HOPE BANCORP INC (HOPE) stock intrinsic value fair value estimate & owner earnings analysis

Hope Bancorp is the parent of Bank of Hope, the largest Korean-American-founded bank in the United States, now a multi-ethnic commercial bank with about $19.0 billion of assets, $15.9 billion of deposits and $14.8 billion of loans at June 30, 2026. Its core is California, with branches and loan offices in New York, New Jersey, Texas, Illinois, Washington, Georgia, Florida, Alabama and Colorado, and, since the all-stock purchase of Territorial Bancorp closed on April 2, 2025, Hawaii. It earns its living on the spread between what it collects on commercial real estate, business and residential loans and what it pays depositors, plus SBA loan-sale gains and fees. How we measure earnings. We start from the cash the bank's operations generate, strip out timing swings (loans originated for sale, accrued interest), subtract stock pay and a normal level of branch and equipment spending. For a bank, that cash measure has two blind spots that we now correct, and they are the main reason our estimate is lower than before. First, it contains no cost for bad loans: loan-loss provisions are added back as non-cash, and actual charge-offs show up only as shrinking loan balances. Credit losses are a real, recurring cost of lending, so we charge a normal level: net charge-offs averaged about $18 million a year from 2017 through 2025 (from a net recovery of $12 million in 2022 to $54 million in 2021); on today's larger loan book we use about 0.15% of loans, roughly $22 million before tax. Second, beginning in late 2024 the bank started buying renewable energy tax credits ($17.2 million paid in 2024, $36.4 million in 2025). The cash paid is recorded as an investment, while the tax savings ($40.3 million in 2025) flow through operating cash, so the cash measure counted the full tax saving and none of its cost. The true benefit is only the difference, about $3.4 million in 2025, so we deduct the amortization of those investments ($36.9 million in 2025, $16.6 million in 2024). One-time items are left out: about $21 million of Territorial merger costs in 2025, a $39.3 million loss from selling low-yielding bonds, and a $37.7 million write-down on loans moved to held-for-sale. Those were one-time losses from repositioning the balance sheet, and the higher yields they bought are already showing up in current results. On that corrected basis, owner earnings ran about $1.10 to $1.39 per share in 2017-2019, rose to $1.53-1.80 in 2020-2022, then fell to $0.91-1.17 in 2023-2025. We set the normal level at about $1.13 per share, the median of 2017-2019 and 2023-2025. We leave out 2020-2022 because those results were lifted by near-zero deposit costs and pandemic-era conditions that have since reversed. Noninterest-bearing deposits, the bank's cheapest funding, are now about $3.4 billion, roughly 22% of deposits, well below their share in that era. The current run rate is a little below that normal level: second-quarter 2026 net income of $33.0 million annualizes to about $1.03 per share, and net interest income was $253.0 million in the first half of 2026 against $218.3 million a year earlier, helped by a full year of Territorial and the higher-yielding reinvested bonds. On our corrected basis, owner earnings grew about 5% in 2025. We assume about 9% for the coming year, because 2025 carried nine months of Territorial and a one-time merger-cost charge. Both have now rolled through, and the year-one figure ($1.04) is still below 2025's level excluding merger costs (about $1.08). Debt. For a bank, deposits and borrowings are the raw material of the business, not financing for it, and interest paid is an operating cost already charged before owner earnings. So we value the owners' earnings directly and do not subtract the bank's deposits, Federal Home Loan Bank advances or its roughly $110 million of subordinated debentures from trust-preferred issues. Counting them again would double-charge. For each case below, the figure shown is what the shareholders' stake is worth after everything the bank owes has already been paid for through its earnings. Leverage is charged in the bear case through credit losses. The bank holds $2.30 billion of equity (about $1.77 billion after goodwill and intangibles, roughly $13.80 per share), and its common equity tier 1 ratio was 12.27% at year-end 2025, so the cases need no forced capital raise. Base case (about $18.71 per share). Earnings of about $1.04 per share next year and $1.09 the year after, returning to the $1.13 normal level by the third year. That is the continuation of deposit repricing and loan and bond yields already under way, and a return to a level the bank has already earned under similar interest rates, not new growth. Credit losses stay at about 0.15% of loans. After that we hold $1.13 flat indefinitely. The deposit franchise has persisted through several credit and rate cycles since its predecessor banks were founded, so we keep the earning power going, but we credit no growth. Loan growth depends on market demand and on capital the bank would have to retain, and buybacks have been sporadic (none in 2023-2025, $8.7 million in the first half of 2026). Neither is proven, repeatable growth. Bear case (about $15.09 per share). The credit deterioration already visible continues. Nonperforming assets rose from 0.24% of assets in 2023 to 0.73% in 2025, charge-offs on business loans increased in 2025, and about 58% of loans are secured by commercial real estate. We model credit losses of about 0.45% of loans for two to three years, about three times the 2020-2021 pandemic losses combined. Earnings fall to about $0.78 per share, then settle at $0.92, with losses staying elevated at 0.25% of loans and no further improvement in margin. The bank's capital absorbs this without new shares, so the case still carries itself, but the shareholder is left with a smaller, permanently less profitable franchise. Bull case (about $21.82 per share). The margin keeps recovering toward the 3.2% to 3.4% the bank earned in 2019 and 2022 as certificates of deposit reprice and older fixed-rate loans and bonds roll into today's yields. Credit losses run near the long-run average (about 0.12% of loans). Earnings reach about $1.34 per share, the level of 2018-2019, within four years and hold there. We still credit no loan growth or buybacks. What changed since our previous estimate ($17.94 / $39.20 / $58.93). The earlier figures relied on a cash earnings measure that left out loan losses and counted the full tax-credit savings without their cost. They also assumed growth continuing forever after year ten (1.5% a year) and a normal level that included the 2020-2022 cheap-deposit years. Once losses and tax-credit costs are charged, and growth is credited only where it is secured, the bank's earning power supports a value near 1.3 to 1.4 times its tangible book value, consistent with a franchise earning roughly 7.5-8% on tangible equity. The margin-of-safety price is about $11.50 per share, about 39% below the base case and roughly 0.8 times tangible book. The wide discount reflects a leveraged lender with a heavy commercial real estate concentration and a credit trend that is still moving the wrong way. That price sits below the bear-case value, and from it the base case plus the $0.56 annual dividend implies a strong return. What we could not fully reconcile: the operating cash flow line that combines depreciation, amortization and purchase-accounting accretion (up to $70.2 million in 2025 from $23.5 million in 2023) mixes several items, including the tax-credit amortization and the bond-sale loss. We separated the tax-credit piece from the bank's own disclosure. Smaller affordable-housing tax-credit investments in earlier years were not separated, which slightly flatters 2017-2019.