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OP Bancorp Reports Net Income for 2024 Second Quarter of $5.4 Million and Diluted Earnings Per Share of $0.36

2024 Second Quarter Highlights compared with 2024 First Quarter:

  • Financial Results:
    • Net income of $5.4 million, a 4.0% increase compared to $5.2 million
    • Diluted earnings per share of $0.36, a 5.9% increase compared to $0.34
    • Net interest income of $16.2 million, compared to $16.0 million
    • Net interest margin of 2.96%, compared to 3.06%
    • Provision for credit losses of $617 thousand, compared to $145 thousand
    • Total assets of $2.29 billion, a 2.5% increase compared to $2.23 billion
    • Gross loans of $1.87 billion, a 3.6% increase compared to $1.80 billion
    • Total deposits of $1.94 billion, a 2.4% increase compared to $1.90 billion
  • Credit Quality:
    • Allowance for credit losses to gross loans of 1.22%, compared to 1.23%
    • Net charge-offs(1) to average gross loans(2) of (0.00)%, compared to 0.01%
    • Loans past due 30-89 days to gross loans of 0.36%, compared to 0.22%
    • Nonperforming loans to gross loans of 0.23%, compared to 0.24%
    • Criticized loans(3) to gross loans of 0.88%, compared to 0.64%
  • Capital Levels:
    • Remained well-capitalized with a Common Equity Tier 1 (“CET1”) ratio of 12.01%
    • Book value per common share increased to $13.22, compared to $13.00
    • Repurchased 224,321 shares of common stock at an average price of $9.64 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.

OP Bancorp (the “Company”) (NASDAQ: OPBK), the holding company of Open Bank (the “Bank”), today reported its financial results for the second quarter of 2024. Net income for the second quarter of 2024 was $5.4 million, or $0.36 per diluted common share, compared with $5.2 million, or $0.34 per diluted common share, for the first quarter of 2024, and $6.1 million, or $0.39 per diluted common share, for the second quarter of 2023.

Min Kim, President and Chief Executive Officer:

“Even with the extended pressure on the business and banking environment, we continued to grow our loans and deposits while improving net income and earnings per share over the last quarter. Our net interest margin was controlled with a slight decline while our credit quality remained strong. We remain optimistic about our future growth and performance and will continue to focus on executing our strategic goals while maintaining an optimal 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 2Q2024 vs.

 

 

2Q2024

 

 

 

1Q2024

 

 

 

2Q2023

 

 

1Q2024

 

 

2Q2023

 

Selected Income Statement Data:

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

16,194

 

 

$

15,979

 

 

$

17,252

 

 

1.3

%

 

(6.1

)%

Provision for credit losses

 

 

617

 

 

 

145

 

 

 

 

 

325.5

 

 

n/m

 

Noninterest income

 

 

4,184

 

 

 

3,586

 

 

 

3,605

 

 

16.7

 

 

16.1

 

Noninterest expense

 

 

12,189

 

 

 

12,157

 

 

 

12,300

 

 

0.3

 

 

(0.9

)

Income tax expense

 

 

2,136

 

 

 

2,037

 

 

 

2,466

 

 

4.9

 

 

(13.4

)

Net income

 

 

5,436

 

 

 

5,226

 

 

 

6,091

 

 

4.0

 

 

(10.8

)

Diluted earnings per share

 

 

0.36

 

 

 

0.34

 

 

 

0.39

 

 

5.9

 

 

(7.7

)

Selected Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

Gross loans

 

$

1,870,106

 

 

$

1,804,987

 

 

$

1,716,197

 

 

3.6

%

 

9.0

%

Total deposits

 

 

1,940,821

 

 

 

1,895,411

 

 

 

1,859,639

 

 

2.4

 

 

4.4

 

Total assets

 

 

2,290,680

 

 

 

2,234,520

 

 

 

2,151,701

 

 

2.5

 

 

6.5

 

Average loans(1)

 

 

1,843,284

 

 

 

1,808,932

 

 

 

1,725,764

 

 

1.9

 

 

6.8

 

Average deposits

 

 

1,970,320

 

 

 

1,836,331

 

 

 

1,817,101

 

 

7.3

 

 

8.4

 

Credit Quality:

 

 

 

 

 

 

 

 

 

 

Nonperforming loans

 

$

4,389

 

 

$

4,343

 

 

$

3,447

 

 

1.1

%

 

27.3

%

Nonperforming loans to gross loans

 

 

0.23

%

 

 

0.24

%

 

 

0.20

%

 

(0.01

)

 

0.03

 

Criticized loans(2) to gross loans

 

 

0.88

 

 

 

0.64

 

 

 

0.44

 

 

0.24

 

 

0.44

 

Net charge-offs (recoveries)(3) to average gross loans(1)

 

 

(0.00

)

 

 

0.01

 

 

 

0.00

 

 

(0.01

)

 

(0.00

)

Allowance for credit losses to gross loans

 

 

1.22

 

 

 

1.23

 

 

 

1.21

 

 

(0.01

)

 

0.01

 

Allowance for credit losses to nonperforming loans

 

 

519

 

 

 

510

 

 

 

603

 

 

9.00

 

 

(84.00

)

Financial Ratios:

 

 

 

 

 

 

 

 

 

 

Return on average assets(3)

 

 

0.95

%

 

 

0.96

%

 

 

1.15

%

 

(0.01

)%

 

(0.20

)%

Return on average equity(3)

 

 

11.23

 

 

 

10.83

 

 

 

13.27

 

 

0.40

 

 

(2.04

)

Net interest margin(3)

 

 

2.96

 

 

 

3.06

 

 

 

3.40

 

 

(0.10

)

 

(0.44

)

Efficiency ratio(4)

 

 

59.81

 

 

 

62.14

 

 

 

58.97

 

 

(2.33

)

 

0.84

 

Common equity tier 1 capital ratio

 

 

12.01

 

 

 

12.34

 

 

 

11.92

 

 

(0.33

)

 

0.09

 

Leverage ratio

 

 

9.28

 

 

 

9.65

 

 

 

9.50

 

 

(0.37

)

 

(0.22

)

Book value per common share

 

$

13.22

 

 

$

13.00

 

 

$

12.16

 

 

1.7

 

 

8.7

 

 

 

 

 

 

 

 

 

 

 

 

(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 2Q2024 vs.

 

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

1Q2024

 

 

2Q2023

 

Interest Income

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

34,357

 

$

32,913

 

$

30,102

 

4.4

%

 

14.1

%

Interest expense

 

 

18,163

 

 

16,934

 

 

12,850

 

7.3

 

 

41.3

 

Net interest income

 

$

16,194

 

$

15,979

 

$

17,252

 

1.3

%

 

(6.1

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

Yield Change 2Q2024 vs.

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

 

 

Interest

and Fees

 

Yield/Rate(1)

 

Interest

and Fees

 

Yield/Rate(1)

 

Interest

and Fees

 

Yield/Rate(1)

 

1Q2024

 

 

2Q2023

 

Interest-earning Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

30,605

 

6.67

%

 

$

30,142

 

6.69

%

 

$

27,288

 

6.34

%

 

(0.02

)%

 

0.33

%

Total interest-earning assets

 

 

34,357

 

6.29

 

 

 

32,913

 

6.32

 

 

 

30,102

 

5.94

 

 

(0.03

)

 

0.35

 

Interest-bearing Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

17,343

 

4.84

 

 

 

15,675

 

4.77

 

 

 

11,920

 

3.98

 

 

0.07

 

 

0.86

 

Total interest-bearing liabilities

 

 

18,163

 

4.81

 

 

 

16,934

 

4.76

 

 

 

12,850

 

4.01

 

 

0.05

 

 

0.80

 

Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income / interest rate spreads

 

 

16,194

 

1.48

 

 

 

15,979

 

1.56

 

 

 

17,252

 

1.93

 

 

(0.08

)

 

(0.45

)

Net interest margin

 

 

 

2.96

 

 

 

 

3.06

 

 

 

 

3.40

 

 

(0.10

)

 

(0.44

)

Total deposits / cost of deposits

 

 

17,343

 

3.54

 

 

 

15,675

 

3.43

 

 

 

11,920

 

2.63

 

 

0.11

 

 

0.91

 

Total funding liabilities / cost of funds

 

 

18,163

 

3.57

 

 

 

16,934

 

3.50

 

 

 

12,850

 

2.71

 

 

0.07

 

 

0.86

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Annualized.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

Yield Change 2Q2024 vs.

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

 

 

Interest

& Fees

 

Yield(1)

 

Interest

& Fees

 

Yield(1)

 

Interest

& Fees

 

Yield(1)

 

1Q2024

 

 

2Q2023

 

Loan Yield Component:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual interest rate

 

$

29,719

 

 

6.48

%

 

$

28,877

 

 

6.41

%

 

$

26,411

 

 

6.13

%

 

0.07

%

 

0.35

%

SBA loan discount accretion(2)

 

 

1,087

 

 

0.24

 

 

 

881

 

 

0.20

 

 

 

1,078

 

 

0.25

 

 

0.04

 

 

(0.01

)

Amortization of net deferred fees

 

 

(44

)

 

(0.01

)

 

 

54

 

 

0.01

 

 

 

16

 

 

0.01

 

 

(0.02

)

 

(0.02

)

Amortization of premium

 

 

(396

)

 

(0.09

)

 

 

(428

)

 

(0.10

)

 

 

(452

)

 

(0.11

)

 

0.01

 

 

0.02

 

Net interest recognized on nonaccrual loans

 

 

(3

)

 

 

 

 

492

 

 

0.11

 

 

 

40

 

 

0.01

 

 

(0.11

)

 

(0.01

)

Prepayment penalties and other fees(3)

 

 

242

 

 

0.05

 

 

 

266

 

 

0.06

 

 

 

195

 

 

0.05

 

 

(0.01

)

 

 

Yield on loans

 

$

30,605

 

 

6.67

%

 

$

30,142

 

 

6.69

%

 

$

27,288

 

 

6.34

%

 

(0.02

)%

 

0.33

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Annualized.

(2)

Includes discount accretion from SBA loan payoffs of $564 thousand, $345 thousand and $459 thousand for the three months ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively.

(3)

Includes prepayment penalty income of $26 thousand, $115 thousand and $110 thousand for the three months ended June 30, 2024, March 31, 2024 and June 30, 2023, respectively, from Commercial Real Estate (“CRE”) and Commercial and Industrial (“C&I”) loans.

Second Quarter 2024 vs. First Quarter 2024

Net interest income increased $215 thousand, or 1.3%, primarily due to higher interest income on deposits in other banks and loans, coupled with lower interest expense on borrowings, but partially offset by higher interest expense on interest-bearing deposits. Net interest margin was 2.96%, a decrease of 10 basis points from 3.06%.

  • An $858 thousand increase in interest income on interest-bearing deposits in other banks was primarily due to a $62.9 million, or 86.2%, increase in average balance.
  • A $463 thousand increase in interest income on loans was primarily due to a $34.4 million, or 1.9%, increase in average balance.
  • A $439 thousand decrease in interest expense on borrowings was primarily due to a $31.4 million, or 28.9%, decrease in average balance.
  • A $1.7 million increase in interest expense on interest-bearing deposits was primarily due to a $119.3 million, or 9.0%, increase in average balance.

Second Quarter 2024 vs. Second Quarter 2023

Net interest income decreased $1.1 million, or 6.1%, primarily due to higher interest expense on interest-bearing deposits, partially offset by higher interest income on loans and deposits in other banks as our deposit costs repriced quicker than our interest-earning asset yields following the Federal Reserve’s rate increases. Net interest margin was 2.96%, a decrease of 44 basis points from 3.40%.

  • A $5.4 million increase in interest expense on interest-bearing deposits was primarily due to a $239.8 million, or 20.0%, increase in average balance and a 86 basis point increase in average cost.
  • A $3.3 million increase in interest income on loans was primarily due to a $117.5 million, or 6.8%, increase in average balance and a 33 basis point increase in average yield.
  • An $844 thousand increase in interest income on interest-bearing deposits in other banks was primarily due to a $56.8 million, or 71.7%, increase in average balance and a 36 basis point increase in average yield.

Provision for Credit Losses

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

 

2Q2024

 

 

 

1Q2024

 

 

 

2Q2023

Provision for credit losses on loans

 

$

627

 

 

$

193

 

 

$

Reversal of credit losses on off-balance sheet exposure

 

 

(10

)

 

 

(48

)

 

 

Total provision for credit losses

 

$

617

 

 

$

145

 

 

$

 

 

 

 

 

 

 

Second Quarter 2024 vs. First Quarter 2024

The Company recorded a $617 thousand provision for credit losses, an increase of $472 thousand, compared with a $145 thousand provision for credit losses. Provision for credit losses on loans of $627 thousand was partially offset by a $10 thousand reversal of credit losses on off-balance sheet exposure.

Provision for credit losses on loans of $627 thousand was primarily due to a $634 thousand increase in the qualitative reserve. The quantitative reserve was unchanged from the prior quarter. The increase in the qualitative reserve was primarily due to weakening economic and business conditions, increasing criticized loans, and declining collateral values for collateral dependent CRE loans.

Second Quarter 2024 vs. Second Quarter 2023

The Company recorded a $617 thousand provision for credit losses, an increase of $617 thousand, compared with no provision for credit losses.

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 2Q2024 vs.

 

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

1Q2024

 

 

2Q2023

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

 

$

793

 

$

612

 

$

573

 

29.6

%

 

38.4

%

Loan servicing fees, net of amortization

 

 

575

 

 

772

 

 

595

 

(25.5

)

 

(3.4

)

Gain on sale of loans

 

 

2,325

 

 

1,703

 

 

2,098

 

36.5

 

 

10.8

 

Other income

 

 

491

 

 

499

 

 

339

 

(1.6

)

 

44.8

 

Total noninterest income

 

$

4,184

 

$

3,586

 

$

3,605

 

16.7

%

 

16.1

%

 

 

 

 

 

 

 

 

 

 

 

Second Quarter 2024 vs. First Quarter 2024

Noninterest income increased $598 thousand, or 16.7%, primarily due to higher gain on sale of loans and higher service charges on deposits, offset by lower loan servicing fee.

  • Gain on sale of loans was $2.3 million, an increase of $622 thousand from $1.7 million, primarily due to a higher Small Business Administration (“SBA”) loan sold amount and a higher average premium on sales. The Bank sold $32.1 million in SBA loans at an average premium rate of 8.58%, compared to the sale of $24.8 million at an average premium rate of 8.33%.
  • Service charges on deposits was $793 thousand, an increase of $181 thousand from $612 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 $575 thousand, a decrease of $197 thousand from $772 thousand, primarily due to an increase in servicing fee amortization driven by higher loan payoffs in loan servicing portfolio.

Second Quarter 2024 vs. Second Quarter 2023

Noninterest income increased $579 thousand, or 16.1%, primarily due to higher gain on sale of loans, higher service charges on deposits and higher other income.

  • Gain on sale of loans was $2.3 million, an increase of $227 thousand from $2.1 million, primarily due to a higher average premium rate. The Bank sold $32.1 million in SBA loans at an average premium rate of 8.58%, compared to the sale of $36.8 million at an average premium rate of 6.64%.
  • Service charges on deposits was $793 thousand, an increase of $220 thousand from $573 thousand, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts.
  • Other income was $491 thousand, an increase of $152 thousand from $339 thousand, primarily due to an increase of $98 thousand in credit related fee income.

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 2Q2024 vs.

 

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

1Q2024

 

 

2Q2023

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

$

7,568

 

$

7,841

 

$

7,681

 

(3.5

)%

 

(1.5

)%

Occupancy and equipment

 

 

1,660

 

 

1,655

 

 

1,598

 

0.3

 

 

3.9

 

Data processing and communication

 

 

530

 

 

487

 

 

546

 

8.8

 

 

(2.9

)

Professional fees

 

 

406

 

 

395

 

 

381

 

2.8

 

 

6.6

 

FDIC insurance and regulatory assessments

 

 

378

 

 

374

 

 

420

 

1.1

 

 

(10.0

)

Promotion and advertising

 

 

151

 

 

149

 

 

159

 

1.3

 

 

(5.0

)

Directors’ fees

 

 

178

 

 

157

 

 

210

 

13.4

 

 

(15.2

)

Foundation donation and other contributions

 

 

539

 

 

540

 

 

594

 

(0.2

)

 

(9.3

)

Other expenses

 

 

779

 

 

559

 

 

711

 

39.4

 

 

9.6

 

Total noninterest expense

 

$

12,189

 

$

12,157

 

$

12,300

 

0.3

%

 

(0.9

)%

 

 

 

 

 

 

 

 

 

 

 

Second Quarter 2024 vs. First Quarter 2024

Noninterest expense increased $32 thousand, or 0.3%, primarily due to higher other expenses and data processing and communication, partially offset by lower salaries and employee benefits.

  • Other expenses increased $220 thousand, primarily due to an increase of $147 thousand in business development expense related to the addition of deposit analysis accounts and an increase of $84 thousand in Other Real Estate Owned (“OREO”) expense.
  • Data processing and communication increased $43 thousand, primarily due to an accrual adjustment made in the prior quarter for credits received on data processing fees.
  • Salaries and employee benefits decreased $273 thousand, primarily due to decreases in employer payroll taxes, employee incentive accruals, and employee vacation accruals.

Second Quarter 2024 vs. Second Quarter 2023

Noninterest expense decreased $111 thousand, or 0.9%, primarily due to lower salaries and employee benefits and foundation donation and other contributions, partially offset by higher other expenses.

  • Salaries and employee benefits decreased $113 thousand, primarily due to decreases in employee incentive accruals and employee vacation accruals.
  • Foundation donations and other contributions decreased $55 thousand, primarily due to a lower donation accrual for Open Stewardship as a result of lower net income.
  • Other expenses increased $68 thousand, primarily due to an increase of $84 thousand in OREO expense.

Income Tax Expense

Second Quarter 2024 vs. First Quarter 2024

Income tax expense was $2.1 million and the effective tax rate was 28.2%, compared to income tax expense of $2.0 million and the effective rate of 28.0%. The increase in income tax expense was in line with the increase in income before income taxes.

Second Quarter 2024 vs. Second Quarter 2023

Income tax expense was $2.1 million and the effective tax rate was 28.2%, compared to income tax expense of $2.5 million and an effective rate of 28.8%. 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

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of

 

% Change 2Q2024 vs.

 

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

1Q2024

 

 

2Q2023

 

CRE loans

 

$

931,284

 

$

905,534

 

$

847,863

 

2.8

%

 

9.8

%

SBA loans

 

 

242,395

 

 

247,550

 

 

238,785

 

(2.1

)

 

1.5

 

C&I loans

 

 

188,557

 

 

147,508

 

 

112,160

 

27.8

 

 

68.1

 

Home mortgage loans

 

 

506,873

 

 

502,995

 

 

516,226

 

0.8

 

 

(1.8

)

Consumer & other loans

 

 

997

 

 

1,400

 

 

1,163

 

(28.8

)

 

(14.3

)

Gross loans

 

$

1,870,106

 

$

1,804,987

 

$

1,716,197

 

3.6

%

 

9.0

%

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 2Q2024 vs.

 

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

1Q2024

 

 

2Q2023

 

CRE loans

 

$

41,990

 

$

44,595

 

$

29,976

 

(5.8

)%

 

40.1

%

SBA loans

 

 

24,142

 

 

52,379

 

 

34,312

 

(53.9

)

 

(29.6

)

C&I loans

 

 

21,271

 

 

22,124

 

 

25,650

 

(3.9

)

 

(17.1

)

Home mortgage loans

 

 

13,720

 

 

2,478

 

 

22,788

 

453.7

 

 

(39.8

)

Gross loans

 

$

101,123

 

$

121,576

 

$

112,726

 

(16.8

)%

 

(10.3

)%

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

 

2Q2024

 

 

 

1Q2024

 

 

 

2Q2023

 

Loan Activities:

 

 

 

 

 

 

Gross loans, beginning

 

$

1,804,987

 

 

$

1,765,845

 

 

$

1,692,485

 

New originations

 

 

101,123

 

 

 

121,576

 

 

 

112,726

 

Net line advances

 

 

43,488

 

 

 

16,965

 

 

 

(25,961

)

Purchases

 

 

 

 

 

 

 

 

6,359

 

Sales

 

 

(32,102

)

 

 

(32,106

)

 

 

(36,791

)

Paydowns

 

 

(19,710

)

 

 

(24,557

)

 

 

(17,210

)

Payoffs

 

 

(36,902

)

 

 

(28,539

)

 

 

(25,969

)

Decrease (increase) in loans held for sale

 

 

9,590

 

 

 

(14,280

)

 

 

7,534

 

Other

 

 

(368

)

 

 

83

 

 

 

3,024

 

Total

 

 

65,119

 

 

 

39,142

 

 

 

23,712

 

Gross loans, ending

 

$

1,870,106

 

 

$

1,804,987

 

 

$

1,716,197

 

 

 

 

 

 

 

 

As of June 30, 2024 vs. March 31, 2024

Gross loans were $1.87 billion as of June 30, 2024, up $65.1 million, from March 31, 2024, 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 $101.1 million $32.1 million and $56.6 million, respectively, for the second quarter of 2024, compared with $121.6 million, $32.1 million and $53.1 million, respectively, for the first quarter of 2024.

As of June 30, 2024 vs. June 30, 2023

Gross loans were $1.87 billion as of June 30, 2024, up $153.9 million, from June 30, 2023, primarily due to new loan originations of $415.7 million, primarily offset by loan sales of $127.7 million and loan payoffs and paydowns of $211.6 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

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

 

%

 

Rate

 

%

 

Rate

 

%

 

Rate

Fixed rate

 

36.2

%

 

5.39

%

 

35.1

%

 

5.17

%

 

36.2

%

 

4.82

%

Hybrid rate

 

33.9

 

 

5.42

 

 

32.8

 

 

5.22

 

 

34.7

 

 

4.99

 

Variable rate

 

29.9

 

 

9.19

 

 

32.1

 

 

9.16

 

 

29.1

 

 

9.05

 

Gross loans

 

100.0

%

 

6.54

%

 

100.0

%

 

6.47

%

 

100.0

%

 

6.11

%

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of June 30, 2024

 

Within One Year

 

One Year Through Five Years

 

After Five Years

 

Total

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

Fixed rate

 

$

155,421

 

6.17

%

 

$

292,706

 

5.11

%

 

$

229,174

 

5.21

%

 

$

677,301

 

5.39

%

Hybrid rate

 

 

5,032

 

8.38

 

 

 

173,341

 

4.21

 

 

 

454,749

 

5.84

 

 

 

633,122

 

5.42

 

Variable rate

 

 

93,103

 

9.03

 

 

 

128,778

 

9.04

 

 

 

337,802

 

9.29

 

 

 

559,683

 

9.19

 

Gross loans

 

$

253,556

 

7.26

%

 

$

594,825

 

5.70

%

 

$

1,021,725

 

6.84

%

 

$

1,870,106

 

6.54

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for Credit Losses

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 2Q2024 vs.

 

 

2Q2024

 

 

 

1Q2024

 

 

 

2Q2023

 

 

 

1Q2024

 

 

 

2Q2023

 

Allowance for credit losses on loans, beginning

 

$

22,129

 

 

$

21,993

 

 

$

20,814

 

 

$

136

 

 

$

1,315

 

Provision for credit losses

 

 

627

 

 

 

193

 

 

 

 

 

 

434

 

 

 

627

 

Gross charge-offs

 

 

 

 

 

(68

)

 

 

(20

)

 

 

68

 

 

 

20

 

Gross recoveries

 

 

4

 

 

 

11

 

 

 

8

 

 

 

(7

)

 

 

(4

)

Net (charge-offs) recoveries

 

 

4

 

 

 

(57

)

 

 

(12

)

 

 

61

 

 

 

16

 

Allowance for credit losses on loans, ending

 

$

22,760

 

 

$

22,129

 

 

$

20,802

 

 

$

631

 

 

$

1,958

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

468

 

 

$

516

 

 

$

367

 

 

$

(48

)

 

$

101

 

Reversal of credit losses

 

 

(10

)

 

 

(48

)

 

 

 

 

 

38

 

 

 

(10

)

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

 

$

458

 

 

$

468

 

 

$

367

 

 

$

(10

)

 

$

91

 

 

 

 

 

 

 

 

 

 

 

 

Asset Quality

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of and For the Three Months Ended

 

Change 2Q2024 vs.

 

 

2Q2024

 

 

 

1Q2024

 

 

 

2Q2023

 

 

1Q2024

 

 

2Q2023

 

Loans 30-89 days past due and still accruing

 

$

6,652

 

 

$

3,904

 

 

$

5,215

 

 

70.4

%

 

27.6

%

As a % of gross loans

 

 

0.36

%

 

 

0.22

%

 

 

0.30

%

 

0.14

 

 

0.06

 

 

 

 

 

 

 

 

 

 

 

 

Nonperforming loans(1)

 

$

4,389

 

 

$

4,343

 

 

$

3,447

 

 

1.1

%

 

27.3

%

Nonperforming assets(1)

 

 

5,626

 

 

 

5,580

 

 

 

3,447

 

 

0.8

 

 

63.2

 

Nonperforming loans to gross loans

 

 

0.23

%

 

 

0.24

%

 

 

0.20

%

 

(0.01

)

 

0.03

 

Nonperforming assets to total assets

 

 

0.25

 

 

 

0.25

 

 

 

0.16

 

 

0.00

 

 

0.09

 

 

 

 

 

 

 

 

 

 

 

 

Criticized loans(1)(2)

 

$

16,428

 

 

$

11,564

 

 

$

7,538

 

 

42.1

%

 

117.9

%

Criticized loans to gross loans

 

 

0.88

%

 

 

0.64

%

 

 

0.44

%

 

0.24

 

 

0.44

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses ratios:

 

 

 

 

 

 

 

 

 

 

As a % of gross loans

 

 

1.22

%

 

 

1.23

%

 

 

1.21

%

 

(0.01

)%

 

0.01

%

As a % of nonperforming loans

 

 

519

 

 

 

510

 

 

 

603

 

 

9

 

 

(84

)

As a % of nonperforming assets

 

 

405

 

 

 

397

 

 

 

603

 

 

8

 

 

(198

)

As a % of criticized loans

 

 

139

 

 

 

191

 

 

 

276

 

 

(52

)

 

(137

)

Net charge-offs (recoveries)(3) to average gross loans(4)

 

 

(0.00

)

 

 

0.01

 

 

 

0.00

 

 

(0.01

)

 

(0.00

)

 

 

 

 

 

 

 

 

 

 

 

(1)

Excludes the guaranteed portion of SBA loans that are in liquidation totaling $3.5 million, $3.1 million and $5.4 million as of June 30, 2024, March 31, 2024 and June 30, 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 1.22%.

  • Loans 30-89 days past due and still accruing were $6.7 million or 0.36% of gross loans as of June 30, 2024, compared with $3.9 million or 0.22% as of March 31, 2024. The increase was due to two home mortgage loans totaling $2.2 million, one of which was paid current after the quarter, and one SBA relationship totaling $0.9 million.
  • Nonperforming loans were $4.4 million or 0.23% of gross loans as of June 30, 2024, compared with $4.3 million or 0.24% as of March 31, 2024.
  • Nonperforming assets were $5.6 million or 0.25% of total assets as of June 30, 2024, compared with $5.6 million or 0.25% as of March 31, 2024. OREO was $1.2 million as of June 30, 2024, which is secured by a mix-use property in Los Angeles Koreatown with 90% guaranteed by SBA.
  • Criticized loans were $16.4 million or 0.88% of gross loans as of June 30, 2024, compared with $11.6 million or 0.64% as of March 31, 2024. The increase was due to three Special Mention downgrades totaling $2.1 million and five Substandard downgrades totaling $3.2 million.
  • Net recoveries were $4 thousand or 0.00% of average loans in the second quarter of 2024, compared to net charge-offs of $57 thousand, or 0.01% of average loans in the first quarter of 2024 and of $12 thousand, or 0.00% of average loans in the second quarter of 2023.

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of

 

% Change 2Q2024 vs.

 

 

2Q2024

 

 

 

1Q2024

 

 

 

2Q2023

 

 

 

Amount

 

%

 

Amount

 

%

 

Amount

 

%

 

1Q2024

 

 

2Q2023

 

Noninterest-bearing deposits

 

$

518,456

 

26.7

%

 

$

539,396

 

28.5

%

 

$

634,745

 

34.1

%

 

(3.9

)%

 

(18.3

)%

Money market deposits and others

 

 

332,137

 

17.1

 

 

 

327,718

 

17.3

 

 

 

344,162

 

18.5

 

 

1.3

 

 

(3.5

)

Time deposits

 

 

1,090,228

 

56.2

 

 

 

1,028,297

 

54.2

 

 

 

880,732

 

47.4

 

 

6.0

 

 

23.8

 

Total deposits

 

$

1,940,821

 

100.0

%

 

$

1,895,411

 

100.0

%

 

$

1,859,639

 

100.0

%

 

2.4

%

 

4.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated uninsured deposits

 

$

860,419

 

44.3

%

 

$

805,523

 

42.5

%

 

$

805,070

 

43.3

%

 

6.8

%

 

6.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2024 vs. March 31, 2024

Total deposits were $1.94 billion as of June 30, 2024, up $45.4 million from March 31, 2024, primarily due to increases of $61.9 million in time deposits and $4.4 million in money market deposits, offset by a $20.9 million decrease in noninterest-bearing deposit. Noninterest-bearing deposits, as a percentage of total deposits, decreased to 26.7% from 28.5%. The composition shift to time deposits driven by customers’ preference for high-rate deposit products continued but slowed to a lesser extent.

As of June 30, 2024 vs. June 30, 2023

Total deposits were $1.94 billion as of June 30, 2024, up $81.2 million from June 30, 2023, primarily driven by a $209.5 million increase in time deposits, offset by decreases of $116.3 million in noninterest-bearing deposits and $12.0 million in money market deposits. Noninterest-bearing deposits, as a percentage of total deposits, decreased to 26.7% from 34.1%. 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 June 30, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2024

($ in thousands)

 

Within Three

Months

 

Three to

Six Months

 

Six to Nine Months

 

Nine to Twelve

Months

 

After

Twelve Months

 

Total

Time deposits (greater than $250)

 

$

96,968

 

 

$

201,334

 

 

$

145,549

 

 

$

85,958

 

 

$

4,048

 

 

$

533,857

 

Time deposits ($250 or less)

 

 

155,311

 

 

 

188,367

 

 

 

102,834

 

 

 

77,680

 

 

 

32,179

 

 

 

556,371

 

Total time deposits

 

$

252,279

 

 

$

389,701

 

 

$

248,383

 

 

$

163,638

 

 

$

36,227

 

 

$

1,090,228

 

Weighted average rate

 

 

5.09

%

 

 

5.18

%

 

 

5.07

%

 

 

5.16

%

 

 

4.17

%

 

 

5.10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

 

2Q2024

 

 

 

1Q2024

 

 

 

2Q2023

 

Liquidity Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

127,676

 

 

$

139,246

 

 

$

143,761

 

Available-for-sale debt securities

 

 

199,205

 

 

 

187,225

 

 

 

202,250

 

Liquid assets

 

$

326,881

 

 

$

326,471

 

 

$

346,011

 

Liquid assets to total assets

 

 

14.3

%

 

 

14.6

%

 

 

16.1

%

 

 

 

 

 

 

 

Available borrowings:

 

 

 

 

 

 

Federal Home Loan Bank—San Francisco

 

$

343,600

 

 

$

331,917

 

 

$

400,543

 

Federal Reserve Bank

 

 

191,421

 

 

 

185,913

 

 

 

172,316

 

Pacific Coast Bankers Bank

 

 

50,000

 

 

 

50,000

 

 

 

50,000

 

Zions Bank

 

 

25,000

 

 

 

25,000

 

 

 

25,000

 

First Horizon Bank

 

 

25,000

 

 

 

25,000

 

 

 

25,000

 

Total available borrowings

 

$

635,021

 

 

$

617,830

 

 

$

672,859

 

Total available borrowings to total assets

 

 

27.7

%

 

 

27.6

%

 

 

31.3

%

 

 

 

 

 

 

 

Liquid assets and available borrowings to total deposits

 

 

49.6

%

 

 

49.8

%

 

 

54.8

%

 

 

 

 

 

Capital and Capital Ratios

On July 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 August 22, 2024 to all shareholders of record as of the close of business on August 8, 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 224,321 shares of its common stock at an average price of $9.64 per share during the second quarter of 2024 under the stock repurchase program announced in August 2023. Since the announcement of the stock repurchase program in August 2023, the Company repurchased a total of 424,018 shares of its common stock at an average repurchase price of $9.36 per share through June 30, 2024.

 

 

 

 

 

 

 

 

 

 

 

OP Bancorp(1)

 

Open Bank

 

Minimum Well

Capitalized

Ratio

 

Minimum

Capital Ratio+

Conservation

Buffer(2)

Risk-Based Capital Ratios:

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

13.26

%

 

13.24

%

 

10.00

%

 

10.50

%

Tier 1 risk-based capital ratio

 

12.01

 

 

11.99

 

 

8.00

 

 

8.50

 

Common equity tier 1 ratio

 

12.01

 

 

11.99

 

 

6.50

 

 

7.00

 

Leverage ratio

 

9.28

 

 

9.27

 

 

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

 

 

 

 

 

 

 

Change 2Q2024 vs.

 

 

2Q2024

 

 

 

1Q2024

 

 

 

2Q2023

 

 

1Q2024

 

 

2Q2023

 

Risk-Based Capital Ratios:

 

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

 

13.26

%

 

 

13.59

%

 

 

13.10

%

 

(0.33

)%

 

0.16

%

Tier 1 risk-based capital ratio

 

 

12.01

 

 

 

12.34

 

 

 

11.92

 

 

(0.33

)

 

0.09

 

Common equity tier 1 ratio

 

 

12.01

 

 

 

12.34

 

 

 

11.92

 

 

(0.33

)

 

0.09

 

Leverage ratio

 

 

9.28

 

 

 

9.65

 

 

 

9.50

 

 

(0.37

)

 

(0.22

)

Risk-weighted Assets ($ in thousands)

 

$

1,776,771

 

 

$

1,715,186

 

 

$

1,700,205

 

 

3.59

 

 

4.50

 

 

 

 

 

 

 

 

 

 

 

 

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; infrastructure risks and similar circumstances that affect our and our customers’ ability to communicate and to engage in routine online banking activities; 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 subsequent filings with the Securities and Exchange Commission.

CONSOLIDATED BALANCE SHEETS (unaudited)

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of

 

% Change 2Q2024 vs.

 

 

2Q2024

 

 

 

1Q2024

 

 

 

2Q2023

 

 

1Q2024

 

 

2Q2023

 

Assets

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

21,771

 

 

$

20,513

 

 

$

21,295

 

 

6.1

%

 

2.2

%

Interest-bearing deposits in other banks

 

 

105,905

 

 

 

118,733

 

 

 

122,466

 

 

(10.8

)

 

(13.5

)

Cash and cash equivalents

 

 

127,676

 

 

 

139,246

 

 

 

143,761

 

 

(8.3

)

 

(11.2

)

Available-for-sale debt securities, at fair value

 

 

199,205

 

 

 

187,225

 

 

 

202,250

 

 

6.4

 

 

(1.5

)

Other investments

 

 

16,367

 

 

 

16,264

 

 

 

16,183

 

 

0.6

 

 

1.1

 

Loans held for sale

 

 

6,485

 

 

 

16,075

 

 

 

 

 

(59.7

)

 

n/m

 

CRE loans

 

 

931,284

 

 

 

905,534

 

 

 

847,863

 

 

2.8

 

 

9.8

 

SBA loans

 

 

242,395

 

 

 

247,550

 

 

 

238,785

 

 

(2.1

)

 

1.5

 

C&I loans

 

 

188,557

 

 

 

147,508

 

 

 

112,160

 

 

27.8

 

 

68.1

 

Home mortgage loans

 

 

506,873

 

 

 

502,995

 

 

 

516,226

 

 

0.8

 

 

(1.8

)

Consumer loans

 

 

997

 

 

 

1,400

 

 

 

1,163

 

 

(28.8

)

 

(14.3

)

Gross loans receivable

 

 

1,870,106

 

 

 

1,804,987

 

 

 

1,716,197

 

 

3.6

 

 

9.0

 

Allowance for credit losses

 

 

(22,760

)

 

 

(22,129

)

 

 

(20,802

)

 

2.9

 

 

9.4

 

Net loans receivable

 

 

1,847,346

 

 

 

1,782,858

 

 

 

1,695,395

 

 

3.6

 

 

9.0

 

Premises and equipment, net

 

 

4,716

 

 

 

4,971

 

 

 

5,093

 

 

(5.1

)

 

(7.4

)

Accrued interest receivable, net

 

 

8,555

 

 

 

8,370

 

 

 

7,703

 

 

2.2

 

 

11.1

 

Servicing assets

 

 

11,043

 

 

 

11,405

 

 

 

12,654

 

 

(3.2

)

 

(12.7

)

Company owned life insurance

 

 

22,566

 

 

 

22,399

 

 

 

21,913

 

 

0.7

 

 

3.0

 

Deferred tax assets, net

 

 

14,117

 

 

 

13,802

 

 

 

13,360

 

 

2.3

 

 

5.7

 

Other real estate owned

 

 

1,237

 

 

 

1,237

 

 

 

 

 

 

 

n/m

 

Operating right-of-use assets

 

 

8,348

 

 

 

8,864

 

 

 

9,487

 

 

(5.8

)

 

(12.0

)

Other assets

 

 

23,019

 

 

 

21,804

 

 

 

23,902

 

 

5.6

 

 

(3.7

)

Total assets

 

$

2,290,680

 

 

$

2,234,520

 

 

$

2,151,701

 

 

2.5

%

 

6.5

%

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

518,456

 

 

$

539,396

 

 

$

634,745

 

 

(3.9

)%

 

(18.3

)%

Money market and others

 

 

332,137

 

 

 

327,718

 

 

 

344,162

 

 

1.3

 

 

(3.5

)

Time deposits greater than $250

 

 

533,857

 

 

 

451,497

 

 

 

416,208

 

 

18.2

 

 

28.3

 

Other time deposits

 

 

556,371

 

 

 

576,800

 

 

 

464,524

 

 

(3.5

)

 

19.8

 

Total deposits

 

 

1,940,821

 

 

 

1,895,411

 

 

 

1,859,639

 

 

2.4

 

 

4.4

 

Federal Home Loan Bank advances

 

 

115,000

 

 

 

105,000

 

 

 

75,000

 

 

9.5

 

 

53.3

 

Accrued interest payable

 

 

15,504

 

 

 

12,270

 

 

 

9,354

 

 

26.4

 

 

65.7

 

Operating lease liabilities

 

 

9,000

 

 

 

9,614

 

 

 

10,486

 

 

(6.4

)

 

(14.2

)

Other liabilities

 

 

14,449

 

 

 

17,500

 

 

 

13,452

 

 

(17.4

)

 

7.4

 

Total liabilities

 

 

2,094,774

 

 

 

2,039,795

 

 

 

1,967,931

 

 

2.7

 

 

6.4

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

73,749

 

 

 

75,957

 

 

 

77,464

 

 

(2.9

)

 

(4.8

)

Additional paid-in capital

 

 

11,441

 

 

 

11,240

 

 

 

10,297

 

 

1.8

 

 

11.1

 

Retained earnings

 

 

127,929

 

 

 

124,280

 

 

 

114,177

 

 

2.9

 

 

12.0

 

Accumulated other comprehensive loss

 

 

(17,213

)

 

 

(16,752

)

 

 

(18,168

)

 

2.8

 

 

(5.3

)

Total shareholders’ equity

 

 

195,906

 

 

 

194,725

 

 

 

183,770

 

 

0.6

 

 

6.6

 

Total liabilities and shareholders' equity

 

$

2,290,680

 

 

$

2,234,520

 

 

$

2,151,701

 

 

2.5

%

 

6.5

%

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

 

 

 

 

 

 

 

 

 

 

 

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

 

For the Three Months Ended

 

% Change 2Q2024 vs.

 

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

1Q2024

 

 

2Q2023

 

Interest income

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

30,605

 

$

30,142

 

$

27,288

 

1.5

%

 

12.2

%

Interest on available-for-sale debt securities

 

 

1,590

 

 

1,460

 

 

1,562

 

8.9

 

 

1.8

 

Other interest income

 

 

2,162

 

 

1,311

 

 

1,252

 

64.9

 

 

72.7

 

Total interest income

 

 

34,357

 

 

32,913

 

 

30,102

 

4.4

 

 

14.1

 

Interest expense

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

17,343

 

 

15,675

 

 

11,920

 

10.6

 

 

45.5

 

Interest on borrowings

 

 

820

 

 

1,259

 

 

930

 

(34.9

)

 

(11.8

)%

Total interest expense

 

 

18,163

 

 

16,934

 

 

12,850

 

7.3

 

 

41.3

 

Net interest income

 

 

16,194

 

 

15,979

 

 

17,252

 

1.3

 

 

(6.1

)

Provision for credit losses

 

 

617

 

 

145

 

 

 

325.5

 

 

n/m

 

Net interest income after provision for credit losses

 

 

15,577

 

 

15,834

 

 

17,252

 

(1.6

)

 

(9.7

)

Noninterest income

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

 

 

793

 

 

612

 

 

573

 

29.6

 

 

38.4

 

Loan servicing fees, net of amortization

 

 

575

 

 

772

 

 

595

 

(25.5

)

 

(3.4

)

Gain on sale of loans

 

 

2,325

 

 

1,703

 

 

2,098

 

36.5

 

 

10.8

 

Other income

 

 

491

 

 

499

 

 

339

 

(1.6

)

 

44.8

 

Total noninterest income

 

 

4,184

 

 

3,586

 

 

3,605

 

16.7

 

 

16.1

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

7,568

 

 

7,841

 

 

7,681

 

(3.5

)

 

(1.5

)

Occupancy and equipment

 

 

1,660

 

 

1,655

 

 

1,598

 

0.3

 

 

3.9

 

Data processing and communication

 

 

530

 

 

487

 

 

546

 

8.8

 

 

(2.9

)

Professional fees

 

 

406

 

 

395

 

 

381

 

2.8

 

 

6.6

 

FDIC insurance and regulatory assessments

 

 

378

 

 

374

 

 

420

 

1.1

 

 

(10.0

)

Promotion and advertising

 

 

151

 

 

149

 

 

159

 

1.3

 

 

(5.0

)

Directors’ fees

 

 

178

 

 

157

 

 

210

 

13.4

 

 

(15.2

)

Foundation donation and other contributions

 

 

539

 

 

540

 

 

594

 

(0.2

)

 

(9.3

)

Other expenses

 

 

779

 

 

559

 

 

711

 

39.4

 

 

9.6

 

Total noninterest expense

 

 

12,189

 

 

12,157

 

 

12,300

 

0.3

 

 

(0.9

)

Income before income tax expense

 

 

7,572

 

 

7,263

 

 

8,557

 

4.3

 

 

(11.5

)

Income tax expense

 

 

2,136

 

 

2,037

 

 

2,466

 

4.9

 

 

(13.4

)

Net income

 

$

5,436

 

$

5,226

 

$

6,091

 

4.0

%

 

(10.8

)%

 

 

 

 

 

 

 

 

 

 

 

Book value per share

 

$

13.22

 

$

13.00

 

$

12.16

 

1.7

%

 

8.7

%

Earnings per share - basic

 

 

0.36

 

 

0.34

 

 

0.39

 

5.9

 

 

(7.7

)

Earnings per share - diluted

 

 

0.36

 

 

0.34

 

 

0.39

 

5.9

 

 

(7.7

)

 

 

 

 

 

 

 

 

 

 

 

Shares of common stock outstanding, at period end

 

 

14,816,281

 

 

14,982,555

 

 

15,118,268

 

(1.1

)%

 

(2.0

)%

Weighted average shares:

 

 

 

 

 

 

 

 

 

 

- Basic

 

 

14,868,344

 

 

14,991,835

 

 

15,158,365

 

(0.8

)%

 

(1.9

)%

- Diluted

 

 

14,868,344

 

 

14,991,835

 

 

15,169,794

 

(0.8

)

 

(2.0

)

 

 

 

 

 

 

 

 

 

 

 

KEY RATIOS

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

% Change 2Q2024 vs.

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

 

1Q2024

 

 

2Q2023

 

Return on average assets (ROA)(1)

 

0.95

%

 

0.96

%

 

1.15

%

 

%

 

(0.2

)%

Return on average equity (ROE)(1)

 

11.23

 

 

10.83

 

 

13.27

 

 

0.4

 

 

(2.0

)

Net interest margin(1)

 

2.96

 

 

3.06

 

 

3.40

 

 

(0.1

)

 

(0.4

)

Efficiency ratio

 

59.81

 

 

62.14

 

 

58.97

 

 

(2.3

)

 

0.8

 

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

13.26

%

 

13.59

%

 

13.10

%

 

(0.3

)%

 

0.2

%

Tier 1 risk-based capital ratio

 

12.01

 

 

12.34

 

 

11.92

 

 

(0.3

)

 

0.1

 

Common equity tier 1 ratio

 

12.01

 

 

12.34

 

 

11.92

 

 

(0.3

)

 

0.1

 

Leverage ratio

 

9.28

 

 

9.65

 

 

9.50

 

 

(0.4

)

 

(0.2

)

 

 

 

 

 

 

 

 

 

 

 

(1)

Annualized.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

 

 

 

 

 

 

 

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

 

For the Six Months Ended

 

 

 

 

2Q2024

 

 

2Q2023

 

 

% Change

Interest income

 

 

 

 

 

 

Interest and fees on loans

 

$

60,747

 

$

53,299

 

 

14.0

%

Interest on available-for-sale debt securities

 

 

3,050

 

 

3,128

 

 

(2.5

)

Other interest income

 

 

3,473

 

 

2,269

 

 

53.1

 

Total interest income

 

 

67,270

 

 

58,696

 

 

14.6

 

Interest expense

 

 

 

 

 

 

Interest on deposits

 

 

33,018

 

 

22,302

 

 

48.0

 

Interest on borrowings

 

 

2,079

 

 

1,250

 

 

66.3

 

Total interest expense

 

 

35,097

 

 

23,552

 

 

49.0

 

Net interest income

 

 

32,173

 

 

35,144

 

 

(8.5

)

Provision for (reversal of) credit losses

 

 

762

 

 

(338

)

 

n/m

 

Net interest income after provision for credit losses

 

 

31,411

 

 

35,482

 

 

(11.5

)

Noninterest income

 

 

 

 

 

 

Service charges on deposits

 

 

1,405

 

 

991

 

 

41.8

%

Loan servicing fees, net of amortization

 

 

1,347

 

 

1,441

 

 

(6.5

)

Gain on sale of loans

 

 

4,028

 

 

4,668

 

 

(13.7

)

Other income

 

 

990

 

 

800

 

 

23.8

 

Total noninterest income

 

 

7,770

 

 

7,900

 

 

(1.6

)

Noninterest expense

 

 

 

 

 

 

Salaries and employee benefits

 

 

15,409

 

 

14,933

 

 

3.2

 

Occupancy and equipment

 

 

3,315

 

 

3,168

 

 

4.6

 

Data processing and communication

 

 

1,017

 

 

1,096

 

 

(7.2

)

Professional fees

 

 

801

 

 

740

 

 

8.2

 

FDIC insurance and regulatory assessments

 

 

752

 

 

887

 

 

(15.2

)

Promotion and advertising

 

 

300

 

 

321

 

 

(6.5

)

Directors’ fees

 

 

335

 

 

371

 

 

(9.7

)

Foundation donation and other contributions

 

 

1,079

 

 

1,347

 

 

(19.9

)

Other expenses

 

 

1,338

 

 

1,345

 

 

(0.5

)

Total noninterest expense

 

 

24,346

 

 

24,208

 

 

0.6

 

Income before income tax expense

 

 

14,835

 

 

19,174

 

 

(22.6

)

Income tax expense

 

 

4,173

 

 

5,549

 

 

(24.8

)

Net income

 

$

10,662

 

$

13,625

 

 

(21.7

)%

 

 

 

 

 

 

 

Book value per share

 

$

13.22

 

$

12.16

 

 

8.7

%

Earnings per share - basic

 

 

0.70

 

 

0.88

 

 

(20.5

)

Earnings per share - diluted

 

 

0.70

 

 

0.88

 

 

(20.5

)

 

 

 

 

 

 

 

Shares of common stock outstanding, at period end

 

 

14,816,281

 

 

15,118,268

 

 

(2.0

)%

Weighted average shares:

 

 

 

 

 

 

- Basic

 

 

14,930,090

 

 

15,221,010

 

 

(1.9

)%

- Diluted

 

 

14,930,090

 

 

15,241,903

 

 

(2.0

)

 

 

 

 

 

 

 

KEY RATIOS

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

 

 

2Q2024

 

 

2Q2023

 

 

% Change

Return on average assets (ROA)(1)

 

0.96

%

 

1.29

%

 

(0.3

)%

Return on average equity (ROE)(1)

 

11.03

 

 

15.02

 

 

(4.0

)

Net interest margin(1)

 

3.01

 

 

3.48

 

 

(0.5

)

Efficiency ratio

 

60.95

 

 

56.24

 

 

4.7

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

13.26

%

 

13.10

%

 

0.2

%

Tier 1 risk-based capital ratio

 

12.01

 

 

11.92

 

 

0.1

 

Common equity tier 1 ratio

 

12.01

 

 

11.92

 

 

0.1

 

Leverage ratio

 

9.28

 

 

9.50

 

 

(0.2

)

 

 

 

 

 

 

 

(1)

Annualized.

ASSET QUALITY

 

 

 

 

 

 

 

($ in thousands)

 

As of and For the Three Months Ended

 

 

2Q2024

 

 

 

1Q2024

 

 

 

2Q2023

 

Nonaccrual loans(1)

 

$

4,389

 

 

$

4,343

 

 

$

3,447

 

Loans 90 days or more past due, accruing(2)

 

 

 

 

 

 

 

 

 

Nonperforming loans

 

 

4,389

 

 

 

4,343

 

 

 

3,447

 

OREO

 

 

1,237

 

 

 

1,237

 

 

 

 

Nonperforming assets

 

$

5,626

 

 

$

5,580

 

 

$

3,447

 

 

 

 

 

 

 

 

Criticized loans by risk categories:

 

 

 

 

 

 

Special mention loans

 

$

3,339

 

 

$

1,415

 

 

$

2,909

 

Classified loans(1)(3)

 

 

13,089

 

 

 

10,149

 

 

 

4,629

 

Total criticized loans

 

$

16,428

 

 

$

11,564

 

 

$

7,538

 

 

 

 

 

 

 

 

Criticized loans by loan type:

 

 

 

 

 

 

CRE loans

 

$

5,896

 

 

$

5,292

 

 

$

 

SBA loans

 

 

9,771

 

 

 

6,055

 

 

 

4,784

 

C&I loans

 

 

550

 

 

 

 

 

 

200

 

Home mortgage loans

 

 

211

 

 

 

217

 

 

 

2,554

 

Total criticized loans

 

$

16,428

 

 

$

11,564

 

 

$

7,538

 

 

 

 

 

 

 

 

Nonperforming loans / gross loans

 

 

0.23

%

 

 

0.24

%

 

 

0.20

%

Nonperforming assets / gross loans plus OREO

 

 

0.30

 

 

 

0.31

 

 

 

0.20

 

Nonperforming assets / total assets

 

 

0.25

 

 

 

0.25

 

 

 

0.16

 

Classified loans / gross loans

 

 

0.70

 

 

 

0.56

 

 

 

0.27

 

Criticized loans / gross loans

 

 

0.88

 

 

 

0.64

 

 

 

0.44

 

 

 

 

 

 

 

 

Allowance for credit losses ratios:

 

 

 

 

 

 

As a % of gross loans

 

 

1.22

%

 

 

1.23

%

 

 

1.21

%

As a % of nonperforming loans

 

 

519

 

 

 

510

 

 

 

603

 

As a % of nonperforming assets

 

 

405

 

 

 

397

 

 

 

603

 

As a % of classified loans

 

 

174

 

 

 

218

 

 

 

449

 

As a % of criticized loans

 

 

139

 

 

 

191

 

 

 

276

 

 

 

 

 

 

 

 

Net charge-offs (recoveries)

 

$

(4

)

 

$

57

 

 

$

12

 

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

 

 

(0.00

)%

 

 

0.01

%

 

 

0.00

%

 

 

 

 

 

 

 

(1)

 

Excludes the guaranteed portion of SBA loans that are in liquidation totaling $3.5 million, $3.1 million and $5.1 million as of June 30, 2024, March 31, 2024 and June 30, 2023, respectively.

(2)

 

Excludes the guaranteed portion of SBA loans that are in liquidation totaling $246 thousand as of June 30, 2023.

(3)

 

Consists of substandard, doubtful and loss categories.

(4)

 

Annualized.

(5)

 

Includes loans held for sale.

 

 

 

 

 

 

($ in thousands)

 

 

2Q2024

 

 

1Q2024

 

 

2Q2023

Accruing delinquent loans 30-89 days past due

 

 

 

 

 

 

30-59 days

 

$

3,774

 

$

801

 

$

3,647

60-89 days

 

 

2,878

 

 

3,103

 

 

1,568

Total

 

$

6,652

 

$

3,904

 

$

5,215

 

 

 

 

 

 

 

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

2Q2024

 

 

1Q2024

 

 

2Q2023

 

($ 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

 

$

135,984

 

$

1,847

 

5.37

%

 

$

73,047

 

$

989

 

5.35

%

 

$

79,200

 

$

1,003

 

5.01

%

Federal funds sold and other investments

 

 

16,307

 

 

315

 

7.72

 

 

 

16,265

 

 

322

 

7.92

 

 

 

15,374

 

 

249

 

6.46

 

Available-for-sale debt securities, at fair value

 

 

195,512

 

 

1,590

 

3.25

 

 

 

191,383

 

 

1,460

 

3.05

 

 

 

209,801

 

 

1,562

 

2.98

 

CRE loans

 

 

908,073

 

 

13,742

 

6.09

 

 

 

901,262

 

 

13,729

 

6.13

 

 

 

838,526

 

 

11,823

 

5.66

 

SBA loans

 

 

259,649

 

 

7,116

 

11.02

 

 

 

259,368

 

 

7,213

 

11.19

 

 

 

262,825

 

 

7,174

 

10.95

 

C&I loans

 

 

172,481

 

 

3,367

 

7.85

 

 

 

134,893

 

 

2,670

 

7.96

 

 

 

114,103

 

 

2,232

 

7.85

 

Home mortgage loans

 

 

501,862

 

 

6,348

 

5.06

 

 

 

512,023

 

 

6,495

 

5.07

 

 

 

508,976

 

 

6,043

 

4.75

 

Consumer loans

 

 

1,219

 

 

32

 

10.44

 

 

 

1,386

 

 

35

 

10.10

 

 

 

1,334

 

 

16

 

4.77

 

Loans(2)

 

 

1,843,284

 

 

30,605

 

6.67

 

 

 

1,808,932

 

 

30,142

 

6.69

 

 

 

1,725,764

 

 

27,288

 

6.34

 

Total interest-earning assets

 

 

2,191,087

 

 

34,357

 

6.29

 

 

 

2,089,627

 

 

32,913

 

6.32

 

 

 

2,030,139

 

 

30,102

 

5.94

 

Noninterest-earning assets

 

 

89,446

 

 

 

 

 

 

87,586

 

 

 

 

 

 

84,991

 

 

 

 

Total assets

 

$

2,280,533

 

 

 

 

 

$

2,177,213

 

 

 

 

 

$

2,115,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market deposits and others

 

$

338,554

 

$

3,494

 

4.15

%

 

$

367,386

 

$

3,940

 

4.31

%

 

$

357,517

 

$

3,201

 

3.59

%

Time deposits

 

 

1,102,587

 

 

13,849

 

5.05

 

 

 

954,442

 

 

11,735

 

4.94

 

 

 

843,836

 

 

8,719

 

4.14

 

Total interest-bearing deposits

 

 

1,441,141

 

 

17,343

 

4.84