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
33.3
%
Interest on available-for-sale debt
securities
6,131
3,351
83.0
Other interest income
5,071
1,997
153.9
Total interest income
121,665
88,212
37.9
Interest expense
Interest on deposits
49,435
11,210
341.0
Interest on borrowings
3,543
91
3793.4
Total interest expense
52,978
11,301
368.8
Net interest income
68,687
76,911
(10.7
)
Provision for credit losses
1,651
2,976
(44.5
)
Net interest income after provision for
credit losses
67,036
73,935
(9.3
)
Noninterest income
Service charges on deposits
2,123
1,675
26.7
Loan servicing fees, net of
amortization
2,449
2,416
1.4
Gain on sale of loans
7,843
12,285
(36.2
)
Other income
1,766
1,243
42.1
Total noninterest income
14,181
17,619
(19.5
)
Noninterest expense
Salaries and employee benefits
29,593
27,189
8.8
Occupancy and equipment
6,490
5,964
8.8
Data processing and communication
2,109
2,085
1.2
Professional fees
1,571
1,620
(3.0
)
FDIC insurance and regulatory
assessments
1,457
813
79.2
Promotion and advertising
614
543
13.1
Directors’ fees
680
682
(0.3
)
Foundation donation and other
contributions
2,400
3,393
(29.3
)
Other expenses
2,812
2,541
10.7
Total noninterest expense
47,726
44,830
6.5
Income before income tax expense
33,491
46,724
(28.3
)
Income tax expense
9,573
13,414
(28.6
)
Net income
$
23,918
$
33,310
(28.2
) %
Book value per share
$
12.84
$
11.59
10.8
%
Earnings per share - basic
1.55
2.15
(27.9
)
Earnings per share - diluted
1.55
2.14
(27.6
)
Shares of common stock outstanding, at
period end
15,000,436
15,270,344
(1.8
) %
Weighted average shares:
- Basic
15,149,597
15,171,240
(0.1
) %
- Diluted
15,158,857
15,231,418
(0.5
)
KEY RATIOS
For the Twelve Months
Ended
4Q2023
4Q2022
% Change
Return on average assets (ROA)
1.13
%
1.74
%
(0.6
) %
Return on average equity (ROE)
13.05
19.57
(6.5
)
Net interest margin
3.37
4.18
(0.8
)
Efficiency ratio
57.59
47.42
10.2
Total risk-based capital ratio
13.77
%
13.06
%
0.7
%
Tier 1 risk-based capital ratio
12.52
11.87
0.7
Common equity tier 1 ratio
12.52
11.87
0.7
Leverage ratio
9.57
9.38
0.2
ASSET QUALITY
($ in thousands)
As of and For the Three Months
Ended
4Q2023
3Q2023
4Q2022
Nonaccrual loans(1)
$
6,082
$
4,211
$
2,033
Loans 90 days or more past due,
accruing(2)
—
—
—
Nonperforming loans
6,082
4,211
2,033
Other real estate owned ("OREO")
—
—
—
Nonperforming assets
$
6,082
$
4,211
$
2,033
Criticized loans by risk categories:
Special mention loans
$
1,428
$
3,651
$
563
Classified loans(1)(3)
11,921
10,139
2,701
Total criticized loans
$
13,349
$
13,790
$
3,264
Criticized loans by loan type:
CRE loans
$
4,995
$
5,130
$
563
SBA loans
5,864
6,169
1,142
C&I loans
—
—
279
Home mortgage loans
2,490
2,491
1,280
Total criticized loans
$
13,349
$
13,790
$
3,264
Nonperforming loans / gross loans
0.34
%
0.24
%
0.12
%
Nonperforming assets / gross loans plus
OREO
0.34
0.24
0.12
Nonperforming assets / total assets
0.28
0.20
0.10
Classified loans / gross loans
0.68
0.58
0.16
Criticized loans / gross loans
0.76
0.78
0.19
Allowance for credit losses ratios:
As a % of gross loans
1.25
%
1.23
%
1.15
%
As an adjusted % of gross loans(4)
1.27
1.26
1.18
As a % of nonperforming loans
362
513
946
As a % of nonperforming assets
362
513
946
As a % of classified loans
184
213
712
As a % of criticized loans
165
157
589
Net charge-offs
$
161
$
488
$
105
Net charge-offs(5) to average gross
loans(6)
0.04
%
0.11
%
0.03
%
(1)
Excludes the guaranteed portion of SBA
loans that are in liquidation totaling $2.0 million, $5.2 million
and $606 thousand as of December 31, 2023, September 30, 2023 and
December 31, 2022, respectively.
(2)
Excludes the guaranteed portion of SBA
loans that are in liquidation totaling $441 thousand as of December
31, 2022.
(3) Consists of substandard, doubtful and loss categories. (4)
See the Reconciliation of GAAP to NON-GAAP
Financial Measures.
(5)
Annualized.
(6)
Includes loans held for sale.
($ in thousands)
4Q2023
3Q2023
4Q2022
Accruing delinquent loans 30-89 days past
due
30-59 days
$
5,945
$
5,979
$
1,918
60-89 days
3,662
2,377
1,559
Total
$
9,607
$
8,356
$
3,477
AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE
ANALYSIS
For the Three Months
Ended
4Q2023
3Q2023
4Q2022
($ 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
$
78,496
$
1,076
5.36
%
$
82,752
$
1,116
5.28
%
$
75,988
$
734
3.78
%
Federal funds sold and other
investments
16,115
309
7.66
16,176
301
7.44
12,074
196
6.47
Available-for-sale debt securities, at
fair value
189,462
1,484
3.13
199,205
1,519
3.05
186,461
1,237
2.66
CRE loans
892,092
13,104
5.83
856,911
12,207
5.65
836,609
11,172
5.30
SBA loans
255,692
7,055
10.95
248,960
7,303
11.64
289,408
6,681
9.16
C&I loans
122,950
2,416
7.80
117,578
2,340
7.90
114,265
1,917
6.66
Home mortgage loans
515,840
6,315
4.90
516,465
6,393
4.95
449,684
4,929
4.38
Consumer loans
966
24
9.92
274
7
10.01
1,676
20
4.80
Loans(2)
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
Noninterest-earning assets
86,874
84,580
87,189
Total assets
$
2,158,487
$
2,122,901
$
2,053,354
Interest-bearing liabilities:
Money market deposits and others
$
377,304
$
3,993
4.20
%
$
352,424
$
3,487
3.93
%
$
515,747
$
3,045
2.34
%
Time deposits
866,142
10,134
4.64
869,675
9,519
4.34
569,584
3,553
2.47
Total interest-bearing deposits
1,243,446
14,127
4.51
1,222,099
13,006
4.22
1,085,331
6,598
2.41
Borrowings
118,764
1,426
4.76
79,891
867
4.31
8,158
90
4.35
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
Noninterest-bearing liabilities:
Noninterest-bearing deposits
569,965
599,262
751,405
Other noninterest-bearing liabilities
41,312
36,620
35,593
Total noninterest-bearing liabilities
611,277
635,882
786,998
Shareholders’ equity
185,000
185,029
172,867
Total liabilities and shareholders’
equity
$
2,158,487
2,122,901
2,053,354
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
%
Cost of deposits & cost of funds:
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.
(2)
Includes loans held for sale.
AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE
ANALYSIS
For the Twelve Months
Ended
4Q2023
4Q2022
($ in thousands)
Average Balance
Interest and
Fees
Yield/ Rate
Average Balance
Interest and
Fees
Yield/ Rate
Interest-earning assets:
Interest-bearing deposits in other
banks
$
78,676
$
4,040
5.14
%
$
79,482
$
1,399
1.76
%
Federal funds sold and other
investments
14,963
1,031
6.89
11,810
598
5.06
Available-for-sale debt securities, at
fair value
202,167
6,131
3.03
170,479
3,351
1.97
CRE loans
857,124
48,312
5.64
777,776
37,861
4.87
SBA loans
260,507
28,514
10.95
321,757
24,073
7.48
C&I loans
119,135
9,189
7.71
142,630
7,217
5.06
Home mortgage loans
507,125
24,384
4.81
334,984
13,660
4.08
Consumer & other loans
987
64
6.51
1,071
53
4.95
Loans(1)
1,744,878
110,463
6.33
1,578,218
82,864
5.25
Total interest-earning assets
2,040,684
121,665
5.96
1,839,989
88,212
4.79
Noninterest-earning assets
84,757
76,883
Total assets
$
2,125,441
$
1,916,872
Interest-bearing liabilities:
Money market deposits and others
$
374,116
$
13,830
3.70
%
$
475,414
$
5,305
1.12
%
Time deposits
841,804
35,605
4.23
445,169
5,905
1.33
Total interest-bearing deposits
1,215,920
49,435
4.07
920,583
11,210
1.22
Borrowings
77,114
3,543
4.59
2,089
91
4.36
Total interest-bearing liabilities
1,293,034
52,978
4.10
922,672
11,301
1.22
Noninterest-bearing liabilities:
Noninterest-bearing deposits
613,797
796,175
Other noninterest-bearing liabilities
35,377
27,829
Total noninterest-bearing liabilities
649,174
824,004
Shareholders’ equity
183,233
170,196
Total liabilities and shareholders’
equity
$
2,125,441
1,916,872
Net interest income / interest rate
spreads
$
68,687
1.86
%
$
76,911
3.57
%
Net interest margin
3.37
%
4.18
%
Cost of deposits & cost of funds:
Total deposits / cost of deposits
$
1,829,717
$
49,435
2.70
%
$
1,716,758
$
11,210
0.65
%
Total funding liabilities / cost of
funds
1,906,831
52,978
2.78
1,718,847
11,301
0.66
(1)
Includes loans held for sale.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240125702702/en/
Investor Relations OP Bancorp Christine Oh EVP & CFO
213.892.1192 Christine.oh@myopenbank.com
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