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  Title	OP Bancorp Reports Net Income for 2024 Third Quarter of $5.4 Million and Diluted Earnings Per Share of $0.36
  ID	3566288
  External ID	7244720987
  Author	Unknown
  Published Date	Oct. 24, 2024, 5:20 p.m.
  Summary	2024 Third Quarter Highlights compared with 2024 Second Quarter: Financial Results: Net income of $5.4 million, no change compared to $5.4 million Diluted earnings per share of $0.36, no change compar
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  URL	https://www.marketscreener.com/quote/stock/op-bancorp-42529067/news/op-bancorp-reports-net-income-for-2024-third-quarter-of-5-4-million-and-diluted-earnings-per-share-48158366/
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  Content ID	1883138
  Key	61f307ac-647d-4249-937a-d6de3a2ce41e
  Content	2024 Third Quarter Highlights compared with 2024 Second Quarter: Financial Results: Net income of $5.4 million, no change compared to $5.4 million Diluted earnings per share of $0.36, no change compared to $0.36 Net interest income of $16.5 million, compared to $16.2 million Net interest margin of 2.95%, compared to 2.96% Provision for credit losses of $448 thousand, compared to $617 thousand Total assets of $2.39 billion, a 4.2% increase compared to $2.29 billion Gross loans of $1.93 billion, a 3.3% increase compared to $1.87 billion Total deposits of $2.06 billion, a 6.4% increase compared to $1.94 billion Credit Quality: Allowance for credit losses to gross loans of 1.19%, compared to 1.22% Net charge-offs (recoveries)(1) to average gross loans(2) of 0.01%, compared to (0.00)% Loans past due 30-89 days to gross loans of 0.53%, compared to 0.36% Nonperforming loans to gross loans of 0.19%, compared to 0.23% Criticized loans(3) to gross loans of 0.85%, compared to 0.88% Capital Levels: Remained well-capitalized with a Common Equity Tier 1 (“CET1”) ratio of 11.57% Book value per common share increased to $13.75, compared to $13.23 Repurchased 4,610 shares of common stock at an average price of $10.09 per share Paid quarterly cash dividend of $0.12 per share for the periods ___________________________________________________________ (1) Annualized. (2) Includes loans held for sale. (3) Includes special mention, substandard, doubtful, and loss categories. OP Bancorp (the “Company”) (NASDAQ: OPBK), the holding company of Open Bank (the “Bank”), today reported its financial results for the third quarter of 2024. Net income remained relatively the same for both the third quarter and second quarter of 2024 at $5.4 million, or $0.36 per diluted common share, compared with $5.1 million, or $0.33 per diluted common share, for the third quarter of 2023. Min Kim, President and Chief Executive Officer “We continued to grow our loans and deposits at double digit annualized rates in this quarter while maintaining ample liquidity, stable net interest margin, and strong credit quality. As the Fed's easing cycle began in the quarter, the pressure on funding cost and net interest margin is diminishing, and we believe we are well positioned to prolong our growth and performance to achieve our long term strategic goals,” said Min Kim, President and Chief Executive. SELECTED FINANCIAL HIGHLIGHTS INCOME STATEMENT HIGHLIGHTS Net Interest Income and Net Interest Margin Third Quarter 2024 vs. Second Quarter 2024 Net interest income increased $312 thousand, or 1.9%, primarily due to higher interest income on loans but partially offset by higher interest expense on interest-bearing deposits and lower interest income on interest-bearing deposits in other banks. Net interest margin was 2.95%, a decrease of 1 basis point from 2.96%. A $1.3 million increase in interest income on loans was primarily due to a $62.7 million, or 3.4%, increase in average balance. A $578 thousand increase in interest expense on interest-bearing deposits was primarily due to a $29.4 million, or 2.0%, increase in average balance. A $373 thousand decrease in interest income on interest-bearing deposits in other banks was primarily due to a $27.0 million, or 19.8%, decrease in average balance. Third Quarter 2024 vs. Third Quarter 2023 Net interest income decreased $807 thousand, or 4.7%, primarily due to higher interest expense on interest-bearing deposits, partially offset by higher interest income on loans and higher interest-bearing deposits in other banks, as our deposit costs repriced quicker than our interest-earning asset yields following the Federal Reserve's rate increases. Net interest margin was 2.95%, a decrease of 43 basis points from 3.38%. A $4.9 million increase in interest expense on interest-bearing deposits was primarily due to a $248.4 million, or 20.3%, increase in average balance and a 63 basis point increase in average cost. A $3.6 million increase in interest income on loans was primarily due to a $165.8 million, or 9.5%, increase in average balance and a 21 basis point increase in average yield. A $358 thousand increase in interest income on interest-bearing deposits in other banks was primarily due to a $26.3 million, or 31.7%, increase in average balance. Provision for Credit Losses Third Quarter 2024 vs. Second Quarter 2024 The Company recorded $448 thousand in total provision for credit losses, a decrease of $169 thousand, compared with $617 thousand. Provision for credit losses on loans decreased $393 thousand and provision for credit losses on off-balance sheet exposure increased $224 thousand. Provision for credit losses on loans of $234 thousand was primarily due to a $215 thousand increase in the qualitative reserve driven by declining collateral values for collateral dependent CRE loans and weakening economic and business conditions. Provision for credit losses on off-balance sheet exposure of $214 thousand was primarily due to increases in unfunded commitment balance and utilization of commitment. Third Quarter 2024 vs. Third Quarter 2023 The Company recorded $448 thousand in total provision for credit losses, a decrease of $911 thousand, compared with $1.4 million. Noninterest Income Third Quarter 2024 vs. Second Quarter 2024 Noninterest income increased $56 thousand, or 1.3%, primarily due to higher loan servicing fees and higher service charges on deposits, partially offset by lower gain on the sale of loans. Loan servicing fees, net of amortization, were $693 thousand, an increase of $118 thousand from $575 thousand, primarily due to a decrease in servicing fee amortization driven by lower loan payoffs in loan servicing portfolio. Service charges on deposits were $889 thousand, an increase of $96 thousand from $793 thousand, primarily due to an increase in deposit analysis fees from analysis accounts added in 2024. Gain on sale of loans was $2.1 million, a decrease of $237 thousand from $2.3 million, primarily due to a lower average premium on sales. The Bank sold $35.6 million in SBA loans at an average premium rate of 7.30%, compared to the sale of $32.1 million at an average premium rate of 8.58%. Third Quarter 2024 vs. Third Quarter 2023 Noninterest income increased $1.6 million, or 63.0%, primarily due to higher gain on sale of loans, higher service charges on deposits, and higher loan servicing fees. Gain on sale of loans was $2.1 million, an increase of $909 thousand from $1.2 million, primarily due to a higher loan sold amount and a higher average premium rate. The Bank sold $35.6 million in SBA loans at an average premium rate of 7.30%, compared to the sale of $23.4 million at an average premium rate of 6.50%. Service charges on deposits were $889 thousand, an increase of $314 thousand from $575 thousand, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts. Loan servicing fees were $693 thousand, an increase of $225 thousand from $468 thousand, primarily due to a decrease in servicing fee amortization driven by lower loan payoffs in loan servicing portfolio. Noninterest Expense Third Quarter 2024 vs. Second Quarter 2024 Noninterest expense increased $531 thousand, or 4.4%, primarily due to higher salaries and employee benefits, and data processing and communication. Salaries and employee benefits increased $463 thousand, primarily due to increases in employee incentive accruals and employee vacation accruals. Data processing and communication increased $104 thousand, primarily due to accrual adjustments made to be in line with our continued growth. Third Quarter 2024 vs. Third Quarter 2023 Noninterest expense increased $1.2 million, or 10.3%, primarily due to higher salaries and employee benefits, and data processing and communication. Salaries and employee benefits increased $1.0 million, primarily due to increases in salaries and employee benefits to support our growth and a lower accrual on employee incentives in the third quarter of 2023. Data processing and communication increased $265 thousand, primarily due to additional expense to support our continued growth and a lower expense in the third quarter of 2023 from a credit received on data processing fees. Income Tax Expense Third Quarter 2024 vs. Second Quarter 2024 Income tax expense was $2.1 million, resulting in an effective tax rate of 28.3%, compared to income tax expense of $2.1 million, resulting in an effective tax rate of 28.2%. Third Quarter 2024 vs. Third Quarter 2023 Income tax expense was $2.1 million, resulting in an effective tax rate of 28.3%, compared to income tax expense of $1.9 million, resulting in an effective tax rate of 27.1%. The effective tax rate for the third quarter of 2023 was lower primarily due to adjustments for differences between the prior year tax provision and the final tax returns that were applied in the quarter. BALANCE SHEET HIGHLIGHTS Loans The following table presents new loan originations based on loan commitment amounts for the periods indicated: The following table presents changes in gross loans by loan activity for the periods indicated: As of September 30, 2024 vs. June 30, 2024 Gross loans were $1.93 billion as of September 30, 2024, up $60.9 million from June 30, 2024, primarily due to new loan originations, partially offset by loan sales, payoffs and paydowns. New loan originations, loan sales, and loan payoffs and paydowns were $152.7 million, $35.6 million, and $54.4 million, respectively, for the third quarter of 2024, compared with $101.1 million, $32.1 million, and $56.6 million, respectively, for the second quarter of 2024. As of September 30, 2024 vs. September 30, 2023 Gross loans were $1.93 billion as of September 30, 2024, up $171.5 million, from September 30, 2023, primarily due to and increase in new loan originations of $472.3 million, partially offset by loan sales of $132.6 million and loan payoffs and paydowns of $214.9 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: The following table presents the maturity of gross loans by interest rate type accompanied with the weighted average contractual rates for the periods indicated: Allowance for Credit Losses The following table presents allowance for credit losses and provision for credit losses as of and for the periods presented: Asset Quality Overall, the Bank continued to maintain low levels of nonperforming loans and net charge-offs. Our allowance remained strong with an allowance to gross loans ratio of 1.19%. Loans 30-89 days past due and still accruing were $10.3 million or 0.53% of gross loans as of September 30, 2024, compared with $6.7 million or 0.36% as of June 30, 2024. The increase was largely due to four home mortgage loans totaling $2.4 million and three SBA real estate loans totaling $1.3 million. Nonperforming loans were $3.6 million or 0.19% of gross loans as of September 30, 2024, compared with $4.4 million or 0.23% as of June 30, 2024. Nonperforming assets were $4.9 million or 0.20% of total assets as of September 30, 2024, compared with $5.6 million or 0.25% as of June 30, 2024. OREO remained the same at $1.2 million as of September 30, 2024 and June 30, 2024, which is secured by a mix-use property in Los Angeles Koreatown with 90% guaranteed by SBA. Criticized loans were $16.5 million or 0.85% of gross loans as of September 30, 2024, compared with $16.4 million or 0.88% as of June 30, 2024. Net charge-offs were $34 thousand or 0.01% of average loans in the third quarter of 2024, compared to net recoveries of $4 thousand, or 0.00% of average loans in the second quarter of 2024 and net recoveries of $488 thousand, or 0.11% of average loans in the third quarter of 2023. Deposits As of September 30, 2024 vs. June 30, 2024 Total deposits were $2.06 billion as of September 30, 2024, reflecting an increase of $123.8 million from June 30, 2024, primarily due to increases of $69.4 million in time deposits and $43.3 million in noninterest-bearing deposits. Customers' preference for high-rate deposit products continued to drive the increase in time deposits. The increase in noninterest-bearing deposits was mostly driven by balance increases in existing customers, including escrow and 1031 exchanges accounts. The composition of noninterest-bearing deposits also increased to 27.2% of total deposits from 26.7%. As of September 30, 2024 vs. September 30, 2023 Total deposits were $2.06 billion as of September 30, 2024, up $239.4 million from September 30, 2023, primarily driven by a $288.8 million increase in time deposits, offset by decreases of $43.7 million in noninterest-bearing deposits and $5.7 million in money market deposits. Noninterest-bearing deposits, as a percentage of total deposits, decreased to 27.2% from 33.2%. The composition shift to time deposits was primarily due to customers' preference for high-rate deposit products driven by market rate increases as a result of the Federal Reserve's rate increases. The following table sets forth the maturity of time deposits as of September 30, 2024: 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: Capital and Capital Ratios On October 24, 2024, the Company's Board of Directors declared a quarterly cash dividend of $0.12 per share of its common stock. The cash dividend is payable on or about November 21, 2024 to all shareholders of record as of the close of business on November 7, 2024. The payment of the dividend is based primarily on dividends from the Bank to the Company, and future dividends will depend on the Board's assessment of the availability of capital levels to support the ongoing operating capital needs of both the Company and the Bank. The Company also repurchased 4,610 shares of its common stock at an average price of $10.09 per share during the third quarter of 2024 under the stock repurchase program announced in August 2023. Since the announcement of the stock repurchase program in August 2023, the Company repurchased a total of 428,628 shares of its common stock at an average repurchase price of $9.37 per share through September 30, 2024. ABOUT OP BANCORP OP Bancorp, the holding company for Open Bank (the “Bank”), is a California corporation whose common stock is quoted on the Nasdaq Global Market under the ticker symbol, “OPBK.” The Bank is engaged in the general commercial banking business in Los Angeles, Orange, and Santa Clara Counties in California, the Dallas metropolitan area in Texas, and Clark County in Nevada and is focused on serving the banking needs of small- and medium-sized businesses, professionals, and residents with a particular emphasis on Korean and other ethnic minority communities. The Bank currently operates eleven full-service branch offices in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Cerritos, Gardena, Buena Park, and Santa Clara, California, Carrollton, Texas and Las Vegas, Nevada. The Bank also has five loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, Lynnwood, Washington, and Fairfax, Virginia. The Bank commenced its operations on June 10, 2005 as First Standard Bank and changed its name to Open Bank in October 2010. Its headquarters is located at 1000 Wilshire Blvd., Suite 500, Los Angeles, California 90017. Phone 213.892.9999; www.myopenbank.com CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain matters set forth herein constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including forward-looking statements relating to the Company's current business plans and expectations regarding future operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to: the effects of substantial fluctuations in, and continuing elevated levels of, interest rates on our borrowers' ability to perform in accordance with the terms of their loans and on our deposit customers' expectation for higher rates on deposit products; cybersecurity risks, including the potential for the occurrence of successful cyberattacks and our ability to prevent and to mitigate the harms resulting from any such attacks; infrastructure risks and similar circumstances that affect our and our customers' ability to communicate and to engage in routine online banking activities; business and economic conditions, particularly those affecting the financial services industry and our primary market areas; risks of international conflict, terrorism, civil unrest and domestic instability; the continuing effects of inflation and monetary policies, particularly those relating to the decisions and indicators of intent expressed by the Federal Reserve Open Markets Committee, as those circumstances impact our operations and our current and prospective borrowers and depositors; our ability to balance deposit liabilities and liquidity sources (including our ability to reprice those instruments and balancing our borrowings and investments to keep pace with changing market conditions) so as to meet current and expected withdrawals while promoting strong earning capacity; our ability to manage our credit risk successfully and to assess, adjust and monitor the sufficiency of our allowance for credit losses; factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers, the success of construction projects that we finance, including any loans acquired in acquisition transactions; the impacts of credit quality on our earnings and the related effects of increases to the reserve on our net income; our ability effectively to execute our strategic plan and manage our growth; interest rate fluctuations, which could have an adverse effect on our profitability; external economic and/or market factors, such as changes in monetary and fiscal policies and laws, including inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition; continued or increasing competition from other banks and from credit unions and non-bank financial services companies, many of which are subject to less restrictive or less costly regulations than we are; challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services; practical and regulatory constraints on the ability of Open Bank to pay dividends to us; increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all; a failure in the internal controls we have implemented to address the risks inherent to the business of banking; including internal controls that affect the reliability of our publicly reported financial statements; inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance, particularly with respect to the effects of predictions of future economic conditions as those circumstances affect our estimates for the adequacy of our allowance for credit losses and the related provision expense; changes in our management personnel or our inability to retain motivate and hire qualified management personnel; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies; risks related to potential acquisitions; political developments, uncertainties or instability, catastrophic events, or natural disasters, such as earthquakes, fires, drought, pandemic diseases (such as the coronavirus) or extreme weather events, any of which may affect services we use or affect our customers, employees or third parties with which we conduct business; incremental costs and obligations associated with operating as a public company; the impact of any claims or legal actions to which we may be subject, including any effect on our reputation; compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with commercial mortgage origination, sale and servicing operations; changes in federal tax law or policy; and our ability the manage the foregoing and other factors set forth in the Company's public reports. We describe these and other risks that could affect our results in Item 1A. “Risk Factors,” of our latest Annual Report on Form 10-K for the year ended December 31, 2023 and in our subsequent filings with the Securities and Exchange Commission. CONSOLIDATED BALANCE SHEETS (unaudited) CONSOLIDATED STATEMENTS OF INCOME (unaudited) KEY RATIOS CONSOLIDATED STATEMENTS OF INCOME (unaudited) KEY RATIOS ASSET QUALITY AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS View source version on businesswire.com: https://www.businesswire.com/news/home/20241024516652/en/
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