~~Sarbanes-Oxley Act~~

The Company is subject to the accounting oversight and corporate governance requirements of the Sarbanes-Oxley Act of 2002, including, among other things, required executive officer certification of financial information presentations, requirements for board audit committees and their members, and disclosure of controls and procedures and internal control over financial reporting.

Bank Regulation

AsThe Bank is a California ~~commercial~~state-chartered bank whose ~~deposits~~deposit accounts are insured by the FDIC, up to applicable limits. As such, the Bank is subject to regulation, supervision and regular examination by the ~~DBO~~DFPI and by the ~~FDIC, as~~FDIC. In addition, while the ~~Bank’s primary federal regulator, and must additionally comply with~~Bank is not a member of the FRB, the Bank is subject to certain ~~applicable~~ regulations of the FRB. ~~Specific federal~~

Federal and state laws and regulations ~~that are~~ applicable to banks regulate, among other things, the scope of their business, their investments, their reserves against deposits, ~~the timing of the availability of deposited funds, their~~lending activities, ~~relating to dividends, investments, loans, the nature and amount of and collateral for certain loans,~~ servicing and foreclosing on loans, borrowings, capital requirements, certain check-clearing activities, dividends, branching, and mergers and acquisitions. California banks are also subject to statutes and regulations including FRB Regulation O and Federal Reserve Act Sections 23A and 23B and Regulation W, which restrict or limit loans or extensions of credit to “insiders”, including officers, directors, and principal ~~shareholders,~~stockholders, and loans or extension of credit by banks to affiliates or purchases of assets from affiliates, including parent bank holding companies, except pursuant to certain exceptions and only on terms and conditions at least as favorable to those prevailing for comparable transactions with unaffiliated parties. The Dodd-Frank ~~Act~~Wall Street Reform and Consumer Protection Action (the “Dodd-Frank Act”) expanded definitions and restrictions on transactions with affiliates and insiders under Sections 23A and 23B and also lending limits for derivative transactions, repurchase agreements, and securities lending and borrowing transactions.

~~Pursuant to~~Under the Federal Deposit Insurance Act (“FDI ~~Act~~Act”) and the California Financial Code, California state chartered commercial banks may generally engage in any activity permissible for national banks. Therefore, the Bank may form subsidiaries to engage in the many so-called “closely related to banking” or “nonbanking” activities commonly conducted by national banks in operating subsidiaries or by subsidiaries of bank holding companies. Further, California state chartered banks may conduct certain financial activities permitted under GLBA in a “financial subsidiary” to the same extent as a national bank, provided the bank is and remains well-capitalized, well-managed and in satisfactory compliance with the ~~CRA.~~Community Reinvestment Act (the “CRA”). The Bank currently conducts no non-banking or financial activities through subsidiaries.

Capital Adequacy Requirements

Hope Bancorp and the Bank are subject to similar regulatory capital requirements administered by its primary federal supervisory banking agencies. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the federal banking agencies have adopted capital rules based on the Basel III Accord (the “Basel III Capital Rules”). The Basel III Capital Rules became effective on January 1, 2015. The Basel III Capital Rules are risk-based, meaning that the levels of capital required vary based on the perceived degree of risk associated with a banking organization’s balance sheet assets, such as loans and investment securities, and those recorded as off-balance sheet items, such as commitments, letters of credit, and recourse arrangements. The risk classifications and, therefore, the required capital amounts may be subject to qualitative judgments by regulators about components, risk-weighting, and other factors.

The Basel III Capital Rules (i) introduced a new capital measure called “common equity Tier 1 and a related regulatory capital ratio of common equity Tier 1 to risk‑weighted assets, (ii) specified that Tier 1 capital consists of common equity Tier 1 and “additional Tier 1 capital” instruments meeting certain requirements, (iii) mandated that most deductions and adjustments to regulatory capital measures be made to common equity Tier 1 and not to the other components of capital, and (iv) expanded the scope of the deductions from and adjustments to capital compared to prior capital rules. The Basel III Capital Rules differ from earlier capital rules by excluding from Tier 1 capital trust preferred securities (subject to certain grandfathering exceptions for organizations like Hope Bancorp, which had less than $15 billion in assets as of December 31, 2009), mortgage servicing rights and certain deferred tax assets and to include unrealized gains and losses on available for sale debt and equity securities (unless the organization opts out of including such unrealized gains and losses).

Under the Basel III Capital Rules, the minimum capital ratios applicable to Hope Bancorp and the Bank are as follows:

•4.5% common equity Tier 1 to risk‑weighted assets;

•6.0% Tier 1 capital (that is, common equity Tier 1 plus additional Tier 1 capital) to risk‑weighted assets;

•8.0% total capital (that is, Tier 1 capital plus Tier 2 capital) to risk‑weighted assets; and

•4.0% Tier 1 capital to average consolidated assets as reported on regulatory financial statements (known as the “leverage ratio”). (To be considered well-capitalized under the Prompt Corrective Action framework, the Bank must maintain a minimum Tier 1 leverage ratio of at least 5.0%.)

The Basel III Capital Rules include an additional “capital conservation buffer” of 2.5% of risk-weighted assets above the regulatory minimum capital ratios. If Hope Bancorp and the Bank do not maintain capital sufficient to satisfy the capital conservation buffer, we would face restrictions in our ability to pay dividends, repurchase shares, and pay discretionary bonuses.

Including the capital conservation buffer of 2.5%, the minimum ratios for a banking organization are as follows: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5% and (iii) a total capital ratio of 10.5%. Management believes that as of December 31, 2022, Hope Bancorp and the Bank met all requirements under the Basel III Capital Rules applicable to them on a fully phased-in basis, including the capital conservation buffer. At December 31, 2022, the ratios of each of Hope Bancorp and the Bank exceeded the minimum percentage requirements to generally be deemed “well-capitalized” for bank regulatory purposes and satisfied the capital conservation buffer requirement. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

While the Basel III Capital Rules set higher regulatory capital standards for Hope Bancorp and the Bank, bank regulators may also continue their past policies of expecting banks to maintain capital in excess of the minimum requirements. The implementation of the Basel III Capital Rules or more stringent requirements to maintain higher levels of capital or to maintain higher levels of liquid assets could adversely impact the Company’s net income and return on equity, restrict the ability to pay dividends or executive bonuses and require the raising of additional capital.

The Bank is also subject to capital adequacy requirements under the California Financial Code.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Increased Supervision and Regulation for Bank Holding Companies with Consolidated Assets of More than $10 Billion

As a banking organization with consolidated assets exceeding $10 billion, the Company is subject to heightened supervision and regulation imposed by the Dodd-Frank Act, such as the following:

•We are subject to periodic examination by the Consumer Finance Protection Bureau (“CFPB”) with respect to compliance with federal consumer laws. Although we were previously subject to regulations issued by the CFPB, the Bank’s primary federal regulator, the FDIC, previously had responsibility for our consumer compliance examinations. See “Consumer Finance Protection Bureau.”

•We are subject to the maximum permissible interchange fee for swipe transactions, equal to no more than 21 cents plus 5 basis points of the transaction value for many types of debit interchange transactions.

•We calculate our FDIC deposit assessment base using a performance score and ~~DBO Enforcement Authority~~a loss-severity score system described below in “Deposit Insurance.”

•We are subject to the “Volcker Rule,” which generally restricts us from engaging in activities that are considered proprietary trading and from sponsoring or investing in certain entities, including hedge or private equity funds that are considered covered funds. While Hope Bancorp and the Bank had no investment positions or relationships at December 31, 2022 that were subject to the Volcker Rule, we may be subject to the compliance and recording keeping provisions of this rule.

The Dodd-Frank Act requires banking organizations with consolidated assets exceeding $10 billion to establish board-level risk committees and to perform annual stress tests. The Economic Growth, Regulatory Relief, and Consumer Protection Act enacted in 2018 raises the asset thresholds for these requirements to $50 billion and $100 billion, respectively.

Many aspects of the Dodd-Frank Act continue to be subject to rule-making or proposed change, making it difficult to anticipate the overall financial impact on the Company, its customers or the financial industry in general. Provisions in the legislation that affect deposit insurance assessments, payment of interest on demand deposits and interchange fees could increase the costs associated with deposits as well as place limitations on certain revenues those deposits may generate.

Prompt Corrective Action

The FDI Act requires the federal bank regulatory agencies to take “prompt corrective action” with respect to a depository institution that does not meet certain capital adequacy standards, including requiring the prompt submission of an acceptable capital restoration plan. Depending on the bank’s capital ratios, the agencies’ regulations define five categories in which an insured depository institution will be placed: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. At each successive lower capital category, an insured bank is subject to more restrictions, including restrictions on the bank’s activities, operational practices or the ability to pay dividends or executive bonuses.

The prompt corrective action standards conform with the Basel III Capital Rules. In order to be generally considered well-capitalized for bank regulatory purposes, the Bank is required maintain the following minimum capital ratios: a common equity Tier 1 ratio of 6.5%, a Tier 1 ratio of 8%, a total capital ratio of 10% and a leverage ratio of 5%. A bank meeting the minimum capital ratios required to be considered well-capitalized, adequately capitalized, or undercapitalized may, however, may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or practice warrants such treatment.

The federal banking agencies also may require banks and ~~California regulatory structure gives~~bank holding companies subject to enforcement actions to maintain capital ratios in excess of the minimum ratios otherwise generally required to be deemed well capitalized for bank regulatory ~~agencies extensive discretion~~purposes, in ~~connection~~which case institutions may no longer be deemed to be well capitalized and may therefore be subject to certain restrictions such as on taking brokered deposits.

Consumer Compliance Laws

The Bank must comply with ~~their supervisory~~numerous federal and ~~enforcement activities~~state consumer protection statutes and ~~examination policies,~~implementing regulations, including, ~~policies with respect~~but not limited to, the ~~classification~~Fair Debt Collection Practices Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act, the California Homeowner Bill of ~~assets~~Rights and various federal and state privacy protection laws, including the Telephone Consumer Protection Act, and CAN-SPAM Act. The Bank and Hope Bancorp are also subject to federal and state laws prohibiting unfair or fraudulent business practices, untrue or misleading advertising and unfair competition.

These laws and regulations mandate certain disclosure and reporting requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, servicing, collecting and foreclosure of loans, and providing other services. Failure to comply with these laws and regulations can subject the Bank to various penalties, including but not limited to enforcement actions, injunctions, fines or criminal penalties, punitive damages to consumers, and the ~~establishment~~loss of ~~appropriate loan loss reserves~~certain contractual rights.

Community Reinvestment Act

The Bank is subject to the CRA, which requires federal banking regulators to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low and moderate income neighborhoods. The federal banking agencies consider a financial institution’s compliance with the CRA into account when considering regulatory applications for ~~regulatory purposes.~~mergers and other expansionary activities. The ~~regulatory agencies have adopted guidelines~~Bank received a “Satisfactory” rating in the most recent public disclosure of CRA performance evaluation released by the FDIC in 2021, which states that the Bank’s CRA performance under the lending, investment, and service tests supports the overall rating.

USA PATRIOT Act and Anti-Money Laundering Laws

Under the USA PATRIOT Act of 2001, financial institutions are subject to ~~assist~~prohibitions against specified financial transactions and account relationships, as well as enhanced due diligence standards that are intended to prevent and detect the use of the United States financial system for money laundering and terrorist financing activities. The act requires financial institutions, including banks, to establish anti-money laundering programs, including employee training and independent audit requirements, meet minimum standards specified by the act, follow minimum standards for customer identification and maintenance of customer identification records, and regularly compare customer lists against lists of suspected terrorists, terrorist organizations and money launderers.

The Bank Secrecy Act (the “BSA”) establishes requirements for recordkeeping and reporting by banks and other financial institutions that are intended to help identify the source, volume and movement of currency and other monetary instruments into and out of the United States in ~~identifying~~order to help detect and ~~addressing potential safety~~prevent money laundering connected with drug trafficking, terrorism and ~~soundness concerns before an institution’s capital becomes impaired.~~other criminal activities. Under the BSA and related regulations, banking institutions must file suspicious activity reports and maintain programs designed to assure and monitor compliance with certain recordkeeping and reporting requirements regarding currency transactions. The ~~guidelines establish operational and managerial standards generally relating to: (1) internal controls, information~~programs must include systems and internal ~~audit systems; (2) loan documentation; (3) credit underwriting; (4) interest-rate exposure; (5) asset growth~~controls to assure ongoing compliance, provide for independent testing of such systems and ~~asset quality;~~compliance and ~~(6) compensation, fees,~~provide appropriate personnel training.

The Anti-Money Laundering Act of 2020 (“AMLA”), which amends the BSA, was enacted in January 2021. The AMLA is intended to be a comprehensive reform and ~~benefits. Further,~~modernization to U.S. bank secrecy and anti-money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the ~~regulatory agencies have adopted safety and soundness guidelines for asset quality and~~development of standards for evaluating technology and ~~monitoring earnings~~internal processes for BSA compliance; expands enforcement- and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting whistleblower incentives and protections.

Loans to ~~ensure that earnings are sufficient for~~One Borrower

Under California law, the ~~maintenance of adequate capital~~Bank’s ability to make aggregate secured and reserves. If, as a result of an examination, the DBO or the FDIC should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspectsunsecured loans to borrower is limited to 25% and 15%, respectively, of the Bank’s ~~operations are unsatisfactory or that the Bank or its management is violating or has violated any law or regulation, the DBO and the FDIC have residual authority to:~~

~~Require affirmative action to correct any conditions resulting from any violation or practice;~~

~~Table of Contents~~

~~Direct an increase in~~unimpaired capital and surplus. The Bank has established internal loan limits that are lower than the ~~maintenance of higher specific minimum capital ratios, which could preclude the Bank from being deemed well capitalized and restrict its ability to accept certain brokered deposits;~~

~~Restrict the Bank’s growth geographically, by products and services, or by mergers and acquisitions, including precluding bidding in FDIC receiverships~~legal lending limits for ~~failed banks;~~a California bank.

Enter into or issue informal or formal enforcement actions, including required Board resolutions, Matters Requiring Board Attention (MRBA), memoranda of understanding, written agreements and consent or cease and desist orders or prompt corrective action orders to take corrective action and cease unsafe and unsound practices;

~~Require prior approval of senior executive officer or director changes; remove officers and directors and assess civil monetary penalties; and~~

~~Terminate FDIC insurance, revoke the charter and/or take possession of and close and liquidate the Bank or appoint the FDIC as receiver.~~

Deposit Insurance

The FDIC is an independent federal agency that insures deposits, up to prescribed statutory limits, of federally insured banks and savings institutions, and safeguards the safety and soundness of the depository institutions. The FDIC insures our customer deposits through the DIF up to prescribed ~~limits.~~limits, currently $250 thousand per customer. The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound, or that the institution has engaged in unsafe or unsound practices that pose a risk to the DIF or that may prejudice the interest of the bank’s depositors. The termination of the Bank’s deposit insurance would result in the revocation of the Bank’s charter by the ~~DBO.~~DFPI.

We are generally unable to control the amount of assessments that we pay for FDIC insurance, which can be affected by the cost of bank failures to the FDIC, among other factors. The Dodd-Frank Act revised the FDIC’s DIF management authority by setting requirements for the Designated Reserve Ratio (the DIF balance divided by estimated insured deposits) and redefining the assessment base which is used to calculate banks’ quarterly assessments. The amount of FDIC assessments paid by each DIF member institution is based on its asset size and its relative risk of default as measured by regulatory capital ratios and other supervisory factors.

In 2016, the FDIC adopted a rule increasing the DIF’s minimum reserve ratio to 1.35% as required by the Dodd Frank Act. As required by the Dodd-Frank Act, the costs of increasing the DIF’s reserve ratio from 1.15% to 1.35% will be borne by depository institutions with total consolidated assets of $10 billion or more, which has an impact on the Bank’s deposit insurance assessments because the Bank now has in excess of $10 billion in assets. Any future ~~increases~~changes in FDIC insurance assessments may have a material and adverse effect on our earnings and could have a material adverse effect on the value of, or market for, our common stock.

Safety and Soundness Standards; Regulatory Enforcement Authority

The federal and California bank regulatory agencies have extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of appropriate loan loss reserves for regulatory purposes. The federal bank regulatory agencies have adopted guidelines to assist in identifying and addressing potential safety and soundness concerns before an institution’s capital becomes impaired. The guidelines establish operational and managerial standards generally relating to: (1) internal controls, information systems, and internal audit systems; (2) loan documentation; (3) credit underwriting; (4) interest-rate exposure; (5) asset growth and asset quality; and (6) compensation, fees, and benefits. Further, the regulatory agencies have adopted safety and soundness guidelines for asset quality and for evaluating and monitoring earnings to ensure that earnings are sufficient for the maintenance of adequate capital and reserves.

If the FRB, the FDIC or the DFPI should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the Company’s or the Bank’s operations are unsatisfactory or that the Company or the Bank or management is violating or has violated any law or regulation, these agencies have the authority to:

•Require affirmative action to correct any conditions resulting from any violation or practice;

•Direct an increase in capital and the maintenance of higher specific minimum capital ratios, which could preclude Hope Bancorp or the Bank from being deemed well capitalized which, in the case of the Bank, would restrict its ability to accept certain brokered deposits, for example;

•Restrict Hope Bancorp’s or the Bank’s growth geographically, by products and services, or by mergers and acquisitions;

•Enter into or issue informal or formal enforcement actions, including required board resolutions, memoranda of understanding, written agreements and consent or cease and desist orders or prompt corrective action orders to take corrective action and cease unsafe and unsound practices;

•Assess civil money penalties;

•Require prior approval of senior executive officer or director changes; remove officers and directors and assess civil monetary penalties; and

•Terminate FDIC insurance, revoke the charter and/or take possession of and close and liquidate the Bank or appoint the FDIC as receiver.

Dividends and Stock Repurchases

Hope Bancorp’s ability to pay dividends or repurchase shares of its common stock is subject to restrictions set forth in the Delaware General Corporation Law. The Delaware General Corporation Law provides that a Delaware corporation may pay dividends or repurchase its shares either (i) out of the corporation’s surplus (as defined by Delaware law), or (ii) if there is no surplus, out of the corporation’s net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. It is the FRB’s policy, however, that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. FRB policy requires that a bank holding company must notify the FRB if its repurchase or redemption of shares would cause a net reduction in the amount of such capital instrument outstanding at the beginning of the quarter in which the redemption or repurchase occurs. It is also the FRB’s policy that bank holding companies should not maintain dividend levels or repurchase shares in amounts that would undermine their ability to be a source of strength to its banking subsidiaries. The FRB also discourages dividend payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong. In addition, if Hope Bancorp does not maintain an adequate capital conservation buffer under the Basel III Capital Rules, its ability to pay dividends to or repurchase shares from stockholders may be restricted.

The Bank is a legal entity that is separate and distinct from Hope Bancorp. Hope Bancorp depends on the ~~performance~~Bank’s payment of ~~the Bank for funds that the Bank may pay to Hope Bancorp~~dividends as ~~dividends~~its primary source of cash for use in Hope Bancorp’s operations, Hope Bancorp’s payment of dividends to stockholders and ~~that~~ Hope ~~Bancorp may use~~Bancorp’s stock repurchases. The Bank’s ability to pay dividends ~~to shareholders. The ability of the Bank to pay a cash dividend~~ to Hope Bancorp is subject to provisions of the California Financial Code that limit the amount available for cash dividends to the lesser of a bank’s retained earnings or net income for its last three fiscal years (less any distributions to ~~shareholders~~stockholders made during such period). Where the above test is not met, cash dividends may still be paid, with the prior approval of the ~~DBO,~~DFPI, in an amount not exceeding the greatest of (1) retained earnings of the ~~bank;~~Bank; (2) the net income of the ~~bank~~Bank for its last fiscal year; or (3) the net income of the ~~bank~~Bank for its current fiscal year. The Bank’s ability to pay cash dividends to Hope Bancorp will also depend upon management’s assessment of future capital requirements, contractual restrictions, and other factors. ~~The New Capital Rules may also restrict dividends by~~If the Bank ~~if the additional~~does not maintain an adequate capital conservation buffer ~~is not achieved.~~

~~Table of Contents~~

~~Operations and Consumer Compliance Laws~~

~~The Bank must comply with numerous federal and state anti-money laundering and consumer protection statutes and implementing regulations, including, but not limited to,~~under the ~~USA PATRIOT Act of 2001,~~Basel III Capital Rules, the Bank Secrecy Act, the Foreign Account Tax Compliance Act, the CRA, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act, the California Homeowner Bill of Rights and various federal and state privacy protection laws, including the Telephone Consumer Protection Act, and CAN-SPAM Act. Noncompliance with any of these laws could subject the Bankmay face restrictions on its ability to ~~compliance enforcement actions as well as lawsuits and could also result in administrative penalties, including, fines and reimbursements. The Bank and~~pay dividends to Hope ~~Bancorp are also subject to federal and state laws prohibiting unfair or fraudulent business practices, untrue or misleading advertising and unfair competition.~~

The Bank received a “Satisfactory” rating in the most recent public disclosure of CRA performance evaluation released by the FDIC in 2015, which states that the Bank’s CRA performance under the Lending, Investment, and Service Tests supports the overall rating.Bancorp.

Consumer ~~Finance~~Financial Protection Bureau

The Dodd-Frank Act created the CFPB as an independent entity within the FRB with broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential mortgages, home-equity loans and credit cards. The ~~bureau’s~~CFPB’s functions include investigating consumer complaints, conducting market research, rulemaking, supervising and examining bank consumer transactions, and enforcing rules related to consumer financial products and services. CFPB regulations and guidance apply to all financial institutions and banks with $10 billion or more in assets are subject to examination by the CFPB. Banks with less than $10 billion in assets continue to be examined for compliance by their primary federal banking agency. The Bank is subject to examination by the CFPB. The CFPB has the authority to bring formal and informal enforcement actions against the Bank similar to those that may be brought by the federal banking regulators discussed above.

In 2014, the CFPB adopted revisions to Regulation Z, which ~~implement~~implements the Truth in Lending Act, pursuant to the Dodd-Frank Act, and apply to consumer mortgages. The revisions mandate specific underwriting criteria for home loans in order for creditors to make a reasonable, good faith determination of a consumer’s ability to repay and establish certain protections from liability under the requirements for “qualified mortgages” that meet certain specific standards. As required by the Dodd-Frank Act, the CFPB also promulgated TILA-RESPA Integrated Disclosure ~~(”TRID”)~~ rules which became effective in 2015 and require new mortgage disclosures.

Human Capital Resources

It is our philosophy to attract, develop, and retain a diverse range of qualified bankers who share our values, entrepreneurial spirit and unwavering commitment to service. The Company respects, values, and invites diversity in our team members, customers, suppliers, marketplace, and community. We seek to recognize the unique contribution each individual brings to our company, and we are fully committed to supporting a rich culture of diversity as a cornerstone to our success.

We recognize that retaining a culture of diversity and inclusion requires active engagement and motivation. In 2022, we launched a social rewards and recognition platform that allows employees to recognize one another for milestones and achievements, or simply express gratitude to anyone within the Bank ~~believes it has fully implemented~~for demonstrating Bank of Hope Core Values, which are Integrity, Teamwork, Fairness, Initiative, Transparency and Satisfaction. Employees can redeem accumulated points for a gift card or use the ~~TRID requirements.~~points toward one of the many experiences available through the program.

We provide professional development opportunities to team members and seeks to improve retention, development, and job satisfaction of team members from diverse groups by providing career skills training, mentoring, and tuition fee reimbursements to support job related higher education. All employees of Bank of Hope are required to undergo various training courses on a quarterly basis to promote their ongoing growth and professional development as bankers. Training courses focus on compliance, banking regulations, information security, cybersecurity, workplace safety, among others, as well as business code and ethics topics, including confidentiality, whistle blower policy, anti-harassment, and conflict of interest.

~~Employees~~We offer a competitive salary and a leading benefits package that includes medical, dental and vision healthcare, 401(k) benefits, parental and family leave, holiday and paid time off, and tuition assistance. We are committed to the long-term health of our employees and provide basic life, basic accidental death and dismemberment (AD&D) and long-term disability insurance, Flexible Spending Accounts (FSA), and discounted gym memberships, among other benefits. We also conduct regular wellness programs and incentivize our staff to participate in activities and webinars that promote a healthy lifestyle.

As of December 31, ~~2017~~,2022, we had ~~1,470~~1,549 full-time equivalent employees compared to ~~1,372~~1,476 full-time equivalent employees at December 31, ~~2016.~~2021. None of our employees are represented by a union or covered by a collective bargaining agreement. Management believes that its relations with its employees are good.

Our employees actively share their talents in their communities through volunteer activities in education, economic development, human and health services, and community reinvestment. Our employees are committed to be good neighbors that foster growth for our customers and communities. As a community based bank, we are committed to being model corporate citizens and through our communities through various forms of investments, contributions, and volunteer work.

Some of the highlights we have taken to be a socially responsible company are:

•One out of two of the Bank’s branches are located in low-to-moderate income areas;

•Our employees had nearly 731 hours of CRA-reportable volunteer hours in 2022;

•We funded approximately $4.45 billion of loans in 2022;

•We have invested in affordable housing partnership investments, CRA investments, and CDFI investments;

•We had approximately $315.8 million of CRA-reportable small business lending in 2022;

•We had approximately $570 thousand in charitable donations and grants to 122 organizations to support the social, educational and cultural wellness of the communities in which we operate; and

•We awarded 60 students grants of $1,500 each in 2022. In aggregate, we contributed approximately more than $2.3 million to the Hope Scholarship Foundation since its establishment in 2001.

In 2022, we launched and published our initial Environmental, Social and Governance (“ESG”) report and webpage in our investor relation website (www.ir-hopebancorp.com). The initial ESG report contains our ESG progress including the establishment of an ESG framework, ESG policy, and our achievements on the ESG compliance.

~~Table of Contents~~

Item 1A.RISK FACTORS


~~Item 1A.~~	~~RISK FACTORS~~

In the course of conducting ~~its~~our business operations, we are exposed to a variety of risks, some of which are inherent in the financial services industry and others of which are more specific to ~~its~~our own business. The following discussion addresses the most significant risks that could affect our business, financial condition, liquidity, results of operations, and capital position. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs, our business, financial condition and results of operations may be materially and adversely effected. In that event, the market price for our common stock ~~will~~would likely decline.

~~Risk relating~~Risks Related to our ~~business~~Business

Economic conditions in the markets in which we operate may adversely affect our loan portfolio and reduce the demand for our services. We focus our business primarily in Korean-American communities in California, the greater New York City, Chicago, Houston, ~~and~~ Dallas, Tampa, and Seattle metropolitan areas, New Jersey, Virginia, ~~Alabama,~~Georgia and ~~Georgia.~~Alabama. Adverse economic conditions in our market areas could potentially have a material adverse impact on the quality of our business. A renewed economic slowdown in the markets in which we operate currently and in the future may have any or all of the following consequences, any of which may reduce our net income and adversely affect our financial condition:

•loan delinquencies may increase;

•problem assets and foreclosures may increase;

•the level and duration of deposits may decline;

•demand for our products and services may decline; and

•collateral for loans may decline in value below the principal amount owed by the borrower.

We have a high level of loans secured by real estate collateral. A downturn in the real estate market may seriously impair our loan portfolio. As of December 31, ~~2017~~,2022, approximately ~~77%~~61% of our loan portfolio consisted of loans secured by various types of commercial real ~~estate. Following the financial crisis of 2008, there was a general~~estate (excluding 1-4 family residential mortgage loans). A slowdown in the economy ~~and~~is often accompanied by declines in the value of real estate. ~~Although~~In the ~~economy has rebounded and real estate prices have gradually recovered from their earlier low levels, it is possible that there will be~~height of the COVID-19 pandemic, the impact of the virus resulted in renewed deterioration in the real estate market generally and in commercial real estate values in particular. Such developments may result in additional loan charge-offs and provisions for ~~loan~~credit losses, which may have a material and adverse effect on our net income and capital levels.

Our commercial loan and commercial real estate loan portfolios expose us to risks that may be greater than the risks related to our other loans. Our loan portfolio includes commercial loans and commercial real estate loans, which are secured by hotels and motels, shopping/retail centers, service station and car wash, industrial and warehouse properties, and other types of commercial properties. Commercial and commercial real estate loans carry more risk as compared to other types of lending, because they typically involve larger loan balances often concentrated with a single borrower or groups of related borrowers.

Accordingly, charge-offs on commercial and commercial real estate loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios. In addition, these loans expose a lender to greater credit risk than loans secured by residential real estate. The payment experience on commercial real estate loans that are secured by income producing properties are typically dependent on the successful operation of the related real estate project and thus, may subject us to adverse conditions in the real estate market or to the general economy. The collateral securing these loans typically cannot be liquidated as easily as residential real estate. If we foreclose on these loans, our holding period for the collateral typically is longer than residential properties because there are fewer potential purchasers of the collateral.

Unexpected deterioration in the credit quality of our commercial or commercial real estate loan portfolios would require us to increase our provision for ~~loan~~credit losses, which would reduce our profitability and could materially adversely affect our business, financial condition, results of operations and prospects.

In addition, with respect to commercial real estate loans, federal and state banking regulators are examining commercial real estate lending activity with heightened scrutiny and may require banks with higher levels of commercial real estate loans to implement more stringent underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures. Because a significant portion of our loan portfolio is comprised of commercial real estate loans, the banking regulators may require us to maintain higher levels of capital than we would otherwise be expected to maintain, which could limit our ability to leverage our capital and have a material adverse effect on our business, financial condition, results of operations and prospects.

~~Table of Contents~~

Our allowance for ~~loan~~credit losses may not cover our actual loan losses. As a lender, we are exposed to the risk that the principal of, or interest on, a loan will not be paid timely or at all or that the value of any collateral supporting a loan will be insufficient to cover our outstanding exposure. In accordance with U.S. GAAP, we maintain an allowance for credit losses to provide for loan defaults and non-performance. If our actual ~~loan~~credit losses exceed the amount we have allocated for estimated ~~probable incurred~~current expected credit losses, our business will be adversely affected. We attempt to limit the risk that borrowers will fail to repay loans by carefully underwriting our loans, but losses nevertheless occur in the ordinary course of business operations. We create allowances for estimated ~~loan~~credit losses through provisions that are recorded as reductions in income in our accounting records. We base these allowances on estimates of the following:

•historical experience with our loans;

•evaluation of current economic conditions and other factors;

•reviews of the quality, mix and size of the overall loan portfolio;

•reviews of delinquencies; and

•the quality of the collateral underlying our loans.

If our allowance estimates are inadequate, we may incur losses, our financial condition may be materially and adversely affected and we may be required to try and raise additional capital to enhance our capital position. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the adequacy of our allowance. These agencies may require us to establish additional allowances based on their judgment of the information available at the time of their examinations. No assurance can be given that we will not sustain loan losses in excess of present or future levels of the allowance for ~~loan~~credit losses or that regulatory agencies will not require us to increase our allowance thereby impacting our profitability.

An increase in nonperforming assets would reduce our income and increase our expenses. If the level of nonperforming assets increases in the future, it may adversely affect our operating results and financial condition. Nonperforming assets are mainly loans on which the borrowers are not making their required payments. Nonperforming assets also include loans that have been restructured to permit the borrower to make payments and real estate that has been acquired through foreclosure or deed in lieu of foreclosure of unpaid loans. To the extent that assets are nonperforming, we have less earning assets generating interest income and an increase in credit related expenses, including provisions for credit losses.

Increases in the level of our problem assets, occurrence of operating losses or a failure to comply with requirements of the agencies which regulate us may result in regulatory actions against us which may materially and adversely affect our business and the market price of our common stock. The DFPI, the FDIC, and the FRB each have authority to take actions to require that we comply with applicable regulatory capital requirements, cease engaging in what they perceive to be unsafe or unsound practices or make other changes in our business. Among others, the corrective measures that such regulatory authorities may take include requiring us to enter into informal or formal agreements regarding our operations, the issuance of cease and desist orders to refrain from engaging in unsafe and unsound practices, removal of officers and directors and the assessment of civil monetary penalties. See “Item 1. Business – Supervision and Regulation” for a further description of such regulatory powers.

Our use of appraisals in deciding whether to make loans secured by real property does not ensure that the value of the real property collateral will be sufficient to repay our loans. In considering whether to make a loan secured by real property, we require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made and requires the exercise of a considerable degree of judgment. If the appraisal does not accurately reflect the amount that may be obtained upon sale or foreclosure of the property, whether due to a decline in property value after the date of the original appraisal or defective preparation of the appraisal, we may not realize an amount equal to the indebtedness secured by the property and as a result, we may suffer losses.

Changes in interest rates affect our profitability. The interest rate risk inherent in our lending, investing, and deposit taking activities is a significant market risk to us and our business. We derive our income mainly from the difference or “spread” between the interest earned on loans, securities and other interest earning assets, and interest paid on deposits, borrowings and other interest bearing liabilities. In general, the wider the spread, the more net interest income we earn. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can greatly affect our income. In addition, interest rate fluctuations can affect how much money we may be able to lend. There can be no assurance that we will be successful in minimizing the potentially adverse effects of changes in interest rates.

We face risks associated with the replacement of LIBOR. The London Interbank Offered Rate, or LIBOR, was largely phased out at the end of 2021 with the exception of certain U.S. dollar-based benchmarks that will be phased out in 2023. The U.S. federal banking agencies have issued guidance strongly encouraging banking organizations to cease using the U.S. Dollar LIBOR as a reference rate in new agreements. LIBOR has served as the benchmark rate worldwide for many financial assets, such as loans, bonds and other securities. While a working group comprised of the Federal Reserve and other market participants proposed an alternative, the Secured Overnight Financing Rate (“SOFR”), there is no consensus on what rate or rates may become accepted alternatives to LIBOR. The market transition away from LIBOR to an alternative reference rate, such as SOFR, is complex and could have a range of adverse effects on our business, financial condition and results of operations. The transition could, for example:

•Adversely affect the interest rates we pay or receive on, the revenue and expenses associated with or the value of our LIBOR-based assets and liabilities, which include our subordinated debentures, certain variable rate loans and certain other securities and financial arrangements;

•Adversely affect the interest rates paid or received on, the revenue and expenses associated with or the value of other securities or financial arrangements, given LIBOR’s role in determining market interest rates globally;

•Prompt inquiries or other actions from banking regulators regarding our preparation and readiness for the replacement of LIBOR with an alternative reference rate; and

•Result in disputes, litigation or other actions with counterparties, including disputes regarding the interpretation and enforceability of fallback language in LIBOR-based contracts and securities.

The manner and impact of the transition from LIBOR to an alternative reference rate and the effect of these developments on our funding costs, loan and investment and trading securities portfolios, asset-liability management, and business, is uncertain. Accordingly, it is not currently possible for us to determine whether, or to what extent, any such changes would affect us. However, the discontinuation of existing benchmark rates could have a material adverse effect on our business, financial condition, results of operations, prospects and customers.

If we lose key employees, our business may ~~suffer~~. suffer. There is intense competition for experienced and highly qualified personnel in the Korean-American banking industry and the banking industry more broadly. Our future success depends on the continued employment of existing senior management personnel. If we lose key employees temporarily or permanently, it may hurt our business. We may be particularly hurt if our key employees, including any of our executive officers, became employed by our competitors in the Korean-American banking industry.

~~Environmental laws may force us to pay for environmental problems~~. The cost of cleaning up or paying damages and penalties associated with environmental problems may increase our operating expenses. When a borrower defaults on a loan secured by real property, we often purchase the property in foreclosure or accept a deedWe face continuing risks related to the ~~property surrendered~~COVID-19 pandemic. Beginning in 2020, the overall economic climate in the U.S., generally, and in our market areas specifically, experienced material disruption due to the COVID-19 pandemic. The extent to which the COVID-19 pandemic will continue to negatively affect our business, financial condition and results of operations will depend on future developments, including the emergence and spread of new strains of COVID-19, which are highly uncertain and cannot be predicted. Additionally, the responses of various governmental and nongovernmental authorities and consumers to the pandemic may have material long term effects on us and our customers, which are difficult to quantify.

We could be subject to a number of risks as the result of the COVID-19 pandemic, any of which could have a material, adverse effect on our business, financial condition and results of operations. These risks include but are not limited to increased credit losses or other impairments in our loan portfolios and increases in our allowance for credit losses; changes in demand for our products and services; a decline in the collateral value for our loans, especially real estate; unavailability of employees; increased cyber security risks as employees work remotely; a prolonged weakness in economic conditions resulting in a reduction of future projected earnings; a triggering event leading to impairment testing on our goodwill and other assets, which could result in impairment charges; and increased costs as we and our regulators, customers and vendors adapt to evolving pandemic conditions.

Our inability to successfully manage the increased credit and other risks caused by the ~~borrower. We may also take over the management~~COVID-19 pandemic could have a material adverse effect on our business, financial condition and results of commercial properties whose owners have defaulted on loans. We also lease premises where our branches and other facilities are located, all where environmental problems may exist. Although we have lending, foreclosure and facilities guidelines that are intended to exclude properties with an unreasonable risk of contamination, hazardous substances may exist on some of the properties that we own, lease, manage or occupy. We may face the risk that environmental laws may force us to clean up the properties at our expense. The cost of cleaning up a property may exceed the value of the property. We may also be liable for pollution generated by a borrower’s operations if we take a role in managing those operations after a default. We may find it difficult or impossible to sell contaminated properties.operations.

We are exposed to the risks of natural disasters. A significant portion of our operations is concentrated in Southern California, which is an earthquake and fire prone region. A major earthquake or fire may result in material loss to us. A significant percentage of our loans are and will be secured by real estate. Many of our borrowers may suffer uninsured property damage, experience interruption of their businesses or lose their jobs after an earthquake or fire. Those borrowers might not be able to repay their loans, and the collateral for such loans may decline significantly in value. Unlike a bank with operations that are more geographically diversified, we are vulnerable to greater losses if an earthquake, fire, flood, mudslide or other natural catastrophe occurs in Southern California.

~~An increase in nonperforming assets would reduce our income and increase our expenses~~. If the level of nonperforming assets increases in the future, it may adversely affect our operating results and financial condition. Nonperforming assets are mainly loans on which the borrowers are not making their required payments. Nonperforming assets also include loans that have been restructured to permit the borrower to make payments and real estate that has been acquired through foreclosure or deed in lieu of foreclosure of unpaid loans. To the extent that assets are nonperforming, we have less earning assets generating interest income and an increase in credit related expenses, including provisions for loan losses.

We may experience adverse effects from acquisitions. We have acquired other banking companies and bank offices in the past, and will consider additional acquisitions as opportunities arise. If we do not adequately address the financial and operational

~~Table of Contents~~

risks associated with acquisitions of other companies, we may incur material unexpected costs and disruption of our business. Future acquisitions may increase the degree of such risks.

Risks involved in acquisitions of other companies include:

•the risk of failure to adequately evaluate the asset quality of the acquired company;

•difficulty in assimilating the operations, technology and personnel of the acquired company;

•diversion of management’s attention from other important business activities;

•difficulty in maintaining good relations with the loan and deposit customers of the acquired company;

•inability to maintain uniform and effective operating standards, controls, procedures and policies;

•potentially dilutive issuances of equity securities or the incurrence of debt and contingent liabilities; and

•amortization of expenses related to acquired intangible assets that have finite lives.

Liquidity risks may impair our ability to fund operations and jeopardize our financial condition. Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans, and other sources may have a material adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities may be impaired by factors that affect us specifically or the financial services industry in general. Factors that may detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us. Our ability to acquire deposits or borrow may also be impaired by factors that are not specific to us, such as a disruption of the financial markets or negative views and expectations about the prospects for the banking industry or the general financial services industry as a whole.

Increases in the level of our problem assets, occurrence of operating losses or a failure to comply with requirements of the agencies which regulate us may result in regulatory actions against us which may materially and adversely affect our business and the market price of our common stock. The DBO, the FDIC, and the FRB each have authority to take actions to require that we comply with applicable regulatory capital requirements, cease engaging in what they perceive to be unsafe or unsound practices or make other changes in our business. Among others, the corrective measures that such regulatory authorities may take include requiring us to enter into informal or formal agreements regarding our operations, the issuance of cease and desist orders to refrain from engaging in unsafe and unsound practices, removal of officers and directors and the assessment of civil monetary penalties. See “Item 1. Business – Supervision and Regulation” for a further description of such regulatory powers.

~~Changes in accounting standards may affect how we record and report our financial condition and results of operations~~. Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, the Financial Accounting Standards Board and SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes and their impacts on us can be hard to predict and may result in unexpected and materially adverse impacts on our reported financial condition and results of operations.

~~We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.~~ The Bank Secrecy Act, the USA PATRIOT Act of 2001, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. We are also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control and compliance with the Foreign Corrupt Practices Act. If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could materially and adversely affect our business, financial condition and results of operations.

~~The occurrence of fraudulent~~Fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business. As a financial institution, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related incidents that may be committed against us or our clients, which may result in financial losses or increased costs to us or our clients, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation, or damage to our reputation. Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts. Information security breaches and cybersecurity-related incidents may include fraudulent or unauthorized access to systems used by us or our clients, denial or degradation of service attacks, and malware, or other ~~cyber-~~

~~Table of Contents~~

~~attacks.~~cyber-attacks. In recent periods, there continues to be a rise in electronic fraudulent activity, security breaches, and cyber-attacks within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting commercial bank accounts. Consistent with industry trends, we have also experienced an increase in attempted electronic fraudulent activity, security breaches and cybersecurity-related incidents in recent periods. Moreover, in recent periods, several large corporations, including financial institutions and retail companies, have suffered major data breaches, in some cases exposing not only confidential and proprietary corporate information, but also sensitive financial and other personal information of their customers and employees and subjecting them to potential fraudulent activity. Some of our clients may have been affected by these breaches, which increase their risks of identity theft, credit card fraud and other fraudulent activity that could involve their accounts with us.

We are subject to operational risks relating to our technology and information systems. The continued efficacy of our technology and information systems, related operational infrastructure and relationships with third party vendors in our ongoing operations is integral to our performance. Failure of any of these resources, including but not limited to operational or systems failures, interruptions of client service operations and ineffectiveness of or interruption in third party data processing or other vendor support, may cause material disruptions in our business, impairment of customer relations and exposure to liability for our customers, as well as action by bank regulatory authorities.

Information pertaining to us and our clients is maintained, and transactions are executed, on the networks and systems of us, our clients and certain of our third party partners, such as our online banking or reporting systems. The secure maintenance and transmission of confidential information, as well as execution of transactions over these systems, are essential to protect us and our clients against fraud and security breaches and to maintain our clients’ confidence. Breaches of information security also may occur, and in infrequent cases have occurred, through intentional or unintentional acts by those having access to our systems or our clients’ or counterparties’ confidential information, including employees. In addition, increases in criminal activity, levels and sophistication, advances in computer capabilities, new discoveries, vulnerabilities in third-party technologies (including browsers and operating systems) or other developments could result in a compromise or breach of the technology, processes and controls that we use to prevent fraudulent transactions and to protect data about us, our clients and underlying transactions, as well as the technology used by our clients to access our systems. Although we have developed, and continue to invest in, systems and processes that are designed to detect and prevent security breaches and cyber-attacks and periodically test our security, our inability to anticipate, or failure to adequately mitigate, breaches of security could result in: losses to us or our clients; our loss of business and/or clients; damage to our reputation; the incurrence of additional expenses; disruption to our business; our inability to grow our online services or other businesses; additional regulatory scrutiny or penalties; or our exposure to civil litigation and possible financial liability - any of which could have a material adverse effect on our business, financial condition and results of operations.

More generally, publicized information concerning security and cyber-related problems could inhibit the use or growth of electronic or web-based applications or solutions as a means of conducting commercial transactions. Such publicity may also cause damage to our reputation as a financial institution. As a result, our business, financial condition and results of operations could be adversely affected.

~~We are subject to operational risks relating~~Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our ~~technology~~environmental, social and ~~information systems. The continued efficacy of our technology~~governance practices may impose additional costs on us or expose us to new or additional risks. Companies are facing increasing scrutiny from customers, regulators, investors, investor advocacy groups, and ~~information systems,~~other stakeholders related ~~operational infrastructure~~to their environmental, social, and ~~relationships with third party vendors~~governance (“ESG”) practices and disclosure, especially as they relate to the environment, health and safety, diversity, labor conditions, and human rights. Increased ESG related compliance costs will result in ~~our ongoing operations is integral~~increases to our ~~performance.~~overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our financial condition and results of ~~any~~operations. New government regulations could also result in new or more stringent forms of ESG oversight and expand mandatory and voluntary reporting, diligence, and disclosure. Additionally, concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these ~~resources, including but not limited~~concerns. We, along with our customers, will need to ~~operational or systems failures, interruptions of client service operations~~respond to new laws and ineffectiveness of or interruption in third party data processing or other vendor support, may cause material disruptions in our business, impairment of customer relations and exposure to liability for our customers,regulations as well as ~~action by bank regulatory authorities.~~consumer and business preferences resulting from climate change concerns. We may also face cost increases, asset value reductions, operating process changes, among other impacts. In addition, we could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans.

In 2022, we launched and published our initial ESG report and webpage in our investor relations website (www.ir-hopebancorp.com). The initial ESG report contains our ESG progress including the establishment of an ESG framework, ESG policy, and our achievements on the ESG compliance. However, there is no guarantee that our efforts will adequately address new laws and regulations and governmental efforts as well as investor concerns. Our efforts to take these risks into account in making lending and other decisions may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.

Our business reputation is important and any damage to it may have a material adverse effect on our business. Our reputation is very important for our business, as we rely on our relationships with our current, former, and potential clients and stockholders in the communities we serve. Any damage to our reputation, whether arising from regulatory, supervisory or enforcement actions, matters affecting our financial reporting or compliance with SEC and exchange listing requirements, negative publicity, our conduct of our business or otherwise may have a material adverse effect on our business.

As we expand outside our ~~California~~traditional geographic markets, we may encounter additional risks that may adversely affect us. Currently, the majority of our offices are located in California, but we also have offices in the greater New York City, Chicago, Houston, Dallas, Tampa, and Seattle metropolitan areas, New Jersey, Virginia, ~~Alabama,~~Colorado, Georgia, and ~~Georgia.~~Alabama. Over time, we may seek to establish offices to serve Korean-American and other ethnic communities in other parts of the United States as well. In the course of these expansion activities, we may encounter significant risks, including unfamiliarity with the characteristics and business dynamics of new markets, increased marketing and administrative expenses and operational difficulties arising from our efforts to attract business in new markets, manage operations in noncontiguous geographic markets, comply with local laws and regulations and effectively and consistently manage our non-California personnel and business. If we are unable to manage these risks, our operations may be materially and adversely affected.

~~Table of Contents~~

Adverse conditions in South Korea or globally may adversely affect our business. A substantial number of our customers have economic and cultural ties to South Korea and, as a result, we are likely to feel the effects of adverse economic and political conditions there. If economic or political conditions in South Korea deteriorate, we may, among other things, be exposed to economic and transfer risk, and may experience an outflow of deposits by our customers with connections to South Korea. Transfer risk may result when an entity is unable to obtain the foreign exchange needed to meet its obligations or to provide liquidity. This may materially and adversely impact the recoverability of investments in or loans made to such entities. Adverse economic conditions in South Korea may also negatively impact asset values and the profitability and liquidity of our customers who operate in this region. In addition, a general overall decline in global economic conditions may materially and adversely affect our profitability and overall results of operations.

~~Our use of appraisals in deciding whether to make loans secured by real property does not ensure that the value of the real property collateral will be sufficient to repay our loans~~. In considering whether to make a loan secured by real property, we require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is madeLegal and requires the exercise of a considerable degree of judgment. If the appraisal does not accurately reflect the amount that may be obtained upon sale or foreclosure of the property, whether due to a decline in property value after the date of the original appraisal or defective preparation of the appraisal, we may not realize an amount equal to the indebtedness secured by the property and as a result, we may suffer losses.Regulatory Risks

Governmental regulation and regulatory actions against us may further impair our operations or restrict our growth. We are subject to significant governmental supervision and regulation. These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Statutes and regulations affecting our business may be changed at any time and the interpretation of these statutes and regulations by examining authorities may also change. In addition, regulations may be adopted which increase our deposit insurance premiums and enact special assessments which could increase expenses associated with running our business and adversely affect our earnings.

There can be no assurance that such statutes and regulations, any changes thereto or to their interpretation will not adversely affect our business. In particular, these statutes and regulations, and any changes thereto, could subject us to additional costs (including legal and compliance costs), limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. In addition to governmental supervision and regulation, we are subject to changes in other federal and state laws, including changes in tax laws, which could materially affect us and the banking industry generally. We are subject to the rules, ~~and~~ regulations of, and examination by the FRB, the FDIC, ~~and~~ the ~~DBO,~~DFPI, and ~~examination by~~ the CFPB. In addition, we are subject to the rules and regulation of the Nasdaq Stock Market and the SEC and are subject to enforcement actions and other punitive actions by these agencies. If we fail to comply with federal and state regulations, the regulators may limit our activities or growth, impose fines on us or in the case of our bank regulators, ultimately require our bank to cease its operations. Bank regulations can hinder our ability to compete with financial services companies that are not regulated in the same manner or are less regulated. Federal and state bank regulatory agencies regulate many aspects of our operations. These areas include:

•the capital that must be maintained;

•the kinds of activities that can be engaged in;

•the kinds and amounts of investments that can be made;

•the locations of offices;

•insurance of deposits and the premiums that we must pay for this insurance;

•procedures and policies we must adopt;

•conditions and restrictions on our executive compensation; and

•how much cash we must set aside as reserves for deposits.

In addition, bank regulatory authorities have the authority to bring enforcement actions against banks and bank holding companies, including the Bank and Hope Bancorp, for unsafe or unsound practices in the conduct of their businesses or for violations of any law, rule or regulation, any condition imposed in writing by the appropriate bank regulatory agency or any written agreement with the authority. Enforcement actions against us could include a federal conservatorship or receivership for the bank, the issuance of additional orders that could be judicially enforced, the imposition of civil monetary penalties, the issuance of directives to enter into a strategic transaction, whether by merger or otherwise, with a third party, the termination of insurance of deposits, the issuance of removal and prohibition orders against institution-affiliated parties, and the enforcement of such actions through injunctions or restraining orders. In addition, as we have grown beyond $10 billion in assets, we are subject to enhanced CFPB examination ~~as well as~~and required to perform more comprehensive stress-testing on our business and operations.

~~Table~~

We face a risk of ~~Contents~~noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations. The BSA, the USA PATRIOT Act of 2001, the Anti-Money Laundering Act of 2020, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. We are also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control and compliance with the Foreign Corrupt Practices Act. If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could materially and adversely affect our business, financial condition and results of operations.

SBA lending is an important part of our business. Our SBA lending program is dependent upon the federal government, and we face specific risks associated with originating SBA loans. Our SBA lending program is dependent upon the federal government. As an SBA Preferred Lender, we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process ~~necessary~~required for lenders that are not SBA Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the lender’s Preferred Lender status. If we lose our status as a Preferred Lender, we may lose some or all of our customers to lenders who are SBA Preferred Lenders, and as a result we could experience a material adverse effect to our financial results. Any changes to the SBA program, including changes to the level of guarantee provided by the federal government on SBA loans, may also have a material adverse effect on our business.

~~We generally sell the guaranteed portion~~The sales of ~~our~~ SBA 7(a) loans ~~in the secondary market. These sales have resulted~~results in both premium income for us at the time of sale, and ~~created~~creates a stream of future servicing income. We may not be able to continue originating these loans or selling them in the secondary market. Furthermore, even if we are able to continue originating and selling SBA 7(a) loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans. When we sell the guaranteed portion of our SBA 7(a) loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on the non-guaranteed portion of a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us, which could materially adversely affect our business, financial condition, results of operations and prospects.

The laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future. We cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies and especially our organization, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our ability to operate profitably.

Environmental laws may force us to pay for environmental problems. The cost of cleaning up or paying damages and penalties associated with environmental problems may increase our operating expenses. When a borrower defaults on a loan secured by real property, we often purchase the property in foreclosure or accept a deed to the property surrendered by the borrower. We may also take over the management of commercial properties whose owners have defaulted on loans. We also lease premises where our branches and other facilities are located, all where environmental problems may exist. Although we have lending, foreclosure and facilities guidelines that are intended to exclude properties with an unreasonable risk of contamination, hazardous substances may exist on some of the properties that we own, lease, manage or occupy. We may face the risk that environmental laws may force us to clean up the properties at our expense. The cost of cleaning up a property may exceed the value of the property. We may also be liable for pollution generated by a borrower’s operations if we take a role in managing those operations after a default. We may find it difficult or impossible to sell contaminated properties.

Changes in accounting standards may affect how we record and report our financial condition and results of operations. Our ~~stock price may~~accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, the Financial Accounting Standards Board and SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes and their impacts on us can be ~~volatile, which~~hard to predict and may result in ~~substantial losses~~unexpected and materially adverse impacts on our reported financial condition and results of operations.

Financial and Market Risks

We may reduce or discontinue the payment of dividends on common stock. Our stockholders are only entitled to receive such dividends as our Board may declare out of funds legally available for ~~our stockholders. The market price of~~such payments. Although we have historically declared cash dividends on our common stock, we are not required to do so and may ~~be subject to fluctuations in response to a number of factors, including:~~

~~issuing new equity securities;~~

~~the amount of~~reduce or eliminate our common stock ~~outstanding~~dividend in the future. Our ability to pay dividends to our stockholders is subject to the restrictions set forth in Delaware law, by the FRB, and ~~the trading volume of our stock;~~

~~actual or anticipated changes~~by certain covenants contained in our ~~future financial performance;~~

~~changes~~subordinated debentures. Notification to the FRB is also required prior to our declaring and paying a cash dividend to our stockholders during any period in ~~financial performance estimates by us~~ which our quarterly and/or ~~by securities analysts;~~

~~competitive developments, including announcements by us or our competitors of new products or services or acquisitions, strategic partnerships, joint ventures or capital commitments;~~

cumulative twelve-month net earnings are insufficient to fund the ~~operating and stock performance of our competitors;~~

~~changes in interest rates;~~

~~changes in key personnel;~~

~~changes in economic conditions that affect the Bank’s performance; and~~

~~changes in legislation or regulations that affect the Bank.~~

dividend amount, among other requirements. We may ~~raise additional capital, which~~not pay a dividend if the FRB objects or until such time as we receive approval from the FRB or we no longer need to provide notice under applicable regulations. In addition, we may be restricted by applicable law or regulation or actions taken by our regulators, now or in the future, from paying dividends to our stockholders. We cannot provide assurance that we will continue paying dividends on our common stock at current levels or at all. A reduction or discontinuance of dividends on our common stock could have a ~~dilutive~~material adverse effect on ~~the existing holders of~~ our ~~common stock and adversely affect~~business, including the market price of our common stock.~~We periodically evaluate opportunities to access capital markets, taking into account~~

The conditional conversion features of the convertible notes issued by the Company, if met, may adversely affect our financial condition ~~regulatory capital ratios, business strategies, anticipated asset growth~~ and ~~other relevant considerations. It is possible that future acquisitions, organic growth or changes~~operating results. In 2018, we issued $217.5 million aggregate principal amount of 2.00% convertible senior notes maturing on May 15, 2038 in ~~regulatory capital requirements could require us~~a private offering to ~~increase~~qualified institutional buyers under Rule 144A of the ~~amount or change~~Securities Act of 1933. In the ~~composition~~event the conditional conversion features of our current capital, including our common equity. For all of these reasons and others, and always subject to market conditions, we may issue additional shares of common stock or other capital securities in public or private transactions.

~~The issuance of additional common stock or securities~~the convertible ~~into or exchangeable for our common stock or that represent~~notes issued by the ~~right to receive common stock, or the exercise of such securities, could be substantially dilutive to~~Company are met, holders of convertible notes will be entitled to convert the notes at any time during specified periods at their option. If one or more holders elect to convert their notes, unless we elect to satisfy our ~~common stock. Holders~~conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

We may not have ~~no preemptive or other rights that would entitle them~~the capital resources necessary to ~~purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in dilution~~settle conversions of the ~~ownership interests of our stockholders.~~

~~Our ability~~convertible notes in cash or to ~~declare and pay dividends in~~repurchase the ~~future, as well as the ability~~convertible notes if holders of the ~~Bank to make dividend payments to us, will be subject to regulatory, statutory~~convertible note exercise their repurchase rights or upon a fundamental change, and ~~other restrictions. There can be no assurance that we will continue payment of regular cash dividends. Our~~our future debt may contain limitations on our ability to pay ~~dividends~~cash upon conversion or repurchase of the convertible notes. Holders of the convertible notes will have the right to require us to repurchase all or a portion of their convertible notes on certain specified dates or upon the occurrence of a fundamental change at ~~that~~a repurchase price equal to 100% of the principal amount of the convertible notes to be repurchased, plus accrued and unpaid special interest, if any. We may not have enough available cash or be able to obtain financing at the time ~~will be subject~~we are required to ~~statutory and other limitations applicable to us~~repurchase convertible notes surrendered or pay cash with respect to the ~~Bank.~~convertible notes being converted if we elect not to issue shares, which could harm our reputation and affect the trading price of our common stock.

~~Table~~The value of ~~Contents~~

~~Our results~~our securities in our investment portfolio may decline in the future. The fair value of ~~operations or financial condition could~~our investment securities may be adversely affected asby market conditions, including changes in interest rates, implied credit spreads, and the occurrence of any events adversely affecting the issuer of particular securities in our investments portfolio or any given market segment or industry in which we are invested. We analyze our securities available for sale on a ~~result~~quarterly basis to determine if there is a requirement to recognize current expected credit losses. The process for determining current expected credit losses usually requires complex, subjective judgments about the future financial performance of ~~future impairment of our intangible assets. Future acquisitions could result in increases in~~ the ~~amount of our goodwill or other intangible assets. We assess the carrying value of intangible assets, including goodwill, at least annually~~issuer in order to ~~determine whether such assets are impaired. We make~~assess the probability of receiving all contractual principal and interest payments sufficient to recover our amortized cost of the security. Because of changing economic and market conditions affecting issuers, we may be required to recognize credit losses in future periods, which could have a ~~qualitative assessment~~material adverse effect on our business, financial condition, or results of ~~whether it is more likely than not that the fair value of goodwill or other intangible assets is less than its carrying amount.~~operations.

If we fail to maintain an effective system of internal controls and disclosure controls and procedures, we may not be able to accurately report our financial results or prevent fraud. Effective internal control over financial reporting and disclosure controls and procedures are necessary for us to provide reliable financial reports, effectively prevent fraud and to operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and business would be harmed. In addition, failure in our internal control over financial reporting and disclosure controls and procedures could cause us to fail to meet the continued listing requirements of the Nasdaq Global Select Market and, as a result, adversely impact the liquidity and trading price of our securities.

Anti-takeover provisions in our charter documents and applicable federal and state law may limit the ability of another party to acquire us, which could cause our stock price to decline. Various provisions of our charter documents could delay or prevent a third-party from acquiring us, even if doing so might be beneficial to our ~~shareholders.~~stockholders. These include, among other things, advance notice requirements to submit stockholder proposals at stockholder meetings and the authorization to issue “blank check” preferred stock by action of the Board of Directors acting alone, thus without obtaining stockholder approval. In addition, applicable provisions of federal and state banking law require regulatory approval in connection with certain acquisitions of our common stock and supermajority voting provisions in connection with certain transactions. In particular, both federal and state law limit the acquisition of ownership of, generally, 10% or more of our common stock without providing prior notice to the regulatory agencies and obtaining prior regulatory approval or non-objection or being able to rely on an exemption from such requirement. We are also subject to Section 203 of the Delaware General Corporation Law that, subject to exceptions, prohibits us from engaging in any business combinations with any interested stockholder, as defined in that section, for a period of three years following the date on which that stockholder became an interested stockholder. Collectively, these provisions of our charter documents and applicable federal and state law may prevent a merger or acquisition that would be attractive to stockholders and could limit the price investors would be willing to pay in the future for our common stock.

Our common stock is not insured and you could lose the value of your entire investment. An investment in our common stock is not a deposit and is not insured against loss by any government agency.

General Risk Factors

Our common stock is equity and therefore is subordinate to ~~our subsidiaries’~~ indebtedness and preferred stock. Our common stock constitutes equity interests and does not constitute indebtedness. As such, common stock will rank junior to all current and future indebtedness and other non-equity claims on us with respect to assets available to satisfy claims against us, including in the event of our liquidation. We may, and the ~~bank~~Bank and our other subsidiaries may also, incur additional indebtedness from time to time and may increase our aggregate level of outstanding indebtedness. Additionally, holders of common stock are subject to the prior dividend and liquidation rights of any holders of our preferred stock that may be outstanding from time to time. The Board of Directors is authorized to cause us to issue additional classes or series of preferred stock without any action on the part of our stockholders. If we issue preferred shares in the future that have a preference over our common stock with respect to the payment of dividends or upon liquidation, or if we issue preferred shares with voting rights that dilute the voting power of the common stock, then the rights of holders of our common stock or the market price of our common stock could be materially adversely affected.

Our ~~common~~ stock ~~is not insured and you could lose the value~~price may be volatile, which may result in substantial losses for our stockholders. The market price of ~~your entire investment.~~ ~~An investment in~~ our common stock ~~is not~~may be subject to fluctuations in response to a ~~deposit~~number of factors, including:

•issuing new equity securities;

•the amount of our common stock outstanding and ~~is not insured against loss~~the trading volume of our stock;

•actual or anticipated changes in our future financial performance;

•changes in financial performance estimates by ~~any government agency.~~us or by securities analysts;

•competitive developments, including announcements by us or our competitors of new products or services or acquisitions, strategic partnerships, joint ventures or capital commitments;

•the operating and stock performance of our competitors;

•changes in interest rates;

•changes in key personnel;

•changes in economic conditions that affect the Bank’s performance; and

•changes in legislation or regulations that affect the Bank.

We may ~~fail to realize cost savings from the Wilshire merger.~~ Although we expect to realize cost savings from the merger when fully phased in, it is possible that these potential cost savings may not be realized fully or realized at all, or may take longer to realize than expected. For example, future business developments may require us to continue to operate or maintain some facilities or support functions that are currently expected to be combined or reduced. Cost savings also depend on our ability to combine the businesses of the Company and Wilshire in a manner that permits those costs savings to be realized. If we are not able to combine the two companies successfully, these anticipated cost savings may not be fully realized or realized at all, or may take longer to realize than expected,raise additional capital, which could have a ~~material adverse~~dilutive effect on the existing holders of our common stock and adversely affect the market price of our common stock. We periodically evaluate opportunities to access capital markets, taking into account our financial condition, ~~results~~regulatory capital ratios, business strategies, anticipated asset growth and other relevant considerations. It is possible that future acquisitions, organic growth or changes in regulatory capital requirements could require us to increase the amount or change the composition of ~~operation~~our current capital, including our common equity. For all of these reasons and others, and always subject to market conditions, we may issue additional shares of common stock ~~price.~~or other capital securities in public or private transactions.

~~Impairment~~

The issuance of ~~goodwill resulting prior mergers~~additional common stock, debt, or securities convertible into or exchangeable for our common stock or that represent the right to receive common stock, or the exercise of such securities, could be substantially dilutive to holders of our common stock. Holders of our common stock have no preemptive or other rights that would entitle them to purchase their pro rata share of any offering of shares of any class or series and, ~~acquisitions may~~therefore, such sales or offerings could result in dilution of the ownership interests of our stockholders.

Climate change concerns could adversely affect our ~~results~~business and our customers. Concerns over the long-term impacts of ~~operations.~~ ~~Goodwill~~climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Climate change presents multi-faceted risks, including operational risk from the physical effects of ~~approximately $464.5 million~~climate events on us; credit risk from borrowers with significant exposure to climate risk; transition risks associated with the transition to a less carbon-dependent economy; and ~~core deposits intangibles of $16.5 million were recorded~~reputational risk from stakeholder concerns about our practices related to climate change. Consumers and businesses are changing their behavior and business preferences as a result of ~~prior mergers~~these concerns. New governmental regulations or guidance relating to climate change, as well as changes in consumers’ and ~~acquisitions. Potential impairment of goodwill~~businesses’ behaviors and ~~amortization of other intangible assets~~business preferences, may affect whether and on what terms and conditions we will engage in certain activities or offer certain products or services. The governmental and supervisory focus on climate change could ~~adversely affect~~also result in our ~~financial condition, results of operations and stock price. We assess our goodwill and other intangible assets and long-lived assets~~becoming subject to new or heightened regulatory requirements relating to climate change, such as requirements relating to operational resiliency or stress testing for impairment annually and more frequently when required by generally accepted accounting principles. We are required to record an impairment charge if circumstances indicate that the asset carrying values exceed their fair values. Our assessment of goodwill, other intangible assets,various climate stress scenarios. Any such new or ~~long-lived assets could indicate that an impairment of the carrying value of such assets may have occurred that~~heightened requirements could result in increased regulatory, compliance or other costs or higher capital requirements. In connection with the transition to a ~~material, non-cash write-down~~low carbon economy, legislative or public policy changes and changes in consumer sentiment could negatively impact the businesses and financial condition of ~~such assets,~~our clients, which ~~could have a material adverse effect on~~may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Our business, reputation and ability to attract and retain employees may also be harmed if our ~~results of operations and future earnings.~~

response to climate change is perceived to be ineffective or insufficient.

~~Table of Contents~~

Implementation of the various provisions of the Dodd-Frank Act-in particular provisions that are applicable to banks and bank holding companies with $10 billion or more in assets-may delay the receipt of regulatory approvals and increase our operating costs or otherwise have a material effect on our financial condition, results of operations and stock price. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) enacted in 2010 significantly changes the bank regulatory structure and affects the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting the implementing rules and regulations, and the rule-making process is still underway.

Several requirements in the Dodd-Frank Act for new banking regulations are applicable to certain banks and bank holding companies with $10 billion or more in assets. As a result of the merger, we surpassed this threshold, and these provisions, subject to a phase in period, will significantly increase compliance and operating costs and otherwise may have a significant impact on our business, financial condition, results of operations and stock price. Such provisions include the following:Item 1B.UNRESOLVED STAFF COMMENTS

The Dodd-Frank Act created the Consumer Financial Protection Bureau (“CFPB”), which has broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks with more than $10 billion in assets, and accordingly has assumed examination and enforcement authority over us post-merger.

The Dodd-Frank Act increased the authority of the FRB to examine us and our non-bank subsidiaries and gave the FRB the authority to establish rules regarding interchange fees charged for an electronic debit transaction by a payment card issuer that, together with its affiliates, has assets of $10 billion or more, and to enforce a new statutory requirement that such fees be reasonable and proportional to the actual cost of a transaction to the issuer (the “Durbin Amendment”). By regulation, the FRB has limited the fees for such a transaction to the sum of 21 cents plus five basis points times the value of the transaction, plus up to one cent for fraud prevention costs. The effect of the Durbin Amendment has significantly lowered our interchange or “swipe” revenue, but such lower fees are not expected to have a material adverse effect on our results of operations.

The Dodd-Frank Act established 1.35% as the minimum Designated Reserve Ratio (“DRR”). The FDIC has determined that the DRR should be 2.0% and has adopted a plan under which it will meet the statutory minimum DRR of 1.35% by the statutory deadline of September 30, 2020. The Dodd-Frank Act requires the FDIC to offset the effect of the increase in the statutory minimum DRR to 1.35% from the former statutory minimum of 1.15% on institutions with assets less than $10 billion. As a result of the merger, we are no longer entitled to benefit from the offset.

The Dodd-Frank Act requires a publicly traded bank holding company with $10 billion or more in assets to establish and maintain a risk committee responsible for enterprise-wide risk management practices, comprised of an independent chairman and at least one risk management expert. The risk committee must approve and periodically review the risk-management policies of the bank holding company’s global operations and oversee the operations of its risk-management framework. The bank holding company’s risk-management framework must be commensurate with its structure, risk profile, complexity, activities and size. These requirements will first apply to us commencing on October 1, 2018, and we will need to build the necessary infrastructure to comply with these enhanced risk management requirements well before the effective date.

A bank holding company with more than $10 billion in assets is required under the Dodd-Frank Act to conduct annual stress tests using various scenarios established by the FRB, including a baseline, adverse and severely adverse economic conditions (known as “Dodd-Frank Act Stress Tests” or “DFAST”). The stress tests are designed to determine whether our capital planning, assessment of our capital adequacy and risk management practices, adequately protect it and its affiliates in the event of an economic downturn. We must establish adequate internal controls, documentation, policies and procedures to ensure the annual stress test adequately meets these objectives. Our Board of Directors are required to review our policies and procedures at least annually. We are also required to report the results of its annual stress tests to the FRB, and to consider the results of the stress tests as part of its capital planning and risk management practices. We will be subject to the DFAST regime commencing on January 1, 2018, but well in advance of that date, we have undertaken the planning and other actions that we deem reasonably necessary to achieve timely compliance.

It is difficult to predict the overall compliance cost of these provisions, which became effective (with phase-in periods) when the merger was consummated. Compliance with these provisions will require additional staffing, engagement of external consultants and other operating costs that could have a material adverse effect on our future financial condition, results of operations and stock price.

~~Table of Contents~~


~~Item~~ ~~1B.~~	~~UNRESOLVED STAFF COMMENTS~~

None.


~~Item 2.~~	~~PROPERTIES~~

Item 2.PROPERTIES

Our principal executive offices are located at 3200 Wilshire Blvd., Suite 1400, Los Angeles, California 90010. As of December 31, ~~2017,~~2022, we operated full-service branches at 5647 leased and seven owned facilities, and we operated loan production offices at ~~eight~~10 leased facilities. Expiration dates of our leases range from ~~2018~~2023 to ~~2030.~~2032. We believe our present facilities are suitable and adequate for our current operating needs.


~~Item 3.~~	~~LEGAL PROCEEDINGS~~

Item 3.LEGAL PROCEEDINGS

In the normal course of business, we are involved in various legal claims. We have reviewed all legal claims against us with counsel and have taken into consideration the views of such counsel as to the potential outcome of the claims. ~~Accrued loss~~Loss contingencies for all legal claims totaled approximately ~~$414~~$229 thousand at December 31, ~~2017.~~2022. It is reasonably possible we may incur losses in addition to the amounts we have accrued. However, at this time, we are unable to estimate the range of additional losses that are reasonably possible because of a number of factors, including the fact that certain of these litigation matters are still in their early stages and involve claims for which, at this point, we believe have little to no merit. Management has considered these and other possible loss contingencies and does not expect the amounts to be material to any of the consolidated financial statements.


~~Item 4.~~	~~MINE SAFETY DISCLOSURES~~

Item 4.MINE SAFETY DISCLOSURES

Not ~~applicable.~~Applicable.

~~Table of Contents~~

Part II


~~Item 5.~~	~~MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES~~

Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Global Select Market under the symbol “HOPE.”

The following table sets forth ~~the~~ quarterly ~~range of high and low closing prices and quarterly dividend~~dividends paid on our common stock for the past two fiscal years:


	For the Three Months Ended
	March 31, 2021		June 30, 2021		September 30, 2021		December 31, 2021		March 31, 2022		June 30, 2022		September 30, 2022		December 31, 2022
Dividends Paid	$	0.14	$	0.14	$	0.14	$	0.14	$	0.14	$	0.14	$	0.14	$	0.14

Closing Sale Price
Dividends
Paid
Quarters ended: High Low
December 31, 2017 $ 19.22

$ 17.03

$ 0.13
September 30, 2017 $ 19.17

$ 15.21

$ 0.13
June 30, 2017 $ 19.63

$ 17.41

$ 0.12
March 31, 2017 $ 22.69

$ 18.57

$ 0.12
December 31, 2016 $ 22.41
$ 15.45
$ 0.12
September 30, 2016 $ 17.45
$ 14.41
$ 0.11
June 30, 2016 $ 16.36
$ 14.09
$ 0.11
March 31, 2016 $ 16.80
$ 13.79
$ 0.11

The Company’s Board of Directors currently intends to continue its policy of paying quarterly cash dividends, however, no assurance can be given as to whether future dividends will be paid as cash dividend payments are dependent on the Company’s future earnings, capital requirements, and financial condition.

The closing price for our common stock on the NASDAQ Global Select Market on February 21, ~~2018~~2023 was ~~$18.74~~$12.96 per share. As of February 21, ~~2018,~~2023, there were ~~1,188~~1,119 stockholders of record of our common stock.

Our ability to pay dividends is subject to restrictions set forth in the Delaware General Corporation Law. The Delaware General Corporation Law provides that a Delaware corporation may pay dividends either (i) outUnregistered Sales of ~~the corporation’s surplus (as defined by Delaware law), or (ii) if there is~~Equity Securities

There were no ~~surplus, out~~sales of the corporation’s net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. In addition, the payment of dividends by us is subject to review and possible limitationany equity securities by the ~~FRB~~Company during the period covered this Annual Report on Form 10-K that were not registered under the Securities Act.

Issuer Purchases of Equity Securities

In January 2022, the Company’s Board of Directors approved a share repurchase program that authorized the Company to repurchase up to $50.0 million of its ~~authority as regulator of bank holding companies, including any limitations which~~common stock. The stock repurchase authorization does not have an expiration date and may be ~~imposed as a condition in connection with~~modified, amended, suspended, or discontinued at the Company’s discretion at any regulatory approvals we may apply for. In general, the FRB discourages the payment of dividends on common stock in amounts exceeding a holding company’s net income available to common stockholders for the four quarters preceding a dividend payment. If we defer interest on the subordinated debentures issued in connection with our trust preferred securities, Hope Bancorp would also be prohibited from paying any dividends on common stock or preferred stock until Hope Bancorp is current on its interest payments.

~~Our ability to pay cash dividends in the future will depend in large part on the ability of the Bank to pay dividends on its capital stock to us.~~time without notice. The ~~ability of the Bank to declare a cash dividend to us is subject to compliance with its minimum capital requirements and, additional limitations under California law and regulations.~~

~~The applicable statutory and regulatory limitations on the declaration and payment of dividends are further described in “Item 1. Business – Supervision and Regulation –~~ ~~Dividends~~.”

WeCompany did not repurchase any shares as part of ~~our shares of common stock~~this program during the ~~year~~three months ended December 31, ~~2017. We currently do not have a common stock~~2022.

The following table summarizes share repurchase ~~program in place.~~activities during the three months ended December 31, 2022:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
					(Dollars in thousands)
October 1, 2022 to October 31, 2022	—	$	—	—	$	35,333
November 1, 2022 to November 30, 2022	—	—		—	35,333
December 1, 2022 to December 31, 2022	—	—		—	35,333
Total	—	$	—	—

~~Table of Contents~~

Stock Performance Graph

The following graph compares the yearly percentage change in the cumulative total shareholder return (stock price appreciation plus reinvested dividends) on our common stock with (i) the cumulative total return of the NASDAQ Composite Index, and (ii) the cumulative total return of the KBW Regional Banking Index. This year the stock performance graph reflects changes made by the Company to the broad equity market indices presented by removing the S&P ~~Small Cap~~500 Index and the S&P 600 Index, ~~(iii)~~and to the published industry index presented by replacing the S&P U.S. BMI Banks Index with the KBW Regional Banking Index. Management believes that the KBW Regional Banking Index provides a ~~published index comprised~~better peer group comparison of ~~banks~~financial institutions more comparable to the Company in asset size and ~~thrifts selected by SNL Financial LLC,~~other factors. The Company is not a company within the S&P 500 Index. In accordance with Item 201(e) of the Regulation S-K of the Securities and ~~(iv)~~Exchange Commission, which requires the inclusion of all new indexes and all indexes used in the immediately preceding year, this year the performance graph also includes a comparison of the cumulative total return offor (iii) the S&P 600 Index, (iv) the S&P U.S. BMI Banks Index, and (v) the S&P 500 Index.

The graph assumes an initial investment of $100 and reinvestment of dividends. Points on the graph represent the performance as of the last business day of each of the years indicated. The graph is not indicative of future price performance.

The ~~following~~ graph does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any filing by Hope Bancorp under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we may specifically incorporate this graph by reference.

~~COMPARATIVE CUMULATIVE TOTAL RETURN~~

~~AMONG HOPE BANCORP, NASDAQ MARKET INDEX, S&P SMALL CAP 600 INDEX,~~

~~SNL BANK & THRIFT INDEX AND, S&P 500 INDEX~~

ASSUMES $100 INVESTED ON DECEMBER 31, ~~2012~~2017

ASSUMES DIVIDENDS REINVESTED

FISCAL YEAR ENDING DECEMBER 31, ~~2017~~2022


	Period Ending
Stock/Index	12/31/2017	12/31/2018	12/31/2019	12/31/2020	12/31/2021	12/31/2022
Hope Bancorp, Inc.	$100.00	$67.17	$87.51	$68.24	$95.86	$86.69
NASDAQ Composite Index	$100.00	$97.16	$132.81	$192.47	$235.15	$158.65
KBW Regional Banking Index	$100.00	$82.50	$102.15	$93.25	$127.42	$118.59
S&P 600 Index*	$100.00	$91.52	$112.37	$125.05	$158.59	$133.06
S&P U.S. BMI Banks Index*	$100.00	$83.54	$114.74	$100.10	$136.10	$112.89
S&P 500 Index*	$100.00	$95.62	$125.72	$148.85	$191.58	$156.88

Period Ending
Stock/Index 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017
Hope Bancorp, Inc. $100.00 $146.02 $129.62 $159.60 $208.86 $178.79
NASDAQ Composite $100.00 $140.12 $160.78 $171.97 $187.22 $242.71
S&P 600 Index $100.00 $141.31 $149.45 $146.50 $185.40 $209.94
SNL Bank and Thrift $100.00 $136.92 $152.85 $155.94 $196.86 $231.49
S&P 500 Index $100.00 $132.39 $150.51 $152.59 $170.84 $208.14

~~Table of Contents~~


~~Item 6.~~	~~SELECTED FINANCIAL DATA~~

~~The following table presents selected financial and other data for each of the years~~* Indices previously used in the five-year period ended December 31, 2017. The information below should be read in conjunction with, the more detailed information included elsewhere herein, including our Audited Consolidated Financial Statements and Notes thereto.immediately preceding year.

As of or For The Year Ended December 31,
2017 2016 2015 2014 2013
(Dollars in thousands, except share and per share data)
Income Statement Data:
Interest income $ 572,104
$ 421,934
$ 313,660
$ 302,657
$ 283,073
Interest expense 90,724
58,579
40,618
36,060
30,018
Net interest income 481,380
363,355
273,042
266,597
253,055
Provision for loan losses 17,360
9,000
8,000
12,638
20,000
Net interest income after provision for loan losses 464,020
354,355
265,042
253,959
233,055
Noninterest income 66,415
51,819
43,691
44,187
42,719
Noninterest expense 266,601
214,975
153,384
151,624
141,620
Income before income tax provision 263,834
191,199
155,349
146,522
134,154
Income tax provision 124,389
77,452
63,091
57,907
52,399
Net income $ 139,445
$ 113,747
$ 92,258
$ 88,615
$ 81,755

Per Common Share Data:

Earnings - basic $ 1.03
$ 1.10
$ 1.16
$ 1.11
$ 1.03
Earnings - diluted $ 1.03
$ 1.10
$ 1.16
$ 1.11
$ 1.03
Book value (period end) $ 14.23
$ 13.72
$ 11.79
$ 11.10
$ 10.18
Cash dividends declared per common share $ 0.50
$ 0.45
$ 0.42
$ 0.35
$ 0.25
Number of common shares outstanding (period end) 135,511,891
135,240,079
79,566,356
79,503,552
79,441,525
Balance Sheet Data—At Period End:
Assets $ 14,206,717
$ 13,441,422
$ 7,912,648
$ 7,140,330
$ 6,475,199
Securities available for sale $ 1,720,257
$ 1,556,740
$ 1,010,556
$ 792,523
$ 701,751
Loans receivable, net of unearned loan fees and discounts (excludes loans held for sale) $ 11,102,575
$ 10,543,332
$ 6,248,341
$ 5,565,192
$ 5,074,175
Deposits $ 10,846,609
$ 10,642,035
$ 6,340,976
$ 5,693,452
$ 5,148,057
FHLB advances and federal funds purchased $ 1,227,593
$ 754,290
$ 530,591
$ 480,975
$ 421,352
Subordinated debentures $ 100,853
$ 99,808
$ 42,327
$ 42,158
$ 57,410
Stockholders’ equity $ 1,928,255
$ 1,855,473
$ 938,095
$ 882,773
$ 809,374

Average Balance Sheet Data:

Assets $ 13,648,963
$ 10,342,063
$ 7,389,530
$ 6,830,244
$ 6,042,674
Securities available for sale $ 1,679,468
$ 1,276,068
$ 871,010
$ 713,775
$ 699,812
Gross loans, including loans held for sale $ 10,642,349
$ 8,121,897
$ 5,846,658
$ 5,355,243
$ 4,692,089
Deposits $ 10,751,886
$ 8,232,984
$ 5,879,704
$ 5,439,920
$ 4,739,261
Stockholders’ equity $ 1,907,746
$ 1,342,954
$ 912,609
$ 848,443
$ 788,570

~~Table of Contents~~

Item 6.[RESERVED]

As of or For The Year Ended December 31,
2017 2016 2015 2014 2013
(Dollars in thousands)
Selected Performance Ratios:
Return on average assets⁽¹⁾
1.02 % 1.10 % 1.25 % 1.30 % 1.35 %
Return on average stockholders’ equity⁽²⁾
7.31 % 8.47 % 10.11 % 10.44 % 10.37 %
Average stockholders’ equity to average assets 13.98 % 12.99 % 12.35 % 12.42 % 13.05 %
Dividend payout ratio
(dividends per share/earnings per share)
48.54 % 40.86 % 36.21 % 31.53 % 24.27 %
Net interest spread⁽³⁾
3.46 % 3.49 % 3.62 % 3.88 % 4.23 %
Net interest margin⁽⁴⁾
3.80 % 3.75 % 3.88 % 4.13 % 4.46 %
Yield on interest earning assets⁽⁵⁾
4.51 % 4.36 % 4.46 % 4.68 % 4.99 %
Cost of interest bearing liabilities⁽⁶⁾
1.05 % 0.87 % 0.84 % 0.80 % 0.76 %
Efficiency ratio⁽⁷⁾
48.67 % 51.78 % 48.43 % 48.79 % 47.88 %

Regulatory Capital Ratios:
Hope Bancorp:
Common Equity Tier 1 12.30 % 12.10 % 12.08 % 12.96 % 12.65 %
Tier 1 Leverage 11.54 % 11.49 % 11.53 % 11.62 % 11.97 %
Tier 1 risk-based 13.11 % 12.92 % 12.67 % 13.64 % 13.66 %
Total risk-based 13.82 % 13.64 % 13.80 % 14.80 % 14.90 %
Bank of Hope:
Common Equity Tier 1 12.95 % 12.75 % 12.56 % 13.44 % 13.46 %
Tier 1 Leverage 11.40 % 11.33 % 11.43 % 11.45 % 11.79 %
Tier I risk-based 12.95 % 12.75 % 12.56 % 13.44 % 13.46 %
Total risk-based 13.66 % 13.46 % 13.69 % 14.61 % 14.70 %

Asset Quality Data:
Nonaccrual loans $ 46,775
$ 40,074
$ 40,801
$ 46,353
$ 39,154
Loans 90 days or more past due and still accruing ⁽⁸⁾
407
305
375
361
5
Restructured loans (accruing) 67,250
48,874
47,984
57,128
33,903
Total nonperforming loans 114,432
89,253
89,160
103,842
73,062
Other real estate owned 10,787
21,990
21,035
21,938
24,288
Total nonperforming assets $ 125,219
$ 111,243
$ 110,195
$ 125,780
$ 97,350

Asset Quality Ratios:
Nonaccrual loans to loans receivable 0.42 % 0.38 % 0.65 % 0.83 % 0.77 %
Nonperforming loans to loans receivable 1.03 % 0.85 % 1.43 % 1.87 % 1.44 %
Nonperforming assets to total assets 0.88 % 0.83 % 1.39 % 1.76 % 1.50 %
Nonperforming assets to loans receivable and
other real estate owned
1.13 % 1.05 % 1.76 % 2.25 % 1.91 %
Allowance for loan losses to loans receivable 0.76 % 0.75 % 1.22 % 1.22 % 1.33 %
Allowance for loan losses to nonaccrual loans 180.74 % 197.99 % 187.27 % 146.18 % 171.94 %
Allowance for loan losses to nonperforming loans 73.88 % 88.90 % 85.70 % 65.25 % 92.14 %
Allowance for loan losses to nonperforming assets 67.51 % 71.32 % 69.34 % 53.87 % 69.15 %
Net charge-offs (recoveries) to average loans receivable 0.11 % 0.07 % (0.01 )% 0.23 % 0.42 %


~~(1)~~	~~Net income divided by average assets.~~


~~(2)~~	~~Net income divided by average stockholders’ equity.~~


~~(3)~~	~~Difference between the average yield earned on interest earning assets and the average rate paid on interest bearing liabilities.~~


~~(4)~~	~~Net interest income expressed as a percentage of average interest earning assets.~~


~~(5)~~	~~Interest income divided by average interest earning assets.~~


~~(6)~~	~~Interest expense divided by average interest bearing liabilities.~~


~~(7)~~	~~Noninterest expense divided by the sum of net interest income plus noninterest income.~~


~~(8)~~	~~Excludes acquired credit impaired loans totaling $18.1 million, $19.6 million, $12.2 million, $30.4 million, and $43.8 million as of December 31, 2017, 2016, 2015, 2014, and 2013, respectively.~~

~~Table of Contents~~

Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


~~Item 7.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~You should read the~~The following discussion and analysis of our financial condition and results of operations should be read together with our Consolidated Financial Statements and accompanying notes presented elsewhere in this Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under Item 1A “Risk Factors” and elsewhere in this Report. Please see the “Forward Looking Information” immediately preceding Part I of this Report.

Overview

We offer a full range of commercial and retail banking loan and deposit products through Bank of Hope. We have 6354 banking offices in California, New York/New Jersey, Illinois, Washington, Texas, Virginia, ~~Alabama,~~Georgia and ~~Georgia.~~Alabama. We have ~~eight~~10 loan production offices located in Atlanta, Houston, Dallas, Denver, Portland, Seattle, Fremont, ~~Newport Beach,~~Tampa and ~~Laguna Niguel.~~in Southern California. We offer our banking services through our network of banking offices and loan production offices to our customers who typically are small to medium-sized businesses in our market areas. We accept deposits and originate a variety of loans including commercial business loans, ~~commercial~~ real estate loans, trade finance loans, SBA loans, and consumer loans.

Our results are affected by economic conditions in our markets and to a lesser degree in South Korea. A decline in economic and business conditions in our market areas or in South Korea may have a material adverse impact on the quality of our loan portfolio or the demand for our products and services, which in turn may have a material adverse effect on our financial condition and results of operations.

Our principal business involves earning interest on loans and investment securities that are funded primarily by customer deposits, wholesale deposits, and other borrowings. Our 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 and income from the sale of ~~SBA~~ loans. Our major expenses are the interest we pay on deposits and borrowings, provisions for ~~loan~~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 and political changes and events. We cannot predict the impact that these factors and future changes in domestic and foreign economic and political conditions might have on our performance.

~~Mergers~~Our results are affected by economic conditions in our markets and ~~Acquisitions~~to a lesser degree in South Korea. A decline in economic and business conditions in our market areas or in South Korea may have a material adverse impact on the quality of our loan portfolio or the demand for our products and services, which in turn may have a material adverse effect on our financial condition and results of operations.

~~On January 23, 2017, we announced the signing of a definitive agreement~~

Selected Financial Data

The following table presents selected financial and plan of merger (the “U & I Merger Agreement”) with U & I Financial Corporation (“U & I”) pursuant to which U & I would have merged with and into Hope Bancorp with Hope Bancorp as the surviving corporation. As partother data for each of the ~~merger, UniBank, a wholly-owned subsidiary of U & I, would have merged with and into~~years in the ~~Bank. Subsequently on September 15, 2017, we announced the termination of the proposed merger with U & I as regulatory approval had not been obtained.~~five-year period ended December 31, 2022. The ~~Mutual Termination Agreement provides, among other things, that each party will bear its own costs and expenses~~information below should be read in ~~connection~~conjunction with, the ~~terminated transaction, without penalties or termination fees. In connection with~~more detailed information included elsewhere herein, including our Audited Consolidated Financial Statements and Notes thereto.


	As of or For The Year Ended December 31,
	2022		2021		2020		2019		2018
	(Dollars in thousands, except share and per share data)
Income Statement Data:
Interest income	$	716,115	$	566,532	$	598,878	$	684,786	$	650,172
Interest expense	137,694		53,762		131,380		218,191		162,245
Net interest income	578,421		512,770		467,498		466,595		487,927
Provision (credit) for credit losses	9,600		(12,200)		95,000		7,300		14,900
Net interest income after provision (credit) for credit losses	568,821		524,970		372,498		459,295		473,027
Noninterest income	51,397		43,594		53,432		49,683		60,180
Noninterest expense	324,170		293,292		283,639		282,628		277,726
Income before income tax provision	296,048		275,272		142,291		226,350		255,481
Income tax provision	77,771		70,700		30,776		55,310		65,892
Net income	$	218,277	$	204,572	$	111,515	$	171,040	$	189,589

Per Common Share Data:
Earnings - basic	$	1.82	$	1.67	$	0.90	$	1.35	$	1.44
Earnings - diluted	$	1.81	$	1.66	$	0.90	$	1.35	$	1.44
Book value (period end)	$	16.90	$	17.44	$	16.66	$	16.19	$	15.03
Cash dividends declared per common share	$	0.56	$	0.56	$	0.56	$	0.56	$	0.54
Number of common shares outstanding (period end)	119,495,209		120,006,452		123,264,864		125,756,543		126,639,912
Balance Sheet Data—At Period End:
Assets	$	19,164,491	$	17,889,061	$	17,106,664	$	15,667,440	$	15,305,952
Investment securities AFS and HTM	2,243,195		2,666,275		2,285,611		1,715,987		1,846,265
Loans receivable, net of unearned loan fees and discounts (excludes loans held for sale)	15,403,540		13,952,743		13,563,213		12,276,007		12,098,115
Deposits	15,738,801		15,040,450		14,333,912		12,527,364		12,155,656
FHLB and FRB borrowings	865,000		300,000		250,000		625,000		821,280
Subordinated debentures	106.565		105.354		104,178		103,035		101,929
Convertible notes, net	217,148		216,209		204,565		199,458		194,543
Stockholders’ equity	2,019,328		2,092,983		2,053,745		2,036,011		1,903,211

Average Balance Sheet Data:
Assets	$	18,231,609	$	17,467,665	$	16,515,102	$	15,214,412	$	14,749,166
Investment securities AFS and HTM	2,415,621		2,392,589		1,899,948		1,796,412		1,772,080
Loans receivable and loans held for sale	14,634,627		13,343,431		12,698,523		11,998,675		11,547,022
Deposits	15,172,264		14,727,778		13,560,531		12,066,719		11,628,177
Stockholders’ equity	2,034,027		2,071,453		2,032,570		1,981,811		1,910,224


	As of or For The Year Ended December 31,
	2022			2021			2020			2019			2018
	(Dollars in thousands)
Selected Performance Ratios:
Return on average assets(1)	1.20		%	1.17		%	0.68		%	1.12 %			1.29 %
Return on average stockholders’ equity(2)	10.73		%	9.88		%	5.49		%	8.63		%	9.92 %
Average stockholders’ equity to average assets	11.16		%	11.86		%	12.31		%	13.03 %			12.95 %
Dividend payout ratio (dividends per share/earnings per share)	30.91		%	33.71		%	62.22		%	41.54 %			37.58 %
Net interest spread(3)	2.84		%	2.86		%	2.58		%	2.65 %			3.04 %
Net interest margin(4)	3.36		%	3.09		%	3.00		%	3.27 %			3.53 %
Yield on interest earning assets(5)	4.16		%	3.42		%	3.84		%	4.81 %			4.71 %
Cost of interest bearing liabilities(6)	1.32		%	0.56		%	1.26		%	2.16 %			1.67 %
Efficiency ratio(7)	51.47		%	52.72		%	54.45		%	54.74 %			50.67 %

Regulatory Capital Ratios:
Hope Bancorp:
Common equity tier 1	10.55		%	11.03		%	10.94		%	11.76 %			11.44 %
Tier 1 leverage	10.15		%	10.11		%	10.22		%	11.22 %			10.55 %
Tier 1 risk-based	11.15		%	11.70		%	11.64		%	12.51 %			12.21 %
Total risk-based	11.97		%	12.42		%	12.87		%	13.23 %			12.94 %
Bank of Hope:
Common equity tier 1	12.03		%	12.96		%	12.90		%	13.72 %			13.63 %
Tier 1 leverage	10.94		%	11.20		%	11.33		%	12.29 %			11.76 %
Tier 1 risk-based	12.03		%	12.96		%	12.90		%	13.72 %			13.63 %
Total risk-based	12.85		%	13.68		%	14.14		%	14.44 %			14.36 %

Asset Quality Data:
Nonaccrual loans(8)	$	49,687		$	54,616		$	85,238		$	54,785		$	53,286
Loans 90 days or more past due and still accruing (9)	401			2,131			614			7,547			1,529
Accruing restructured loans	16,931			52,418			37,354			35,709			50,410
Total nonperforming loans	67,019			109,165			123,206			98,041			105,225
Other real estate owned	2,418			2,597			20,121			24,091			7,754
Total nonperforming assets	$	69,437		$	111,762		$	143,327		$	122,132		$	112,979

Asset Quality Ratios:
Nonaccrual loans to loans receivable	0.32		%	0.39		%	0.63		%	0.45 %			0.44 %
Nonperforming loans to loans receivable	0.44		%	0.78		%	0.91		%	0.80 %			0.87 %
Nonperforming assets to total assets	0.36		%	0.62		%	0.84		%	0.78 %			0.74 %
Nonperforming assets to loans receivable and other real estate owned	0.45		%	0.80		%	1.06		%	0.99 %			0.93 %
Allowance for credit losses to loans receivable	1.05		%	1.01		%	1.52		%	0.77 %			0.77 %
Allowance for credit losses to nonaccrual loans	326.76		%	257.34		%	242.55		%	171.84 %			173.70 %
Allowance for credit losses to nonperforming loans	242.26		%	128.75		%	167.80		%	96.03 %			87.96 %
Allowance for credit losses to nonperforming assets	233.82		%	125.76		%	144.24		%	77.08 %			81.92 %
Net (recoveries) charge-offs to average loans receivable	(0.08)		%	0.40		%	0.07		%	0.04 %			0.06 %

(1)Net income divided by average assets.

(2)Net income divided by average stockholders’ equity.

(3)Difference between the ~~termination,~~average yield earned on interest earning assets and the ~~parties have provided mutual releases to one another relating to~~average rate paid on interest bearing liabilities.

(4)Net interest income expressed as a percentage of average interest earning assets.

(5)Interest income divided by average interest earning assets.

(6)Interest expense divided by average interest bearing liabilities.

(7)Noninterest expense divided by the ~~merger transaction.~~sum of net interest income plus noninterest income.

~~On July 29, 2016, we completed the merger with Wilshire Bancorp, Inc (“Wilshire”). Through the merger, we~~(8)Excludes delinquent SBA loans that are guaranteed and currently in liquidation.

(9)Excludes acquired ~~Wilshire’s thirty-five full-service branch offices, twenty-two of which were located in California, eight in New York~~credit impaired loans totaling $13.2 million and New Jersey, three in Texas, and one of each in Georgia and Alabama. Under the terms of the Merger Agreement, Wilshire shareholders had the right to receive 0.7034 of a share of our common stock in exchange for each share of Wilshire common stock they own in a 100% stock-for-stock transaction.

On August 13, 2013, we completed the acquisition of Foster Bankshares, Inc. (“Foster”), the holding company of Foster Bank. Through the acquisition, we acquired Foster’s nine full-service branch offices, eight of which were located in Illinois and one in Virginia. Under the terms of the acquisition agreement, we issued an aggregate of 189,838 shares of our common stock and paid $2.0$14.1 million ~~in cash to Foster shareholders.~~

On February 15, 2013, we completed the acquisition of Pacific International Bancorp, Inc. (“PIB”), the holding company of Pacific International Bank, a Washington state-chartered bank. Through the acquisition, we acquired PIB’s four full-service branch offices in the Seattle metropolitan area. Under the terms of the acquisition agreement, we issued an aggregate of 632,050 shares of BBCN common stock for each share of PIB common stock owned as of ~~the close of business February 15, 2013.~~

December 31, 2019 and 2018, respectively.

~~Table of Contents~~

~~Each acquisition was accounted for as an acquisition in accordance with the acquisition method of accounting as detailed in Accounting Standards Codification (“ASC”) 805,~~ ~~Business Combinations~~. The acquisition method of accounting requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree based on their fair values as of the date of acquisition. This process is heavily reliant on measuring and estimating the fair values of all the assets and liabilities of the acquired entities. To the extent we did not have the requisite expertise to determine the fair values of the assets acquired and liabilities assumed, we engaged third party valuation specialists to assist us in determining such values.

Critical Accounting Policies

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and generally accepted practices within the banking industry. The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. All of our significant accounting policies are described in Note 1 of our Consolidated Financial Statements presented elsewhere in this Report and are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may materially and adversely differ from these estimates under different assumptions or conditions.

The following is a summary of the more subjective and complex accounting estimates and ~~principles~~judgements affecting the financial condition and results reported in our financial statements. In each area, we have identified the variables we believe to be the most important in the estimation process. We use the best information available to us to make the estimations necessary to value the related assets and liabilities in each of these areas.

~~Business Combinations~~

Mergers and acquisitions are accounted for in accordance with ASC 805 “Business Combinations” using the acquisition method of accounting. Assets and liabilities acquired and assumed are generally recorded at their fair values as of the date of the transaction. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Significant Management has reviewed these critical accounting estimates and ~~judgments are involved in the fair valuation and purchase price allocation process. Critical accounting policies~~ related ~~to acquired loans is discussed in more detail below under “Acquired Loans and Purchase Credit Impaired Loans”.~~disclosures with our Audit Committee.

Investment Securities

~~The fair values of~~Description - We evaluate investment securities are generally determined by quoted market prices obtained from independent external broker or external pricing services providers who have experience in valuing these securities. We perform a monthly analysis on the broker quotes received from third partiesavailable for sale (“AFS”) and held to ~~assess whether the prices represent a reasonable estimate of the fair value. The procedures include, but are not limited~~maturity (“HTM”) for impairment related to initial and on-going review of third party pricing methodologies as well as independent auditors’ reports from the third party regarding its controls over valuation of financial instruments, review of pricing trends and monitoring of trading volumes. We also compare the market prices obtained from one source to another reputable independent external broker or independent external pricing service provider for the reasonableness of the initial market prices obtained on a quarterly basis. We did not adjust any of the prices provided to us by the independent pricing services at ~~December 31, 2017~~ or ~~2016~~.

~~We evaluate securities for other-than-temporary impairment~~credit losses on at least a quarterly ~~basis,~~basis. Based on our evaluation, we do not believe that we had any investment securities AFS or HTM with a credit loss impairment as of December 31, 2022. Investment securities are discussed in more detail under “Financial Condition - Investment Security Portfolio”.

Subjective Estimates and ~~more frequently~~Judgments- Significant judgment is involved in determining when ~~economic or market concerns warrant such evaluation. Consideration is given to the financial condition and near-term prospects of the issuer; the length of time and the extent to which the~~an investment securities AFS decline in fair value ~~has been less than cost, and our intention~~is credit impaired. Investment securities AFS in unrealized loss positions are first assessed as to whether we intend to sell, or ~~whether~~if it is more likely than not that we will be required to sell athe security ~~in an unrealized loss position~~ before recovery of its amortized cost basis. If one of the criteria is met, the security’s amortized cost basis is written down to fair value through current earnings. For securities that do not meet these criteria, we evaluate whether the decline in fair value resulted from credit losses or other factors. In ~~analyzing~~evaluating whether a credit loss exists, we set up an ~~issuer’s financial condition, we consider whether~~initial filter for impairment triggers. Once the quantitative filters have been triggered, the securities are placed on a watch list and an additional assessment is performed to identify whether a credit impairment exists. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors.

The investment securities HTM as of December 31, 2022 were all issued by the ~~federal~~U.S. government or ~~its agencies, whether downgrades by bond rating agencies have occurred,~~government-sponsored enterprises and therefore the ~~results of reviews~~Company applied a zero credit loss assumption.

Impact if Actual Results Differ From Estimates and Judgments - Changes in management’s assessment of the ~~issuer’s financial condition. We do not believe~~factors used to determine if an investment security is credit impaired could lead to additional impairment charges. Additionally, a security that we had ~~any investment securities available~~no apparent risk could be affected by a sudden or acute market condition and necessitate an impairment charge.

Allowance for ~~sale with unrealized~~Credit Losses

Description - The allowance for credit losses ~~that would be deemed~~is maintained at a level believed to be ~~other-than-temporarily impaired~~adequate by management to absorb expected lifetime credit losses in the loan portfolio as of ~~December 31, 2017. Investment securities are~~the date of the consolidated financial statements. The adequacy of the allowance for credit losses is determined by management based upon an evaluation and review of the credit quality of the loan portfolio, consideration of current and projected economic conditions and variables, historical loss experience, relevant internal and external factors that affect the collection of a loan, and other pertinent factors.

The allowance for credit losses is discussed in more detail under “Financial ~~Condition—Investment Securities Portfolios” below.~~

Condition - Allowance for ~~Loan Losses~~Credit Losses.”

~~Accounting for~~Subjective Estimates and Judgments- We determine the adequacy of the allowance for credit losses by analyzing and estimating lifetime expected credit losses in the loan portfolio. The allowance for credit losses ~~involves significant judgments~~is determined utilizing quantitative and qualitative loss factors.

Included in the quantitative portion of our analysis of the allowance for credit losses are key inputs including borrowers’ net operating income, debt coverage ratios, real estate collateral values, as well as key inputs that are more subjective or require management’s judgment including key macroeconomic variables from Moody’s forecast scenarios including GDP, unemployment rates, interest rates, and commercial real estate prices. These key inputs are utilized in our models to develop probability of default (“PD”) and loss given default (“LGD”) assumptions used in the calculation of estimated quantitative losses. The key macroeconomic variables were derived from Moody’s consensus scenario as of December 31, 2022 and 2021.

The key macroeconomic inputs used in the calculation of our allowance for credit losses experienced a general decline from December 31, 2021 to December 31, 2022, particularly projected GDP growth rates and CRE Price Index Growth rates as a result of rising inflation and the potential for a recession in 2023. The decline to certain key macroeconomic inputs contributed to an increase in our allowance for credit losses at December 31, 2022 compared to at December 31, 2021. Changes in our key macroeconomic variables are presented in the tables below.

Moody's Consensus projected key macroeconomic inputs as of December 31, 2022:


	Year Ending December 31,
	2023	2024	2025
GDP Growth*	0.3%	1.6%	2.6%
Unemployment Rate	4.6%	4.7%	4.2%
CRE Price Index Growth*	(2.6)%	1.7%	6.4%
10 Year Treasury Rate	4.5%	3.7%	3.3%

* Represents year over year growth rates.

Moody's Consensus projected key macroeconomic inputs as of December 31, 2021:


	Year Ending December 31,
	2022	2023	2024
GDP Growth*	4.0%	2.5%	2.2%
Unemployment Rate	4.0%	3.7%	3.6%
CRE Price Index Growth*	3.1%	9.6%	6.4%
10 Year Treasury Rate	1.7%	2.1%	2.5%

* Represents year over year growth rates.

In addition to an estimate of quantitatively derived losses, our allowance for credit losses also includes an estimate of qualitatively derived losses to account for risks not fully captured by the quantitative calculation of estimated credit losses. At December 31, 2022, the qualitative portion of our allowance for credit losses totaled $45.1 million compared to $37.7 million at December 31, 2021. The qualitative portion of our allowance for credit losses is determined by management and takes into consideration factors related to changes to lending policies, changes in the nature and volume of loans, risks related to lending management, changes to the volume and severity of past due and nonaccrual loans, changes in the quality of loan review, concentrations of credit, and other external factors. Some of these factors are more subjective than others and require significant judgment from management to determine estimated losses.

Impact if Actual Results Differ From Estimates and Judgments - Adverse changes in management’s assessment of the assumptions and key inputs used to determine the allowance for credit losses could lead to increases in the allowance for credit losses through additional provision for credit losses. If actual losses and conditions differ materially from the assumptions used to determine the allowance for credit losses, our actual credit losses could differ materially from management’s estimates.

Moody’s consensus forecast assumes that the probability that the economy will perform better than the consensus estimates is equal to the probability that it will perform worse. A sensitivity analysis of our allowance for credit losses was performed by estimating credit losses using the Moody’s S2 scenario as of December 31, 2022, which has a ~~material impact~~more negative outlook on the ~~carrying value of net loans.~~economy compared to the Moody’s consensus scenario. The ~~judgments~~S2 scenario includes assumptions including worsening supply chain issues, an increase in interest rates, rising tensions with China regarding Taiwan that could limit the global chip ship supply, and ~~assumptions used by management are based on historical data and management’s analysis of other qualitative factors, including~~a decline in the ~~current economic environment as described under “Financial Condition—Allowance for Loan Losses” below.~~

~~Table of Contents~~

~~Purchased Credit Impaired (“PCI”) Loans~~

In accordance with ASC 310-30, PCI loans were aggregated into pools based on individually evaluated common risk characteristics and expected cash flows were estimated on a pool basis. Each pool is accounted for as a single asset with a single interest rate, cumulative loss rate and cash flow expectation. A loan will be removedstock market. Incorporating key macroeconomic inputs from ~~a pool of loans at its carrying value only if the loan is sold or foreclosed, assets are received~~Moody’s S2 projected scenario in ~~satisfaction~~our calculation of the ~~loan or~~allowance for credit losses resulted in additional allowance for credit losses of approximately $15.1 million compared to the ~~loan is written off.~~

The cash flows expected to be received over the life of the pools were estimated by management with the assistance of a third party valuation specialist. These cash flows were utilized in calculating the carrying values of the pools and underlying loans, book yields, effective interest income and impairment, if any, based on actual and projected events. Default rates, loss severity and prepayment speeds assumptions are periodically reassessed and updated within the accounting model to update the expectation of future cash flows. The excess of the cash expected to be collected over the pool’s carrying value is considered to be the accretable yield and is recognized as interest income over the estimated life of the loan poolresults using the ~~effective interest yield method. The accretable yield will change due to changes in~~Moody’s consensus forecast as of December 31, 2022. Management reviews the ~~timing~~results using the comparison scenario for sensitivity analysis and ~~amounts of expected cash flows. Changes in~~considered the ~~accretable yield are disclosed quarterly.~~results when evaluating the qualitative factor adjustments.

~~The excess of the contractual balances due over the cash flows expected to be collected is considered to be nonaccretable difference. The nonaccretable difference represents our estimate of the~~While management believes that it has established adequate allowances for lifetime credit losses ~~expected to occur~~on loans, actual results may prove different, and ~~was considered in determining~~the differences could be material.

Goodwill

Description - Goodwill is generally determined as the excess of the fair value of the ~~loans as of their acquisition date. Subsequent to their acquisition date, any increases in expected cash flows~~consideration paid over ~~those expected at~~ the ~~acquisition date in excess of~~ fair value are adjusted through the accretable difference on a prospective basis. Any subsequent decreases in expected cash flows over those expected at their acquisition date are recognized by recording a provision for loan losses.

PCI loans that met the criteria for nonaccrual of interest prior to the acquisition are considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if we can reasonably estimate the timing and amount of the expected cash flows on such loans and if we expect to collect the new carrying value of the ~~loans~~net assets acquired and liabilities assumed as of the acquisition date. Goodwill recorded in ~~full. As such, we no longer consider~~a purchase business combination is determined to have an indefinite useful life and is not amortized but tested for impairment at least annually. Goodwill may also be tested for impairment on an interim basis if circumstances change or an event occurs between annual tests that would more likely than not reduce the loan to be nonaccrual or nonperforming and accrue interest on these loans, including the impact of any accretable discount. We have determined that we can reasonably estimate future cash flows on any such acquired loans that are past due 90 days or more and on which we are accruing interest and we expect to fully collect the carryingfair value of the ~~loans.~~reporting unit below its carrying amount. An impairment loss must be recognized for any excess of carrying value over fair value of the goodwill.

~~Goodwill~~

~~We assess goodwill for impairment annually.~~Subjective Estimates and Judgments- Before applying the ~~two-step~~ goodwill impairment test, in accordance with ASC 350 “~~Intangibles~~“Intangibles - Goodwill and Other”, we ~~make~~perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. If we conclude that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, we do not perform Step 1 of the ~~two-step~~ impairment ~~test.~~analysis. We ~~assessed~~assess certain qualitative factors to determine whether impairment ~~was~~is likely including: our market capitalization, capital adequacy, continued performance compared to peers, and continued improvement in asset quality trends, among others. ~~Based on our~~This qualitative assessment ~~we were not required to perform the two-step impairment test as~~can be subjective in nature and includes a certain amount of ~~December 31, 2017.~~

~~Goodwill may also be tested for impairment on an interim basis if circumstances change or an event occurs between annual tests that would~~management judgment in determining whether it is more likely than not ~~reduce the~~that a reporting unit’s fair value ~~of the reporting unit below~~is less than its carrying amount. ~~Significant judgment~~

In the event we perform an impairment test, the determination of fair value is ~~applied when goodwill is assessed for impairment. This judgment includes~~based on valuations using management assumptions and estimates including developing cash flow projections, selecting appropriate discount rates, calculation of a terminal growth rate, minimum target capitalization levels, identifying relevant market comparables, incorporating ~~general~~current and projected economic ~~and market~~ conditions, and selecting an appropriate control premium. ~~The~~

Impact if Actual Results Differ From Estimates and Judgments - Changes in qualitative factors assessed, changes to assumptions used in the impairment test, selection and weighting of the various fair value techniques, ~~may~~and downturns in economic or business conditions, could have a significant adverse impact on the carrying value of goodwill and could result in impairment losses which could have a ~~higher or lower fair value. Judgment is applied in determining the weighting that is most representative of fair value.~~material impact our financial condition and earnings.

Income Taxes

The provision for income taxes is based on income reported for financial statement purposes, and differs from the amount of taxes currently payable, since certain income and expense items are reported for financial statement purposes in different periods than those for tax reporting purposes. Taxes are discussed in more detail in Note 10 to our Consolidated Financial Statements presented elsewhere in this Report. Accrued taxes represent the net estimated amount due or to be received from taxing authorities. In estimating accrued taxes, we assess the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory, judicial, and regulatory guidance in the context of our tax position.Description - We ~~account for income taxes using~~use the asset and liability ~~approach, the objective~~method of accounting for income taxes in which ~~is to establish~~ deferred tax assets and liabilities are established for the temporary differences between the financial reporting basis and the tax basis of our asset and liabilities. The realization of the net deferred tax asset generally depends upon future levels of taxable income and the existence of prior years’ taxable income, to which “carry back” refund claims could be made. A valuation allowance is maintained, when necessary, to reduce deferred tax assets ~~and liabilities at enacted tax rates expected~~that management estimates are more likely than not to be ~~in effect when such amounts~~unrealizable based on available evidence at the time the estimate is made. Furthermore, tax positions that could be deemed uncertain are ~~realized or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,~~required to be disclosed and reserved for if it is more likely than not that ~~some portion,~~the position would not be sustained upon audit examination. Taxes are discussed in more detail in Note 11 to our Consolidated Financial Statements presented elsewhere in this Report.

Subjective Estimates and Judgments- Significant management judgment is required in determining income tax expense and deferred tax assets and liabilities. Some judgments are subjective and involve estimates and assumptions about matters that are inherently uncertain. In determining the valuation allowance, we use historical and forecasted future operating results. In determining the level of reserve needed for uncertain tax positions, we consider relevant current legislation and court rulings, among other authoritative items, to determine the level of exposure inherent in our tax positions. Management believes that the accounting estimate related to the valuation allowance and uncertain tax positions are a critical accounting estimate because the underlying assumptions can change from period to period.

Impact if Actual Results Differ From Estimates and Judgments - Although management believes that the judgments and estimates used are reasonable, should actual factors and conditions differ materially from those considered by management, the actual realization of the net deferred tax asset and tax positions taken could differ materially from the amounts recorded in the financial statements. If we are not able to realize all or ~~all,~~part of our net deferred tax asset in the future or if a tax position is overturned by a taxing authority, an adjustment to the deferred tax asset ~~will not~~valuation allowance would be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income and taxable income, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is updated quarterly and adjusted as necessary.

~~Table of Contents~~

~~Section 382 of the Internal Revenue Code imposes a limitation (“382 Limitation”) on a corporation’s ability~~charged to use any net unrealized built in losses and other tax attributes, such as net operating loss and tax credit carry-forwards, when it undergoes a 50% ownership change over a designated testing period not to exceed three years (“382 Ownership Change”). As a result of the acquisition on July 29, 2016, Wilshire Bancorp underwent a 382 Ownership Change resulting in a 382 Limitation to its net operating loss and tax credit carry-forwards. Wilshire Bancorp did not have a net unrealized built in loss as of the 382 Ownership Change date. Given the applicable 382 Limitation, we expect to fully utilize Wilshire Bancorp’s net operating loss and tax credit carry-forwards before expiration. However, future transactions, such as issuances of common stock or sales of shares of our stock by certain holders of our shares, including persons who have held, currently hold or may accumulate in the future 5% or more of our outstanding common stock for their own account, could trigger a future Section 382 Ownership Change which could limit the our use of these tax attributes.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). Among other changes, the Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%. We have calculated our best estimate of the impact of the Act in our year end income tax provision in accordance with our understanding of the Act and guidance available and as a result have recorded $25.42 million as additional income tax expense in the ~~fourth quarter of 2017, the~~ period insuch determination was made which ~~the legislation was enacted. See Note 10 to the consolidated financial statements for further details.~~

could have a material impact on our earnings.

~~Table of Contents~~

Results of Operations

Operations Summary

Our most significant source of income is net interest income, which is the difference between our interest income and our interest expense. Generally, interest income is generated from the loans we extend to our customers and from investments, and interest expense is generated from interest bearing deposits our customers have with us and from borrowings or debt that we may have, such as FHLB advances, federal funds purchased, convertible notes, and subordinated debentures. Our ability to generate profitable levels of net interest income is largely dependent on our ability to manage the levels of interest earning assets and interest bearing liabilities, and the rates received or paid on them, as well as our ability to maintain sound asset quality and appropriate levels of capital and liquidity. As mentioned above, interest income and interest expense may fluctuate based on factors beyond our control, such as economic or political ~~conditions.~~conditions and policies.

We attempt to minimize the effect of interest rate fluctuations on net interest margin by monitoring our interest sensitive assets and our interest sensitive liabilities. Net interest income can be affected by a change in the composition of assets and liabilities, such as replacing higher yielding loans with a like amount of lower yielding investment securities. Changes in the level of nonaccrual loans and changes in volume and interest rates can also affect net interest income. Volume changes are caused by differences in the level of interest earning assets and interest bearing liabilities. Interest rate changes result from differences in yields earned on assets and rates paid on liabilities.

The other source of our income is noninterest income, including service charges and fees on deposit accounts, loan servicing fees, fees from trade finance activities, net gains on sale of loans that were held for sale and investment securities available for sale, and other income and fees. Our noninterest income can be reduced by charges ~~for other than temporary~~from the credit impairment onof our investment securities.

In addition to interest expense, our income is also impacted by provisions for ~~loan~~credit losses and noninterest expense, primarily salaries and benefits and occupancy expense. The following table presents our condensed consolidated statements of income and the ~~increases~~changes year over year.


	Year Ended December 31, 2022		Increase				Year Ended December 31, 2021		Increase (Decrease)				Year Ended December 31, 2020
			Amount		%				Amount		%
	(Dollars in thousands)
Interest income	$	716,115	$	149,583	26	%	$	566,532	$	(32,346)	(5)	%	$	598,878
Interest expense	137,694		83,932		156	%	53,762		(77,618)		(59)	%	131,380
Net interest income	578,421		65,651		13	%	512,770		45,272		10	%	467,498
Provision (credit) for credit losses	9,600		21,800		N/A		(12,200)		(107,200)		N/A		95,000
Noninterest income	51,397		7,803		18	%	43,594		(9,838)		(18)	%	53,432
Noninterest expense	324,170		30,878		11	%	293,292		9,653		3	%	283,639
Income before income tax provision	296,048		20,776		8	%	275,272		132,981		93	%	142,291
Income tax provision	77,771		7,071		10	%	70,700		39,924		130	%	30,776
Net income	$	218,277	$	13,705	7	%	$	204,572	$	93,057	83	%	$	111,515

Year Ended December 31, 2017 Increase Year Ended December 31, 2016 Increase Year Ended December 31, 2015
Amount % Amount %
(Dollars in thousands)
Interest income $ 572,104
$ 150,170
36 % $ 421,934

$108,274
35 % $ 313,660
Interest expense 90,724
32,145
55 % 58,579
17,961
44 % 40,618
Net interest income 481,380
118,025
32 % 363,355
90,313
33 % 273,042
Provision for loan losses 17,360
8,360
93 % 9,000
1,000
13 % 8,000
Noninterest income 66,415
14,596
28 % 51,819
8,128
19 % 43,691
Noninterest expense 266,601
51,626
24 % 214,975
61,591
40 % 153,384
Income before income tax provision 263,834
72,635
38 % 191,199
35,850
23 % 155,349
Income tax provision 124,389
46,937
61 % 77,452
14,361
23 % 63,091
Net income $ 139,445
$ 25,698
23 % $ 113,747
$ 21,489
23 % $ 92,258

Net Income

Our net income was ~~$139.4~~$218.3 million for ~~2017~~2022 compared to ~~$113.7~~$204.6 million for ~~2016~~2021 and ~~$92.3~~$111.5 million for ~~2015~~.2020. Our diluted earnings per common share ~~based on fully diluted shares were $1.03, $1.10~~totaled $1.81, $1.66, and ~~$1.16~~$0.90 for ~~2017~~, ~~2016~~the years 2022, 2021, and ~~2015~~,2020, respectively. The return on average assets was ~~1.02%~~1.20%, ~~1.10%~~1.17%, and ~~1.25%~~0.68% and the return on average stockholders’ equity was ~~7.31%~~10.73%, ~~8.47%~~9.88%, and ~~10.11%~~5.49% for ~~2017~~, ~~2016~~the years 2022, 2021, and ~~2015~~,2020, respectively. The decline in return on average assets and average stockholders’ equity was due to the enactment of the Tax Act on December 22, 2017 which resulted in a one-time incremental income tax provision expense from the reassessment of our net deferred tax assets and investments in affordable housing partnerships at a lower corporate tax rate. The total impact to tax provision as a result of the reassessment was $25.4 million consisting of $23.8 million related to our adjustment of our net deferred tax assets and $1.6 million for the adjustment to our investments in affordable housing partnerships.

~~Table of Contents~~

~~Impact of Acquisitions~~

The comparability of our operating results is affected by our acquisition of Wilshire Bancorp in July 2016. We acquired $4.63 billion in total assets from Wilshire at the time of the acquisition. The acquisition was accounted for using the acquisition method of accounting and, accordingly, Wilshire’s operating results have been included in the consolidated financial statements from the acquisition date. In addition to Wilshire, we acquired Foster Bancshares and Pacific International Bancorp in 2013. Financial information for the year 2017 reflects a full year of combined operations subsequent to the merger with Wilshire, while 2016 reflects seven months of stand-alone operations and five months of combined operations.

Income before income tax provision for the year ended December 31, 2017 and 2016 was impacted by the accretion of discounts and the amortization of premiums relating to past acquisitions. The following table summarizes the accretion and amortization adjustments that are includedincrease in net income for ~~the year ended December 31, 2017~~2022 compared to 2021 was due primarily to an increase in interest income offset partially by increases in provision for credit losses, interest expense and ~~2016:~~noninterest expense. The increase in net income for 2021 compared to 2020 was due to a decrease in provision for credit losses and a decrease in interest expense offset partially by a decline in interest income.

Year Ended December 31,
2017 2016 2015
(Dollars in thousands)
Accretion on purchased non-impaired loans $ 18,372
$ 9,330
$ 9,840
Accretion on purchased credit-impaired loans 21,542
15,817
7,179
Amortizations of premium on low income housing tax credits (338 ) (127 ) —
Amortization of premiums on acquired FHLB borrowings 1,597
973
384
Accretion of discounts on acquired subordinated debt (1,045 ) (539 ) (169 )
Amortization of premiums on acquired time deposits and savings 4,903
5,857
186
Amortization of core deposit intangibles (2,703 ) (1,732 ) (1,068 )
Total acquisition accounting adjustments $ 42,328
$ 29,579
$ 16,352
Merger-related expenses (1,781 ) (16,914 ) (1,540 )
Total $ 40,547
$ 12,665
$ 14,812

~~Table of Contents~~

Net Interest Margin and Net Interest Rate Spread

We analyze our earnings performance using, among other measures, ~~the~~ net interest spread and net interest margin. The net interest spread represents the difference between the weighted average yield earned on interest earning assets and the weighted average rate paid on interest bearing liabilities. Net interest income, when expressed as a percentage of average total interest earning assets, is referred to as the net interest margin. Our net interest margin is affected by changes in the yields earned on assets and rates paid on liabilities, as well as the ratio of the amounts of interest earning assets to interest bearing liabilities.

Interest rates charged on our loans are affected principally by the demand for such loans, the supply of money available for lending purposes, the interest rate environment, and other competitive factors. These factors are in turn affected by general economic conditions and other factors beyond our control, such as federal economic policies, the general supply of money in the economy, legislative tax policies, governmental budgetary matters, and the actions of the FRB.

The following ~~table presents~~tables present our ~~net interest margin, net interest rate spread, and our condensed~~ consolidated daily average balance ~~sheet information,~~of major assets and liabilities, together with interest rates earned and paid on the various sources and uses of funds for the periods indicated:


	Year Ended December 31,
	2022						2021						2020
	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
	(Dollars in thousands)
INTEREST EARNING ASSETS:
Loans (1) (2)	$	14,634,627	$	660,732	4.51	%	$	13,343,431	$	528,174	3.96	%	$	12,698,523	$	554,967	4.37	%
Investment securities AFS and HTM (3)	2,415,621		52,220		2.16	%	2,392,589		35,492		1.48	%	1,899,948		39,362		2.07	%
FHLB stock and other investments	176,313		3,163		1.79	%	844,010		2,866		0.34	%	982,419		4,549		0.46	%
Total interest earning assets	17,226,561		716,115		4.16	%	16,580,030		566,532		3.42	%	15,580,890		598,878		3.84	%
Total noninterest earning assets	1,005,048						887,635						934,212
Total assets	$	18,231,609					$	17,467,665					$	16,515,102

INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing	$	6,202,104	$	68,961	1.11	%	$	5,657,958	$	22,867	0.40	%	$	4,729,438	$	34,529	0.73	%
Savings	315,775		3,802		1.20	%	309,295		3,623		1.17	%	291,655		3,475		1.19	%
Time deposits	3,084,851		42,076		1.36	%	3,178,722		15,521		0.49	%	4,698,503		72,365		1.54	%
Total interest bearing deposits	9,602,730		114,839		1.20	%	9,145,975		42,011		0.46	%	9,719,596		110,369		1.14	%
FHLB and FRB borrowings	528,342		11,525		2.18	%	208,721		2,561		1.23	%	435,836		6,865		1.58	%
Convertible notes, net	216,654		5,289		2.41	%	215,633		5,289		2.42	%	201,859		9,457		4.61	%
Other borrowings, net	102,037		6,041		5.84	%	100,848		3,901		3.82	%	99,682		4,689		4.63	%
Total interest bearing liabilities	10,449,763		137,694		1.32	%	9,671,177		53,762		0.56	%	10,456,973		131,380		1.26	%
Noninterest bearing liabilities and equity:
Noninterest bearing demand deposits	5,569,534						5,581,803						3,840,935
Other liabilities	178,285						143,232						184,624
Stockholders’ equity	2,034,027						2,071,453						2,032,570
Total liabilities and stockholders’ equity	$	18,231,609					$	17,467,665					$	16,515,102

Net interest income			$	578,421					$	512,770					$	467,498
Net interest margin					3.36	%					3.09	%					3.00	%
Net interest spread (4)					2.84	%					2.86	%					2.58	%
Cost of funds (5)					0.86	%					0.35	%					0.92	%
Cost of deposits					0.76	%					0.29	%					0.81	%

Year Ended December 31,
2017 2016 2015

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Average
Balance

Interest
Income/
Expense

Average
Yield/
Rate
(Dollars in thousands)
INTEREST EARNING ASSETS:
Loans^(1)(2)(3)
$ 10,642,349
$ 529,760
4.98 % $ 8,121,897
$ 392,127
4.83 % $ 5,846,658
$ 291,344
4.98 %
Securities⁽³⁾
1,679,468
36,917
2.20 % 1,276,068
25,442
1.99 % 871,010
18,611
2.14 %
FRB and FHLB stock and
other investments
360,086
5,427
1.51 % 281,824
4,365
1.55 % 313,904
3,705
1.18 %
Total interest earning assets 12,681,903
572,104
4.51 % 9,679,789
421,934
4.36 % 7,031,572
313,660
4.46 %
Total noninterest earning assets 967,060
662,274
357,958

Total assets $ 13,648,963
$ 10,342,063
$ 7,389,530

INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing $ 3,490,440
31,856
0.91 % $ 2,587,548
21,136
0.82 % 1,697,033
12,430
0.73 %
Savings 268,292
1,354
0.50 % 234,332
1,282
0.55 % 193,610
1,670
0.86 %
Time certificates 4,037,259
41,692
1.03 % 3,219,484
25,673
0.80 % 2,377,993
19,312
0.81 %
FHLB advances and
federal funds purchased
787,119
10,706
1.36 % 619,557
7,560
1.22 % 503,127
5,645
1.12 %
Other borrowings 96,363
5,116
5.24 % 64,165
2,928
4.49 % 40,694
1,561
3.78 %
Total interest bearing liabilities 8,679,473
90,724
1.05 % 6,725,086
58,579
0.87 % 4,812,457
40,618
0.84 %
Noninterest bearing liabilities and equity:
Demand deposits 2,955,895
2,191,620
1,611,068

Other liabilities 105,849
82,403
53,396

Stockholders’ equity 1,907,746
1,342,954
912,609

Total liabilities and stockholders’ equity $ 13,648,963
$ 10,342,063
$ 7,389,530

Net interest income $ 481,380
$ 363,355
$ 273,042

Net interest margin 3.80 % 3.75 % 3.88 %
Net interest spread⁽⁴⁾
3.46 % 3.49 % 3.62 %
Cost of funds⁽⁵⁾
0.78 % 0.66 % 0.63 %

(1) Interest income on loans includes accretion of net deferred loan origination fees and costs, prepayment fees received on loan pay-offs and accretion of discounts on acquired loans. See the table below for detail. ~~The average balance of loans is net of deferred loan origination fees and costs~~.

(2) Average balances of loans are net of deferred loan origination fees and costs and include nonaccrual loans and loans held for sale.

(3) Interest income and yields are not presented on a tax-equivalent basis.

(4) Yield on interest earning assets minus cost of interest bearing liabilities.

(5) ~~Yield~~Cost on interest bearing liabilities and noninterest bearing deposits.

~~Table of Contents~~

The following table presents net loan origination fees, loan prepayments fee income, interest reversed for nonaccrual loans, and discount accretion income included as part of loan interest income for the years indicated:

Year ended December 31, Net Loan Origination Fees Loan Prepayment Fee Income Interest Reversed for Nonaccrual Loans, Net of Income Recognized Accretion of Discounts on Acquired Loans
(Dollars in thousands)
2017 $ 1,485
$ 3,963
$ (419 ) $ 39,914
2016 $ 1,798
$ 3,491
$ (483 ) $ 25,147
2015 $ 1,540
$ 2,202
$ 27
$ 17,019


Year Ended December 31,	Net Loan Origination Fees (Costs)		Loan Prepayment Fee Income		Interest Reversed for Nonaccrual Loans, Net of Income Recognized		Accretion of Discounts on Acquired Loans
	(Dollars in thousands)
2022	$	9,990	$	5,350	$	(2,523)	$	2,630
2021	$	14,950	$	4,106	$	(3,184)	$	9,925
2020	$	4,810	$	3,740	$	(1,128)	$	23,059

Net Interest Income

Net interest income was ~~$481.4~~$578.4 million for ~~2017,~~2022, compared to ~~$363.4~~$512.8 million for ~~2016~~2021 and ~~$273.0~~$467.5 million for ~~2015.~~2020. Changes in net interest income are a function of changes in interest rates and ~~volume~~volumes of interest earning assets and interest bearing liabilities. The table below sets forth information regarding the changes in interest income and interest expense for the periods indicated. The total change for each category of interest earning assets and interest bearing liabilities is segmented into the change attributable to variations in volume (changes in volume multiplied by the old rate) and the change attributable to variations in interest rates (changes in rates multiplied by the old volume). Nonaccrual loans are included in average loans used to compute this table.

For the year ended December 31,
2017 Compared to 2016 2016 Compared to 2015

Net
Increase
Change due to
Net
Increase
(Decrease)
Change due to
Rate Volume Rate Volume
(Dollars in thousands)
INTEREST INCOME:
Interest and fees on loans $ 137,633
$ 12,512
$ 125,121
$ 100,783
$ (9,327 ) $ 110,110
Interest on securities 11,475
2,810
8,665
6,831
(1,318 ) 8,149
Interest on other investments 1,062
(120 ) 1,182
660
1,068
(408 )
TOTAL INTEREST INCOME $ 150,170
$ 15,202
$ 134,968
$ 108,274
$ (9,577 ) $ 117,851
INTEREST EXPENSE:
Interest on demand deposits $ 10,720
$ 2,697
$ 8,023
$ 8,706
$ 1,567
$ 7,139
Interest on savings 72
(104 ) 176
(388 ) (692 ) 304
Interest on time deposits 16,019
8,608
7,411
6,361
(355 ) 6,716
Interest on FHLB advances and federal funds purchased 3,146
937
2,209
1,915
526
1,389
Interest on other borrowings 2,188
545
1,643
1,367
334
1,033
TOTAL INTEREST EXPENSE $ 32,145
$ 12,683
$ 19,462
$ 17,961
$ 1,380
$ 16,581
NET INTEREST INCOME $ 118,025
$ 2,519
$ 115,506
$ 90,313
$ (10,957 ) $ 101,270


	Year Ended December 31,
	2022 Compared to 2021						2021 Compared to 2020
	Net Increase		Change due to				Net Increase (Decrease)		Change due to
			Rate		Volume				Rate		Volume
	(Dollars in thousands)
INTEREST INCOME:
Loans, including fees	$	132,558	$	78,519	$	54,039	$	(26,793)	$	(54,047)	$	27,254
Investment securities AFS and HTM	16,728		16,383		345		(3,870)		(12,693)		8,823
FHLB stock and other investments	297		4,078		(3,781)		(1,683)		(1,101)		(582)
TOTAL INTEREST INCOME	$	149,583	$	98,980	$	50,603	$	(32,346)	$	(67,841)	$	35,495
INTEREST EXPENSE:
Demand, interest bearing	$	46,094	$	43,694	$	2,400	$	(11,662)	$	(17,517)	$	5,855
Savings	179		102		77		148		(59)		207
Time deposits	26,555		27,027		(472)		(56,844)		(38,575)		(18,269)
FHLB and FRB borrowings	8,964		3,019		5,945		(4,304)		(1,282)		(3,022)
Convertible notes, net	—		(25)		25		(4,168)		(4,754)		586
Other borrowings, net	2,140		2,093		47		(788)		(840)		52
TOTAL INTEREST EXPENSE	$	83,932	$	75,910	$	8,022	$	(77,618)	$	(63,027)	$	(14,591)
NET INTEREST INCOME	$	65,651	$	23,070	$	42,581	$	45,272	$	(4,814)	$	50,086

Net interest income before provision for ~~loan~~credit losses increased by ~~$118.0~~$65.7 million, or ~~32%~~13%, ~~during 2017.~~for 2022 compared to 2021. The increase was primarily due to increases in loans yields, which increased by 55 basis points for 2022 compared to 2021, and an increase in average ~~interest earning assets by 31% during the year which resulted in~~loan balances. These increases contributed to an increase in total interest income of ~~$135.0~~$149.6 million for 2022 compared to 2021. The increase in interest income ~~due to volume. Interest bearing liabilities increased~~was partially offset by ~~29% for 2017 compared to the previous year, which resulted in~~ an increase ~~of $19.5 million~~ in interest expense of $83.9 million largely due to ~~volume. Although yields on~~an increase in the cost of interest ~~earnings assets increased~~bearing deposits, which grew by 74 basis points for ~~2017~~2022 compared to ~~2016, the increase was largely offset~~2021, reflecting increased market interest rates driven in part by ~~the increase in cost of deposits for the same period.~~Federal Funds target rate hikes during 2022.

Net interest income before provision for credit losses increased ~~$90.3~~by $45.3 million, or ~~33%~~10%, ~~during 2016.~~for 2021 compared to 2020. The increase was primarily due to ~~an increase~~a decrease in ~~average~~cost of interest ~~earning assets~~bearing deposits which decreased by ~~38% during the year which resulted~~68 basis points for 2021 compared to 2020 and a decline in ~~an increase of $117.9 million~~time deposit balances. The decrease in interest ~~income due~~bearing deposit expenses contributed to ~~volume. Interest bearing liabilities increased 40% during the year.~~a decrease in total interest expense of $77.6 million for 2021 compared to 2020. The ~~corresponding increase~~decrease in interest expense ~~due to volume was $16.6 million. The growth in interest earning assets~~ was partially offset by ~~decreasing yields~~a decrease in ~~both~~interest income of $32.3 million due to the origination of lower rate loans ~~and investment securities throughout~~compared to the ~~same period.~~

Average interest earnings assets and liabilities for 2017 included the full year impact from assets acquired and liabilities assumed from Wilshire, while average interest earnings assets and liabilities for 2016 included only five months of asset and liability balances acquired from Wilshire.

existing portfolio.

~~Table of Contents~~

Interest Income

~~Interest Incom~~e

Interest income was ~~$572.1~~$716.1 million for ~~2017~~,2022, compared to ~~$421.9~~$566.5 million for ~~2016~~2021 and ~~$313.7~~$598.9 million for ~~2015~~.2020. The yield on average interest earning assets was ~~4.51%~~4.16% for ~~2017~~,2022, compared to ~~4.36%~~3.42% for ~~2016~~2021 and ~~4.46%~~3.84% for ~~2015~~2020.

Comparison of ~~2017~~2022 with ~~2016~~

~~The increase in interest income of~~ ~~$150.2 million, or 36%, for~~ ~~2017~~ ~~compared to~~ ~~2016~~ was primarily a result of the growth in total loans and investments. The increase in 2017 was a result of both organic growth and the full year impact of the assets acquired from Wilshire compared to only a five month impact of assets acquired from Wilshire for 2016. Average total loans increased $2.52 billion in 2017 compared to 2016 and total investments increased $403.4 million in the same period. Discount accretion income on acquired loans increased in 2017 totaling $39.9 million compared to $25.1 million for 2016. Accretion income on loans acquired from Wilshire was recognized throughout the entire year in 2017, whereas in 2016, accretion income was recorded in only the last five months of the year subsequent to the acquisition in July 2016.

~~Comparison of 2016 with~~ ~~2015~~2021

The increase in interest income of ~~$108.3~~$149.6 million, or ~~35%~~26.4%, for ~~2016~~2022 compared to ~~2015~~2021 was primarily ~~a result of income on~~due to new loans ~~and investments acquired from the acquisition of Wilshire in July 2016. The fair value of loans acquired from Wilshire~~originated at ~~acquisition totaled $3.82 billion~~higher average interest rates and the ~~fair value~~repricing of ~~investments totaled $478.9 million. The average balances of gross~~variable rate loans following the increases in the market interest rates. Average total loans increased by ~~$2.28~~$1.29 billion ~~during the year and average investments increased by $405.1~~for 2022 compared to 2021. Discount accretion income on acquired loans decreased to $2.6 million for 2022 compared to $9.9 million for 2021. Interest income from investment securities also increased due to the ~~same period. This~~purchases of higher yielding securities and the upward repricing of variable rate securities in line with increases in market interest rates, which contributed to the increase in interest income.

Comparison of 2021 with 2020

The decrease in interest income ~~from the increase in overall~~of $32.3 million, or 5%, for 2021 compared to 2020 was primarily due to new loans ~~was partially offset by~~originated at lower interest rates and a decline in ~~interest~~discount accretion income. Average total loans increased by $644.9 million for 2021 compared to 2020. Discount accretion income on acquired loans decreased to $9.9 million for 2021 compared to $23.1 million for 2020. Interest income from ~~a reduction~~investment securities also declined due to the sale and pay-down of higher yielding securities in ~~loan yield. Loan discount accretion increased by $8.1 million, from $17.0 million for~~combination with the ~~year ended December 31, 2015~~purchase of lower yielding securities which contributed to ~~$25.1 million for~~ the ~~year ended December 31, 2016.~~decline in interest income.

Interest Expense

~~Deposit~~sDeposits

Interest expense on deposits was ~~$74.9~~$114.8 million for ~~2017~~2022 compared to ~~$48.1~~$42.0 million for ~~2016~~2021 and ~~$33.4~~$110.4 million for ~~2015.~~2020. The average cost of deposits was ~~0.70%~~0.76% for ~~2017,~~2022, compared to ~~0.58%~~0.29% for ~~2016~~2021 and ~~0.57%~~0.81% for ~~2015.~~2020. The average cost of interest bearing deposits was ~~0.96%,~~1.20% for 2022, compared to ~~0.80%~~0.46% for ~~2016~~2021 and ~~0.78%~~1.14% for ~~2015~~.2020.

Comparison of ~~2017~~2022 with ~~2016~~2021

The increase in interest expense on total deposits of ~~$26.8~~$72.8 million, or ~~56%~~173%, for ~~2017,~~2022 compared to ~~2016~~2021 was due to an increase in rates paid on interest bearing ~~liabilities~~deposits in ~~addition~~2022 compared to ~~an overall increase~~2021. Management increased rates on most of its deposit products several times in ~~rates offered in 2017.~~2022 as the Federal ~~funds rates was~~Funds target rate increased by a total of 425 basis points over the ~~Federal Open Market Committee (“FOMC”) in June~~course of ~~2017 and again in December~~2022. The average balance of ~~2017. As~~noninterest bearing deposits remained relatively stable, accounting for 37% of ~~result of the 25 basis point increase in interest rates in June 2017, many of our deposits were priced higher and time deposits were renewed and opened at higher interest rates increasing our~~ total ~~cost of deposits for 2017. In addition,~~ average deposits for ~~2017 included~~the year ended December 31, 2022 compared to 38% for the year ended December 31, 2021.

Comparison of 2021 with 2020

The decrease in interest expense on total deposits of $68.4 million, or 62%, for 2021 compared to 2020 was due to a ~~full year of balances assumed from Wilshire while 2016 only reflected five months of assumed~~reduction in rates paid on interest bearing deposits in 2021 compared to 2020. Management reduced rates on most of its deposit products several times in 2021 to offset the ~~average deposit balance.~~decline in loan yields. The average balance of noninterest bearing deposits accounted for ~~27.5%~~38% of total average deposits atfor the year ended December 31, ~~2017~~2021 compared to ~~26.6% at~~28% for the year ended December 31, ~~2016.~~2020.

~~Comparison of 2016 with~~ ~~2015~~FHLB and FRB Borrowings

The increase in interest expense on total deposits of $14.7 million, or 44%, for 2016, compared to 2015 was due to an increase in interest bearing deposits acquired from Wilshire. The fair value of deposits assumed from Wilshire at acquisition was $3.81 billion. The average balance of interest bearing deposits increased by $1.77 billion in 2016 compared to 2015. In addition, the average rate on average interest bearing deposits increased by 2 basis points. The average balance of noninterest bearing deposits accounted for 26.6% of total average deposits at December 31, 2016, compared to 27.4% at December 31, 2015.

~~Borrowing~~s

FHLB and FRB Borrowings include ~~borrowings~~advances from the FHLB ~~federal funds purchased,~~ and ~~subordinated debentures.~~FRB. As part of our asset-liability management, we utilize FHLB ~~advances~~and FRB borrowings to supplement our deposit source of funds. Therefore, there may be fluctuations in these balances depending on the short-term liquidity and longer-term financing needs of the Bank.

Average FHLB ~~advances~~ and ~~federal funds purchased~~FRB borrowings were ~~$787.1~~$528.3 million for 2022, compared to $208.7 million in ~~2017, compared to $619.6~~2021 and $435.8 million in ~~2016~~ ~~and $503.1 million in~~ ~~2015~~.2020. Interest expense on FHLB ~~advances~~ and ~~federal funds purchased~~FRB borrowings was ~~$10.7~~$11.5 million for ~~2017~~2022 compared to ~~$7.6~~$2.6 million for ~~2016~~2021 and ~~$5.6~~$6.9 million for ~~2015~~.2020. The average cost of FHLB ~~advances~~ and ~~federal funds purchased~~FRB borrowings was ~~1.36%~~2.18% for ~~2017~~,2022, compared to ~~1.22%~~1.23% for ~~2016~~2021 and ~~1.12%~~1.58% for ~~2015. The average cost of FHLB advances~~2020. During 2022, we repaid $23.45 billion and ~~federal funds purchased includes the amortization of premiums recorded on advances acquired from prior acquisitions. Total amortization for~~ ~~2017~~ ~~was $1.6 million, compared to $973 thousand in~~ ~~2016~~ ~~and $384 thousand in 2015. We repaid $1.02~~$16.28 billion in FHLB advances ~~in 2017~~

~~Table of Contents~~

and FRB borrowings, respectively, with an average rate of ~~1.02%. In addition,~~1.12% and 3.23%, respectively. During 2022, we borrowed ~~$1.49~~$23.75 billion and $16.55 billion in FHLB advances and ~~federal funds purchased~~FRB borrowings, respectively, with an average rate of ~~1.39%~~1.18% and 3.25%, respectively. During 2021, we repaid $2.27 billion in ~~2017.~~FHLB advances with an average rate of 0.15% and borrowed $2.32 billion in advances with an average rate of 0.15%. In 2020, $300.0 million in FHLB advances were paid off before maturity and we paid a prepayment penalty of $3.6 million.

Convertible Notes

In 2018, we issued $217.5 million in senior convertible notes. The carrying balance of our convertible notes include issuance costs to be capitalized. The cost of our convertible notes for 2022 was 2.41% compared to 2.42% for 2021 and 4.61% for 2020. The cost of our convertible notes for 2022 and 2021 consisted of the 2.00% coupon rate and non-cash interest expense from the capitalization of issuance cost. The cost of our convertible notes for 2020 included non-cash interest expense from the amortization of the convertible notes discount. On January 1, 2021, we early adopted ASU 2020-06, which eliminated the discount on our convertible notes and reduced interest expense.

Other Borrowings

Other borrowings ~~include~~consist of subordinated debentures which bear interest at the 3-month LIBOR rate plus a designated spread. ~~With the acquisition of Wilshire, we assumed four subordinated debentures at a fair value of $56.9 million.~~ There were no ~~other~~ changes in our balance of subordinated debentures during ~~2016~~2022 or ~~2017, except for~~2021 aside from the ~~increase~~increases related to the discount accretion on subordinated debentures acquired from previous acquisitions. The average rate on other borrowings increased to 5.84% for 2022 compared to 3.82% for 2021 and 4.63% for 2020. The change in cost of other borrowings for 2022 and 2021 compared to prior years was due to respective increases and decreases in the 3-month LIBOR rate.

Provision for ~~Loan~~Credit Losses

The provision for ~~loan~~credit losses reflects our judgment of the current period cost associated with credit risk inherent in our loan portfolio. The ~~loan loss~~ provision for credit losses for each period is dependent upon many factors, including loan growth, net ~~charge-offs,~~charge offs, changes in the composition of the loan portfolio, delinquencies, assessments by management, third parties’ and regulators’ examination of the loan portfolio, the value of the underlying collateral on problem loans, ~~and~~ the general economic conditions in our market ~~areas.~~areas, and future projections of the economy. Specifically, the provision for ~~loan~~credit losses represents the amount charged against current period earnings to achieve an allowance for ~~loan~~credit losses that, in our judgment, is adequate to absorb probable ~~incurred~~lifetime losses inherent in our loan portfolio. Periodic fluctuations in the provision for ~~loan~~credit losses result from management’s assessment of the adequacy of the allowance for ~~loan~~credit losses; however, actual ~~loan~~credit losses ~~may~~could potentially vary ~~in material respects~~materially from current estimates. If the allowance for ~~loan~~credit losses is inadequate, we may be required to record additional ~~loan loss~~ provision for credit losses, which ~~may~~could have a material adverse effect on our business, ~~and our~~ financial condition,. and results of operations.

Comparison of ~~2017~~2022 with ~~2016~~2021

The provision for ~~loan~~credit losses was ~~$17.4~~$9.6 million for ~~2017~~,2022, an increase of ~~$8.4~~$21.8 million ~~or 93%,~~ from ~~$9.0~~$12.2 million in negative provision for credit losses for 2021. The positive provision for credit losses for the year ended December 31, 2022 was to account for the large increase in loans and future potential recessionary concerns. This increase was partially offset by the continued de-risking of our loan portfolio and continued improvements in our overall credit quality. During the first quarter of 2022, we had a large recovery of $17.3 million on a previously charged off loan which reduced provision for credit losses required for periods in 2022. The allowance for credit losses coverage ratio was 1.05% of total loans at December 31, 2022 compared to 1.01% at December 31, 2021.

Comparison of 2021 with 2020

The negative provision for credit losses was $12.2 million for ~~2016~~.2021, a decrease of $107.2 million from $95.0 million in provision for credit losses for 2020. The decrease in provision for credit losses for 2021 compared to 2020 was ~~calculated based on net charge offs~~due to management’s efforts of ~~$12.2 million during~~de-risking and rebalancing our loan portfolio and the economic recovery and improved future economic forecasts for 2021 compared to 2020. In 2020, due to the COVID-19 pandemic, we recorded additional reserves to reflect the economic decline that impacted the global economy, including additional risks associated with the large amount of loans that were modified as a result of the hardships experienced by borrowers due to the effects of COVID-19. The balance of loans modified due to COVID-19 was approximately 10.2% of the total portfolio as of December 31, 2020, but has declined significantly to less than 1.0% of the total loan portfolio as of December 31, 2021. The decline in COVID-19 modified loans and overall reduction of credit risk in our loan portfolio contributed to the recapture of provision for credit losses for 2021 compared to 2020. The allowance for credit losses coverage ratio was 1.01% of total loans at December 31, 2021 compared to 1.52% at December 31, 2020.

During the year ended December 31, 2021, we sold $275.3 million in loans most of which had borrowers with elevated credit risk that we felt had potential for future losses. The strategic sales of and ~~an increase in~~transfer to loans held for sale of loans with elevated credit risk helped to significantly improve the overall credit quality of the loan portfolio which reduced the required allowance for ~~loan~~credit losses ~~primarily due to an increase in loan volume which also~~and contributed to the ~~increase~~decline in ~~provision.~~

~~Comparison of 2016 with~~ ~~2015~~

~~The~~ provision for ~~loan~~credit losses ~~was $9.0 million~~ for ~~2016, an increase of $1.0 million, or 13%, from $8.0 million for 2015. The provision was calculated based on net charge offs of $6.1 million during~~ the year ~~and an increase in the required allowance for loan losses primarily due~~ended December 31, 2021 compared to ~~an increase in loan volume. Loans acquired from Wilshire during 2016 were recorded at fair value and therefore did not significantly impact the provision for loan losses during the year.~~2020.

~~See “Financial Condition—Allowance for Loan Losses” for a description of our methodology for determining the allowance for loan losses~~.

Noninterest ~~Incom~~eIncome

Noninterest income is primarily comprised of service ~~charges~~fees on deposit accounts, international service fees (fees received on trade finance letters of credit), loan servicing fees, wire transfer fees, swap fee income, net gains on sales of ~~SBA~~loans, net gains on sales and ~~residential mortgage loans,~~calls of securities available for sale, and other ~~fees~~income which includes earnings on bank owned life insurance, changes in the fair value of our equity investments with readily determinable fair value, and other miscellaneous income. Noninterest income was ~~$66.4~~$51.4 million for ~~2017~~2022 compared to ~~$51.8~~$43.6 million for ~~2016~~2021, and ~~$43.7~~$53.4 million for ~~2015~~.2020.

~~Comparison of~~ ~~2017~~ ~~with~~ ~~2016~~

The increase in noninterest income for 2017 over 2016 primarily reflected increases in service charges on deposit accounts, loan servicing fees, net gain on sales of SBA loans, and other income and fees.

Service charges on deposits increased $4.7 million, or 29%, to $20.6 million due mostly to an increase of $2.8 million in analysis fees charged on demand deposits accounts and an increase of $1.3 million in non-sufficient funds collected from business and personal accounts. The increase in deposits service charges in 2017 was largely due to the full year impact of the increase in deposits from the acquisition of Wilshire.

Loan servicing fees increased by $1.9 million, or 54%, to $5.4 million in 2017 compared to $3.5 million in 2016. The increase in loan servicing fees in 2017 was primarily a result of an increase in sales of residential loans and SBA loans in 2016 and 2017. We earn servicing fees on loans we continue to service subsequent to the sale of the loan. As more loans continue to be sold, our servicing fees continue to increase until the loans are paid off.

Net gains on sales of SBA loans increased by $4.0 million, or 46%, to $12.8 million in 2017 from $8.8 million in 2016. The volume of sales of SBA loans and the net gains recorded from the sales are primarily driven by the production of SBA loans which increased during in 2017. SBA loans sold totaled $177.4 million in 2017 compared to $116.1 million in 2016. The increase in SBA loans sold in 2017 was due to the full year operations of the combined bank after the merger with Wilshire, while 2016 represented only five months of combined operations.

~~Table of Contents~~

Other income and fees increased by $3.1 million, or 27% in 2017 compared to 2016. Loan recoveries on pre-merger charged-off loans and miscellaneous income increased $1.2 million in 2017 and gains on sale of fixed assets increased by $1.0 million in 2017 compared to the previous year mostly due to the sale of a building and associated land at the end of 2017.

~~Comparison of 2016 with~~ ~~2015~~

The increase in noninterest income for 2016 over 2015 primarily reflected increases in service charges on deposit accounts and other income and fees. These increases were offset by a decrease in net gains on sales of SBA loans.

Service charges on deposits increased $3.8 million, or 31%, to $16.0 million due to an increase of $2.2 million in business analysis fees charged and an increase of $1.2 million in non-sufficient funds collected from business and personal accounts. The increase in deposits service charges was largely due to the increase in deposits from the acquisition of Wilshire.

Net gains on sales of SBA loans decreased by $3.9 million, or 31%, to $8.8 million in 2016 from $12.7 million in 2015. The volume of sales of SBA loans and the net gains recorded from the sales are primarily driven by the production of SBA loans which decreased during the year. SBA loans sold during the year totaled $116.1 million in 2016 compared to $165.2 million in 2015.

Other income and fees increased by $3.8 million, or 48%, during 2016 compared to 2015. Miscellaneous income increased $1.8 million in 2016 and fee income from our loan hedging product increased by $789 thousand during the year due to an increase in the volume of transactions. Credit card processing fees also increased by $865 thousand during 2016. Overall other income and fees increased in 2016 compared to 2015 due to the acquisition of Wilshire.

A breakdown of noninterest income by category is shown ~~below~~:below:



	Year Ended December 31, 2022		Increase (Decrease)				Year Ended December 31, 2021		Increase (Decrease)				Year Ended December 31, 2020
			Amount		Percent (%)				Amount		Percent (%)
	(Dollars in thousands)
Service fees on deposit accounts	$	8,938	$	1,663	23	%	$	7,275	$	(5,168)	(42)	%	$	12,443
International service fees	3,134		(452)		(13)	%	3,586		447		14	%	3,139
Loan servicing fees, net	3,588		221		7	%	3,367		558		20	%	2,809
Wire transfer fees	3,477		(42)		(1)	%	3,519		(58)		(2)	%	3,577
Swap fees	2,605		1,147		79	%	1,458		(2,608)		(64)	%	4,066
Net gains on sales of SBA loans	16,343		7,895		93	%	8,448		8,448		100	%	—
Net gains on sales of residential mortgage loans	882		(3,553)		(80)	%	4,435		(3,569)		(45)	%	8,004
Net losses on sales of other loans	193		193		100	%	—		—		—	%	—
Net gains on sales of securities available for sale	—		—		—	%	—		(7,531)		(100)	%	7,531
Other income and fees	12,237		731		6	%	11,506		(357)		(3)	%	11,863
Total noninterest income	$	51,397	$	7,803	18	%	$	43,594	$	(9,838)	(18)	%	$	53,432

Comparison of 2022 with 2021

The increase in service fees on deposit accounts for 2022 compared to 2021 was mainly due to increases in business analysis fees and business non-sufficient funds fees from an overall increase in deposit transactions.

International service fees decreased for 2022 compared to 2021 due to a decrease in fees generated from trade finance loans. International service fees are earned from trade finance loans which decreased to $137.3 million at December 31, 2022 from $146.8 million at December 31, 2021. Along with the decrease in the balance of trade finance loans from December 31, 2021 to December 31, 2022, the volume of trade finance loan transactions declined for periods in 2022 compared to periods in 2021, which resulted in a decline in international service fees.

Loan servicing fees, net represents income earned from servicing SBA and residential mortgage loans that were previously sold. We retain servicing on most of the loans that we choose to sell. The increase in loan servicing fees, net for 2022 compared to 2021 was due to a reduction in payoffs of serviced loans. Payoffs of serviced loans were higher during 2021, which resulted in the full amortization of the remaining servicing asset, which is recorded as a reduction to loan servicing fee income.

Wire transfer fees declined slightly for 2022 compared to 2021.

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 2022 which resulted in an increase in swap fee income for 2022 compared to 2021.

During the fourth quarter of 2018, we stopped the practice of regularly selling the guaranteed portion of SBA loans due to the reduction in premium rates paid in the secondary market. However, premiums for SBA guaranteed loans have increased to levels previously paid prior to the decline experienced in 2018. As a result, we returned to the practice of regularly selling SBA guaranteed loans starting the second quarter of 2021. During the year ended December 31, 2022, we sold $227.3 million in SBA guaranteed loans and recorded $16.3 million in net gains on sale of SBA loans. During the year ended December 31, 2021, we sold $102.4 million in SBA guaranteed loans and recorded $8.4 million in net gains on sale of SBA loans.

Year Ended December 31, 2017
Increase
(Decrease)
Year Ended December 31, 2016
Increase
(Decrease)
Year Ended December 31, 2015
(Dollars in thousands) Amount % Amount %
Service fees on deposit accounts $ 20,619
$ 4,655
29 % $ 15,964
$ 3,758
31 % $ 12,206
International service fees 4,494
801
22 % 3,693
245
7 % 3,448
Loan servicing fees, net 5,433
1,914
54 % 3,519
384
12 % 3,135
Wire transfer fees 5,057
731
17 % 4,326
694
19 % 3,632
Net gains on sales of SBA loans 12,774
4,024
46 % 8,750
(3,915 ) (31 )% 12,665
Net gains on sales of other loans 2,927
7
— % 2,920
2,650
981 % 270
Net gains on sales or called securities available for sale 301
(649 ) (68 )% 950
526
124 % 424
Other income and fees 14,810
3,113
27 % 11,697
3,786
48 % 7,911
Total noninterest income $ 66,415
$ 14,596
28 % $ 51,819
$ 8,128
19 % $ 43,691
Net gain on sale of residential mortgage loans decreased in 2022 compared to 2021 due to a decrease in loans sold and a decrease in premiums received. During 2022, we sold $49.1 million in residential mortgage loans compared to $186.5 million residential mortgage loans sold in 2021. The average weighted premium on residential mortgage loans sold was 1.80% for 2022 compared to 2.38% for 2021.

There were no net gains on sales of securities available for sale during 2022 and 2021 as there were no securities sold during those periods.

Other income and fees include income from bank owned life insurance, recoveries on acquired loans that were fully charged-off at acquisition, debit card/credit card fee income, fair value changes on our derivatives and equity investments, and other miscellaneous income. Other income and fees increased for 2022 compared to 2021 due to an increase in various income.

Comparison of 2021 with 2020

The decrease in service fees on deposit accounts for 2021 compared to 2020 was due to a decrease in customer analysis fees driven by risk management’s decision to discontinue our relationships with customers in the check cashing industry and a decline in and non-sufficient funds fees. In addition, due to the COVID-19 pandemic and social distancing and related restrictions, deposit activity for 2021 was greatly reduced compared to the 2020. As a result, demand deposit account transactions declined which negatively impacted the amount of non-sufficient fees earned.

International service fees increased for 2021 compared to 2020 due to an increase in fees generated from trade finance loans. International service fees are earned from trade finance loans and as the balance of these loans have increased, the associated fee income earned has also increased. The balance of trade finance loans increased to $146.8 million at December 31, 2021 from $102.8 million at December 31, 2020.

Loan servicing fees, net represents income earned from servicing SBA and residential mortgage loans that were previously sold. We retain servicing on most of the loans that we choose to sell. The increase in loan servicing fees, net for 2021 compared to 2020 was due to a reduction in payoffs of serviced loans. Payoffs of serviced loans were higher during 2020, which resulted in the full amortization of the remaining servicing asset, which is recorded as a reduction to loan servicing fee income.

Wire transfer fees declined slightly for 2021 compared to 2020 due to the COVID-19 pandemic, which resulted in continued decline in deposit related transactions, including wire transfers.

Swap fee income represents fees earned from back to back swap transactions for our loan customers. The number of swap transactions decreased in 2021 which resulted in a decrease in swap fee income for 2021 compared to 2020.

During the year ended December 31, 2021, we sold $102.4 million in SBA guaranteed loans and recorded $8.4 million in net gains on sale of SBA loans. The SBA loans that we sold were mostly seasoned loans that were originated in 2018 and 2019. We chose to focus on selling seasoned loans first as these loans have higher prepayment risk compared to newly originated loans. We did not record any net gains on sales of SBA loans in 2020.

Net gain on sale of residential mortgage loans decreased in 2021 compared to 2020 due to a decrease in loans sold and a decrease in premiums received. During 2021, we sold $186.5 million in residential mortgage loans compared to $298.4 million residential mortgage loans sold in 2020. The average weighted premium on residential mortgage loans sold was 2.38% for 2021 compared to 2.68% for 2020.

There were no net gains on sales of securities available for sale during 2021 as there were no securities sold. During 2020, we sold investment securities with a total book value of $160.5 million for a net gain of $7.5 million.

Noninterest Expense

Noninterest expense is primarily comprised of salaries and employee benefit expense, occupancy expense, furniture and equipment expense, advertising and marketing expenses, data processing and communications expenses, professional fees, investment in affordable housing partnership expenses, and other expenses. Noninterest expense was ~~$266.6~~$324.2 million for ~~2017~~,2022, compared to ~~$215.0~~$293.3 million for ~~2016~~2021 and ~~$153.4~~$283.6 million for ~~2015~~.2020. The ~~increases~~increase in noninterest expenses ~~were $51.6~~was $30.9 million, or ~~24%~~11%, for ~~2017~~2022 compared to ~~2016,~~2021, and ~~$61.6~~the increase in noninterest expenses was $9.7 million, or ~~40%~~3%, for ~~2016~~2021 compared to ~~2015~~.2020. Noninterest expense as a percentage of average assets for 2022 was 1.78% compared to 1.68% for 2021 and 1.72% for 2020.

A breakdown of noninterest expense by category is provided below:


	Year Ended December 31, 2022		Increase (Decrease)				Year Ended December 31, 2021		Increase (Decrease)				Year Ended December 31, 2020
			Amount		Percent (%)				Amount		Percent (%)
	(Dollars in thousands)
Salaries and employee benefits	$	204,719	$	29,568	17	%	$	175,151	$	12,229	8	%	$	162,922
Occupancy	28,267		(631)		(2)	%	28,898		(19)		—	%	28,917
Furniture and equipment	19,434		1,355		7	%	18,079		531		3	%	17,548
Advertising and marketing	7,470		(1,237)		(14)	%	8,707		2,423		39	%	6,284
Data processing and communications	10,683		352		3	%	10,331		987		11	%	9,344
Professional fees	6,314		(5,854)		(48)	%	12,168		3,998		49	%	8,170
Investments in affordable housing partnership expenses	8,742		(2,325)		(21)	%	11,067		(2,079)		(16)	%	13,146
FDIC assessments	6,248		1,139		22	%	5,109		(435)		(8)	%	5,544
Credit related expenses	5,897		1,497		34	%	4,400		(2,417)		(35)	%	6,817
OREO expense, net	315		(1,323)		(81)	%	1,638		(2,227)		(58)	%	3,865
Earnings credit rebates	10,998		9,156		497	%	1,842		1,188		182	%	654
Software impairment	—		(2,146)		(100)	%	2,146		2,146		100	%	—
FHLB advance prepayment fee	—		—		—	%	—		(3,584)		(100)	%	3,584
Branch restructuring costs	—		—		—	%	—		(2,367)		(100)	%	2,367
Other	15,083		1,327		10	%	13,756		(721)		(5)	%	14,477
Total noninterest expense	$	324,170	$	30,878	11	%	$	293,292	$	9,653	3	%	$	283,639

Comparison of ~~2017~~2022 with ~~2016~~2021

The increase in noninterest expense for ~~2017~~ ~~over 2016~~2022 compared to 2021 was due mostly to increases in salaries and employee benefits, ~~occupancy~~earnings credit rebates expenses, credit related expenses, furniture and equipment ~~advertising~~expenses and ~~marketing,~~FDIC assessments, partially offset by declines in professional fees, ~~and~~ investment in affordable housing ~~partnership~~partnerships expenses, ~~partially offset by a decline in merger~~software impairment, OREO expense and ~~integration expenses~~advertising and ~~credit related expenses. Most noninterest expense line items aside from merger and integration expenses and credit related expense increased in~~ ~~2017~~ compared to 2016 as expenses for 2017 represented a full year of combined operations after the merger with Wilshire while 2016 represented only five month of combined operations and related expenditures.marketing.

Salaries and employee benefits ~~totaled $144.7~~expense increased by $29.6 million for ~~2017, an increase of $36.7 million, or 34%,~~2022 compared to ~~$107.9 million for~~ ~~2016~~. The increase was comprised of a $28.2 million increase in employee salary expenses and an increase of $8.5 million in employee benefits. These increases primarily reflect increases in the number of full-time equivalent employees to 1,470 at December 31, 2017, from 1,372 as of December 31, 2016, and 938 at December 31, 2015.2021. The increase in salaries and employee benefits was due to an increase in full-time employees and because 2017 reflected a full year of combined expenses including staff acquired from Wilshire while 2016 reflected salary and benefit expenses for only the last five months of combined operations.

~~Table of Contents~~

~~Occupancy expense increased $4.0 million, or 16%, to $28.6 million for~~ ~~2017~~ compared to $24.6 million for 2016. With the acquisition of Wilshire, we assumed 35 branches offices and six loan production offices. Although some of these locations were subsequently closed in accordance with our branch consolidation plan, the remaining lease locations contributed to the overall increase in ~~occupancy expenses~~compensation costs to account for ~~2017~~an increase in employees and the competitive staffing market and also reflects higher incentive compensation accruals related to the strong financial performance. Competition in the market for staffing has intensified, which has played a factor in rising salaries and employee benefits costs particularly as it relates to new employees. The number of full-time equivalent employees increased from 1,476 at December 31, 2021 to 1,549 at December 31, 2022.

Occupancy expense decreased by $631 thousand for 2022 compared to ~~2016. The increase in expenses for 2017 was~~2021, primarily due to ~~the full year of expenditure for leases acquired from Wilshire while 2016 expenditures included Wilshire~~decreased lease and occupancy related ~~lease expenses for only the last five months of the year.~~expenses.

Furniture and equipment ~~expenses~~expense increased ~~$2.9 million, or 25%, to $14.6~~by $1.4 million for ~~2017~~2022 compared to ~~$11.7 million for 2016. The increase in these expenses in 2017 compared to the previous year was also~~2021 primarily due to ~~the full year of combined furniture~~higher software depreciation, software subscription expenses, and ~~equipment expenses after the merger with Wilshire compared to only five months of expenses after the merger with Wilshire in 2016.~~IT related expenses.

Advertising and marketing ~~expenses increased $3.0 million, or 40%, to $10.3~~expense decreased by $1.2 million for ~~2017~~2022 compared to $7.3 million in 2016. Advertising and marketing expenses for 2017 included $1.5 million in sponsorship fees paid to sponsor the Ladies Professional Golf Association (“LPGA”) Bank of Hope Founders Cup event for the first time in March 2017. The remaining increase in 2017 was2021 largely due to a ~~full year of expenses~~decrease in deposit promotion expenses.

Data processing and communications expense increased by $352 thousand for ~~the combined entity after the merger with Wilshire~~2022 compared to ~~five months of combined expenses for 2016.~~

~~Professional fees increased $8.4 million, or 128%, to $15.0 million for~~ ~~2017~~ ~~compared to $6.6 million for 2016. The increase in professional fees for 2017 compared 2016 was~~2021 primarily due to an increase in ~~predecessor external auditor fees as well as additional consulting~~ costs associated with ~~new compliance requirements as a result of exceeding $10 billion~~credit card processing and residential mortgage loan processing services.

Professional fees decreased by $5.9 million in ~~total assets. We also had an increase~~2022 compared to 2021. The decrease in ~~legal~~professional fees ~~for 2017 compared 2016~~was due ~~mostly~~primarily to lower legal fees related to ~~the proposed merger with U & I Financial Corp., which was terminated in September 2017.~~litigation costs and other professional fees.

~~Investments~~Investment in affordable housing partnership expenses ~~increased $9.8~~decreased by $2.3 million ~~or 238%, to $13.9 million for~~ ~~2017~~in 2022 compared to $4.1 million in 2016. In 2017, we recorded an impairment of $3.3 million on our investments in affordable housing partnerships after an analysis of the individual investment carrying values compared to their expected future tax benefits. We also recorded an impairment of $1.6 million as a direct result of the Tax Act, which reduced the corporate tax rate to 21%. The impairment that resulted due to the tax reform, was recorded as an increase in tax provision expenses. Other investments in affordable housing partnership expenses are recorded based on the financial statements of the investment projects.2021. We make investments in affordable housing partnerships and receive Community Reinvestment Act ~~credit~~credits and tax credits, which reduces our overall tax provision rate. Investments in affordable housing partnership expenses ~~that~~ are ~~not impairment related are~~recorded based on benefit schedules of individual investment projects under the ~~performance~~equity method of accounting. The benefit schedules show tax loss/deductions investors can take each year. We amortize the ~~underlying investment. We receive updated financial information for our~~initial cost of investments in affordable housing ~~partnerships investments and record losses based on the performance of the investment. These losses will eventually be~~partnership by tax loss/deductions. This amortization expense is more than offset by both tax credits received, which ~~reduce~~reduces our tax provision ~~expense. Investments~~expense dollar for dollar and the tax benefits related to any tax losses generated through the affordable housing project’s expenditures. Total tax credits related to our investment in affordable housing partnership investment was approximately $8.9 million for the year ended December 31, 2022 compared to $10.4 million for the year ended December 31, 2021. The balance of investments in affordable housing partnerships ~~increased~~decreased from ~~$70.1~~$58.4 million at December 31, ~~2016~~2021 to ~~$81.0~~$47.7 million at December 31, ~~2017.~~2022.

The FDIC assessment premium utilizes an initial base assessment rate, which is calculated as a percentage of our average consolidated total assets less average tangible equity. In addition to the initial assessment base, adjustments are added based upon our regulatory rating and selected financial measures. The increase in FDIC assessment fees for 2022 compared to 2021 was due mainly to an increase in total consolidated assets.

Credit related expenses ~~decreased $2.4 million, or 80%,~~increased in 2022 compared to ~~$582~~2021 due largely to increases in legal expenses related to loan collections and provision for unfunded loan commitments. We recorded a provision for unfunded loan commitments of $250 thousand for ~~2017~~2022 compared to ~~$3.0 million~~a negative provision of $195 thousand for ~~2016. Credit related expenses declined~~2021.

The decrease in ~~2017~~OREO expense for 2022 compared to ~~2016 largely~~2021 was due to a ~~$2.8 million provision reversal for off balance sheet unfunded commitments recorded during~~decrease in valuation expenses and an overall decline in OREO maintenance expenses. With the ~~third quarter of 2017. Updated information related to off balance sheet unfunded commitments~~continued decline in OREO balances, OREO maintenance and ~~utilization rates used~~valuation expenses were reduced in the calculation of the allowance for unfunded commitments resulted in a $2.8 million reduction in the required allowance for the third quarter of 2017. Reserves for off balance sheet unfunded commitments at December 31, 2017 totaled $836 thousand2022 compared to ~~$3.2~~2021. The balance of OREO declined slightly from $2.6 million at December 31, ~~2016.~~2021 to $2.4 million at December 31, 2022.

~~Merger and integration expenses decreased $15.1 million, or 89%, to $1.8~~Earnings credit rebates expense increased $9.2 million for ~~2017~~2022 compared to ~~$16.9~~2021. Earnings credit rebates are provided to certain commercial depositors to help offset deposit service charges incurred. The earnings credit rebates is tied to the Federal Funds rate and increased as interest rates went up in 2022.

Other noninterest expense for 2022 increased by $1.3 million ~~in 2016. The decline in merger and integration expenses was~~compared to 2021 largely due to ~~a decline~~an increases in expenses related to the merger with Wilshire. The bulk of merger and integration expenses for 2016 were related to advisory and legal fees associated with preparing for the acquisition of Wilshire. With the merger completed in 2016, these expenses were greatly reduced in 2017. Merger and integration expense for 2017 mostly consisted of remaining expenses related to the merger with Wilshire but also included expenses for the now terminated merger with U & I Financial Corp.various expenses.

Other expenses increased $2.0 million, or 13%, to $16.8 million in 2017 compared to $14.8 million in 2016. Amortization of core deposit intangible included in other expenses increased $1.0 million from $1.7 million in 2016 to $2.7 million in 2017. The increase in other expenses was mostly due to a full year of combined other expenses after the merger with Wilshire compared to only five month of combined expenses recorded for 2016.

Comparison of ~~2016~~2021 with ~~2015~~2020

The increase in noninterest expense for ~~2016 over 2015~~2021 compared to 2020 was due mostly to increases in salaries and employee benefits, ~~merger~~professional fees, advertising and ~~integration~~marketing, software impairments, and data processing, partially offset by declines in FHLB advance prepayment fee, credit related expenses, branch restructuring costs, OREO expense, net and ~~occupancy~~investment in affordable housing partnerships expenses. ~~All noninterest expense line items were increased in 2016 compared to 2015 due to the acquisition of Wilshire in the third quarter of 2016.~~

~~Table of Contents~~

Salaries and employee benefits ~~totaled $107.9~~expense increased $12.2 million for ~~2016, an increase of $23.0 million, or 27%~~2021 compared to ~~$84.9 million for 2015.~~2020. The increase ~~was comprised mostly of a $14.1 million increase~~ in ~~employee~~ salaries and ~~an increase of $4.1 million~~employee benefits was due to increases in ~~provision for bonuses.~~salaries paid in 2021, bonus reserves, group insurance and a decrease in payroll related origination costs compared to 2020. These increases ~~primarily reflect increases~~were partially offset by declines in other compensation, vacation accrual, and officer life insurance expense. Salaries and employee benefits for 2021 and 2020 included deferred originations costs which were recorded from the origination of $324.5 million and $480.2 million, respectively, in SBA PPP loans. SBA PPP loan origination costs of $2.2 million and $5.3 million was recorded during 2021 and 2020, respectively, which initially reduced salaries and benefits and is then amortized through the life of the loans as a reduction to interest income. The number of full-time equivalent employees ~~to 1,372~~increased from 1,408 at December 31, ~~2016 from 938 as of~~2020 to 1,476 at December 31, ~~2015.~~2021.

Furniture and equipment expense increased for 2021 compared to 2020 due to additional expenditures made for software subscriptions, licenses, and IT related equipment and services.

Advertising and marketing expense increased for 2021 compared to 2020 due to the renewal of public sponsorship fees and deposit promotion expenses. The increase in ~~full-time employees was directly a result~~advertising and marketing expense reflects additional fees for the sponsorship of the ~~acquisition~~Bank of ~~Wilshire~~Hope Ladies Professional Golf Association (“LPGA”) Match Play. In 2017, we began our annual sponsorship of the LPGA’s event, but chose not to sponsor the event in 2020. However, in 2021, we again became the ~~third quarter~~main sponsor for the Bank of ~~2016.~~

~~Occupancy expense increased $5.2~~Hope LPGA Match Play event for which sponsorship fees of $1.5 million ~~or 27%, to $24.6 million for 2016 compared to $19.4 million~~were paid in ~~2015. With the acquisition of Wilshire, we assumed 35 branches offices~~2021. Advertising and ~~six loan production offices. Although some of these locations were closed with our branch consolidation plan, the remaining lease locations contributed to the overall increase in occupancy~~marketing expenses for ~~2016.~~

~~Merger and integration expenses increased $15.4~~2021 also included $1.1 million to $16.9 million for 2016 compared to $1.5 million in 2015. Of the $16.9 million in merger and integration expenses for 2016, $16.8 million was related to the acquisition of Wilshire in July 2016. The bulk of these expenses were related to financial advisory and legal fees associated with preparing for the acquisition of Wilshire.

Other expenses increased $5.3 million, or 56%, to $14.8 million in 2016, compared to $9.5 million in 2015. The increase in other expenses was attributed to increases in amortization on our core deposit intangible assets and an increase in expenses related to deposit promotions held during the first half of the year. There were no deposit promotion expenses for periods in 2020.

Data processing and communications expense increased for 2021 compared to 2020 due to a fully amortized contract incentive which reduced the data process and communication expense in 2020.

Professional fees increased by $4.0 million in 2021 compared to 2020. The increase in professional fees for 2021 was due to increases in legal fees related to litigation fees paid to attorneys for current and resolved legal cases.

Investment in affordable housing partnership expenses decreased in 2021 compared to 2020. We make investment in affordable housing partnerships and receive Community Reinvestment Act credits and tax credits, which reduces our ~~directors. All~~overall tax provision rate. Investments in affordable housing partnership expenses are recorded based on benefit schedules of ~~these increases were~~individual investment projects under the equity method of accounting. The benefit schedules show tax loss/deductions investors can take each year. We amortize the initial cost of investments in ~~some way~~affordable housing partnership by tax loss/deductions. This amortization expense is more than offset by both tax credits received, which reduces our tax provision expense dollar for dollar and the tax benefits related to any tax losses generated through the affordable housing project’s expenditures. Total tax credits related to our investment in affordable housing partnership investment was approximately $10.4 million for the year ended December 31, 2021 compared to $10.5 million for the year ended December 31, 2020. The balance of investments in affordable housing partnerships decreased from $69.5 million at December 31, 2020 to $58.4 million at December 31, 2021.

The FDIC assessment premium utilizes an initial base assessment rate, which is calculated as a percentage of our average consolidated total assets less average tangible equity. In addition to the initial assessment base, adjustments are added based upon our regulatory rating and selected financial measures. The decrease in FDIC assessment fees for 2021 compared to the 2020 was due to a decline in assessment fees adjustments related to the ~~acquisition~~balance of ~~Wilshire.~~brokered deposits.

~~A breakdown~~Credit related expenses decreased in 2021 compared to 2020 due to decreases in legal expenses, loan related expenses and negative provision for unfunded commitments. With the overall improvements in credit quality in 2021, fees related to the collection of ~~noninterest~~loans declined by approximately $894 thousand in 2021 compared to 2020. For 2021, we recorded a credit for unfunded commitments totaling $195 thousand compared to $660 thousand in provision for unfunded commitments for 2020 resulting in a decline of $855 thousand.

The decrease in OREO expense ~~by category is provided below~~:for 2021 compared to 2020 was due to a decrease in valuation expenses and an overall decline in OREO maintenance expenses. The value of OREO was much less volatile in 2021 compared to 2020 and with the continued decline in OREO balances, OREO maintenance and valuation expenses were reduced in 2021 compared to 2020. The balance of OREO declined from $20.1 million at December 31, 2020 to $2.6 million at December 31, 2021.

Year Ended December 31, 2017 Increase (Decrease) Year Ended December 31, 2016 Increase Year Ended December 31, 2015
(Dollars in thousands) Amount % Amount %
Salaries and employee benefits $ 144,669
$ 36,725
34 % $ 107,944
$ 23,045
27 % $ 84,899
Occupancy 28,587
4,013
16 % 24,574
5,183
27 % 19,391
Furniture and equipment 14,643
2,917
25 % 11,726
2,481
27 % 9,245
Advertising and marketing 10,281
2,961
40 % 7,320
2,230
44 % 5,090
Data processing and communications 12,179
776
7 % 11,403
2,224
24 % 9,179
Professional fees 14,954
8,398
128 % 6,556
971
17 % 5,585
Investment in affordable housing partnerships expenses 13,862
9,762
238 % 4,100
2,658
184 % 1,442
FDIC assessments 5,173
1,008
24 % 4,165
77
2 % 4,088
Credit related expenses 582
(2,372 ) (80 )% 2,954
1,030
54 % 1,924
OREO expense, net 3,100
608
24 % 2,492
969
64 % 1,523
Merger and integration expense 1,781
(15,133 ) (89 )% 16,914
15,374
998 % 1,540
Other 16,790
1,963
13 % 14,827
5,349
56 % 9,478
Total noninterest expense $ 266,601
$ 51,626
24 % $ 214,975
$ 61,591
40 % $ 153,384
In 2021, we did not have any FHLB prepayment fees or branch restructuring expenses.

Income Tax Provision

The provision for income taxes for ~~2017~~2022 was ~~$124.4~~$77.8 million, compared to ~~$77.5~~$70.7 million in ~~2016~~2021 and ~~$63.1~~$30.8 million in ~~2015~~.2020. The effective income tax rate was ~~47.15%~~26.27% for ~~2017~~2022 compared to ~~40.51%~~25.68% for ~~2016~~2021 and ~~40.61%~~21.63% for ~~2015~~. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act which among other changes, reduces the U.S. federal corporate tax rate from 35% to 21%. As a result of the Tax Act, we had to reassess our net deferred tax assets and investments2020. The increase in ~~affordable housing partnerships at the lower tax rate. This resulted in additional tax provision expenses of $25.4 million which increased our overall~~effective tax rate for ~~2017. See Note 10 of Notes~~2022 compared to ~~Consolidated Financial Statements for more detailed information~~2021 was primarily due to affordable housing partnership investment tax credits benefit having a lower effect on ~~income taxes.~~

larger annual pre-tax book income.

~~Table of Contents~~

Financial Condition

Our total assets were ~~$14.21~~$19.16 billion at December 31, ~~2017~~2022 compared to ~~$13.44~~$17.89 billion at December 31, ~~2016~~,2021, an increase of ~~$765.3 million,~~$1.28 billion, or 6%7.1% year over year. The increase in total assets for ~~2017~~2022 compared to ~~2016~~2021 was principally due to increases in loans receivable partially offset by a decrease in investment securities during 2022.

Investment Securities Portfolio

The main objectives of our investment strategy are to provide sources of liquidity while managing our interest rate risk and to generate an adequate level of interest income without taking undue risks. Our investment policy permits investments in various types of securities, certificates of deposits, and federal funds sold in compliance with various restrictions in the policy. The securities for which we have the ability and intent to hold to maturity are classified as held to maturity securities.

Our investment securities AFS totaled $1.97 billion at December 31, 2022, compared to $2.67 billion at December 31, 2021. As of December 31, 2022, we had $271.1 million in investment securities HTM compared to $0 at December 31, 2021. We have the ability and intent to hold investment securities classified as HTM to maturity. $254.1 million in investment securities were purchased and $336.3 million in investment securities were paid down in 2022. There were no sales of investment securities in 2022. At December 31, 2022, $360.7 million in securities were pledged to secure public deposits, or for other purposes required or permitted by law, of which $359.1 million in securities were pledged in the State of California time deposit program, and $648 thousand was pledged for other public deposits.

During the second quarter of 2022, we transferred $239.0 million in fair value of debt securities from AFS to HTM. The transferred securities had an amortized cost of $275.5 million with a pre-tax net unrealized loss of $36.6 million, which was recorded as a discount to be amortized as an adjustment to yield. The unrealized holding loss at the date of transfer will continue to be reported, net of taxes, in accumulated other comprehensive income as a component of stockholders’ equity and will be amortized over the remaining life of the securities as an adjustment to yield, offsetting the corresponding discount amortization’s impact on interest income.

Our investment portfolio consists of treasury bonds, government sponsored enterprise (“GSE”) bonds, mortgage backed securities (“MBS”), collateralized mortgage obligations (“CMOs”), asset-backed securities, corporate securities, and municipal securities.

Our investment securities portfolio is primarily invested in residential CMOs and residential and commercial MBS, which combined to represent 84% and 89% of our total investment securities portfolio as of December 31, 2022 and 2021, respectively. At December 31, 2022 and 2021, all of our CMOs and MBS were issued by the Government National Mortgage Association (“GNMA”), Fannie Mae (“FNMA”), or Freddie Mac (“FHLMC”), which guarantee the contractual cash flows of these investments. All of our corporate, asset-backed, and municipal securities at December 31, 2022 were rated as investment grade.

The following table presents the amortized cost, estimated fair value, and net unrealized gain and losses on our investment securities as of the dates indicated:



	December 31, 2022						December 31, 2021
	Amortized Cost		Estimated Fair Value		Net Unrealized Gain (Loss)		Amortized Cost		Estimated Fair Value		Net Unrealized Gain (Loss)
	(Dollars in thousands)
Debt securities available for sale:
U.S. Treasury securities	$	3,990	$	3,886	$	(104)	$	—	$	—	$	—
U.S. Government agency and U.S. Government sponsored enterprises:
Agency securities	4,000		3,867		(133)		—		—		—
CMOs	947,541		793,699		(153,842)		1,039,543		1,026,430		(13,113)
MBS:
Residential	544,084		453,177		(90,907)		769,113		759,224		(9,889)
Commercial	417,241		368,287		(48,954)		595,659		599,402		3,743
Asset-backed securities	153,539		147,604		(5,935)		153,564		153,451		(113)
Corporate securities	23,351		18,857		(4,494)		23,398		22,484		(914)
Municipal securities	195,675		182,752		(12,923)		104,371		105,284		913
Total investment securities available for sale	$	2,289,421	$	1,972,129	$	(317,292)	$	2,685,648	$	2,666,275	$	(19,373)

Debt securities held to maturity:
U.S. Government agency and U.S. Government sponsored enterprises:
MBS:
Residential	$	157,881	$	150,840	$	(7,041)	$	—	$	—	$	—
Commercial	113,185		107,567		(5,618)		—		—		—
Total investment securities held to maturity	$	271,066	$	258,407	$	(12,659)	$	—	$	—	$	—

The following table summarizes the maturity of securities based on carrying value and their related weighted average yield (non-tax equivalent) at December 31, 2022:


	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in thousands)
Debt securities AFS:
US Treasury securities	$	—	—	%	$	3,886	2.68	%	$	—	—	%	$	—	—	%	$	3,886	2.68	%
Agency securities*	—		—	%	3,867		4.03	%	—		—	%	—		—	%	3,867		4.03	%
CMOs*	—		—	%	529		1.70	%	3,852		2.26	%	789,318		1.86	%	793,699		1.86	%
MBS:
Residential*	—		—	%	—		—	%	16,814		2.35	%	436,363		1.83	%	453,177		1.85	%
Commercial*	2,267		1.76	%	113,559		2.84	%	36,892		3.62	%	215,569		1.85	%	368,287		2.33	%
Asset-backed securities	—		—	%	—		—	%	15,315		6.80	%	132,289		6.60	%	147,604		6.62	%
Corporate securities	—		—	%	—		—	%	15,107		2.70	%	3,750		5.60	%	18,857		3.28	%
Municipal securities	—		—	%	4,882		1.50	%	30,674		2.41	%	147,196		3.16	%	182,752		2.99	%
Total securities AFS	$	2,267	1.76	%	$	126,723	2.81	%	$	118,654	3.38	%	$	1,724,485	2.33	%	$	1,972,129	2.43	%

Debt securities HTM:
MBS:
Residential*	$	—	—	%	$	—	—	%	$	—	—	%	$	157,881	3.74	%	$	157,881	3.74	%
Commercial*	—		—	%	7,742		4.34	%	28,254		4.00	%	77,189		4.01	%	113,185		4.03	%
Total securities HTM	$	—	—	%	$	7,742	4.34	%	$	28,254	4.00	%	$	235,070	3.82	%	$	271,066	3.86	%

* Investments in U.S. Government agency and U.S. Government sponsored enterprises

The following tables show the Company’s investments’ gross unrealized losses and estimated fair values, aggregated by investment category and the length of time that the individual securities have been in a continuous unrealized loss position as of December 31, 2022. The length of time that the individual investment securities AFS have been in a continuous unrealized loss position is not a factor in determining credit impairment with the adoption of CECL.


	December 31, 2022
	Less than 12 months					12 months or longer					Total
Description of Securities AFS	Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses		Number of Securities	Fair Value		Gross Unrealized Losses
	(Dollars in thousands)
U.S. Treasury securities	1	$	3,886	$	(104)	—	$	—	$	—	1	$	3,886	$	(104)
Agency securities*	1	3,867		(133)		—	—		—		1	3,867		(133)
Collateralized mortgage obligations*	61	150,419		(14,888)		59	643,280		(138,954)		120	793,699		(153,842)
Mortgage-backed securities:
Residential*	23	55,645		(5,616)		42	397,532		(85,291)		65	453,177		(90,907)
Commercial*	29	172,963		(12,156)		26	195,324		(36,798)		55	368,287		(48,954)
Asset-backed securities	3	21,836		(716)		15	125,768		(5,219)		18	147,604		(5,935)
Corporate securities	1	3,401		(600)		5	15,456		(3,894)		6	18,857		(4,494)
Municipal securities	31	76,942		(3,207)		32	65,730		(10,506)		63	142,672		(13,713)
Total	150	$	488,959	$	(37,420)	179	$	1,443,090	$	(280,662)	329	$	1,932,049	$	(318,082)

* Investments in U.S. Government agency and U.S. Government sponsored enterprises

We performed an analysis on our investment securities portfolio as of December 31, 2022 and December 31, 2021 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 we determined to have zero loss expectation. At December 31, 2022, we also had 18 asset-backed securities, six corporate securities, and 63 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 we expect full payment of principal and interest.

Equity Investments

As of December 31, 2022, equity investments totaled $42.4 million compared to $57.9 million at December 31, 2021. In 2022, we purchased $7.0 million in equity investments all of which were in CRA investments. No purchases were made in 2021. For the year ended December 31, 2022, we recorded a decrease in equity investments due to sales of mutual funds of $20.6 million, return of equity investments of $305 thousand and change in fair value of $563 thousand. Equity investments as of December 31, 2022 included $4.3 million in equity investments with readily determinable fair values and $38.1 million in equity investments without readily determinable fair values.

Equity investments with readily determinable fair values at December 31, 2022 consisted of mutual funds totaling $4.3 million. Changes to the fair value of equity investments with readily determinable fair values is recorded in other noninterest income. Equity investments without readily determinable fair values at December 31, 2022 included $36.7 million in CRA investments, $1.0 million in Community Development Financial Institutions 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 these investments during the year ended December 31, 2022.

Deferred Tax Assets, Net

At December 31, 2022, we had $150.4 million in net deferred tax assets compared to $49.7 million at December 31, 2021. The increase in deferred tax assets, net was primarily due to the increase in ~~loans~~deferred taxes resulting from ~~higher loan originations~~unrealized losses on our investments securities AFS during the year ended December 31, 2022.

Investments in ~~2017 as well as an~~Affordable Housing Partnerships

At December 31, 2022, we had $47.7 million in investments in affordable housing partnerships compared to $58.4 million at December 31, 2021. The decrease in investments in affordable housing partnerships was due to recorded losses and premium amortizations recorded during the year ended December 31, 2022. Commitments to fund investments in affordable housing partnerships totaled $11.8 million at December 31, 2022 compared to $9.5 million at December 31, 2021. The increase in ~~investment securities~~commitments to fund investments in affordable housing partnerships during the year ended December 31, 2022 was due to ~~purchases throughout~~new commitments, offset partially by cash contributions which reduced the ~~year.~~remaining commitment balances.

~~Loan~~Loans Held For Sale

Loans held for sale at December 31, 2022 totaled $49.2 million compared to $99.0 million at December 31, 2021, representing a decrease of $49.8 million, or 50.3%. The decrease in loans held for sale was due to reduction in SBA, residential mortgage loans, and other loans held for sale. Loans held for sale at December 31, 2022 included $48.8 million in other loans held for sale, comprising commercial real estate and commercial business loans with elevated credit risk, and $450 thousand in residential mortgage loans held for sale. At December 31, 2021, loans held for sale consisted of $49.7 million in SBA loans held for sale, $26.2 million in loans with elevated credit risk, and $23.2 million in residential mortgage loans held for sale.

Loans Portfolio

We offer ~~various~~a variety of products designed to meet the credit needs of our borrowers. Our lending activities primarily consist of ~~commercial~~ real estate loans, commercial business loans, ~~trade finance,~~residential mortgage, and consumer loans. Gross loans receivable ~~rose~~increased by ~~$559.2 million~~$1.45 billion to ~~$11.10~~$15.40 billion at December 31, ~~2017~~2022 from ~~$10.54~~$13.95 billion at December 31, ~~2016. The remaining discount on acquired loans at December 31, 2017 totaled $85.5 million compared to $110.4 million at December 31, 2016.~~2021.

We experienced an increase in ~~all loan types apart from~~real estate residential, real estate ~~and~~commercial, commercial business and residential mortgage loans in ~~2017~~2022 compared to the previous year. Only construction loans and consumer loans experienced declines in 2022 compared to 2021. The rates of interest charged on ~~adjustable~~variable rate loans are set at specified spreads based on the prime lending rate, LIBOR, and SOFR rates and other indices and vary as the ~~prime lending~~ rate ~~varies.~~indices reprice. Approximately ~~43%~~46% of our total loans were ~~adjustable~~variable rate loans at December 31, ~~2017~~2022 compared to ~~47%~~41% at December 31, ~~2016.~~2021. Real estate loans as a percentage to total loans was 61% at December 31, 2022, compared to 65% at December 31, 2021.

With certain exceptions, we are permitted under applicable law to make unsecured loans to single borrowers (including certain related persons and entities) in aggregate amounts of up to 15% of the sum of our total capital, ~~and~~ our allowance for ~~loan~~credit losses (as defined for regulatory purposes) at the Bank level, and certain capital notes and debentures issued by ~~us, if any.~~us. As of December 31, ~~2017,~~2022, our lending limit was approximately ~~$245.1~~$364.9 million per borrower for unsecured loans. For lending limit purposes, a secured loan is defined as a loan secured by collateral having a current fair value of at least 100% of the amount of the loan or extension of credit at all times and satisfying certain other requirements. In addition to unsecured loans, we are permitted to make such collateral-secured loans in an additional amount up to 10% (for a total of 25%) of our total capital and the allowance for ~~loan~~credit losses for a total limit of approximately ~~$408.5~~$608.2 million to one ~~borrower.~~borrower as of December 31, 2022. The largest aggregate amount of loans that the Bank had outstanding to any one borrower and related entities was ~~$127.8~~$170.5 million, of which ~~were~~the entire amount was performing and in good standing at December 31, ~~2017.~~2022.

The following table shows the composition of our loan portfolio by type of loan on the dates indicated:


	December 31,																										December 31,
	2017					2016					2015					2014					2013						2022				2021				2020				2019				2018
	Amount			%		Amount			%		Amount			%		Amount			%		Amount			%			Amount		%		Amount		%		Amount		%		Amount		%		Amount		%
	(Dollars in thousands)																										(Dollars in thousands)
Loan portfolio composition:																										Loan portfolio composition:
Real estate loans:																										Real estate loans:
Residential	$	49,774		0	%	$	57,884		1	%	$	33,797		0	%	$	21,415		0	%	$	10,039		0	%	Residential	$	76,045	—	%	$	69,199	—	%	$	54,795	—	%	$	52,558	—	%	$	51,197	—	%
Commercial	8,142,036			73	%	7,842,573			75	%	4,912,655			78	%	4,324,349			78	%	3,821,163			75	%	Commercial	9,170,784		60	%	8,816,080		63	%	8,425,959		63	%	8,316,470		69	%	8,393,551		70	%
Construction	316,412			3	%	254,113			2	%	123,030			2	%	94,086			2	%	72,856			2	%	Construction	167,751		1	%	220,652		2	%	291,380		2	%	295,523		2	%	275,076		2	%
Total real estate loans	8,508,222			76	%	8,154,570			78	%	5,069,482			80	%	4,439,850			80	%	3,904,058			77	%	Total real estate loans	9,414,580		61	%	9,105,931		65	%	8,772,134		65	%	8,664,551		71	%	8,719,824		72	%
Commercial business	1,780,869			16	%	1,832,021			17	%	980,153			16	%	903,621			16	%	949,093			19	%	Commercial business	5,109,532		33	%	4,208,674		30	%	4,157,787		31	%	2,721,183		22	%	2,325,544		20	%
Trade finance	166,664			2	%	154,928			1	%	99,163			2	%	134,762			2	%	124,685			2	%
Residential mortgage																										Residential mortgage	846,080		6	%	579,626		5	%	582,232		4	%	835,188		7	%	1,002,113		8	%
Consumer and other	647,102			6	%	403,470			4	%	102,573			2	%	89,849			2	%	98,507			2	%	Consumer and other	33,348		—	%	58,512		—	%	51,060		—	%	55,085		—	%	50,634		—	%
Total loans outstanding	11,102,857			100	%	10,544,989			100	%	6,251,371			100	%	5,568,082			100	%	5,076,343			100	%	Total loans outstanding	15,403,540		100	%	13,952,743		100	%	13,563,213		100	%	12,276,007		100	%	12,098,115		100	%
Less: deferred loan fees	(282		)			(1,657		)			(3,030		)			(2,890		)			(2,168		)
Gross loans receivable	11,102,575					10,543,332					6,248,341					5,565,192					5,074,175
Less: allowance for loan losses	(84,541		)			(79,343		)			(76,408		)			(67,758		)			(67,320		)
Less: allowance for credit losses																										Less: allowance for credit losses	(162,359)				(140,550)				(206,741)				(94,144)				(92,557)
Loans receivable, net	$	11,018,034				$	10,463,989				$	6,171,933				$	5,497,434				$	5,006,855				Loans receivable, net	$	15,241,181			$	13,812,193			$	13,356,472			$	12,181,863			$	12,005,558

Real Estate Loans

Our real estate loans consist primarily of loans secured by deeds of trust on commercial real estate, including SBA loans secured by commercial real estate. It is our general policy to restrict commercial real estate loan amounts to 75% of the appraised value of the property at the time of loan funding. We offer both fixed and floating interest rate loans. The maturities on such loans are generally up to seven years (with payments determined on the basis of principal amortization schedules of up to 25 years and a balloon payment due at maturity). Real estate loans secured by non-consumer residential real estate comprise less than 1% of the total loan portfolio (consumer residential mortgage loans are classified separately asand included in consumer loans). Construction loans are also a small portion of the total real estate portfolio, comprising approximately 3%1% of total loans outstanding. Total real estate loans, consisting primarily of commercial real estate loans, increased ~~$353.7~~$308.6 million or, 4%3%, to ~~$8.51~~$9.41 billion at December 31, ~~2017~~2022 from ~~$8.15~~$9.11 billion at December 31, ~~2016. The increase was mostly~~2021 due to ~~higher levels of~~originations in 2022 offset by loan ~~originations for the year ended December 31, 2017 compared to the prior year.~~

payoffs and loans sales.

~~Table of Contents~~

Other Loans

Commercial business loans include term loans to businesses, lines of credit, trade finance facilities, commercial SBA loans, equipment leasing loans, ~~and~~ warehouse lines of ~~credit.~~credit and SBA Paycheck Protection Program (“PPP”) loans. Business term loans are generally provided to finance business acquisitions, working capital, and/or equipment purchases. Lines of credit are generally provided to finance short-term working capital needs. Trade finance facilities are generally provided to finance import and export activities. SBA loans are provided to small businesses under the U.S. SBA guarantee program. Short-term credit facilities (payable within one year) typically provide for periodic interest payments, with principal payable at maturity. Term loans (usually 5 to 7 years) normally provide for monthly payments of both principal and interest. SBA commercial loans usually have a longer maturity (7 to 10 years). These credits are reviewed on a periodic basis, and most loans are secured by business assets and/or real estate. Warehouse lines of credit are ~~used~~utilized by mortgage originators to fund mortgages which are then pledged to the Bank as collateral until the mortgage loans are sold and the lines of credit are paid down. The typical duration of these lines of credit from the time of funding to pay-down ranges from 10-30 days. Although collateralized by mortgage loans, the structure of warehouse lending agreements results in the commercial ~~and industrial loan treatment~~business classification for ~~these types~~warehouse lines of ~~loans.~~credit. During ~~2017,~~2022, commercial business loans ~~decreased $51.2~~increased $900.9 million, or 3%21%, to ~~$1.78~~$5.11 billion at December 31, ~~2017~~2022 from ~~$1.83~~$4.21 billion at December 31, ~~2016, primarily~~2021. The increase in commercial business loans was due to ~~a decline~~an increase in ~~warehouse lines~~commercial term loans and syndicated loans in 2022 and was part of ~~credit.~~our strategy to diversify our loan portfolio and reduce our concentration of commercial real estate loans.

Residential mortgage loans represented approximately 6% of the total loan portfolio. The residential mortgage portfolio increased $266.5 million, or 46%, to $846.1 million at December 31, 2022 from $579.6 million at December 31, 2021. Consumer loans comprise ~~approximately 6%~~less than 1% of the total loan portfolio. Most of our consumer loan portfolio ~~consists of single-family mortgages, but also include~~includes automobile loans, home equity lines and loans, signature ~~(unsecured)~~term loans and lines of credit, ~~and loans,~~ and credit card loans. Consumer loans ~~increased $243.6~~decreased $25.2 million, or ~~60%~~43%, to ~~$647.1~~$33.3 million at December 31, ~~2017~~2022 from ~~$403.5~~$58.5 million at December 31, ~~2016. The increase in consumer loans was due primarily to an increase in originations of single-family mortgages in 2017.~~2021.

Loan Commitments

We provide lines of credit to business customers usually on an annual renewal basis. We normally do not make loan commitments in material amounts for periods in excess of one year.

The following table shows our loan commitments and letters of credit outstanding at the dates indicated:


	December 31,											December 31,
	2017		2016		2015		2014		2013			2022		2021		2020		2019		2018
	(Dollars in thousands)											(Dollars in thousands)
Commitments to extend credit	$	1,526,981	$	1,592,221	$	802,251	$	586,714	$	668,306	Commitments to extend credit	$	2,856,263	$	2,329,421	$	2,137,178	$	1,864,947	$	1,712,032
Standby letters of credit	74,748		63,753		45,083		41,987		44,190		Standby letters of credit	132,538		126,137		108,834		113,720		69,763
Other commercial letters of credit	74,147		52,125		36,256		37,439		56,380		Other commercial letters of credit	22,376		56,333		40,508		37,627		65,822
Total	$	1,675,876	$	1,708,099	$	883,590	$	666,140	$	768,876	Total	$	3,011,177	$	2,511,891	$	2,286,520	$	2,016,294	$	1,847,617

Nonperforming Assets

Nonperforming assets consist of nonaccrual loans, accruing loans that are 90 days or more past due, accruing restructured loans, and OREO.

Loans are placed on nonaccrual status when they become 90 days or more past due, unless the loan is both well-secured and in the process of collection. Loans may be placed on nonaccrual status earlier if the full and timely collection of principal or interest becomes uncertain. When a loan is placed on nonaccrual status, unpaid accrued interest is charged against interest income. Loans are charged off when collection of the loan is determined to be unlikely. Loans are restructured when, for economic or legal reasons related to the borrower’s financial difficulties, the Bank grants a concession to the borrower that it would not otherwise consider. OREO consists of real estate acquired by the Bank through foreclosure or similar means, including by deed from the owner in lieu of foreclosure, and is held for future sale.

~~Table of Contents~~

Nonperforming assets were ~~$125.2~~$69.4 million at December 31, ~~2017~~2022 compared to ~~$111.2~~$111.8 million at December 31, ~~2016~~.2021. Nonperforming assets at December 31, ~~2017 increased~~2022 decreased from ~~nonperforming assets at~~ December 31, ~~2016~~2021 due primarily to the ~~increase~~decreases in nonaccrual loans, ~~which was partially offset by a decline in OREO.~~accruing restructured loans, and loans past due 90 days or more and still accruing. The following table illustrates the composition of nonperforming assets and nonperforming loans ~~by legacy loans (loans originated by us) and acquired loans~~ as of the dates indicated:


	December 31,
	2022		2021		2020		2019		2018
	(Dollars in thousands)
Nonaccrual loans (1)	$	49,687	$	54,616	$	85,238	$	54,785	$	53,286
Loans 90 days or more days past due, still accruing (2)	401		2,131		614		7,547		1,529
Accruing restructured loans	16,931		52,418		37,354		35,709		50,410
Total nonperforming loans	67,019		109,165		123,206		98,041		105,225
OREO	2,418		2,597		20,121		24,091		7,754
Total nonperforming assets	$	69,437	$	111,762	$	143,327	$	122,132	$	112,979

December 31,
2017 2016 2015 2014 2013
(Dollars in thousands)
Nonaccrual loans $ 46,775
$ 40,074
$ 40,801
$ 46,353
$ 39,154
Loans past due 90 days or more and still accruing 407
305
375
361
5
Accruing restructured loans 67,250
48,874
47,984
57,128
33,904
Total nonperforming loans 114,432
89,253
89,160
103,842
73,063
Other real estate owned 10,787
21,990
21,035
21,938
24,288
Total nonperforming assets $ 125,219
$ 111,243
$ 110,195
$ 125,780
$ 97,351

Nonaccrual loans:
Legacy Portfolio $ 28,235
$ 28,944
$ 28,469
$ 28,815
$ 18,440
Acquired Portfolio 18,540
11,130
12,332
17,538
20,714
Total nonaccrual loans $ 46,775
$ 40,074
$ 40,801
$ 46,353
$ 39,154

Nonperforming loans:
Legacy Portfolio $ 77,305
$ 74,890
$ 73,422
$ 83,609
$ 50,536
Acquired Portfolio 37,127
14,363
15,738
20,233
22,527
Total nonperforming loans $ 114,432
$ 89,253
$ 89,160
$ 103,842
$ 73,063
_________________________

~~Subsequent~~(1) Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation and excludes PCI loans for periods prior to 2020.

(2) Excludes PCI loans for periods prior to 2020.

COVID-19 Related Loan Modifications

In 2020, we received a large number of modification requests from borrowers affected by the COVID-19 pandemic. Subsequently many of those requests for modifications were granted during the second quarter of 2020. As of December 31, 2017, we downgraded one lending relationship with two commercial business loans with ties to the entertainment industry to nonaccrual status because additional information came to light that could potentially affect the collectibility of these loans. Although these two loans totaling $13.5 million were performing and well secured2022, all COVID related modifications had expired. COVID-19 modifications as of December 31, ~~2017, as~~2021 totaled $22.8 million consisting of ~~this Report date, it is probable that we will not be able to fully collect all of the principal~~$12.5 million in commercial real estate loans, $9.9 million in residential mortgage loans, and ~~interest on these loans~~$365 thousand in ~~accordance with the contractual terms.~~consumer loans.

~~Table of Contents~~

Maturity of Loans

The following table illustrates the maturity distribution intervals of loans outstanding as of December 31, ~~2017~~.2022.


	December 31, 2022
	Loans Maturing
	Within One Year		After One to Five Years		After Five to Fifteen Years		After Fifteen Years		Total Loans Outstanding
	(Dollars in thousands)
Real estate loans:
Residential	$	10,591	$	20,177	$	45,277	$	—	$	76,045
Commercial	637,425		2,930,446		5,014,319		588,594		9,170,784
Construction	150,350		17,401		—		—		167,751
Total real estate loans	798,366		2,968,024		5,059,596		588,594		9,414,580
Commercial business loans	1,028,892		2,171,139		1,909,120		381		5,109,532
Residential mortgage	4,882		175		9,703		831,320		846,080
Consumer loans	25,928		4,966		2,382		72		33,348
Total loans outstanding	$	1,858,068	$	5,144,304	$	6,980,801	$	1,420,367	$	15,403,540

Fixed interest rate (1)	$	366,250	$	2,402,611	$	4,478,643	$	1,144,874	$	8,392,378
Variable interest rate	1,491,818		2,741,693		2,502,158		275,493		7,011,162
Total loans outstanding	$	1,858,068	$	5,144,304	$	6,980,801	$	1,420,367	$	15,403,540

_________________________

(1) Includes hybrid loans (loans with fixed interest rates for a specified period and then convert to variable interest rates) in fixed interest rate periods as of December 31, 2022.

December 31, 2017
Loans Maturing

Within One
Year

After One to
Five Years

After Five
Years

Total Loans
Outstanding
(Dollars in thousands)
Real estate loans:
Residential $ 8,030
$ 31,888
$ 9,856
$ 49,774
Commercial 744,389
4,079,659
3,317,988
8,142,036
Construction 253,272
59,773
3,367
316,412
Total real estate loans 1,005,691
4,171,320
3,331,211
8,508,222
Commercial business loans 822,939
560,072
397,858
1,780,869
Trade finance loans 165,734
930
—
166,664
Consumer loans 34,507
25,726
586,869
647,102
Total loans outstanding $ 2,028,871
$ 4,758,048
$ 4,315,938
$ 11,102,857

Fixed $ 540,169
$ 3,299,120
$ 2,440,850
$ 6,280,139
Variable 1,488,702
1,458,928
1,875,088
4,822,718
Total loans outstanding $ 2,028,871
$ 4,758,048
$ 4,315,938
$ 11,102,857
The following table presents the loans outstanding due after one year as of December 31, 2022.


	December 31, 2022
	Fixed Interest Rate (1)		Variable Interest Rate		Total Loans Due After One Year
	(Dollars in thousands)
Real estate loans:
Residential	$	62,071	$	3,383	$	65,454
Commercial	6,788,344		1,745,015		8,533,359
Construction	—		17,401		17,401
Total real estate loans	6,850,415		1,765,799		8,616,214
Commercial business loans	337,729		3,742,911		4,080,640
Residential mortgage	835,848		5,350		841,198
Consumer loans	2,136		5,284		7,420
Total loans outstanding	$	8,026,128	$	5,519,344	$	13,545,472

_________________________

(1) Includes hybrid loans (loans with fixed interest rates for a specified period and then convert to variable interest rates) in fixed interest rate periods as of December 31, 2022.

At December 31, 2022, we had $47.3 million in loan accrued interest receivables compared to $36.2 million at December 31, 2021.

Concentrations

Our lending activities are predominately in California, New Jersey and the New York City, Houston, Dallas, Chicago, and Seattle metropolitan areas. At December 31, ~~2017,~~2022, loans from California represented ~~67.9%~~52% of the total loans outstanding and loans from New York and New Jersey represented ~~14.5%~~18%. The remaining ~~17.6%~~30% of total loans outstanding represented loans from other states. Although we have a diversified loan portfolio, a substantial portion of the loan portfolio and credit performance depends on the economic stability of Southern California. Within the California market, most of our business activity is with customers located within ~~Los Angeles County (58.7%~~Southern California (46%). Therefore, our exposure to credit risk is significantly affected by changes in the economy in the ~~Los Angeles County~~Southern California area. Within our commercial real estate loan portfolio, the largest industry concentrations are ~~hotel/motel (19.2%),~~ retail building ~~(21.0%~~(27%), multifamily (14%), industrial & warehouse (14%), and gas station & car wash ~~(11.3%), and industrial & warehouse (10.1%~~(11%). Within our commercial and ~~industrial~~business loan portfolio, the largest industry concentrations are ~~wholesalers (22.7%~~finance and insurance (20%), manufacturing (14%), information technology (13%), and retail trade ~~(18.1%), manufacturing (14.7%), and services (10.1%~~(12%).

Allowance for ~~Loan~~Credit Losses

The Bank has implemented a multi-faceted process to identify, manage, and mitigate the credit risks that are inherent in the loan portfolio. For new loans, each loan application package is fully analyzed by experienced reviewers and approvers. In accordance with current lending approval authority guidelines, a majority of loans are approved by the Management Loan Committee (“MLC”) and Directors Loan Committee (“DLC”). For existing loans, the Bank maintains a systematic loan review program, which includes internally conducted reviews and periodic reviews by external loan review consultants. Based on these reviews, loans are graded as to their overall credit quality, which is measured based on: ~~the sufficiency of credit~~payment capacity and collateral documentation; proper lien perfection; proper approval by loan committee(s); adherence to any loan agreement covenants; compliance with internal policies and procedures, and with laws and regulations; adequacy and strength of repayment sources including borrower or collateral generated cash flow; payment performance; and liquidation value of the collateral. We closely monitor loans that management has determined require further supervision because of the loan size, loan structure, and/or specific circumstances of the borrower.

When principal or interest on a loan is 90 days or more past due, a loan is generally placed on nonaccrual status unless it is considered to be both well-secured and in the process of collection. Further, a loan is considered a loss in whole or in part when (1) it appears that loss exposure on the loan exceeds the collateral value for the loan, (2) servicing of the unsecured portion has been discontinued, or (3) collection is not anticipated due to the borrower’s financial condition and general economic conditions in the borrower’s industry. Any loan or portion of a loan judged by management to be uncollectible is charged against the allowance for ~~loan~~credit losses, while any recoveries are credited to ~~such~~the allowance.

Allowance for Credit Losses

The allowance for ~~loan~~credit losses (“ACL”) was ~~$84.5~~$162.4 million at December 31, ~~2017,~~2022 compared to ~~$79.3~~allowance for credit losses of $140.6 million at December 31, ~~2016.~~2021. We recorded ~~provisions~~a provision for credit losses of $9.6 million in 2022 compared to a negative provision for credit losses of $12.2 million in 2021, and a provision for loan losses of ~~$17.4~~$95.0 million in ~~2017 compared to $9.0 million in 2016, and $8.0 million in 2015.~~

~~Table of Contents~~

2020. During ~~2017,~~2022, we charged off ~~$17.4~~$12.4 million in loans outstanding and recovered ~~$5.2~~$24.6 million in loans previously charged ~~off.~~off compared to $62.2 million in charge offs and $8.2 million in recoveries for 2021. The decrease in charge off for 2022 was largely due a reduction in charge offs related to the sale of loans with elevated credit risk. In addition, for 2021, we had one loan relationship with charge offs totaling $29.6 million. Subsequently in 2022, we recorded $17.3 million in recoveries from this one relationship which contributed to a net recovery position for 2022 compared to total net charge offs for 2021. Total ~~Criticized Loans,~~criticized loans, or loan rated special mention, substandard, doubtful, or loss at December 31, ~~2017 were $568.5~~2022 totaled $261.3 million compared to ~~$556.7~~$499.6 million at December 31, ~~2016.~~2021. The ~~allowance for loan losses~~ACL was ~~0.76%~~1.05% of ~~gross~~loans receivable at December 31, 2022 and 1.01% of loans receivable at December 31, 2021. The ACL to loans receivable ratio does not include non-credit related discount on acquired loans. Total discount on acquired loans at December 31, ~~2017 compared~~2022 and 2021 totaled $9.1 million and $12.4 million, respectively. ACL on individually evaluated loans decreased to ~~0.75%~~$3.9 million at December 31, ~~2016.~~2022 from $5.1 million at December 31, 2021. In addition to allowance for ~~loan~~credit losses, we had ~~$836 thousand~~$1.4 million in allowances for ~~unused~~unfunded loan commitments as of December 31, ~~2017,~~2022, compared to ~~$3.2~~$1.1 million as of December 31, ~~2016.~~2021.

~~For loans not classified as impaired loans, general loan loss allowances are provided~~Economic forecasts used in the calculation of the December 31, 2022 ACL reflected a deterioration in outlook compared to ~~cover probable and incurred losses. The allowance is determined based first on a quantitative analysis using a loss migration methodology. The loans are classified by type and loan grade~~economic forecasts used in the calculation of the December 31, 2021 ACL and the ~~historical loss migration is tracked for the various stratifications. We further segregate these stratifications between~~large increase in loans accounted for under the amortized cost method (referred to as “Legacy Loans”) and loans acquired (referred to as “Acquired Loans”), as acquired loans were originally recorded at fair value with no carryover of the related allowance for loan losses. See “Financial Condition—Allowance for Loan Losses Methodology” for a detailed description of our loan loss methodology.

~~Impaired loans as defined by ASC 310-10-35, totaled $114.3 million and $140.4 million, respectively, as of~~resulted in an overall increase in ACL. For both December 31, ~~2017~~2022 and December 31, 2016, with specific allowances of $5.3 million and $7.4 million, respectively. The MLC, DLC, and the Management ALLL Committee of the Bank all review the adequacy of the allowance for loan losses on at least a quarterly basis and more frequently as needed. Based upon these evaluations and internal and external reviews of the overall quality of our loan portfolio,2021, we believe that the allowance for loan losses was adequate to absorb estimated probable incurred losses inherent in the loan portfolio as of December 31, 2017. However, no assurances can be given that the Bank will not experience further losses in excess of the allowance, which may require additional future provisions for loan losses.incorporated Moody’s consensus scenario.

The following table presents total nonaccrual and delinquent loans (loans past due ~~30 to 89~~30+ days) as of the dates indicated:

December 31,
2017 2016 2015 2014 2013
(Dollars in thousands)
Real estate—Residential $ —
$ 679
$ —
$ —
$ —
Real estate—Commercial 33,838
37,649
28,085
34,051
35,492
Real estate—Construction 1,300
2,813
1,369
1,521
—
Commercial business 25,546
13,076
15,893
12,875
11,366
Trade finance —
2,556
1,731
3,194
1,031
Consumer and other 10,451
1,643
2,087
1,211
1,364
Total Nonaccrual and Delinquent Loans $ 71,135
$ 58,416
$ 49,165
$ 52,852
$ 49,253
Nonaccrual loans included above $ 46,775
$ 40,074
$ 40,801
$ 46,353
$ 39,154


	December 31,
	2022		2021		2020		2019		2018
	(Dollars in thousands)
Real estate - residential	$	1,266	$	—	$	—	$	—	$	—
Real estate - commercial	36,764		60,203		64,894		40,460		38,260
Real estate - construction	—		—		18,723		14,015		—
Commercial business	9,146		15,576		17,304		12,681		23,884
Residential mortgage	11,101		20,188		11,690		13,220		17,431
Consumer and other	1,103		848		1,414		1,100		804
Total nonaccrual and delinquent loans	$	59,380	$	96,815	$	114,025	$	81,476	$	80,379
Nonaccrual loans included above	$	49,687	$	54,616	$	85,238	$	54,785	$	53,286

We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt including but not limited ~~to:~~to current financial information, historical payment experience, credit documentation, public information, and current economic trends. We analyze loans individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans. Homogeneous loans are not risk rated and credit risk is analyzed largely by the number of days past due.

This analysis is performed on at least a quarterly basis. We use the following definitions for risk ratings:

•Pass: Loans that meet a preponderance or more of our underwriting criteria and evidence an acceptable level of risk.

•Special Mention: Loans ~~classified as Special Mention~~that have a potential ~~weakness~~weaknesses that ~~deserves~~deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

•Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the ~~obligor~~borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

•Doubtful/Loss: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

~~Table of Contents~~

Loans assigned a risk rating of Special Mention, Substandard, Doubtful, or ~~worse~~Loss are referred to as Criticized Loans and loans assigned a risk rating of Substandard, Doubtful, or ~~worse~~Loss are separately referred to as Classified Loans. The following table provides the detail of Criticized Loans by risk rating as of the dates indicated:


	December 31,
	2022		2021		2020		2019		2018
	(Dollars in thousands)
Special Mention	$	157,263	$	257,194	$	184,941	$	141,452	$	163,089
Substandard	104,073		242,397		366,556		259,278		317,915
Doubtful/Loss	—		—		1		13		412
Total Criticized Loans	$	261,336	$	499,591	$	551,498	$	400,743	$	481,416

For 2022, we completed the sale of approximately $77.0 million in loans with elevated credit risk or were likely to exhibit credit issues in the future. Of the loans sold, $76.6 million were rated as substandard and $400 thousand were rated as special mention. In 2021, we completed the sale of approximately $275.3 million in loans with elevated credit risk or were likely to exhibit credit issues in the future. Of the loans sold, $182.6 million were rated as substandard and $68.4 million were rated as special mention at the time of the sale. As a result of these loan sales, substandard loans experienced a significant declines in 2021 and 2022.

December 31,
2017 2016 2015 2014 2013
(Dollars in thousands)
Special Mention $ 214,891
$ 243,656
$ 104,186
$ 122,335
$ 89,489
Substandard 353,222
311,106
201,362
221,875
258,500
Doubtful 362
1,949
2,214
2,187
7,861
Loss —
—
—
—
—
Total Criticized Loans $ 568,475
$ 556,711
$ 307,762
$ 346,397
$ 355,850

The following table shows the provision for ~~loan~~credit losses, the amount of loans charged off, ~~the~~and recoveries on loans previously charged off together with the balance in the allowance for ~~loan~~credit losses at the beginning and end of each year, the amount of average and total loans outstanding ~~and~~as well as other pertinent ratios as of the dates and for the years indicated:

At or For The Year Ended December 31,
2017 2016 2015 2014 2013
(Dollars in thousands)
LOANS:
Average loans receivable, including loans held for sale (net of deferred fees) $ 10,642,349
$ 8,121,897
$ 5,846,658
$ 5,355,243
$ 4,692,089
Total loans receivables, excluding loans held for sale (net of deferred fees) 11,102,575
10,543,332
6,248,341
5,565,192
5,074,175
ALLOWANCE:
Balance—beginning of year 79,343
76,408
67,758
67,320
66,941
Loans charged off:
Commercial real estate 3,142
910
741
2,726
8,529
Commercial business and trade finance 13,300
7,293
3,530
14,933
12,973
Consumer and other loans 968
757
641
100
567
Total loans charged off 17,410
8,960
4,912
17,759
22,069
Less recoveries:
Commercial real estate 212
1,187
1,947
963
311
Commercial business and trade finance 4,996
1,614
3,011
4,366
1,937
Consumer and other loans 40
94
604
230
200
Total loan recoveries 5,248
2,895
5,562
5,559
2,448
Net loans charged off (recovered) 12,162
6,065
(650 ) 12,200
19,621
Provision for loan losses 17,360
9,000
8,000
12,638
20,000
Balance—end of year $ 84,541
$ 79,343
$ 76,408
$ 67,758
$ 67,320

RATIOS:
Net loan charge-offs (recoveries) to average loans 0.11 % 0.07 % (0.01 )% 0.23 % 0.42 %
Allowance for loan losses to gross loans 0.76 % 0.75 % 1.22 % 1.22 % 1.33 %
Net loan charge-offs (recoveries) to allowance for loan losses 14.39 % 7.64 % (0.85 )% 18.01 % 29.15 %
Net loan charge-offs (recoveries) to provision for loan losses 70.06 % 67.39 % (8.13 )% 96.53 % 98.11 %
Allowance for loan losses to nonperforming loans 73.88 % 88.90 % 85.70 % 65.25 % 92.14 %


	As of or For The Year Ended December 31,
	2022			2021			2020			2019			2018
	(Dollars in thousands)
LOANS:
Average loans:
Real estate	$	9,371,641		$	8,877,324		$	8,693,105		$	8,631,923		$	8,582,716
Commercial business	4,468,498			3,871,726			3,226,423			2,413,066			2,091,612
Residential mortgage	752,020			552,999			729,432			902,287			816,467
Consumer and other	42,468			41,382			49,563			51,399			56,227
Average loans, including loans held for sale	$	14,634,627		$	13,343,431		$	12,698,523		$	11,998,675		$	11,547,022

Total loans, excluding loans held for sale	$	15,403,540		$	13,952,743		$	13,563,213		$	12,276,007		$	12,098,115
ALLOWANCE:
Balance - beginning of year	140,550			206,741			94,144			92,557			84,541
Loans charged off:

Real estate	(6,803)			(57,427)			(8,658)			(1,803)			(6,726)
Commercial business	(5,160)			(3,558)			(6,157)			(5,086)			(2,891)
Residential mortgage	(22)			(923)			—			—			—
Consumer and other	(404)			(328)			(1,211)			(1,220)			(1,258)
Total loans charged off	(12,389)			(62,236)			(16,026)			(8,109)			(10,875)
Less recoveries:
Real estate	21,698			5,722			1,851			2,104			1,028
Commercial business	2,861			2,196			5,526			1,596			2,892
Residential mortgage	—			—			—			—			—
Consumer and other	39			327			46			36			71
Total loan recoveries	24,598			8,245			7,423			3,736			3,991
Net loan recoveries (charge offs)	12,209			(53,991)			(8,603)			(4,373)			(6,884)
CECL day 1 adoption impact	—			—			26,200			—			—
Provision (credit) for credit losses	9,600			(12,200)			95,000			7,300			14,900
PCI allowance adjustment	—			—			—			(1,340)			—
Balance - end of year	$	162,359		$	140,550		$	206,741		$	94,144		$	92,557

RATIOS:
Net loan (recoveries) charge offs to average loans	(0.08)		%	0.40		%	0.07		%	0.04		%	0.06		%
Allowance for credit losses to total loans receivable	1.05		%	1.01		%	1.52		%	0.77		%	0.77		%
Net loan (recoveries) charge offs to allowance for credit losses	(7.52)		%	38.41		%	4.16		%	4.65		%	7.44		%
Net loan charge offs to provision for credit losses	N/A			N/A			9.06		%	59.90		%	46.20		%
Allowance for credit losses to nonperforming loans	242.26		%	128.75		%	167.80		%	96.03		%	87.96		%

~~Table of Contents~~

The following table presents net loans (recoveries) charge offs to average loans by loan category for the years indicated:

~~Allowance for Loan Losses Methodology~~

We maintain an allowance for loan losses to provide for estimated probable losses that are inherent in our loan portfolio. The allowance is based on our regular quarterly assessments. Our methodologies for measuring the appropriate level of the allowance include the combination of: (1) a quantitative historical loss migration analysis (“Migration Analysis”) for pools of loans and a qualitative analysis of subjective factors and (2) a specific allowance method for impaired loans.


	Year Ended December 31,
	2022		2021		2020		2019		2018
	(Dollars in thousands)
Loan Type
Real estate	(0.16)	%	0.58	%	0.08	%	—	%	0.07	%
Commercial business	0.05	%	0.04	%	0.02	%	0.14	%	—	%
Residential mortgage	—	%	0.17	%	—	%	—	%	—	%
Consumer and other loans	0.86	%	—	%	2.35	%	2.30	%	2.11	%
Net loan (recoveries) charge offs to average loans	(0.08)	%	0.40	%	0.07	%	0.04	%	0.06	%

The following table reflects our allocation of the allowance for ~~loan~~credit losses by loan category and the ratio of each loan category to total loans as of the dates indicated:


	December 31,
	2022				2021				2020				2019				2018
	Amount of allowance for credit losses		ACL Coverage Ratio		Amount of allowance for credit losses		ACL Coverage Ratio		Amount of allowance for credit losses		ACL Coverage Ratio		Amount of allowance for loan losses		ALLL Coverage Ratio		Amount of allowance for loan losses		ALLL Coverage Ratio
	(Dollars in thousands)
Loan Type
Real estate—residential	$	1,014	1.33	%	$	729	1.05	%	$	391	0.71	%	$	204	0.39	%	$	112	0.22	%
Real estate—commercial	93,817		1.02	%	106,170		1.20	%	159,527		1.89	%	51,712		0.62	%	55,890		0.67	%
Real estate—construction	1,053		0.63	%	1,541		0.70	%	2,278		0.78	%	1,677		0.57	%	765		0.28	%
Commercial business	56,872		1.11	%	27,811		0.66	%	39,155		0.94	%	33,032		1.21	%	28,484		1.22	%
Residential mortgage	8,920		1.05	%	3,316		0.57	%	4,227		0.73	%	5,925		0.71	%	5,207		0.52	%
Consumer and other	683		2.05	%	983		1.68	%	1,163		2.28	%	1,594		2.89	%	2,099		4.15	%
Total	$	162,359	1.05	%	$	140,550	1.01	%	$	206,741	1.52	%	$	94,144	0.77	%	$	92,557	0.77	%

December 31,
2017 2016 2015 2014 2013
Amount of allowance for loan losses Percent of loans to total loans Amount of allowance for loan losses Percent of loans to total loans Amount of allowance for loan losses Percent of loans to total loans Amount of allowance for loan losses Percent of loans to total loans Amount of allowance for loan losses Percent of loans to total loans
(Dollars in thousands)
Loan Type
Real estate—residential
$ 88
— % $ 209
1 % $ 230
— % $ 146
— % $ 25
— %
Real estate—commercial
57,664
73 % 49,917
75 % 54,505
78 % 46,535
78 % 45,897
75 %
Real estate—construction
930
3 % 1,621
2 % 917
2 % 667
2 % 628
2 %
Commercial business 20,755
16 % 23,547
17 % 16,547
16 % 16,471
16 % 17,592
19 %
Trade finance 1,716
2 % 1,897
1 % 3,592
2 % 3,456
2 % 2,653
2 %
Consumer and other 3,388
6 % 2,152
4 % 617
2 % 483
2 % 525
2 %
Total $ 84,541
100 % $ 79,343
100 % $ 76,408
100 % $ 67,758
100 % $ 67,320
100 %

The adequacy of the allowance for ~~loan~~credit losses is determined ~~by management based~~ upon an evaluation and review of the credit quality of the loan portfolio, taking into consideration ofeconomic forecasts, historical loan loss ~~migration~~ experience, relevant internal and external factors that affect the collection of a loan, and other pertinent factors.

~~The Migration Analysis~~ We use a combination of a modeled and non-modeled approach that incorporates current and future economic conditions to estimate lifetime expected losses on a collective basis. We incorporate in our modeled approach, Probability of Default (“PD”), Loss Given Default (“LGD”), and Exposure at Default (“EAD”) methodologies. For non-modeled loans, the allowance for credit losses is ~~a formula methodology~~largely based on ~~the Bank’s actual~~ historical ~~net charge off experience for each loan pool~~loss experience. Both approaches are combined with other quantitative factors and loan risk grade (Pass, Special Mention, Substandard and Doubtful). The migration analysis is centered on the Bank’s internal credit risk rating system. Our internal and external credit reviews are used to determine and validate loan risk grades. This credit review system takes into consideration factors such as: borrower’s background and experience; historical and current financial condition; credit history and payment performance; economic conditions and their impact on various industries; type, fair value, and volatilityqualitative considerations in calculation of the ~~value of collateral; lien position;~~allowance for credit losses for collectively assessed loans with similar risk characteristics.

For loans which do not share similar risk characteristics such as nonaccrual and ~~the financial strength of any guarantors.~~

~~A general loan loss allowance is provided~~troubled debt restructured (“TDR”) loans above $1.0 million, we evaluate these loans on loans not specifically identified as impaired (“non-impaired loans”). For non- impaired loans, including loans acquired without credit deterioration, the allowance is determined first based on a quantitative analysis using a loss migration methodology. The loans are classified by typean individual basis in accordance with ASC 326. These nonaccrual and loan grade and the historical loss migration is tracked for the various stratifications. Loss experience is quantified for a specified period determined by management and then weighted to give more weight to the most recent periods. That loss experience is then applied to the stratified portfolio at the end of each quarter. As of December 31, 2017, we utilized nineteen non-homogeneous loan pools in the quantitative analysis process. The non-impaired commercial real estate loan portfolio was stratified into fourteen different loan pools based on property types and the non-impaired commercial and industrial loan portfolio was stratified into five different loan pools based on loan type in order to allocate historic loss experience to more granular loan pools.

Additionally, in order to systematically quantify the credit risk impact of other trends and changes within the loan portfolio, the Bank utilizes qualitative adjustments to the Migration Analysis within established parameters. The parameters for making adjustments are established under a Credit Risk Matrix that provides seven possible scenarios for each of the factors below. The matrix allows for up to three positive (major, moderate and minor), three negative (major, moderate and minor), and one neutral credit risk scenarios within each factor for each loan type pool. Generally, the factorsTDR loans are considered to have ~~no significant impact (neutral)~~different risk profiles than performing loans and therefore are evaluated separately. We ultimately decided to ~~our historical migration ratios. However, if information exists to warrant adjustment to the Migration Analysis, changes are made in accordance~~collectively assess TDRs and nonaccrual loans with balances below $1.0 million along with the ~~established parameters supported by narrative and/or statistical analysis. The Credit Risk Matrix~~performing and accrual loans in order to reduce the nine possible scenarios enable the Bank to qualitatively adjust the Loss Migration Ratio or individual specific reserve allocations by as much as 50 basis points in either direction (positive or negative) for each loan type pool. This matrix considers the following nine factors, which are patterned after the guidelines provided under the Federal Financial Institutions Examination Council (“FFIEC”) Interagency Policy Statement on the Allowance for Loanoperational burden of individually assessing small TDR and ~~Lease Losses:~~

~~Changes in lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices.~~

~~Table of Contents~~

~~Changes in national and local economic and business conditions and developments, including the condition of various market segments.~~

~~Changes in the nature and volume of the loan portfolio.~~

~~Changes in the experience, ability and depth of lending management and staff.~~

~~Changes in the trends of the volume and severity of past due and classified loans and changes in trends in the volume of~~ nonaccrual loans ~~troubled debt restructurings and other loan modifications.~~

~~Changes in~~with immaterial balances. For individually assessed loans, the ~~quality of our loan review system and the degree of oversight by the Directors.~~

~~Changes in the value of underlying collateral for collateral dependent loans.~~

~~The existence and effect of any concentrations of credit, and changes in the level of such concentrations.~~

~~The effect of external factors such as competition and legal and regulatory requirements on the level of estimated losses in our loan portfolio.~~

We also establish specific loss allowances for loans where we have identified potential credit risk conditions or circumstances related to a specific individual credit. The specific allowance amounts are determined by a method prescribed by ASC 310-10-35-22, ~~Measurement of Impairment. The loans identified as impaired are accounted for in accordance with one of the three acceptable valuation methods:~~ACL is measured using either 1) the present value of future cash flows discounted at the loan’s effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral, if the loan is collateral dependent. For the collateral dependent ~~impaired~~ loans, we obtain ~~an appraisal~~new appraisals to determine the ~~amount~~fair value of ~~impairment as of the date that the loan became impaired.~~collateral. The appraisals are based on an ~~“as is”~~“as-is” valuation. To ensure that appraised values remain current, we ~~generally~~either obtain ~~either an internally prepared evaluation report or an~~ updated ~~appraisal~~appraisals every twelve months from a qualified independent ~~appraiser.~~appraiser or an internal evaluation of the collateral is performed by qualified personnel. If the third party market data indicates that the value of the collateral property has declined since the most recent valuation date, management adjusts the value of the property downward to reflect current market conditions. If the fair value of the collateral ~~less cost to sell,~~ is less than the ~~recorded amount~~amortized balance of the loan, we ~~then~~ recognize ~~impairment by creating or adjusting~~ an ~~existing valuation allowance~~ACL with a corresponding charge to the provision for loan losses. If an impaired loan is expected to be collected through liquidation of the collateral, the loan is deemed to be collateral dependent and the amount of impairment is charged off against the allowance for loan losses.

We consider a loan to be impaired when it is probable that not all amounts due (principal and interest) will be collectible in accordance with the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. The significance of payment delays and payment shortfalls is determined on a case-by-case basis by taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

For commercial business loans, real estate loans and certain consumer loans, we base the measurement of loan impairment on the present value of the expected future cash flows, discounted at the loan’s effective interest rate or on the fair value of the loan’s collateral if the loan is collateral dependent. We evaluate most consumer loans for impairment on a collective basis, because these loans have generally smaller balances and are homogeneous in the underwriting terms and conditions, and in the type of collateral. If a loan is deemed to be impaired, the amount of the impairment is supported by a specific allowance amount which is included in the allowance for loan losses through a charge to the provision for loancredit losses.

The scope for evaluation of individual impairment includes all loans risk graded Doubtful or Loss, all troubled debt restructured loans (“TDRs”) and all loans risk graded Substandard that are greater than $500 thousand regardless of performance under their contractual terms. Impaired

Individually evaluated loans at December 31, ~~2017~~2022 were ~~$114.3~~$66.1 million,, a net decrease of ~~$26.1~~$40.5 million from ~~$140.4~~$106.6 million at December 31, ~~2016. This~~2021. The net decrease in ~~impaired~~individually evaluated loans iswas due primarily to ~~payoffs~~sale of problem loans and ~~charge-offs of impaired loans~~continued de-risking the loan portfolio in ~~2017.~~2022.

~~Investment Security Portfolio~~

The main objectives of our investment strategy are to provide a source of liquidity while managing our interest rate risk and to generate an adequate level of interest income without taking undue risks. Our investment policy permits investments in various types of securities, certificates of deposits and federal funds sold in compliance with various restrictions in the policy. All of our investment securities are classified as available-for-sale. The securities for which we have the ability and intent to hold to maturity may be classified as held-to-maturity securities. However, we do not currentlyWe also maintain a ~~held-for-maturity or trading portfolio.~~

~~Our available-for-sale securities totaled $1.72 billion~~separate ACL for our off-balance sheet unfunded loan commitments. We utilize a funding rate to allocate the allowance to undrawn exposures. This funding rate is used as a credit conversion factor to capture how much undrawn can potentially become drawn at December 31, 2017, compared to $1.56 billion at December 31, 2016. We had no securities that were categorized as held-to-maturity at December 31, 2017 or 2016. We had securities matured, called, or paid down totaling $264.7 million and purchased $572.5 million in securities during the year. In 2017, we sold securities totaling $128.8 million and had a net gain on sale of securities of $301 thousand. At December 31, 2017, we had a carrying balance of $359.2 million in securities that were pledged to secure public deposits, or for other purposes required or permitted by law. $337.7 million in securities were pledged in the State of California time deposit program, $8.0 million was pledged at the United State Department of Justice, and $13.5 million were pledged for public deposits.

~~Table of Contents~~

Our investment portfolio consists of government sponsored enterprise (“GSE”) bonds, mortgage backed securities (“MBS”), collateralized mortgage obligations (“CMOs”), mutual funds, corporate securities, and municipal securities.

~~Our available-for-sale securities portfolio~~any point. The funding rate is ~~primarily invested in residential CMOs and residential and commercial MBS, which comprised~~ ~~94%~~ ~~of our total available-for-sale portfolio as of~~ ~~December 31, 2017~~ ~~and~~ ~~2016. At~~ ~~December 31, 2017~~ ~~and~~ ~~2016~~, all of our CMOs and MBS were issued by the Government National Mortgage Association (“GNMA”), Fannie Mae (“FNMA”), or Freddie Mac (“FHLMC”), which guarantee the contractual cash flows of these investments.

~~The following table presents the amortized cost, estimated fair value, and unrealized gain and losses on our investment securities as of the dates indicated:~~

December 31,
2017 2016

Amortized
Cost

Estimated
Fair
Value

Unrealized
Loss

Amortized
Cost

Estimated
Fair
Value

Unrealized
Gain (Loss)
(Dollars in thousands)
Debt securities*:
Agency securities $ —
$ —
$ —
$ 12,005
$ 12,008
$ 3
CMOs 856,193
838,709
(17,484 ) 715,981
705,667
(10,314 )
MBS:

Residential 477,676
471,214
(6,462 ) 611,201
602,852
(8,249 )
Commercial 308,046
301,365
(6,681 ) 130,103
125,089
(5,014 )
Corporate Securities 4,997
4,475
(522 ) 11,576
11,127
(449 )
Municipal Securities 82,542
82,537
(5 ) 88,018
86,839
(1,179 )
Total debt securities 1,729,454
1,698,300
(31,154 ) 1,568,884
1,543,582
(25,202 )
Mutual funds 22,425
21,957
(468 ) 13,425
13,058
(367 )
Total $ 1,751,879
$ 1,720,257
$ (31,622 ) $ 1,582,309
$ 1,556,640
$ (25,569 )

* GSE bonds were issued by GNMA, FNMA, and FHLMC and are all mortgage-backed securities.

~~Table of Contents~~

~~The following table summarizes the maturity of securities~~determined based on ~~carrying value and their related weighted average yield (non-tax equivalent) at~~ ~~December 31, 2017~~:

Within One Year
After One But
Within Five Years

After Five But
Within Ten Years
After Ten Years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
(Dollars in thousands)
CMOs $ —
— % $ —
— % $ 7,278
1.48 % $ 831,431
2.25 % $ 838,709
2.24 %
MBS:

Residential —
— % —
— % 90,697
1.94 % 380,517
2.35 % 471,214
2.27 %
Commercial —
— % —
— % 161,663
2.75 % 139,702
2.27 % 301,365
2.53 %
Corporate Securities —
— % —
— % —
— % 4,475
3.51 % 4,475
3.51 %
Municipal Securities —
— % 11,729
4.00 % 33,581
3.24 % 37,227
4.24 % 82,537
3.80 %
Mutual funds — % —
— % 21,957
2.04 % —
— % 21,957
2.04 %
Total $ —
— % $ 11,729
4.00 % $ 315,176
2.49 % $ 1,393,352
2.34 % $ 1,720,257
2.37 %

~~The following table shows our investments with gross unrealized losses and their estimated fair values, aggregated by investment category and length~~a lookback period of ~~time that individual securities have been in a continuous unrealized loss position, at December 31, 2017:~~

Less than 12 months 12 months or longer Total
Description of
Securities
Number of
Securities
Fair Value
Gross
Unrealized
Losses

Number of
Securities
Fair Value
Gross
Unrealized
Losses

Number of
Securities
Fair Value
Gross
Unrealized
Losses
(Dollars in thousands)
CMOs* 38
$ 425,198
$ (5,954 ) 53
$ 408,526
$ (11,588 ) 91
$ 833,724
$ (17,542 )
MBS:
Residential* 20
195,086
(1,282 ) 23
230,616
(5,701 ) 43
425,702
(6,983 )
Commercial* 16
186,357
(1,614 ) 8
115,008
(5,067 ) 24
301,365
(6,681 )
Corporate securities 1
4,475
(522 ) —
—
—
1
4,475
(522 )
Municipal securities 18
9,295
(69 ) 3
22,144
(806 ) 21
31,439
(875 )
Mutual funds 1
8,899
(101 ) 3
11,579
(384 ) 4
20,478
(485 )
Total 94
$ 829,310
$ (9,542 ) 90
$ 787,873
$ (23,546 ) 184
$ 1,617,183
$ (33,088 )

* Investments in U.S. Government agency and U.S. Government sponsored enterprises

ASC 320 requires an entity to assess whether the entity has the intent to sell a debt security or more likely than not will be required to sell the debt security before its anticipated recovery. If either of these conditions is met, an entity must recognize an other than temporary impairment (“OTTI”). If an entity does not intend to sell the debt security and will not be required to sell the debt security, the entity must consider whether it will recover the amortized cost basis of the security. If the present value of expected cash flows is less than the amortized cost basis of the security, OTTI shall be considered to have occurred. OTTI is then separated into the amount of the total impairment related to credit losses and the amount of the total impairment related to all other factors. An entity determines the impairment related to credit losses by comparing the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. OTTI related to the crediteight quarters. Credit loss is ~~then recognized in earnings. OTTI related to all other factors is recognized in other comprehensive income.~~

~~ASC 320 requires an entity to assess whether the entity plans to sell an equity security and does~~ not ~~expect the fair value of the equity security to recover~~estimated for off-balance sheet credit exposures that are unconditionally cancellable by ~~the time of the sale. If both of these conditions are met, an entity must recognize OTTI when the decision to sell is made. The entity considers facts and circumstances present~~us at the time of ~~assessment, which include the consideration~~measurement.

OREO

OREO consists of ~~general market conditions, and the duration and extent to which the~~real estate properties acquired through foreclosure or similar means. OREO is recorded at fair value, ~~is below cost. OTTI related to equity securities is recognized in earnings.~~

~~We evaluate securities for OTTI on at least a quarterly basis,~~less estimated selling costs. At December 31, 2022 and ~~more frequently when economic or market concerns warrant such evaluation. Consideration is given to the financial condition~~2021, OREO, net totaled $2.4 million and ~~near-term prospects~~$2.6 million, respectively. The number of the issuer, the length of time and the extent to which the fair value of the securities has been less than our cost for the securities, and our intention to sell, or whether it is more likely than not that we will be required to sell, a security in an unrealized loss position before recovery of its amortized

~~Table of Contents~~

cost basis. In analyzing an issuer’s financial condition, we consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

~~We consider the losses on our investments in an unrealized loss position~~OREO properties held at December 31, ~~2017 to be temporary based on: 1)~~2022 and 2021 was four and six, respectively. For the likelihood of recovery; 2) the information available to us relative to the extent and duration of the decline in market value; and 3) our intention not to sell, and our determination that it is more likely than not that we will not be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. The increase in the net unrealized loss position can be attributed to the change in Treasury yields due to the increases in interest rates atyear ended December 31, ~~2017 compared~~2022, one property was transferred to ~~rates at~~OREO totaling $938 thousand and we sold three OREO properties with carrying balances totaling $702 thousand. For the year ended December 31, ~~2016.~~2021, no properties were transferred to OREO and we sold eight OREO properties totaling $15.9 million.

The changes in OREO for the years ended December 31, 2022 and 2021 were as follows:


	Year Ended December 31,
	2022		2021
	(Dollars in thousands)
Balance at beginning of period	$	2,597	$	20,121
Additions to OREO	938		—
OREO sales	(702)		(15,903)
Valuation adjustments, net	(415)		(1,621)
Balance at end of period	$	2,418	$	2,597

Deposits

Deposits are our primary source of funds for loans and investments. We offer a wide variety of deposit account products to commercial and consumer customers. Total deposits increased to ~~$10.85~~$15.74 billion at December 31, ~~2017~~2022 from ~~$10.64~~$15.04 billion at December 31, ~~2016~~.2021.

The increase in deposits during ~~2017~~2022 was primarily due to an increase in time deposits, partially offset by declines in demand deposits, money market deposits, and ~~noninterest~~savings deposits. Noninterest bearing demand deposits decreased $902.4 million during 2022 due primarily to a decrease in ~~2017 partially offset by a decline in money market and savings accounts. At~~retail deposits. Time deposits increased $2.20 billion from December 31, ~~2017, we had $797.1 million~~2021 to December 31, 2022 due to an increase in customer deposits of $1.13 billion and in brokered time deposits ~~and money market accounts~~of $1.07 billion. At December 31, 2022, we had $1.18 billion in brokered deposits and $300.0 million in California State Treasurer deposits compared to ~~$724.7~~$810.9 million in brokered ~~time~~ deposits ~~and money market accounts~~ and $300.0 million in California State Treasurer deposits at December 31, ~~2016.~~2021. The brokered deposits represented approximately ~~7.3%~~7.50% of our total deposits as of December 31, ~~2017~~2022 compared to ~~6.8%~~5.39% as of December 31, ~~2016.~~2021. The California State Treasurer deposits have upthree to six months maturities with a weighted average interest rate of ~~1.37%~~4.27% and 0.10% at December 31, ~~2017 compared to 0.45% at December 31, 2016.~~2022 and 2021, respectively.

Although our deposits may vary with local and national economic conditions, we do not believe that our deposits are seasonal in nature.

The following table sets forth the balances of our deposits by category for the periods indicated:


	December 31,													December 31,
	2017				2016				2015					2022				2021				2020
	Amount		Percent		Amount		Percent		Amount		Percent			Amount		Percent		Amount		Percent		Amount		Percent
	(Dollars in thousands)													(Dollars in thousands)
Demand, noninterest bearing	$	2,998,734	27	%	$	2,900,241	27	%	$	1,694,427	27	%	Demand, noninterest bearing	$	4,849,493	31	%	$	5,751,870	38	%	$	4,814,254	34	%
Demand, interest bearing	3,332,703		31	%	3,401,446		32	%	1,983,250		31	%	Demand, interest bearing	5,615,784		36	%	6,178,850		41	%	5,232,413		36	%
Savings	240,509		2	%	301,906		3	%	187,498		3	%	Savings	283,464		2	%	321,377		2	%	300,770		2	%
Time deposit of more than $250,000	1,279,108		12	%	1,077,024		10	%	1,021,937		16	%	Time deposit of more than $250,000	2,385,573		15	%	1,493,651		10	%	1,854,414		13	%
Other time deposits	2,995,555		28	%	2,961,418		28	%	1,453,864		23	%	Other time deposits	2,604,487		16	%	1,294,702		9	%	2,132,061		15	%
Total Deposits	$	10,846,609	100	%	$	10,642,035	100	%	$	6,340,976	100	%	Total Deposits	$	15,738,801	100	%	$	15,040,450	100	%	$	14,333,912	100	%

The following table ~~indicates~~presents the maturity schedules of our time deposits, ~~for the years~~as of dates indicated:


	December 31,
	2022				2021				2020
	Amount		Percentage		Amount		Percentage		Amount		Percentage
	(Dollars in thousands)
Three months or less	$	1,166,952	23	%	$	1,262,868	45	%	$	1,612,171	40	%
Over three months through six months	1,003,444		21	%	571,155		21	%	1,095,373		27	%
Over six months through twelve months	2,802,627		56	%	892,462		32	%	1,177,552		30	%
Over twelve months	17,037		—	%	61,868		2	%	101,379		3	%
Total time deposits	$	4,990,060	100	%	$	2,788,353	100	%	$	3,986,475	100	%

December 31,
2017 2016 2015
Amount Percentage Amount Percentage Amount Percentage
(Dollars in thousands)
Three months or less $ 857,761
20 % $ 1,006,581
25 % $ 700,991
28 %
Over three months through six months 1,075,202
25 % 719,986
18 % 467,615
19 %
Over six months through twelve months 1,923,003
45 % 1,761,056
43 % 1,083,248
44 %
Over twelve months 418,697
10 % 550,819
14 % 223,947
9 %
Total time deposits $ 4,274,663
100 % $ 4,038,442
100 % $ 2,475,801
100 %

~~Table of Contents~~

The following table indicates the maturity schedules of our time deposits in amounts of more than $250,000 as of December 31, ~~2017~~:2022:


	Amount		Percentage			Amount		Percentage
	(Dollars in thousands)					(Dollars in thousands)
Three months or less	$	249,568	20	%	Three months or less	$	242,755	10	%
Over three months through six months	473,313		37	%	Over three months through six months	509,744		21	%
Over six months through twelve months	493,054		38	%	Over six months through twelve months	1,629,667		69	%
Over twelve months	63,173		5	%	Over twelve months	3,407		—	%
Total	$	1,279,108	100	%	Total	$	2,385,573	100	%

There ~~can be~~is no assurance that we will be able to continue to replace maturing time deposits at competitive rates. However, if we are unable to replace these maturing time deposits with new deposits, we believe that we have adequate liquidity resources to fund these obligations through secured credit lines with the FHLB and FRB, as well as with liquid assets.

At December 31, 2022, total uninsured deposits of the Bank reported by the Bank was approximately $10.19 billion which represents the estimated portion of deposit accounts that exceed the FDIC insurance limit. This estimate was determined based on the same methodologies and assumptions used for regulatory reporting requirements.

FHLB and FRB Borrowings and Fed Funds Purchased

We utilize a combination of short-term and long-term borrowings from the FHLB and FRB as well as other sources to help manage our liquidity position. However, borrowings are used as a secondary source of funds and deposits are our main source of funding and liquidity.

Federal Funds Purchased

Federal funds purchased generally mature within one to three business days from the transaction date. ~~At December 31, 2017, we had $69.9 million in overnight federal funds purchased at an average weighted rate of 1.79%.~~ We did not have any federal funds purchased at December 31, ~~2016.~~2022 and 2021.

FHLB ~~Advances~~and FRB Borrowings

We may borrow from the FHLB and FRB on a short term or long term basis to provide funding for certain loans or investment securities strategies, as well as for asset liability management strategies. ~~As of~~At December 31, ~~2017~~2022, borrowings totaled $865.0 million consisting of $600.0 million in FHLB borrowings and ~~2016,~~$265.0 million in FRB borrowings compared to $300.0 million in FHLB ~~advances totaled $1.16 billion~~borrowings at December 31, 2021. At December 31, 2022 and ~~$754.3 million with~~December 31, 2021, the average weighted remaining ~~maturities~~maturity of ~~2.0 years~~FHLB and ~~2.2 years,~~FRB borrowings was less than 1 month and 4 months, respectively. The weighted average rate ~~net of fair value adjustments,~~ for FHLB advances ~~was 1.63%~~and FRB borrowings were 3.40% and 4.50%, respectively, at December 31, ~~2017~~2022, compared to ~~1.22%~~0.92% for FHLB advances at ~~year-end 2016.~~December 31, 2021. As of December 31, ~~2017,~~2022, our remaining available FHLB borrowing capacity was ~~$2.32~~$3.98 billion. ~~See~~

Convertible Notes

In 2018, we issued $217.5 million aggregate principal amount of 2.00% convertible senior notes maturing on May 15, 2038 in a private offering to qualified institutional buyers under Rule 144A of the Securities Act of 1933. The convertible notes were issued as part of our plan to repurchase common stock. The convertible notes pay interest on a semi-annual basis to holders of the notes. The convertible notes can be called by us, in whole or in part, at any time after five years for the original issued amount in cash. Holders of the notes can put the notes for cash on the fifth, tenth, and fifteenth year of the notes. Based on our stock price at December 31, 2022, it is likely that most holders of the convertible notes will put their holdings on May 15, 2023. Management is currently assessing different options in the event that the convertible notes are put in May 2023.

The net carrying balance of convertible notes at December 31, 2022 was $217.1 million, net of $352 thousand in uncapitalized issuance costs. At December 31, 2021, the net carrying balance of convertible notes was $216.2 million, net of $1.3 million in uncapitalized issuance costs. With the adoption of ASU 2020-06, our convertible notes are accounted for entirely as debt and no longer has a discount or equity portion. (See Note 8 10 “Subordinated Debentures and Convertible Notes” of the Notes to the Consolidated Financial Statements for ~~more detailed~~additional information ~~on FHLB advances.~~regarding convertible notes issued).

Subordinated Debentures

At December 31, ~~2017~~,2022, our nine wholly-owned subsidiary grantor trusts (“Trusts”) had issued ~~$126.0~~$126.0 million of pooled trust preferred securities (“Trust Preferred Securities”). The Trust Preferred Securities accrue and pay distributions periodically at specified annual rates as provided in the related indentures for the securities. The Trusts used the net proceeds from the offering of the Trust Preferred Securities to purchase a like amount of Hope Bancorp’s subordinated debentures (the “Debentures”) ~~issued by us.~~. The Debentures are the sole assets of the trusts. Our obligations under the Debentures and related documents, taken together, constitute a full and unconditional guarantee by us of the obligations of the trusts. The Trust Preferred Securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. We have the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date. Debentures totaled $106.6 million at December 31, 2022 and $105.4 million at December 31, 2021.

As of December 31, ~~2017~~2022 and ~~2016~~,2021, the Trusts are not reported on a consolidated basis pursuant to ASC 810, ~~Consolidation~~.Consolidation. Therefore, the capital securities of ~~$126.0~~$126.0 million are not presented on the consolidated statements of financial condition. Instead, as of December 31, 2022 the long-term subordinated debentures of ~~$100.9~~$106.6 million, as net of ~~December 31, 2017~~,$23.3 million in discounts, issued by us to the Trusts and the investment in Trusts’ common stock of $3.9 million (included in other assets) are separately reported. ~~During the third quarter of 2016, we acquired four subordinated debentures from Wilshire at a fair value of $56.9 million, net of $25.5 million in total discount.~~

~~Table of Contents~~

The following table summarizes our outstanding Debentures related to the Trust Preferred Securities at December 31, ~~2017~~:2022:

Trust Name

Issuance Date

Amount

Carry Value of Subordinated Debentures

Maturity

Date

Coupon Rate

Current Rate

Interest Distribution

and Callable Date

Trust Name

Issuance Date

Amount

Carry Value of Subordinated Debentures

Maturity
Date

Coupon Rate

Current Rate

Interest Distribution

and Callable Date

(Dollars in thousands)

Nara Capital Trust III

06/05/2003

5,000

5,155

06/15/2033

3 month LIBOR

+ 3.15%

4.74%

Every 15^th of

Mar, Jun, Sep, and Dec

Nara Capital Trust III

06/05/2003

5,000

5,155

06/15/2033

3M LIBOR + 3.15%

7.919%

Every 15th of

Mar, Jun, Sep, and Dec

Nara Statutory Trust IV

12/22/2003

5,000

5,155

01/07/2034

3 month LIBOR

+ 2.85%

4.21%

Every 7^th of

Jan, Apr, Jul and Oct

Nara Statutory Trust IV

12/22/2003

5,000

5,155

01/07/2034

3M LIBOR + 2.85%

6.929%

Every 7th of

Jan, Apr, Jul and Oct

Nara Statutory Trust V

12/17/2003

10,000

10,310

12/17/2033

3 month LIBOR

+ 2.95%

4.55%

Every 17^th of

Mar, Jun, Sep and Dec

Nara Statutory Trust V

12/17/2003

10,000

10,310

12/17/2033

3M LIBOR + 2.95%

7.688%

Every 17th of

Mar, Jun, Sep and Dec

Nara Statutory Trust VI

03/22/2007

8,000

8,248

06/15/2037

3 month LIBOR

+1.65%

3.24%

Every 15^th of

Mar, Jun, Sep and Dec

Nara Statutory Trust VI

03/22/2007

8,000

8,248

06/15/2037

3M LIBOR + 1.65%

6.419%

Every 15th of

Mar, Jun, Sep and Dec

Center Capital Trust I

12/30/2003

18,000

13,827

01/07/2034

3 month LIBOR

+2.85%

4.21%

Every 7^th of

Jan, Apr, Jul and Oct

Center Capital Trust I

12/30/2003

18,000

14,937

01/07/2034

3M LIBOR + 2.85%

6.929%

Every 7th of

Mar, Jun, Sep, and Dec

Wilshire Statutory Trust II

03/17/2005

20,000

15,314

03/17/2035

3 month LIBOR

+1.79%

3.39%

Every 17^th of

Mar, Jun, Sep, and Dec

Wilshire Statutory Trust II

03/17/2005

20,000

16,435

03/17/2035

3M LIBOR + 1.79%

6.528%

Every 17th of

Mar, Jun, Sep, and Dec

Wilshire Statutory Trust III

09/15/2005

15,000

10,767

09/15/2035

3 month LIBOR

+1.40%

2.99%

Every 15^th of

Mar, Jun, Sep, and Dec

Wilshire Statutory Trust III

09/15/2005

15,000

11,722

09/15/2035

3M LIBOR + 1.40%

6.169%

Every 15th of

Mar, Jun, Sep, and Dec

Wilshire Statutory Trust IV

07/10/2007

25,000

17,479

09/15/2037

3 month LIBOR

+1.38%

2.97%

Every 15^th of

Mar, Jun, Sep, and Dec

Wilshire Statutory Trust IV

07/10/2007

25,000

18,932

09/15/2037

3M LIBOR + 1.38%

6.149%

Every 15th of

Mar, Jun, Sep, and Dec

Saehan Capital Trust I

03/30/2007

20,000

14,598

06/30/2037

3 month LIBOR

+1.62%

3.31%

Every 30^th of

Mar, Jun, Sep, and Dec

Saehan Capital Trust I

03/30/2007

20,000

15,671

06/30/2037

3M LIBOR + 1.62%

6.350%

Every 30th of

Mar, Jun, Sep, and Dec

Total Trust

126,000

100,853

Total Trust

126,000

106,565

Capital Resources

Historically, our primary source of capital has been the retention of earnings, net of interest payments on debentures and convertible notes and dividend payments to ~~shareholders.~~stockholders and share repurchases. We seek to maintain capital at a level sufficient to assure our stockholders, ~~our~~ customers, and ~~our~~ regulators that Hope Bancorp and the Bank ~~subsidiary~~ are financially sound. For this purpose, we perform ongoing assessments of ~~our~~capital related risks, components of capital, as well as projected sources and uses of capital in conjunction with projected increases in assets and levels of risk.

In conjunction with the acquisition of PIB, we assumed a warrant (related to the TARP Capital Purchase Plan) to purchase shares of its common stock. At the acquisition date, the warrants were canceled and converted into a warrant to purchase BBCN Bancorp common stock which expires on December 12, 2018. As of December 31, 2017, the U.S. Treasury Department held the warrant for the purchase of 20,379 shares of our common stock.

On July 29, 2016 we acquired Wilshire in an all-stock transaction. Pursuant to the merger agreement, Wilshire shareholders received 0.7034 shares of our common stock for each share of Wilshire stock owned. We therefore issued 55,493,726 shares of its common stock to Wilshire shareholders at $15.37 per share. This resulted in the issuance of $852.9 million in common shares of HOPE stock during the third quarter of 2016.

Our total stockholders’ equity ~~increased $72.8~~decreased $73.7 million, or ~~3.9%~~3.5%, to ~~$1.93~~$2.02 billion at December 31, ~~2017~~2022 from ~~$1.86~~$2.09 billion at December 31, ~~2016. Net income of $139.4 million during the year contributed to the increase~~2021. The decrease in ~~overall~~our stockholders’ equity ~~partially offset by~~at December 31, 2022 compared to December 31, 2021 was largely due to a decrease in equity from other comprehensive loss of $3.5 million, a reclassification of stranded tax effects of $3.6 million, and dividends paid on common stock of $67.7 million. As permitted by ASU 2018-02, we reclassified $3.6 million in stranded tax effects in accumulated other comprehensive income ~~that resulted~~of $219.4 million, dividends paid of $67.1 million, and share repurchases of $14.7 million, offset partially by net income earned of $218.3 million and increases in additional paid-in capital consisting of $8.8 million in stock based compensation and $530 thousand in issuance of additional shares of stock. The decrease in accumulated other comprehensive income from ~~the reduction in corporate tax rates~~December 31, 2021 to ~~retained earnings related~~December 31, 2022 was due to the ~~deferred tax assets for~~increase in unrealized losses on ~~investments~~our investment securities ~~and~~AFS as a result of rising market interest ~~only strip. The total reclassification for the year ended December 31, 2017 was $3.6 million.~~ rates.

At December 31, ~~2017,~~2022, our ratio of common equity to total assets was ~~13.57%~~10.54% compared to ~~13.80%~~11.70% at December 31, ~~2016,~~2021, and our tangible common equity represented ~~10.54%~~8.29% of tangible assets at December 31, ~~2017,~~2022, compared with ~~10.60%~~9.31% of tangible assets at December 31, ~~2016.~~2021. Tangible common equity per share was ~~$10.68~~$12.96 at December 31, ~~2017,~~2022, compared with ~~$10.15~~$13.51 at December 31, ~~2016.~~2021. Tangible common equity to tangible assets ~~is a non-GAAP financial measure that represents common equity less goodwill~~ and ~~net other intangible assets divided by total assets less goodwill and net other intangible assets. We review~~ tangible common equity ~~to tangible assets~~per share are non-GAAP financial measures that we believe provide investors with information that is useful in ~~evaluating the capital levels.~~understanding our financial performance and position.

We provide certain non‑GAAP financial measures that we believe provide investors with meaningful supplemental information that is useful in understanding our financial performance and position. The methodologies for determining non-GAAP measures may differ among companies. The following ~~tables compare~~table reconciles non-GAAP financial measures used to the most comparable GAAP performance measures:


	December 31,
	2022			2021
	(Dollars in thousands, except share and per share data)
Total stockholders’ equity	$	2,019,328		$	2,092,983
Less: Goodwill and core deposit intangible assets, net	(470,176)			(472,121)
Tangible common equity	$	1,549,152		$	1,620,862

Total assets	$	19,164,491		$	17,889,061
Less: Goodwill and core deposit intangible assets, net	(470,176)			(472,121)
Tangible assets	$	18,694,315		$	17,416,940

Common shares outstanding	119,495,209			120,006,452

Tangible common equity ratio (Tangible common equity / tangible assets)	8.29		%	9.31		%
Common tangible equity per share (Tangible common equity / common shares outstanding)	$	12.96		$	13.51

The following table compares Hope Bancorp’s and the Bank’s ~~actual~~ capital ratios at December 31, ~~2017~~2022 to those required by our regulatory agencies to generally be deemed “adequately capitalized” for capital adequacy classification purposes:


	December 31, 2022
	Actual				Required				Excess
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
Hope Bancorp
Common equity tier 1 capital (to risk-weighted assets):	$	1,799,020	10.55	%	$	767,223	4.50	%	$	1,031,797	6.05	%
Total capital (to risk-weighted assets)	$	2,041,319	11.97	%	$	1,363,953	8.00	%	$	677,366	3.97	%
Tier 1 capital (to risk-weighted assets)	$	1,901,685	11.15	%	$	1,022,965	6.00	%	$	878,720	5.15	%
Tier 1 capital (to average assets)	$	1,901,685	10.15	%	$	749,743	4.00	%	$	1,151,942	6.15	%

Bank of Hope
Common equity tier 1 capital (to risk-weighted assets):	$	2,049,973	12.03	%	$	766,971	4.50	%	$	1,283,002	7.53	%
Total capital (to risk-weighted assets)	$	2,189,607	12.85	%	$	1,363,504	8.00	%	$	826,103	4.85	%
Tier 1 capital (to risk-weighted assets)	$	2,049,973	12.03	%	$	1,022,628	6.00	%	$	1,027,345	6.03	%
Tier 1 capital (to average assets)	$	2,049,973	10.94	%	$	749,540	4.00	%	$	1,300,433	6.94	%

~~Table of Contents~~

December 31, 2017
Actual Required Excess
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
Hope Bancorp
Common equity tier 1 capital (to risk-weighted assets): $ 1,471,193
12.30 % $ 538,435
4.50 % $ 932,758
7.80 %
Total capital
(to risk-weighted assets)
$ 1,653,521
13.82 % $ 957,217
8.00 % $ 696,304
5.82 %
Tier 1 capital
(to risk-weighted assets)
$ 1,568,144
13.11 % $ 717,913
6.00 % $ 850,231
7.11 %
Tier 1 capital
(to average assets)
$ 1,568,144
11.54 % $ 543,528
4.00 % $ 1,024,616
7.54 %

December 31, 2017
Actual Required Excess
Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
Bank of Hope
Common equity tier 1 capital (to risk-weighted assets): $ 1,548,401
12.95 % $ 538,178
4.50 % $ 1,010,223
8.45 %
Total capital
(to risk-weighted assets)
$ 1,633,778
13.66 % $ 956,761
8.00 % $ 677,017
5.66 %
Tier 1 capital
(to risk-weighted assets)
$ 1,548,401
12.95 % $ 717,571
6.00 % $ 830,830
6.95 %
Tier 1 capital
(to average assets)
$ 1,548,401
11.40 % $ 543,441
4.00 % $ 1,004,960
7.40 %

~~New~~ Capital ~~Rules requires~~rules require a capital conservation buffer of 2.50% above the three minimum ~~risked weighted~~risked-weighted capital ~~ratios. In January 2016, the capital conservation buffer started~~ratios to ~~phase in at 0.625%~~avoid constraints on dividend payments, stock repurchases, and ~~increases at annual increments of 0.625% until fully-phased in January 2019. At January 1, 2016, the capital conservation buffer stood was 0.625% and increased~~discretionary bonus payments to ~~1.25% at January 1, 2018, and increased again to 1.875% on January 1, 2018, and will be fully phased-in on January 1, 2019 at 2.50%.~~executives. Our capital ratios at December 31, ~~2017~~2022 and ~~December 31, 2016~~2021 exceeded all of the regulatory minimums including the fully-phased in capital conservation buffer.

Liquidity Management

Liquidity risk is the risk of reduction in our earnings or capital that ~~would~~could result if we were not able to meet our obligations when they come due without incurring unacceptable losses. Liquidity risk includes the risk of unplanned decreases or changes in funding sources and changes in market conditions that affect our ability to liquidate assets quickly and with minimum loss of value. Factors considered in liquidity risk management are the stability of the deposit base; the marketability, maturity, and pledging of our investments; the availability of alternative sources of funds; and our demand for credit.

The objective of our liquidity management is to have funds available to meet cash flow requirements arising from fluctuations in deposit levels and the demands of daily operations, which include funding of securities purchases, providing for customers’ credit needs, and ongoing repayment of borrowings.

We manage our liquidity actively on a daily basis and it is reviewed periodically by our management-level Asset/Liability Management Committee (“ALM”) and the Board Asset Liability Committee (“ALCO”). This process is intended to ensure the maintenance of sufficient funds to meet our liquidity needs, including adequate cash flow for off-balance-sheet commitments. In general, our liquidity is managed daily by controlling the level of federal funds and the funds provided by cash flow from operations. To meet unexpected demands, lines of credit are maintained with the FHLB, the Federal Reserve Bank, and other correspondent banks. The sale of investment securities and loans held for sale also serves as a source of funds.

Our primary sources of liquidity are derived from financing activities, which include customer and broker deposits, federal funds facilities, and borrowings from the FHLB and the FRB Discount Window. These funding sources are augmented by payments of principal and interest on loans, proceeds from sale of loans, pay down of investment securities, and the liquidation or sale of

~~Table of Contents~~

securities from our ~~available-for-sale~~available for sale portfolio. Primary uses of funds include withdrawal of and interest payments on deposits, originations of loans, purchases of investment securities, payment of operating expenses, share repurchases, and payment of dividends.

Net cash inflows from operating activities totaled ~~$203.9~~$485.5 million, ~~$130.6~~$324.2 million, and ~~$108.1~~$165.9 million during ~~2017, 2016~~2022, 2021 and ~~2015,~~2020, respectively. Net cash inflows from operating activities for ~~2017~~2022 were primarily attributable to proceeds from sales of loans held for sale and net income partially offset by originations of loans held for ~~sale loans.~~sale.

Net cash outflows from investing activities totaled ~~$767.3 million, $463.4~~$1.47 billion, $993.0 million, and ~~$935.0 million~~$1.83 billion during ~~2017, 2016~~2022, 2021 and ~~2015,~~2020, respectively. Net cash outflows ~~for~~from investing activities during ~~2017~~2022 were primarily from net increase in loans receivable, purchases of investment securities available for sale and ~~the net change in~~investment securities held to maturity, and purchase of loans receivable. These outflows were partially offset by proceeds received for investment securities available for sale and investment securities held to maturity that were paid down during the ~~year.~~year, and proceeds from sales of other loans.

Net cash inflows from financing activities totaled ~~$548.2 million, $471.7~~$1.18 billion, $634.5 million, and ~~$663.1 million~~$1.32 billion during ~~2017, 2016~~2022, 2021 and ~~2015,~~2020, respectively. Net cash inflows from financing activities for ~~2017~~2022 was primarily attributable to an increase in deposits, ~~and net~~ proceeds from FHLB advances, and proceeds from FRB borrowings. These inflows were partially offset by the repayment of FHLB advances, the repayment of FRB borrowings, dividends paid on common stock, and purchase of treasury stock.

When we have more funds than required for our reserve requirements or short-term liquidity needs, we sell federal funds to other financial institutions. Conversely, when we have less funds than required, we may purchase federal funds or borrow funds from the FHLB or the FRB’s Discount Window. As of December 31, ~~2017,~~2022, the maximum amount that we were able to borrow on an overnight basis from the FHLB and the FRB was an aggregate of ~~$4.10~~$5.26 billion, and we had ~~$1.23 billion~~$600.0 million in ~~federal funds purchased and~~ borrowings from the FHLB ~~(including $2.7~~and $265.0 million ~~in premiums from acquired advances) and no~~ borrowings outstanding from the FRB. The FHLB System functions as a line of credit facility for qualifying financial institutions. As a member, we are required to own capital stock in the FHLB and may apply for advances from the FHLB by pledging qualifying ~~mortgage~~ loans and certain securities as collateral for these advances.

At times we maintain a portion of our liquid assets in interest bearing cash deposits with other banks, in overnight federal funds sold to other banks, and in investment securities available for sale that are not pledged. Our liquid assets consist of cash and cash equivalents, interest bearing cash deposits with other banks, ~~overnight federal funds sold to other banks,~~ liquid investment securities available for sale, and loan repayments within 30 days. Liquid assets totaled ~~$1.73~~$2.19 billion and ~~$1.53~~$2.57 billion at December 31, ~~2017~~2022 and ~~2016,~~2021, respectively. Cash and cash equivalents ~~including federal funds sold,~~ totaled ~~$492.0~~$506.8 million at December 31, ~~2017~~2022 compared to ~~$437.3~~$316.3 million at December 31, ~~2016.~~2021.

Because our primary sources and uses of funds are deposits and loans, the relationship between gross loans and total deposits provides one measure of our liquidity. Typically, the closer the ratio of loans to deposits is to, or the more it exceeds 100%, the more we rely on borrowings and other sources to provide liquidity. Alternative sources of funds such as FHLB advances and FRB borrowings, brokered deposits, and other collateralized borrowings that provide liquidity as needed from diverse liability sources are an important part of our asset/liability management strategy. ~~For 2017, our~~Our average gross ~~loan~~loans to average ~~deposit~~deposits ratio was ~~99% unchanged from~~ ~~2016~~96%, 91% and ~~2015~~.93% for years ended 2022, 2021 and 2020.

We believe our liquidity sources to be stable and adequate to meet our day-to-day cash flow requirements. At December 31, ~~2017~~,2022, management was not aware of any demands, commitments, trends, events, or uncertainties that will or are reasonably likely to have a material or adverse effect on our liquidity position. As of December 31, ~~2017~~,2022, we are not aware of any material commitments for capital expenditures in the foreseeable future.

~~Off-Balance- Sheet~~Off-Balance-Sheet Activities and Contractual Obligations

The Bank routinely engages in activities that involve, to varying degrees, elements of risk that are not reflected, in whole or in part, in the Consolidated Financial Statements. These activities are part of our normal course of business and include traditional off-balance-sheet credit-related financial instruments, interest rate swap contracts, operating leases, and ~~long-term debt.~~interest commitments on our liabilities.

Traditional off-balance-sheet credit-related financial instruments are primarily commitments to extend credit and standby letters of credit. These activities may require us to make cash payments to third parties in the event specified future events occur. The contractual amounts represent the extent of our exposure in these off-balance-sheet activities. However, since certain off-balance-sheet commitments, particularly standby letters of credit, are expected to expire or be only partially used, the total amount of commitments does not necessarily represent future cash requirements. These activities are necessary to meet the financing needs of our customers.

We do not anticipate that our current off-balance-sheet activities will have a material impact on our future results of operations or financial condition. Further information regarding risks from our off-balance-sheet financial instruments can be found in Note 14 of the Notes to Consolidated Financial Statements and in Item 7A. - “Quantitative and Qualitative Disclosures about Market Risk.”

~~Table of Contents~~

We also commit to fund certain affordable housing partnership investments in the future. Funded commitments are presented as investments in affordable housing partnerships in the Consolidated Financial Statements while unfunded commitments are presented as commitments to fund investment in affordable housing partnerships.

We lease our banking facilities and equipment under non-cancelable operating leases, which have remaining terms of up to 15 years. Our facility lease obligations are discussed in Note 14 of the Notes to Consolidated Financial Statements.

The following table summarizes our contractual obligations and commitments to make future payments as of December 31, ~~2017.~~2022. Payments shown for time deposits, ~~subordinated debentures, and~~ FHLB advances, convertible notes, and subordinated debenture include interest obligation to their respective repricing dates:


	Payments Due By Period
	Less than 1 year		1-3 years		3-5 years		Over 5 years		Total
	(Dollars in thousands)
Contractual Obligations and Commitments
Time deposits	$	5,079,912	$	16,050	$	1,058	$	—	$	5,097,020
FHLB and FRB borrowings	865,427		—		—		—		865,427
Convertible notes	219,109		—		—		—		219,109
Subordinated debentures (1)	127,680		—		—		—		127,680
Commitments to fund investments in affordable housing partnerships	9,257		670		477		1,388		11,792
Unused credit extensions	1,755,567		628,705		435,880		36,111		2,856,263
Standby letters of credit	116,879		15,338		321		—		132,538
Other commercial letters of credit	20,850		1,526		—		—		22,376
Total	$	8,194,681	$	662,289	$	437,736	$	37,499	$	9,332,205

Payments Due By Period
Less than 1 year 1-3 years 3-5 years Over 5 years Total
(Dollars in thousands)
Contractual Obligations and Commitments
Time deposits $ 3,889,238
$ 397,581
$ 25,515
$ —
$ 4,312,334
FHLB advances and federal funds purchased * 446,074
529,679
296,981
—
1,272,734
Subordinated debentures * 881
—
—
100,853
101,734
Operating lease obligations 14,055
21,898
14,882
15,863
66,698
Commitments to fund investments in affordable housing partnerships 29,052
7,035
559
1,821
38,467
Unused credit extensions 1,116,157
319,258
54,761
36,805
1,526,981
Standby letters of credit 70,261
487
—
—
70,748
Other commercial letters of credit 71,698
2,449
—
—
74,147
Total $ 5,637,416
$ 1,278,387
$ 392,698
$ 155,342
$ 7,463,843
___________________

*(1) Interest for variable rate subordinated debentures ~~and FHLB advances~~ were calculated using interest rates at December 31, ~~2017.~~

2022.

~~Table of Contents~~

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


~~Item 7A.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

The objective of our asset and liability management activities is to ~~improve~~maximize our earnings while maintaining adequate liquidity and an exposure to interest rate risk deemed by management to be acceptable by adjusting the type and mix of assets and liabilities to seek to effectively address changing conditions and risks. Through overall management of our balance sheet and by ~~controlling~~seeking to manage various risks, we seek to optimize our financial returns within safe and sound parameters. Our operating strategies for attaining this objective include managing ~~our~~ net interest margin through appropriate risk/return pricing of assets and liabilities and emphasizing growth in retail deposits, as a percentage of interest bearing liabilities, to reduce our cost of funds. We also seek to improve earnings by controlling noninterest expense and enhancing noninterest income. We also use ~~risk management instruments~~various methods to ~~modify interest rate characteristics of certain assets and liabilities to hedge~~protect against our exposure to interest rate fluctuations with the objective of reducing the effects ~~these~~ fluctuations might have on associated cash flows or values. ~~We also~~Finally, we perform ~~periodic~~ internal ~~analyses~~analysis to measure, evaluate, and monitor ~~market~~ risk.

Interest Rate Risk

~~Market risk is the risk of loss to future earnings, to the fair value of our assets and liabilities, or to future cash flows that may result from changes in the price of a financial instrument.~~ Interest rate risk is the most significant market risk impacting us. Interest rate risk occurs when interest rate sensitive assets and liabilities do not reprice simultaneously ~~or at the same rate of interest or~~and in equal ~~volume.~~volumes. A key objective of ~~our~~ asset and liability management is to manage interest rate risk associated with changing asset and liability cash flows, values of our assets and liabilities, and market interest rate movements. The management of ~~our~~ interest rate risk is governed by policies reviewed and approved annually by the Board of ~~Directors of the Bank. The~~Directors. Our Board delegates responsibility for interest rate risk management to the ~~ALM,~~Board Risk Committee and to the Asset and Liability Management Committee (“ALM”), which is composed of the Bank’s senior executives and other designated officers.

The fundamental objective of our ALM is to manage our exposure to interest rate fluctuations while maintaining adequate levels of liquidity and capital. The ALM meets regularly to monitor ~~the~~ interest rate risk, the sensitivity of our assets and liabilities to interest rate changes, the book and ~~fair~~market values of our assets and liabilities, and our investment ~~activities, and~~activities. It also directs changes in the composition of our ~~interest earning~~ assets and ~~interest bearing~~ liabilities. ~~The ALM reports at least quarterly to the ALCO.~~ Our strategy has been to reduce the sensitivity of our earnings to interest rate fluctuations by more closely matching the effective maturities or repricing characteristics of our assets and liabilities. Certain assets and liabilities, however, may react in different degrees to changes in market interest rates. ~~Further,~~Furthermore, interest rates on certain types of assets and liabilities may fluctuate prior to changes in market interest rates, while interest rates on other types of assets and liabilities may lag ~~behind.~~behind changes in market interest rates. We consider the anticipated effects of these factors when implementing our interest rate risk management objectives.

Derivative Activity

As part of our asset and liability management strategy, we may enter into derivative financial instruments, such as interest rate swaps, risk participation agreements, foreign exchange contracts, caps, floors, collars, interest rate lock commitments, and forward sales commitments, with the overall goal of minimizing the impact of interest rate fluctuations on our net interest margin. Interest rate swaps ~~and caps~~ involve the exchange of fixed-rate and variable-rate interest payment obligations without the exchange of the underlying notional amounts.

Our monitoring activities related to managing interest rate risk include both interest rate sensitivity “gap” analysis and the use of a simulation model. While traditional gap analysis provides a simple picture of the interest rate risk embedded in the statement of financial condition, it provides only a static view of interest rate sensitivity at a specific point in time and does not measure the potential volatility in forecasted results relating to changes in market interest rates over time. Accordingly, we combine the use of gap analysis with the use of a simulation model, which provides a dynamic assessment of interest rate sensitivity.

The interest rate sensitivity gap is defined as the difference between the amount of interest earning assets anticipated to reprice within a specific time period and the amount of interest bearing liabilities anticipated to reprice within that same time period. A gap is considered positive when the amount of interest rate sensitive assets repricing within a specific time period exceeds the amount of interest bearing liabilities repricing within that same time period. A positive cumulative gap suggests that earnings will increase when interest rates rise and decrease when interest rates fall. A negative cumulative gap suggests that earnings will increase when interest rates fall and decrease when interest rates rise.

~~Table of Contents~~

The following table illustrates our combined asset and liability contractual repricing as of December 31, ~~2017~~:2022:


														0 - 3 Months		Over 3 Months to 1 Year		Over 1 Year to 5 Years		Over 5 Years		Total
	0 - 3 Months			Over 3 Months to 1 Year			Over 1 Year to 5 Years		Over 5 Years		Total			(Dollars in thousands)
Rate Sensitive Assets:													Rate Sensitive Assets:
Interest-bearing cash													Interest-bearing cash	$	293,002	$	—	$	—	$	—	$	293,002
Interest-bearing deposits in other financial institutions													Interest-bearing deposits in other financial institutions	735		—		—		—		735
Investment securities available for sale													Investment securities available for sale	149,247		—		126,876		1,696,006		1,972,129
Investment securities held to maturity													Investment securities held to maturity	2,107		—		13,818		255,141		271,066
Equity investments													Equity investments	42,396		—		—		—		42,396
Loans outstanding(1)													Loans outstanding(1)	7,254,524		975,635		6,279,573		943,053		15,452,785
	(Dollars in thousands)
Rate Sensitive Assets
Interest-bearing cash in other banks	$	306,473		$	—		$	—	$	—	$	306,473
Interest-bearing deposits in other financial institutions and other investments	19,220			18,945			15,201		—		53,366
Securities available for sale	4,475			490			735,912		979,380		1,720,257
Loans outstanding⁽¹⁾	4,298,142			778,188			5,353,259		702,929		11,132,518
FHLB stock	29,776			—			—		—		29,776
Total rate sensitive assets	$	4,658,086		$	797,623		$	6,104,372	$	1,682,309	$	13,242,390	Total rate sensitive assets	$	7,742,011	$	975,635	$	6,420,267	$	2,894,200	$	18,032,113
Rate Sensitive Liabilities
Time deposits	857,761			2,998,205			418,697		—		4,274,663

Rate Sensitive Liabilities:													Rate Sensitive Liabilities:
Money market and NOW	3,332,703			—			—		—		3,332,703		Money market and NOW	$	5,615,784	$	—	$	—	$	—	5,615,784
Savings deposits	165,899			39,484			35,126		—		240,509		Savings deposits	170,324		55,375		57,765		—		283,464
FHLB advances and federal funds purchased	364,900			65,000			797,693		—		1,227,593
Subordinated Debentures	100,853			—			—		—		100,853
Time deposits													Time deposits	1,166,952		3,806,071		17,037		—		4,990,060
FHLB and FRB borrowings													FHLB and FRB borrowings	865,000		—		—		—		865,000
Convertible notes													Convertible notes	—		217,148		—		—		217,148
Subordinated debentures													Subordinated debentures	106,565		—		—		—		106,565
Total rate sensitive liabilities	$	4,822,116		$	3,102,689		$	1,251,516	$	—	$	9,176,321	Total rate sensitive liabilities	$	7,924,625	$	4,078,594	$	74,802	$	—	$	12,078,021

Net Gap Position	$	(164,030	)	$	(2,305,066	)	$	4,852,856	$	1,682,309			Net Gap Position	$	(182,614)	$	(3,102,959)	$	6,345,465	$	2,894,200
Cumulative Gap Position	$	(164,030	)	$	(2,469,096	)	$	2,383,760	$	4,066,069			Cumulative Gap Position	$	(182,614)	$	(3,285,573)	$	3,059,892	$	5,954,092

___________________


~~(1)~~	~~Includes loans held for sale of $29.7 million.~~

(1)Includes nonaccrual loans of $49.7 million and loans held for sale of $49.2 million.

The simulation model discussed above provides our ALM with the ability to simulate our net interest income. In order to measure, at December 31, ~~2017,~~2022, the sensitivity of our forecasted net interest income to changing interest rates, both rising and falling interest rate scenarios were projected and compared to base market interest rate forecasts. One application of our simulation model measures the impact of market interest rate changes on the net present value of estimated cash flows from our assets and liabilities, defined as our market value of equity. This analysis assesses the changes in market values of interest rate sensitive financial instruments that would occur in response to an instantaneous and sustained increase in market interest rates.

Our net interest income and market value of equity exposure related to these hypothetical changes in market interest rates are illustrated in the following table:


	December 31, 2022				December 31, 2021
Simulated Rate Changes	Estimated Net Interest Income Sensitivity		Market Value Of Equity Volatility		Estimated Net Interest Income Sensitivity		Market Value Of Equity Volatility

+ 200 basis points	9.86	%	(6.01)	%	6.95	%	0.84	%
+ 100 basis points	4.94	%	(2.57)	%	3.52	%	1.55	%
- 100 basis points	(4.57)	%	1.58	%	(2.62)	%	(5.94)	%
- 200 basis points	(9.25)	%	1.42	%	(4.25)	%	(15.71)	%

December 31, 2017 December 31, 2016
Simulated Rate Changes
Estimated Net
Interest Income
Sensitivity

Market Value
of Equity
Volatility

Estimated Net
Interest Income
Sensitivity

Market Value
of Equity
Volatility
+ 200 basis points 2.18 %
(4.42 )% 2.58 % (4.05 )%
+ 100 basis points 1.12 %
(2.08 )% 1.15 % (1.91 )%
- 100 basis points (2.22 )%
1.00 % (0.60 )% 1.41 %
- 200 basis points (8.56 )%
0.60 % (9.66 )% 0.42 %

The estimated sensitivity does not necessarily represent our forecast of future results and the estimated results may not be indicative of actual changes to our net interest income. These estimates are based upon a number of assumptions including: the nature and timing of interest rate levels including yield curve shape, prepayment on loans and securities, pricing strategies on loans and deposits, and replacement of asset and liability cash flows. While the assumptions used are based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions including how customer preferences or competitor influences may change. The ALCO, which oversees our interest rate risk management, has established the exposure limits for acceptable changes in net interest income and market value of equity related to these hypothetical changes in market interest rates. Given the limitations of the ~~analyses,~~analysis, management believes that these hypothetical changes are considered tolerable and manageable as of December 31, ~~2017~~.2022.

LIBORTransition

The Company has financial instruments that are indexed to LIBOR including investment securities, loans, derivatives, subordinated debentures, and other financial contracts as of December 31, 2022. The Company’s LIBOR committee has identified all financial instruments that are indexed to LIBOR and maturing after June 30, 2023. Since January 1, 2022, the Company has ceased to originate any LIBOR based financial instruments. The Company has limited LIBOR exposures subsequent to June 2023 and is on track to transition financial instruments indexed to LIBOR to an alternative index. The transition away from LIBOR is not expected to have a material impact on the Company’s consolidated financial statements. For additional information about our associated risks, please refer to Item 1A, Risk Factors.

~~Table of Contents~~

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


~~Item 8.~~	~~FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~

The following Consolidated Financial Statements of Hope Bancorp, together with the ~~reports thereon~~report of Crowe ~~Horwath, LLP and BDO USA,~~ LLP begin on page F-1 of this Report and are incorporated herein by reference:

~~Reports~~Report of Independent Registered Public Accounting ~~Firms~~Firm (PCAOB ID 173)

Consolidated Statements of Financial Condition as of December 31, ~~2017~~202 2 and ~~2016~~202 1

Consolidated Statements of Income for the Years Ended December 31, ~~2017, 2016~~202 2 , 202 1 and ~~2015~~20 20

Consolidated Statements of Comprehensive Income for the Years Ended December 31, ~~2017, 2016~~202 2 , 202 1 and ~~2015~~20 20

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, ~~2017, 2016~~202 2 , 202 1 and ~~2015~~20 20

Consolidated Statements of Cash Flows for the Years Ended December 31, ~~2017, 2016~~202 2 , 202 1 and ~~2015~~20 20

Notes to Consolidated Financial Statements for the Years Ended December 31, ~~2017, 2016~~202 2 , 202 1 and ~~2015~~20 20

See ““Item 15. Exhibits and Financial Statement ~~Schedules”~~Schedules” for exhibits filed as a part of this Report.

The supplementary data required by this Item (selected quarterly financial data) is provided in Note 2123 “Quarterly Financial Data (unaudited)” in the Notes to the Consolidated Financial Statements.


~~Item 9.~~	~~CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

~~Table of Contents~~

Item 9A.CONTROLS AND PROCEDURES


~~Item 9A.~~	~~CONTROLS AND PROCEDURES~~


a.	~~Evaluation of Disclosure Controls and Procedures~~

a. Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chairman, President, and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required ~~disclosure.~~disclosures.

In designing and evaluating disclosure controls and procedures, ~~our~~ management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and ~~our~~ management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We conducted an evaluation under the supervision and with the participation of our management, including our Chairman, President, and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, ~~2017.~~2022. Based upon that evaluation, our Chairman, President, and Chief Executive Officer and our Chief Financial Officer determined that our disclosure controls and procedures were effective as of December 31, ~~2017.~~2022.

b. Management’s Annual Report on Internal Control Over Financial Reporting

The management of ~~Hope Bancorp, Inc. (the “Company”)~~the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a-15(f) under the Exchange Act. This system, which our management has chosen to base on the framework set forth in the 2013 Internal Control-Integrated Framework, published by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), is supervised by our Chairman, President, and Chief Executive Officer and Chief Financial Officer, and is effected by the Company’s board of directors, management and other personnel, is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time.

With the participation of our Chairman, President, and Chief Executive Officer and our Chief Financial Officer, and under the direction of our audit committee, our management has conducted an assessment of the effectiveness of the Company’s system of internal control over financial reporting as of December 31, ~~2017~~2022 using the criteria set forth by COSO. Based on this assessment, our management believes that the Company’s system of internal control over financial reporting was effective as of December 31, ~~2017.~~2022.

Our independent registered public accounting firm has issued an attestation report on our internal control over financial reporting which is included ~~below in~~on page F-1 of this ~~section.~~

~~Remediation of Prior Year Material Weaknesses~~

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on May 18, 2017, management conducted an assessment of the effectiveness of the system of internal control over financial reporting as of December 31, 2016. Based on that assessment, management determined that, as of December 31, 2016, the Company's system of internal control over financial reporting was not effective because of the material weaknesses that were identified and summarized in our Annual Report on Form 10-K for the year ended December 31, 2016. In an effort to remediate the material weaknesses, management, with the oversight of the audit committee, took steps in 2017 that we believe remediated the material weaknesses identified as of December 31, 2016. The Company’s remediation efforts and internal control enhancements relate to, but were not limited to, the following:

~~Table of Contents~~

Internal control over financial reporting related to the review process for the allowance for loan losses was enhanced by strengthening the review and approval process of the allowance for loan losses components, in particular the qualitative adjustment factors. The controls were also enhanced to include a detailed review of the allowance for loan losses by the Company’s Management Allowance Committee;

Internal control over financial reporting and documentation related to the review process for impaired loans on accrual status and the allowance for loan losses calculation was enhanced through an additional layer of monitoring and review. The Company also enhanced its policies and procedures so that impaired loans on accrual status are reviewed to ensure that the principal and interest is expected to be recovered;

Internal control over financial reporting related to the review of the consolidated financial statements, including the consolidated statement cash flows, was enhanced to ensure that multiple layers of detailed reviews are performed to prevent potential errors in the consolidated statement of cash flows; and

The Company hired additional staff, including a SOX Compliance Manager and two additional SOX Compliance Officers, who are part of the Company’s newly established SOX Compliance Department. The Company also enhanced its SOX Compliance Program in 2017 and formed a SOX Steering Committee to oversee the execution of the Company’s SOX Compliance Program.

Additionally, some of the material weaknesses identified as of December 31, 2016 were related to business combinations, however, the Company has had no such activity as of December 31, 2017. Although the controls related to business combinations have not been tested for remediation, management assessed, as of December 31, 2017, the severity of the deficiencies related to business combinations and the maximum potential impact to our consolidated financial statements (in accordance with Auditing Standard 2201). Based on this assessment, management concluded that no material weakness existed as of December 31, 2017 related to business combinations. The Company had no identified material weaknesses as of December 31, 2017.

report.

c. Changes in Internal Control Over Financial Reporting

Management has determined that there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended December 31, ~~2017~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As of December 31, 2017, our management completed its remediation of the material weaknesses identified and summarized in our Annual Report on Form 10-K for the year ended December 31, 2016, and as part of our remediation efforts, the Company made enhancements to our internal control over financial reporting as noted above. However, these changes did not constitute a change in the Company’s internal control over financial reporting.

~~Table of Contents~~

Report of Independent Registered Public Accounting Firm

Our independent registered public accounting firm has issued an audit report on our internal control over financial reporting which is included on page F-1 of this report.

~~Table~~Item 9B.OTHER INFORMATION

Our Board periodically reviews the Company’s governance documents, including the Company’s bylaws, as amended and restated on July 25, 2019. Effective as of ~~Contents~~February 24, 2023, the Company amended and restated its bylaws to revise and clarify certain procedural and disclosure requirements for the Company’s stockholders proposing business or director nominations for consideration at the Company’s annual or special meetings of stockholders, including to provide an orderly process in consideration of the SEC Rule 14a-19 (the “universal proxy card” rules). The amended and restated bylaws also now include a forum selection provision requiring that claims arising under the Securities Act of 1933, as amended, be brought in federal court as the sole forum for stockholders to litigate these claims. Certain other technical and conforming revisions and clarifications were also made to the amended and restated bylaws.

A summary of the changes that were made in the amended and restated bylaws with regard to the universal proxy card rules are as follows:

•Clarify that the Company’s currently existing 100-120 day advance notice provision applies to the request for inclusion of a director nominee pursuant to Rule 14a-19;


~~Item 9B.~~	~~OTHER INFORMATION~~

•Require a stockholder to provide a written representation to the Company confirming that the stockholder will comply with Rule 14a-19;

•Require a stockholder to demonstrate that it has complied with Rule 14a-19;

•Allow the chair of a meeting to determine compliance with Rule 14a-19 and disregard nominations not submitted in compliance;

•Require the stockholder to use a proxy card, other than white, which is the color reserved exclusively for board nominated nominees;

•Require a stockholder’s director nominees to consent to being named in the Company’s proxy statement and proxy card;

•Clarify that all requirements also apply to special meetings called for the purpose of electing directors, in addition to annual meetings;

•Require stockholder director nominees to complete a Director & Officer questionnaire or provide other information required by the Company; and

•Require stockholder nominees to indicate whether they have filed or intend to file a notice of change of control with the Company’s regulators or any other change of control relating to another financial institution.

The foregoing summary is qualified in its entirety by reference to the bylaws of the Company, as amended and restated on February 24, 2023, a copy of which is attached hereto as Exhibit 3.2.

Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

~~Table of Contents~~

PART III


~~Item 10.~~	~~DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE~~

Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item with respect to the Company’s directors and executive officers, Delinquent Section 16(a) ~~beneficial ownership reporting compliance,~~Reports, the Company’s Code of Ethics and Business Conduct, director nomination procedures, the Audit Committee and the audit committee financial expert will be filed in Hope Bancorp’s definitive Proxy Statement for its ~~2018~~2023 Annual Meeting of Stockholders (the ~~“2018~~“2023 Proxy Statement”), which will be filed with the SEC not later than 120 days after December 31, ~~2017.~~2022.


~~Item 11.~~	~~EXECUTIVE COMPENSATION~~

Item 11.EXECUTIVE COMPENSATION

The information required by this Item with respect to director and executive compensation, “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” will be filed in Hope Bancorp’s ~~2018~~2023 Proxy Statement which will be filed with the SEC not later than 120 days after December 31, ~~2017.~~2022.


~~Item 12.~~	~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.~~

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by this Item with respect to security ownership of certain beneficial owners and management will be filed in Hope Bancorp’s ~~2018~~2023 Proxy Statement which will be filed with the SEC not later than 120 days after December 31, ~~2017.~~2022.

The following table summarizes our equity compensation plans as of December 31, ~~2017:~~2022:

Securities Authorized for Issuance Under Equity Compensation Plans


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in Column (a) (c)
Equity compensation plans approved by security holders	649,367	$	16.63	1,443,000
Equity compensation plans not approved by security holders	—	—		—
Total	649,367	$	16.63	1,443,000

Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Plan Category
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)

Weighted average
exercise price of
outstanding options,
warrants and rights
(b)

Number of securities
remaining available for
future issuance under
equity compensation
plans excluding
securities reflected in
Column (a)
(c)
Equity compensation plans approved by security holders 1,075,423
$ 15.06
1,341,621
Equity compensation plans not approved by security holders —
—
—
Total 1,075,423
$ 15.06
1,341,621


~~Item 13.~~	~~CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

The information required by this Item with respect to certain relationships and related transactions and director independence will be filed in Hope Bancorp’s ~~2018~~2023 Proxy Statement which will be filed with the SEC not later than 120 days after December 31, ~~2017.~~2022.


~~Item 14.~~	~~PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

Item 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item with respect to principal accountant fees and services will be filed in Hope Bancorp’s ~~2018~~2023 Proxy Statement which will be filed with the SEC not later than 120 days after December 31, ~~2017.~~2022.

~~Table of Contents~~

PART IV


~~Item 15.~~	~~EXHIBITS AND FINANCIAL STATEMENT SCHEDULES~~

Item 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements: The financial statements listed under Part II-Item 8. “Financial Statements and Supplementary Data” are filed as part of this Annual Report on Form 10-K.

(a)(2) Financial Statement Schedules: All financial statement schedules have been omitted since the required information is either not applicable or not required, or has been included in the Financial Statements and related notes.

(a)(3) List of Exhibits


Number		Description

~~Number~~3.1		~~Description~~

~~2.1~~	~~Agreement~~Amended and Plan of Merger, dated as of December 7, 2015, between BBCN Bancorp, Inc. and Wilshire Bancorp, Inc. (incorporated herein by reference to the Current Report on Form 8-K, Exhibit 2.1, filed with the SEC on December 7, 2015)

~~2.2~~	Agreement and Plan of Merger, dated as of January 23, 2017, by and between Hope Bancorp, Inc. and U & I Financial Corp. (incorporated herein by reference to the Current Report on Form 8-K, Exhibit 2.1, filed with the SEC on January 24, 2017)

~~3.1~~	Restated Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on June 5, 2000 (incorporated herein by reference to Appendix III to the prospectus included in the Registration Statement on Form S-4 filed with the SEC on November 16, 2000)Hope Bancorp, Inc.+

3.2		Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on May 31, 2002 (incorporated herein by reference to the Registration Statement on Form S-8, Exhibit 3.3, filed with the SEC on February 5, 2003)

~~3.3~~	Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on June 1, 2004 (incorporated herein by reference to the Quarterly Report on Form 10-Q, Exhibit 3.1, filed with the SEC on August 9, 2004)

~~3.4~~	Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on November 2, 2005 (incorporated herein by reference to the Quarterly Report on Form 10-Q, Appendix B, filed with the SEC on November 9, 2005)

~~3.5~~	Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on July 20, 2007 (incorporated herein by reference to the Proxy Statement on Schedule 14A, Appendix C, filed with the SEC on April 19, 2007)

~~3.6~~	Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on November 30, 2011 (incorporated herein by reference to the Annual Report on Form 10-K, Exhibit 3.6, filed with the SEC on March 1, 2013)

~~3.7~~	Amended and Restated Bylaws of ~~BBCN~~Hope Bancorp, Inc. ~~(incorporated herein by reference to the Current Report on Form 8-K, Exhibit 3.1, filed with the SEC on May 11, 2015)~~+

~~3.8~~ 4.1		~~Certificate of Amendment of Bylaws of Hope Bancorp, Inc. (incorporated herein by reference to the Current Report on Form 8-K, Exhibit 3.2, filed with the SEC on August 1, 2016)~~

~~4.1~~	Junior Subordinated Indenture, dated June 5, 2003, by and between the Nara Bancorp, Inc. as Issuer and The Bank of New York as Trustee (incorporated herein by reference to the Current Report on Form 8-K/A, Exhibit 99.2, filed with the SEC on May 2, 2008)

4.2		Indenture, dated December 17, 2003, by and between Nara Bancorp, Inc. as Issuer and U.S. Bank National Association as Trustee (incorporated herein by reference to the Current Report on Form 8-K/A, Exhibit 99.5, filed with the SEC on May 2, 2008)

~~Table of Contents~~



~~Number~~4.3		~~Description~~
~~4.3~~	Indenture, dated December 22, 2003, between Nara Bancorp, Inc. as Issuer and Wells Fargo Bank, National Association as Trustee (incorporated herein by reference to the Current Report on Form 8-K/A, Exhibit 99.8, filed with the SEC on May 2, 2008)

4.4		Indenture, dated March 22, 2007, by and between Nara Bancorp, Inc. and Wilmington Trust Company (incorporated herein by reference to the Current Report on Form 8-K, Exhibit 4.2, filed with the SEC on March 29, 2007)

4.5		Indenture, dated as of December 30, 2003, between Center Financial Corporation and Wells Fargo Bank, National Association (incorporated herein by reference to Center Financial’s Annual Report on Form 10-K, Exhibit 10.4, for the year ended December 31, 2003, filed with the SEC on March 30, 2004)

4.6		Indenture, dated as of March 17, 2005, between Wilshire Bancorp, Inc. and Wilmington Trust Company (incorporated herein by reference to Wilshire Bancorp’s Annual Report on Form 10-K, Exhibit 4.6, for the year ended December 31, 2006, filed with the SEC on March 16, 2007)

4.7		Indenture, dated as of September 15, 2005, between Wilshire Bancorp, Inc. and Wilmington Trust Company (incorporated herein by reference to Wilshire Bancorp’s Annual Report on Form 10-K, Exhibit 4.9, for the year ended December 31, 2006, filed with the SEC on March 16, 2007)

4.8		Indenture, dated as of July 10, 2007, between Wilshire Bancorp, Inc. and LaSalle Bank National Association (incorporated herein by reference to Wilshire Bancorp’s Quarterly Report on Form 10-Q, Exhibit 4.12, for the quarter ended September 30, 2007, filed with the SEC on November 9, 2007)

4.9		Indenture, dated as of March 30, 2007 between Saehan Bancorp, Inc. and Wilmington Trust Company (incorporated herein by reference to Wilshire Bancorp’s Annual Report on Form 10-K, Exhibit 4.11, for the year ended December 31, 2013, filed with the SEC on March 14, 2014)

~~10.1~~ 4.10		~~Nara~~Indenture dated May 11, 2018, by and between Hope Bancorp, Inc. ~~2001 Nara~~and U.S. Bank ~~2000 Continuation Long Term~~National Association (incorporated herein by reference to the Current Report on Form 8-K, Exhibit 4.1, filed with the SEC on May 11, 2018)

4.11		Description of Securities Registered Under Section 12 of the Exchange Act (incorporated herein by reference to the Annual Report on Form 10-K , Exhibit 4.11 , for the year ended D ecember 31, 2021, filed with the SEC on February 28, 2022)


Number						Description


10.1						Wilshire State Bank Directors' Survivor Income Plan, dated July 30, 2003, as amended on September 26, 2012 (i ncorporated herein by reference to Wilshire Bancorp ’s Annual Report on Form 10-K , Exhibit 10.13 , for the year ended December 31, 2012,filed with the SEC on March 14, 2013)*

10.2						Wilshire State Bank Executive Survivor Income Plan, dated July 30, 2003, as amended on September 26, 2012 (incorporated herein by reference to Wilshire Bancorp’s Annual Report on Form 10-K, Exhibit 10.14, for the year ended December 31, 2012, filed with the SEC on March 14, 2013)*

10.3						Wilshire State Bank Directors' Survivor Income Plan, dated July 1, 2005, as amended on September 26, 2012 (incorporated herein by reference to Wilshire Bancorp’s Annual Report on Form 10-K, Exhibit 10.15, for the year ended December 31, 2012, filed with the SEC on March 14, 2013)*

10.4						Wilshire State Bank Executive Survivor Income Plan, dated July 1, 2005, as amended on September 26, 2012 (incorporated herein by reference to Wilshire Bancorp’s Annual Report on Form 10-K, Exhibit 10.16, for the year ended December 31, 2012, filed with the SEC on March 14, 2013)*

10.5						Amended and Restated BBCN Bancorp, Inc. 2007 Equity Incentive Plan (incorporated herein by reference to BBCN Bancorp’s Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended March 31, 2015, filed with the SEC on May 11, 2015)*

10.6						Form of Incentive Stock Option Agreement under the 2007 Incentive Compensation Plan *+

10.7						Form of Non-qualified Stock Option Agreement under the 2007 Incentive Compensation Plan *+

10.8						BBCN Bancorp, Inc. 2016 Incentive Compensation Plan (incorporated herein by reference to the Registration Statement on Form S-8, Exhibit ~~99.2,~~4.1, filed with the SEC on ~~April 9, 2001)+~~May 7, 2021)*

~~10.2~~ 10.9						~~Nara Bank, N.A. Executive Deferred~~Form of Incentive Stock Option Agreement under the 2016 Incentive Compensation Plan (incorporated herein by reference to the ~~Annual Report~~Registration Statement on Form ~~10-K,~~S-8, Exhibit ~~10.3, for the year ended December 31, 2001,~~10.1, filed with the SEC on ~~April 1, 2002)+~~May 7, 2021)*

~~10.3~~ 10.10						~~Center Bank Executive Deferred~~Form of Non-qualified Stock Option Agreement under the 2016 Incentive Compensation Plan (incorporated herein by reference to the ~~Quarterly Report~~Registration Statement on Form ~~10-Q,~~S-8, Exhibit ~~10.7, for the quarter ended March 31, 2006,~~10.2, filed with the SEC on May ~~5, 2006)+~~7, 2021)*

~~10.4~~ 10.11						~~Affiliate~~Form of Restricted Stock Unit Agreement ~~between Nara Bancorp and Nara Bank, N.A.~~under the 2016 Incentive Compensation Plan (incorporated herein by reference to the Registration Statement on Form S-8, Exhibit 10.3, filed with the SEC on May 7, 2021)*

10.12						Form of Performance-Based Restricted Stock Unit Agreement under the 2016 Incentive Compensation Plan (incorporated herein by reference to the Registration Statement on Form S-8, Exhibit 10.4, filed with the SEC on May 7, 2021)*

10.13						Hope Bancorp, Inc. 2019 Incentive Compensation Plan (incorporated herein by reference to the Definitive Proxy Statement on Schedule 14A, Annex A, filed with the SEC on April 30, 2019)*

10.14						Form of Restricted Stock Unit Agreement under the 2019 Incentive Compensation Plan (incorporated herein by reference to the Registration Statement on Form S-8, Exhibit 10.5, filed with the SEC on May 7, 2021)*

10.15						Form of Performance-Based Restricted Stock Unit Agreement under the 2019 Incentive Compensation Plan (incorporated herein by reference to the Registration Statement on Form S-8, Exhibit 10.6, filed with the SEC on May 7, 2021)*

10.16						Affiliate Agreement between Hope Bancorp, Inc. and Bank of Hope (incorporated herein by reference to the Annual Report on Form 10-K , Exhibit ~~10.12,~~10.10 , for the year ended December 31, ~~2001,~~2019, filed with the SEC on ~~April 1, 2002)+~~February 26, 2020)*

~~10.5~~ 10.17						~~BBCN Employees’ 401(K) & Profit~~Tax Sharing ~~Plan, as amended~~Agreement among Hope Bancorp, Inc and ~~restated December 1, 2011~~Bank of Hope (incorporated herein by reference to the Annual Report on Form 10-K , Exhibit ~~10.16,~~10.11 , for the year ended December 31, 2019, filed with the SEC on ~~March 1, 2013)+~~February 26, 2020)*


Number		Description
~~10.6~~

10.18		Fourth Amended and Restated Employment Agreement, dated ~~July 11, 2014,~~April 22, 2022, by and between ~~BBCN~~Hope Bancorp, Inc., Bank of Hope and Kevin S. Kim (incorporated herein by reference to the Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended March 31, 2022, filed with the SEC on ~~August 8, 2014)+~~May 9, 2022)*

~~10.7~~ 10.19		~~Amended~~Separation and ~~Restated BBCN~~Release Agreement, dated January 5, 2023, by and between Hope Bancorp, Inc. ~~2007 Equity Incentive Plan~~, Bank of Hope and Alex Ko (incorporated herein by reference to the ~~Quarterly~~Current Report on Form ~~10-Q,~~8-K, Exhibit 10.1, filed with the SEC on ~~May 11, 2015)+~~January 6, 2023)*

~~10.8~~ 10.20		~~Tax Sharing~~Consulting Agreement, ~~among BBCN~~dated January 5, 2023, by and between Hope Bancorp, Inc., ~~BBCN~~ Bank ~~N.A., Nara Bancorp Capital Trust I, Nara Capital Trust III, Nara Statutory Trust IV, Nara Statutory Trust V, Nara Statutory Trust VI,~~of Hope and ~~Center Capital Trust I~~ Alex Ko (incorporated herein by reference to the ~~Annual~~Current Report on Form ~~10-K,~~8-K, Exhibit ~~10.9, for the year ended December 31, 2015,~~10.2, filed with the SEC on ~~March 4, 2016)+~~January 6, 2023)*

~~10.9~~	~~BBCN Bancorp, Inc. 2016 BBCN Incentive Compensation Plan (incorporated herein by reference to the S-4 filed with the SEC on March 8, 2016)+~~

~~10.10~~	~~Bank of Hope 2017 Employee Stock Purchase Program (incorporated herein by reference to the 10-Q filed with the SEC on November 8, 2017)+~~

~~Table of Contents~~



~~Number~~14.1		~~Description~~

~~11.1~~	Statement regarding Computation of Per Share Earnings (Footnote 18 in the Notes to the Consolidated Financial Statements)*

~~12.1~~	Statement regarding computation of Ratios of Earnings to Fixed Charges*

~~14.1~~	Director Code of Ethics and Business Conduct*Conduct+

14.2		Code of Ethics and Business Conduct*Conduct+

21.1		Subsidiaries of the Registrant*Registrant+

23.1		Consent of Crowe Horwath LLP*LLP+

~~23.2~~ 31.1		Consent of BDO USA, LLP*

~~31.1~~	Certification of Chief Executive Officer pursuant to section 302 of Sarbanes-Oxley of 2002*2002+

31.2		Certification of Chief Financial Officer pursuant to section 302 of Sarbanes-Oxley of 2002*2002+

32.1		Certification of Chief Executive Officer pursuant to ~~section~~18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the ~~Public Company Accounting Reform and Investor Protection~~Sarbanes-Oxley Act of 2002**2002++

32.2		Certification of Chief Financial Officer pursuant to ~~section~~18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the ~~Public Company Accounting Reform and Investor Protection~~Sarbanes-Oxley Act of 2002**2002++

101.INS		Inline XBRL Instance Document*Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document+

101.SCH		Inline XBRL Taxonomy Extension Schema Document*Document+

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document*Document+

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document*Document+

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document*Document+

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document*Document+

~~________________~~


*104			~~Filed herewith~~			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


**	~~Furnished herewith~~


+	~~Management contract or compensatory plan or arrangement~~

_______________________

* Management contract, compensatory plan, or arrangement

+ Filed herewith

++ Furnished herewith

Item 16. FORM 10-K SUMMARY

None

~~Table of Contents~~

~~SIGNATURES~~

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~Date: March 1, 2018~~



~~HOPE BANCORP, INC.~~
~~By:~~	~~/s/ KEVIN S. KIM~~
	~~Kevin S. Kim~~
	~~President and Chief Executive Officer~~

~~Table of Contents~~

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.



	~~Signature/Name~~	~~Title~~	~~Date~~

~~By:~~	~~/S/ KEVIN S. KIM~~	~~President and Chief Executive Officer~~	~~March 1, 2018~~
	~~Kevin S. Kim~~	~~(Principal Executive Officer)~~
~~By:~~	~~/S/ ALEX KO~~	~~Executive Vice President & Chief Financial Officer~~	~~March 1, 2018~~
	~~Alex Ko~~	~~(Principal Financial and Accounting Officer)~~
~~By:~~	~~/S/ SCOTT YOON-SUK WHANG~~	~~Chairman~~	~~March 1, 2018~~
	~~Scott Yoon-Suk Whang~~
~~By:~~	~~/S/ STEVEN S. KOH~~	~~Director~~	~~March 1, 2018~~
	~~Steven S. Koh~~
~~By:~~	~~/S/ DONALD D. BYUN~~	~~Director~~	~~March 1, 2018~~
	~~Donald D. Byun~~
~~By:~~	~~/S/ STEVEN J. DIDION~~	~~Director~~	~~March 1, 2018~~
	~~Steven J. Didion~~
~~By:~~	~~/S/ JINHO DOO~~	~~Director~~	~~March 1, 2018~~
	~~Jinho Doo~~
~~By:~~	~~/S/ DAISY HA~~	~~Director~~	~~March 1, 2018~~
	~~Daisy Ha~~
~~By:~~	~~/S/ JIN CHUL JHUNG~~	~~Director~~	~~March 1, 2018~~
	~~Jin Chul Jhung~~
~~By:~~	~~/S/ CHUNG HYUN LEE~~	~~Director~~	~~March 1, 2018~~
	~~Chung Hyun Lee~~
~~By:~~	~~/S/ WILLIAM J. LEWIS~~	~~Director~~	~~March 1, 2018~~
	~~William J. Lewis~~
~~By:~~	~~/S/ DAVID P. MALONE~~	~~Director~~	~~March 1, 2018~~
	~~David P. Malone~~
~~By:~~	~~/S/ JOHN R. TAYLOR~~	~~Director~~	~~March 1, 2018~~
	~~John R. Taylor~~
~~By:~~	~~/S/ DALE S. ZUEHLS~~	~~Director~~	~~March 1, 2018~~
	~~Dale S. Zuehls~~

~~Table of Contents~~

Report of Independent Registered Public Accounting Firm

~~Shareholders and the Board of Directors of Hope Bancorp, Inc.~~

~~Los Angeles, California~~

~~Opinions~~Our independent registered public accounting firm has issued an audit report on ~~the Financial Statements and Internal Control over Financial Reporting~~

We have audited the accompanying consolidated statement of financial condition of Hope Bancorp, Inc. (the "Company") as of December 31, 2017, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’sour internal control over financial reporting which is included on page F-1 of this report.

Item 9B.OTHER INFORMATION

Our Board periodically reviews the Company’s governance documents, including the Company’s bylaws, as amended and restated on July 25, 2019. Effective as of February 24, 2023, the Company amended and restated its bylaws to revise and clarify certain procedural and disclosure requirements for the Company’s stockholders proposing business or director nominations for consideration at the Company’s annual or special meetings of stockholders, including to provide an orderly process in consideration of the SEC Rule 14a-19 (the “universal proxy card” rules). The amended and restated bylaws also now include a forum selection provision requiring that claims arising under the Securities Act of 1933, as amended, be brought in federal court as the sole forum for stockholders to litigate these claims. Certain other technical and conforming revisions and clarifications were also made to the amended and restated bylaws.