Los Angeles-based Hope Bancorp Inc. will close up to six branches across the country and will pause its regular sale of guaranteed Small Business Administration 7(a) loans to the secondary market.
The bank expects to close the branches by the second quarter of 2019. It will book a one-time pretax charge of about $1.7 million in the fourth quarter of 2018 and expects to realize annualized pretax savings of about $1.9 million, with initial benefits to be recognized starting in the second quarter of 2019.
The bank decided to temporarily discontinue selling guaranteed SBA 7(a) loans as premiums on such sales are falling in the secondary market. Hope Bancorp sold $10.2 million of SBA loans in the fourth quarter for a net gain of $447,000. The bank will retain production until pricing improves, and, as a result, it expects loan yields, net interest margin and net interest income to get a boost.
"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," President and CEO Kevin Kim said in a statement.