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OP Bancorp Reports Net Income for 2023 First Quarter of $7.5 Million and Diluted Earnings Per Share Of $0.48

2023 First Quarter Highlights compared with 2022 First Quarter:

  • Financial Results:
    • Net income of $7.5 million, compared to $8.2 million
    • Diluted earnings per share of $0.48, compared to $0.53
    • Net interest income of $17.9 million, compared to $17.3 million
    • Net interest margin of 3.56%, compared to 4.12%
    • Adopted Current Expected Credit Losses (“CECL”) and recorded additional allowance for credit losses of $2.1 million on January 1, 2023
    • Reversal of credit losses of $338 thousand, compared to provision for credit losses of $341 thousand
    • Total assets of $2.2 billion, a 16% increase compared to $1.9 billion
    • Gross loans of $1.7 billion, a 18% increase compared to $1.4 billion
    • Total deposits of $1.9 billion, a 14% increase compared to $1.7 billion
  • Credit Quality:
    • Allowance for credit losses to gross loans of 1.23%, compared to 1.17%, reflecting implementation of CECL
    • Net loan charge-offs (1) to average gross loans (2) of 0.02%, compared to 0.00%
    • Nonperforming loans to gross loans of 0.26%, compared to 0.20%
    • Criticized loans (3) to gross loans of 0.44%, compared to 0.27%
  • Capital Levels:
    • Quarterly cash dividend of $0.12 per share, a 20% increase from $0.10 per share
    • Remained well-capitalized with a Common Equity Tier 1 (“CET1”) ratio of 12.06%.
    • Book value per common share increased to $12.02, compared to $10.97
    • Repurchased 76,990 shares of common stock at an average price of $9.25

___________________________________________________________

(1) Annualized.

(2) Includes loans held for sale.

(3) Includes special mention, substandard, doubtful, and loss categories.

OP Bancorp (the “Company”) (NASDAQ: OPBK), the holding company of Open Bank, today reported its financial results for the first quarter of 2023. Net income for the first quarter of 2023 was $7.5 million, or $0.48 per diluted common share, compared with $8.0 million, or $0.51 per diluted common share, for the fourth quarter of 2022, and $8.2 million, or $0.53 per diluted common share, for the first quarter of 2022.

Min Kim, President and Chief Executive Officer:

“With the unexpected recent turmoil in the banking industry, we have focused our effort on connecting with our customers to reassure them that the Company maintains strong liquidity and capital positions to withstand challenges in these unusual times,” said Min Kim, President and Chief Executive.

“Although we have experienced migration from noninterest bearing to interest bearing deposits amid higher rate environment, we did not have much outflow during the quarter. We are grateful for our customers’ loyalty and the trust that they have in us. As we continue to face many headwinds, we anticipate stress on our short-term earnings. However, we believe we are well positioned to build a stronger franchise as we remain focused in maintaining the safety and soundness of our operations.”

SELECTED FINANCIAL HIGHLIGHTS

($ in thousands, except per share data)

 

As of and For the Three Months Ended

 

% Change 1Q23 vs.

 

 

1Q2023

 

 

 

4Q2022

 

 

 

1Q2022

 

 

4Q2022

 

 

1Q2022

 

Selected Income Statement Data:

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

17,892

 

 

$

20,198

 

 

$

17,290

 

 

(11.4

) %

 

3.5

%

(Reversal of) provision for credit losses

 

 

(338

)

 

 

977

 

 

 

341

 

 

n/m

 

 

n/m

 

Noninterest income

 

 

4,295

 

 

 

3,223

 

 

 

4,216

 

 

33.3

 

 

1.9

 

Noninterest expense

 

 

11,908

 

 

 

11,327

 

 

 

9,662

 

 

5.1

 

 

23.2

 

Income tax expense

 

 

3,083

 

 

 

3,089

 

 

 

3,351

 

 

(0.2

)

 

(8.0

)

Net Income

 

 

7,534

 

 

 

8,028

 

 

 

8,152

 

 

(6.2

)

 

(7.6

)

Diluted earnings per share

 

 

0.48

 

 

 

0.51

 

 

 

0.53

 

 

(5.9

)

 

(9.4

)

Selected Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

Gross loans

 

$

1,692,485

 

 

$

1,678,292

 

 

$

1,428,410

 

 

0.8

%

 

18.5

%

Total deposits

 

 

1,904,818

 

 

 

1,885,771

 

 

 

1,672,003

 

 

1.0

 

 

13.9

 

Total assets

 

 

2,170,450

 

 

 

2,094,497

 

 

 

1,863,945

 

 

3.6

 

 

16.4

 

Average loans (1)

 

 

1,725,392

 

 

 

1,691,642

 

 

 

1,444,054

 

 

2.0

 

 

19.5

 

Average deposits

 

 

1,867,684

 

 

 

1,836,736

 

 

 

1,570,376

 

 

1.7

 

 

18.9

 

Credit Quality:

 

 

 

 

 

 

 

 

 

 

Nonperforming loans

 

$

4,358

 

 

$

3,080

 

 

$

2,806

 

 

41.5

%

 

55.3

%

Net charge-offs to average gross loans (2)

 

 

0.02

%

 

 

0.03

%

 

 

0.00

%

 

(0.01

) %

 

0.02

%

Allowance for credit losses to gross loans

 

 

1.23

%

 

 

1.15

%

 

 

1.17

%

 

0.08

%

 

0.06

%

Allowance for credit losses to nonperforming loans

 

 

478

%

 

 

625

%

 

 

594

%

 

(147

) %

 

(116

) %

Financial Ratios:

 

 

 

 

 

 

 

 

 

 

Return on average assets (2)

 

 

1.43

%

 

 

1.56

%

 

 

1.85

%

 

(0.13

) %

 

(0.42

) %

Return on average equity (2)

 

 

16.82

%

 

 

18.58

%

 

 

19.54

%

 

(1.76

) %

 

(2.72

) %

Net interest margin (2)

 

 

3.56

%

 

 

4.08

%

 

 

4.12

%

 

(0.52

) %

 

(0.56

) %

Efficiency ratio (3)

 

 

53.67

%

 

 

48.36

%

 

 

44.93

%

 

5.31

%

 

8.74

%

Common equity tier 1 capital ratio

 

 

12.06

%

 

 

11.87

%

 

 

12.11

%

 

0.19

%

 

(0.05

) %

Leverage ratio

 

 

9.43

%

 

 

9.38

%

 

 

9.80

%

 

0.05

%

 

(0.37

) %

Book value per common share

 

$

12.02

 

 

$

11.59

 

 

$

10.97

 

 

3.7

%

 

9.6

%

 

 

 

 

 

 

 

 

 

 

 

(1)   

Includes loans held for sale.

(2)  

Annualized.

(3)  

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 1Q23 vs.

 

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

4Q2022

 

 

1Q2022

 

Interest Income

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

28,594

 

$

26,886

 

$

17,944

 

6.4

%

 

59.4

%

Interest expense

 

 

10,702

 

 

6,688

 

 

654

 

60.0

 

 

1536.4

 

Net interest income

 

$

17,892

 

$

20,198

 

$

17,290

 

(11.4

) %

 

3.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

 

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

 

$

1,725,392

 

$

26,011

 

6.10

%

 

$

1,691,642

 

$

24,719

 

5.81

%

 

$

1,444,054

 

$

17,257

 

4.84

%

Total interest-earning assets

 

 

2,022,146

 

 

28,594

 

5.71

 

 

 

1,966,165

 

 

26,886

 

5.43

 

 

 

1,698,799

 

 

17,944

 

4.28

 

Interest-bearing Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

1,196,194

 

 

10,382

 

3.52

 

 

 

1,085,331

 

 

6,598

 

2.41

 

 

 

786,915

 

 

654

 

0.34

 

Total interest-bearing liabilities

 

 

1,222,362

 

 

10,702

 

3.55

 

 

 

1,093,489

 

 

6,688

 

2.43

 

 

 

786,915

 

 

654

 

0.34

 

Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest Income/interest rate spreads

 

 

 

 

17,892

 

2.16

 

 

 

 

 

20,198

 

3.00

 

 

 

 

 

17,290

 

3.94

 

Net interest margin

 

 

 

 

 

3.56

 

 

 

 

 

 

4.08

 

 

 

 

 

 

4.12

 

Total deposits / cost of deposits

 

 

1,867,684

 

 

10,382

 

2.25

 

 

 

1,836,736

 

 

6,598

 

1.43

 

 

 

1,570,376

 

 

654

 

0.17

 

Total funding liabilities / cost of funds

 

 

1,893,852

 

 

10,702

 

2.29

 

 

 

1,844,894

 

 

6,688

 

1.44

 

 

 

1,570,376

 

 

654

 

0.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

Yield Change 1Q23 vs.

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

 

 

Interest

& Fees

 

Yield (1)

 

Interest

& Fees

 

Yield (1)

 

Interest

& Fees

 

Yield (1)

 

4Q2022

 

 

1Q2022

 

Loan Yield Component

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual interest rate

 

$

25,477

 

 

5.97

%

 

$

23,694

 

 

5.57

%

 

$

15,312

 

 

4.29

%

 

0.40

%

 

1.68

%

SBA discount accretion

 

 

974

 

 

0.23

 

 

 

1,034

 

 

0.24

 

 

 

1,433

 

 

0.40

 

 

(0.01

)

 

(0.17

)

Amortization of net deferred fees

 

 

79

 

 

0.02

 

 

 

46

 

 

0.01

 

 

 

500

 

 

0.14

 

 

0.01

 

 

(0.12

)

Amortization of premium

 

 

(392

)

 

(0.09

)

 

 

(344

)

 

(0.08

)

 

 

(188

)

 

(0.05

)

 

(0.01

)

 

(0.04

)

Net interest recognized on nonaccrual loans

 

 

(243

)

 

(0.06

)

 

 

 

 

 

 

 

34

 

 

0.01

 

 

(0.06

)

 

(0.07

)

Prepayment penalties (2) and other fees

 

 

116

 

 

0.03

 

 

 

289

 

 

0.07

 

 

 

166

 

 

0.05

 

 

(0.04

)

 

(0.02

)

Yield on loans

 

$

26,011

 

 

6.10

%

 

$

24,719

 

 

5.81

%

 

$

17,257

 

 

4.84

%

 

0.29

%

 

1.26

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net deferred fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PPP loan forgiveness (3)

 

$

3

 

 

%

 

$

15

 

 

%

 

$

483

 

 

0.13

%

 

%

 

(0.13

) %

Other

 

 

76

 

 

0.02

 

 

 

31

 

 

0.01

 

 

 

17

 

 

0.01

 

 

0.01

 

 

0.01

 

Total amortization of net deferred fees

 

$

79

 

 

0.02

%

 

$

46

 

 

0.01

%

 

$

500

 

 

0.14

%

 

0.01

%

 

(0.12

) %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)   

Annualized.

(2)  

Prepayment penalty income of $3 thousand, $172 thousand and $95 thousand for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively, was from commercial real estate and C&I loans.

(3)  

As of March 31, 2023, there were unamortized net deferred fees and unaccredited discounts of $4 thousand to be recognized over the estimated life of the loans as a yield adjustment on the loans.

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

During the second quarter of 2021, the Company 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

 

 

1Q2023

 

 

 

4Q2022

 

 

 

1Q2022

 

Hana Loan Purchase:

 

 

 

 

 

 

Contractual interest rate

 

$

1,400

 

 

$

1,286

 

 

$

976

 

Purchased loan discount accretion

 

 

413

 

 

 

374

 

 

 

772

 

Other fees

 

 

24

 

 

 

25

 

 

 

7

 

Total interest income

 

$

1,837

 

 

$

1,685

 

 

$

1,755

 

 

 

 

 

 

 

 

Effect on average loan yield (1)

 

 

0.24

%

 

 

0.20

%

 

 

0.26

%

Effect on net interest margin (1)

 

 

0.27

%

 

 

0.22

%

 

 

0.25

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

 

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)

 

$

1,725,392

 

$

26,011

 

6.10

%

 

$

1,691,642

 

$

24,719

 

5.81

%

 

$

1,444,054

 

$

17,257

 

4.84

%

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

 

 

1,667,155

 

 

24,174

 

5.86

 

 

 

1,631,128

 

 

23,034

 

5.61

 

 

 

1,369,423

 

 

15,502

 

4.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (1)

 

 

2,022,146

 

 

17,892

 

3.56

 

 

 

1,966,165

 

 

20,198

 

4.08

 

 

 

1,698,799

 

 

17,290

 

4.12

 

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

 

 

1,963,909

 

 

16,055

 

3.29

 

 

 

1,905,651

 

 

18,513

 

3.86

 

 

 

1,624,168

 

 

15,535

 

3.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  

Annualized.

(2)  

See reconciliation of GAAP to non-GAAP financial measures.

First Quarter 2023 vs. Fourth Quarter 2022

Net interest income decreased $2.3 million, or 11.4%, primarily due to higher interest expense on time deposits, partially offset by higher interest income on loans and available-for-sale debt securities. Net interest margin was 3.56%, a decrease of 52 basis points from 4.08%.

  • A $1.3 million increase in interest income on loans was primarily due to a $33.8 million increase in average balance and a 29 basis point increase in contractual loan yield as a result of the Federal Reserve’s rate increases.
  • A $329 thousand increase in interest income on available-for-sale debt securities was primarily due to a $24.0 million increase in average balance and a 28 basis point increase in average yield due to higher yields on recently purchased securities.
  • A $3.7 million increase in interest expense on time deposits was primarily due to a $216.8 million increase in average balance and a 126 basis point increase in average cost driven by the Federal Reserve’s rate increases.

First Quarter 2023 vs. First Quarter 2022

Net interest income increased $602 thousand, or 3.5%, primarily due to higher interest income on loans and available-for-sale debt securities, mostly offset by higher interest expenses on time deposits and money market deposits. Net interest margin was 3.56%, a decrease of 56 basis point from 4.12%.

  • An $8.8 million increase in interest income on loans was primarily due to a $281.3 million increase in average balance and a 126 basis point increase in contractual loan yield as a result of the Federal Reserve’s rate increases.
  • A $1.0 million increase in interest income on available-for-sale debt securities was primarily due to a $53.5 million increase in average balance and a 159 basis point increase in average yield due to higher yields on recently purchased securities.
  • A $6.8 million increase in interest expense on time deposits was primarily due to a $411.8 million increase in average balance and a 329 basis point increase in average cost driven by the Federal Reserve’s rate increases.
  • A $2.9 million increase in interest expense on money market deposits was primarily due to a 287 basis point increase in average cost driven by the Federal Reserve’s rate increases.

Provision for Credit Losses

($ in thousands)

 

For the Three Months Ended

 

% Change 1Q23 vs.

 

 

1Q2023

 

 

 

4Q2022

 

 

1Q2022

 

4Q2022

 

1Q2022

(Reversal of) provision for credit losses on loans

 

$

(258

)

 

$

977

 

$

341

 

n/m

 

n/m

(Reversal of) provision for credit losses on off-balance sheet exposure (1)

 

 

(80

)

 

 

74

 

 

5

 

n/m

 

n/m

Total (reversal of) provision for credit losses

 

$

(338

)

 

$

1,051

 

$

346

 

n/m

 

n/m

 

 

 

 

 

 

 

 

 

 

 

(1)

 

Reversal of credit losses on off-balance sheet exposure of $80 thousand for the three months ended March 31, 2023 was included in total (reversal of) provision for credit losses. Prior to CECL adoption, provisions for credit losses on off-balance sheet exposure of $74 thousand and $5 thousand for the three months ended December 31, 2022 and March 31, 2022, respectively, were included in other expenses.

First Quarter 2023 vs. Fourth Quarter 2022

The Company recorded a $338 thousand reversal of credit losses, a decrease of $1.4 million, compared with a $1.1 million provision for credit losses. The $258 thousand reversal of credit losses on loans and the $80 thousand reversal of credit losses on off-balance sheet exposure were primarily due to changes in the qualitative adjustments, reflecting improving trends in loan concentration ratios.

First Quarter 2023 vs. First Quarter 2022

The Company recorded a $338 thousand reversal of credit losses, a decrease of $684 thousand, compared with a $346 thousand provision for credit losses.

Noninterest Income

($ in thousands)

 

For the Three Months Ended

 

% Change 1Q23 vs.

 

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

4Q2022

 

 

1Q2022

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

 

$

418

 

$

406

 

$

388

 

3.0

%

 

7.7

%

Loan servicing fees, net of amortization

 

 

846

 

 

705

 

 

447

 

20.0

 

 

89.3

 

Gain on sale of loans

 

 

2,570

 

 

1,684

 

 

3,238

 

52.6

 

 

(20.6

)

Other income

 

 

461

 

 

428

 

 

143

 

7.7

 

 

222.4

 

Total noninterest income

 

$

4,295

 

$

3,223

 

$

4,216

 

33.3

%

 

1.9

%

 

 

 

 

 

 

 

 

 

 

 

First Quarter 2023 vs. Fourth Quarter 2022

Noninterest income increased $1.1 million, or 33.3%, primarily due to higher gain on sale of loans.

  • Gain on sale of loans was $2.6 million, an increase of $886 thousand from $1.7 million, primarily due to a higher SBA loan sold amount and a higher average sales premium. The Company sold $44.7 million in SBA loans at an average premium rate of 7.33%, compared to the sale of $32.2 million at an average premium rate of 6.13%.

First Quarter 2023 vs. First Quarter 2022

Noninterest income increased $79 thousand, or 1.9%, due to an increase in loan servicing fees and other income, mostly offset by lower gain on sale of loans.

  • Loan servicing fees were $846 thousand, an increase $399 thousand from $447 thousand, primarily due to an increase in servicing portfolio and a decrease in servicing asset amortization driven by slower loan prepayments in the first quarter of 2023.
  • Other income was $461 thousand, an increase of $318 thousand from $143 thousand, primarily due to an increase of $226 thousand in fair value of equity investment.
  • Gain on sale of loans was $2.6 million, a decrease of $668 thousand from $3.2 million, primarily due to a lower average sales premium partially offset by a higher SBA loans sold amount. The Company sold $44.7 million in SBA loans at an average premium rate of 7.33%, compared to the sale of $31.8 million at an average premium rate of 11.02%.

Noninterest Expense

($ in thousands)

 

For the Three Months Ended

 

% Change 1Q23 vs.

 

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

4Q2022

 

 

1Q2022

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

$

7,252

 

$

7,080

 

$

5,657

 

2.4

%

 

28.2

%

Occupancy and equipment

 

 

1,570

 

 

1,560

 

 

1,378

 

0.6

 

 

13.9

 

Data processing and communication

 

 

550

 

 

514

 

 

493

 

7.0

 

 

11.6

 

Professional fees

 

 

359

 

 

330

 

 

324

 

8.8

 

 

10.8

 

FDIC insurance and regulatory assessments

 

 

467

 

 

176

 

 

207

 

165.3

 

 

125.6

 

Promotion and advertising

 

 

162

 

 

12

 

 

189

 

1,250.0

 

 

(14.3

)

Directors’ fees

 

 

161

 

 

145

 

 

177

 

11.0

 

 

(9.0

)

Foundation donation and other contributions

 

 

753

 

 

851

 

 

815

 

(11.5

)

 

(7.6

)

Other expenses

 

 

634

 

 

659

 

 

422

 

(3.8

)

 

50.2

 

Total noninterest expense

 

$

11,908

 

$

11,327

 

$

9,662

 

5.1

%

 

23.2

%

 

 

 

 

 

 

 

 

 

 

 

First Quarter 2023 vs. Fourth Quarter 2022

Noninterest expense increased $581 thousand, or 5.1%, primarily due to increases in FDIC insurance and regulatory assessments, salaries and employee benefits, and promotion and advertising.

  • FDIC insurance and regulatory assessments increased $291 thousand due to increases in FDIC assessment fees in 2023.
  • Salaries and employee benefits increased $172 thousand primarily due to lower employee incentive accruals in the fourth quarter of 2022.
  • Promotion and advertising increased $150 thousand primarily due to lower expense in the fourth quarter of 2022 from year-end accrual adjustments.

First Quarter 2023 vs. First Quarter 2022

Noninterest expense increased $2.2 million, or 23.2%, primarily due to higher salaries and employee benefits and FDIC insurance and regulatory assessments.

  • Salaries and employee benefits increased $1.6 million primarily due to 23 additional full-time employees to support continued growth of the Company.
  • FDIC insurance and regulatory assessments increased $260 thousand primarily due to our deposit growth from the first quarter of 2022 and increases in FDIC assessment fees in 2023.

Income Tax Expense

First Quarter 2023 vs. Fourth Quarter 2022

Income tax expense was $3.1 million, and the effective tax rate was 29.0%, compared to income tax expense of $3.1 million and the effective rate of 27.8%.

First Quarter 2023 vs. First Quarter 2022

Income tax expense was $3.1 million and the effective tax rate was 29.0%, compared to income tax expense of $3.4 million and an effective rate of 29.1%.

BALANCE SHEET HIGHLIGHTS

Loans

($ in thousands)

 

As of

 

% Change 1Q23 vs.

 

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

4Q2022

 

 

1Q2022

 

Real estate loans

 

$

833,615

 

$

842,208

 

$

730,841

 

(1.0

) %

 

14.1

%

SBA loans

 

 

238,994

 

 

234,717

 

 

253,064

 

1.8

 

 

(5.6

)

C&I loans

 

 

117,841

 

 

116,951

 

 

176,934

 

0.8

 

 

(33.4

)

Home mortgage loans

 

 

500,635

 

 

482,949

 

 

266,465

 

3.7

 

 

87.9

 

Consumer & other loans

 

 

1,400

 

 

1,467

 

 

1,106

 

(4.6

)

 

26.6

 

Gross loans

 

$

1,692,485

 

$

1,678,292

 

$

1,428,410

 

0.8

%

 

18.5

%

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 1Q23 vs.

 

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

4Q2022

 

 

1Q2022

 

Real estate loans

 

$

24,200

 

$

44,416

 

$

49,868

 

(45.5

) %

 

(51.5

) %

SBA loans

 

 

16,258

 

 

55,594

 

 

37,400

 

(70.8

)

 

(56.5

)

C&I loans

 

 

7,720

 

 

46,014

 

 

11,876

 

(83.2

)

 

(35.0

)

Home mortgage loans

 

 

20,903

 

 

28,188

 

 

22,785

 

(25.8

)

 

(8.3

)

Gross loans

 

$

69,081

 

$

174,212

 

$

121,929

 

(60.3

) %

 

(43.3

) %

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

 

1Q2023

 

 

 

4Q2022

 

 

 

1Q2022

 

Loan activities:

 

 

 

 

 

 

Gross loans, beginning

 

$

1,678,292

 

 

$

1,618,018

 

 

$

1,314,019

 

New originations

 

 

69,081

 

 

 

174,212

 

 

 

121,929

 

Net line advances

 

 

9,949

 

 

 

(80,144

)

 

 

17,455

 

Purchases

 

 

12,142

 

 

 

49,980

 

 

 

81,552

 

Sales

 

 

(41,032

)

 

 

(32,204

)

 

 

(31,819

)

Paydowns

 

 

(40,190

)

 

 

(22,939

)

 

 

(15,972

)

Payoffs

 

 

(28,326

)

 

 

(23,238

)

 

 

(45,391

)

PPP Payoffs

 

 

(200

)

 

 

(657

)

 

 

(19,079

)

Decrease / (increase) in loans held for sale

 

 

36,802

 

 

 

(7,693

)

 

 

3,185

 

Other

 

 

(4,033

)

 

 

2,957

 

 

 

2,531

 

Total

 

 

14,193

 

 

 

60,274

 

 

 

114,391

 

Gross loans, ending

 

$

1,692,485

 

 

$

1,678,292

 

 

$

1,428,410

 

 

 

 

 

 

 

 

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

Gross loans were $1.69 billion as of March 31, 2023, up $14.2 million from December 31, 2022, primarily due to new loan originations and a decrease in loans held for sale, partially offset by loan sales, payoffs and paydowns.

New loan originations and loan payoffs and paydowns were $69.1 million and $68.7 million for the first quarter of 2023, respectively, compared with $174.2 million and $46.8 million for the fourth quarter of 2022, respectively.

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

Gross loans were $1.69 billion as of March 31, 2023, up $264.1 million from March 31, 2022, primarily due to new loan originations of $592.3 million and loan purchases of $155.7 million, primarily offset by loan sales of $191.5 million and loan payoffs and paydowns of $243.1 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

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

 

%

 

Rate

 

%

 

Rate

 

%

 

Rate

Fixed rate

 

36.5

%

 

4.76

%

 

36.0

%

 

4.63

%

 

33.3

%

 

4.11

%

Hybrid rate

 

34.2

 

 

4.94

 

 

33.8

 

 

4.79

 

 

25.6

 

 

4.30

 

Variable rate

 

29.3

 

 

8.76

 

 

30.2

 

 

8.46

 

 

41.1

 

 

5.09

 

Gross loans

 

100.0

%

 

5.99

%

 

100.0

%

 

5.84

%

 

100.0

%

 

4.56

%

 

 

 

 

 

 

 

 

 

 

 

 

 

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 March 31, 2023

 

Within One Year

 

One Year Through Five Years

 

After Five Years

 

Total

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

Fixed rate

 

$

35,609

 

5.49

%

 

$

342,741

 

4.68

%

 

$

239,129

 

4.76

%

 

$

617,479

 

4.76

%

Hybrid rate

 

 

5,703

 

7.54

 

 

 

76,729

 

4.71

 

 

 

496,995

 

4.94

 

 

 

579,427

 

4.94

 

Variable rate

 

 

78,333

 

8.54

 

 

 

117,492

 

8.39

 

 

 

299,754

 

8.96

 

 

 

495,579

 

8.76

 

Gross loans

 

$

119,645

 

7.58

%

 

$

536,962

 

5.49

%

 

$

1,035,878

 

6.06

%

 

$

1,692,485

 

5.99

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 1Q23 vs.

 

 

1Q2023

 

 

 

4Q2022

 

 

 

1Q2022

 

 

4Q2022

 

 

1Q2022

 

Allowance for credit losses on loans, beginning

 

$

19,241

 

 

$

18,369

 

 

$

16,123

 

 

4.7

%

 

19.3

%

Impact of CECL adoption

 

 

1,924

 

 

 

 

 

 

 

 

n/m

 

 

n/m

 

(Reversal of) provision for credit losses (1)

 

 

(258

)

 

 

977

 

 

 

341

 

 

n/m

 

 

n/m

 

Gross charge-offs

 

 

(116

)

 

 

(109

)

 

 

(14

)

 

6.4

 

 

728.6

%

Gross recoveries

 

 

23

 

 

 

4

 

 

 

17

 

 

475.0

 

 

35.3

%

Net (charge-offs) recoveries

 

 

(93

)

 

 

(105

)

 

 

3

 

 

(11.4

)

 

n/m

 

Allowance for credit losses on loans, ending (2)

 

$

20,814

 

 

$

19,241

 

 

$

16,467

 

 

8.2

%

 

26.4

%

 

 

 

 

 

 

 

 

 

 

 

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

 

$

263

 

 

$

189

 

 

$

167

 

 

39.2

%

 

57.5

%

Impact of CECL adoption

 

 

184

 

 

 

 

 

 

 

 

n/m

 

 

n/m

 

(Reversal of) provision for credit losses

 

 

(80

)

 

 

74

 

 

 

5

 

 

n/m

 

 

n/m

 

Allowance for credit losses on off-balance sheet exposure, ending (2)

 

$

367

 

 

$

263

 

 

$

172

 

 

39.5

%

 

113.4

%

 

 

 

 

 

 

 

 

 

 

 

(1)

 

Excludes reversal of uncollectible accrued interest receivable of $205 thousand for the three months ended March 31, 2022.

(2)

 

Allowance for credit losses as of March 31, 2023 was calculated under the CECL methodology while allowance for loan losses for prior periods were calculated under the incurred loss methodology.

Asset Quality

($ in thousands)

 

 

 

% Change 1Q23 vs.

 

 

1Q2023

 

 

 

4Q2022

 

 

 

 1Q2022

 

 

4Q2022

 

 

1Q2022

 

Nonperforming loans (1)

 

$

4,358

 

 

$

3,080

 

 

$

2,806 

 

 

41.5

%

 

55.3

%

Nonperforming assets (1)

 

$

4,358

 

 

$

3,080

 

 

$

2,806 

 

 

41.5

%

 

55.3

%

Nonperforming loans to gross loans

 

 

0.26

%

 

 

0.18

%

 

 

0.20 

%

 

0.08

%

 

0.06

%

Nonperforming assets to total assets

 

 

0.20

%

 

 

0.15

%

 

 

                0.15 

%

 

0.05

%

 

0.05

%

 

 

 

 

 

 

 

 

 

 

 

Criticized loans (2):

 

 

 

 

 

 

 

 

 

 

Special mention loans

 

$

2,617

 

 

$

563

 

 

$

-- 

 

 

364.8

%

 

n/m

 

Classified loans (3)

 

 

4,763

 

 

 

3,307

 

 

 

3,848

 

 

44.0

 

 

23.8

 

Total criticized loans

 

$

7,380

 

 

$

3,870

 

 

$

3,848

 

 

90.7

%

 

91.8

%

 

 

 

 

 

 

 

 

 

 

 

Criticized loans (2) to gross loans

 

 

0.44

%

 

 

0.23

%

 

 

0.27

%

 

0.21

%

 

0.17

%

Classified loans (3) to gross loans

 

 

0.28

%

 

 

0.20

%

 

 

0.27

%

 

0.08

%

 

0.01

%

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses ratios:

 

 

 

 

 

 

 

 

 

 

As a % of gross loans

 

 

1.23

%

 

 

1.15

%

 

 

1.17

%

 

0.08

%

 

0.06

%

As an adjusted % of gross loans (4)

 

 

1.27

 

 

 

1.18

 

 

 

1.24

 

 

0.09

 

 

0.03

 

As a % of nonperforming loans

 

 

478

 

 

 

625

 

 

 

594

 

 

(147

)

 

(116

)

As a % of nonperforming assets

 

 

478

 

 

 

625

 

 

 

594

 

 

(147

)

 

(116

)

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

 

 

0.02

 

 

 

0.03

 

 

 

0.00

 

 

(0.01

)

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

(1)  

Includes the guaranteed portion of SBA loans totaling $1.6 million, $1.0 million and $899 thousand as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

(2)  

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

(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

Overall, the Company continued to maintain solid asset quality with low levels of nonperforming loans and net charge-offs. Nonperforming assets and criticized loans remained below our historical norms, a reflection of our conservative credit culture and expertise in the industries we serve. Our allowance remained strong with an adjusted allowance to gross loans ratio of 1.27%.

  • Criticized loans increased by $3.5 million or 91.8% from a year ago, and the criticized loans to gross loans ratio increased by 17 basis points. Criticized loans consist of loans categorized as Special Mention, Substandard, Doubtful and Loss categories defined by regulatory authorities.
  • Nonperforming assets increased $1.6 million to $4.4 million, or 0.20% of total assets from a year ago. As of March 31, 2023, $1.6 million of nonaccrual assets consisted of guaranteed portion of SBA loans that are in liquidation. The Company did not have OREO as of March 31, 2023 or 2022.
  • Net charge-offs were $93 thousand or 0.02% of average loans in the first quarter of 2023, compared to net charge-offs of $105 thousand, or 0.03%, of average loans in the fourth quarter of 2022 and net recoveries of $3 thousand, or 0.00%, of average loans in the first quarter of 2022.

Deposits

($ in thousands)

 

As of

 

% Change 1Q23 vs.

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

 

 

Amount

 

%

 

Amount

 

%

 

Amount

 

%

 

4Q2022

 

 

1Q2022

 

Noninterest bearing deposits

 

$

643,902

 

33.8

%

 

$

701,584

 

37.2

%

 

$

848,531

 

50.8

%

 

(8.2

) %

 

(24.1

) %

Money market deposits and others

 

 

436,796

 

22.9

 

 

 

526,321

 

27.9

 

 

 

456,890

 

27.3

 

 

(17.0

)

 

(4.4

)

Time deposits

 

 

824,120

 

43.3

 

 

 

657,866

 

34.9

 

 

 

366,582

 

21.9

 

 

25.3

 

 

124.8

 

Total deposits

 

$

1,904,818

 

100.0

%

 

$

1,885,771

 

100.0

%

 

$

1,672,003

 

100.0

%

 

1.0

%

 

13.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated uninsured deposits

 

$

900,579

 

47.3

%

 

$

938,329

 

49.8

%

 

$

952,501

 

57.0

%

 

(4.0

) %

 

(5.5

) %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Total deposits were $1.90 billion as of March 31, 2023, up $19.0 million from December 31, 2022, primarily due to growth in time deposits, mostly offset by decreases in noninterest bearing deposits and money market deposits and others. Time deposits grew $166.3 million to $824.1 million from $657.9 million, due to management’s actions to support loan growth during the third quarter of 2022 including upward adjustments of interest rates on customer deposits and increases in wholesale deposits. Noninterest-bearing deposits decreased $57.7 million to $643.9 million from $701.6 million, primarily due to decreases in transaction volumes in escrow and 1031 exchanges accounts and other decreases affected by market rate increases by the Federal Reserve. Money market deposits and others decreased $89.5 million to $436.8 million from $526.3 million, primarily due to market rate increases as a result of the Federal Reserve’s rate increases.

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

Total deposits were $1.90 billion as of March 31, 2023, up $232.8 million from March 31, 2022, primarily driven by growth in time deposits, partially offset by a decrease in noninterest bearing deposits. Time deposits grew $457.5 million to $824.1 million from $366.6 million, 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. Noninterest-bearing deposits decreased $204.6 million to $643.9 million from $848.5 million, primarily due to decreases in transaction volumes in escrow and 1031 exchanges accounts and other decreases affected by market rate increases by the Federal Reserve.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 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)

 

$

84,818

 

 

$

29,657

 

 

$

138,288

 

 

$

158,140

 

 

$

745

 

 

$

411,648

 

Time deposits ($250 or less)

 

 

48,402

 

 

 

65,444

 

 

 

163,976

 

 

 

92,110

 

 

 

42,540

 

 

 

412,472

 

Total time deposits

 

$

133,220

 

 

$

95,101

 

 

$

302,264

 

 

$

250,250

 

 

$

43,285

 

 

$

824,120

 

Weighted average rate

 

 

3.88

%

 

 

3.18

%

 

 

4.19

%

 

 

4.41

%

 

 

4.06

%

 

 

4.12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

March 31, 2023

 

December 31, 2022

 

% Change

Liquid assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

181,509

 

 

$

82,972

 

 

118.8

%

Available-for-sale debt securities

 

 

212,767

 

 

 

209,809

 

 

1.4

%

Liquid assets

 

$

394,276

 

 

$

292,781

 

 

34.7

%

Liquid assets to total assets

 

 

18.2

%

 

 

14.0

%

 

 

 

 

 

 

 

 

 

Available borrowings:

 

 

 

 

 

 

Federal Home Loan Bank—San Francisco

 

$

406,500

 

 

$

440,358

 

 

(7.7

) %

Federal Reserve Bank

 

 

174,284

 

 

 

175,605

 

 

(0.8

) %

Pacific Coast Bankers Bank

 

 

50,000

 

 

 

50,000

 

 

%

Zions Bank

 

 

25,000

 

 

 

25,000

 

 

%

First Horizon Bank

 

 

25,000

 

 

 

24,950

 

 

0.2

%

Total available borrowings

 

$

680,784

 

 

$

715,913

 

 

(4.9

) %

Total available borrowings to total assets

 

 

31.4

%

 

 

34.2

%

 

 

 

 

 

 

 

 

 

Liquid assets and available borrowings to total assets

 

 

49.5

%

 

 

48.2

%

 

 

 

 

 

 

 

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 May 25, 2023 to all shareholders of record as of the close of business on May 11, 2023.

The Company repurchased 76,990 shares of its common stock at an average price of $9.25 during the first quarter of 2023. Since the announcement of the initial stock repurchase program in January 2019, the Company repurchased a total of 1.65 million shares of its common stock at an average repurchase price of $8.61 per share through March 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

 

13.31

%

 

13.08

%

 

10.00

%

 

10.50

%

Tier 1 risk-based capital ratio

 

12.06

 

 

11.80

 

 

8.00

 

 

8.50

 

Common equity tier 1 ratio

 

12.06

 

 

11.80

 

 

6.50

 

 

7.00

 

Leverage ratio

 

9.43

 

 

9.24

 

 

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 bonus to executive officers.

 

 

 

 

 

 

 

 

 

 

 

OP Bancorp

 

Basel III

 

% Change 1Q23 vs.

 

 

1Q2023

 

 

 

4Q2022

 

 

 

1Q2022

 

 

4Q2022

 

 

1Q2022

 

Risk-Based Capital Ratios:

 

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

 

13.31

%

 

 

13.06

%

 

 

13.29

%

 

0.25

%

 

0.02

%

Tier 1 risk-based capital ratio

 

 

12.06

 

 

 

11.87

 

 

 

12.11

 

 

0.19

 

 

(0.05

)

Common equity tier 1 ratio

 

 

12.06

 

 

 

11.87

 

 

 

12.11

 

 

0.19

 

 

(0.05

)

Leverage ratio

 

 

9.43

 

 

 

9.38

 

 

 

9.80

 

 

0.05

 

 

(0.37

)

Risk-weighted Assets ($ in thousands)

 

$

1,659,737

 

 

$

1,638,040

 

 

$

1,427,569

 

 

1.32

 

 

16.26

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

1Q2023

 

 

 

4Q2022

 

 

1Q2022

Interest income

 

$

28,594

 

 

$

26,886

 

$

17,944

Interest expense

 

 

10,702

 

 

 

6,688

 

 

654

Net interest income

 

 

17,892

 

 

 

20,198

 

 

17,290

Noninterest income

 

 

4,295

 

 

 

3,223

 

 

4,216

Noninterest expense

 

 

11,908

 

 

 

11,327

 

 

9,662

Pre-provision net revenue

(a)

$

10,279

 

 

$

12,094

 

$

11,844

Reconciliation to net income:

 

 

 

 

 

 

(Reversal of) provision for credit losses

(b)

$

(338

)

 

$

977

 

$

341

Income tax expense

(c)

 

3,083

 

 

 

3,089

 

 

3,351

Net income

(a)+(b) +(c)

$

7,534

 

 

$

8,028

 

$

8,152

 

 

 

 

 

 

 

During the second quarter of 2021, the Company 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 March 31, 2023, December 31, 2022 and March 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

 

 

1Q2023

 

 

 

4Q2022

 

 

 

1Q2022

 

Yield on Average Loans

 

 

 

 

 

 

Interest income on loans

 

$

26,011

 

 

$

24,719

 

 

$

17,257

 

Less: interest income on purchased Hana loans

 

 

1,837

 

 

 

1,685

 

 

 

1,755

 

Adjusted interest income on loans

(a)

$

24,174

 

 

$

23,034

 

 

$

15,502

 

 

 

 

 

 

 

 

Average loans

 

$

1,725,392

 

 

$

1,691,642

 

 

$

1,444,054

 

Less: Average purchased Hana loans

 

 

58,237

 

 

 

60,514

 

 

 

74,631

 

Adjusted average loans

(b)

$

1,667,155

 

 

$

1,631,128

 

 

$

1,369,423

 

 

 

 

 

 

 

 

Average loan yield (1)

 

 

6.10

%

 

 

5.81

%

 

 

4.84

%

Effect on average loan yield (1)

 

 

0.24

%

 

 

0.20

%

 

 

0.26

%

Adjusted average loan yield (1)

(a)/(b)

 

5.86

%

 

 

5.61

%

 

 

4.58

%

 

 

 

 

 

 

 

Net Interest Margin

 

 

 

 

 

 

Net interest income

 

$

17,892

 

 

$

20,198

 

 

$

17,290

 

Less: interest income on purchased Hana loans

 

 

1,837

 

 

 

1,685

 

 

 

1,755

 

Adjusted net interest income

(c)

$

16,055

 

 

$

18,513

 

 

$

15,535

 

 

 

 

 

 

 

 

Average interest-earning assets

 

$

2,022,146

 

 

$

1,966,165

 

 

$

1,698,799

 

Less: Average purchased Hana loans

 

 

58,237

 

 

 

60,514

 

 

 

74,631

 

Adjusted average interest-earning assets

(d)

$

1,963,909

 

 

$

1,905,651

 

 

$

1,624,168

 

 

 

 

 

 

 

 

Net interest margin (1)

 

 

3.56

%

 

 

4.08

%

 

 

4.12

%

Effect on net interest margin (1)

 

 

0.27

 

 

 

0.22

 

 

 

0.25

 

Adjusted net interest margin (1)

(c)/(d)

 

3.29

%

 

 

3.86

%

 

 

3.87

%

 

 

 

 

 

 

 

(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

 

 

1Q2023

 

 

 

4Q2022

 

 

 

1Q2022

 

Gross loans

 

$

1,692,485

 

 

$

1,678,292

 

 

$

1,428,410

 

Less: Purchased Hana loans

 

 

(56,717

)

 

 

(58,966

)

 

 

(71,377

)

PPP loans (1)

 

 

(247

)

 

 

(434

)

 

 

(21,016

)

Adjusted gross loans

(a)

$

1,635,521

 

 

$

1,618,892

 

 

$

1,336,017

 

 

 

 

 

 

 

 

Accrued interest receivable on loans

 

$

6,440

 

 

$

6,413

 

 

$

4,494

 

Less: Accrued interest receivable on purchased Hana loans

 

 

(432

)

 

 

(397

)

 

 

(295

)

Accrued interest receivable on PPP loans (2)

 

 

(5

)

 

 

(8

)

 

 

(229

)

Add: Allowance on accrued interest receivable

 

 

 

 

 

 

 

 

 

Adjusted accrued interest receivable on loans

(b)

$

6,003

 

 

$

6,008

 

 

$

3,970

 

 

 

 

 

 

 

 

Adjusted gross loans and accrued interest receivable

(a)+(b) =(c)

$

1,641,524

 

 

$

1,624,900

 

 

$

1,339,987

 

 

 

 

 

 

 

 

Allowance for credit losses

 

$

20,814

 

 

$

19,241

 

 

$

16,672

 

Add: Allowance on accrued interest receivable

 

 

 

 

 

 

 

 

 

Adjusted Allowance

(d)

$

20,814

 

 

$

19,241

 

 

$

16,672

 

 

 

 

 

 

 

 

Adjusted allowance to gross loans ratio

(d)/(c)

 

1.27

%

 

 

1.18

%

 

 

1.24

%

 

 

 

 

 

 

 

(1)  

Excludes purchased PPP loans of $8 thousand and $1.0 million as of December 31, 2022 and March 31, 2022, respectively.

(2)  

Excludes purchased accrued interest receivable on PPP loans of $11 thousand as of March 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, 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 ten full-service branch offices in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Cerritos, Gardena, Buena Park, and Santa Clara, California and Carrollton, Texas. 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 mitigate and manage deposit liabilities 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 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; 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 1Q23 vs.

 

 

1Q2023

 

 

 

4Q2022

 

 

 

1Q2022

 

 

4Q2022

 

 

1Q2022

 

Assets

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

16,781

 

 

$

12,952

 

 

$

18,206

 

 

29.6

%

 

(7.8

) %

Interest-bearing deposits in other banks

 

 

164,728

 

 

 

70,020

 

 

 

111,770

 

 

135.3

 

 

47.4

 

Cash and cash equivalents

 

 

181,509

 

 

 

82,972

 

 

 

129,976

 

 

118.8

 

 

39.6

 

Available-for-sale debt securities, at fair value

 

 

212,767

 

 

 

209,809

 

 

 

161,182

 

 

1.4

 

 

32.0

 

Other investments

 

 

12,172

 

 

 

12,098

 

 

 

10,836

 

 

0.6

 

 

12.3

 

Loans held for sale

 

 

7,534

 

 

 

44,335

 

 

 

86,243

 

 

(83.0

)

 

(91.3

)

Commercial real estate loans

 

 

833,615

 

 

 

842,208

 

 

 

730,841

 

 

(1.0

)

 

14.1

 

SBA loans

 

 

238,994

 

 

 

234,717

 

 

 

253,064

 

 

1.8

 

 

(5.6

)

C&I loans

 

 

117,841

 

 

 

116,951

 

 

 

176,934

 

 

0.8

 

 

(33.4

)

Home mortgage loans

 

 

500,635

 

 

 

482,949

 

 

 

266,465

 

 

3.7

 

 

87.9

 

Consumer loans

 

 

1,400

 

 

 

1,467

 

 

 

1,106

 

 

(4.6

)

 

26.6

 

Gross loans receivable

 

 

1,692,485

 

 

 

1,678,292

 

 

 

1,428,410

 

 

0.8

 

 

18.5

 

Allowance for credit losses

 

 

(20,814

)

 

 

(19,241

)

 

 

(16,672

)

 

8.2

 

 

24.8

 

Net loans receivable

 

 

1,671,671

 

��

 

1,659,051

 

 

 

1,411,738

 

 

0.8

 

 

18.4

 

Premises and equipment, net

 

 

4,647

 

 

 

4,400

 

 

 

4,570

 

 

5.6

 

 

1.7

 

Accrued interest receivable, net

 

 

7,302

 

 

 

7,180

 

 

 

4,893

 

 

1.7

 

 

49.2

 

Servicing assets

 

 

12,898

 

 

 

12,759

 

 

 

12,341

 

 

1.1

 

 

4.5

 

Company owned life insurance

 

 

21,762

 

 

 

21,613

 

 

 

11,197

 

 

0.7

 

 

94.4

 

Deferred tax assets, net

 

 

12,008

 

 

 

14,316

 

 

 

10,882

 

 

(16.1

)

 

10.3

 

Operating right-of-use assets

 

 

9,459

 

 

 

9,097

 

 

 

8,471

 

 

4.0

 

 

11.7

 

Other assets

 

 

16,721

 

 

 

16,867

 

 

 

11,616

 

 

(0.9

)

 

43.9

 

Total assets

 

$

2,170,450

 

 

$

2,094,497

 

 

$

1,863,945

 

 

3.6

%

 

16.4

%

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Noninterest bearing

 

$

643,902

 

 

$

701,584

 

 

$

848,531

 

 

(8.2

) %

 

(24.1

) %

Money market and others

 

 

436,796

 

 

 

526,321

 

 

 

456,890

 

 

(17.0

)

 

(4.4

)

Time deposits greater than $250

 

 

411,648

 

 

 

356,197

 

 

 

192,849

 

 

15.6

 

 

113.5

 

Other time deposits

 

 

412,472

 

 

 

301,669

 

 

 

173,733

 

 

36.7

 

 

137.4

 

Total deposits

 

 

1,904,818

 

 

 

1,885,771

 

 

 

1,672,003

 

 

1.0

 

 

13.9

 

Federal Home Loan Bank advances

 

 

50,000

 

 

 

 

 

 

 

 

n/m

 

 

n/m

 

Accrued interest payable

 

 

5,751

 

 

 

2,771

 

 

 

548

 

 

107.5

 

 

949.5

 

Operating lease liabilities

 

 

10,513

 

 

 

10,213

 

 

 

9,839

 

 

2.9

 

 

6.9

 

Other liabilities

 

 

15,587

 

 

 

18,826

 

 

 

15,564

 

 

(17.2

)

 

0.1

 

Total liabilities

 

 

1,986,669

 

 

 

1,917,581

 

 

 

1,697,954

 

 

3.6

 

 

17.0

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

79,475

 

 

 

79,326

 

 

 

78,718

 

 

0.2

 

 

1.0

 

Additional paid-in capital

 

 

10,056

 

 

 

9,743

 

 

 

8,860

 

 

3.2

 

 

13.5

 

Retained earnings

 

 

109,908

 

 

 

105,690

 

 

 

85,694

 

 

4.0

 

 

28.3

 

Accumulated other comprehensive loss

 

 

(15,658

)

 

 

(17,843

)

 

 

(7,281

)

 

(12.2

)

 

115.1

 

Total shareholders’ equity

 

 

183,781

 

 

 

176,916

 

 

 

165,991

 

 

3.9

 

 

10.7

 

Total liabilities and shareholders' equity

 

$

2,170,450

 

 

$

2,094,497

 

 

$

1,863,945

 

 

3.6

%

 

16.4

%

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

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

 

For the Three Months Ended

 

% Change 1Q23 vs.

 

 

1Q2023

 

 

 

4Q2022

 

 

1Q2022

 

4Q2022

 

 

1Q2022

 

Interest income

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

26,011

 

 

$

24,719

 

$

17,257

 

5.2

%

 

50.7

%

Interest on available-for-sale debt securities

 

 

1,566

 

 

 

1,237

 

 

530

 

26.6

 

 

195.5

 

Other interest income

 

 

1,017

 

 

 

930

 

 

157

 

9.4

 

 

547.8

 

Total interest income

 

 

28,594

 

 

 

26,886

 

 

17,944

 

6.4

 

 

59.4

 

Interest expense

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

10,382

 

 

 

6,597

 

 

654

 

57.4

 

 

1487.5

 

Interest on borrowings

 

 

320

 

 

 

91

 

 

 

252

%

 

n/m

 

Total interest expense

 

 

10,702

 

 

 

6,688

 

 

654

 

60.0

 

 

n/m

 

Net interest income

 

 

17,892

 

 

 

20,198

 

 

17,290

 

(11.4

)

 

3.5

 

(Reversal of) provision for credit losses

 

 

(338

)

 

 

977

 

 

341

 

n/m

 

 

n/m

 

Net interest income after provision for credit losses

 

 

18,230

 

 

 

19,221

 

 

16,949

 

(5.2

)

 

7.6

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

 

 

418

 

 

 

406

 

 

388

 

3.0

 

 

7.7

 

Loan servicing fees, net of amortization

 

 

846

 

 

 

705

 

 

447

 

20.0

 

 

89.3

 

Gain on sale of loans

 

 

2,570

 

 

 

1,684

 

 

3,238

 

52.6

 

 

(20.6

)

Other income

 

 

461

 

 

 

428

 

 

143

 

7.7

 

 

222.4

 

Total noninterest income

 

 

4,295

 

 

 

3,223

 

 

4,216

 

33.3

 

 

1.9

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

7,252

 

 

 

7,080

 

 

5,657

 

2.4

 

 

28.2

 

Occupancy and equipment

 

 

1,570

 

 

 

1,560

 

 

1,378

 

0.6

 

 

13.9

 

Data processing and communication

 

 

550

 

 

 

514

 

 

493

 

7.0

 

 

11.6

 

Professional fees

 

 

359

 

 

 

330

 

 

324

 

8.8

 

 

10.8

 

FDIC insurance and regulatory assessments

 

 

467

 

 

 

176

 

 

207

 

165.3

 

 

125.6

 

Promotion and advertising

 

 

162

 

 

 

12

 

 

189

 

1250.0

 

 

(14.3

)

Directors’ fees

 

 

161

 

 

 

145

 

 

177

 

11.0

 

 

(9.0

)

Foundation donation and other contributions

 

 

753

 

 

 

851

 

 

815

 

(11.5

)

 

(7.6

)

Other expenses

 

 

634

 

 

 

659

 

 

422

 

(3.8

)

 

50.2

 

Total noninterest expense

 

 

11,908

 

 

 

11,327

 

 

9,662

 

5.1

 

 

23.2

 

Income before income tax expense

 

 

10,617

 

 

 

11,117

 

 

11,503

 

(4.5

)

 

(7.7

)

Income tax expense

 

 

3,083

 

 

 

3,089

 

 

3,351

 

(0.2

)

 

(8.0

)

Net income

 

$

7,534

 

 

$

8,028

 

$

8,152

 

(6.2

) %

 

(7.6

) %

 

 

 

 

 

 

 

 

 

 

 

Book value per share

 

$

12.02

 

 

$

11.59

 

$

10.97

 

3.7

%

 

9.6

%

Earnings per share - Basic

 

$

0.48

 

 

 

0.52

 

$

0.53

 

(7.7

)

 

(9.4

)

Earnings per share - Diluted

 

$

0.48

 

 

 

0.51

 

$

0.53

 

(5.9

)

 

(9.4

)

 

 

 

 

 

 

 

 

 

 

 

Shares of common stock outstanding, at period end

 

 

15,286,558

 

 

 

15,270,344

 

 

15,137,808

 

0.1

 

 

1.0

 

Weighted average shares:

 

 

 

 

 

 

 

 

 

 

- Basic

 

 

15,284,350

 

 

 

15,208,308

 

 

15,137,808

 

0.5

 

 

1.0

 

- Diluted

 

 

15,312,673

 

 

 

15,264,971

 

 

15,242,214

 

0.3

 

 

0.5

 

 

 

 

 

 

 

 

 

 

 

 

Key Ratios

 

 

For the Three Months Ended

 

Change 1Q23 vs.

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

 

4Q2022

 

 

1Q2022

 

Return on average assets (ROA) (1)

 

1.43

%

 

1.56

%

 

1.85

%

 

(0.1

) %

 

(0.4

) %

Return on average equity (ROE) (1)

 

16.82

 

 

18.58

 

 

19.54

 

 

(1.8

)

 

(2.7

)

Net interest margin (1)

 

3.56

 

 

4.08

 

 

4.12

 

 

(0.5

)

 

(0.6

)

Efficiency ratio

 

53.67

 

 

48.36

 

 

44.93

 

 

5.3

 

 

8.7

 

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

13.31

%

 

13.06

%

 

13.29

%

 

0.3

%

 

%

Tier 1 risk-based capital ratio

 

12.06

 

 

11.87

 

 

12.11

 

 

0.2

 

 

(0.1

)

Common equity tier 1 ratio

 

12.06

 

 

11.87

 

 

12.11

 

 

0.2

 

 

(0.1

)

Leverage ratio

 

9.43

 

 

9.38

 

 

9.80

 

 

0.1

 

 

(0.4

)

 

 

 

 

 

 

 

 

 

 

(1) Annualized.  

ASSET QUALITY

($ in thousands)

 

As of and For the Three Months Ended

 

 

1Q2023

 

 

 

4Q2022

 

 

 

1Q2022

 

Nonaccrual loans (1)

 

$

4,112

 

 

$

2,639

 

 

$

2,806

 

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

 

 

246

 

 

 

441

 

 

 

 

Nonperforming loans

 

 

4,358

 

 

 

3,080

 

 

 

2,806

 

Other real estate owned ("OREO")

 

 

 

 

 

 

 

 

 

Nonperforming assets

 

$

4,358

 

 

$

3,080

 

 

$

2,806

 

 

 

 

 

 

 

 

Criticized loans (3) by loan type:

 

 

 

 

 

 

Commercial real estate

 

$

560

 

 

$

563

 

 

$

 

SBA loans

 

 

5,284

 

 

 

1,472

 

 

 

2,543

 

C&I loans

 

 

271

 

 

 

555

 

 

 

305

 

Home mortgage loans

 

 

1,265

 

 

 

1,280

 

 

 

1,000

 

Total criticized loans (3)

 

$

7,380

 

 

$

3,870

 

 

$

3,848

 

 

 

 

 

 

 

 

Nonperforming assets/total assets

 

 

0.20

%

 

 

0.15

%

 

 

0.15

%

Nonperforming assets / gross loans plus OREO

 

 

0.26

 

 

 

0.18

 

 

 

0.20

 

Nonperforming loans / gross loans

 

 

0.26

 

 

 

0.18

 

 

 

0.20

 

Allowance for credit losses / nonperforming loans

 

 

478

 

 

 

625

 

 

 

594

 

Allowance for credit losses / nonperforming assets

 

 

478

 

 

 

625

 

 

 

594

 

Allowance for credit losses / gross loans

 

 

1.23

 

 

 

1.15

 

 

 

1.17

 

Criticized loans (3) / gross loans

 

 

0.44

 

 

 

0.23

 

 

 

0.27

 

Classified loans / gross loans

 

 

0.28

 

 

 

0.20

 

 

 

0.27

 

 

 

 

 

 

 

 

Net charge-offs (recoveries)

 

$

93

 

 

$

105

 

 

$

(3

)

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

 

 

0.02

%

 

 

0.03

%

 

 

(0.00

) %

 

 

 

 

 

 

 

(1)  

Includes the guaranteed portion of SBA loans that are in liquidation totaling $1.6 million, $606 thousand and $899 thousand as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

(2)  

Includes the guaranteed portion of PPP loans totaling $441 thousand as of December 31, 2022.

(3)  

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

(4)  

Annualized.

 

 

 

 

 

 

 

($ in thousands)

 

 

1Q2023

 

 

4Q2022

 

 

1Q2022

Accruing delinquent loans 30-89 days past due

 

 

 

 

 

 

30-59 days

 

$

4,866

 

$

1,918

 

$

201

60-89 days

 

 

 

 

1,559

 

 

Total (1)

 

$

4,866

 

$

3,477

 

$

201

 

 

 

 

 

 

 

(1) Includes the guaranteed portion of PPP loans totaling $9 thousand as of March 31, 2022.  

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS

 

 

For the Three Months Ended

 

 

1Q2023

 

 

4Q2022

 

 

1Q2022

 

($ 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

 

$

74,162

 

$

846

 

4.56

%

 

$

75,988

 

$

734

 

3.78

%

 

$

86,875

 

$

42

 

0.19

%

Federal funds sold and other investments

 

 

12,130

 

 

171

 

5.65

 

 

 

12,074

 

 

196

 

6.47

 

 

 

10,957

 

 

115

 

4.19