First, the Company announced a branch rationalization plan designed to enhance its operational efficiencies in 2019 and beyond.
The plan, which is subject to regulatory non-objection and expected to be implemented by the second quarter of 2019, will impact up to six branches across the country. The Company anticipates incurring a one-time pre-tax charge of approximately $1.7 million in the fourth quarter of 2018 related to the branch rationalization plan. Projected savings are expected to be approximately $1.9 million pre-tax on an annual basis, the initial benefits of which will be recognized beginning in the 2019 second quarter.
Second, the Company announced plans to temporarily discontinue its practice of regularly selling the guaranteed portion of its SBA 7(a) loans to the secondary market.
Earlier in the 2018 fourth quarter, the Company sold $10.2 million of its SBA loans held for sale and recognized net gains on sale of SBA loans of $447,000. Given the continuing reduction in the premiums available in the secondary market, the Company plans to retain its production of SBA 7(a) loans in its portfolio going forward until such time when premiums become more attractive.
The Company expects that retaining the SBA loans in its portfolio, which tend to have higher interest rates and are all variable rate, will have a positive effect on its overall loan yields, net interest margin, and growth in interest income.
Hope Bancorp president and CEO Kevin Kim said: “Our branch rationalization plan follows a comprehensive review of our market presence, branch profitability and opportunities for more efficient customer engagement channels.
“We continually analyze the economics of retaining or selling our SBA 7(a) loan production, and while the change in our strategy will impact our near-term gain-on-sale revenue generation, at this point we believe retaining the loans will ultimately lead to better profitability longer term.
Notwithstanding this change in strategy, we always retain the opportunity to sell the remaining SBA guaranteed portions at a later date when premiums recover to more attractive levels.”
“These initiatives are elements of a more comprehensive earnings quality improvement plan and exemplify our Board and management’s ongoing focus on better positioning the Company for profitable growth and creating greater shareholder value. We look forward to keeping our stakeholders apprised of additional initiatives in the near term as plans are more fully developed,” said Kim.
Hope Bancorp is the holding company of Bank of Hope, the first and only super regional Korean-American bank in the United States with $15.2 billion in total assets as of September 30, 2018.
Headquartered in Los Angeles and serving a multi-ethnic population of customers across the nation, Bank of Hope operates 63 full-service branches in California, Washington, Texas, Illinois, New York, New Jersey, Virginia, Georgia and Alabama.
Source: Company Press Release
