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

2023 Fourth Quarter Highlights compared with 2023 Third Quarter:

  • Financial Results:
    • Net income of $5.2 million, compared to $5.1 million
    • Diluted earnings per share of $0.34, compared to $0.33
    • Net interest income of $16.2 million, compared to $17.3 million
    • Net interest margin of 3.12%, compared to 3.38%
    • Provision for credit losses of $0.6 million, compared to $1.4 million
    • Total assets of $2.15 billion, compared to $2.14 billion
    • Gross loans of $1.77 billion, compared to $1.76 billion
    • Total deposits of $1.81 billion, compared to $1.83 billion
  • Credit Quality:
    • Allowance for credit losses to gross loans of 1.25%, compared to 1.23%
    • Net charge-offs(1) to average gross loans(2) of 0.04%, compared to 0.11%
    • Nonperforming loans to gross loans of 0.34%, compared to 0.24%
    • Criticized loans(3) to gross loans of 0.76%, compared to 0.78%
  • Capital Levels:
    • Remained well-capitalized with a Common Equity Tier 1 (“CET1”) ratio of 12.52%
    • Book value per common share increased to $12.84, compared to $12.17
    • Repurchased 150,000 shares of common stock at an average price of $8.72
    • Paid quarterly cash dividend of $0.12 per share for the periods

___________________________________________________________

(1) Annualized.

(2) Includes loans held for sale.

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

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

Min Kim, President and Chief Executive Officer:

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

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

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

SELECTED FINANCIAL HIGHLIGHTS

 

 

 

 

 

 

 

 

 

 

 

($ in thousands, except per share data)

 

As of and For the Three Months Ended

 

% Change 4Q2023 vs.

 

 

4Q2023

 

 

 

3Q2023

 

 

 

4Q2022

 

 

3Q2023

 

4Q2022

Selected Income Statement Data:

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

16,230

 

 

$

17,313

 

 

$

20,198

 

 

(6.3

) %

 

(19.6

) %

Provision for credit losses

 

 

630

 

 

 

1,359

 

 

 

977

 

 

(53.6

)

 

(35.5

)

Noninterest income

 

 

3,680

 

 

 

2,601

 

 

 

3,223

 

 

41.5

 

 

14.2

 

Noninterest expense

 

 

11,983

 

 

 

11,535

 

 

 

11,327

 

 

3.9

 

 

5.8

 

Income tax expense

 

 

2,125

 

 

 

1,899

 

 

 

3,089

 

 

11.9

 

 

(31.2

)

Net income

 

 

5,172

 

 

 

5,121

 

 

 

8,028

 

 

1.0

 

 

(35.6

)

Diluted earnings per share

 

 

0.34

 

 

 

0.33

 

 

 

0.51

 

 

3.0

 

 

(33.3

)

Selected Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

Gross loans

 

$

1,765,845

 

 

$

1,759,525

 

 

$

1,678,292

 

 

0.4

%

 

5.2

%

Total deposits

 

 

1,807,558

 

 

 

1,825,171

 

 

 

1,885,771

 

 

(1.0

)

 

(4.1

)

Total assets

 

 

2,147,730

 

 

 

2,142,675

 

 

 

2,094,497

 

 

0.2

 

 

2.5

 

Average loans(1)

 

 

1,787,540

 

 

 

1,740,188

 

 

 

1,691,642

 

 

2.7

 

 

5.7

 

Average deposits

 

 

1,813,411

 

 

 

1,821,361

 

 

 

1,836,736

 

 

(0.4

)

 

(1.3

)

Credit Quality:

 

 

 

 

 

 

 

 

 

 

Nonperforming loans

 

$

6,082

 

 

$

4,211

 

 

$

2,033

 

 

44.4

%

 

199.2

%

Nonperforming loans to gross loans

 

 

0.34

%

 

 

0.24

%

 

 

0.12

%

 

0.10

 

 

0.22

 

Criticized loans(2) to gross loans

 

 

0.76

 

 

 

0.78

 

 

 

0.19

 

 

(0.02

)

 

0.57

 

Net charge-offs to average gross loans(3)

 

 

0.04

 

 

 

0.11

 

 

 

0.03

 

 

(0.07

)

 

0.01

 

Allowance for credit losses to gross loans

 

 

1.25

 

 

 

1.23

 

 

 

1.15

 

 

0.02

 

 

0.10

 

Allowance for credit losses to nonperforming loans

 

 

362

 

 

 

513

 

 

 

946

 

 

(151

)

 

(584

)

Financial Ratios:

 

 

 

 

 

 

 

 

 

 

Return on average assets(3)

 

 

0.96

%

 

 

0.96

%

 

 

1.56

%

 

%

 

(0.60

) %

Return on average equity(3)

 

 

11.18

 

 

 

11.07

 

 

 

18.58

 

 

0.11

 

 

(7.40

)

Net interest margin(3)

 

 

3.12

 

 

 

3.38

 

 

 

4.08

 

 

(0.26

)

 

(0.96

)

Efficiency ratio(4)

 

 

60.19

 

 

 

57.92

 

 

 

48.36

 

 

2.27

 

 

11.83

 

Common equity tier 1 capital ratio

 

 

12.52

 

 

 

12.09

 

 

 

11.87

 

 

0.43

 

 

0.65

 

Leverage ratio

 

 

9.57

 

 

 

9.63

 

 

 

9.38

 

 

(0.06

)

 

0.19

 

Book value per common share

 

$

12.84

 

 

$

12.17

 

 

$

11.59

 

 

5.5

 

 

10.8

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Includes loans held for sale.

(2)

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

(3)

Annualized.

(4)

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

 

 

 

 

 

 

 

($ in thousands, except per share data)

 

As of and For the Twelve Months Ended December 31,

 

 

 

 

2023

 

 

 

2022

 

 

% Change

Selected Income Statement Data:

 

 

 

 

 

 

Net interest income

 

$

68,687

 

 

$

76,911

 

 

(10.7

) %

Provision for credit losses

 

 

1,651

 

 

 

2,976

 

 

(44.5

)

Noninterest income

 

 

14,181

 

 

 

17,619

 

 

(19.5

)

Noninterest expense

 

 

47,726

 

 

 

44,830

 

 

6.5

 

Income tax expense

 

 

9,573

 

 

 

13,414

 

 

(28.6

)

Net income

 

 

23,918

 

 

 

33,310

 

 

(28.2

)

Diluted earnings per share

 

 

1.55

 

 

 

2.14

 

 

(27.6

)

Selected Balance Sheet Data:

 

 

 

 

 

 

Average loans(1)

 

$

1,744,878

 

 

$

1,578,218

 

 

10.6

%

Average deposits

 

 

1,829,717

 

 

 

1,716,758

 

 

6.6

 

Credit Quality:

 

 

 

 

 

 

Net charge-offs to average gross loans

 

 

0.04

%

 

 

%

 

0.04

%

Financial Ratios:

 

 

 

 

 

 

Return on average assets

 

 

1.13

%

 

 

1.74

%

 

(0.61

) %

Return on average equity

 

 

13.05

 

 

 

19.57

 

 

(6.52

)

Net interest margin

 

 

3.37

 

 

 

4.18

 

 

(0.81

)

Efficiency ratio(2)

 

 

57.59

 

 

 

47.42

 

 

10.17

 

 
(1)

Includes loans held for sale.

(2)

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

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 4Q2023 vs.

 

 

4Q2023

 

 

3Q2023

 

 

4Q2022

 

3Q2023

 

4Q2022

Interest Income

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

31,783

 

$

31,186

 

$

26,886

 

1.9

%

 

18.2

%

Interest expense

 

 

15,553

 

 

13,873

 

 

6,688

 

12.1

 

 

132.6

 

Net interest income

 

$

16,230

 

$

17,313

 

$

20,198

 

(6.3

) %

 

(19.6

) %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

4Q2023

 

3Q2023

 

4Q2022

 

Average

Balance

 

Interest

and Fees

 

Yield/Rate

(1)

 

Average

Balance

 

Interest

and Fees

 

Yield/Rate

(1)

 

Average

Balance

 

Interest

and Fees

 

Yield/Rate

(1)

Interest-earning Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

1,787,540

 

$

28,914

 

6.43

%

 

$

1,740,188

 

$

28,250

 

6.45

%

 

$

1,691,642

 

$

24,719

 

5.81

%

Total interest-earning assets

 

 

2,071,613

 

 

31,783

 

6.10

 

 

 

2,038,321

 

 

31,186

 

6.08

 

 

 

1,966,165

 

 

26,886

 

5.43

 

Interest-bearing Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

1,243,446

 

 

14,127

 

4.51

 

 

 

1,222,099

 

 

13,006

 

4.22

 

 

 

1,085,331

 

 

6,598

 

2.41

 

Total interest-bearing liabilities

 

 

1,362,210

 

 

15,553

 

4.53

 

 

 

1,301,990

 

 

13,873

 

4.23

 

 

 

1,093,489

 

 

6,688

 

2.43

 

Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income / interest rate spreads

 

 

 

 

16,230

 

1.57

 

 

 

 

 

17,313

 

1.85

 

 

 

 

 

20,198

 

3.00

 

Net interest margin

 

 

 

 

 

3.12

 

 

 

 

 

 

3.38

 

 

 

 

 

 

4.08

 

Total deposits / cost of deposits

 

 

1,813,411

 

 

14,127

 

3.09

 

 

 

1,821,361

 

 

13,006

 

2.83

 

 

 

1,836,736

 

 

6,598

 

1.43

 

Total funding liabilities / cost of funds

 

 

1,932,175

 

 

15,553

 

3.19

 

 

 

1,901,252

 

 

13,873

 

2.90

 

 

 

1,844,894

 

 

6,688

 

1.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Annualized.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

Yield Change 4Q2023

vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

 

Interest

& Fees

 

Yield(1)

 

Interest

& Fees

 

Yield(1)

 

Interest

& Fees

 

Yield(1)

 

3Q2023

 

4Q2022

Loan Yield Component:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual interest rate

 

$

28,596

 

 

6.36

%

 

$

27,319

 

 

6.24

%

 

$

23,694

 

 

5.57

%

 

0.12

%

 

0.79

%

SBA discount accretion

 

 

960

 

 

0.21

 

 

 

1,263

 

 

0.29

 

 

 

1,034

 

 

0.24

 

 

(0.08

)

 

(0.03

)

Amortization of net deferred fees

 

 

(67

)

 

-0.01

 

 

 

1

 

 

 

 

 

46

 

 

0.01

 

 

(0.01

)

 

(0.02

)

Amortization of premium

 

 

(423

)

 

(0.09

)

 

 

(445

)

 

(0.10

)

 

 

(344

)

 

(0.08

)

 

0.01

 

 

(0.01

)

Net interest recognized on nonaccrual loans

 

 

(345

)

 

(0.08

)

 

 

(26

)

 

(0.01

)

 

 

 

 

 

 

(0.07

)

 

(0.08

)

Prepayment penalties(2) and other fees

 

 

193

 

 

0.04

 

 

 

138

 

 

0.03

 

 

 

289

 

 

0.07

 

 

0.01

 

 

(0.03

)

Yield on loans

 

$

28,914

 

 

6.43

%

 

$

28,250

 

 

6.45

%

 

$

24,719

 

 

5.81

%

 

(0.02

) %

 

0.62

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of Net Deferred Fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PPP loan forgiveness

 

$

 

 

%

 

$

3

 

 

%

 

$

15

 

 

%

 

%

 

%

Other

 

 

(67

)

 

(0.01

)

 

 

(2

)

 

 

 

 

31

 

 

0.01

 

 

(0.01

)

 

(0.02

)

Total amortization of net deferred fees

 

$

(67

)

 

(0.01

) %

 

$

1

 

 

%

 

$

46

 

 

0.01

%

 

(0.01

) %

 

(0.02

) %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Annualized.

(2)

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

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

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

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

 

4Q2023

 

 

 

3Q2023

 

 

 

4Q2022

 

Hana Loan Purchase:

 

 

 

 

 

 

Contractual interest rate

 

$

1,160

 

 

$

1,383

 

 

$

1,286

 

Purchased loan discount accretion

 

 

226

 

 

 

513

 

 

 

374

 

Other fees

 

 

9

 

 

 

27

 

 

 

25

 

Total interest income

 

$

1,395

 

 

$

1,923

 

 

$

1,685

 

 

 

 

 

 

 

 

Effect on average loan yield(1)

 

 

0.14

%

 

 

0.25

%

 

 

0.20

%

Effect on net interest margin(1)

 

 

0.20

%

 

 

0.30

%

 

 

0.22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

4Q2023

 

3Q2023

 

4Q2022

 

Average

Balance

 

Interest

and Fees

 

Yield/

Rate

 

Average

Balance

 

Interest

and Fees

 

Yield/

Rate

 

Average

Balance

 

Interest

and Fees

 

Yield/

Rate

Average loan yield(1)

 

$

1,787,540

 

$

28,914

 

6.43

%

 

$

1,740,188

 

$

28,250

 

6.45

%

 

$

1,691,642

 

$

24,719

 

5.81

%

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

 

 

1,739,603

 

 

27,519

 

6.29

 

 

 

1,688,404

 

 

26,327

 

6.20

 

 

 

1,631,128

 

 

23,034

 

5.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin(1)

 

 

2,071,613

 

 

16,230

 

3.12

 

 

 

2,038,321

 

 

17,313

 

3.38

 

 

 

1,966,165

 

 

20,198

 

4.08

 

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

 

 

2,023,676

 

 

14,835

 

2.92

 

 

 

1,986,537

 

 

15,390

 

3.08

 

 

 

1,905,651

 

 

18,513

 

3.86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Annualized.

(2)

See reconciliation of GAAP to non-GAAP financial measures.

Fourth Quarter 2023 vs. Third Quarter 2023

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

  • A $1.1 million increase in interest expense on interest-bearing deposits was primarily due to a 29 basis point increase in average cost as deposit accounts continued to reprice following the Federal Reserve’s rate increases in 2022 and 2023.
  • A $559 thousand increase in interest expense on borrowings was primarily due to a $38.9 million, or 49%, increase in average balance to complement our liability management strategy for effective cost controls.
  • A $664 thousand increase in interest income on loans was primarily due to a $47.4 million, or 3%, increase in average balance.

Fourth Quarter 2023 vs. Fourth Quarter 2022

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

  • A $7.5 million increase in interest expense on interest-bearing deposits was primarily due to a $158.1 million, or 15%, increase in average balance and a 210 basis point increase in average cost driven by the Federal Reserve’s rate increases.
  • A $1.3 million increase in interest expense on borrowings was primarily due to a $110.6 million, or 1,356%, increase in average balance and a 41 basis point increase in average cost driven by the Federal Reserve’s rate increases.
  • A $4.2 million increase in interest income on loans was primarily due to a $95.9 million, or 6%, increase in average balance and a 62 basis point increase in average yield as a result of the Federal Reserve’s rate increases.

Provision for Credit Losses

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

 

4Q2023

 

 

3Q2023

 

 

4Q2022

Provision for credit losses on loans

 

$

537

 

$

1,303

 

$

977

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

 

 

93

 

 

56

 

 

74

Total provision for credit losses

 

$

630

 

$

1,359

 

$

1,051

 

 

 

 

 

 

 

(1)

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

Fourth Quarter 2023 vs. Third Quarter 2023

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

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

Fourth Quarter 2023 vs. Fourth Quarter 2022

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

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 4Q2023 vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

3Q2023

 

4Q2022

Noninterest Income

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

 

$

557

 

$

575

 

$

406

 

(3.1

) %

 

37.2

%

Loan servicing fees, net of amortization

 

 

540

 

 

468

 

 

705

 

15.4

 

 

(23.4

)

Gain on sale of loans

 

 

1,996

 

 

1,179

 

 

1,684

 

69.3

 

 

18.5

 

Other income

 

 

587

 

 

379

 

 

428

 

54.9

 

 

37.1

 

Total noninterest income

 

$

3,680

 

$

2,601

 

$

3,223

 

41.5

%

 

14.2

%

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarter 2023 vs. Third Quarter 2023

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

  • Gain on sale of loans was $2.0 million, an increase of $817 thousand from $1.2 million, primarily due to a higher SBA loan sold amount. The Bank sold $40.1 million in SBA loans at an average premium rate of 5.99%, compared to the sale of $23.4 million at an average premium rate of 6.50%.
  • Other income was $587 thousand, an increase of $208 thousand from $379 thousand. The increase was primarily due to a $259 thousand increase in holding gain on equity investment for CRA purposes driven by a significant drop in the yields curve.

Fourth Quarter 2023 vs. Fourth Quarter 2022

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

  • Gain on sale of loans was $2.0 million, an increase of $312 thousand from $1.7 million, primarily due to a higher SBA loan sold amount. The Bank sold $40.1 million in SBA loans at an average premium rate of 5.99%, compared to the sale of $32.2 million at an average premium rate of 6.13%.
  • Service charges on deposits was $557 thousand, and increase of $151 thousand from $406 thousand, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts.
  • Loan servicing fees, net of amortization was $540 thousand, a decrease of $165 thousand from $705 thousand, primarily due to an increase in servicing fee amortization driven by higher loan payoffs.
  • Other income was $587 thousand, an increase of $159 thousand from $428 thousand, primarily due to a $146 thousand increase in holding gain on equity investment for CRA purposes driven by a drop in the yield curve.

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 4Q2023 vs.

 

 

4Q2023

 

 

3Q2023

 

 

4Q2022

 

3Q2023

 

4Q2022

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

$

7,646

 

$

7,014

 

$

7,080

 

9.0

%

 

8.0

%

Occupancy and equipment

 

 

1,616

 

 

1,706

 

 

1,560

 

(5.3

)

 

3.6

 

Data processing and communication

 

 

644

 

 

369

 

 

514

 

74.5

 

 

25.3

 

Professional fees

 

 

391

 

 

440

 

 

330

 

(11.1

)

 

18.5

 

FDIC insurance and regulatory assessments

 

 

237

 

 

333

 

 

176

 

(28.8

)

 

34.7

 

Promotion and advertising

 

 

86

 

 

207

 

 

12

 

(58.5

)

 

616.7

 

Directors’ fees

 

 

145

 

 

164

 

 

145

 

(11.6

)

 

 

Foundation donation and other contributions

 

 

524

 

 

529

 

 

851

 

(0.9

)

 

(38.4

)

Other expenses

 

 

694

 

 

773

 

 

659

 

(10.2

)

 

5.3

 

Total noninterest expense

 

$

11,983

 

$

11,535

 

$

11,327

 

3.9

%

 

5.8

%

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarter 2023 vs. Third Quarter 2023

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

  • Salaries and employee benefits increased $632 thousand, primarily due to a $491 thousand increase in employee incentive accruals.
  • Data processing and communication increased $275 thousand primarily due to an accrual adjustment for a credit received on data processing fees in the third quarter of 2023.
  • Promotion and advertising decreased $121 thousand, FDIC insurance and regulatory assessments decreased $96 thousand, and occupancy and equipment decreased $90 thousand, primarily due to year end accrual adjustments.

Fourth Quarter 2023 vs. Fourth Quarter 2022

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

  • Salaries and employee benefits increased $566 thousand, primarily due to an increase from employee salary adjustments in 2023 and an increase in employee incentive accruals.
  • Data processing and communication increased $130 thousand, primarily due to an increase in data and item processing fees in line with the Bank’s growth.
  • Foundation donations and other contributions decreased $327 thousand, primarily due to a lower donation accrual for Open Stewardship as a result of lower net income.

Income Tax Expense

Fourth Quarter 2023 vs. Third Quarter 2023

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

Fourth Quarter 2023 vs. Fourth Quarter 2022

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

BALANCE SHEET HIGHLIGHTS

Loans

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of

 

% Change 4Q2023 vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

3Q2023

 

4Q2022

CRE loans

 

$

885,585

 

$

878,824

 

$

842,208

 

0.8

%

 

5.2

%

SBA loans

 

 

239,692

 

 

240,154

 

 

234,717

 

(0.2

)

 

2.1

 

C&I loans

 

 

120,970

 

 

124,632

 

 

116,951

 

(2.9

)

 

3.4

 

Home mortgage loans

 

 

518,024

 

 

515,789

 

 

482,949

 

0.4

 

 

7.3

 

Consumer & other loans

 

 

1,574

 

 

126

 

 

1,467

 

n/m

 

 

7.3

 

Gross loans

 

$

1,765,845

 

$

1,759,525

 

$

1,678,292

 

0.4

%

 

5.2

%

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 4Q2023 vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

3Q2023

 

4Q2022

CRE loans

 

$

15,885

 

$

33,222

 

$

44,416

 

(52.2

) %

 

(64.2

) %

SBA loans

 

 

51,855

 

 

39,079

 

 

55,594

 

32.7

 

 

(6.7

)

C&I loans

 

 

15,270

 

 

14,617

 

 

46,014

 

4.5

 

 

(66.8

)

Home mortgage loans

 

 

12,417

 

 

9,137

 

 

28,188

 

35.9

 

 

(55.9

)

Consumer & other loans

 

 

1,500

 

 

 

 

 

 

 

 

Gross loans

 

$

96,927

 

$

96,055

 

$

174,212

 

0.9

%

 

(44.4

) %

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

For the Twelve Months Ended

 

 

4Q2023

 

 

 

3Q2023

 

 

 

4Q2022

 

 

 

4Q2023

 

 

 

4Q2022

 

Loan Activities:

 

 

 

 

 

 

 

 

 

 

Gross loans, beginning

 

$

1,759,525

 

 

$

1,716,197

 

 

$

1,618,018

 

 

$

1,678,292

 

 

 

1,314,019

 

New originations

 

 

96,927

 

 

 

96,055

 

 

 

174,212

 

 

 

374,503

 

 

 

645,188

 

Net line advances

 

 

(7,350

)

 

 

22,146

 

 

 

(80,144

)

 

 

(809

)

 

 

(120,820

)

Purchases

 

 

2,371

 

 

 

6,732

 

 

 

49,980

 

 

 

27,604

 

 

 

225,133

 

Sales

 

 

(40,122

)

 

 

(23,377

)

 

 

(32,204

)

 

 

(145,311

)

 

 

(182,315

)

Paydowns

 

 

(19,901

)

 

 

(22,169

)

 

 

(22,939

)

 

 

(99,470

)

 

 

(73,975

)

Payoffs

 

 

(23,590

)

 

 

(36,024

)

 

 

(23,238

)

 

 

(113,909

)

 

 

(139,544

)

PPP payoffs

 

 

 

 

 

(250

)

 

 

(657

)

 

 

(450

)

 

 

(41,289

)

Decrease in loans held for sale

 

 

(1,795

)

 

 

 

 

 

(7,693

)

 

 

42,541

 

 

 

 

Other

 

 

(220

)

 

 

215

 

 

 

2,957

 

 

 

2,854

 

 

 

51,895

 

Total

 

 

6,320

 

 

 

43,328

 

 

 

60,274

 

 

 

87,553

 

 

 

364,273

 

Gross loans, ending

 

$

1,765,845

 

 

$

1,759,525

 

 

$

1,678,292

 

 

$

1,765,845

 

 

$

1,678,292

 

 

 

 

 

 

 

 

 

 

 

 

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

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

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

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

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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of

 

4Q2023

 

3Q2023

 

4Q2022

 

%

 

Rate

 

%

 

Rate

 

%

 

Rate

Fixed rate

 

35.1

%

 

5.07

%

 

36.3

%

 

4.95

%

 

36.0

%

 

4.63

%

Hybrid rate

 

33.9

 

 

5.15

 

 

34.0

 

 

5.08

 

 

33.8

 

 

4.79

 

Variable rate

 

31.0

 

 

9.15

 

 

29.7

 

 

9.23

 

 

30.2

 

 

8.46

 

Gross loans

 

100.0

%

 

6.36

%

 

100.0

%

 

6.27

%

 

100.0

%

 

5.84

%

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of December 31, 2023

 

Within One Year

 

One Year Through

Five Years

 

After Five Years

 

Total

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

Fixed rate

 

$

85,254

 

5.55

%

 

$

300,165

 

4.89

%

 

$

235,510

 

5.13

%

 

$

620,929

 

5.07

%

Hybrid rate

 

 

 

 

 

 

122,695

 

4.28

 

 

 

475,633

 

5.38

 

 

 

598,328

 

5.15

 

Variable rate

 

 

116,289

 

8.83

 

 

 

110,647

 

9.02

 

 

 

319,652

 

9.31

 

 

 

546,588

 

9.15

 

Gross loans

 

$

201,543

 

7.44

%

 

$

533,507

 

5.60

%

 

$

1,030,795

 

6.54

%

 

$

1,765,845

 

6.36

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for Credit Losses

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

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

 

 

 

 

 

 

 

 

 

($ in thousands)

 

Allowance For

Credit Losses on

Loans

 

Allowance For

Credit Losses on

Off-Balance

Sheet Exposure

 

Deferred Tax

Assets

 

Retained

Earnings

As of December 31, 2022

 

$

19,241

 

$

263

 

$

14,316

 

$

105,690

 

Day 1 adjustments on January 1, 2023

 

 

1,924

 

 

184

 

 

624

 

 

(1,484

)

After Day 1 adjustments

 

$

21,165

 

$

447

 

$

14,940

 

$

104,206

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of and For the Three Months Ended

 

% Change 4Q2023 vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

3Q2023

 

4Q2022

Allowance for credit losses on loans, beginning

 

$

21,617

 

 

$

20,802

 

 

$

18,369

 

 

3.9

%

 

17.7

%

Provision for credit losses

 

 

537

 

 

 

1,303

 

 

 

977

 

 

(58.8

)

 

(45.0

)

Gross charge-offs

 

 

(236

)

 

 

(492

)

 

 

(109

)

 

(52.0

)

 

116.5

 

Gross recoveries

 

 

75

 

 

 

4

 

 

 

4

 

 

1775.0

 

 

1775.0

 

Net charge-offs

 

 

(161

)

 

 

(488

)

 

 

(105

)

 

(67.0

)

 

53.3

 

Allowance for credit losses on loans, ending(1)

 

$

21,993

 

 

$

21,617

 

 

$

19,241

 

 

1.7

%

 

14.3

%

 

 

 

 

 

 

 

 

 

 

 

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

 

$

423

 

 

$

367

 

 

$

189

 

 

15.3

%

 

123.8

%

Impact of CECL adoption

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

93

 

 

 

56

 

 

 

74

 

 

66.1

 

 

25.7

 

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

 

$

516

 

 

$

423

 

 

$

263

 

 

22.0

%

 

96.2

%

 

 

 

 

 

 

 

 

 

 

 

(1)

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

Asset Quality

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of and For the Three Months Ended

 

Change 4Q2023 vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

3Q2023

 

4Q2022

Loans 30-89 days past due and still accruing

 

$

9,607

 

 

$

8,356

 

 

$

3,477

 

 

15.0

%

 

176.3

%

As a % of gross loans

 

 

0.54

%

 

 

0.47

%

 

 

0.21

%

 

0.07

 

 

0.33

 

 

 

 

 

 

 

 

 

 

 

 

Nonperforming loans(1)

 

$

6,082

 

 

$

4,211

 

 

$

2,033

 

 

44.4

%

 

199.2

%

Nonperforming assets(1)

 

 

6,082

 

 

 

4,211

 

 

 

2,033

 

 

44.4

 

 

199.2

 

Nonperforming loans to gross loans

 

 

0.34

%

 

 

0.24

%

 

 

0.12

%

 

0.10

 

 

0.22

 

Nonperforming assets to total assets

 

 

0.28

%

 

 

0.20

%

 

 

0.10

%

 

0.08

 

 

0.18

 

 

 

 

 

 

 

 

 

 

 

 

Criticized loans(1)(2)

 

$

13,349

 

 

$

13,790

 

 

$

3,264

 

 

(3.2

) %

 

309.0

%

Criticized loans to gross loans

 

 

0.76

%

 

 

0.78

%

 

 

0.19

%

 

(0.02

)

 

0.57

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses ratios:

 

 

 

 

 

 

 

 

 

 

As a % of gross loans

 

 

1.25

%

 

 

1.23

%

 

 

1.15

%

 

0.02

%

 

0.10

%

As an adjusted % of gross loans(3)

 

 

1.27

 

 

 

1.26

 

 

 

1.18

 

 

0.01

 

 

0.09

 

As a % of nonperforming loans

 

 

362

 

 

 

513

 

 

 

946

 

 

(151

)

 

(584

)

As a % of nonperforming assets

 

 

362

 

 

 

513

 

 

 

946

 

 

(151

)

 

(584

)

As a % of criticized loans

 

 

165

 

 

 

157

 

 

 

589

 

 

8

 

 

(424

)

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

 

 

0.04

 

 

 

0.11

 

 

 

0.03

 

 

(0.07

)

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

(2)

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

(3)

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

(4)

Annualized.

(5)

Includes loans held for sale.

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

  • Loans 30-89 days past due and still accruing were $9.6 million or 0.54% of gross loans as of December 31, 2023, compared with $8.4 million or 0.47% as of September 30, 2023. Subsequent to December 31, 2023, payments on loans totaling $3.2 million were collected, and the loans are now current.
  • Nonperforming loans were $6.1 million or 0.34% of gross loans as of December 31, 2023, compared with $4.2 million or 0.24% as of September 30, 2023. The increase was due to an addition of $2.2 million on two SBA loans, one of which was from Hana purchased pool of loans with discount. The loans were individually evaluated for impairment, and a $183 thousand provision for credit losses was recorded. Of these nonperforming loans, two loans totaling $1.8 million are under workout and performing, three loans totaling $3.4 million are listed for sale, and two loans totaling $528 thousand are performing and current. The Bank expects minimum losses from these loans.
  • Nonperforming assets were $6.1 million or 0.28% of total assets as of December 31, 2023, compared with $4.2 million or 0.20% as of September 30, 2023. The Company did not have OREO as of December 31, 2023 or September 30, 2023.
  • Criticized loans were $13.3 million or 0.76% of gross loans as of December 31, 2023, compared with $13.8 million or 0.78% as of September 30, 2023.
  • Net charge-offs were $161 thousand or 0.04% of average loans in the fourth quarter of 2023, compared to net charge-offs of $488 thousand, or 0.11% of average loans in the third quarter of 2023 and of $105 thousand, or 0.03% of average loans in the fourth quarter of 2022.

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of

 

% Change 4Q2023 vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

 

Amount

 

%

 

Amount

 

%

 

Amount

 

%

 

3Q2023

 

 

4Q2022

 

Noninterest-bearing deposits

 

$

522,751

 

28.9

%

 

$

605,509

 

33.2

%

 

$

701,584

 

37.2

%

 

(13.7

) %

 

(25.5

) %

Money market deposits and others

 

 

399,018

 

22.1

 

 

 

348,869

 

19.1

 

 

 

526,321

 

27.9

 

 

14.4

 

 

(24.2

)

Time deposits

 

 

885,789

 

49.0

 

 

 

870,793

 

47.7

 

 

 

657,866

 

34.9

 

 

1.7

 

 

34.6

 

Total deposits

 

$

1,807,558

 

100.0

%

 

$

1,825,171

 

100.0

%

 

$

1,885,771

 

100.0

%

 

(1.0

) %

 

(4.1

) %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated uninsured deposits

 

$

1,156,270

 

64.0

%

 

$

1,061,964

 

58.2

%

 

$

938,329

 

49.8

%

 

8.9

%

 

23.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

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

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

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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2023

($ in thousands)

 

Within

Three

Months

 

Three to

Six Months

 

Six to Nine

Months

 

Nine to

Twelve

Months

 

After

Twelve

Months

 

Total

Time deposits (more than $250)

 

$

177,329

 

 

$

75,343

 

 

$

48,158

 

 

$

130,795

 

 

$

2,267

 

 

$

433,892

 

Time deposits ($250 or less)

 

 

94,692

 

 

 

131,152

 

 

 

60,472

 

 

 

123,316

 

 

 

42,265

 

 

 

451,897

 

Total time deposits

 

$

272,021

 

 

$

206,495

 

 

$

108,630

 

 

$

254,111

 

 

$

44,532

 

 

$

885,789

 

Weighted average rate

 

 

4.54

%

 

 

4.92

%

 

 

4.89

%

 

 

5.17

%

 

 

4.16

%

 

 

4.83

%

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER HIGHLIGHTS

Liquidity

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

 

 

 

 

 

($ in thousands)

 

 

4Q2023

 

 

 

3Q2023

 

 

 

4Q2022

 

Liquidity Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

91,216

 

 

$

105,740

 

 

$

82,972

 

Available-for-sale debt securities

 

 

194,250

 

 

 

191,313

 

 

 

209,809

 

Liquid assets

 

$

285,466

 

 

$

297,053

 

 

$

292,781

 

Liquid assets to total assets

 

 

13.3

%

 

 

13.9

%

 

 

14.0

%

 

 

 

 

 

 

 

Available borrowings:

 

 

 

 

 

 

Federal Home Loan Bank—San Francisco

 

$

363,615

 

 

$

375,874

 

 

$

440,358

 

Federal Reserve Bank

 

 

182,989

 

 

 

186,380

 

 

 

175,605

 

Pacific Coast Bankers Bank

 

 

50,000

 

 

 

50,000

 

 

 

50,000

 

Zions Bank

 

 

25,000

 

 

 

25,000

 

 

 

25,000

 

First Horizon Bank

 

 

25,000

 

 

 

25,000

 

 

 

24,950

 

Total available borrowings

 

$

646,604

 

 

$

662,254

 

 

$

715,913

 

Total available borrowings to total assets

 

 

30.1

%

 

 

30.9

%

 

 

34.2

%

 

 

 

 

 

 

 

Liquid assets and available borrowings to total deposits

 

 

51.6

%

 

 

52.6

%

 

 

53.5

%

 

 

 

 

 

Capital and Capital Ratios

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

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

 

 

 

 

 

 

 

 

 

 

 

Basel III

 

OP Bancorp(1)

 

Open Bank

 

Minimum

Well

Capitalized

Ratio

 

Minimum

Capital Ratio+

Conservation

Buffer(2)

Risk-Based Capital Ratios:

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

13.77

%

 

13.66

%

 

10.00

%

 

10.50

%

Tier 1 risk-based capital ratio

 

12.52

 

 

12.41

 

 

8.00

 

 

8.50

 

Common equity tier 1 ratio

 

12.52

 

 

12.41

 

 

6.50

 

 

7.00

 

Leverage ratio

 

9.57

 

 

9.49

 

 

5.00

 

 

4.00

 

 

 

 

 

 

 

 

 

 

(1)

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

(2)

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

 

 

 

 

 

 

 

 

 

 

 

OP Bancorp

 

Basel III

 

Change 4Q2023 vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

3Q2023

 

4Q2022

Risk-Based Capital Ratios:

 

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

 

13.77

%

 

 

13.31

%

 

 

13.06

%

 

0.46

%

 

0.71

%

Tier 1 risk-based capital ratio

 

 

12.52

 

 

 

12.09

 

 

 

11.87

 

 

0.43

 

 

0.65

 

Common equity tier 1 ratio

 

 

12.52

 

 

 

12.09

 

 

 

11.87

 

 

0.43

 

 

0.65

 

Leverage ratio

 

 

9.57

 

 

 

9.63

 

 

 

9.38

 

 

(0.06

)

 

0.19

 

Risk-weighted Assets ($ in thousands)

 

$

1,667,067

 

 

$

1,707,318

 

 

$

1,638,040

 

 

(2.36

)

 

1.77

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

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

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

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

 

4Q2023

 

 

3Q2023

 

 

4Q2022

Interest income

 

$

31,783

 

$

31,186

 

$

26,886

Interest expense

 

 

15,553

 

 

13,873

 

 

6,688

Net interest income

 

 

16,230

 

 

17,313

 

 

20,198

Noninterest income

 

 

3,680

 

 

2,601

 

 

3,223

Noninterest expense

 

 

11,983

 

 

11,535

 

 

11,327

Pre-provision net revenue

(a)

$

7,927

 

$

8,379

 

$

12,094

Reconciliation to net income

 

 

 

 

 

 

Provision for credit losses

(b)

 

630

 

 

1,359

 

 

977

Income tax expense

(c)

 

2,125

 

 

1,899

 

 

3,089

Net income

(a)-(b)-(c)

$

5,172

 

$

5,121

 

$

8,028

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

4Q2023

 

3Q2023

 

4Q2022

Yield on Average Loans

 

 

 

 

 

 

Interest income on loans

 

$

28,914

 

 

$

28,250

 

 

$

24,719

 

Less: interest income on purchased Hana loans

 

 

1,395

 

 

 

1,923

 

 

 

1,685

 

Adjusted interest income on loans

(a)

$

27,519

 

 

$

26,327

 

 

$

23,034

 

 

 

 

 

 

 

 

Average loans

 

$

1,787,540

 

 

$

1,740,188

 

 

$

1,691,642

 

Less: Average purchased Hana loans

 

 

47,937

 

 

 

51,784

 

 

 

60,514

 

Adjusted average loans

(b)

$

1,739,603

 

 

$

1,688,404

 

 

$

1,631,128

 

 

 

 

 

 

 

 

Average loan yield(1)

 

 

6.43

%

 

 

6.45

%

 

 

5.81

%

Effect on average loan yield(1)

 

 

0.14

 

 

 

0.25

 

 

 

0.20

 

Adjusted average loan yield(1)

(a)/(b)

 

6.29

%

 

 

6.20

%

 

 

5.61

%

 

 

 

 

 

 

 

Net Interest Margin

 

 

 

 

 

 

Net interest income

 

$

16,230

 

 

$

17,313

 

 

$

20,198

 

Less: interest income on purchased Hana loans

 

 

1,395

 

 

 

1,923

 

 

 

1,685

 

Adjusted net interest income

(c)

$

14,835

 

 

$

15,390

 

 

$

18,513

 

 

 

 

 

 

 

 

Average interest-earning assets

 

$

2,071,613

 

 

$

2,038,321

 

 

$

1,966,165

 

Less: Average purchased Hana loans

 

 

47,937

 

 

 

51,784

 

 

 

60,514

 

Adjusted average interest-earning assets

(d)

$

2,023,676

 

 

$

1,986,537

 

 

$

1,905,651

 

 

 

 

 

 

 

 

Net interest margin(1)

 

 

3.12

%

 

 

3.38

%

 

 

4.08

%

Effect on net interest margin(1)

 

 

0.20

 

 

 

0.30

 

 

 

0.22

 

Adjusted net interest margin(1)

(c)/(d)

 

2.92

%

 

 

3.08

%

 

 

3.86

%

 

 

 

 

 

 

 

(1)

Annualized.

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

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

 

4Q2023

 

 

 

3Q2023

 

 

 

4Q2022

 

Gross loans

 

$

1,765,845

 

 

$

1,759,525

 

 

$

1,678,292

 

Less: Purchased Hana loans

 

 

(47,272

)

 

 

(48,780

)

 

 

(58,966

)

PPP loans(1)

 

 

(1

)

 

 

(1

)

 

 

(434

)

Adjusted gross loans

(a)

$

1,718,572

 

 

$

1,710,744

 

 

$

1,618,892

 

 

 

 

 

 

 

 

Accrued interest receivable on loans

 

$

7,331

 

 

$

7,057

 

 

$

6,413

 

Less: Accrued interest receivable on purchased Hana loans

 

 

(306

)

 

 

(402

)

 

 

(397

)

Accrued interest receivable on PPP loans

 

 

 

 

 

 

 

 

(8

)

Adjusted accrued interest receivable on loans

(b)

$

7,025

 

 

$

6,655

 

 

$

6,008

 

Adjusted gross loans and accrued interest receivable

(a)+(b)=(c)

$

1,725,597

 

 

$

1,717,399

 

 

$

1,624,900

 

 

 

 

 

 

 

 

Allowance for credit losses

 

$

21,993

 

 

$

21,617

 

 

$

19,241

 

Add: Allowance on accrued interest receivable

 

 

 

 

 

 

 

 

 

Adjusted Allowance

(d)

$

21,993

 

 

$

21,617

 

 

$

19,241

 

Adjusted allowance to gross loans ratio

(d)/(c)

 

1.27

%

 

 

1.26

%

 

 

1.18

%

 

 

 

 

 

 

 

(1)

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

ABOUT OP BANCORP

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

Cautionary Note Regarding Forward-Looking Statements

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

CONSOLIDATED BALANCE SHEETS (unaudited)

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of

 

% Change 4Q2023 vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

3Q2023

 

4Q2022

Assets

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

16,948

 

 

$

21,748

 

 

$

12,952

 

 

(22.1

) %

 

30.9

%

Interest-bearing deposits in other banks

 

 

74,268

 

 

 

83,992

 

 

 

70,020

 

 

(11.6

)

 

6.1

 

Cash and cash equivalents

 

 

91,216

 

 

 

105,740

 

 

 

82,972

 

 

(13.7

)

 

9.9

 

Available-for-sale debt securities, at fair value

 

 

194,250

 

 

 

191,313

 

 

 

209,809

 

 

1.5

 

 

(7.4

)

Other investments

 

 

16,276

 

 

 

16,100

 

 

 

12,098

 

 

1.1

 

 

34.5

 

Loans held for sale

 

 

1,795

 

 

 

 

 

 

44,335

 

 

n/m

 

 

(96.0

)

CRE loans

 

 

885,585

 

 

 

878,824

 

 

 

842,208

 

 

0.8

 

 

5.2

 

SBA loans

 

 

239,692

 

 

 

240,154

 

 

 

234,717

 

 

(0.2

)

 

2.1

 

C&I loans

 

 

120,970

 

 

 

124,632

 

 

 

116,951

 

 

(2.9

)

 

3.4

 

Home mortgage loans

 

 

518,024

 

 

 

515,789

 

 

 

482,949

 

 

0.4

 

 

7.3

 

Consumer loans

 

 

1,574

 

 

 

126

 

 

 

1,467

 

 

n/m

 

 

7.3

 

Gross loans receivable

 

 

1,765,845

 

 

 

1,759,525

 

 

 

1,678,292

 

 

0.4

 

 

5.2

 

Allowance for credit losses

 

 

(21,993

)

 

 

(21,617

)

 

 

(19,241

)

 

1.7

 

 

14.3

 

Net loans receivable

 

 

1,743,852

 

 

 

1,737,908

 

 

 

1,659,051

 

 

0.3

 

 

5.1

 

Premises and equipment, net

 

 

5,248

 

 

 

5,378

 

 

 

4,400

 

 

(2.4

)

 

19.3

 

Accrued interest receivable, net

 

 

8,259

 

 

 

7,996

 

 

 

7,180

 

 

3.3

 

 

15.0

 

Servicing assets

 

 

11,741

 

 

 

11,931

 

 

 

12,759

 

 

(1.6

)

 

(8.0

)

Company owned life insurance

 

 

22,233

 

 

 

22,071

 

 

 

21,613

 

 

0.7

 

 

2.9

 

Deferred tax assets, net

 

 

13,309

 

 

 

15,061

 

 

 

14,316

 

 

(11.6

)

 

(7.0

)

Operating right-of-use assets

 

 

8,497

 

 

 

8,993

 

 

 

9,097

 

 

(5.5

)

 

(6.6

)

Other assets

 

 

31,054

 

 

 

20,184

 

 

 

16,867

 

 

53.9

 

 

84.1

 

Total assets

 

$

2,147,730

 

 

$

2,142,675

 

 

$

2,094,497

 

 

0.2

%

 

2.5

%

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

522,751

 

 

$

605,509

 

 

$

701,584

 

 

(13.7

) %

 

(25.5

) %

Money market and others

 

 

399,018

 

 

 

348,869

 

 

 

526,321

 

 

14.4

 

 

(24.2

)

Time deposits greater than $250

 

 

433,892

 

 

 

420,162

 

 

 

356,197

 

 

3.3

 

 

21.8

 

Other time deposits

 

 

451,897

 

 

 

450,631

 

 

 

301,669

 

 

0.3

 

 

49.8

 

Total deposits

 

 

1,807,558

 

 

 

1,825,171

 

 

 

1,885,771

 

 

(1.0

)

 

(4.1

)

Federal Home Loan Bank advances

 

 

105,000

 

 

 

95,000

 

 

 

 

 

10.5

 

 

n/m

 

Accrued interest payable

 

 

12,628

 

 

 

13,552

 

 

 

2,771

 

 

(6.8

)

 

355.7

 

Operating lease liabilities

 

 

9,341

 

 

 

9,926

 

 

 

10,213

 

 

(5.9

)

 

(8.5

)

Other liabilities

 

 

20,538

 

 

 

14,719

 

 

 

18,826

 

 

39.5

 

 

9.1

 

Total liabilities

 

 

1,955,065

 

 

 

1,958,368

 

 

 

1,917,581

 

 

(0.2

)

 

2.0

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

76,319

 

 

 

77,632

 

 

 

79,326

 

 

(1.7

)

 

(3.8

)

Additional paid-in capital

 

 

10,942

 

 

 

10,606

 

 

 

9,743

 

 

3.2

 

 

12.3

 

Retained earnings

 

 

120,855

 

 

 

117,483

 

 

 

105,690

 

 

2.9

 

 

14.3

 

Accumulated other comprehensive loss

 

 

(15,451

)

 

 

(21,414

)

 

 

(17,843

)

 

(27.8

)

 

(13.4

)

Total shareholders’ equity

 

 

192,665

 

 

 

184,307

 

 

 

176,916

 

 

4.5

 

 

8.9

 

Total liabilities and shareholders' equity

 

$

2,147,730

 

 

$

2,142,675

 

 

$

2,094,497

 

 

0.2

%

 

2.5

%

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

 

 

 

 

 

 

 

 

 

 

 

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

 

For the Three Months Ended

 

% Change 4Q2023 vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

3Q2023

 

4Q2022

Interest income

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

28,914

 

$

28,250

 

$

24,719

 

2.4

%

 

17.0

%

Interest on available-for-sale debt securities

 

 

1,484

 

 

1,519

 

 

1,237

 

(2.3

)

 

20.0

 

Other interest income

 

 

1,385

 

 

1,417

 

 

930

 

(2.3

)

 

48.9

 

Total interest income

 

 

31,783

 

 

31,186

 

 

26,886

 

1.9

 

 

18.2

 

Interest expense

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

14,127

 

 

13,006

 

 

6,597

 

8.6

 

 

114.1

 

Interest on borrowings

 

 

1,426

 

 

867

 

 

91

 

64.5

 

 

n/m

 

Total interest expense

 

 

15,553

 

 

13,873

 

 

6,688

 

12.1

 

 

132.6

 

Net interest income

 

 

16,230

 

 

17,313

 

 

20,198

 

(6.3

)

 

(19.6

)

Provision for credit losses

 

 

630

 

 

1,359

 

 

977

 

(53.6

)

 

(35.5

)

Net interest income after provision for credit losses

 

 

15,600

 

 

15,954

 

 

19,221

 

(2.2

)

 

(18.8

)

Noninterest income

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

 

 

557

 

 

575

 

 

406

 

(3.1

)

 

37.2

 

Loan servicing fees, net of amortization

 

 

540

 

 

468

 

 

705

 

15.4

 

 

(23.4

)

Gain on sale of loans

 

 

1,996

 

 

1,179

 

 

1,684

 

69.3

 

 

18.5

 

Other income

 

 

587

 

 

379

 

 

428

 

54.9

 

 

37.1

 

Total noninterest income

 

 

3,680

 

 

2,601

 

 

3,223

 

41.5

 

 

14.2

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

7,646

 

 

7,014

 

 

7,080

 

9.0

 

 

8.0

 

Occupancy and equipment

 

 

1,616

 

 

1,706

 

 

1,560

 

(5.3

)

 

3.6

 

Data processing and communication

 

 

644

 

 

369

 

 

514

 

74.5

 

 

25.3

 

Professional fees

 

 

391

 

 

440

 

 

330

 

(11.1

)

 

18.5

 

FDIC insurance and regulatory assessments

 

 

237

 

 

333

 

 

176

 

(28.8

)

 

34.7

 

Promotion and advertising

 

 

86

 

 

207

 

 

12

 

(58.5

)

 

616.7

 

Directors’ fees

 

 

145

 

 

164

 

 

145

 

(11.6

)

 

 

Foundation donation and other contributions

 

 

524

 

 

529

 

 

851

 

(0.9

)

 

(38.4

)

Other expenses

 

 

694

 

 

773

 

 

659

 

(10.2

)

 

5.3

 

Total noninterest expense

 

 

11,983

 

 

11,535

 

 

11,327

 

3.9

 

 

5.8

 

Income before income tax expense

 

 

7,297

 

 

7,020

 

 

11,117

 

3.9

 

 

(34.4

)

Income tax expense

 

 

2,125

 

 

1,899

 

 

3,089

 

11.9

 

 

(31.2

)

Net income

 

$

5,172

 

$

5,121

 

$

8,028

 

1.0

%

 

(35.6

) %

 

 

 

 

 

 

 

 

 

 

 

Book value per share

 

$

12.84

 

$

12.17

 

$

11.59

 

5.5

%

 

10.8

%

Earnings per share - basic

 

 

0.34

 

 

0.33

 

 

0.52

 

3.0

 

 

(34.6

)

Earnings per share - diluted

 

 

0.34

 

 

0.33

 

 

0.51

 

3.0

 

 

(33.3

)

 

 

 

 

 

 

 

 

 

 

 

Shares of common stock outstanding, at period end

 

 

15,000,436

 

 

15,149,203

 

 

15,270,344

 

(1.0

) %

 

(1.8

) %

Weighted average shares:

 

 

 

 

 

 

 

 

 

 

- Basic

 

 

15,027,110

 

 

15,131,587

 

 

15,208,308

 

(0.7

) %

 

(1.2

) %

- Diluted

 

 

15,034,822

 

 

15,140,577

 

 

15,264,971

 

(0.7

)

 

(1.5

)

 

 

 

 

 

 

 

 

 

 

 

KEY RATIOS

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

Change 4Q2023 vs.

 

4Q2023

 

3Q2023

 

4Q2022

 

3Q2023

 

4Q2022

Return on average assets (ROA)(1)

 

0.96

%

 

0.96

%

 

1.56

%

 

%

 

(0.6

) %

Return on average equity (ROE)(1)

 

11.18

 

 

11.07

 

 

18.58

 

 

0.1

 

 

(7.4

)

Net interest margin(1)

 

3.12

 

 

3.38

 

 

4.08

 

 

(0.3

)

 

(1.0

)

Efficiency ratio

 

60.19

 

 

57.92

 

 

48.36

 

 

2.3

 

 

11.8

 

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

13.77

%

 

13.31

%

 

13.06

%

 

0.5

%

 

0.7

%

Tier 1 risk-based capital ratio

 

12.52

 

 

12.09

 

 

11.87

 

 

0.4

 

 

0.7

 

Common equity tier 1 ratio

 

12.52

 

 

12.09

 

 

11.87

 

 

0.4

 

 

0.7

 

Leverage ratio

 

9.57

 

 

9.63

 

 

9.38

 

 

(0.1

)

 

0.2

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Annualized.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

 

 

 

 

 

 

 

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

 

For the Twelve Months Ended

 

4Q2023

 

4Q2022

 

% Change

Interest income

 

 

 

 

 

 

Interest and fees on loans

 

$

110,463

 

$

82,864