HOPE BANCORP INC

Previous wording

Hope Bancorp, Inc. is the holding company of Bank of Hope, the only regional Korean American bank in the United States with $18.99 billion in total assets at June 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 28 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.

Current wording

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.

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 (loss) 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.

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

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 certain assets and liabilities of the Commercial Banking Unit of SMBC, the closing of which is subject to regulatory approvals and the satisfaction of other customary closing conditions. The comparability of our operating results for the three and six months ended June 30, 2025, with performance for the three and six months ended June 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 SMBC 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.”

Current wording

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.”

Previous wording

(1)Net income (loss) 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.

Current wording

(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.

Previous wording

During the three and six months ended June 30, 2026 and 2025, our operating results included certain notable items as a result of the 2025 Merger with Territorial, 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 they are irregular one-time events, and 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.

Current wording

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.

Previous wording

Return on average tangible common equity is calculated by dividing net income (loss) 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.

Current wording

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.

Previous wording

Net income for the second quarter of 2026 was $33.0 million, or $0.26 per diluted common share, an increase of $57.8 million over net loss of $24.8 million, or $(0.19) per diluted common share, for the same period of 2025. The year-over-year increase in net income was primarily due to increases in noninterest income and net interest income and a decrease in noninterest expense. Net income excluding notable items, a non-GAAP measure, for the three months ended June 30, 2026, was $34.5 million, or $0.27 per diluted common share, compared with net income of $24.6 million, or $0.19 per diluted share, for the same period of 2025.

Current wording

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.

Previous wording

Net income for the six months ended June 30, 2026, was $62.6 million, or $0.49 per diluted common share, compared with net loss of $3.7 million, or $(0.03) per diluted share, for the same period of 2025, which was an increase of $66.2 million. Net income excluding notable items, a non-GAAP measure, for the six months ended June 30, 2026, was $64.2 million, or $0.50 per diluted common share, compared with net income of $47.5 million, or $0.38 per diluted share, for the same period of 2025. The comparison between the six-month periods ended June 30, 2026, and 2025, was impacted by the acquisition of Territorial in April 2025, which included only three months of activity in 2025.

Current wording

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.

Previous wording

Notable items for the six months ended June 30, 2026, included merger-related expenses and other items. Notable items specific to the second quarter of 2025 totaled $49.3 million after tax, comprising $30.5 million after tax in net loss on sales of securities related to the investment securities repositioning, $14.0 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.

Current wording

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.

Previous wording

Net interest income was $129.0 million for the second quarter of 2026, compared with $117.5 million for the same period of 2025, an increase of $11.5 million, or 9.8%. The year-over-year increase in net interest income was primarily driven by a lower cost of deposits, a decrease in the average balance of interest bearing deposits, and an increase in the average balance of interest earning assets, partially offset by lower yields on loans. As of June 30, 2026, the Federal Funds target rate was cut by an aggregate 75 basis points since June 30, 2025, favorably impacting funding costs for the second quarter of 2026 compared with the prior-year period.

Current wording

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.

Previous wording

Net interest income was $253.0 million for the six months ended June 30, 2026, compared with $218.3 million for the same period of 2025, an increase of $34.8 million, or 15.9%. The year-over-year increase in year-to-date net interest income was primarily driven by a lower cost of funds and an increase in the average balance of loans, partially offset by lower yields on loans and an increase in the average balance of deposits. The year-over-year growth in average earning assets primarily reflected the acquisition of Territorial, which closed in the second quarter of 2025. As of June 30, 2026, the Federal Funds target rate was cut by an aggregate 75 basis points since June 30, 2025, favorably impacting funding costs for the six months ended June 30, 2026, compared with the prior-year period.

Current wording

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.

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 second quarter of 2026 was 2.96%, up 27 basis points from 2.69% for the same period of 2025. The net interest margin for the six months ended June 30, 2026, was 2.93%, an increase of 31 basis points from 2.62% for the same period of 2025. The net interest margin expansion year over year was primarily driven by funding cost improvements, with the cost of interest bearing deposits decreasing 46 basis points and 60 basis points for the three and six months ended June 30, 2026, compared to the same periods in 2025, respectively.

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 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.

Previous wording

The weighted average yield on loans decreased to 5.73% for the second quarter of 2026, down 15 basis points from 5.88% for the same period of 2025. The weighted average yield on loans decreased by 17 basis points to 5.71% for the six months ended June 30, 2026, down from 5.88% 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 June 30, 2026, variable interest rate loans made up 46% of the loan portfolio. The total accretion of net discount on acquired loans was $4.5 million and $9.1 million for the three and six months ended June 30, 2026, respectively, compared with $4.1 million and $4.3 million for the same periods of 2025, respectively.

Current wording

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.

Previous wording

The weighted average yield on investment securities for the three and six months ended June 30, 2026, was 3.68% and 3.65%, respectively, compared with 3.25% and 3.17% for the same periods of 2025, respectively. The increase in average yields was primarily due to higher rates on new purchases of investment securities, and the sale of lower-yielding investment securities in the second quarter of 2025 as part of a strategic securities portfolio repositioning. At June 30, 2026, 22% 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 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.

Previous wording

The weighted average cost of deposits for the three and six months ended June 30, 2026, was 2.60% and 2.62%, respectively, a decrease of 36 basis points and 45 basis points, respectively, from 2.96% and 3.07% for the same periods of 2025, respectively. The weighted average cost of interest bearing deposits for the three and six months ended June 30, 2026, was 3.31% and 3.34%, respectively, a decrease of 46 basis points and 60 basis points, respectively, from 3.77% and 3.94% for the same periods of 2025, respectively. The year-over-year decrease in the cost of deposits was driven by decreases in market interest rates, the planned runoff of higher-cost time deposits, and the positive impact of the acquired Territorial deposits, which have a lower cost of funds.

Current wording

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.

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 second quarter of 2026 was $6.8 million, a decrease of $4.3 million from $11.1 million for the same period of the prior year. The provision for credit losses for the six months ended June 30, 2026 was $15.4 million, a decrease of $472 thousand from $15.9 million in provision for credit losses for the same period of the prior year. The decrease in provision for credit losses for the three and six months ended June 30, 2026, compared with the same periods in 2025, was due to improvements in credit quality, particularly in the C&I loan portfolio, and the reversal of provision for unfunded loan commitments in 2026.

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 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.

Previous wording

The recapture of provision for unfunded loan commitments was $330 thousand and $880 thousand for the three and six months ended June 30, 2026, respectively, compared with a provision for unfunded loan commitments of $1.0 million and $600 thousand 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.

Current wording

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.

Previous wording

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 second quarter of 2026 was $18.9 million, compared with noninterest loss of $23.0 million for the same period of 2025, an increase of $41.8 million. Noninterest income for the six months ended June 30, 2026, was $35.8 million, compared with noninterest loss of $7.3 million for the same period of the prior year, an increase of $43.1 million.

Current wording

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.

Previous wording

The year-over-year increase in noninterest income for the three and six months ended June 30, 2026, was primarily driven by net gains on sales of AFS securities compared with prior-year net losses on sales of AFS securities, and an increase in other customer-driven income and fees, partially offset by a decrease in other noninterest income. The noninterest loss for 2025 was primarily driven by the investment securities portfolio repositioning which resulted in a net loss of $38.9 million for the three and six months ended June 30, 2025.

Current wording

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.

Previous wording

Customer related 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 six months ended June 30, 2026 compared to the three and six months ended June 30, 2025. The increase in customer related fees were driven by the increases in deposit accounts and transactions and due to an increase in commercial loans. The increase in commercial borrowers resulted in an increase in business analysis fees and syndication related fees.

Current wording

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.

Previous wording

During the three and six months ended June 30, 2026, we sold $67.9 million and $120.9 million in SBA guaranteed loans, respectively, and recorded $4.4 million and $7.7 million, respectively, in net gains on sale of SBA loans. This compares with net gains of $4.0 million and $7.1 million for the three and six months ended June 30, 2025, respectively. $67.4 million and $117.3 million in SBA guaranteed loans were sold for the three and six months ended June 30, 2025, respectively.

Current wording

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.

Previous wording

Noninterest income in the three and six months ended June 30, 2025, included $38.9 million of net losses on investment securities AFS related to the securities portfolio repositioning, which we consider a notable item. See the “General” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures.

Current wording

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.

Previous wording

Other noninterest income decreased $358 thousand for the three months ended June 30, 2026, and $1.7 million for the six months ended June 30, 2026, compared with the same periods in 2025. The six-month decrease was mainly driven by a $1.5 million decrease in net gains on sale of other loans.

Current wording

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.

Previous wording

Noninterest expense for the second quarter of 2026 was $98.5 million, a decrease of $11.0 million, or 10.1%, from $109.5 million for the second quarter of 2025. Noninterest expense for the six months ended June 30, 2026, was $192.9 million, a decrease of $415 thousand, or 0.2%, from $193.3 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 second quarter of 2026 was $96.4 million compared with $92.2 million in the year-ago period. Excluding notable items, noninterest expense for the six months ended June 30, 2026, was $190.7 million compared with $173.5 million in the year-ago period. See the “General” section of this MD&A for a reconciliation of GAAP to non-GAAP financial measures.

Current wording

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.

Previous wording

The year-over-year decrease in noninterest expense for the three and six months ended June 30, 2026, compared with the same periods of 2025, was primarily driven by decreases in merger-related costs and earned interest credit expense, partially offset by increases in salaries and employee benefits; software and subscriptions; occupancy, furniture and equipment; and data and item processing. We closed the acquisition of Territorial on April 2, 2025, and the year-to-date second quarter of 2025 included one quarter of operating expenses related to the Territorial franchise, compared with two quarters for 2026.

Current wording

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.

Previous wording

Salaries and employee benefits expense increased $4.1 million, or 7.7%, for the second quarter of 2026, compared with the same period of 2025, and increased $11.8 million, or 11.7%, for the six months ended June 30, 2026, compared with the same period in 2025. The year-over-year increase in salaries and employee benefits was due to an increase in headcount following the 2025 Territorial acquisition, as well as additional hires in 2026. The number of full-time equivalent employees was 1,432 and 1,416 at June 30, 2026 and 2025, respectively.

Current wording

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.

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 decreased with 75 basis point drop in the Federal Funds target rate since the first quarter of 2025. Earned interest credit expense decreased $809 thousand, or 24.4%, for the second quarter of 2026, compared with the same period of 2025, and decreased $1.5 million, or 23.7%, for the six months ended June 30, 2026, compared with 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 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.

Previous wording

Merger-related costs decreased $15.2 million, or 88.1%, for the second quarter of 2026, compared with the same period of 2025, and decreased $17.5 million, or 88.4%, for the six months ended June 30, 2026, compared with the same period in 2025. Merger-related costs mainly comprised employee retention bonuses and professional fees related to the Territorial acquisition, which was completed on April 2, 2025. In addition, we incurred $1.9 million in merger expenses related to the SMBC acquisition in the second quarter of 2026. See Note 15 - “Acquisitions” of the Notes to Consolidated Financial Statements for additional information regarding the Merger and SMBC acquisition.

Current wording

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.

Previous wording

Income tax provision expense was $9.6 million and $17.9 million for the three and six months ended June 30, 2026, respectively, compared with an income tax benefit of $1.3 million and income tax provision of $5.4 million for the same periods of 2025, respectively. The effective income tax rate for the three and six months ended June 30, 2026, was 22.44% and 22.28%, respectively, compared with 5.05% and 305.51% for the same periods of 2025, respectively.

Current wording

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.

Previous wording

The year-over-year changes in the income tax provision or benefit, as well as the effective tax rates, for the three and six months ended June 30, 2026, compared with the three and six months ended June 30, 2025, reflected the impact legislative changes in a significant state jurisdiction enacted and the impact of merger-related costs and securities portfolio sales in the second quarter of 2025.

Current wording

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.

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 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 six months ended June 30, 2026, total tax credits related to our investment in affordable housing partnerships were approximately $2.2 million and $4.5 million, respectively. This compares with approximately $2.3 million and $4.6 million in tax credits related to our investment in affordable housing partnerships for the same periods in 2025, 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 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.

Previous wording

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 months ended June 30, 2026 and 2025, the total generated renewable energy tax credits and benefits was $6.3 million and $350 thousand, respectively. This was partially offset by amortization on the investments, which was $5.4 million and $319 thousand for the three months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2026 and 2025, the total generated renewable energy tax credits and benefits was $14.4 million and $700 thousand, respectively. This was partially offset by amortization on the investments, which was $12.4 million and $638 thousand for the six months ended June 30, 2026 and 2025, respectively.

Current wording

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.

Previous wording

At June 30, 2026, total assets were $18.99 billion, an increase of $460.3 million, or 2.5%, from $18.53 billion at December 31, 2025. The increase in total assets was primarily due to increases in loans receivable, investment securities and cash and cash equivalents during the six months ended June 30, 2026.

Current wording

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.

Previous wording

At June 30, 2026, we had $1.95 billion in investment securities AFS, compared with $1.83 billion at December 31, 2025. The net unrealized loss on the investment securities AFS at June 30, 2026, was $200.5 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 June 30, 2026, we had $232.4 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.

Current wording

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.

Previous wording

During the six months ended June 30, 2026, $493.3 million in investment securities was purchased, $156.0 million in investment securities was sold, $108.7 million in investment securities was paid down, and $111.0 million in investment securities was called or matured.

Current wording

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.

Previous wording

We performed an analysis on our investment securities in unrealized loss positions at June 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 June 30, 2026, we also had two asset-backed securities, five corporate securities, and 28 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 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.

Previous wording

At June 30, 2026, loans receivable totaled $14.94 billion, an increase of $240.5 million, or 1.6%, 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:

Current wording

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:

Previous wording

Nonperforming assets, which consist of nonaccrual loans, accruing delinquent loans past due 90 days or more, and OREO, totaled $112.9 million at June 30, 2026, compared with $136.1 million at December 31, 2025, a decrease of 17.1%. 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 0.59% at June 30, 2026, compared with 0.73% at December 31, 2025. Nonaccrual loans to loans receivable was 0.75% at June 30, 2026, down from 0.90% at December 31, 2025.

Current wording

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.

Previous wording

(1) Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $17.1 million at June 30, 2026, and $15.6 million at December 31, 2025.

Current wording

(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.

Previous wording

The ACL was $153.2 million at June 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 June 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:

Current wording

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: