HOPE BANCORP INC

Previous wording

Hope Bancorp, Inc. is the holding company of Bank of Hope, a multi-regional bank in the United States with $17.35 billion in total assets at September 30, 2024, and headquartered in Los Angeles, California. From its roots as the largest Korean American bank in the United States, Bank of Hope has grown to serve a multi-ethnic population of customers across the nation through its network of branches and loan production offices. The Bank also operates a representative office in Seoul, Korea to serve its growing base of multi-national commercial and consumer customers. The Bank provides a full suite of consumer and commercial loans, deposit accounts and fee-based products and services, including CRE, C&I, SBA, residential mortgage and other consumer lending, treasury management services and trade finance, foreign currency exchange transactions, and interest rate contracts.

Current wording

Hope Bancorp, Inc. is the holding company of Bank of Hope, the only regional Korean American bank in the United States with $17.07 billion in total assets at March 31, 2025. With the addition of Territorial Savings, a division of Bank of Hope, effective April 2, 2025, 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 46 full-service branches in California, New York, New Jersey, Washington, Texas, Illinois, New York, New Jersey, Alabama and Georgia under the Bank of Hope banner, and 29 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.

Previous wording

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, 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.

Current wording

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.

Previous wording

Net income for the third quarter of 2024 was $24.2 million, or $0.20 per diluted common share, compared with $30.0 million, or $0.25 per diluted common share, for the same period of 2023, which was a decrease of $5.9 million, or 19.6%. The year-over-year decrease in net income was primarily due to a decrease in net interest income, offset partially by decreases in the provision for credit losses and noninterest expense, and an increase in noninterest income.

Current wording

Net income for the first quarter of 2025 was $21.1 million, or $0.17 per diluted common share, compared with $25.9 million, or $0.21 per diluted common share, for the same period of 2024, which was a decrease of $4.8 million, or 18.4%. The year-over-year decrease in net income was primarily due to a decrease in net interest income and an increase in provision for credit losses, offset partially by an increase in noninterest income, and a decrease in noninterest expense.

Previous wording

A principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans and investments, 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.

Current wording

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.

Previous wording

Net interest income before provision for credit losses was $104.8 million for the third quarter of 2024, compared with $135.4 million for the same period of 2023, a decrease of $30.6 million, or 22.6%. The year-over-year decrease in net interest income was driven by a decrease in the average balances of loans and interest earning cash and deposits at other banks and an increase in total cost of deposits, partially offset by a decrease in the average balance of interest bearing liabilities. The decrease in the average balance of loans reflected elevated payoffs in a high interest rate environment. The decrease in the average balance of interest earning cash and deposits in other banks was attributable to the payoff of FRB BTFP borrowings, which matured in the first half of 2024, with interest earning cash. The year-over-year increase in deposit costs was due to an increase in costs of all of our interest bearing deposit types.

Current wording

Net interest income before provision for credit losses was $100.8 million for the first quarter of 2025, compared with $115.0 million for the same period of 2024, a decrease of $14.2 million, or 12.4%. The year-over-year decrease in net interest income was primarily driven by a decrease in the average balance of interest earning cash and deposits at other banks and lower yields on loans, partially offset by decreases in interest on deposits and interest on FHLB and FRB borrowings. The decrease in the average balance of interest earning cash and deposits in other banks was attributable to the payoff of FRB Bank Term Funding Program (“BTFP”) borrowings, which matured in the first half of 2024, with interest earning cash. The Federal Funds target rate was cut by an aggregate 100 basis points during the second half of 2024, impacting average yields and rates during the 2025 first quarter, compared with the same period of 2024.

Previous wording

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 2024 was 2.55%, a decrease of 28 basis points from 2.83% for the same period of 2023. The net interest margin for the nine months ended September 30, 2024, was 2.57%, a decrease of 27 basis points from 2.84% for the same period of 2023. The decrease in net interest margin was primarily due to a higher cost of funds, and a decrease in average loans, partially offset by the net impact of paying off FRB BTFP borrowings, which matured in the first half of 2024, and a decrease in average interest bearing deposits.

Current wording

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 first quarter of 2025 decreased to 2.54%, from 2.55% for the same period of 2024. The decrease in net interest margin was primarily due to lower weighted average yield on loans, as well as decreases in the average balances of interest earning cash and deposits at other banks and average loans, partially offset by a lower cost of funds and the net impact of paying off FRB BTFP borrowings, which matured in the first half of 2024.

Previous wording

The weighted average yield on loans decreased to 6.16% for the third quarter of 2024, down 11 basis points from 6.27% for the same period of 2023. The year-over-year decrease in average yields was driven by a decline in yields on new loan originations and the downward repricing of variable rate loans, reflecting the decrease in benchmark interest rates in the third quarter of 2024. The weighted average yield on loans increased by 20 basis points to 6.20% for the nine months ended September 30, 2024, up from 6.00% for the same period of 2023. The year-over-year increase in average yields was driven by the upward repricing of variable rate loans, reflecting higher benchmark interest rates in 2024 versus 2023. At September 30, 2024, variable interest rate loans made up 45% of the loan portfolio.

Current wording

The weighted average yield on loans decreased to 5.88% for the first quarter of 2025, down 37 basis points from 6.25% for the same period of 2024. The year-over-year decrease in loan yields was driven by spread compression on new loan originations and the downward repricing of variable rate loans, reflecting year-over-year decreases in benchmark interest rates. At March 31, 2025, variable interest rate loans made up 45% of the loan portfolio.

Previous wording

The weighted average yield on investment securities for the three and nine months ended September 30, 2024, was 3.05% and 3.10%, respectively, compared with 2.97% and 2.83% for the same periods of 2023, respectively. The increase in average yields was primarily due to higher rates on new purchases of investment securities, and an upward repricing of variable rate investments. At September 30, 2024, 13% 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 the change in pay-down speeds of investment securities.

Current wording

The weighted average yield on investment securities for the three months ended March 31, 2025 and 2024, was 3.09% and 3.13%, respectively. The decrease in average yields was primarily due to lower rates on new purchases of investment securities, and a downward repricing of variable rate investments. At March 31, 2025, 15% 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 the change in pay-down speeds of investment securities.

Previous wording

The weighted average yield on interest earning cash and deposits at other banks for the third quarter of 2024 was 5.23%, a decrease of 7 basis points from 5.30% for the same period of 2023. The weighted average yield on interest earning cash and deposits at other banks for the nine months ended September 30, 2024, was 5.32%, an increase of 23 basis points from 5.09% for the same period of 2023. The yield on interest earning cash and deposits at other banks is tied to the Federal Funds rate.

Current wording

The weighted average yield on interest earning cash and deposits at other banks for the first quarter of 2025 was 4.25%, a decrease of 116 basis points from 5.41% for the same period of 2024. The yield on interest earning cash and deposits at other banks is tied to the Federal Funds rate.

Previous wording

The weighted average cost of FHLB and FRB borrowings for the third quarter of 2024 was 1.09%, a decrease of 326 basis points from 4.35% for the same period of 2023. The weighted average cost of FHLB and FRB borrowings for the nine months ended September 30, 2024, was 3.90%, a decrease of 40 basis points from 4.30% for the same period of 2023. The year-over-year decrease in the cost of FHLB and FRB borrowings primarily reflected the payoff of $1.70 billion in FRB BTFP borrowings, which had a weighted average rate of 4.47%, and the impact of our cash flow hedges which reduced interest expense on borrowing starting in the second quarter of 2024.

Current wording

The weighted average cost of FHLB and FRB borrowings for the first quarter of 2025 was 1.19%, a decrease of 308 basis points from 4.27% for the same period of 2024. The year-over-year decrease in the cost of FHLB and FRB borrowings primarily reflected the payoff of $1.70 billion in FRB BTFP borrowings in the first half of 2024, which had a weighted average rate of 4.47%, and the impact of cash flow hedges, which reduced interest expense on borrowings starting in the second quarter of 2024.

Previous wording

The weighted average cost of subordinated debentures for the third quarter of 2024 was 10.28%, a decrease of 8 basis points from 10.36% for the same period of 2023. The weighted average cost of subordinated debentures for the nine months ended September 30, 2024, was 10.35%, an increase of 48 basis points from 9.87% for the same period of 2023. The subordinated debentures have variable interest rates that are tied to the three-month Chicago Mercantile Exchange term Secured Financing Overnight Rate (“SOFR”) rate, and the three-month LIBOR rate prior to LIBOR cessation at June 2023.

Current wording

The weighted average cost of subordinated debentures for the first quarter of 2025 was 9.13%, a decrease of 128 basis points from 10.41% for the same period of 2024. The subordinated debentures have variable interest rates that are tied to the three-month Chicago Mercantile Exchange term Secured Financing Overnight Rate (“SOFR”) rate.

Previous wording

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 2024 was $3.3 million, a decrease of $13.6 million from $16.9 million for the same period of the prior year. Provision for credit losses for the nine months ended September 30, 2024 was $7.3 million, a decrease of $21.9 million from $29.2 million in provision for credit losses for the same period of the prior year.

Current wording

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 first quarter of 2025 was $4.8 million, an increase of $2.2 million from $2.6 million for the same period of the prior year.

Previous wording

The provision for unfunded loan commitments was $280 thousand and a recapture of provision for unfunded loan commitments of $1.0 million for the three and nine months ended September 30, 2024, respectively, compared with a provision for unfunded loan commitments of $62 thousand and $1.8 million for the same periods of 2023, respectively. The year-over-year decrease to the year-to-date provision for unfunded loan commitments was due to lower balances of unfunded loan and trade finance commitments.

Current wording

The recapture of provision for unfunded loan commitments was $400 thousand and $1.0 million for the three months ended March 31, 2025 and 2024, respectively. The year-over-year decrease in the recapture of provision for unfunded loan commitments was due to the change in balances of unfunded loan commitments.

Previous wording

The allowance for credit losses coverage ratio was 1.13% of loans receivable at September 30, 2024, compared with 1.11% at September 30, 2023.

Current wording

The allowance for credit losses coverage ratio was 1.11% of loans receivable at March 31, 2025, compared with 1.16% at March 31, 2024.

Previous wording

Noninterest income is primarily comprised of service fees on deposit accounts, international service fees (fees received on trade finance letters of credit), wire transfer and foreign currency fees, swap fee income, net gains on sales of loans, and other income and fees. Noninterest income for the third quarter of 2024 was $11.8 million, compared with $8.3 million for the same period of 2023, an increase of $3.5 million, or 42.6%. Noninterest income for the nine months ended September 30, 2024, was $31.2 million, compared with $36.3 million for the same period of the prior year, a decrease of $5.1 million, or 14.1%.

Current wording

Noninterest income is primarily comprised of service fees on deposit accounts, international service fees (fees received on trade finance letters of credit), wire transfer and foreign currency fees, swap fee income, net gains on sales of SBA loans, and other income and fees. Noninterest income for the first quarter of 2025 was $15.7 million, compared with $8.3 million for the same period of 2024, an increase of $7.4 million, or 89.3%.

Previous wording

The year-over-year increase in third quarter noninterest income was primarily driven by gains on sales of SBA loans, of which there were none in the same period last year. For the nine months ended September 30, 2024, the decrease was mainly due to lower other income and fees, due to a $5.8 million cash distribution gain from investment in an affordable housing partnership in the second quarter of 2023 that did not recur in 2024.

Current wording

The year-over-year increase in first quarter noninterest income was primarily driven by gains on sales of SBA loans, of which there were none in the same period of last year, and increases in swap fees and other income and fees.

Previous wording

The Bank resumed the sales of SBA guaranteed loans in the second quarter of 2024 due to improved premiums in the secondary markets, after retaining loan production on balance sheet starting in the second half of 2023. During the three months ended September 30, 2024, we sold $41.4 million in SBA guaranteed loans and recorded $2.7 million in net gains on sale of SBA loans. During the nine months ended September 30, 2024 we sold $71.2 million in SBA loans and recorded $4.7 million in net gains on sale of SBA loans. During the nine months ended September 30, 2023 we sold $79.1 million in SBA loans and recorded $4.1 million in net gains on sale of SBA loans; this production was sold in the first half of 2023.

Current wording

The Bank resumed the sales of SBA guaranteed loans in the second quarter of 2024 due to improved premiums in the secondary markets, after retaining loan production on balance sheet starting in the second half of 2023. During the three months ended March 31, 2025, we sold $49.9 million in SBA guaranteed loans and recorded $3.1 million in net gains on sale of SBA loans.

Previous wording

Swap fee income represents fees earned from back to back swap transactions for our loan customers. The number of swap transactions and their total notional amounts decreased in 2024 which has resulted in a decrease in swap fee income for the nine months ended September 30, 2024, compared with the same periods in 2023.

Current wording

Swap fee income represents fees earned from back to back swap transactions for our loan customers. The number of swap transactions and their total notional amounts increased in 2025, which resulted in an increase in swap fee income for the three months ended March 31, 2025, compared with the same period in 2024.

Previous wording

The year-over-year decrease in noninterest expense for the three and nine months ended September 30, 2024 compared with the same periods in 2023, was primarily driven by lower salaries and employee benefits expense and lower FDIC assessment expense, excluding FDIC special assessment expense, partially offset by merger-related costs, restructuring-related costs and higher earned interest credits expense.

Current wording

The year-over-year decrease in noninterest expense for the three months ended March 31, 2025 compared with the same period in 2024, was primarily driven by lower earned interest credits expense and FDIC special assessment expense, partially offset by increases in merger-related costs, other noninterest expense, and salaries and employee benefits.

Previous wording

FDIC assessments expense decreased by $1.5 million, or 40.3%, for the third quarter of 2024, compared with the same period of 2023, and decreased $2.0 million or 20.0% for the nine months ended September 30, 2024, compared with the same period in 2023. The FDIC assessment expense utilizes an initial base assessment rate, which is calculated as a percentage of the Bank’s average consolidated total assets less average tangible equity. In addition to the initial assessment base, adjustments are added based upon the Bank’s regulatory rating and on other financial measures. In 2023, the FDIC annual base assessment rate increased by two basis points industry-wide. In addition, in November 2023, the FDIC approved a special assessment at the rate of approximately 13.4 basis points per year, paid in eight quarterly installments beginning in the first quarter of 2024. This rate was applied to an assessment base of the insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits. In February 2024, the FDIC informed banks of an increase from the original estimate related to this special assessment. This additional amount was paid in two additional quarterly installments, at a rate of approximately 9.4 basis points per year on the same adjusted assessment base. The decrease in FDIC assessments expense for the three and nine months ended September 30, 2024, compared with the same periods in 2023, was due primarily to lower average consolidated total assets and a lower assessment base.

Current wording

In November 2023, the FDIC approved a special assessment at the rate of approximately 13.4 basis points per year, paid in eight quarterly installments beginning in the first quarter of 2024. This rate was applied to an assessment base of the insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits. In February 2024, the FDIC informed banks of an increase from the original estimate related to this special assessment. This additional amount was paid in two additional quarterly installments, at a rate of approximately 9.4 basis points per year on the same adjusted assessment base. $1.0 million was accrued for the special assessment in the first quarter of 2024, compared with zero for the same period of 2025.

Previous wording

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 increased with the increases in the Federal Funds rate since mid-2022. Earned interest credit expense increased to $6.9 million for the third quarter of 2024, compared with $6.4 million for the same period in 2023, and increased to $18.8 million for the nine months ended September 30, 2024, compared with $15.9 million in the year-ago period.

Current wording

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 with the decreases in the Federal Funds rate since September 2024. Earned interest credit expense decreased to $3.1 million for the first quarter of 2025, compared with $5.8 million for the same period in 2024.

Previous wording

Merger-related costs of $1.2 million and $3.9 million for the three and nine months ended September 30, 2024, respectively, primarily relate to professional fees for the definitive merger agreement with Territorial Bancorp, Inc. announced in April 2024. See Note 1—“Hope Bancorp, Inc.” to the Notes to Consolidated Financial Statements for additional information regarding the merger.

Current wording

Merger-related costs of $2.4 million for the three months ended March 31, 2025, mainly related to employee retention bonuses and professional fees for the acquisition of Territorial Bancorp, Inc., which was completed on April 2, 2025. See Note 21—“Subsequent Events” of the Notes to Consolidated Financial Statements for additional information regarding the merger.

Previous wording

Income tax provision expense was $7.9 million and $27.2 million for the three and nine months ended September 30, 2024, respectively, compared with $10.0 million and $37.1 million for the same periods of 2023, respectively. The effective income tax rate for the three and nine months ended September 30, 2024, was 24.74% and 26.57%, respectively, compared with 24.90% and 25.71% for the same periods of 2023, respectively.

Current wording

Income tax provision expense was $6.7 million and $10.0 million for the three months ended March 31, 2025 and 2024, respectively. The effective income tax rate for the three months ended March 31, 2025 and 2024, was 24.24% and 27.94%, respectively.

Previous wording

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 benefit schedules 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 both 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, 2024, total tax credits related to our investment in affordable housing partnerships were approximately $2.1 million and $6.4 million, respectively. This compares with approximately $2.0 million and $6.0 million in tax credits related to our investment in affordable housing partnerships for the same periods in 2023, respectively.

Current wording

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 benefit schedules 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 both 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 months ended March 31, 2025 and 2024, total tax credits related to our investment in affordable housing partnerships were approximately $2.2 million and $2.1 million, respectively.

Previous wording

At September 30, 2024, total assets were $17.35 billion, a decrease of $1.78 billion, or 9.3%, from $19.13 billion at December 31, 2023. The decrease in total assets was primarily due to decreases in cash and cash equivalents, which were used to pay off $1.70 billion of FRB BTFP borrowings, followed by smaller decreases in loans receivable and investment securities during the nine months ended September 30, 2024.

Current wording

At March 31, 2025, total assets were $17.07 billion, an increase of $14.3 million, or 0.1%, from $17.05 billion at December 31, 2024. The increase in total assets was primarily due to increases in cash and cash equivalents and equity investments, partially offset by a decrease in loans receivable during the three months ended March 31, 2025.

Previous wording

At September 30, 2024, we had $1.92 billion in investment securities AFS, compared with $2.15 billion at December 31, 2023. The net unrealized loss on the investment securities AFS at September 30, 2024, was $239.0 million, compared with a net unrealized loss on securities AFS of $284.7 million at December 31, 2023. The year-to-date decrease in net unrealized loss position reflected movements in market interest rates. At September 30, 2024, we had $256.3 million in investment securities HTM, compared with $263.9 million at December 31, 2023. We have the ability and intent to hold securities classified as HTM to maturity.

Current wording

At March 31, 2025, we had $1.84 billion in investment securities AFS, compared with $1.82 billion at December 31, 2024. The net unrealized loss on the investment securities AFS at March 31, 2025, was $266.7 million, compared with a net unrealized loss on securities AFS of $299.4 million at December 31, 2024. The year-to-date decrease in net unrealized loss position reflected movements in market interest rates. At March 31, 2025, we had $250.2 million in investment securities HTM, compared with $252.4 million at December 31, 2024. We have the ability and intent to hold securities classified as HTM to maturity.

Previous wording

We performed an analysis on our investment securities in unrealized loss positions at September 30, 2024 and December 31, 2023, and determined that an allowance for credit losses was not required for investment securities AFS or HTM. The majority of our investment portfolio consists 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, 2024, we also had five asset-backed securities, six corporate securities, and 44 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.

Current wording

We performed an analysis on our investment securities in unrealized loss positions at March 31, 2025 and December 31, 2024, and determined that an allowance for credit losses was not required for investment securities AFS or HTM. The majority of our investment portfolio consists of securities issued by U.S. Government agencies or U.S. Government sponsored enterprises, which were determined to have a zero loss expectation. At March 31, 2025, we also had two asset-backed securities, six corporate securities, and 58 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.

Previous wording

Total equity investments include equity investments with readily determinable fair values and equity investments without readily determinable fair values. Equity investments at September 30, 2024, totaled $39.9 million, a decrease of $3.8 million, or 8.8%, from $43.8 million at December 31, 2023.

Current wording

Total equity investments include equity investments with readily determinable fair values and equity investments without readily determinable fair values. Equity investments at March 31, 2025, totaled $86.2 million, an increase of $46.3 million, or 115.9%, from $39.9 million at December 31, 2024. The increase in equity investments during the first quarter of 2025 was mostly due to purchases of equity investments with readily determinable fair values amounting to $45.3 million.

Previous wording

At September 30, 2024 and December 31, 2023, total equity investments with readily determinable fair values totaled $4.5 million and $4.4 million, respectively, consisting of mutual funds. Changes to the fair value of equity investments with readily determinable fair values is recorded in other noninterest income.

Current wording

At March 31, 2025 and December 31, 2024, total equity investments with readily determinable fair values totaled $50.3 million and $4.3 million, respectively, consisting of mutual funds. Changes to the fair value of equity investments with readily determinable fair values are recorded in other noninterest income.

Previous wording

We also had $35.5 million and $39.4 million in equity investments without readily determinable fair values at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024, equity investments without readily determinable fair values included $34.1 million in CRA investments, $1.0 million in CDFI investments, and $370 thousand in correspondent bank stock. Equity investments without readily determinable fair values are carried at cost, less impairment, and adjustments are made to the carrying balance based on observable price changes. There were no impairments or observable price changes for equity investments without readily determinable fair values during the nine months ended September 30, 2024 and 2023.

Current wording

We also had $35.9 million and $35.6 million in equity investments without readily determinable fair values at March 31, 2025 and December 31, 2024, respectively. At March 31, 2025, equity investments without readily determinable fair values included $34.6 million in CRA investments, $1.0 million in CDFI investments, and $370 thousand in correspondent bank stock. Equity investments without readily determinable fair values are carried at cost, less impairment, and adjustments are made to the carrying balance based on observable price changes. There were no impairments or observable price changes for equity investments without readily determinable fair values during the three months ended March 31, 2025 and 2024.

Previous wording

Loans held for sale at September 30, 2024, totaled $25.7 million, compared with $3.4 million at December 31, 2023. Loans held for sale at September 30, 2024, comprised $2.0 million in residential mortgage loans and $23.7 million in C&I loans. At December 31, 2023, loans held for sale consisted of $1.1 million in residential mortgage loans and $2.3 million in C&I loans. During the nine months ended September 30, 2024, we sold $117.8 million in loans, consisting of $71.2 million in SBA loans, $19.9 million in residential mortgage loans, and $26.7 million in other loans.

Current wording

Loans held for sale at March 31, 2025, totaled $183 thousand, compared with $14.5 million at December 31, 2024, representing a decrease of $14.3 million, or 98.7%. Loans held for sale at March 31, 2025, comprised $183 thousand in residential mortgage loans. At December 31, 2024, loans held for sale consisted of $13.8 million in C&I loans and $646 thousand in residential mortgage loans. During the three months ended March 31, 2025, we sold $80.5 million in loans, consisting of $49.9 million in SBA loans, $4.4 million in residential mortgage loans, and $26.2 million in C&I loans.

Previous wording

At September 30, 2024, loans receivable totaled $13.62 billion, a decrease of $235.6 million, or 1.7%, from $13.85 billion at December 31, 2023. The following table summarizes our loan portfolio by amount and percentage of total loans outstanding in each loan segment as of the dates indicated:

Current wording

At March 31, 2025, loans receivable totaled $13.34 billion, a decrease of $283.0 million, or 2.1%, from $13.62 billion at December 31, 2024. The following table summarizes our loan portfolio by amount and percentage of total loans outstanding in each loan segment as of the dates indicated:

Previous wording

The year-to-date decrease in our total loans receivable was primarily due to declines in C&I and CRE loans, partially offset by the growth in residential mortgage loans. During the nine months ended September 30, 2024, loan payoffs, paydowns and sales exceeded new origination volume, reflecting, in part, an elevated pace of payoffs in a high interest rate environment.

Current wording

The year-to-date decrease in our total loans receivable was primarily due to declines in C&I and CRE loans, partially offset by the growth in residential mortgage loans. During the three months ended March 31, 2025, loan payoffs, paydowns and sales exceeded new origination volume, reflecting, in part, an elevated pace of payoffs in a high interest rate environment.

Previous wording

Nonperforming assets, which consist of nonaccrual loans, accruing delinquent loans past due 90 days or more, and OREO, totaled $103.8 million at September 30, 2024, compared with $45.5 million at December 31, 2023. The increase in nonperforming loans was largely driven by an increase in CRE and C&I nonaccrual loans. The increase in CRE nonaccrual loans was due primarily to the migration of loans from one relationship to nonaccrual after its loan matured. The loans are well-secured by properties in primary locations with minimal loss expected. The ratio of nonperforming assets to total assets increased to 0.60% at September 30, 2024, compared with 0.24% at December 31, 2023. Nonaccrual loans to loans receivable was 0.76% at September 30, 2024, compared with 0.33% at December 31, 2023.

Current wording

Nonperforming assets, which consist of nonaccrual loans, accruing delinquent loans past due 90 days or more, and OREO, totaled $83.9 million at March 31, 2025, compared with $90.8 million at December 31, 2024, a decrease of 7.6%. The decrease in nonperforming loans was largely driven by a decrease in C&I nonaccrual loans. The ratio of nonperforming assets to total assets decreased to 0.49% at March 31, 2025, compared with 0.53% at December 31, 2024. Nonaccrual loans to loans receivable was 0.63% at March 31, 2025, compared with 0.67% at December 31, 2024.

Previous wording

(1) Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $13.1 million at September 30, 2024, and $11.4 million at December 31, 2023.

Current wording

(1) Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $11.8 million at March 31, 2025, and $12.8 million at December 31, 2024.

Previous wording

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:

Current wording

The ACL was $147.4 million at March 31, 2025, compared with $150.5 million at December 31, 2024. The ACL was 1.11% of loans receivable at both March 31, 2025 and December 31, 2024, 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:

Previous wording

Overall ACL coverage at September 30, 2024, declined 2 basis points compared with December 31, 2023 as a result of improving projected macroeconomic variables, partially offset by an increase in ACL for individually evaluated loans. The third-party economic forecast used in the calculation at September 30, 2024, improved relative to the forecast used at December 31, 2023. The updated macroeconomic forecast projected on average slightly higher GDP growth and CRE price index. The decrease in total ACL at September 30, 2024, compared with December 31, 2023, consisted of a decrease in ACL for collectively evaluated loans, partially offset by an increase in ACL for individually evaluated loans. The decrease in ACL on residential mortgage loans at September 30, 2024, compared with December 31, 2023, was primarily due to model enhancements made to the CECL model for residential loans during the second quarter of 2024. The updated model now utilizes property values when estimating losses for collectively evaluated residential mortgage loans and the coverage ratios for these loans are now more in line with industry averages. The ACL on CRE loans decreased with the decline in CRE loans outstanding year-to-date, which was partially offset by increased estimated losses resulting from the enhancements made to the CRE CECL model. During the second quarter of 2024, the owner-occupied CRE CECL model was enhanced, to better incorporate the impact of the underlying income from the borrowers’ businesses. ACL on C&I loans increased, reflecting higher levels of classified and nonperforming C&I loans.

Current wording

Overall ACL coverage at March 31, 2025, remained unchanged at 1.11% compared with December 31, 2024. The third-party economic forecast used in the calculation at March 31, 2025, improved slightly relative to the forecast used at December 31, 2024. The updated macroeconomic forecast projected on average slightly higher GDP growth, CRE price index, and lower unemployment rates. The decrease in ACL at March 31, 2025, compared with December 31, 2024, was primarily due to a decline in ACL for CRE loans which was due to a decrease in the balance of CRE loans and updates to historical loss and prepayment assumptions during the three months ended March 31, 2025. The decline in ACL on CRE loans was offset partially by increases in ACL for residential mortgage loans and C&I loans. ACL for both collectively evaluated loans and individually evaluated loans declined as of March 31, 2025 compared to December 31, 2024.

Previous wording

Net loan charge offs as a percentage of average loans were 0.17% and 0.13%, annualized, for the three and nine months ended September 30, 2024, respectively, compared with net loans charge offs of 0.85% and 0.27%, respectively, for the same periods in 2023. Net loan charge offs for the three and nine months ended September 30, 2024, primarily reflected C&I loan net charge offs of $5.3 million and $13.3 million, respectively.

Current wording

Net loan charge offs as a percentage of average loans were 0.25% and 0.10%, annualized, for the three months ended March 31, 2025 and 2024, respectively. Net loan charge offs for the three months ended March 31, 2025, primarily reflected C&I loan net charge offs of $7.4 million.

Previous wording

We believe the ACL at September 30, 2024 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 the 2023 banking industry disruption, inflation, potential economic recession, and the wars in the Gaza Strip and Ukraine are worse than we currently expect, 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.

Current wording

We believe the ACL at March 31, 2025 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 the tariffs, trade wars, inflation, potential economic recession, and the wars in the Gaza Strip and Ukraine are worse than we currently expect, 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.

Previous wording

At September 30, 2024, we had $43.1 million in accrued interest receivables on loans, compared with $49.3 million at December 31, 2023.

Current wording

At March 31, 2025, we had $42.3 million in accrued interest receivables on loans, compared with $43.0 million at December 31, 2024.