Document

EX-99.1 2 opbk-20220930xex991.htm EX-99.1 Document

Exhibit 99.1

OP BANCORP REPORTS NET INCOME FOR 2022 THIRD QUARTER

OF $8.7 MILLION AND DILUTED EARNINGS PER SHARE OF $0.55

2022 Third Quarter Highlights compared with 2021 Third Quarter:

•Financial Results:

◦Net income of $8.7 million, up $400 thousand, or 5%

◦Diluted earnings per share of $0.55, up $0.01, or 2%

◦Net interest income of $20.3 million, up $3.8 million, or 23%

◦Provision for loan losses of $662 thousand, a $1.5 million increase, compared to reversal of provision for loan losses of $884 thousand

◦Noninterest income of $4.8 million, up $1.3 million, or 36%

◦Noninterest expense of $12.3 million, up $2.8 million, or 30%

◦Pre-provision net revenue (1) of $12.8 million, up $2.2 million, or 21%

◦Total assets of $2.03 billion, up $349.7 million, or 21%

◦Total loans (2) of $1.65 billion, up $328.4 million, or 25%; Average loans (2) of $1.61 billion, up $305.7 million, or 23%

◦Total deposits of $1.82 billion, up $320.4 million, or 21%; Average deposits of $1.75 billion, up $305.0 million, or 21%

◦Noninterest-bearing deposits of $794.6 million, up $81.5 million, or 11%; noninterest-bearing deposits to total deposits of 43.7%, compared to 47.6%

◦Net interest margin of 4.31%, up from 4.21%

◦Return on average equity of 19.91%, compared to 21.30%

◦Return on average assets of 1.77%, compared to 2.03%

◦Efficiency ratio of 49.03%, compared to 47.28%

•Credit Quality:

◦Allowance for loan losses to gross loans of 1.14%, compared to 1.15%

◦Adjusted allowance to gross loans (1) of 1.18%, compared to 1.34%

◦Net loan recoveries to average gross loans of 0.00%

◦Nonperforming loans to gross loans of 0.14%, compared to 0.09%

◦Criticized loans (3) to gross loans of 0.22%, compared to 0.18%

•Capital Levels:

◦Quarterly cash dividend of $0.12 per share, a 20% increase from $0.10 per share

◦Capital position remained well-capitalized with a Common Equity Tier 1 (“CET1”) ratio of 11.92%.

◦Book value per common share of $11.19, up 7%

___________________________________________________________

(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.

LOS ANGELES, October 27, 2022 — OP Bancorp (the “Company”) (NASDAQ: OPBK), the holding company of Open Bank, today reported its financial results for the third quarter of 2022. Net income for the third quarter of 2022 was $8.7 million, or $0.55 per diluted common share, compared with $8.5 million, or $0.54 per diluted common share, for the second quarter of 2022, and $8.3 million, or $0.54 per diluted common share, for the third quarter of 2021.

Min Kim, President and Chief Executive Officer:

“We are pleased to report another strong quarter of balance sheet growth and earnings performance. Our total assets surpassed $2 billion for the first time as our average loans and deposits grew 23% and 21%, respectively, from a year ago. The growth was accompanied by increased net income and diluted earnings per share, expanded net interest margin, and maintenance of strong asset quality. Despite external headwinds related to supply chain bottlenecks, inflation, and market rate increases by the Federal Reserve, we remain optimistic about our future growth and performance 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 3Q22 vs.
	3Q22			2Q22			3Q21			2Q22		3Q21
Selected Income Statement Data:
Net interest income	$	20,344		$	19,079		$	16,589		6.6	%	22.6	%
Provision for (reversal of) loan losses	662			996			(884)			(33.5)		n/m
Noninterest income	4,821			5,359			3,542			(10.0)		36.1
Noninterest expense	12,338			11,503			9,519			7.3		29.6
Income tax expense	3,515			3,459			3,246			1.6		8.3
Net Income	$	8,650		$	8,480		$	8,250		2.0	%	4.8	%
Diluted earnings per share	$	0.55		$	0.54		$	0.54		1.9	%	1.9	%
Selected Balance Sheet Data:
Total loans (1)	$	1,654,660		$	1,551,973		$	1,326,287		6.6	%	24.8	%
Total deposits	$	1,816,811		$	1,741,623		$	1,496,406		4.3	%	21.4	%
Total assets	$	2,029,575		$	1,934,242		$	1,679,911		4.9	%	20.8	%
Average loans (1)	$	1,614,000		$	1,560,064		$	1,308,338		3.5	%	23.4	%
Average deposits	$	1,753,726		$	1,702,860		$	1,448,771		3.0	%	21.0	%
Credit Quality:
Nonperforming loans	$	2,251		$	2,177		$	1,052		3.4	%	114.0	%
Net (recoveries) charge-offs to average gross loans (2)	(0.00)		%	(0.01)		%	(0.00)		%	0.01	%	0.00	%
Allowance for loan losses to gross loans	1.14		%	1.19		%	1.15		%	(0.05)	%	(0.01)	%
Financial Ratios:
Return on average assets (2)	1.77		%	1.79		%	2.03		%	(0.02)	%	(0.26)	%
Return on average equity (2)	19.91		%	20.29		%	21.30		%	(0.38)	%	(1.39)	%
Net interest margin (2)	4.31		%	4.21		%	4.21		%	0.10	%	0.10	%
Common equity tier 1 capital ratio	11.92		%	12.29		%	12.63		%	(0.37)	%	(0.71)	%
Leverage ratio	9.52		%	9.48		%	9.75		%	0.04	%	(0.23)	%
Efficiency ratio (3)	49.03		%	47.07		%	47.28		%	1.96	%	1.75	%
Book value per common share	$	11.19		$	11.16		$	10.48		0.3	%	6.8	%

(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 3Q22 vs.
	3Q22		2Q22		3Q21		2Q22		3Q21
Interest Income
Interest income	$	23,234	$	20,148	$	17,355	15.3	%	33.9	%
Interest expense	2,890		1,069		766		170.3		277.3
Net interest income	$	20,344	$	19,079	$	16,589	6.6	%	22.6	%



($ in thousands)	For the Three Months Ended
	3Q22						2Q22						3Q21
	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	$	1,614,000	$	21,780	5.36	%	$	1,560,064	$	19,108	4.91	%	$	1,308,338	$	16,922	5.13	%
Total interest-earning assets	$	1,874,516	$	23,234	4.92	%	$	1,817,157	$	20,148	4.44	%	$	1,566,050	$	17,355	4.40	%
Interest-bearing Liabilities
Interest-bearing deposits	$	947,437	$	2,889	1.21	%	$	859,072	$	1,069	0.50	%	$	752,010	$	766	0.40	%
Total interest-bearing liabilities	$	947,567	$	2,890	1.21	%	$	859,072	$	1,069	0.50	%	$	752,010	$	766	0.40	%
Ratios
Net interest Income/interest rate spreads			$	20,344	3.71	%			$	19,079	3.94	%			$	16,589	4.00	%
Net interest margin					4.31	%					4.21	%					4.21	%
Total deposits / cost of deposits	$	1,753,726	$	2,889	0.65	%	$	1,702,860	$	1,069	0.25	%	$	1,448,771	$	766	0.21	%
Total funding liabilities / cost of funds	$	1,753,856	$	2,890	0.65	%	$	1,702,860	$	1,069	0.25	%	$	1,448,771	$	766	0.21	%

(1)Annualized.



($ in thousands)	For the Three Months Ended												Yield Change 3Q22 vs.
	3Q22				2Q22				3Q21
	Interest & Fees		Yield (1)		Interest & Fees		Yield (1)		Interest & Fees		Yield (1)		2Q22		3Q21
Loan Yield Component
Contractual interest rate	$	20,419	5.02	%	$	17,425	4.48	%	$	14,251	4.32	%	0.54	%	0.70	%
SBA discount accretion	1,336		0.33		1,151		0.30		1,584		0.48		0.03		(0.15)
Amortization of net deferred fees	122		0.03		493		0.13		1,249		0.38		(0.10)		(0.35)
Amortization of premium	(250)		(0.06)		(197)		(0.05)		(188)		(0.06)		(0.01)		—
Net interest recognized on nonaccrual loans	—		0.00		5		0.00		(15)		—		0.00		0.00
Prepayment penalties (2) and other fees	153		0.04		231		0.05		41		0.01		(0.01)		0.03
Yield on loans	$	21,780	5.36	%	$	19,108	4.91	%	$	16,922	5.13	%	0.45	%	0.23	%

Amortization of net deferred fees:
PPP loan forgiveness (3)	$	146	0.04	%	$	351	0.09	%	$	1,006	0.31	%	(0.05)	%	(0.27)	%
Other	(24)		-0.01		142		0.04		243		0.07		(0.05)		(0.08)
Total amortization of net deferred fees	$	122	0.03	%	$	493	0.13	%	$	1,249	0.38	%	(0.10)	%	(0.35)	%

(1)Annualized.

(2)Prepayment penalty income of $79 thousand, $118 thousand and $0 for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively, was from commercial real estate and C&I loans.

(3)As of September 30, 2022, there were unamortized net deferred fees and unaccredited discounts of $28 thousand to be recognized over the estimated life of the loans as a yield adjustment on the loans.

Impact of Hana 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
	3Q22			2Q22			3Q21
Hana Loan Purchase:
Contractual interest rate	$	1,114		$	956		$	1,094
Purchased loan discount accretion	594			592			948
Other fees	9			24			15
Total interest income	$	1,717		$	1,572		$	2,057

Effect on average loan yield (1)	0.21		%	0.19		%	0.30		%
Effect on net interest margin (1)	0.22		%	0.20		%	0.30		%



($ in thousands)	For the Three Months Ended
	3Q22						2Q22						3Q21
	Average Balance		Interest and Fees		Yield/ Rate		Average Balance		Interest and Fees		Yield/ Rate		Average Balance		Interest and Fees		Yield/ Rate
Average loan yield (1)	$	1,614,000	$	21,780	5.36	%	$	1,560,064	$	19,108	4.91	%	$	1,308,338	$	16,922	5.13	%
Adjusted average loan yield excluding purchased Hana loans (1)(2)	$	1,549,313	$	20,063	5.15	%	$	1,490,884	$	17,536	4.72	%	$	1,222,628	$	14,865	4.83	%

Net interest margin (1)	$	1,874,516	$	20,344	4.31	%	$	1,817,157	$	19,079	4.21	%	$	1,566,050	$	16,589	4.21	%
Adjusted interest margin excluding purchased Hana loans (1)(2)	$	1,809,829	$	18,627	4.09	%	$	1,747,977	$	17,507	4.01	%	$	1,480,340	$	14,532	3.91	%

(1)Annualized.

(2)See reconciliation of GAAP to non-GAAP financial measures.

Third Quarter 2022 vs. Second Quarter 2022

Net interest income increased $1.3 million, or 6.6%, primarily due to higher interest income on loans. Net interest margin was 4.31%, an increase of 10 basis points from 4.21%.

◦A $2.7 million increase in interest income on loans was primarily due to interest income increases of $1.4 million on real estate loans and $983 thousand on home mortgage loans driven by average balance increases of $58.5 million on real estate loans and $81.5 million on home mortgage loans.

◦The 10 basis point increase in net interest margin was primarily due to a 48 basis point increase in average yield on interest-earning assets.

◦Average loan yield was 5.36%, a 45 basis point increase from 4.91%, primarily due to a 54 basis point increase in contractual loan yield as a result of market rate increases by the Federal Reserve.

◦Average cost of interest-bearing deposits was 1.21%, a 71 basis point increase from 0.50%. Average cost of deposits was 0.65%, a 40 basis point increase from 0.25%, primarily due to the Federal Reserve’s rate increases.

Third Quarter 2022 vs. Third Quarter 2021

Net interest income increased $3.8 million, or 22.6%, primarily due to higher interest income on loans. Net interest margin was 4.31%, an increase of 10 basis points from 4.21%.

◦A $4.9 million increase in interest income on loans was primarily due to higher average loan balance from loan growth in home loans and real estate loans.

◦The improvement of 10 basis points in net interest margin was primarily due to a 52 basis point increase in average yield on interest-earning assets.

◦Average loan yield was 5.36%, a 23 basis point increase from 5.13%, primarily due to a 70 basis point increase in contractual loan yield as a result of market rate increases by the Federal Reserve, partially offset by a 15 basis point decrease in SBA discount accretion income as a result of lower SBA loan payoffs and a 35 basis point decrease in amortization of net deferred fees as a result of lower net deferred fees on SBA PPP loans.

◦Average yield on interesting-bearing deposits in other banks was 2.21%, a 208 basis point increase from 0.13%, primarily due to the Federal Reserve’s rate increases. Average yield on available-for-sale debt securities was 2.04%, a 105 basis point increase from 0.99%, primarily due to higher yields on securities purchased in 2022 as a result of the Federal Reserve’s rate increases.

◦Average cost of interest-bearing deposits was 1.21%, an 81 basis point increase from 0.40% primarily due to the Federal Reserve’s rate increases. Average cost of deposits was 0.65%, a 44 basis point increase from 0.21%, primarily due to the Federal Reserve’s rate increases.

Provision for loan losses

Third Quarter 2022 vs. Second Quarter 2022

The Company recorded $662 thousand provision for loan losses, a decrease of $334 thousand, compared with a $996 thousand provision for loan losses. The $662 thousand provision for loan losses was primarily due to an increase of $2.3 million in quantitative reserves from loan growth in real estate and home mortgage loans, partially offset by a decrease of $1.6 million in qualitative assessments of our loan portfolio.

Third Quarter 2022 vs. Third Quarter 2021

The Company recorded $662 thousand provision for loan losses, an increase of $1.5 million, compared with $884 thousand reversal of provision for loan losses.

Noninterest Income



($ in thousands)	For the Three Months Ended						% Change 3Q22 vs.
	3Q22		2Q22		3Q21		2Q22		3Q21
Noninterest income
Service charges on deposits	$	454	$	427	$	409	6.3	%	11.0	%
Loan servicing fees, net of amortization	610		654		599		(6.7)		1.8
Gain on sale of loans	3,490		3,873		2,188		(9.9)		59.5
Other income	267		405		346		(34.1)		(22.8)
Total noninterest income	$	4,821	$	5,359	$	3,542	(10.0)	%	36.1	%

Third Quarter 2022 vs. Second Quarter 2022

Noninterest income decreased $538 thousand, or 10.0%, primarily due to lower gains on sale of loans and other income.

◦Gains on sale of loans were $3.5 million, down $383 thousand from the second quarter of 2022, primarily due to lower average premium on loan sales. The Company sold $59.3 million in SBA loans at an average premium of 6.67%, compared to the sale of $58.6 million at an average premium of 7.02%.

◦Other income were $267 thousand, down $138 thousand from second quarter of 2022, primarily due to a decreases in credit related fees and an increase in unrealized loss on CRA qualified mutual fund.

Third Quarter 2022 vs. Third Quarter 2021

Noninterest income increased $1.3 million, or 36.1%, primarily due to higher gains on sale of loans.

◦Gains on sales of loans were $3.5 million, up $1.3 million from the third quarter of 2021. The increase was primarily due to higher sales volume partially offset by lower average premium on loan sales. The Company sold $59.3 million in SBA loans at an average premium of 6.67%, compared to the sale of $10.6 million at an average premium of 11.48%.

Noninterest Expense



($ in thousands)	For the Three Months Ended						% Change 3Q22 vs.
	3Q22		2Q22		3Q21		2Q22		3Q21
Noninterest expense
Salaries and employee benefits	$	7,343	$	7,109	$	5,724	3.3	%	28.3	%
Occupancy and equipment	1,537		1,489		1,326		3.2		15.9
Data processing and communication	586		492		448		19.1		30.8
Professional fees	602		364		308		65.4		95.5
FDIC insurance and regulatory assessments	238		192		146		24.0		63.0
Promotion and advertising	177		165		175		7.3		1.1
Directors’ fees	170		190		183		(10.5)		(7.1)
Foundation donation and other contributions	875		852		842		2.7		3.9
Other expenses	810		650		367		24.6		120.7
Total noninterest expense	$	12,338	$	11,503	$	9,519	7.3	%	29.6	%

Third Quarter 2022 vs. Second Quarter 2022

Noninterest expense increased $835 thousand, or 7.3%, primarily due to higher salaries and employee benefits, professional fees and other expenses.

◦Salaries and employee benefits were $7.3 million, up $234 thousand from the second quarter of 2022. The increase was primarily due to an increase in employee incentive accruals and salaries as a result of 13 additional employees.

◦Professional fees were $602 thousand, up $238 thousand from the second of 2022, primarily due to increases in other consulting fees.

◦Other expenses were $810 thousand, up $160 thousand from the second of 2022, primarily due to an increase in business development expense.

Third Quarter 2022 vs. Third Quarter 2021

Noninterest expense increased $2.8 million, or 29.6%, primarily due to higher salaries and employee benefits and other expenses.

◦Salaries and employee benefits were $7.3 million, up $1.6 million from the third quarter of 2021. The increase was primarily due to an increase in employee incentive accruals and salaries as a result of 30 additional employees to support continued growth of the Company.

◦Occupancy and equipment expenses were $1.5 million, up $211 thousand from the third quarter of 2021, primarily due to a new branch opened in the first quarter of 2022.

◦Professional fees were $602 thousand, up $294 thousand from the third of 2021, primarily due to increases in other consulting fees.

◦Other expenses were $810 thousand, up $443 thousand from the third quarter of 2021, primarily due to an increase in business development expense.

Income Tax Expense

Third Quarter 2022 vs. Second Quarter 2022

Income tax expense was $3.5 million, and the effective tax rate was 28.9%, compared to income tax expense of $3.5 million and the effective rate of 29.0% for the second quarter of 2022.

Third Quarter 2022 vs. Third Quarter 2021

Income tax expense was $3.5 million and the effective tax rate was 28.9%, compared to income tax expense of $3.2 million and the effective rate of 28.2% for the third quarter of 2021.

Balance Sheet Highlights

Loans



($ in thousands)	As of						% Change 3Q22 vs.
	3Q22		2Q22		3Q21		2Q22		3Q21
Real estate loans	$	830,125	$	776,785	$	688,430	6.9	%	20.6	%
SBA loans (1)	232,569		247,413		303,625		(6.0)		(23.4)
C&I loans	133,855		128,620		123,422		4.1		8.5
Home mortgage loans	419,469		331,362		115,255		26.6		263.9
Consumer & other loans	2,000		538		1,089		271.7		83.7
Gross loans	$	1,618,018	$	1,484,718	$	1,231,821	9.0	%	31.4	%

(1)Includes PPP loans of $1.1 million, $8.1 million and $69.3 million as of September 30, 2022, June 30, 2022 and September 30, 2021, 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 3Q22 vs.
	3Q22		2Q22		3Q21		2Q22		3Q21
Real estate loans	$	43,929	$	61,924	$	27,671	(29.1)	%	58.8	%
SBA loans (1)	43,984		55,085		57,541		(20.2)		(23.6)
C&I loans	9,720		2,718		35,279		257.6		(72.4)
Home mortgage loans	68,842		30,345		13,437		126.9		412.3
Consumer & other loans	2,500		—		—		—		—
Gross loans	$	168,975	$	150,072	$	133,928	12.6	%	26.2	%

(1)There were no new PPP originations for the periods indicated.

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



($ in thousands)	For the Three Months Ended
	3Q22		2Q22		3Q21
Gross loans, beginning	$	1,484,718	$	1,428,410	$	1,245,866
New originations	168,975		150,072		152,913
Net line advances	18,642		(46,773)		(24,018)
Purchases	37,146		56,455		—
Sales	(60,307)		(57,954)		(22,506)
Paydowns	(19,084)		(16,011)		(14,675)
Payoffs	(37,817)		(33,098)		(46,409)
PPP Payoffs	(7,206)		(14,347)		(36,108)
Other	32,951		17,964		(23,242)
Total	133,300		56,308		(14,045)
Gross loans, ending	$	1,618,018	$	1,484,718	$	1,231,821

As of September 30, 2022 vs. June 30, 2022

Gross loans were $1.62 billion at September 30, 2022, up $133.3 million from June 30, 2022, primarily due to new loan originations and home mortgage loan purchases.

Home mortgage loans of $37.1 million were purchased from third party mortgage originators, compared to $56.5 million in the second quarter of 2022. New loan originations and loan payoffs were $169.0 million and $45.0 million for the third quarter of 2022, compared with $150.1 million and $47.4 million for the second quarter of 2022, respectively. Of the PPP loans, $7.2 million in principal amount has been forgiven under the program, compared to a $14.3 million of PPP loans forgiven in the second quarter of 2022.

As of September 30, 2022 vs. September 30, 2021

Gross loans were $1.62 billion at September 30, 2022, up $386.2 million from September 30, 2021, primarily due to new loan originations of $609.2 million and home mortgage loan purchases of $224.1 million, partially offset by loan sales of $211.0 million and loan payoffs of $233.6 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:



($ in thousands)	As of
	3Q22				2Q22				3Q21
	%		Rate		%		Rate		%		Rate
Fixed rate	35.2	%	4.39	%	34.9	%	4.19	%	32.2	%	4.05	%
Hybrid rate	34.1		4.59		28.2		4.47		22.4		4.55
Variable rate	30.7		6.97		36.9		5.77		45.4		5.08
Gross loans	100.0	%	5.25	%	100.0	%	4.85	%	100.0	%	4.63	%

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 September 30, 2022
	Within One Year				One Year Through Five Years				After Five Years				Total
	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
Fixed rate	$	33,014	4.32	%	$	325,509	4.47	%	$	211,033	4.29	%	$	569,556	4.39	%
Hybrid rate	28,577		4.35		52,341		5.12		470,087		4.54		551,005		4.59
Variable rate	76,193		6.83		132,162		6.84		289,102		7.08		497,457		6.97
Gross loans	$	137,784	5.71	%	$	510,012	5.15	%	$	970,222	5.24	%	$	1,618,018	5.25	%

Deposits



($ in thousands)	As of												% Change 3Q22 vs.
	3Q22				2Q22				3Q21
	Amount		%		Amount		%		Amount		%		2Q22		3Q21
Noninterest-bearing deposits	$	794,631	43.7	%	$	820,311	47.1	%	$	713,141	47.6	%	(3.1)	%	11.4	%
Money market deposits and others	524,911		28.9	%	519,389		29.8		351,186		23.5	%	1.1		49.5
Time deposits	497,269		27.4	%	401,923		23.1		432,079		28.9	%	23.7		15.1
Total deposits	$	1,816,811	100.0	%	$	1,741,623	100.0	%	$	1,496,406	100.0	%	4.3	%	21.4	%

As of September 30, 2022 vs. June 30, 2022

Total deposits were $1.82 billion as of September 30, 2022, up $75.2 million from June 30, 2022, primarily driven by growth in money market deposits and time deposits, partially offset by a decrease in noninterest-bearing deposits. Money market deposits and time deposits grew $5.5 million and $95.3 million, respectively, due to management’s actions to support loan growth during the third quarter of 2022 including upward adjustments of interest rates on customer deposits and increases in wholesale deposits. Noninterest-bearing deposits decreased $25.7 million, primarily due to decreases from Special Deposit Center as a result of lower transaction volumes, specifically escrow and 1031 exchange accounts.

As of September 30, 2022 vs. September 30, 2021

Total deposits were $1.82 billion as of September 30, 2022, up $320.4 million from September 30, 2021, primarily driven by growth in money market and noninterest-bearing deposits. Money market deposits were $524.9 million, up $173.7 million from $351.2 million at September 30, 2021. Noninterest-bearing deposits were $794.6 million, up $81.5 million from $713.1 million as of September 30, 2021. The growth in noninterest-bearing deposits was primarily due to addition of new customers from our Specialty Deposit Center.

The following table sets forth the maturity of time deposits as of September 30, 2022:



	As of September 30, 2022
($ 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 $250,000)	$	76,174		$	15,362		$	33,682		$	149,265		$	3,302		$	277,785
Time deposits ($250,000 or less)	51,818			39,287			37,942			84,080			6,357			219,484
Total time deposits	$	127,992		$	54,649		$	71,624		$	233,345		$	9,659		$	497,269
Weighted average rate	1.65		%	1.29		%	1.07		%	1.95		%	1.68		%	1.63		%

Capital and Cash Dividend



	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	13.10	%	12.97	%	10.00	%	10.50	%
Tier 1 risk-based capital ratio	11.92	%	11.79	%	8.00	%	8.50	%
Common equity tier 1 ratio	11.92	%	11.79	%	6.50	%	7.00	%
Leverage ratio	9.52	%	9.41	%	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 bonus to executive officers.



($ in thousands)	Basel III									% Change 3Q22 vs.
	3Q22			2Q22			3Q21			2Q22		3Q21
Risk-Based Capital Ratios:
Total risk-based capital ratio	13.10		%	13.51		%	13.81		%	(0.41)	%	(0.71)	%
Tier 1 risk-based capital ratio	11.92		%	12.29		%	12.63		%	(0.37)	%	(0.71)	%
Common equity tier 1 ratio	11.92		%	12.29		%	12.63		%	(0.37)	%	(0.71)	%
Leverage ratio	9.52		%	9.48		%	9.75		%	0.04	%	(0.23)	%
Risk-weighted Assets	$	1,571,593		$	1,465,707		$	1,251,867		7.22	%	25.54	%

Capital ratios remained strong during the quarter. Our CET1 and total risk-based capital ratios were 11.92% and 13.10% as of September 30, 2022, down 71 basis points and 71 basis points from a year ago, respectively. The decreases in capital ratios were primarily due to year-over-year asset growth.

The Company’s Board of Directors has declared a quarterly cash dividend of $0.12 per share of its common stock. The cash dividend is payable on or about November 24, 2022 to all shareholders of record as of the close of business on November 10, 2022.

The Company did not repurchase any shares during the third quarter of 2022. 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 September 30, 2022.

Asset Quality



($ in thousands)	As of and For the Three Months Ended									% Change 3Q22 vs.
	3Q22			2Q22			3Q21			2Q22		3Q21
Nonperforming loans (1)	$	2,251		$	2,177		$	1,052		3.4	%	114.0	%
OREO	—			—			—			—		—
Total nonperforming assets	$	2,251		$	2,177		$	1,052		3.4	%	114.0	%

Nonperforming loans to gross loans	0.14		%	0.15		%	0.09		%	(0.01)	%	0.05	%
Nonperforming assets to total assets	0.11		%	0.11		%	0.06		%	0.00	%	0.05	%

Criticized (2) Loan:
Special mention loans	$	—		$	—		$	—		—	%	—	%
Classified loans (3)	3,542			3,020			2,201			17.3		60.9
Total criticized loans	$	3,542		$	3,020		$	2,201		17.3	%	60.9	%

Criticized (2) loans to gross loans	0.22		%	0.27		%	0.18		%	(0.05)	%	0.04	%
Classified loans (3) to gross loans	0.22		%	0.27		%	0.18		%	(0.05)	%	0.04	%

Allowance for loan losses, beginning	$	17,702		$	16,672		$	14,687		6.2	%	20.5	%
Provision for (reversal of) loan losses (4)	662			996			(557)			(33.5)		n/m
Gross charge-offs	—			(18)			—			(100.0)		—
Gross recoveries	5			52			4			(90.4)		25.0
Allowance for loan losses, ending (5)	$	18,369		$	17,702		$	14,134		3.8	%	30.0	%

Allowance for loan losses ratios:
As a % of gross loans	1.14		%	1.19		%	1.15		%	(0.05)	%	(0.01)	%
As an adjusted % of gross loans (6)	1.18		%	1.25		%	1.34		%	(0.07)	%	(0.16)	%
As a % of nonperforming loans	816		%	813		%	1,344		%	3	%	(528)	%
As a % of nonperforming assets	816		%	813		%	1,344		%	3	%	(528)	%
Net (recoveries) charge-offs to average gross loans	(0.00)		%	(0.01)		%	0.00		%	0.01	%	0.00	%

(1)Includes the guaranteed portion of SBA loans totaling $442 thousand and $346 thousand as of September 30, 2022 and June 30, 2022, respectively.

(2)Includes special mention, substandard, doubtful and loss categories.

(3)Includes substandard, doubtful and loss categories.

(4)Excludes reversal of uncollectible accrued interest receivable of $327 thousand for the three months ended September 30, 2021.

(5)Excludes allowance for uncollectible accrued interest receivable of $465 thousand as of September 30, 2021.

(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 1.18%.

◦Allowance for loan losses increased $4.2 million to $18.4 million from a year ago. Excluding the impacts of the purchased Hana loans, PPP loans, adjusted allowance to gross loans ratio was 1.18% as of September 30, 2022.

◦Criticized loans increased by $1.3 million or 60.9% from a year ago, and the criticized loans to gross loans ratio increased by 4 basis points, primarily due to home mortgage loans that were categorized as Substandard in the fourth quarter of 2021. Criticized loans are generally consistent

with the Special Mention, Substandard, Doubtful and Loss categories defined by regulatory authorities.

◦Nonperforming assets increased $1.2 million to $2.3 million, or 0.11% of total assets from a year ago. The increase in nonperforming assets was primarily due to home mortgage loans that were placed on nonaccrual in the fourth quarter of 2021. As of September 30, 2022, $442 thousand of nonaccrual loans was the guaranteed portion of SBA loans that are in liquidation. The Company did not have OREO as of September 30, 2022 or 2021.

◦Net recoveries were $5 thousand or 0.00% of average loans in the third quarter of 2022, compared to net recoveries of $4 thousand in the third quarter of 2021.

COVID-19 Pandemic Update

As of September 30, 2022, no loan was under COVID-19 loan payment modification.

Since the PPP’s inception through September 30, 2022, we have funded $154.5 million, and $153.4 million of principal forgiveness has been provided on qualifying PPP loans.

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
		3Q22		2Q22		3Q21
Interest income		$	23,234	$	20,148	$	17,355
Interest expense		2,890		1,069		766
Net interest income		20,344		19,079		16,589
Noninterest income		4,821		5,359		3,542
Noninterest expense		12,338		11,503		9,519
Pre-provision net revenue	(a)	$	12,827	$	12,935	$	10,612
Reconciliation to net income:
Provision for (reversal of) loan losses	(b)	$	662	$	996	$	(884)
Income tax expense	(c)	3,515		3,459		3,246
Net income	(a)+(b) +(c)	$	8,650	$	8,480	$	8,250

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 September 30, 2022, June 30, 2022 and September 30, 2021 excluded the impacts of contractual interest and discount accretion of the purchased Hana 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
		3Q22			2Q22			3Q21
Yield on Average Loans
Interest income on loans		$	21,780		$	19,108		$	16,922
Less: interest income on purchased Hana loans		1,717			1,572			2,057
Adjusted interest income on loans	(a)	$	20,063		$	17,536		$	14,865

Average loans		$	1,614,000		$	1,560,064		$	1,308,338
Less: Average purchased Hana loans		64,687			69,180			85,710
Adjusted average loans	(b)	$	1,549,313		$	1,490,884		$	1,222,628

Average loan yield (1)		5.36		%	4.91		%	5.13		%
Effect on average loan yield (1)		0.21		%	0.19		%	0.30		%
Adjusted average loan yield (1)	(a)/(b)	5.15		%	4.72		%	4.83		%

Net Interest Margin
Net interest income		$	20,344		$	19,079		$	16,589
Less: interest income on purchased Hana loans		1,717			1,572			2,057
Adjusted net interest income	(c)	$	18,627		$	17,507		$	14,532

Average interest-earning assets		$	1,874,516		$	1,817,157		$	1,566,050
Less: Average purchased Hana loans		64,687			69,180			85,710
Adjusted average interest-earning assets	(d)	$	1,809,829		$	1,747,977		$	1,480,340

Net interest margin (1)		4.31		%	4.21		%	4.21		%
Effect on net interest margin (1)		0.22		%	0.20		%	0.30		%
Adjusted net interest margin (1)	(c)/(d)	4.09		%	4.01		%	3.91		%

(1)Annualized.

Adjusted allowance to gross loans ratio removes the impacts of purchased Hana 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)		For the Three Months Ended
		3Q22			2Q22			3Q21
Gross loans		$	1,618,018		$	1,484,718		$	1,231,821
Less: Purchased Hana loans		(61,899)			(66,946)			(83,025)
PPP loans (1)		(1,022)			(7,151)			(64,574)
Adjusted gross loans	(a)	$	1,555,097		$	1,410,621		$	1,084,222

Accrued interest receivable on loans		$	5,203		$	4,602		$	3,659
Less: Accrued interest receivable on purchased Hana loans		(323)			(290)			(375)
Accrued interest receivable on PPP loans (2)		(16)			(93)			(416)
Add: Allowance on accrued interest receivable		—			—			465
Adjusted accrued interest receivable on loans	(b)	$	4,864		$	4,219		$	3,333

Adjusted gross loans and accrued interest receivable	(a)+(b) =(c)	$	1,559,961		$	1,414,840		$	1,087,555

Allowance for loan losses		$	18,369		$	17,702		$	14,134
Add: Allowance on accrued interest receivable		—			—			465
Adjusted Allowance	(d)	$	18,369		$	17,702		$	14,599

Adjusted allowance to gross loans ratio	(d)/(c)	1.18		%	1.25		%	1.34		%

(1)Excludes purchased PPP loans of $57 thousand, $942 thousand and $4.7 million as of September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

(2)Excludes purchased accrued interest receivable on PPP loans of $1 thousand, $13 thousand and $30 thousand as of September 30, 2022, June 30, 2022 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 ten full service branch offices in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Cerritos, Gardena, Buena Park, and Santa Clara, California and Carrollton, Texas. 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 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: 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, 2021 and in our other subsequent filings with the Securities and Exchange Commission.

Contact

Investor Relations

OP Bancorp

Christine Oh

EVP & CFO

213.892.1192

Christine.oh@myopenbank.com

Consolidated Balance Sheets (unaudited)



($ in thousands)	As of						% Change 3Q22 vs.
	3Q22		2Q22		3Q21		2Q22		3Q21
Assets
Cash and due from banks	$	25,516	$	14,937	$	17,617	70.8	%	44.8	%
Interest-bearing deposits in other banks	81,765		117,760		170,528		(30.6)		(52.1)
Cash and cash equivalents	107,281		132,697		188,145		(19.2)		(43.0)
Securities available for sale, at fair value	186,438		174,814		102,535		6.6		81.8
Other investments	12,074		12,205		11,025		(1.1)		9.5
Loans held for sale	36,642		67,255		94,466		(45.5)		(61.2)
Real estate loans	830,125		776,785		688,430		6.9		20.6
SBA loans (1)	232,569		247,413		303,625		(6.0)		(23.4)
C&I loans	133,855		128,620		123,422		4.1		8.5
Home mortgage loans	419,469		331,362		115,255		26.6		263.9
Consumer & other loans	2,000		538		1,089		271.7		83.7
Gross loans, net of unearned income	1,618,018		1,484,718		1,231,821		9.0		31.4
Allowance for loan losses	(18,369)		(17,702)		(14,134)		3.8		30.0
Net loans receivable	1,599,649		1,467,016		1,217,687		9.0		31.4
Premises and equipment, net	4,383		4,493		4,199		(2.4)		4.4
Accrued interest receivable, net	5,856		5,112		3,931		14.6		49.0
Servicing assets	12,889		12,708		12,389		1.4		4.0
Company owned life insurance	21,464		21,317		11,070		0.7		93.9
Deferred tax assets	17,296		13,371		5,247		29.4		229.6
Operating right-of-use assets	8,265		8,036		9,270		2.8		(10.8)
Other assets	17,338		15,218		19,947		13.9		(13.1)
Total assets	$	2,029,575	$	1,934,242	$	1,679,911	4.9	%	20.8	%
Liabilities and Shareholders' Equity
Liabilities
Noninterest bearing	$	794,631	$	820,311	$	713,141	(3.1)	%	11.4	%
Money market and others	524,911		519,389		351,186		1.1		49.5
Time deposits greater than $250,000	277,785		237,634		209,091		16.9		32.9
Other time deposits	219,484		164,289		222,988		33.6		(1.6)
Total deposits	1,816,811		1,741,623		1,496,406		4.3		21.4
Federal Home Loan Bank advances	10,000		—		—		—		—
Accrued interest payable	1,099		612		575		79.6		91.1
Operating lease liabilities	9,485		9,335		10,703		1.6		(11.4)
Other liabilities	22,085		13,180		13,603		67.6		62.4
Total liabilities	1,859,480		1,764,750		1,521,287		5.4		22.2
Shareholders’ equity
Common stock	78,782		78,718		78,718		0.1		0.1
Additional paid-in capital	9,424		9,089		8,491		3.7		11.0
Retained earnings	99,487		92,659		71,436		7.4		39.3
Accumulated other comprehensive (loss) income	(17,598)		(10,974)		(21)		60.4		n/m
Total shareholders’ equity	170,095		169,492		158,624		0.4		7.2
Total liabilities and shareholders' equity	$	2,029,575	$	1,934,242	$	1,679,911	4.9	%	20.8	%

(1)Includes SBA Paycheck Protection Program (“PPP”) loans of $1.1 million, $8.1 million and $69.3 million as of September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

Consolidated Statements of Income (unaudited)



($ in thousands, except share and per share data)	For the Three Months Ended						% Change 3Q22 vs.
	3Q22		2Q22		3Q21		2Q22		3Q21
Interest income
Interest and fees on loans	$	21,780	$	19,108	$	16,922	14.0	%	28.7	%
Interest on securities available for sale	881		703		269		25.3		227.5
Other interest income	573		337		164		70.0		249.4
Total interest income	23,234		20,148		17,355		15.3		33.9
Interest expense
Interest on deposits	2,890		1,069		766		170.3		277.3
Total interest expense	2,890		1,069		766		170.3		277.3
Net interest income	20,344		19,079		16,589		6.6		22.6
Provision for (reversal of) loan losses	662		996		(884)		(33.5)		(174.9)
Net interest income after provision for loan losses	19,682		18,083		17,473		8.8		12.6
Noninterest income
Service charges on deposits	454		427		409		6.3		11.0
Loan servicing fees, net of amortization	610		654		599		(6.7)		1.8
Gain on sale of loans	3,490		3,873		2,188		(9.9)		59.5
Other income	267		405		346		(34.1)		(22.8)
Total noninterest income	4,821		5,359		3,542		(10.0)		36.1
Noninterest expense
Salaries and employee benefits	7,343		7,109		5,724		3.3		28.3
Occupancy and equipment	1,537		1,489		1,326		3.2		15.9
Data processing and communication	586		492		448		19.1		30.8
Professional fees	602		364		308		65.4		95.5
FDIC insurance and regulatory assessments	238		192		146		24.0		63.0
Promotion and advertising	177		165		175		7.3		1.1
Directors’ fees	170		190		183		(10.5)		(7.1)
Foundation donation and other contributions	875		852		842		2.7		3.9
Other expenses	810		650		367		24.6		120.7
Total noninterest expense	12,338		11,503		9,519		7.3		29.6
Income before income tax expense	12,165		11,939		11,496		1.9		5.8
Income tax expense	3,515		3,459		3,246		1.6		8.3
Net income	$	8,650	$	8,480	$	8,250	2.0	%	4.8	%

Book value per share	$	11.19	$	11.16	$	10.48	0.3	%	6.8	%
Earnings per share - Basic	$	0.56	$	0.55	$	0.54	1.8	%	3.7	%
Earnings per share - Diluted	$	0.55	$	0.54	$	0.54	1.9	%	1.9	%

Shares of common stock outstanding	15,199,840		15,189,203		15,133,407		0.1	%	0.4	%
Weighted Average Shares:
- Basic	15,195,826		15,141,975		15,133,407		0.4	%	0.4	%
- Diluted	15,275,156		15,234,577		15,200,613		0.3	%	0.5	%

Key Ratios



	For the Three Months Ended						Change 3Q22 vs.
	3Q22		2Q22		3Q21		2Q22		3Q21
Return on average assets (ROA) (1)	1.77	%	1.79	%	2.03	%	—	%	(0.3)	%
Return on average equity (ROE) (1)	19.91	%	20.29	%	21.30	%	(0.4)	%	(1.4)	%
Net interest margin (1)	4.31	%	4.21	%	4.21	%	0.1	%	0.1	%
Efficiency ratio	49.03	%	47.07	%	47.28	%	2.0	%	1.8	%

Total risk-based capital ratio	13.10	%	13.51	%	13.81	%	(0.4)	%	(0.7)	%
Tier 1 risk-based capital ratio	11.92	%	12.29	%	12.63	%	(0.4)	%	(0.7)	%
Common equity tier 1 ratio	11.92	%	12.29	%	12.63	%	(0.4)	%	(0.7)	%
Leverage ratio	9.52	%	9.48	%	9.75	%	—	%	(0.2)	%

(1)Annualized.

Consolidated Statements of Income (unaudited)



($ in thousands, except share and per share data)	For the Nine Months Ended
	3Q22		3Q21		% Change
Interest income
Interest and fees on loans	$	58,145	$	45,177	28.7	%
Interest on securities available for sale	2,114		723		192.4
Other interest income	1,067		436		144.7
Total interest income	61,326		46,336		32.4
Interest expense
Interest on deposits	4,613		2,406		91.7
Total interest expense	4,613		2,406		91.7
Net interest income	56,713		43,930		29.1
Provision for (reversal of) loan losses	1,999		(1,376)		(245.3)
Net interest income after provision for loan losses	54,714		45,306		20.8
Noninterest income
Service charges on deposits	1,269		1,157		9.7
Loan servicing fees, net of amortization	1,711		1,432		19.5
Gain on sale of loans	10,601		5,280		100.8
Other income	815		859		(5.1)
Total noninterest income	14,396		8,728		64.9
Noninterest expense
Salaries and employee benefits	20,109		15,693		28.1
Occupancy and equipment	4,404		3,795		16.0
Data processing and communication	1,571		1,363		15.3
Professional fees	1,290		925		39.5
FDIC insurance and regulatory assessments	637		401		58.9
Promotion and advertising	531		528		0.6
Directors’ fees	537		427		25.8
Foundation donation and other contributions	2,542		1,989		27.8
Other expenses	1,882		1,153		63.2
Total noninterest expense	33,503		26,274		27.5
Income before income tax expense	35,607		27,760		28.3
Income tax expense	10,325		8,054		28.2
Net income	$	25,282	$	19,706	28.3	%

Book value per share	$	11.19	$	10.48	6.8	%
Earnings per share - Basic	$	1.63	$	1.29	26.4	%
Earnings per share - Diluted	$	1.62	$	1.29	25.6	%

Shares of common stock outstanding	15,199,840		15,133,407		0.4	%
Weighted Average Shares:
- Basic	15,158,749		15,071,327		0.6	%
- Diluted	15,246,345		15,133,573		0.7	%

Key Ratios



	For the Nine Months Ended
	3Q22		3Q21		Change
Return on average assets (ROA) (1)	1.80	%	1.73	%	0.1	%
Return on average equity (ROE) (1)	19.91	%	17.55	%	2.4	%
Net interest margin (1)	4.22	%	4.01	%	0.2	%
Efficiency ratio	47.11	%	49.90	%	(2.8)	%

Total risk-based capital ratio	13.10	%	13.81	%	(0.7)	%
Tier 1 risk-based capital ratio	11.92	%	12.63	%	(0.7)	%
Common equity tier 1 ratio	11.92	%	12.63	%	(0.7)	%
Leverage ratio	9.52	%	9.75	%	(0.2)	%

(1)Annualized.

Asset Quality



($ in thousands)	As of and For the Three Months Ended
	3Q22			2Q22			3Q21
Nonaccrual Loans (1)	$	2,251		$	2,172		$	1,052
Loans 90 days or more past due, accruing	—			5			—
Accruing restructured loans	—			—			—
Nonperforming loans	2,251			2,177			1,052
Other real estate owned ("OREO")	—			—			—
Nonperforming assets	$	2,251		$	2,177		$	1,052

Criticized loans (2) by loan type:
SBA loans	$	1,817		$	1,738		$	1,881
C&I loans	742			297			320
Home mortgage loans	983			985			—
Total criticized loans (2)	$	3,542		$	3,020		$	2,201

Nonperforming assets/total assets	0.11		%	0.11		%	0.06		%
Nonperforming assets / gross loans plus OREO	0.14		%	0.15		%	0.09		%
Nonperforming loans / gross loans	0.14		%	0.15		%	0.09		%
Allowance for loan losses / nonperforming loans	816		%	813		%	1344		%
Allowance for loan losses / nonperforming assets	816		%	813		%	1344		%
Allowance for loan losses / gross loans	1.14		%	1.19		%	1.15		%
Criticized loans (2) / gross loans	0.22		%	0.20		%	0.18		%
Classified loans / gross loans	0.22		%	0.20		%	0.18		%

Net (recoveries) charge-offs	$	(5)		$	(34)		$	(4)
Net (recoveries) charge-offs to average gross loans (3)	(0.00)		%	(0.01)		%	(0.00)		%

(1)Includes the guaranteed portion of SBA loans that are in liquidation totaling $442 thousand and $346 thousand as of September 30, 2022 and June 30, 2022, respectively.

(2)Consists of special mention, substandard, doubtful and loss categories.

(3)Annualized.



($ in thousands)	3Q22		2Q22		3Q21
Accruing delinquent loans 30-89 days past due
30-59 days	$	360	$	447	$	263
60-89 days	845		—		1,064
Total (1)	$	1,205	$	447	$	1,327

(1)Includes the guaranteed portion of PPP loans totaling $756 thousand as of September 30, 2022.

Average Balance Sheet, Interest and Yield/Rate Analysis



	For the Three Months Ended
	3Q22						2Q2022						3Q21
($ 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	$	75,599	$	427	2.21	%	$	79,628	$	197	0.98	%	$	137,662	$	47	0.13	%
Federal funds sold and other investments	12,221		146		4.78		11,966		140		4.70		11,041		117		4.25
Available-for-sale debt securities, at fair value	172,696		881		2.04		165,499		703		1.70		109,009		269		0.99
Real estate loans	810,158		10,144		4.97		751,610		8,743		4.67		678,642		7,680		4.49
SBA loans	286,903		5,850		8.09		353,138		5,707		6.48		403,279		6,835		6.72
C&I loans	140,098		1,952		5.53		160,291		1,811		4.53		107,614		1,074		3.96
Home mortgage loans	375,804		3,820		4.07		294,341		2,837		3.86		117,825		1,317		4.47
Consumer & other loans	1,037		14		4.88		684		10		5.49		978		16		6.49
Loans (2)	1,614,000		21,780		5.36		1,560,064		19,108		4.91		1,308,338		16,922		5.13
Total interest-earning assets	1,874,516		23,234		4.92		1,817,157		20,148		4.44		1,566,050		17,355		4.40
Noninterest-earning assets	83,398						73,594						56,807
Total assets	$	1,957,914					$	1,890,751					$	1,622,857

Interest-bearing liabilities:
Money market deposits and others	$	502,166	$	1,506	1.19	%	$	470,013	$	503	0.43	%	$	368,507	$	299	0.32	%
Time deposits	445,271		1,383		1.23		389,059		566		0.58		383,503		467		0.48
Total interest-bearing deposits	947,437		2,889		1.21		859,072		1,069		0.50		752,010		766		0.40
Borrowings	130		1		3.00		—		—		—		—		—		—
Total interest-bearing liabilities	947,567		2,890		1.21		859,072		1,069		0.50		752,010		766		0.40
Noninterest-bearing liabilities:
Noninterest-bearing deposits	806,289						843,788						696,761
Other noninterest-bearing liabilities	30,258						20,720						19,169
Total noninterest-bearing liabilities	836,547						864,508						715,930
Shareholders’ equity	173,800						167,171						154,917
Total liabilities and shareholders’ equity	$	1,957,914					$	1,890,751					$	1,622,857

Net interest income / interest rate spreads			$	20,344	3.71	%			$	19,079	3.94	%			$	16,589	4.00	%
Net interest margin					4.31	%					4.21	%					4.21	%

Cost of deposits & cost of funds:
Total deposits / cost of deposits	$	1,753,726	$	2,889	0.65	%	$	1,702,860	$	1,069	0.25	%	1,448,771		$	766	0.21	%
Total funding liabilities / cost of funds	$	1,753,856	$	2,890	0.65	%	$	1,702,860	$	1,069	0.25	%	1,448,771		$	766	0.21	%

(1)Annualized.

(2)Includes loans held for sale.

Average Balance Sheet, Interest and Yield/Rate Analysis



	For the Nine Months Ended
	3Q22						3Q21
($ in thousands)	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	$	80,659	$	665	1.09	%	$	111,799	$	97	0.11	%
Federal funds sold and other investments	11,720		402		4.59		10,668		339		4.22
Available-for-sale debt securities, at fair value	165,094		2,114		1.71		103,699		723		0.93
Real estate loans	757,950		26,689		4.71		667,547		22,870		4.58
SBA loans	332,659		17,392		6.99		339,968		14,931		5.87
C&I loans	152,189		5,300		4.66		108,402		3,129		3.86
Home mortgage loans	296,331		8,731		3.93		122,008		4,200		4.59
Consumer & other loans	866		33		5.04		1,115		47		5.61
Loans (2)	1,539,995		58,145		5.05		1,239,040		45,177		4.87
Total interest-earning assets	1,797,468		61,326		4.56		1,465,206		46,336		4.23
Noninterest-earning assets	73,410						52,573
Total assets	$	1,870,878					$	1,517,779

Interest-bearing liabilities:
Money market deposits and others	$	461,821	$	2,260	0.65	%	$	357,525	$	851	0.32	%
Time deposits	403,242		2,352		0.78		370,715		1,555		0.56
Total interest-bearing deposits	865,063		4,612		0.71		728,240		2,406		0.44
Borrowings	44		1		3.00		2,657		—		—
Total interest-bearing liabilities	865,107		4,613		0.71		730,897		2,406		0.44
Noninterest-bearing liabilities:
Noninterest-bearing deposits	811,263						619,437
Other noninterest-bearing liabilities	25,213						17,726
Total noninterest-bearing liabilities	836,476						637,163
Shareholders’ equity	169,295						149,719
Total liabilities and shareholders’ equity	$	1,870,878					1,517,779

Net interest income / interest rate spreads			$	56,713	3.85	%			$	43,930	3.79	%
Net interest margin					4.22	%					4.01	%

Cost of deposits & cost of funds:
Total deposits / cost of deposits	$	1,676,326	$	4,612	0.37	%	1,347,677		$	2,406	0.24	%
Total funding liabilities / cost of funds	$	1,676,370	$	4,613	0.37	%	1,350,334		$	2,406	0.24	%

(1)Annualized.

(2)Includes loans held for sale.