Op bancorp reports first quarter result of 2020
Los angeles--(business wire)--op bancorp (the “company”) (nasdaq: opbk), the holding company of open bank (the “bank”), today reported unaudited financial results for the first quarter of 2020. net income for the first quarter of 2020 was $3.3 million, or $0.21 per diluted common share, compared to net income of $4.2 million, or $0.26 per diluted common share for fourth quarter of 2019, and net income of $4.7 million, or $0.29 per diluted common share for the first quarter of 2019. excluding one-time gain of $1.2 million on company owned life insurance, net income for the first quarter of 2019 was $3.8 million or $0.23 per diluted common share. “as the impact of covid-19 has been collectively felt by all of us, my heartfelt appreciation goes out to all those working in the front line serving our community as we work together in recovery. in order to do our part, we have taken various steps to help our customers, employees and communities in this challenging and unprecedented time while maintaining our safe and sound banking operations. we have been assisting our customers with loan deferrals and the sba payroll protection program (ppp) in recent weeks. i am very proud of the efforts our employees are making to support our customers, especially those on the front lines,” commented min kim, president and chief executive officer of op bancorp and open bank. ms. kim continued, “as part of our continued effort to support our communities, we have donated $1 million through open stewardship foundation to help small restaurants in our communities. in addition, our directors and employees together have donated $100,000 to two local non-profit organizations to support families who are most severely impacted by the pandemic.” covid-19 actions for our customers, employees and communities offering loan payment deferrals: we have received 164 loan deferment requests for an aggregate of $218 million loan balances, which is approximately 22% of loan portfolio as of march 31, 2020 processing the sba paycheck protection program (ppp) loans: we have approved 326 loans for an aggregate of $37.4 million as of april 20, 2020 enabled remote working environment for employees while maintaining fully functioning operations in all areas donated $1 million through open stewardship foundation to support small restaurants in the communities we serve donated $100,000 from our directors and employees’ contribution to two non-profit organizations to support families who are most severely impacted by the pandemic financial highlights (unaudited) (dollars in thousands, except per share data) as of or for the three months ended march 31, december 31, march 31, 2020 2019 2019 income statement data: interest income $ 14,345 $ 14,703 $ 14,086 interest expense 3,229 3,625 3,288 net interest income 11,116 11,078 10,798 provision for loan losses 743 411 0 noninterest income 2,296 2,513 3,533 noninterest expense 8,207 7,665 8,073 income before taxes 4,462 5,515 6,258 provision for income taxes 1,163 1,334 1,518 net income $ 3,299 $ 4,181 $ 4,740 diluted earnings per share $ 0.21 $ 0.26 $ 0.29 balance sheet data: loans held for sale $ 4,382 $ 2,100 $ 246 gross loans, net of unearned income 996,559 990,138 913,064 allowance for loan losses 10,748 10,050 9,619 total assets 1,209,593 1,179,520 1,077,235 deposits 1,052,198 1,020,711 929,402 shareholders’ equity 138,099 140,576 132,376 performance ratios: return on average assets (annualized) 1.12 % 1.45 % 1.83 % return on average equity (annualized) 9.44 % 12.05 % 14.46 % net interest margin (annualized) 3.95 % 3.99 % 4.38 % efficiency ratio (1) 61.19 % 56.40 % 56.48 % credit quality: nonperforming loans $ 1,533 $ 1,548 $ 1,580 nonperforming assets 1,533 1,548 2,726 net charge-offs to average gross loans (annualized) 0.02 % 0.00 % 0.01 % nonperforming assets to gross loans plus oreo 0.15 % 0.16 % 0.30 % all to nonperforming loans 701 % 649 % 609 % all to gross loans, net of unearned income 1.08 % 1.02 % 1.05 % capital ratios: total risk-based capital ratio 14.77 % 15.18 % 16.02 % tier 1 risk-based capital ratio 13.68 % 14.16 % 14.94 % common equity tier 1 ratio 13.68 % 14.16 % 14.94 % leverage ratio 11.58 % 12.14 % 12.96 % (1) represents noninterest expense divided by the sum of net interest income and noninterest income. financial highlights, excluding gain on coli (dollars in thousands, except per share data) as of or for the three months ended march 31, december 31, march 31, 2020 2019 2019 income before taxes, as reported $ 4,462 $ 5,515 $ 6,258 gain on coli — — 1,228 provision for income taxes 1,163 1,334 1,254 net income $ 3,299 $ 4,181 $ 3,776 diluted earnings per share $ 0.21 $ 0.26 $ 0.23 return on average assets (annualized) 1.12 % 1.45 % 1.45 % return on average equity (annualized) 9.44 % 12.05 % 11.52 % results of operations 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 march 31, 2020 december 31, 2019 march 31, 2019 (dollars in thousands) interest & fees yield interest & fees yield interest & fees yield contractual interest rate $ 13,080 5.27 % $ 13,337 5.44 % $ 12,495 5.70 % sba discount accretion 558 0.22 % 589 0.24 % 509 0.23 % amortization of net deferred fees/(costs) 39 0.01 % 41 0.02 % 116 0.05 % interest recognized on nonaccrual loans - 0.00 % - 0.00 % - 0.00 % prepayment penalties and other fees 17 0.01 % 28 0.01 % 234 0.11 % yield on loans (as reported) $ 13,694 5.51 % $ 13,995 5.71 % $ 13,354 6.09 % net interest margin for the first quarter of 2020 decreased 4 basis points to 3.95% from 3.99% for the fourth quarter of 2019 primarily due to a decrease in the reported yield on interest-earning assets, partially offset by a decrease in the cost of interest-bearing liabilities as a result of the cumulative market rate decreases by the federal reserve since october 2019. net interest income before the provision for loan losses for the first quarter of 2020 was $11.1 million, an increase of $38,000, or 0.3%, compared to the fourth quarter of 2019, primarily due to a $396,000 decrease in interest expense, partially offset by a $358,000 decrease in interest income. interest income on securities available for sale and other interest income decreased $57,000, or 8.0%, during the first quarter of 2020 compared to the fourth quarter of 2019. the decrease was primarily due to a $42,000 decrease in other interest income as a result of a 38 basis point decrease in the yield on the average balance of fed funds sold and other investments and a $15,000 decrease in interest income on securities available for sale as a result of a $2.7 million decrease in the average balance from $2.0 million of maturities in agency securities and a $3.6 million of paydowns in mbs and cmo securities during the first quarter of 2020. interest income from contractual interest rates on loans decreased $257,000, or 1.9%, during the first quarter of 2020 compared to the fourth quarter of 2019, reflecting a 17 basis point decrease in the average contractual interest rate, primarily resulting from the cumulative rate cuts by the federal reserve in october 2019 and march 2020. the amount of discount accretion on sba loans decreased $31,000 during the first quarter of 2020 due to a decrease in sba loan payoffs. the reported interest income on loans, net of sba discount accretions and other components, decreased $301,000, or 2.2% during the first quarter of 2020. interest expense for the first quarter of 2020 decreased $396,000, or 10.9%, compared to the fourth quarter of 2019, due to a decrease of 25 basis points in the average cost of interest-bearing liabilities, primarily due to the rate cuts by the federal reserve. net interest margin for the first quarter of 2020 decreased 43 basis points to 3.95% from 4.38% for the first quarter of 2019, primarily due to a decrease in the reported yield on interest-earning assets as a result of cumulative market rate cuts by the federal reserve in 2019. net interest income before provision for loan losses for the first quarter of 2020 increased $318,000, or 2.9%, to $11.1 million, compared to $10.8 million for the first quarter of 2019, primarily due to a $259,000 increase in interest income and a $59,000 decrease in interest expense. interest income on securities available for sale and other interest income for the first quarter of 2020 decreased $81,000, or 11.1%, compared to the first quarter of 2019. the decrease was primarily due to a $40,000 decrease in other interest income as a result of a 114 basis point decrease in the yield on the average balance of fed funds sold and other investments and a $41,000 decrease in interest income on securities available for sale as a result of a 30 basis point decrease in the yield on the average balance of securities available for sale. interest income from contractual interest rates on loans for the first quarter of 2020 increased $585,000, or 4.7%, compared to the first quarter of 2019, primarily due to a $110.1 million, or 12.4%, increase in the balance of average loans, including loans held for sale, compared to the first quarter of 2019, partially offset by a 43 basis point decrease in the yield on average loans to 5.27% for the first quarter of 2020 from 5.70% for the same period of 2019. prepayment penalties and other fees for the first quarter of 2020 decreased $217,000 compared to the first quarter of 2019. the reported interest income on loans, net of sba discount accretions and other components, for the first quarter of 2020 increased $340,000, or 2.5%, compared to the same period of 2019. interest expense for the first quarter of 2020 decreased $59,000, or 1.8%, compared to the first quarter of 2019, primarily due to a 32 basis point decrease in the cost of interest-bearing liabilities, partially offset by a $92.8 million, or 14.6%, increase in the average balance of total interest-bearing liabilities. the following tables show the asset yields, liability costs, spreads and margins for the periods indicated. three months ended percentage change march 31, december 31, march 31, q1-20 q1-20 2020 2019 2019 vs. q4-19 vs. q1-19 yield on loans 5.51 % 5.71 % 6.09 % -0.20 % -0.58 % yield on interest-earning assets 5.10 % 5.30 % 5.72 % -0.20 % -0.62 % cost of interest-bearing liabilities 1.78 % 2.03 % 2.10 % -0.25 % -0.32 % cost of deposits 1.27 % 1.44 % 1.48 % -0.17 % -0.21 % cost of funds 1.27 % 1.44 % 1.48 % -0.17 % -0.21 % net interest spread 3.32 % 3.27 % 3.62 % 0.05 % -0.30 % net interest margin 3.95 % 3.99 % 4.38 % -0.04 % -0.43 % the company recorded the provision for loan losses (llp) of $743,000 for the first quarter of 2020. considering the pandemic’s negative impacts to national and local economic and business conditions, the management increased qualitative factors, especially in commercial and home mortgage loans. the increases in qualitative factors accounted for $593,000, or 80%, of the llp for the quarter. the company recorded the llp of $411,000 for the fourth quarter of 2019 and had no llp for the first quarter of 2019. noninterest income for the first quarter of 2020 was $2.3 million, a decrease of $217,000, or 8.67%, from $2.5 million for the fourth quarter of 2019, primarily due to a decrease of $372,000 in gain on sale of loans and a decrease of $89,000 in service charges on deposits, partially offset by an increase of $59,000 in loan servicing fees and an increase of $185,000 in other income. gain on sale of loans for the first quarter of 2020 was $1.2 million, a decrease of $372,000, compared to $1.5 million for the fourth quarter of 2019. the company sold $17.5 million in sba loans with an average premium of 8.41% in the first quarter of 2020, compared to the sale of $23.9 million in sba loans with an average premium of 7.73% in the fourth quarter of 2019. due to the closure of sba’s secondary market operation amid covid-19, approximately $3.3 million in sba loans were not sold in the first quarter of 2020 and placed in the loans held for sale as of march 31, 2020. noninterest income for the first quarter of 2020 decreased $1.2 million to $2.3 million compared to $3.5 million for the first quarter of 2019, primarily due to one-time gain of $1.2 million on company owned life insurance in the first quarter of 2019. gain on sale of loans for the first quarter of 2019 was $1.1 million from the sale of $17.7 million in sba loans with an average premium of 8.19%. noninterest expense for the first quarter of 2020 was $8.2 million, an increase of $542,000, or 7.1%, compared to $7.7 million for the fourth quarter of 2019. the increase was primarily due to an increase of $666,000 in salary and employee benefits, partially offset by a decrease of $101,000 in promotion and advertising expenses. the increase in salary and employee benefits expense was primarily due to a lower employee bonus and profit sharing accrual in the fourth quarter of 2019 from adjustments in management incentive accruals that were tied to the company’s actual financial performance in 2019. noninterest expense for the first quarter of 2020 was $8.2 million, an increased $134,000, or 1.7%, compared to $8.1 million for the first quarter of 2019. the increase was primarily due to an increase of $153,000 in occupancy and equipment expense, an increase of $70,000 in professional fees, and an increase of $51,000 in data processing and communication expense, partially offset by a decrease of $97,000 in salary and employee benefits. the increases in occupancy and equipment expense and data processing and communication expense were primarily attributable to a new branch opening in the second quarter of 2019. income tax provision was $1.2 million for the first quarter of 2020, $1.3 million for the fourth quarter of 2019, and $1.5 million for the first quarter of 2019. the effective tax rate for the first quarter of 2020 was 26.1%, compared to 24.2% for the fourth quarter of 2019 and 24.3% for the first quarter of 2019. the higher effective tax rates for the first quarter of 2020 compared to the fourth of 2019 was primarily due to less tax benefits from a decrease in non-qualified stock option exercises in 2020. balance sheet total assets at march 31, 2020, were $1.21 billion, an increase of $30.1 million, or 2.5%, compared to $1.18 billion at december 31, 2019, and an increase of $132.4 million, or 12.3%, compared to $1.08 billion at march 31, 2019. gross loans, net of unearned income, were $996.6 million at march 31, 2020, an increase of $6.4 million, or 0.6%, from $990.1 million at december 31, 2019, and an increase of $83.5 million, or 9.1%, from $913.1 million at march 31, 2019. new loan originations for the first quarter of 2020 totaled $77.9 million, including sba loan originations of $25.7 million, compared to $98.4 million, including sba loan originations of $26.3 million, for the fourth quarter of 2019, and $92.8 million, including sba loan originations of $23.7 million, for the first quarter of 2019. loan payoffs for the first quarter of 2020 were $44.6 million, compared to $35.9 million for the fourth quarter of 2019, and $35.9 million for the first quarter of 2019. total deposits were $1.05 billion at march 31, 2020, an increase of $31.5 million, or 3.1%, from $1.02 billion at december 31, 2019, and an increase of $122.8 million, or 13.2%, from $905.2 million at march 31, 2019. noninterest bearing deposits were $304.8 million at march 31, 2020, compared to $294.3 million at december 31, 2019, and $272.5 million at march 31, 2019. noninterest bearing deposits accounted for 29.0% of total deposits at march 31, 2020, compared to 28.8% at december 31, 2019, and 29.3% at march 31, 2019. the following table shows the company’s deposits by type as a percentage of total deposits as of the periods indicated. as of march 31, december 31, march 31, 2020 2019 2019 noninterest bearing deposits 29.0 % 28.8 % 29.3 % interest bearing demand deposits 27.7 % 28.6 % 27.7 % savings 0.5 % 0.5 % 0.4 % time deposits over $250,000 20.0 % 20.9 % 20.3 % other time deposits 22.8 % 21.2 % 22.3 % total deposits 100.0 % 100.0 % 100.0 % the company had no borrowings from the federal home loan bank (“fhlb”) at march 31, 2020, december 31, 2019, and march 31, 2019. the company had right-of-use assets and lease liabilities of $7.9 million and $9.7 million, respectively, at march 31, 2020. the company’s consolidated regulatory capital ratios exceeded regulatory guidelines and the bank’s capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the basel iii regulatory requirements at march 31, 2020, as summarized in the following table. regulatory well-capitalized capital ratio financial requirements (1), institution including basel iii fully phased-in regulatory capital conservation capital ratios op bancorp open bank guidelines buffer total risk-based 14.77 % 14.58 % 10.00 % 10.50 % tier 1 risk-based 13.68 % 13.49 % 8.00 % 8.50 % common equity tier 1 risk-based 13.68 % 13.49 % 6.50 % 7.00 % leverage 11.58 % 11.42 % 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. the company announced a third stock repurchase program on february 28, 2020, which authorizes the company to repurchase up to 500,000 shares of its common stock following the completion of the company’s second stock repurchase program in february 2020. since the announcement of the third stock repurchase program, the company has repurchased an aggregate of 476,761 shares of its common stock at an average repurchase price of $7.80 per share through april 22, 2020. asset quality nonperforming loans were $1.53 million at march 31, 2020, a decrease of $15,000 from $1.55 million at december 31, 2019, and a decrease of $47,000 from $1.58 million at march 31, 2019. the company had no oreo at march 31, 2020 and december 31, 2019 but had $1.1 million in oreo at march 31, 2019. the company sold the oreo of $1.1 million during the second quarter of 2019, and no loss was recorded on the sale. nonperforming assets were $1.53 million, or 0.13% of total assets, at march 31, 2020, compared to $1.55 million, or 0.13% of total assets, at december 31, 2019, and $2.7 million, or 0.25% of total assets, at march 31, 2019. nonperforming loans to gross loans were 0.15% at march 31, 2020, compared to 0.16% at december 31, 2019, and 0.17% at march 31, 2019. total classified loans were $3.6 million, or 0.36% of gross loans, at march 31, 2020, compared to $3.5 million, or 0.35% of gross loans, at december 31, 2019, and $4.2 million, or 0.46% of gross loans, at march 31, 2019. the following tables shows the trend of classified loans by loan type as of the date stated. as of march 31, december 31, september 30, june 30, march 31, 2020 2019 2019 2019 2019 classified loans by loan type (dollars in thousands) commercial real estate $ — $ — $ — $ — $ — sba loans—real estate 2,021 2,036 2,247 2,264 2,281 sba loans—non-real estate 159 33 36 41 49 commercial and industrial 686 697 710 1,892 1,906 home mortgage 694 698 256 — — consumer — — — — — total classified loans $ 3,560 $ 3,464 $ 3,249 $ 4,197 $ 4,236 sba guarantee balance retained sba loans—real estate 357 363 516 524 534 sba loans—non-real estate 33 33 36 41 49 total sba unsold guarantee portion $ 390 $ 396 $ 552 $ 565 $ 583 total classified loans, net of sba guarantee balance retained $ 3,170 $ 3,068 $ 2,697 $ 3,632 $ 3,653 the allowance for loan losses was $10.7 million at march 31, 2020, compared to $10.1 million at december 31, 2019, and $9.6 million at march 31, 2019. the allowance for loan losses was 1.08% of gross loans at march 31, 2020, 1.02% at december 31, 2019 and 1.05% at march 31, 2019. the allowance for loan losses was 701% of nonperforming assets at december 31, 2019, 649% at december 31, 2019, and 353% at march 31, 2019. about op bancorp op bancorp, the holding company for open bank (the “bank”), is a california corporation whose common stock is quoted on the nasdaq global market under the ticker symbol, “opbk.” the bank is engaged in the general commercial banking business in los angeles, orange, and santa clara counties, california, and carrollton, texas and is focused on serving the banking needs of small- and medium-sized businesses, professionals, and residents with a particular emphasis on korean and other ethnic minority communities. the bank currently operates with nine full branch offices in downtown los angeles, los angeles fashion district, los angeles koreatown, gardena, buena park, and santa clara, california and carrollton, texas. the bank also has four loan production offices in atlanta, georgia, aurora, colorado, and lynnwood and seattle, washington. the bank commenced its operations on june 10, 2005 as first standard bank and changed its name to open bank in october 2010. its headquarters is located at 1000 wilshire blvd., suite 500, los angeles, california 90017. phone 213.892.9999; www.myopenbank.com member fdic, equal housing lender. cautionary note regarding forward-looking statements certain matters set forth herein (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 company’s 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 losses; factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers, the success of construction projects that we finance, including any loans acquired in acquisition transactions; our ability to effectively execute our strategic plan and manage our growth; interest rate fluctuations, which could have an adverse effect on our profitability; liquidity issues, including fluctuations in the fair value and liquidity of the securities we hold for sale and our ability to raise additional capital, if necessary; external economic and/or market factors, such as changes in monetary and fiscal policies and laws, including the interest rate policies of the federal reserve, inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition; continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are; challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services; restraints on the ability of open bank to pay dividends to us, which could limit our liquidity; increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all; a failure in the internal controls we have implemented to address the risks inherent to the business of banking; inaccuracies in our assumptions about future events, which could result in material differences between our financial projections and actual financial performance; changes in our management personnel or our inability to retain motivate and hire qualified management personnel; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems; disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions; an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies; risks related to potential acquisitions; political developments, uncertainties or instability, catastrophic events, acts of war or terrorism, or natural disasters, such as earthquakes, drought, pandemic diseases (such as the coronavirus) or extreme weather events, any of which may affect services we use or affect our customers, employees or third parties with which we conduct business; incremental costs and obligations associated with operating as a public company; the impact of any claims or legal actions to which we may be subject, including any effect on our reputation; compliance with governmental and regulatory requirements, including the dodd-frank act and others relating to banking, consumer protection, securities and tax matters, and our ability to maintain licenses required in connection with commercial mortgage origination, sale and servicing operations; changes in federal tax law or policy; the rapidly changing uncertainties related to the coronavirus pandemic including, but not limited to, the potential adverse effect of the pandemic on the economy, our employees and customers, and our financial performance; and our ability the manage the foregoing and other factors set forth in the company’s public reports. we describe these and other risks that could affect our results in item 1a. “risk factors,” of our latest annual report on form 10-k for the year ended december 31, 2019 and in our other subsequent filings with the securities and exchange commission. the foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report. because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this report. in addition, our past results of operations are not necessarily indicative of our future results. you should not rely on any forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. consolidated balance sheet (unaudited) (dollars in thousands) as of 03/31/2020 12/31/2019 % change 03/31/2019 % change assets cash and cash equivalents $ 110,999 $ 86,036 29.0 % $ 65,796 68.7 % securities available for sale, at fair value 52,179 56,549 -7.7 % 54,116 -3.6 % other investments 9,253 9,176 0.8 % 7,306 26.6 % loans held for sale 4,382 2,100 108.7 % 246 1681.3 % real estate loans 639,411 630,668 1.4 % 545,481 17.2 % sba loans 133,909 132,268 1.2 % 130,478 2.6 % c & i loans 99,860 103,852 -3.8 % 106,796 -6.5 % home mortgage loans 119,984 120,686 -0.6 % 127,851 -6.2 % consumer & other loans 3,395 2,664 27.4 % 2,458 38.1 % gross loans, net of unearned income 996,559 990,138 0.6 % 913,064 9.1 % allowance for loan losses (10,748 ) (10,050 ) 6.9 % (9,619 ) 11.7 % net loans receivable 985,811 980,088 0.6 % 903,445 9.1 % premises and equipment, net 5,141 5,226 -1.6 % 5,083 1.1 % accrued interest receivable 3,056 3,166 -3.5 % 3,368 -9.3 % servicing assets 6,963 7,024 -0.9 % 7,046 -1.2 % company owned life insurance 10,683 10,618 0.6 % 10,414 2.6 % deferred tax assets 2,709 3,189 -15.1 % 3,665 -26.1 % other real estate owned (oreo) - - 100.0 % 1,146 0.0 % operating right-of-use assets (1) 7,885 8,254 -4.5 % 7,738 1.9 % other assets 10,532 8,094 30.1 % 7,866 33.9 % total assets $ 1,209,593 $ 1,179,520 2.5 % $ 1,077,235 12.3 % liabilities and shareholders' equity noninterest bearing deposits $ 304,845 $ 294,281 3.6 % $ 272,482 11.9 % savings 5,220 4,753 9.8 % 3,527 48.0 % money market and others 291,137 291,865 -0.2 % 257,694 13.0 % time deposits over $250,000 210,507 213,345 -1.3 % 188,162 11.9 % other time deposits 240,489 216,467 11.1 % 207,537 15.9 % total deposits 1,052,198 1,020,711 3.1 % 929,402 13.2 % accrued interest payable 2,592 2,686 -3.5 % 2,178 19.0 % operating lease liabilities (1) 9,701 10,126 -4.2 % 9,566 1.4 % other liabilities 7,003 5,421 29.2 % 3,713 88.6 % total liabilities 1,071,494 1,038,944 3.1 % 944,859 13.4 % common stock 80,422 86,381 -6.9 % 89,119 -9.8 % additional paid-in capital 7,882 7,524 4.8 % 6,627 18.9 % retained earnings 48,695 46,483 4.8 % 36,824 32.2 % accumulated other comprehensive income(loss) 1,100 188 485.1 % (194 ) -667.0 % total shareholders' equity 138,099 140,576 -1.8 % 132,376 4.3 % total liabilities and shareholders' equity $ 1,209,593 $ 1,179,520 2.5 % $ 1,077,235 12.3 % (1) the adoption of asu 2016-02, leases (topic 842) in the first quarter of 2019 resulted in the recognition of right-of-use assets and lease liabilities on balance sheet. consolidated statements of income (unaudited) (dollars in thousands, except per share data) three months ended 03/31/2020 12/31/2019 % change 03/31/2019 % change interest income interest and fees on loans $ 13,694 $ 13,995 -2.2 % $ 13,354 2.5 % interest on securities available for sale 319 334 -4.5 % 360 -11.4 % other interest income 332 374 -11.2 % 372 -10.8 % total interest income 14,345 14,703 -2.4 % 14,086 1.8 % interest expense interest on deposits 3,229 3,625 -10.9 % 3,288 -1.8 % interest on borrowed funds - - 0.0 % - 0.0 % total interest expense 3,229 3,625 -10.9 % 3,288 -1.8 % net interest income 11,116 11,078 0.3 % 10,798 2.9 % provision for loan losses 743 411 80.8 % - 0.0 % net interest income after provision for loan losses 10,373 10,667 -2.8 % 10,798 -3.9 % noninterest income service charges on deposits 430 519 -17.1 % 527 -18.4 % loan servicing fees, net of amortization 392 333 17.7 % 383 2.3 % gain on sale of loans 1,155 1,527 -24.4 % 1,077 7.2 % other income 319 134 138.1 % 1,546 -79.4 % total noninterest income 2,296 2,513 -8.6 % 3,533 -35.0 % noninterest expense salaries and employee benefits 5,071 4,405 15.1 % 5,168 -1.9 % occupancy and equipment 1,230 1,207 1.9 % 1,077 14.2 % data processing and communication 409 420 -2.6 % 358 14.2 % professional fees 273 268 1.9 % 203 34.5 % fdic insurance and regulatory assessments 106 71 49.3 % 104 1.9 % promotion and advertising 162 263 -38.4 % 178 -9.0 % directors’ fees 233 228 2.2 % 228 2.2 % foundation donation and other contributions 330 417 -20.9 % 388 -14.9 % other expenses 393 386 1.8 % 369 6.5 % total noninterest expense 8,207 7,665 7.1 % 8,073 1.7 % income before income taxes 4,462 5,515 -19.1 % 6,258 -28.7 % provision for income taxes 1,163 1,334 -12.8 % 1,518 -23.4 % net income $ 3,299 $ 4,181 -21.1 % $ 4,740 -30.4 % book value per share $ 9.14 $ 8.95 2.1 % $ 8.42 8.6 % basic eps $ 0.21 $ 0.26 -19.2 % $ 0.29 -27.6 % diluted eps $ 0.21 $ 0.26 -19.2 % $ 0.29 -27.6 % shares of common stock outstanding 15,115,868 15,703,276 -3.7 % 15,719,583 -3.8 % weighted average shares: - basic 15,486,549 15,697,531 -1.3 % 15,817,060 -2.1 % - diluted 15,586,255 15,899,419 -2.0 % 16,112,725 -3.3 % key ratios (dollars in thousands, except ratios) three months ended 03/31/2020 12/31/2019 % change 03/31/2019 % change return on average assets (roa)* 1.12 % 1.45 % -0.33 % 1.49 % -0.37 % return on average equity (roe) * 9.44 % 12.05 % -2.61 % 11.84 % -2.40 % net interest margin * 3.95 % 3.99 % -0.04 % 4.50 % -0.55 % efficiency ratio 61.19 % 56.40 % 4.79 % 58.33 % 2.86 % total risk based capital ratio 14.77 % 15.18 % -0.41 % 16.26 % -1.49 % tier 1 capital ratio 13.68 % 14.16 % -0.48 % 15.13 % -1.45 % common equity tier 1 ratio 13.68 % 14.16 % -0.48 % 15.13 % -1.45 % tier 1 leverage ratio 11.58 % 12.14 % -0.56 % 12.88 % -1.30 % * annualized asset quality (dollars in thousands, except ratios) three months ended 03/31/2020 12/31/2019 09/30/2019 06/30/2019 03/31/2019 nonaccrual loans $ 1,203 $ 1,215 $ 1,234 $ 1,218 $ 1,239 loans 90 days or more past due, accruing - - - - - accruing restructured loans 330 333 336 338 341 nonperforming loans 1,533 1,548 1,570 1,556 1,580 other real estate owned (oreo) - - 1,817 - 1,146 nonperforming assets 1,533 1,548 3,387 1,556 2,726 classified loans 3,560 3,464 3,249 4,197 4,236 nonperforming assets/total assets 0.13 % 0.13 % 0.29 % 0.14 % 0.25 % nonperforming assets/gross loans plus oreo 0.15 % 0.16 % 0.35 % 0.16 % 0.30 % nonperforming loans/gross loans 0.15 % 0.16 % 0.16 % 0.16 % 0.17 % allowance for loan losses/nonperforming loans 701 % 649 % 614 % 612 % 609 % allowance for loan losses/nonperforming assets 701 % 649 % 285 % 612 % 353 % allowance for loan losses/gross loans 1.08 % 1.02 % 1.00 % 1.01 % 1.05 % classified loans/gross loans 0.36 % 0.35 % 0.34 % 0.44 % 0.46 % net charge-offs $ 45 $ (1 ) $ 175 $ 495 $ 17 net charge-offs to average gross loans * 0.02 % 0.00 % 0.07 % 0.21 % 0.01 % * annualized accruing delinquent loans 30-89 days past due 03/31/2020 12/31/2019 09/30/2019 06/30/2019 03/31/2019 30-59 days $ 1,788 $ 3,899 $ 2,580 $ 1,065 $ 2,073 60-89 days 2,277 126 580 2,207 - total 4,065 4,025 3,160 3,272 2,073 average balance sheet, interest and yield/rate analysis (dollars in thousands) three months ended march 31, 2020 december 31, 2019 march 31, 2019 average balance interest and fees yield/ rate average balance interest and fees yield/ rate average balance interest and fees yield/ rate interest-earning assets: federal funds sold and other investments $ 78,256 $ 332 1.68 % $ 71,426 $ 374 2.06 % $ 52,963 $ 372 2.82 % securities available for sale 54,647 319 2.33 57,381 334 2.33 54,771 360 2.63 total investments 132,903 651 1.95 128,807 708 2.18 107,734 732 2.72 real estate loans 633,963 8,198 5.20 607,022 8,175 5.34 519,037 7,149 5.59 sba loans 138,900 2,667 7.72 142,910 2,880 8.00 131,272 2,933 9.06 c & i loans 100,686 1,277 5.10 99,215 1,379 5.51 106,680 1,594 6.06 home mortgage loans 121,768 1,514 4.97 121,485 1,520 5.00 128,507 1,636 5.09 consumer & other loans 2,774 38 5.51 2,778 41 5.86 2,532 42 6.68 loans (1) 998,091 13,694 5.51 973,410 13,995 5.71 888,028 13,354 6.09 total interest-earning assets 1,130,994 14,345 5.10 1,102,217 14,703 5.30 995,762 14,086 5.72 noninterest-earning assets 48,189 51,026 42,476 total assets $ 1,179,183 $ 1,153,243 $ 1,038,238 interest-bearing liabilities: now and savings deposits $ 7,988 5 0.25 % $ 6,032 4 0.20 % $ 5,176 3 0.25 % money market deposits 289,214 952 1.32 283,814 1,144 1.60 251,583 1,121 1.81 time deposits 431,772 2,272 2.12 417,092 2,477 2.36 379,430 2,164 2.31 total interest-bearing deposits 728,974 3,229 1.78 706,938 3,625 2.03 636,189 3,288 2.10 borrowings 45 - - 4 - 1.55 - - - total interest-bearing liabilities 729,019 3,229 1.78 706,942 3,625 2.03 636,189 3,288 2.10 noninterest-bearing liabilities: noninterest-bearing deposits 292,453 289,592 262,524 other noninterest-bearing liabilities 17,921 17,902 8,445 total noninterest-bearing liabilities 310,374 307,494 270,969 shareholders’ equity 139,790 138,807 131,081 total liabilities and shareholders’ equity $ 1,179,183 $ 1,153,243 $ 1,038,239 net interest income / interest rate spreads $ 11,116 3.32 % $ 11,078 3.27 % $ 10,798 3.62 % net interest margin 3.95 % 3.99 % 4.38 % cost of deposits & cost of funds: total deposits / cost of deposits $ 1,021,427 $ 3,229 1.27 % $ 996,530 $ 3,625 1.44 % $ 898,713 $ 3,288 1.48 % total funding liabilities / cost of funds $ 1,021,472 $ 3,229 1.27 % $ 996,534 $ 3,625 1.44 % $ 898,713 $ 3,288 1.48 % (1) the average loan balance includes loans held for sale. loan portfolio breakdown by industry excluding home mortgage and consumer loans (dollars in thousands) as of march 31, 2020 industry number of accounts % of total balance % of total real estate lessors 209 20.0 % $ 356,175 40.2 % - retail 87 8.3 161,741 18.3 - industrial 46 4.4 87,625 9.9 - mixed use 15 1.4 29,414 3.3 - office 13 1.2 24,809 2.8 - other 48 4.6 52,586 5.9 hotel / motel 125 12.0 145,364 16.4 gas station 146 14.0 125,708 14.2 wholesale 103 9.8 50,663 5.7 carwash 33 3.2 33,230 3.8 food services / restaurant 107 10.2 24,486 2.8 laundry services 49 4.7 22,288 2.5 church 12 1.1 14,272 1.6 other 262 25.0 113,308 12.8 total 1,046 100.0 % $ 885,494 100.0 % loan deferment request summary by industry for requests received through april 20, 2020 excluding home mortgage and consumer loans (dollars in thousands) number of requests balance of requests industry number of accounts % of request % of total loans balance % of request % of total loans real estate lessors 50 50.5 % 23.9 % $ 115,417 61.4 % 32.4 % - retail 28 28.3 32.2 60,581 32.2 37.5 - industrial 8 8.1 17.4 30,362 16.2 34.6 - mixed use 2 2.0 13.3 11,513 6.1 39.1 - office 5 5.1 38.5 6,817 3.6 27.5 - other 7 7.1 14.6 6,145 3.3 11.7 hotel / motel 12 12.1 9.6 33,180 17.7 22.8 gas station 6 6.1 4.1 8,963 4.8 7.1 wholesale 6 6.1 5.8 7,816 4.2 15.4 carwash 2 2.0 6.1 2,487 1.3 7.5 food services / restaurant 11 11.1 10.3 9,785 5.2 40.0 laundry services 3 3.0 6.1 2,302 1.2 10.3 church 5 5.1 41.7 5,627 3.0 39.4 other 4 4.0 1.5 2,371 1.3 2.1 total 99 100.0 % 9.5 % $ 187,948 100.0 % 21.2 % * number of accounts and balance information were as of march 31, 2020. for requests received through april 20, 2020 (dollars in thousands) number of requests balance of requests loan type number of accounts % of request % of total loans balance % of request % of total loans real estate loans 76 46.3 % 21.5 % $ 172,410 79.0 % 27.0 % home mortgage loans 64 39.0 20.6 30,111 13.8 25.1 c & i loans 23 14.0 11.5 15,538 7.1 15.6 consumer 1 0.6 11.1 282 0.1 8.3 total 164 100.0 % 12.0 % $ 218,341 100.0 % 21.9 % * number of accounts and balance information were as of march 31, 2020. sba ppp loan approval summary by customer type for loans approved through april 20, 2020 (dollars in thousands) number of loans approved balance customer type number of accounts % of total balance % of total commercial lending 152 46.6 % $ 22,265 59.6 % sba lending 97 29.8 9,430 25.2 deposit 77 23.6 5,684 15.2 total 326 100.0 % $ 37,379 100.0 %
