2023 Second Quarter Highlights compared with 2022 Second Quarter:
-
Financial Results:
- Net income of $6.1 million, compared to $8.5 million
- Diluted earnings per share of $0.39, compared to $0.54
- Net interest income of $17.3 million, compared to $19.1 million
- Net interest margin of 3.40%, compared to 4.21%
- No provision for credit losses, compared to provision for credit losses of $996 thousand
- Total assets of $2.2 billion, an 11% increase compared to $1.9 billion
- Gross loans of $1.7 billion, a 16% increase compared to $1.5 billion
- Total deposits of $1.9 billion, a 7% increase compared to $1.7 billion
-
Credit Quality:
- Allowance for credit losses to gross loans of 1.21%, compared to 1.19%
- Net charge-offs(1) to average gross loans(2) of 0.00%, compared to net recoveries of 0.01%
- Nonperforming loans to gross loans of 0.20%, compared to 0.12%
- Criticized loans(3) to gross loans of 0.44%, compared to 0.18%
-
Capital Levels:
- Remained well-capitalized with a Common Equity Tier 1 (“CET1”) ratio of 11.92%.
- Book value per common share increased to $12.16, compared to $11.16
- Repurchased 221,494 shares of common stock at an average price of $8.40
- Paid quarterly cash dividend of $0.12 per share, compared to $0.10 per share
___________________________________________________________
(1) Annualized.
(2) Includes loans held for sale.
(3) Includes special mention, substandard, doubtful, and loss categories.
LOS ANGELES–(BUSINESS WIRE)–OP Bancorp (the “Company”) (NASDAQ: OPBK), the holding company of Open Bank (the “Bank”), today reported its financial results for the second quarter of 2023. Net income for the second quarter of 2023 was $6.1 million, or $0.39 per diluted common share, compared with $7.5 million, or $0.48 per diluted common share, for the first quarter of 2023, and $8.5 million, or $0.54 per diluted common share, for the second quarter of 2022.
Min Kim, President and Chief Executive Officer:
“We continued to maintain strong liquidity, credit quality, and solid capital positions to withstand the recent turmoil in the banking industry. Our liquid assets and available borrowings were more than 47% of total assets,” said Min Kim, President and Chief Executive.
“The migration from noninterest-bearing to interest-bearing deposits has been stabilized during the quarter, and our noninterest-bearing deposits remained at 34% of total deposits. We are truly grateful for our customers’ loyalty and trust throughout these difficult times.
“Although we anticipate additional challenges in the short term, we remain optimistic about our future performance and will continue to focus on executing our strategic goals while maintaining appropriate risk and control environment.”
|
SELECTED FINANCIAL HIGHLIGHTS |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
($ in thousands, except per share data) |
|
As of and For the Three Months Ended |
|
% Change 2Q23 vs. |
||||||||||||||
|
|
|
2Q2023 |
|
|
|
1Q2023 |
|
|
|
2Q2022 |
|
|
1Q2023 |
|
|
2Q2022 |
|
|
|
Selected Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net interest income |
|
$ |
17,252 |
|
|
$ |
17,892 |
|
|
$ |
19,079 |
|
|
(3.6 |
)% |
|
(9.6 |
)% |
|
(Reversal of) provision for credit losses |
|
|
— |
|
|
|
(338 |
) |
|
|
996 |
|
|
n/m |
|
|
n/m |
|
|
Noninterest income |
|
|
3,605 |
|
|
|
4,295 |
|
|
|
5,359 |
|
|
(16.1 |
) |
|
(32.7 |
) |
|
Noninterest expense |
|
|
12,300 |
|
|
|
11,908 |
|
|
|
11,503 |
|
|
3.3 |
|
|
6.9 |
|
|
Income tax expense |
|
|
2,466 |
|
|
|
3,083 |
|
|
|
3,459 |
|
|
(20.0 |
) |
|
(28.7 |
) |
|
Net Income |
|
|
6,091 |
|
|
|
7,534 |
|
|
|
8,480 |
|
|
(19.2 |
) |
|
(28.2 |
) |
|
Diluted earnings per share |
|
|
0.39 |
|
|
|
0.48 |
|
|
|
0.54 |
|
|
(18.8 |
) |
|
(27.8 |
) |
|
Selected Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Gross loans |
|
$ |
1,716,197 |
|
|
$ |
1,692,485 |
|
|
$ |
1,484,718 |
|
|
1.4 |
% |
|
15.6 |
% |
|
Total deposits |
|
|
1,859,639 |
|
|
|
1,904,818 |
|
|
|
1,741,623 |
|
|
(2.4 |
) |
|
6.8 |
|
|
Total assets |
|
|
2,151,701 |
|
|
|
2,170,594 |
|
|
|
1,934,242 |
|
|
(0.9 |
) |
|
11.2 |
|
|
Average loans(1) |
|
|
1,725,764 |
|
|
|
1,725,392 |
|
|
|
1,560,064 |
|
|
— |
|
|
10.6 |
|
|
Average deposits |
|
|
1,817,101 |
|
|
|
1,867,684 |
|
|
|
1,702,860 |
|
|
(2.7 |
) |
|
6.7 |
|
|
Credit Quality: |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Nonperforming loans |
|
$ |
3,447 |
|
|
$ |
2,504 |
|
|
$ |
1,826 |
|
|
37.7 |
% |
|
88.8 |
% |
|
Net charge-offs (recoveries) to average gross loans(2) |
|
|
0.00 |
% |
|
|
0.02 |
% |
|
|
(0.01 |
)% |
|
(0.02 |
) |
|
0.01 |
|
|
Allowance for credit losses to gross loans |
|
|
1.21 |
|
|
|
1.23 |
|
|
|
1.19 |
|
|
(0.02 |
) |
|
0.02 |
|
|
Allowance for credit losses to nonperforming loans |
|
|
603 |
|
|
|
831 |
|
|
|
969 |
|
|
(228 |
) |
|
(366 |
) |
|
Financial Ratios: |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Return on average assets(2) |
|
|
1.15 |
% |
|
|
1.43 |
% |
|
|
1.79 |
% |
|
(0.28 |
)% |
|
(0.64 |
)% |
|
Return on average equity(2) |
|
|
13.27 |
|
|
|
16.82 |
|
|
|
20.29 |
|
|
(3.55 |
) |
|
(7.02 |
) |
|
Net interest margin(2) |
|
|
3.40 |
|
|
|
3.57 |
|
|
|
4.21 |
|
|
(0.17 |
) |
|
(0.81 |
) |
|
Efficiency ratio(3) |
|
|
58.97 |
|
|
|
53.67 |
|
|
|
47.07 |
|
|
5.30 |
|
|
11.90 |
|
|
Common equity tier 1 capital ratio |
|
|
11.92 |
|
|
|
12.06 |
|
|
|
12.29 |
|
|
(0.14 |
) |
|
(0.37 |
) |
|
Leverage ratio |
|
|
9.50 |
|
|
|
9.43 |
|
|
|
9.48 |
|
|
0.07 |
|
|
0.02 |
|
|
Book value per common share |
|
$ |
12.16 |
|
|
$ |
12.02 |
|
|
$ |
11.16 |
|
|
1.2 |
|
|
9.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
| (1) |
Includes loans held for sale. |
|
| (2) |
Annualized. |
|
| (3) |
Represents noninterest expense divided by the sum of net interest income and noninterest income. |
|
INCOME STATEMENT HIGHLIGHTS |
|||||||||||||||
|
Net Interest Income and Net Interest Margin |
|||||||||||||||
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|
|
|
|
|
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|
|
|
|
|
|||||
|
($ in thousands) |
|
For the Three Months Ended |
|
% Change 2Q23 vs. |
|||||||||||
|
|
|
2Q2023 |
|
|
1Q2023 |
|
|
2Q2022 |
|
1Q2023 |
|
|
2Q2022 |
|
|
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|||||
|
Interest income |
|
$ |
30,102 |
|
$ |
28,594 |
|
$ |
20,148 |
|
5.3 |
% |
|
49.4 |
% |
|
Interest expense |
|
|
12,850 |
|
|
10,702 |
|
|
1,069 |
|
20.1 |
|
|
1102.1 |
|
|
Net interest income |
|
$ |
17,252 |
|
$ |
17,892 |
|
$ |
19,079 |
|
(3.6 |
)% |
|
(9.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
($ in thousands) |
|
For the Three Months Ended |
|||||||||||||||||||||||||
|
|
2Q2023 |
|
|
1Q2023 |
|
|
2Q2022 |
|
|||||||||||||||||||
|
|
Average Balance |
|
Interest and Fees |
|
Yield/Rate(1) |
|
Average Balance |
|
Interest and Fees |
|
Yield/Rate(1) |
|
Average Balance |
|
Interest and Fees |
|
Yield/Rate(1) |
||||||||||
|
Interest-earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Loans |
|
$ |
1,725,764 |
|
$ |
27,288 |
|
6.34 |
% |
|
$ |
1,725,392 |
|
$ |
26,011 |
|
6.10 |
% |
|
$ |
1,560,064 |
|
$ |
19,108 |
|
4.91 |
% |
|
Total interest-earning assets |
|
|
2,030,139 |
|
|
30,102 |
|
5.94 |
|
|
|
2,022,146 |
|
|
28,594 |
|
5.71 |
|
|
|
1,817,157 |
|
|
20,148 |
|
4.44 |
|
|
Interest-bearing Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Interest-bearing deposits |
|
|
1,201,353 |
|
|
11,920 |
|
3.98 |
|
|
|
1,196,194 |
|
|
10,382 |
|
3.52 |
|
|
|
859,072 |
|
|
1,069 |
|
0.50 |
|
|
Total interest-bearing liabilities |
|
|
1,283,939 |
|
|
12,850 |
|
4.01 |
|
|
|
1,222,362 |
|
|
10,702 |
|
3.55 |
|
|
|
859,072 |
|
|
1,069 |
|
0.50 |
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Net interest income / interest rate spreads |
|
|
|
|
17,252 |
|
1.93 |
|
|
|
|
|
17,892 |
|
2.16 |
|
|
|
|
|
19,079 |
|
3.94 |
|
|||
|
Net interest margin |
|
|
|
|
|
3.40 |
|
|
|
|
|
|
3.57 |
|
|
|
|
|
|
4.21 |
|
||||||
|
Total deposits / cost of deposits |
|
|
1,817,101 |
|
|
11,920 |
|
2.63 |
|
|
|
1,867,684 |
|
|
10,382 |
|
2.25 |
|
|
|
1,702,860 |
|
|
1,069 |
|
0.25 |
|
|
Total funding liabilities / cost of funds |
|
|
1,899,687 |
|
|
12,850 |
|
2.71 |
|
|
|
1,893,852 |
|
|
10,702 |
|
2.29 |
|
|
|
1,702,860 |
|
|
1,069 |
|
0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
| (1) Annualized. | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
($ in thousands) |
|
For the Three Months Ended |
|
Yield Change 2Q23 vs. |
|||||||||||||||||||||||
|
|
2Q2023 |
|
|
1Q2023 |
|
|
2Q2022 |
|
|
||||||||||||||||||
|
|
Interest & Fees |
|
Yield(1) |
|
Interest & Fees |
|
Yield(1) |
|
Interest & Fees |
|
Yield(1) |
|
1Q2023 |
|
|
2Q2022 |
|
||||||||||
|
Loan Yield Component: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Contractual interest rate |
|
$ |
26,411 |
|
|
6.13 |
% |
|
$ |
25,477 |
|
|
5.97 |
% |
|
$ |
17,425 |
|
|
4.48 |
% |
|
0.16 |
% |
|
1.65 |
% |
|
SBA discount accretion |
|
|
1,078 |
|
|
0.25 |
|
|
|
974 |
|
|
0.23 |
|
|
|
1,151 |
|
|
0.30 |
|
|
0.02 |
|
|
(0.05 |
) |
|
Amortization of net deferred fees |
|
|
16 |
|
|
0.01 |
|
|
|
79 |
|
|
0.02 |
|
|
|
493 |
|
|
0.13 |
|
|
(0.01 |
) |
|
(0.12 |
) |
|
Amortization of premium |
|
|
(452 |
) |
|
(0.11 |
) |
|
|
(392 |
) |
|
(0.09 |
) |
|
|
(197 |
) |
|
(0.05 |
) |
|
(0.02 |
) |
|
(0.06 |
) |
|
Net interest recognized on nonaccrual loans |
|
|
40 |
|
|
0.01 |
|
|
|
(243 |
) |
|
(0.06 |
) |
|
|
5 |
|
|
— |
|
|
0.07 |
|
|
0.01 |
|
|
Prepayment penalties(2) and other fees |
|
|
195 |
|
|
0.05 |
|
|
|
116 |
|
|
0.03 |
|
|
|
231 |
|
|
0.05 |
|
|
0.02 |
|
|
— |
|
|
Yield on loans |
|
$ |
27,288 |
|
|
6.34 |
% |
|
$ |
26,011 |
|
|
6.10 |
% |
|
$ |
19,108 |
|
|
4.91 |
% |
|
0.24 |
% |
|
1.43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Amortization of Net Deferred Fees: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
PPP loan forgiveness(3) |
|
$ |
— |
|
|
— |
% |
|
$ |
3 |
|
|
— |
% |
|
$ |
351 |
|
|
0.09 |
% |
|
— |
% |
|
(0.09 |
)% |
|
Other |
|
|
16 |
|
|
0.01 |
|
|
|
76 |
|
|
0.02 |
|
|
|
142 |
|
|
0.04 |
|
|
(0.01 |
) |
|
(0.03 |
) |
|
Total amortization of net deferred fees |
|
$ |
16 |
|
|
0.01 |
% |
|
$ |
79 |
|
|
0.02 |
% |
|
$ |
493 |
|
|
0.13 |
% |
|
(0.01 |
)% |
|
(0.12 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) |
Annualized. |
|
| (2) |
Prepayment penalty income of $110 thousand, $3 thousand and $118 thousand for the three months ended June 30, 2023, March 31, 2023 and June 30, 2022, respectively, was from commercial real estate and Commercial and Industrial (“C&I”) loans. |
|
| (3) |
As of June 30, 2023, there were unamortized net deferred fees and unaccredited discounts of $4 thousand to be recognized over the estimated life of the loans as a yield adjustment on the loans. |
Impact of Hana Loan Purchase on Average Loan Yield and Net Interest Margin
During the second quarter of 2021, the Bank purchased an SBA portfolio of 638 loans with an ending balance of $100.0 million, excluding loan discount of $8.9 million from Hana Small Business Lending, Inc. (“Hana”). The following table presents impacts of the Hana loan purchase on average loan yield and net interest margin:
|
|
|
|
|
|
|
|
||||||
|
($ in thousands) |
|
For the Three Months Ended |
||||||||||
|
|
|
2Q2023 |
|
|
|
1Q2023 |
|
|
|
2Q2022 |
|
|
|
Hana Loan Purchase: |
|
|
|
|
|
|
||||||
|
Contractual interest rate |
|
$ |
1,409 |
|
|
$ |
1,400 |
|
|
$ |
956 |
|
|
Purchased loan discount accretion |
|
|
384 |
|
|
|
413 |
|
|
|
592 |
|
|
Other fees |
|
|
16 |
|
|
|
24 |
|
|
|
24 |
|
|
Total interest income |
|
$ |
1,809 |
|
|
$ |
1,837 |
|
|
$ |
1,572 |
|
|
|
|
|
|
|
|
|
||||||
|
Effect on average loan yield(1) |
|
|
0.23 |
% |
|
|
0.24 |
% |
|
|
0.19 |
% |
|
Effect on net interest margin(1) |
|
|
0.27 |
% |
|
|
0.28 |
% |
|
|
0.20 |
% |
|
|
|
|
|
|
|
|
||||||
|
($ in thousands) |
|
For the Three Months Ended |
|||||||||||||||||||||||||
|
|
|
2Q2023 |
|
|
|
1Q2023 |
|
|
|
2Q2022 |
|
||||||||||||||||
|
|
Average Balance |
|
Interest and Fees |
|
Yield/ Rate |
|
Average Balance |
|
Interest and Fees |
|
Yield/ Rate |
|
Average Balance |
|
Interest and Fees |
|
Yield/ Rate |
||||||||||
|
Average loan yield(1) |
|
$ |
1,725,764 |
|
$ |
27,288 |
|
6.34 |
% |
|
$ |
1,725,392 |
|
$ |
26,011 |
|
6.10 |
% |
|
$ |
1,560,064 |
|
$ |
19,108 |
|
4.91 |
% |
|
Adjusted average loan yield excluding purchased Hana loans(1)(2) |
|
|
1,670,530 |
|
|
25,479 |
|
6.11 |
|
|
|
1,667,155 |
|
|
24,174 |
|
5.86 |
|
|
|
1,490,884 |
|
|
17,536 |
|
4.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Net interest margin(1) |
|
|
2,030,139 |
|
|
17,252 |
|
3.40 |
|
|
|
2,022,146 |
|
|
17,892 |
|
3.57 |
|
|
|
1,817,157 |
|
|
19,079 |
|
4.21 |
|
|
Adjusted interest margin excluding purchased Hana loans(1)(2) |
|
|
1,974,905 |
|
|
15,443 |
|
3.13 |
|
|
|
1,963,909 |
|
|
16,055 |
|
3.29 |
|
|
|
1,747,977 |
|
|
17,507 |
|
4.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
| (1) |
Annualized. |
|
| (2) |
See reconciliation of GAAP to non-GAAP financial measures. |
Second Quarter 2023 vs. First Quarter 2023
Net interest income decreased $0.6 million, or 3.6%, primarily due to higher interest expense on deposits and borrowings, partially offset by higher interest income on loans. Net interest margin was 3.40%, a decrease of 17 basis points from 3.57%.
- A $1.5 million increase in interest expense on deposits was primarily due to a $5.2 million increase in average balance of interest-bearing deposits and a 46 basis point increase in average cost driven by the Federal Reserve’s rate increases.
- A $610 thousand increase in interest expense on borrowings was primarily due to a $56.4 million increase in average balance.
- A $1.3 million increase in interest income on loans was primarily due to a 24 basis point increase in loan yield as a result of the Federal Reserve’s rate increases.
Second Quarter 2023 vs. Second Quarter 2022
Net interest income decreased $1.8 million, or 9.6%, primarily due to higher interest expense on deposits, partially offset by higher interest income on loans. Net interest margin was 3.40%, a decrease of 81 basis points from 4.21%.
- An $8.2 million increase in interest income on loans was primarily due to a $165.7 million increase in average balance of interest-bearing deposits and a 143 basis point increase in loan yield as a result of the Federal Reserve’s rate increases.
- A $10.9 million increase in interest expense on deposits was primarily due to a $342.3 million increase in average balance and a 348 basis point increase in average cost driven by the Federal Reserve’s rate increases.
Provision for Credit Losses
|
|
|
|
|
|
|
|
||||
|
($ in thousands) |
|
For the Three Months Ended |
||||||||
|
|
|
2Q2023 |
|
|
1Q2023 |
|
|
|
2Q2022 |
|
|
(Reversal of) provision for credit losses on loans |
|
$ |
— |
|
$ |
(258 |
) |
|
$ |
996 |
|
(Reversal of) provision for credit losses on off-balance sheet exposure(1) |
|
|
— |
|
|
(80 |
) |
|
|
23 |
|
Total (reversal of) provision for credit losses |
|
$ |
— |
|
$ |
(338 |
) |
|
$ |
1,019 |
|
|
|
|
|
|
|
|
||||
|
(1) |
Reversal of provision for credit losses on off-balance sheet exposure of $80 thousand for the three months ended March 31, 2023 was included in total (reversal of) provision for credit losses. Prior to CECL adoption, provisions for credit losses on off-balance sheet exposure of $23 thousand for the three months ended June 30, 2022 was included in other expenses. |
Second Quarter 2023 vs. First Quarter 2023
The Company did not record provision for credit losses, compared with a $338 thousand reversal of credit losses.
A $163 thousand increase from qualitative factor adjustments in the second quarter of 2023 was primarily offset by decreases in specific reserve requirements on individually evaluated loans. The change in quantitative general reserve during the quarter was insignificant as the impact from a 1.4% growth in gross loans was mostly offset by a decrease in historical loss factors.
Second Quarter 2023 vs. Second Quarter 2022
The Company did not record provision for credit losses, compared with a $1.0 million provision for credit losses.
|
Noninterest Income |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
($ in thousands) |
|
For the Three Months Ended |
|
% Change 2Q23 vs. |
|||||||||||
|
|
|
2Q2023 |
|
|
1Q2023 |
|
|
2Q2022 |
|
1Q2023 |
|
|
2Q2022 |
|
|
|
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|||||
|
Service charges on deposits |
|
$ |
573 |
|
$ |
418 |
|
$ |
427 |
|
37.1 |
% |
|
34.2 |
% |
|
Loan servicing fees, net of amortization |
|
|
595 |
|
|
846 |
|
|
654 |
|
(29.7 |
) |
|
(9.0 |
) |
|
Gain on sale of loans |
|
|
2,098 |
|
|
2,570 |
|
|
3,873 |
|
(18.4 |
) |
|
(45.8 |
) |
|
Other income |
|
|
339 |
|
|
461 |
|
|
405 |
|
(26.5 |
) |
|
(16.3 |
) |
|
Total noninterest income |
|
$ |
3,605 |
|
$ |
4,295 |
|
$ |
5,359 |
|
(16.1 |
)% |
|
(32.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Second Quarter 2023 vs. First Quarter 2023
Noninterest income decreased $690 thousand, or 16.1%, primarily due to lower gain on sale of loans.
- Gain on sale of loans was $2.1 million, a decrease of $472 thousand from $2.6 million, primarily due to a lower SBA loan sold amount and a lower average sales premium. The Bank sold $36.8 million in SBA loans at an average premium rate of 6.64%, compared to the sale of $44.7 million at an average premium rate of 7.33%.
Second Quarter 2023 vs. Second Quarter 2022
Noninterest income decreased $1.8 million, or 32.7%, primarily due to lower gain on sale of loans.
- Gain on sale of loans was $2.1 million, a decrease of $1.8 million from $3.9 million, primarily due to a lower SBA loan sold amount and a lower average sales premium. The Bank sold $36.8 million in SBA loans at an average premium rate of 6.64%, compared to the sale of $58.6 million at an average premium rate of 7.02%.
Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
($ in thousands) |
|
For the Three Months Ended |
|
% Change 2Q23 vs. |
|||||||||||
|
|
|
2Q2023 |
|
|
1Q2023 |
|
|
2Q2022 |
|
1Q2023 |
|
|
2Q2022 |
|
|
|
Noninterest Expense |
|
|
|
|
|
|
|
|
|
|
|||||
|
Salaries and employee benefits |
|
$ |
7,681 |
|
$ |
7,252 |
|
$ |
7,109 |
|
5.9 |
% |
|
8.0 |
% |
|
Occupancy and equipment |
|
|
1,598 |
|
|
1,570 |
|
|
1,489 |
|
1.8 |
|
|
7.3 |
|
|
Data processing and communication |
|
|
546 |
|
|
550 |
|
|
492 |
|
(0.7 |
) |
|
11.0 |
|
|
Professional fees |
|
|
381 |
|
|
359 |
|
|
364 |
|
6.1 |
|
|
4.7 |
|
|
FDIC insurance and regulatory assessments |
|
|
420 |
|
|
467 |
|
|
192 |
|
(10.1 |
) |
|
118.8 |
|
|
Promotion and advertising |
|
|
159 |
|
|
162 |
|
|
165 |
|
(1.9 |
) |
|
(3.6 |
) |
|
Directors’ fees |
|
|
210 |
|
|
161 |
|
|
190 |
|
30.4 |
|
|
10.5 |
|
|
Foundation donation and other contributions |
|
|
594 |
|
|
753 |
|
|
852 |
|
(21.1 |
) |
|
(30.3 |
) |
|
Other expenses |
|
|
711 |
|
|
634 |
|
|
650 |
|
12.1 |
|
|
9.4 |
|
|
Total noninterest expense |
|
$ |
12,300 |
|
$ |
11,908 |
|
$ |
11,503 |
|
3.3 |
% |
|
6.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Second Quarter 2023 vs. First Quarter 2023
Noninterest expense increased $392 thousand, or 3.3%, primarily due to higher salaries and employee benefits, partially offset by a lower foundation donation.
- Salaries and employee benefits increased $429 thousand primarily due to an addition of four full-time employees and annual salary adjustments effective in the second quarter of 2023.
- Foundation donations and other contributions decreased $159 thousand primarily due to lower donation accrual for Open Stewardship as a result of lower net income.
Second Quarter 2023 vs. Second Quarter 2022
Noninterest expense increased $797 thousand, or 6.9%, primarily due to higher salaries and employee benefits and FDIC insurance and regulatory assessments, mainly offset by a lower foundation donation.
- Salaries and employee benefits increased $572 thousand primarily due to 22 additional full-time employees to support continued growth of the Company.
- FDIC insurance and regulatory assessments increased $228 thousand primarily due to our deposit growth from the second quarter of 2022 and increases in FDIC assessment fees in 2023.
- Foundation donations and other contributions decreased $258 thousand primarily due to lower donation accrual for Open Stewardship as a result of lower net income.
Income Tax Expense
Second Quarter 2023 vs. First Quarter 2023
Income tax expense was $2.5 million, and the effective tax rate was 28.8%, compared to income tax expense of $3.1 million and the effective rate of 29.0%.
Second Quarter 2023 vs. Second Quarter 2022
Income tax expense was $2.5 million and the effective tax rate was 28.8%, compared to income tax expense of $3.5 million and an effective rate of 29.0%.
BALANCE SHEET HIGHLIGHTS
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
($ in thousands) |
|
As of |
|
% Change 2Q23 vs. |
|||||||||||
|
|
|
2Q2023 |
|
|
1Q2023 |
|
|
2Q2022 |
|
1Q2023 |
|
|
2Q2022 |
|
|
|
Commercial real estate loans |
|
$ |
847,863 |
|
$ |
833,615 |
|
$ |
776,785 |
|
1.7 |
% |
|
9.2 |
% |
|
SBA loans |
|
|
238,785 |
|
|
238,994 |
|
|
247,413 |
|
(0.1 |
) |
|
(3.5 |
) |
|
C&I loans |
|
|
112,160 |
|
|
117,841 |
|
|
128,620 |
|
(4.8 |
) |
|
(12.8 |
) |
|
Home mortgage loans |
|
|
516,226 |
|
|
500,635 |
|
|
331,362 |
|
3.1 |
|
|
55.8 |
|
|
Consumer & other loans |
|
|
1,163 |
|
|
1,400 |
|
|
538 |
|
(16.9 |
) |
|
116.2 |
|
|
Gross loans |
|
$ |
1,716,197 |
|
$ |
1,692,485 |
|
$ |
1,484,718 |
|
1.4 |
% |
|
15.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
The following table presents new loan originations based on loan commitment amounts for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
($ in thousands) |
|
For the Three Months Ended |
|
% Change 2Q23 vs. |
|||||||||||
|
|
|
2Q2023 |
|
|
1Q2023 |
|
|
2Q2022 |
|
1Q2023 |
|
|
2Q2022 |
|
|
|
Commercial real estate loans |
|
$ |
29,976 |
|
$ |
24,200 |
|
$ |
61,924 |
|
23.9 |
% |
|
(51.6 |
)% |
|
SBA loans |
|
|
34,312 |
|
|
16,258 |
|
|
55,085 |
|
111.0 |
|
|
(37.7 |
) |
|
C&I loans |
|
|
25,650 |
|
|
7,720 |
|
|
2,718 |
|
232.3 |
|
|
843.7 |
|
|
Home mortgage loans |
|
|
22,788 |
|
|
20,617 |
|
|
30,345 |
|
10.5 |
|
|
(24.9 |
) |
|
Gross loans |
|
$ |
112,726 |
|
$ |
68,795 |
|
$ |
150,072 |
|
63.9 |
% |
|
(24.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
The following table presents changes in gross loans by loan activity for the periods indicated:
|
|
|
|
|
|
|
|
||||||
|
($ in thousands) |
|
For the Three Months Ended |
||||||||||
|
|
|
2Q2023 |
|
|
|
1Q2023 |
|
|
|
2Q2022 |
|
|
|
Loan Activities: |
|
|
|
|
|
|
||||||
|
Gross loans, beginning |
|
$ |
1,692,485 |
|
|
$ |
1,678,292 |
|
|
$ |
1,428,410 |
|
|
New originations |
|
|
112,726 |
|
|
|
68,795 |
|
|
|
150,072 |
|
|
Net line advances |
|
|
(25,961 |
) |
|
|
10,356 |
|
|
|
(46,773 |
) |
|
Purchases |
|
|
6,359 |
|
|
|
12,142 |
|
|
|
56,455 |
|
|
Sales |
|
|
(36,791 |
) |
|
|
(45,021 |
) |
|
|
(58,999 |
) |
|
Paydowns |
|
|
(17,210 |
) |
|
|
(40,190 |
) |
|
|
(15,977 |
) |
|
Payoffs |
|
|
(25,969 |
) |
|
|
(28,326 |
) |
|
|
(33,098 |
) |
|
PPP Payoffs |
|
|
— |
|
|
|
(200 |
) |
|
|
(14,347 |
) |
|
Decrease in loans held for sale |
|
|
7,534 |
|
|
|
36,802 |
|
|
|
18,988 |
|
|
Other |
|
|
3,024 |
|
|
|
(165 |
) |
|
|
(13 |
) |
|
Total |
|
|
23,712 |
|
|
|
14,193 |
|
|
|
56,308 |
|
|
Gross loans, ending |
|
$ |
1,716,197 |
|
|
$ |
1,692,485 |
|
|
$ |
1,484,718 |
|
|
|
|
|
|
|
|
|
||||||
As of June 30, 2023 vs. March 31, 2023
Gross loans were $1.72 billion as of June 30, 2023, up $23.7 million from March 31, 2023, primarily due to new loan originations, partially offset by loan sales, and payoffs and paydowns.
New loan originations and loan payoffs and paydowns were $112.7 million and $43.2 million for the second quarter of 2023, respectively, compared with $68.8 million and $68.7 million for the first quarter of 2023, respectively.
As of June 30, 2023 vs. June 30, 2022
Gross loans were $1.72 billion as of June 30, 2023, up $231.5 million from June 30, 2022, primarily due to new loan originations of $554.7 million and loan purchases of $105.6 million, primarily offset by loan sales of $173.3 million and loan payoffs and paydowns of $222.8 million.
The following table presents the composition of gross loans by interest rate type accompanied with the weighted average contractual rates as of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
($ in thousands) |
|
As of |
||||||||||||||||
|
|
2Q2023 |
|
|
|
1Q2023 |
|
|
|
2Q2022 |
|
|
|||||||
|
|
% |
|
Rate |
|
% |
|
Rate |
|
% |
|
Rate |
|||||||
|
Fixed rate |
|
36.2 |
% |
|
4.82 |
% |
|
36.5 |
% |
|
4.76 |
% |
|
34.9 |
% |
|
4.19 |
% |
|
Hybrid rate |
|
34.7 |
|
|
4.99 |
|
|
34.2 |
|
|
4.94 |
|
|
28.2 |
|
|
4.47 |
|
|
Variable rate |
|
29.1 |
|
|
9.05 |
|
|
29.3 |
|
|
8.76 |
|
|
36.9 |
|
|
5.77 |
|
|
Gross loans |
|
100.0 |
% |
|
6.11 |
% |
|
100.0 |
% |
|
5.99 |
% |
|
100.0 |
% |
|
4.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
The following table presents the maturity of gross loans by interest rate type accompanied with the weighted average contractual rates for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
($ in thousands) |
|
As of June 30, 2023 |
||||||||||||||||||||||
|
|
Within One Year |
|
One Year Through Five Years |
|
After Five Years |
|
Total |
|||||||||||||||||
|
|
Amount |
|
Rate |
|
Amount |
|
Rate |
|
Amount |
|
Rate |
|
Amount |
|
Rate |
|||||||||
|
Fixed rate |
|
$ |
50,591 |
|
5.33 |
% |
|
$ |
331,824 |
|
4.78 |
% |
|
$ |
239,489 |
|
4.77 |
% |
|
$ |
621,904 |
|
4.82 |
% |
|
Hybrid rate |
|
|
— |
|
— |
|
|
|
83,789 |
|
4.63 |
|
|
|
510,775 |
|
5.05 |
|
|
|
594,564 |
|
4.99 |
|
|
Variable rate |
|
|
82,254 |
|
8.87 |
|
|
|
116,620 |
|
8.65 |
|
|
|
300,855 |
|
9.25 |
|
|
|
499,729 |
|
9.05 |
|
|
Gross loans |
|
$ |
132,845 |
|
7.52 |
% |
|
$ |
532,233 |
|
5.60 |
% |
|
$ |
1,051,119 |
|
6.21 |
% |
|
$ |
1,716,197 |
|
6.11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Allowance for Credit Losses
The Company adopted the CECL accounting standard effective as of January 1, 2023 under a modified retrospective approach. The adoption resulted in a $1.9 million increase to the allowance for credit losses on loans, a $184 thousand increase to the allowance for credit losses on off-balance sheet exposure, a $624 thousand increase to deferred tax assets, and a $1.5 million charge to retained earnings.
The following table presents impact of CECL adoption for allowance for credit losses and related items on January 1, 2023:
|
|
|
|
|
|
|
|
|
|
|||||
|
($ in thousands) |
|
Allowance For Credit Losses on Loans |
|
Allowance For Credit Losses on Off-Balance Sheet Exposure |
|
Deferred Tax Assets |
|
Retained Earnings |
|||||
|
As of December 31, 2022 |
|
$ |
19,241 |
|
$ |
263 |
|
$ |
14,316 |
|
$ |
105,690 |
|
|
Day 1 adjustments on January 1, 2023 |
|
|
1,924 |
|
|
184 |
|
|
624 |
|
|
(1,484 |
) |
|
After Day 1 adjustments |
|
$ |
21,165 |
|
$ |
447 |
|
$ |
14,940 |
|
$ |
104,206 |
|
|
|
|
|
|
|
|
|
|
|
|||||
The following table presents allowance for credit losses and provision for credit losses as of and for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
($ in thousands) |
|
As of and For the Three Months Ended |
|
% Change 2Q23 vs. |
||||||||||||||
|
|
|
2Q2023 |
|
|
|
1Q2023 |
|
|
|
2Q2022 |
|
|
1Q2023 |
|
|
2Q2022 |
|
|
|
Allowance for credit losses on loans, beginning |
|
$ |
20,814 |
|
|
$ |
19,241 |
|
|
$ |
16,672 |
|
|
8.2 |
% |
|
24.8 |
% |
|
Impact of CECL adoption |
|
|
— |
|
|
|
1,924 |
|
|
|
— |
|
|
n/m |
|
|
n/m |
|
|
(Reversal of) provision for credit losses(1) |
|
|
— |
|
|
|
(258 |
) |
|
|
996 |
|
|
n/m |
|
|
n/m |
|
|
Gross charge-offs |
|
|
(20 |
) |
|
|
(116 |
) |
|
|
(18 |
) |
|
(82.8 |
) |
|
11.1 |
% |
|
Gross recoveries |
|
|
8 |
|
|
|
23 |
|
|
|
52 |
|
|
(65.2 |
) |
|
(84.6 |
)% |
|
Net (charge-offs) recoveries |
|
|
(12 |
) |
|
|
(93 |
) |
|
|
34 |
|
|
(87.1 |
) |
|
n/m |
|
|
Allowance for credit losses on loans, ending(2) |
|
$ |
20,802 |
|
|
$ |
20,814 |
|
|
$ |
17,702 |
|
|
(0.1 |
)% |
|
17.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Allowance for credit losses on off-balance sheet exposure, beginning |
|
$ |
367 |
|
|
$ |
263 |
|
|
$ |
172 |
|
|
39.5 |
% |
|
113.4 |
% |
|
Impact of CECL adoption |
|
|
— |
|
|
|
184 |
|
|
|
— |
|
|
n/m |
|
|
n/m |
|
|
(Reversal of) provision for credit losses |
|
|
— |
|
|
|
(80 |
) |
|
|
23 |
|
|
n/m |
|
|
n/m |
|
|
Allowance for credit losses on off-balance sheet exposure, ending(2) |
|
$ |
367 |
|
|
$ |
367 |
|
|
$ |
195 |
|
|
— |
% |
|
88.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
(1) |
Excludes reversal of uncollectible accrued interest receivable of $205 thousand for the three months ended June 30, 2022. |
|
|
(2) |
Allowance for credit losses as of June 30, 2023 and March 31, 2023 were calculated under the CECL methodology while allowance for loan losses for June 30, 2022 was calculated under the incurred loss methodology. |
|
Asset Quality |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
($ in thousands) |
|
As of and For the Three Months Ended |
|
% Change 2Q23 vs. |
||||||||||||||
|
|
|
2Q2023 |
|
|
|
1Q2023 |
|
|
|
2Q2022 |
|
|
1Q2023 |
|
|
2Q2022 |
|
|
|
Nonperforming loans(1) |
|
$ |
3,447 |
|
|
$ |
2,504 |
|
|
$ |
1,826 |
|
|
37.7 |
% |
|
88.8 |
% |
|
Nonperforming assets(1) |
|
|
3,447 |
|
|
|
2,504 |
|
|
|
1,826 |
|
|
37.7 |
|
|
88.8 |
|
|
Nonperforming loans to gross loans |
|
|
0.20 |
% |
|
|
0.15 |
% |
|
|
0.12 |
% |
|
0.05 |
|
|
0.08 |
|
|
Nonperforming assets to total assets |
|
|
0.16 |
% |
|
|
0.12 |
% |
|
|
0.09 |
% |
|
0.04 |
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Criticized loans(1)(2) |
|
$ |
7,538 |
|
|
$ |
5,772 |
|
|
$ |
2,673 |
|
|
30.6 |
% |
|
182.0 |
% |
|
Criticized loans to gross loans |
|
|
0.44 |
% |
|
|
0.34 |
% |
|
|
0.18 |
% |
|
0.10 |
|
|
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Allowance for credit losses ratios: |
|
|
|
|
|
|
|
|
|
|
||||||||
|
As a % of gross loans |
|
|
1.21 |
% |
|
|
1.23 |
% |
|
|
1.19 |
% |
|
(0.02 |
)% |
|
0.02 |
% |
|
As an adjusted % of gross loans(3) |
|
|
1.25 |
|
|
|
1.27 |
|
|
|
1.25 |
|
|
(0.02 |
) |
|
— |
|
|
As a % of nonperforming loans |
|
|
603 |
|
|
|
831 |
|
|
|
969 |
|
|
(228 |
) |
|
(366 |
) |
|
As a % of nonperforming assets |
|
|
603 |
|
|
|
831 |
|
|
|
969 |
|
|
(228 |
) |
|
(366 |
) |
|
As a % of criticized loans |
|
|
276 |
|
|
|
361 |
|
|
|
662 |
|
|
(85 |
) |
|
(386 |
) |
|
Net charge-offs (recoveries)(4) to average gross loans(5) |
|
|
0.00 |
|
|
|
0.02 |
|
|
|
(0.01 |
) |
|
(0.02 |
) |
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Contacts
Investor Relations
OP Bancorp
Christine Oh
EVP & CFO
213.892.1192
[email protected]
