OP Bancorp Reports Net Income for 2024 First Quarter of $5.2 Million and Diluted Earnings Per Share of $0.34

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 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		$	1,808,932			$	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 vs.
		1Q2024							4Q2023							1Q2023
		Interest & Fees				Yield(1)			Interest & Fees				Yield(1)			Interest & Fees				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 Five Years							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 0.64% of gross loans as of March 31, 2024, compared with $13.3 million or 0.76% as of December 31, 2023. The improvement was due to the payoffs of several nonperforming home mortgage loans.
• Net charge-offs were $57 thousand or 0.01% of average loans in the first quarter of 2024, compared to net charge-offs of $161 thousand, or 0.04% of average loans in the fourth quarter of 2023 and of $93 thousand, or 0.02% of average loans in the first quarter of 2023. The charge-off in the first quarter of 2024 was the reversal of the accrued interest on three loans totaling $519 thousand that were placed on nonaccrual during the same quarter.

Deposits

		As of																					% Change 1Q2024 vs.
		1Q2024							4Q2023							1Q2023
($ in thousands)		Amount				%			Amount				%			Amount				%			4Q2023			1Q2023
Noninterest-bearing deposits		$	539,396			28.5	%		$	522,751			28.9	%		$	643,902			33.8	%		3.2	%		(16.2	)%
Money market deposits and others			327,718			17.3				399,018			22.1				436,796			22.9			(17.9	)		(25.0	)
Time deposits			1,028,297			54.2				885,789			49.0				824,120			43.3			16.1			24.8
Total deposits		$	1,895,411			100.0	%		$	1,807,558			100.0	%		$	1,904,818			100.0	%		4.9	%		(0.5	)%
Estimated uninsured deposits		$	1,248,644			65.9	%		$	1,156,270			64.0	%		$	900,579			47.3	%		8.0	%		38.6	%

As of March 31, 2024 vs. December 31, 2023

Total deposits were $1.90 billion as of March 31, 2024, up $87.9 million from December 31, 2023, primarily due to increases of $142.5 million in time deposits and $16.6 million in noninterest-bearing deposit, offset by a $71.3 million decrease in money market deposits. Noninterest-bearing deposits, as a percentage of total deposits, decreased to 28.5% from 28.9%. The composition shift to time deposits was primarily due to customers' continued preference for high-rate deposit products driven by the Federal Reserve's rate increases.

As of March 31, 2024 vs. March 31, 2023

Total deposits were $1.90 billion as of March 31, 2024, down $9.4 million from March 31, 2023, primarily driven by decreases of $104.5 million in noninterest-bearing deposits and $109.1 million in money market deposits, offset by a $204.2 million increase in time deposits. 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 March 31, 2024:

		As of March 31, 2024
($ 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)		$	95,516			$	65,321			$	143,382			$	142,830			$	4,448			$	451,497
Time deposits ($250 or less)			151,358				102,471				186,340				104,481				32,150				576,800
Total time deposits		$	246,874			$	167,792			$	329,722			$	247,311			$	36,598			$	1,028,297
Weighted average rate			4.97	%			4.99	%			5.18	%			5.04	%			4.25	%			5.03	%

OTHER HIGHLIGHTS

Liquidity

The Company maintains ample access to liquidity, including highly liquid assets on our balance sheet and available unused borrowings from other financial institutions. The following table presents the Company's liquid assets and available borrowings as of dates presented:

($ in thousands)			1Q2024				4Q2023				1Q2023
Liquidity Assets:
Cash and cash equivalents		$	139,246			$	91,216			$	181,509
Available-for-sale debt securities			187,225				194,250				212,767
Liquid assets		$	326,471			$	285,466			$	394,276
Liquid assets to total assets			14.6	%			13.3	%			18.2	%
Available borrowings:
Federal Home Loan Bank-San Francisco		$	331,917			$	363,615			$	406,500
Federal Reserve Bank			185,913				182,989				174,284
Pacific Coast Bankers Bank			50,000				50,000				50,000
Zions Bank			25,000				25,000				25,000
First Horizon Bank			25,000				25,000				24,950
Total available borrowings		$	617,830			$	646,604			$	680,734
Total available borrowings to total assets			27.6	%			30.1	%			31.4	%
Liquid assets and available borrowings to total deposits			49.8	%			51.6	%			56.4	%

Capital and Capital Ratios

On April 25, 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 May 23, 2024 to all shareholders of record as of the close of business on May 9, 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 49,697 shares of its common stock at an average price of $10.02 per share during the first quarter of 2024 under the stock repurchase program announced in August 2023. Since the announcement of the initial stock repurchase program in January 2019, the Company repurchased a total of 2,069,697 shares of its common stock at an average repurchase price of $8.63 per share through March 31, 2024.

		Basel III
		OP Bancorp(1)			Open Bank			Minimum Well Capitalized Ratio			Minimum Capital Ratio+ Conservation Buffer(2)
Risk-Based Capital Ratios:
Total risk-based capital ratio		13.59	%		13.53	%		10.00	%		10.50	%
Tier 1 risk-based capital ratio		12.34			12.28			8.00			8.50
Common equity tier 1 ratio		12.34			12.28			6.50			7.00
Leverage ratio		9.65			9.60			5.00			4.00

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

		Basel III												Change 1Q2024 vs.
OP Bancorp		1Q2024				4Q2023				1Q2023				4Q2023			1Q2023
Risk-Based Capital Ratios:
Total risk-based capital ratio			13.59	%			13.77	%			13.27	%		(0.18	)%		0.32	%
Tier 1 risk-based capital ratio			12.34				12.52				12.06			(0.18	)		0.28
Common equity tier 1 ratio			12.34				12.52				12.06			(0.18	)		0.28
Leverage ratio			9.65				9.57				9.43			0.08			0.22
Risk-weighted Assets ($ in thousands)		$	1,715,185			$	1,667,067			$	1,659,584			2.89			3.35

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 four loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, and Lynnwood, Washington. The Bank commenced its operations on June 10, 2005 as First Standard Bank and changed its name to Open Bank in October 2010. Its headquarters is located at 1000 Wilshire Blvd., Suite 500, Los Angeles, California 90017. Phone [phone]; 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; 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 other subsequent filings with the Securities and Exchange Commission.

CONSOLIDATED BALANCE SHEETS (unaudited)

		As of												% Change 1Q2024 vs.
($ in thousands)		1Q2024				4Q2023				1Q2023				4Q2023			1Q2023
Assets
Cash and due from banks		$	20,513			$	16,948			$	16,781			21.0	%		22.2	%
Interest-bearing deposits in other banks			118,733				74,268				164,728			59.9			(27.9	)
Cash and cash equivalents			139,246				91,216				181,509			52.7			(23.3	)
Available-for-sale debt securities, at fair value			187,225				194,250				212,767			(3.6	)		(12.0	)
Other investments			16,264				16,276				12,172			(0.1	)		33.6
Loans held for sale			16,075				1,795				7,534			795.5			113.4
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 loans			1,400				1,574				1,400			(11.1	)		-
Gross loans receivable			1,804,987				1,765,845				1,692,485			2.2			6.6
Allowance for credit losses			(22,129	)			(21,993	)			(20,814	)		0.6			6.3
Net loans receivable			1,782,858				1,743,852				1,671,671			2.2			6.7
Premises and equipment, net			4,971				5,248				4,647			(5.3	)		7.0
Accrued interest receivable, net			8,370				8,259				7,302			1.3			14.6
Servicing assets			11,405				11,741				12,898			(2.9	)		(11.6	)
Company owned life insurance			22,399				22,233				21,762			0.7			2.9
Deferred tax assets, net			13,802				13,309				12,323			3.7			12.0
Other real estate owned			1,237				-				-			n/m			n/m
Operating right-of-use assets			8,864				8,497				9,459			4.3			(6.3	)
Other assets			21,804				31,054				16,550			(29.8	)		31.7
Total assets		$	2,234,520			$	2,147,730			$	2,170,594			4.0	%		2.9	%
Liabilities and Shareholders' Equity
Liabilities:
Noninterest-bearing		$	539,396			$	522,751			$	643,902			3.2	%		(16.2	)%
Money market and others			327,718				399,018				436,796			(17.9	)		(25.0	)
Time deposits greater than $250			451,497				433,892				411,648			4.1			9.7
Other time deposits			576,800				451,897				412,472			27.6			39.8
Total deposits			1,895,411				1,807,558				1,904,818			4.9			(0.5	)
Federal Home Loan Bank advances			105,000				105,000				50,000			-			110.0
Accrued interest payable			12,270				12,628				5,751			(2.8	)		113.4
Operating lease liabilities			9,614				9,341				10,513			2.9			(8.6	)
Other liabilities			17,500				20,577				15,731			(15.0	)		11.2
Total liabilities			2,039,795				1,955,104				1,986,813			4.3			2.7
Shareholders' equity:
Common stock			75,957				76,280				79,475			(0.4	)		(4.4	)
Additional paid-in capital			11,240				10,942				10,056			2.7			11.8
Retained earnings			124,280				120,855				109,908			2.8			13.1
Accumulated other comprehensive loss			(16,752	)			(15,451	)			(15,658	)		8.4			7.0
Total shareholders' equity			194,725				192,626				183,781			1.1			6.0
Total liabilities and shareholders' equity		$	2,234,520			$	2,147,730			$	2,170,594			4.0	%		2.9	%

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

		For the Three Months Ended												% Change 1Q2024 vs.
($ in thousands, except share and per share data)		1Q2024				4Q2023				1Q2023				4Q2023			1Q2023
Interest income
Interest and fees on loans		$	30,142			$	28,914			$	26,011			4.2	%		15.9	%
Interest on available-for-sale debt securities			1,460				1,484				1,566			(1.6	)		(6.8	)
Other interest income			1,311				1,385				1,017			(5.3	)		28.9
Total interest income			32,913				31,783				28,594			3.6			15.1
Interest expense
Interest on deposits			15,675				14,127				10,382			11.0			51.0
Interest on borrowings			1,259				1,426				320			(11.7	)		293.4	%
Total 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	)
Provision for (reversal of) credit losses			145				630				(338	)		(77.0	)		n/m
Net interest income after provision for credit losses			15,834				15,600				18,230			1.5			(13.1	)
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	)
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
Income before income tax expense			7,263				7,297				10,617			(0.5	)		(31.6	)
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	)%
Book value per share		$	13.00			$	12.84			$	12.02			1.2	%		8.2	%
Earnings per share - basic			0.34				0.34				0.48			-			(29.2	)
Earnings per share - diluted			0.34				0.34				0.48			-			(29.2	)
Shares of common stock outstanding, at period end			14,982,555				15,000,436				15,286,558			(0.1	)%		(2.0	)%
Weighted average shares:
- Basic			14,991,835				15,027,110				15,284,350			(0.2	)%		(1.9	)%
- Diluted			14,991,835				15,034,822				15,312,673			(0.3	)		(2.1	)

KEY RATIOS

		For the Three Months Ended									% Change 1Q2024 vs.
		1Q2024			4Q2023			1Q2023			4Q2023			1Q2023
Return on average assets (ROA)(1)		0.96	%		0.96	%		1.43	%		-	%		(0.5	)%
Return on average equity (ROE)(1)		10.83			11.18			16.82			(0.4	)		(6.0	)
Net interest margin(1)		3.06			3.12			3.57			(0.1	)		(0.5	)
Efficiency ratio		62.14			60.19			53.67			2.0			8.5
Total risk-based capital ratio		13.59	%		13.77	%		13.27	%		(0.2	)%		0.3	%
Tier 1 risk-based capital ratio		12.34			12.52			12.06			(0.2	)		0.3
Common equity tier 1 ratio		12.34			12.52			12.06			(0.2	)		0.3
Leverage ratio		9.65			9.57			9.43			0.1			0.2

(1)

Annualized.

ASSET QUALITY

		As of and For the Three Months Ended
($ in thousands)		1Q2024				4Q2023				1Q2023
Nonaccrual loans(1)		$	4,343			$	6,082			$	2,504
Loans 90 days or more past due, accruing(2)			-				-				-
Nonperforming loans			4,343				6,082				2,504
OREO			1,237				-				-
Nonperforming assets		$	5,580			$	6,082			$	2,504
Criticized loans by risk categories:
Special mention loans		$	1,415			$	1,428			$	2,617
Classified loans(1)(3)			10,149				11,921				3,155
Total criticized loans		$	11,564			$	13,349			$	5,772
Criticized loans by loan type:
CRE loans		$	5,292			$	4,995			$	560
SBA loans			6,055				5,864				3,676
C&I loans			-				-				271
Home mortgage loans			217				2,490				1,265
Total criticized loans		$	11,564			$	13,349			$	5,772
Nonperforming loans / gross loans			0.24	%			0.34	%			0.15	%
Nonperforming assets / gross loans plus OREO			0.31				0.34				0.15
Nonperforming assets / total assets			0.25				0.28				0.12
Classified loans / gross loans			0.56				0.68				0.19
Criticized loans / gross loans			0.64				0.76				0.34
Allowance for credit losses ratios:
As a % of gross loans			1.23	%			1.25	%			1.23	%
As a % of nonperforming loans			510				362				831
As a % of nonperforming assets			397				362				831
As a % of classified loans			218				184				660
As a % of criticized loans			191				165				361
Net charge-offs		$	57			$	161			$	93
Net charge-offs(5) to average gross loans(6)			0.01	%			0.04	%			0.02	%

(1)		Excludes the guaranteed portion of SBA loans that are in liquidation totaling $3.1 million, $2.0 million and $1.6 million as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively.
(2)		Excludes the guaranteed portion of SBA loans that are in liquidation totaling $246 thousand as of March 31, 2023.
(3)		Consists of substandard, doubtful and loss categories.
(4)		See the Reconciliation of GAAP to NON-GAAP Financial Measures.
(5)		Annualized.
(6)		Includes loans held for sale.

($ in thousands)		1Q2024				4Q2023				1Q2023
Accruing delinquent loans 30-89 days past due
30-59 days		$	801			$	5,945			$	4,866
60-89 days			3,103				3,662				-
Total		$	3,904			$	9,607			$	4,866

AVERAGE BALANCE SHEET, INTEREST AND YIELD/RATE ANALYSIS

		For the Three Months Ended
		1Q2024											4Q2023											1Q2023
($ 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		$	73,047			$	989			5.35	%		$	78,496			$	1,076			5.36	%		$	74,162			$	846			4.56	%
Federal funds sold and other investments			16,265				322			7.92				16,115				309			7.66				12,130				171			5.65
Available-for-sale debt securities, at fair value			191,383				1,460			3.05				189,462				1,484			3.13				210,462				1,566			2.98
CRE loans			901,262				13,729			6.13				892,092				13,104			5.83				840,402				11,179			5.39
SBA loans			259,368				7,213			11.19				255,692				7,055			10.95				274,889				6,982			10.30
C&I loans			134,893				2,670			7.96				122,950				2,416			7.80				121,915				2,200			7.32
Home mortgage loans			512,023				6,495			5.07				515,840				6,315			4.90				486,800				5,633			4.63
Consumer loans			1,386				35			10.10				966				24			9.92				1,386				17			5.07
Loans(2)			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
Noninterest-earning assets			87,586											86,874											82,538
Total assets		$	2,177,213										$	2,158,487										$	2,104,684
Interest-bearing liabilities:
Money market deposits and others		$	367,386			$	3,940			4.31	%		$	377,304			$	3,993			4.20	%		$	409,813			$	3,150			3.12	%
Time deposits			954,442				11,735			4.94				866,142				10,134			4.64				786,381				7,232			3.73
Total interest-bearing deposits			1,321,828				15,675			4.77				1,243,446				14,127			4.51				1,196,194				10,382			3.52
Borrowings			108,681				1,259			4.66				118,764				1,426			4.76				26,168				320			4.95
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
Noninterest-bearing liabilities:
Noninterest-bearing deposits			514,503											569,965											671,490
Other noninterest-bearing liabilities			39,207											41,312											31,648
Total noninterest-bearing liabilities			553,710											611,277											703,138
Shareholders' equity			192,994											185,000											179,184
Total liabilities and shareholders' equity		$	2,177,213											2,158,487											2,104,684
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	%
Cost of deposits & cost of funds:
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.
(2)		Includes loans held for sale.

Contacts

Investor Relations
OP Bancorp
Christine Oh
EVP & CFO
213.892.1192
[e-mail]