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.
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/
Investor Relations OP Bancorp Christine Oh EVP & CFO
213.892.1192 Christine.oh@myopenbank.com
OP Bancorp (NASDAQ:OPBK)
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