OP Bancorp announces a net income of $5.2 million and diluted earnings per share of $0.34 for the first quarter of 2024

2024 First Quarter Highlights compared with 2023 Fourth Quarter:

  • Financial Results:
    • Net income of $5.23 million, compared to $5.17 million
    • Diluted earnings per share of $0.34, compared to $0.34
    • Net interest income of $16.0 million, compared to $16.2 million
    • Net interest margin of 3.06%, compared to 3.12%
    • Provision for credit losses of $0.1 million, compared to $0.6 million
    • Total assets of $2.23 billion, compared to $2.15 billion
    • Gross loans of $1.80 billion, compared to $1.77 billion
    • Total deposits of $1.90 billion, compared to $1.81 billion
  • Credit Quality:
    • Allowance for credit losses to gross loans of 1.23%, compared to 1.25%
    • Net charge-offs(1) to average gross loans(2) of 0.01%, compared to 0.04%
    • Past due 30-89 days to gross loans of 0.22%, compared to 0.54%
    • Nonperforming loans to gross loans of 0.24%, compared to 0.34%
    • Criticized loans(3) to gross loans of 0.64%, compared to 0.76%
  • Capital Levels:
    • Remained well-capitalized with a Common Equity Tier 1 (“CET1”) ratio of 12.34%
    • Book value per common share increased to $13.00, compared to $12.84
    • Repurchased 49,697 shares of common stock at an average price of $10.02 per share
    • 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.

April 25, 2024 04:45 PM Eastern Daylight Time

LOS ANGELES–(BUSINESS WIRE)–OP Bancorp (the “Company”) (NASDAQ: OPBK), the holding company of Open Bank (the “Bank”), today reported its financial results for the first quarter of 2024. Net income for the first quarter of 2024 was $5.23 million, or $0.34 per diluted common share, compared with $5.17 million, or $0.34 per diluted common share, for the fourth quarter of 2023, and $7.5 million, or $0.48 per diluted common share, for the first quarter of 2023.

Min Kim, President and Chief Executive Officer:

“Despite the prolonged stress from the high interest rate environment, we were able to grow loans and deposits in the first quarter while controlling impacts to net interest margin at a manageable level. Our credit quality improved noticeably across all metrics even in the face of significant uncertainties that affect our borrowers. I’d like to thank our loyal customers and our dedicated employees for their continuing support of Open Bank, and we look forward to continuing to grow prudently while maintaining an optimum risk profile,” said Min Kim, President and Chief Executive.

SELECTED FINANCIAL HIGHLIGHTS

           
($ in thousands, except per share data) As of and For the Three Months Ended % Change 1Q2024 vs.
 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
Selected Income Statement Data:          
Net interest income $15,979  $16,230  $17,892  (1.5)% (10.7)%
Provision for (reversal of) credit losses  145   630   (338) (77.0) (142.9)
Noninterest income  3,586   3,680   4,295  (2.6) (16.5)
Noninterest expense  12,157   11,983   11,908  1.5  2.1 
Income tax expense  2,037   2,125   3,083  (4.1) (33.9)
Net income  5,226   5,172   7,534  1.0  (30.6)
Diluted earnings per share  0.34   0.34   0.48  —  (29.2)
Selected Balance Sheet Data:          
Gross loans $1,804,987  $1,765,845  $1,692,485  2.2% 6.6%
Total deposits  1,895,411   1,807,558   1,904,818  4.9  (0.5)
Total assets  2,234,520   2,147,730   2,170,594  4.0  2.9 
Average loans(1)  1,808,932   1,787,540   1,725,392  1.2  4.8 
Average deposits  1,836,331   1,813,411   1,867,684  1.3  (1.7)
Credit Quality:          
Nonperforming loans $4,343  $6,082  $2,504  (28.6)% 73.4%
Nonperforming loans to gross loans  0.24%  0.34%  0.15% (0.10) 0.09 
Criticized loans(2) to gross loans  0.64   0.76   0.34  (0.12) 0.30 
Net charge-offs(3) to average gross loans(1)  0.01   0.04   0.02  (0.03) (0.01)
Allowance for credit losses to gross loans  1.23   1.25   1.23  (0.02) — 
Allowance for credit losses to nonperforming loans  510   362   831  148.00  (321.00)
Financial Ratios:          
Return on average assets(3)  0.96%  0.96%  1.43% —% (0.47)%
Return on average equity(3)  10.83   11.18   16.82  (0.35) (5.99)
Net interest margin(3)  3.06   3.12   3.57  (0.06) (0.51)
Efficiency ratio(4)  62.14   60.19   53.67  1.95  8.47 
Common equity tier 1 capital ratio  12.34   12.52   12.06  (0.18) 0.28 
Leverage ratio  9.65   9.57   9.43  0.08  0.22 
Book value per common share $13.00  $12.84  $12.02  1.2  8.2 
           
(1)Includes loans held for sale.
(2)Includes special mention, substandard, doubtful, and loss categories.
(3)Annualized.
(4)Represents noninterest expense divided by the sum of net interest income and noninterest income.

INCOME STATEMENT HIGHLIGHTS

Net Interest Income and Net Interest Margin

           
($ in thousands) For the Three Months Ended % Change 1Q2024 vs.
 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
Interest Income          
Interest income $32,913 $31,783 $28,594 3.6% 15.1%
Interest expense  16,934   15,553   10,702  8.9  58.2 
Net interest income $15,979  $16,230  $17,892  (1.5)% (10.7)%
           
                   
($ in thousands) For the Three Months Ended
 1Q2024 4Q2023 1Q2023
 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 $1,808,932 $30,142 6.69% $1,787,540 $28,914 6.43% $1,725,392 $26,011 6.10%
Total interest-earning assets  2,089,627   32,913  6.32   2,071,613   31,783  6.10   2,022,146   28,594  5.71 
Interest-bearing Liabilities:                  
Interest-bearing deposits  1,321,828   15,675  4.77   1,243,446   14,127  4.51   1,196,194   10,382  3.52 
Total interest-bearing liabilities  1,430,509   16,934  4.76   1,362,210   15,553  4.53   1,222,362   10,702  3.55 
Ratios:                  
Net interest income / interest rate spreads    15,979  1.56     16,230  1.57     17,892  2.16 
Net interest margin     3.06      3.12      3.57 
Total deposits / cost of deposits  1,836,331   15,675  3.43   1,813,411   14,127  3.09   1,867,684   10,382  2.25 
Total funding liabilities / cost of funds  1,945,012   16,934  3.50   1,932,175   15,553  3.19   1,893,852   10,702  2.29 
                   
(1)Annualized.
                 
($ in thousands) For the Three Months Ended Yield Change 1Q2024
vs.
 1Q2024 4Q2023 1Q2023 
 Interest
& Fees		 Yield(1) Interest
& Fees		 Yield(1) Interest
& Fees		 Yield(1) 4Q2023 1Q2023
Loan Yield Component:                
Contractual interest rate $28,877  6.41% $28,596  6.36% $25,477  5.97% 0.05% 0.44%
SBA loan discount accretion  881  0.20   960  0.21   974  0.23  (0.01) (0.03)
Amortization of net deferred fees  54  0.01   (67) (0.01)  79  0.02  0.02  (0.01)
Amortization of premium  (428) (0.10)  (423) (0.09)  (392) (0.09) (0.01) (0.01)
Net interest recognized on nonaccrual loans  492  0.11   (345) (0.08)  (243) (0.06) 0.19  0.17 
Prepayment penalties(2) and other fees  266  0.06   193  0.04   116  0.03  0.02  0.03 
Yield on loans $30,142  6.69% $28,914  6.43% $26,011  6.10% 0.26% 0.59%
                 
(1)Annualized.
(2)Prepayment penalty income of $115 thousand, $43 thousand and $3 thousand for the three months ended March 31, 2024, December 31, 2023 and March 31, 2023, respectively, was from Commercial Real Estate (“CRE”) and Commercial and Industrial (“C&I”) loans.

First Quarter 2024 vs. Fourth Quarter 2023

Net interest income decreased $251 thousand, or 1.5%, primarily due to higher interest expense on deposits, partially offset by higher interest income on loans. Net interest margin was 3.06%, a decrease of 6 basis points from 3.12%.

  • A $1.5 million increase in interest expense on interest-bearing deposits was primarily due to a $78.4 million, or 6.3%, increase in average balance.
  • A $1.2 million increase in interest income on loans was primarily due to a $21.4 million, or 1.2%, increase in average balance and a $837 thousand increase in net interest recognized on nonaccrual loans.

First Quarter 2024 vs. First Quarter 2023

Net interest income decreased $1.9 million, or 10.7%, 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 3.06%, a decrease of 51 basis points from 3.57%.

  • A $5.3 million increase in interest expense on interest-bearing deposits was primarily due to a $125.6 million, or 10.5%, increase in average balance and a 125 basis point increase in average cost driven by the Federal Reserve’s rate increases.
  • A $939 thousand increase in interest expense on borrowings was primarily due to a $82.5 million, or 315.3%, increase in average balance.
  • A $4.1 million increase in interest income on loans was primarily due to a $83.5 million, or 4.8%, increase in average balance and a 59 basis point increase in average yield as a result of the Federal Reserve’s rate increases.

Provision for Credit Losses

       
  For the Three Months Ended
($ in thousands) 1Q2024 4Q2023 1Q2023
Provision for (reversal of) credit losses on loans $193  $537 $(258)
Provision for (reversal of) credit losses on off-balance sheet exposure  (48)  93   (80)
Total provision for (reversal of) credit losses $145  $630  $(338)
       

First Quarter 2024 vs. Fourth Quarter 2023

The Company recorded a $145 thousand provision for credit losses, a decrease of $485 thousand, compared with a $630 thousand provision for credit losses.

Provision for credit losses on loans was $193 thousand, primarily due to a $1.8 million increase in the quantitative general reserve, mostly offset by a $1.7 million decrease in the qualitative reserve. The increase in the quantitative reserve was due to the increase in the average life of home mortgage loans because of the slower prepayment rate based on the 2-year look back period. The decrease in the qualitative reserve was due to noticeable improvements in various asset quality metrics and improving economic and business conditions.

First Quarter 2024 vs. First Quarter 2023

The Company recorded a $145 thousand provision for credit losses, a decrease of $483 thousand, compared with a $338 thousand reversal of credit losses.

Noninterest Income

           
($ in thousands) For the Three Months Ended % Change 1Q2024 vs.
 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
Noninterest Income          
Service charges on deposits $612 $557 $418 9.9% 46.4%
Loan servicing fees, net of amortization  772   540   846  43.0  (8.7)
Gain on sale of loans  1,703   1,996   2,570  (14.7) (33.7)
Other income  499   587   461  (15.0) 8.2 
Total noninterest income $3,586  $3,680  $4,295  (2.6)% (16.5)%
           

First Quarter 2024 vs. Fourth Quarter 2023

Noninterest income decreased $94 thousand, or 2.6%, primarily due to lower gain on sale of loans, partially offset by higher loan servicing fee.

  • Gain on sale of loans was $1.7 million, a decrease of $293 thousand from $2.0 million, primarily due to a lower Small Business Administration (“SBA”) loan sold amount partially offset by a higher average premium on sales. The Bank sold $24.8 million in SBA loans at an average premium rate of 8.33%, compared to the sale of $40.1 million at an average premium rate of 5.99%.
  • Loan servicing fees, net of amortization, was $772 thousand, an increase of $232 thousand from $540 thousand, primarily due to a decrease in servicing fee amortization driven by lower loan payoffs in loan servicing portfolio.

First Quarter 2024 vs. First Quarter 2023

Noninterest income decreased $709 thousand, or 16.5%, primarily due to a lower gain on sale of loans, partially offset by higher service charges on deposits.

  • Gain on sale of loans was $1.7 million, a decrease of $867 thousand from $2.6 million, primarily due to a lower SBA loan sold amount. The Bank sold $24.8 million in SBA loans at an average premium rate of 8.33%, compared to the sale of $44.7 million at an average premium rate of 7.33%.
  • Service charges on deposits was $612 thousand, and an increase of $194 thousand from $418 thousand, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts.

Noninterest Expense

           
($ in thousands) For the Three Months Ended % Change 1Q2024 vs.
 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
Noninterest Expense          
Salaries and employee benefits $7,841 $7,646 $7,252 2.6% 8.1%
Occupancy and equipment  1,655   1,616   1,570  2.4  5.4 
Data processing and communication  487   644   550  (24.4) (11.5)
Professional fees  395   391   359  1.0  10.0 
FDIC insurance and regulatory assessments  374   237   467  57.8  (19.9)
Promotion and advertising  149   86   162  73.3  (8.0)
Directors’ fees  157   145   161  8.3  (2.5)
Foundation donation and other contributions  540   524   753  3.1  (28.3)
Other expenses  559   694   634  (19.5) (11.8)
Total noninterest expense $12,157  $11,983  $11,908  1.5% 2.1%
           

First Quarter 2024 vs. Fourth Quarter 2023

Noninterest expense increased $174 thousand, or 1.5%, primarily due to higher salaries and employee benefits, and FDIC insurance and regulatory assessments, partially offset by lower data processing and communication and other expenses.

  • Salaries and employee benefits increased $195 thousand, primarily due to increases in employer payroll taxes and employee vacation accruals, partially offset by lower employee incentive accruals.
  • FDIC insurance and regulatory assessments increased $137 thousand, primarily due to a lower expense in the fourth quarter of 2023 as a result of an accrual adjustment.
  • Data processing and communication decreased $157 thousand, primarily due to an accrual adjustment for a credit received on data processing fees in the first quarter of 2024.

First Quarter 2024 vs. First Quarter 2023

Noninterest expense increased $249 thousand, or 2.1%, primarily due to higher salaries and employee benefits, partially offset by lower foundation donation and other contributions.

  • Salaries and employee benefits increased $589 thousand, primarily due to an increase from employee salary adjustments in 2023 and an increase in employee health insurance.
  • Foundation donations and other contributions decreased $213 thousand, primarily due to a lower donation accrual for Open Stewardship as a result of lower net income.

Income Tax Expense

First Quarter 2024 vs. Fourth Quarter 2023

Income tax expense was $2.0 million and the effective tax rate was 28.1%, compared to income tax expense of $2.1 million and the effective rate of 29.1%. The decrease in the effective tax rate was primarily due to an increased tax benefits from an increase in low income housing tax credit investments.

First Quarter 2024 vs. First Quarter 2023

Income tax expense was $2.0 million and the effective tax rate was 28.1%, compared to income tax expense of $3.1 million and an effective rate of 29.0%. The decrease in the effective tax rate was primarily due to an increased tax benefits from an increase in low income housing tax credit investments.

BALANCE SHEET HIGHLIGHTS

Loans

           
 As of % Change 1Q2024 vs.
($ in thousands) 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
CRE loans $905,534 $885,585 $833,615 2.3% 8.6%
SBA loans  247,550   239,692   238,994  3.3  3.6 
C&I loans  147,508   120,970   117,841  21.9  25.2 
Home mortgage loans  502,995   518,024   500,635  (2.9) 0.5 
Consumer & other loans  1,400   1,574   1,400  (11.1) — 
Gross loans $1,804,987  $1,765,845  $1,692,485  2.2% 6.6%
           

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

           
 For the Three Months Ended % Change 1Q2024 vs.
($ in thousands) 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
CRE loans $44,596 $15,885 $24,200 180.7% 84.3%
SBA loans  52,379   51,855   16,258  1.0  222.2 
C&I loans  23,775   15,270   7,720  55.7  208.0 
Home mortgage loans  2,478   12,417   20,617  (80.0) (88.0)
Consumer & other loans  —   1,500   —  (100.0) — 
Gross loans $123,228  $96,927  $68,795  27.1% 79.1%
           

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

       
 For the Three Months Ended
($ in thousands) 1Q2024 4Q2023 1Q2023
Loan Activities:      
Gross loans, beginning $1,765,845  $1,759,525  $1,678,292 
New originations  123,228   96,927   68,795 
Net line advances  15,313   (7,350)  10,356 
Purchases  —   2,371   12,142 
Sales  (32,106)  (40,122)  (45,021)
Paydowns  (24,557)  (19,901)  (40,190)
Payoffs  (28,539)  (23,590)  (28,326)
PPP payoffs  —   —   (200)
Decrease (increase) in loans held for sale  (14,280)  (1,795)  36,802 
Other  83   (220)  (165)
Total  39,142   6,320   14,193 
Gross loans, ending $1,804,987  $1,765,845  $1,692,485 
       

As of March 31, 2024 vs. December 31, 2023

Gross loans were $1.80 billion as of March 31, 2024, up $39.1 million, from December 31, 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 $123.2 million $32.1 million and $53.1 million, respectively, for the first quarter of 2024, compared with $96.9 million, $40.1 million and $43.5 million, respectively, for the fourth quarter of 2023.

As of March 31, 2024 vs. March 31, 2023

Gross loans were $1.80 billion as of March 31, 2024, up $112.5 million, from March 31, 2023, primarily due to new loan originations of $428.9 million and loan purchases of $15.5 million, primarily offset by loan sales of $132.4 million and loan payoffs and paydowns of $198.2 million.

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

             
 As of
 1Q2024 4Q2023 1Q2023
($ in thousands) % Rate % Rate % Rate
Fixed rate 35.1% 5.17% 35.1% 5.07% 36.5% 4.76%
Hybrid rate 32.8  5.22  33.9  5.15  34.2  4.94 
Variable rate 32.1  9.16  31.0  9.15  29.3  8.76 
Gross loans 100.0% 6.47% 100.0% 6.35% 100.0% 5.99%
             

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

                 
 As of March 31, 2024
 Within One Year One Year Through
Five Years		 After Five Years Total
($ in thousands) Amount Rate Amount Rate Amount Rate Amount Rate
Fixed rate $125,369 5.81% $282,814 4.93% $226,332 5.11% $634,515 5.17%
Hybrid rate  —  —   138,336  4.17   453,281  5.54   591,617  5.22 
Variable rate  113,184  8.79   130,126  9.02   335,545  9.34   578,855  9.16 
Gross loans $238,553  7.22% $551,276  5.71% $1,015,158  6.70% $1,804,987  6.47%
                 

Allowance for Credit Losses

The Company adopted the Current Expected Credit Losses (“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 allowance for credit losses and provision for credit losses as of and for the periods presented:

           
 As of and For the Three Months Ended % Change 1Q2024 vs.
($ in thousands) 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
Allowance for credit losses on loans, beginning $21,993  $21,617  $19,241  1.7% 14.3%
Impact of CECL adoption  —   —   1,924  n/m  n/m 
Provision for (reversal of) credit losses  193   537   (258) (64.1) (174.8)
Gross charge-offs  (68)  (236)  (116) (71.2) (41.4)
Gross recoveries  11   75   23  (85.3) (52.2)
Net charge-offs  (57)  (161)  (93) (64.6) (38.7)
Allowance for credit losses on loans, ending $22,129  $21,993  $20,814  0.6% 6.3%
           
Allowance for credit losses on off-balance sheet exposure, beginning $516  $423  $263  22.0% 96.2%
Impact of CECL adoption  —   —   184  n/m  n/m 
Provision for (reversal of) credit losses  (48)  93   (80) (151.6) (40.0)
Allowance for credit losses on off-balance sheet exposure, ending $468  $516  $367  (9.3)% 27.5%
           

Asset Quality

           
 As of and For the Three Months Ended Change 1Q2024 vs.
($ in thousands) 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
Loans 30-89 days past due and still accruing $3,904  $9,607  $4,866  (59.4)% (19.8)%
As a % of gross loans  0.22%  0.54%  0.29% (0.32) (0.07)
           
Nonperforming loans(1) $4,343  $6,082  $2,504  (28.6)% 73.4%
Nonperforming assets(1)  5,580   6,082   2,504  (8.3) 122.8 
Nonperforming loans to gross loans  0.24%  0.34%  0.15% (0.10) 0.09 
Nonperforming assets to total assets  0.25%  0.28%  0.12% (0.03) 0.13 
           
Criticized loans(1)(2) $11,564  $13,349  $5,772  (13.4)% 100.3%
Criticized loans to gross loans  0.64%  0.76%  0.34% (0.12) 0.30 
           
Allowance for credit losses ratios:          
As a % of gross loans  1.23%  1.25%  1.23% (0.02)% —%
As a % of nonperforming loans  510   362   831  148  (321)
As a % of nonperforming assets  397   362   831  35  (434)
As a % of criticized loans  191   165   361  26  (170)
Net charge-offs(3) to average gross loans(4)  0.01   0.04   0.02  (0.03) (0.01)
           
(1)Excludes the guaranteed portion of SBA loans that are in liquidation totaling $3.1 million, $2.0 million and $1.9 million as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively.
(2)Consists of special mention, substandard, doubtful and loss categories.
(3)Annualized.
(4)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 allowance to gross loans ratio of 1.23%.

  • Loans 30-89 days past due and still accruing were $3.9 million or 0.22% of gross loans as of March 31, 2024, compared with $9.6 million or 0.54% as of December 31, 2023. Several past due home mortgage loans were paid off through voluntary sale and several home mortgage and SBA loans were brought current.
  • Nonperforming loans were $4.3 million or 0.24% of gross loans as of March 31, 2024, compared with $6.1 million or 0.34% as of December 31, 2023. Several escrows on the nonperforming home mortgage loans were closed during the quarter with full payoffs.
  • Nonperforming assets were $5.6 million or 0.25% of total assets as of March 31, 2024, compared with $6.1 million or 0.28% as of December 31, 2023. Other Real Estate Owned (“OREO”) was $1.2 million as of March 31, 2024, which is secured by a mix-use property in Los Angeles Koreatown with 90% guaranteed by SBA. We are in receipt of a few written offers above the OREO balance and negotiating the terms of the offer.
  • Criticized loans were $11.6 million or 0.64% of gross loans as of March 31, 2024, compared with $13.3 million or 0.76% as of December 31, 2023. The improvement was due to the payoffs of several nonperforming home mortgage loans.
  • Net charge-offs were $57 thousand or 0.01% of average loans in the first quarter of 2024, compared to net charge-offs of $161 thousand, or 0.04% of average loans in the fourth quarter of 2023 and of $93 thousand, or 0.02% of average loans in the first quarter of 2023. The charge-off in the first quarter of 2024 was the reversal of the accrued interest on three loans totaling $519 thousand that were placed on nonaccrual during the same quarter.

Deposits

                 
 As of % Change 1Q2024 vs.
 1Q2024 4Q2023 1Q2023 
($ in thousands) Amount % Amount % Amount % 4Q2023 1Q2023
Noninterest-bearing deposits $539,396 28.5% $522,751 28.9% $643,902 33.8% 3.2% (16.2)%
Money market deposits and others  327,718  17.3   399,018  22.1   436,796  22.9  (17.9) (25.0)
Time deposits  1,028,297  54.2   885,789  49.0   824,120  43.3  16.1  24.8 
Total deposits $1,895,411  100.0% $1,807,558  100.0% $1,904,818  100.0% 4.9% (0.5)%
                 
Estimated uninsured deposits $1,248,644  65.9% $1,156,270  64.0% $900,579  47.3% 8.0% 38.6%
                 

As of March 31, 2024 vs. December 31, 2023

Total deposits were $1.90 billion as of March 31, 2024, up $87.9 million from December 31, 2023, primarily due to increases of $142.5 million in time deposits and $16.6 million in noninterest-bearing deposit, offset by a $71.3 million decrease in money market deposits. Noninterest-bearing deposits, as a percentage of total deposits, decreased to 28.5% from 28.9%. The composition shift to time deposits was primarily due to customers’ continued preference for high-rate deposit products driven by the Federal Reserve’s rate increases.

As of March 31, 2024 vs. March 31, 2023

Total deposits were $1.90 billion as of March 31, 2024, down $9.4 million from March 31, 2023, primarily driven by decreases of $104.5 million in noninterest-bearing deposits and $109.1 million in money market deposits, offset by a $204.2 million increase 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 March 31, 2024:

             
  As of March 31, 2024
($ in thousands) Within
Three
Months		 Three to
Six Months		 Six to Nine
Months		 Nine to
TwelveMonths		 After
Twelve
Months		 Total
Time deposits (more than $250) $95,516  $65,321  $143,382  $142,830  $4,448  $451,497 
Time deposits ($250 or less)  151,358   102,471   186,340   104,481   32,150   576,800 
Total time deposits $246,874  $167,792  $329,722  $247,311  $36,598  $1,028,297 
Weighted average rate  4.97%  4.99%  5.18%  5.04%  4.25%  5.03%
             

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)  1Q2024   4Q2023   1Q2023 
Liquidity Assets:      
Cash and cash equivalents $139,246  $91,216  $181,509 
Available-for-sale debt securities  187,225   194,250   212,767 
Liquid assets $326,471  $285,466  $394,276 
Liquid assets to total assets  14.6%  13.3%  18.2%
       
Available borrowings:      
Federal Home Loan Bank—San Francisco $331,917  $363,615  $406,500 
Federal Reserve Bank  185,913   182,989   174,284 
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 $617,830  $646,604  $680,734 
Total available borrowings to total assets  27.6%  30.1%  31.4%
       
Liquid assets and available borrowings to total deposits  49.8%  51.6%  56.4%
     

Capital and Capital Ratios

On April 25, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.12 per share of its common stock. The cash dividend is payable on or about May 23, 2024 to all shareholders of record as of the close of business on May 9, 2024. The payment of the dividend is based primarily on dividends from the Bank to the Company, and future dividends will depend on the Board’s assessment of the availability of capital levels to support the ongoing operating capital needs of both the Company and the Bank.

The Company also repurchased 49,697 shares of its common stock at an average price of $10.02 per share during the first quarter of 2024 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 2,069,697 shares of its common stock at an average repurchase price of $8.63 per share through March 31, 2024.

         
 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 13.59% 13.53% 10.00% 10.50%
Tier 1 risk-based capital ratio 12.34  12.28  8.00  8.50 
Common equity tier 1 ratio 12.34  12.28  6.50  7.00 
Leverage ratio 9.65  9.60  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.
           
 Basel III Change 1Q2024 vs.
OP Bancorp 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
Risk-Based Capital Ratios:          
Total risk-based capital ratio  13.59%  13.77%  13.27% (0.18)% 0.32%
Tier 1 risk-based capital ratio  12.34   12.52   12.06  (0.18) 0.28 
Common equity tier 1 ratio  12.34   12.52   12.06  (0.18) 0.28 
Leverage ratio  9.65   9.57   9.43  0.08  0.22 
Risk-weighted Assets ($ in thousands) $1,715,185  $1,667,067  $1,659,584  2.89  3.35 
           

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 Section 21E of the Securities Exchange Act of 1934, as amended, 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, and continuing elevated levels of, 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; cybersecurity risks, including the potential for the occurrence of successful cyberattacks and our ability to prevent and to mitigate the harms resulting from any such attacks; business and economic conditions, particularly those affecting the financial services industry and our primary market areas; risks of international conflict, terrorism, civil unrest and domestic instability; 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 operations and our current and prospective borrowers and depositors; our ability to balance deposit liabilities and liquidity sources (including our ability to reprice those instruments and balancing our borrowings and investments to keep pace with changing market conditions) so as to meet current and expected withdrawals while promoting strong earning capacity; our ability to manage our credit risk successfully 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 effectively to 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 banks and from 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, 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, 2023 and in our other subsequent filings with the Securities and Exchange Commission.

CONSOLIDATED BALANCE SHEETS (unaudited)

           
 As of % Change 1Q2024 vs.
($ in thousands) 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
Assets          
Cash and due from banks $20,513  $16,948  $16,781  21.0% 22.2%
Interest-bearing deposits in other banks  118,733   74,268   164,728  59.9  (27.9)
Cash and cash equivalents  139,246   91,216   181,509  52.7  (23.3)
Available-for-sale debt securities, at fair value  187,225   194,250   212,767  (3.6) (12.0)
Other investments  16,264   16,276   12,172  (0.1) 33.6 
Loans held for sale  16,075   1,795   7,534  795.5  113.4 
CRE loans  905,534   885,585   833,615  2.3  8.6 
SBA loans  247,550   239,692   238,994  3.3  3.6 
C&I loans  147,508   120,970   117,841  21.9  25.2 
Home mortgage loans  502,995   518,024   500,635  (2.9) 0.5 
Consumer loans  1,400   1,574   1,400  (11.1) — 
Gross loans receivable  1,804,987   1,765,845   1,692,485  2.2  6.6 
Allowance for credit losses  (22,129)  (21,993)  (20,814) 0.6  6.3 
Net loans receivable  1,782,858   1,743,852   1,671,671  2.2  6.7 
Premises and equipment, net  4,971   5,248   4,647  (5.3) 7.0 
Accrued interest receivable, net  8,370   8,259   7,302  1.3  14.6 
Servicing assets  11,405   11,741   12,898  (2.9) (11.6)
Company owned life insurance  22,399   22,233   21,762  0.7  2.9 
Deferred tax assets, net  13,802   13,309   12,323  3.7  12.0 
Other real estate owned  1,237   —   —  n/m  n/m 
Operating right-of-use assets  8,864   8,497   9,459  4.3  (6.3)
Other assets  21,804   31,054   16,550  (29.8) 31.7 
Total assets $2,234,520  $2,147,730  $2,170,594  4.0% 2.9%
Liabilities and Shareholders’ Equity          
Liabilities:          
Noninterest-bearing $539,396  $522,751  $643,902  3.2% (16.2)%
Money market and others  327,718   399,018   436,796  (17.9) (25.0)
Time deposits greater than $250  451,497   433,892   411,648  4.1  9.7 
Other time deposits  576,800   451,897   412,472  27.6  39.8 
Total deposits  1,895,411   1,807,558   1,904,818  4.9  (0.5)
Federal Home Loan Bank advances  105,000   105,000   50,000  —  110.0 
Accrued interest payable  12,270   12,628   5,751  (2.8) 113.4 
Operating lease liabilities  9,614   9,341   10,513  2.9  (8.6)
Other liabilities  17,500   20,577   15,731  (15.0) 11.2 
Total liabilities  2,039,795   1,955,104   1,986,813  4.3  2.7 
Shareholders’ equity:          
Common stock  75,957   76,280   79,475  (0.4) (4.4)
Additional paid-in capital  11,240   10,942   10,056  2.7  11.8 
Retained earnings  124,280   120,855   109,908  2.8  13.1 
Accumulated other comprehensive loss  (16,752)  (15,451)  (15,658) 8.4  7.0 
Total shareholders’ equity  194,725   192,626   183,781  1.1  6.0 
Total liabilities and shareholders’ equity $2,234,520  $2,147,730  $2,170,594  4.0% 2.9%
           

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

           
 For the Three Months Ended % Change 1Q2024 vs.
($ in thousands, except share and per share data) 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
Interest income          
Interest and fees on loans $30,142 $28,914 $26,011  4.2% 15.9%
Interest on available-for-sale debt securities  1,460   1,484   1,566  (1.6) (6.8)
Other interest income  1,311   1,385   1,017  (5.3) 28.9 
Total interest income  32,913   31,783   28,594  3.6  15.1 
Interest expense          
Interest on deposits  15,675   14,127   10,382  11.0  51.0 
Interest on borrowings  1,259   1,426   320  (11.7) 293.4%
Total interest expense  16,934   15,553   10,702  8.9  58.2 
Net interest income  15,979   16,230   17,892  (1.5) (10.7)
Provision for (reversal of) credit losses  145   630   (338) (77.0) n/m 
Net interest income after provision for credit losses  15,834   15,600   18,230  1.5  (13.1)
Noninterest income          
Service charges on deposits  612   557   418  9.9  46.4 
Loan servicing fees, net of amortization  772   540   846  43.0  (8.7)
Gain on sale of loans  1,703   1,996   2,570  (14.7) (33.7)
Other income  499   587   461  (15.0) 8.2 
Total noninterest income  3,586   3,680   4,295  (2.6) (16.5)
Noninterest expense          
Salaries and employee benefits  7,841   7,646   7,252  2.6  8.1 
Occupancy and equipment  1,655   1,616   1,570  2.4  5.4 
Data processing and communication  487   644   550  (24.4) (11.5)
Professional fees  395   391   359  1.0  10.0 
FDIC insurance and regulatory assessments  374   237   467  57.8  (19.9)
Promotion and advertising  149   86   162  73.3  (8.0)
Directors’ fees  157   145   161  8.3  (2.5)
Foundation donation and other contributions  540   524   753  3.1  (28.3)
Other expenses  559   694   634  (19.5) (11.8)
Total noninterest expense  12,157   11,983   11,908  1.5  2.1 
Income before income tax expense  7,263   7,297   10,617  (0.5) (31.6)
Income tax expense  2,037   2,125   3,083  (4.1) (33.9)
Net income $5,226  $5,172  $7,534  1.0% (30.6)%
           
Book value per share $13.00  $12.84  $12.02  1.2% 8.2%
Earnings per share – basic  0.34   0.34   0.48  —  (29.2)
Earnings per share – diluted  0.34   0.34   0.48  —  (29.2)
           
Shares of common stock outstanding, at period end  14,982,555   15,000,436   15,286,558  (0.1)% (2.0)%
Weighted average shares:          
– Basic  14,991,835   15,027,110   15,284,350  (0.2)% (1.9)%
– Diluted  14,991,835   15,034,822   15,312,673  (0.3) (2.1)
           

KEY RATIOS

           
 For the Three Months Ended % Change 1Q2024 vs.
 1Q2024 4Q2023 1Q2023 4Q2023 1Q2023
Return on average assets (ROA)(1) 0.96% 0.96% 1.43% —% (0.5)%
Return on average equity (ROE)(1) 10.83  11.18  16.82  (0.4) (6.0)
Net interest margin(1) 3.06  3.12  3.57  (0.1) (0.5)
Efficiency ratio 62.14  60.19  53.67  2.0  8.5 
           
Total risk-based capital ratio 13.59% 13.77% 13.27% (0.2)% 0.3%
Tier 1 risk-based capital ratio 12.34  12.52  12.06  (0.2) 0.3 
Common equity tier 1 ratio 12.34  12.52  12.06  (0.2) 0.3 
Leverage ratio 9.65  9.57  9.43  0.1  0.2 
           
(1)Annualized.

ASSET QUALITY

       
 As of and For the Three Months Ended
($ in thousands) 1Q2024 4Q2023 1Q2023
Nonaccrual loans(1) $4,343  $6,082  $2,504 
Loans 90 days or more past due, accruing(2)  —   —   — 
Nonperforming loans  4,343   6,082   2,504 
OREO  1,237   —   — 
Nonperforming assets $5,580  $6,082  $2,504 
       
Criticized loans by risk categories:      
Special mention loans $1,415  $1,428  $2,617 
Classified loans(1)(3)  10,149   11,921   3,155 
Total criticized loans $11,564  $13,349  $5,772 
       
Criticized loans by loan type:      
CRE loans $5,292  $4,995  $560 
SBA loans  6,055   5,864   3,676 
C&I loans  —   —   271 
Home mortgage loans  217   2,490   1,265 
Total criticized loans $11,564  $13,349  $5,772 
       
Nonperforming loans / gross loans  0.24%  0.34%  0.15%
Nonperforming assets / gross loans plus OREO  0.31   0.34   0.15 
Nonperforming assets / total assets  0.25   0.28   0.12 
Classified loans / gross loans  0.56   0.68   0.19 
Criticized loans / gross loans  0.64   0.76   0.34 
       
Allowance for credit losses ratios:      
As a % of gross loans  1.23%  1.25%  1.23%
As a % of nonperforming loans  510   362   831 
As a % of nonperforming assets  397   362   831 
As a % of classified loans  218   184   660 
As a % of criticized loans  191   165   361 
       
Net charge-offs $57  $161  $93 
Net charge-offs(5) to average gross loans(6)  0.01%  0.04%  0.02%
       
(1)Excludes the guaranteed portion of SBA loans that are in liquidation totaling $3.1 million, $2.0 million and $1.6 million as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively.
(2)Excludes the guaranteed portion of SBA loans that are in liquidation totaling $246 thousand as of March 31, 2023.
(3)Consists of substandard, doubtful and loss categories.
(4)See the Reconciliation of GAAP to NON-GAAP Financial Measures.
(5)Annualized.
(6)Includes loans held for sale.
       
($ in thousands) 1Q2024 4Q2023 1Q2023
Accruing delinquent loans 30-89 days past due      
30-59 days $801 $5,945 $4,866
60-89 days  3,103   3,662   — 
Total $3,904  $9,607  $4,866 
       

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS

                   
  For the Three Months Ended
  1Q2024 4Q2023 1Q2023
($ 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 $73,047 $989 5.35% $78,496 $1,076 5.36% $74,162 $846 4.56%
Federal funds sold and other investments  16,265   322  7.92   16,115   309  7.66   12,130   171  5.65 
Available-for-sale debt securities, at fair value  191,383   1,460  3.05   189,462   1,484  3.13   210,462   1,566  2.98 
CRE loans  901,262   13,729  6.13   892,092   13,104  5.83   840,402   11,179  5.39 
SBA loans  259,368   7,213  11.19   255,692   7,055  10.95   274,889   6,982  10.30 
C&I loans  134,893   2,670  7.96   122,950   2,416  7.80   121,915   2,200  7.32 
Home mortgage loans  512,023   6,495  5.07   515,840   6,315  4.90   486,800   5,633  4.63 
Consumer loans  1,386   35  10.10   966   24  9.92   1,386   17  5.07 
Loans(2)  1,808,932   30,142  6.69   1,787,540   28,914  6.43   1,725,392   26,011  6.10 
Total interest-earning assets  2,089,627   32,913  6.32   2,071,613   31,783  6.10   2,022,146   28,594  5.71 
Noninterest-earning assets  87,586       86,874       82,538     
Total assets $2,177,213      $2,158,487      $2,104,684     
                   
Interest-bearing liabilities:                  
Money market deposits and others $367,386  $3,940  4.31% $377,304  $3,993  4.20% $409,813  $3,150  3.12%
Time deposits  954,442   11,735  4.94   866,142   10,134  4.64   786,381   7,232  3.73 
Total interest-bearing deposits  1,321,828   15,675  4.77   1,243,446   14,127  4.51   1,196,194   10,382  3.52 
Borrowings  108,681   1,259  4.66   118,764   1,426  4.76   26,168   320  4.95 
Total interest-bearing liabilities  1,430,509   16,934  4.76   1,362,210   15,553  4.53   1,222,362   10,702  3.55 
Noninterest-bearing liabilities:                  
Noninterest-bearing deposits  514,503       569,965       671,490     
Other noninterest-bearing liabilities  39,207       41,312       31,648     
Total noninterest-bearing liabilities  553,710       611,277       703,138     
Shareholders’ equity  192,994       185,000       179,184     
Total liabilities and shareholders’ equity $2,177,213       2,158,487       2,104,684     
                   
Net interest income / interest rate spreads   $15,979  1.56%   $16,230  1.57%   $17,892  2.16%
Net interest margin     3.06%     3.12%     3.57%
                   
Cost of deposits & cost of funds:                  
Total deposits / cost of deposits $1,836,331  $15,675  3.43% $1,813,411  $14,127  3.09% $1,867,684  $10,382  2.25%
Total funding liabilities / cost of funds  1,945,012   16,934  3.50   1,932,175   15,553  3.19   1,893,852   10,702  2.29 
                   
(1)Annualized.
(2)Includes loans held for sale.

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