OP Bancorp Reports Net Income for 2023 Fourth Quarter of $5.2 Million and Diluted Earnings Per Share of $0.34

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2023 Fourth Quarter Highlights compared with 2023 Third Quarter:

  • Financial Results:

    • Net income of $5.2 million, compared to $5.1 million

    • Diluted earnings per share of $0.34, compared to $0.33

    • Net interest income of $16.2 million, compared to $17.3 million

    • Net interest margin of 3.12%, compared to 3.38%

    • Provision for credit losses of $0.6 million, compared to $1.4 million

    • Total assets of $2.15 billion, compared to $2.14 billion

    • Gross loans of $1.77 billion, compared to $1.76 billion

    • Total deposits of $1.81 billion, compared to $1.83 billion

  • Credit Quality:

    • Allowance for credit losses to gross loans of 1.25%, compared to 1.23%

    • Net charge-offs(1) to average gross loans(2) of 0.04%, compared to 0.11%

    • Nonperforming loans to gross loans of 0.34%, compared to 0.24%

    • Criticized loans(3) to gross loans of 0.76%, compared to 0.78%

  • Capital Levels:

    • Remained well-capitalized with a Common Equity Tier 1 ("CET1") ratio of 12.52%

    • Book value per common share increased to $12.84, compared to $12.17

    • Repurchased 150,000 shares of common stock at an average price of $8.72

    • Paid quarterly cash dividend of $0.12 per share for the periods

___________________________________________________________

(1) Annualized.
(2) Includes loans held for sale.
(3) Includes special mention, substandard, doubtful, and loss categories.

LOS ANGELES, January 25, 2024--(BUSINESS WIRE)--OP Bancorp (the "Company") (NASDAQ: OPBK), the holding company of Open Bank (the "Bank"), today reported its financial results for the fourth quarter of 2023. Net income for the fourth quarter of 2023 was $5.2 million, or $0.34 per diluted common share, compared with $5.1 million, or $0.33 per diluted common share, for the third quarter of 2023, and $8.0 million, or $0.51 per diluted common share, for the fourth quarter of 2022. Net income for the full year of 2023 was $23.9 million, or $1.55 per diluted common share, compared with $33.3 million, or $2.14 per diluted common share, for the full year of 2022.

Min Kim, President and Chief Executive Officer:

"Given the continued stress in banking from the high interest rate environment, we have been focusing on managing our funding strategy for balancing effective cost control against the need to maintain ample liquidity. As comments from the Federal Reserve Open Markets Committee suggest that the Fed’s tightening cycle appears to be nearing an end, the pressure on funding cost seems to be fading away, and we expect to see a turnaround in our net interest margin in the coming quarters," said Min Kim, President and Chief Executive.

"We know that our customers are going through this difficult time as well. To return our gratitude to our customer for their loyalty and trust they have in us, we will continue our effort to work together with the customers and provide all the support they need from us."

Although we may encounter additional challenges in the short term, we remain hopeful to achieve our long term strategic goals while maintaining an appropriate risk and control environment."

SELECTED FINANCIAL HIGHLIGHTS

($ in thousands, except per share data)

As of and For the Three Months Ended

% Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

Selected Income Statement Data:

Net interest income

$

16,230

$

17,313

$

20,198

(6.3

) %

(19.6

) %

Provision for credit losses

630

1,359

977

(53.6

)

(35.5

)

Noninterest income

3,680

2,601

3,223

41.5

14.2

Noninterest expense

11,983

11,535

11,327

3.9

5.8

Income tax expense

2,125

1,899

3,089

11.9

(31.2

)

Net income

5,172

5,121

8,028

1.0

(35.6

)

Diluted earnings per share

0.34

0.33

0.51

3.0

(33.3

)

Selected Balance Sheet Data:

Gross loans

$

1,765,845

$

1,759,525

$

1,678,292

0.4

%

5.2

%

Total deposits

1,807,558

1,825,171

1,885,771

(1.0

)

(4.1

)

Total assets

2,147,730

2,142,675

2,094,497

0.2

2.5

Average loans(1)

1,787,540

1,740,188

1,691,642

2.7

5.7

Average deposits

1,813,411

1,821,361

1,836,736

(0.4

)

(1.3

)

Credit Quality:

Nonperforming loans

$

6,082

$

4,211

$

2,033

44.4

%

199.2

%

Nonperforming loans to gross loans

0.34

%

0.24

%

0.12

%

0.10

0.22

Criticized loans(2) to gross loans

0.76

0.78

0.19

(0.02

)

0.57

Net charge-offs to average gross loans(3)

0.04

0.11

0.03

(0.07

)

0.01

Allowance for credit losses to gross loans

1.25

1.23

1.15

0.02

0.10

Allowance for credit losses to nonperforming loans

362

513

946

(151

)

(584

)

Financial Ratios:

Return on average assets(3)

0.96

%

0.96

%

1.56

%

—

%

(0.60

) %

Return on average equity(3)

11.18

11.07

18.58

0.11

(7.40

)

Net interest margin(3)

3.12

3.38

4.08

(0.26

)

(0.96

)

Efficiency ratio(4)

60.19

57.92

48.36

2.27

11.83

Common equity tier 1 capital ratio

12.52

12.09

11.87

0.43

0.65

Leverage ratio

9.57

9.63

9.38

(0.06

)

0.19

Book value per common share

$

12.84

$

12.17

$

11.59

5.5

10.8

(1)

Includes loans held for sale.

(2)

Includes special mention, substandard, doubtful, and loss categories.

(3)

Annualized.

(4)

Represents noninterest expense divided by the sum of net interest income and noninterest income.

($ in thousands, except per share data)

As of and For the Twelve Months Ended December 31,

2023

2022

% Change

Selected Income Statement Data:

Net interest income

$

68,687

$

76,911

(10.7

) %

Provision for credit losses

1,651

2,976

(44.5

)

Noninterest income

14,181

17,619

(19.5

)

Noninterest expense

47,726

44,830

6.5

Income tax expense

9,573

13,414

(28.6

)

Net income

23,918

33,310

(28.2

)

Diluted earnings per share

1.55

2.14

(27.6

)

Selected Balance Sheet Data:

Average loans(1)

$

1,744,878

$

1,578,218

10.6

%

Average deposits

1,829,717

1,716,758

6.6

Credit Quality:

Net charge-offs to average gross loans

0.04

%

—

%

0.04

%

Financial Ratios:

Return on average assets

1.13

%

1.74

%

(0.61

) %

Return on average equity

13.05

19.57

(6.52

)

Net interest margin

3.37

4.18

(0.81

)

Efficiency ratio(2)

57.59

47.42

10.17

(1)

Includes loans held for sale.

(2)

Represents noninterest expense divided by the sum of net interest income and noninterest income.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

($ in thousands)

For the Three Months Ended

% Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

Interest Income

Interest income

$

31,783

$

31,186

$

26,886

1.9

%

18.2

%

Interest expense

15,553

13,873

6,688

12.1

132.6

Net interest income

$

16,230

$

17,313

$

20,198

(6.3

) %

(19.6

) %

($ in thousands)

For the Three Months Ended

4Q2023

3Q2023

4Q2022

Average
Balance

Interest
and Fees

Yield/Rate
(1)

Average
Balance

Interest
and Fees

Yield/Rate
(1)

Average
Balance

Interest
and Fees

Yield/Rate
(1)

Interest-earning Assets:

Loans

$

1,787,540

$

28,914

6.43

%

$

1,740,188

$

28,250

6.45

%

$

1,691,642

$

24,719

5.81

%

Total interest-earning assets

2,071,613

31,783

6.10

2,038,321

31,186

6.08

1,966,165

26,886

5.43

Interest-bearing Liabilities:

Interest-bearing deposits

1,243,446

14,127

4.51

1,222,099

13,006

4.22

1,085,331

6,598

2.41

Total interest-bearing liabilities

1,362,210

15,553

4.53

1,301,990

13,873

4.23

1,093,489

6,688

2.43

Ratios:

Net interest income / interest rate spreads

16,230

1.57

17,313

1.85

20,198

3.00

Net interest margin

3.12

3.38

4.08

Total deposits / cost of deposits

1,813,411

14,127

3.09

1,821,361

13,006

2.83

1,836,736

6,598

1.43

Total funding liabilities / cost of funds

1,932,175

15,553

3....19

1,901,252

13,873

2.90

1,844,894

6,688

1.44

(1)

Annualized.

($ in thousands)

For the Three Months Ended

Yield Change 4Q2023
vs.

4Q2023

3Q2023

4Q2022

Interest
& Fees

Yield(1)

Interest
& Fees

Yield(1)

Interest
& Fees

Yield(1)

3Q2023

4Q2022

Loan Yield Component:

Contractual interest rate

$

28,596

6.36

%

$

27,319

6.24

%

$

23,694

5.57

%

0.12

%

0.79

%

SBA discount accretion

960

0.21

1,263

0.29

1,034

0.24

(0.08

)

(0.03

)

Amortization of net deferred fees

(67

)

-0.01

1

—

46

0.01

(0.01

)

(0.02

)

Amortization of premium

(423

)

(0.09

)

(445

)

(0.10

)

(344

)

(0.08

)

0.01

(0.01

)

Net interest recognized on nonaccrual loans

(345

)

(0.08

)

(26

)

(0.01

)

—

—

(0.07

)

(0.08

)

Prepayment penalties(2) and other fees

193

0.04

138

0.03

289

0.07

0.01

(0.03

)

Yield on loans

$

28,914

6.43

%

$

28,250

6.45

%

$

24,719

5.81

%

(0.02

) %

0.62

%

Amortization of Net Deferred Fees:

PPP loan forgiveness

$

—

—

%

$

3

—

%

$

15

—

%

—

%

—

%

Other

(67

)

(0.01

)

(2

)

—

31

0.01

(0.01

)

(0.02

)

Total amortization of net deferred fees

$

(67

)

(0.01

) %

$

1

—

%

$

46

0.01

%

(0.01

) %

(0.02

) %

(1)

Annualized.

(2)

Prepayment penalty income of $43 thousand and $172 thousand for the three months ended December 31, 2023 and December 31, 2022, respectively, was from Commercial Real Estate ("CRE") and Commercial and Industrial ("C&I") loans.

Impact of Hana Loan Purchase on Average Loan Yield and Net Interest Margin

During the second quarter of 2021, the Bank purchased an SBA portfolio of 638 loans with an ending balance of $100.0 million, excluding loan discount of $8.9 million from Hana Small Business Lending, Inc. ("Hana"). The following table presents impacts of the Hana loan purchase on average loan yield and net interest margin:

($ in thousands)

For the Three Months Ended

4Q2023

3Q2023

4Q2022

Hana Loan Purchase:

Contractual interest rate

$

1,160

$

1,383

$

1,286

Purchased loan discount accretion

226

513

374

Other fees

9

27

25

Total interest income

$

1,395

$

1,923

$

1,685

Effect on average loan yield(1)

0.14

%

0.25

%

0.20

%

Effect on net interest margin(1)

0.20

%

0.30

%

0.22

%

($ in thousands)

For the Three Months Ended

4Q2023

3Q2023

4Q2022

Average
Balance

Interest
and Fees

Yield/
Rate

Average
Balance

Interest
and Fees

Yield/
Rate

Average
Balance

Interest
and Fees

Yield/
Rate

Average loan yield(1)

$

1,787,540

$

28,914

6.43

%

$

1,740,188

$

28,250

6.45

%

$

1,691,642

$

24,719

5.81

%

Adjusted average loan yield excluding purchased Hana loans(1)(2)

1,739,603

27,519

6.29

1,688,404

26,327

6.20

1,631,128

23,034

5.61

Net interest margin(1)

2,071,613

16,230

3.12

2,038,321

17,313

3.38

1,966,165

20,198

4.08

Adjusted interest margin excluding purchased Hana loans(1)(2)

2,023,676

14,835

2.92

1,986,537

15,390

3.08

1,905,651

18,513

3.86

(1)

Annualized.

(2)

See reconciliation of GAAP to non-GAAP financial measures.

Fourth Quarter 2023 vs. Third Quarter 2023

Net interest income decreased $1.1 million, or 6.3%, primarily due to higher interest expense on deposits and borrowings, partially offset by higher interest income on loans. Net interest margin was 3.12%, a decrease of 26 basis points from 3.38%.

  • A $1.1 million increase in interest expense on interest-bearing deposits was primarily due to a 29 basis point increase in average cost as deposit accounts continued to reprice following the Federal Reserve’s rate increases in 2022 and 2023.

  • A $559 thousand increase in interest expense on borrowings was primarily due to a $38.9 million, or 49%, increase in average balance to complement our liability management strategy for effective cost controls.

  • A $664 thousand increase in interest income on loans was primarily due to a $47.4 million, or 3%, increase in average balance.

Fourth Quarter 2023 vs. Fourth Quarter 2022

Net interest income decreased $4.0 million, or 19.6%, primarily due to higher interest expense on deposits and borrowings, partially offset by higher interest income on loans as our deposit and borrowing costs repriced more quickly than our interest-earning assets. Net interest margin was 3.12%, a decrease of 96 basis points from 4.08%.

  • A $7.5 million increase in interest expense on interest-bearing deposits was primarily due to a $158.1 million, or 15%, increase in average balance and a 210 basis point increase in average cost driven by the Federal Reserve’s rate increases.

  • A $1.3 million increase in interest expense on borrowings was primarily due to a $110.6 million, or 1,356%, increase in average balance and a 41 basis point increase in average cost driven by the Federal Reserve’s rate increases.

  • A $4.2 million increase in interest income on loans was primarily due to a $95.9 million, or 6%, increase in average balance and a 62 basis point increase in average yield as a result of the Federal Reserve’s rate increases.

Provision for Credit Losses

($ in thousands)

For the Three Months Ended

4Q2023

3Q2023

4Q2022

Provision for credit losses on loans

$

537

$

1,303

$

977

Provision for credit losses on off-balance sheet exposure(1)

93

56

74

Total provision for credit losses

$

630

$

1,359

$

1,051

(1)

Provision for credit losses on off-balance sheet exposure of $93 thousand and $56 thousand for the three months ended December 31, 2023 and September 30, 2023, respectively, was included in total provision for credit losses. Prior to CECL adoption, provisions for credit losses on off-balance sheet exposure of $74 thousand for the three months ended December 31, 2022 was included in other expenses.

Fourth Quarter 2023 vs. Third Quarter 2023

The Company recorded a $630 thousand provision for credit losses, a decrease of $729 thousand, compared with a $1.4 million provision for credit losses.

Provision for credit losses on loans was $537 thousand, primarily due to a $341 thousand in specific reserves on two individually evaluated SBA loans, a $161 thousand in net charge-offs, and a $44 thousand increase in qualitative factor adjustments. The change in quantitative general reserve during the quarter was insignificant as the impact from a 0.4% growth in gross loans was mostly offset by a decrease in historical loss factors.

Fourth Quarter 2023 vs. Fourth Quarter 2022

The Company recorded a $630 thousand provision for credit losses, a decrease of $421 thousand, compared with a $1.1 million provision for credit losses.

Noninterest Income

($ in thousands)

For the Three Months Ended

% Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

Noninterest Income

Service charges on deposits

$

557

$

575

$

406

(3.1

) %

37.2

%

Loan servicing fees, net of amortization

540

468

705

15.4

(23.4

)

Gain on sale of loans

1,996

1,179

1,684

69.3

18.5

Other income

587

379

428

54.9

37.1

Total noninterest income

$

3,680

$

2,601

$

3,223

41.5

%

14.2

%

Fourth Quarter 2023 vs. Third Quarter 2023

Noninterest income increased $1.1 million, or 41.5%, primarily due to higher gain on sale of loans and other income.

  • Gain on sale of loans was $2.0 million, an increase of $817 thousand from $1.2 million, primarily due to a higher SBA loan sold amount. The Bank sold $40.1 million in SBA loans at an average premium rate of 5.99%, compared to the sale of $23.4 million at an average premium rate of 6.50%.

  • Other income was $587 thousand, an increase of $208 thousand from $379 thousand. The increase was primarily due to a $259 thousand increase in holding gain on equity investment for CRA purposes driven by a significant drop in the yields curve.

Fourth Quarter 2023 vs. Fourth Quarter 2022

Noninterest income increased $457 thousand, or 14.2%, primarily due to higher gain on sale of loans.

  • Gain on sale of loans was $2.0 million, an increase of $312 thousand from $1.7 million, primarily due to a higher SBA loan sold amount. The Bank sold $40.1 million in SBA loans at an average premium rate of 5.99%, compared to the sale of $32.2 million at an average premium rate of 6.13%.

  • Service charges on deposits was $557 thousand, and increase of $151 thousand from $406 thousand, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts.

  • Loan servicing fees, net of amortization was $540 thousand, a decrease of $165 thousand from $705 thousand, primarily due to an increase in servicing fee amortization driven by higher loan payoffs.

  • Other income was $587 thousand, an increase of $159 thousand from $428 thousand, primarily due to a $146 thousand increase in holding gain on equity investment for CRA purposes driven by a drop in the yield curve.

Noninterest Expense

($ in thousands)

For the Three Months Ended

% Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

Noninterest Expense

Salaries and employee benefits

$

7,646

$

7,014

$

7,080

9.0

%

8.0

%

Occupancy and equipment

1,616

1,706

1,560

(5.3

)

3.6

Data processing and communication

644

369

514

74.5

25.3

Professional fees

391

440

330

(11.1

)

18.5

FDIC insurance and regulatory assessments

237

333

176

(28.8

)

34.7

Promotion and advertising

86

207

12

(58.5

)

616.7

Directors’ fees

145

164

145

(11.6

)

—

Foundation donation and other contributions

524

529

851

(0.9

)

(38.4

)

Other expenses

694

773

659

(10.2

)

5.3

Total noninterest expense

$

11,983

$

11,535

$

11,327

3.9

%

5.8

%

Fourth Quarter 2023 vs. Third Quarter 2023

Noninterest expense increased $448 thousand, or 3.9%, primarily due to higher salaries and employee benefits, and data processing communication, partially offset by decreases in noninterest expense items listed below.

  • Salaries and employee benefits increased $632 thousand, primarily due to a $491 thousand increase in employee incentive accruals.

  • Data processing and communication increased $275 thousand primarily due to an accrual adjustment for a credit received on data processing fees in the third quarter of 2023.

  • Promotion and advertising decreased $121 thousand, FDIC insurance and regulatory assessments decreased $96 thousand, and occupancy and equipment decreased $90 thousand, primarily due to year end accrual adjustments.

Fourth Quarter 2023 vs. Fourth Quarter 2022

Noninterest expense increased $656 thousand, or 5.8%, primarily due to higher salaries and employee benefits and data processing and communication, partially offset by lower foundation donation and other contributions.

  • Salaries and employee benefits increased $566 thousand, primarily due to an increase from employee salary adjustments in 2023 and an increase in employee incentive accruals.

  • Data processing and communication increased $130 thousand, primarily due to an increase in data and item processing fees in line with the Bank’s growth.

  • Foundation donations and other contributions decreased $327 thousand, primarily due to a lower donation accrual for Open Stewardship as a result of lower net income.

Income Tax Expense

Fourth Quarter 2023 vs. Third Quarter 2023

Income tax expense was $2.1 million and the effective tax rate was 29.1%, compared to income tax expense of $1.9 million and the effective rate of 27.1%. The increase in the effective tax rate was primarily due to an adjustment for differences between the prior year tax provision and the final tax returns that were applied in the third quarter of 2023.

Fourth Quarter 2023 vs. Fourth Quarter 2022

Income tax expense was $2.1 million and the effective tax rate was 29.1%, compared to income tax expense of $3.1 million and an effective rate of 27.8%. The increase in the effective tax rate was primarily due to an adjustment for differences between the tax provision for 2021 and the final 2021 tax returns that were applied in the fourth quarter of 2022.

BALANCE SHEET HIGHLIGHTS

Loans

($ in thousands)

As of

% Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

CRE loans

$

885,585

$

878,824

$

842,208

0.8

%

5.2

%

SBA loans

239,692

240,154

234,717

(0.2

)

2.1

C&I loans

120,970

124,632

116,951

(2.9

)

3.4

Home mortgage loans

518,024

515,789

482,949

0.4

7.3

Consumer & other loans

1,574

126

1,467

n/m

7.3

Gross loans

$

1,765,845

$

1,759,525

$

1,678,292

0.4

%

5.2

%

The following table presents new loan originations based on loan commitment amounts for the periods indicated:

($ in thousands)

For the Three Months Ended

% Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

CRE loans

$

15,885

$

33,222

$

44,416

(52.2

) %

(64.2

) %

SBA loans

51,855

39,079

55,594

32.7

(6.7

)

C&I loans

15,270

14,617

46,014

4.5

(66.8

)

Home mortgage loans

12,417

9,137

28,188

35.9

(55.9

)

Consumer & other loans

1,500

—

—

—

—

Gross loans

$

96,927

$

96,055

$

174,212

0.9

%

(44.4

) %

The following table presents changes in gross loans by loan activity for the periods indicated:

($ in thousands)

For the Three Months Ended

For the Twelve Months Ended

4Q2023

3Q2023

4Q2022

4Q2023

4Q2022

Loan Activities:

Gross loans, beginning

$

1,759,525

$

1,716,197

$

1,618,018

$

1,678,292

1,314,019

New originations

96,927

96,055

174,212

374,503

645,188

Net line advances

(7,350

)

22,146

(80,144

)

(809

)

(120,820

)

Purchases

2,371

6,732

49,980

27,604

225,133

Sales

(40,122

)

(23,377

)

(32,204

)

(145,311

)

(182,315

)

Paydowns

(19,901

)

(22,169

)

(22,939

)

(99,470

)

(73,975

)

Payoffs

(23,590

)

(36,024

)

(23,238

)

(113,909

)

(139,544

)

PPP payoffs

—

(250

)

(657

)

(450

)

(41,289

)

Decrease in loans held for sale

(1,795

)

—

(7,693

)

42,541

—

Other

(220

)

215

2,957

2,854

51,895

Total

6,320

43,328

60,274

87,553

364,273

Gross loans, ending

$

1,765,845

$

1,759,525

$

1,678,292

$

1,765,845

$

1,678,292

As of December 31, 2023 vs. September 30, 2023

Gross loans were $1.77 billion as of December 31, 2023, up $6.3 million from September 30, 2023, primarily due to new loan originations, partially offset by loan sales, payoffs and paydowns.

New loan originations, loan sales, and loan payoffs and paydowns were $96.9 million $40.1 million and $43.5 million, respectively, for the fourth quarter of 2023, compared with $96.1 million, $23.4 million and $58.4 million, respectively, for the third quarter of 2023.

As of December 31, 2023 vs. December 31, 2022

Gross loans were $1.77 billion as of December 31, 2023, up $87.6 million from December 31, 2022, primarily due to new loan originations of $374.5 million and loan purchases of $27.6 million, primarily offset by loan sales of $145.3 million and loan payoffs and paydowns of $213.8 million.

The following table presents the composition of gross loans by interest rate type accompanied with the weighted average contractual rates as of the periods indicated:

($ in thousands)

As of

4Q2023

3Q2023

4Q2022

%

Rate

%

Rate

%

Rate

Fixed rate

35.1

%

5.07

%

36.3

%

4.95

%

36.0

%

4.63

%

Hybrid rate

33.9

5.15

34.0

5.08

33.8

4.79

Variable rate

31.0

9.15

29.7

9.23

30.2

8.46

Gross loans

100.0

%

6.36

%

100.0

%

6.27

%

100.0

%

5.84

%

The following table presents the maturity of gross loans by interest rate type accompanied with the weighted average contractual rates for the periods indicated:

($ in thousands)

As of December 31, 2023

Within One Year

One Year Through
Five Years

After Five Years

Total

Amount

Rate

Amount

Rate

Amount

Rate

Amount

Rate

Fixed rate

$

85,254

5.55

%

$

300,165

4.89

%

$

235,510

5.13

%

$

620,929

5.07

%

Hybrid rate

—

—

122,695

4.28

475,633

5.38

598,328

5.15

Variable rate

116,289

8.83

110,647

9.02

319,652

9.31

546,588

9.15

Gross loans

$

201,543

7.44

%

$

533,507

5.60

%

$

1,030,795

6.54

%

$

1,765,845

6.36

%

Allowance for Credit Losses

The Company adopted the CECL accounting standard effective as of January 1, 2023 under a modified retrospective approach. The adoption resulted in a $1.9 million increase to the allowance for credit losses on loans, a $184 thousand increase to the allowance for credit losses on off-balance sheet exposure, a $624 thousand increase to deferred tax assets, and a $1.5 million charge to retained earnings.

The following table presents impact of CECL adoption for allowance for credit losses and related items on January 1, 2023:

($ in thousands)

Allowance For
Credit Losses on
Loans

Allowance For
Credit Losses on
Off-Balance
Sheet Exposure

Deferred Tax
Assets

Retained
Earnings

As of December 31, 2022

$

19,241

$

263

$

14,316

$

105,690

Day 1 adjustments on January 1, 2023

1,924

184

624

(1,484

)

After Day 1 adjustments

$

21,165

$

447

$

14,940

$

104,206

The following table presents allowance for credit losses and provision for credit losses as of and for the periods presented:

($ in thousands)

As of and For the Three Months Ended

% Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

Allowance for credit losses on loans, beginning

$

21,617

$

20,802

$

18,369

3.9

%

17.7

%

Provision for credit losses

537

1,303

977

(58.8

)

(45.0

)

Gross charge-offs

(236

)

(492

)

(109

)

(52.0

)

116.5

Gross recoveries

75

4

4

1775.0

1775.0

Net charge-offs

(161

)

(488

)

(105

)

(67.0

)

53.3

Allowance for credit losses on loans, ending(1)

$

21,993

$

21,617

$

19,241

1.7

%

14.3

%

Allowance for credit losses on off-balance sheet exposure, beginning

$

423

$

367

$

189

15.3

%

123.8

%

Impact of CECL adoption

—

—

—

—

—

Provision for credit losses

93

56

74

66.1

25.7

Allowance for credit losses on off-balance sheet exposure, ending(1)

$

516

$

423

$

263

22.0

%

96.2

%

(1)

Allowance for credit losses as of December 31, 2023 and September 30, 2023 were calculated under the CECL methodology while allowance for loan losses for December 31, 2022 was calculated under the incurred loss methodology.

Asset Quality

($ in thousands)

As of and For the Three Months Ended

Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

Loans 30-89 days past due and still accruing

$

9,607

$

8,356

$

3,477

15.0

%

176.3

%

As a % of gross loans

0.54

%

0.47

%

0.21

%

0.07

0.33

Nonperforming loans(1)

$

6,082

$

4,211

$

2,033

44.4

%

199.2

%

Nonperforming assets(1)

6,082

4,211

2,033

44.4

199.2

Nonperforming loans to gross loans

0.34

%

0.24

%

0.12

%

0.10

0.22

Nonperforming assets to total assets

0.28

%

0.20

%

0.10

%

0.08

0.18

Criticized loans(1)(2)

$

13,349

$

13,790

$

3,264

(3.2

) %

309.0

%

Criticized loans to gross loans

0.76

%

0.78

%

0.19

%

(0.02

)

0.57

Allowance for credit losses ratios:

As a % of gross loans

1.25

%

1.23

%

1.15

%

0.02

%

0.10

%

As an adjusted % of gross loans(3)

1.27

1.26

1.18

0.01

0.09

As a % of nonperforming loans

362

513

946

(151

)

(584

)

As a % of nonperforming assets

362

513

946

(151

)

(584

)

As a % of criticized loans

165

157

589

8

(424

)

Net charge-offs(4) to average gross loans(5)

0.04

0.11

0.03

(0.07

)

0.01

(1)

Excludes the guaranteed portion of SBA loans that are in liquidation totaling $2.0 million, $5.2 million and $1.0 million as of December 31, 2023, September 30, 2023 and December 31, 2022, respectively.

(2)

Consists of special mention, substandard, doubtful and loss categories.

(3)

See the Reconciliation of GAAP to NON-GAAP Financial Measures.

(4)

Annualized.

(5)

Includes loans held for sale.

Overall, the Bank continued to maintain low levels of nonperforming loans and net charge-offs. Our allowance remained strong with an adjusted allowance to gross loans ratio of 1.27%.

  • Loans 30-89 days past due and still accruing were $9.6 million or 0.54% of gross loans as of December 31, 2023, compared with $8.4 million or 0.47% as of September 30, 2023. Subsequent to December 31, 2023, payments on loans totaling $3.2 million were collected, and the loans are now current.

  • Nonperforming loans were $6.1 million or 0.34% of gross loans as of December 31, 2023, compared with $4.2 million or 0.24% as of September 30, 2023. The increase was due to an addition of $2.2 million on two SBA loans, one of which was from Hana purchased pool of loans with discount. The loans were individually evaluated for impairment, and a $183 thousand provision for credit losses was recorded. Of these nonperforming loans, two loans totaling $1.8 million are under workout and performing, three loans totaling $3.4 million are listed for sale, and two loans totaling $528 thousand are performing and current. The Bank expects minimum losses from these loans.

  • Nonperforming assets were $6.1 million or 0.28% of total assets as of December 31, 2023, compared with $4.2 million or 0.20% as of September 30, 2023. The Company did not have OREO as of December 31, 2023 or September 30, 2023.

  • Criticized loans were $13.3 million or 0.76% of gross loans as of December 31, 2023, compared with $13.8 million or 0.78% as of September 30, 2023.

  • Net charge-offs were $161 thousand or 0.04% of average loans in the fourth quarter of 2023, compared to net charge-offs of $488 thousand, or 0.11% of average loans in the third quarter of 2023 and of $105 thousand, or 0.03% of average loans in the fourth quarter of 2022.

Deposits

($ in thousands)

As of

% Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

Amount

%

Amount

%

Amount

%

3Q2023

4Q2022

Noninterest-bearing deposits

$

522,751

28.9

%

$

605,509

33.2

%

$

701,584

37.2

%

(13.7

) %

(25.5

) %

Money market deposits and others

399,018

22.1

348,869

19.1

526,321

27.9

14.4

(24.2

)

Time deposits

885,789

49.0

870,793

47.7

657,866

34.9

1.7

34.6

Total deposits

$

1,807,558

100.0

%

$

1,825,171

100.0

%

$

1,885,771

100.0

%

(1.0

) %

(4.1

) %

Estimated uninsured deposits

$

1,156,270

64.0

%

$

1,061,964

58.2

%

$

938,329

49.8

%

8.9

%

23.2

%

As of December 31, 2023 vs. September 30, 2023

Total deposits were $1.81 billion as of December 31, 2023, down $17.6 million from September 30, 2023, primarily due to a decrease of $82.8 million in noninterest-bearing deposits, partially offset by a $50.1 million increase in money market deposits and a $15.0 million in time deposits. Noninterest-bearing deposits, as a percentage of total deposits, decreased to 28.9% from 33.2%. The composition shift to money market and time deposits was primarily due to customers’ continued preference for high-rate deposit products driven by the Federal Reserve’s rate increases.

As of December 31, 2023 vs. December 31, 2022

Total deposits were $1.81 billion as of December 31, 2023, down $78.2 million from December 31, 2022, primarily driven by decreases of $178.8 million in noninterest-bearing deposits and $127.3 million in money market deposits, partially offset by an increase of $227.9 million in time deposits. The composition shift to time deposits was primarily due to customers’ preference for high-rate deposit products driven by market rate increases as a result of the Federal Reserve’s rate increases.

The following table sets forth the maturity of time deposits as of December 31, 2023:

As of December 31, 2023

($ in thousands)

Within
Three
Months

Three to
Six Months

Six to Nine
Months

Nine to
Twelve
Months

After
Twelve
Months

Total

Time deposits (more than $250)

$

177,329

$

75,343

$

48,158

$

130,795

$

2,267

$

433,892

Time deposits ($250 or less)

94,692

131,152

60,472

123,316

42,265

451,897

Total time deposits

$

272,021

$

206,495

$

108,630

$

254,111

$

44,532

$

885,789

Weighted average rate

4.54

%

4.92

%

4.89

%

5.17

%

4.16

%

4.83

%

OTHER HIGHLIGHTS

Liquidity

The Company maintains ample access to liquidity, including highly liquid assets on our balance sheet and available unused borrowings from other financial institutions. The following table presents the Company's liquid assets and available borrowings as of dates presented:

($ in thousands)

4Q2023

3Q2023

4Q2022

Liquidity Assets:

Cash and cash equivalents

$

91,216

$

105,740

$

82,972

Available-for-sale debt securities

194,250

191,313

209,809

Liquid assets

$

285,466

$

297,053

$

292,781

Liquid assets to total assets

13.3

%

13.9

%

14.0

%

Available borrowings:

Federal Home Loan Bank—San Francisco

$

363,615

$

375,874

$

440,358

Federal Reserve Bank

182,989

186,380

175,605

Pacific Coast Bankers Bank

50,000

50,000

50,000

Zions Bank

25,000

25,000

25,000

First Horizon Bank

25,000

25,000

24,950

Total available borrowings

$

646,604

$

662,254

$

715,913

Total available borrowings to total assets

30.1

%

30.9

%

34.2

%

Liquid assets and available borrowings to total deposits

51.6

%

52.6

%

53.5

%

Capital and Capital Ratios

The Company’s Board of Directors declared a quarterly cash dividend of $0.12 per share of its common stock. The cash dividend is payable on or about February 22, 2024 to all shareholders of record as of the close of business on February 8, 2024.

The Company repurchased 150,000 shares of its common stock at an average price of $8.72 during the fourth quarter of 2023 under the stock repurchase program announced in August 2023. Since the announcement of the initial stock repurchase program in January 2019, the Company repurchased a total of 2,020,000 shares of its common stock at an average repurchase price of $8.59 per share through December 31, 2023.

Basel III

OP Bancorp(1)

Open Bank

Minimum
Well
Capitalized
Ratio

Minimum
Capital Ratio+
Conservation
Buffer(2)

Risk-Based Capital Ratios:

Total risk-based capital ratio

13.77

%

13.66

%

10.00

%

10.50

%

Tier 1 risk-based capital ratio

12.52

12.41

8.00

8.50

Common equity tier 1 ratio

12.52

12.41

6.50

7.00

Leverage ratio

9.57

9.49

5.00

4.00

(1)

The capital requirements are only applicable to the Bank, and the Company's ratios are included for comparison purpose.

(2)

An additional 2.5% capital conservation buffer above the minimum capital ratios are required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonuses to executive officers.

OP Bancorp

Basel III

Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

Risk-Based Capital Ratios:

Total risk-based capital ratio

13.77

%

13.31

%

13.06

%

0.46

%

0.71

%

Tier 1 risk-based capital ratio

12.52

12.09

11.87

0.43

0.65

Common equity tier 1 ratio

12.52

12.09

11.87

0.43

0.65

Leverage ratio

9.57

9.63

9.38

(0.06

)

0.19

Risk-weighted Assets ($ in thousands)

$

1,667,067

$

1,707,318

$

1,638,040

(2.36

)

1.77

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

In addition to GAAP measures, management uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance.

Pre-provision net revenue removes provision for credit losses and income tax expense. Management believes that this non-GAAP measure, when taken together with the corresponding GAAP financial measures (as applicable), provides meaningful supplemental information regarding our performance. This non-GAAP financial measure also facilitates a comparison of our performance to prior periods.

($ in thousands)

For the Three Months Ended

4Q2023

3Q2023

4Q2022

Interest income

$

31,783

$

31,186

$

26,886

Interest expense

15,553

13,873

6,688

Net interest income

16,230

17,313

20,198

Noninterest income

3,680

2,601

3,223

Noninterest expense

11,983

11,535

11,327

Pre-provision net revenue

(a)

$

7,927

$

8,379

$

12,094

Reconciliation to net income

Provision for credit losses

(b)

630

1,359

977

Income tax expense

(c)

2,125

1,899

3,089

Net income

(a)-(b)-(c)

$

5,172

$

5,121

$

8,028

During the second quarter of 2021, the Bank purchased 638 loans from Hana for a total purchase price of $97.6 million. The Company evaluated $100.0 million of the loans purchased in accordance with the provisions of ASC 310-20, Nonrefundable Fees and Other Costs, which were recorded with a $8.9 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the expected life of the loans using the effective yield method. Adjusted loan yield and net interest margin for the three months ended December 31, 2023, September 30, 2023 and December 31, 2022 excluded the impacts of contractual interest and discount accretion of the purchased Hana loans as management does not consider purchasing loan portfolios to be normal or recurring transactions. Management believes that presenting the adjusted average loan yield and net interest margin provide comparability to prior periods and these non-GAAP financial measures provide supplemental information regarding the Company’s performance.

($ in thousands)

For the Three Months Ended

4Q2023

3Q2023

4Q2022

Yield on Average Loans

Interest income on loans

$

28,914

$

28,250

$

24,719

Less: interest income on purchased Hana loans

1,395

1,923

1,685

Adjusted interest income on loans

(a)

$

27,519

$

26,327

$

23,034

Average loans

$

1,787,540

$

1,740,188

$

1,691,642

Less: Average purchased Hana loans

47,937

51,784

60,514

Adjusted average loans

(b)

$

1,739,603

$

1,688,404

$

1,631,128

Average loan yield(1)

6.43

%

6.45

%

5.81

%

Effect on average loan yield(1)

0.14

0.25

0.20

Adjusted average loan yield(1)

(a)/(b)

6.29

%

6.20

%

5.61

%

Net Interest Margin

Net interest income

$

16,230

$

17,313

$

20,198

Less: interest income on purchased Hana loans

1,395

1,923

1,685

Adjusted net interest income

(c)

$

14,835

$

15,390

$

18,513

Average interest-earning assets

$

2,071,613

$

2,038,321

$

1,966,165

Less: Average purchased Hana loans

47,937

51,784

60,514

Adjusted average interest-earning assets

(d)

$

2,023,676

$

1,986,537

$

1,905,651

Net interest margin(1)

3.12

%

3.38

%

4.08

%

Effect on net interest margin(1)

0.20

0.30

0.22

Adjusted net interest margin(1)

(c)/(d)

2.92

%

3.08

%

3.86

%

(1)

Annualized.

Adjusted allowance to gross loans ratio removes the impacts of purchased Hana loans, PPP loans and allowance on accrued interest receivable. Management believes that this ratio provides greater consistency and comparability between the Company’s results and those of its peer banks.

($ in thousands)

For the Three Months Ended

4Q2023

3Q2023

4Q2022

Gross loans

$

1,765,845

$

1,759,525

$

1,678,292

Less: Purchased Hana loans

(47,272

)

(48,780

)

(58,966

)

PPP loans(1)

(1

)

(1

)

(434

)

Adjusted gross loans

(a)

$

1,718,572

$

1,710,744

$

1,618,892

Accrued interest receivable on loans

$

7,331

$

7,057

$

6,413

Less: Accrued interest receivable on purchased Hana loans

(306

)

(402

)

(397

)

Accrued interest receivable on PPP loans

—

—

(8

)

Adjusted accrued interest receivable on loans

(b)

$

7,025

$

6,655

$

6,008

Adjusted gross loans and accrued interest receivable

(a)+(b)=(c)

$

1,725,597

$

1,717,399

$

1,624,900

Allowance for credit losses

$

21,993

$

21,617

$

19,241

Add: Allowance on accrued interest receivable

—

—

—

Adjusted Allowance

(d)

$

21,993

$

21,617

$

19,241

Adjusted allowance to gross loans ratio

(d)/(c)

1.27

%

1.26

%

1.18

%

(1)

Excludes purchased PPP loans of $8 thousand as of December 31, 2022.

ABOUT OP BANCORP

OP Bancorp, the holding company for Open Bank (the "Bank"), is a California corporation whose common stock is quoted on the Nasdaq Global Market under the ticker symbol, "OPBK." The Bank is engaged in the general commercial banking business in Los Angeles, Orange, and Santa Clara Counties in California, the Dallas metropolitan area in Texas, and Clark County in Nevada and is focused on serving the banking needs of small- and medium-sized businesses, professionals, and residents with a particular emphasis on Korean and other ethnic minority communities. The Bank currently operates eleven full-service branch offices in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Cerritos, Gardena, Buena Park, and Santa Clara, California, Carrollton, Texas and Las Vegas, Nevada. The Bank also has four loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, and Lynnwood, Washington. The Bank commenced its operations on June 10, 2005 as First Standard Bank and changed its name to Open Bank in October 2010. Its headquarters is located at 1000 Wilshire Blvd., Suite 500, Los Angeles, California 90017. Phone 213.892.9999; www.myopenbank.com.

Cautionary Note Regarding Forward-Looking Statements

Certain matters set forth herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to: the effects of substantial fluctuations in interest rates on our borrowers’ ability to perform in accordance with the terms of their loans and on our deposit customers’ expectation for higher rates on deposit products; business and economic conditions, particularly those affecting the financial services industry and our primary market areas; the continuing effects of inflation and monetary policies, particularly those relating to the decisions and indicators of intent expressed by the Federal Reserve Open Markets Committee, as those circumstances impact our current and prospective borrowers and depositors; our ability to balance deposit liabilities and liquidity sources (including our ability to reprice those instruments to keep pace with changing market conditions) in a manner that balances the need to meet current and expected withdrawals while investing a sufficient portion of our assets to promote strong earning capacity; our ability to successfully manage our credit risk and to assess, adjust and monitor the sufficiency of our allowance for credit losses; factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers, the success of construction projects that we finance, including any loans acquired in acquisition transactions; the impacts of credit quality on our earnings and the related effects of increases to the reserve on our net income; our ability to effectively execute our strategic plan and manage our growth; interest rate fluctuations, which could have an adverse effect on our profitability; external economic and/or market factors, such as changes in monetary and fiscal policies and laws, including inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition; continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to less restrictive or less costly regulations than we are; challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services; practical and regulatory constraints on the ability of Open Bank to pay dividends to us; increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all; a failure in the internal controls we have implemented to address the risks inherent to the business of banking; including internal controls that affect the reliability of our publicly reported financial statements; inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance, particularly with respect to the effects of predictions of future economic conditions as those circumstances affect our estimates for the adequacy of our allowance for credit losses and the related provision expense; changes in our management personnel or our inability to retain motivate and hire qualified management personnel; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies; risks related to potential acquisitions; political developments, uncertainties or instability, catastrophic events, acts of war or terrorism, or natural disasters, such as earthquakes, fires, drought, pandemic diseases (such as the coronavirus) or extreme weather events, any of which may affect services we use or affect our customers, employees or third parties with which we conduct business; incremental costs and obligations associated with operating as a public company; the impact of any claims or legal actions to which we may be subject, including any effect on our reputation; compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with commercial mortgage origination, sale and servicing operations; changes in federal tax law or policy; and our ability the manage the foregoing and other factors set forth in the Company’s public reports. We describe these and other risks that could affect our results in Item 1A. "Risk Factors," of our latest Annual Report on Form 10-K for the year ended December 31, 2022 and in our other subsequent filings with the Securities and Exchange Commission.

CONSOLIDATED BALANCE SHEETS (unaudited)

($ in thousands)

As of

% Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

Assets

Cash and due from banks

$

16,948

$

21,748

$

12,952

(22.1

) %

30.9

%

Interest-bearing deposits in other banks

74,268

83,992

70,020

(11.6

)

6.1

Cash and cash equivalents

91,216

105,740

82,972

(13.7

)

9.9

Available-for-sale debt securities, at fair value

194,250

191,313

209,809

1.5

(7.4

)

Other investments

16,276

16,100

12,098

1.1

34.5

Loans held for sale

1,795

—

44,335

n/m

(96.0

)

CRE loans

885,585

878,824

842,208

0.8

5.2

SBA loans

239,692

240,154

234,717

(0.2

)

2.1

C&I loans

120,970

124,632

116,951

(2.9

)

3.4

Home mortgage loans

518,024

515,789

482,949

0.4

7.3

Consumer loans

1,574

126

1,467

n/m

7.3

Gross loans receivable

1,765,845

1,759,525

1,678,292

0.4

5.2

Allowance for credit losses

(21,993

)

(21,617

)

(19,241

)

1.7

14.3

Net loans receivable

1,743,852

1,737,908

1,659,051

0.3

5.1

Premises and equipment, net

5,248

5,378

4,400

(2.4

)

19.3

Accrued interest receivable, net

8,259

7,996

7,180

3.3

15.0

Servicing assets

11,741

11,931

12,759

(1.6

)

(8.0

)

Company owned life insurance

22,233

22,071

21,613

0.7

2.9

Deferred tax assets, net

13,309

15,061

14,316

(11.6

)

(7.0

)

Operating right-of-use assets

8,497

8,993

9,097

(5.5

)

(6.6

)

Other assets

31,054

20,184

16,867

53.9

84.1

Total assets

$

2,147,730

$

2,142,675

$

2,094,497

0.2

%

2.5

%

Liabilities and Shareholders' Equity

Liabilities:

Noninterest-bearing

$

522,751

$

605,509

$

701,584

(13.7

) %

(25.5

) %

Money market and others

399,018

348,869

526,321

14.4

(24.2

)

Time deposits greater than $250

433,892

420,162

356,197

3.3

21.8

Other time deposits

451,897

450,631

301,669

0.3

49.8

Total deposits

1,807,558

1,825,171

1,885,771

(1.0

)

(4.1

)

Federal Home Loan Bank advances

105,000

95,000

—

10.5

n/m

Accrued interest payable

12,628

13,552

2,771

(6.8

)

355.7

Operating lease liabilities

9,341

9,926

10,213

(5.9

)

(8.5

)

Other liabilities

20,538

14,719

18,826

39.5

9.1

Total liabilities

1,955,065

1,958,368

1,917,581

(0.2

)

2.0

Shareholders' equity:

Common stock

76,319

77,632

79,326

(1.7

)

(3.8

)

Additional paid-in capital

10,942

10,606

9,743

3.2

12.3

Retained earnings

120,855

117,483

105,690

2.9

14.3

Accumulated other comprehensive loss

(15,451

)

(21,414

)

(17,843

)

(27.8

)

(13.4

)

Total shareholders’ equity

192,665

184,307

176,916

4.5

8.9

Total liabilities and shareholders' equity

$

2,147,730

$

2,142,675

$

2,094,497

0.2

%

2.5

%

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

($ in thousands, except share and per share data)

For the Three Months Ended

% Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

Interest income

Interest and fees on loans

$

28,914

$

28,250

$

24,719

2.4

%

17.0

%

Interest on available-for-sale debt securities

1,484

1,519

1,237

(2.3

)

20.0

Other interest income

1,385

1,417

930

(2.3

)

48.9

Total interest income

31,783

31,186

26,886

1.9

18.2

Interest expense

Interest on deposits

14,127

13,006

6,597

8.6

114.1

Interest on borrowings

1,426

867

91

64.5

n/m

Total interest expense

15,553

13,873

6,688

12.1

132.6

Net interest income

16,230

17,313

20,198

(6.3

)

(19.6

)

Provision for credit losses

630

1,359

977

(53.6

)

(35.5

)

Net interest income after provision for credit losses

15,600

15,954

19,221

(2.2

)

(18.8

)

Noninterest income

Service charges on deposits

557

575

406

(3.1

)

37.2

Loan servicing fees, net of amortization

540

468

705

15.4

(23.4

)

Gain on sale of loans

1,996

1,179

1,684

69.3

18.5

Other income

587

379

428

54.9

37.1

Total noninterest income

3,680

2,601

3,223

41.5

14.2

Noninterest expense

Salaries and employee benefits

7,646

7,014

7,080

9.0

8.0

Occupancy and equipment

1,616

1,706

1,560

(5.3

)

3.6

Data processing and communication

644

369

514

74.5

25.3

Professional fees

391

440

330

(11.1

)

18.5

FDIC insurance and regulatory assessments

237

333

176

(28.8

)

34.7

Promotion and advertising

86

207

12

(58.5

)

616.7

Directors’ fees

145

164

145

(11.6

)

—

Foundation donation and other contributions

524

529

851

(0.9

)

(38.4

)

Other expenses

694

773

659

(10.2

)

5.3

Total noninterest expense

11,983

11,535

11,327

3.9

5.8

Income before income tax expense

7,297

7,020

11,117

3.9

(34.4

)

Income tax expense

2,125

1,899

3,089

11.9

(31.2

)

Net income

$

5,172

$

5,121

$

8,028

1.0

%

(35.6

) %

Book value per share

$

12.84

$

12.17

$

11.59

5.5

%

10.8

%

Earnings per share - basic

0.34

0.33

0.52

3.0

(34.6

)

Earnings per share - diluted

0.34

0.33

0.51

3.0

(33.3

)

Shares of common stock outstanding, at period end

15,000,436

15,149,203

15,270,344

(1.0

) %

(1.8

) %

Weighted average shares:

- Basic

15,027,110

15,131,587

15,208,308

(0.7

) %

(1.2

) %

- Diluted

15,034,822

15,140,577

15,264,971

(0.7

)

(1.5

)

KEY RATIOS

For the Three Months Ended

Change 4Q2023 vs.

4Q2023

3Q2023

4Q2022

3Q2023

4Q2022

Return on average assets (ROA)(1)

0.96

%

0.96

%

1.56

%

—

%

(0.6

) %

Return on average equity (ROE)(1)

11.18

11.07

18.58

0.1

(7.4

)

Net interest margin(1)

3.12

3.38

4.08

(0.3

)

(1.0

)

Efficiency ratio

60.19

57.92

48.36

2.3

11.8

Total risk-based capital ratio

13.77

%

13.31

%

13.06

%

0.5

%

0.7

%

Tier 1 risk-based capital ratio

12.52

12.09

11.87

0.4

0.7

Common equity tier 1 ratio

12.52

12.09

11.87

0.4

0.7

Leverage ratio

9.57

9.63

9.38

(0.1

)

0.2

(1)

Annualized.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

($ in thousands, except share and per share data)

For the Twelve Months Ended

4Q2023

4Q2022

% Change

Interest income

Interest and fees on loans

$

110,463

$

82,864

33.3

%

Interest on available-for-sale debt securities

6,131

3,351

83.0

Other interest income

5,071

1,997

153.9

Total interest income

121,665

88,212

37.9

Interest expense

Interest on deposits

49,435

11,210

341.0

Interest on borrowings

3,543

91

3793.4

Total interest expense

52,978

11,301

368.8

Net interest income

68,687

76,911

(10.7

)

Provision for credit losses

1,651

2,976

(44.5

)

Net interest income after provision for credit losses

67,036

73,935

(9.3

)

Noninterest income

Service charges on deposits

2,123

1,675

26.7

Loan servicing fees, net of amortization

2,449

2,416

1.4

Gain on sale of loans

7,843

12,285

(36.2

)

Other income

1,766

1,243

42.1

Total noninterest income

14,181

17,619

(19.5

)

Noninterest expense

Salaries and employee benefits

29,593

27,189

8.8

Occupancy and equipment

6,490

5,964

8.8

Data processing and communication

2,109

2,085

1.2

Professional fees

1,571

1,620

(3.0

)

FDIC insurance and regulatory assessments

1,457

813

79.2

Promotion and advertising

614

543

13.1

Directors’ fees

680

682

(0.3

)

Foundation donation and other contributions

2,400

3,393

(29.3

)

Other expenses

2,812

2,541

10.7

Total noninterest expense

47,726

44,830

6.5

Income before income tax expense

33,491

46,724

(28.3

)

Income tax expense

9,573

13,414

(28.6

)

Net income

$

23,918

$

33,310

(28.2

) %

Book value per share

$

12.84

$

11.59

10.8

%

Earnings per share - basic

1.55

2.15

(27.9

)

Earnings per share - diluted

1.55

2.14

(27.6

)

Shares of common stock outstanding, at period end

15,000,436

15,270,344

(1.8

) %

Weighted average shares:

- Basic

15,149,597

15,171,240

(0.1

) %

- Diluted

15,158,857

15,231,418

(0.5

)

KEY RATIOS

For the Twelve Months Ended

4Q2023

4Q2022

% Change

Return on average assets (ROA)

1.13

%

1.74

%

(0.6

) %

Return on average equity (ROE)

13.05

19.57

(6.5

)

Net interest margin

3.37

4.18

(0.8

)

Efficiency ratio

57.59

47.42

10.2

Total risk-based capital ratio

13.77

%

13.06

%

0.7

%

Tier 1 risk-based capital ratio

12.52

11.87

0.7

Common equity tier 1 ratio

12.52

11.87

0.7

Leverage ratio

9.57

9.38

0.2

ASSET QUALITY

($ in thousands)

As of and For the Three Months Ended

4Q2023

3Q2023

4Q2022

Nonaccrual loans(1)

$

6,082

$

4,211

$

2,033

Loans 90 days or more past due, accruing(2)

—

—

—

Nonperforming loans

6,082

4,211

2,033

Other real estate owned ("OREO")

—

—

—

Nonperforming assets

$

6,082

$

4,211

$

2,033

Criticized loans by risk categories:

Special mention loans

$

1,428

$

3,651

$

563

Classified loans(1)(3)

11,921

10,139

2,701

Total criticized loans

$

13,349

$

13,790

$

3,264

Criticized loans by loan type:

CRE loans

$

4,995

$

5,130

$

563

SBA loans

5,864

6,169

1,142

C&I loans

—

—

279

Home mortgage loans

2,490

2,491

1,280

Total criticized loans

$

13,349

$

13,790

$

3,264

Nonperforming loans / gross loans

0.34

%

0.24

%

0.12

%

Nonperforming assets / gross loans plus OREO

0.34

0.24

0.12

Nonperforming assets / total assets

0.28

0.20

0.10

Classified loans / gross loans

0.68

0.58

0.16

Criticized loans / gross loans

0.76

0.78

0.19

Allowance for credit losses ratios:

As a % of gross loans

1.25

%

1.23

%

1.15

%

As an adjusted % of gross loans(4)

1.27

1.26

1.18

As a % of nonperforming loans

362

513

946

As a % of nonperforming assets

362

513

946

As a % of classified loans

184

213

712

As a % of criticized loans

165

157

589

Net charge-offs

$

161

$

488

$

105

Net charge-offs(5) to average gross loans(6)

0.04

%

0.11

%

0.03

%

(1)

Excludes the guaranteed portion of SBA loans that are in liquidation totaling $2.0 million, $5.2 million and $606 thousand as of December 31, 2023, September 30, 2023 and December 31, 2022, respectively.

(2)

Excludes the guaranteed portion of SBA loans that are in liquidation totaling $441 thousand as of December 31, 2022.

(3)

Consists of substandard, doubtful and loss categories.

(4)

See the Reconciliation of GAAP to NON-GAAP Financial Measures.

(5)

Annualized.

(6)

Includes loans held for sale.

($ in thousands)

4Q2023

3Q2023

4Q2022

Accruing delinquent loans 30-89 days past due

30-59 days

$

5,945

$

5,979

$

1,918

60-89 days

3,662

2,377

1,559

Total

$

9,607

$

8,356

$

3,477

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS

For the Three Months Ended

4Q2023

3Q2023

4Q2022

($ in thousands)

Average
Balance

Interest
and Fees

Yield/
Rate(1)

Average
Balance

Interest
and Fees

Yield/
Rate(1)

Average
Balance

Interest
and Fees

Yield/
Rate(1)

Interest-earning assets:

Interest-bearing deposits in other banks

$

78,496

$

1,076

5.36

%

$

82,752

$

1,116

5.28

%

$

75,988

$

734

3.78

%

Federal funds sold and other investments

16,115

309

7.66

16,176

301

7.44

12,074

196

6.47

Available-for-sale debt securities, at fair value

189,462

1,484

3.13

199,205

1,519

3.05

186,461

1,237

2.66

CRE loans

892,092

13,104

5.83

856,911

12,207

5.65

836,609

11,172

5.30

SBA loans

255,692

7,055

10.95

248,960

7,303

11.64

289,408

6,681

9.16

C&I loans

122,950

2,416

7.80

117,578

2,340

7.90

114,265

1,917

6.66

Home mortgage loans

515,840

6,315

4.90

516,465

6,393

4.95

449,684

4,929

4.38

Consumer loans

966

24

9.92

274

7

10.01

1,676

20

4.80

Loans(2)

1,787,540

28,914

6.43

1,740,188

28,250

6.45

1,691,642

24,719

5.81

Total interest-earning assets

2,071,613

31,783

6.10

2,038,321

31,186

6.08

1,966,165

26,886

5.43

Noninterest-earning assets

86,874

84,580

87,189

Total assets

$

2,158,487

$

2,122,901

$

2,053,354

Interest-bearing liabilities:

Money market deposits and others

$

377,304

$

3,993

4.20

%

$

352,424

$

3,487

3.93

%

$

515,747

$

3,045

2.34

%

Time deposits

866,142

10,134

4.64

869,675

9,519

4.34

569,584

3,553

2.47

Total interest-bearing deposits

1,243,446

14,127

4.51

1,222,099

13,006

4.22

1,085,331

6,598

2.41

Borrowings

118,764

1,426

4.76

79,891

867

4.31

8,158

90

4.35

Total interest-bearing liabilities

1,362,210

15,553

4.53

1,301,990

13,873

4.23

1,093,489

6,688

2.43

Noninterest-bearing liabilities:

Noninterest-bearing deposits

569,965

599,262

751,405

Other noninterest-bearing liabilities

41,312

36,620

35,593

Total noninterest-bearing liabilities

611,277

635,882

786,998

Shareholders’ equity

185,000

185,029

172,867

Total liabilities and shareholders’ equity

$

2,158,487

2,122,901

2,053,354

Net interest income / interest rate spreads

$

16,230

1.57

%

$

17,313

1.85

%

$

20,198

3.00

%

Net interest margin

3.12

%

3.38

%

4.08

%

Cost of deposits & cost of funds:

Total deposits / cost of deposits

$

1,813,411

$

14,127

3.09

%

$

1,821,361

$

13,006

2.83

%

$

1,836,736

$

6,598

1.43

%

Total funding liabilities / cost of funds

1,932,175

15,553

3.19

1,901,252

13,873

2.90

1,844,894

6,688

1.44

(1)

Annualized.

(2)

Includes loans held for sale.

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS

For the Twelve Months Ended

4Q2023

4Q2022

($ in thousands)

Average
Balance

Interest
and Fees

Yield/
Rate

Average
Balance

Interest
and Fees

Yield/
Rate

Interest-earning assets:

Interest-bearing deposits in other banks

$

78,676

$

4,040

5.14

%

$

79,482

$

1,399

1.76

%

Federal funds sold and other investments

14,963

1,031

6.89

11,810

598

5.06

Available-for-sale debt securities, at fair value

202,167

6,131

3.03

170,479

3,351

1.97

CRE loans

857,124

48,312

5.64

777,776

37,861

4.87

SBA loans

260,507

28,514

10.95

321,757

24,073

7.48

C&I loans

119,135

9,189

7.71

142,630

7,217

5.06

Home mortgage loans

507,125

24,384

4.81

334,984

13,660

4.08

Consumer & other loans

987

64

6.51

1,071

53

4.95

Loans(1)

1,744,878

110,463

6.33

1,578,218

82,864

5.25

Total interest-earning assets

2,040,684

121,665

5.96

1,839,989

88,212

4.79

Noninterest-earning assets

84,757

76,883

Total assets

$

2,125,441

$

1,916,872

Interest-bearing liabilities:

Money market deposits and others

$

374,116

$

13,830

3.70

%

$

475,414

$

5,305

1.12

%

Time deposits

841,804

35,605

4.23

445,169

5,905

1.33

Total interest-bearing deposits

1,215,920

49,435

4.07

920,583

11,210

1.22

Borrowings

77,114

3,543

4.59

2,089

91

4.36

Total interest-bearing liabilities

1,293,034

52,978

4.10

922,672

11,301

1.22

Noninterest-bearing liabilities:

Noninterest-bearing deposits

613,797

796,175

Other noninterest-bearing liabilities

35,377

27,829

Total noninterest-bearing liabilities

649,174

824,004

Shareholders’ equity

183,233

170,196

Total liabilities and shareholders’ equity

$

2,125,441

1,916,872

Net interest income / interest rate spreads

$

68,687

1.86

%

$

76,911

3.57

%

Net interest margin

3.37

%

4.18

%

Cost of deposits & cost of funds:

Total deposits / cost of deposits

$

1,829,717

$

49,435

2.70

%

$

1,716,758

$

11,210

0.65

%

Total funding liabilities / cost of funds

1,906,831

52,978

2.78

1,718,847

11,301

0.66

(1)

Includes loans held for sale.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240125702702/en/

Contacts

Investor Relations
OP Bancorp
Christine Oh
EVP & CFO
213.892.1192
Christine.oh@myopenbank.com

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