OP Bancorp Announces Q1 Earnings of $2.15 Million and Reports Unaudited First Quarter 2017 Results

OP Bancorp Announces Q1 Earnings of $2.15 Million and Reports Unaudited First Quarter 2017 Results

Financial Highlights

• Net income totaled $2.15 million for the first quarter of 2017, or $0.15 per diluted common share, slightly down from $2.25 million for the fourth quarter of 2016 and up 62.7% from $1.32 million for the first quarter of 2016.
• Net interest margin was 4.47% for the first quarter of 2017, compared to 4.41% for the fourth quarter of 2016 and 4.15% for the first quarter of 2016.
• Total assets were $800 million at March 31, 2017, up 5.1% from $761 million at December 31, 2016, and up 22.3% from $654 million at March 31, 2016.
• Net loans receivable were $674 million at March 31, 2017, up 1.1% from $666 million at December 31, 2016 and up 29.5% from $520 million at March 31, 2016.
• Total deposits were $711 million at March 31, 2017, up 7.4% from $662 million at December 31, 2016 and up 28.1% from $555 million at March 31, 2016.
• Non-interest bearing deposits were $257 million at March 31, 2017, up 3.8% from $247 million at December 31, 2016, and up 47.2% from $174 million at March 31, 2016.
• Non-performing assets to total assets were 0.05% at March 31, 2017, compared to 0.08% at December 31, 2016 and 0.15% at March 31, 2016.

OP Bancorp (the “Company”) (OTCQB: OPBK), the holding company of Open Bank (the “Bank”), today reported that net income for the first quarter of 2017 was $2.15 million, or $0.15 per diluted common share. This compares with net income of $2.25 million, or $0.16 per diluted share, for the fourth quarter of 2016, and net income of $1.32 million, or $0.10 per diluted share, for the first quarter of 2016. Pre-tax pre-provision income was $4.1 million for the first quarter 2017, compared to $4.0 million for the fourth quarter 2016, and $2.4 million for the first quarter 2016.

“It is with great pride that I announce yet another very strong and positive quarter. The confidence that our community places in our bank is reflected in the continuing growth of our total assets, which for the first time ever reached $800 million. Even more importantly, we have achieved this growth while maintaining a strong foundation of core deposits, specifically non-interest bearing deposits, which accounted for 36% of our total deposits. Our overall credit quality and performance ratios have also seen sustained improvement,” stated Min Kim, President and Chief Executive Officer. “Our SBA productions have been strong in past years and we intend to keep this momentum through our expanded SBA marketing campaign launched in April of 2017.”

Results of Operations

Net interest income before loan loss provision was $8.2 million for the three months ended March 31, 2017, an increase of 4.2% from $7.9 million for the fourth quarter of 2016, and an increase of 31.9% from $6.2 million for the first quarter of 2016. The increases from the fourth quarter of 2016 and the first quarter of 2016 were primarily the result of continued growth in interest earning assets, mostly loans. Average gross loans, including held-for-sale loans, were $685 million for the first quarter of 2017, an increase of $28 million, or 4.3%, from $657 million for the fourth quarter of 2016 and an increase of $161 million, or 30.8%, from $524 million for the first quarter of 2016.

The net interest margin for the first quarter of 2017 was 4.47%, a 6 basis point increase from 4.41% for the fourth quarter of 2016, and a 32 basis point increase from 4.15% for the first quarter of 2016. Excluding impacts from non-recurring items, such as loan payoffs and FHLB special dividend, the net interest margin for the first quarter of 2017 was 4.37%, up 7 basis points compared to 4.30% for the fourth quarter of 2016, and up 28 basis points from 4.09% for the first quarter of 2016.

The net interest margin expansion from the fourth quarter of 2016 was due to higher increases in loan yields compared to increases in deposit costs. Average yield on net loans, excluding non-recurring items, increased 12 basis points while average cost of deposits increased 3 basis points during the first quarter of 2017.

The net interest margin expansion from the first quarter of 2016 was attributable to improved yields on earning assets due to higher average gross loans and 5 basis points increase in loan rates, and lower average Fed funds in the first quarter of 2017. Average gross loans, net of unearned income, increased to 92% of earning assets for the first quarter 2017, compared to 87% for the first quarter 2016. Average Fed funds was 2.5% of earning assets in the first quarter of 2017, compared to 5.2% in the first quarter of 2016.

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

Loan loss provision for the first quarter of 2017 was $541 thousand, compared to $323 thousand for the fourth quarter of 2016 and $230 thousand for the first quarter of 2016.

Non-interest income was $2.2 million for the first quarter of 2017, down 11.4% compared to $2.5 million for the fourth quarter of 2016, and up 24.1% from $1.8 million for the first quarter of 2016. The changes were primarily due to changes in net gains on sale of SBA loans for the first quarter of 2017, from the fourth quarter of 2016 and the first quarter of 2016.

Net gain on sale of SBA loans totaled $1.2 million for the first quarter of 2017, compared to $1.5 million for the fourth quarter of 2016 and $0.9 million for the first quarter of 2016. Sale of SBA loans for the first quarter of 2017 was $16.4 million, compared to $21.4 million for the fourth quarter of 2016 and $12.7 million for the first quarter of 2016. The average premium on the sale of SBA loans for the first quarter of 2017 was 9.4%, compared to 8.2% for the fourth quarter of 2016 and 10.2% for the first quarter of 2016.

Non-interest expense was $6.4 million for the first quarter of 2017 and the fourth quarter of 2016. Non-interest expense for the first quarter of 2017 increased $794 thousand compared to $5.6 million for the first quarter of 2016, primarily due to increased operating expenses to support continued growth of the company. Salary & employee benefits expenses increased $516 thousand as the number of full time equivalent employees increased to 128.5 at March 31, 2017 from 120.5 at March 31, 2016. The increases in data processing, occupancy, and other business development related expenses totaled $247 thousand.

The effective tax rate for the first quarter of 2017 was 39.1%, compared to 38.4% for the fourth quarter of 2016 and 40.1% for the first quarter of 2016. The tax rate for the fourth quarter of 2016 was lower due to certain year-end true-up adjustments. The decrease from the first quarter of 2016 was mostly due to tax benefits from the vesting of restricted stock units in the first quarter of 2017.

Balance Sheet

Total assets were $800.2 million at March 31, 2017, an increase of $38.9 million, or 5.1% from $761.3 million at December 31, 2016, and an increase of $145.8 million, or 22.3%, from $654.3 million at March 31, 2016. Gross loans, net of unearned income, were $681.9 million at March 31, 2017, an increase of $7.7 million, or 1.1%, from $674.2 million at December 31, 2016, and an increase of $155.0 million, or 29.4%, from $526.9 million at March 31, 2016.

New loan originations for the first quarter of 2017 totaled $66.7 million, including SBA loan originations of $23.0 million, compared to $82.3 million, including SBA loan originations of $29.5 million for the fourth quarter of 2016. New loan originations for the first quarter of 2016 were $56.9 million, including SBA loan originations of $20.6 million. Loan payoffs for the first quarter of 2017 was $28.4 million, compared to $20.5 million for the fourth quarter of 2016, and $9.1 million for the first quarter of 2016.

Total deposits were $711.0 million at March 31, 2017, an increase of $49.3 million, or 7.4% from $661.8 million at December 31, 2016, and an increase of $155.8 million, or 28.1%, from $555.3 million at March 31, 2016. Non-interest bearing deposits were $256.9 million at March 31, 2017, an increase of $9.5 million, or 3.8%, from $247.4 million at December 31, 2016, and an increase of $82.4 million, or 47.2% from $174.5 million at March 31, 2016.

Non-interest bearing deposits accounted for 36.1% of total deposits at March 31, 2017, compared to 37.4% at December 31, 2016 and 31.4% at March 31, 2016.

There was no borrowings from the Federal Home Loan Bank (“FHLB”) at March 31, 2017, compared to $10 million at December 31, 2016 and $20 million at March 31, 2016.

At March 31, 2017, the Company continued to exceed all regulatory capital requirements to be classified as “well-capitalized,” as summarized in the following table.

At March 31, 2017, the tangible common equity represented 10.47% of tangible assets, compared to 10.68% at December 31, 2016 and 11.34% at March 31, 2016. 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 Company’s capital levels.

Asset Quality

Loan loss provision for the first quarter of 2017 was $541 thousand, compared to $323 thousand for the fourth quarter of 2016 and $230 thousand for the first quarter of 2016. Non-performing assets were $364 thousand, or 0.05% of total assets, at March 31, 2017, $576 thousand, or 0.08% of total assets, at December 31, 2016 and $1.0 million, or 0.15% of total assets, at March 31, 2016. There was no other real estate owned (“OREO”) at March 31, 2017, December 31, 2016, or March 31, 2016.

Non-performing loans to gross loans were 0.05% at March 31, 2017, compared to 0.09% at December 31, 2016 and 0.19% at March 31, 2016. Total classified loans were $2.1 million, or 0.30% of gross loans, at March 31, 2017, compared to $2.3 million, or 0.34% of gross loans, at December 31, 2016 and $1.2 million, or 0.23% of gross loans, at March 31, 2016.

The allowance for loan losses was $8.4 million at March 31, 2017, compared to $7.9 million at December 31, 2016 and $6.6 million at March 31, 2016. The allowance for loan losses was 1.23% of gross loans at March 31, 2017 and 1.17% at December 31, 2016 and 1.26% at March 31, 2016.

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 the Company’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 two loan production offices in Seattle, Washington and Dallas, Texas. 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 Statement

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 Company’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 Company’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.

OP Bancorp
Christine Oh
EVP & CFO
213-892-1192
Christine.oh@myopenbank.com

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