OP Bancorp Reports Net Income for 2023 Second Quarter of $6.1 Million and Diluted Earnings Per Share of $0.39

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
($ 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

(1)		Excludes the guaranteed portion of SBA loans that are in liquidation totaling $5.4 million, $1.9 million and $351 thousand as of June 30, 2023, March 31, 2023 and June 30, 2022, respectively.
(2)		Consists of special mention, substandard, doubtful and loss categories.
(3)		See the Reconciliation of GAAP to NON-GAAP Financial Measures.
(4)		Annualized.
(5)		Includes loans held for sale.

Overall, the Bank continued to maintain solid asset quality with low levels of nonperforming loans and net charge-offs. Nonperforming assets and criticized loans remained below our historical norms, a reflection of our conservative credit culture and expertise in the industries we serve. Our allowance remained strong with an adjusted allowance to gross loans ratio of 1.25%.

• Criticized loans was $7.5 million, an increase of $4.9 million from a year ago, and represented 0.44% of gross loans. Criticized loans consist of loans categorized as Special Mention, Substandard, Doubtful and Loss categories defined by regulatory authorities.

• Nonperforming assets was $3.4 million, an increase of $1.6 million from a year ago, and represented 0.16% of total assets. As of June 30, 2023, $5.4 million of nonaccrual assets consisted of guaranteed portion of SBA loans that are in liquidation. The Company did not have OREO as of June 30, 2023 or 2022.

• Net charge-offs were $12 thousand or 0.00% of average loans in the second quarter of 2023, compared to net charge-offs of $93 thousand, or 0.02%, of average loans in the first quarter of 2023 and net recoveries of $34 thousand, or 0.01%, of average loans in the second quarter of 2022.

Deposits
($ in thousands)		As of																		% Change 2Q23 vs.
		2Q2023						1Q2023						2Q2022
		Amount			%			Amount			%			Amount			%			1Q2023			2Q2022
Noninterest-bearing deposits		$	634,745		34.1	%		$	643,902		33.8	%		$	820,311		47.1	%		(1.4	)%		(22.6	)%
Money market deposits and others			344,162		18.5				436,796		22.9				519,389		29.8			(21.2	)		(33.7	)
Time deposits			880,732		47.4				824,120		43.3				401,923		23.1			6.9			119.1
Total deposits		$	1,859,639		100.0	%		$	1,904,818		100.0	%		$	1,741,623		100.0	%		(2.4	)%		6.8	%
Estimated uninsured deposits		$	796,211		42.8	%		$	900,579		47.3	%		$	1,036,943		59.5	%		(11.6	)%		(23.2	)%

As of June 30, 2023 vs. March 31, 2023

Total deposits were $1.86 billion as of June 30, 2023, down $45.2 million from March 31, 2023, primarily due to decreases in money market deposits partially offset by growth in time deposits. The composition shift from money market deposits to time deposits was primarily due to customers’ continued preference for high-rate deposit products driven by the Federal Reserve’s rate increases. Noninterest-bearing deposits remained relatively stable at 34% of total deposits.

As of June 30, 2023 vs. June 30, 2022

Total deposits were $1.86 billion as of June 30, 2023, up $118.0 million from June 30, 2022, primarily driven by growth in time deposits, partially offset by decreases in noninterest-bearing deposits, and money market and others. 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 and decreases in transaction volumes in escrow and 1031 exchanges accounts.

The following table sets forth the maturity of time deposits as of June 30, 2023:

		As of June 30, 2023
($ in thousands)		Within Three Months				Three to Six Months				Six to Nine Months				Nine to Twelve Months				After Twelve Months				Total
Time deposits (more than $250)		$	30,086			$	188,654			$	146,874			$	48,944			$	1,650			$	416,208
Time deposits ($250 or less)			67,165				174,086				90,045				90,721				42,507				464,524
Total time deposits		$	97,251			$	362,740			$	236,919			$	139,665			$	44,157			$	880,732
Weighted average rate			3.37	%			4.31	%			4.40	%			4.50	%			4.11	%			4.25	%

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)			2Q2023				1Q2023				4Q2022
Liquid assets:
Cash and cash equivalents		$	143,761			$	181,509			$	82,972
Available-for-sale debt securities			202,250				212,767				209,809
Liquid assets		$	346,011			$	394,276			$	292,781
Liquid assets to total assets			16.1	%			18.2	%			14.0	%
Available borrowings:
Federal Home Loan Bank—San Francisco		$	400,543			$	406,500			$	440,358
Federal Reserve Bank			172,316				174,284				175,605
Pacific Coast Bankers Bank			50,000				50,000				50,000
Zions Bank			25,000				25,000				25,000
First Horizon Bank			25,000				25,000				24,950
Total available borrowings		$	672,859			$	680,784			$	715,913
Total available borrowings to total assets			31.3	%			31.4	%			34.2	%
Liquid assets and available borrowings to total assets			47.4	%			49.6	%			48.2	%

Capital and Capital Ratios

The Company’s Board of Directors declared a quarterly cash dividend of $0.12 per share of its common stock. The cash dividend is payable on or about August 24, 2023 to all shareholders of record as of the close of business on August 10, 2023.

The Company repurchased 221,494 shares of its common stock at an average price of $8.40 during the second quarter of 2023. Since the announcement of the initial stock repurchase program in January 2019, the Company repurchased a total of 1.9 million shares of its common stock at an average repurchase price of $8.58 per share through June 30, 2023.

		Basel III
		OP Bancorp(1)			Open Bank			Minimum Well Capitalized Ratio			Minimum Capital Ratio+ Conservation Buffer(2)
Risk-Based Capital Ratios:
Total risk-based capital ratio		13.10	%		12.98	%		10.00	%		10.50	%
Tier 1 risk-based capital ratio		11.92			11.80			8.00			8.50
Common equity tier 1 ratio		11.92			11.80			6.50			7.00
Leverage ratio		9.50			9.41			5.00			4.00

(1)		The capital requirements are only applicable to the Bank, and the Company's ratios are included for comparison purpose.
(2)		An additional 2.5% capital conservation buffer above the minimum capital ratios are required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonuses to executive officers.

OP Bancorp		Basel III												% Change 2Q23 vs.
			2Q2023				1Q2023				2Q2022			1Q2023			2Q2022
Risk-Based Capital Ratios:
Total risk-based capital ratio			13.10	%			13.27	%			13.51	%		(0.17	)%		(0.41	)%
Tier 1 risk-based capital ratio			11.92				12.06				12.29			(0.14	)		(0.37	)
Common equity tier 1 ratio			11.92				12.06				12.29			(0.14	)		(0.37	)
Leverage ratio			9.50				9.43				9.48			0.07			0.02
Risk-weighted Assets ($ in thousands)		$	1,700,205			$	1,659,584			$	1,465,707			2.45			16.00

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

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

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

($ in thousands)		For the Three Months Ended
			2Q2023			1Q2023				2Q2022
Interest income		$	30,102		$	28,594			$	20,148
Interest expense			12,850			10,702				1,069
Net interest income			17,252			17,892				19,079
Noninterest income			3,605			4,295				5,359
Noninterest expense			12,300			11,908				11,503
Pre-provision net revenue	(a)	$	8,557		$	10,279			$	12,935
Reconciliation to net income
(Reversal of) provision for credit losses	(b)	$	—		$	(338	)		$	996
Income tax expense	(c)		2,466			3,083				3,459
Net income	(a)+(b)+(c)	$	6,091		$	7,534			$	8,480

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

($ in thousands)		For the Three Months Ended
			2Q2023				1Q2023				2Q2022
Yield on Average Loans
Interest income on loans		$	27,288			$	26,011			$	19,108
Less: interest income on purchased Hana loans			1,809				1,837				1,572
Adjusted interest income on loans	(a)	$	25,479			$	24,174			$	17,536
Average loans		$	1,725,764			$	1,725,392			$	1,560,064
Less: Average purchased Hana loans			55,234				58,237				69,180
Adjusted average loans	(b)	$	1,670,530			$	1,667,155			$	1,490,884
Average loan yield(1)			6.34	%			6.10	%			4.91	%
Effect on average loan yield(1)			0.23	%			0.24	%			0.19	%
Adjusted average loan yield(1)	(a)/(b)		6.11	%			5.86	%			4.72	%
Net Interest Margin
Net interest income		$	17,252			$	17,892			$	19,079
Less: interest income on purchased Hana loans			1,809				1,837				1,572
Adjusted net interest income	(c)	$	15,443			$	16,055			$	17,507
Average interest-earning assets		$	2,030,139			$	2,022,146			$	1,817,157
Less: Average purchased Hana loans			55,234				58,237				69,180
Adjusted average interest-earning assets	(d)	$	1,974,905			$	1,963,909			$	1,747,977
Net interest margin(1)			3.40	%			3.57	%			4.21	%
Effect on net interest margin(1)			0.27				0.28				0.20
Adjusted net interest margin(1)	(c)/(d)		3.13	%			3.29	%			4.01	%
(1) Annualized.

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

($ in thousands)		For the Three Months Ended
			2Q2023				1Q2023				2Q2022
Gross loans		$	1,716,197			$	1,692,485			$	1,484,718
Less: Purchased Hana loans			(54,016	)			(56,735	)			(66,946	)
PPP loans(1)			(247	)			(247	)			(7,151	)
Adjusted gross loans	(a)	$	1,661,934			$	1,635,503			$	1,410,621
Accrued interest receivable on loans		$	6,815			$	6,440			$	4,602
Less: Accrued interest receivable on purchased Hana loans			(426	)			(432	)			(290	)
Accrued interest receivable on PPP loans(2)			(6	)			(5	)			(93	)
Add: Allowance on accrued interest receivable			—				—				—
Adjusted accrued interest receivable on loans	(b)	$	6,383			$	6,003			$	4,219
Adjusted gross loans and accrued interest receivable	(a)+(b)=(c)	$	1,668,317			$	1,641,506			$	1,414,840
Allowance for credit losses		$	20,802			$	20,814			$	17,702
Add: Allowance on accrued interest receivable			—				—				—
Adjusted Allowance	(d)	$	20,802			$	20,814			$	17,702
Adjusted allowance to gross loans ratio	(d)/(c)		1.25	%			1.27	%			1.25	%

(1)		Excludes purchased PPP loans of $942 thousand as of June 30, 2022.
(2)		Excludes purchased accrued interest receivable on PPP loans of $13 thousand as of June 30, 2022.

ABOUT OP BANCORP

OP Bancorp, the holding company for Open Bank (the “Bank”), is a California corporation whose common stock is quoted on the Nasdaq Global Market under the ticker symbol, “OPBK.” The Bank is engaged in the general commercial banking business in Los Angeles, Orange, and Santa Clara Counties, California, and Carrollton, Texas 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 ten full-service branch offices in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Cerritos, Gardena, Buena Park, and Santa Clara, California and Carrollton, Texas. The Bank also has four loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, and Lynnwood, Washington. The Bank commenced its operations on June 10, 2005 as First Standard Bank and changed its name to Open Bank in October 2010. Its headquarters is located at 1000 Wilshire Blvd., Suite 500, Los Angeles, California 90017. Phone 213.892.9999; www.myopenbank.com.

Cautionary Note Regarding Forward-Looking Statements

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

CONSOLIDATED BALANCE SHEETS (unaudited)
($ in thousands)		As of												% Change 2Q23 vs.
			2Q2023				1Q2023				2Q2022			1Q2023			2Q2022
Assets
Cash and due from banks		$	21,295			$	16,781			$	14,937			26.9	%		42.6	%
Interest-bearing deposits in other banks			122,466				164,728				117,760			(25.7	)		4.0
Cash and cash equivalents			143,761				181,509				132,697			(20.8	)		8.3
Available-for-sale debt securities, at fair value			202,250				212,767				174,814			(4.9	)		15.7
Other investments			16,183				12,172				12,205			33.0			32.6
Loans held for sale			—				7,534				67,255			n/m			n/m
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 loans			1,163				1,400				538			(16.9	)		116.2
Gross loans receivable			1,716,197				1,692,485				1,484,718			1.4			15.6
Allowance for credit losses			(20,802	)			(20,814	)			(17,702	)		(0.1	)		17.5
Net loans receivable			1,695,395				1,671,671				1,467,016			1.4			15.6
Premises and equipment, net			5,093				4,647				4,493			9.6			13.4
Accrued interest receivable, net			7,703				7,302				5,112			5.5			50.7
Servicing assets			12,654				12,898				12,708			(1.9	)		(0.4	)
Company owned life insurance			21,913				21,762				21,317			0.7			2.8
Deferred tax assets, net			13,360				12,323				13,371			8.4			(0.1	)
Operating right-of-use assets			9,487				9,459				8,036			0.3			18.1
Other assets			23,902				16,550				15,218			44.4			57.1
Total assets		$	2,151,701			$	2,170,594			$	1,934,242			(0.9	)%		11.2	%
Liabilities and Shareholders' Equity
Liabilities:
Noninterest-bearing		$	634,745			$	643,902			$	820,311			(1.4	)%		(22.6	)%
Money market and others			344,162				436,796				519,389			(21.2	)		(33.7	)
Time deposits greater than $250			416,208				411,648				237,634			1.1			75.1
Other time deposits			464,524				412,472				164,289			12.6			182.7
Total deposits			1,859,639				1,904,818				1,741,623			(2.4	)		6.8
Federal Home Loan Bank advances			75,000				50,000				—			50.0			n/m
Accrued interest payable			9,354				5,751				612			62.6			1428.4
Operating lease liabilities			10,486				10,513				9,335			(0.3	)		12.3
Other liabilities			13,452				15,731				13,180			(14.5	)		2.1
Total liabilities			1,967,931				1,986,813				1,764,750			(1.0	)		11.5
Shareholders' equity:
Common stock			77,464				79,475				78,718			(2.5	)		(1.6	)
Additional paid-in capital			10,297				10,056				9,089			2.4			13.3
Retained earnings			114,177				109,908				92,659			3.9			23.2
Accumulated other comprehensive loss			(18,168	)			(15,658	)			(10,974	)		16.0			65.6
Total shareholders’ equity			183,770				183,781				169,492			—			8.4
Total liabilities and shareholders' equity		$	2,151,701			$	2,170,594			$	1,934,242			(0.9	)%		11.2	%

CONSOLIDATED STATEMENTS OF INCOME (unaudited)
($ in thousands, except share and per share data)		For the Three Months Ended										% Change 2Q23 vs.
			2Q2023			1Q2023				2Q2022		1Q2023			2Q2022
Interest income
Interest and fees on loans		$	27,288		$	26,011			$	19,108		4.9	%		42.8	%
Interest on available-for-sale debt securities			1,562			1,566				703		(0.3	)		122.2
Other interest income			1,252			1,017				337		23.1			271.5
Total interest income			30,102			28,594				20,148		5.3			49.4
Interest expense
Interest on deposits			11,920			10,382				1,069		14.8			1015.1
Interest on borrowings			930			320				—		190.6			n/m
Total 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	)
(Reversal of) provision for credit losses			—			(338	)			996		n/m			n/m
Net interest income after provision for credit losses			17,252			18,230				18,083		(5.4	)		(4.6	)
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	)
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
Income before income tax expense			8,557			10,617				11,939		(19.4	)		(28.3	)
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	)%
Book value per share		$	12.16		$	12.02			$	11.16		1.2	%		9.0	%
Earnings per share - Basic			0.39			0.48				0.55		(18.8	)		(29.1	)
Earnings per share - Diluted			0.39			0.48				0.54		(18.8	)		(27.8	)
Shares of common stock outstanding, at period end			15,118,268			15,286,558				15,189,203		(1.1	)%		(0.5	)%
Weighted average shares:
- Basic			15,158,365			15,284,350				15,141,975		(0.8	)%		0.1	%
- Diluted			15,169,794			15,312,673				15,234,577		(0.9	)		(0.4	)

KEY RATIOS
		For the Three Months Ended									Change 2Q23 vs.
		2Q2023			1Q2023			2Q2022			1Q2023			2Q2022
Return on average assets (ROA)(1)		1.15	%		1.43	%		1.79	%		(0.3	)%		(0.6	)%
Return on average equity (ROE)(1)		13.27			16.82			20.29			(3.6	)		(7.0	)
Net interest margin(1)		3.40			3.57			4.21			(0.2	)		(0.8	)
Efficiency ratio		58.97			53.67			47.07			5.3			11.9
Total risk-based capital ratio		13.10	%		13.27	%		13.51	%		(0.2	)%		(0.4	)%
Tier 1 risk-based capital ratio		11.92			12.06			12.29			(0.1	)		(0.4	)
Common equity tier 1 ratio		11.92			12.06			12.29			(0.1	)		(0.4	)
Leverage ratio		9.50			9.43			9.48			0.1			—
(1) Annualized.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)
($ in thousands, except share and per share data)		For the Six Months Ended
			2Q2023				2Q2022		% Change
Interest income
Interest and fees on loans		$	53,299			$	36,365		46.6	%
Interest on available-for-sale debt securities			3,128				1,233		153.7
Other interest income			2,269				494		359.3
Total interest income			58,696				38,092		54.1
Interest expense
Interest on deposits			22,302				1,723		1194.4
Interest on borrowings			1,250				—		n/m
Total interest expense			23,552				1,723		1266.9
Net interest income			35,144				36,369		(3.4	)
(Reversal of) provision for credit losses			(338	)			1,337		n/m
Net interest income after provision for credit losses			35,482				35,032		1.3
Noninterest income
Service charges on deposits			991				815		21.6
Loan servicing fees, net of amortization			1,441				1,101		30.9
Gain on sale of loans			4,668				7,111		(34.4	)
Other income			800				548		46.0
Total noninterest income			7,900				9,575		(17.5	)
Noninterest expense
Salaries and employee benefits			14,933				12,766		17.0
Occupancy and equipment			3,168				2,867		10.5
Data processing and communication			1,096				985		11.3
Professional fees			740				688		7.6
FDIC insurance and regulatory assessments			887				399		122.3
Promotion and advertising			321				354		(9.3	)
Directors’ fees			371				367		1.1
Foundation donation and other contributions			1,347				1,667		(19.2	)
Other expenses			1,345				1,072		25.5
Total noninterest expense			24,208				21,165		14.4
Income before income tax expense			19,174				23,442		(18.2	)
Income tax expense			5,549				6,810		(18.5	)
Net income		$	13,625			$	16,632		(18.1	)%
Book value per share		$	12.16			$	11.16		9.0	%
Earnings per share - Basic			0.88				1.08		(18.5	)
Earnings per share - Diluted			0.88				1.07		(17.8	)
Shares of common stock outstanding, at period end			15,118,268				15,189,203		(0.5	)%
Weighted average shares:
- Basic			15,221,010				15,139,903		0.5	%
- Diluted			15,241,903				15,238,113		—

KEY RATIOS
		For the Six Months Ended
		2Q2023			2Q2022			% Change
Return on average assets (ROA)(1)		1.29	%		1.82	%		(0.5	)%
Return on average equity (ROE)(1)		15.02			19.92			(4.9	)
Net interest margin(1)		3.48			4.16			(0.7	)
Efficiency ratio		56.24			46.07			10.2
Total risk-based capital ratio		13.10	%		13.51	%		(0.4	)%
Tier 1 risk-based capital ratio		11.92			12.29			(0.4	)
Common equity tier 1 ratio		11.92			12.29			(0.4	)
Leverage ratio		9.50			9.48			—
(1) Annualized.

ASSET QUALITY
($ in thousands)		As of and For the Three Months Ended
			2Q2023				1Q2023				2Q2022
Nonaccrual loans(1)		$	3,447			$	2,504			$	1,826
Loans 90 days or more past due, accruing(2)			—				—				—
Nonperforming loans			3,447				2,504				1,826
Other real estate owned ("OREO")			—				—				—
Nonperforming assets		$	3,447			$	2,504			$	1,826
Criticized loans by risk categories:
Special mention loans		$	2,909			$	2,617			$	—
Classified loans(1)(3)			4,629				3,155				2,673
Total criticized loans		$	7,538			$	5,772			$	2,673
Criticized loans by loan type:
Commercial real estate		$	—			$	560			$	—
SBA			4,784				3,676				1,391
C&I			200				271				297
Home mortgage			2,554				1,265				985
Total criticized loans		$	7,538			$	5,772			$	2,673
Nonperforming loans / gross loans			0.20	%			0.15	%			0.12	%
Nonperforming assets / gross loans plus OREO			0.20				0.15				0.12
Nonperforming assets / total assets			0.16				0.12				0.09
Classified loans / gross loans			0.27				0.19				0.18
Criticized loans / gross loans			0.44				0.34				0.18
Allowance for credit losses ratios:
As a % of gross loans			1.21	%			1.23	%			1.19	%
As an adjusted % of gross loans(4)			1.25				1.27				1.25
As a % of nonperforming loans			603				831				969
As a % of nonperforming assets			603				831				969
As a % of classified loans			449				660				662
As a % of criticized loans			276				361				662
Net charge-offs (recoveries)		$	12			$	93			$	(34	)
Net charge-offs (recoveries)(5) to average gross loans(6)			0.00	%			0.02	%			(0.01	)%

(1)		Excludes the guaranteed portion of SBA loans that are in liquidation totaling $5.1 million, $1.6 million and $346 thousand as of June 30, 2023, March 31, 2023 and June 30, 2022, respectively.
(2)		Excludes the guaranteed portion of SBA loans that are in liquidation totaling $246 thousand, $246 thousand and $5 thousand as of June 30, 2023, March 31, 2023 and June 30, 2022, respectively.
(3)		Consists of substandard, doubtful and loss categories.
(4)		See the Reconciliation of GAAP to NON-GAAP Financial Measures.
(5)		Annualized.
(6)		Includes loans held for sale.

($ in thousands)			2Q2023			1Q2023			2Q2022
Accruing delinquent loans 30-89 days past due
30-59 days		$	3,647		$	4,866		$	447
60-89 days			1,568			—			—
Total		$	5,215		$	4,866		$	447

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS
		For the Three Months Ended
								2Q2023									1Q2023									2Q2022
($ 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		$	79,200		$	1,003		5.01	%		$	74,162		$	846		4.56	%		$	79,628		$	197		0.98	%
Federal funds sold and other investments			15,374			249		6.46				12,130			171		5.65				11,966			140		4.70
Available-for-sale debt securities, at fair value			209,801			1,562		2.98				210,462			1,566		2.98				165,499			703		1.70
Commercial real estate loans			838,526			11,823		5.66				840,402			11,179		5.39				751,610			8,743		4.67
SBA loans			262,825			7,174		10.95				274,889			6,982		10.30				353,138			5,707		6.48
C&I loans			114,103			2,232		7.85				121,915			2,200		7.32				160,291			1,811		4.53
Home mortgage loans			508,976			6,043		4.75				486,800			5,633		4.63				294,341			2,837		3.86
Consumer loans			1,334			16		4.77				1,386			17		5.07				684			10		5.49
Loans(2)			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
Noninterest-earning assets			84,991									82,538									73,594
Total assets		$	2,115,130								$	2,104,684								$	1,890,751
Interest-bearing liabilities:
Money market deposits and others		$	357,517		$	3,201		3.59	%		$	409,813		$	3,150		3.12	%		$	470,013		$	503		0.43	%
Time deposits			843,836			8,719		4.14				786,381			7,232		3.73				389,059			566		0.58
Total interest-bearing deposits			1,201,353			11,920		3.98				1,196,194			10,382		3.52				859,072			1,069		0.50
Borrowings			82,586			930		4.52				26,168			320		4.95				—			—		—
Total interest-bearing liabilities			1,283,939			12,850		4.01				1,222,362			10,702		3.55				859,072			1,069		0.50
Noninterest-bearing liabilities:
Noninterest-bearing deposits			615,748									671,490									843,788
Other noninterest-bearing liabilities			31,810									31,648									20,720
Total noninterest-bearing liabilities			647,558									703,138									864,508
Shareholders’ equity			183,633									179,184									167,171
Total liabilities and shareholders’ equity		$	2,115,130									2,104,684									1,890,751
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	%
Cost of deposits & cost of funds:
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.
(2)		Includes loans held for sale.

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS
		For the Six Months Ended
								2Q2023									2Q2022
($ in thousands)		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		$	76,695		$	1,849		4.79	%		$	83,231		$	238		0.57	%
Federal funds sold and other investments			13,761			420		6.10				11,465			256		4.45
Available-for-sale debt securities, at fair value			210,130			3,128		2.98				161,230			1,233		1.53
Commercial real estate loans			839,459			23,002		5.53				731,413			16,545		4.56
SBA loans			268,823			14,156		10.62				355,916			11,542		6.54
C&I loans			117,988			4,432		7.58				158,334			3,348		4.26
Home mortgage loans			497,949			11,676		4.69				255,936			4,911		3.84
Consumer & other loans			1,360			33		4.92				780			19		5.15
Loans(2)			1,725,579			53,299		6.22				1,502,379			36,365		4.88
Total interest-earning assets			2,026,165			58,696		5.83				1,758,305			38,092		4.36
Noninterest-earning assets			83,771									68,334
Total assets		$	2,109,936								$	1,826,639
Interest-bearing liabilities:
Money market deposits and others		$	383,521		$	6,351		3.34	%		$	441,314		$	754		0.34	%
Time deposits			815,267			15,952		3.95				381,879			969		0.51
Total interest-bearing deposits			1,198,788			22,303		3.75				823,193			1,723		0.42
Borrowings			54,533			1,249		4.62				—			—		—
Total interest-bearing liabilities			1,253,321			23,552		3.79				823,193			1,723		0.42
Noninterest-bearing liabilities:
Noninterest-bearing deposits			643,465									813,791
Other noninterest-bearing liabilities			31,729									22,649
Total noninterest-bearing liabilities			675,194									836,440
Shareholders’ equity			181,421									167,006
Total liabilities and shareholders’ equity		$	2,109,936									1,826,639
Net interest income / interest rate spreads					$	35,144		2.04	%					$	36,369		3.94	%
Net interest margin								3.48	%								4.16	%
Cost of deposits & cost of funds:
Total deposits / cost of deposits		$	1,842,253		$	22,303		2.44	%		$	1,636,984		$	1,723		0.21	%
Total funding liabilities / cost of funds			1,896,786			23,552		2.50	%			1,636,984			1,723		0.21	%

(1)		Annualized.
(2)		Includes loans held for sale.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230727654337/en/

Investor Relations

OP Bancorp

Christine Oh

EVP & CFO

213.892.1192

Christine.oh@myopenbank.com

Source: OP Bancorp