OP Bancorp Reports Net Income for 2023 Third Quarter of $5.1 Million and Diluted Earnings Per Share of $0.33

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2023 Third Quarter Highlights compared with 2023 Second Quarter:

  • Financial Results:

    • Net income of $5.1 million, compared to $6.1 million

    • Diluted earnings per share of $0.33, compared to $0.39

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

    • Net interest margin of 3.38%, compared to 3.40%

    • Provision for credit losses of $1.4 million, compared to none

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

    • Gross loans of $1.76 billion, compared to $1.72 billion

    • Total deposits of $1.83 billion, compared to $1.86 billion

  • Credit Quality:

    • Allowance for credit losses to gross loans of 1.23%, compared to 1.21%

    • Net charge-offs(1) to average gross loans(2) of 0.11%, compared to 0.00%

    • Nonperforming loans to gross loans of 0.24%, compared to 0.20%

    • Criticized loans(3) to gross loans of 0.78%, compared to 0.44%

  • Capital Levels:

    • Remained well-capitalized with a Common Equity Tier 1 ("CET1") ratio of 12.09%

    • Book value per common share increased to $12.17, compared to $12.16

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

    • Announced a new program to repurchase up to 750,000 shares of its common stock

___________________________________________________________

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

LOS ANGELES, October 26, 2023--(BUSINESS WIRE)--OP Bancorp (the "Company") (NASDAQ: OPBK), the holding company of Open Bank (the "Bank"), today reported its financial results for the third quarter of 2023. Net income for the third quarter of 2023 was $5.1 million, or $0.33 per diluted common share, compared with $6.1 million, or $0.39 per diluted common share, for the second quarter of 2023, and $8.7 million, or $0.55 per diluted common share, for the third quarter of 2022.

Min Kim, President and Chief Executive Officer:

"Recognizing the continued challenges in banking environment, we have been actively engaging with our borrowers to provide support in this high interest rate environment. As we maintain a healthy level of liquidity, our primary emphasis has been on fine-tuning our deposit composition to control costs effectively. Our noninterest-bearing deposits stand at 33% of total deposits showing promising signs of stability in our net interest margin," said Min Kim, President and Chief Executive.

"We also expanded our branch network by opening our eleventh full service branch in Las Vegas, Nevada during the quarter. Although we anticipate additional challenges in the short term, we remain optimistic about achieving our longer-term goals."

SELECTED FINANCIAL HIGHLIGHTS

($ in thousands, except per share data)

As of and For the Three Months Ended

% Change 3Q23 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

Selected Income Statement Data:

Net interest income

$

17,313

$

17,252

$

20,344

0.4

%

(14.9

)%

Provision for credit losses

1,359

—

662

n/m

105.3

Noninterest income

2,601

3,605

4,821

(27.9

)

(46.0

)

Noninterest expense

11,535

12,300

12,338

(6.2

)

(6.5

)

Income tax expense

1,899

2,466

3,515

(23.0

)

(46.0

)

Net income

5,121

6,091

8,650

(15.9

)

(40.8

)

Diluted earnings per share

0.33

0.39

0.55

(15.4

)

(40.0

)

Selected Balance Sheet Data:

Gross loans

$

1,759,525

$

1,716,197

$

1,618,018

2.5

%

8.7

%

Total deposits

1,825,171

1,859,639

1,816,811

(1.9

)

0.5

Total assets

2,142,675

2,151,701

2,029,575

(0.4

)

5.6

Average loans(1)

1,740,188

1,725,764

1,614,000

0.8

7.8

Average deposits

1,821,361

1,817,101

1,753,726

0.2

3.9

Credit Quality:

Nonperforming loans

$

4,211

$

3,447

$

1,809

22.2

%

132.8

%

Nonperforming loans to gross loans

0.24

%

0.20

%

0.11

%

20.0

118.2

Criticized loans(2) to gross loans

0.78

0.44

0.19

77.3

310.5

Net charge-offs (recoveries) to average gross loans(3)

0.11

0.00

(0.00

)

0.11

0.11

Allowance for credit losses to gross loans

1.23

1.21

1.14

0.02

0.09

Allowance for credit losses to nonperforming loans

513

603

1015

(90

)

(502

)

Financial Ratios:

Return on average assets(3)

0.96

%

1.15

%

1.77

%

(0.19

)%

(0.81

)%

Return on average equity(3)

11.07

13.27

19.91

(2.20

)

(8.84

)

Net interest margin(3)

3.38

3.40

4.31

(0.02

)

(0.93

)

Efficiency ratio(4)

57.92

58.97

49.03

(1.05

)

8.89

Common equity tier 1 capital ratio

12.09

11.92

11.92

0.17

0.17

Leverage ratio

9.63

9.50

9.52

0.13

0.11

Book value per common share

$

12.17

$

12.16

$

11.19

0.1

8.8

(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.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

($ in thousands)

For the Three Months Ended

% Change 3Q23 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

Interest Income

Interest income

$

31,186

$

30,102

$

23,234

3.6

%

34.2

%

Interest expense

13,873

12,850

2,890

8.0

380.0

Net interest income

$

17,313

$

17,252

$

20,344

0.4

%

(14.9

)%

($ in thousands)

For the Three Months Ended

3Q2023

2Q2023

3Q2022

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

$

1,740,188

$

28,250

6.45

%

$

1,725,764

$

27,288

6.34

%

$

1,614,000

$

21,780

5.36

%

Total interest-earning assets

2,038,321

31,186

6.08

2,030,139

30,102

5.94

1,874,516

23,234

4.92

Interest-bearing Liabilities:

Interest-bearing deposits

1,222,099

13,006

4.22

1,201,353

11,920

3.98

947,437

2,889

1.21

Total interest-bearing liabilities

1,301,990

13,873

4.23

1,283,939

12,850

4.01

947,567

2,890

1.21

Ratios:

Net interest income / interest rate spreads

17,313

1.85

17,252

1.93

20,344

3.71

Net interest margin

3.38

3.40

4.31

Total deposits / cost of deposits

1,821,361

13,006

2.83

1,817,101

11,920

2.63

1,753,726

2,889

0.65

Total funding liabilities / cost of funds

1,901,252

13,873

2.90

1,899,687

12,850

2.71

1,753,856

2,890

0.65

(1)

Annualized.

($ in thousands)

For the Three Months Ended

Yield Change 3Q23 vs.

3Q2023

2Q2023

3Q2022

Interest

& Fees

Yield(1)

Interest

& Fees

Yield(1)

Interest

& Fees

Yield(1)

2Q2023

3Q2022

Loan Yield Component:

Contractual interest rate

$

27,319

6.24

%

$

26,411

6.13

%

$

20,419

5.02

%

0.11

%

1.22

%

SBA discount accretion

1,263

0.29

1,078

0.25

1,336

0.33

0.04

(0.04

)

Amortization of net deferred fees

1

—

16

0.01

122

0.03

(0.01

)

(0.03

)

Amortization of premium

(445

)

(0.10

)

(452

)

(0.11

)

(250

)

(0.06

)

0.01

(0.04

)

Net interest recognized on nonaccrual loans

(26

)

(0.01

)

40

0.01

—

—

(0.02

)

(0.01

)

Prepayment penalties(2) and other fees

138

0.03

195

0.05

153

0.04

(0.02

)

(0.01

)

Yield on loans

$

28,250

6.45

%

$

27,288

6.34

%

$

21,780

5.36

%

0.11

%

1.09

%

Amortization of Net Deferred Fees:

PPP loan forgiveness

$

3

—

%

$

—

—

%

$

351

0.04

%

—

%

(0.04

)%

Other

(2

)

—

16

0.01

142

-0.01

(0.01

)

0.01

Total amortization of net deferred fees

$

1

—

%

$

16

0.01

%

$

493

0.03

%

(0.01

)%

(0.03

)%

(1)

Annualized.

(2)

Prepayment penalty income of $110 thousand and $79 thousand for the three months ended June 30, 2023 and September 30, 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

3Q2023

2Q2023

3Q2022

Hana Loan Purchase:

Contractual interest rate

$

1,383

$

1,409

$

1,114

Purchased loan discount accretion

513

384

594

Other fees

27

16

9

Total interest income

$

1,923

$

1,809

$

1,717

Effect on average loan yield(1)

0.25

%

0.23

%

0.21

%

Effect on net interest margin(1)

0.30

%

0.27

%

0.22

%

($ in thousands)

For the Three Months Ended

3Q2023

2Q2023

3Q2022

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)

$

1,740,188

$

28,250

6.45

%

$

1,725,764

$

27,288

6.34

%

$

1,614,000

$

21,780

5.36

%

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

1,688,404

26,327

6.20

1,670,530

25,479

6.11

1,549,313

20,063

5.15

Net interest margin(1)

2,038,321

17,313

3.38

2,030,139

17,252

3.40

1,874,516

20,344

4.31

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

1,986,537

15,390

3.08

1,974,905

15,443

3.13

1,809,829

18,627

4.09

(1)

Annualized.

(2)

See reconciliation of GAAP to non-GAAP financial measures.

Third Quarter 2023 vs. Second Quarter 2023

Net interest income increased $0.1 million, or 0.4%, primarily due to higher interest income on loans and interest-bearing deposits in other banks, mostly offset by higher interest expense on deposits. Net interest margin was 3.38%, a decrease of 2 basis points from 3.40%.

  • A $1.0 million increase in interest income on loans was primarily due to a 11 basis point increase in average yield as a result of the Federal Reserve’s rate increases.

  • A $113 thousand increase in interest income on interest-bearing deposits in other banks was primarily due the Federal Reserve’s rate increases.

  • A $1.1 million increase in interest expense on interest-bearing deposits was primarily due to a 24 basis point increase in average cost.

Third Quarter 2023 vs. Third Quarter 2022

Net interest income decreased $3.0 million, or 14.9%, primarily due to higher interest expense on deposits, partially offset by higher interest income on loans. Net interest margin was 3.38%, a decrease of 93 basis points from 4.31%.

  • A $10.1 million increase in interest expense on deposits was primarily due to a $274.7 million increase in average balance and a 301 basis point increase in average cost driven by the Federal Reserve’s rate increases.

  • A $6.5 million increase in interest income on loans was primarily due to a $126.2 million increase in average balance and a 109 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

3Q2023

2Q2023

3Q2022

Provision for credit losses on loans

$

1,303

$

—

$

662

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

56

—

(6

)

Total provision for credit losses

$

1,359

$

—

$

656

(1)

Provision for credit losses on off-balance sheet exposure of $56 thousand for the three months ended September 30, 2023 was included in total provision for credit losses. Prior to CECL adoption, reversal of provisions for credit losses on off-balance sheet exposure of $6 thousand for the three months ended September 30, 2022 was included in other expenses.

Third Quarter 2023 vs. Second Quarter 2023

The Company recorded a $1.4 million provision for credit losses, an increase of $1.4 million, compared with no provision for credit losses. The increase was primarily due to a $488 thousand in net charge-offs, a $356 thousand increase from loan balance and historical loss factor changes, and a $575 thousand increase in qualitative factor adjustments in the third quarter of 2023.

Third Quarter 2023 vs. Third Quarter 2022

The Company recorded a $1.4 million provision for credit losses, compared with a $656 thousand provision for credit losses.

Noninterest Income

($ in thousands)

For the Three Months Ended

% Change 3Q23 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

Noninterest Income

Service charges on deposits

$

575

$

573

$

454

0.3

%

26.7

%

Loan servicing fees, net of amortization

468

595

610

(21.3

)

(23.3

)

Gain on sale of loans

1,179

2,098

3,490

(43.8

)

(66.2

)

Other income

379

339

267

11.8

41.9

Total noninterest income

$

2,601

$

3,605

$

4,821

(27.9

)%

(46.0

)%

Third Quarter 2023 vs. Second Quarter 2023

Noninterest income decreased $1.0 million, or 27.9%, primarily due to lower gain on sale of loans.

  • Gain on sale of loans was $1.2 million, a decrease of $919 thousand from $2.1 million, primarily due to a lower SBA loan sold amount and a lower average sales premium. The Bank sold $23.4 million in SBA loans at an average premium rate of 6.50%, compared to the sale of $36.8 million at an average premium rate of 6.64%.

Third Quarter 2023 vs. Third Quarter 2022

Noninterest income decreased $2.2 million, or 46.0%, primarily due to lower gain on sale of loans.

  • Gain on sale of loans was $1.2 million, a decrease of $2.3 million from $3.5 million, primarily due to a lower SBA loan sold amount and a lower average sales premium. The Bank sold $23.4 million in SBA loans at an average premium rate of 6.50%, compared to the sale of $59.3 million at an average premium rate of 6.67%.

Noninterest Expense

($ in thousands)

For the Three Months Ended

% Change 3Q23 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

Noninterest Expense

Salaries and employee benefits

$

7,014

$

7,681

$

7,343

(8.7

)%

(4.5

)%

Occupancy and equipment

1,706

1,598

1,537

6.8

11.0

Data processing and communication

369

546

586

(32.4

)

(37.0

)

Professional fees

440

381

602

15.5

(26.9

)

FDIC insurance and regulatory assessments

333

420

238

(20.7

)

39.9

Promotion and advertising

207

159

177

30.2

16.9

Directors’ fees

164

210

170

(21.9

)

(3.5

)

Foundation donation and other contributions

529

594

875

(10.9

)

(39.5

)

Other expenses

773

711

810

8.7

(4.6

)

Total noninterest expense

$

11,535

$

12,300

$

12,338

(6.2

)%

(6.5

)%

Third Quarter 2023 vs. Second Quarter 2023

Noninterest expense decreased $765 thousand, or 6.2%, primarily due to lower salaries and employee benefits, and data processing communication, partially offset by a higher occupancy and equipment.

  • Salaries and employee benefits decreased $667 thousand primarily due to a lower accrual on employee incentives.

  • Data processing and communication decreased $177 thousand primarily due to an accrual adjustment for a credit received on data processing fees.

  • Occupancy and equipment increased $108 thousand primarily due to increases in leasehold improvements and equipment expense accrual adjustments.

Third Quarter 2023 vs. Third Quarter 2022

Noninterest expense decreased $803 thousand, or 6.5%, primarily due to lower foundation donation and other contributions, salaries and employee benefits, and data processing and communication.

  • Foundation donations and other contributions decreased $346 thousand, primarily due to a lower donation accrual for Open Stewardship as a result of lower net income.

  • Salaries and employee benefits decreased $329 thousand, primarily due to a lower accrual on employee incentives.

  • Data processing and communication decreased $217 thousand, primarily due to an accrual adjustment for a credit received on data processing fees.

Income Tax Expense

Third Quarter 2023 vs. Second Quarter 2023

Income tax expense was $1.9 million and the effective tax rate was 27.1%, compared to income tax expense of $2.5 million and the effective rate of 28.8%. The decrease in the effective tax rate was primarily due to adjustments for differences between the prior year tax provision and the final tax returns that were applied in the third quarter of 2023.

Third Quarter 2023 vs. Third Quarter 2022

Income tax expense was $1.9 million and the effective tax rate was 27.1%, compared to income tax expense of $3.5 million and an effective rate of 28.9%. The decrease in the effective tax rate was primarily due to return to provision adjustments applied in the third quarter of 2023.

BALANCE SHEET HIGHLIGHTS

Loans

($ in thousands)

As of

% Change 3Q23 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

CRE loans

$

878,824

$

847,863

$

830,125

3.7

%

5.9

%

SBA loans

240,154

238,785

232,569

0.6

3.3

C&I loans

124,632

112,160

133,855

11.1

(6.9

)

Home mortgage loans

515,789

516,226

419,469

(0.1

)

23.0

Consumer & other loans

126

1,163

2,000

(89.2

)

(93.7

)

Gross loans

$

1,759,525

$

1,716,197

$

1,618,018

2.5

%

8.7

%

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

($ in thousands)

For the Three Months Ended

% Change 3Q23 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

CRE loans

$

33,222

$

29,976

$

43,929

10.8

%

(24.4

)%

SBA loans

39,079

34,312

43,984

13.9

(11.2

)

C&I loans

14,617

25,650

39,720

(43.0

)

(63.2

)

Home mortgage loans

9,137

22,788

68,842

(59.9

)

(86.7

)

Gross loans

$

96,055

$

112,726

$

198,975

(14.8

)%

(51.7

)%

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

($ in thousands)

For the Three Months Ended

3Q2023

2Q2023

3Q2022

Loan Activities:

Gross loans, beginning

$

1,716,197

$

1,692,485

$

1,484,718

New originations

96,055

112,726

198,975

Net line advances

25,464

(25,961

)

(6,337

)

Purchases

3,415

6,359

37,146

Sales

(22,137

)

(36,791

)

(64,314

)

Paydowns

(22,169

)

(17,210

)

(19,087

)

Payoffs

(36,024

)

(25,969

)

(37,817

)

PPP payoffs

(250

)

—

(7,206

)

Decrease in loans held for sale

—

7,534

30,613

Other

(1,026

)

3,024

1,327

Total

43,328

23,712

133,300

Gross loans, ending

$

1,759,525

$

1,716,197

$

1,618,018

As of September 30, 2023 vs. June 30, 2023

Gross loans were $1.76 billion as of September 30, 2023, up $43.3 million from June 30, 2023, primarily due to new loan originations and net line advances, partially offset by loan sales, and payoffs and paydowns.

New loan originations, net line advances, and loan payoffs and paydowns were $96.1 million $25.5 million, and $58.4 million for the third quarter of 2023, respectively, compared with $112.7 million $(26.0) million and $43.2 million for the second quarter of 2023, respectively.

As of September 30, 2023 vs. September 30, 2022

Gross loans were $1.76 billion as of September 30, 2023, up $141.5 million from September 30, 2022, primarily due to new loan originations of $451.8 million and loan purchases of $71.9 million, primarily offset by loan sales of $136.2 million and loan payoffs and paydowns of $217.2 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

3Q2023

2Q2023

3Q2022

%

Rate

%

Rate

%

Rate

Fixed rate

36.3

%

4.95

%

36.2

%

4.82

%

35.2

%

4.39

%

Hybrid rate

34.0

5.08

34.7

4.99

34.1

4.59

Variable rate

29.7

9.23

29.1

9.05

30.7

6.97

Gross loans

100.0

%

6.27

%

100.0

%

6.11

%

100.0

%

5.25

%

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 September 30, 2023

Within One Year

One Year Through Five Years

After Five Years

Total

Amount

Rate

Amount

Rate

Amount

Rate

Amount

Rate

Fixed rate

$

77,850

5.84

%

$

316,120

4.82

%

$

243,749

4.83

%

$

637,719

4.95

%

Hybrid rate

—

—

96,038

4.49

502,942

5.19

598,980

5.08

Variable rate

91,108

9.18

113,209

8.83

318,509

9.39

522,826

9.23

Gross loans

$

168,958

7.52

%

$

525,367

5.63

%

$

1,065,200

6.36

%

$

1,759,525

6.27

%

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 3Q23 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

Allowance for credit losses on loans, beginning

$

20,802

$

20,814

$

17,702

(0.1

)%

17.5

%

Provision for credit losses

1,303

—

662

n/m

96.8

Gross charge-offs

(492

)

(20

)

—

n/m

n/m

Gross recoveries

4

8

5

(50.0

)

(20.0

)

Net (charge-offs) recoveries

(488

)

(12

)

5

n/m

n/m

Allowance for credit losses on loans, ending(1)

$

21,617

$

20,802

$

18,369

3.9

%

17.7

%

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

$

367

$

367

$

195

—

%

88.2

%

Impact of CECL adoption

—

—

—

n/m

n/m

Provision for (reversal of) credit losses

56

—

(6

)

n/m

n/m

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

$

423

$

367

$

189

15.3

%

123.8

%

(1)

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

Asset Quality

($ in thousands)

As of and For the Three Months Ended

Change 3Q2023 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

Loans 30-89 days past due and still accruing

$

8,356

$

5,215

$

1,205

60.2

%

593.4

%

As a % of gross loans

0.47

%

0.30

%

0.07

%

0.17

%

0.40

%

Nonperforming loans(1)

$

4,211

$

3,447

$

1,809

22.2

%

132.8

%

Nonperforming assets(1)

4,211

3,447

1,809

22.2

132.8

Nonperforming loans to gross loans

0.24

%

0.20

%

0.11

%

0.04

0.13

Nonperforming assets to total assets

0.20

%

0.16

%

0.09

%

0.04

0.11

Criticized loans(1)(2)

$

13,790

$

7,538

$

3,100

82.9

%

344.8

%

Criticized loans to gross loans

0.78

%

0.44

%

0.19

%

0.34

0.59

Allowance for credit losses ratios:

As a % of gross loans

1.23

%

1.21

%

1.14

%

0.02

%

0.09

%

As an adjusted % of gross loans(3)

1.26

1.25

1.18

0.01

0.08

As a % of nonperforming loans

513

603

1,015

(90

)

(502

)

As a % of nonperforming assets

513

603

1,015

(90

)

(502

)

As a % of criticized loans

157

276

593

(119

)

(436

)

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

0.11

0.00

(0.00

)

0.11

0.11

(1)

Excludes the guaranteed portion of SBA loans that are in liquidation totaling $5.2 million, $5.4 million and $442 thousand as of September 30, 2023, June 30, 2023 and September 30, 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 1.26%.

  • Loans 30-89 days past due and still accruing were $8.4 million or 0.47% of gross loans as of September 30, 2023, compared with $5.2 million or 0.30% as of June 30, 2023. The increase was mainly due to one home mortgage loan and one CRE and C&I relationship. Subsequent to September 30, 2023, past due payments on five loans totaling $3.5 million were collected, and the loans are now current.

  • Nonperforming loans were $4.2 million or 0.24% of gross loans as of September 30, 2023, compared with $3.4 million or 0.20% as of June 30, 2023. The increase was due to one home mortgage loan in Los Angeles with loan to value below 60% and one USDA loan with 80% government guaranty which has been written down to its fair value per the impairment analysis.

  • Nonperforming assets were $4.2 million or 0.20% of total assets as of September 30, 2023, compared with $3.4 million or 0.16% as of June 30, 2023. The Company did not have OREO as of September 30, 2023 or 2022.

  • Criticized loans were $13.8 million or 0.78% of gross loans as of September 30, 2023, compared with $7.5 million or 0.44% as of June 30, 2023. The increase was mainly due to one CRE loan to a motel in San Diego for $4.4 million and two relationships already mentioned under the nonperforming loans above. Subsequent to September 30, 2023, two loans totaling $1.4 million have been upgraded to Pass risk rating based on satisfactory cash flows.

  • Net charge-offs were $488 thousand or 0.11% of average loans in the third quarter of 2023, compared to net charge-offs of $12 thousand, or 0.00%, of average loans in the second quarter of 2023 and net recoveries of $5 thousand, or 0.00%, of average loans in the third quarter of 2022.

Deposits

($ in thousands)

As of

% Change 3Q23 vs.

3Q2023

2Q2023

3Q2022

Amount

%

Amount

%

Amount

%

2Q2023

3Q2022

Noninterest-bearing deposits

$

605,509

33.2

%

$

634,745

34.1

%

$

794,631

43.7

%

(4.6

)%

(23.8

)%

Money market deposits and others

348,869

19.1

344,162

18.5

524,911

28.9

1.4

(33.5

)

Time deposits

870,793

47.7

880,732

47.4

497,269

27.4

(1.1

)

75.1

Total deposits

$

1,825,171

100.0

%

$

1,859,639

100.0

%

$

1,816,811

100.0

%

(1.9

)%

0.5

%

Estimated uninsured deposits

$

1,061,964

58.2

%

$

1,091,753

58.7

%

$

1,073,483

59.1

%

(2.7

)%

(1.1

)%

As of September 30, 2023 vs. June 30, 2023

Total deposits were $1.83 billion as of September 30, 2023, down $34.5 million from June 30, 2023, primarily due to decreases in noninterest-bearing deposits. Noninterest-bearing deposits, as a percentage of total deposits, decreased to 33.2% from 34.1%. 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 September 30, 2023 vs. September 30, 2022

Total deposits were $1.83 billion as of September 30, 2023, up $8.4 million from September 30, 2022, primarily driven by growth in time deposits, partially offset by decreases in noninterest-bearing deposits, and money market and others. 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 September 30, 2023:

As of September 30, 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)

$

184,757

$

141,526

$

46,464

$

45,929

$

1,486

$

420,162

Time deposits ($250 or less)

178,507

92,788

88,265

49,049

42,022

450,631

Total time deposits

$

363,264

$

234,314

$

134,729

$

94,978

$

43,508

$

870,793

Weighted average rate

4.39

%

4.41

%

4.70

%

4.67

%

4.02

%

4.46

%

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)

3Q2023

2Q2023

3Q2022

Liquidity Assets:

Cash and cash equivalents

$

105,740

$

143,761

$

107,281

Available-for-sale debt securities

191,313

202,250

186,438

Liquid assets

$

297,053

$

346,011

$

293,719

Liquid assets to total assets

13.9

%

16.1

%

14.5

%

Available borrowings:

Federal Home Loan Bank—San Francisco

$

375,874

$

400,543

$

406,523

Federal Reserve Bank

186,380

172,316

179,942

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

25,000

Total available borrowings

$

662,254

$

672,859

$

686,465

Total available borrowings to total assets

30.9

%

31.3

%

33.8

%

Liquid assets and available borrowings to total deposits

52.6

%

54.8

%

54.0

%

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 November 23, 2023 to all shareholders of record as of the close of business on November 9, 2023.

The Company has an active stock repurchase program to repurchase up to 750,000 shares of its common stock, which was announced in August 2023. There was no repurchase during the third quarter of 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

13.31

%

13.20

%

10.00

%

10.50

%

Tier 1 risk-based capital ratio

12.09

11.98

8.00

8.50

Common equity tier 1 ratio

12.09

11.98

6.50

7.00

Leverage ratio

9.63

9.55

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 3Q2023 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

Risk-Based Capital Ratios:

Total risk-based capital ratio

13.31

%

13.10

%

13.10

%

0.21

%

0.21

%

Tier 1 risk-based capital ratio

12.09

11.92

11.92

0.17

0.17

Common equity tier 1 ratio

12.09

11.92

11.92

0.17

0.17

Leverage ratio

9.63

9.50

9.52

0.13

0.11

Risk-weighted Assets ($ in thousands)

$

1,707,318

$

1,700,205

$

1,571,593

0.42

8.64

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

3Q2023

2Q2023

3Q2022

Interest income

$

31,186

$

30,102

$

23,234

Interest expense

13,873

12,850

2,890

Net interest income

17,313

17,252

20,344

Noninterest income

2,601

3,605

4,821

Noninterest expense

11,535

12,300

12,338

Pre-provision net revenue

(a)

$

8,379

$

8,557

$

12,827

Reconciliation to net income

Provision for credit losses

(b)

$

1,359

$

—

$

662

Income tax expense

(c)

1,899

2,466

3,515

Net income

(a)-(b)-(c)

$

5,121

$

6,091

$

8,650

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 September 30, 2023, June 30, 2023 and September 30, 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

3Q2023

2Q2023

3Q2022

Yield on Average Loans

Interest income on loans

$

28,250

$

27,288

$

21,780

Less: interest income on purchased Hana loans

1,923

1,809

1,717

Adjusted interest income on loans

(a)

$

26,327

$

25,479

$

20,063

Average loans

$

1,740,188

$

1,725,764

$

1,614,000

Less: Average purchased Hana loans

51,784

55,234

64,687

Adjusted average loans

(b)

$

1,688,404

$

1,670,530

$

1,549,313

Average loan yield(1)

6.45

%

6.34

%

5.36

%

Effect on average loan yield(1)

0.25

%

0.23

%

0.21

%

Adjusted average loan yield(1)

(a)/(b)

6.20

%

6.11

%

5.15

%

Net Interest Margin

Net interest income

$

17,313

$

17,252

$

20,344

Less: interest income on purchased Hana loans

1,923

1,809

1,717

Adjusted net interest income

(c)

$

15,390

$

15,443

$

18,627

Average interest-earning assets

$

2,038,321

$

2,030,139

$

1,874,516

Less: Average purchased Hana loans

51,784

55,234

64,687

Adjusted average interest-earning assets

(d)

$

1,986,537

$

1,974,905

$

1,809,829

Net interest margin(1)

3.38

%

3.40

%

4.31

%

Effect on net interest margin(1)

0.30

0.27

0.22

Adjusted net interest margin(1)

(c)/(d)

3.08

%

3.13

%

4.09

%

(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

3Q2023

2Q2023

3Q2022

Gross loans

$

1,759,525

$

1,716,197

$

1,618,018

Less: Purchased Hana loans

(48,780

)

(54,016

)

(61,899

)

PPP loans(1)

(1

)

(247

)

(1,022

)

Adjusted gross loans

(a)

$

1,710,744

$

1,661,934

$

1,555,097

Accrued interest receivable on loans

$

7,057

$

6,815

$

5,203

Less: Accrued interest receivable on purchased Hana loans

(402

)

(426

)

(323

)

Accrued interest receivable on PPP loans(2)

—

(6

)

(16

)

Adjusted accrued interest receivable on loans

(b)

$

6,655

$

6,383

$

4,864

Adjusted gross loans and accrued interest receivable

(a)+(b)=(c)

$

1,717,399

$

1,668,317

$

1,559,961

Allowance for credit losses

$

21,617

$

20,802

$

18,369

Add: Allowance on accrued interest receivable

—

—

—

Adjusted Allowance

(d)

$

21,617

$

20,802

$

18,369

Adjusted allowance to gross loans ratio

(d)/(c)

1.26

%

1.25

%

1.18

%

(1)

Excludes purchased PPP loans of $57 thousand as of September 30, 2022.

(2)

Excludes purchased accrued interest receivable on PPP loans of $1 thousand as of September 30, 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, California, and Carrollton, Texas 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: business and economic conditions, particularly those affecting the financial services industry and our primary market areas; the continuing effects of inflation and monetary policies, and the impacts of those circumstances upon our current and prospective borrowers and depositors; our ability to manage deposit liabilities and liquidity sources 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 the interest rate policies of the Federal Reserve, 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; restraints on the ability of Open Bank to pay dividends to us, which could limit our liquidity; 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; 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 3Q23 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

Assets

Cash and due from banks

$

21,748

$

21,295

$

25,516

2.1

%

(14.8

)%

Interest-bearing deposits in other banks

83,992

122,466

81,765

(31.4

)

2.7

Cash and cash equivalents

105,740

143,761

107,281

(26.4

)

(1.4

)

Available-for-sale debt securities, at fair value

191,313

202,250

186,438

(5.4

)

2.6

Other investments

16,100

16,183

12,074

(0.5

)

33.3

Loans held for sale

—

—

36,642

n/m

n/m

CRE loans

878,824

847,863

830,125

3.7

5.9

SBA loans

240,154

238,785

232,569

0.6

3.3

C&I loans

124,632

112,160

133,855

11.1

(6.9

)

Home mortgage loans

515,789

516,226

419,469

(0.1

)

23.0

Consumer loans

126

1,163

2,000

(89.2

)

(93.7

)

Gross loans receivable

1,759,525

1,716,197

1,618,018

2.5

8.7

Allowance for credit losses

(21,617

)

(20,802

)

(18,369

)

3.9

17.7

Net loans receivable

1,737,908

1,695,395

1,599,649

2.5

8.6

Premises and equipment, net

5,378

5,093

4,383

5.6

22.7

Accrued interest receivable, net

7,996

7,703

5,856

3.8

36.5

Servicing assets

11,931

12,654

12,889

(5.7

)

(7.4

)

Company owned life insurance

22,071

21,913

21,464

0.7

2.8

Deferred tax assets, net

15,061

13,360

17,296

12.7

(12.9

)

Operating right-of-use assets

8,993

9,487

8,265

(5.2

)

8.8

Other assets

20,184

23,902

17,338

(15.6

)

16.4

Total assets

$

2,142,675

$

2,151,701

$

2,029,575

(0.4

)%

5.6

%

Liabilities and Shareholders' Equity

Liabilities:

Noninterest-bearing

$

605,509

$

634,745

$

794,631

(4.6

)%

(23.8

)%

Money market and others

348,869

344,162

524,911

1.4

(33.5

)

Time deposits greater than $250

420,162

416,208

277,785

1.0

51.3

Other time deposits

450,631

464,524

219,484

(3.0

)

105.3

Total deposits

1,825,171

1,859,639

1,816,811

(1.9

)

0.5

Federal Home Loan Bank advances

95,000

75,000

10,000

26.7

850.0

Accrued interest payable

13,552

9,354

1,099

44.9

1133.1

Operating lease liabilities

9,926

10,486

9,485

(5.3

)

4.6

Other liabilities

14,719

13,452

22,085

9.4

(33.4

)

Total liabilities

1,958,368

1,967,931

1,859,480

(0.5

)

5.3

Shareholders' equity:

Common stock

77,632

77,464

78,782

0.2

(1.5

)

Additional paid-in capital

10,606

10,297

9,424

3.0

12.5

Retained earnings

117,483

114,177

99,487

2.9

18.1

Accumulated other comprehensive loss

(21,414

)

(18,168

)

(17,598

)

17.9

21.7

Total shareholders’ equity

184,307

183,770

170,095

0.3

8.4

Total liabilities and shareholders' equity

$

2,142,675

$

2,151,701

$

2,029,575

(0.4

)%

5.6

%

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

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

For the Three Months Ended

% Change 3Q23 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

Interest income

Interest and fees on loans

$

28,250

$

27,288

$

21,780

3.5

%

29.7

%

Interest on available-for-sale debt securities

1,519

1,562

881

(2.8

)

72.4

Other interest income

1,417

1,252

573

13.2

147.3

Total interest income

31,186

30,102

23,234

3.6

34.2

Interest expense

Interest on deposits

13,006

11,920

2,890

9.1

350.0

Interest on borrowings

867

930

—

(6.8

)

n/m

Total interest expense

13,873

12,850

2,890

8.0

380.0

Net interest income

17,313

17,252

20,344

0.4

(14.9

)

Provision for credit losses

1,359

—

662

n/m

105.3

Net interest income after provision for credit losses

15,954

17,252

19,682

(7.5

)

(18.9

)

Noninterest income

Service charges on deposits

575

573

454

0.3

26.7

Loan servicing fees, net of amortization

468

595

610

(21.3

)

(23.3

)

Gain on sale of loans

1,179

2,098

3,490

(43.8

)

(66.2

)

Other income

379

339

267

11.8

41.9

Total noninterest income

2,601

3,605

4,821

(27.9

)

(46.0

)

Noninterest expense

Salaries and employee benefits

7,014

7,681

7,343

(8.7

)

(4.5

)

Occupancy and equipment

1,706

1,598

1,537

6.8

11.0

Data processing and communication

369

546

586

(32.4

)

(37.0

)

Professional fees

440

381

602

15.5

(26.9

)

FDIC insurance and regulatory assessments

333

420

238

(20.7

)

39.9

Promotion and advertising

207

159

177

30.2

16.9

Directors’ fees

164

210

170

(21.9

)

(3.5

)

Foundation donation and other contributions

529

594

875

(10.9

)

(39.5

)

Other expenses

773

711

810

8.7

(4.6

)

Total noninterest expense

11,535

12,300

12,338

(6.2

)

(6.5

)

Income before income tax expense

7,020

8,557

12,165

(18.0

)

(42.3

)

Income tax expense

1,899

2,466

3,515

(23.0

)

(46.0

)

Net income

$

5,121

$

6,091

$

8,650

(15.9

)%

(40.8

)%

Book value per share

$

12.17

$

12.16

$

11.19

0.1

%

8.8

%

Earnings per share - basic

0.33

0.39

0.56

(15.4

)

(41.1

)

Earnings per share - diluted

0.33

0.39

0.55

(15.4

)

(40.0

)

Shares of common stock outstanding, at period end

15,149,203

15,118,268

15,199,840

0.2

%

(0.3

)%

Weighted average shares:

- Basic

15,131,587

15,158,365

15,195,826

(0.2

)%

(0.4

)%

- Diluted

15,140,577

15,169,794

15,275,156

(0.2

)

(0.9

)

KEY RATIOS

For the Three Months Ended

Change 3Q23 vs.

3Q2023

2Q2023

3Q2022

2Q2023

3Q2022

Return on average assets (ROA)(1)

0.96

%

1.15

%

1.77

%

(0.2

)%

(0.8

)%

Return on average equity (ROE)(1)

11.07

13.27

19.91

(2.2

)

(8.8

)

Net interest margin(1)

3.38

3.40

4.31

—

(0.9

)

Efficiency ratio

57.92

58.97

49.03

(1.1

)

8.9

Total risk-based capital ratio

13.31

%

13.10

%

13.10

%

0.2

%

0.2

%

Tier 1 risk-based capital ratio

12.09

11.92

11.92

0.2

0.2

Common equity tier 1 ratio

12.09

11.92

11.92

0.2

0.2

Leverage ratio

9.63

9.50

9.52

0.1

0.1

(1)

Annualized.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

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

For the Nine Months Ended

3Q2023

3Q2022

% Change

Interest income

Interest and fees on loans

$

81,549

$

58,145

40.3

%

Interest on available-for-sale debt securities

4,647

2,114

119.8

Other interest income

3,686

1,067

245.5

Total interest income

89,882

61,326

46.6

Interest expense

Interest on deposits

35,308

4,613

665.4

Interest on borrowings

2,117

—

n/m

Total interest expense

37,425

4,613

711.3

Net interest income

52,457

56,713

(7.5

)

Provision for credit losses

1,021

1,999

(48.9

)

Net interest income after provision for credit losses

51,436

54,714

(6.0

)

Noninterest income

Service charges on deposits

1,566

1,269

23.4

Loan servicing fees, net of amortization

1,909

1,711

11.6

Gain on sale of loans

5,847

10,601

(44.8

)

Other income

1,179

815

44.7

Total noninterest income

10,501

14,396

(27.1

)

Noninterest expense

Salaries and employee benefits

21,947

20,109

9.1

Occupancy and equipment

4,874

4,404

10.7

Data processing and communication

1,465

1,571

(6.7

)

Professional fees

1,180

1,290

(8.5

)

FDIC insurance and regulatory assessments

1,220

637

91.5

Promotion and advertising

528

531

(0.6

)

Directors’ fees

535

537

(0.4

)

Foundation donation and other contributions

1,876

2,542

(26.2

)

Other expenses

2,118

1,882

12.5

Total noninterest expense

35,743

33,503

6.7

Income before income tax expense

26,194

35,607

(26.4

)

Income tax expense

7,448

10,325

(27.9

)

Net income

$

18,746

$

25,282

(25.9

)%

Book value per share

$

12.17

$

11.19

8.8

%

Earnings per share - basic

1.21

1.63

(25.8

)

Earnings per share - diluted

1.21

1.62

(25.3

)

Shares of common stock outstanding, at period end

15,149,203

15,199,840

(0.3

)%

Weighted average shares:

- Basic

15,190,874

15,158,749

0.2

%

- Diluted

15,200,612

15,246,345

(0.3

)

KEY RATIOS

For the Nine Months Ended

3Q2023

3Q2022

% Change

Return on average assets (ROA)(1)

1.18

%

1.80

%

(0.6

)%

Return on average equity (ROE)(1)

13.69

19.91

(6.2

)

Net interest margin(1)

3.45

4.22

(0.8

)

Efficiency ratio

56.77

47.11

9.7

Total risk-based capital ratio

13.31

%

13.10

%

0.2

%

Tier 1 risk-based capital ratio

12.09

11.92

0.2

Common equity tier 1 ratio

12.09

11.92

0.2

Leverage ratio

9.63

9.52

0.1

(1)

Annualized.

ASSET QUALITY

($ in thousands)

As of and For the Three Months Ended

3Q2023

2Q2023

3Q2022

Nonaccrual loans(1)

$

4,211

$

3,447

$

1,809

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

—

—

—

Nonperforming loans

4,211

3,447

1,809

Other real estate owned ("OREO")

—

—

—

Nonperforming assets

$

4,211

$

3,447

$

1,809

Criticized loans by risk categories:

Special mention loans

$

3,651

$

2,909

$

—

Classified loans(1)(3)

10,139

4,629

3,100

Total criticized loans

$

13,790

$

7,538

$

3,100

Criticized loans by loan type:

CRE loans

$

5,130

$

—

$

—

SBA loans

6,169

4,784

1,375

C&I loans

—

200

742

Home mortgage loans

2,491

2,554

983

Total criticized loans

$

13,790

$

7,538

$

3,100

Nonperforming loans / gross loans

0.24

%

0.20

%

0.11

%

Nonperforming assets / gross loans plus OREO

0.24

0.20

0.11

Nonperforming assets / total assets

0.20

0.16

0.09

Classified loans / gross loans

0.58

0.27

0.19

Criticized loans / gross loans

0.78

0.44

0.19

Allowance for credit losses ratios:

As a % of gross loans

1.23

%

1.21

%

1.14

%

As an adjusted % of gross loans(4)

1.26

1.25

1.18

As a % of nonperforming loans

513

603

1015

As a % of nonperforming assets

513

603

1015

As a % of classified loans

213

449

593

As a % of criticized loans

157

276

593

Net charge-offs (recoveries)

$

488

$

12

$

(5

)

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

0.11

%

0.00

%

(0.00

)%

(1)

Excludes the guaranteed portion of SBA loans that are in liquidation totaling $5.2 million, $5.1 million and $442 thousand as of September 30, 2023, June 30, 2023 and September 30, 2022, respectively.

(2)

Excludes the guaranteed portion of SBA loans that are in liquidation totaling $246 thousand as of June 30, 2023.

(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)

3Q2023

2Q2023

3Q2022

Accruing delinquent loans 30-89 days past due

30-59 days

$

5,979

$

3,647

$

360

60-89 days

2,377

1,568

845

Total

$

8,356

$

5,215

$

1,205

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS

For the Three Months Ended

3Q2023

2Q2023

3Q2022

($ 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

$

82,752

$

1,116

5.28

%

$

79,200

$

1,003

5.01

%

$

75,599

$

427

2.21

%

Federal funds sold and other investments

16,176

301

7.44

15,374

249

6.46

12,221

146

4.78

Available-for-sale debt securities, at fair value

199,205

1,519

3.05

209,801

1,562

2.98

172,696

881

2.04

CRE loans

856,911

12,207

5.65

838,526

11,823

5.66

810,158

10,144

4.97

SBA loans

248,960

7,303

11.64

262,825

7,174

10.95

286,903

5,850

8.09

C&I loans

117,578

2,340

7.90

114,103

2,232

7.85

140,098

1,952

5.53

Home mortgage loans

516,465

6,393

4.95

508,976

6,043

4.75

375,804

3,820

4.07

Consumer loans

274

7

10.01

1,334

16

4.77

1,037

14

4.88

Loans(2)

1,740,188

28,250

6.45

1,725,764

27,288

6.34

1,614,000

21,780

5.36

Total interest-earning assets

2,038,321

31,186

6.08

2,030,139

30,102

5.94

1,874,516

23,234

4.92

Noninterest-earning assets

84,580

84,991

83,398

Total assets

$

2,122,901

$

2,115,130

$

1,957,914

Interest-bearing liabilities:

Money market deposits and others

$

352,424

$

3,487

3.93

%

$

357,517

$

3,201

3.59

%

$

502,166

$

1,506

1.19

%

Time deposits

869,675

9,519

4.34

843,836

8,719

4.14

445,271

1,383

1.23

Total interest-bearing deposits

1,222,099

13,006

4.22

1,201,353

11,920

3.98

947,437

2,889

1.21

Borrowings

79,891

867

4.31

82,586

930

4.52

130

1

—

Total interest-bearing liabilities

1,301,990

13,873

4.23

1,283,939

12,850

4.01

947,567

2,890

1.21

Noninterest-bearing liabilities:

Noninterest-bearing deposits

599,262

615,748

806,289

Other noninterest-bearing liabilities

36,620

31,810

30,258

Total noninterest-bearing liabilities

635,882

647,558

836,547

Shareholders’ equity

185,029

183,633

173,800

Total liabilities and shareholders’ equity

$

2,122,901

2,115,130

1,957,914

Net interest income / interest rate spreads

$

17,313

1.85

%

$

17,252

1.93

%

$

20,344

3.71

%

Net interest margin

3.38

%

3.40

%

4.31

%

Cost of deposits & cost of funds:

Total deposits / cost of deposits

$

1,821,361

$

13,006

2.83

%

$

1,817,101

$

11,920

2.63

%

$

1,753,726

$

2,889

0.65

%

Total funding liabilities / cost of funds

1,901,252

13,873

2.90

1,899,687

12,850

2.71

1,753,856

2,890

0.65

(1)

Annualized.

(2)

Includes loans held for sale.

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS

For the Nine Months Ended

3Q2023

3Q2022

($ in thousands)

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

$

78,736

$

2,965

4.97

%

$

80,659

$

665

1.09

%

Federal funds sold and other investments

14,575

721

6.59

11,720

402

4.59

Available-for-sale debt securities, at fair value

206,448

4,647

3.00

165,094

2,114

1.71

CRE loans

845,340

35,208

5.57

757,950

26,689

4.71

SBA loans

262,130

21,459

10.94

332,659

17,392

6.99

C&I loans

117,850

6,772

7.68

152,189

5,300

4.66

Home mortgage loans

504,188

18,070

4.78

296,331

8,731

3.93

Consumer & other loans

994

40

5.40

866

33

5.04

Loans(2)

1,730,502

81,549

6.30

1,539,995

58,145

5.05

Total interest-earning assets

2,030,261

89,882

5.91

1,797,468

61,326

4.56

Noninterest-earning assets

84,044

73,410

Total assets

$

2,114,305

$

1,870,878

Interest-bearing liabilities:

Money market deposits and others

$

373,041

$

9,837

3.53

%

$

461,821

$

2,260

0.65

%

Time deposits

833,603

25,471

4.09

403,242

2,352

0.78

Total interest-bearing deposits

1,206,644

35,308

3.91

865,063

4,612

0.71

Borrowings

63,078

2,117

4.49

44

1

3.00

Total interest-bearing liabilities

1,269,722

37,425

3.94

865,107

4,613

0.71

Noninterest-bearing liabilities:

Noninterest-bearing deposits

628,569

811,263

Other noninterest-bearing liabilities

33,377

25,213

Total noninterest-bearing liabilities

661,946

836,476

Shareholders’ equity

182,637

169,295

Total liabilities and shareholders’ equity

$

2,114,305

1,870,878

Net interest income / interest rate spreads

$

52,457

1.97

%

$

56,713

3.85

%

Net interest margin

3.45

%

4.22

%

Cost of deposits & cost of funds:

Total deposits / cost of deposits

$

1,835,213

$

35,308

2.57

%

$

1,676,326

$

4,612

0.37

%

Total funding liabilities / cost of funds

1,898,291

37,425

2.64

%

1,676,370

4,613

0.37

%

(1)

Annualized.

(2)

Includes loans held for sale.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231026605249/en/

Contacts

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

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