HOPE BANCORP INCHOPE
HOPE BANCORP INC Income Taxes Disclosure
INCOME TAXES
The Company’s operations are entirely domestic; accordingly, there was no foreign component of pretax income or provision for foreign income taxes for the years ended December 31, 2025, 2024 and 2023. The following presents a summary of the Company’s income tax provisions for the years ended December 31:
| Current | Deferred | Total | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| 2025 | |||||||||||||||||
| Federal | $ | 4,191 | $ | (2,015) | $ | 2,176 | |||||||||||
| State | 5,254 | 8,259 | 13,513 | ||||||||||||||
| $ | 9,445 | $ | 6,244 | $ | 15,689 | ||||||||||||
| 2024 | |||||||||||||||||
| Federal | $ | 14,475 | $ | 3,760 | $ | 18,235 | |||||||||||
| State | 13,576 | 1,523 | 15,099 | ||||||||||||||
| $ | 28,051 | $ | 5,283 | $ | 33,334 | ||||||||||||
| 2023 | |||||||||||||||||
| Federal | $ | 22,076 | $ | 3,158 | $ | 25,234 | |||||||||||
| State | 17,998 | 982 | 18,980 | ||||||||||||||
| $ | 40,074 | $ | 4,140 | $ | 44,214 | ||||||||||||
The Company adopted ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” effective January 1, 2025, which requires the Company to disclose a rate reconciliation table with additional information as disclosed in detail on Note 1 “Summary of Significant Accounting Policies, Accounting Pronouncements Adopted”. A reconciliation of the difference between the U.S. federal statutory income tax rate and the effective tax rate is shown in the following table for the year ended December 31, 2025:
| Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| (Dollars in thousands) | |||||||||||
| Statutory U.S. federal income tax rate | $ | 16,228 | 21.00 | % | |||||||
U.S. state and local income taxes, net of U.S. federal income tax effect (1) (2) | 10,628 | 13.75 | % | ||||||||
| Tax credits | |||||||||||
| Energy tax credit | (38,182) | (49.41) | % | ||||||||
| Low income housing tax credit | (8,587) | (11.11) | % | ||||||||
| Energy tax credit investment amortization expense, net of benefit from tax losses | 35,371 | 45.77 | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| BOLI | (683) | (0.88) | % | ||||||||
| Excess tax expense on executive compensation limitation | 1,161 | 1.50 | % | ||||||||
| FDIC premium | 461 | 0.60 | % | ||||||||
| Tax exempt municipal bonds and loans | (82) | (0.11) | % | ||||||||
| Other | 838 | 1.08 | % | ||||||||
| Changes in uncertain tax positions | (15) | (0.02) | % | ||||||||
Adjustments on deferred taxes (3) | (1,692) | (2.19) | % | ||||||||
| Other | 243 | 0.32 | % | ||||||||
| Effective income tax rate | $ | 15,689 | 20.30 | % | |||||||
__________________________________
(1) State taxes in California made up the majority (greater than 50%) of the tax effect in this category.
(2) During the year ended December 31, 2025, the Company recorded an increase in income tax expense of approximately $4.8 million related to the remeasurement of deferred tax assets and liabilities following the enactment of a change in California state income tax apportionment methodology. The adjustment reflects the revised allocation of future taxable income to the state and is included in the effective tax rate reconciliation in the state and local income taxes section.
(3) During the year ended December 31, 2025, the Company recorded a discrete decrease in income tax expense of approximately $1.7 million related to the correction of prior period errors of deferred tax asset measurement. The adjustment reflects the federal portion of the resolution of prior modeling assumptions and is included in the effective tax rate reconciliation within other reconciling items, with $710 thousand recorded in the state tax reconciling item.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the table below is a reconciliation of the components that caused the Company’s provision for income taxes to differ from amounts computed by applying the U.S. federal statutory rate of 21%:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Statutory federal income tax rate | 21.00 | % | 21.00 | % | |||||||
| State taxes-net of federal tax effect | 8.74 | % | 8.79 | % | |||||||
| Nondeductible transaction costs | 0.60 | % | — | % | |||||||
| Tax credits and benefits, net of amortization expenses | (7.25) | % | (4.67) | % | |||||||
| BOLI | (0.28) | % | (0.24) | % | |||||||
| Tax exempt municipal bonds and loans | (0.08) | % | (0.82) | % | |||||||
| State tax rate change | 0.93 | % | 0.02 | % | |||||||
| Changes in uncertain tax positions | 0.21 | % | (0.59) | % | |||||||
| Other | 1.20 | % | 1.37 | % | |||||||
| Effective income tax rate | 25.07 | % | 24.86 | % | |||||||
Deferred tax assets and liabilities at December 31, 2025 and 2024, comprised the following:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Statutory bad debt deduction less than financial statement provision | $ | 46,841 | $ | 47,626 | |||||||
| Net operating loss carry-forward | 7,018 | 1,100 | |||||||||
| Sale of investment in securities carry-forward | 34,534 | — | |||||||||
| Investment security provision | — | 468 | |||||||||
| State tax deductions | 556 | 1,960 | |||||||||
| Accrued compensation | 15 | 21 | |||||||||
| Deferred compensation | 121 | 119 | |||||||||
| Nonaccrual loan interest | 3,338 | 4,753 | |||||||||
| Non-qualified stock option and restricted share expense | 1,815 | 2,754 | |||||||||
| Lease liabilities | 18,187 | 13,945 | |||||||||
| Tax credits carry-forward | 8,642 | 48 | |||||||||
| Purchase accounting fair value adjustment | 51,924 | — | |||||||||
| Unrealized loss on securities AFS | 60,404 | 95,025 | |||||||||
| Other | 5,855 | 7,246 | |||||||||
| Total deferred tax assets | $ | 239,250 | $ | 175,065 | |||||||
| Deferred tax liabilities: | |||||||||||
| Purchase accounting fair value adjustment | $ | — | $ | (8,331) | |||||||
| Depreciation | (5,267) | (95) | |||||||||
| FHLB stock dividends | (95) | (77) | |||||||||
| Deferred loan costs | (7,531) | (6,981) | |||||||||
| State taxes deferred and other | (8,222) | (3,376) | |||||||||
| Prepaid expenses | (2,106) | (2,834) | |||||||||
| Amortization of intangibles | (14,010) | (846) | |||||||||
| ROU assets | (17,630) | (12,481) | |||||||||
| Total deferred tax liabilities | $ | (54,861) | $ | (35,021) | |||||||
| Net deferred tax assets | $ | 184,389 | $ | 140,044 | |||||||
Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not 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, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is updated quarterly and adjusted as necessary.
Based on the analysis, the Company has determined that a valuation allowance for deferred tax assets was not required at December 31, 2025 and 2024.
A summary of the Company’s net operating loss carry-forwards at December 31, 2025 and 2024, is as follows:
| Federal | State | ||||||||||||||||||||||||||||||||||
| Remaining Amount | Expires | Annual Limitation | Remaining Amount | Expires | Annual Limitation | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| 2025 | |||||||||||||||||||||||||||||||||||
| Saehan Bank (acquired by Wilshire) | $ | 1,131 | 2030 | $ | 226 | $ | 1,583 | 2032 | $ | 226 | |||||||||||||||||||||||||
| Pacific International Bank | 2,730 | 2032 | 420 | — | N/A | — | |||||||||||||||||||||||||||||
| Territorial Bancorp | 19,910 | N/A | 2,691 | 20,011 | N/A | 2,691 | |||||||||||||||||||||||||||||
| Total | $ | 23,771 | $ | 3,337 | $ | 21,594 | $ | 2,917 | |||||||||||||||||||||||||||
| 2024 | |||||||||||||||||||||||||||||||||||
| Saehan Bank (acquired by Wilshire) | $ | 1,357 | 2030 | $ | 226 | $ | 1,809 | 2032 | $ | 226 | |||||||||||||||||||||||||
| Pacific International Bank | 3,150 | 2032 | 420 | — | N/A | — | |||||||||||||||||||||||||||||
| Total | $ | 4,507 | $ | 646 | $ | 1,809 | $ | 226 | |||||||||||||||||||||||||||
In 2020, the California Assembly Bill 85 (A.B. 85) was signed into law. A.B. 85 suspends the use of the net operating loss (“NOL”) for the 2020, 2021, and 2022 tax years. For NOL incurred in tax years before 2020 for which a deduction is denied, the carryover period is extended by three years. On February 9, 2022, Senate Bill 113 (“S.B. 113”) was signed into law, and among other changes, S.B. reinstates the California NOL deductions for tax years beginning in 2022, in effect shortening the suspension period for NOL deductions from A.B. 85 by one year.
In 2025, in connection with the acquisition of Territorial and its wholly owned subsidiary, Territorial Savings Bank, the NOL carryforwards from the acquired entities of $19.9 million and the tax loss incurred on sale of securities AFS of $121.4 million are subject to Internal Revenue Code Section 382 limitation. The loss incurred on the sale of Territorial’s securities AFS was mostly offset by the fair value discount recorded on the date of the acquisition. The NOLs are carried forward indefinitely and the unutilized loss on sale of securities AFS of $118.7 million is also carried forward until fully utilized. The annual limitation Pursuant to Section 382 is $2.7 million.
At December 31, 2025, the Company had federal tax credit carryforwards of approximately $8.6 million that will expire in 2045.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of the state of California and various other states. The statute of limitations for the assessment of taxes for the consolidated Federal income tax return is closed for all tax years up to and including 2021. The expiration of the statute of limitations for the assessment of taxes for the various state income and franchise tax returns for the Company and subsidiaries varies by state. The Company is currently under examination by the New York City Department of Finance for the 2016, 2017 and 2018 tax years. While the outcome of the examination is unknown, the Company expects no material adjustments. In 2025, the Company was contacted by the state of Ohio regarding an examination of the Company’s financial institutions tax returns for the tax year from 2022 to 2024. While the outcome of the examination is unknown, the Company expects no material adjustments.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2025 and 2024, is as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Balance at January 1, | $ | 696 | $ | 469 | |||||||
| Additions based on tax positions related to prior years | 59 | 311 | |||||||||
| Expiration of statute of limitations | (119) | (84) | |||||||||
| Balance at December 31, | $ | 636 | $ | 696 | |||||||
The following table summarizes the components of income taxes paid, net of refunds, all of which were domestic, for the year ended December 31, 2025:
| Year Ended December 31, 2025 | |||||
| (Dollars in thousands) | |||||
| U.S. federal | $ | — | |||
| U.S. state and local | |||||
| New York State | 1,105 | ||||
| Hawaii | 500 | ||||
| New York City | 333 | ||||
| Massachusetts | 235 | ||||
| Texas | 228 | ||||
| California | (772) | ||||
| Other states and local | 940 | ||||
| Total income taxes paid | $ | 2,569 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | May 18, 2017 | |
| 2015 | Mar 4, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.