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, SEPTEMBER 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| BALANCE, DECEMBER 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to various stock plans, net of forfeitures and tax withholding cancellations | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net of tax settlements | ||||||||||||||||||||||||||||||||||||||||||||
Cash dividends declared on common stock ($ | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Repurchase of treasury stock | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| BALANCE, SEPTEMBER 30, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements (Unaudited)
9
HOPE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash from operating activities: | |||||||||||
| Discount accretion, net of depreciation and amortization | |||||||||||
| Stock-based compensation expense | |||||||||||
| Provision for credit losses | |||||||||||
| Gains on BOLI | ( | ( | |||||||||
| Net gains on sales of loans | ( | ( | |||||||||
| Net change in fair value of derivatives | ( | ( | |||||||||
| Net (gains) losses on sales of investment securities AFS | ( | ||||||||||
| Net change in deferred income taxes | ( | ||||||||||
| Proceeds from sales of loans held for sale | |||||||||||
| Originations of loans held for sale | ( | ( | |||||||||
| Originations of servicing assets | ( | ( | |||||||||
| Net change in accrued interest receivable | ( | ||||||||||
| Net change in other assets | ( | ( | |||||||||
| Net change in accrued interest payable | ( | ( | |||||||||
| Net change in other liabilities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Investment in interest earning deposits in other financial institutions | ( | ||||||||||
| Redemption of interest earning deposits in other financial institutions | |||||||||||
| Investment securities available for sale: | |||||||||||
| Purchase of securities | ( | ( | |||||||||
| Proceeds from matured, called, or paid-down securities | |||||||||||
| Proceeds from sales of securities | |||||||||||
| Investment securities held to maturity: | |||||||||||
| Proceeds from matured, called, or paid-down securities | |||||||||||
| Equity investments: | |||||||||||
| Purchase of investments | ( | ( | |||||||||
| Proceeds from sales of loans held for sale previously classified as held for investment | |||||||||||
| Net change in loans receivable | ( | ( | |||||||||
| Redemption of FHLB and Federal Reserve Bank ("FRB") stock | |||||||||||
| Purchase of premises and equipment | ( | ( | |||||||||
| Proceeds from BOLI death benefits | |||||||||||
| Investments in affordable housing partnerships | ( | ( | |||||||||
| Investments in renewable energy tax credits | ( | ( | |||||||||
| Proceeds from terminations of derivatives | |||||||||||
| Proceeds from sales of OREO | |||||||||||
| Net cash received from the acquisition of Territorial | |||||||||||
| Net cash (used in) provided by investing activities | ( | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Net change in deposits | ( | ||||||||||
| Proceeds from FHLB advances | |||||||||||
| Repayment of FHLB advances | ( | ( | |||||||||
| Proceeds from FRB borrowings | |||||||||||
| Repayment of FRB borrowings | ( | ( | |||||||||
| Purchase of treasury stock | ( | ||||||||||
| Cash dividends paid on common stock | ( | ( | |||||||||
| Taxes paid in net settlement of restricted stock | ( | ( | |||||||||
| Issuance of additional stock pursuant to various stock plans | |||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ( | |||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | |||||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | $ | |||||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes, net | |||||||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES | |||||||||||
| Transfer from loans receivable to OREO | $ | $ | |||||||||
| Transfer from loans receivable to loans held for sale | |||||||||||
| Transfer from loans held for sale to loans receivable | |||||||||||
| Transfer from premises and equipment to premises held for sale | |||||||||||
| Lease liabilities arising from obtaining ROU assets | |||||||||||
| New commitments to fund investments in renewable energy tax credits | |||||||||||
| Merger with Territorial: | |||||||||||
| Identifiable assets acquired, net of cash | ( | ||||||||||
| Liabilities assumed | |||||||||||
| Goodwill | |||||||||||
| Issuance of common stock as consideration | |||||||||||
See accompanying Notes to Consolidated Financial Statements (Unaudited)
10
HOPE BANCORP, INC. AND SUBSIDIARIES
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 September 30, 2026, the Bank operated 45 full-service branches in California, New York, New Jersey, Washington, Texas, Illinois, Georgia and Alabama under the Bank of Hope banner, and 25 branches in Hawaii under the Territorial Savings banner. The Bank also operates SBA loan production offices, commercial loan production offices, and residential mortgage loan production offices throughout the United States, and a representative office in Seoul, South Korea. The Bank is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. The Bank is an Equal Opportunity Lender. 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, 2025, which was derived from the audited financial statements included in the Company’s 2025 Annual Report on Form 10-K. Certain information and footnote disclosures normally included in annual financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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 September 30, 2026 and December 31, 2025, and the results of operations for the three and nine months ended September 30, 2026 and 2025. Certain reclassifications have been made to prior period amounts to conform to the current year presentation, and did not have an impact on the prior year net income or stockholders’ equity. The results of operations for the interim periods are not necessarily indicative of results to be anticipated for the full year.
During the fourth quarter of 2025, the Company early adopted ASU 2025-08 effective January 1, 2025. As a result, ASU 2025-08 was applied to the acquisition of Territorial. With the adoption, the Company reversed $3.9 million in provision for credit losses which was offset by a reduction to the accretable discount on loans acquired from Territorial as of April 2, 2025. The presentation of prior-year interim periods have been adjusted on a prospective basis to reflect the early adoption of ASU 2025-08.
These unaudited Consolidated Financial Statements should be read along with the audited Consolidated Financial Statements and accompanying Notes included in the Company’s 2025 Annual Report on Form 10-K.
11
2. Investment Securities
The following table summarizes the amortized cost and related fair value of investment securities available-for-sale (“AFS”) and securities held-to-maturity (“HTM”) and the corresponding amounts of gross unrealized gains and losses.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt securities AFS: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | ( | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
U.S. Government agency and U.S. Government sponsored enterprises: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Agency securities | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations (“CMO”) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities (“MBS”): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset-backed securities | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate securities | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Municipal securities | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total investment securities AFS | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
| Debt securities HTM: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government agency and U.S. Government sponsored enterprises: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| MBS: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
| Commercial | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total investment securities HTM | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
The Company has elected to exclude accrued interest from the amortized cost of its investment debt securities. Accrued interest receivable for investment debt securities at September 30, 2026 and December 31, 2025, totaled $9.3 million and $8.3 million, respectively, and was included in accrued interest receivable on the Consolidated Statements of Financial Condition.
At September 30, 2026 and December 31, 2025, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.
Investments AFS and HTM of $18.5 million and $516.7 million, respectively, were acquired as part of the merger with Territorial Bancorp Inc. (“Territorial”) completed on April 2, 2025 (“the Merger”) and, immediately upon the Merger, all of the acquired investments were categorized as AFS according to management intent and sold. The investment securities were sold at a market value of $535.2 million, with no gain or loss impact on the Consolidated Statements of Income.
12
The table below summarizes the proceeds from and gains and losses on the sales of investment securities AFS, for the periods presented below.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Proceeds from sales of investment securities AFS | $ | $ | $ | $ | |||||||||||||||||||
| Gains from sales of investment securities AFS | $ | $ | $ | $ | |||||||||||||||||||
| Losses from sales of investment securities AFS | ( | ( | |||||||||||||||||||||
| Net gains (losses) on sales of investment securities AFS | $ | $ | $ | $ | ( | ||||||||||||||||||
At September 30, 2026 and December 31, 2025, $199.2 million and $129.3 million in unrealized losses on investment securities AFS, net of taxes, respectively, were included in accumulated other comprehensive loss.
The following table presents a breakdown of interest income recorded for investment securities that are taxable and nontaxable.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Interest income on investment securities: | |||||||||||||||||||||||
| Taxable | $ | $ | $ | $ | |||||||||||||||||||
| Nontaxable | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The amortized cost and estimated fair value of investment securities at September 30, 2026, by contractual maturity, are presented in the table below. Collateralized mortgage obligations, mortgage-backed securities, and asset-backed securities are presented by final maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.
| Available for Sale | Held to Maturity | ||||||||||||||||||||||
| Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||
| Due within one year | $ | $ | $ | $ | |||||||||||||||||||
| Due after one year through five years | |||||||||||||||||||||||
| Due after five years through ten years | |||||||||||||||||||||||
| Due after ten years | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Securities with carrying values of approximately $230.3 million and $229.2 million at September 30, 2026 and December 31, 2025, respectively, were pledged to secure public deposits, for various borrowings, and for other purposes as required or permitted by law.
13
The following tables present gross unrealized losses and estimated fair values of the Company’s investment portfolio, aggregated by investment category and the length of time that the individual securities have been in a continuous unrealized loss position as of the dates indicated. The length of time that the individual securities have been in a continuous unrealized loss position is not a factor in determining credit impairment under the current expected credit losses (“CECL”) accounting standard.
| September 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Description of Securities AFS | Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government agency and U.S. Government sponsored enterprises: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Agency securities | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CMOs | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| MBS: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset-backed securities | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Municipal securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Description of Securities AFS | Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses | Number of Securities | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government agency and U.S. Government sponsored enterprises: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CMOs | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| MBS: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Asset-backed securities | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Municipal securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||
The Company had CMO, MBS, corporate, and municipal securities classified as AFS that were in a continuous loss position for twelve months or longer at September 30, 2026. The CMO and MBS are investments in U.S. Government agency and U.S. Government sponsored enterprises and have high credit ratings (“AA” grade or better). The interest on corporate and municipal securities that were in an unrealized loss position has been paid as agreed, and the Company believes this will continue in the future and that the securities will be paid in full as scheduled. The market value declines for these securities were primarily due to movements in interest rates and are not reflective of management’s expectations of the Company’s ability to fully recover any unrealized losses, which may be at maturity. The Company does not intend to sell, and it is not more likely than not that the Company will be required to sell the securities before recovery of its amortized cost basis. Under CECL, the length of time that the fair value of investment securities has been less than amortized cost is not considered when assessing for credit impairment.
14
Allowance for Credit Losses on Securities Available for Sale—The Company evaluates investment securities AFS in unrealized loss positions for impairment related to credit losses on at least a quarterly basis. Investment securities AFS in unrealized loss positions are first assessed as to whether the Company intends to sell, or if it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If one of the criteria is met, the security’s amortized cost basis is written down to fair value through earnings. For securities that do not meet these criteria, the Company evaluates whether the decline in fair value resulted from credit losses or other factors. In evaluating whether a credit loss exists, the Company has set up an initial quantitative filter for impairment triggers. If the quantitative filter has been triggered, a security is placed on a watch list and an additional assessment is performed to identify whether a credit impairment exists. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors. If this assessment indicates that a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Unrealized losses that have not been recorded through an allowance for credit losses are recognized in other comprehensive income, net of applicable taxes. The Company did not
15
3. Equity Investments
Equity Investments with Readily Determinable Fair Values
Equity investments with readily determinable fair values at September 30, 2026 and December 31, 2025, consisted of mutual funds in the amounts of $4.2 million and $4.5 million, respectively, and were included in equity investments on the Consolidated Statements of Financial Condition.
There were no equity investments with readily determinable fair values that were purchased during the three and nine months ended September 30, 2026. During the three and nine months ended September 30, 2025, the Company purchased $0 and $45.5 million in equity investments with readily determinable fair values, consisting of Community Reinvestment Act (“CRA”) mutual funds.
The net losses recognized from changes in fair value for equity investments with readily determinable fair values for the three and nine months ended September 30, 2026, totaled $166 thousand and $212 thousand, respectively, and were recorded in other noninterest income and fees in the Consolidated Statements of Income. The net gains recognized from changes in fair value for equity investments with readily determinable fair values for the three and nine months ended September 30, 2025, totaled $350 thousand and $1.1 million, respectively.
Equity Investments without Readily Determinable Fair Values
At September 30, 2026 and December 31, 2025, the Company also had equity investments without readily determinable fair values, which were carried at cost less any determined impairment. The balance of these investments was adjusted for changes in subsequent observable prices, and was included in equity investments on the Consolidated Statements of Financial Condition. The table below summarizes equity investments without readily determinable fair values by type:
| September 30, 2026 | December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Correspondent bank stock | $ | $ | |||||||||
| Community Development Financial Institutions (“CDFI”) investments | |||||||||||
| CRA investments | |||||||||||
| Total | $ | $ | |||||||||
16
4. Loans Receivable and Allowance for Credit Losses
The following is a summary of loans receivable by loan segment:
| September 30, 2026 | December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Loan portfolio composition | |||||||||||
| Commercial real estate (“CRE”) loans | $ | $ | |||||||||
| Commercial and industrial (“C&I”) loans | |||||||||||
| Residential mortgage loans | |||||||||||
| Consumer and other loans | |||||||||||
| Total loans receivable, net of deferred costs and fees | |||||||||||
| Allowance for credit losses | ( | ( | |||||||||
| Loans receivable, net of allowance for credit losses | $ | $ | |||||||||
Loans receivable is stated at the amount of unpaid principal, adjusted for net deferred fees and costs, premiums and discounts, and purchase accounting fair value adjustments. The Company had net deferred costs of $10.0 million and $4.7 million at September 30, 2026 and December 31, 2025, respectively. Net discount on acquired loans at September 30, 2026 and December 31, 2025, totaled $178.7 million and $192.8 million, respectively.
The loan portfolio consists of four segments: CRE loans, C&I loans, residential mortgage loans, and consumer and other loans. CRE loans are extended for the purchase and refinance of commercial real estate and are generally secured by first deeds of trust and collateralized by multifamily residential or commercial properties. C&I loans are loans provided to businesses for various purposes such as working capital, purchasing inventory, debt refinancing, business acquisitions, international trade finance activities, and other business-related financing needs. CRE and C&I loans also include Small Business Administration (“SBA”) loans. Residential mortgage loans are extended for personal, family, or household use and are secured by a first mortgage or deed of trust. Consumer and other loans consist of home equity, and other personal loans.
The Company had loans receivable of $15.05 billion at September 30, 2026, an increase of $349.5 million, or 2.4 %, from December 31, 2025.
The Company had $67.4 million in loans held for sale at September 30, 2026, compared with $86.9 million at December 31, 2025. Loans held for sale at September 30, 2026, consisted of $49.1 million in SBA loans, $2.3 million in residential mortgage loans, and $16.0 million in other C&I and CRE loans, compared with $4.0 million in residential mortgage loans and $82.9 million in C&I loans at December 31, 2025. Loans held for sale are not included in the loans receivable table presented above.
17
The tables below detail the activity in the allowance for credit losses (“ACL”) by portfolio segment for the three and nine months ended September 30, 2026 and 2025.
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| Three Months Ended September 30, 2026 | |||||||||||||||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision for credit loss on loans | |||||||||||||||||||||||||||||
| Loans charged off | ( | ( | ( | ||||||||||||||||||||||||||
| Recoveries of charge offs | |||||||||||||||||||||||||||||
| Balance, end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2026 | |||||||||||||||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision (credit) for credit loss on loans | ( | ||||||||||||||||||||||||||||
| Loans charged off | ( | ( | ( | ||||||||||||||||||||||||||
| Recoveries of charge offs | |||||||||||||||||||||||||||||
| Balance, end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision (credit) for credit loss on loans | ( | ||||||||||||||||||||||||||||
| Loans charged off | ( | ( | ( | ( | |||||||||||||||||||||||||
| Recoveries of charge offs | |||||||||||||||||||||||||||||
| Balance, end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2025 | |||||||||||||||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Initial allowance for purchased seasoned loans (“PSL”) and purchased credit deteriorated (“PCD”) loans acquired | |||||||||||||||||||||||||||||
| Provision (credit) for credit loss on loans | ( | ||||||||||||||||||||||||||||
| Loans charged off | ( | ( | ( | ( | |||||||||||||||||||||||||
| Recoveries of charge offs | |||||||||||||||||||||||||||||
| Balance, end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
18
The following tables break out the allowance for credit losses and loan balance by measurement methodology at September 30, 2026 and December 31, 2025:
| September 30, 2026 | |||||||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||
| Individually evaluated | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Collectively evaluated | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Loans outstanding: | |||||||||||||||||||||||||||||
| Individually evaluated | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Collectively evaluated | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Individually evaluated | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
| Collectively evaluated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
| Loans outstanding: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Individually evaluated | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
| Collectively evaluated | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
At September 30, 2026 and December 31, 2025, reserves for unfunded loan commitments recorded in other liabilities were $2.9 million and $3.3 million, respectively. For the three and nine months ended September 30, 2026, the Company recorded an addition to reserves for unfunded commitments of $460 thousand and a reduction to reserves for unfunded commitments of $420 thousand, respectively. For the three and nine months ended September 30, 2025, the Company recorded an addition to reserves for unfunded commitments of $610 thousand and $1.2 million, respectively.
Generally, loans are placed on nonaccrual status if principal and/or interest payments become 90 days or more past due, and/or management deems the collectability of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to customers whose financial conditions have deteriorated are considered for nonaccrual status whether or not the loan is 90 days or more past due. Generally, payments received on nonaccrual loans are recorded as principal reductions. Loans are returned to accrual status only when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Company does not recognize interest income while loans are on nonaccrual status.
19
The tables below represent the amortized cost of nonaccrual loans, as well as loans past due 90 or more days and still on accrual status, by loan segment and broken out by loans with a recorded ACL and those without a recorded ACL, at September 30, 2026 and December 31, 2025.
| September 30, 2026 | ||||||||||||||||||||||||||
| Nonaccrual with No ACL | Nonaccrual with an ACL | Total Nonaccrual (1) | Accruing Loans Past Due 90 Days or More | |||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||
| CRE loans | $ | $ | $ | $ | ||||||||||||||||||||||
| C&I loans | ||||||||||||||||||||||||||
| Residential mortgage loans | ||||||||||||||||||||||||||
| Consumer and other loans | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Nonaccrual with No ACL | Nonaccrual with an ACL | Total Nonaccrual (1) | Accruing Loans Past Due 90 Days or More | |||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||
| CRE loans | $ | $ | $ | $ | ||||||||||||||||||||||
| C&I loans | ||||||||||||||||||||||||||
| Residential mortgage loans | ||||||||||||||||||||||||||
| Consumer and other loans | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
__________________________________
The following table presents the amortized cost of collateral-dependent loans at September 30, 2026 and December 31, 2025:
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Real Estate Collateral | Other Collateral | Total | Real Estate Collateral | Other Collateral | Total | |||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||
| CRE loans | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| C&I loans | ||||||||||||||||||||||||||||||||||||||
| Residential mortgage loans | ||||||||||||||||||||||||||||||||||||||
| Consumer and other loans | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Collateral on loans is a significant portion of what secures collateral-dependent loans and significant changes to the fair value of the collateral can potentially impact ACL. During the nine months ended September 30, 2026, the Company did not have any significant changes to the extent to which collateral secured its collateral-dependent loans, due to general deterioration or from other factors. At September 30, 2026 and December 31, 2025, real estate collateral securing CRE and C&I loans consisted of commercial real estate properties including hotel/motel, building, office, gas station, warehouse, mixed-use, multifamily, restaurant properties, and real estate collateral securing residential mortgage loans consisted of underlying residential mortgage loan homes. Collateral dependent loans secured by other collateral at September 30, 2026 and December 31, 2025, consisted of loans secured by underlying businesses.
20
Accrued interest receivable on loans totaled $45.4 million at September 30, 2026, and $43.5 million at December 31, 2025. The Company has elected to exclude accrued interest receivable in its estimates of expected credit losses because the Company writes off uncollectible accrued interest receivable in a timely manner. The Company considers writing off accrued interest amounts once the amounts become 90 days past due to be considered within a timely manner. The Company writes off accrued interest receivable by reversing interest income. The following table presents interest income reversals, due to loans being placed on nonaccrual status, by loan segment for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| CRE loans | $ | $ | $ | $ | |||||||||||||||||||
| C&I loans | |||||||||||||||||||||||
| Residential mortgage loans | |||||||||||||||||||||||
| Consumer and other loans | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The following table presents the amortized cost of past due loans, including nonaccrual loans past due 30 or more days, by the number of days past due at September 30, 2026 and December 31, 2025, by loan segment:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due | Total Past Due | 30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due | Total Past Due | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| CRE loans | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| C&I loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer and other loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Past Due | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. Homogeneous loans (i.e., home mortgage loans, home equity lines of credit, overdraft loans, express business loans, and automobile loans) are not risk rated and credit risk is analyzed largely by the number of days past due. This analysis is performed at least on a quarterly basis.
The definitions for risk ratings are as follows:
•Pass: Loans that meet a preponderance or more of the Company’s underwriting criteria and evidence an acceptable level of risk.
•Special Mention: Loans that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
•Substandard: Loans that are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Substandard loans are further subcategorized into those still accruing interest and those on nonaccrual status.
•Doubtful: Loans that have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
21
The following tables present the amortized cost basis of loans receivable by segment, risk rating, and year of origination, renewal, or major modification at September 30, 2026 and December 31, 2025.
| September 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loan by Year | Revolving Loans | Revolving Loans Converted to Term Loans | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CRE loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful / loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| C&I loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful / loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer and other loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful / loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total year-to-date gross charge offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
22
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loan by Year | Revolving Loans | Revolving Loans Converted to Term Loans | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CRE loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| C&I loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful / loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer and other loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subtotal | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful / loss | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total year-to-date gross charge offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
23
The Company may reclassify loans held for investment to loans held for sale in the event that the Company plans to sell loans that were originated with the intent to hold to maturity. Loans transferred from held for investment to held for sale are carried at the lower of cost or fair value. The breakdown of loans by segment that were reclassified from held for investment to held for sale for the three and nine months ended September 30, 2026 and 2025, is presented in the following table:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Transfer of loans held for investment to held for sale | (Dollars in thousands) | ||||||||||||||||||||||
| CRE loans | $ | $ | $ | $ | |||||||||||||||||||
| C&I loans | |||||||||||||||||||||||
| Residential mortgage loans | |||||||||||||||||||||||
| Consumer and other loans | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Loans transferred from held for investment to held for sale included the guaranteed portion of SBA loans totaling $5.0 million and $65.1 million for the three and nine months ended September 30, 2026, respectively, and $27.0 million and $85.7 million for the three and nine months ended September 30, 2025, respectively.
The Company calculates its ACL by estimating expected credit losses on a collective basis for loans that share similar risk characteristics. Loans that do not share similar risk characteristics with other loans are evaluated for credit losses on an individual basis. The Company differentiates its loan segments based on shared risk characteristics for which allowance for credit losses is measured on a collective basis.
| Risk Characteristics | |||||||||||
| CRE loans | Property type, location, owner-occupied status | ||||||||||
| C&I loans | Borrower asset size, risk rating, industry type | ||||||||||
| Residential mortgage loans | FICO score, LTV, delinquency status, maturity date, collateral value, location | ||||||||||
| Consumer and other loans | Historical losses | ||||||||||
The Company uses a combination of a modeled and non-modeled approach that incorporates current and future economic conditions to estimate lifetime expected losses on a collective basis. The Company uses Probability of Default (“PD”), Loss Given Default (“LGD”), and Exposure at Default (“EAD”) methodologies with quantitative factors and qualitative considerations in the calculation of the allowance for credit losses for collectively assessed loans. The Company uses a reasonable and supportable period of two years , at which point loss assumptions revert back to historical loss information by means of a one-year reversion period. Included in the quantitative portion of the ACL analysis are inputs such as borrowers’ net operating income, debt coverage ratios, real estate collateral values, as well as factors that are more subjective or require management’s judgment, including key macroeconomic variables from Moody’s forecast scenarios such as gross domestic product (“GDP”), unemployment rates, interest rates, and CRE prices. These key inputs are utilized in the Company’s models to develop PD and LGD assumptions used in the calculation of estimated quantitative losses.
The ACL for the Company’s construction and certain consumer loans is calculated based on a non-modeled approach that utilizes historical loss rates to estimate losses. A non-modeled approach was chosen for these loans as fewer data points exist, which could result in high levels of estimated loss volatility under a modeled approach. In the aggregate, non-modeled loans represented approximately 1 % of the Company’s total loan portfolio at September 30, 2026.
The Company’s Economic Forecasting Committee (“EFC”) reviews economic forecast scenarios that are incorporated in the Company’s ACL. The EFC reviews multiple scenarios provided to the Company by an independent third party and chooses a single scenario that best aligns with management’s expectation of future economic conditions. At September 30, 2026, the Company utilized the September 2026 consensus economic forecast scenario from Moody’s, as it best aligned with management’s expectations of future conditions. The Company also utilized Moody’s December 2025 consensus economic forecast for the calculation of its December 31, 2025 ACL.
24
Key macroeconomic variable inputs from Moody's September 2026 consensus forecast are presented in the table below:
| 2026 | 2027 | 2028 | |||||||||||||||
| GDP Growth* | 2.2% | 2.2% | 2.1% | ||||||||||||||
| Unemployment Rate | 4.3% | 4.2% | 4.2% | ||||||||||||||
| CRE Price Index Growth* | 3.5% | 3.5% | 3.3% | ||||||||||||||
| 10 Year Treasury Rate | 4.5% | 4.8% | 4.6% | ||||||||||||||
__________________________________
* Represents year-over-year growth rates.
In order to quantify the credit risk impact of other trends and changes within the loan portfolio, the Company utilizes qualitative adjustments to the modeled and non-modeled estimated loss approaches. The parameters for making adjustments are established under a Credit Risk Matrix that provides different possible scenarios for each of the factors below. The Credit Risk Matrix and the possible scenarios enable the Bank to qualitatively adjust the quantitative loss ratio by as much as 25 basis points for each loan type pool. This matrix considers the following seven factors, which are patterned after the guidelines provided under the Interagency Policy Statement on the Allowance for Credit Losses:
•Changes in lending policies and procedures, including underwriting standards and collection, charge off, and recovery practices;
•Changes in the nature and volume of the loan portfolio;
•Changes in the experience, ability, and depth of lending management and staff;
•Changes in the trends of the volume and severity of past due loans, classified loans, nonaccrual loans, and other loan modifications;
•Changes in the quality of the loan review system and the degree of oversight by the management and the Board of Directors;
•The existence and effect of any concentrations of credit, and changes in the level of such concentrations; and
•The effect of external factors, such as competition, legal requirements, and regulatory requirements on the level of estimated losses in the loan portfolio.
For loans that do not share similar risk characteristics such as nonaccrual loans above $1.0 million, the Company evaluates these loans on an individual basis in accordance with ASC 326. Such nonaccrual loans are considered to have different risk profiles than performing loans and are therefore evaluated individually. The Company elected to collectively assess nonaccrual loans with balances below $1.0 million along with the performing and accrual loans, in order to reduce the operational burden of individually assessing small nonaccrual loans with immaterial balances. For individually assessed loans, the ACL is measured using either 1) the present value of future cash flows discounted at the loan’s effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral, if the loan is collateral-dependent. For the collateral-dependent loans, the fair value of the loan’s collateral is determined by appraisals or independent valuations utilizing enterprise value, asset fair value, or other valuation techniques. The Company obtains a new appraisal to determine the fair value of collateral. The appraisals are based on an “as-is” valuation. To ensure that appraised values remain current, the Company either obtains updated appraisals every twelve months from a qualified independent appraiser or an internal evaluation of the collateral is performed by qualified personnel. If the third-party market data or other valuation techniques indicates that the value of the collateral property has declined since the most recent valuation date, management adjusts the value of the property downward to reflect the current valuations. If the fair value of the collateral is less than the amortized balance of the loan, the Company recognizes an ACL with a corresponding charge to the provision for credit loss on loans.
The Company maintains a separate ACL for its off-balance-sheet unfunded loan commitments. The Company uses an estimated funding rate to allocate an allowance to undrawn exposures. This funding rate is used as a credit conversion factor to capture how much undrawn lines of credit can potentially become drawn at any point. The funding rate is determined based on a look-back period of eight quarters. Credit loss is not estimated for off-balance-sheet credit exposures that are unconditionally cancellable by the Company.
25
Loan Modifications to Borrowers Experiencing Financial Difficulty
The Company modifies loans to borrowers experiencing financial difficulty in the form of principal forgiveness, term extension, an other-than insignificant payment delay, or interest rate reduction (or a combination thereof). Payment delay may include loan modifications that allow borrowers to delay principal repayment and/or pay interest only for a set period of time.
The tables below present the amortized cost, outstanding as of each period end, of loans modified to borrowers experiencing financial difficulty for the periods presented, disaggregated by loan segment and type of modification.
| Three Months Ended September 30, 2026 | |||||||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
| Payment delay | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term extension | |||||||||||||||||||||||||||||
| Total Loan Modifications | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| % of Loan Segment | % | % | % | % | % | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2026 | |||||||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
| Payment delay | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term extension | |||||||||||||||||||||||||||||
| Total Loan Modifications | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| % of Loan Segment | % | % | % | % | % | ||||||||||||||||||||||||
| Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
| Term extension | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Combination of term extension & interest rate reduction | |||||||||||||||||||||||||||||
| Total Loan Modifications | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| % of Loan Segment | % | % | % | % | % | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2025 | |||||||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
| Payment delay | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term extension | |||||||||||||||||||||||||||||
| Combination of term extension & interest rate reduction | |||||||||||||||||||||||||||||
| Total Loan Modifications | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| % of Loan Segment | % | % | % | % | % | ||||||||||||||||||||||||
26
The following tables describe the financial effect of the loan modifications made to borrowers experiencing financial difficulty for the periods presented:
| Financial Effect | ||||||||||||||||||||||||||
| Modification & Loan Types | Description of Financial Effect | Three Months Ended September 30, 2026 | Nine Months Ended September 30, 2026 | |||||||||||||||||||||||
| Payment delay | ||||||||||||||||||||||||||
| C&I loans | Length of payment delay by a weighted average of: | N/A | ||||||||||||||||||||||||
| Term extension | ||||||||||||||||||||||||||
| CRE loans | Extended term by a weighted average of: | |||||||||||||||||||||||||
| C&I loans | Extended term by a weighted average of: | |||||||||||||||||||||||||
| Financial Effect | ||||||||||||||||||||
| Modification & Loan Types | Description of Financial Effect | Three Months Ended September 30, 2025 | Nine Months Ended September 30, 2025 | |||||||||||||||||
| Payment delay | ||||||||||||||||||||
| Residential mortgage loans | Length of payment delay by a weighted average of : | N/A | ||||||||||||||||||
| Term extension | ||||||||||||||||||||
| C&I loans | Extended term by a weighted average of: | |||||||||||||||||||
| Combination of term extension & interest rate reduction | ||||||||||||||||||||
| C&I loans | Extended term by a weighted average of: | |||||||||||||||||||
| And interest rate reduced by a weighted average of: | % | % | ||||||||||||||||||
As of September 30, 2026, commitments to lend additional funds to borrowers whose loans were modified in the nine months ended September 30, 2026, totaled $4.9 million. As of December 31, 2025, commitments to lend additional funds to borrowers whose loans were modified in the year ended December 31, 2025, totaled $7 thousand.
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulties to understand the effectiveness of its modification efforts. Loans modified in the 12 months prior to September 30, 2026, consisted of $31.9 million that was current to 89 days delinquent, and $20.6 million that was on nonaccrual status as of September 30, 2026. Loans modified in the 12 months prior to September 30, 2025, consisted of $42.3 million that was current to 89 days delinquent, and $30.0 million that was on nonaccrual status as of September 30, 2025.
27
The following tables present the amortized cost basis, outstanding as of each period end, of modified loans that, within 12 months of the modification date, experienced a subsequent default during the periods presented:
| Three Months Ended September 30, 2026 | |||||||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
| Payment delay | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term extension | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2026 | |||||||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
| Payment delay | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term extension | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
| Payment delay | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term extension | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2025 | |||||||||||||||||||||||||||||
| CRE Loans | C&I Loans | Residential Mortgage Loans | Consumer and Other Loans | Total | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
| Payment delay | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Term extension | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
28
5. Goodwill, Intangible Assets, and Servicing Assets
Goodwill
Goodwill and other intangible assets generated from business combinations and deemed to have indefinite lives are not subject to amortization and instead are tested for impairment annually at the reporting unit level unless a triggering event occurs thereby requiring an updated assessment. Goodwill represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed. Impairment exists when the carrying value of the goodwill exceeds the fair value of the reporting unit.
The carrying amount of the Company’s goodwill at September 30, 2026, and December 31, 2025, was $484.1 million and $480.9 million, respectively. The Company recorded goodwill of $19.7 million as a result of the Merger with Territorial on April 2, 2025. At December 31, 2025, the Company performed a qualitative assessment to test for impairment and management has concluded that there was no impairment. As the Company operates as a single business unit, goodwill impairment was assessed based on the Company as a whole.
There were no triggering events during the three and nine months ended September 30, 2026, that indicated goodwill was more than likely impaired. Therefore, there was no 3.2 million, net of taxes, as an increase to goodwill in the nine months ended September 30, 2026, to finalize the Company’s measurement of deferred taxes related to the acquisition of Territorial.
Intangible Assets
A core deposit intangible asset of $46.5 million, representing 4.1 % of core deposits, was recorded in 2025 as part of the acquisition of Territorial and is scheduled to be amortized over a period of 15 years ending in 2040.
Amortization expense related to core deposit intangible assets totaled $893 thousand and $3.2 million for the three and nine months ended September 30, 2026, respectively. Amortization expense related to core deposit intangible assets totaled $1.2 million and $2.7 million for the three and nine months ended September 30, 2025, respectively. The following table provides information regarding the core deposit intangibles at September 30, 2026 and December 31, 2025:
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||
| Core Deposit Intangibles Related To: | Acquisition Year | Amortization Period | Gross Amount | Accumulated Amortization | Carrying Amount | Accumulated Amortization | Carrying Amount | |||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
| Wilshire Bancorp | 2016 | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| Territorial Bancorp | 2025 | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
Servicing Assets
Total servicing assets at September 30, 2026 totaled $15.8 million, comprising $14.9 million in SBA servicing assets and $1.0 million in mortgage related servicing assets. At December 31, 2025, servicing assets totaled $13.0 million and comprised $11.9 million in SBA servicing assets and $1.1 million in mortgage related servicing assets.
Management periodically evaluates servicing assets for impairment based upon the fair value of the rights as compared to the carrying amount. Impairment is determined by stratifying rights into groupings based on loan type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. At September 30, 2026 and December 31, 2025, the Company did not have a valuation allowance on its servicing assets.
29
The changes in servicing assets for the three and nine months ended September 30, 2026 and 2025, were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Additions through originations of servicing assets | |||||||||||||||||||||||
| Amortization | ( | ( | ( | ( | |||||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||
Loans serviced for others are not reported as assets. The principal balances of loans serviced for other institutions totaled $1.19 billion and $1.09 billion at September 30, 2026, and December 31, 2025, respectively.
The Company utilizes the discounted cash flow method to calculate the initial excess servicing assets. The inputs used in evaluating servicing assets for impairment at September 30, 2026 and December 31, 2025, are presented below.
| September 30, 2026 | December 31, 2025 | ||||||||||
| SBA Servicing Assets: | |||||||||||
| Weighted-average discount rate | |||||||||||
| Constant prepayment rate | |||||||||||
| Mortgage Servicing Assets: | |||||||||||
| Weighted-average discount rate | |||||||||||
| Constant prepayment rate | |||||||||||
30
6. Deposits
Total deposits of $16.12 billion at September 30, 2026, were up $513.0 million, or 3.3 %, from $15.60 billion at December 31, 2025. $1.67 billion in deposits were assumed in the Merger with Territorial on April 2, 2025. At September 30, 2026, noninterest bearing demand deposits and money market and NOW accounts increased, while savings and time deposits decreased, compared with December 31, 2025.
The aggregate amount of time deposits in denominations of more than $250 thousand at September 30, 2026 and December 31, 2025 was $3.13 billion and $3.21 billion, respectively. Included in time deposits of more than $250 thousand was $300.0 110 % of outstanding deposits. At September 30, 2026 and December 31, 2025, a letter of credit issued by the FHLB for $330.0 429.0 million, and were collateralized by investment securities with an aggregate fair value of $204.0 million, and a letter of credit issued by the FHLB for $222.0 million. At December 31, 2025, time deposits owned by state and local governments in Hawaii in amounts greater than or equal to $250 thousand were $193.7 million, and were collateralized by investment securities with an aggregate fair value of $205.5 million.
Brokered deposits at September 30, 2026 and December 31, 2025, totaled $796.5 million and $902.0 million, respectively. Brokered deposits at September 30, 2026, consisted of $486.9 million in money market and NOW accounts and $309.7 million in time deposit accounts. Brokered deposits at December 31, 2025, consisted of $455.8 million in money market and NOW accounts and $446.1 million in time deposit accounts.
The aggregate amount of unplanned overdrafts of demand deposits that were reclassified as loans was $3.5 million and $2.5 million at September 30, 2026 and December 31, 2025, respectively.
The following is a breakdown of the Company’s deposits at September 30, 2026 and December 31, 2025:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Balance | Percentage (%) | Balance | Percentage (%) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Noninterest bearing demand deposits | $ | % | $ | % | |||||||||||||||||||
| Money market and NOW accounts | % | % | |||||||||||||||||||||
| Savings deposits | % | % | |||||||||||||||||||||
| Time deposits | % | % | |||||||||||||||||||||
| Total deposits | $ | % | $ | % | |||||||||||||||||||
31
7. Borrowings
At September 30, 2026, borrowings totaled $374.0 million compared with $284.9 million at December 31, 2025. Borrowings at September 30, 2026 and December 31, 2025 were net of discounts totaling $0 and $78 thousand, respectively, and had a weighted average effective rate of 3.65 % and 3.32 %, respectively.
The Company’s borrowings at September 30, 2026, included borrowings with put options that entitle the FHLB to require the Company to prepay the borrowings without any prepayment penalties. The Company’s borrowings at September 30, 2026 had remaining maturities of less than 1 month aside from the putable borrowings of $322.0 million, which had a remaining weighted average maturity of approximately 1.4 years.
The tables below summarize the Company’s borrowing lines at September 30, 2026 and December 31, 2025:
| September 30, 2026 | |||||||||||||||||||||||
| Total Borrowing Capacity | Borrowings Outstanding | Available Borrowing Capacity | |||||||||||||||||||||
| Amount | Weighted Average Rate | ||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| FHLB | $ | $ | % | $ | |||||||||||||||||||
| FRB Discount Window | % | ||||||||||||||||||||||
| Unsecured Federal Funds lines | % | ||||||||||||||||||||||
| Total | $ | $ | % | $ | |||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Total Borrowing Capacity | Borrowings Outstanding | Available Borrowing Capacity | |||||||||||||||||||||
| Amount | Weighted Average Rate | ||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| FHLB | $ | $ | % | $ | |||||||||||||||||||
| FRB Discount Window | % | ||||||||||||||||||||||
| Unsecured Federal Funds lines | % | ||||||||||||||||||||||
| Total | $ | $ | % | $ | |||||||||||||||||||
The Company maintains a line of credit with the FHLB of San Francisco as a secondary source of funds. The borrowing capacity with the FHLB is limited to the lower of either 25 % of the Bank’s total assets or the Bank’s collateral capacity. The terms of this credit facility require the Company to pledge eligible collateral with the FHLB equal to at least 100 % of outstanding advances. At September 30, 2026, loans with a carrying amount of $8.89 billion were pledged at the FHLB for outstanding advances and remaining borrowing capacity. The purchase of FHLB stock is a prerequisite to become a member of the FHLB system, and the Company is required to own a certain amount of FHLB stock based on total asset size and outstanding borrowings.
The Company may also borrow from the FRB discount window up to the maximum amount, which is limited to 99 % of the fair market value of the qualifying loans and securities that are pledged. At September 30, 2026, the outstanding principal balance of the qualifying loans pledged at the FRB discount window was $2.06 billion.
The Company also maintains unsecured federal funds borrowing lines with other banks. There were no borrowings outstanding from other banks at September 30, 2026 and December 31, 2025.
32
8. Convertible Notes and Subordinated Debentures
Convertible Notes
In 2018, the Company issued $217.5 million aggregate principal amount of 2.00 % convertible senior notes maturing on May 15, 2038, in a private offering to qualified institutional buyers under Rule 144A of the Securities Act of 1933. The convertible notes can be called by the Company, in part or in whole, on or after May 20, 2023, for 100 % of the principal amount in cash. Holders of the convertible notes have the option to put the notes back to the Company on May 15, 2028, or May 15, 2033, for 100 % of the principal amount in cash. The convertible notes can be settled in cash, stock, or a combination of stock and cash at the option of the Company. On May 15, 2023, most holders of the Company’s convertible notes elected to exercise their optional put right and the Company paid off $197.1 million principal amount of notes in cash. During 2023, the Company also repurchased its notes in the aggregate principal amount of $19.9 million and recorded a gain on debt extinguishment of $405 thousand. The repurchased notes were immediately cancelled subsequent to the repurchase.
The carrying value of the convertible notes at September 30, 2026 and December 31, 2025, was $444 2 thousand and $6 thousand, respectively. Interest expense on the convertible notes for the three and nine months ended September 30, 2025, totaled $2 thousand and $6 thousand, respectively.
Subordinated Debentures
At September 30, 2026, the Company had nine wholly owned subsidiary grantor trusts that had issued $126.0 million of pooled trust preferred securities. Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the indentures. The trusts used the net proceeds from the offering to purchase a like amount of subordinated debentures. The subordinated debentures are the sole assets of the trusts. The Company’s obligations under the subordinated debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon the maturity of the subordinated debentures, or upon earlier redemption as provided in the indentures. The Company has the right to redeem the subordinated debentures in whole or in part on a quarterly basis at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date. The Company also has a right to defer consecutive payments of interest on the subordinated debentures for up to five years .
The following table is a summary of trust preferred securities and subordinated debentures at September 30, 2026:
| Issuance Trust | Issuance Date | Trust Preferred Security Amount | Carrying Value of Subordinated Debentures | Rate Type | Current Rate | Maturity Date | ||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||
| Nara Capital Trust III | 06/05/2003 | $ | $ | Variable | 06/15/2033 | |||||||||||||||||||||||||||||||||
| Nara Statutory Trust IV | 12/22/2003 | Variable | 01/07/2034 | |||||||||||||||||||||||||||||||||||
| Nara Statutory Trust V | 12/17/2003 | Variable | 12/17/2033 | |||||||||||||||||||||||||||||||||||
| Nara Statutory Trust VI | 03/22/2007 | Variable | 06/15/2037 | |||||||||||||||||||||||||||||||||||
| Center Capital Trust I | 12/30/2003 | Variable | 01/07/2034 | |||||||||||||||||||||||||||||||||||
| Wilshire Trust II | 03/17/2005 | Variable | 03/17/2035 | |||||||||||||||||||||||||||||||||||
| Wilshire Trust III | 09/15/2005 | Variable | 09/15/2035 | |||||||||||||||||||||||||||||||||||
| Wilshire Trust IV | 07/10/2007 | Variable | 09/15/2037 | |||||||||||||||||||||||||||||||||||
| Saehan Capital Trust I | 03/30/2007 | Variable | 06/30/2037 | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||||||||||||||
The carrying value of the subordinated debentures at September 30, 2026 and December 31, 2025, was $111.6 million and $110.5 million, respectively. At September 30, 2026 and December 31, 2025, acquired subordinated debentures had remaining discounts of $18.3 million and $19.4 million, respectively. The carrying balance of subordinated debentures is net of remaining discounts and includes common trust securities.
The Company’s investment in the common trust securities of the issuer trusts was $3.9
33
9. Commitments and Contingencies
The following table presents a summary of commitments at the dates indicated:
| September 30, 2026 | December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Unfunded commitments to extend credit | $ | $ | |||||||||
| Standby letters of credit | |||||||||||
| Other commercial letters of credit | |||||||||||
| Commitments to fund tax credit investments and CRA investments | |||||||||||
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, commercial letters of credit, and commitments to fund tax credit investments and CRA investments. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statements of Financial Condition.
The Company’s exposure to credit loss in the event of nonperformance on commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as the Company does for extending loan facilities to customers. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on the Company’s credit evaluation of the counterparty. The types of collateral that the Company may hold can vary and may include accounts receivable, inventory, property, plant and equipment, and income-producing properties. The estimated exposure to loss from these commitments is included in the reserve for unfunded loan commitments, which amounted to $2.9 million at September 30, 2026, and $3.3 million at December 31, 2025.
In the normal course of business, the Company is involved in various legal claims. The Company has reviewed all legal claims against the Company with counsel and has taken into consideration the views of such counsel as to the potential outcome of the claims. Loss contingencies for all legal claims totaled $774 thousand at September 30, 2026, and $484 thousand at December 31, 2025. It is reasonably possible that the Company may incur losses in excess of the amounts currently accrued. However, at this time, the Company is unable to estimate the range of additional losses that are reasonably possible because of a number of factors, including the fact that certain of these litigation matters are still in their early stages. 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.
34
10. Stockholders’ Equity
Total stockholders’ equity was $2.26 billion at September 30, 2026, compared with $2.28 billion at December 31, 2025.
On April 2, 2025, the Company acquired Territorial in an all-stock transaction. Pursuant to the merger agreement, Territorial shareholders received 0.8048 shares of the Company’s common stock in exchange for each share of Territorial common stock owned, with cash paid in lieu of fractional shares. The Company issued 6,976,754 shares of the Company’s common stock to Territorial shareholders valued at $73.3 million as part of the transaction, based on the closing price of the Company’s common stock on April 2, 2025. The pre-merger outstanding shares of the Company’s common stock remained outstanding and were not affected by the Merger.
In January 2022, the Company’s Board of Directors approved a share repurchase program that authorized the Company to repurchase up to $50.0 million of its common stock. The Board of Directors reaffirmed the repurchase program in December 2025, and at September 30, 2026, $26.6 million remained for repurchases. During the nine months ended September 30, 2026, the Company repurchased 772,726 shares of common stock for $8.7 million. The stock repurchases were recorded as treasury stock. See Part II, Item 2-“Unregistered Sales of Equity Securities and Use of Proceeds” for additional information.
For the three months ended September 30, 2026 and 2025, the Company paid dividends of $0.14 0.42
The following table presents the changes to accumulated other comprehensive loss for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Balance at beginning of period | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Unrealized net (losses) gains on investment securities AFS | ( | ( | |||||||||||||||||||||
| Unrealized net gains (losses) on interest rate contracts used for cash flow hedges | ( | ||||||||||||||||||||||
Reclassification adjustments for net losses (gains) realized in net income | ( | ||||||||||||||||||||||
| Tax effect | ( | ( | |||||||||||||||||||||
| Other comprehensive (loss) income, net of tax | ( | ( | |||||||||||||||||||||
| Balance at end of period | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Reclassifications for net gains and losses realized in net income for the three and nine months ended September 30, 2026 and 2025, related to net gains on interest rate contracts designated as cash flow hedges, amortization on unrealized losses from transferred investment securities to HTM, and net gains and losses on sales of investment securities AFS. Gains and losses on interest rate contracts are recorded in interest income and interest expense in the Consolidated Statements of Income. The unrealized holding losses at the date of transfer on securities HTM will continue to be reported, net of taxes, in AOCI as a component of stockholders’ equity and amortized over the remaining life of the securities as an adjustment to yield.
For the three and nine months ended September 30, 2026, the Company reclassified net gains of $115 thousand and $175 thousand on interest rate contracts designated as cash flow hedges, respectively, from other comprehensive income to net interest income, compared with net gains of $1.0 million and $4.2 million for the three and nine months ended September 30, 2025, respectively.
For the three and nine months ended September 30, 2026, the Company recorded a reclassification adjustment of $722 thousand and $2.4 million, respectively, from other comprehensive income to a reduction of interest income, to amortize transferred unrealized losses to investment securities HTM, compared with $899 thousand and $2.6 million for the three and nine months ended September 30, 2025, respectively.
For the three and nine months ended September 30, 2026, the Company reclassified net gains of $0 and $1.8 million on the sale of investment securities AFS, respectively, from other comprehensive income to noninterest income, compared with net losses of $0 and $38.9 million for the three and nine months ended September 30, 2025.
35
11. Earnings Per Share (“EPS”)
EPS are computed by dividing net income by the weighted average number of common shares outstanding for the period. Basic EPS does not reflect the possibility of dilution that could result from the issuance of additional shares of common stock upon exercise or conversion of outstanding equity awards or convertible notes. Diluted EPS reflects the potential dilution that could occur if stock options, convertible notes, or other contracts to issue common stock were exercised or converted to common stock that would then share in earnings. For the three and nine months ended September 30, 2026, stock options and restricted share awards of 3,890 and 1,321 shares of common stock, respectively, were excluded in computing diluted earnings per common share because they were antidilutive. For the three and nine months ended September 30, 2025, stock options and restricted share awards of 410,103 and 492,892 shares of common stock, respectively, were excluded in computing diluted earnings per common share because they were antidilutive.
Pursuant to the Territorial merger agreement, Territorial shareholders received 0.8048 shares of Hope Bancorp common stock in exchange for each share of Territorial common stock; accordingly, the Company issued 6,976,754 shares, or $73.3 million of equity, as part of the transaction, based on the closing price of the Company’s common stock on April 2, 2025.
The Company previously issued $217.5 million in convertible senior notes maturing on May 15, 2038, of which $444 thousand remained outstanding at September 30, 2026. The convertible notes can be converted into the Company’s shares of common stock at an initial rate of 45.0760 shares per $1,000 principal amount of the notes (See Note 8 - “Convertible Notes and Subordinated Debentures” for additional information regarding convertible notes issued). Under the required if-converted method for calculating dilutive EPS for convertible instruments, the denominator of the diluted EPS calculation is adjusted to reflect the full number of common shares issuable upon conversion, while the numerator is adjusted to add back after-tax interest expense for the period. For the three and nine months ended September 30, 2026 and 2025, shares related to the convertible notes issued were not included in the Company’s diluted EPS calculation. In accordance with the terms of the convertible notes and settlement options available to the Company, no shares would have been delivered to investors of the convertible notes based on the Company’s common stock price during the three and nine months ended September 30, 2026 and 2025, as the conversion price exceeded the market price of the Company’s stock.
As part of a board-approved share repurchase program, during the three and nine months ended September 30, 2026, the Company repurchased 0 and 772,726 shares of common stock, respectively, totaling $0 and $8.7 million, respectively, which was recorded as treasury stock. At September 30, 2026, $26.6 million remained available for the repurchase of additional stock under this program.
The following tables present computations of basic and diluted EPS for the three and nine months ended September 30, 2026 and 2025.
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| Net Income (Numerator) | Weighted-Average Shares (Denominator) | Earnings Per Share | Net Income (Numerator) | Weighted-Average Shares (Denominator) | Earnings Per Share | ||||||||||||||||||||||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||||||||||||||||||||||||
| Basic EPS - common stock | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||||||||||||||
| Stock options and restricted stock | |||||||||||||||||||||||||||||||||||
| Diluted EPS - common stock | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| Net Income (Numerator) | Weighted-Average Shares (Denominator) | Earnings Per Share | Net Income (Numerator) | Weighted-Average Shares (Denominator) | Earnings Per Share | ||||||||||||||||||||||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||||||||||||||||||||||||
| Basic EPS - common stock | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||||||||||||||
| Stock options and restricted stock | |||||||||||||||||||||||||||||||||||
| Diluted EPS - common stock | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
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12. Segment Reporting
The Company’s reportable segment is determined by the Chief Executive Officer, who is designated as the chief operating decision maker (“CODM”), based upon information provided about the Company’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the CODM, who uses such information to review the performance of various lines of business, which are then aggregated if operating performance, product/services, and customers are similar. The CODM evaluates the financial performance of the Company’s businesses using revenue streams, comparative product pricing, and significant expenses to assess performance and return on assets. The CODM uses consolidated net income and profitability metrics to benchmark the Company against its competitors. Benchmarking analysis and monitoring of budget to actual results are used to assess performance and establish compensation. When making significant decisions, the CODM takes into consideration certain financial metrics including loan growth, deposit growth, return on assets, return on average tangible common equity, efficiency ratio, and net interest margin.
Interest income from loans and other earning assets, and income from fee-based businesses provide revenue from banking operations. Interest expense on deposits and other sources of funding, provisions for credit losses, and operating expenses, primarily salaries and employee benefits, occupancy, furniture and equipment, and data processing and communications, provide the significant expenses of banking operations. The Company currently operates as a single segment and all operations are domestic. The Merger did not result in any additional operating segments for the Company since Territorial branches became part of the Company’s single segment.
The following table presents certain segment income statement information, including significant expense categories:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Net interest income | $ | $ | $ | $ | |||||||||||||||||||
| Provision for credit losses | ( | ( | ( | ( | |||||||||||||||||||
| Noninterest income | |||||||||||||||||||||||
| Noninterest expense | ( | ( | ( | ( | |||||||||||||||||||
| Income before income taxes | $ | $ | $ | $ | |||||||||||||||||||
| Significant segment expenses | |||||||||||||||||||||||
| Salaries and employee benefits | $ | $ | $ | $ | |||||||||||||||||||
| Occupancy, furniture and equipment | |||||||||||||||||||||||
| Software and subscriptions | |||||||||||||||||||||||
| Data and item processing | |||||||||||||||||||||||
| Merger-related costs | |||||||||||||||||||||||
The following table presents certain segment balance sheet information:
| September 30, 2026 | December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Total assets | $ | $ | |||||||||
| Investment securities AFS and HTM | |||||||||||
| Total loans receivable | |||||||||||
| Total deposits | |||||||||||
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13. Stock-Based Compensation
In May 2024, the Company’s stockholders approved the 2024 Equity Incentive Plan (the “2024 Plan”), which provides for grants of stock options, stock appreciation rights (“SAR”), restricted stock, performance shares, and performance units to non-employee directors and employees of the Company. Stock options may be either incentive stock options (“ISOs”), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options (“NQSOs”).
The 2024 Plan provides the Company flexibility to (i) attract and retain qualified non-employee directors, executives, and other key employees with appropriate equity-based awards; (ii) motivate high levels of performance; (iii) recognize employees’ contributions to the Company’s success; and (iv) align the interests of the participants with those of the Company’s stockholders. The 2024 Plan initially reserved for 4,500,000 shares available for grant to participants. At September 30, 2026, there were 1,220,857 remaining shares available for future grants under the 2024 Plan. The pool of available shares can be partially replenished for future grants to the extent there are forfeitures, expirations or otherwise terminations of existing equity awards without issuance of the shares underlying such awards. The exercise price for shares under an ISO may not be less than 100 % of fair market value on the date the award is granted under the Code. Similarly, under the terms of the 2024 Plan, the exercise price for SARs and NQSOs may not be less than 100 % of fair market value on the date of grant. Performance units are awarded to participants at the market price of the Company’s common stock on the date of award, after the lapse of the restriction period and the attainment of the performance criteria. All options not exercised generally expire 10 years after the date of grant.
ISOs, SARs, and NQSOs have vesting periods of three to five years and have 10 -year contractual terms. Restricted stock, performance shares, and performance units are granted with a restriction period of not less than one year from the grant date for performance-based awards and not more than three years from the grant date for time-based vesting of grants. Compensation expense for awards is recognized over the vesting period.
With the exception of the shares that are underlying stock options and restricted stock awards, the Board of Directors may choose to settle the awards by paying the equivalent cash value or by delivering the appropriate number of shares.
The following is a summary of the stock option activity under the Company’s plans for the nine months ended September 30, 2026:
| Number of Shares | Weighted-Average Exercise Price Per Share | Weighted-Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
Outstanding - January 1, 2026 | $ | ||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | |||||||||||||||||||||||
| Expired | ( | ||||||||||||||||||||||
| Forfeited | |||||||||||||||||||||||
Outstanding - September 30, 2026 | $ | $ | |||||||||||||||||||||
Options exercisable - September 30, 2026 | $ | $ | |||||||||||||||||||||
The following is a summary of the restricted stock and performance unit activity under the Company’s plans for the nine months ended September 30, 2026:
| Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||
Outstanding (unvested) - January 1, 2026 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
Outstanding (unvested) - September 30, 2026 | $ | ||||||||||
The total fair value of restricted stock and performance units vested during the nine months ended September 30, 2026 and 2025, was $5.8 million and $7.4 million, respectively.
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The total amounts charged against income related to stock-based payment arrangements were $2.9 million and $6.6 million for the three and nine months ended September 30, 2026, respectively. For the three and nine months ended September 30, 2025, $2.0 million and $5.6 million, respectively, of stock-based payment arrangements were charged against income. The income tax benefit recognized was approximately $821 thousand and $1.9 million for the three and nine months ended September 30, 2026, respectively, compared with $559 thousand and $1.6 million for the three and nine months ended September 30, 2025, respectively.
All stock option grants have expired at September 30, 2026, therefore, there was no unrecognized compensation expense related to non-vested stock option grants. Unrecognized compensation expense related to non-vested restricted stock and performance units at September 30, 2026, was $20.3 million, and is expected to be recognized over a weighted average vesting period of 2.12 years.
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14. Income Taxes
For the three months ended September 30, 2026, the Company recorded an income tax provision of $10.5 million on pretax income of $46.1 million, representing an effective tax rate of 22.86 %, compared with an income tax provision of $5.6 million on pretax income of $36.4 million, representing an effective tax rate of 15.38 % for the three months ended September 30, 2025.
For the nine months ended September 30, 2026, the Company recorded an income tax provision of $28.5 million on pretax income of $126.6 million, representing an effective tax rate of 22.49 %, compared with an income tax provision of $11.0 million on pretax income of $38.1 million, representing an effective tax rate of 28.91 % for the nine months ended September 30, 2025.
The year-over-year changes in the income tax provision, and effective tax rates for the three and nine months ended September 30, 2026, compared with the three and nine months ended September 30, 2025, reflected the higher pretax income and tax credits having a smaller effect on larger pretax income.
The Company and its subsidiaries are subject to U.S. federal income tax, as well as state income taxes. The Company had total unrecognized tax benefits of $627 thousand and $636 thousand at September 30, 2026 and December 31, 2025, respectively, that relate to uncertainties associated with federal and state income tax matters.
Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities (without regard to certain changes to deferred taxes). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
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15. Acquisitions
Acquisition of the Commercial Banking Unit of SMBC MANUBANK
On March 31, 2026, the Company’s wholly owned subsidiary, Bank of Hope, entered into a definitive agreement under which the Bank will acquire certain assets and liabilities of the Commercial Banking Unit of SMBC MANUBANK (“MANUBANK”), a subsidiary of SMBC Americas Holdings, Inc. and Sumitomo Mitsui Banking Corporation (“SMBC”). Under the terms of the definitive agreement, the Bank will be purchasing assets and liabilities consisting mostly of loans and deposits to be settled in 100% cash. Following the close of the acquisition, the Bank and SMBC will enter into a collaboration and partnership agreement to provide banking services to SMBC’s Japanese commercial and retail customers needing banking services in the United States.
The transaction closed effective October 1, 2026. See Note 21 - “Subsequent Events” for additional information regarding the close of the acquisition.
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16. Derivative Financial Instruments
As part of the Company’s overall interest rate risk management, the Company enters into derivative instruments, including interest rate swaps, collars, caps, floors, foreign exchange contracts, risk participation agreements and mortgage banking derivatives. The notional amount does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual agreements. Derivative instruments are recognized on the balance sheet at their fair value and are not reported on a net basis.
The tables below present the fair value of the Company’s derivative financial instruments at September 30, 2026 and December 31, 2025. The Company’s derivative assets and derivative liabilities are located within “Other assets” and “Other liabilities,” respectively, on the Company’s Consolidated Statements of Financial Condition.
| September 30, 2026 | |||||||||||||||||
| Notional Amount | Fair Value(1) | ||||||||||||||||
| Other Assets | Other Liabilities | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Derivatives designated as cash flow hedges | |||||||||||||||||
| Interest rate collars | $ | $ | $ | ( | |||||||||||||
| Total | $ | $ | $ | ( | |||||||||||||
| Derivatives not designated as hedges | |||||||||||||||||
| Interest rate contracts with correspondent banks | $ | $ | $ | ( | |||||||||||||
| Interest rate contracts with customers | ( | ||||||||||||||||
| Foreign exchange contracts with correspondent banks | ( | ||||||||||||||||
| Foreign exchange contracts with customers | ( | ||||||||||||||||
| Risk participation agreement - sold | |||||||||||||||||
| Risk participation agreement - purchased | |||||||||||||||||
| Mortgage banking derivatives | ( | ||||||||||||||||
| Total | $ | $ | $ | ( | |||||||||||||
__________________________________
(1) The fair values of centrally-cleared derivative contracts are presented net of settled-to-market margin.
| December 31, 2025 | |||||||||||||||||
| Notional Amount | Fair Value(1) | ||||||||||||||||
| Other Assets | Other Liabilities | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Derivatives designated as cash flow hedges | |||||||||||||||||
| Interest rate swaps | $ | $ | $ | ||||||||||||||
| Interest rate collars | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Derivatives not designated as hedges | |||||||||||||||||
| Interest rate contracts with correspondent banks | $ | $ | $ | ( | |||||||||||||
| Interest rate contracts with customers | ( | ||||||||||||||||
| Foreign exchange contracts with correspondent banks | ( | ||||||||||||||||
| Risk participation agreement | ( | ||||||||||||||||
| Mortgage banking derivatives | ( | ||||||||||||||||
| Total | $ | $ | $ | ( | |||||||||||||
__________________________________
(1) The fair values of centrally-cleared derivative contracts are presented net of settled-to-market margin.
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Derivatives designated as cash flow hedges
The Company’s interest rate contracts designated as cash flow hedges were determined to be fully effective during the periods presented and were hedged to financial instruments tied to term Secured Overnight Financing Rate (“SOFR”) and Federal Funds Rate. The aggregate fair value of the cash flow hedges are recorded in assets or liabilities on the Consolidated Statements of Financial Condition, with changes in fair value recorded in other comprehensive income on the Consolidated Statements of Comprehensive Income. The gain or loss on derivatives is recorded in accumulated other comprehensive income (“AOCI”) and is subsequently reclassified into interest income and interest expense in the period, during which the hedged forecasted transaction affects earnings. Amounts reported in AOCI related to interest rate agreements will be reclassified to interest income and interest expense as interest payments are received or paid on the Company’s derivatives. The Company expects the hedges to remain fully effective throughout the remaining terms. The Company expects to reclassify, during the next 12 months, approximately $79 thousand, net of taxes, from AOCI as a decrease to net interest income, including a decrease of $72 thousand from terminated swaps.
At September 30, 2026, $53 thousand in net pre-tax losses attributable to terminated swaps were included in AOCI, and will be accreted as an increase to net interest income over an expected remaining period of less than one year . This represents the unamortized fair value adjustments on $1.61 billion in notional value of terminated swaps that were designated as cash flow hedges on the changes in cash flows associated with certain variable rate loans, deposits, and borrowings. Prior to the termination of the swaps, the change in value of the swaps was recorded through accumulated other comprehensive income. $614.0 million in notional value of these swaps, with maturities through August 2027, and which were designated as cash flow hedges on the changes in cash flows associated with certain variable rate deposits and borrowings, were terminated by the Company during the nine months ended September 30, 2026.
The table below presents the gains (losses) on derivative instruments designated as cash flow hedges, that were reclassified from AOCI into earnings for the periods indicated:
| Derivative Instruments Designated as Cash Flow Hedges | Location of Gain (Loss) Recognized in Income | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||
| Interest rate contracts | Interest income and fees on loans | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
| Interest rate contracts | Interest expense on deposits | |||||||||||||||||||||||||||||||
| Interest rate contracts | Interest expense on FHLB borrowings | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||
Derivatives not designated as hedges
The Company’s derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers.
The Company offers a loan hedging program to certain loan customers. Through this program, the Company originates a variable rate loan with the customer. The Company and the customer will then enter into a fixed interest rate swap. Simultaneously, an identical offsetting swap is entered into by the Company with a correspondent bank. These “back-to-back” swap arrangements are intended to offset each other and allow the Company to book a variable rate loan, while providing the customer with a contract for fixed interest payments. In these arrangements, the Company’s net cash flow is equal to the interest income received from the variable rate loan originated with the customer. These customer interest rate contracts are not designated as hedging instruments and are recorded at fair value in other assets and other liabilities on the Consolidated Statements of Financial Condition. The change in fair value is recognized in the Consolidated Statements of Income as other income and fees.
43
The Company offers foreign exchange contracts to customers to purchase and/or sell foreign currencies at set rates in the future. The foreign exchange contracts allow customers to hedge the foreign exchange rate risk of their deposits and loans denominated in foreign currencies. In conjunction with this, the Company also enters into offsetting back-to-back contracts with institutional counterparties to hedge the Company’s foreign exchange rate risk. The Company also enters into certain foreign exchange contracts with institutional counterparties, including non-deliverable forward contracts, to manage its foreign exchange rate risk. These foreign exchange contracts are not designated as hedging instruments and are recorded at fair value in “Other assets” and “Other liabilities” on the Consolidated Statements of Financial Condition. During the three and nine months ended September 30, 2026, the changes in fair value on foreign exchange contracts were losses of $953 thousand and $644 thousand, respectively, and were recognized in the Consolidated Statements of Income as other income and fees. During the three and nine months ended September 30, 2025, the changes in fair value on foreign exchange contracts were gains of $452 thousand and losses of $921 thousand, respectively, and were recognized in the Consolidated Statements of Income as other income and fees.
The Company had risk participation agreements with an outside counterparty for interest rate swaps related to loans in which it is a participant. The risk participation agreements provide credit protection to the financial institution should the borrowers fail to perform on their interest rate derivative contracts. Risk participation agreements are credit derivatives not designated as hedges. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities. Changes in the fair value of credit derivatives are recognized directly in Consolidated Statements of Income as other income and fees. The fee received or paid, less the estimate of the loss for credit exposure, is recognized in Consolidated Statements of Income as other income and fees.
The Company enters into various stand-alone mortgage-banking derivatives in order to hedge the risk associated with the fluctuation of interest rates. Changes in fair value are recorded as mortgage banking revenue. Residential mortgage loans funded with interest rate lock commitments and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives.
44
17. Fair Value Measurements
Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date reflecting assumptions that a market participant would use when pricing an asset or liability. There are three levels of inputs that may be used to measure fair value. The fair value inputs of the instruments are classified and disclosed in one of the following categories pursuant to ASC 820:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. The quoted price shall not be adjusted for any blockage factor (i.e., size of the position relative to trading volume).
Level 2 - Pricing inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Fair value is determined through the use of models or other valuation methodologies, including the use of pricing matrices. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 - Pricing inputs are unobservable for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. The inputs into the determination of fair value require significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company uses the following methods and assumptions in estimating fair value disclosures for financial instruments. Financial assets and liabilities recorded at fair value on a recurring and non-recurring basis are listed as follows:
Interest Earning Deposits in Other Banks
The fair values of interest earning deposits in other financial institutions are valued by utilizing recent issuance rates and a market rate analysis of recent rates for retail deposits. While several assumptions are made surrounding the applicable observable market rates, the underlying data points utilized are observable through market data and therefore classified as Level 2 inputs.
Investment Securities
The fair values of investment securities available for sale and held to maturity are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
The fair value of the Company’s Level 3 security available for sale was measured using an income approach valuation technique. The primary inputs and assumptions used in the fair value measurement were derived from the security’s underlying collateral, which included discount rate, prepayment speeds, payment delays, and an assessment of the risk of default of the underlying collateral, among other factors. Significant increases or decreases in any of the inputs or assumptions could result in a significant increase or decrease in the fair value measurement.
Equity Investments With Readily Determinable Fair Value
The fair value of the Company’s equity investments with readily determinable fair value consists of mutual funds. The fair value for these investments is obtained from unadjusted quoted prices in active markets on the date of measurement and is therefore classified as Level 1.
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Interest Rate Contracts
The Company offers interest rate contracts to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable-to-fixed interest rate contract with the customer. The Company also enters into an offsetting interest rate contract with a correspondent bank. These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. The fair value of these derivatives is based on a discounted cash flow approach. The fair value of assets and liabilities of centrally cleared interest rate contracts are net of variation margin settled-to-market. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate contracts is classified as Level 2.
Mortgage Banking Derivatives
Mortgage banking derivative instruments consist of interest rate lock commitments and forward sale contracts that trade in liquid markets. The fair value is based on the prices available from third party investors. Due to the observable nature of the inputs used in deriving the fair value, the valuation of mortgage banking derivatives is classified as Level 2.
Other Derivatives
Other derivatives consist of interest rate contracts designated as cash flow hedges, foreign exchange contracts and risk participation agreements. The fair values of these other derivative financial instruments are based upon the estimated amount the Company would receive or pay to terminate the instruments, taking into account current interest rates, foreign exchange rates and, when appropriate, the current credit worthiness of the counterparties. Fair value of assets and liabilities of centrally cleared derivatives are net of variation margin settled-to-market. Interest rate contracts designated as cash flow hedges and foreign exchange contracts, which includes non-deliverable forward contracts, are classified within Level 2 due to the observable nature of the inputs used in deriving the fair value of these contracts. Credit derivatives such as risk participation agreements are valued based on credit worthiness of the underlying borrower, which is a significant unobservable input and therefore is classified as Level 3.
Collateral-Dependent Loans
The fair values of collateral-dependent loans are generally measured for ACL using the practical expedients permitted by ASC 326-20-35-5 including collateral-dependent loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral-dependent). Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuations utilizing enterprise value, asset fair value, or other valuation techniques, less costs to sell of 8.5 %. Appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and income approach. Adjustment may be made in the appraisal process by the independent appraiser to adjust for differences between the comparable sales and income data available for similar loans and the underlying collateral. Enterprise valuation techniques may also utilize a single valuation approach or a combination of approaches including comparable sales, income approach, Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”) multiples, or active bids. For C&I and asset backed loans, independent valuations may include a discount for eligible accounts receivable and a discount for inventory. These result in a Level 3 classification.
Loans Held For Sale
Loans held for sale are carried at the lower of cost or fair value, as determined by outstanding commitments from investors, or based on recent comparable sales (Level 2 inputs), if available. If Level 2 inputs are not available, carrying values are based on discounted cash flows using current market rates applied to the estimated life and credit risk (Level 3 inputs) or may be assessed based upon the fair value of the collateral, which is obtained from recent real estate appraisals (Level 3 inputs). These appraisals may utilize a single valuation approach or a combination of approaches including the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.
Other Real Estate Owned (“OREO”)
OREO is fair valued at the time the loan is foreclosed upon and the asset is transferred to OREO. The value is based primarily on third party appraisals, less costs to sell of up to 8.5 % and result in a Level 3 classification of the inputs for determining fair value. OREO is reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted to lower of cost or market accordingly, based on the same factors identified above.
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Premises Held For Sale
Premises held for sale consist of a branch location held for sale. The Company measured the fair value of its branch location held for sale as of September 30, 2026, based on a secured offer from an active buyer adjusted for broker fees and closing costs which the Company has determined to be a Level 2 input. If the fair value of the premises held for sale is less than the carrying amount, a charge is taken to reduce the property to its fair value (less estimated selling costs). If Level 2 inputs are not available, fair value may be based on the listed selling price, which is predominately determined using market transactions for similar properties (Level 3).
Assets and liabilities measured at fair value on a recurring basis are summarized below:
| Fair Value Measurements at the End of the Reporting Period Using | |||||||||||||||||||||||
| September 30, 2026 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Investment securities AFS: | |||||||||||||||||||||||
| U.S. Treasury securities | $ | $ | $ | $ | |||||||||||||||||||
| U.S. Government agency and U.S. Government sponsored enterprises: | |||||||||||||||||||||||
| Agency securities | |||||||||||||||||||||||
| CMO | |||||||||||||||||||||||
| MBS | |||||||||||||||||||||||
| Residential | |||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||
| Asset-backed securities | |||||||||||||||||||||||
| Corporate securities | |||||||||||||||||||||||
| Municipal securities | |||||||||||||||||||||||
| Equity investments with readily determinable fair value | |||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||
| Other derivatives | |||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||
| Mortgage banking derivatives | |||||||||||||||||||||||
| Other derivatives | |||||||||||||||||||||||
47
| Fair Value Measurements at the End of the Reporting Period Using | |||||||||||||||||||||||
| December 31, 2025 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Investment securities AFS: | |||||||||||||||||||||||
| U.S. Government agency and U.S. Government sponsored enterprises: | |||||||||||||||||||||||
| CMO | $ | $ | $ | $ | |||||||||||||||||||
| MBS | |||||||||||||||||||||||
| Residential | |||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||
| Asset-backed securities | |||||||||||||||||||||||
| Corporate securities | |||||||||||||||||||||||
| Municipal securities | |||||||||||||||||||||||
| Equity investments with readily determinable fair value | |||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||
| Mortgage banking derivatives | |||||||||||||||||||||||
| Other derivatives | |||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||
| Mortgage banking derivatives | |||||||||||||||||||||||
| Other derivatives | |||||||||||||||||||||||
There were no transfers between Levels 1, 2, and 3 during the three and nine months ended September 30, 2026 and 2025.
The table below presents a reconciliation and income statement classification of gains (losses) for the municipal security and risk participation agreements measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Municipal securities: | |||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | |||||||||||||||||||
Change in fair value included in other comprehensive income | ( | ( | ( | ( | |||||||||||||||||||
| Ending Balance | $ | $ | $ | $ | |||||||||||||||||||
| Risk participation agreements: | |||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | |||||||||||||||||||
| Change in fair value included in income | ( | ( | ( | ||||||||||||||||||||
| Ending Balance | $ | ( | $ | $ | ( | $ | |||||||||||||||||
48
The Company measures certain assets at fair value on a non-recurring basis including collateral-dependent loans, loans held for sale, OREO and premises held for sale. These fair value adjustments result from individually evaluated ACL recognized during the period, the application of the lower of cost or fair value on loans held for sale, and the application of fair value less costs to sell on OREO and premises held for sale.
Assets measured at fair value on a non-recurring basis are summarized below:
| Fair Value Measurements at the End of the Reporting Period Using | |||||||||||||||||||||||
| September 30, 2026 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Collateral-dependent loans receivable at fair value: | |||||||||||||||||||||||
| CRE loans | $ | $ | $ | $ | |||||||||||||||||||
| C&I loans | |||||||||||||||||||||||
| Consumer and other loans | |||||||||||||||||||||||
| Loans held for sale | |||||||||||||||||||||||
| OREO | |||||||||||||||||||||||
| Fair Value Measurements at the End of the Reporting Period Using | |||||||||||||||||||||||
| December 31, 2025 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Collateral-dependent loans receivable at fair value: | |||||||||||||||||||||||
| CRE loans | $ | $ | $ | $ | |||||||||||||||||||
| C&I loans | |||||||||||||||||||||||
| Loans held for sale | |||||||||||||||||||||||
| OREO | |||||||||||||||||||||||
| Premises held for sale | |||||||||||||||||||||||
For assets measured at fair value on a non-recurring basis, the total net losses, which include charge offs, recoveries, recorded ACL, valuations, and recognized gains and losses on sales are summarized below:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Collateral-dependent loans receivable at fair value: | |||||||||||||||||||||||
| CRE loans | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| C&I loans | ( | ( | ( | ( | |||||||||||||||||||
| Residential mortgage loans | ( | ( | |||||||||||||||||||||
| Consumer and other loans | ( | ( | |||||||||||||||||||||
| Loans held for sale | ( | ( | ( | ( | |||||||||||||||||||
| OREO | ( | ( | |||||||||||||||||||||
| Premises held for sale | ( | ( | |||||||||||||||||||||
49
The following table presents the quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements that are measured on a nonrecurring basis as of September 30, 2026 and December 31, 2025:
| Fair Value Measurements (Level 3) | Valuation Techniques | Unobservable Inputs | Range of Inputs | Weighted-Average of Inputs | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| Collateral dependent loans | $ | Collateral fair value | Sales price | N/A | N/A | |||||||||||||||||||||||||||||||||
| Enterprise value | Discounted cash flow analysis - discount rate | - | ||||||||||||||||||||||||||||||||||||
| Enterprise value | Active bid | N/A | N/A | |||||||||||||||||||||||||||||||||||
| Enterprise value | Settlement | N/A | N/A | |||||||||||||||||||||||||||||||||||
| Loans held for sale | Collateral fair value | Sales Price | N/A | N/A | ||||||||||||||||||||||||||||||||||
| Enterprise value | Sales Price | N/A | N/A | |||||||||||||||||||||||||||||||||||
| OREO | Collateral fair value | Sales price | N/A | N/A | ||||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Collateral dependent loans | $ | Internal model | Probability of default | |||||||||||||||||||||||||||||||||||
| Loss given default | ||||||||||||||||||||||||||||||||||||||
| Collateral fair value | Sales price | N/A | N/A | |||||||||||||||||||||||||||||||||||
| Collateral fair value | Discounted cash flow analysis - discount rate | - | ||||||||||||||||||||||||||||||||||||
| Enterprise value | Discounted cash flow analysis - discount rate | - | ||||||||||||||||||||||||||||||||||||
| Enterprise value | Sales price | N/A | N/A | |||||||||||||||||||||||||||||||||||
| Enterprise value | Sales price | N/A | N/A | |||||||||||||||||||||||||||||||||||
EBITDA(1) multiple | ||||||||||||||||||||||||||||||||||||||
| Asset fair value | Discount | - | ||||||||||||||||||||||||||||||||||||
| Loans held for sale | Enterprise value | Sales Price | N/A | N/A | ||||||||||||||||||||||||||||||||||
| OREO | Collateral fair value | Sales price | N/A | N/A | ||||||||||||||||||||||||||||||||||
__________________________________
(1) EBITDA = earnings before interest, tax, depreciation and amortization.
50
Fair Value of Financial Instruments
Carrying amounts and estimated fair values of financial instruments, not previously presented, at September 30, 2026 and December 31, 2025, were as follows:
| September 30, 2026 | |||||||||||||||||
| Carrying Amount | Estimated Fair Value | Fair Value Measurement Using | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Financial Assets: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | Level 1 | ||||||||||||||
| Interest earning deposits in other banks | Level 2 | ||||||||||||||||
| Investment securities HTM | Level 2 | ||||||||||||||||
| Equity investments without readily determinable fair values | Level 2 | ||||||||||||||||
| Loans held for sale | Level 2/3 | ||||||||||||||||
| Loans receivable, net | Level 3 | ||||||||||||||||
| Accrued interest receivable | Level 2/3 | ||||||||||||||||
| Servicing assets, net | Level 3 | ||||||||||||||||
| Customers’ liabilities on acceptances | Level 2 | ||||||||||||||||
| Financial Liabilities: | |||||||||||||||||
| Noninterest bearing deposits | $ | $ | Level 2 | ||||||||||||||
| Money market, interest bearing demand and savings deposits | Level 2 | ||||||||||||||||
| Time deposits | Level 2 | ||||||||||||||||
| FHLB borrowings | Level 2 | ||||||||||||||||
| Convertible notes, net | Level 1 | ||||||||||||||||
| Subordinated debentures | Level 3 | ||||||||||||||||
| Accrued interest payable | Level 2 | ||||||||||||||||
| Acceptances outstanding | Level 2 | ||||||||||||||||
| December 31, 2025 | |||||||||||||||||
| Carrying Amount | Estimated Fair Value | Fair Value Measurement Using | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Financial Assets: | |||||||||||||||||
| Cash and cash equivalents | $ | $ | Level 1 | ||||||||||||||
| Investment securities HTM | Level 2 | ||||||||||||||||
| Equity investments without readily determinable fair values | Level 2 | ||||||||||||||||
| Loans held for sale | Level 2/3 | ||||||||||||||||
| Loans receivable, net | Level 3 | ||||||||||||||||
| Accrued interest receivable | Level 2/3 | ||||||||||||||||
| Servicing assets, net | Level 3 | ||||||||||||||||
| Customers’ liabilities on acceptances | Level 2 | ||||||||||||||||
| Financial Liabilities: | |||||||||||||||||
| Noninterest bearing deposits | $ | $ | Level 2 | ||||||||||||||
| Money market, interest bearing demand and savings deposits | Level 2 | ||||||||||||||||
| Time deposits | Level 2 | ||||||||||||||||
| FHLB borrowings | Level 2 | ||||||||||||||||
| Convertible notes, net | Level 1 | ||||||||||||||||
| Subordinated debentures | Level 3 | ||||||||||||||||
| Accrued interest payable | Level 2 | ||||||||||||||||
| Acceptances outstanding | Level 2 | ||||||||||||||||
51
The Company measures assets and liabilities for its fair value disclosures based on an exit price notion. Although the exit price notion represents the value that would be received to sell an asset or paid to transfer a liability, the actual price received for a sale of assets or paid to transfer liabilities could be different from exit price disclosed. The methods and assumptions used to estimate fair value are described as follows:
The carrying amount was the estimated fair value for cash and cash equivalents, savings and other nonmaturity interest bearing demand deposits, equity investments without readily determinable fair values, customers’ and Bank’s liabilities on acceptances, noninterest bearing deposits, short-term debt, secured borrowings, and variable rate loans or deposits that reprice frequently and fully. The fair value of loans was determined through a discounted cash flow analysis, which incorporates probability of default and loss given default rates on an individual loan basis. For fixed rate loans, the discount rate used in a discounted cash flow analysis was based on the SOFR Swap Rate. For variable loans, the discount rate started with the underlying index rate and an adjustment was made on certain loans, which considered factors such as servicing costs, capital charges, duration, asset type incremental costs, and use of projected cash flows. Fair values of residential real estate loans included Fannie Mae and Freddie Mac prepayment speed assumptions or a third-party index based on historical prepayment speeds. Fair value of time deposits was based on discounted cash flow analyses using recent issuance rates over the prior three months and a market rate analysis of recent offering rates for retail products. Wholesale time deposit fair values incorporated brokered time deposit offering rates. The fair value of the Company’s debt was based on current rates for similar financing with a liquidity premium added to assumed market spreads to reflect exit pricing and the marketability/liquidity costs contained with consummating an orderly transaction. Fair value for the Company’s convertible notes was based on the actual last traded price of the notes. The fair value of commitments to fund loans represents fees currently charged to enter into similar agreements with similar remaining maturities and was not presented herein, as the fair value of these financial instruments was not material to the Consolidated Financial Statements.
52
18. Leases
The Company’s operating leases comprise primarily real estate leases of bank branch locations, loan production offices, and office spaces with remaining lease terms ranging from 1 year to 12 years at September 30, 2026. In addition, the Company leases ATM equipment located at certain branches with remaining lease terms of up to 6 years. Certain lease arrangements contain extension options, which are typically around 5 years. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term. The Company did not have any finance leases at September 30, 2026 and December 31, 2025.
The table below summarizes supplemental balance sheet information related to operating leases:
| September 30, 2026 | December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Operating lease ROU assets | $ | $ | |||||||||
| Current portion of long-term lease liabilities | |||||||||||
| Long-term lease liabilities | |||||||||||
The Company assumed operating leases with the acquisition of Territorial. The ROU assets and related lease liabilities recorded for the assumed leases were $22.7 million and $21.1 million, respectively, at the close of the Territorial acquisition on April 2, 2025. ROU assets related to the acquisition reflect net favorable adjustments of approximately $1.9 million. The ROU assets from Territorial included 26 real estate and one equipment leases.
The Company uses its incremental borrowing rate to present value lease payments in order to recognize a ROU asset and the related lease liability. The Company calculates its incremental borrowing rate by adding a spread to the FHLB borrowing interest rate at a given period. During the nine months ended September 30, 2026, the Company extended ten leases and entered into four new lease contracts, three of which had not yet commenced. Lease extension terms were up to 7 years each and the Company reassessed the ROU assets and lease liabilities related to these leases.
The table below summarizes the Company’s net operating lease cost:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Variable lease cost | |||||||||||||||||||||||
| Sublease income | ( | ( | ( | ( | |||||||||||||||||||
| Net lease cost | $ | $ | $ | $ | |||||||||||||||||||
The table below summarizes other information related to the Company’s operating leases:
| At or for the Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash outflows for operating leases | $ | $ | |||||||||
| Weighted-average remaining lease term - operating leases | |||||||||||
| Weighted-average discount rate - operating leases | % | % | |||||||||
53
The table below summarizes the maturity of remaining lease liabilities:
| September 30, 2026 | |||||
| (Dollars in thousands) | |||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 and thereafter | |||||
| Total lease payments | |||||
| Less: imputed interest | |||||
| Total lease obligations | $ | ||||
At September 30, 2026, the Company had four operating lease commitments that had not yet commenced, totaling $39.6 million in lease payments over terms ranging from five to 15 years, of which $36.6 million was related to a contract entered into in the first quarter of 2026 for the relocation of the Company's office headquarters.
54
19. Investments in Tax Credit Structures
The Company invests in the equity of certain limited partnerships or limited liability companies that are typically associated with affordable housing partnerships and renewable energy projects that generate low-income housing tax credits, investment tax credits, and other income tax benefits for the Company.
Following the adoption of ASU 2023-02 in 2024, the Company elected to account for its tax credit investments using the proportional amortization method (“PAM”) on a program-by-program basis if certain conditions are met. For the Company’s accounting policies on PAM, see Note 1 - “Summary of Significant Accounting Policies”, of its audited Consolidated Financial Statements included in its 2025 Annual Report on Form 10-K.
The Company recorded its investments in qualifying affordable housing partnerships, net, using the equity investment method. The Company’s investments in renewable energy tax credits were accounted for under PAM and recorded under other assets, and its commitments to fund investments in tax credit structures were recorded in other liabilities on the Consolidated Statements of Financial Condition.
The following table presents the investments and unfunded commitments of the Company’s investments in tax credit structures at September 30, 2026 and December 31, 2025:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Assets | Unfunded Commitments | Assets | Unfunded Commitments | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| PAM: | |||||||||||||||||||||||
| Investments in renewable energy tax credits | $ | $ | $ | $ | |||||||||||||||||||
| Equity method: | |||||||||||||||||||||||
| Investments in affordable housing partnerships | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
The increase in both investments and their unfunded commitments reflected new investments made. During the nine months ended September 30, 2026, the Company made new commitments to invest $23.3 million in renewable energy tax credit investments.
The following table presents additional information related to tax credits and benefits, and amortization recorded for the three and nine months ended September 30, 2026 and 2025.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Tax credits and benefits: | |||||||||||||||||||||||
| PAM | |||||||||||||||||||||||
| Investments in renewable energy tax credits | $ | $ | $ | $ | |||||||||||||||||||
| Equity method | |||||||||||||||||||||||
| Investments in affordable housing partnerships | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Amortization: | |||||||||||||||||||||||
| PAM | |||||||||||||||||||||||
| Investments in renewable energy tax credits | $ | $ | $ | $ | |||||||||||||||||||
| Equity method | |||||||||||||||||||||||
| Investments in affordable housing partnerships | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
55
20. Regulatory Matters
The Company and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material and adverse effect on the Company’s and the Bank’s business, financial condition and results of operation, such as restrictions on growth or the payment of dividends or other capital distributions or management fees. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
At September 30, 2026 and December 31, 2025, the capital ratios for the Company and the Bank were in excess of all regulatory minimum capital ratios with the addition of the conservation buffer.
At September 30, 2026 and December 31, 2025, the most recent regulatory notification categorized the Bank as “well-capitalized” under the regulatory framework for prompt corrective action. To generally be categorized as “well-capitalized”, the Bank must maintain a minimum total capital ratio, Tier 1 capital ratio, common equity Tier 1 capital ratio, and leverage ratio as set forth in the following table. There are no conditions or events since the most recent notification from regulators that management believes has changed the institution’s category.
Regulatory Developments
On March 19, 2026, the Federal Reserve, Office of the Comptroller of the Currency, and FDIC jointly issued notices of proposed rulemaking (the “Proposed Rules”) that would revise the regulatory capital framework applicable to banking organizations. The Proposed Rules are intended to enhance the resilience of the banking system by strengthening risk-based capital requirements, refining the measurement of risk-weighted assets, and incorporating elements of international standards, including aspects of the Basel III framework. The Proposed Rules, if adopted as issued, could impact the Company’s capital requirements and the calculation of risk-weighted assets. The Proposed Rules were subject to public comment, which closed on June 18, 2026, and regulatory agencies are reviewing feedback as they attempt to finalize the rule. The Company is currently evaluating the potential effects of the Proposed Rules. At this time, the full impact cannot be reasonably estimated due to uncertainties regarding the final form and implementation timeline of the rules.
56
The Company’s and the Bank’s levels and ratios are presented in the tables below for the dates indicated:
| Actual | Ratio Required for Capital Adequacy Purposes | Ratio Required To Be Well-Capitalized | Ratio Required for Minimum Capital Adequacy With Capital Conservation Buffer | ||||||||||||||||||||||||||
| September 30, 2026 | Amount | Ratio | |||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| Common equity Tier 1 capital (to risk weighted assets): | |||||||||||||||||||||||||||||
| Company | $ | % | % | N/A | % | ||||||||||||||||||||||||
| Bank | $ | % | % | % | % | ||||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets): | |||||||||||||||||||||||||||||
| Company | $ | % | % | N/A | % | ||||||||||||||||||||||||
| Bank | $ | % | % | % | % | ||||||||||||||||||||||||
| Total capital (to risk-weighted assets): | |||||||||||||||||||||||||||||
| Company | $ | % | % | N/A | % | ||||||||||||||||||||||||
| Bank | $ | % | % | % | % | ||||||||||||||||||||||||
| Leverage capital (to average assets): | |||||||||||||||||||||||||||||
| Company | $ | % | % | N/A | N/A | ||||||||||||||||||||||||
| Bank | $ | % | % | % | N/A | ||||||||||||||||||||||||
| Actual | Ratio Required for Capital Adequacy Purposes | Ratio Required To Be Well-Capitalized | Ratio Required for Minimum Capital Adequacy With Capital Conservation Buffer | ||||||||||||||||||||||||||
| December 31, 2025 | Amount | Ratio | |||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| Common equity Tier 1 capital (to risk weighted assets): | |||||||||||||||||||||||||||||
| Company | $ | % | % | N/A | % | ||||||||||||||||||||||||
| Bank | $ | % | % | % | % | ||||||||||||||||||||||||
| Tier 1 capital (to risk-weighted assets): | |||||||||||||||||||||||||||||
| Company | $ | % | % | N/A | % | ||||||||||||||||||||||||
| Bank | $ | % | % | % | % | ||||||||||||||||||||||||
| Total capital (to risk-weighted assets): | |||||||||||||||||||||||||||||
| Company | $ | % | % | N/A | % | ||||||||||||||||||||||||
| Bank | $ | % | % | % | % | ||||||||||||||||||||||||
| Leverage capital (to average assets): | |||||||||||||||||||||||||||||
| Company | $ | % | % | N/A | N/A | ||||||||||||||||||||||||
| Bank | $ | % | % | % | N/A | ||||||||||||||||||||||||
57
21. Subsequent Events
Effective October 1, 2026, Bank of Hope completed the previously announced acquisition of certain assets and assumption of certain liabilities of the Commercial Banking Unit of SMBC MANUBANK (“MANUBANK”) pursuant to the Asset Purchase Agreement dated March 31, 2026. As part of the closing of the MANUBANK transaction, the Bank received an estimated net cash settlement of $307.4 million from the seller, SMBC MANUBANK, a wholly owned subsidiary of SMBC Americas Holdings, Inc. and Sumitomo Mitsui Banking Corporation. The net cash settlement is based on an estimated final closing statement and is subject to change. No shares of the Company’s common stock were issued as part of the transaction.
Loans acquired from MANUBANK totaled approximately $2.20 billion and deposits acquired totaled approximately $2.60 billion, both before purchase and other accounting adjustments. Subsequent to the acquisition, the Bank sold most of MANUBANK’s portfolio of purchased SBA 7(a) guaranteed loans with no gain or loss recognized on the sale, for net proceeds of $191.3 million. The Bank also acquired seven locations in Southern California as part of the acquisition, one of which will be closed in the fourth quarter of 2026.
The Company has determined that the acquisition of MANUBANK will be accounted for as a business combination under ASC 805. In addition, the Company determined that the acquisition was not “significant” under the definition as stated in SEC rules and regulations.
Following the close of the acquisition, the Bank and SMBC entered into a collaboration and partnership agreement to provide banking services to SMBC’s Japanese commercial and retail customers needing banking services in the United States.
58
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
The following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025 and the unaudited Consolidated Financial Statements and Notes set forth elsewhere in this Quarterly Report on Form 10-Q.
GENERAL
Hope Bancorp, Inc. is the holding company of Bank of Hope, the only regional Korean American bank in the United States with $19.19 billion in total assets at September 30, 2026. With the addition of Territorial Savings, a division of Bank of Hope, the Company became the largest regional bank catering to multicultural customers across the continental United States and Hawaii. Headquartered in Los Angeles, the Bank provides a full suite of commercial, corporate and consumer loans, deposit and fee-based products and services, including commercial and commercial real estate lending, SBA lending, residential mortgage and other consumer lending, treasury management services, foreign currency exchange solutions, interest rate derivative products, and international trade financing, among others. The Bank operates 45 full-service branches in California, New York, New Jersey, Washington, Texas, Illinois, Georgia and Alabama under the Bank of Hope banner, and 25 branches in Hawaii under the Territorial Savings banner. The Bank also operates SBA loan production offices, commercial loan production offices, and residential mortgage loan production offices throughout the United States, and a representative office in Seoul, South Korea. Bank of Hope is a California-chartered bank, and its deposits are insured by the FDIC to the extent provided by law. Bank of Hope is an Equal Opportunity Lender.
The Bank’s principal business involves earning interest on loans and investment securities, primarily funded by deposits and borrowings. Operating income and net income are derived primarily from the difference between interest income received from interest earning assets and interest expense paid on interest bearing liabilities and, to a lesser extent, from fees received in connection with servicing loan and deposit accounts, providing fee-based products and services, and income from the sale of loans. Major expenses are the interest paid on deposits and borrowings, provisions for credit losses and general operating expenses, which primarily consist of salaries and employee benefits, occupancy costs, and other operating expenses. Interest rates are highly sensitive to many factors that are beyond our control, such as changes in the national economy and in the related monetary policies of the FRB, inflation, unemployment, consumer spending, tariffs, political changes, and other events. We cannot predict the impact that these factors and future changes in domestic and foreign economic and political conditions might have on our business, financial condition, and results of operations.
59
Selected Financial Data
The following tables set forth a performance overview concerning the periods indicated and should be read in conjunction with the unaudited Consolidated Financial Statements and Notes set forth elsewhere in this Quarterly Report on Form 10-Q and the following Results of Operations and Financial Condition sections of this MD&A. During the second quarter of 2025, we completed the acquisition of Territorial Bancorp and repositioned our investment securities AFS portfolio. In addition, in the first quarter of 2026, we announced an upcoming acquisition of MANUBANK loans and deposits, which was subsequently completed on October 1, 2026. The comparability of our operating results for the three and nine months ended September 30, 2025, with performance for the three and nine months ended September 30, 2026, was impacted by acquisition accounting adjustments associated with the 2025 Territorial Merger, the loss on securities sold, merger-related expenses for both the Merger and the MANUBANK acquisition, and the change in the California state tax apportionment rate. We have provided supplemental non-GAAP information to facilitate a better understanding of financial performance, identifying certain items as “notable.”
| At or for the Three Months Ended September 30, | At or for the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||||||||||||
| Income Statement Data: | |||||||||||||||||||||||
| Interest income | $ | 245,158 | $ | 244,700 | $ | 711,479 | $ | 700,958 | |||||||||||||||
| Interest expense | 109,793 | 118,143 | 323,088 | 356,129 | |||||||||||||||||||
| Net interest income | 135,365 | 126,557 | 388,391 | 344,829 | |||||||||||||||||||
| Provision for credit losses | 8,560 | 8,710 | 23,980 | 24,602 | |||||||||||||||||||
| Net interest income after provision for credit losses | 126,805 | 117,847 | 364,411 | 320,227 | |||||||||||||||||||
| Noninterest income | 22,112 | 15,385 | 57,929 | 8,117 | |||||||||||||||||||
| Noninterest expense | 102,794 | 96,861 | 295,713 | 290,195 | |||||||||||||||||||
| Income before income taxes | 46,123 | 36,371 | 126,627 | 38,149 | |||||||||||||||||||
| Income tax provision | 10,546 | 5,595 | 28,479 | 11,027 | |||||||||||||||||||
| Net income | $ | 35,577 | $ | 30,776 | $ | 98,148 | $ | 27,122 | |||||||||||||||
Net income, excluding notable items (1) | $ | 37,468 | $ | 31,526 | $ | 101,633 | $ | 78,997 | |||||||||||||||
| Per Share Data: | |||||||||||||||||||||||
| Earnings per common share – basic | $ | 0.28 | $ | 0.24 | $ | 0.77 | $ | 0.22 | |||||||||||||||
| Earnings per common share – diluted | $ | 0.28 | $ | 0.24 | $ | 0.76 | $ | 0.22 | |||||||||||||||
Earnings per common share – diluted excluding notable items (1) | $ | 0.29 | $ | 0.25 | $ | 0.79 | $ | 0.63 | |||||||||||||||
| Cash dividends declared per common share | $ | 0.14 | $ | 0.14 | $ | 0.42 | $ | 0.42 | |||||||||||||||
| Book value per common share (period end) | $ | 17.67 | $ | 17.62 | $ | 17.67 | $ | 17.62 | |||||||||||||||
Tangible common equity (“TCE”) per share (period end) (1) | $ | 13.55 | $ | 13.53 | $ | 13.55 | $ | 13.53 | |||||||||||||||
| Common Share Count: | |||||||||||||||||||||||
Number of common shares outstanding (period end) | 127,758,427 | 128,185,271 | 127,758,427 | 128,185,271 | |||||||||||||||||||
| Weighted average shares – basic | 127,747,310 | 128,167,932 | 127,867,984 | 125,687,283 | |||||||||||||||||||
| Weighted average shares – diluted | 128,624,630 | 128,593,874 | 128,509,496 | 126,110,136 | |||||||||||||||||||
| Selected Performance Ratios: | |||||||||||||||||||||||
Return on average assets (“ROA”) (2) | 0.75 | % | 0.66 | % | 0.70 | % | 0.20 | % | |||||||||||||||
Return on average stockholders’ equity (“ROE”) (2) | 6.19 | % | 5.50 | % | 5.70 | % | 1.64 | % | |||||||||||||||
Return on average tangible common equity (“ROTCE”) (1) (2) | 8.03 | % | 7.19 | % | 7.39 | % | 2.13 | % | |||||||||||||||
Net interest margin (2) (3) | 3.02 | % | 2.89 | % | 2.96 | % | 2.71 | % | |||||||||||||||
Efficiency ratio (4) | 65.28 | % | 68.24 | % | 66.26 | % | 82.22 | % | |||||||||||||||
ROA excluding notable items (1) (2) | 0.79 | % | 0.68 | % | 0.72 | % | 0.58 | % | |||||||||||||||
ROE excluding notable items (1) (2) | 6.52 | % | 5.64 | % | 5.90 | % | 4.78 | % | |||||||||||||||
ROTCE excluding notable items (1) (2) | 8.45 | % | 7.36 | % | 7.65 | % | 6.20 | % | |||||||||||||||
Efficiency ratio excluding notable items (1) (4) | 63.59 | % | 67.56 | % | 65.16 | % | 68.77 | % | |||||||||||||||
60
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Average Balance Sheet Data: | |||||||||||||||||||||||
| Assets | $ | 18,991,587 | $ | 18,548,982 | $ | 18,741,699 | $ | 18,126,058 | |||||||||||||||
| Interest earning cash and deposits at other banks | 437,305 | 488,992 | 432,086 | 607,549 | |||||||||||||||||||
| Investment securities AFS and HTM | 2,305,772 | 2,256,228 | 2,226,139 | 2,178,155 | |||||||||||||||||||
| Loans | 14,967,728 | 14,522,425 | 14,816,982 | 14,139,046 | |||||||||||||||||||
| Deposits | 15,898,039 | 15,911,601 | 15,720,783 | 15,498,357 | |||||||||||||||||||
| FHLB borrowings | 433,276 | 27,286 | 359,117 | 65,441 | |||||||||||||||||||
| Stockholders’ equity | 2,299,264 | 2,237,375 | 2,297,305 | 2,203,641 | |||||||||||||||||||
| September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Statement of Financial Condition Data - at Period End: | |||||||||||||||||||||||
| Assets | $ | 19,189,488 | $ | 18,510,799 | |||||||||||||||||||
| Loans receivable | 15,050,474 | 14,590,519 | |||||||||||||||||||||
| Deposits | 16,116,169 | 15,831,262 | |||||||||||||||||||||
| FHLB borrowings | 374,000 | 24,878 | |||||||||||||||||||||
| Stockholders’ equity | 2,257,458 | 2,258,960 | |||||||||||||||||||||
Consolidated Capital Ratios (5) | |||||||||||||||||||||||
| Common equity Tier 1 capital ratio | 12.25 | % | 12.14 | % | |||||||||||||||||||
| Tier 1 capital ratio | 12.93 | % | 12.83 | % | |||||||||||||||||||
| Total capital ratio | 13.92 | % | 13.85 | % | |||||||||||||||||||
Leverage ratio (6) | 11.01 | % | 10.86 | % | |||||||||||||||||||
TCE ratio (1) | 9.28 | % | 9.64 | % | |||||||||||||||||||
| Asset Quality Ratios: | |||||||||||||||||||||||
| Allowance for credit losses to loans receivable | 1.03 | % | 1.05 | % | |||||||||||||||||||
| Allowance for credit losses to nonaccrual loans | 143.16 | % | 138.63 | % | |||||||||||||||||||
| Nonaccrual loans to loans receivable | 0.72 | % | 0.75 | % | |||||||||||||||||||
| Nonperforming loans to loans receivable | 0.72 | % | 0.77 | % | |||||||||||||||||||
| Nonperforming assets to total assets | 0.57 | % | 0.61 | % | |||||||||||||||||||
_____________________________________________
(1)Net income excluding notable items, earnings per common share - diluted excluding notable items, TCE per share, ROTCE, ROA excluding notable items, ROE excluding notable items, ROTCE excluding notable items, efficiency ratio excluding notable items, and TCE ratio are non-GAAP financial measures that we believe provide investors with information useful in understanding our operating results and financial condition. A quantitative reconciliation of the most directly comparable GAAP to non-GAAP financial measures is provided on the following pages.
(2)Annualized.
(3)Net interest margin is calculated by dividing annualized net interest income by average total interest earning assets.
(4)Efficiency ratio is defined as noninterest expense divided by the sum of net interest income and noninterest income.
(5)The ratios generally required to meet the definition of a “well-capitalized” financial institution under certain banking regulations are 5.0% leverage capital ratio, 6.5% common equity tier 1 capital ratio, 8.0% tier 1 capital ratio, and 10.0% total capital ratio.
(6)Calculations are based on quarterly average asset balances.
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Non-GAAP Financial Measurements
We provide certain non-GAAP financial measures that we believe provide investors with meaningful supplemental information that is useful in understanding our operating results and financial condition. The methodologies for calculating non-GAAP measures may differ among companies. The following tables reconcile the non-GAAP financial measures used in this Form 10-Q to the most comparable GAAP performance measures. The non-GAAP financial measures provide information useful to investors in understanding our operating performance and trends and assist in comparing our results with the performance of our peers.
During the three and nine months ended September 30, 2026 and 2025, our operating results included certain notable items as a result of the 2025 Merger with Territorial and the MANUBANK acquisition, our legacy investment securities repositioning, the change in the California state tax apportionment rate, and other items. We have presented figures that adjust for these notable items because we believe that doing so will help investors better understand our operating performance. The following table summarizes the impact of non-core notable items recorded for the periods indicated and reconciles them to the most directly comparable GAAP financial measure.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||||||||||||
| Net income | $ | 35,577 | $ | 30,776 | $ | 98,148 | $ | 27,122 | |||||||||||||||
| Notable items: | |||||||||||||||||||||||
| Merger-related provision for credit losses | — | — | — | 553 | |||||||||||||||||||
| Loss on investment portfolio repositioning | — | — | — | 38,856 | |||||||||||||||||||
| FDIC special assessment reversal | — | — | (58) | — | |||||||||||||||||||
| Merger-related costs | 2,650 | 958 | 4,942 | 20,758 | |||||||||||||||||||
| Total notable items included in pre-tax income | 2,650 | 958 | 4,884 | 60,167 | |||||||||||||||||||
| Tax effect on notable items in pre-tax income | (759) | (208) | (1,399) | (13,170) | |||||||||||||||||||
| Notable impact from California state tax apportionment law change | — | — | — | 4,878 | |||||||||||||||||||
| Total notable items, net of tax | 1,891 | 750 | 3,485 | 51,875 | |||||||||||||||||||
Net income excluding notable items (1) | $ | 37,468 | $ | 31,526 | $ | 101,633 | $ | 78,997 | |||||||||||||||
| Diluted common shares | 128,624,630 | 128,593,874 | 128,509,496 | 126,110,136 | |||||||||||||||||||
EPS excluding notable items (1) | $ | 0.29 | $ | 0.25 | $ | 0.79 | $ | 0.63 | |||||||||||||||
| Average assets | $ | 18,991,587 | $ | 18,548,982 | $ | 18,741,699 | $ | 18,126,058 | |||||||||||||||
ROA excluding notable items (annualized) (1) | 0.79 | % | 0.68 | % | 0.72 | % | 0.58 | % | |||||||||||||||
| Average equity | $ | 2,299,264 | $ | 2,237,375 | $ | 2,297,305 | $ | 2,203,641 | |||||||||||||||
ROE excluding notable items (annualized) (1) | 6.52 | % | 5.64 | % | 5.90 | % | 4.78 | % | |||||||||||||||
Average TCE (1) | $ | 1,772,732 | $ | 1,712,353 | $ | 1,770,749 | $ | 1,697,859 | |||||||||||||||
ROTCE excluding notable items (annualized) (1) | 8.45 | % | 7.36 | % | 7.65 | % | 6.20 | % | |||||||||||||||
_____________________________________________
(1)Non-GAAP financial measures.
62
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Noninterest expense | $ | 102,794 | $ | 96,861 | $ | 295,713 | $ | 290,195 | |||||||||||||||
| Notable items: | |||||||||||||||||||||||
| FDIC special assessment reversal | — | — | 58 | — | |||||||||||||||||||
| Merger-related costs | (2,650) | (958) | (4,942) | (20,758) | |||||||||||||||||||
Noninterest expense excluding notable items (1) | $ | 100,144 | $ | 95,903 | $ | 290,829 | $ | 269,437 | |||||||||||||||
| Revenue (net interest income and noninterest income) | $ | 157,477 | $ | 141,942 | $ | 446,320 | $ | 352,946 | |||||||||||||||
| Notable items: | |||||||||||||||||||||||
| Loss on investment portfolio repositioning | — | — | — | 38,856 | |||||||||||||||||||
Revenue excluding notable items (1) | $ | 157,477 | $ | 141,942 | $ | 446,320 | $ | 391,802 | |||||||||||||||
Efficiency ratio excluding notable items (1) | 63.59 | % | 67.56 | % | 65.16 | % | 68.77 | % | |||||||||||||||
Tangible book value per common share is calculated by subtracting goodwill and core deposit intangible assets from total stockholders’ equity, then dividing the difference by the number of shares of common stock outstanding. TCE ratio is calculated by subtracting goodwill and core deposit intangible assets from total stockholders’ equity, then dividing the difference by total assets after subtracting goodwill and core deposit intangible assets.
| September 30, 2026 | September 30, 2025 | ||||||||||
| (Dollars in thousands, except share data) | |||||||||||
| Total stockholders’ equity | $ | 2,257,458 | $ | 2,258,960 | |||||||
| Less: Goodwill and CDI, net | (525,997) | (524,503) | |||||||||
TCE (1) | $ | 1,731,461 | $ | 1,734,457 | |||||||
| Total assets | $ | 19,189,488 | $ | 18,510,799 | |||||||
| Less: Goodwill and CDI, net | (525,997) | (524,503) | |||||||||
Tangible assets (1) | $ | 18,663,491 | $ | 17,986,296 | |||||||
| Common shares outstanding | 127,758,427 | 128,185,271 | |||||||||
Tangible book value per common share (1) | $ | 13.55 | $ | 13.53 | |||||||
TCE ratio (1) | 9.28 | % | 9.64 | % | |||||||
Return on average tangible common equity is calculated by dividing net income for the period (annualized) by average stockholders’ equity for the period after subtracting average goodwill and core deposit intangible assets for the period from average stockholders’ equity.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Net income | $ | 35,577 | $ | 30,776 | $ | 98,148 | $ | 27,122 | |||||||||||||||
| Average stockholders’ equity | $ | 2,299,264 | $ | 2,237,375 | $ | 2,297,305 | $ | 2,203,641 | |||||||||||||||
| Less: Average goodwill and CDI, net | (526,532) | (525,022) | (526,556) | (505,782) | |||||||||||||||||||
Average tangible common equity (1) | $ | 1,772,732 | $ | 1,712,353 | $ | 1,770,749 | $ | 1,697,859 | |||||||||||||||
ROTCE (annualized) (1) | 8.03 | % | 7.19 | % | 7.39 | % | 2.13 | % | |||||||||||||||
________________________________
(1)Non-GAAP financial measures.
63
Results of Operations
Overview
Net income for the third quarter of 2026 was $35.6 million, or $0.28 per diluted common share, an increase of $4.8 million over $30.8 million, or $0.24 per diluted common share, for the same period of 2025. The year-over-year increase in net income was primarily due to increases in net interest income and noninterest income, partially offset by an increase in noninterest expense. Net income excluding notable items, a non-GAAP measure, for the three months ended September 30, 2026, was $37.5 million, or $0.29 per diluted common share, compared with $31.5 million, or $0.25 per diluted share, for the same period of 2025.
Net income for the nine months ended September 30, 2026, was $98.1 million, or $0.76 per diluted common share, compared with $27.1 million, or $0.22 per diluted share, for the same period of 2025, which was an increase of $71.0 million. Net income excluding notable items, a non-GAAP measure, for the nine months ended September 30, 2026, was $101.6 million, or $0.79 per diluted common share, compared with net income of $79.0 million, or $0.63 per diluted share, for the same period of 2025. The comparison between the nine-month periods ended September 30, 2026 and 2025, was impacted by the acquisition of Territorial in April 2025, which included only six months of activity in 2025, the investment securities repositioning in the second quarter of 2025, and a change in California’s state tax apportionment law.
Notable items for the nine months ended September 30, 2026, included $3.5 million in after tax merger-related expenses and $58 thousand in FDIC assessment reversals. Notable items for the nine months ended September 30, 2025, totaled $51.9 million after tax, comprising $30.5 million after tax in net loss on sales of securities related to the investment securities repositioning, $16.5 million after tax in merger-related items, and a $4.9 million impact on income tax expense from the change in California’s state tax apportionment law.
See the “General” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures.
Net Interest Income and Net Interest Margin
Net Interest Income
A principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans, investments and interest earning cash, and the interest paid on deposits, borrowed funds, and convertible notes. Net interest income expressed as a percentage of average interest earning assets is referred to as the net interest margin. The net interest spread is the yield on average interest earning assets less the cost of average interest bearing liabilities. Net interest income is affected by changes in the balances of interest earning assets and interest bearing liabilities, changes in yields earned on interest earning assets, and changes in rates paid on interest bearing liabilities.
Comparison of Three Months Ended September 30, 2026, with the Three Months Ended September 30, 2025
Net interest income was $135.4 million for the third quarter of 2026, compared with $126.6 million for the same period of 2025, an increase of $8.8 million, or 7.0%. The year-over-year increase in net interest income was primarily driven by a lower cost of funds and an increase in the average balance of interest earning assets, partially offset by lower yields on loans and a higher average balance of FHLB borrowings. The Federal Funds target rate was cut by an aggregate 75 basis points in the last four months of 2025, favorably impacting funding costs for the third quarter of 2026 compared with the prior-year period.
Comparison of Nine Months Ended September 30, 2026, with the Nine Months Ended September 30, 2025
Net interest income was $388.4 million for the nine months ended September 30, 2026, compared with $344.8 million for the same period of 2025, an increase of $43.6 million, or 12.6%. The year-over-year increase in year-to-date net interest income was primarily driven by a lower cost of deposits and an increase in the average balance of loans, partially offset by lower yields on loans and an increase in the average balance of interest bearing liabilities. The year-over-year growth in average earning assets primarily reflected the acquisition of Territorial, which closed in the second quarter of 2025. The Federal Funds target rate was cut by an aggregate 75 basis points in the last four months of 2025, favorably impacting funding costs for the nine months ended September 30, 2026, compared with the prior-year period.
64
Net Interest Margin
Net interest margin is impacted by the weighted average rates earned on interest earning assets and paid on interest bearing liabilities. The net interest margin for the third quarter of 2026 was 3.02%, up 13 basis points from 2.89% for the same period of 2025. The net interest margin for the nine months ended September 30, 2026, was 2.96%, an increase of 25 basis points from 2.71% for the same period of 2025. The year-over-year net interest margin expansion was primarily driven by funding cost improvements, with the cost of interest bearing deposits decreasing 38 basis points and 53 basis points for the three and nine months ended September 30, 2026, compared with the same periods in 2025, respectively.
The weighted average yield on loans decreased to 5.78% for the third quarter of 2026, down 14 basis points from 5.92% for the same period of 2025. The weighted average yield on loans decreased by 16 basis points to 5.73% for the nine months ended September 30, 2026, down from 5.89% for the same period of 2025. The year-over-year decrease in average loan yields was driven by the downward repricing of variable rate loans, reflecting higher benchmark interest rates in 2025 versus 2026. At September 30, 2026, variable interest rate loans made up 48% of the loan portfolio. The total accretion of net discount on acquired loans was $4.0 million and $13.1 million for the three and nine months ended September 30, 2026, compared with $5.1 million and $9.5 million for the same periods of 2025, respectively.
The weighted average yield on investment securities for the three and nine months ended September 30, 2026, was 3.72% and 3.68%, compared with 3.77% and 3.38% for the same periods of 2025, respectively. The 30 basis point increase in nine-month average yields was primarily due to higher rates on newly purchased investment securities and the sale of lower-yielding investment securities in the second quarter of 2025 as part of the securities portfolio repositioning. At September 30, 2026, 24% of the investment portfolio consisted of securities with variable coupon rates. The change in yields was also impacted by fluctuations in the overall investment portfolio yield due to changes in pay-down speeds of investment securities, which fluctuate with market interest rate movements.
The weighted average cost of deposits for the three and nine months ended September 30, 2026, was 2.58% and 2.61%, a decrease of 30 basis points and 39 basis points, respectively, from 2.88% and 3.00% for the same periods of 2025. The weighted average cost of interest bearing deposits for the three and nine months ended September 30, 2026, was 3.31% and 3.33%, a decrease of 38 basis points and 53 basis points, respectively, from 3.69% and 3.86% for the same periods of 2025. The year-over-year decrease in the cost of deposits was driven by decreases in underlying market interest rates during the periods, the planned runoff of higher-cost time deposits, and the positive impact of the acquired Territorial deposits, which have a lower cost of funds.
65
The following tables present our consolidated daily average balance of major assets and liabilities, together with interest rates earned and paid on the various sources and uses of funds for the periods indicated:
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Rate* | Average Balance | Interest Income/ Expense | Average Yield/ Rate* | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| INTEREST EARNINGS ASSETS: | |||||||||||||||||||||||||||||||||||
Loans (1) (2) | $ | 14,967,728 | $ | 218,216 | 5.78 | % | $ | 14,522,425 | $ | 216,774 | 5.92 | % | |||||||||||||||||||||||
Investment securities AFS and HTM (3) | 2,305,772 | 21,631 | 3.72 | % | 2,256,228 | 21,467 | 3.77 | % | |||||||||||||||||||||||||||
| Interest earning cash and deposits at other banks | 437,305 | 4,051 | 3.68 | % | 488,992 | 5,273 | 4.28 | % | |||||||||||||||||||||||||||
| FHLB stock and other investments | 51,749 | 1,260 | 9.66 | % | 97,584 | 1,186 | 4.82 | % | |||||||||||||||||||||||||||
| Total interest earning assets | 17,762,554 | 245,158 | 5.48 | % | 17,365,229 | 244,700 | 5.59 | % | |||||||||||||||||||||||||||
| Total noninterest earning assets | 1,229,033 | 1,183,753 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 18,991,587 | $ | 18,548,982 | |||||||||||||||||||||||||||||||
| INTEREST BEARING LIABILITIES: | |||||||||||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||||||||
| Money market, interest bearing demand and savings deposits | $ | 6,363,113 | $ | 47,120 | 2.94 | % | $ | 6,045,464 | $ | 49,458 | 3.25 | % | |||||||||||||||||||||||
| Time deposits | 6,033,130 | 56,373 | 3.71 | % | 6,359,578 | 65,967 | 4.12 | % | |||||||||||||||||||||||||||
| Total interest bearing deposits | 12,396,243 | 103,493 | 3.31 | % | 12,405,042 | 115,425 | 3.69 | % | |||||||||||||||||||||||||||
| FHLB borrowings | 433,276 | 4,018 | 3.68 | % | 27,286 | 273 | 3.97 | % | |||||||||||||||||||||||||||
| Convertible notes, net | 444 | 2 | 2.00 | % | 444 | 2 | 2.00 | % | |||||||||||||||||||||||||||
| Subordinated debentures, net | 107,461 | 2,280 | 8.30 | % | 106,041 | 2,443 | 9.01 | % | |||||||||||||||||||||||||||
| Total interest bearing liabilities | 12,937,424 | 109,793 | 3.37 | % | 12,538,813 | 118,143 | 3.74 | % | |||||||||||||||||||||||||||
| Noninterest bearing liabilities and equity: | |||||||||||||||||||||||||||||||||||
| Noninterest bearing demand deposits | 3,501,796 | 3,506,559 | |||||||||||||||||||||||||||||||||
| Other liabilities | 253,103 | 266,235 | |||||||||||||||||||||||||||||||||
| Stockholders’ equity | 2,299,264 | 2,237,375 | |||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 18,991,587 | $ | 18,548,982 | |||||||||||||||||||||||||||||||
| Net interest income/net interest spread (not annualized) | $ | 135,365 | 2.11 | % | $ | 126,557 | 1.85 | % | |||||||||||||||||||||||||||
| Net interest margin | 3.02 | % | 2.89 | % | |||||||||||||||||||||||||||||||
| Cost of deposits | 2.58 | % | 2.88 | % | |||||||||||||||||||||||||||||||
__________________________________
* Annualized
(1)Interest income on loans includes loan fees.
(2)Average balances of loans consist of loans receivable and loans held for sale.
(3)Interest income and yields are not presented on a tax-equivalent basis.
66
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Rate* | Average Balance | Interest Income/ Expense | Average Yield/ Rate* | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| INTEREST EARNINGS ASSETS: | |||||||||||||||||||||||||||||||||||
Loans (1) (2) | $ | 14,816,982 | $ | 635,513 | 5.73 | % | $ | 14,139,046 | $ | 623,098 | 5.89 | % | |||||||||||||||||||||||
Investment securities AFS and HTM (3) | 2,226,139 | 61,208 | 3.68 | % | 2,178,155 | 55,128 | 3.38 | % | |||||||||||||||||||||||||||
| Interest earning cash and deposits at other banks | 432,086 | 11,637 | 3.60 | % | 607,549 | 19,261 | 4.24 | % | |||||||||||||||||||||||||||
| FHLB stock and other investments | 51,757 | 3,121 | 8.06 | % | 94,272 | 3,471 | 4.92 | % | |||||||||||||||||||||||||||
| Total interest earning assets | 17,526,964 | 711,479 | 5.43 | % | 17,019,022 | 700,958 | 5.51 | % | |||||||||||||||||||||||||||
| Total noninterest earning assets | 1,214,735 | 1,107,036 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 18,741,699 | $ | 18,126,058 | |||||||||||||||||||||||||||||||
| INTEREST BEARING LIABILITIES: | |||||||||||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||||||||
| Money market, interest bearing demand and savings deposits | $ | 6,105,493 | $ | 132,270 | 2.90 | % | $ | 5,927,729 | $ | 151,960 | 3.43 | % | |||||||||||||||||||||||
| Time deposits | 6,210,790 | 174,463 | 3.76 | % | 6,131,577 | 195,902 | 4.27 | % | |||||||||||||||||||||||||||
| Total interest bearing deposits | 12,316,283 | 306,733 | 3.33 | % | 12,059,306 | 347,862 | 3.86 | % | |||||||||||||||||||||||||||
| FHLB borrowings | 359,117 | 9,606 | 3.58 | % | 65,441 | 993 | 2.03 | % | |||||||||||||||||||||||||||
| Convertible notes, net | 444 | 6 | 2.00 | % | 444 | 6 | 2.00 | % | |||||||||||||||||||||||||||
| Subordinated debentures, net | 107,110 | 6,743 | 8.30 | % | 105,709 | 7,268 | 9.07 | % | |||||||||||||||||||||||||||
| Total interest bearing liabilities | 12,782,954 | 323,088 | 3.38 | % | 12,230,900 | 356,129 | 3.89 | % | |||||||||||||||||||||||||||
| Noninterest bearing liabilities and equity: | |||||||||||||||||||||||||||||||||||
| Noninterest bearing demand deposits | 3,404,500 | 3,439,051 | |||||||||||||||||||||||||||||||||
| Other liabilities | 256,940 | 252,466 | |||||||||||||||||||||||||||||||||
| Stockholders’ equity | 2,297,305 | 2,203,641 | |||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 18,741,699 | $ | 18,126,058 | |||||||||||||||||||||||||||||||
| Net interest income/net interest spread (not annualized) | $ | 388,391 | 2.05 | % | $ | 344,829 | 1.62 | % | |||||||||||||||||||||||||||
| Net interest margin | 2.96 | % | 2.71 | % | |||||||||||||||||||||||||||||||
| Cost of deposits | 2.61 | % | 3.00 | % | |||||||||||||||||||||||||||||||
__________________________________
* Annualized
(1)Interest income on loans includes loan fees.
(2)Average balances of loans consist of loans receivable and loans held for sale.
(3)Interest income and yields are not presented on a tax-equivalent basis.
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Changes in net interest income are a function of changes in interest rates and volumes of interest earning assets and interest bearing liabilities. The following table sets forth information regarding the changes in interest income and interest expense for the periods indicated. The total change for each category of interest earning assets and interest bearing liabilities is segmented into the change attributable to variations in volume (changes in volume multiplied by the old rate) and the change attributable to variations in interest rates (changes in rates multiplied by the old volume). Nonaccrual loans are included in average loans used to compute this table.
| Three Months Ended September 30, 2026 over September 30, 2025 | |||||||||||||||||
| Net Increase (Decrease) | Change due to: | ||||||||||||||||
| Rate | Volume | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| INTEREST INCOME: | |||||||||||||||||
| Loans, including fees | $ | 1,442 | $ | (5,117) | $ | 6,559 | |||||||||||
| Investment securities AFS and HTM | 164 | (303) | 467 | ||||||||||||||
| Interest earning cash and deposits at other banks | (1,222) | (698) | (524) | ||||||||||||||
| FHLB stock and other investments | 74 | 809 | (735) | ||||||||||||||
| Total interest income | $ | 458 | $ | (5,309) | $ | 5,767 | |||||||||||
| INTEREST EXPENSE: | |||||||||||||||||
| Money market, interest bearing demand and savings deposits | $ | (2,338) | $ | (5,696) | $ | 3,358 | |||||||||||
| Time deposits | (9,594) | (6,322) | (3,272) | ||||||||||||||
| FHLB borrowings | 3,745 | (21) | 3,766 | ||||||||||||||
| Subordinated debentures, net | (163) | (195) | 32 | ||||||||||||||
| Total interest expense | $ | (8,350) | $ | (12,234) | $ | 3,884 | |||||||||||
| NET INTEREST INCOME | $ | 8,808 | $ | 6,925 | $ | 1,883 | |||||||||||
| Nine Months Ended September 30, 2026 over September 30, 2025 | |||||||||||||||||
| Net Increase (Decrease) | Change due to: | ||||||||||||||||
| Rate | Volume | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| INTEREST INCOME: | |||||||||||||||||
| Loans, including fees | $ | 12,415 | $ | (16,948) | $ | 29,363 | |||||||||||
| Investment securities AFS and HTM | 6,080 | 4,844 | 1,236 | ||||||||||||||
| Interest earning cash and deposits at other banks | (7,624) | (2,612) | (5,012) | ||||||||||||||
| FHLB stock and other investments | (350) | 1,629 | (1,979) | ||||||||||||||
| Total interest income | $ | 10,521 | $ | (13,087) | $ | 23,608 | |||||||||||
| INTEREST EXPENSE: | |||||||||||||||||
| Money market, interest bearing demand and savings deposits | $ | (19,690) | $ | (24,102) | $ | 4,412 | |||||||||||
| Time deposits | (21,439) | (23,940) | 2,501 | ||||||||||||||
| FHLB borrowings | 8,613 | 1,251 | 7,362 | ||||||||||||||
| Subordinated debentures, net | (525) | (618) | 93 | ||||||||||||||
| Total interest expense | $ | (33,041) | $ | (47,409) | $ | 14,368 | |||||||||||
| NET INTEREST INCOME | $ | 43,562 | $ | 34,322 | $ | 9,240 | |||||||||||
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Provision for Credit Losses
The provision for credit losses reflects management’s assessment of the current period cost associated with credit risk inherent in the loan portfolio. The provision for credit losses for each period includes provision for credit loss on loans and provision for unfunded loan commitments. Provision for credit loss on loans is dependent upon many factors, including loan growth, net charge offs, changes in the composition of the loan portfolio, delinquencies, assessments by management, examinations of the loan portfolio, the value of the underlying collateral on problem loans, the general economic conditions in our market areas, and future projections of the economy. Specifically, the provision for credit loss on loans represents the amount charged against current period earnings to achieve an allowance for credit losses that, in management’s judgment, is adequate to absorb probable lifetime losses inherent in the loan portfolio. Provision for unfunded loan commitments is based on the estimated future funding of loan commitments. Periodic fluctuations in the provision for credit losses result from management’s assessment of the adequacy of the allowance for credit losses and allowance for unfunded loan commitments, and actual credit losses may vary in material respects from current estimates. If the allowances are inadequate, we may be required to record additional provisions, which may have a material and adverse effect on business, financial condition, and results of operations.
The provision for credit losses includes both provision for credit loss on loans and provision for unfunded loan commitments. The provision for credit losses for the third quarter of 2026 was $8.6 million, a decrease of $150 thousand from $8.7 million for the same period of the prior year. The provision for credit losses for the nine months ended September 30, 2026, was $24.0 million, a decrease of $622 thousand from $24.6 million for the same period of the prior year. The decrease in provision for credit losses for the three and nine months ended September 30, 2026, compared with the same periods in 2025, was mostly due to changes in provision for unfunded loan commitments.
The provision for unfunded loan commitments was $460 thousand for the three months ended September 30, 2026, and the recapture of provision for unfunded loan commitments was $420 thousand for the nine months ended September 30, 2026, compared with a provision for unfunded loan commitments of $610 thousand and $1.2 million for the same periods of 2025, respectively. The year-over-year decrease in the provision for unfunded loan commitments was primarily due to the change in balances of unfunded loan commitments.
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Noninterest Income
Noninterest income consists primarily of service fees on deposit accounts, international service fees (fees received on trade finance letters of credit), wire transfer and foreign currency fees, other customer-driven income and fees, net gains on sales of SBA loans, net gains (losses) on sales of investment securities AFS, and other noninterest income. Noninterest income for the third quarter of 2026 was $22.1 million, compared with $15.4 million for the same period of 2025, an increase of $6.7 million. Noninterest income for the nine months ended September 30, 2026, was $57.9 million, compared with $8.1 million for the same period of the prior year, an increase of $49.8 million.
Noninterest income by category is summarized in the tables below:
| Three Months Ended September 30, | Increase (Decrease) | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent (%) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Service fees on deposit accounts | $ | 3,439 | $ | 3,235 | $ | 204 | 6.3 | % | |||||||||||||||
| International service, wire transfer and foreign currency fees | 1,861 | 2,122 | (261) | (12.3) | % | ||||||||||||||||||
| Other customer-driven income and fees | 6,471 | 3,814 | 2,657 | 69.7 | % | ||||||||||||||||||
| Net gains on sales of SBA loans | 4,674 | 2,774 | 1,900 | 68.5 | % | ||||||||||||||||||
| Other noninterest income | 5,667 | 3,440 | 2,227 | 64.7 | % | ||||||||||||||||||
| Total noninterest income | $ | 22,112 | $ | 15,385 | $ | 6,727 | 43.7 | % | |||||||||||||||
| Nine Months Ended September 30, | Increase (Decrease) | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent (%) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Service fees on deposit accounts | $ | 10,169 | $ | 9,262 | $ | 907 | 9.8 | % | |||||||||||||||
| International service, wire transfer and foreign currency fees | 6,098 | 5,665 | 433 | 7.6 | % | ||||||||||||||||||
| Other customer-driven income and fees | 17,087 | 12,293 | 4,794 | 39.0 | % | ||||||||||||||||||
| Net gains on sales of SBA loans | 12,387 | 9,903 | 2,484 | 25.1 | % | ||||||||||||||||||
| Net gains (losses) on sales of investment securities AFS | 1,776 | (38,856) | 40,632 | N/A | |||||||||||||||||||
| Other noninterest income | 10,412 | 9,850 | 562 | 5.7 | % | ||||||||||||||||||
| Total noninterest income | $ | 57,929 | $ | 8,117 | $ | 49,812 | 613.7 | % | |||||||||||||||
The year-over-year increase in noninterest income for the three and nine months ended September 30, 2026, was primarily driven by net gains on sales of investment securities AFS compared with prior-year net losses, an increase in other customer-driven income and fees, and an increase in net gains on sales of SBA loans.
Other customer-driven income and fees including service fees on deposit accounts, international service, wire transfer and foreign currency fees, and other customer-driven income and fees, increased for the three and nine months ended September 30, 2026, compared with the same periods in 2025. The increases in other customer-driven income and fees were due to increases in swap fee income, syndication-related fees, and loan servicing fee income for periods in 2026 compared with periods in 2025.
During the three and nine months ended September 30, 2026, we sold $72.2 million and $193.0 million in SBA guaranteed loans, and recorded $4.7 million and $12.4 million, respectively, in net gains on sale of SBA loans. During the three and nine months ended September 30, 2025, we sold $48.1 million and $165.4 million in SBA guaranteed loans, and recorded $2.8 million and $9.9 million, respectively, in net gains on sale of SBA loans.
Noninterest income for the nine months ended September 30, 2025, included $38.9 million of net losses on sales of investment securities AFS related to an investment securities portfolio repositioning in the second quarter of 2025, which we consider a notable item. See the “General” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures.
Other noninterest income increased $2.2 million for the three months ended September 30, 2026, and $562 thousand for the nine months ended September 30, 2026, compared with the same periods in 2025. The increase in the third quarter of 2026 was due to net gains on sale of other loans.
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Noninterest Expense
Noninterest expense for the third quarter of 2026 was $102.8 million, an increase of $5.9 million, or 6.1%, from $96.9 million for the third quarter of 2025. Noninterest expense for the nine months ended September 30, 2026, was $295.7 million, an increase of $5.5 million, or 1.9%, from $290.2 million for the same period of the prior year. Noninterest expense included merger-related costs, which we consider a notable item. Excluding notable items, noninterest expense for the third quarter of 2026 was $100.1 million, compared with $95.9 million in the year-ago period. Excluding notable items, noninterest expense for the nine months ended September 30, 2026, was $290.8 million compared with $269.4 million in the year-ago period. See the “General” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures.
The breakdown of changes in noninterest expense by category is shown in the following tables:
| Three Months Ended September 30, | Increase (Decrease) | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent (%) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Salaries and employee benefits | $ | 58,697 | $ | 54,910 | $ | 3,787 | 6.9 | % | |||||||||||||||
| Occupancy, furniture and equipment | 11,737 | 11,596 | 141 | 1.2 | % | ||||||||||||||||||
| Software and subscriptions | 7,533 | 6,337 | 1,196 | 18.9 | % | ||||||||||||||||||
| Data and item processing | 3,240 | 3,346 | (106) | (3.2) | % | ||||||||||||||||||
| Amortization of investments in affordable housing partnerships | 2,740 | 3,216 | (476) | (14.8) | % | ||||||||||||||||||
| FDIC assessments | 2,622 | 2,942 | (320) | (10.9) | % | ||||||||||||||||||
| Earned interest credit expense | 3,109 | 3,529 | (420) | (11.9) | % | ||||||||||||||||||
| Merger-related costs | 2,650 | 958 | 1,692 | 176.6 | % | ||||||||||||||||||
| Other noninterest expense | 10,466 | 10,027 | 439 | 4.4 | % | ||||||||||||||||||
| Total noninterest expense | $ | 102,794 | $ | 96,861 | $ | 5,933 | 6.1 | % | |||||||||||||||
| Nine Months Ended September 30, | Increase (Decrease) | ||||||||||||||||||||||
| 2026 | 2025 | Amount | Percent (%) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Salaries and employee benefits | $ | 171,821 | $ | 156,204 | $ | 15,617 | 10.0 | % | |||||||||||||||
| Occupancy, furniture and equipment | 33,656 | 31,525 | 2,131 | 6.8 | % | ||||||||||||||||||
| Software and subscriptions | 20,962 | 16,992 | 3,970 | 23.4 | % | ||||||||||||||||||
| Data and item processing | 10,014 | 8,851 | 1,163 | 13.1 | % | ||||||||||||||||||
| Amortization of investments in affordable housing partnerships | 7,768 | 7,607 | 161 | 2.1 | % | ||||||||||||||||||
| FDIC assessments | 8,219 | 7,932 | 287 | 3.6 | % | ||||||||||||||||||
| FDIC special assessment (reversal) | (58) | — | (58) | N/A | |||||||||||||||||||
| Earned interest credit expense | 7,993 | 9,926 | (1,933) | (19.5) | % | ||||||||||||||||||
| Merger-related costs | 4,942 | 20,758 | (15,816) | (76.2) | % | ||||||||||||||||||
| Other noninterest expense | 30,396 | 30,400 | (4) | — | % | ||||||||||||||||||
| Total noninterest expense | $ | 295,713 | $ | 290,195 | $ | 5,518 | 1.9 | % | |||||||||||||||
The year-over-year increase in noninterest expense for the three and nine months ended September 30, 2026, compared with the same periods of 2025, was primarily driven by increases in salaries and employee benefits, and software and subscriptions. For the nine months ended September 30, 2026, these increases were partially offset by a decrease in merger-related costs. We closed the acquisition of Territorial on April 2, 2025, and the nine months ended September 30, 2025, included two quarters of operating expenses related to the Territorial franchise, compared with three quarters for 2026.
Salaries and employee benefits expense increased $3.8 million, or 6.9%, for the third quarter of 2026, compared with the same period of 2025, and increased $15.6 million, or 10.0%, for the nine months ended September 30, 2026, compared with the same period in 2025. The year-over-year increases in salaries and employee benefits were due to an increase in employee salaries and the impact of Territorial in operating expenses. The number of full-time equivalent employees was 1,434 and 1,452 at September 30, 2026 and 2025, respectively.
71
Software and subscriptions expense increased $1.2 million, or 18.9%, for the third quarter of 2026, compared with the same period of 2025, and increased $4.0 million, or 23.4%, for the nine months ended September 30, 2026, compared with the year-ago period. The year-over-year increase in software and subscriptions expense largely reflects the addition of operating expenses that resulted from the acquisition of Territorial and increased investment in our information technology infrastructure.
Earned interest credits are provided to certain commercial depositors to help offset deposit service charges incurred. The earned interest credits are tied to short-term interest rates, and accordingly, earned interest credit expense decreased in 2026 with an aggregate 75 basis point drop in the Federal Funds target rate in the last four months of 2025. Earned interest credit expense decreased $420 thousand, or 11.9%, for the third quarter of 2026, compared with the same period of 2025, and decreased $1.9 million, or 19.5%, for the nine months ended September 30, 2026, compared with the year-ago period.
Merger-related costs increased $1.7 million, or 176.6%, for the third quarter of 2026, compared with the same period of 2025, and decreased $15.8 million, or 76.2%, for the nine months ended September 30, 2026, compared with the same period in 2025. Merger-related costs for the third quarter of 2026 were primarily related to the MANUBANK acquisition. Merger-related costs for the 2025 period were primarily related to the Territorial acquisition, which was completed on April 2, 2025.
Provision for Income Taxes
Income tax provision expense was $10.5 million and $28.5 million for the three and nine months ended September 30, 2026, compared with an income tax provision of $5.6 million and $11.0 million for the same periods of 2025, respectively. The effective income tax rate for the three and nine months ended September 30, 2026, was 22.86% and 22.49%, compared with 15.38% and 28.91% for the same periods of 2025, respectively.
The year-over-year changes in the income tax provision or benefit, as well as the effective tax rates, for the three and nine months ended September 30, 2026, compared with the three and nine months ended September 30, 2025, reflected growth in pretax income and, accordingly, tax credits having a smaller effect on larger pretax income.
We invest in affordable housing partnerships and receive tax credits that reduce our overall effective tax rate. Amortization of investments in affordable housing partnerships is recorded in noninterest expense based on financial statements of individual investment projects under the equity method of accounting. The benefit schedules show tax deductions investors can take each year. We amortize the initial cost of the investments in affordable housing partnerships. This amortization expense is more than offset by tax credits received, which reduce our tax provision expense dollar for dollar, and the tax benefits related to any tax losses generated through the affordable housing project’s expenditures. For the three and nine months ended September 30, 2026, total tax credits related to our investment in affordable housing partnerships were approximately $2.2 million and $6.7 million, respectively. This compares with approximately $2.3 million and $6.9 million in tax credits related to our investment in affordable housing partnerships for the same periods in 2025, respectively.
In addition to affordable housing partnerships, we invest in projects that qualify for renewable energy tax credits. Amortization of investments in renewable energy projects is recorded as a part of income tax expense under the proportional amortization method of accounting. For the three and nine months ended September 30, 2026, the total generated renewable energy tax credits and benefits was $8.1 million and $22.5 million, respectively. This was partially offset by amortization on the investments, which was $7.8 million and $20.2 million for the three and nine months ended September 30, 2026, respectively. For the three and nine months ended September 30, 2025, the total generated renewable energy tax credits and benefits was $21.9 million and $22.6 million, respectively. This was partially offset by amortization on the investments, which was $20.1 million and $20.8 million for the three and nine months ended September 30, 2025, respectively.
72
Financial Condition
At September 30, 2026, total assets were $19.19 billion, an increase of $657.9 million, or 3.5%, from $18.53 billion at December 31, 2025. The increase in total assets was primarily due to increases in loans receivable and investment securities during the nine months ended September 30, 2026.
Investment Securities Portfolio
At September 30, 2026, we had $2.17 billion in investment securities AFS, compared with $1.83 billion at December 31, 2025. The net unrealized loss on the investment securities AFS at September 30, 2026, was $283.6 million, compared with a net unrealized loss on securities AFS of $185.3 million at December 31, 2025. The year-to-date increase in net unrealized loss position reflected movements in market interest rates during the period. At September 30, 2026, we had $230.3 million in investment securities HTM, compared with $239.8 million at December 31, 2025. We have the ability and intent to hold securities classified as HTM to maturity.
During the nine months ended September 30, 2026, $833.4 million in investment securities was purchased, $156.0 million in investment securities was sold, $150.7 million in investment securities was paid down, and $111.0 million in investment securities was called or matured.
We performed an analysis on our investment securities in unrealized loss positions at September 30, 2026 and December 31, 2025, and determined that an allowance for credit losses was not required for investment securities AFS or HTM. The majority of our investment portfolio consisted of securities issued by U.S. Government agencies or U.S. Government sponsored enterprises, which were determined to have a zero loss expectation. At September 30, 2026, we also had four asset-backed securities, five corporate securities, and 30 municipal bonds not issued by U.S. Government agencies or U.S. Government sponsored enterprises that were in unrealized loss positions. Based on our analysis of these investment securities, we concluded a credit loss did not exist due to the strength of the issuers, high bond ratings, and because full payment of principal and interest is expected.
Loans Receivable
At September 30, 2026, loans receivable totaled $15.05 billion, an increase of $349.5 million, or 2.4%, from $14.70 billion at December 31, 2025. The following table summarizes our loan portfolio by amount and percentage of total loans outstanding in each loan segment as of the dates indicated:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Loan portfolio composition | |||||||||||||||||||||||
| CRE loans | $ | 8,462,596 | 56 | % | $ | 8,494,508 | 58 | % | |||||||||||||||
| C&I loans | 3,983,853 | 27 | % | 3,711,875 | 25 | % | |||||||||||||||||
| Residential mortgage loans | 2,569,160 | 17 | % | 2,440,456 | 17 | % | |||||||||||||||||
| Consumer and other loans | 34,865 | — | % | 54,173 | — | % | |||||||||||||||||
| Total loans receivable, net of deferred costs and fees | 15,050,474 | 100 | % | 14,701,012 | 100 | % | |||||||||||||||||
| Allowance for credit losses | (154,325) | (156,661) | |||||||||||||||||||||
| Loans receivable, net of allowance for credit losses | $ | 14,896,149 | $ | 14,544,351 | |||||||||||||||||||
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The following tables present the segmentation by property type and geography of our largest loan segment, CRE loans, at September 30, 2026 and December 31, 2025.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Amount | % | Average Loan Size | Weighted Average LTV(1) | Amount | % | Average Loan Size | Weighted Average LTV(1) | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Multi-tenant retail | $ | 1,541,629 | 18 | % | $ | 2,511 | 42 | % | $ | 1,618,715 | 19 | % | $ | 2,506 | 42 | % | |||||||||||||||||||||||||||||||
| Industrial warehouses | 1,289,124 | 15 | % | 2,743 | 42 | % | 1,258,703 | 15 | % | 2,553 | 39 | % | |||||||||||||||||||||||||||||||||||
| Multifamily | 1,158,229 | 14 | % | 2,423 | 60 | % | 1,191,145 | 14 | % | 2,363 | 59 | % | |||||||||||||||||||||||||||||||||||
| Gas stations and car washes | 1,158,067 | 14 | % | 2,068 | 51 | % | 1,176,491 | 14 | % | 2,021 | 50 | % | |||||||||||||||||||||||||||||||||||
| Hotels/motels | 831,473 | 10 | % | 2,278 | 43 | % | 821,845 | 9 | % | 2,277 | 43 | % | |||||||||||||||||||||||||||||||||||
| Mixed-use facilities | 721,321 | 8 | % | 2,097 | 50 | % | 691,821 | 8 | % | 1,855 | 49 | % | |||||||||||||||||||||||||||||||||||
| Single-tenant retail | 638,472 | 8 | % | 1,475 | 47 | % | 658,440 | 8 | % | 1,460 | 46 | % | |||||||||||||||||||||||||||||||||||
| Office | 320,194 | 4 | % | 1,929 | 50 | % | 331,603 | 4 | % | 1,962 | 54 | % | |||||||||||||||||||||||||||||||||||
| All other | 804,087 | 9 | % | 1,722 | 40 | % | 745,745 | 9 | % | 1,528 | 41 | % | |||||||||||||||||||||||||||||||||||
| Total CRE loans | $ | 8,462,596 | 100 | % | 2,172 | 47 | % | $ | 8,494,508 | 100 | % | 2,089 | 46 | % | |||||||||||||||||||||||||||||||||
| CRE loans owner occupied | $ | 2,832,524 | 33 | % | $ | 2,561 | 45 | % | $ | 2,692,265 | 32 | % | $ | 2,305 | 45 | % | |||||||||||||||||||||||||||||||
| CRE loans non-owner occupied | 5,630,072 | 67 | % | 2,017 | 47 | % | 5,802,243 | 68 | % | 2,001 | 47 | % | |||||||||||||||||||||||||||||||||||
__________________________________
(1) Weighted average loan-to-value (“LTV”): LTVs are based on collateral value which utilizes the most recent available appraisal and property-specific data, including submarket appreciation or depreciation, and changes to vacancy, debt service coverage or rent per square foot.
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| CRE loans by geography | |||||||||||||||||||||||
| Southern California | $ | 4,280,626 | 51 | % | $ | 4,558,082 | 54 | % | |||||||||||||||
| Northern California | 711,031 | 8 | % | 676,501 | 8 | % | |||||||||||||||||
| California | 4,991,657 | 59 | % | 5,234,583 | 62 | % | |||||||||||||||||
| New York | 1,219,658 | 15 | % | 1,110,617 | 13 | % | |||||||||||||||||
| Texas | 691,116 | 8 | % | 647,729 | 8 | % | |||||||||||||||||
| New Jersey | 356,472 | 4 | % | 352,799 | 4 | % | |||||||||||||||||
| Washington | 162,899 | 2 | % | 165,653 | 2 | % | |||||||||||||||||
| Illinois | 106,003 | 1 | % | 115,787 | 1 | % | |||||||||||||||||
| Other states | 934,791 | 11 | % | 867,340 | 10 | % | |||||||||||||||||
| Total | $ | 8,462,596 | 100 | % | $ | 8,494,508 | 100 | % | |||||||||||||||
Lines of credit or loan commitments to business customers are normally made for a period of three years or less. The same credit policies are used in making commitments and conditional obligations as for providing loan facilities to customers. Annual reviews of such commitments are performed prior to renewal.
The following table shows loan commitments and letters of credit outstanding as of the dates indicated:
| September 30, 2026 | December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Unfunded commitments to extend credit | $ | 2,247,846 | $ | 2,200,436 | |||||||
| Standby letters of credit | 200,111 | 154,067 | |||||||||
| Other commercial letters of credit | 48,006 | 18,848 | |||||||||
| Total loan commitments and letters of credit | $ | 2,495,963 | $ | 2,373,351 | |||||||
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Nonperforming Assets
Nonperforming assets, which consist of nonaccrual loans, accruing delinquent loans past due 90 days or more, and OREO, totaled $108.5 million at September 30, 2026, compared with $136.1 million at December 31, 2025, a decrease of 20.3%. The year-to-date decrease in nonperforming loans was largely driven by the payoff of a large CRE nonaccrual loan during the first quarter of 2026 and a reduction in accruing delinquent loans past due 90 days or more during the second quarter of 2026. The ratio of nonperforming assets to total assets decreased to 0.57% at September 30, 2026, compared with 0.73% at December 31, 2025. Nonaccrual loans to loans receivable was 0.72% at September 30, 2026, down from 0.90% at December 31, 2025.
The following table summarizes the composition of our nonperforming assets as of the dates indicated:
| September 30, 2026 | December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
Nonaccrual loans (1) | $ | 107,797 | $ | 131,747 | |||||||
| Accruing delinquent loans past due 90 days or more | — | 3,943 | |||||||||
| Total nonperforming loans | 107,797 | 135,690 | |||||||||
| OREO | 661 | 365 | |||||||||
| Total nonperforming assets | $ | 108,458 | $ | 136,055 | |||||||
| Nonaccrual loans to loans receivable | 0.72 | % | 0.90 | % | |||||||
| Nonperforming loans to loans receivable | 0.72 | % | 0.92 | % | |||||||
| Nonperforming assets to total assets | 0.57 | % | 0.73 | % | |||||||
| Allowance for credit losses to nonaccrual loans | 143.16 | % | 118.91 | % | |||||||
| Allowance for credit losses to nonperforming loans | 143.16 | % | 115.46 | % | |||||||
| Allowance for credit losses to nonperforming assets | 142.29 | % | 115.15 | % | |||||||
__________________________________
(1) Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $17.3 million at September 30, 2026, and $15.6 million at December 31, 2025.
Allowance for Credit Losses
The ACL was $154.3 million at September 30, 2026, compared with $156.7 million at December 31, 2025. The ACL coverage ratio was 1.03% and 1.07% of loans receivable at September 30, 2026 and December 31, 2025, respectively. The following table reflects the allocation of the ACL by loan segment and the ratio of total ACL to total loans as of the dates indicated:
| September 30, 2026 | December 31, 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| CRE loans | $ | 97,539 | $ | 85,144 | |||||||
| C&I loans | 45,454 | 60,172 | |||||||||
| Residential mortgage loans | 10,902 | 10,557 | |||||||||
| Consumer and other loans | 430 | 788 | |||||||||
| Total | $ | 154,325 | $ | 156,661 | |||||||
| Allowance for credit losses to loans receivable | 1.03 | % | 1.07 | % | |||||||
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The decrease in ACL at September 30, 2026, compared with December 31, 2025, was due to a decrease in ACL for C&I loans, which was due to overall improvements in credit metrics for C&I loans as a result of loan sales and charge offs made during the nine months ended September 30, 2026, to resolve problem loans. The ACL for CRE loans increased from December 31, 2025 to September 30, 2026, primarily driven by increased refinance risk and downgrade of CRE loans from December 31, 2025 to September 30, 2026. The third-party economic forecast used in the calculation at September 30, 2026, projected slightly higher GDP growth and growth in the CRE price index, and unemployment rates remained largely unchanged relative to the forecast used at December 31, 2025.
The following table presents the provisions for credit losses on loans, the amount of loans charged off, and the recoveries on loans previously charged off, together with the balance of the ACL at the beginning and end of each period, the balance of average loans and loans receivable outstanding, and related ratios at the dates and for the periods indicated:
| At or for the Three Months Ended September 30, | At or for the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| LOANS: | |||||||||||||||||||||||
| Average loans | $ | 14,967,728 | $ | 14,522,425 | $ | 14,816,982 | $ | 14,139,046 | |||||||||||||||
| Loans receivable (end of period) | $ | 15,050,474 | $ | 14,590,519 | $ | 15,050,474 | $ | 14,590,519 | |||||||||||||||
| ALLOWANCE: | |||||||||||||||||||||||
| Balance, beginning of period | $ | 153,218 | $ | 149,505 | $ | 156,661 | $ | 150,527 | |||||||||||||||
| Less loan charge offs: | |||||||||||||||||||||||
| CRE loans | (3,655) | (439) | (5,002) | (1,411) | |||||||||||||||||||
| C&I loans | (4,248) | (6,114) | (23,169) | (27,417) | |||||||||||||||||||
| Consumer and other loans | — | (60) | — | (1,147) | |||||||||||||||||||
Total loan charge offs | (7,903) | (6,613) | (28,171) | (29,975) | |||||||||||||||||||
| Plus loan recoveries: | |||||||||||||||||||||||
| CRE loans | 315 | 1,372 | 456 | 2,288 | |||||||||||||||||||
| C&I loans | 592 | 136 | 926 | 2,226 | |||||||||||||||||||
| Consumer and other loans | 3 | 9 | 53 | 80 | |||||||||||||||||||
| Total loan recoveries | 910 | 1,517 | 1,435 | 4,594 | |||||||||||||||||||
| Net loan charge offs | (6,993) | (5,096) | (26,736) | (25,381) | |||||||||||||||||||
| Initial allowance for PSL and PCD loans acquired | — | — | — | 3,971 | |||||||||||||||||||
| Provision for credit losses on loans | 8,100 | 8,100 | 24,400 | 23,392 | |||||||||||||||||||
| Balance, end of period | $ | 154,325 | $ | 152,509 | $ | 154,325 | $ | 152,509 | |||||||||||||||
| Net loan charge offs to average loans* | 0.19 | % | 0.14 | % | 0.24 | % | 0.24 | % | |||||||||||||||
| Allowance for credit losses to loans receivable at end of period | 1.03 | % | 1.05 | % | 1.03 | % | 1.05 | % | |||||||||||||||
__________________________________
* Annualized
Net loan charge offs as a percentage of average loans were 0.19% and 0.24%, annualized, for the three and nine months ended September 30, 2026, compared with net loans charge offs of 0.14% and 0.24%, respectively, for the same periods in 2025. Net loan charge offs for the three and nine months ended September 30, 2026, primarily reflected C&I loan net charge offs of $3.7 million and $22.2 million, respectively.
We believe the ACL at September 30, 2026 was adequate to absorb current expected lifetime losses in the loan portfolio. However, there is no assurance that actual losses will not exceed the current estimated credit losses. Among other things, if the effects of tariffs, global trade tensions, inflation, potential economic recession, volatility of oil prices, and unrest and wars in the Middle East and Ukraine are worse than currently expected, or if the effects are prolonged, actual losses could exceed the estimated credit losses, which could have a material and adverse effect on our financial condition and results of operations.
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At September 30, 2026, we had $45.4 million in accrued interest receivables on loans, compared with $43.5 million at December 31, 2025.
Investments in Tax Credit Structures
At September 30, 2026, we had $31.1 million in investments in affordable housing partnerships, compared with $27.9 million at December 31, 2025. The increase in investments in affordable housing partnerships primarily reflected investment in affordable housing partnerships of $10.9 million, partially offset by amortization of $7.8 million during the nine months ended September 30, 2026. Off-balance sheet commitments to fund investments in affordable housing partnerships totaled $34.6 million and $20.5 million at September 30, 2026 and December 31, 2025, respectively. Investments in affordable housing partnerships provide low-income housing tax credits.
At September 30, 2026, we had $15.5 million in investments in renewable energy tax credits on the Consolidated Statements of Financial Condition, compared with $12.4 million at December 31, 2025. These investments were recorded as part of other assets. At September 30, 2026 and December 31, 2025, unfunded commitments were $22.6 million and $12.4 million, respectively, which were recorded in other liabilities. The increase in both investments in renewable energy tax credits and their unfunded commitments reflected new investments, which was partially offset by amortization of the investments, and by cash contributions towards the unfunded commitments. During the nine months ended September 30, 2026, we made new commitments to invest $23.3 million in renewable energy tax credit investments.
Deposits, Borrowings, Convertible Notes, and Subordinated Debentures
Deposits
Deposits are the primary source of funds used in lending and investment activities. At September 30, 2026, total deposits were $16.12 billion, an increase of $513.0 million, or 3.3%, from $15.60 billion at December 31, 2025.
The following table sets forth the balances of our deposits by category for the periods indicated:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Balance | Percent | Balance | Percent | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Demand, noninterest bearing | $ | 3,501,963 | 22 | % | $ | 3,371,759 | 22 | % | |||||||||||||||
| Money market, interest bearing demand and savings | 6,708,100 | 41 | % | 5,856,373 | 37 | % | |||||||||||||||||
| Time deposits | 5,906,106 | 37 | % | 6,375,011 | 41 | % | |||||||||||||||||
| Total deposits | $ | 16,116,169 | 100 | % | $ | 15,603,143 | 100 | % | |||||||||||||||
At September 30, 2026, we had $796.5 million in brokered deposits and $300.0 million in California State Treasurer deposits, compared with $902.0 million in brokered deposits and $300.0 million in California State Treasurer deposits at December 31, 2025. The California State Treasurer time deposits at September 30, 2026, had original maturities of six months, a weighted average interest rate of 3.93%, and were collateralized with a $330.0 million letter of credit issued by the FHLB. At September 30, 2026, time deposits owned by state and local governments in Hawaii were $429.0 million, and were collateralized by investment securities with an aggregate fair value of $204.0 million, and a letter of credit issued by the FHLB for $222.0 million. At September 30, 2026, time deposits of more than $250 thousand totaled $3.13 billion, compared with $3.21 billion at December 31, 2025.
The Bank’s estimated insured deposits at September 30, 2026, were equivalent to approximately 58% of the Bank’s total deposits, compared with approximately 62% at December 31, 2025. The Bank’s estimated uninsured deposits at September 30, 2026, totaled $6.77 billion (42% of deposits), compared with $5.98 billion (38% of deposits) at December 31, 2025. Uninsured deposits are estimated based on the portion of account balances in excess of FDIC insurance limits.
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The following is a schedule of time deposit maturities at September 30, 2026:
| September 30, 2026 | |||||||||||
| Balance | Percent | ||||||||||
| (Dollars in thousands) | |||||||||||
| Three months or less | $ | 1,940,083 | 33 | % | |||||||
| Over three months through six months | 1,440,151 | 24 | % | ||||||||
| Over six months through nine months | 694,606 | 12 | % | ||||||||
| Over nine months through twelve months | 739,491 | 13 | % | ||||||||
| Over twelve months | 1,091,775 | 18 | % | ||||||||
| Total time deposits | $ | 5,906,106 | 100 | % | |||||||
FHLB and FRB Borrowings and Other Borrowings
We utilize FHLB and FRB borrowings as a secondary source of funds in addition to deposits, which we consider our primary source of funds. FHLB advances are typically secured by pledged loans and/or securities with a market value at least equal to the outstanding advances plus our investment in FHLB stock. At September 30, 2026, borrowings totaled $374.0 million, consisting entirely of FHLB borrowings, compared with $284.9 million borrowings at December 31, 2025. At September 30, 2026 and December 31, 2025, the weighted average remaining maturity of total FHLB borrowings was 1.2 years and 1.9 years, respectively. The weighted average coupon rate for FHLB borrowings was 3.65% and 3.32% at September 30, 2026 and December 31, 2025, respectively.
We did not have federal funds purchased at September 30, 2026, and December 31, 2025.
Subordinated Debentures
Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the related indentures for the securities. The trusts used the net proceeds from their respective offerings to purchase a like amount of subordinated debentures issued by us. The subordinated debentures are the sole assets of the trusts. Our obligations under the subordinated debentures and related documents, taken together, constitute a full and unconditional guarantee by us of the obligations of the trusts. The subordinated debentures totaled $111.6 million at September 30, 2026, and $110.5 million at December 31, 2025. The trust preferred securities are mandatorily redeemable upon the maturity of the subordinated debentures, or upon earlier redemption as provided in the indentures. We have the right to redeem the subordinated debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date. See Note 8 - “Convertible Notes and Subordinated Debentures” of the Notes to Consolidated Financial Statements for additional information regarding the subordinated debentures issued.
Off-Balance-Sheet Activities and Contractual Obligations
We routinely engage in activities that involve, to varying degrees, elements of risk that are not reflected, in whole or in part, in the Consolidated Financial Statements. These activities are part of our normal course of business and include traditional off-balance-sheet credit-related financial instruments, interest rate swap contracts, foreign exchange contracts, commitments related to affordable housing partnership investments accounted under the equity method, and long-term debt.
Traditional off-balance-sheet credit-related financial instruments are primarily commitments to extend credit and standby letters of credit. These activities could require us to make cash payments to third parties if certain specified future events occur. The contractual amounts represent the extent of our exposure in these off-balance-sheet activities. These activities are necessary to meet the financing needs of our customers.
We enter into interest rate contracts under which we are required to either receive cash from or pay cash to counterparties depending on changes in interest rates. We utilize interest rate contracts, interest rate floors, and interest rate caps to help manage the risk of changing interest rates. We also sell interest rate contracts to certain adjustable rate commercial loan customers to fix the interest rate on their floating rate loans. When the fixed rate interest rate contract is originated with the customer, an identical offsetting interest rate contract is also entered into by us with a correspondent bank.
We have outstanding risk participation agreements that are part of syndicated loan transactions in which we participated to earn additional fee income. Risk participation agreements are credit derivatives not designated as hedges, in which we share in the risk related to the interest rate swap on participated loans. Credit derivatives are not speculative and are not used to manage interest rate risk in assets or liabilities.
78
We enter into various stand-alone mortgage-banking derivatives in order to hedge the risk associated with the fluctuation of interest rates. The first type of derivative, an interest rate lock commitment, is a commitment to originate loans whereby the interest rate on the loan is determined prior to funding. To mitigate interest rate risk on these rate lock commitments, we also enter into forward commitments, or commitments to deliver residential mortgage loans on a future date, which are also considered derivatives. The net change in the fair value of derivatives represents income recorded from changes in fair value for these mortgage derivative instruments.
We invest in the equity of certain limited partnerships or limited liability companies that typically are associated with affordable housing partnerships and renewable energy projects that generate low-income tax credits, investment tax credits, and/or CRA credits. The unfunded commitments on affordable housing partnerships are off-balance sheet liabilities and are funded based on funding schedules or as called by the limited liability companies.
We do not anticipate that our current off-balance-sheet activities will have a material impact on our future results of operations or our financial condition. Further information regarding our financial instruments with off-balance-sheet risk can be found in Item 3 “Quantitative and Qualitative Disclosures About Market Risk.”
Stockholders’ Equity and Regulatory Capital
Historically, our primary source of capital has been the retention of earnings, net of interest payments on subordinated debentures and convertible notes and dividend payments to stockholders. We seek to maintain capital at a level sufficient to assure our stockholders, customers, and regulators that Hope Bancorp and the Bank are financially sound. For this purpose, we perform ongoing assessments of capital-related risks, components of capital, as well as projected sources and uses of capital in conjunction with projected increases in assets and levels of risks.
Total stockholders’ equity was $2.26 billion and $2.28 billion at September 30, 2026 and December 31, 2025, respectively. During the nine months ended September 30, 2026, stockholders’ equity decreased by $25.8 million due to an increase in accumulated other comprehensive loss of $66.1 million, cash dividends paid of $53.7 million, and repurchases of treasury stock of $8.7 million, partially offset by net income earned of $98.1 million, and an increase in additional paid-in capital consisting of $4.6 million in stock-based compensation. The increase in accumulated other comprehensive loss from December 31, 2025 to September 30, 2026, primarily reflected an increase in unrealized losses on our investment securities AFS due to changes in market interest rates.
In January 2022, our Board of Directors approved a stock repurchase plan that authorized management to repurchase up to $50.0 million of common stock. Stock repurchases through the plan may be executed through various means, including, without limitation, open market transactions, privately negotiated transactions or by other means as determined by management and in accordance with SEC rules and regulations. We had $26.6 million remaining of the $50.0 million stock repurchase plan at September 30, 2026. During the nine months ended September 30, 2026, we repurchased 772,726 shares, equivalent to 0.6% of shares outstanding, at an average price of $11.28 per share, for a total of $8.7 million.
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At September 30, 2026 and December 31, 2025, the most recent regulatory notification generally categorized the Bank as “well capitalized” under the general regulatory framework for Prompt Corrective Action. To be generally categorized as “well-capitalized”, the Bank must maintain the common equity Tier 1 capital, total capital, Tier 1 capital, and Tier 1 leverage capital ratios as set forth in the tables below.
| September 30, 2026 | |||||||||||||||||||||||||||||||||||
| Actual | Ratio Required To Be Well-Capitalized | Excess Over Well-Capitalized | |||||||||||||||||||||||||||||||||
| Amount | Ratio | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Hope Bancorp, Inc. | |||||||||||||||||||||||||||||||||||
Common equity tier 1 capital (to risk-weighted assets) | $ | 1,941,479 | 12.25 | % | N/A | N/A | |||||||||||||||||||||||||||||
Tier 1 capital (to risk-weighted assets) | $ | 2,049,174 | 12.93 | % | N/A | N/A | |||||||||||||||||||||||||||||
Total capital (to risk-weighted assets) | $ | 2,206,215 | 13.92 | % | N/A | N/A | |||||||||||||||||||||||||||||
Leverage capital (to average assets) | $ | 2,049,174 | 11.01 | % | N/A | N/A | |||||||||||||||||||||||||||||
| Bank of Hope | |||||||||||||||||||||||||||||||||||
Common equity tier 1 capital (to risk-weighted assets) | $ | 2,001,709 | 12.63 | % | 6.50 | % | 6.13 | % | |||||||||||||||||||||||||||
Tier 1 capital (to risk-weighted assets) | $ | 2,001,709 | 12.63 | % | 8.00 | % | 4.63 | % | |||||||||||||||||||||||||||
Total capital (to risk-weighted assets) | $ | 2,158,750 | 13.62 | % | 10.00 | % | 3.62 | % | |||||||||||||||||||||||||||
Leverage capital (to average assets) | $ | 2,001,709 | 10.76 | % | 5.00 | % | 5.76 | % | |||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Actual | Ratio Required To Be Well-Capitalized | Excess Over Well-Capitalized | |||||||||||||||||||||||||||||||||
| Amount | Ratio | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Hope Bancorp, Inc. | |||||||||||||||||||||||||||||||||||
Common equity tier 1 capital (to risk-weighted assets) | $ | 1,904,868 | 12.27 | % | N/A | N/A | |||||||||||||||||||||||||||||
Tier 1 capital (to risk-weighted assets) | $ | 2,011,484 | 12.96 | % | N/A | N/A | |||||||||||||||||||||||||||||
Total capital (to risk-weighted assets) | $ | 2,171,256 | 13.99 | % | N/A | N/A | |||||||||||||||||||||||||||||
Leverage capital (to average assets) | $ | 2,011,484 | 11.05 | % | N/A | N/A | |||||||||||||||||||||||||||||
| Bank of Hope | |||||||||||||||||||||||||||||||||||
Common equity tier 1 capital (to risk-weighted assets) | $ | 1,989,051 | 12.82 | % | 6.50 | % | 6.32 | % | |||||||||||||||||||||||||||
Tier 1 capital (to risk-weighted assets) | $ | 1,989,051 | 12.82 | % | 8.00 | % | 4.82 | % | |||||||||||||||||||||||||||
Total capital (to risk-weighted assets) | $ | 2,148,823 | 13.85 | % | 10.00 | % | 3.85 | % | |||||||||||||||||||||||||||
Leverage capital (to average assets) | $ | 1,989,051 | 10.93 | % | 5.00 | % | 5.93 | % | |||||||||||||||||||||||||||
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Liquidity Management
Liquidity risk is the risk of reduction in our earnings or capital that would result if we were not able to meet our obligations when they come due without incurring unacceptable losses. Liquidity risk includes the risk of unplanned decreases or changes in funding sources and changes in market conditions that affect our ability to liquidate assets quickly and with minimum loss of value. Factors considered in liquidity risk management are the stability of the deposit base; the marketability, maturity, and pledging of our investments; the availability of alternative sources of funds; and our demand for credit. The objective of our liquidity management is to have funds available to meet cash flow requirements arising from fluctuations in deposit levels and the demands of daily operations, which include funding of securities purchases, providing for customers’ credit needs, and ongoing repayment of borrowings.
Our primary sources of liquidity are derived from financing activities, which include deposits, federal funds facilities, and borrowings from the FHLB and the FRB’s Discount Window. These funding sources are augmented by payments of principal and interest on loans and securities, proceeds from sale of loans, and the liquidation or sale of securities from our available for sale portfolio or sale of equity investments. Primary uses of funds include withdrawal of and interest payments on deposits, originations of loans, purchases of investment securities, and payment of operating expenses.
At September 30, 2026, our total available borrowing capacity, cash and cash equivalents, and unpledged securities totaled $8.47 billion, compared with $8.39 billion at December 31, 2025. At September 30, 2026, our borrowing capacity comprised $4.18 billion from the FHLB ($3.80 billion unused and available to borrow), $1.77 billion from the FRB (entirely unused and available to borrow), and $241.2 million of Fed funds facilities with other banks (entirely unused). At September 30, 2026, our total remaining available borrowing capacity was $5.81 billion. In addition to these lines, cash and cash equivalents totaled $491.9 million, and unpledged investment securities AFS amounted to $2.17 billion.
At times we maintain a portion of our liquid assets in interest earning cash deposits with other banks, overnight federal funds sold to other banks, and in investment securities AFS that are not pledged. Our liquid assets consist of cash and cash equivalents, interest earning cash deposits with other banks, liquid investment securities AFS, and loan repayments within 30 days. Liquid assets totaled $2.45 billion and $2.19 billion at September 30, 2026 and December 31, 2025, respectively. Our liquidity ratio, or total liquid assets as a percentage of total assets, at September 30, 2026, totaled 12.8%, compared with 11.8% at December 31, 2025. Cash and cash equivalents totaled $491.9 million at September 30, 2026, compared with $560.1 million at December 31, 2025. We believe our liquidity sources are sufficient to meet all reasonably foreseeable short-term and intermediate-term needs.
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Item 3.Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk that movements in market risk factors, including interest rates, foreign exchange rates, equity prices, commodity prices, credit spreads, and volatilities, will negatively impact the Company’s income and the value of its portfolios. The Company is exposed to market risk as a result of its core business of extending loans and acquiring deposits, and secondarily through its asset and liability management activities. The Company’s asset and liability management activities are intended to optimize earnings while maintaining safety and soundness through proper risk management.
Interest Rate Risk
Interest rate risk is the most significant market risk impacting the Company. Interest rate risk, which is inherent in the banking industry, is measured by potential changes in net interest income (“NII”) and the economic value of equity (“EVE”). The primary forms of interest rate risk consist of repricing risk, basis risk, yield curve risk, and options risk.
•Repricing Risk: The risk that interest rate sensitive assets and liabilities do not reprice simultaneously and/or in equal volumes.
•Basis Risk: The risk that different indices with the same repricing frequency do not move in unison due to asymmetrical changes in interest rate indices.
•Yield Curve Risk: The risk from non-parallel changes in the slope of the yield curve.
•Options Risk: The risk that cash flows change due to embedded options (e.g., prepayment / extension, call options, deposit runoff, time deposit early withdrawal).
The Company’s interest rate risk management is governed by policies reviewed and approved annually by the Board of Directors. The Board delegates responsibility for interest rate risk management to the Board Risk Committee and to the Asset and Liability Management Committee (“ALM”), which is composed of the Bank’s senior executives and other designated officers.
The fundamental objective of the ALM is to manage exposure to interest rate fluctuations while maintaining adequate levels of liquidity and capital. ALM meets regularly to monitor the Company’s interest rate risk, balance sheet activities, on- and off-balance sheet composition, earnings, capital, and market trends. Overall, the Company aims to reduce the sensitivity of earnings to interest rate fluctuations. Certain assets and liabilities, however, may react in different degrees to changes in market interest rates. Furthermore, interest rates on certain types of assets and liabilities may fluctuate prior to changes in market interest rates, while interest rates on other types of assets and liabilities may lag behind changes in market interest rates. The expected maturities of various assets or liabilities may shorten or lengthen as interest rates change. Management considers the anticipated effects of these factors when implementing interest rate risk management objectives.
The Company’s interest rate risk sensitivity simulations apply various behavior models and assumptions to account for customer tendencies stemming from interest rate risk changes. The key behavior models and assumptions incorporated in the EVE and NII simulations impact deposit pricing, deposit runoff, time deposit early withdrawal, and prepayments on loans and investments. The deposit pricing model is one of the most significant of these assumptions and determines to what degree our deposit rates change when benchmark interest rates change. The deposit runoff model reflects the increased attrition rate observed in noninterest bearing deposits in higher rate scenarios as customers migrate to interest bearing deposits and/or alternative investments. The time deposit early withdrawal model incorporates the customer’s ability to terminate time deposits early and reinvest at higher rates. The prepayment models applied to loans and investments reflect the incentive borrowers have to refinance when market rates are low while conversely slowing down their payments in higher rate environments. Each of the models and assumptions is tailored to the specific interest rate environment and validated on a regular basis. However, assumptions and models are inherently uncertain and actual results may differ from those derived in simulation analysis for multiple reasons, which may include actual balance sheet composition differences, timing, magnitude and frequency of interest rate changes, deviations from projected customer behavioral assumptions, and changes in market conditions or management strategies.
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Net Interest Income Sensitivity Simulation
Net interest income sensitivity simulations are used by management to measure the risk and impact to earnings over various time horizons, using a variety of interest rate scenarios. The following table presents the Company’s net interest income sensitivity profile over a gradual 12-month “ramp” scenario applied to the base implied forward curve. The “ramp” scenario is a parallel shift applied gradually over the 12 months of the forecast on a pro rata basis. The scenarios are applied to an adjusted balance sheet that incorporates assumptions related to asset prepayments, time deposit withdrawal speeds, noninterest bearing deposit migration, and estimated deposit betas; these assumptions differ in rising or falling interest rate scenarios and are anchored in historical performance. Deposit betas represent the change in the rates paid on deposits against a change in benchmark interest indices. The net interest income simulation model does not represent a forecast of the Company’s net interest income but is a tool utilized to assess the impact of changing market interest rates across a range of market interest rate environments.
The following table presents the Company’s net interest income sensitivity related to a 12-month parallel ramp of 100, 200 and 300 bps applied in year 1 on implied forward market interest rates as of September 30, 2026 and 2025, on a balance sheet assuming static balances on assets and liabilities with deposit balances modeled to migrate from noninterest bearing deposits to interest bearing deposits as rates move.
| Net Interest Income Sensitivity (Ramp Scenario) | Interest Rate Change (basis points) | |||||||||||||||||||||||||||||||||||||
| (300) | (200) | (100) | + 100 | + 200 | + 300 | |||||||||||||||||||||||||||||||||
| September 30, 2026 | (8.5)% | (6.2)% | (3.5)% | 3.5% | 7.0% | 10.5% | ||||||||||||||||||||||||||||||||
| September 30, 2025 | (6.1)% | (4.2)% | (2.1)% | 2.3% | 5.0% | 6.7% | ||||||||||||||||||||||||||||||||
The year-over-year changes in the modeled net interest income sensitivity profile are primarily driven by changes in the mix of CRE loans (more variable rate loans), partially offset by the termination of the receive-float interest rate swap portfolio during the second quarter of 2026.
Economic Value of Equity Sensitivity
EVE is used by management to measure the impact of interest rate changes on the net present value of assets and liabilities, including off-balance sheet instruments. EVE estimates the risk exposure for a longer time horizon, or more specifically, the expected life of the current balance sheet, complementing net interest income sensitivity simulations. EVE does not incorporate any assumptions related to new originations or renewal activities used in the net interest income sensitivity analysis. The following table presents the Company’s EVE profile applied to immediate parallel shock scenarios.
| Economic Value of Equity Sensitivity | Interest Rate Change (basis points) | |||||||||||||||||||||||||||||||||||||
| (300) | (200) | (100) | + 100 | + 200 | + 300 | |||||||||||||||||||||||||||||||||
| September 30, 2026 | 7.1% | 6.4% | 3.7% | (4.1)% | (8.6)% | (13.5)% | ||||||||||||||||||||||||||||||||
| September 30, 2025 | 5.4% | 5.9% | 3.9% | (4.7)% | (10.0)% | (15.7)% | ||||||||||||||||||||||||||||||||
The year-over-year changes in the EVE profile were primarily attributable to a decline in the duration of the CRE loan portfolio, driven by higher volumes of variable-rate loan originations. This impact was partially offset by a shorter modeled duration of noninterest bearing deposit balances associated with the elevated interest rate environment, including higher U.S. Treasury yields and federal funds target rates, as well as the termination of the receive-float interest rate swap portfolio during the second quarter of 2026.
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Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chairman, President, and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
We conducted an evaluation under the supervision and with the participation of our management, including our Chairman, President, and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chairman, President, and Chief Executive Officer and our Chief Financial Officer determined that our disclosure controls and procedures were effective at September 30, 2026.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
Item 1.Legal Proceedings
In the normal course of business, the Company is involved in various legal claims. Management has reviewed all legal claims against the Company with counsel and has taken into consideration the views of such counsel as to the potential outcome of the claims in determining our accrued loss contingency. Accrued loss contingencies for all legal claims totaled approximately $774 thousand at September 30, 2026. It is reasonably possible that the Company may incur losses in excess of this accrued loss contingency. However, at this time, the Company is unable to estimate the range of additional losses that are reasonably possible because of a number of factors, including the fact that certain of these litigation matters are still in their early stages. 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.
Item 1A.Risk Factors
Management is not aware of any material changes to the risk factors discussed in Part I, Item 1A, of the Annual Report on Form 10-K for the year ended December 31, 2025. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A, of the Annual Report on Form 10-K for the year ended December 31, 2025, which could materially and adversely affect the Company’s business, financial condition, results of operations, and stock price. The risks described in the Annual Report on Form 10-K and this Quarterly Report on Form 10-Q are not the only risks facing the Company. Additional risks and uncertainties not presently known to management, or that management presently believes not to be material, may also result in material and adverse effects on the Company’s business, financial condition, results of operations, and stock price.
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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
The Company did not have any unregistered sales of equity securities during the three months ended September 30, 2026.
In January 2022, the Company’s Board of Directors approved a stock repurchase program that authorized the Company to repurchase up to $50.0 million of its common stock. The stock repurchase authorization does not have an expiration date and may be modified, amended, suspended, or discontinued at the Company’s discretion at any time without notice. The Board of Directors reaffirmed this repurchase program in December 2025.
The following table summarizes stock repurchase activities during the three months ended September 30, 2026:
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | ||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||
| July 1, 2026 to July 31, 2026 | — | $ | — | — | $ | 26,616 | ||||||||||||||||||||
| August 1, 2026 to August 31, 2026 | — | — | — | 26,616 | ||||||||||||||||||||||
| September 1, 2026 to September 30, 2026 | — | — | — | 26,616 | ||||||||||||||||||||||
| Total | — | — | — | |||||||||||||||||||||||
Item 3.Defaults Upon Senior Securities
None.
Item 4.Mine Safety Disclosures
Not Applicable.
Item 5.Other Information
During the three months ended September 30, 2026, no director or officer of the Company adopted terminated
Item 6.Exhibits
See “Index to Exhibits.”
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INDEX TO EXHIBITS
| Exhibit No. | Description | |||||||
| 3.1 | Second Amended and Restated Certificate of Incorporation of Hope Bancorp, Inc. (incorporated herein by reference to the Current Report on Form 8-K, Exhibit 3.1, filed with the SEC on May 29, 2024) | |||||||
| 3.2 | Amended and Restated Bylaws of Hope Bancorp, Inc. (incorporated herein by reference to the Current Report on Form 8-K, Exhibit 3.1, filed with the SEC on January 16, 2026) | |||||||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |||||||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |||||||
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |||||||
| 101.INS | The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document* | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document* | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document* | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document* | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document* | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)* | |||||||
__________________________________
| * | Filed herewith | ||||
| ** | Furnished herewith | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HOPE BANCORP, INC. | |||||||||||
| Date: | November 6, 2026 | /s/ Kevin S. Kim | |||||||||
| Kevin S. Kim | |||||||||||
| Chairman, President, and Chief Executive Officer | |||||||||||
| Date: | November 6, 2026 | /s/ Julianna Balicka | |||||||||
| Julianna Balicka | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
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