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OP Bancorp Reports Net Income for First Quarter 2022 of $8.2 Million and Diluted Earnings Per Share Of $0.53

2022 First Quarter Highlights compared with 2021 First Quarter:

  • Financial Results:
    • Net income of $8.2 million, up $3.1 million, or 61%
    • Diluted earnings per share of $0.53, up $0.20, or 61%
    • Net interest income of $17.3 million, up $4.5 million, or 36%
    • Provision for loan losses of $341 thousand, down $279 thousand, or 45%
    • Noninterest income of $4.2 million, up $1.3 million, or 42%
    • Noninterest expense of $9.7 million, up $1.7 million, or 21%
    • Pre-provision net revenue (1) of $11.8 million, up $4.1 million, or 53%
    • Total assets of $1.86 billion, up $409 million, or 28%
    • Total loans (2) of $1.51 billion, up $330 million, or 28%; Average loans (2) of $1.44 billion, up $278.9 million, or 24%
    • Total deposits of $1.67 billion, up $387 million, or 30%; Average deposits of $1.57 billion, up $327.3 million, or 26%
    • Noninterest-bearing deposits to total deposits of 51%, up from 45%
    • Net interest margin of 4.12%, up from 3.80%
    • Return on average equity of 19.54%, up from 14.02%
    • Return on average assets of 1.85%, up from 1.44%
    • Efficiency ratio of 44.93%, an improvement from 50.67%
  • Credit Quality:
    • Allowance for loan losses to gross loans of 1.17%, compared to 1.33%
    • Adjusted allowance to gross loans (1) of 1.24%, compared to 1.59%
    • Net loan recoveries to average gross loans of 0.00%
    • Nonperforming loans to gross loans of 0.20%, compared to 0.10%
    • Criticized loans (3) to gross loans of 0.27%, down from 0.62%
  • Capital Levels:
    • Quarterly cash dividend of $0.10 per share, a 43% increase from $0.07 per share
    • Capital position well-capitalized with a Common Equity Tier 1 (“CET1”) ratio of 12.11%.
    • Book value per common share of $10.97, up 12%

___________________________________________________________

(1) See reconciliation of GAAP to non-GAAP financial measures.

(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, today reported its financial results for the first quarter of 2022. Net income for the first quarter of 2022 was $8.2 million, or $0.53 per diluted common share, compared with $9.1 million, or $0.59 per diluted common share, for the fourth quarter of 2021, and $5.1 million, or $0.33 per diluted common share, for the first quarter of 2021.

Min Kim, President and Chief Executive Officer:

“We started this year with another strong quarter. Our net income and diluted earnings per share increased 61% each from a year ago. This growth in earnings was driven by strong growth in our balance sheet, expanded net interest margin, and improved efficiency. Our loans grew 28%, from a year ago, through balanced increases across all categories, further diversifying our loan portfolio. Total deposits grew 30% from a year ago with noninterest-bearing deposits reaching a record level at 50.8% of total deposits. We also expanded our branch network by opening our tenth full service branch in Cerritos, California during the quarter. We remain optimistic about our future growth and sustainability of our strong financial performance.”

SELECTED FINANCIAL HIGHLIGHTS

 

 

 

 

 

 

 

 

 

 

 

($ in thousands, except per share data)

 

As of and For the Three Months Ended

 

% Change 1Q22 vs.

 

 

1Q22

 

 

 

4Q21

 

 

 

1Q21

 

 

4Q21

 

 

1Q21

 

Selected Income Statement Data:

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

17,290

 

 

$

17,096

 

 

$

12,755

 

 

1.1

%

 

35.6

%

Provision for loan losses

 

 

341

 

 

 

1,898

 

 

 

620

 

 

(82.0

)

 

(45.0

)

Noninterest income

 

 

4,216

 

 

 

7,289

 

 

 

2,966

 

 

(42.2

)

 

42.1

 

Noninterest expense

 

 

9,662

 

 

 

9,591

 

 

 

7,966

 

 

0.7

 

 

21.3

 

Income tax expense

 

 

3,351

 

 

 

3,762

 

 

 

2,058

 

 

(10.9

)

 

62.8

 

Net Income

 

$

8,152

 

 

$

9,134

 

 

$

5,077

 

 

(10.8

) %

 

60.6

%

Diluted earnings per share

 

$

0.53

 

 

$

0.59

 

 

$

0.33

 

 

(10.2

) %

 

60.6

%

Selected Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

Total loans (1)

 

$

1,514,653

 

 

$

1,403,447

 

 

$

1,184,447

 

 

7.9

%

 

27.9

%

Total deposits

 

$

1,672,003

 

 

$

1,534,066

 

 

$

1,285,390

 

 

9.0

%

 

30.1

%

Total assets

 

$

1,863,945

 

 

$

1,726,691

 

 

$

1,455,334

 

 

7.9

%

 

28.1

%

Average loans (1)

 

$

1,444,054

 

 

$

1,343,414

 

 

$

1,165,150

 

 

7.5

%

 

23.9

%

Average deposits

 

$

1,570,376

 

 

$

1,545,799

 

 

$

1,243,091

 

 

1.6

%

 

26.3

%

Credit Quality:

 

 

 

 

 

 

 

 

 

 

Nonperforming loans

 

$

2,806

 

 

$

3,200

 

 

$

1,148

 

 

(12.3

) %

 

144.4

%

Net (recoveries) charge-offs to average gross loans (2)

 

 

(0.00

) %

 

 

0.05

%

 

 

(0.00

) %

 

(0.05

) %

 

0.00

%

Allowance for loan losses to gross loans

 

 

1.17

%

 

 

1.23

%

 

 

1.33

%

 

(0.06

) %

 

(0.16

) %

Financial Ratios:

 

 

 

 

 

 

 

 

 

 

Return on average assets (2)

 

 

1.85

%

 

 

2.11

%

 

 

1.44

%

 

(0.26

) %

 

0.41

%

Return on average equity (2)

 

 

19.54

%

 

 

22.72

%

 

 

14.02

%

 

(3.18

) %

 

5.52

%

Net interest margin (2)

 

 

4.12

%

 

 

4.07

%

 

 

3.80

%

 

0.05

%

 

0.32

%

Common equity tier 1 capital ratio

 

 

12.11

%

 

 

12.42

%

 

 

13.79

%

 

(0.31

) %

 

(1.68

) %

Leverage ratio

 

 

9.80

%

 

 

9.58

%

 

 

10.38

%

 

0.22

%

 

(0.58

) %

Efficiency ratio (3)

 

 

44.93

%

 

 

39.34

%

 

 

50.67

%

 

5.59

%

 

(5.74

) %

Book value per common share

 

$

10.97

 

 

$

10.92

 

 

$

9.77

 

 

0.5

%

 

12.3

%

 

 

 

 

 

 

 

 

 

 

 

  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 1Q22 vs.

 

 

1Q22

 

 

4Q21

 

 

1Q21

 

4Q21

 

 

1Q21

 

Interest Income

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

17,944

 

$

17,822

 

$

13,632

 

0.7

%

 

31.6

%

Interest expense

 

 

654

 

 

726

 

 

877

 

(9.9

)

 

(25.4

)

Net interest income

 

$

17,290

 

$

17,096

 

$

12,755

 

1.1

%

 

35.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

1Q22

 

 

4Q21

 

 

1Q21

 

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

 

$

1,444,054

 

$

17,257

 

4.84

%

 

$

1,343,414

 

$

17,271

 

5.10

%

 

$

1,165,150

 

$

13,284

 

4.62

%

Total interest-earning assets

 

$

1,698,799

 

$

17,944

 

4.28

%

 

$

1,668,865

 

$

17,822

 

4.24

%

 

$

1,358,119

 

$

13,632

 

4.07

%

Interest-bearing Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

786,915

 

$

654

 

0.34

%

 

$

780,787

 

$

726

 

0.37

%

 

$

698,599

 

$

877

 

0.51

%

Total interest-bearing liabilities

 

$

786,915

 

$

654

 

0.34

%

 

$

780,791

 

$

726

 

0.37

%

 

$

703,599

 

$

877

 

0.51

%

Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest Income/interest rate spreads

 

 

 

$

17,290

 

3.94

%

 

 

 

$

17,096

 

3.87

%

 

 

 

$

12,755

 

3.56

%

Net interest margin

 

 

 

 

 

4.12

%

 

 

 

 

 

4.07

%

 

 

 

 

 

3.80

%

Total deposits / cost of deposits

 

$

1,570,376

 

$

654

 

0.17

%

 

$

1,545,799

 

$

726

 

0.19

%

 

$

1,243,091

 

$

877

 

0.29

%

Total funding liabilities / cost of funds

 

$

1,570,376

 

$

654

 

0.17

%

 

$

1,545,803

 

$

726

 

0.19

%

 

$

1,248,091

 

$

877

 

0.28

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. Annualized.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

Yield % Change 1Q22 vs.

 

1Q22

 

4Q21

 

1Q21

 

 

Interest

& Fees

 

Yield (1)

 

Interest

& Fees

 

Yield (1)

 

Interest

& Fees

 

Yield (1)

 

4Q21

 

 

1Q21

 

Loan Yield Component

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual interest rate

 

$

15,120

 

4.24

%

 

$

14,509

 

 

4.29

%

 

$

12,168

 

 

4.23

%

 

(0.05

) %

 

0.01

%

SBA discount accretion

 

 

1,433

 

0.40

 

 

 

1,571

 

 

0.46

 

 

 

507

 

 

0.18

 

 

(0.06

)

 

0.22

 

Amortization of net deferred fees

 

 

500

 

0.14

 

 

 

1,087

 

 

0.32

 

 

 

538

 

 

0.19

 

 

(0.18

)

 

(0.05

)

Amortization of premium

 

 

16

 

 

 

 

3

 

 

 

 

 

 

 

 

 

0.00

 

 

 

Net interest recognized on nonaccrual loans

 

 

34

 

-0.01

 

 

 

(16

)

 

-0.00

 

 

 

(2

)

 

 

 

0.01

 

 

0.01

 

Prepayment penalties (2) and other fees

 

 

154

 

0.05

 

 

 

117

 

 

0.03

 

 

 

73

 

 

0.02

 

 

0.02

 

 

0.03

 

Yield on loans

 

$

17,257

 

4.84

%

 

$

17,271

 

 

5.10

%

 

$

13,284

 

 

4.62

%

 

(0.26

) %

 

0.22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net deferred fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PPP loan forgiveness (3)

 

$

483

 

0.13

%

 

$

920

 

 

0.27

%

 

$

175

 

 

0.06

%

 

(0.14

) %

 

0.07

%

Other

 

 

17

 

0.01

 

 

 

167

 

 

0.05

 

 

 

363

 

 

0.13

 

 

(0.04

)

 

(0.12

)

Total amortization of net deferred fees

 

$

500

 

0.14

%

 

$

1,087

 

 

0.32

%

 

$

538

 

 

0.19

%

 

(0.18

) %

 

(0.05

) %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. Annualized.
  2. Prepayment penalty income of $95 thousand, $84 thousand and $69 thousand for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively, was from commercial real estate and C&I loans.
  3. As of March 31, 2022, there were unamortized net deferred fees of $579 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 Company 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

 

 

1Q22

 

 

 

4Q21

 

 

 

1Q21

 

Hana Loan Purchase:

 

 

 

 

 

 

Contractual interest rate

 

$

976

 

 

$

1,027

 

 

$

 

Purchased loan discount accretion

 

 

772

 

 

 

826

 

 

 

 

Other fees

 

 

7

 

 

 

10

 

 

 

 

Total interest income

 

$

1,755

 

 

$

1,863

 

 

$

 

 

 

 

 

 

 

 

Effect on average loan yield (1)

 

 

0.26

%

 

 

0.26

%

 

 

%

Effect on net interest margin (1)

 

 

0.25

%

 

 

0.26

%

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

1Q22

 

4Q21

 

1Q21

 

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)

 

$

1,444,054

 

$

17,257

 

4.84

%

 

$

1,343,414

 

$

17,271

 

5.10

%

 

$

1,165,150

 

$

13,284

 

4.62

%

Adjusted average loan yield excluding purchased loans (1)(2)

 

$

1,369,423

 

$

15,502

 

4.58

%

 

$

1,263,789

 

$

15,408

 

4.84

%

 

$

1,165,150

 

$

13,284

 

4.62

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (1)

 

$

1,698,799

 

$

17,290

 

4.12

%

 

$

1,668,865

 

$

17,096

 

4.07

%

 

$

1,358,119

 

$

12,755

 

3.80

%

Adjusted interest margin excluding purchased loans (1)(2)

 

$

1,624,168

 

$

15,535

 

3.87

%

 

$

1,589,240

 

$

15,233

 

3.81

%

 

$

1,358,119

 

$

12,755

 

3.80

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. Annualized.
  2. See reconciliation of GAAP to non-GAAP financial measures.

First Quarter 2022 vs. Fourth Quarter 2021

Net interest income increased $194 thousand, or 1.1%, primarily due to higher interest income on securities available-for-sale. Net interest margin was 4.12%, an increase of 5 basis points from 4.07%.

  • An increase of $168 thousand in interest income from securities available-for-sale was primarily due to higher average balance.
  • An increase of $754 thousand in interest income on home mortgage loans from an $81.6 million purchase was offset by a $714 thousand decrease in interest income on PPP loans from lower average balance.
  • A $72 thousand decrease in interest expense contributed to the increase in net interest income.
  • Average loan yield was 4.84%, a decrease of 26 basis points from 5.10%, primarily due to lower interest income in PPP loans. Average yield on interest earning assets was 4.28%, an increase of 4 basis points from 4.24%, due to lower average balance in low-yielding interest-bearing deposits in other banks.
  • Average cost of deposits was 0.17%, a decrease of 2 basis points from 0.19%.

First Quarter 2022 vs. First Quarter 2021

Net interest income increased $4.5 million, or 35.6%, primarily due to higher interest income on loans. Net interest margin was 4.12%, an increase of 32 basis points from 3.80%.

  • An increase of $4.0 million in interest income on loans was primarily due to higher average loan balance from loan growth in home loans and C&I loans, discount accretions from the Hana loan purchase, and loan fees from PPP loan forgiveness.
  • The improvement of 32 basis points in net interest margin was primarily driven by a 22 basis point increase in average loan yield and a 17 basis point decrease in average cost of interest-bearing liabilities.

Provision for loan losses

First Quarter 2022 vs. Fourth Quarter 2021

The Company recorded $341 thousand provision for loan losses, compared with a $1.9 million provision for loan losses. The $341 thousand provision for loan losses was primarily due to loan growth from home mortgage purchases, partially offset by improvements in qualitative assessments of our loan portfolio.

First Quarter 2022 vs. First Quarter 2021

The Company recorded $341 thousand provision for loan losses, compared with $620 thousand provision for loan losses.

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 1Q22 vs.

 

 

1Q22

 

 

4Q21

 

 

1Q21

 

4Q21

 

 

1Q21

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

 

$

388

 

$

405

 

$

355

 

(4.2

) %

 

9.3

%

Loan servicing fees, net of amortization

 

 

447

 

 

521

 

 

531

 

(14.2

)

 

(15.8

)

Gain on sale of loans

 

 

3,238

 

 

6,033

 

 

1,882

 

(46.3

)

 

72.1

 

Other income

 

 

143

 

 

330

 

 

198

 

(56.7

)

 

(27.8

)

Total noninterest income

 

$

4,216

 

$

7,289

 

$

2,966

 

(42.2

) %

 

42.1

%

 

 

 

 

 

 

 

 

 

 

 

First Quarter 2022 vs. Fourth Quarter 2021

Noninterest income decreased $3.1 million, or 42.2%, primarily due to lower gains on sale of loans.

  • Gains on sale of loans were $3.2 million, down $2.8 million from the fourth quarter of 2021. The decrease was primarily due to a decreased loan sales volume. The Company sold $31.8 million in SBA loans at an average premium of 11.02%, compared to the sale of $56.8 million at an average premium of 10.98%.

First Quarter 2022 vs. First Quarter 2021

Noninterest income increased $1.3 million, or 42.1%, primarily due to higher gains on sale of loans.

  • Gains on sales of loans were $3.2 million, up $1.4 million from the first quarter of 2021. The increase was mainly driven by higher sales volume and premiums on SBA loans. The Company sold $31.8 million in SBA loans at an average premium of 11.02%, compared to the sale of $22.4 million at an average premium of 10.51%.

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 1Q22 vs.

 

 

1Q22

 

 

4Q21

 

 

1Q21

 

4Q21

 

 

1Q21

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

$

5,657

 

$

5,560

 

$

4,662

 

1.7

%

 

21.3

%

Occupancy and equipment

 

 

1,378

 

 

1,418

 

 

1,235

 

(2.8

)

 

11.6

 

Data processing and communication

 

 

493

 

 

637

 

 

448

 

(22.6

)

 

10.0

 

Professional fees

 

 

324

 

 

267

 

 

314

 

21.3

 

 

3.2

 

FDIC insurance and regulatory assessments

 

 

207

 

 

182

 

 

132

 

13.7

 

 

56.8

 

Promotion and advertising

 

 

189

 

 

156

 

 

177

 

21.2

 

 

6.8

 

Directors’ fees

 

 

177

 

 

166

 

 

116

 

6.6

 

 

52.6

 

Foundation donation and other contributions

 

 

815

 

 

901

 

 

507

 

(9.5

)

 

60.7

 

Other expenses

 

 

422

 

 

304

 

 

375

 

38.8

 

 

12.5

 

Total noninterest expense

 

$

9,662

 

$

9,591

 

$

7,966

 

0.7

%

 

21.3

%

 

 

 

 

 

 

 

 

 

 

 

First Quarter 2022 vs. Fourth Quarter 2021

Noninterest expense remained relatively stable in the first quarter of 2022 at $9.7 million compared to $9.6 million for the fourth quarter of 2021.

First Quarter 2022 vs. First Quarter 2021

Noninterest expense increased $1.7 million, or 21.3%, primarily due to higher salaries and employee benefits, and foundation donation and other contributions.

  • Salaries and employee benefits were $5.7 million, up $995 thousand from the first quarter of 2021. The increase was primarily due to a decrease in deferred loan origination costs compared to higher origination costs related to PPP loans for the first quarter of 2021.
  • Foundation donation and other contributions were $815 thousand, up $308 thousand from the first quarter of 2021. The increase was primarily due to higher donation accruals for Open Stewardship Foundation as a result of higher net income compared to the first quarter of 2021.

Income Tax Expense

First Quarter 2022 vs. Fourth Quarter 2021

Income tax expense was $3.4 million, and the effective tax rate was 29.1%, compared to income tax expense of $3.8 million and the effective rate of 29.2% for the fourth quarter of 2021.

First Quarter 2022 vs. First Quarter 2021

Income tax expense was $3.4 million and the effective tax rate was 29.1%, compared to income tax expense of $2.1 million and the effective rate of 28.8% for the first quarter of 2021.

Balance Sheet Highlights

Loans

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of

 

% Change 1Q22 vs.

 

 

1Q22

 

 

4Q21

 

 

1Q21

 

4Q21

 

 

1Q21

 

Real estate loans

 

$

730,841

 

$

701,450

 

$

662,445

 

4.2

%

 

10.3

%

SBA loans (1)

 

 

253,064

 

 

275,858

 

 

263,185

 

(8.3

)

 

(3.8

)

C&I loans

 

 

176,934

 

 

162,543

 

 

103,883

 

8.9

 

 

70.3

 

Home mortgage loans

 

 

266,465

 

 

173,303

 

 

125,285

 

53.8

 

 

112.7

 

Consumer & other loans

 

 

1,106

 

 

865

 

 

1,074

 

27.9

 

 

3.0

 

Gross loans

 

$

1,428,410

 

$

1,314,019

 

$

1,155,872

 

8.7

%

 

23.6

%

 

 

 

 

 

 

 

 

 

 

 

  1. Includes PPP loans of $22.1 million, $40.6 million and $113.6 million as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively.

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

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

% Change 1Q22 vs.

 

 

1Q22

 

 

4Q21

 

 

1Q21

 

4Q21

 

 

1Q21

 

Real estate loans

 

$

49,868

 

$

35,458

 

$

42,748

 

40.6

%

 

16.7

%

SBA loans (1)

 

 

37,400

 

 

65,492

 

 

105,340

 

(42.9

)

 

(64.5

)

C&I loans

 

 

11,876

 

 

47,981

 

 

9,505

 

(75.2

)

 

24.9

 

Home mortgage loans

 

 

22,785

 

 

19,295

 

 

11,563

 

18.1

 

 

97.1

 

Gross loans

 

$

121,929

 

$

168,226

 

$

169,156

 

(27.5

) %

 

(27.9

) %

 

 

 

 

 

 

 

 

 

 

 

  1. Includes PPP loans of $74.2 million for the three months ended March 31, 2021.

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

 

 

 

 

 

 

 

($ in thousands)

 

For the Three Months Ended

 

 

1Q22

 

 

 

4Q21

 

 

 

1Q21

 

Loan activities:

 

 

 

 

 

 

Gross loans, beginning

 

$

1,314,019

 

 

$

1,231,821

 

 

$

1,099,736

 

New originations

 

 

121,929

 

 

 

168,226

 

 

 

169,156

 

Net line advances

 

 

17,455

 

 

 

7,759

 

 

 

(11,846

)

Purchases

 

 

81,552

 

 

 

48,915

 

 

 

 

Sales

 

 

(31,819

)

 

 

(60,954

)

 

 

(26,621

)

Paydowns

 

 

(15,972

)

 

 

(12,373

)

 

 

(12,767

)

Payoffs

 

 

(45,391

)

 

 

(46,778

)

 

 

(36,987

)

PPP Payoffs

 

 

(19,079

)

 

 

(29,918

)

 

 

(22,886

)

Other

 

 

5,716

 

 

 

7,321

 

 

 

(1,913

)

Total

 

 

114,391

 

 

 

82,198

 

 

 

56,136

 

Gross loans, ending

 

$

1,428,410

 

 

$

1,314,019

 

 

$

1,155,872

 

 

 

 

 

 

 

 

First Quarter 2022 vs. Fourth Quarter 2021

Gross loans were $1.43 billion at March 31, 2022, up $114.4 million from December 31, 2021, primarily due to home mortgage loan purchases.

$81.6 million of home mortgage loans were purchased from third party mortgage originators, compared to $48.9 million in the fourth quarter of 2021. New loan originations and loan payoffs were $121.9 million and $64.5 million for the first quarter of 2022, compared with $168.2 million and $76.7 million for the fourth quarter of 2021, respectively. Of the PPP loans, $18.2 million in principal amount has been forgiven under the program, compared to a $29.9 million of PPP loans forgiven in the fourth quarter of 2021.

First Quarter 2022 vs. First Quarter 2021

Gross loans were $1.43 billion at March 31, 2022, up $272.5 million from March 31, 2021, primarily due to the Hana loan purchase, home mortgage loan purchases, and warehouse credit lines.

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

 

1Q22

 

4Q21

 

1Q21

 

%

 

Rate

 

%

 

Rate

 

%

 

Rate

Fixed rate

 

33.3 %

 

4.11 %

 

31.5 %

 

4.12 %

 

37.3 %

 

3.83 %

Hybrid rate

 

25.6

 

4.30

 

22.8

 

4.45

 

21.9

 

4.84

Variable rate

 

41.1

 

5.09

 

45.7

 

4.94

 

40.8

 

4.43

Gross loans

 

100.0 %

 

4.56 %

 

100.0 %

 

4.57 %

 

100.0 %

 

4.30 %

 

 

 

 

 

 

 

 

 

 

 

 

 

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 March 31, 2022

 

Within One Year

 

One Year Through Five Years

 

After Five Years

 

Total

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

 

Amount

 

Rate

Fixed rate

 

$

24,040

 

4.18

%

 

$

299,952

 

4.18

%

 

$

150,671

 

3.98

%

 

$

474,663

 

4.11

%

Hybrid rate

 

 

26,469

 

3.29

 

 

 

43,409

 

5.29

 

 

 

296,224

 

4.25

 

 

 

366,102

 

4.30

 

Variable rate

 

 

124,934

 

4.18

 

 

 

165,770

 

4.19

 

 

 

296,941

 

5.97

 

 

 

587,645

 

5.09

 

Gross loans

 

$

175,443

 

4.05

%

 

$

509,131

 

4.28

%

 

$

743,836

 

4.88

%

 

$

1,428,410

 

4.56

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of

 

% Change 1Q22 vs.

 

1Q22

 

4Q21

 

1Q21

 

 

Amount

 

%

 

Amount

 

%

 

Amount

 

%

 

4Q21

 

1Q21

Noninterest-bearing deposits

 

$ 848,531

 

50.8 %

 

$ 774,754

 

50.5 %

 

$ 571,985

 

44.5 %

 

9.5 %

 

48.3 %

Money market deposits and others

 

456,890

 

27.3 %

 

380,226

 

24.8

 

354,148

 

27.6 %

 

20.2

 

29.0

Time deposits

 

366,582

 

21.9 %

 

379,086

 

24.7

 

359,257

 

27.9 %

 

(3.3)

 

2.0

Total deposits

 

$ 1,672,003

 

100.0 %

 

$ 1,534,066

 

100.0 %

 

$ 1,285,390

 

100.0 %

 

9.0 %

 

30.1 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter 2022 vs. Fourth Quarter 2021

Total deposits were $1.67 billion at March 31, 2022, up $137.9 million from December 31, 2021, primarily driven by growth in noninterest-bearing and money market deposits, partially offset by time deposits. Noninterest-bearing deposits reached a record $848.5 million or 50.8% of total deposits as of March 31, 2022, an increase from $774.8 million or 50.5% of total deposits as of December 31, 2021. The growth in noninterest-bearing deposits was primarily due to addition of new customers from our Specialty Deposit Center, which was added during the fourth quarter of 2021.

First Quarter 2022 vs. First Quarter 2021

Total deposits were $1.67 billion at March 31, 2022, an increase of $386.6 million from March 31, 2021, primarily driven by growth in noninterest-bearing deposits. Noninterest-bearing deposits were $848.5 million or 50.8% of total deposits, an increase from $572.0 million or 44.5% of total deposits as of March 31, 2021. The growth in noninterest-bearing deposits was driven by continued customer preferences for liquidity given the sustained economic uncertainty and deposit growth from our Specialty Deposit Center.

The following table sets forth the maturity of time deposits as of March 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2022

($ 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 $250,000)

 

$

92,471

 

 

$

41,573

 

 

$

30,629

 

 

$

27,137

 

 

$

1,039

 

 

$

192,849

 

Time deposits ($250,000 or less)

 

 

64,166

 

 

 

42,975

 

 

 

31,826

 

 

 

28,209

 

 

 

6,557

 

 

 

173,733

 

Total time deposits

 

$

156,637

 

 

$

84,548

 

 

$

62,455

 

 

$

55,346

 

 

$

7,596

 

 

$

366,582

 

Weighted average rate

 

 

0.37

%

 

 

0.51

%

 

 

0.45

%

 

 

0.43

%

 

 

1.37

%

 

 

0.45

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital and Cash Dividend

 

 

 

 

 

 

 

 

 

 

 

Basel III

 

OP Bancorp

 

Open Bank

 

Well

Capitalized

Ratio

 

Minimum

Capital Ratio+

Conservation

Buffer (1)

Risk-Based Capital Ratios:

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

13.29 %

 

13.12 %

 

10.00 %

 

10.50 %

Tier 1 risk-based capital ratio

 

12.11 %

 

11.94 %

 

8.00 %

 

8.50 %

Common equity tier 1 ratio

 

12.11 %

 

11.94 %

 

6.50 %

 

7.00 %

Leverage ratio

 

9.80 %

 

9.66 %

 

5.00 %

 

4.00 %

 

 

 

 

 

 

 

 

 

  1. 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 bonus to executive officers.
  2. The capital requirements are only applicable to the Bank, and the Company's ratios are included for comparison purpose.

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

Basel III

 

% Change 1Q22 vs.

 

1Q22

 

4Q21

 

1Q21

 

4Q21

 

1Q21

Risk-Based Capital Ratios:

 

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio

 

13.29 %

 

13.66 %

 

15.04 %

 

(0.37) %

 

(1.75) %

Tier 1 risk-based capital ratio

 

12.11 %

 

12.42 %

 

13.79 %

 

(0.31) %

 

(1.68) %

Common equity tier 1 ratio

 

12.11 %

 

12.42 %

 

13.79 %

 

(0.31) %

 

(1.68) %

Leverage ratio

 

9.80 %

 

9.58 %

 

10.38 %

 

0.22 %

 

(0.58) %

Risk-weighted Assets

 

$ 1,427,569

 

$ 1,335,889

 

$ 1,061,131

 

6.86 %

 

34.53 %

 

 

 

 

 

 

 

 

 

 

 

Capital ratios remained strong during the quarter. Our CET1 and total risk-based capital ratios were 12.11% and 13.29% as of March 31, 2022, respectively, a decrease from a year ago due to year-over-year asset growth.

The Company’s Board of Directors has declared a quarterly cash dividend of $0.10 per share of its common stock. The cash dividend is payable on or about May 26, 2022 to all shareholders of record as of the close of business on May 12, 2022.

The Company did not repurchase any shares during the first quarter of 2022. Since the announcement of the initial stock repurchase program in January 2019, the Company has repurchased a total of 1.57 million shares of its common stock at an average repurchase price of $8.58 per share through March 31, 2022.

Asset Quality

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of and For the Three Months Ended

 

% Change 1Q22 vs.

 

 

1Q22

 

 

 

4Q21

 

 

 

1Q21

 

 

4Q21

 

 

1Q21

 

Nonperforming loans (1)

 

$

2,806

 

 

$

3,200

 

 

$

1,148

 

 

(12.3

) %

 

144.4

%

OREO

 

 

 

 

 

 

 

 

 

 

 

 

 

Total nonperforming assets

 

$

2,806

 

 

$

3,200

 

 

$

1,148

 

 

(12.3

) %

 

144.4

%

 

 

 

 

 

 

 

 

 

 

 

Nonperforming loans to gross loans

 

 

0.20

%

 

 

0.24

%

 

 

0.10

%

 

(0.04

) %

 

0.10

%

Nonperforming assets to total assets

 

 

0.15

%

 

 

0.19

%

 

 

0.08

%

 

(0.04

) %

 

0.07

%

 

 

 

 

 

 

 

 

 

 

 

Criticized (2) Loan:

 

 

 

 

 

 

 

 

 

 

Special mention loans

 

$

 

 

$

 

 

$

530

 

 

%

 

(100.0

) %

Classified loans (3)

 

 

3,848

 

 

 

4,039

 

 

 

6,586

 

 

(4.7

)

 

(41.6

)

Total criticized loans

 

$

3,848

 

 

$

4,039

 

 

$

7,116

 

 

(4.7

) %

 

(45.9

) %

 

 

 

 

 

 

 

 

 

 

 

Criticized (2) loans to gross loans

 

 

0.27

%

 

 

0.31

%

 

 

0.62

%

 

(0.04

) %

 

(0.35

) %

Classified loans (3) to gross loans

 

 

0.27

%

 

 

0.31

%

 

 

0.57

%

 

(0.04

) %

 

(0.30

) %

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses, beginning

 

$

16,123

 

 

$

14,134

 

 

$

15,352

 

 

14.1

%

 

5.0

%

Provision for (reversal of) loan losses (4)

 

 

546

 

 

 

2,157

 

 

 

(16

)

 

(74.7

)

 

(3512.5

)

Gross charge-offs

 

 

(14

)

 

 

(168

)

 

 

 

 

(91.7

)

 

 

Gross recoveries

 

 

17

 

 

 

 

 

 

3

 

 

 

 

466.7

 

Allowance for loan losses, ending (5)

 

$

16,672

 

 

$

16,123

 

 

$

15,339

 

 

3.4

%

 

8.7

%

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses ratios:

 

 

 

 

 

 

 

 

 

 

As a % of gross loans

 

 

1.17

%

 

 

1.23

%

 

 

1.33

%

 

(0.06

) %

 

(0.16

) %

As an adjusted of gross loans (6)

 

 

1.24

%

 

 

1.36

%

 

 

1.59

%

 

(0.12

) %

 

(0.35

) %

As a % of nonperforming loans

 

 

594

%

 

 

503

%

 

 

1,337

%

 

91

%

 

(743

) %

As a % of nonperforming assets

 

 

594

%

 

 

503

%

 

 

1,337

%

 

91

%

 

(743

) %

Net (recoveries) charge-offs to average gross loans

 

 

0.00

%

 

 

0.05

%

 

 

0.00

%

 

(0.05

) %

 

0.00

%

 

 

 

 

 

 

 

 

 

 

 

  1. Includes the guaranteed portion of SBA loans totaling $0.9 million as of March 31, 2022.
  2. Includes special mention, substandard, doubtful and loss categories.
  3. Includes substandard, doubtful and loss categories.
  4. Excludes (reversal of) provision for uncollectible accrued interest receivable of $(205) thousand, $(259) thousand and $636 thousand for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, respectively.
  5. Excludes allowance for uncollectible accrued interest receivable of $205 thousand and $1.3 million as of December 31, 2021 and March 31, 2021, respectively.
  6. See the Reconciliation of GAAP to NON-GAAP Financial Measures.

Overall, the Company 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 1.24%. We expect economic metrics to remain relatively strong over the next year, which bodes well for growth.: however, we remain vigilant given potential impacts on our customers from supply chain and labor constraints as well as COVID variants.

  • Allowance for loan losses increased $1.3 million to $16.7 million from a year ago. Excluding the impacts of the purchased Hana loans, PPP loans, and the allowance for uncollectible accrued interest receivable, adjusted allowance to gross loans ratio was 1.24% as of March 31, 2022.
  • Criticized loans decreased by $3.3 million or 45.9% from a year ago, and the criticized loans to gross loans ratio improved by 35 basis points, primarily due to a $3.8 million payoff in one C&I relationship. Criticized loans are generally consistent with the Special Mention, Substandard, Doubtful and Loss categories defined by regulatory authorities.
  • Nonperforming assets increased $1.7 million to $2.8 million, or 0.15% of total assets from a year ago. The increase in nonperforming assets was primarily due to SBA loans that were placed on nonaccrual in 2021. As of March 31, 2022, $899 thousand of nonaccrual loans was the guaranteed portion of SBA loans that are in liquidation. The Company did not have OREO as of March 31, 2022 or 2021.
  • Net recoveries were $3 thousand or 0.00% of average loans in the first quarter of 2022. In comparison, there were $3 thousand net recoveries in the first quarter of 2021.

COVID-19 Pandemic Update

Total outstanding balance of loans remaining in deferment status as of March 31, 2022, represented 0.3% of the total loan portfolio.

Since the PPP’s inception through March 31, 2022, we have funded $154.5 million, and $137.0 million of principal forgiveness has been provided on qualifying PPP loans.

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 loan 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

 

 

1Q22

 

 

4Q21

 

 

1Q21

Interest income

 

$

17,944

 

$

17,822

 

$

13,632

Interest expense

 

 

654

 

 

726

 

 

877

Net interest income

 

 

17,290

 

 

17,096

 

 

12,755

Noninterest income

 

 

4,216

 

 

7,289

 

 

2,966

Noninterest expense

 

 

9,662

 

 

9,591

 

 

7,966

Pre-provision net revenue

(a)

$

11,844

 

$

14,794

 

$

7,755

Reconciliation to net income:

 

 

 

 

 

 

Provision for loan losses

(b)

$

341

 

$

1,898

 

$

620

Income tax expense

(c)

 

3,351

 

 

3,762

 

 

2,058

Net income

(a)+(b) +(c)

$

8,152

 

$

9,134

 

$

5,077

 

 

 

 

 

 

 

During the second quarter of 2021, the Company 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 March 31, 2022 and December 31, 2021 excluded the impacts of contractual interest and discount accretion of the purchased 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

 

 

1Q22

 

 

 

4Q21

 

 

 

1Q21

 

Yield on Average Loans

 

 

 

 

 

 

Interest income on loans

 

$

17,257

 

 

$

17,271

 

 

$

13,284

 

Less: interest income on purchased loans

 

 

1,755

 

 

 

1,863

 

 

 

 

Adjusted interest income on loans

(a)

$

15,502

 

 

$

15,408

 

 

$

13,284

 

 

 

 

 

 

 

 

Average loans

 

$

1,444,054

 

 

$

1,343,414

 

 

$

1,165,150

 

Less: Average purchased loans

 

 

74,631

 

 

 

79,625

 

 

 

 

Adjusted average loans

(b)

$

1,369,423

 

 

$

1,263,789

 

 

$

1,165,150

 

 

 

 

 

 

 

 

Average loan yield (1)

 

 

4.84

%

 

 

5.10

%

 

 

4.62

%

Effect on average loan yield (1)

 

 

0.26

%

 

 

0.26

%

 

 

%

Adjusted average loan yield (1)

(a)/(b)

 

4.58

%

 

 

4.84

%

 

 

4.62

%

 

 

 

 

 

 

 

Net Interest Margin

 

 

 

 

 

 

Net interest income

 

$

17,290

 

 

$

17,096

 

 

$

12,755

 

Less: interest income on purchased loans

 

 

1,755

 

 

 

1,863

 

 

 

 

Adjusted net interest income

(c)

$

15,535

 

 

$

15,233

 

 

$

12,755

 

 

 

 

 

 

 

 

Average interest-earning assets

 

$

1,698,799

 

 

$

1,668,865

 

 

$

1,357,450

 

Less: Average purchased loans

 

 

74,631

 

 

 

79,625

 

 

 

 

Adjusted average interest-earning assets

(d)

$

1,624,168

 

 

$

1,589,240

 

 

$

1,357,450

 

 

 

 

 

 

 

 

Net interest margin (1)

 

 

4.12

%

 

 

4.07

%

 

 

3.80

%

Effect on net interest margin (1)

 

 

0.25

%

 

 

0.26

%

 

 

%

Adjusted net interest margin (1)

(c)/(d)

 

3.87

%

 

 

3.81

%

 

 

3.80

%

 

 

 

 

 

 

 

  1. Annualized.

Adjusted allowance to gross loans ratio removes the impacts of purchased 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

 

 

1Q22

 

 

 

4Q21

 

 

 

1Q21

 

Gross loans

 

$

1,428,410

 

 

$

1,314,019

 

 

$

1,155,872

 

Less: Purchased loans

 

 

(71,377

)

 

 

(77,170

)

 

 

 

PPP loans (1)

 

 

(21,016

)

 

 

(38,918

)

 

 

(113,551

)

Adjusted gross loans

(a)

 

1,336,017

 

 

$

1,197,931

 

 

$

1,042,321

 

 

 

 

 

 

 

 

Accrued interest receivable on loans

 

$

4,494

 

 

$

4,231

 

 

$

2,839

 

Less: Accrued interest receivable on purchased loans

 

 

(295

)

 

 

(340

)

 

 

 

Accrued interest receivable on PPP loans (2)

 

 

(229

)

 

 

(340

)

 

 

(481

)

Add: Allowance on accrued interest receivable

 

 

 

 

 

205

 

 

 

1,279

 

Adjusted accrued interest receivable on loans

(b)

$

3,970

 

 

$

3,756

 

 

$

3,637

 

 

 

 

 

 

 

 

Adjusted gross loans and accrued interest receivable

(a)+(b) =(c)

$

1,339,987

 

 

$

1,201,687

 

 

$

1,045,958

 

 

 

 

 

 

 

 

Allowance for loan losses

 

$

16,672

 

 

$

16,123

 

 

$

15,339

 

Add: Allowance on accrued interest receivable

 

 

 

 

 

205

 

 

 

1,279

 

Adjusted Allowance

(d)

$

16,672

 

 

$

16,328

 

 

$

16,618

 

 

 

 

 

 

 

 

Adjusted allowance to gross loans ratio

(d)/(c)

 

1.24

%

 

 

1.36

%

 

 

1.59

%

 

 

 

 

 

 

 

  1. Excludes purchased PPP loans of $1.0 million and $1.7 million as of March 31, 2022 and December 31, 2021, respectively.
  2. Excludes purchased accrued interest receivable on PPP loans of $11 thousand and $15 thousand as of March 31, 2022 and December 31, 2021, respectively.

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 with 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 Atlanta, Georgia, Aurora, Colorado, and Lynnwood and Seattle, 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 Member FDIC, Equal Housing Lender.

Cautionary Note Regarding Forward-Looking Statements

Certain matters set forth herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to: the uncertainties related to the coronavirus pandemic including, but not limited to, the potential adverse effect of the pandemic on the economy, our employees and customers, and our financial performance; the impact of the federal CARES Act and the significant additional lending activities undertaken by the Company in connection with the Small Business Administration’s Paycheck Protection Program enacted thereunder, including risks to the Company with respect to the uncertain application by the Small Business Administration of new borrower and loan eligibility, forgiveness and audit criteria; business and economic conditions, particularly those affecting the financial services industry and our primary market areas; our ability to successfully manage our credit risk and the sufficiency of our allowance for loan 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; liquidity issues, including fluctuations in the fair value and liquidity of the securities we hold for sale and our ability to raise additional capital, if necessary; 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 different 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; 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, 2021 and in our other subsequent filings with the Securities and Exchange Commission.

Consolidated Balance Sheets (unaudited)

 

 

 

 

 

 

 

 

 

 

 

($ in thousands)

 

As of

 

% Change 1Q22 vs.

 

 

1Q22

 

 

 

4Q21

 

 

 

1Q21

 

 

4Q21

 

 

1Q21

 

Assets

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

18,206

 

 

$

11,283

 

 

$

20,386

 

 

61.4

%

 

(10.7

) %

Interest-bearing deposits in other banks

 

 

111,770

 

 

 

104,176

 

 

 

107,044

 

 

7.3

 

 

4.4

 

Cash and cash equivalents

 

 

129,976

 

 

 

115,459

 

 

 

127,430

 

 

12.6

 

 

2.0

 

Securities available for sale, at fair value

 

 

161,182

 

 

 

150,444

 

 

 

102,413

 

 

7.1

 

 

57.4

 

Other investments

 

 

10,836

 

 

 

10,999

 

 

 

10,047

 

 

(1.5

)

 

7.9

 

Loans held for sale

 

 

86,243

 

 

 

89,428

 

 

 

28,575

 

 

(3.6

)

 

201.8

 

Real estate loans

 

 

730,841

 

 

 

701,450

 

 

 

662,445

 

 

4.2

 

 

10.3

 

SBA loans (1)

 

 

253,064

 

 

 

275,858

 

 

 

263,185

 

 

(8.3

)

 

(3.8

)

C&I loans

 

 

176,934

 

 

 

162,543

 

 

 

103,883

 

 

8.9

 

 

70.3

 

Home mortgage loans

 

 

266,465

 

 

 

173,303

 

 

 

125,285

 

 

53.8

 

 

112.7

 

Consumer & other loans

 

 

1,106

 

 

 

865

 

 

 

1,074

 

 

27.9

 

 

3.0

 

Gross loans, net of unearned income

 

 

1,428,410

 

 

 

1,314,019

 

 

 

1,155,872

 

 

8.7

 

 

23.6

 

Allowance for loan losses

 

 

(16,672

)

 

 

(16,123

)

 

 

(15,339

)

 

3.4

 

 

(8.7

)

Net loans receivable

 

 

1,411,738

 

 

 

1,297,896

 

 

 

1,140,533

 

 

8.8

 

 

23.8

 

Premises and equipment, net

 

 

4,570

 

 

 

4,355

 

 

 

4,368

 

 

4.9

 

 

4.6

 

Accrued interest receivable, net

 

 

4,893

 

 

 

4,579

 

 

 

3,096

 

 

6.9

 

 

58.0

 

Servicing assets

 

 

12,341

 

 

 

12,720

 

 

 

7,492

 

 

(3.0

)

 

64.7

 

Company owned life insurance

 

 

11,197

 

 

 

11,134

 

 

 

10,941

 

 

0.6

 

 

2.3

 

Deferred tax assets

 

 

10,882

 

 

 

8,409

 

 

 

5,391

 

 

29.4

 

 

101.9

 

Operating right-of-use assets

 

 

8,471

 

 

 

8,905

 

 

 

6,443

 

 

(4.9

)

 

31.5

 

Other assets

 

 

11,616

 

 

 

12,363

 

 

 

8,605

 

 

(6.0

)

 

35.0

 

Total assets

 

$

1,863,945

 

 

$

1,726,691

 

 

$

1,455,334

 

 

7.9

%

 

28.1

%

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Noninterest bearing

 

$

848,531

 

 

$

774,754

 

 

$

571,985

 

 

9.5

%

 

48.3

%

Money market and others

 

 

456,890

 

 

 

380,226

 

 

 

354,148

 

 

20.2

 

 

29.0

 

Time deposits greater than $250,000

 

 

192,849

 

 

 

207,288

 

 

 

190,960

 

 

(7.0

)

 

1.0

 

Other time deposits

 

 

173,733

 

 

 

171,798

 

 

 

168,297

 

 

1.1

 

 

3.2

 

Total deposits

 

 

1,672,003

 

 

 

1,534,066

 

 

 

1,285,390

 

 

9.0

 

 

30.1

 

Federal Home Loan Bank advances

 

 

 

 

 

 

 

 

5,000

 

 

 

 

(100.0

)

Accrued interest payable

 

 

548

 

 

 

558

 

 

 

622

 

 

(1.8

)

 

(11.9

)

Operating lease liabilities

 

 

9,839

 

 

 

10,307

 

 

 

8,016

 

 

(4.5

)

 

22.7

 

Other liabilities

 

 

15,564

 

 

 

16,538

 

 

 

9,313

 

 

(5.9

)

 

67.1

 

Total liabilities

 

 

1,697,954

 

 

 

1,561,469

 

 

 

1,308,341

 

 

8.7

 

 

29.8

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

78,718

 

 

 

78,718

 

 

 

78,654

 

 

 

 

0.1

 

Additional paid-in capital

 

 

8,860

 

 

 

8,645

 

 

 

8,652

 

 

2.5

 

 

2.4

 

Retained earnings

 

 

85,694

 

 

 

79,056

 

 

 

59,373

 

 

8.4

 

 

44.3

 

Accumulated other comprehensive (loss) income

 

 

(7,281

)

 

 

(1,197

)

 

 

314

 

 

508.3

 

 

(2418.8

)

Total shareholders’ equity

 

 

165,991

 

 

 

165,222

 

 

 

146,993

 

 

0.5

 

 

12.9

 

Total liabilities and shareholders' equity

 

$

1,863,945

 

 

$

1,726,691

 

 

$

1,455,334

 

 

7.9

%

 

28.1

%

 

 

 

 

 

 

 

 

 

 

 

  1. Includes SBA Paycheck Protection Program (“PPP”) loans of $22.1 million, $40.6 million and $113.6 million as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively.

     

Consolidated Statements of Income (unaudited)

 

 

 

 

 

 

 

 

 

 

 

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

 

For the Three Months Ended

 

% Change 1Q22 vs.

 

 

1Q22

 

 

4Q21

 

 

1Q21

 

4Q21

 

 

1Q21

 

Interest income

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

17,257

 

$

17,271

 

$

13,284

 

(0.1

) %

 

29.9

%

Interest on securities available for sale

 

 

530

 

 

362

 

 

236

 

46.4

 

 

124.6

 

Other interest income

 

 

157

 

 

189

 

 

112

 

(16.9

)

 

40.2

 

Total interest income

 

 

17,944

 

 

17,822

 

 

13,632

 

0.7

 

 

31.6

 

Interest expense

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

654

 

 

726

 

 

877

 

(9.9

)

 

(25.4

)

Total interest expense

 

 

654

 

 

726

 

 

877

 

(9.9

)

 

(25.4

)

Net interest income

 

 

17,290

 

 

17,096

 

 

12,755

 

1.1

 

 

35.6

 

Provision for loan losses

 

 

341

 

 

1,898

 

 

620

 

(82.0

)

 

(45.0

)

Net interest income after provision for loan losses

 

 

16,949

 

 

15,198

 

 

12,135

 

11.5

 

 

39.7

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

Service charges on deposits

 

 

388

 

 

405

 

 

355

 

(4.2

)

 

9.3

 

Loan servicing fees, net of amortization

 

 

447

 

 

521

 

 

531

 

(14.2

)

 

(15.8

)

Gain on sale of loans

 

 

3,238

 

 

6,033

 

 

1,882

 

(46.3

)

 

72.1

 

Other income

 

 

143

 

 

330

 

 

198

 

(56.7

)

 

(27.8

)

Total noninterest income

 

 

4,216

 

 

7,289

 

 

2,966

 

(42.2

)

 

42.1

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

5,657

 

 

5,560

 

 

4,662

 

1.7

 

 

21.3

 

Occupancy and equipment

 

 

1,378

 

 

1,418

 

 

1,235

 

(2.8

)

 

11.6

 

Data processing and communication

 

 

493

 

 

637

 

 

448

 

(22.6

)

 

10.0

 

Professional fees

 

 

324

 

 

267

 

 

314

 

21.3

 

 

3.2

 

FDIC insurance and regulatory assessments

 

 

207

 

 

182

 

 

132

 

13.7

 

 

56.8

 

Promotion and advertising

 

 

189

 

 

156

 

 

177

 

21.2

 

 

6.8

 

Directors’ fees

 

 

177

 

 

166

 

 

116

 

6.6

 

 

52.6

 

Foundation donation and other contributions

 

 

815

 

 

901

 

 

507

 

(9.5

)

 

60.7

 

Other expenses

 

 

422

 

 

304

 

 

375

 

38.8

 

 

12.5

 

Total noninterest expense

 

 

9,662

 

 

9,591

 

 

7,966

 

0.7

 

 

21.3

 

Income before income tax expense

 

 

11,503

 

 

12,896

 

 

7,135

 

(10.8

)

 

61.2

 

Income tax expense

 

 

3,351

 

 

3,762

 

 

2,058

 

(10.9

)

 

62.8

 

Net income

 

$

8,152

 

$

9,134

 

$

5,077

 

(10.8

) %

 

60.6

%

 

 

 

 

 

 

 

 

 

 

 

Book value per share

 

$

10.97

 

$

10.92

 

$

9.77

 

0.5

%

 

12.3

%

Earnings per share - Basic

 

$

0.53

 

$

0.60

 

$

0.33

 

(11.7

) %

 

60.6

%

Earnings per share - Diluted

 

$

0.53

 

$

0.59

 

$

0.33

 

(10.2

) %

 

60.6

%

 

 

 

 

 

 

 

 

 

 

 

Shares of common stock outstanding

 

 

15,137,808

 

 

15,137,808

 

 

15,037,635

 

%

 

0.7

%

Weighted Average Shares:

 

 

 

 

 

 

 

 

 

 

- Basic

 

 

15,137,808

 

 

15,136,229

 

 

15,022,876

 

%

 

0.8

%

- Diluted

 

 

15,242,214

 

 

15,227,291

 

 

15,069,444

 

0.1

%

 

1.1

%

 

 

 

 

 

 

 

 

 

 

 

Key Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

% Change 1Q22 vs.

 

1Q22

 

4Q21

 

1Q21

 

4Q21

 

1Q21

Return on average assets (ROA) (1)

 

1.85 %

 

2.11 %

 

1.44 %

 

(0.3) %

 

0.4 %

Return on average equity (ROE) (1)

 

19.54 %

 

22.68 %

 

14.02 %

 

(3.1) %

 

5.5 %

Net interest margin (1)

 

4.12 %

 

4.07 %

 

3.80 %

 

0.1 %

 

0.3 %

Efficiency ratio

 

44.93 %

 

39.34 %

 

50.67 %

 

5.6 %

 

(5.7) %

 

 

 

 

 

 

 

 

 

 

 

Total risk-based capital ratio (2)

 

13.29 %

 

13.66 %

 

15.04 %

 

(0.4) %

 

(1.8) %

Tier 1 risk-based capital ratio (2)

 

12.11 %

 

12.42 %

 

13.79 %

 

(0.3) %

 

(1.7) %

Common equity tier 1 ratio (2)

 

12.11 %

 

12.42 %

 

13.79 %

 

(0.3) %

 

(1.7) %

Leverage ratio (2)

 

9.80 %

 

9.58 %

 

10.38 %

 

0.2 %

 

(0.6) %

 

 

 

 

 

 

 

 

 

 

 

  1. Annualized.
  2. The Company’s March 31, 2022 regulatory capital ratios are preliminary.

     

Asset Quality

 

 

 

 

 

 

 

($ in thousands)

 

As of and For the Three Months Ended

 

 

1Q22

 

 

 

4Q21

 

 

 

1Q21

 

Nonaccrual Loans (1)

 

$

2,806

 

 

$

3,000

 

 

$

1,148

 

Loans 90 days or more past due, accruing

 

 

 

 

 

200

 

 

 

 

Accruing restructured loans

 

 

 

 

 

 

 

 

 

Nonperforming loans

 

 

2,806

 

 

 

3,200

 

 

 

1,148

 

Other real estate owned ("OREO")

 

 

 

 

 

 

 

 

 

Nonperforming assets

 

$

2,806

 

 

$

3,200

 

 

$

1,148

 

 

 

 

 

 

 

 

Criticized loans (2) by loan type:

 

 

 

 

 

 

SBA loans

 

$

2,544

 

 

$

2,688

 

 

$

1,684

 

C&I loans

 

 

305

 

 

 

313

 

 

 

4,832

 

Home mortgage loans

 

 

999

 

 

 

1,038

 

 

 

600

 

Total criticized loans (2)

 

$

3,848

 

 

$

4,039

 

 

$

7,116

 

 

 

 

 

 

 

 

Nonperforming assets/total assets

 

 

0.15

%

 

 

0.19

%

 

 

0.08

%

Nonperforming assets / gross loans plus OREO

 

 

0.20

%

 

 

0.24

%

 

 

0.10

%

Nonperforming loans / gross loans

 

 

0.20

%

 

 

0.24

%

 

 

0.10

%

Allowance for loan losses / nonperforming loans

 

 

594

%

 

 

503

%

 

 

1337

%

Allowance for loan losses / nonperforming assets

 

 

594

%

 

 

503

%

 

 

1337

%

Allowance for loan losses / gross loans

 

 

1.17

%

 

 

1.23

%

 

 

1.33

%

Criticized loans (2) / gross loans

 

 

0.27

%

 

 

0.31

%

 

 

0.62

%

Classified loans / gross loans

 

 

0.27

%

 

 

0.31

%

 

 

0.57

%

 

 

 

 

 

 

 

Net (recoveries) charge-offs

 

$

(3

)

 

$

168

 

 

$

(3

)

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

 

 

(0.00

) %

 

 

0.05

%

 

 

(0.00

) %

 

 

 

 

 

 

 

  1. Includes the guaranteed portion of SBA loans that are in liquidation totaling $899 thousand as of March 31, 2022.
  2. Consists of special mention, substandard, doubtful and loss categories.
  3. Annualized.

 

 

 

 

 

 

 

($ in thousands)

 

 

1Q22

 

 

4Q21

 

 

1Q21

Accruing delinquent loans 30-89 days past due

 

 

 

 

 

 

30-59 days

 

$

201

 

$

76

 

$

60-89 days

 

 

 

 

336

 

 

Total (1)

 

$

201

 

$

412

 

$

 

 

 

 

 

 

 

  1. Includes the guaranteed portion of PPP loans totaling $9 thousand as of March 31, 2022.

Average Balance Sheet, Interest and Yield/Rate Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

1Q22

 

4Q21

 

1Q21

($ 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

 

$

86,875

 

$

42

 

0.19

%

 

$

192,302

 

$

73

 

0.15

%

 

$

89,931

 

$

23

 

0.19

%

Federal funds sold and other investments

 

 

10,957

 

 

115

 

4.19

 

 

 

11,012

 

 

116

 

4.23

 

 

 

10,087

 

 

89

 

3.53

 

Available-for-sale debt securities, at fair value

 

 

156,913

 

 

530

 

1.35

 

 

 

122,137

 

 

362

 

1.19

 

 

 

92,951

 

 

236

 

1.02

 

Real estate loans

 

 

710,993

 

 

7,802

 

4.45

 

 

 

685,394

 

 

7,774

 

4.50

 

 

 

653,498

 

 

7,466

 

4.63

 

SBA loans

 

 

358,725

 

 

5,834

 

6.60

 

 

 

400,059

 

 

6,829

 

6.77

 

 

 

268,440

 

 

3,280

 

4.95

 

C&I loans

 

 

156,355

 

 

1,536

 

3.98

 

 

 

133,104

 

 

1,334

 

3.98

 

 

 

116,327

 

 

1,072

 

3.74

 

Home mortgage loans

 

 

217,103

 

 

2,074

 

3.82

 

 

 

123,822

 

 

1,320

 

4.27

 

 

 

125,698

 

 

1,451

 

4.62

 

Consumer & other loans

 

 

878

 

 

11

 

4.88

 

 

 

1,035

 

 

14

 

5.21

 

 

 

1,187

 

 

15

 

5.12

 

Loans (2)

 

 

1,444,054

 

 

17,257

 

4.84

 

 

 

1,343,414

 

 

17,271

 

5.10

 

 

 

1,165,150

 

 

13,284

 

4.62

 

Total interest-earning assets

 

 

1,698,799

 

 

17,944

 

4.28

 

 

 

1,668,865

 

 

17,822

 

4.24

 

 

 

1,358,119

 

 

13,632

 

4.07

 

Noninterest-earning assets

 

 

63,016

 

 

 

 

 

 

62,996

 

 

 

 

 

 

51,707

 

 

 

 

Total assets

 

$

1,761,815

 

 

 

 

 

$

1,731,861

 

 

 

 

 

$

1,409,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market deposits and others

 

$

412,295

 

$

251

 

0.25

%

 

$

378,849

 

$

283

 

0.30

%

 

$

336,796

 

$

270

 

0.33

%

Time deposits

 

 

374,620

 

 

403

 

0.44

 

 

 

401,938

 

 

443

 

0.44

 

 

 

361,803

 

 

607

 

0.68

 

Total interest-bearing deposits

 

 

786,915

 

 

654

 

0.34

 

 

 

780,787

 

 

726

 

0.37

 

 

 

698,599

 

 

877

 

0.51

 

Borrowings

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

5,000

 

 

 

 

Total interest-bearing liabilities

 

 

786,915

 

 

654

 

0.34

 

 

 

780,791

 

 

726

 

0.37

 

 

 

703,599

 

 

877

 

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

783,461

 

 

 

 

 

 

765,012

 

 

 

 

 

 

544,492

 

 

 

 

Other noninterest-bearing liabilities

 

 

24,599

 

 

 

 

 

 

24,994

 

 

 

 

 

 

16,865

 

 

 

 

Total noninterest-bearing liabilities

 

 

808,060

 

 

 

 

 

 

790,006

 

 

 

 

 

 

561,357

 

 

 

 

Shareholders’ equity

 

 

166,840

 

 

 

 

 

 

161,064

 

 

 

 

 

 

144,870

 

 

 

 

Total liabilities and shareholders’ equity

 

$

1,761,815

 

 

 

 

 

$

1,731,861

 

 

 

 

 

$

1,409,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income / interest rate spreads

 

 

 

$

17,290

 

3.94

%

 

 

 

$

17,096

 

3.87

%

 

 

 

$

12,755

 

3.56

%

Net interest margin

 

 

 

 

 

4.12

%

 

 

 

 

 

4.07

%

 

 

 

 

 

3.80

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of deposits & cost of funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total deposits / cost of deposits

 

$

1,570,376

 

$

654

 

0.17

%

 

$

1,545,799

 

$

726

 

0.19

%

 

 

1,243,091

 

$

877

 

0.29

%

Total funding liabilities / cost of funds

 

$

1,570,376

 

$

654

 

0.17

%

 

$

1,545,803

 

$

726

 

0.19

%

 

 

1,248,091

 

$

877

 

0.28

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

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