OP Bancorp(OPBK) - 2025 Q3 - Quarterly Report

Financial Performance - Net income for Q3 2025 was $6.7 million, up $1.3 million, or 23%, compared to $5.4 million in Q3 2024[116] - Net interest income for Q3 2025 increased to $20.3 million, up $3.8 million, or 23%, from the same quarter last year[116] - The efficiency ratio for Q3 2025 improved to 55.68%, a decrease of 563 basis points from the same period in 2024[116] - Return on average assets (ROA) for Q3 2025 was 1.04%, up from 0.94% in Q3 2024[116] - Return on average equity (ROE) for Q3 2025 was 12.36%, compared to 10.95% in Q3 2024[116] Asset and Loan Growth - Total assets reached $2.61 billion as of September 30, 2025, up $248.2 million, or 10%, from December 31, 2024[116] - Gross loans were $2.15 billion, up $194.4 million, or 10%, from December 31, 2024, primarily driven by growth in commercial real estate and home mortgage loans[116] - Total deposits were $2.27 billion, up $246.1 million, or 12%, from December 31, 2024, reflecting growth in time and money market deposits[116] - Average loan balances grew, contributing to the increase in interest income, despite a decline in loan yields due to repricing at lower interest rates[128] - The average gross loans increased to $2,107,081 thousand for the three months ended September 30, 2025, compared to $1,891,157 thousand for the same period in 2024[176] Interest Income and Margin - Net interest income for Q3 2025 increased by 23% year-over-year, driven by a $3.1 million (10%) increase in interest income on loans[128] - Net interest margin increased by 31 basis points, reflecting a 62 basis point increase in net interest spread[130] - The cost of deposits for Q3 2025 was 3.10%, down from 3.57% in the previous year[124] - The average interest rate on loans for Q3 2025 was 6.52%, compared to 6.66% in Q3 2024[124] Credit Losses and Nonperforming Loans - The provision for credit losses for Q3 2025 was $1.175 million, up from $448,000 in Q3 2024[116] - Nonperforming loans to gross loans ratio increased to 0.57% from 0.40% year-over-year[116] - Provision for credit losses for the first nine months of 2025 was $3.1 million, up from $1.2 million in the same period last year, reflecting higher qualitative reserves and loan growth[137] - Nonperforming loans rose by $4.5 million, or 57%, to $12.3 million as of September 30, 2025, primarily due to reclassifications of $3.4 million in SBA—real estate loans[181] Noninterest Income and Expenses - Total noninterest income for the first nine months of 2025 increased by $904 thousand, or 8%, primarily due to higher loan servicing fees and service charges on deposits[141] - Salaries and employee benefits for the first nine months of 2025 increased by $3.3 million, or 14%, driven by staffing growth and merit-based salary adjustments[150] - Total noninterest expense for the first nine months of 2025 rose by $4.4 million, or 12%, primarily due to higher salaries and employee benefits[149] Capital and Deposits - The Bank's total capital ratio was 12.06% as of September 30, 2025, exceeding the minimum requirement to be considered "well-capitalized"[197] - CET1 capital to risk-weighted assets was 10.81% for the Bank as of September 30, 2025, above the required minimum of 4.50%[197] - The company had estimated uninsured deposits of $1.13 billion, or 50% of total deposits, as of September 30, 2025[188] - Total deposits grew by 12% to $2,273,417 thousand as of September 30, 2025, from $2,027,285 thousand as of December 31, 2024[187] Interest Rate Risk Management - Interest rate risk is identified as the primary source of market risk for the Company, arising from changes in market interest rates[200] - The company employs a net interest income simulation model to evaluate potential changes in net interest income under various interest rate scenarios, running these simulations at least quarterly[206] - The company assesses interest rate risk by measuring both Earnings at Risk (EAR) and Economic Value of Equity (EVE), with EVE providing a period-end measurement of market value changes[206] - Interest rate risk management involves monitoring loan and deposit flows alongside investment and funding activities to determine the appropriate risk posture[203]