2024 First Quarter Highlights compared with 2023 Fourth Quarter:
- Financial Results:
- Net income of $5.23 million, compared to $5.17 million
- Diluted earnings per share of $0.34, compared to $0.34
- Net interest income of $16.0 million, compared to $16.2 million
- Net interest margin of 3.06%, compared to 3.12%
- Provision for credit losses of $0.1 million, compared to $0.6 million
- Total assets of $2.23 billion, compared to $2.15 billion
- Gross loans of $1.80 billion, compared to $1.77 billion
- Total deposits of $1.90 billion, compared to $1.81 billion
- Credit Quality:
- Allowance for credit losses to gross loans of 1.23%, compared to 1.25%
- Net charge-offs(1) to average gross loans(2) of 0.01%, compared to 0.04%
- Past due 30-89 days to gross loans of 0.22%, compared to 0.54%
- Nonperforming loans to gross loans of 0.24%, compared to 0.34%
- Criticized loans(3) to gross loans of 0.64%, compared to 0.76%
- Capital Levels:
- Remained well-capitalized with a Common Equity Tier 1 ("CET1") ratio of 12.34%
- Book value per common share increased to $13.00, compared to $12.84
- Repurchased 49,697 shares of common stock at an average price of $10.02 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.
LOS ANGELES--(BUSINESS WIRE)--OP Bancorp (the "Company") (NASDAQ: OPBK), the holding company of Open Bank (the "Bank"), today reported its financial results for the first quarter of 2024. Net income for the first quarter of 2024 was $5.23 million, or $0.34 per diluted common share, compared with $5.17 million, or $0.34 per diluted common share, for the fourth quarter of 2023, and $7.5 million, or $0.48 per diluted common share, for the first quarter of 2023.
Min Kim, President and Chief Executive Officer:
"Despite the prolonged stress from the high interest rate environment, we were able to grow loans and deposits in the first quarter while controlling impacts to net interest margin at a manageable level. Our credit quality improved noticeably across all metrics even in the face of significant uncertainties that affect our borrowers. I'd like to thank our loyal customers and our dedicated employees for their continuing support of Open Bank, and we look forward to continuing to grow prudently while maintaining an optimum risk profile," said Min Kim, President and Chief Executive.
SELECTED FINANCIAL HIGHLIGHTS
($ in thousands, except per share data) | As of and For the Three Months Ended | % Change 1Q2024 vs. | ||||||||||||||||
1Q2024 | 4Q2023 | 1Q2023 | 4Q2023 | 1Q2023 | ||||||||||||||
Selected Income Statement Data: | ||||||||||||||||||
Net interest income | $ | 15,979 | $ | 16,230 | $ | 17,892 | (1.5)% | (10.7)% | ||||||||||
Provision for (reversal of) credit losses | 145 | 630 | (338 | ) | (77.0) | (142.9) | ||||||||||||
Noninterest income | 3,586 | 3,680 | 4,295 | (2.6) | (16.5) | |||||||||||||
Noninterest expense | 12,157 | 11,983 | 11,908 | 1.5 | 2.1 | |||||||||||||
Income tax expense | 2,037 | 2,125 | 3,083 | (4.1) | (33.9) | |||||||||||||
Net income | 5,226 | 5,172 | 7,534 | 1.0 | (30.6) | |||||||||||||
Diluted earnings per share | 0.34 | 0.34 | 0.48 | — | (29.2) | |||||||||||||
Selected Balance Sheet Data: | ||||||||||||||||||
Gross loans | $ | 1,804,987 | $ | 1,765,845 | $ | 1,692,485 | 2.2% | 6.6% | ||||||||||
Total deposits | 1,895,411 | 1,807,558 | 1,904,818 | 4.9 | (0.5) | |||||||||||||
Total assets | 2,234,520 | 2,147,730 | 2,170,594 | 4.0 | 2.9 | |||||||||||||
Average loans(1) | 1,808,932 | 1,787,540 | 1,725,392 | 1.2 | 4.8 | |||||||||||||
Average deposits | 1,836,331 | 1,813,411 | 1,867,684 | 1.3 | (1.7) | |||||||||||||
Credit Quality: | ||||||||||||||||||
Nonperforming loans | $ | 4,343 | $ | 6,082 | $ | 2,504 | (28.6)% | 73.4% | ||||||||||
Nonperforming loans to gross loans | 0.24 | % | 0.34 | % | 0.15 | % | (0.10) | 0.09 | ||||||||||
Criticized loans(2) to gross loans | 0.64 | 0.76 | 0.34 | (0.12) | 0.30 | |||||||||||||
Net charge-offs(3) to average gross loans(1) | 0.01 | 0.04 | 0.02 | (0.03) | (0.01) | |||||||||||||
Allowance for credit losses to gross loans | 1.23 | 1.25 | 1.23 | (0.02) | — | |||||||||||||
Allowance for credit losses to nonperforming loans | 510 | 362 | 831 | 148.00 | (321.00) | |||||||||||||
Financial Ratios: | ||||||||||||||||||
Return on average assets(3) | 0.96 | % | 0.96 | % | 1.43 | % | —% | (0.47)% | ||||||||||
Return on average equity(3) | 10.83 | 11.18 | 16.82 | (0.35) | (5.99) | |||||||||||||
Net interest margin(3) | 3.06 | 3.12 | 3.57 | (0.06) | (0.51) | |||||||||||||
Efficiency ratio(4) | 62.14 | 60.19 | 53.67 | 1.95 | 8.47 | |||||||||||||
Common equity tier 1 capital ratio | 12.34 | 12.52 | 12.06 | (0.18) | 0.28 | |||||||||||||
Leverage ratio | 9.65 | 9.57 | 9.43 | 0.08 | 0.22 | |||||||||||||
Book value per common share | $ | 13.00 | $ | 12.84 | $ | 12.02 | 1.2 | 8.2 | ||||||||||
(1) | Includes loans held for sale. | |
(2) | Includes special mention, substandard, doubtful, and loss categories. | |
(3) | Annualized. | |
(4) | 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 1Q2024 vs. | ||||||||||||||||
1Q2024 | 4Q2023 | 1Q2023 | 4Q2023 | 1Q2023 | ||||||||||||||
Interest Income | ||||||||||||||||||
Interest income | $ | 32,913 | $ | 31,783 | $ | 28,594 | 3.6% | 15.1% | ||||||||||
Interest expense | 16,934 | 15,553 | 10,702 | 8.9 | 58.2 | |||||||||||||
Net interest income | $ | 15,979 | $ | 16,230 | $ | 17,892 | (1.5)% | (10.7)% | ||||||||||
($ in thousands) | For the Three Months Ended | ||||||||||||||||||||||||||||||||
1Q2024 | 4Q2023 | 1Q2023 | |||||||||||||||||||||||||||||||
Average | Interest | Yield/ | Average | Interest | Yield/ | Average | Interest | Yield/ | |||||||||||||||||||||||||
Interest-earning Assets: | |||||||||||||||||||||||||||||||||
Loans | $ | 1,808,932 | $ | 30,142 | 6.69% | $ | 1,787,540 | $ | 28,914 | 6.43% | $ | 1,725,392 | $ | 26,011 | 6.10% | ||||||||||||||||||
Total interest-earning assets | 2,089,627 | 32,913 | 6.32 | 2,071,613 | 31,783 | 6.10 | 2,022,146 | 28,594 | 5.71 | ||||||||||||||||||||||||
Interest-bearing Liabilities: | |||||||||||||||||||||||||||||||||
Interest-bearing deposits | 1,321,828 | 15,675 | 4.77 | 1,243,446 | 14,127 | 4.51 | 1,196,194 | 10,382 | 3.52 | ||||||||||||||||||||||||
Total interest-bearing liabilities | 1,430,509 | 16,934 | 4.76 | 1,362,210 | 15,553 | 4.53 | 1,222,362 | 10,702 | 3.55 | ||||||||||||||||||||||||
Ratios: | |||||||||||||||||||||||||||||||||
Net interest income / interest rate spreads | 15,979 | 1.56 | 16,230 | 1.57 | 17,892 | 2.16 | |||||||||||||||||||||||||||
Net interest margin | 3.06 | 3.12 | 3.57 | ||||||||||||||||||||||||||||||
Total deposits / cost of deposits | 1,836,331 | 15,675 | 3.43 | 1,813,411 | 14,127 | 3.09 | 1,867,684 | 10,382 | 2.25 | ||||||||||||||||||||||||
Total funding liabilities / cost of funds | 1,945,012 | 16,934 | 3.50 | 1,932,175 | 15,553 | 3.19 | 1,893,852 | 10,702 | 2.29 | ||||||||||||||||||||||||
(1) | Annualized. |
($ in thousands) | For the Three Months Ended | Yield Change 1Q2024 | |||||||||||||||||||||||||
1Q2024 | 4Q2023 | 1Q2023 | |||||||||||||||||||||||||
Interest | Yield(1) | Interest | Yield(1) | Interest | Yield(1) | 4Q2023 | 1Q2023 | ||||||||||||||||||||
Loan Yield Component: | |||||||||||||||||||||||||||
Contractual interest rate | $ | 28,877 | 6.41% | $ | 28,596 | 6.36% | $ | 25,477 | 5.97% | 0.05% | 0.44% | ||||||||||||||||
SBA loan discount accretion | 881 | 0.20 | 960 | 0.21 | 974 | 0.23 | (0.01) | (0.03) | |||||||||||||||||||
Amortization of net deferred fees | 54 | 0.01 | (67 | ) | (0.01) | 79 | 0.02 | 0.02 | (0.01) | ||||||||||||||||||
Amortization of premium | (428 | ) | (0.10) | (423 | ) | (0.09) | (392 | ) | (0.09) | (0.01) | (0.01) | ||||||||||||||||
Net interest recognized on nonaccrual loans | 492 | 0.11 | (345 | ) | (0.08) | (243 | ) | (0.06) | 0.19 | 0.17 | |||||||||||||||||
Prepayment penalties(2) and other fees | 266 | 0.06 | 193 | 0.04 | 116 | 0.03 | 0.02 | 0.03 | |||||||||||||||||||
Yield on loans | $ | 30,142 | 6.69% | $ | 28,914 | 6.43% | $ | 26,011 | 6.10% | 0.26% | 0.59% | ||||||||||||||||
(1) | Annualized. | |
(2) | Prepayment penalty income of $115 thousand, $43 thousand and $3 thousand for the three months ended March 31, 2024, December 31, 2023 and March 31, 2023, respectively, was from Commercial Real Estate ("CRE") and Commercial and Industrial ("C&I") loans. |
First Quarter 2024 vs. Fourth Quarter 2023
Net interest income decreased $251 thousand, or 1.5%, primarily due to higher interest expense on deposits, partially offset by higher interest income on loans. Net interest margin was 3.06%, a decrease of 6 basis points from 3.12%.
- A $1.5 million increase in interest expense on interest-bearing deposits was primarily due to a $78.4 million, or 6.3%, increase in average balance.
- A $1.2 million increase in interest income on loans was primarily due to a $21.4 million, or 1.2%, increase in average balance and a $837 thousand increase in net interest recognized on nonaccrual loans.
First Quarter 2024 vs. First Quarter 2023
Net interest income decreased $1.9 million, or 10.7%, primarily due to higher interest expense on deposits and borrowings, partially offset by higher interest income on loans as our deposit and borrowing costs repriced more quickly than our interest-earning assets. Net interest margin was 3.06%, a decrease of 51 basis points from 3.57%.
- A $5.3 million increase in interest expense on interest-bearing deposits was primarily due to a $125.6 million, or 10.5%, increase in average balance and a 125 basis point increase in average cost driven by the Federal Reserve's rate increases.
- A $939 thousand increase in interest expense on borrowings was primarily due to a $82.5 million, or 315.3%, increase in average balance.
- A $4.1 million increase in interest income on loans was primarily due to a $83.5 million, or 4.8%, increase in average balance and a 59 basis point increase in average yield as a result of the Federal Reserve's rate increases.
Provision for Credit Losses
For the Three Months Ended | ||||||||||||
($ in thousands) | 1Q2024 | 4Q2023 | 1Q2023 | |||||||||
Provision for (reversal of) credit losses on loans | $ | 193 | $ | 537 | $ | (258) | ||||||
Provision for (reversal of) credit losses on off-balance sheet exposure | (48 | ) | 93 | (80) | ||||||||
Total provision for (reversal of) credit losses | $ | 145 | $ | 630 | $ | (338) | ||||||
First Quarter 2024 vs. Fourth Quarter 2023
The Company recorded a $145 thousand provision for credit losses, a decrease of $485 thousand, compared with a $630 thousand provision for credit losses.
Provision for credit losses on loans was $193 thousand, primarily due to a $1.8 million increase in the quantitative general reserve, mostly offset by a $1.7 million decrease in the qualitative reserve. The increase in the quantitative reserve was due to the increase in the average life of home mortgage loans because of the slower prepayment rate based on the 2-year look back period. The decrease in the qualitative reserve was due to noticeable improvements in various asset quality metrics and improving economic and business conditions.
First Quarter 2024 vs. First Quarter 2023
The Company recorded a $145 thousand provision for credit losses, a decrease of $483 thousand, compared with a $338 thousand reversal of credit losses.
Noninterest Income
($ in thousands) | For the Three Months Ended | % Change 1Q2024 vs. | ||||||||||||||||
1Q2024 | 4Q2023 | 1Q2023 | 4Q2023 | 1Q2023 | ||||||||||||||
Noninterest Income | ||||||||||||||||||
Service charges on deposits | $ | 612 | $ | 557 | $ | 418 | 9.9% | 46.4% | ||||||||||
Loan servicing fees, net of amortization | 772 | 540 | 846 | 43.0 | (8.7) | |||||||||||||
Gain on sale of loans | 1,703 | 1,996 | 2,570 | (14.7) | (33.7) | |||||||||||||
Other income | 499 | 587 | 461 | (15.0) | 8.2 | |||||||||||||
Total noninterest income | $ | 3,586 | $ | 3,680 | $ | 4,295 | (2.6)% | (16.5)% | ||||||||||
First Quarter 2024 vs. Fourth Quarter 2023
Noninterest income decreased $94 thousand, or 2.6%, primarily due to lower gain on sale of loans, partially offset by higher loan servicing fee.
- Gain on sale of loans was $1.7 million, a decrease of $293 thousand from $2.0 million, primarily due to a lower Small Business Administration ("SBA") loan sold amount partially offset by a higher average premium on sales. The Bank sold $24.8 million in SBA loans at an average premium rate of 8.33%, compared to the sale of $40.1 million at an average premium rate of 5.99%.
- Loan servicing fees, net of amortization, was $772 thousand, an increase of $232 thousand from $540 thousand, primarily due to a decrease in servicing fee amortization driven by lower loan payoffs in loan servicing portfolio.
First Quarter 2024 vs. First Quarter 2023
Noninterest income decreased $709 thousand, or 16.5%, primarily due to a lower gain on sale of loans, partially offset by higher service charges on deposits.
- Gain on sale of loans was $1.7 million, a decrease of $867 thousand from $2.6 million, primarily due to a lower SBA loan sold amount. The Bank sold $24.8 million in SBA loans at an average premium rate of 8.33%, compared to the sale of $44.7 million at an average premium rate of 7.33%.
- Service charges on deposits was $612 thousand, and an increase of $194 thousand from $418 thousand, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts.
Noninterest Expense
($ in thousands) | For the Three Months Ended | % Change 1Q2024 vs. | ||||||||||||||||
1Q2024 | 4Q2023 | 1Q2023 | 4Q2023 | 1Q2023 | ||||||||||||||
Noninterest Expense | ||||||||||||||||||
Salaries and employee benefits | $ | 7,841 | $ | 7,646 | $ | 7,252 | 2.6% | 8.1% | ||||||||||
Occupancy and equipment | 1,655 | 1,616 | 1,570 | 2.4 | 5.4 | |||||||||||||
Data processing and communication | 487 | 644 | 550 | (24.4) | (11.5) | |||||||||||||
Professional fees | 395 | 391 | 359 | 1.0 | 10.0 | |||||||||||||
FDIC insurance and regulatory assessments | 374 | 237 | 467 | 57.8 | (19.9) | |||||||||||||
Promotion and advertising | 149 | 86 | 162 | 73.3 | (8.0) | |||||||||||||
Directors' fees | 157 | 145 | 161 | 8.3 | (2.5) | |||||||||||||
Foundation donation and other contributions | 540 | 524 | 753 | 3.1 | (28.3) | |||||||||||||
Other expenses | 559 | 694 | 634 | (19.5) | (11.8) | |||||||||||||
Total noninterest expense | $ | 12,157 | $ | 11,983 | $ | 11,908 | 1.5% | 2.1% | ||||||||||
First Quarter 2024 vs. Fourth Quarter 2023
Noninterest expense increased $174 thousand, or 1.5%, primarily due to higher salaries and employee benefits, and FDIC insurance and regulatory assessments, partially offset by lower data processing and communication and other expenses.
- Salaries and employee benefits increased $195 thousand, primarily due to increases in employer payroll taxes and employee vacation accruals, partially offset by lower employee incentive accruals.
- FDIC insurance and regulatory assessments increased $137 thousand, primarily due to a lower expense in the fourth quarter of 2023 as a result of an accrual adjustment.
- Data processing and communication decreased $157 thousand, primarily due to an accrual adjustment for a credit received on data processing fees in the first quarter of 2024.
First Quarter 2024 vs. First Quarter 2023
Noninterest expense increased $249 thousand, or 2.1%, primarily due to higher salaries and employee benefits, partially offset by lower foundation donation and other contributions.
- Salaries and employee benefits increased $589 thousand, primarily due to an increase from employee salary adjustments in 2023 and an increase in employee health insurance.
- Foundation donations and other contributions decreased $213 thousand, primarily due to a lower donation accrual for Open Stewardship as a result of lower net income.
Income Tax Expense
First Quarter 2024 vs. Fourth Quarter 2023
Income tax expense was $2.0 million and the effective tax rate was 28.1%, compared to income tax expense of $2.1 million and the effective rate of 29.1%. The decrease in the effective tax rate was primarily due to an increased tax benefits from an increase in low income housing tax credit investments.
First Quarter 2024 vs. First Quarter 2023
Income tax expense was $2.0 million and the effective tax rate was 28.1%, compared to income tax expense of $3.1 million and an effective rate of 29.0%. The decrease in the effective tax rate was primarily due to an increased tax benefits from an increase in low income housing tax credit investments.
BALANCE SHEET HIGHLIGHTS
Loans
As of | % Change 1Q2024 vs. | |||||||||||||||||
| ($ in thousands) | 1Q2024 | 4Q2023 | 1Q2023 | 4Q2023 | 1Q2023 | |||||||||||||
CRE loans | $ | 905,534 | $ | 885,585 | $ | 833,615 | 2.3% | 8.6% | ||||||||||
SBA loans | 247,550 | 239,692 | 238,994 | 3.3 | 3.6 | |||||||||||||
C&I loans | 147,508 | 120,970 | 117,841 | 21.9 | 25.2 | |||||||||||||
Home mortgage loans | 502,995 | 518,024 | 500,635 | (2.9) | 0.5 | |||||||||||||
Consumer & other loans | 1,400 | 1,574 | 1,400 | (11.1) | — | |||||||||||||
Gross loans | $ | 1,804,987 | $ | 1,765,845 | $ | 1,692,485 | 2.2% | 6.6% | ||||||||||
The following table presents new loan originations based on loan commitment amounts for the periods indicated:
For the Three Months Ended | % Change 1Q2024 vs. | |||||||||||||||||
| ($ in thousands) | 1Q2024 | 4Q2023 | 1Q2023 | 4Q2023 | 1Q2023 | |||||||||||||
CRE loans | $ | 44,596 | $ | 15,885 | $ | 24,200 | 180.7% | 84.3% | ||||||||||
SBA loans | 52,379 | 51,855 | 16,258 | 1.0 | 222.2 | |||||||||||||
C&I loans | 23,775 | 15,270 | 7,720 | 55.7 | 208.0 | |||||||||||||
Home mortgage loans | 2,478 | 12,417 | 20,617 | (80.0) | (88.0) | |||||||||||||
Consumer & other loans | — | 1,500 | — | (100.0) | — | |||||||||||||
Gross loans | $ | 123,228 | $ | 96,927 | $ | 68,795 | 27.1% | 79.1% | ||||||||||
The following table presents changes in gross loans by loan activity for the periods indicated:
For the Three Months Ended | ||||||||||||
| ($ in thousands) | 1Q2024 | 4Q2023 | 1Q2023 | |||||||||
Loan Activities: | ||||||||||||
Gross loans, beginning | $ | 1,765,845 | $ | 1,759,525 | $ | 1,678,292 | ||||||
New originations | 123,228 | 96,927 | 68,795 | |||||||||
Net line advances | 15,313 | (7,350 | ) | 10,356 | ||||||||
Purchases | — | 2,371 | 12,142 | |||||||||
Sales | (32,106 | ) | (40,122 | ) | (45,021) | |||||||
Paydowns | (24,557 | ) | (19,901 | ) | (40,190) | |||||||
Payoffs | (28,539 | ) | (23,590 | ) | (28,326) | |||||||
PPP payoffs | — | — | (200) | |||||||||
Decrease (increase) in loans held for sale | (14,280 | ) | (1,795 | ) | 36,802 | |||||||
Other | 83 | (220 | ) | (165) | ||||||||
Total | 39,142 | 6,320 | 14,193 | |||||||||
Gross loans, ending | $ | 1,804,987 | $ | 1,765,845 | $ | 1,692,485 | ||||||
As of March 31, 2024 vs. December 31, 2023
Gross loans were $1.80 billion as of March 31, 2024, up $39.1 million, from December 31, 2023, 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 $123.2 million $32.1 million and $53.1 million, respectively, for the first quarter of 2024, compared with $96.9 million, $40.1 million and $43.5 million, respectively, for the fourth quarter of 2023.
As of March 31, 2024 vs. March 31, 2023
Gross loans were $1.80 billion as of March 31, 2024, up $112.5 million, from March 31, 2023, primarily due to new loan originations of $428.9 million and loan purchases of $15.5 million, primarily offset by loan sales of $132.4 million and loan payoffs and paydowns of $198.2 million.
The following table presents the composition of gross loans by interest rate type accompanied with the weighted average contractual rates as of the periods indicated:
As of | ||||||||||||||||||
1Q2024 | 4Q2023 | 1Q2023 | ||||||||||||||||
| ($ in thousands) | % | Rate | % | Rate | % | Rate | ||||||||||||
Fixed rate | 35.1% | 5.17% | 35.1% | 5.07% | 36.5% | 4.76% | ||||||||||||
Hybrid rate | 32.8 | 5.22 | 33.9 | 5.15 | 34.2 | 4.94 | ||||||||||||
Variable rate | 32.1 | 9.16 | 31.0 | 9.15 | 29.3 | 8.76 | ||||||||||||
Gross loans | 100.0% | 6.47% | 100.0% | 6.35% | 100.0% | 5.99% | ||||||||||||
The following table presents the maturity of gross loans by interest rate type accompanied with the weighted average contractual rates for the periods indicated:
As of March 31, 2024 | ||||||||||||||||||||||||||||
Within One Year | One Year Through | After Five Years | Total | |||||||||||||||||||||||||
| ($ in thousands) | Amount | Rate | Amount | Rate | Amount | Rate | Amount | Rate | ||||||||||||||||||||
Fixed rate | $ | 125,369 | 5.81% | $ | 282,814 | 4.93% | $ | 226,332 | 5.11% | $ | 634,515 | 5.17% | ||||||||||||||||
Hybrid rate | — | — | 138,336 | 4.17 | 453,281 | 5.54 | 591,617 | 5.22 | ||||||||||||||||||||
Variable rate | 113,184 | 8.79 | 130,126 | 9.02 | 335,545 | 9.34 | 578,855 | 9.16 | ||||||||||||||||||||
Gross loans | $ | 238,553 | 7.22% | $ | 551,276 | 5.71% | $ | 1,015,158 | 6.70% | $ | 1,804,987 | 6.47% | ||||||||||||||||
Allowance for Credit Losses
The Company adopted the Current Expected Credit Losses ("CECL") accounting standard effective as of January 1, 2023 under a modified retrospective approach. The adoption resulted in a $1.9 million increase to the allowance for credit losses on loans, a $184 thousand increase to the allowance for credit losses on off-balance sheet exposure, a $624 thousand increase to deferred tax assets, and a $1.5 million charge to retained earnings.
The following table presents allowance for credit losses and provision for credit losses as of and for the periods presented:
As of and For the Three Months Ended | % Change 1Q2024 vs. | |||||||||||||||||
| ($ in thousands) | 1Q2024 | 4Q2023 | 1Q2023 | 4Q2023 | 1Q2023 | |||||||||||||
Allowance for credit losses on loans, beginning | $ | 21,993 | $ | 21,617 | $ | 19,241 | 1.7% | 14.3% | ||||||||||
Impact of CECL adoption | — | — | 1,924 | n/m | n/m | |||||||||||||
Provision for (reversal of) credit losses | 193 | 537 | (258 | ) | (64.1) | (174.8) | ||||||||||||
Gross charge-offs | (68 | ) | (236 | ) | (116 | ) | (71.2) | (41.4) | ||||||||||
Gross recoveries | 11 | 75 | 23 | (85.3) | (52.2) | |||||||||||||
Net charge-offs | (57 | ) | (161 | ) | (93 | ) | (64.6) | (38.7) | ||||||||||
Allowance for credit losses on loans, ending | $ | 22,129 | $ | 21,993 | $ | 20,814 | 0.6% | 6.3% | ||||||||||
Allowance for credit losses on off-balance sheet exposure, beginning | $ | 516 | $ | 423 | $ | 263 | 22.0% | 96.2% | ||||||||||
Impact of CECL adoption | — | — | 184 | n/m | n/m | |||||||||||||
Provision for (reversal of) credit losses | (48 | ) | 93 | (80 | ) | (151.6) | (40.0) | |||||||||||
Allowance for credit losses on off-balance sheet exposure, ending | $ | 468 | $ | 516 | $ | 367 | (9.3)% | 27.5% | ||||||||||
Asset Quality
As of and For the Three Months Ended | Change 1Q2024 vs. | |||||||||||||||||
| ($ in thousands) | 1Q2024 | 4Q2023 | 1Q2023 | 4Q2023 | 1Q2023 | |||||||||||||
Loans 30-89 days past due and still accruing | $ | 3,904 | $ | 9,607 | $ | 4,866 | (59.4)% | (19.8)% | ||||||||||
As a % of gross loans | 0.22 | % | 0.54 | % | 0.29 | % | (0.32) | (0.07) | ||||||||||
Nonperforming loans(1) | $ | 4,343 | $ | 6,082 | $ | 2,504 | (28.6)% | 73.4% | ||||||||||
Nonperforming assets(1) | 5,580 | 6,082 | 2,504 | (8.3) | 122.8 | |||||||||||||
Nonperforming loans to gross loans | 0.24 | % | 0.34 | % | 0.15 | % | (0.10) | 0.09 | ||||||||||
Nonperforming assets to total assets | 0.25 | % | 0.28 | % | 0.12 | % | (0.03) | 0.13 | ||||||||||
Criticized loans(1)(2) | $ | 11,564 | $ | 13,349 | $ | 5,772 | (13.4)% | 100.3% | ||||||||||
Criticized loans to gross loans | 0.64 | % | 0.76 | % | 0.34 | % | (0.12) | 0.30 | ||||||||||
Allowance for credit losses ratios: | ||||||||||||||||||
As a % of gross loans | 1.23 | % | 1.25 | % | 1.23 | % | (0.02)% | —% | ||||||||||
As a % of nonperforming loans | 510 | 362 | 831 | 148 | (321) | |||||||||||||
As a % of nonperforming assets | 397 | 362 | 831 | 35 | (434) | |||||||||||||
As a % of criticized loans | 191 | 165 | 361 | 26 | (170) | |||||||||||||
Net charge-offs(3) to average gross loans(4) | 0.01 | 0.04 | 0.02 | (0.03) | (0.01) | |||||||||||||
| (1) | Excludes the guaranteed portion of SBA loans that are in liquidation totaling $3.1 million, $2.0 million and $1.9 million as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively. | |
(2) | Consists of special mention, substandard, doubtful and loss categories. | |
(3) | Annualized. | |
(4) | Includes loans held for sale. |
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 1.23%.
- Loans 30-89 days past due and still accruing were $3.9 million or 0.22% of gross loans as of March 31, 2024, compared with $9.6 million or 0.54% as of December 31, 2023. Several past due home mortgage loans were paid off through voluntary sale and several home mortgage and SBA loans were brought current.
- Nonperforming loans were $4.3 million or 0.24% of gross loans as of March 31, 2024, compared with $6.1 million or 0.34% as of December 31, 2023. Several escrows on the nonperforming home mortgage loans were closed during the quarter with full payoffs.
- Nonperforming assets were $5.6 million or 0.25% of total assets as of March 31, 2024, compared with $6.1 million or 0.28% as of December 31, 2023. Other Real Estate Owned ("OREO") was $1.2 million as of March 31, 2024, which is secured by a mix-use property in Los Angeles Koreatown with 90% guaranteed by SBA. We are in receipt of a few written offers above the OREO balance and negotiating the terms of the offer.
- Criticized loans were $11.6 million or 0.
Contacts
Investor Relations
OP Bancorp
Christine Oh
EVP & CFO
213.892.1192
Christine.oh@myopenbank.com
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