OP Bancorp(OPBK) - 2020 Q2 - Quarterly Report

Financial Performance - Interest income for Q2 2020 was $12.92 million, a decrease of 13.1% from $14.88 million in Q2 2019[110] - Net income for the first half of 2020 was $5.72 million, down 33.3% from $8.58 million in the same period of 2019[110] - Net income for the three months ended June 30, 2020, was $2.4 million, a decrease of 37.0% from $3.8 million for the same period in 2019[124] - Net interest income decreased by $529,000, or 4.7%, to $10.6 million for the three months ended June 30, 2020[139] - Net interest income decreased by $212,000, or 1.0%, to $21.8 million for the six months ended June 30, 2020, compared to $22.0 million for the same period in 2019[166] - Noninterest income decreased by $585,000, or 22.1%, to $2.1 million for the three months ended June 30, 2020, compared to $2.6 million in 2019[143] - Noninterest income for the six months ended June 30, 2020, was $4.4 million, a decrease of $1.8 million, or 29.5%, compared to $6.2 million for the same period in 2019[168] Loan Loss Provisions - Provision for loan losses increased significantly to $1.99 million in Q2 2020 from $0.40 million in Q2 2019, reflecting a proactive approach to potential credit losses[110] - The provision for loan losses increased by $1.6 million, contributing to the decline in net income[124] - Provision for loan losses increased to $2.0 million for the three months ended June 30, 2020, compared to $401,000 in the same period in 2019, reflecting a 397.5% increase[141] - Provision for loan losses increased by $2.3 million, or 581.0%, to $2.7 million for the six months ended June 30, 2020, compared to $401,000 for the same period in 2019[167] - The total provision for loan losses for the six months ended June 30, 2020 was $2.7 million, compared to $401,000 for the same period in 2019[204] Asset Quality - Nonperforming loans decreased to $1.02 million, down from $1.55 million at the end of 2019, showing improvement in credit quality[111] - Non-performing loans decreased to $1.0 million at June 30, 2020, down from $1.5 million at December 31, 2019[208] - Classified loans were $2.8 million at June 30, 2020, a decrease from $3.5 million at December 31, 2019[209] - Non-performing loans to gross loans ratio was 0.10% at June 30, 2020, compared to 0.16% at December 31, 2019[211] Capital and Assets - Total assets as of June 30, 2020, reached $1.29 billion, an increase of 9.2% from $1.18 billion at the end of 2019[111] - The allowance for loan losses (ALL) increased to $12.76 million as of June 30, 2020, compared to $10.05 million at the end of 2019, indicating a higher reserve for potential loan defaults[111] - The allowance for loan losses increased to $12.8 million at June 30, 2020, compared to $10.1 million at December 31, 2019[185] - Total assets increased to $1,217.3 million as of June 30, 2020, compared to $1,070.3 million as of June 30, 2019[158] Deposits and Borrowings - Total deposits increased to $1.12 billion as of June 30, 2020, up by $100 million or 9.8% from $1.02 billion at December 31, 2019[213] - Noninterest-bearing demand accounts constituted 38.2% of total deposits, while interest-bearing deposits without a stated maturity made up 26.7% and time deposits accounted for 35.1%[213] - The gross loan to deposit ratio was 93.1% as of June 30, 2020, down from 97.0% at December 31, 2019[218] - The company had $10 million in borrowings from the Federal Home Loan Bank (FHLB) at June 30, 2020, with a maximum borrowing capacity of $391.9 million[215] Community Support - The company donated $1.0 million to support small restaurants affected by the pandemic, demonstrating commitment to community support[113] Interest Rate Risk - Interest rate risk is identified as the primary source of market risk, with a focus on managing the impact of changing interest rates on net interest income[232] - The company’s net interest income sensitivity to a +400 basis points shift is projected at 16.35% as of June 30, 2020, compared to 18.23% as of December 31, 2019[240] - The Economic Value of Equity sensitivity at +400 basis points is 12.10% as of June 30, 2020, compared to (2.94)% as of December 31, 2019[240] - The asset liability committee monitors interest rate risk sensitivity quarterly to ensure compliance with established risk limits[234]