OP Bancorp Reports Fourth Quarter and Year End Financial Results for 2018

OP Bancorp (the Company) (NASDAQ: OPBK), the holding company of Open Bank (the Bank), today reported unaudited financial results for the fourth quarter and full year ended December 31, 2018. Net income for the fourth quarter of 2018 was $3.8 million, or $0.23 per diluted common share, compared with net income of $3.5 million, or $0.21 per diluted share for the third quarter of 2018, and net income of $1.9 million, or $0.13 per diluted share for the fourth quarter of 2017. For the 2018, net income was $14.3 million, or $0.89 per diluted share, compared with $9.2 million, or $0.66 per diluted share, for 2017.

We are pleased to announce another strong quarter and year end results for our first year as a public company. Our net income year over year increased 54.3%, or $0.23 to $0.89 earnings per share on a fully diluted basis, compared to $0.66 for the year ended 2017. Our loans and deposits continued to grow with 17% increases from the prior year, while we maintained strong asset quality and retained noninterest bearing deposits at 31.5% of total deposits, commented Min Kim, President and Chief Executive Officer of OP Bancorp and Open Bank. Ms. Kim continued, We are also pleased to announce that our Board of Directors have declared a quarterly cash dividend for the first quarter of $0.05 per shares. Our Board also approved a stock repurchase program for up to 400,000 of our outstanding shares subject to market conditions.

Financial Highlights (unaudited)
(Dollars in thousands, except per share data)As of or for the Three Months Ended
December 31,September 30,December 31,
201820182017
Income Statement Data:
Interest income$13,820$13,006$11,077
Interest expense2,8942,5211,376
Net interest income10,92610,4859,701
Provision for loan losses220439322
Noninterest income2,0502,2842,278
Noninterest expense7,5687,7056,571
Income before taxes5,1884,6255,086
Provision for income taxes1,4231,1443,186
Net Income$3,765$3,481$1,900
Diluted earnings per share$0.23$0.21$0.13
Balance Sheet Data:
Loans held for sale$752$3,254$15,739
Gross loans, net of unearned income875,059850,018748,023
Allowance for loan losses9,6369,5519,139
Total assets1,044,1861,035,028900,999
Deposits905,176896,891773,306
Shareholders equity129,787124,97591,480
Performance Ratios:
Return on average assets (annualized)1.49%1.42%0.87%
Return on average equity (annualized)11.84%11.28%8.33%
Net interest margin (annualized)4.50%4.44%4.69%
Efficiency ratio (1)58.33%60.34%54.86%
Credit Quality:
Nonperforming loans$1,914$1,233$1,037
Nonperforming assets1,9141,2331,037
Net charge-offs to average gross loans (annualized)0.06%0.29%0.05%
Nonperforming assets to gross loans plus OREO0.22%0.15%0.14%
ALL to nonperforming loans503%775%881%
ALL to gross loans1.10%1.12%1.22%
Capital Ratios:
Total risk-based capital ratio16.26%16.16%13.49%
Tier 1 risk-based capital ratio15.13%15.01%12.26%
Common equity tier 1 ratio15.13%15.01%12.26%
Leverage ratio12.88%12.77%10.46%
(1) Represents noninterest expense divided by the sum of net interest income and noninterest income.
Financial Highlights (unaudited)

(Dollars in thousands, except per share data)

For the Twelve Months Ended
December 31,December 31,
20182017
Income Statement Data:
Interest income$50,068$40,283
Interest expense9,1114,573
Net interest income40,95735,710
Provision for loan losses1,2671,311
Noninterest income9,3298,986
Noninterest expense29,56226,257
Income before taxes19,45717,128
Provision for income taxes5,2047,892
Net Income$14,253$9,236
Diluted earnings per share$0.89$0.66
Performance Ratios:
Return on average assets1.49%1.13%
Return on average equity12.27%10.63%
Net interest margin4.49%4.61%
Efficiency ratio (1)58.79%58.74%
(1) Represents noninterest expense divided by the sum of net interest income and noninterest income.

Results of Operations

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The reported interest income and yield on our loan portfolio are impacted by a number of components, including changes in the average contractual interest rate earned on loans and the amount of discount accretion on SBA loans. The following table reconciles the contractual interest income and yield on our loan portfolio to the reported interest income and yield for the periods indicated.

Three Months Ended

December 31, 2018

September 30, 2018

December 31, 2017

(Dollars in thousands)

Interest & Fees

Yield

Interest & Fees

Yield

Interest & Fees

Yield
Contractual interest rate$12,1275.58%$11,8205.46%$9,7465.11%
SBA discount accretion9670.44%6110.28%9100.48%
Amortization of net deferred fees/(costs)10.00%650.03%(16)-0.01%
Interest recognized on nonaccrual loans(69)-0.03%(8)0.00%470.02%
Prepayment penalties and late fees400.02%360.02%460.02%
Yield on loans (as reported)$13,0666.01%$12,5245.79%$10,7335.63%
Twelve Months Ended

December 31, 2018

December 31, 2017

(Dollars in thousands)

Interest & Fees

Yield

Interest & Fees

Yield
Contractual interest rate$45,1475.41%$35,9895.04%
SBA discount accretion2,6260.31%2,5580.36%
Amortization of net deferred fees/(costs)2150.03%1630.02%
Interest recognized on nonaccrual loans(47)-0.01%2080.03%
Prepayment penalties and late fees1670.02%1940.03%
Yield on loans (as reported)$48,1085.76%$39,1125.48%

Net interest income before provision for loan losses for the fourth quarter of 2018 was $10.9 million, an increase of $441 thousand, or 4.2%, compared to $10.5 million for the third quarter of 2018, primarily due to a $814 thousand increase in interest income, partially offset by a $373 thousand increase in interest expense.

Interest income on securities available for sale and other investment increased $272 thousand, or 56.5% during the fourth quarter compared to the prior quarter and $409 thousand, or 118.9% compared to the same period of 2017. The increase was primarily due to purchases of higher yielding securities and Federal Home Loan Banks special dividend during the fourth quarter of 2018.

Interest income from the contractual interest rates on loans increased $307 thousand, or 2.6%, during the fourth quarter compared to the third quarter of 2018, reflecting a 12 basis point increase in the average contractual interest rate from the increase in Fed funds rate in September 2018 of 25 basis points. The amount of discount accretion on SBA loans increased $356 thousand during the fourth quarter due to an increase in SBA loan payoffs. The reported interest income on loans, net of SBA discount accretions and other components, increased $542 thousand during the quarter.

Interest expense for the fourth quarter of 2018 increased $373 thousand, or 14.8%, compared to the third quarter of 2018, due to an increase of $10.5 million, or 1.8% in average balance of interest-bearing liabilities and an increase of 21 basis points in average cost of interest-bearing liabilities, primarily due to the increase in Fed funds rate.

Net interest margin for the fourth quarter of 2018 increased 6 basis points to 4.50% from 4.44% for the third quarter of 2018, primarily due to the increase in the reported yield on earning assets, partially offset by the increase in the cost of interest-bearing liabilities.

Net interest income before provision for loan losses for the fourth quarter of 2018 increased $1.2 million, or 12.6%, to $10.9 million, compared to $9.7 million for the fourth quarter of 2017, primarily due to a $2.7 million increase in interest income, partially offset by an increase of $1.5 million in interest expense.

The increase in interest income was primarily due to a 14.0% increase in average loans, including loans held for sale, and a 38 basis point increase in the yield on average loans to 6.01% for the fourth quarter of 2018 from 5.63% for the fourth quarter of 2017.

The increase in interest expense in the fourth quarter of 2018 compared to the fourth quarter of 2017 was due to a 19.3% increase in average interest-bearing liabilities and an 82 basis point increase in the cost of interest-bearing liabilities. The increases in the average yields on loans and average cost of deposits were primarily due to cumulative market rate increases by the Federal Reserve of 100 basis points through four rate hikes of 25 basis points in each of December 2017, March 2018, June 2018 and September 2018.

Net interest margin for the fourth quarter of 2018 decreased 19 basis points to 4.50% from 4.69% for the fourth quarter of 2017.

Net interest income for the full year of 2018 increased $5.2 million, or 14.7%, to $41.0 million, compared to $35.7 million for 2017, primarily due to a $9.8 million increase in interest income, partially offset by an increase of $4.5 million in interest expense.

The increase in interest income for the year ended December 31, 2018 was primarily due to a 16.9% increase in average loans, including loans held for sale, and a 28 basis point increase in the yield on average loans to 5.76% from 5.48% for 2017. The increase in interest expense was due to a 21.8% increase in average interest-bearing liabilities and a 62 basis point increase in the cost of average interest-bearing liabilities to 1.59% for 2018 from 0.97% for 2017.

Net interest margin for the full year of 2018 decreased 12 basis points to 4.49% from 4.61% for 2017.

The following table shows the asset yields, liability costs, spreads and margins.

Three Months EndedPercentage Change
December 31,September 30,December 31,Q4-18Q4-18
201820182017vs. Q3-18vs. Q4-17
Yield on loans6.01%5.79%5.63%0.22%0.38%
Yield on interest-earning assets5.69%5.51%5.35%0.18%0.34%
Cost of interest-bearing liabilities1.90%1.69%1.08%0.21%0.82%
Cost of deposits1.32%1.17%0.70%0.15%0.62%
Cost of funds1.32%1.18%0.71%0.14%0.61%
Net interest spread3.79%3.82%4.27%-0.03%-0.48%
Net interest margin4.50%4.44%4.69%0.06%-0.19%
Twelve Months EndedPercentage Change
December 31,December 31,2018 YTD
20182017vs. 2017 YTD
Yield on loans5.76%5.48%0.28%
Yield on interest-earning assets5.49%5.20%0.29%
Cost of interest-bearing liabilities1.59%0.97%0.62%
Cost of deposits1.09%0.62%0.47%
Cost of funds1.09%0.63%0.46%
Net interest spread3.90%4.23%-0.33%
Net interest margin4.49%4.61%-0.12%

The provision for loan loss for the fourth quarter of 2018 was $220 thousand, a $219 thousand decrease from $439 thousand for the third quarter of 2018, and a $102 thousand decrease from $322 thousand for the fourth quarter of 2017. The decreases were primarily due to a decrease in the required reserve for loan losses as a percentage of gross loans for December 31, 2018 as overall loss factors used in the fourth quarter of 2018 were lower than those for the third quarter of 2018 and the fourth quarter of 2017.

Noninterest income for the fourth quarter of 2018 was $2.1 million, a decrease of $234 thousand, or 10.2%, from $2.3 million for the third quarter of 2018, primarily due to a decrease of $238 thousand in loan servicing fees, a decrease of $107 thousand in gain on sale of SBA loans, partially offset by an increase of $62 thousand in credit related fees and an increase of $43 thousand in other gain.

Loan servicing fees decreased $238 thousand to $72 thousand for the fourth quarter of 2018 from $310 for the prior quarter. The decrease in loan servicing fees was primarily due to an increase in the amortization of SBA servicing assets from the increase in SBA loan payoffs.

Gain on sale of SBA loans decreased $107 thousand to $1.0 million for the fourth quarter of 2018 from $1.1 million for the third quarter of 2018. We sold $24.7 million in SBA loans with an average premium of 5.65% in the fourth quarter of 2018, compared to the sale of $22.8 million in SBA loans with an average premium of 6.47% in the third quarter of 2018.

Noninterest income for the fourth quarter of 2018 decreased $228 thousand compared to $2.3 million for the fourth quarter of 2017, primarily due to a decrease of $374 thousand in gain on sale of SBA loans, partially offset by an increase of $72 thousand in credit related fees and an increase of $42 thousand in service charges on deposits. Gain on sale of SBA loans for the fourth quarter of 2017 was $1.4 million. We sold $18.6 million in SBA loans with an average premium of 9.35% in the fourth quarter of 2017. Decrease in average premium rates on SBA loans sold to 5.65% from 9.35% year over year was primarily due to the acceleration of prepayments in SBA loans as more borrowers are refinancing SBA loans to conventional loans with lower interest rates.

Noninterest expense for the fourth quarter of 2018 was $7.6 million, a decrease of $137 thousand, or 1.8%, compared to $7.7 million for the third quarter of 2018. The decrease was primarily due to a $236 thousand decrease in salary and employee benefits, partially offset by an increase of $77 thousand in other expenses.

Noninterest expense for the fourth quarter of 2018 increased $997 thousand, or 15.2%, to $7.6 million, compared to $6.6 million for the fourth quarter of 2017. The increase was primarily due to a $506 thousand increase in salary and employee benefits from an increase of 25 in employee headcount from 129 at December 31, 2017. Professional fees increased $154 thousand, primarily resulting from our financial and legal requirements as a public company. Foundation donation and other contributions increased $154 thousand, which were tied to the Companys increased net income.

Income tax provision for the fourth quarter of 2018 was $1.4 million, compared to $1.1 million for the third quarter of 2018 and $3.2 million for the fourth quarter of 2017. The effective tax rate for the fourth quarter of 2018 was 27.4%, compared to 24.7% for the third quarter of 2018 and 62.6% for the fourth quarter of 2017. The effective tax rates were 26.8% and 46.1% for the full year ended December 31, 2018 and 2017, respectively. The significant decreases in the effective tax rate for 2018 compared to 2017 were due to the enactment the Tax Cuts and Jobs Act signed into law on December 22, 2017.

Balance Sheet

Total assets at December 31, 2018 were $1.04 billion, an increase of $9.2 million, or 0.9%, from the preceding quarter, and an increase of $143.0 million, or 15.9%, from a year ago. Gross loans, net of unearned income, were $875.1 million at December 31, 2018, an increase of $25.0 million, or 2.9%, from $850.0 million at September 30, 2018, and an increase of $127.0 million, or 17.0%, from $748.0 million at December 31, 2017.

New loan originations for the fourth quarter of 2018 totaled $62.4 million, including SBA loan originations of $23.5 million, compared to $91.7 million, including SBA loan originations of $30.3 million for the third quarter of 2018. New loan originations for the fourth quarter of 2017 were $57.1 million, including SBA loan originations of $18.0 million. Loan payoffs for the fourth quarter of 2018 were $13.2 million, compared to $29.3 million for the third quarter of 2018, and $22.9 million for the fourth quarter of 2017.

Total deposits were $905.2 million at December 31, 2018, an increase of $8.3 million, or 0.9%, from $896.9 million at September 30, 2018, and an increase of $131.9 million, or 17.1%, from $773.3 million at December 31, 2017. Noninterest bearing deposits were $285.1 million at December 31, 2018, a decrease of $1.2 million, or 0.4%, from $286.3 million at September 30, 2018, and a decrease of $4.3 million, or 1.5%, from $289.4 million at December 31, 2017.

Noninterest bearing deposits accounted for 31.5% of total deposits at December 31, 2018, compared to 31.9% at September 30, 2018 and 37.4% at December 31, 2017.

As of
December 31,September 30,December 31,
201820182017
Noninterest bearing deposits31.5%31.9%37.4%
Interest bearing demand deposits28.9%28.3%32.0%
Savings0.4%0.4%0.5%
Time deposits over $250,00018.1%17.6%14.1%
Other time deposits21.1%21.8%16.0%
Total deposits100.0%100.0%100.0%

The Company had no borrowings from the Federal Home Loan Bank (FHLB) at December 31, 2018 and September 30, 2018, compared to the advances from the FHLB of $25 million at December 31, 2017. The payoff advances from the FHLB were funded by the increase in total deposits.

The Companys consolidated regulatory capital ratios exceeded regulatory guidelines and the Banks capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at December 31, 2018, as summarized in the following table.

Well-capitalizedFully Phased-in
FinancialBasel III
InstitutionMinimal
Basel IIIRequirements (1)
RegulatoryEffective
Capital RatiosOP BancorpOpen BankGuidelinesJanuary 1, 2019
Total risk-based16.26%16.25%10.00%10.50%
Tier 1 risk-based15.13%15.12%8.00%8.50%
Common equity tier 1 Risk-Based15.13%15.12%6.50%7.00%
Leverage12.88%12.87%5.00%4.00%
(1) Fully phased in Basel III requirement for both OP Bancorp and Open Bank. Includes a 2.5% capital conservation buffer, except the leverage ratio.

Asset Quality

Nonperforming loans were $1.9 million at December 31, 2018, an increase of $681 thousand from $1.2 million at September 30, 2018 and an increase of $877 thousand from $1.0 million at December 31, 2017. There were two loans added to nonaccrual status during the fourth quarter, but an allocation of the allowance for loan losses was not required for these nonperforming loans.

Nonperforming assets were $1.9 million, or 0.18% of total assets, at December 31, 2018, $1.2 million, or 0.12% of total assets, at September 30, 2018 and $1.0 million, or 0.12% of total assets, at December 31, 2017. There was no other real estate owned (OREO) at December 31, 2018, September 30, 2018, or December 31, 2017.

Nonperforming loans to gross loans were 0.22% at December 31, 2018, compared to 0.15% at September 30, 2018 and 0.14% at December 31, 2017. Total classified loans were $3.1 million, or 0.36% of gross loans, at December 31, 2018, compared to $3.0 million, or 0.35% of gross loans, at September 30, 2018 and $2.1 million, or 0.28% of gross loans, at December 31, 2017.

The allowance for loan losses was $9.6 million at December 31, 2018 and September 30, 2018, compared to $9.1 million at December 31, 2017. The allowance for loan losses was 1.10% of gross loans at December 31, 2018, 1.12% at September 30, 2018 and 1.22% at December 31, 2017. The allowance for loan losses was 503% of nonperforming assets at December 31, 2018, 775% at September 30, 2018 and 881% at December 31, 2017. An additional reserve for loan losses was not required for the fourth quarter, primarily due to decreases in overall loss factors as managements reassessment adjusted qualitative factors lower in the fourth quarter of 2018.

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 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 eight full branch offices in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Gardena, Buena Park, and Santa Clara. The Bank also has three loan production offices in Seattle, Washington, Dallas, Texas, and Atlanta, Georgia. 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 (including any exhibits hereto) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Companys current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as likely result in, expects, anticipates, estimates, forecasts, projects, intends to, or may include other similar words or phrases, such as believes, plans, trend, objective, continues, remains, or similar expressions, or future or conditional verbs, such as will, would, should, could, may, might, can, or similar verbs. 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 loss; 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 and the success of construction projects that we finance; 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; 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 the Bank to pay dividends to us; 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; 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; the affect if any of the recent federal government shutdown on our SBA loan program; and our ability the manage the foregoing and other factors set forth in the Companys public reports including its Registration Statement on Form S-1 effective as of March 27, 2018, and particularly the discussion of risk factors within that document. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, our results could differ materially from those expressed in, implied or projected by such forward-looking statements. We assume no obligation to update such forward-looking statements. Any forward-looking statements presented herein are made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, except as required by law.

Consolidated Balance Sheet (unaudited)
(Dollars in thousands)
12/31/20189/30/2018% change12/31/2017% change
Assets
Cash and due from banks$77,726$95,787-18.9%$63,25022.9%
Securities available for sale, at fair value55,33646,32419.5%41,47233.4%
Other investments7,2607,2210.5%4,28769.3%
Loans held for sale7523,254-76.9%15,739-95.2%
Real Estate Loans503,834489,8282.9%420,76019.7%
SBA Loans127,375132,505-3.9%115,55910.2%
C & I Loans113,975104,3019.3%103,6819.9%
Home Mortgage Loans127,298120,2625.9%104,06822.3%
Consumer & Other Loans2,5773,122-17.5%3,955-34.8%
Gross loans, net of unearned income875,059850,0182.9%748,02317.0%
Allowance for loan losses(9,636)(9,551)0.9%(9,139)5.4%
Net loans receivable865,423840,4673.0%738,88417.1%
Premises and equipment, net4,6334,757-2.6%4,4813.4%
Accrued interest receivable3,0682,78310.2%2,46324.6%
Servicing assets6,9877,097-1.5%6,7713.2%
Company owned life insurance11,39411,3210.6%11,0902.7%
Deferred tax assets3,6724,257-13.7%3,3838.5%
Other assets7,93511,760-32.5%9,179-13.6%
Total assets$1,044,186$1,035,0280.9%$900,99915.9%
Liabilities and Shareholders’ Equity
Noninterest bearing deposits$285,132$286,347-0.4%$289,410-1.5%
Savings3,4213,2405.6%3,838-10.9%
Money market and others261,349253,8073.0%247,3245.7%
Time deposits over $250,000164,281157,6874.2%108,95250.8%
Other time deposits190,993195,810-2.5%123,78254.3%
Total deposits905,176896,8910.9%773,30617.1%
Other borrowings0.0%25,000-100.0%
Accrued interest payable1,7151,19643.4%423305.4%
Other liabilities7,50811,966-37.3%10,790-30.4%
Total liabilities914,399910,0530.5%809,51913.0%
Common stock91,20991,0090.2%67,92634.3%
Additional paid-in capital6,2495,8866.2%5,28018.4%
Retained earnings32,87729,11312.9%18,62476.5%
Accumulated other comprehensive loss(548)(1,033)-47.0%(350)56.6%
Total shareholders’ equity129,787124,9753.9%91,48041.9%
Total Liabilities and Shareholders’ Equity$1,044,186$1,035,0280.9%$900,99915.9%
Consolidated Statements of Income (unaudited)
(Dollars in thousands, except per share data)Three Months Ended
12/31/20189/30/2018% change12/31/2017% change
Interest income
Interest and fees on loans$13,066$12,5244.3%$10,73321.7%
Interest on securities available for sale34024936.5%20070.0%
Other interest income41423377.7%144187.5%
Total interest income13,82013,0066.3%11,07724.8%
Interest expense
Interest on deposits2,8942,47716.8%1,344115.3%
Interest on borrowed funds44-100.0%32-100.0%
Total interest expense2,8942,52114.8%1,376110.3%
Net interest income10,92610,4854.2%9,70112.6%
Provision for loan losses220439-49.9%322-31.7%
Net interest income after provision for loan losses10,70610,0466.6%9,37914.1%
Noninterest income
Service charges on deposits4974842.7%4559.2%
Loan servicing fees, net of amortization72310-76.8%694.3%
Gain on sale of loans1,0281,135-9.4%1,402-26.7%
Other income45335527.6%35228.7%
Total noninterest income2,0502,284-10.2%2,278-10.0%
Noninterest expense
Salaries and employee benefits4,5674,803-4.9%4,06112.5%
Occupancy and equipment1,0469767.2%9994.7%
Data processing and communication283320-11.6%326-13.2%
Professional fees3082944.8%154100.0%
FDIC insurance and regulatory assessments99106-6.6%7630.3%
Promotion and advertising215222-3.2%17324.3%
Directors fees2182160.9%19810.1%
Foundation donation and other contributions356369-3.5%20276.2%
Other expenses47639919.3%38224.6%
Total noninterest expense7,5687,705-1.8%6,57115.2%
Income before income taxes5,1884,62512.2%5,0862.0%
Provision for income taxes1,4231,14424.4%3,186-55.3%
Net income (loss)$3,765$3,4818.2%$1,90098.2%
Book value per share$8.18$7.923.3%$6.9417.9%
Basic EPS$0.23$0.224.5%$0.1464.3%
Diluted EPS$0.23$0.219.5%$0.1376.9%
Shares of common stock outstanding15,860,30615,770,5760.6%13,190,52720.2%
Weighted Average Shares:
– Basic15,801,40615,714,2260.6%13,182,63019.9%
– Diluted16,201,40816,234,926-0.2%13,655,87218.6%
Key Ratios
(Dollars in thousands, except ratios)Three Months Ended
12/31/20189/30/2018% change12/31/2017% change
Return on average assets (ROA)*1.49%1.42%0.07%0.87%0.62%
Return on average equity (ROE) *11.84%11.28%0.56%8.33%3.51%
Net interest margin *4.50%4.44%0.06%4.69%-0.19%
Efficiency ratio58.33%60.34%-2.01%54.86%3.47%
Total Risk Based Capital Ratio16.26%16.16%0.10%13.49%2.77%
Tier 1 Capital Ratio15.13%15.01%0.12%12.26%2.87%
Common Equity Tier 1 Ratio15.13%15.01%0.12%12.26%2.87%
Tier 1 Leverage Ratio12.88%12.77%0.11%10.46%2.42%
* Annualized
Consolidated Statements of Income (unaudited)
(Dollars in thousands, except per share data)Twelve Months Ended
12/31/201812/31/2017% change
Interest income
Interest and fees on loans$48,108$39,11123.0%
Interest on securities available for sale98567645.7%
Other interest income97549597.0%
Total interest income50,06840,28324.3%
Interest expense
Interest on deposits8,9644,470100.5%
Interest on borrowed funds14710342.7%
Total interest expense9,1114,57399.2%
Net interest income40,95735,71014.7%
Provision for loan losses1,2671,311-3.4%
Net interest income after provision for loan losses39,69034,39915.4%
Noninterest income
Service charges on deposits1,9161,65615.7%
Loan servicing fees, net of amortization1,0781,127-4.3%
Gain on sale of loans4,8804,939-1.2%
Other income1,4551,26415.1%
Total noninterest income9,3298,9863.8%
Noninterest expense
Salaries and employee benefits18,19516,47410.4%
Occupancy and equipment4,1113,9184.9%
Data processing and communication1,2311,323-7.0%
Professional fees92158956.4%
FDIC insurance and regulatory assessments4053777.4%
Promotion and advertising81463129.0%
Directors fees8517966.9%
Foundation donation and other contributions1,44195451.0%
Other expenses1,5931,19533.3%
Total noninterest expense29,56226,25712.6%
Income before income taxes19,45717,12813.6%
Provision for income taxes5,2047,892-34.1%
Net income (loss)$14,253$9,23654.3%
Book value per share$8.18$6.9417.9%
Basic EPS$0.92$0.6835.3%
Diluted EPS$0.89$0.6634.8%
Shares of common stock outstanding15,860,30613,190,52720.2%
Weighted Average Shares:
– Basic15,104,93913,063,34415.6%
– Diluted15,551,06313,485,79115.3%
Key Ratios
(Dollars in thousands, except ratios)Twelve Months Ended
12/31/201812/31/2017% change
Return on average assets (ROA)1.49%1.13%0.36%
Return on average equity (ROE)12.27%10.63%1.64%
Net interest margin4.49%4.61%-0.12%
Efficiency ratio58.79%58.74%0.05%
Total Risk Based Capital Ratio16.26%13.49%2.77%
Tier 1 Capital Ratio15.13%12.26%2.87%
Common Equity Tier 1 Ratio15.13%12.26%2.87%
Tier 1 Leverage Ratio12.88%10.46%2.42%
Asset Quality
(Dollars in thousands, except ratios)Three Months Ended
12/31/20189/30/20186/30/20183/31/201812/31/2017
Nonaccrual Loans$1,571$888$642$241$683
Loans 90 days or more past due, accruing
Accruing restructured loans343345348351354
Nonperforming loans1,9141,2339905921,037
Other real estate loans (OREO)
Nonperforming assets1,9141,2339905921,037
Classified loans3,1242,9653,0653,3562,088
Nonperforming assets/total assets0.18%0.12%0.10%0.06%0.12%
Nonperforming assets/gross loans plus OREO0.22%0.15%0.12%0.07%0.14%
Nonperforming loans/gross loans0.22%0.15%0.12%0.07%0.14%
Allowance for loan losses/nonperforming loans503%775%982%1641%881%
Allowance for loan losses/nonperforming assets503%775%982%1641%881%
Allowance for loan losses/gross loans1.10%1.12%1.18%1.22%1.22%
Classified loans/gross loans0.36%0.35%0.37%0.43%0.28%
Net charge-offs$135$611$26$(2)$92
Net charge-offs to average gross loans *0.06%0.29%0.01%0.00%0.05%
* Annualized
Average Balance Sheet, Interest and Yield/Rate Analysis
(Dollars in thousands)Three Months Ended
December 31, 2018September 30, 2018December 31, 2017

Average Balance

Interest and Fees

Yield/ Rate

Average Balance

Interest and Fees

Yield/ Rate

Average Balance

Interest and Fees

Yield/ Rate

Earning assets:
Federal funds sold and other investments$49,167$4143.32%$34,216$2332.68%$22,449$1442.55%
Securities available for sale52,9953402.5644,4412492.2442,7562001.87
Total investments102,1627542.9378,6574822.4365,2053442.10
Real estate494,8176,7685.43483,6256,4725.31417,2145,2104.95
SBA136,6443,1639.18146,2592,9788.08135,0742,8078.24
C & I104,3711,5135.75106,6541,5105.6298,1071,3405.42
Home Mortgage124,1721,5785.08119,3461,5155.08102,5301,3205.15
Consumer2,829446.213,373495.754,031565.49
Loans (1)862,83313,0666.01859,25712,5245.79756,95610,7335.63
Total earning assets964,99513,8205.69937,91413,0065.51822,16111,0775.35
Noninterest-earning assets44,17545,91353,366
Total assets$1,009,170$983,827$875,527
Interest-bearing liabilities:
NOW and savings deposits$5,38330.25%$5,92940.25%$6,50440.25%
Money market deposits246,8011,0481.68254,5109481.48267,6766550.97
Time deposits350,5971,8432.08323,5121,5251.87220,3346851.23
Total interest-bearing deposits602,7812,8941.90583,9512,4771.68494,5141,3441.08
Borrowings12.248,300442.0910,632321.21
Total interest-bearing liabilities602,7822,8941.90592,2512,5211.69505,1461,3761.08
Noninterest-bearing liabilities:
Noninterest-bearing deposits269,538258,252268,691
Other noninterest-bearing liabilities9,6819,81710,445
Total noninterest-bearing liabilities279,219268,069279,136
Shareholders equity127,169123,50791,245
Total liabilities and shareholders equity$1,009,170$983,827$875,527
Net interest income / interest rate spreads$10,9263.79%$10,4853.82%$9,7014.27%
Net interest margin4.50%4.44%4.69%
Cost of deposits & cost of funds:
Total deposits / cost of deposits$872,319$2,8941.32%$842,203$2,4771.17%$763,205$1,3440.70%
Total funding liabilities / cost of funds$872,320$2,8941.32%$850,503$2,5211.18%$773,837$1,3760.71%
(1) Includes loans held for sale.
Average Balance Sheet, Interest and Yield/Rate Analysis
(Dollars in thousands)Twelve Months Ended
December 31, 2018December 31, 2017

Average Balance

Interest and Fees

Yield/ Rate

Average Balance

Interest and Fees

Yield/ Rate

Earning assets:
Federal funds sold and other investments$33,110$9752.95%$22,926$4952.16%
Securities available for sale44,0469852.2437,6206761.80
Total investments77,1561,9602.5460,5461,1711.93
Real estate472,06224,7845.25384,46218,7214.87
SBA140,38111,4048.12123,8229,4307.62
C & I104,7065,8625.6098,4555,3465.43
Home Mortgage114,6305,8645.12103,1915,3445.18
Consumer3,3581945.784,3852716.18
Loans (1)835,13748,1085.76714,31539,1125.48
Total earning assets912,29350,0685.49774,86140,2835.20
Noninterest-earning assets47,26045,499
Total assets$959,553$820,360
Interest-bearing liabilities:
NOW and savings deposits$6,080150.25%$6,137150.24%
Money market deposits253,8093,5081.38258,0192,3440.91
Time deposits304,4075,4411.79196,8312,1111.07
Total interest-bearing deposits564,2968,9641.59460,9874,4700.97
Borrowings8,7361471.679,3021031.11
Total interest-bearing liabilities573,0329,1111.59470,2894,5730.97
Noninterest-bearing liabilities:
Noninterest-bearing deposits260,697256,267
Other noninterest-bearing liabilities9,6226,895
Total noninterest-bearing liabilities270,319263,162
Shareholders equity116,20286,909
Total liabilities and shareholders equity$959,553$820,360
Net interest income / interest rate spreads$40,9573.90%$35,7104.23%
Net interest margin4.49%4.61%
Cost of deposits & cost of funds:
Total deposits / cost of deposits$824,993$8,9641.09%$717,254$4,4700.62%
Total funding liabilities / cost of funds$833,729$9,1111.09%$726,556$4,5730.63%
(1) Includes loans held for sale.

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