OP Bancorp(OPBK) - 2025 Q1 - Quarterly Results

Overview and Financial Highlights This section presents the company's key financial performance and strategic highlights for the period First Quarter 2025 Highlights OP Bancorp reported strong financial results for Q1 2025, with net income rising to $5.6 million and diluted EPS to $0.37, up from $5.0 million and $0.33 in Q4 2024, respectively. The quarter saw growth in total assets, loans, and deposits, alongside an improved net interest margin of 3.01%. While credit quality showed a slight increase in nonperforming loans, the bank remains well-capitalized with a CET1 ratio of 11.08% and increased its book value per share | Metric | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Net Income | $5.6 million | $5.0 million | | Diluted EPS | $0.37 | $0.33 | | Net Interest Income | $17.4 million | $16.9 million | | Net Interest Margin | 3.01% | 2.96% | | Total Assets | $2.51 billion | $2.37 billion | | Gross Loans | $2.04 billion | $1.96 billion | | Total Deposits | $2.19 billion | $2.03 billion | | Nonperforming Loans to Gross Loans | 0.51% | 0.40% | | Book Value Per Common Share | $14.09 | $13.83 | - The company paid a quarterly cash dividend of $0.12 per share[4] CEO Statement President and CEO Min Kim highlighted the company's strong quarterly performance, attributing it to double-digit annualized growth in both loans (4.4% QoQ) and deposits (8.0% QoQ), coupled with a 5 basis point expansion in net interest margin. This resulted in a 12% increase in diluted EPS over the prior quarter. Despite acknowledging heightened economic and interest rate uncertainties, management remains optimistic about future growth and committed to its strategic goals - Loan portfolio grew by 4.4% and deposits by 8.0% during the first quarter[5] - Net interest margin improved by 5 basis points, contributing to a 12% increase in diluted EPS compared to the previous quarter[5] - Management remains optimistic about future growth despite acknowledging heightened uncertainties regarding economic conditions and interest rates[5] Selected Financial Highlights (Table) This section provides a comprehensive table comparing key income statement, balance sheet, credit quality, and ratio data for Q1 2025 against Q4 2024 and Q1 2024. Notable year-over-year increases include a 9.0% rise in net interest income and a 13.2% growth in gross loans. However, nonperforming loans increased significantly by 139.7% YoY, though from a low base | ($ in thousands, except per share data) | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | Selected Income Statement Data: | | | | | Net interest income | $17,418 | $16,929 | $15,979 | | Net income | $5,560 | $4,971 | $5,226 | | Diluted earnings per share | $0.37 | $0.33 | $0.34 | | Selected Balance Sheet Data: | | | | | Gross loans | $2,043,885 | $1,956,852 | $1,804,987 | | Total deposits | $2,189,871 | $2,027,285 | $1,895,411 | | Total assets | $2,512,971 | $2,366,013 | $2,234,520 | | Credit Quality: | | | | | Nonperforming loans | $10,412 | $7,820 | $4,343 | | Nonperforming loans to gross loans | 0.51% | 0.40% | 0.24% | | Financial Ratios: | | | | | Return on average assets (annualized) | 0.92% | 0.84% | 0.96% | | Net interest margin (annualized) | 3.01% | 2.96% | 3.06% | | Book value per common share | $14.09 | $13.83 | $13.00 | Income Statement Analysis This section provides a detailed analysis of the company's revenues, expenses, and profitability drivers Net Interest Income and Net Interest Margin Net interest income (NII) for Q1 2025 was $17.4 million, a 2.9% increase from Q4 2024 and a 9.0% increase from Q1 2024. The net interest margin (NIM) expanded by 5 basis points sequentially to 3.01%, primarily due to a decrease in interest expense on deposits. Compared to the prior year, NIM decreased by 5 basis points as the cost of funds rose faster than asset yields | ($ in thousands) | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | Net interest income | $17,418 | $16,929 | $15,979 | | Net interest margin | 3.01% | 2.96% | 3.06% | - The QoQ increase in NII was driven by a $574 thousand decrease in interest expense on interest-bearing deposits, as deposit costs repriced faster than loan yields[8][10] - The YoY increase in NII was due to a $1.5 million increase in interest income on loans from a larger average balance, which surpassed the $933 thousand increase in interest expense on deposits[9][11] Provision for Credit Losses The company recorded a total provision for credit losses of $736 thousand in Q1 2025. This represents a significant decrease of $811 thousand from Q4 2024, but an increase of $591 thousand from Q1 2024. The provision was primarily driven by an $87.0 million increase in loan balances, particularly in Home mortgage and CRE loans | ($ in thousands) | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | Provision for credit losses on loans | $687 | $1,859 | $193 | | Provision for (reversal of) credit losses on off-balance sheet exposure | $49 | $(312) | $(48) | | Total provision for credit losses | $736 | $1,547 | $145 | - The provision for credit losses on loans of $687 thousand was mainly due to an $87.0 million (4.4%) increase in loan balances, with Home mortgage and CRE loans growing by $43.0 million and $50.0 million, respectively[14] Noninterest Income Noninterest income increased to $4.8 million in Q1 2025, up 9.0% from Q4 2024 and 34.3% from Q1 2024. The sequential growth was driven by higher other income and loan servicing fees. The year-over-year increase was broad-based, with significant gains in service charges on deposits, loan servicing fees, and gain on sale of loans | ($ in thousands) | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | Service charges on deposits | $1,000 | $967 | $612 | | Loan servicing fees, net of amortization | $1,007 | $858 | $772 | | Gain on sale of loans | $2,019 | $2,197 | $1,703 | | Other income | $790 | $395 | $499 | | Total noninterest income | $4,816 | $4,417 | $3,586 | - The Bank sold $31.1 million in SBA loans at an average premium of 8.08% in Q1 2025, compared to selling $34.7 million at 7.82% in Q4 2024 and $24.8 million at 8.33% in Q1 2024[19] - Other income increased by $395 thousand QoQ, primarily due to higher credit-related fees and a decrease in unrealized losses on CRA-qualified mutual funds[19] Noninterest Expense Noninterest expense rose to $13.8 million in Q1 2025, a 5.2% increase from Q4 2024 and a 13.6% increase from Q1 2024. The growth in both periods was primarily driven by higher salaries and employee benefits due to an increased headcount. This was partially offset by a significant decrease in data processing costs following a core banking system change in late 2024 | ($ in thousands) | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $8,776 | $8,277 | $7,841 | | Data processing and communication | $296 | $594 | $487 | | Other expenses | $1,375 | $950 | $559 | | Total noninterest expense | $13,814 | $13,133 | $12,157 | - Salaries and benefits increased due to a rise in employee headcount to 240 from 231 in the previous quarter and 228 in the prior year[23] - Data processing and communication expenses decreased by 50.2% QoQ and 39.2% YoY due to a core banking system change completed in Q4 2024[23] Income Tax Expense Income tax expense for Q1 2025 was $2.1 million, with an effective tax rate of 27.6%. This rate is higher than the 25.4% in Q4 2024, which benefited from year-end tax adjustments. It is slightly lower than the 28.0% rate in Q1 2024, due to tax benefits from vested restricted stock awards in the current quarter - The effective tax rate was 27.6% in Q1 2025, compared to 25.4% in Q4 2024 and 28.0% in Q1 2024[24][25] - The increase in the effective tax rate from Q4 2024 was due to the absence of year-end tax provision adjustments[24] Balance Sheet Analysis This section details the company's financial position, including assets, liabilities, and equity components Loans Gross loans reached $2.04 billion at the end of Q1 2025, marking a 4.4% increase from Q4 2024 and a 13.2% increase from Q1 2024. The growth was fueled by strong new loan originations of $205.8 million, a 61.6% increase from the previous quarter. Growth was particularly strong in Home mortgage and C&I loans | Gross Loans by Type ($ in thousands) | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | CRE loans | $1,023,278 | $980,247 | $905,534 | | SBA loans | $258,778 | $253,710 | $247,550 | | C&I loans | $202,250 | $213,097 | $147,508 | | Home mortgage loans | $559,543 | $509,524 | $502,995 | | Gross loans | $2,043,885 | $1,956,852 | $1,804,987 | - New loan originations were $205.8 million in Q1 2025, a significant increase from $127.4 million in Q4 2024 and $121.6 million in Q1 2024[26][28] - As of Q1 2025, the loan portfolio consisted of 32.8% fixed-rate, 37.4% hybrid-rate, and 29.8% variable-rate loans[29] Allowance for Credit Losses (ACL) The allowance for credit losses on loans ended Q1 2025 at $25.4 million, up from $24.8 million in Q4 2024. The increase was driven by a $687 thousand provision for credit losses, partially offset by net charge-offs of $115 thousand. The allowance for off-balance sheet exposure also increased slightly | ACL Roll-Forward ($ in thousands) | 1Q2025 | | :--- | :--- | | Beginning ACL on loans | $24,796 | | Provision for credit losses | $687 | | Gross charge-offs | $(130) | | Gross recoveries | $15 | | Ending ACL on loans | $25,368 | Asset Quality Asset quality metrics showed some deterioration but remained at relatively low levels. Nonperforming loans (NPLs) increased to 0.51% of gross loans from 0.40% in the prior quarter, primarily due to two home mortgage loans for which no loss is expected. Criticized loans also rose to 1.13% of gross loans. Net charge-offs were minimal at 0.02% of average loans, and the allowance to gross loans ratio stood at 1.24% | Asset Quality Metric | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | Nonperforming loans to gross loans | 0.51% | 0.40% | 0.24% | | Criticized loans to gross loans | 1.13% | 1.00% | 0.64% | | Net charge-offs to average gross loans | 0.02% | 0.00% | 0.01% | | Allowance for credit losses to gross loans | 1.24% | 1.27% | 1.23% | - The $2.6 million increase in nonperforming loans was primarily due to two home mortgage loans totaling $2.1 million. The bank does not expect a loss due to sufficient collateral equity[33] - Criticized loans increased to $23.1 million, partly due to the aforementioned home mortgage loans and an SBA loan for a restaurant construction project that was downgraded to Special Mention due to a longer construction period[33][34] Deposits Total deposits grew strongly to $2.19 billion, an 8.0% increase from Q4 2024 and a 15.5% increase from Q1 2024. The quarterly growth was broad-based, with increases in noninterest-bearing deposits, money market accounts, and time deposits. The year-over-year growth was driven by customers' preference for higher-rate time deposits, which increased by 21.8%. Estimated uninsured deposits rose to 49.0% of total deposits | Deposit Composition ($ in thousands) | 1Q2025 | % of Total | 4Q2024 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Noninterest-bearing deposits | $552,797 | 25.2% | $504,928 | 24.9% | | Money market deposits and others | $385,080 | 17.6% | $329,095 | 16.2% | | Time deposits | $1,251,994 | 57.2% | $1,193,262 | 58.9% | | Total deposits | $2,189,871 | 100.0% | $2,027,285 | 100.0% | - QoQ deposit growth of $162.6 million was driven by increases of $47.9 million in noninterest-bearing, $56.0 million in money market, and $58.7 million in time deposits[37] - Estimated uninsured deposits were $1.07 billion, or 49.0% of total deposits, as of March 31, 2025, up from 47.4% in the prior quarter[35] Other Highlights This section covers additional key financial aspects such as liquidity and capital adequacy Liquidity The company maintained a strong liquidity position with $381.3 million in liquid assets (cash and available-for-sale securities) and $699.0 million in available borrowing capacity from institutions like the FHLB and Federal Reserve. The combined total of liquid assets and available borrowings represented 49.3% of total deposits as of March 31, 2025 | ($ in thousands) | 1Q2025 | 4Q2024 | | :--- | :--- | :--- | | Liquid Assets: | | | | Cash and cash equivalents | $198,861 | $134,943 | | Available-for-sale debt securities | $182,480 | $185,909 | | Total liquid assets | $381,341 | $320,852 | | Available Borrowings: | | | | Federal Home Loan Bank—San Francisco | $381,456 | $401,900 | | Federal Reserve Bank | $217,563 | $215,115 | | Other Banks | $100,000 | $100,000 | | Total available borrowings | $699,019 | $717,015 | Capital and Capital Ratios The company remains well-capitalized, with all capital ratios exceeding regulatory requirements. The Common Equity Tier 1 (CET1) ratio was 11.08% as of March 31, 2025. The Board of Directors declared a quarterly cash dividend of $0.12 per share. No shares were repurchased during the quarter under the existing stock repurchase program - The Board of Directors declared a quarterly cash dividend of $0.12 per share, payable on or about May 22, 2025[41] - The Company did not repurchase any shares of its common stock during the first quarter of 2025[42] | OP Bancorp Capital Ratios | 1Q2025 | 4Q2024 | Minimum Well Capitalized Ratio | | :--- | :--- | :--- | :--- | | Common equity tier 1 ratio | 11.08% | 11.35% | 6.50% | | Tier 1 risk-based capital ratio | 11.08% | 11.35% | 8.00% | | Total risk-based capital ratio | 12.33% | 12.60% | 10.00% | | Leverage ratio | 9.22% | 9.27% | 5.00% | Appendix: Consolidated Financial Statements This section includes the full consolidated financial statements and supplementary financial data Consolidated Balance Sheets This section presents the detailed unaudited consolidated balance sheets as of March 31, 2025, compared to December 31, 2024, and March 31, 2024, showing a breakdown of assets, liabilities, and shareholders' equity. Total assets grew to $2.51 billion, a 6.2% increase from the prior quarter | ($ in thousands) | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $198,861 | $134,943 | $139,246 | | Net loans receivable | $2,018,517 | $1,932,056 | $1,782,858 | | Total assets | $2,512,971 | $2,366,013 | $2,234,520 | | Liabilities and Shareholders' Equity | | | | | Total deposits | $2,189,871 | $2,027,285 | $1,895,411 | | Total liabilities | $2,302,882 | $2,161,020 | $2,039,795 | | Total shareholders' equity | $210,089 | $204,993 | $194,725 | | Total liabilities and shareholders' equity | $2,512,971 | $2,366,013 | $2,234,520 | Consolidated Statements of Income This section provides the detailed unaudited consolidated statements of income for the three months ended March 31, 2025, compared to the previous quarter and the same quarter last year. It breaks down revenues and expenses, leading to a net income of $5.6 million for the quarter | ($ in thousands) | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | Net interest income | $17,418 | $16,929 | $15,979 | | Provision for credit losses | $736 | $1,547 | $145 | | Total noninterest income | $4,816 | $4,417 | $3,586 | | Total noninterest expense | $13,814 | $13,133 | $12,157 | | Net income | $5,560 | $4,971 | $5,226 | Key Ratios and Asset Quality This section provides supplementary tables detailing key performance ratios and a more granular breakdown of asset quality metrics. Key ratios such as ROA (0.92%) and ROE (10.73%) are presented. Asset quality tables show nonperforming, criticized, and delinquent loans by loan type, with home mortgage loans being the primary source of new nonaccrual and delinquent loans in the quarter | Key Ratios | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | Return on average assets (ROA) | 0.92% | 0.84% | 0.96% | | Return on average equity (ROE) | 10.73% | 9.75% | 10.83% | | Net interest margin | 3.01% | 2.96% | 3.06% | | Efficiency ratio | 62.13% | 61.52% | 62.14% | | Asset Quality ($ in thousands) | 1Q2025 | 4Q2024 | 1Q2024 | | :--- | :--- | :--- | :--- | | Nonperforming loans | $10,412 | $7,820 | $4,343 | | Criticized loans | $23,055 | $19,570 | $11,564 | | Accruing delinquent loans 30-89 days | $6,452 | $8,964 | $3,904 | Average Balance Sheet and Yield/Rate Analysis This section presents a detailed analysis of average balances for assets and liabilities, along with the corresponding interest income/expense and yields/rates. Average interest-earning assets grew to $2.33 billion in Q1 2025. The yield on loans was 6.39%, while the cost of total deposits was 3.23%, contributing to a net interest margin of 3.01% | For the Three Months Ended 1Q2025 | Average Balance ($ in thousands) | Yield/Rate | | :--- | :--- | :--- | | Total interest-earning assets | $2,330,231 | 6.04% | | Loans | $2,005,044 | 6.39% | | Total interest-bearing liabilities | $1,640,780 | 4.31% | | Total deposits | $2,083,890 | 3.23% | | Net interest margin | | 3.01% |