2023 Second Quarter Highlights compared with 2022 Second
Quarter:
- Financial Results:
- Net income of $6.1 million, compared to $8.5 million
- Diluted earnings per share of $0.39, compared to $0.54
- Net interest income of $17.3 million, compared to $19.1
million
- Net interest margin of 3.40%, compared to 4.21%
- No provision for credit losses, compared to provision for
credit losses of $996 thousand
- Total assets of $2.2 billion, an 11% increase compared to $1.9
billion
- Gross loans of $1.7 billion, a 16% increase compared to $1.5
billion
- Total deposits of $1.9 billion, a 7% increase compared to $1.7
billion
- Credit Quality:
- Allowance for credit losses to gross loans of 1.21%, compared
to 1.19%
- Net charge-offs(1) to average gross loans(2) of 0.00%, compared
to net recoveries of 0.01%
- Nonperforming loans to gross loans of 0.20%, compared to
0.12%
- Criticized loans(3) to gross loans of 0.44%, compared to
0.18%
- Capital Levels:
- Remained well-capitalized with a Common Equity Tier 1 (“CET1”)
ratio of 11.92%.
- Book value per common share increased to $12.16, compared to
$11.16
- Repurchased 221,494 shares of common stock at an average price
of $8.40
- Paid quarterly cash dividend of $0.12 per share, compared to
$0.10 per share
___________________________________________________________
(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 second quarter of 2023. Net income for the second quarter of
2023 was $6.1 million, or $0.39 per diluted common share, compared
with $7.5 million, or $0.48 per diluted common share, for the first
quarter of 2023, and $8.5 million, or $0.54 per diluted common
share, for the second quarter of 2022.
Min Kim, President and Chief Executive Officer:
“We continued to maintain strong liquidity, credit quality, and
solid capital positions to withstand the recent turmoil in the
banking industry. Our liquid assets and available borrowings were
more than 47% of total assets,” said Min Kim, President and Chief
Executive.
“The migration from noninterest-bearing to interest-bearing
deposits has been stabilized during the quarter, and our
noninterest-bearing deposits remained at 34% of total deposits. We
are truly grateful for our customers’ loyalty and trust throughout
these difficult times.
“Although we anticipate additional challenges in the short term,
we remain optimistic about our future performance and will continue
to focus on executing our strategic goals while maintaining
appropriate risk and control environment.”
SELECTED FINANCIAL HIGHLIGHTS
($ in thousands, except per share
data)
As of and For the Three Months
Ended
% Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Selected Income Statement Data:
Net interest income
$
17,252
$
17,892
$
19,079
(3.6
)%
(9.6
)%
(Reversal of) provision for credit
losses
—
(338
)
996
n/m
n/m
Noninterest income
3,605
4,295
5,359
(16.1
)
(32.7
)
Noninterest expense
12,300
11,908
11,503
3.3
6.9
Income tax expense
2,466
3,083
3,459
(20.0
)
(28.7
)
Net Income
6,091
7,534
8,480
(19.2
)
(28.2
)
Diluted earnings per share
0.39
0.48
0.54
(18.8
)
(27.8
)
Selected Balance Sheet Data:
Gross loans
$
1,716,197
$
1,692,485
$
1,484,718
1.4
%
15.6
%
Total deposits
1,859,639
1,904,818
1,741,623
(2.4
)
6.8
Total assets
2,151,701
2,170,594
1,934,242
(0.9
)
11.2
Average loans(1)
1,725,764
1,725,392
1,560,064
—
10.6
Average deposits
1,817,101
1,867,684
1,702,860
(2.7
)
6.7
Credit Quality:
Nonperforming loans
$
3,447
$
2,504
$
1,826
37.7
%
88.8
%
Net charge-offs (recoveries) to average
gross loans(2)
0.00
%
0.02
%
(0.01
)%
(0.02
)
0.01
Allowance for credit losses to gross
loans
1.21
1.23
1.19
(0.02
)
0.02
Allowance for credit losses to
nonperforming loans
603
831
969
(228
)
(366
)
Financial Ratios:
Return on average assets(2)
1.15
%
1.43
%
1.79
%
(0.28
)%
(0.64
)%
Return on average equity(2)
13.27
16.82
20.29
(3.55
)
(7.02
)
Net interest margin(2)
3.40
3.57
4.21
(0.17
)
(0.81
)
Efficiency ratio(3)
58.97
53.67
47.07
5.30
11.90
Common equity tier 1 capital ratio
11.92
12.06
12.29
(0.14
)
(0.37
)
Leverage ratio
9.50
9.43
9.48
0.07
0.02
Book value per common share
$
12.16
$
12.02
$
11.16
1.2
9.0
(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 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Interest Income
Interest income
$
30,102
$
28,594
$
20,148
5.3
%
49.4
%
Interest expense
12,850
10,702
1,069
20.1
1102.1
Net interest income
$
17,252
$
17,892
$
19,079
(3.6
)%
(9.6
)%
($ in thousands)
For the Three Months
Ended
2Q2023
1Q2023
2Q2022
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
$
1,725,764
$
27,288
6.34
%
$
1,725,392
$
26,011
6.10
%
$
1,560,064
$
19,108
4.91
%
Total interest-earning assets
2,030,139
30,102
5.94
2,022,146
28,594
5.71
1,817,157
20,148
4.44
Interest-bearing Liabilities:
Interest-bearing deposits
1,201,353
11,920
3.98
1,196,194
10,382
3.52
859,072
1,069
0.50
Total interest-bearing liabilities
1,283,939
12,850
4.01
1,222,362
10,702
3.55
859,072
1,069
0.50
Ratios:
Net interest income / interest rate
spreads
17,252
1.93
17,892
2.16
19,079
3.94
Net interest margin
3.40
3.57
4.21
Total deposits / cost of deposits
1,817,101
11,920
2.63
1,867,684
10,382
2.25
1,702,860
1,069
0.25
Total funding liabilities / cost of
funds
1,899,687
12,850
2.71
1,893,852
10,702
2.29
1,702,860
1,069
0.25
(1) Annualized.
($ in thousands)
For the Three Months
Ended
Yield Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
Interest
& Fees
Yield(1)
Interest
& Fees
Yield(1)
Interest
& Fees
Yield(1)
1Q2023
2Q2022
Loan Yield Component:
Contractual interest rate
$
26,411
6.13
%
$
25,477
5.97
%
$
17,425
4.48
%
0.16
%
1.65
%
SBA discount accretion
1,078
0.25
974
0.23
1,151
0.30
0.02
(0.05
)
Amortization of net deferred fees
16
0.01
79
0.02
493
0.13
(0.01
)
(0.12
)
Amortization of premium
(452
)
(0.11
)
(392
)
(0.09
)
(197
)
(0.05
)
(0.02
)
(0.06
)
Net interest recognized on nonaccrual
loans
40
0.01
(243
)
(0.06
)
5
—
0.07
0.01
Prepayment penalties(2) and other fees
195
0.05
116
0.03
231
0.05
0.02
—
Yield on loans
$
27,288
6.34
%
$
26,011
6.10
%
$
19,108
4.91
%
0.24
%
1.43
%
Amortization of Net Deferred
Fees:
PPP loan forgiveness(3)
$
—
—
%
$
3
—
%
$
351
0.09
%
—
%
(0.09
)%
Other
16
0.01
76
0.02
142
0.04
(0.01
)
(0.03
)
Total amortization of net deferred
fees
$
16
0.01
%
$
79
0.02
%
$
493
0.13
%
(0.01
)%
(0.12
)%
(1)
Annualized.
(2)
Prepayment penalty income of $110
thousand, $3 thousand and $118 thousand for the three months ended
June 30, 2023, March 31, 2023 and June 30, 2022, respectively, was
from commercial real estate and Commercial and Industrial
(“C&I”) loans.
(3)
As of June 30, 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 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
2Q2023
1Q2023
2Q2022
Hana Loan Purchase:
Contractual interest rate
$
1,409
$
1,400
$
956
Purchased loan discount accretion
384
413
592
Other fees
16
24
24
Total interest income
$
1,809
$
1,837
$
1,572
Effect on average loan yield(1)
0.23
%
0.24
%
0.19
%
Effect on net interest margin(1)
0.27
%
0.28
%
0.20
%
($ in thousands)
For the Three Months
Ended
2Q2023
1Q2023
2Q2022
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)
$
1,725,764
$
27,288
6.34
%
$
1,725,392
$
26,011
6.10
%
$
1,560,064
$
19,108
4.91
%
Adjusted average loan yield excluding
purchased Hana loans(1)(2)
1,670,530
25,479
6.11
1,667,155
24,174
5.86
1,490,884
17,536
4.72
Net interest margin(1)
2,030,139
17,252
3.40
2,022,146
17,892
3.57
1,817,157
19,079
4.21
Adjusted interest margin excluding
purchased Hana loans(1)(2)
1,974,905
15,443
3.13
1,963,909
16,055
3.29
1,747,977
17,507
4.01
(1)
Annualized.
(2)
See reconciliation of GAAP to non-GAAP
financial measures.
Second Quarter 2023 vs. First Quarter
2023
Net interest income decreased $0.6 million, or 3.6%, primarily
due to higher interest expense on deposits and borrowings,
partially offset by higher interest income on loans. Net interest
margin was 3.40%, a decrease of 17 basis points from 3.57%.
- A $1.5 million increase in interest expense on deposits was
primarily due to a $5.2 million increase in average balance of
interest-bearing deposits and a 46 basis point increase in average
cost driven by the Federal Reserve’s rate increases.
- A $610 thousand increase in interest expense on borrowings was
primarily due to a $56.4 million increase in average balance.
- A $1.3 million increase in interest income on loans was
primarily due to a 24 basis point increase in loan yield as a
result of the Federal Reserve’s rate increases.
Second Quarter 2023 vs. Second Quarter
2022
Net interest income decreased $1.8 million, or 9.6%, primarily
due to higher interest expense on deposits, partially offset by
higher interest income on loans. Net interest margin was 3.40%, a
decrease of 81 basis points from 4.21%.
- An $8.2 million increase in interest income on loans was
primarily due to a $165.7 million increase in average balance of
interest-bearing deposits and a 143 basis point increase in loan
yield as a result of the Federal Reserve’s rate increases.
- A $10.9 million increase in interest expense on deposits was
primarily due to a $342.3 million increase in average balance and a
348 basis point increase in average cost driven by the Federal
Reserve’s rate increases.
Provision for Credit Losses
($ in thousands)
For the Three Months
Ended
2Q2023
1Q2023
2Q2022
(Reversal of) provision for credit losses
on loans
$
—
$
(258
)
$
996
(Reversal of) provision for credit losses
on off-balance sheet exposure(1)
—
(80
)
23
Total (reversal of) provision for credit
losses
$
—
$
(338
)
$
1,019
(1)
Reversal of provision for 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 $23 thousand for the three
months ended June 30, 2022 was included in other expenses.
Second Quarter 2023 vs. First Quarter
2023
The Company did not record provision for credit losses, compared
with a $338 thousand reversal of credit losses.
A $163 thousand increase from qualitative factor adjustments in
the second quarter of 2023 was primarily offset by decreases in
specific reserve requirements on individually evaluated loans. The
change in quantitative general reserve during the quarter was
insignificant as the impact from a 1.4% growth in gross loans was
mostly offset by a decrease in historical loss factors.
Second Quarter 2023 vs. Second Quarter
2022
The Company did not record provision for credit losses, compared
with a $1.0 million provision for credit losses.
Noninterest Income
($ in thousands)
For the Three Months
Ended
% Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Noninterest Income
Service charges on deposits
$
573
$
418
$
427
37.1
%
34.2
%
Loan servicing fees, net of
amortization
595
846
654
(29.7
)
(9.0
)
Gain on sale of loans
2,098
2,570
3,873
(18.4
)
(45.8
)
Other income
339
461
405
(26.5
)
(16.3
)
Total noninterest income
$
3,605
$
4,295
$
5,359
(16.1
)%
(32.7
)%
Second Quarter 2023 vs. First Quarter
2023
Noninterest income decreased $690 thousand, or 16.1%, primarily
due to lower gain on sale of loans.
- Gain on sale of loans was $2.1 million, a decrease of $472
thousand from $2.6 million, primarily due to a lower SBA loan sold
amount and a lower average sales premium. The Bank sold $36.8
million in SBA loans at an average premium rate of 6.64%, compared
to the sale of $44.7 million at an average premium rate of
7.33%.
Second Quarter 2023 vs. Second Quarter
2022
Noninterest income decreased $1.8 million, or 32.7%, primarily
due to lower gain on sale of loans.
- Gain on sale of loans was $2.1 million, a decrease of $1.8
million from $3.9 million, primarily due to a lower SBA loan sold
amount and a lower average sales premium. The Bank sold $36.8
million in SBA loans at an average premium rate of 6.64%, compared
to the sale of $58.6 million at an average premium rate of
7.02%.
Noninterest Expense
($ in thousands)
For the Three Months
Ended
% Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Noninterest Expense
Salaries and employee benefits
$
7,681
$
7,252
$
7,109
5.9
%
8.0
%
Occupancy and equipment
1,598
1,570
1,489
1.8
7.3
Data processing and communication
546
550
492
(0.7
)
11.0
Professional fees
381
359
364
6.1
4.7
FDIC insurance and regulatory
assessments
420
467
192
(10.1
)
118.8
Promotion and advertising
159
162
165
(1.9
)
(3.6
)
Directors’ fees
210
161
190
30.4
10.5
Foundation donation and other
contributions
594
753
852
(21.1
)
(30.3
)
Other expenses
711
634
650
12.1
9.4
Total noninterest expense
$
12,300
$
11,908
$
11,503
3.3
%
6.9
%
Second Quarter 2023 vs. First Quarter
2023
Noninterest expense increased $392 thousand, or 3.3%, primarily
due to higher salaries and employee benefits, partially offset by a
lower foundation donation.
- Salaries and employee benefits increased $429 thousand
primarily due to an addition of four full-time employees and annual
salary adjustments effective in the second quarter of 2023.
- Foundation donations and other contributions decreased $159
thousand primarily due to lower donation accrual for Open
Stewardship as a result of lower net income.
Second Quarter 2023 vs. Second Quarter
2022
Noninterest expense increased $797 thousand, or 6.9%, primarily
due to higher salaries and employee benefits and FDIC insurance and
regulatory assessments, mainly offset by a lower foundation
donation.
- Salaries and employee benefits increased $572 thousand
primarily due to 22 additional full-time employees to support
continued growth of the Company.
- FDIC insurance and regulatory assessments increased $228
thousand primarily due to our deposit growth from the second
quarter of 2022 and increases in FDIC assessment fees in 2023.
- Foundation donations and other contributions decreased $258
thousand primarily due to lower donation accrual for Open
Stewardship as a result of lower net income.
Income Tax Expense
Second Quarter 2023 vs. First Quarter
2023
Income tax expense was $2.5 million, and the effective tax rate
was 28.8%, compared to income tax expense of $3.1 million and the
effective rate of 29.0%.
Second Quarter 2023 vs. Second Quarter
2022
Income tax expense was $2.5 million and the effective tax rate
was 28.8%, compared to income tax expense of $3.5 million and an
effective rate of 29.0%.
BALANCE SHEET HIGHLIGHTS
Loans
($ in thousands)
As of
% Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Commercial real estate loans
$
847,863
$
833,615
$
776,785
1.7
%
9.2
%
SBA loans
238,785
238,994
247,413
(0.1
)
(3.5
)
C&I loans
112,160
117,841
128,620
(4.8
)
(12.8
)
Home mortgage loans
516,226
500,635
331,362
3.1
55.8
Consumer & other loans
1,163
1,400
538
(16.9
)
116.2
Gross loans
$
1,716,197
$
1,692,485
$
1,484,718
1.4
%
15.6
%
The following table presents new loan originations based on loan
commitment amounts for the periods indicated:
($ in thousands)
For the Three Months
Ended
% Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Commercial real estate loans
$
29,976
$
24,200
$
61,924
23.9
%
(51.6
)%
SBA loans
34,312
16,258
55,085
111.0
(37.7
)
C&I loans
25,650
7,720
2,718
232.3
843.7
Home mortgage loans
22,788
20,617
30,345
10.5
(24.9
)
Gross loans
$
112,726
$
68,795
$
150,072
63.9
%
(24.9
)%
The following table presents changes in gross loans by loan
activity for the periods indicated:
($ in thousands)
For the Three Months
Ended
2Q2023
1Q2023
2Q2022
Loan Activities:
Gross loans, beginning
$
1,692,485
$
1,678,292
$
1,428,410
New originations
112,726
68,795
150,072
Net line advances
(25,961
)
10,356
(46,773
)
Purchases
6,359
12,142
56,455
Sales
(36,791
)
(45,021
)
(58,999
)
Paydowns
(17,210
)
(40,190
)
(15,977
)
Payoffs
(25,969
)
(28,326
)
(33,098
)
PPP Payoffs
—
(200
)
(14,347
)
Decrease in loans held for sale
7,534
36,802
18,988
Other
3,024
(165
)
(13
)
Total
23,712
14,193
56,308
Gross loans, ending
$
1,716,197
$
1,692,485
$
1,484,718
As of June 30, 2023 vs. March 31,
2023
Gross loans were $1.72 billion as of June 30, 2023, up $23.7
million from March 31, 2023, primarily due to new loan
originations, partially offset by loan sales, and payoffs and
paydowns.
New loan originations and loan payoffs and paydowns were $112.7
million and $43.2 million for the second quarter of 2023,
respectively, compared with $68.8 million and $68.7 million for the
first quarter of 2023, respectively.
As of June 30, 2023 vs. June 30,
2022
Gross loans were $1.72 billion as of June 30, 2023, up $231.5
million from June 30, 2022, primarily due to new loan originations
of $554.7 million and loan purchases of $105.6 million, primarily
offset by loan sales of $173.3 million and loan payoffs and
paydowns of $222.8 million.
The following table presents the composition of gross loans by
interest rate type accompanied with the weighted average
contractual rates as of the periods indicated:
($ in thousands)
As of
2Q2023
1Q2023
2Q2022
%
Rate
%
Rate
%
Rate
Fixed rate
36.2
%
4.82
%
36.5
%
4.76
%
34.9
%
4.19
%
Hybrid rate
34.7
4.99
34.2
4.94
28.2
4.47
Variable rate
29.1
9.05
29.3
8.76
36.9
5.77
Gross loans
100.0
%
6.11
%
100.0
%
5.99
%
100.0
%
4.85
%
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 June 30, 2023
Within One Year
One Year Through Five
Years
After Five Years
Total
Amount
Rate
Amount
Rate
Amount
Rate
Amount
Rate
Fixed rate
$
50,591
5.33
%
$
331,824
4.78
%
$
239,489
4.77
%
$
621,904
4.82
%
Hybrid rate
—
—
83,789
4.63
510,775
5.05
594,564
4.99
Variable rate
82,254
8.87
116,620
8.65
300,855
9.25
499,729
9.05
Gross loans
$
132,845
7.52
%
$
532,233
5.60
%
$
1,051,119
6.21
%
$
1,716,197
6.11
%
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 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Allowance for credit losses on loans,
beginning
$
20,814
$
19,241
$
16,672
8.2
%
24.8
%
Impact of CECL adoption
—
1,924
—
n/m
n/m
(Reversal of) provision for credit
losses(1)
—
(258
)
996
n/m
n/m
Gross charge-offs
(20
)
(116
)
(18
)
(82.8
)
11.1
%
Gross recoveries
8
23
52
(65.2
)
(84.6
)%
Net (charge-offs) recoveries
(12
)
(93
)
34
(87.1
)
n/m
Allowance for credit losses on loans,
ending(2)
$
20,802
$
20,814
$
17,702
(0.1
)%
17.5
%
Allowance for credit losses on off-balance
sheet exposure, beginning
$
367
$
263
$
172
39.5
%
113.4
%
Impact of CECL adoption
—
184
—
n/m
n/m
(Reversal of) provision for credit
losses
—
(80
)
23
n/m
n/m
Allowance for credit losses on off-balance
sheet exposure, ending(2)
$
367
$
367
$
195
—
%
88.2
%
(1)
Excludes reversal of uncollectible accrued
interest receivable of $205 thousand for the three months ended
June 30, 2022.
(2)
Allowance for credit losses as of June 30,
2023 and March 31, 2023 were calculated under the CECL methodology
while allowance for loan losses for June 30, 2022 was calculated
under the incurred loss methodology.
Asset Quality
($ in thousands)
As of and For the Three Months
Ended
% Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Nonperforming loans(1)
$
3,447
$
2,504
$
1,826
37.7
%
88.8
%
Nonperforming assets(1)
3,447
2,504
1,826
37.7
88.8
Nonperforming loans to gross loans
0.20
%
0.15
%
0.12
%
0.05
0.08
Nonperforming assets to total assets
0.16
%
0.12
%
0.09
%
0.04
0.07
Criticized loans(1)(2)
$
7,538
$
5,772
$
2,673
30.6
%
182.0
%
Criticized loans to gross loans
0.44
%
0.34
%
0.18
%
0.10
0.26
Allowance for credit losses ratios:
As a % of gross loans
1.21
%
1.23
%
1.19
%
(0.02
)%
0.02
%
As an adjusted % of gross loans(3)
1.25
1.27
1.25
(0.02
)
—
As a % of nonperforming loans
603
831
969
(228
)
(366
)
As a % of nonperforming assets
603
831
969
(228
)
(366
)
As a % of criticized loans
276
361
662
(85
)
(386
)
Net charge-offs (recoveries)(4) to average
gross loans(5)
0.00
0.02
(0.01
)
(0.02
)
0.01
(1)
Excludes the guaranteed portion of SBA
loans that are in liquidation totaling $5.4 million, $1.9 million
and $351 thousand as of June 30, 2023, March 31, 2023 and June 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 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
1.25%.
- Criticized loans was $7.5 million, an increase of $4.9 million
from a year ago, and represented 0.44% of gross loans. Criticized
loans consist of loans categorized as Special Mention, Substandard,
Doubtful and Loss categories defined by regulatory
authorities.
- Nonperforming assets was $3.4 million, an increase of $1.6
million from a year ago, and represented 0.16% of total assets. As
of June 30, 2023, $5.4 million of nonaccrual assets consisted of
guaranteed portion of SBA loans that are in liquidation. The
Company did not have OREO as of June 30, 2023 or 2022.
- Net charge-offs were $12 thousand or 0.00% of average loans in
the second quarter of 2023, compared to net charge-offs of $93
thousand, or 0.02%, of average loans in the first quarter of 2023
and net recoveries of $34 thousand, or 0.01%, of average loans in
the second quarter of 2022.
Deposits
($ in thousands)
As of
% Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
Amount
%
Amount
%
Amount
%
1Q2023
2Q2022
Noninterest-bearing deposits
$
634,745
34.1
%
$
643,902
33.8
%
$
820,311
47.1
%
(1.4
)%
(22.6
)%
Money market deposits and others
344,162
18.5
436,796
22.9
519,389
29.8
(21.2
)
(33.7
)
Time deposits
880,732
47.4
824,120
43.3
401,923
23.1
6.9
119.1
Total deposits
$
1,859,639
100.0
%
$
1,904,818
100.0
%
$
1,741,623
100.0
%
(2.4
)%
6.8
%
Estimated uninsured deposits
$
796,211
42.8
%
$
900,579
47.3
%
$
1,036,943
59.5
%
(11.6
)%
(23.2
)%
As of June 30, 2023 vs. March 31,
2023
Total deposits were $1.86 billion as of June 30, 2023, down
$45.2 million from March 31, 2023, primarily due to decreases in
money market deposits partially offset by growth in time deposits.
The composition shift from money market deposits to time deposits
was primarily due to customers’ continued preference for high-rate
deposit products driven by the Federal Reserve’s rate increases.
Noninterest-bearing deposits remained relatively stable at 34% of
total deposits.
As of June 30, 2023 vs. June 30,
2022
Total deposits were $1.86 billion as of June 30, 2023, up $118.0
million from June 30, 2022, primarily driven by growth in time
deposits, partially offset by decreases in noninterest-bearing
deposits, and money market and others. The composition shift to
time deposits was primarily due to customers’ preference for
high-rate deposit products driven by market rate increases as a
result of the Federal Reserve’s rate increases and decreases in
transaction volumes in escrow and 1031 exchanges accounts.
The following table sets forth the maturity of time deposits as
of June 30, 2023:
As of June 30, 2023
($ 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)
$
30,086
$
188,654
$
146,874
$
48,944
$
1,650
$
416,208
Time deposits ($250 or less)
67,165
174,086
90,045
90,721
42,507
464,524
Total time deposits
$
97,251
$
362,740
$
236,919
$
139,665
$
44,157
$
880,732
Weighted average rate
3.37
%
4.31
%
4.40
%
4.50
%
4.11
%
4.25
%
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)
2Q2023
1Q2023
4Q2022
Liquid assets:
Cash and cash equivalents
$
143,761
$
181,509
$
82,972
Available-for-sale debt securities
202,250
212,767
209,809
Liquid assets
$
346,011
$
394,276
$
292,781
Liquid assets to total assets
16.1
%
18.2
%
14.0
%
Available borrowings:
Federal Home Loan Bank—San Francisco
$
400,543
$
406,500
$
440,358
Federal Reserve Bank
172,316
174,284
175,605
Pacific Coast Bankers Bank
50,000
50,000
50,000
Zions Bank
25,000
25,000
25,000
First Horizon Bank
25,000
25,000
24,950
Total available borrowings
$
672,859
$
680,784
$
715,913
Total available borrowings to total
assets
31.3
%
31.4
%
34.2
%
Liquid assets and available borrowings to
total assets
47.4
%
49.6
%
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 August 24, 2023 to all shareholders of
record as of the close of business on August 10, 2023.
The Company repurchased 221,494 shares of its common stock at an
average price of $8.40 during the second quarter of 2023. Since the
announcement of the initial stock repurchase program in January
2019, the Company repurchased a total of 1.9 million shares of its
common stock at an average repurchase price of $8.58 per share
through June 30, 2023.
Basel III
OP Bancorp(1)
Open Bank
Minimum Well
Capitalized
Ratio
Minimum
Capital Ratio+
Conservation
Buffer(2)
Risk-Based Capital Ratios:
Total risk-based capital ratio
13.10
%
12.98
%
10.00
%
10.50
%
Tier 1 risk-based capital ratio
11.92
11.80
8.00
8.50
Common equity tier 1 ratio
11.92
11.80
6.50
7.00
Leverage ratio
9.50
9.41
5.00
4.00
(1)
The capital requirements are only
applicable to the Bank, and the Company's ratios are included for
comparison purpose.
(2)
An additional 2.5% capital conservation
buffer above the minimum capital ratios are required in order to
avoid limitations on distributions, including dividend payments and
certain discretionary bonuses to executive officers.
OP Bancorp
Basel III
% Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Risk-Based Capital Ratios:
Total risk-based capital ratio
13.10
%
13.27
%
13.51
%
(0.17
)%
(0.41
)%
Tier 1 risk-based capital ratio
11.92
12.06
12.29
(0.14
)
(0.37
)
Common equity tier 1 ratio
11.92
12.06
12.29
(0.14
)
(0.37
)
Leverage ratio
9.50
9.43
9.48
0.07
0.02
Risk-weighted Assets ($ in thousands)
$
1,700,205
$
1,659,584
$
1,465,707
2.45
16.00
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
2Q2023
1Q2023
2Q2022
Interest income
$
30,102
$
28,594
$
20,148
Interest expense
12,850
10,702
1,069
Net interest income
17,252
17,892
19,079
Noninterest income
3,605
4,295
5,359
Noninterest expense
12,300
11,908
11,503
Pre-provision net revenue
(a)
$
8,557
$
10,279
$
12,935
Reconciliation to net income
(Reversal of) provision for credit
losses
(b)
$
—
$
(338
)
$
996
Income tax expense
(c)
2,466
3,083
3,459
Net income
(a)+(b)+(c)
$
6,091
$
7,534
$
8,480
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 $8.9 million discount. As a result, the
fair value discount on these loans is being accreted into interest
income over the expected life of the loans using the effective
yield method. Adjusted loan yield and net interest margin for the
three months ended June 30, 2023, March 31, 2023 and June 30, 2022
excluded the impacts of contractual interest and discount accretion
of the purchased Hana loans as management does not consider
purchasing loan portfolios to be normal or recurring transactions.
Management believes that presenting the adjusted average loan yield
and net interest margin provide comparability to prior periods and
these non-GAAP financial measures provide supplemental information
regarding the Company’s performance.
($ in thousands)
For the Three Months
Ended
2Q2023
1Q2023
2Q2022
Yield on Average Loans
Interest income on loans
$
27,288
$
26,011
$
19,108
Less: interest income on purchased Hana
loans
1,809
1,837
1,572
Adjusted interest income on loans
(a)
$
25,479
$
24,174
$
17,536
Average loans
$
1,725,764
$
1,725,392
$
1,560,064
Less: Average purchased Hana loans
55,234
58,237
69,180
Adjusted average loans
(b)
$
1,670,530
$
1,667,155
$
1,490,884
Average loan yield(1)
6.34
%
6.10
%
4.91
%
Effect on average loan yield(1)
0.23
%
0.24
%
0.19
%
Adjusted average loan yield(1)
(a)/(b)
6.11
%
5.86
%
4.72
%
Net Interest Margin
Net interest income
$
17,252
$
17,892
$
19,079
Less: interest income on purchased Hana
loans
1,809
1,837
1,572
Adjusted net interest income
(c)
$
15,443
$
16,055
$
17,507
Average interest-earning assets
$
2,030,139
$
2,022,146
$
1,817,157
Less: Average purchased Hana loans
55,234
58,237
69,180
Adjusted average interest-earning
assets
(d)
$
1,974,905
$
1,963,909
$
1,747,977
Net interest margin(1)
3.40
%
3.57
%
4.21
%
Effect on net interest margin(1)
0.27
0.28
0.20
Adjusted net interest margin(1)
(c)/(d)
3.13
%
3.29
%
4.01
%
(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
2Q2023
1Q2023
2Q2022
Gross loans
$
1,716,197
$
1,692,485
$
1,484,718
Less: Purchased Hana loans
(54,016
)
(56,735
)
(66,946
)
PPP loans(1)
(247
)
(247
)
(7,151
)
Adjusted gross loans
(a)
$
1,661,934
$
1,635,503
$
1,410,621
Accrued interest receivable on loans
$
6,815
$
6,440
$
4,602
Less: Accrued interest receivable on
purchased Hana loans
(426
)
(432
)
(290
)
Accrued interest receivable on PPP
loans(2)
(6
)
(5
)
(93
)
Add: Allowance on accrued interest
receivable
—
—
—
Adjusted accrued interest receivable on
loans
(b)
$
6,383
$
6,003
$
4,219
Adjusted gross loans and accrued interest
receivable
(a)+(b)=(c)
$
1,668,317
$
1,641,506
$
1,414,840
Allowance for credit losses
$
20,802
$
20,814
$
17,702
Add: Allowance on accrued interest
receivable
—
—
—
Adjusted Allowance
(d)
$
20,802
$
20,814
$
17,702
Adjusted allowance to gross loans
ratio
(d)/(c)
1.25
%
1.27
%
1.25
%
(1)
Excludes purchased PPP loans of $942
thousand as of June 30, 2022.
(2)
Excludes purchased accrued interest
receivable on PPP loans of $13 thousand as of June 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 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 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Assets
Cash and due from banks
$
21,295
$
16,781
$
14,937
26.9
%
42.6
%
Interest-bearing deposits in other
banks
122,466
164,728
117,760
(25.7
)
4.0
Cash and cash equivalents
143,761
181,509
132,697
(20.8
)
8.3
Available-for-sale debt securities, at
fair value
202,250
212,767
174,814
(4.9
)
15.7
Other investments
16,183
12,172
12,205
33.0
32.6
Loans held for sale
—
7,534
67,255
n/m
n/m
Commercial real estate loans
847,863
833,615
776,785
1.7
9.2
SBA loans
238,785
238,994
247,413
(0.1
)
(3.5
)
C&I loans
112,160
117,841
128,620
(4.8
)
(12.8
)
Home mortgage loans
516,226
500,635
331,362
3.1
55.8
Consumer loans
1,163
1,400
538
(16.9
)
116.2
Gross loans receivable
1,716,197
1,692,485
1,484,718
1.4
15.6
Allowance for credit losses
(20,802
)
(20,814
)
(17,702
)
(0.1
)
17.5
Net loans receivable
1,695,395
1,671,671
1,467,016
1.4
15.6
Premises and equipment, net
5,093
4,647
4,493
9.6
13.4
Accrued interest receivable, net
7,703
7,302
5,112
5.5
50.7
Servicing assets
12,654
12,898
12,708
(1.9
)
(0.4
)
Company owned life insurance
21,913
21,762
21,317
0.7
2.8
Deferred tax assets, net
13,360
12,323
13,371
8.4
(0.1
)
Operating right-of-use assets
9,487
9,459
8,036
0.3
18.1
Other assets
23,902
16,550
15,218
44.4
57.1
Total assets
$
2,151,701
$
2,170,594
$
1,934,242
(0.9
)%
11.2
%
Liabilities and Shareholders'
Equity
Liabilities:
Noninterest-bearing
$
634,745
$
643,902
$
820,311
(1.4
)%
(22.6
)%
Money market and others
344,162
436,796
519,389
(21.2
)
(33.7
)
Time deposits greater than $250
416,208
411,648
237,634
1.1
75.1
Other time deposits
464,524
412,472
164,289
12.6
182.7
Total deposits
1,859,639
1,904,818
1,741,623
(2.4
)
6.8
Federal Home Loan Bank advances
75,000
50,000
—
50.0
n/m
Accrued interest payable
9,354
5,751
612
62.6
1428.4
Operating lease liabilities
10,486
10,513
9,335
(0.3
)
12.3
Other liabilities
13,452
15,731
13,180
(14.5
)
2.1
Total liabilities
1,967,931
1,986,813
1,764,750
(1.0
)
11.5
Shareholders' equity:
Common stock
77,464
79,475
78,718
(2.5
)
(1.6
)
Additional paid-in capital
10,297
10,056
9,089
2.4
13.3
Retained earnings
114,177
109,908
92,659
3.9
23.2
Accumulated other comprehensive loss
(18,168
)
(15,658
)
(10,974
)
16.0
65.6
Total shareholders’ equity
183,770
183,781
169,492
—
8.4
Total liabilities and shareholders'
equity
$
2,151,701
$
2,170,594
$
1,934,242
(0.9
)%
11.2
%
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
($ in thousands, except share and per
share data)
For the Three Months
Ended
% Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Interest income
Interest and fees on loans
$
27,288
$
26,011
$
19,108
4.9
%
42.8
%
Interest on available-for-sale debt
securities
1,562
1,566
703
(0.3
)
122.2
Other interest income
1,252
1,017
337
23.1
271.5
Total interest income
30,102
28,594
20,148
5.3
49.4
Interest expense
Interest on deposits
11,920
10,382
1,069
14.8
1015.1
Interest on borrowings
930
320
—
190.6
n/m
Total interest expense
12,850
10,702
1,069
20.1
1102.1
Net interest income
17,252
17,892
19,079
(3.6
)
(9.6
)
(Reversal of) provision for credit
losses
—
(338
)
996
n/m
n/m
Net interest income after provision for
credit losses
17,252
18,230
18,083
(5.4
)
(4.6
)
Noninterest income
Service charges on deposits
573
418
427
37.1
34.2
Loan servicing fees, net of
amortization
595
846
654
(29.7
)
(9.0
)
Gain on sale of loans
2,098
2,570
3,873
(18.4
)
(45.8
)
Other income
339
461
405
(26.5
)
(16.3
)
Total noninterest income
3,605
4,295
5,359
(16.1
)
(32.7
)
Noninterest expense
Salaries and employee benefits
7,681
7,252
7,109
5.9
8.0
Occupancy and equipment
1,598
1,570
1,489
1.8
7.3
Data processing and communication
546
550
492
(0.7
)
11.0
Professional fees
381
359
364
6.1
4.7
FDIC insurance and regulatory
assessments
420
467
192
(10.1
)
118.8
Promotion and advertising
159
162
165
(1.9
)
(3.6
)
Directors’ fees
210
161
190
30.4
10.5
Foundation donation and other
contributions
594
753
852
(21.1
)
(30.3
)
Other expenses
711
634
650
12.1
9.4
Total noninterest expense
12,300
11,908
11,503
3.3
6.9
Income before income tax expense
8,557
10,617
11,939
(19.4
)
(28.3
)
Income tax expense
2,466
3,083
3,459
(20.0
)
(28.7
)
Net income
$
6,091
$
7,534
$
8,480
(19.2
)%
(28.2
)%
Book value per share
$
12.16
$
12.02
$
11.16
1.2
%
9.0
%
Earnings per share - Basic
0.39
0.48
0.55
(18.8
)
(29.1
)
Earnings per share - Diluted
0.39
0.48
0.54
(18.8
)
(27.8
)
Shares of common stock outstanding, at
period end
15,118,268
15,286,558
15,189,203
(1.1
)%
(0.5
)%
Weighted average shares:
- Basic
15,158,365
15,284,350
15,141,975
(0.8
)%
0.1
%
- Diluted
15,169,794
15,312,673
15,234,577
(0.9
)
(0.4
)
KEY RATIOS
For the Three Months
Ended
Change 2Q23 vs.
2Q2023
1Q2023
2Q2022
1Q2023
2Q2022
Return on average assets (ROA)(1)
1.15
%
1.43
%
1.79
%
(0.3
)%
(0.6
)%
Return on average equity (ROE)(1)
13.27
16.82
20.29
(3.6
)
(7.0
)
Net interest margin(1)
3.40
3.57
4.21
(0.2
)
(0.8
)
Efficiency ratio
58.97
53.67
47.07
5.3
11.9
Total risk-based capital ratio
13.10
%
13.27
%
13.51
%
(0.2
)%
(0.4
)%
Tier 1 risk-based capital ratio
11.92
12.06
12.29
(0.1
)
(0.4
)
Common equity tier 1 ratio
11.92
12.06
12.29
(0.1
)
(0.4
)
Leverage ratio
9.50
9.43
9.48
0.1
—
(1) Annualized.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
($ in thousands, except share and per
share data)
For the Six Months
Ended
2Q2023
2Q2022
% Change
Interest income
Interest and fees on loans
$
53,299
$
36,365
46.6
%
Interest on available-for-sale debt
securities
3,128
1,233
153.7
Other interest income
2,269
494
359.3
Total interest income
58,696
38,092
54.1
Interest expense
Interest on deposits
22,302
1,723
1194.4
Interest on borrowings
1,250
—
n/m
Total interest expense
23,552
1,723
1266.9
Net interest income
35,144
36,369
(3.4
)
(Reversal of) provision for credit
losses
(338
)
1,337
n/m
Net interest income after provision for
credit losses
35,482
35,032
1.3
Noninterest income
Service charges on deposits
991
815
21.6
Loan servicing fees, net of
amortization
1,441
1,101
30.9
Gain on sale of loans
4,668
7,111
(34.4
)
Other income
800
548
46.0
Total noninterest income
7,900
9,575
(17.5
)
Noninterest expense
Salaries and employee benefits
14,933
12,766
17.0
Occupancy and equipment
3,168
2,867
10.5
Data processing and communication
1,096
985
11.3
Professional fees
740
688
7.6
FDIC insurance and regulatory
assessments
887
399
122.3
Promotion and advertising
321
354
(9.3
)
Directors’ fees
371
367
1.1
Foundation donation and other
contributions
1,347
1,667
(19.2
)
Other expenses
1,345
1,072
25.5
Total noninterest expense
24,208
21,165
14.4
Income before income tax expense
19,174
23,442
(18.2
)
Income tax expense
5,549
6,810
(18.5
)
Net income
$
13,625
$
16,632
(18.1
)%
Book value per share
$
12.16
$
11.16
9.0
%
Earnings per share - Basic
0.88
1.08
(18.5
)
Earnings per share - Diluted
0.88
1.07
(17.8
)
Shares of common stock outstanding, at
period end
15,118,268
15,189,203
(0.5
)%
Weighted average shares:
- Basic
15,221,010
15,139,903
0.5
%
- Diluted
15,241,903
15,238,113
—
KEY RATIOS
For the Six Months
Ended
2Q2023
2Q2022
% Change
Return on average assets (ROA)(1)
1.29
%
1.82
%
(0.5
)%
Return on average equity (ROE)(1)
15.02
19.92
(4.9
)
Net interest margin(1)
3.48
4.16
(0.7
)
Efficiency ratio
56.24
46.07
10.2
Total risk-based capital ratio
13.10
%
13.51
%
(0.4
)%
Tier 1 risk-based capital ratio
11.92
12.29
(0.4
)
Common equity tier 1 ratio
11.92
12.29
(0.4
)
Leverage ratio
9.50
9.48
—
(1) Annualized.
ASSET QUALITY
($ in thousands)
As of and For the Three Months
Ended
2Q2023
1Q2023
2Q2022
Nonaccrual loans(1)
$
3,447
$
2,504
$
1,826
Loans 90 days or more past due,
accruing(2)
—
—
—
Nonperforming loans
3,447
2,504
1,826
Other real estate owned ("OREO")
—
—
—
Nonperforming assets
$
3,447
$
2,504
$
1,826
Criticized loans by risk categories:
Special mention loans
$
2,909
$
2,617
$
—
Classified loans(1)(3)
4,629
3,155
2,673
Total criticized loans
$
7,538
$
5,772
$
2,673
Criticized loans by loan type:
Commercial real estate
$
—
$
560
$
—
SBA
4,784
3,676
1,391
C&I
200
271
297
Home mortgage
2,554
1,265
985
Total criticized loans
$
7,538
$
5,772
$
2,673
Nonperforming loans / gross loans
0.20
%
0.15
%
0.12
%
Nonperforming assets / gross loans plus
OREO
0.20
0.15
0.12
Nonperforming assets / total assets
0.16
0.12
0.09
Classified loans / gross loans
0.27
0.19
0.18
Criticized loans / gross loans
0.44
0.34
0.18
Allowance for credit losses ratios:
As a % of gross loans
1.21
%
1.23
%
1.19
%
As an adjusted % of gross loans(4)
1.25
1.27
1.25
As a % of nonperforming loans
603
831
969
As a % of nonperforming assets
603
831
969
As a % of classified loans
449
660
662
As a % of criticized loans
276
361
662
Net charge-offs (recoveries)
$
12
$
93
$
(34
)
Net charge-offs (recoveries)(5) to average
gross loans(6)
0.00
%
0.02
%
(0.01
)%
(1)
Excludes the guaranteed portion of SBA
loans that are in liquidation totaling $5.1 million, $1.6 million
and $346 thousand as of June 30, 2023, March 31, 2023 and June 30,
2022, respectively.
(2)
Excludes the guaranteed portion of SBA
loans that are in liquidation totaling $246 thousand, $246 thousand
and $5 thousand as of June 30, 2023, March 31, 2023 and June 30,
2022, respectively.
(3)
Consists of substandard, doubtful and loss
categories.
(4)
See the Reconciliation of GAAP to NON-GAAP
Financial Measures.
(5)
Annualized.
(6)
Includes loans held for sale.
($ in thousands)
2Q2023
1Q2023
2Q2022
Accruing delinquent loans 30-89 days past
due
30-59 days
$
3,647
$
4,866
$
447
60-89 days
1,568
—
—
Total
$
5,215
$
4,866
$
447
AVERAGE BALANCE SHEET, INTEREST AND
YIELD/RATE ANALYSIS
For the Three Months
Ended
2Q2023
1Q2023
2Q2022
($ 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
$
79,200
$
1,003
5.01
%
$
74,162
$
846
4.56
%
$
79,628
$
197
0.98
%
Federal funds sold and other
investments
15,374
249
6.46
12,130
171
5.65
11,966
140
4.70
Available-for-sale debt securities, at
fair value
209,801
1,562
2.98
210,462
1,566
2.98
165,499
703
1.70
Commercial real estate loans
838,526
11,823
5.66
840,402
11,179
5.39
751,610
8,743
4.67
SBA loans
262,825
7,174
10.95
274,889
6,982
10.30
353,138
5,707
6.48
C&I loans
114,103
2,232
7.85
121,915
2,200
7.32
160,291
1,811
4.53
Home mortgage loans
508,976
6,043
4.75
486,800
5,633
4.63
294,341
2,837
3.86
Consumer loans
1,334
16
4.77
1,386
17
5.07
684
10
5.49
Loans(2)
1,725,764
27,288
6.34
1,725,392
26,011
6.10
1,560,064
19,108
4.91
Total interest-earning assets
2,030,139
30,102
5.94
2,022,146
28,594
5.71
1,817,157
20,148
4.44
Noninterest-earning assets
84,991
82,538
73,594
Total assets
$
2,115,130
$
2,104,684
$
1,890,751
Interest-bearing liabilities:
Money market deposits and others
$
357,517
$
3,201
3.59
%
$
409,813
$
3,150
3.12
%
$
470,013
$
503
0.43
%
Time deposits
843,836
8,719
4.14
786,381
7,232
3.73
389,059
566
0.58
Total interest-bearing deposits
1,201,353
11,920
3.98
1,196,194
10,382
3.52
859,072
1,069
0.50
Borrowings
82,586
930
4.52
26,168
320
4.95
—
—
—
Total interest-bearing liabilities
1,283,939
12,850
4.01
1,222,362
10,702
3.55
859,072
1,069
0.50
Noninterest-bearing liabilities:
Noninterest-bearing deposits
615,748
671,490
843,788
Other noninterest-bearing liabilities
31,810
31,648
20,720
Total noninterest-bearing liabilities
647,558
703,138
864,508
Shareholders’ equity
183,633
179,184
167,171
Total liabilities and shareholders’
equity
$
2,115,130
2,104,684
1,890,751
Net interest income / interest rate
spreads
$
17,252
1.93
%
$
17,892
2.16
%
$
19,079
3.94
%
Net interest margin
3.40
%
3.57
%
4.21
%
Cost of deposits & cost of funds:
Total deposits / cost of deposits
$
1,817,101
$
11,920
2.63
%
$
1,867,684
$
10,382
2.25
%
$
1,702,860
$
1,069
0.25
%
Total funding liabilities / cost of
funds
1,899,687
12,850
2.71
1,893,852
10,702
2.29
1,702,860
1,069
0.25
(1)
Annualized.
(2)
Includes loans held for sale.
AVERAGE BALANCE SHEET, INTEREST AND
YIELD/RATE ANALYSIS
For the Six Months
Ended
2Q2023
2Q2022
($ 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
$
76,695
$
1,849
4.79
%
$
83,231
$
238
0.57
%
Federal funds sold and other
investments
13,761
420
6.10
11,465
256
4.45
Available-for-sale debt securities, at
fair value
210,130
3,128
2.98
161,230
1,233
1.53
Commercial real estate loans
839,459
23,002
5.53
731,413
16,545
4.56
SBA loans
268,823
14,156
10.62
355,916
11,542
6.54
C&I loans
117,988
4,432
7.58
158,334
3,348
4.26
Home mortgage loans
497,949
11,676
4.69
255,936
4,911
3.84
Consumer & other loans
1,360
33
4.92
780
19
5.15
Loans(2)
1,725,579
53,299
6.22
1,502,379
36,365
4.88
Total interest-earning assets
2,026,165
58,696
5.83
1,758,305
38,092
4.36
Noninterest-earning assets
83,771
68,334
Total assets
$
2,109,936
$
1,826,639
Interest-bearing liabilities:
Money market deposits and others
$
383,521
$
6,351
3.34
%
$
441,314
$
754
0.34
%
Time deposits
815,267
15,952
3.95
381,879
969
0.51
Total interest-bearing deposits
1,198,788
22,303
3.75
823,193
1,723
0.42
Borrowings
54,533
1,249
4.62
—
—
—
Total interest-bearing liabilities
1,253,321
23,552
3.79
823,193
1,723
0.42
Noninterest-bearing liabilities:
Noninterest-bearing deposits
643,465
813,791
Other noninterest-bearing liabilities
31,729
22,649
Total noninterest-bearing liabilities
675,194
836,440
Shareholders’ equity
181,421
167,006
Total liabilities and shareholders’
equity
$
2,109,936
1,826,639
Net interest income / interest rate
spreads
$
35,144
2.04
%
$
36,369
3.94
%
Net interest margin
3.48
%
4.16
%
Cost of deposits & cost of funds:
Total deposits / cost of deposits
$
1,842,253
$
22,303
2.44
%
$
1,636,984
$
1,723
0.21
%
Total funding liabilities / cost of
funds
1,896,786
23,552
2.50
%
1,636,984
1,723
0.21
%
(1)
Annualized.
(2)
Includes loans held for sale.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230727654337/en/
Investor Relations OP Bancorp Christine Oh EVP & CFO
213.892.1192 Christine.oh@myopenbank.com
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