OP Bancorp
For the period ended Mar 31, 2025. Filed May 9, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
OPBK$14.76-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001628280-24-047832
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001628280-25-024201
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 161 previous paragraphs and 135 current paragraphs.
85 unchanged; 35 reworded; 15 added; 35 removed; 6 previous and 0 current paragraphs rearranged.
Tables are not compared: 29 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
More recently, the Federal Reserve Board Open Markets Committee, colloquially known as the “Fed,” which controls benchmark interest rates in the United States, has made small decreases in benchmark rates, but has taken a much more incremental approach to significant reductions in response to what appears to be improving economic data. The political climate in the United States appears to remain volatile and uncertain, making it difficult to predict whether and when the Fed may adjust rates further. These factors make it difficult for our management to predict and respond to economic conditions, and exacerbates the challenges of pricing loan and longer-term deposit products.
Current report
•Total assets were $2.51 billion, an increase of $147.0 million, or 6.2%, from $2.37 billion.
Current report
•Gross loans were $2.04 billion, an increase of $87.0 million, or 4.4%, from $1.96 billion.
Current report
•Total deposits were $2.19 billion, an increase of $162.6 million, or 8.0%, from $2.03 billion.
Current report
•Shareholders’ equity was $210.1 million, an increase of $5.1 million, or 2.5%, from $205.0 million.
Current report
•Net interest income decreased to $17.4 million, an increase of $1.4 million, or 9.0%, from $16.0 million.
Current report
Interest income on interest-bearing deposits in other banks increased $383 thousand, or 38.7%, to $1.4 million for the three months ended March 31, 2025, compared with $1.0 million for the same period of 2024. The increase was primarily due to a $51.0 million, or 69.8%, increase in average balance of interest-bearing deposits in other banks, partially offset by a 93 basis point decrease in average yield.
Current report
Net interest margin decreased 5 basis points to 3.01% for the three months ended March 31, 2025 from 3.06% for the same period of 2024, as the negative impact from the 30 basis point decrease in average yield on loans outweighed the positive impacts from average balance increases and a 17 basis point increase in net interest spread.
Current report
Noninterest income for the three months ended March 31, 2025 was $4.8 million, an increase of $1.2 million, or 34.3%, compared to $3.6 million for the same period of 2024, primarily due to higher service charges on deposits, loan servicing fees, gain on sale of loans, and other income.
Current report
Other income was $790 thousand, an increase of $291 thousand from $499 thousand, primarily due to an increase in credit related fees collected and a decrease in unrealized loss of CRA-qualified mutual fund driven by market interest rate changes.
Current report
Noninterest expense for the three months ended March 31, 2025 was $13.8 million, compared with $12.2 million for the same period of 2024, an increase of $1.7 million, or 13.6%, primarily due to higher salaries and employee benefits and other expenses, partially offset by lower data processing and communication.
Current report
Salaries and employee benefits for the three months ended March 31, 2025 was $8.8 million, an increase of $935 thousand, or 11.9%, compared with $7.8 million for the same period of 2024. The increase was primarily due to an increase in our employee headcount increased to 240 from 228.
Current report
Other expenses increased $816 thousand, primarily due to an increase in credit related expenses and an increase in customer services expenses related to the increase in the number of analysis accounts.
Current report
Data processing and communication for the three months ended March 31, 2025 was $296 thousand, a decrease of $191 thousand, or 39.2%, compared with $487 thousand for the same period of 2024. The decrease was primarily due to a reduction in data processing expenses following our core banking system change completed in the fourth quarter of 2024.
Current report
Income tax expense was $2.1 million for the three months ended March 31, 2025, resulting in an effective tax rate of 27.6%, compared to income tax expense of $2.0 million for the same period of 2024, resulting in an effective tax rate of 28.0%. The decrease in effective tax rate was primarily due to tax benefits recognized from restricted stock awards vested in the first quarter of 2025.
Removed paragraphs (35)
Previous report
More recently, following a prolonged low-interest-rate environment, a series of rapid rate increases by the Federal Reserve resulted in a dramatic loss of value for bonds had been priced during the previous market. Those increases had the effect of rapidly diminishing the value of debt securities and, concomitantly, adversely affected liquidity of many financial institutions. These markets appear to have stabilized substantially; however, the United States continues to confront considerable political and economic uncertainty owing to a relatively volatile election cycle, and it remains difficult to predict or to hedge against future fluctuations. While we do not presently expect that the Federal Reserve will resume significant adjustments, the conditions that led the Federal Reserve to make the recent adjustments remain uncertain and relatively volatile, and thus are highly unpredictable. Moreover, although the U.S. presidential election cycle has concluded as of the date of this report, the implications of these events is quite recent and remains difficult to predict.
Previous report
•Total assets were $2.39 billion, an increase of $240.3 million, or 11.2%, from $2.15 billion.
Previous report
•Gross loans were $1.93 billion, an increase of $165.2 million, or 9.4%, from $1.77 billion.
Previous report
•Total deposits were $2.06 billion, an increase of $257.0 million, or 14.2%, from $1.81 billion.
Previous report
•Shareholders’ equity was $203.6 million, an increase of $11.0 million, or 5.7%, from $192.6 million.
Previous report
•Net interest income decreased to $16.5 million, a decrease of $0.8 million, or 4.7%, from $17.3 million.
Previous report
For the nine months ended September 30, 2024 compared to nine months ended September 30, 2023
Previous report
•Net interest income decreased to $48.7 million, a decrease of $3.8 million, or 7.2%, from $52.5 million.
Previous report
•Net income was $16.1 million or $1.06 per diluted common share, a decrease of $2.6 million, or 14.1%, from $18.7 million or $1.21 per diluted common share.
Previous report
We reported net income for the nine months ended September 30, 2024 of $16.1 million, a decrease of $2.6 million, or 14.1%, compared to net income of $18.7 million for the same period of 2023. The decrease was primarily due to a $3.8 million decrease in net interest income and a $1.3 million increase in noninterest expense, offset by a $1.5 million increase in noninterest income and a $1.1 million decrease in income tax expense.
Previous report
(1)Annualized.
Previous report
Interest expense on interest-bearing deposits increased $4.9 million, or 37.8%, to $17.9 million for the three months ended September 30, 2024, compared with $13.0 million for the same period of 2023. The increase was primarily due to a $248.4 million, or 20.3%, increase in average balance of interest-bearing deposits and an 63 basis point increase in average cost of interest-bearing deposits driven by the Federal Reserve's rate increases.
Previous report
Interest income on interest-bearing deposits in other banks increased $358 thousand, or 32.1%, to $1.5 million for the three months ended September 30, 2024, compared with $1.1 million for the same period of 2023. The increase was primarily due to a $26.3 million, or 31.7%, increase in average balance of interest-bearing deposits in other banks.
Previous report
Net interest margin was 2.95% for the three months ended September 30, 2024, a 43 basis point decrease from 3.38% for the same period of 2023, primarily due to a 37 basis point decrease in net interest spread from the higher increase in average cost of interest-bearing deposits and borrowings compared to the increase in average yield on loans.
Previous report
Net interest income decreased $3.8 million, or 7.2%, to $48.7 million for the nine months ended September 30, 2024 from $52.5 million for the same period of 2023, primarily due to higher interest expense on interest-bearing deposits, partially offset by higher interest income on loans and higher interest income on interest-bearing deposits in other banks as our deposit costs repriced quicker than our interest-earning asset yields following the Federal Reserve’s rate increases.
Previous report
Interest income on loans increased $11.1 million to $92.6 million for the nine months ended September 30, 2024, compared with $81.5 million for the same period of 2023, primarily due to a $122.4 million, or 7.1%, increase in average balance of loans and a 38 basis point increase in average yield on loans as a result of the Federal Reserve's rate increase.
Previous report
Interest income on interest-bearing deposits in other banks increased $1.3 million, or 45.4%, to $4.3 million for the nine months ended September 30, 2024, compared with $3.0 million for the same period of 2023. The increase was primarily due to a $27.3 million, or 34.7%, increase in average balance of interest-bearing deposits in other banks and a 37 basis point increase in average yield of interest-bearing deposits in other banks.
Previous report
Net interest margin was 2.99% for the nine months ended September 30, 2024, a 46 basis point decrease from 3.45% for the same period of 2023, primarily due to a 47 basis point decrease in net interest spread from the higher increase in average cost of interest-bearing deposits and borrowings compared to the increase in average yield on loans.
Previous report
Total provision for credit losses was $1.2 million for the nine months ended September 30, 2024, compared to the credit losses of $1.0 million for the same period of 2023. The provision for credit losses on loans and on off-balance sheet exposure were $1.1 million and $156 thousand, respectively. The provision for credit losses on loans of $1.1 million for the nine months ended September 30, 2024 was primarily due to a $1.7 million increase in the quantitative general reserve, partially offset by a $843 thousand decrease in the qualitative reserve. The increase in the quantitative reserve was primarily due to changes in historical loss factors and increases in loan balances. The decrease in the qualitative reserve was due to net improvements in various asset quality metrics and economic conditions compared to those metrics and conditions as of December 31, 2023. The provision for credit losses on off-balance sheet exposure of $156 thousand was primarily due to increases in unfunded commitment balance and utilization of commitment.
Previous report
Noninterest income for the three months ended September 30, 2024 was $4.2 million, an increase of $1.6 million, or 63.0%, compared to $2.6 million for the same period of 2023, primarily due to increases in gain on sale of loans, service charges on deposits, and loan servicing fees.
Previous report
Service charges on deposit was $889 thousand for the three months ended September 30, 2024, compared to $575 thousand for the same period of 2023, an increase of $314 thousand, or 54.6%, primarily due toan increase in deposit analysis fees from an increase in the number of analysis accounts.
Previous report
Noninterest income for the nine months ended September 30, 2024 was $12.0 million, an increase of $1.5 million, or 14.4%, compared to $10.5 million for the same period of 2023, primarily due to increases in service charge on deposits, other income, and gain on sale of loans.
Previous report
Other income was $1.6 million for the nine months ended September 30, 2024, compared to $1.2 million for the same period of 2023, an increase of $381 thousand, or 32.3%, primarily due to an increase of $179 thousand in credit related fees and a decrease of $178 thousand in unrealized loss on the CRA mutual fund.
Previous report
Noninterest expense for the three months ended September 30, 2024 was $12.7 million, compared with $11.5 million for the same period of 2023, a decrease of $1.2 million, or 10.3%, primarily due to decreases in salaries and employee benefits, and data processing and communication, partially offset by a decrease in professional fees.
Previous report
Salaries and employee benefits for the three months ended September 30, 2024 was $8.0 million, an increase of $1.0 million, or 14.5%, compared with $7.0 million for the same period of 2023. The increase was primarily due to increases in salaries and employee benefits to support our growth and a lower accrual on employee incentives in the third quarter of 2023.
Previous report
Data processing and communication for the three months ended September 30, 2024 was $634 thousand, an increase of $265 thousand, or 71.8%, compared with $369 thousand for the same period of 2023. The increase was primarily due to an increase from our continued growth and a lower expense in the third quarter of 2023 from a credit received on data processing fees.
Previous report
Professional fees for the three months ended September 30, 2024 was $346 thousand, a decrease of $94 thousand, or 21.4%, compared with $440 thousand for the same period of 2023, The decrease was primarily due to an accrual adjustments made in the third quarter of 2024.
Previous report
Noninterest expense for the nine months ended September 30, 2024 was $37.1 million, an increase of $1.3 million, or 3.7%, compared to $35.7 million for the same period of 2023, primarily due to increases in salaries and employee benefits expense, occupancy and equipment expense and data processing and communication, partially offset by a decrease in foundation donation and other contributions.
Previous report
Salaries and employee benefits for the nine months ended September 30, 2024 was $23.4 million, an increase of $1,493 thousand, or 6.8%, compared with $21.9 million for the same period of 2023. The increase was primarily due to an increase in the number of employees to support our growth, an increase from employee salary adjustments in 2024, and an increase in employee marketing incentives.
Previous report
Occupancy and equipment for the nine months ended September 30, 2024 was $5.0 million, an increase of $117 thousand, or 2.4%, compared with $4.9 million for the same period of 2023. The increase was primarily due to the opening of a new full service branch in the third quarter of 2023.
Previous report
Data processing and communication for the nine months ended September 30, 2024 was $1.7 million, an increase of $186 thousand, or 12.7%, compared with $1.5 million for the same period of 2023, to support our continued growth.
Previous report
Foundation donations and other contributions for the nine months ended September 30, 2024 was $1.6 million, a decrease of $248 thousand, or 13.2%, compared with $1.9 million for the same period of 2023. The decrease was primarily due to lower donation accruals for Open Stewardship Foundation as a result of lower net income.
Previous report
Income tax expense was $2.1 million for the three months ended September 30, 2024, compared to $1.9 million for the same period of 2023, primarily due to a $558 thousand, or 7.9%, increase in income before income tax to $7.6 million for the three months ended September 30, 2024 from $7.0 million for the same period of 2023. Effective tax rates were 28.3% and 27.1% for the three months ended September 30, 2024 and 2023, respectively.
Previous report
Income tax expense was $6.3 million for the nine months ended September 30, 2024, compared to $7.4 million for the same period of 2023, primarily due to a $3.8 million, or 14.4%, decrease in income before income tax to $22.4 million for the nine months ended September 30, 2024 from $26.2 million for the same period of 2023. Effective tax rates were 28.2% and 28.4% for the nine months ended September 30, 2024 and 2023, respectively.
Previous report
As of September 30, 2024, our SBA portfolio totaled $252.4 million, compared to $239.7 million as of December 31, 2023. We originated $122.8 million for the nine months ended September 30, 2024. We sold SBA loans of $92.5 million with a 8.02% average premium during the nine months ended September 30, 2024.
Reworded paragraphs (35)
Previous wording
We are a bank holding company headquartered in Los Angeles, California. Our commercial community banking activities are operated through Open Bank, our banking subsidiary, and we do not conduct material business operations other than through the Bank. We offer commercial banking services to small and medium-sized businesses, their owners and retail customers primarily in the Korean-American communities within our primary market areas.
Current wording
OP Bancorp ("Company") are a bank holding company headquartered in Los Angeles, California. Our commercial community banking activities are operated through Open Bank ("Bank"), our wholly owned banking subsidiary, and we do not conduct material business operations other than through the Bank. We offer commercial banking services to small and medium-sized businesses, their owners and retail customers primarily in the Korean-American communities within our primary market areas.
Previous wording
Our results of operations depend primarily on our net interest income. We drive our income from interest received on our loan portfolio, the fee income we receive in connection with our deposits, and the sale and service of SBA loans. Our major operating expenses are the interest we pay on deposits and other borrowings, the salaries and related benefits we pay our management and staff, and the rent we pay on our leased properties. We rely primarily on locally-generated deposits, mostly from the Korean-American market within California, to fund our loan activities. We currently operate eight branches in Los Angeles and Orange Counties in California, one branch in Santa Clara, California, one branch in Carrollton, Texas and one branch near Las Vegas, Nevada. We have five loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, Lynnwood, Washington, and Fairfax, Virginia.
Current wording
Our results of operations depend primarily on our net interest income, which represents the interest we earn on loans and related products, reduced by the interest we pay on deposits and other borrowings. In addition to our net interest income, we derive earnings from fee income we receive in connection with our deposits, and from gains on the sale and service of SBA loans. Our major operating expenses are the salaries and related benefits we pay our management and staff, and the rent we pay on our leased properties. We rely primarily on locally-generated deposits, mostly from the Korean-American market within California, to fund our loan activities. We currently operate eight branches in Los Angeles and Orange Counties in California, one branch in Santa Clara, California, one branch in Carrollton, Texas and one branch near Las Vegas, Nevada. We have five loan production offices in Pleasanton, California, Atlanta, Georgia, Aurora, Colorado, Lynnwood, Washington, and Fairfax, Virginia.
Previous wording
In recent periods, our earnings have been affected by a series of upward adjustments to the “discount rate” for short-term borrowings updated by the Federal Reserve Board Open Markets Committee in response to perceived increases in inflationary pressures. Financial institutions and markets promptly followed these adjustments, significantly increasing interest rate pricing on loans and deposits. While such adjustments are commonplace and tend to affect the banking industry as a whole, the pace and degree of these adjustments were nearly unprecedented, resulting in banks, including the Bank, experiencing substantial pressure on multiple fronts. In particular, banks were forced to increase interest rates paid on deposits in order to meet competitive pressures from other financial institutions, as well as from treasury securities and other investment opportunities that offered greater earning capabilities for those customers. These increases correspondingly increased the Bank’s cost of funds and exerted downward pressure on our net interest margins.
Current wording
In recent periods, our earnings have been affected by a series of fluctuations in the “discount rate” for short-term borrowings updated by the Federal Reserve Board Open Markets Committee in response to perceived increases in inflationary pressures. Financial institutions and markets promptly followed the upward adjustments, significantly increasing interest rate pricing on loans and deposits. While such adjustments are commonplace and tend to affect the banking industry as a whole, the pace and degree of these adjustments were nearly unprecedented, resulting in banks, including the Bank, experiencing substantial pressure on multiple fronts. In particular, banks were forced to increase interest rates paid on deposits in order to meet competitive pressures from other financial institutions, as well as from treasury securities and other investment opportunities that offered greater earning capabilities for those customers. These increases correspondingly increased the Bank’s cost of funds and exerted downward pressure on our net interest margins. At the same time, they tended to reduce loan volumes by encouraging borrowers to refrain from initiating new loans and maintaining relatively lower balances on existing lines of credit.
Previous wording
The increases in market interest rates also affected loan pricing, which had multiple effects, including a reduction in borrowing (and thus a reduction in interest paid to banks) by customers that had the ability to avoid or defer additional indebtedness, a decline in the origination of new loans, and an increase in credit risk as borrowers who faced rising interest rates found it more difficult to comply with their loan obligations. The combination of these factors has exerted downward pressure on our fee income, the volume of our interest-earning assets and our net interest income.
Current wording
Recent interest rate increases also increased credit risk as they increased costs to customers at a time when the customers’ sources of repayment remained relatively lower, as a result of which borrowers found it more difficult to comply with their loan obligations. The combination of these factors has exerted downward pressure on our fee income, the volume of our interest-earning assets and our net interest income.
Previous wording
We believe we have adapted well to these shifts in the banking economy, and our success in weathering the challenges to date owes to the loyalty of our customers and the dedication of our employees and management. At the same time, these conditions have forced us to redirect our efforts toward liquidity and capital management, thus limiting our growth and our near-term profitability.
Current wording
We believe we have adapted reasonably well to these shifts in the banking economy, and our success in weathering the challenges to date owes to the loyalty of our customers and the talent and dedication of our employees and management. At the same time, these conditions have forced us to redirect our efforts toward liquidity and capital management, thus limiting our growth and our near-term profitability.
Previous wording
•Net income was $5.4 million or $0.36 per diluted common share, an increase of $315 thousand, or 6.2%, from $5.1 million or $0.33 per diluted common share.
Current wording
•Net income was $5.6 million or $0.37 per diluted common share, an increase of $334 thousand, or 6.4%, from $5.2 million or $0.34 per diluted common share.
Previous wording
We reported net income for the three months ended September 30, 2024 of $5.4 million, an increase of $315 thousand, or 6.2%, compared to net income of $5.1 million for the same period of 2023. The increase was due to a $1.6 million increase in noninterest income and a $911 thousand decrease in provision for credit losses, primarily offset by a $1.2 million increase in noninterest expense and a $807 thousand decrease in net interest income.
Current wording
We reported net income for the three months ended March 31, 2025 of $5.6 million, an increase of $334 thousand, or 6.4%, compared to net income of $5.2 million for the same period of 2024. The increase was due to a $1.4 million increase in net interest income that resulted primarily from an increase in interest-earning assets, as well as a $1.2 million increase in noninterest income, partially offset by a $1.7 million increase in noninterest expense and a $591 thousand increase in provision for credit losses.
Previous wording
The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of our total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets). We seek to maximize net interest income without exposing us to excessive interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities. Our net interest margin is also adversely impacted by the reversal of interest on nonaccrual loans and the reinvestment of loan payoffs into lower yielding investment securities and other short-term investments.
Current wording
The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of our total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets). We seek to maximize net interest income without exposing ourselves to excessive interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities. Our net interest margin also may be affected adversely from time to time when we are required to reverse previously accrued interest on loans that are reclassified as non-accrual.
Previous wording
Net interest income decreased $807 thousand, or 4.7%, to $16.5 million for the three months ended September 30, 2024 from $17.3 million for the same period of 2023, primarily due to higher interest expense on interest-bearing deposits, partially offset by higher interest income on loans and higher interest income on interest-bearing deposits in other banks as our deposit costs repriced quicker than our interest-earning asset yields following the Federal Reserve’s rate increases.
Current wording
Net interest income increased $1.4 million, or 9.0%, to $17.4 million for the three months ended March 31, 2025 from $16.0 million for the same period of 2024, primarily due to higher interest income on average earning assets (loans and interest-earning deposits in other banks), partially offset by higher interest expense on interest-bearing deposits.
Previous wording
Interest income on loans increased $3.6 million, or 12.9%, to $31.9 million for the three months ended September 30, 2024, compared with $28.3 million for the same period of 2023, primarily due to a $165.8 million, or 9.5%, increase in average balance of loans and a 21 basis point increase in average yield on loans as a result of the Federal Reserve's rate increase.
Current wording
Interest income on loans increased $1.5 million, or 5.1%, to $31.7 million for the three months ended March 31, 2025, compared with $30.1 million for the same period of 2024, primarily due to a $196.1 million, or 10.8%, increase in average balance of loans, partially offset by a 30 basis point decrease in average yield on loans as a result of the Federal Reserve's rate cuts.
Previous wording
Interest expense on interest-bearing deposits increased $15.6 million to $50.9 million for the nine months ended September 30, 2024, compared with $35.3 million for the same period of 2023. The increase was primarily due to a $204.7 million, or 17.0%, increase in average balance of interest-bearing deposits and a 91 basis point increase in average cost of interest-bearing deposits driven by the Federal Reserve's rate increases.
Current wording
Interest expense on interest-bearing deposits increased $933 thousand, or 6.0%, to $16.6 million for the three months ended March 31, 2025, compared with $15.7 million for the same period of 2024, primarily due to a $240.0 million, or 18.2%, increase in average balance of interest-bearing deposits, partially offset by a 46 basis point decrease in average cost of interest-bearing deposits driven by the Federal Reserve's rate cuts.
Previous wording
Total provision for credit losses was $448 thousand for the three months ended September 30, 2024, compared to $1.4 million for the same period of 2023. The provision for credit losses on loans and on off-balance sheet exposure were $234 thousand and $214 thousand, respectively. The provision for credit losses on loans of $234 thousand for three months ended September 30, 2024 was primarily due to a $215 thousand increase in the qualitative reserve driven by declining collateral values for collateral dependent CRE loans and weakening economic and business conditions. The provision for credit losses on off-balance sheet exposure of $214 thousand was primarily due to increases in unfunded commitment balance and utilization of commitment.
Current wording
Total provision for credit losses was $736 thousand for the three months ended March 31, 2025, compared to $145 thousand for the same period of 2024. The provision for credit losses on loans and on off-balance sheet exposure were $687 thousand and $49 thousand, respectively. The provision for credit losses on loans of $687 thousand for three months ended March 31, 2025 was primarily due to an $87.0 million, or 4.4%, increase in loan balances. Home mortgage, commercial real estate, and SBA loans increased $50.0 million, $43.0 million, and $5.1 million, respectively, whereas commercial and industrial loans decreased $10.8 million in the first quarter of 2025. The provision for credit losses on off-balance sheet exposure of $49 thousand was primarily due to increases in unfunded commitment balance.
Previous wording
Service charges on deposits was $2.3 million for the nine months ended September 30, 2024, compared to $1,566 thousand for the same period of 2023, an increase of $728 thousand, or 46.5%, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts.
Current wording
Service charges on deposit were $1.0 million for the three months ended March 31, 2025, compared to $612 thousand for the same period of 2024, an increase of $388 thousand, or 63.4%, primarily due to an increase in deposit analysis fees from an increase in the number of analysis accounts.
Previous wording
Loan servicing fees was $693 thousand for the three months ended September 30, 2024, compared to $468 thousand for the same period of 2023, an increase of $225 thousand, or 48.1%, primarilydue to a decrease in servicing fee amortization driven by lower loan payoffs in loan servicing portfolio.
Current wording
Loan servicing fees was $1.0 million for the three months ended March 31, 2025, compared to $772 thousand for the same period of 2024, an increase of $235 thousand, or 30.4%, primarily due to a decrease in servicing fee amortization driven by lower loan payoffs in loan servicing portfolio.
Previous wording
Gain on sale of loans was $6.1 million for the nine months ended September 30, 2024, compared to $5.8 million for the same period of 2023, an increase of $269 thousand, or 4.6%. The increase was primarily due to a higher average sales premium rate, primarily offset by a lower sold amount in SBA loans. We sold $92.5 million of SBA loans with an average premium of 8.02% for the nine months ended September 30, 2024, compared to a sale of $104.8 million of SBA loans with an average premium of 6.91% in the same period of 2023.
Current wording
Gain on sale of loans was $2.0 million for the three months ended March 31, 2025, compared to $1.7 million for the same period of 2024, an increase of $316 thousand, or 18.6%. The increase was primarily due to a higher sold amount in SBA loans, partially offset by a lower average sales premium rate. We sold $31.1 million of SBA loans with an average premium of 8.08% for the three months ended March 31, 2025, compared to a sale of $24.8 million of SBA loans with an average premium of 8.33% in the same period of 2024.
Previous wording
We recognized net deferred tax assets of $12.3 million and $13.3 million as of September 30, 2024 and December 31, 2023, respectively. After consideration of the matters in the preceding paragraph, we have determined that it is more likely than not that net deferred tax assets as of September 30, 2024 will be fully realized in future years.
Current wording
We recognized net deferred tax assets of $13.2 million and $14.9 million as of March 31, 2025 and December 31, 2024, respectively. After consideration of the matters in the preceding paragraph, we have determined that it is more likely than not that net deferred tax assets as of March 31, 2025 will be fully realized in future years.
Previous wording
Available-for-sale debt securities increased $5.1 million, or 2.6%, to $199.4 million as of September 30, 2024 from $194.3 million as of December 31, 2023, primarily due to a $5.2 million decrease in unrealized loss for the nine months ended September 30, 2024. No issuer of the available-for-sale securities, other than U.S. Government and its agencies, comprised more than ten percent of our shareholders’ equity as of September 30, 2024 and December 31, 2023.
Current wording
Available-for-sale debt securities decreased $3.4 million, or 1.8%, to $182.5 million as of March 31, 2025 from $185.9 million as of December 31, 2024, primarily due to a $6.6 million in paydowns of residential mortgage-backed securities and residential collateralized mortgage obligations, partially offset by a $3.2 million decrease in unrealized loss for the three months ended March 31, 2025. No issuer of the available-for-sale securities, other than U.S. Government and its agencies, comprised more than ten percent of our shareholders’ equity as of March 31, 2025 and December 31, 2024.
Previous wording
(1) Includes net deferred loan costs (fees) and unamortized premiums (unaccreted discounts) of $(260) thousand and $140 thousand as of September 30, 2024 and December 31, 2023, respectively.
Current wording
(1) Includes net deferred loan costs (fees) and net unamortized premiums (unaccreted discounts) of $(114) thousand and $(702) thousand as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
Gross loans increased $165.2 million, or 9.4%, to $1.93 billion as of September 30, 2024, compared to $1.77 billion as of December 31, 2023. The increase was primarily attributable to new loan production of $375.4 million, partially offset by loan payoffs and paydowns of $171.4 million.
Current wording
Gross loans increased $87.0 million, or 4.4%, to $2.04 billion as of March 31, 2025, compared to $1.96 billion as of December 31, 2024. The increase was primarily attributable to new loan originations, partially offset by loan sales, payoffs and paydowns. New loan originations, loan sales, and loan payoffs and paydowns were $205.8 million, $31.1 million, and $87.7 million, respectively, for the first quarter of 2025.
Previous wording
Our loan portfolio is concentrated in commercial real estate, which includes unguaranteed balances in SBA loans, home mortgage and commercial (primarily manufacturing, wholesale, and services oriented entities). We do not have any material concentrations by industry or group of industries in the loan portfolio. However, 88.0% of our gross loans were secured by real property as of September 30, 2024, compared to 92.2% as of December 31, 2023.
Current wording
Our loan portfolio is concentrated in commercial real estate, which includes unguaranteed balances in SBA loans, home mortgage and commercial (primarily manufacturing, wholesale, and services oriented entities). We do not have any material concentrations by industry or group of industries in the loan portfolio. However, 89.0% of our gross loans were secured by real property as of March 31, 2025, compared to 88.0% as of December 31, 2024.
Previous wording
Loans — Commercial Real Estate: We have established concentration limits in the loan portfolio for commercial real estate loans, commercial and industrial loans, and unsecured lending, among others. All loan types are within established limits. We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur.
Current wording
Loans Concentration: We have established concentration limits in the loan portfolio for commercial real estate loans, commercial and industrial loans, and unsecured lending, among others. All loan types are within established limits. We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur.
Previous wording
Commercial real estate loans include owner-occupied and non-occupied commercial real estate. We originate both fixed and adjustable rate loans. Adjustable rate loans are based on the Wall Street Journal prime rate. Our commercial real estate loan portfolio totaled $966.5 million as of September 30, 2024 compared to $885.6 million as of December 31, 2023. During the nine months ended September 30, 2024, we originated $155.1 million of commercial real estate loans. As of September 30, 2024, approximately 76.4% of the commercial real estate portfolio consisted of fixed-rate loans. Our policy maximum loan-to-value, or LTV, is 70% for commercial real estate loans. As of September 30, 2024, our average loan to value for commercial real estate loans was 50.8%.
Current wording
Loans — Commercial Real Estate: Commercial real estate loans include owner-occupied and non-occupied commercial real estate. We originate both fixed and adjustable rate loans. Adjustable rate loans are based on the Wall Street Journal prime rate. Our commercial real estate loan portfolio totaled $1.0 billion as of March 31, 2025 compared to $980.2 million as of December 31, 2024. As of March 31, 2025, approximately 76.9% of the commercial real estate portfolio consisted of fixed-rate loans. Our policy maximum loan-to-value, or LTV, is 70% for commercial real estate loans. As of March 31, 2025, our average loan to value for commercial real estate loans was 48.2%.
Previous wording
From our total SBA loan portfolio, $232.2 million is secured by real estate and $20.2 million is unsecured or secured by business assets as of September 30, 2024.
Current wording
As of March 31, 2025, our SBA portfolio totaled $258.8 million, compared to $253.7 million as of December 31, 2024. From our total SBA loan portfolio, $237.2 million is secured by real estate and $21.6 million is unsecured or secured by business assets as of March 31, 2025.
Previous wording
Loans — Commercial and Industrial: Commercial and industrial loans totaled $212.5 million as of September 30, 2024, compared to $121.0 million as of December 31, 2023. We originated $71.2 million for the nine months ended September 30, 2024.
Current wording
Loans — Commercial and Industrial: Commercial and industrial loans totaled $202.3 million as of March 31, 2025, compared to $213.1 million as of December 31, 2024.
Previous wording
Home mortgage loans totaled $499.7 million as of September 30, 2024, compared to $518.0 million as of December 31, 2023. For the nine months ended September 30, 2024, we originated $26.3 million of home mortgage loans. There was no home mortgage loan purchase from third party mortgage originators for the same period.
Current wording
Home mortgage loans totaled $559.5 million as of March 31, 2025, compared to $509.5 million as of December 31, 2024. There was no home mortgage loan purchase from third party mortgage originators for the same period.
Previous wording
As of September 30, 2024 and December 31, 2023, we serviced $694.8 million and $707.4 million, respectively, of SBA loans for others. Activity for loan servicing rights was as follows:
Current wording
As of March 31, 2025 and December 31, 2024, we serviced $716.8 million and $700.9 million, respectively, of SBA loans for others. Activity for loan servicing rights was as follows:
Previous wording
The allowance for credit losses is sensitive to numerous factors, including unemployment rate forecasts, change in asset quality, prepayment rates, and real estate indices. Given the dynamic relationship between these factors within our model, it is difficult to estimate the impact of any one factor or input on the allowance for credit losses. Changes in the factors and inputs considered may not occur at the same rate and may not be consistent across all geographies or product types. Additionally, changes in factors and input may be discretionally inconsistent, such that improvement in one factor may offset deterioration in others. However, to provide additional context regarding the sensitivity of the allowance for credit losses to changes in key variable, we used the following assumptions in a sensitivity analysis of our allowance for credit losses: unemployment rate forecast based on supervisory severely adverse scenario, 0% prepayment rates, loan risk grade changes of commercial real estate and commercial and industrial loan portfolio in worst case scenario based on our history, and applying a 100% weighting to severely adverse scenario.
Current wording
The allowance for credit losses is sensitive to numerous factors, including unemployment rate forecasts, change in asset quality, prepayment rates, and real estate indices. Given the dynamic relationship between these factors within our model, it is difficult to estimate the impact of any one factor or input on the allowance for credit losses. Changes in the factors and inputs considered may not occur at the same rate and may not be consistent across all geographies or product types. Additionally, changes in factors and input may be discretionally inconsistent, such that improvement in one factor may offset deterioration in others. However, to provide additional context regarding the sensitivity of the allowance for credit losses to changes in key variable, we used the following assumptions in a sensitivity analysis of our allowance for credit losses: unemployment rate forecast based on supervisory severely adverse scenario, 0% prepayment rates, loan risk grade changes of commercial real estate and commercial and industrial loan portfolio in worst case scenario based on our history, and applying a 100% weighting to the severely adverse scenario.
Previous wording
The allowance for credit losses was $23.0 million as of September 30, 2024, compared to $22.0 million as of December 31, 2023. Provision of credit losses of $448 thousand was recorded for the three months ended September 30, 2024, compared to $1.4 million for the same period in 2023. Provision of credit losses of $1.2 million was recorded for the nine months ended September 30, 2024, compared to $1.0 million for the same period in 2023.
Current wording
The allowance for credit losses was $25.4 million as of March 31, 2025, compared to $24.8 million as of December 31, 2024. Provision of credit losses of $736 thousand was recorded for the three months ended March 31, 2025, compared to $145 thousand for the same period in 2024.
Previous wording
The following table provides an analysis of the allowance for credit losses, provision for credit losses and net charge-offs, by category, for the three and nine months ended September 30, 2024 and 2023:
Current wording
The following table provides an analysis of the allowance for credit losses, provision for credit losses and net charge-offs, by category, for the three months ended March 31, 2025 and 2024:
Previous wording
Nonperforming loans were $3.6 million as of September 30, 2024, compared to $6.1 million as of December 31, 2023. Nonperforming loans excluded the guaranteed portion of SBA loans of $11.1 million and $2.0 million as of September 30, 2024 and December 31, 2023, respectively.
Current wording
Nonperforming loans were $10.4 million as of March 31, 2025, compared to $7.8 million as of December 31, 2024. Nonperforming loans excluded the guaranteed portion of SBA loans of $14.3 million and $16.3 million as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as OREO until being sold, and is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. As of September 30, 2024, OREO totaled $1.2 million, which is secured by a mix-use property in Los Angeles with 90% guaranteed by SBA. There was no OREO as of December 31, 2023.
Current wording
Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as OREO until being sold, and is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. As of March 31, 2025 and December 31, 2024, OREO totaled $1.2 million, which is secured by a mix-use property in Los Angeles with 90% guaranteed by SBA.
Previous wording
(1)Excludes guaranteed portion of SBA loans of $11.1 million and $2.0 million as of September 30, 2024 and December 31, 2023, respectively.
Current wording
(1)Excludes guaranteed portion of SBA loans of $14.3 million and $16.3 million as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
Other than deposits, we also utilized FHLB advances as a supplementary funding source to finance our operations. The advances from the FHLB are collateralized by residential and commercial real estate loans. As of September 30, 2024 and December 31, 2023, we had maximum borrowing capacity from the FHLB of $650.7 million and $655.9 million, respectively. We had borrowings from FHLB of $75.0 million and $105.0 million as of September 30, 2024 and
Current wording
Other than deposits, we also utilized FHLB advances as a supplementary funding source to finance our operations. The advances from the FHLB are collateralized by residential and commercial real estate loans. As of March 31, 2025 and December 31, 2024, we had maximum borrowing capacity from the FHLB of $683.8 million and $677.0 million, respectively. We had borrowings from FHLB of $75.0 million and $95.0 million as of March 31, 2025 and December 31, 2024, respectively. The Company had estimated uninsured deposits of $1.1 billion, or 49.0% of total deposits, and $961.7 million, or 47.4% of total deposits, as of March 31, 2025 and December 31, 2024, respectively.
Previous wording
We had $100.0 million of unsecured federal funds lines with no amounts advanced as of September 30, 2024 and December 31, 2023. In addition, on such dates we had lines of credit from the Federal Reserve discount window of $207.8 million and $183.0 million, respectively. The Federal Reserve discount window lines were collateralized by a pool of commercial real estate loans and commercial and industrial loans totaling $278.9 million and $251.0 million as of September 30, 2024 and December 31, 2023, respectively. We did not have any borrowings outstanding with the Federal Reserve as of September 30, 2024 or December 31, 2023, and our borrowing capacity is limited only by eligible collateral.
Current wording
We had $100.0 million of unsecured federal funds lines with no amounts advanced as of March 31, 2025 and December 31, 2024. In addition, on such dates we had lines of credit from the Federal Reserve discount window of $217.6 million and $215.1 million, respectively. The Federal Reserve discount window lines were collateralized by a pool of commercial real estate loans and commercial and industrial loans totaling $291.8 million and $278.9 million as of March 31, 2025 and December 31, 2024, respectively. We did not have any borrowings outstanding with the Federal Reserve as of March 31, 2025 or December 31, 2024, and our borrowing capacity is limited only by eligible collateral.
Previous wording
Based on the values of loans pledged as collateral, we had $397.6 million of additional borrowing availability with the FHLB as of September 30, 2024. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.
Current wording
Based on the values of loans pledged as collateral, we had $381.5 million of additional borrowing availability with the FHLB as of March 31, 2025. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
(2)Includes income and average balances for Federal Home Loan Bank (“FHLB”) and Pacific Coast Bankers Bank stock, CRA qualified mutual fund, term federal funds, interest-earning time deposits and other miscellaneous interest-earning assets.
Previous report — wording carried elsewhere
(3)Average loan balances include non-accrual loans and loans held for sale.
Previous report — wording carried elsewhere
Gain on sale of loans was $2.1 million for the three months ended September 30, 2024, compared to $1.2 million for the same period of 2023, an increase of $909 thousand, or 77.1%. The increase was primarily due to a higher sold amount in SBA loans and a higher average sales premium rate. We sold $35.6 million of SBA loans with an average premium of 7.30% for the three months ended September 30, 2024, compared to a sale of $23.4 million of SBA loans with an average premium of 6.50% in the same period of 2023.
Previous report — wording carried elsewhere
The following table sets forth the various components of our noninterest income for the nine months ended September 30, 2024 and 2023:
Previous report — wording carried elsewhere
The following table sets forth the major components of our noninterest expense for the nine months ended September 30, 2024 and 2023:
Previous report — wording carried elsewhere
December 31, 2023, respectively. The Company had estimated uninsured deposits of $946.4 million, or 45.8% of total deposits, and $781.0 million, or 43.2% of total deposits, as of September 30, 2024 and December 31, 2023, respectively.