OP Bancorp Reports Second Quarter 2016 Results

Financial Highlights

• Net income totaled $1.80 million for the second quarter of 2016, or $0.14 per diluted common share, up 36.5% from $1.32 million for the first quarter of 2016 and 13.6% from $1.59 million for the second quarter of 2015.
• Net interest margin was 4.30% for the second quarter of 2016, compared to 4.15% for the first quarter of 2016 and 4.32% for the second quarter of 2016.
• Total assets were $673 million at June 30, 2016, up 2.9% from $654 million at March 31, 2016, and up 19.2% from $565 million at June 30, 2015.
• Net loans receivable were $576 million at June 30, 2016, up 10.7% from $520 million at March 31, 2016 and up 25.3% from $460 million at June 30, 2015.
• Total deposits were $582 million at June 30, 2016, up 4.8% from $555 million at March 31, 2016 and up 21.0% from $481 million at June 30, 2015.
• Non-interest bearing deposits were $205 million at June 30, 2016, up 17.7% from $174 million at March 31, 2016, and up 23.0% from $167 million at June 30, 2015.
• Non-performing assets to total assets were 0.15% at June 30, 2016 and March 31, 2016 and 0.20% at June 30, 2015.

LOS ANGELES--(BUSINESS WIRE)-- OP Bancorp (the “Company”) (OTCQB: OPBK), the holding company of Open Bank (the “Bank”), today reported that net income for the second quarter of 2016 was $1.80 million, or $0.14 per diluted common share. This compares with net income of $1.32 million, or $0.10 per diluted share, for the first quarter of 2016, and net income of $1.59 million, or $0.12 per diluted share, for the second quarter of 2015. Pre-tax pre-provision income was $3.5 million for the second quarter 2016, up 42.9% from $2.4 million for the first quarter 2016, and 28.5% from $2.7 million for the second quarter 2015.

“We reported strong second quarter results, delivering record net income, record loan originations, and solid growth in deposits, especially in our non-interest bearing deposits. Non-interest bearing deposits grew 18% from the previous quarter and accounts for 35% of our total deposits as of June 30, 2016. Our net interest margin improved to 4.30%, which is the highest among our direct competitors and peers. These are amazing accomplishments in light of the current hyper-competitive market conditions, low interest rate environment and strong economic headwinds,” stated Min Kim, President and Chief Executive Officer. “We intend to continue our strategy of growing our non-interest bearing deposits, further strengthening the value of our franchise, continuing to grow our earning assets, all the while managing our risk, and controlling expenses to further improve our efficiency.”

Quarter Financial Highlights
(in thousands, except per share data)
			As of or for the Three Months Ended
			June 30,2016					March 31,2016					June 30,2015
Income Statement Data:
Net interest income			$	6,810				$	6,220				$	5,540
Provision for loan losses				452					230					-
Non-interest income				2,266					1,808					2,178
Non-interest expense				5,613					5,604					5,024
Income before taxes				3,011					2,194					2,694
Provision for income taxes				1,210					875					1,109
Net Income			$	1,801				$	1,319				$	1,585
Balance Sheet Data:
Loans held for sale			$	3,425				$	7,588				$	128
Gross loans, net of unearned income				583,175					526,937					465,697
Allowance for loan losses				7,079					6,621					5,879
Total assets				673,267					654,340					564,772
Deposits				581,736					555,260					480,729
Shareholders’ equity				76,511					74,179					69,078
Credit Quality:
Nonperforming loans			$	1,025				$	1,003				$	1,157
Nonperforming assets				1,025					1,003					1,157
Performance Ratios:
Net interest margin				4.30	%				4.15	%				4.32	%
Efficiency ratio				61.84	%				69.81	%				65.10	%
Pre-tax pre-provision income to average assets (annualized)				1.56	%				1.53	%				1.98	%
Net charge-offs to average gross loans (annualized)				0.00	%				0.00	%				-0.01	%
Nonperforming assets to gross loans plus OREO				0.18	%				0.19	%				0.25	%
ALLL to nonperforming loans				691	%				660	%				508	%
ALLL to gross loans				1.21	%				1.26	%				1.26	%
Capital Ratios:
Tangible common equity to tangible assets				11.36	%				11.34	%				12.23	%
Leverage ratio				11.41	%				11.71	%				12.52	%
Common Equity Tier 1 ratio				13.02	%				13.93	%				14.53	%
Tier 1 risk-based capital ratio				13.02	%				13.93	%				14.53	%
Total risk-based capital ratio				14.24	%				15.18	%				15.78	%

Results of Operations

Net interest income before loan loss provision was $6.8 million for the three months ended June 30, 2016, compared to $6.2 million for the first quarter of 2016 and $5.5 million for the second quarter of 2015. The increases from the first quarter of 2016 and the second quarter of 2015 were primarily the result of continued growth in interest earning assets, mostly loans. Average gross loans were $557 million for the second quarter of 2016, an increase of $33 million, or 6.3%, from $524 million for the first quarter of 2016 and an increase of $103 million, or 22.6%, from $454 million for the second quarter of 2015.

The net interest margin for the second quarter of 2016 was 4.30%, a 15 basis point increase from 4.15% for the first quarter of 2016 and a 2 basis point decrease from 4.32% for the second quarter of 2015. The net interest margin expansion of 15 basis points from the prior quarter is attributable to higher yield on loans and increased level of non-interest bearing deposits. The net interest margin compression of 2 basis points from the second quarter of 2015 was primarily due to increased cost of funds. Total cost of funds, including non-interest bearing deposits and borrowings, increased to 0.57% for the second quarter of 2016, compared to 0.50% for the same quarter of 2015. The following table shows the asset yields, liability costs, spreads and margins.

			Three Months Ended
			June 30,2016				March 31,2016				June 30,2015
Yield on net loans			5.37	%			5.25	%			5.27	%
Yield on interest-earning assets			4.83	%			4.70	%			4.78	%
Cost of interest-bearing liabilities			0.84	%			0.83	%			0.74	%
Cost of deposits			0.58	%			0.59	%			0.51	%
Cost of funds			0.57	%			0.59	%			0.50	%
Net interest spread			3.99	%			3.87	%			4.04	%
Net interest margin			4.30	%			4.15	%			4.32	%

Non-interest income was $2.3 million for the second quarter of 2016, up 25% compared to $1.8 million for the first quarter of 2016 and 4% from $2.2 million for the second quarter of 2015. The increases in non-interest income from the first quarter of 2016 and the second quarter of 2015 were primarily attributable to higher net gain on sale of SBA loans.

Net gain on sale of SBA loans totaled $1.5 million for the second quarter of 2016, compared to $944 thousand for the first quarter of 2016 and $1.3 million for the second quarter of 2015. Sale of SBA loans for the second quarter of 2016 was $24.1 million, compared to $12.7 million for the first quarter of 2016 and $15.3 million for the second quarter of 2015. The average premium on the sale of SBA loans for the second quarter of 2016 decreased to 9.4%, compared to 10.2% for the first quarter of 2016 and 11.0% for the second quarter of 2016.

Non-interest expense for the second quarter of 2016 remained stable at $5.6 million, which was the same as the first quarter of 2016. Non-interest expense has been managed well within the Company’s budget during the year.

Non-interest expense for the second quarter of 2016 increased $589 thousand from $5.0 million for the second quarter of 2015. The increase from the second quarter of 2015 was primarily due to increased operating expenses to support continued growth of the Company. Total salaries and employee benefits expenses for the second quarter of 2016 increased $332 thousand to $3.4 million from $3.1 million for the second quarter of 2015, reflecting an increased number of full time equivalent employees of 125.5 at June 30, 2016, compared to 107.5 at June 30, 2015. Occupancy expenses, professional services fees and data processing expenses for the second quarter of 2016 increased $125 thousand, $82 thousand, and $67 thousand, respectively, compared to the second quarter of 2015, primary due to the Bank’s continued expansion.

The effective tax rate for the second quarter of 2016 was 40.2%, compared to 39.9% for the first quarter of 2016 and 41.2% for the second quarter of 2015.

Balance Sheet

Total assets were $673.3 million at June 30, 2016, an increase of $18.9 million, or 2.9% from 654.3 million at March 31, 2016, and an increase of $108.5 million, or 19.2%, from $564.8 million at June 30, 2015. Gross loans, net of unearned income, were $583.2 million at June 30, 2016, an increase of $56.2 million, or 10.7%, from $526.9 million at March 31, 2016, and an increase of $117.5 million, or 25.2%, from $465.7 million at June 30, 2015.

New loan originations for the second quarter of 2016 totaled $116.7 million, including SBA loan originations of $39.9 million, compared to $56.9 million, including SBA loan originations of $20.6 million for the first quarter of 2016. New loan originations for the second quarter of 2015 were $76.6 million, including SBA loan originations of $20.7 million.

Total deposits were $581.7 million at June 30, 2016, an increase of $26.5 million, or 4.8% from $555.3 million at March 31, 2016, and an increase of $101.0 million, or 21.0%, from $480.7 million at June 30, 2015. Non-interest bearing deposits were $205.4 million at June 30, 2016, an increase of $30.9 million, or 17.7%, from $174.5 million at March 31, 2016, and an increase of $38.4 million, or 23.0% from $167.0 million at June 30, 2015.

Borrowings from the Federal Home Loan Bank (“FHLB”) at June 30, 2016 were $10.0 million, compared to $20.0 million at March 31, 2016 and $10.0 million at June 30, 2015.

Non-interest bearing deposits accounted for 35.3% of total deposits at June 30, 2016, compared to 31.4% at March 31, 2016 and 34.7% at June 30, 2015.

			June 30,2016				March 31,2016				June 30,2015
Non-interest bearing deposits			35.3	%			31.4	%			34.7	%
Interest bearing demand			34.4	%			34.3	%			34.3	%
Savings			0.5	%			0.3	%			0.3	%
Time deposits over $250,000			12.0	%			13.0	%			19.3	%
Other time deposits			17.8	%			21.0	%			11.4	%
Total deposits			100.0	%			100.0	%			100.0	%

At June 30, 2016, the Bank continued to exceed all regulatory capital requirements to be classified as “well-capitalized,” as summarized in the following table.

			June 30,2016				March 31,2016				June 30,2015
Tier 1 leverage capital ratio			11.41	%			11.71	%			12.52	%
CET 1 capital ratio			13.02	%			13.93	%			14.53	%
Tier 1 risk-based capital ratio			13.02	%			13.93	%			14.53	%
Total risk-based capital ratio			14.24	%			15.18	%			15.78	%

At June 30, 2016, the tangible common equity represented 11.36% of tangible assets, compared to 11.34% at March 31, 2016 and 12.23% at June 30, 2015. The tangible common equity to tangible assets ratio is a non-GAAP financial measure that represents common equity less goodwill and other net intangible assets divided by total assets less goodwill and other net intangible assets. Management reviews the tangible common equity to tangible assets ratio to evaluate the Bank’s capital levels.

Asset Quality

Loan loss provision for the second quarter of 2016 was $452 thousand, compared to $230 for the first quarter of 2016. No provision for loan losses was recorded during the second quarter of 2015. Non-performing assets were $1.0 million, or 0.15% of total assets, at June 30, 2016 and March 31, 2016 and $1.2 million, or 0.20% of total assets, at June 30, 2015. There was no other real estate owned (“OREO”) at June 30, 2016, March 31, 2016, or June 30, 2015.

Non-performing loans to gross loans were 0.18% at June 30, 2016, compared to 0.19% at March 31, 2016 and 0.25% at June 30, 2015. Total classified loans were $1.2 million, or 0.21% of gross loans, at June 30, 2016, compared to $1.2 million, or 0.23% of gross loans, at March 31, 2016 and $1.4 million, or 0.30% of gross loans, at June 30, 2015.

The allowance for loan losses was $7.1 million at June 30, 2016, compared to $6.6 million at March 31, 2016 and $5.9 million at June 30, 2015. The allowance for loan losses was 1.21% of gross loans at June 30, 2016, compared to 1.26% at March 31, 2016 and June 30, 2015.

Use of Non-GAAP Financial Measures. This document may contain GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Open Bank’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this earnings release, which can be found on Open Bank’s website at www.myopenbank.com.

About OP Bancorp

OP Bancorp, the holding company for Open Bank, is a California corporation whose common stock is traded on the OTCQB under the ticker symbol, “OPBK.” Open Bank (the "Bank") is engaged in the general commercial banking business in Los Angeles and Orange Counties 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 seven full branch offices in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Gardena and Buena Park. The Bank also has three loan production offices in Seattle, Washington; Dallas, Texas; and Flushing, New York. 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

Safe Harbor

This press release contains certain forward-looking information about OP Bancorp that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements, including statements about the bank’s successful implementation of its strategies resulting in significant increase in non-interest bearing deposits. These forward-looking statements may include, but are not limited to, such words as "believes," "expects," "anticipates," "intends," "plans," "estimates," "may," "will," "should," "could," "predicts," "potential," "continue," or the negative of such terms and other comparable terminology or similar expressions and may include statements about the bank’s focus on exploring new opportunities, building customer relationship through core deposits, growing core deposits, and improving asset quality. Forward-looking statements are not guarantees. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of OP Bancorp such as the ability of the new branch to attract sufficient number of customers, deposits and new business to become profitable. OP Bancorp cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, OP Bancorp’s results could differ materially from those expressed in, or implied or projected by such forward-looking statements. OP Bancorp assumes no obligation to update such forward-looking statements, except as required by law.

Balance Sheet
(Dollars in thousand, except per share data)			June 30, 2016				March 31, 2016				$ change				% change				June 30, 2015				$ change				% change
			(Unaudited)				(Unaudited)												(Audited)
Assets
Cash and due from banks			$	23,050			$	54,353			$	(31,303	)			-57.6	%		$	50,181			$	(27,131	)			-54.1	%
Investment securities				40,052				42,495				(2,443	)			-5.7	%			25,760				14,292				55.5	%
Loans held for sale				3,425				7,588				(4,163	)			-54.9	%			128				3,297				2575.8	%
Gross loans, net of unearned income				583,175				526,937				56,238				10.7	%			465,697				117,478				25.2	%
Allowance for loan losses				(7,079	)			(6,621	)			(458	)			-6.9	%			(5,879	)			(1,200	)			-20.4	%
Net loans receivable				576,096				520,316				55,780				10.7	%			459,818				116,278				25.3	%
Bank premises and equipment, net				5,518				5,721				(203	)			-3.5	%			4,784				734				15.3	%
Accrued interest receivable				1,635				1,650				(15	)			-0.9	%			1,307				328				25.1	%
FHLB and Pacific Coast Bankers Bank Stock, at cost				3,438				2,655				783				29.5	%			2,655				783				29.5	%
Servicing assets				6,025				5,672				353				6.2	%			4,993				1,032				20.7	%
Net deferred taxes				1,357				1,506				(149	)			-9.9	%			2,888				(1,531	)			-53.0	%
Other assets				12,671				12,384				287				2.3	%			12,258				413				3.4	%
Total assets			$	673,267			$	654,340			$	18,927				2.9	%		$	564,772			$	108,495				19.2	%
Liabilities and Shareholders' Equity
Noninterest bearing deposits			$	205,391			$	174,498			$	30,893				17.7	%		$	166,977			$	38,414				23.0	%
Savings				2,855				1,692				1,163				68.7	%			1,566				1,289				82.3	%
Money market and others				200,457				190,077				10,380				5.5	%			164,836				35,621				21.6	%
Time deposits over $250,000				69,710				72,419				(2,709	)			-3.7	%			92,549				(22,839	)			-24.7	%
Other time deposits				103,323				116,574				(13,251	)			-11.4	%			54,801				48,522				88.5	%
Total deposits				581,736				555,260				26,476				4.8	%			480,729				101,007				21.0	%
Other borrowings				10,000				20,000				(10,000	)			-50.0	%			10,000				0				0.0	%
Other liabilities				5,020				4,901				119				2.4	%			4,965				55				1.1	%
Total liabilities				596,756				580,161				16,595				2.9	%			495,694				101,062				20.4	%
Total shareholders' equity				76,511				74,179				2,332				3.1	%			69,078				7,433				10.8	%
Total Liabilities and Shareholders' Equity			$	673,267			$	654,340			$	18,927				2.9	%		$	564,772			$	108,495				19.2	%
Statement of Operations
(Dollars in thousand, except per share data)
			Three Months Ended																				Six Months Ended
			June 30, 2016				March 31, 2016				% change				June 30, 2015				% change				June 30, 2016				June 30, 2015				% change
Interest income			$	7,649			$	7,032				8.8	%		$	6,130				24.8	%		$	14,681			$	11,690			25.6	%
Interest expense				839				812				3.3	%			590				42.2	%			1,651				1,102			49.8	%
Net interest income				6,810				6,220				9.5	%			5,540				22.9	%			13,030				10,588			23.1	%
Provision for loan losses				452				230				96.5	%			-				0.0	%			682				77			785.7	%
Non interest income				2,266				1,808				25.3	%			2,178				4.0	%			4,074				3,997			1.9	%
Non interest expense				5,613				5,604				0.2	%			5,024				11.7	%			11,217				9,605			16.8	%
Income before income taxes				3,011				2,194				37.2	%			2,694				11.8	%			5,205				4,903			6.2	%
Provision for income taxes				1,210				875				38.3	%			1,109				9.1	%			2,085				2,018			3.3	%
Net income (loss)			$	1,801			$	1,319				36.5	%		$	1,585				13.6	%		$	3,120			$	2,885			8.1	%
Pre-tax Pre-provision Income			$	3,463			$	2,424				42.9	%		$	2,694				28.5	%		$	5,887			$	4,980			18.2	%
Book Value			$	6.00			$	5.83				2.9	%		$	5.53				8.5	%		$	6.00			$	5.53			8.5	%
Basic EPS			$	0.14			$	0.10				36.2	%		$	0.13				11.4	%		$	0.25			$	0.23			5.9	%
Diluted EPS			$	0.14			$	0.10				36.2	%		$	0.12				12.8	%		$	0.24			$	0.22			7.5	%
Shares of common stock outstanding				12,747,100				12,715,495				0.2	%			12,490,649				2.1	%			12,747,100				12,490,649			2.1	%
Weighted Average Shares:
- Basic				12,732,265				12,698,882				0.3	%			12,484,588				2.0	%			12,715,573				12,454,007			2.1	%
- Diluted				13,148,362				13,115,588				0.2	%			13,052,008				0.7	%			13,136,302				13,055,402			0.6	%
			Three Months Ended																				Six Months Ended
			June 30, 2016				March 31, 2016				% change				June 30, 2015				% change				June 30, 2016				June 30, 2015				% change
Key Ratios
Return on average assets (ROA)*				0.81	%			0.83	%			-0.02	%			1.17	%			-0.36	%			0.96	%			1.09	%		-0.13	%
Return on average equity (ROE) *				7.18	%			7.20	%			-0.02	%			9.27	%			-2.09	%			8.40	%			8.56	%		-0.16	%
Net interest margin *				4.30	%			4.15	%			0.15	%			4.32	%			-0.02	%			4.23	%			4.26	%		-0.03	%
Efficiency ratio				61.84	%			69.81	%			-7.97	%			65.10	%			-3.26	%			65.58	%			65.85	%		-0.27	%
Pre-tax Pre-provision Income to average assets				1.56	%			1.53	%			0.03	%			1.98	%			-0.42	%			1.81	%			1.88	%		-0.07	%
Tangible common equity to tangible assets				11.36	%			11.34	%			0.02	%			12.23	%			-0.87	%			11.36	%			12.23	%		-0.87	%
Tier 1 Leverage Ratio				11.41	%			11.71	%			-0.30	%			12.52	%			-1.11	%			11.41	%			12.52	%		-1.11	%
Common Equity Tier 1 Ratio				13.02	%			13.93	%			-0.91	%			14.53	%			-1.51	%			13.02	%			14.53	%		-1.51	%
Tier 1 Capital Ratio				13.02	%			13.93	%			-0.91	%			14.53	%			-1.51	%			13.02	%			14.53	%		-1.51	%
Total Risk Based Capital Ratio				14.24	%			15.18	%			-0.94	%			15.78	%			-1.54	%			14.24	%			15.78	%		-1.54	%
Average Balances
Investments			$	79,389			$	77,374				2.6	%		$	59,482				33.5	%		$	78,381			$	61,001			28.5	%
Gross loans, including loans held for sale				556,881				523,912				6.3	%			454,296				22.6	%			540,397				439,621			22.9	%
Interest earning assets				636,270				601,286				5.8	%			513,778				23.8	%			618,778				500,622			23.6	%
Total assets			$	667,751			$	632,270				5.6	%		$	544,041				22.7	%		$	650,011			$	530,491			22.5	%
Noninterest bearing deposits			$	183,977			$	159,827				15.1	%		$	150,894				21.9	%		$	171,902			$	152,185			13.0	%
Interest bearing deposits				384,624				374,015				2.8	%			297,506				29.3	%			379,319				285,163			33.0	%
Total deposits				568,601				533,842				6.5	%			448,399				26.8	%			551,221				437,348			26.0	%
Interest bearing liabilities				403,416				394,017				2.4	%			320,473				25.9	%			398,716				306,765			30.0	%
Shareholders' equity				75,190				73,304				2.6	%			68,356				10.0	%			74,247				67,413			10.1	%
Net interest earning assets			$	232,854			$	207,269				12.3	%		$	193,305				20.5	%		$	220,062			$	193,856			13.5	%
Asset Quality			6/30/2016				3/31/2016				12/31/2015				9/30/2015				6/30/2015
Nonaccrual Loans				650				624				657				617				767
Loans 90 days or more past due, accruing				-				-				-				-				-
Accruing Restructured Loans				375				379				382				386				390
Total Non-Performing Loans				1,025				1,003				1,039				1,003				1,157
Other Real Estate Loans (OREO)				-				-				-				-				-
Total Non-Performing Assets				1,025				1,003				1,039				1,003				1,157
Classified Loans				1,225				1,203				827				758				1,382
Non-Performing Assets/Total Assets				0.15	%			0.15	%			0.17	%			0.17	%			0.20	%
Non-Performing Assets/(Gross Loans +OREO)				0.18	%			0.19	%			0.20	%			0.20	%			0.25	%
Non-Performing Loans/Gross Loans				0.18	%			0.19	%			0.20	%			0.20	%			0.25	%
Allowance for Loan Losses/Non-Performing Loans				691	%			660	%			615	%			637	%			508	%
Allowance for Loan Losses/Non-Performing Assets				691	%			660	%			615	%			637	%			508	%
Allowance for Loan Losses/Gross Loans				1.21	%			1.26	%			1.26	%			1.26	%			1.26	%
Classified Loans/Gross Loans				0.21	%			0.23	%			0.16	%			0.15	%			0.30	%
Net Charge-offs			$	(6	)		$	(1	)		$	(3	)		$	(31	)		$	(8	)
Net Charge-offs to Average Gross Loans *				0.00	%			0.00	%			0.00	%			-0.03	%			-0.01	%
* Annualized

View source version on businesswire.com: http://www.businesswire.com/news/home/20160726005577/en/

OP Bancorp
Christine Oh
EVP & CFO
213.892.1192
[email protected]

Source: OP Bancorp

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