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News   Press Releases

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

OPBK | April 28, 2022

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.comMember 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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