OPBK - OP Bancorp Reports Record Net Income for Fourth Quarter 2021 of $9.1 Million and Diluted Earnings Per Share of $0.59

January, 27 2022 05:10 PM OP Bancorp

2021 Fourth Quarter Highlights compared with 2020 Fourth Quarter:

Financial Results:
- Net income of $9.1 million, up $5.3 million, or 140%
- Diluted earnings per share of $0.59, up $0.34, or 136%
- Net interest income of $17.1 million, up $4.9 million, or 40%
- Provision for loan losses of $1.9 million, up $67 thousand, or 4%
- Noninterest income of $7.3 million, up $3.9 million, or 115%
- Noninterest expense of $9.6 million, up $1.2 million, or 14%
- Pre-provision net revenue ⁽¹⁾ of $14.8 million, up $7.6 million, or 107%
- Total assets of $1.73 billion, up $359.9 million, or 26%
- Total loans ⁽²⁾ of $1.40 billion, up $277.1 million, or 25%; Average loans ⁽²⁾ of $1.34 billion, up $230.5 million, or 21%
- Total deposits of $1.53 billion, up $334.0 million, or 28%; Average deposits of $1.55 billion, up $365.9 million, or 31%
- Noninterest-bearing deposits to total deposits of 51%, up from 44%
- Net interest margin of 4.07%, up from 3.73%
- Return on average equity of 22.72%, up from 10.72%
- Return on average assets of 2.11%, up from 1.13%
- Efficiency ratio of 39.34%, an improvement from 54.02%

Credit Quality:
- Allowance for loan losses to gross loans of 1.23%, compared to 1.40%
- Adjusted allowance to gross loans ⁽¹⁾ of 1.36%, compared to 1.54%
- Net loan charge-offs to average gross loans of 0.05%, compared to 0.00%
- Nonperforming loans to gross loans of 0.24%, compared to 0.09%
- Criticized loans ⁽³⁾ to gross loans of 0.31%, down from 0.71%

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 12.42%.
- Book value per common share of $10.92, up 14%
- Returned $1.5 million of capital to shareholders through cash dividend

___________________________________________________________

(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 fourth quarter of 2021. Net income for the fourth quarter of 2021 was $9.1 million, or $0.59 per diluted common share, compared with $8.3 million, or $0.54 per diluted common share, for the third quarter of 2021, and $3.8 million, or $0.25 per diluted common share, for the fourth quarter of 2020. Net income for the full year of 2021 was $28.9 million, or $1.88 per diluted common share, compared with $13.1 million, or $0.85 per diluted common share, for the full year of 2021.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220127005941/en/

Min Kim, President and Chief Executive Officer :
“We are pleased to report record earnings of $9.1 million, or $0.59 per diluted common share in the fourth quarter. Our loans and deposits grew 25% and 28%, respectively, from a year ago. The loan growth has come from all our loan categories. During the fourth quarter, we have added a new Specialty Deposit Center, which focuses on servicing escrow and trust clients. The growth in our noninterest-bearing deposits during the fourth quarter, which reached a record level at 51% of total deposits, was largely attributable to the Specialty Deposit Center. Our efficiency was also significantly improved as we focused on managing expenses while growing our revenue-generating activities. The economy seems poised for continued growth over the next several quarters despite headwinds related to the Omicron variant, inflation, and supply chain bottlenecks. We remain optimistic about the future and will continue to focus on executing our strategic goals while maintaining appropriate risk and control environment.”

SELECTED FINANCIAL HIGHLIGHTS












($ in thousands, except per share data)

As of and For the Three Months Ended

% Change 4Q21 vs.

4Q21


3Q21


4Q20


3Q21


4Q20

Selected Income Statement Data:










Net interest income

$ 17,096


$ 16,589


$ 12,181


3.1
%

40.3
%
(Reversal of) provision for loan losses

1,898


(884
)

1,831


(314.7
)

3.7

Noninterest income

7,289


3,542


3,392


105.8


114.9

Noninterest expense

9,591


9,519


8,412


0.8


14.0

Income tax expense

3,747


3,246


1,513


15.4


147.7

Net Income

$ 9,149


$ 8,250


$ 3,817


10.9
%

139.7
%
Diluted earnings per share

$ 0.59


$ 0.54


$ 0.25


9.3
%

136.0
%
Selected Balance Sheet Data:










Total loans ⁽¹⁾

$ 1,403,447


$ 1,326,287


$ 1,126,395


5.8
%

24.6
%
Total deposits

$ 1,534,066


$ 1,496,406


$ 1,200,090


2.5
%

27.8
%
Total assets

$ 1,726,706


$ 1,679,911


$ 1,366,826


2.8
%

26.3
%
Average loans ⁽¹⁾

$ 1,343,414


$ 1,308,338


$ 1,112,889


2.7
%

20.7
%
Average deposits

$ 1,545,799


$ 1,448,771


$ 1,179,877


6.7
%

31.0
%
Credit Quality:










Nonperforming loans

$ 3,202


$ 1,052


$ 985


204.4
%

225.1
%
Net charge-offs (recoveries) to average gross loans ⁽²⁾

0.05
%

(0.00
)%

0.00
%

0.05
%

0.05
%
Allowance for loan losses to gross loans

1.23
%

1.15
%

1.40
%

0.08
%

(0.17
) %
Financial Ratios:










Return on average assets ⁽²⁾

2.11
%

2.03
%

1.13
%

0.08
%

0.98
%
Return on average equity ⁽²⁾

22.72
%

21.30
%

10.72
%

1.42
%

12.00
%
Net interest margin ⁽²⁾

4.07
%

4.21
%

3.73
%

(0.14
) %

0.34
%
Common equity tier 1 capital ratio

12.42
%

12.63
%

13.56
%

(0.21
) %

(1.14
) %
Leverage ratio

9.58
%

9.75
%

10.55
%

(0.17
) %

(0.97
) %
Efficiency ratio ⁽³⁾

39.34
%

47.28
%

54.02
%

(7.94
) %

(14.68
) %
Book value per common share

$ 10.92


$ 10.48


$ 9.55


4.2
%

14.3
%

(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 4Q21 vs.

4Q21

3Q21

4Q20

3Q21


4Q20

Interest Income










Interest income

$ 17,822

$ 17,355

$ 13,375

2.7
%

33.2
%
Interest expense

726

766

1,194

(5.2
)

(39.2
)
Net interest income

$ 17,096

$ 16,589

$ 12,181

3.1
%

40.3
%




















($ in thousands)

For the Three Months Ended

4Q21


3Q21


4Q20


Average Balance

Interest

Yield/Rate ⁽¹⁾

Average Balance

Interest and Fees

Yield/Rate ⁽¹⁾

Average Balance

Interest and Fees

Yield/Rate ⁽¹⁾
Interest-earning Assets


















Loans

$ 1,343,414

$ 17,271

5.10
%

$ 1,308,338

$ 16,922

5.13
%

$ 1,112,889

$ 13,006

4.65
%
Total interest-earning assets

$ 1,668,865

$ 17,822

4.24
%

$ 1,566,050

$ 17,355

4.40
%

$ 1,299,347

$ 13,375

4.10
%
Interest-bearing Liabilities


















Interest-bearing deposits

$ 780,787

$ 726

0.37
%

$ 752,010

$ 766

0.40
%

$ 672,183

$ 1,194

0.71
%
Total interest-bearing liabilities

$ 780,791

$ 726

0.37
%

$ 752,010

$ 766

0.40
%

$ 680,121

$ 1,194

0.70
%
Ratios


















Net interest Income/interest rate spreads



$ 17,096

3.87
%



$ 16,589

4.00
%



$ 12,181

3.40
%
Net interest margin





4.07
%





4.21
%





3.73
%
Total deposits / cost of deposits

$ 1,545,799

$ 726

0.19
%

$ 1,448,771

$ 766

0.21
%

$ 1,179,877

$ 1,194

0.40
%
Total funding liabilities / cost of funds

$ 1,545,803

$ 726

0.19
%

$ 1,448,771

$ 766

0.21
%

$ 1,187,815

$ 1,194

0.40
%

(1)

Annualized.


















($ in thousands)

For the Three Months Ended

Yield % Change 4Q21 vs.

4Q21



3Q21



4Q20




Interest & Fees

Yield ⁽¹⁾

Interest & Fees

Yield ⁽¹⁾

Interest & Fees

Yield ⁽¹⁾

3Q21


4Q20

Loan Yield Component
















Contractual interest rate

$ 14,509


4.29
%

$ 14,063


4.27
%

$ 12,156


4.35
%

0.02
%

(0.06
) %
SBA discount accretion

1,571


0.46


1,584


0.48


619


0.22


(0.02
)

0.24

Amortization of net deferred fees

1,087


0.32


1,249


0.37


242


0.09


(0.05
)

0.23

Amortization of premium

3


—


—


—


—


—


0.00


—

Net interest recognized on nonaccrual loans

(16
)

-0.00


(15
)

-0.00


(20
)

-0.01


0.00


0.00

Prepayment penalties ⁽²⁾ and other fees

117


0.03


41


0.01


9


—


0.02


0.03

Yield on loans

$ 17,271


5.10
%

$ 16,922


5.13
%

$ 13,006


4.65
%

(0.03
) %

0.44
%

















Amortization of net deferred fees:
















PPP loan forgiveness ⁽³⁾

$ 920


0.27
%

$ 1,006


0.31
%

$ —


—
%

(0.04
) %

0.27
%
Other

167


0.05


243


0.07


242


0.09


(0.02
)

(0.04
)
Total amortization of net deferred fees

$ 1,087


0.32
%

$ 1,249


0.38
%

$ 242


0.09
%

(0.06
) %

0.23
%

(1)

Annualized.

(2)

Prepayment penalty income of $84 thousand for the three months ended December 31, 2021 was from commercial real estate and C&I loans. In comparison, there was no prepayment penalty income for the three months ended September 30, 2021 and December 31, 2020.

(3)

As of December 31, 2021, there were unamortized net deferred fees of $1.1 million to be recognized over the estimated life of the loans as a yield adjustment on the loans.

Impact of 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

4Q21


3Q21

Hana Loan Purchase:




Contractual interest rate

$ 1,027


$ 1,094

Purchased loan discount accretion

826


948

Other fees

10


15

Total interest income

$ 1,863


$ 2,057






Effect on average loan yield ⁽¹⁾

0.26
%

0.30
%
Effect on net interest margin ⁽¹⁾

0.26
%

0.30
%




















($ in thousands)

For the Three Months Ended

4Q21


3Q21


4Q20


Average Balance

Interest

Yield/ Rate

Average Balance

Interest and Fees

Yield/ Rate

Average Balance

Interest and Fees

Yield/ Rate
Average loan yield ⁽¹⁾

$ 1,343,414

$ 17,271

5.10
%

$ 1,308,338

$ 16,922

5.13
%

$ 1,112,889

$ 13,006

4.65
%
Adjusted average loan yield excluding purchased loans ⁽¹⁾⁽²⁾

$ 1,263,789

$ 15,408

4.84
%

$ 1,222,628

$ 14,865

4.83
%

$ 1,112,889

$ 13,006

4.65
%



















Net interest margin ⁽¹⁾

$ 1,668,865

$ 17,096

4.07
%

$ 1,566,050

$ 16,589

4.21
%

$ 1,299,347

$ 12,181

3.73
%
Adjusted interest margin excluding purchased loans ⁽¹⁾⁽²⁾

$ 1,589,240

$ 15,233

3.81
%

$ 1,480,340

$ 14,532

3.91
%

$ 1,299,347

$ 12,181

3.73
%

(1)

Annualized.

(2)

See reconciliation of GAAP to non-GAAP financial measures.

In addition, the Company purchased home mortgage loans with unpaid principal balance of $48.9 million from third-party sellers in December 2021. Because these loans generally earn interest at a rate that is higher than current market rates, the loans were purchased at a premium to par, resulting in a total purchase price of $49.5 million. The Company amortizes the purchase premium over the expected life of the portfolio using the interest method of accounting.

Fourth Quarter 2021 vs. Third Quarter 2021

Net interest income increased $507 thousand, or 3%, primarily due to higher interest income on loans. Net interest margin was 4.07%, a decrease of 14 basis points from 4.21%.

An increase of $349 thousand in interest income from loans was primarily due to higher average balances from C & I loan growth and higher contractual loan yield from loan composition change driven by a decrease in lower-yielding PPP balances.

A decrease of 14 basis points in net interest margin was primarily due to a 16 basis point decrease in the yield on average interest-earning assets driven by higher average balances on lower-yielding cash equivalents.

Average loan yield was 5.10%, a decrease of three basis points from 5.13%, reflecting lower loan fees from PPP loan forgiveness.

Average cost of deposits was 0.19%, a decrease of two basis points from 0.21%.

Fourth Quarter 2021 vs. Fourth Quarter 2020

Net interest income increased $4.9 million, or 40%, primarily due to higher average loan balance and SBA discount accretion largely resulting from the Hana loan purchase, as well as higher loan fees from PPP loan forgiveness. Net interest margin was 4.07%, an increase of 34 basis points from 3.73%.

An increase of $4.3 million in interest income from loans was primarily due to average loan growth. SBA discount accretions from the Hana loan purchase and loan fees from PPP loan forgiveness have also contributed to the increase.

The improvement of 34 basis points in net interest margin was primarily driven by a 33 basis point decrease in the cost of interest-bearing liabilities.

Average loan yield was 5.10%, an increase of 45 basis points from 4.65%, reflecting higher SBA discount accretions from the Hana loan purchase, and higher loan fees from PPP loan forgiveness.

Average cost of deposits was 0.19%, a decrease of 21 basis points from 0.40%. The decrease in the cost of deposits primarily reflects the impact of lower interest rates and an increase of noninterest bearing deposits in deposit mix.

Provision for loan losses

Fourth Quarter 2021 vs. Third Quarter 2021

The Company recorded $1.9 million provision for loan losses, compared with a negative $884 thousand provision for loan losses. The $1.9 million provision for loan losses was primarily due to loan growth from new warehouse lines of credit and home mortgage purchases.

Fourth Quarter 2021 vs. Fourth Quarter 2020

The Company recorded $1.9 million provision for loan losses, compared with $1.8 million provision for loan losses.

Noninterest Income












($ in thousands)

For the Three Months Ended

% Change 4Q21 vs.

4Q21

3Q21

4Q20

3Q21


4Q20

Noninterest income










Service charges on deposits

$ 405

$ 409

$ 367

(1.0
) %

10.4
%
Loan servicing fees, net of amortization

521

599

367

(13.0
)

42.0

Gain on sale of loans

6,033

2,188

2,188

175.7


175.7

Other income

330

346

470

(4.6
)

(29.8
)
Total noninterest income

$ 7,289

$ 3,542

$ 3,392

105.8
%

114.9
%

Fourth Quarter 2021 vs. Third Quarter 2021

Noninterest income increased $3.7 million, or 106%, primarily due to higher gains on sale of loans.

Gains on sale of loans were $6.0 million, up $3.8 million from third quarter 2021. The increase was primarily due to an increased sales volume. The Company sold $56.8 million in SBA loans at an average premium of 10.98%, compared with the sale of $20.6 million at an average premium of 11.59%.

Fourth Quarter 2021 vs. Fourth Quarter 2020

Noninterest income increased $3.9 million, or 115%, primarily due to higher gains on sale of loans.

Gains on sales of loans were $6.0 million, up $3.8 million from fourth quarter 2020. The increase was mainly driven by higher sales volume and premiums on SBA loans. The Company sold $56.8 million in SBA loans at an average premium of 10.98%, compared with the sale of $28.5 million at an average premium of 8.83%.

Noninterest Expense












($ in thousands)

For the Three Months Ended

% Change 4Q21 vs.

4Q21

3Q21

4Q20

3Q21


4Q20

Noninterest expense










Salaries and employee benefits

$ 5,560

$ 5,724

$ 5,536

(2.9
) %

0.4
%
Occupancy and equipment

1,418

1,326

1,237

6.9


14.6

Data processing and communication

637

448

435

42.2


46.4

Professional fees

267

308

265

(13.3
)

0.8

FDIC insurance and regulatory assessments

182

146

115

24.7


58.3

Promotion and advertising

156

175

62

(10.9
)

151.6

Directors’ fees

166

183

97

(9.3
)

71.1

Foundation donation and other contributions

901

842

400

7.0


125.3

Other expenses

304

367

265

(17.2
)

14.7

Total noninterest expense

$ 9,591

$ 9,519

$ 8,412

0.8
%

14.0
%

Fourth Quarter 2021 vs. Third Quarter 2021

Noninterest expense remained relatively stable in the fourth quarter of 2021 at $9.6 million compared to $9.5 million for the third quarter of 2021.

Fourth Quarter 2021 vs. Fourth Quarter 2020

Noninterest expense increased $1.2 million, or 14%, primarily due to a higher foundation donation and other contributions.

Foundation donation and other contributions were $901 thousand, up $501 thousand from fourth quarter 2020. The increase was primarily due to higher donation accruals for Open Stewardship Foundation as a result of higher net income compared to fourth quarter 2020.

Data processing and communication, and occupancy and equipment also increased $202 thousand and $181 thousand, respectively, primarily to support balance sheet growth.

Income Tax Expense

Fourth Quarter 2021 vs. Third Quarter 2021

Income tax expense was $3.7 million, and the effective tax rate was 29%, compared to income tax expense of $3.2 million and the effective rate of 28% for third quarter 2021.

Fourth Quarter 2021 vs. Fourth Quarter 2020

Income tax expense was $3.7 million, and the effective tax rate was 29%, compared to income tax expense of $1.5 million and the effective rate of 28% for fourth quarter 2020.

BALANCE SHEET HIGHLIGHTS

Loans












($ in thousands)

As of

% Change 4Q21 vs.

4Q21

3Q21

4Q20

3Q21


4Q20

Real estate loans

$ 701,450

$ 688,430

$ 651,684

1.9
%

7.6
%
SBA loans ⁽¹⁾

275,858

303,625

211,375

(9.1
)

30.5

C & I loans

162,543

123,422

107,307

31.7


51.5

Home mortgage loans

173,303

115,255

128,212

50.4


35.2

Consumer & other loans

865

1,089

1,158

(20.6
)

(25.3
)
Gross loans

$ 1,314,019

$ 1,231,821

$ 1,099,736

6.7
%

19.5
%

(1)

Includes PPP loans of $40.6 million, $69.3 million and $64.9 million as of December 31, 2021, September 30, 2021 and December 31, 2020, 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 4Q21 vs.

4Q21

3Q21

4Q20

3Q21


4Q20

Real estate loans

$ 35,458

$ 27,671

$ 30,828

28.1
%

15.0
%
SBA loans

65,492

57,541

16,634

13.8


293.7

C & I loans

47,981

54,264

47,308

(11.6
)

1.4

Home mortgage loans

19,295

13,437

17,027

43.6


13.3

Gross loans

$ 168,226

$ 152,913

$ 111,797

10.0
%

50.5
%

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








($ in thousands)

For the Three Months Ended

4Q21


3Q21


4Q20

Gross loans, beginning

$ 1,231,821


$ 1,245,866


$ 1,072,790

Loan activities:






New originations

168,226


152,913


111,797

Net line advances

7,759


(24,017
)

(17,276
)
Purchases

48,915


—


—

Sales

(66,956
)

(22,506
)

(33,826
)
Paydowns

(12,373
)

(14,675
)

(8,682
)
Payoffs

(46,818
)

(46,409
)

(41,157
)
PPP Payoffs

(29,918
)

(36,108
)

—

Other

13,363


(23,243
)

16,090

Total

82,198


(14,045
)

26,946

Gross loans, ending

$ 1,314,019


$ 1,231,821


$ 1,099,736

Fourth Quarter 2021 vs. Third Quarter 2021

Gross loan balances were $1.31 billion at December 31, 2021, up $82.2 million from September 30, 2021, primarily due to home mortgage loan purchases and an increase in C&I loans, partially offset by PPP loan forgiveness. During fourth quarter 2021, $29.9 million of PPP loans outstanding were forgiven by the Small Business Administration. New loan originations and loan payoffs were $168.2 million and $76.7 million for fourth quarter 2021, compared with $152.9 million and $82.5 million for third quarter 2021, respectively.

Fourth Quarter 2021 vs. Fourth Quarter 2020

Gross loan balances were $1.31 billion at December 31, 2021, up $214.3 million from December 31, 2020, primarily due to the Hana and home mortgage loan purchases during 2021 and broad-based growth in C & I and real estate loans. For the year ended December 31, 2021, $118.7 million of PPP loans outstanding were forgiven by the Small Business Administration. New loan originations and loan payoffs were $168.2 million and $76.7 million for fourth quarter 2021, compared with $111.8 million and $41.2 million for fourth quarter 2020, respectively.

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

4Q21



3Q21



4Q20



%

Rate

%

Rate

%

Rate
Fixed rate

31.5
%

4.12
%

32.2
%

4.05
%

34.4
%

4.09
%
Hybrid rate

22.8


4.45


22.4


4.55


21.9


4.92

Variable rate

45.7


4.94


45.4


5.08


43.7


4.40

Gross loans

100.0
%

4.57
%

100.0
%

4.63
%

100.0
%

4.40
%

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 December 31, 2021

Within One Year

One Year Through Five Years

After Five Years

Total

Amount

Rate

Amount

Rate

Amount

Rate

Amount

Rate
Fixed rate

$ 34,658

4.33
%

$ 314,815

4.00
%

$ 64,563

4.56
%

$ 414,036

4.12
%
Hybrid rate

11,972

3.29


43,004

5.33


244,690

4.36


299,666

4.45

Variable rate

131,374

3.86


165,102

4.02


303,841

5.90


600,317

4.94

Gross loans

$ 178,004

3.92
%

$ 522,921

4.12
%

$ 613,094

5.14
%

$ 1,314,019

4.57
%

Deposits


















($ in thousands)

As of

% Change 4Q21 vs.

4Q21


3Q21


4Q20



Amount

%

Amount

%

Amount

%

3Q21


4Q20

Noninterest-bearing deposits

$ 774,754

50.5
%

$ 713,141

47.6
%

$ 522,754

43.5
%

8.6
%

48.2
%
Money market deposits and others

380,226

24.8


351,186

23.5


328,323

27.4


8.3


15.8

Time deposits

379,086

24.7


432,079

28.9


349,013

29.1


(12.3
)

8.6

Total deposits

$ 1,534,066

100.0
%

$ 1,496,406

100.0
%

$ 1,200,090

100.0
%

2.5
%

27.8
%

Fourth Quarter 2021 vs. Third Quarter 2021

Deposit balances were $1.53 billion at December 31, 2021, up $37.7 million from September 30, 2021, primarily driven by growth in noninterest-bearing and money market deposits, partially offset by time deposits. Noninterest-bearing deposits reached a record $774.8 million or 51% of total deposits as of December 31, 2021, up from $713.1 million or 48% of total deposits as of September 30, 2021. The growth in noninterest-bearing deposits was primarily due to addition of new customers from a new Specialty Deposit Center, which was added during fourth quarter 2021.

Fourth Quarter 2021 vs. Fourth Quarter 2020

Deposit balances were $1.53 billion at December 31, 2021, up $334.0 million from December 31, 2020, primarily driven by growth in noninterest-bearing deposits. Noninterest-bearing deposits were $774.8 million or 51% of total deposits, up from $522.8 million or 44% of total deposits as of December 31, 2020. Deposit growth was primarily driven by continued customer preferences for liquidity given the sustained economic uncertainty associated with the COVID-19 pandemic.

The following table sets forth the maturity of time deposits as of December 31, 2021:














As of December 31, 2021
(Dollars in thousands)
Within Three Months

Three to Six Months

Six to Nine Months

Nine to 12 Months

After 12 Months

Total
Time deposits (more than $250,000)
$ 99,381


$ 33,645


$ 42,025


$ 30,929


$ 1,308


$ 207,288

Time deposits ($250,000 or less)
49,086


39,434


42,956


33,454


6,868


171,798

Total time deposits
$ 148,467


$ 73,079


$ 84,981


$ 64,383


$ 8,176


$ 379,086

Weighted average rate
0.31
%

0.54
%

0.52
%

0.45
%

1.41
%

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

13.66
%

13.47
%

10.00
%

10.50
%
Tier 1 risk-based capital ratio

12.42
%

12.23
%

8.00
%

8.50
%
Common equity tier 1 ratio

12.42
%

12.23
%

6.50
%

7.00
%
Leverage ratio

9.58
%

9.44
%

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.












($ in thousands)

Basel III

% Change 4Q21 vs.

4Q21


3Q21


4Q20


3Q21


4Q20

Risk-Based Capital Ratios:










Total risk-based capital ratio

13.66
%

13.81
%

14.81
%

(0.15
) %

(1.15
) %
Tier 1 risk-based capital ratio

12.42
%

12.63
%

13.56
%

(0.21
) %

(1.14
) %
Common equity tier 1 ratio

12.42
%

12.63
%

13.56
%

(0.21
) %

(1.14
) %
Leverage ratio

9.58
%

9.75
%

10.55
%

(0.17
) %

(0.97
) %
Risk-weighted Assets

$ 1,335,889


$ 1,251,867


$ 1,048,275


6.71
%

27.44
%

Capital ratios remained strong during the quarter. Our CET1 and total risk-based capital ratios were 12.42% and 13.66% as of December 31, 2021, respectively, down 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 February 24, 2022 to all shareholders of record as of the close of business on February 10, 2022.

The Company did not repurchase any shares during fourth quarter 2021. 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 December 31, 2021.

Asset Quality












($ in thousands)

As of and For the Three Months Ended

% Change 4Q21 vs.

4Q21


3Q21


4Q20


3Q21


4Q20

Nonperforming loans ⁽¹⁾

$ 3,202


$ 1,052


$ 985


204.4
%

225.1
%
OREO

—


—


—


—


—

Total nonperforming assets

$ 3,202


$ 1,052


$ 985


204.4
%

225.1
%











Nonperforming loans to gross loans

0.24
%

0.09
%

0.09
%

0.15
%

0.15
%
Nonperforming assets to total assets

0.19
%

0.06
%

0.07
%

0.13
%

0.12
%











Criticized ⁽²⁾ Loan:










Special mention loans

$ —


$ —


$ 535


—
%

(100.0
) %
Classified loans ⁽³⁾

4,039


2,191


7,325


84.3


(44.9
)
Total criticized loans

$ 4,039


$ 2,191


$ 7,860


84.3
%

(48.6
) %











Criticized ⁽²⁾ loans to gross loans

0.31
%

0.18
%

0.71
%

0.13
%

(0.40
) %
Classified loans ⁽³⁾ to gross loans

0.31
%

0.18
%

0.67
%

0.13
%

(0.36
) %











Allowance for loan losses, beginning

$ 14,134


$ 14,687


$ 14,164


(3.8
) %

(0.2
) %
Provision for (reversal of) loan losses ⁽⁴⁾

2,157


(557
)

1,188


(487.3
)

81.6

Gross charge-offs

(168
)

—


—


100.0


100.0

Gross recoveries

—


4


—


(100.0
)

—

Allowance for loan losses, ending ⁽⁵⁾

$ 16,123


$ 14,134


$ 15,352


14.1
%

5.0
%











Allowance for loan losses ratios:










As a % of gross loans

1.23
%

1.15
%

1.40
%

0.08
%

(0.17
) %
As an adjusted of gross loans ⁽⁶⁾

1.36
%

1.34
%

1.54
%

0.02
%

(0.18
) %
As a % of nonperforming loans

503
%

1,344
%

1,559
%

(841
) %

(1,056
) %
As a % of nonperforming assets

503
%

1,344
%

1,559
%

(841
) %

(1,056
) %
Net charge-offs (recoveries) to average gross loans

0.05
%

(0.00
)%

0.00
%

0.05
%

0.05
%

(1)
Includes the guaranteed portion of SBA loans totaling $1.2 million as of December 31, 2021.
(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 $(259) thousand, $(327) thousand and $643 thousand for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively.
(5)
Excludes allowance for uncollectible accrued interest receivable of $205 thousand, $465 thousand and $643 thousand as of December 31, 2021, September 30, 2021 and December 31, 2020, 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 1.36%. 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 $771 thousand to $16.1 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 1.36% as of December 31, 2021.

Criticized loans decreased by $3.8 million or 49% from a year ago, and the criticized loans to gross loans ratio improved by 40 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 $2.2 million to $3.2 million, or 0.19% 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 December 31, 2021, $1.0 million of nonaccrual loans was the guaranteed portion of SBA loans that are in liquidation. The Company did not have OREO as of December 31, 2021 or 2020.

Net charge-offs were $168 thousand or 0.05% of average loans. In comparison, there were no net charge-offs recorded in the fourth quarter 2020.

COVID-19 Pandemic Update














($ in thousands)

Total deferments under the CARES Act through December 31, 2021

Payment resumed or paid off through December 31, 2021

Remaining deferments as of December 31, 2021

Number of accounts

Balance

Number of accounts

Balance

Number of accounts

Balance
Loan Type












Loans, excluding home mortgage and consumer loans

157

$ 220,553

154

$ 215,509

3

$ 5,044
Home mortgage loans

69

30,205

69

30,205

—

—
Total

226

$ 250,758

223

$ 245,714

3

$ 5,044

Total outstanding balance of loans remaining in deferment status as of December 31, 2021, represented 0.4% of the total loan portfolio.

The Company continues to carefully monitor the trajectory of the economic recovery, which could be impacted by the emergence of new variants and continued spread of COVID-19. In addition, we continue to support our clients, employees, and communities.

Since the PPP’s inception through December 31, 2021, we have funded $154.5 million, and $118.7 million of principal forgiveness has been provided on qualifying PPP loans. There were no new PPP loans during the fourth quarter of 2021.

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


4Q21

3Q21


4Q20
Interest income


$ 17,822

$ 17,355


$ 13,375
Interest expense


726

766


1,194
Net interest income


17,096

16,589


12,181
Noninterest income


7,289

3,542


3,392
Noninterest expense


9,591

9,519


8,412
Pre-provision net revenue

(a)
$ 14,794

$ 10,612


$ 7,161
Reconciliation to Net Income:







(Reversal of) provision for loan losses

(b)
$ 1,898

$ (884
)

$ 1,831
Income tax expense

(c)
3,747

3,246


1,513
Net Income

(a) - (b) - (c)
$ 9,149

$ 8,250


$ 3,817

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 December 31, 2021 and September 30, 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


4Q21


3Q21


4Q20

Yield on Average Loans







Interest income on loans


$ 17,271


$ 16,922


$ 13,006

Less: interest income on purchased loans


1,863


2,057


—

Adjusted interest income on loans

(a)
$ 15,408


$ 14,865


$ 13,006









Average loans


$ 1,343,414


$ 1,308,338


$ 1,112,889

Less: Average purchased loans


79,625


85,710


—

Adjusted average loans

(b)
$ 1,263,789


$ 1,222,628


$ 1,112,889









Average loan yield ⁽¹⁾


5.10
%

5.13
%

4.65
%
Effect on average loan yield ⁽¹⁾


0.26


0.30


—

Adjusted average loan yield ⁽¹⁾

(a)/(b)
4.84
%

4.83
%

4.65
%








Net Interest Margin







Net interest income


$ 17,096


$ 16,589


$ 12,181

Less: interest income on purchased loans


1,863


2,057


—

Adjusted net interest income

(c)
$ 15,233


$ 14,532


$ 12,181









Average interest-earning assets


$ 1,668,865


$ 1,566,050


$ 1,299,347

Less: Average purchased loans


79,625


85,710


—

Adjusted average interest-earning assets

(d)
$ 1,589,240


$ 1,480,340


$ 1,299,347









Net interest margin ⁽¹⁾


4.07
%

4.21
%

3.73
%
Effect on net interest margin ⁽¹⁾


0.26


0.30


—

Adjusted net interest margin ⁽¹⁾

(c)/(d)
3.81
%

3.91
%

3.73
%

(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)


As of


4Q21


3Q21


4Q20

Gross loans


$ 1,314,019


$ 1,231,821


$ 1,099,736

Less: Purchased loans


(77,170
)

(83,025
)

—

PPP loans ⁽¹⁾


(38,918
)

(64,574
)

(64,906
)
Adjusted gross loans

(a)
$ 1,197,931


$ 1,084,222


$ 1,034,830









Accrued interest receivable on loans


$ 4,231


$ 3,659


$ 3,729

Less: Accrued interest receivable on purchased loans


(340
)

(375
)

—

Accrued interest receivable on PPP loans ⁽²⁾


(340
)

(416
)

(445
)
Add: Allowance on accrued interest receivable


205


465


643

Adjusted accrued interest receivable on loans

(b)
$ 3,756


$ 3,333


$ 3,927









Adjusted gross loans and accrued interest receivable

(a) + (b) = (c)
$ 1,201,687


$ 1,087,555


$ 1,038,757









Allowance for loan losses


$ 16,123


$ 14,134


$ 15,352

Add: Allowance on accrued interest receivable


205


465


643

Adjusted Allowance

(d)
$ 16,328


$ 14,599


$ 15,995









Adjusted allowance to gross loans ratio

(d)/(c)
1.36
%

1.34
%

1.54
%

(1)

Excludes purchased PPP loans of $1.7 million and $4.7 million as of December 31, 2021 and September 30, 2021, respectively.

(2)

Excludes purchased accrued interest receivable on PPP loans of $15 thousand and $30 thousand as of December 31, 2021 and September 30, 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 nine full branch offices in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Gardena, Buena Park, and Santa Clara, California and Carrollton, Texas. The Bank also has four loan production offices in Atlanta, Georgia, Aurora, Colorado, and Lynnwood and Seattle, Washington. The Bank commenced its operations on June 10, 2005 as First Standard Bank and changed its name to Open Bank in October 2010. Its headquarters is located at 1000 Wilshire Blvd., Suite 500, Los Angeles, California 90017. Phone 213.892.9999; www.myopenbank.com Member FDIC, Equal Housing Lender.

Cautionary Note Regarding Forward-Looking Statements

Certain matters set forth herein constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to: the uncertainties related to the coronavirus pandemic including, but not limited to, the potential adverse effect of the pandemic on the economy, our employees and customers, and our financial performance; the impact of the federal CARES Act and the significant additional lending activities undertaken by the Company in connection with the Small Business Administration’s Paycheck Protection Program enacted thereunder, including risks to the Company with respect to the uncertain application by the Small Business Administration of new borrower and loan eligibility, forgiveness and audit criteria; business and economic conditions, particularly those affecting the financial services industry and our primary market areas; our ability to successfully manage our credit risk and the sufficiency of our allowance for loan losses; factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers, the success of construction projects that we finance, including any loans acquired in acquisition transactions; our ability to effectively execute our strategic plan and manage our growth; interest rate fluctuations, which could have an adverse effect on our profitability; liquidity issues, including fluctuations in the fair value and liquidity of the securities we hold for sale and our ability to raise additional capital, if necessary; external economic and/or market factors, such as changes in monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve, inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition; continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are; challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services; restraints on the ability of Open Bank to pay dividends to us, which could limit our liquidity; increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all; a failure in the internal controls we have implemented to address the risks inherent to the business of banking; inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance; changes in our management personnel or our inability to retain motivate and hire qualified management personnel; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies; risks related to potential acquisitions; political developments, uncertainties or instability, catastrophic events, acts of war or terrorism, or natural disasters, such as earthquakes, fires, drought, pandemic diseases (such as the coronavirus) or extreme weather events, any of which may affect services we use or affect our customers, employees or third parties with which we conduct business; incremental costs and obligations associated with operating as a public company; the impact of any claims or legal actions to which we may be subject, including any effect on our reputation; compliance with governmental and regulatory requirements, including the Dodd-Frank Act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with commercial mortgage origination, sale and servicing operations; changes in federal tax law or policy; and our ability the manage the foregoing and other factors set forth in the Company’s public reports. We describe these and other risks that could affect our results in Item 1A. “Risk Factors,” of our latest Annual Report on Form 10-K for the year ended December 31, 2020 and in our other subsequent filings with the Securities and Exchange Commission.

Consolidated Balance Sheet (unaudited)
($ in thousands)














As of

% Change 4Q21 vs.

4Q21


3Q21


4Q20


3Q21


4Q20

Assets










Cash and due from banks

$ 11,283


$ 17,617


$ 12,622


(36.0
) %

(10.6
) %
Interest-bearing deposits in other banks

104,176


170,528


93,688


(38.9
)

11.2

Cash and cash equivalents

115,459


188,145


106,310


(38.6
)

8.6

Available-for-sale debt securities, at fair value

150,444


102,535


91,791


46.7


63.9

Other investments

10,999


11,025


10,101


(0.2
)

8.9

Loans held for sale

89,428


94,466


26,659


(5.3
)

235.5

Real estate loans

701,450


688,430


651,684


1.9


7.6

SBA loans ⁽¹⁾

275,858


303,625


211,375


(9.1
)

30.5

C & I loans

162,543


123,422


107,307


31.7


51.5

Home mortgage loans

173,303


115,255


128,212


50.4


35.2

Consumer & other loans

865


1,089


1,158


(20.6
)

(25.3
)
Gross loans, net of unearned income

1,314,019


1,231,821


1,099,736


6.7


19.5

Allowance for loan losses

(16,123
)

(14,134
)

(15,352
)

14.1


5.0

Net loans receivable

1,297,896


1,217,687


1,084,384


6.6


19.7

Premises and equipment, net

4,355


4,199


4,544


3.7


(4.2
)
Accrued interest receivable, net

4,579


3,931


3,985


16.5


14.9

Servicing assets

12,720


12,389


7,360


2.7


72.8

Company owned life insurance

11,134


11,070


10,879


0.6


2.3

Deferred tax assets

8,424


5,247


5,242


60.5


60.7

Operating right-of-use assets

8,905


9,270


6,786


(3.9
)

31.2

Other assets

12,363


19,947


8,785


(38.0
)

40.7

Total assets

$ 1,726,706


$ 1,679,911


$ 1,366,826


2.8
%

26.3
%











Liabilities and Shareholders' Equity










Noninterest-bearing deposits

$ 774,754


$ 713,141


$ 522,754


8.6
%

48.2
%
Money market deposits and others

380,226


351,186


328,323


8.3


15.8

Time deposits over $250,000

207,288


209,091


200,210


(0.9
)

3.5

Other time deposits

171,798


222,988


148,803


(23.0
)

15.5

Total deposits

1,534,066


1,496,406


1,200,090


2.5


27.8

Federal Home Loan Bank advances

—


—


5,000


—


(100.0
)
Accrued interest payable

558


575


1,021


(3.0
)

(45.3
)
Operating lease liabilities

10,307


10,703


8,429


(3.7
)

22.3

Other liabilities

16,538


13,603


8,920


21.6


85.4

Total liabilities

1,561,469


1,521,287


1,223,460


2.6


27.6












Common stock

78,718


78,718


78,657


—


0.1

Additional paid-in capital

8,645


8,491


8,521


1.8


1.5

Retained earnings

79,071


71,436


55,348


10.7


42.9

Accumulated other comprehensive income (loss)

(1,197
)

(21
)

840


5600.0


(242.5
)
Total shareholders' equity

165,237


158,624


143,366


4.2


15.3

Total Liabilities and Shareholders' Equity

$ 1,726,706


$ 1,679,911


$ 1,366,826


2.8
%

26.3
%

(1)

Includes SBA Paycheck Protection Program (“PPP”) loans of $40.6 million, $69.3 million and $64.9 million as of December 31, 2021, September 30, 2021 and December 31, 2020, respectively.

Consolidated Statements of Income (unaudited)
($ in thousands, except share and per share data)














For the Three Months Ended

% Change 4Q21 vs.

4Q21

3Q21


4Q20

3Q21


4Q20

Interest income










Interest and fees on loans

$ 17,271

$ 16,922


$ 13,006

2.1
%

32.8
%
Interest on available-for-sale debt securities

362

269


257

34.6


40.9

Other interest income

189

164


112

15.2


68.8

Total interest income

17,822

17,355


13,375

2.7


33.2

Interest expense










Interest on deposits

726

766


1,194

(5.2
)

(39.2
)
Total interest expense

726

766


1,194

(5.2
)

(39.2
)
Net interest income

17,096

16,589


12,181

3.1


40.3

Provision for (reversal of) loan losses

1,898

(884
)

1,831

(314.7
)

3.7

Net interest income after provision for (reversal of) loan losses

15,198

17,473


10,350

(13.0
)

46.8

Noninterest income










Service charges on deposits

405

409


367

(1.0
)

10.4

Loan servicing fees, net of amortization

521

599


367

(13.0
)

42.0

Gain on sale of loans

6,033

2,188


2,188

175.7


175.7

Other income

330

346


470

(4.6
)

(29.8
)
Total noninterest income

7,289

3,542


3,392

105.8


114.9

Noninterest expense










Salaries and employee benefits

5,560

5,724


5,536

(2.9
)

0.4

Occupancy and equipment

1,418

1,326


1,237

6.9


14.6

Data processing and communication

637

448


435

42.2


46.4

Professional fees

267

308


265

(13.3
)

0.8

FDIC insurance and regulatory assessments

182

146


115

24.7


58.3

Promotion and advertising

156

175


62

(10.9
)

151.6

Directors’ fees

166

183


97

(9.3
)

71.1

Foundation donation and other contributions

901

842


400

7.0


125.3

Other expenses

304

367


265

(17.2
)

14.7

Total noninterest expense

9,591

9,519


8,412

0.8


14.0

Income before income tax expense

12,896

11,496


5,330

12.2


142.0

Income tax expense

3,747

3,246


1,513

15.4


147.7

Net income

$ 9,149

$ 8,250


$ 3,817

10.9
%

139.7
%











Book value per share

$ 10.92

$ 10.48


$ 9.55

4.2
%

14.3
%
Basic EPS

$ 0.60

$ 0.54


$ 0.25

11.1
%

140.0
%
Diluted EPS

$ 0.59

$ 0.54


$ 0.25

9.3
%

136.0
%











Shares of common stock outstanding

15,137,808

15,133,407


15,016,700

0.0
%

0.8
%
Weighted Average Shares:










- Basic

15,136,229

15,133,407


15,079,407

0.0
%

0.4
%
- Diluted

15,227,291

15,200,613


15,103,029

0.2
%

0.8
%

Key Ratios














As of and For the Three Months Ended

% Change 4Q21 vs.

4Q21


3Q21


4Q20


3Q21


4Q20

Return on average assets (ROA) ⁽¹⁾

2.11
%

2.03
%

1.13
%

0.08
%

0.98
%
Return on average equity (ROE) ⁽¹⁾

22.72
%

21.30
%

10.72
%

1.42
%

12.00
%
Net interest margin ⁽¹⁾

4.07
%

4.21
%

3.73
%

(0.14
) %

0.34
%
Efficiency ratio

39.34
%

47.28
%

54.02
%

(7.94
) %

(14.68
) %











Total risk-based capital ratio ⁽²⁾

13.66
%

13.81
%

14.81
%

(0.15
) %

(1.15
) %
Tier 1 risk-based capital ratio ⁽²⁾

12.42
%

12.63
%

13.56
%

(0.21
) %

(1.14
) %
Common equity tier 1 ratio ⁽²⁾

12.42
%

12.63
%

13.56
%

(0.21
) %

(1.14
) %
Leverage ratio ⁽²⁾

9.58
%

9.75
%

10.55
%

(0.17
) %

(0.97
) %

(1)

Annualized.

(2)

The Company’s December 31, 2021 regulatory capital ratios are preliminary.

Consolidated Statements of Income (unaudited)
($ in thousands, except share and per share data)










For the Twelve Months Ended

4Q21

4Q20

% change
Interest income






Interest and fees on loans

$ 62,448

$ 51,829

20.5
%
Interest on available-for-sale debt securities

1,085

1,177

(7.8
)
Other interest income

625

650

(3.8
)
Total interest income

64,158

53,656

19.6

Interest expense






Interest on deposits

3,132

8,292

(62.2
)
Total interest expense

3,132

8,292

(62.2
)
Net interest income

61,026

45,364

34.5

Provision for loan losses

522

5,961

(91.2
)
Net interest income after provision for loan losses

60,504

39,403

53.6

Noninterest income






Service charges on deposits

1,562

1,431

9.2

Loan servicing fees, net of amortization

1,953

1,856

5.2

Gain on sale of loans

11,313

6,092

85.7

Other income

1,189

1,392

(14.6
)
Total noninterest income

16,017

10,771

48.7

Noninterest expense






Salaries and employee benefits

21,253

20,041

6.0

Occupancy and equipment

5,213

4,974

4.8

Data processing and communication

2,000

1,682

18.9

Professional fees

1,192

1,101

8.3

FDIC insurance and regulatory assessments

583

449

29.8

Promotion and advertising

684

467

46.5

Directors’ fees

593

700

(15.3
)
Foundation donation and other contributions

2,890

1,335

116.5

Other expenses

1,457

1,191

22.3

Total noninterest expense

35,865

31,940

12.3

Income before income tax expense

40,656

18,234

123.0

Income tax expense

11,801

5,107

131.1

Net income

$ 28,855

$ 13,127

119.8
%







Book value per share

$ 10.92

$ 9.55

14.3
%
Basic EPS

$ 1.89

$ 0.85

122.4
%
Diluted EPS

$ 1.88

$ 0.85

121.2
%







Shares of common stock outstanding

15,137,808

15,016,700

0.8
%
Weighted Average Shares:






- Basic

15,087,686

15,196,351

(0.7
) %
- Diluted

15,155,347

15,223,888

(0.5
) %

Key Ratios










As of and For the Twelve Months Ended

4Q21


4Q20


% Change
Return on average assets (ROA)

1.84
%

1.03
%

0.81
%
Return on average equity (ROE)

18.91
%

9.35
%

9.56
%
Net interest margin

4.02
%

3.72
%

0.30
%
Efficiency ratio

46.55
%

56.90
%

(10.35
) %







Total risk-based capital ratio ⁽¹⁾

13.66
%

14.81
%

(1.15
) %
Tier 1 risk-based capital ratio ⁽¹⁾

12.42
%

13.56
%

(1.14
) %
Common equity tier 1 ratio ⁽¹⁾

12.42
%

13.56
%

(1.14
) %
Leverage ratio ⁽¹⁾

9.58
%

10.55
%

(0.97
) %

(1)

The Company’s December 31, 2021 regulatory capital ratios are preliminary.

Asset Quality








($ in thousands)

As of and For the Three Months Ended

4Q21


3Q21


4Q20

Nonaccrual Loans ⁽¹⁾

$ 3,002


$ 1,052


$ 985

Loans 90 days or more past due, accruing ⁽²⁾

200


—


—

Accruing restructured loans

—


—


—

Nonperforming loans

3,202


1,052


985

Other real estate owned (“OREO”)

—


—


—

Nonperforming assets

$ 3,202


$ 1,052


$ 985








Criticized loans ⁽³⁾ by loan type:






SBA loans

$ 2,688


$ 1,871


$ 2,256

C & I loans

313


320


5,004

Home mortgage loans

1,038


—


600

Total criticized loans ⁽³⁾

$ 4,039


$ 2,191


$ 7,860








Nonperforming assets/total assets

0.19
%

0.06
%

0.07
%
Nonperforming assets/gross loans plus OREO

0.24
%

0.09
%

0.09
%
Nonperforming loans/gross loans

0.24
%

0.09
%

0.09
%
Allowance for loan losses/nonperforming loans

503
%

1,344
%

1,559
%
Allowance for loan losses/nonperforming assets

503
%

1,344
%

1,559
%
Allowance for loan losses/gross loans

1.23
%

1.15
%

1.40
%
Criticized loans ⁽³⁾ /gross loans

0.31
%

0.18
%

0.71
%







Net charge-offs (recoveries)

$ 168


$ (4
)

$ —

Net charge-offs (recoveries) to average gross loans ⁽⁴⁾

0.05
%

(0.00
)%

0.00
%

(1)
Includes the guaranteed portion of SBA loans that are in liquidation totaling $1.0 million as of December 31, 2021.
(2)
Includes the guaranteed portion of PPP loans totaling $200 thousand as of December 31, 2021.
(3)
Consists of special mention, substandard, doubtful and loss categories.
(4)
Annualized.








($ in thousands)

4Q21

3Q21

4Q20
Accruing delinquent loans 30-89 days past due:






30-59 days

$ 72

$ 263

$ —
60-89 days

336

1,064

—
Total ⁽¹⁾

$ 408

$ 1,327

$ —

(1)

Includes the guaranteed portion of PPP loans totaling $408 thousand as of December 31, 2021.

Average Balance Sheet, Interest and Yield/Rate Analysis
($ in thousands)






















For the Three Months Ended


4Q21


3Q21


4Q20



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

$ 192,302

$ 73

0.15
%

$ 137,662

$ 47

0.13
%

$ 83,129

$ 20

0.10
%
Federal funds sold and other investments

11,012

116

4.23


11,041

117

4.25


10,091

92

3.62

Available-for-sale debt securities, at fair value

122,137

362

1.19


109,009

269

0.99


93,238

257

1.10

Real estate loans

685,394

7,774

4.50


678,642

7,680

4.49


644,643

7,457

4.60

SBA loans

400,059

6,829

6.77


403,279

6,835

6.72


251,541

3,231

5.11

C & I loans

133,104

1,334

3.98


107,614

1,074

3.96


90,617

843

3.70

Home mortgage loans

123,822

1,320

4.27


117,825

1,317

4.47


124,763

1,456

4.67

Consumer & other loans

1,035

14

5.21


978

16

6.49


1,325

19

5.70

Loans ⁽²⁾

1,343,414

17,271

5.10


1,308,338

16,922

5.13


1,112,889

13,006

4.65

Total interest-earning assets

1,668,865

17,822

4.24


1,566,050

17,355

4.40


1,299,347

13,375

4.10

Noninterest-earning assets

62,996





56,807





48,678




Total assets

$ 1,731,861





$ 1,622,857





$ 1,348,025























Interest-bearing liabilities:


















Money market deposits and others

$ 378,849

$ 283

0.30
%

$ 368,507

$ 299

0.32
%

$ 328,044

$ 340

0.41
%
Time deposits

401,938

443

0.44


383,503

467

0.48


344,139

854

0.99

Total interest-bearing deposits

780,787

726

0.37


752,010

766

0.40


672,183

1,194

0.71

Borrowings

4

—

—


—

—

—


7,938

—

—

Total interest-bearing liabilities

780,791

726

0.37


752,010

766

0.40


680,121

1,194

0.70




















Noninterest-bearing liabilities:


















Noninterest-bearing deposits

765,012





696,761





507,694




Other noninterest-bearing liabilities

24,994





19,169





17,769




Total noninterest-bearing liabilities

790,006





715,930





525,463




Shareholders’ equity

161,064





154,917





142,441




Total liabilities and shareholders’ equity

$ 1,731,861





$ 1,622,857





$ 1,348,025























Net interest income / interest rate spreads



$ 17,096

3.87
%



$ 16,589

4.00
%



$ 12,181

3.40
%
Net interest margin





4.07
%





4.21
%





3.73
%



















Cost of deposits & cost of funds:


















Total deposits / cost of deposits

$ 1,545,799

$ 726

0.19
%

$ 1,448,771

$ 766

0.21
%

$ 1,179,877

$ 1,194

0.40
%
Total funding liabilities / cost of funds

$ 1,545,803

$ 726

0.19
%

$ 1,448,771

$ 766

0.21
%

$ 1,187,815

$ 1,194

0.40
%

(1)

Annualized.

(2)

Includes loans held for sale.

Average Balance Sheet, Interest and Yield/Rate Analysis
($ in thousands)
















For the Twelve Months Ended

4Q21


4Q20


Average Balance

Interest and Fees

Yield/ Rate

Average Balance

Interest and Fees

Yield/ Rate
Interest-earning assets:












Interest-bearing deposits in other banks

$ 132,090

$ 170

0.13
%

$ 81,997

$ 281

0.34
%
Federal funds sold and other investments

10,755

455

4.23


9,853

369

3.74

Available-for-sale debt securities, at fair value

108,346

1,086

1.00


73,410

1,177

1.60

Real estate loans

672,045

30,644

4.56


636,809

30,616

4.81

SBA loans

355,114

21,760

6.13


200,110

11,231

5.61

C & I loans

114,629

4,463

3.89


93,490

3,887

4.16

Home mortgage loans

122,465

5,520

4.51


122,195

5,977

4.89

Consumer & other loans

1,095

60

5.51


2,102

118

5.61

Loans ⁽¹⁾

1,265,348

62,447

4.94


1,054,706

51,829

4.91

Total interest-earning assets

1,516,539

64,158

4.23


1,219,966

53,656

4.40

Noninterest-earning assets

55,200





49,224




Total assets

$ 1,571,739





$ 1,269,190

















Interest-bearing liabilities:












Money market deposits and others

$ 362,900

$ 1,134

0.31
%

$ 307,316

$ 2,174

0.71
%
Time deposits

378,585

1,998

0.53


391,667

6,118

1.56

Total interest-bearing deposits

741,485

3,132

0.42


698,983

8,292

1.19

Borrowings

1,988

—

—


5,505

—

—

Total interest-bearing liabilities

743,473

3,132

0.42


704,488

8,292

1.18














Noninterest-bearing liabilities:












Noninterest-bearing deposits

656,130





406,401




Other noninterest-bearing liabilities

19,558





17,889




Total noninterest-bearing liabilities

675,688





424,290




Shareholders’ equity

152,578





140,412




Total liabilities and shareholders’ equity

$ 1,571,739





$ 1,269,190

















Net interest income / interest rate spreads



$ 61,026

3.81
%



$ 45,364

3.22
%
Net interest margin





4.02
%





3.72
%













Cost of deposits & cost of funds:












Total deposits / cost of deposits

$ 1,397,615

$ 3,132

0.22
%

$ 1,105,384

$ 8,292

0.75
%
Total funding liabilities / cost of funds

$ 1,399,603

$ 3,132

0.22
%

$ 1,110,889

$ 8,292

0.75
%

(1)

Includes loans held for sale.

Loan Portfolio Breakdown by Industry, excluding home mortgage and consumer loans










($ in thousands)

As of December 31, 2021
Industry

Number of accounts

% of total

Balance

% of total
Hotel / motel

249

11.5
%

$ 186,534

15.2
%
Wholesale

154

7.2


70,181

5.7

Food services / restaurant

298

13.9


45,707

3.7

Real estate lessor

239

11.1


412,641

33.6

Gas station

243

11.3


207,295

16.8

Other

967

45.0


306,921

25.0

Total ⁽¹⁾

2,150

100.0
%

$ 1,229,279

100.0
%

(1)

Includes loans held for sale.

Loan Deferment Summary by Industry, excluding home mortgage and consumer loans














($ in thousands)

As of December 31, 2021

Number of accounts

Loan balance
Industry

Number of accounts

% of deferment

% of total loans

Balance

% of deferment

% of total loans
Hotel / motel

1

33.4
%

0.4
%

$ 4,546

90.1
%

2.4
%
Wholesale

1

33.3


0.6


467

9.3


0.7

Food services / restaurant

1

33.3


0.3


31

0.6


0.1

Total

3

100.0
%

0.1
%

$ 5,044

100.0
%

0.4
%

Loan Deferment Summary by Loan Type














($ in thousands)

As of December 31, 2021

Number of accounts

Loan balance
Loan Type

Number of accounts

% of deferment

% of total loans

Balance

% of deferment

% of total loans
Real estate loans

1

33.3
%

0.1
%

$ 4,546

90.1
%

0.5
%
C & I loans

2

66.7


0.2


498

9.9


0.2

Loans, excluding home mortgage and consumer loans

3

100.0


0.1


5,044

100.0


0.4

Home mortgage loans

—

—


—


—

—


—

Total

3

100.0
%

0.1
%

$ 5,044

100.0
%

0.4
%

Loan Deferment Status Change by Loan Type














($ in thousands)

Total deferments under the CARES Act through December 31, 2021

Payment resumed or paid off through December 31, 2021

Remaining deferments as of December 31, 2021
Loan Type

Number of accounts

Balance

Number of accounts

Balance

Number of accounts

Balance
Loans, excluding home mortgage and consumer loans

157

$ 220,553

154

$ 215,509

3

$ 5,044
Home mortgage loans

69

30,205

69

30,205

—

—
Total

226

$ 250,758

223

$ 245,714

3

$ 5,044

View source version on businesswire.com: https://www.businesswire.com/news/home/20220127005941/en/

Investor Relations
OP Bancorp
Christine Oh
EVP & CFO
213.892.1192
Christine.oh@myopenbank.com

Company Name:	OP Bancorp
Stock Symbol:	OPBK
Market:	NASDAQ
Website:	myopenbank.com

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