Op bancorp reports fourth quarter and year end financial result of 2019
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 fourth quarter of 2019. net income for the fourth quarter of 2019 was $4.2 million, or $0.26 per diluted common share, compared with net income of $4.0 million, or $0.24 per diluted common share, for the third quarter of 2019, and net income of $3.8 million, or $0.23 per diluted common share, for the fourth quarter of 2018. “we are pleased to complete the year achieving a record annual net income of $16.8 million or $1.03 per diluted common share, along with another solid quarterly net income of $4.2 million, or $0.26 per diluted common share. despite a challenging and competitive rate environment, we have continued to grow our loans and deposits this year by 13.2% and 12.8%, respectively, while maintaining strong asset quality and retaining our noninterest bearing deposits at 28.8% 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 an increase to our quarterly cash dividend to $0.07 per share from $0.05 per share starting from the first quarter of 2020. additionally, as of january 23, 2020, we have repurchased an aggregate of 278,924 shares of our common stock at an average price of $9.58 per share under our second stock repurchase program.” financial highlights (unaudited) (dollars in thousands, except per share data) as of or for the three months ended december 31, september 30, december 31, 2019 2019 2018 income statement data: interest income $ 14,703 $ 15,112 $ 13,820 interest expense 3,625 3,893 2,894 net interest income 11,078 11,219 10,926 provision for loan losses 411 290 220 noninterest income 2,513 2,732 2,050 noninterest expense 7,665 8,424 7,568 income before taxes 5,515 5,237 5,188 provision for income taxes 1,334 1,237 1,423 net income $ 4,181 $ 4,000 $ 3,765 diluted earnings per share $ 0.26 $ 0.24 $ 0.23 balance sheet data: loans held for sale $ 2,100 $ 368 $ 752 gross loans, net of unearned income 990,138 964,370 875,059 allowance for loan losses 10,050 9,640 9,636 total assets 1,179,520 1,151,934 1,044,186 deposits 1,020,711 995,993 905,176 shareholders’ equity 140,576 137,593 129,787 performance ratios: return on average assets (annualized) 1.45 % 1.41 % 1.49 % return on average equity (annualized) 12.05 % 11.74 % 11.84 % net interest margin (annualized) 3.99 % 4.13 % 4.50 % efficiency ratio (1) 56.40 % 60.39 % 58.33 % credit quality: nonperforming loans $ 1,548 $ 1,570 $ 1,914 nonperforming assets 1,548 3,387 1,914 net charge-offs to average gross loans (annualized) 0.00 % 0.07 % 0.06 % nonperforming assets to gross loans plus oreo 0.16 % 0.35 % 0.22 % all to nonperforming loans 649 % 614 % 503 % all to gross loans, net of unearned income 1.02 % 1.00 % 1.10 % capital ratios: total risk-based capital ratio 15.18 % 15.36 % 16.26 % tier 1 risk-based capital ratio 14.16 % 14.35 % 15.13 % common equity tier 1 ratio 14.16 % 14.35 % 15.13 % leverage ratio 12.14 % 12.11 % 12.88 % (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, 2019 2018 income statement data: interest income $ 58,779 $ 50,068 interest expense 14,507 9,111 net interest income 44,272 40,957 provision for loan losses 1,102 1,267 noninterest income 11,426 9,329 noninterest expense 32,520 29,562 income before taxes 22,076 19,457 provision for income taxes 5,319 5,204 net income $ 16,757 $ 14,253 diluted earnings per share $ 1.03 $ 0.89 performance ratios: return on average assets 1.51 % 1.49 % return on average equity 12.42 % 12.27 % net interest margin 4.19 % 4.49 % efficiency ratio (1) 58.39 % 58.79 % (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) for the twelve months ended december 31, december 31, 2019 2018 income before taxes, as reported $ 22,076 $ 19,457 gain on coli 1,228 — provision for income taxes 5,319 5,204 net income $ 15,529 $ 14,253 diluted earnings per share $ 0.95 $ 0.89 return on average assets 1.40 % 1.49 % return on average equity 11.51 % 12.27 % 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 december 31, 2019 september 30, 2019 december 31, 2018 (dollars in thousands) interest & fees yield interest & fees yield interest & fees yield contractual interest rate $ 13,337 5.44 % $ 13,492 5.66 % $ 12,127 5.58 % sba discount accretion 589 0.24 % 717 0.30 % 967 0.44 % amortization of net deferred fees/(costs) 41 0.02 % 37 0.02 % 1 0.00 % interest recognized on nonaccrual loans - 0.00 % (12 ) -0.01 % (69 ) -0.03 % prepayment penalties and other fees 28 0.01 % 44 0.02 % 40 0.02 % yield on loans (as reported) $ 13,995 5.71 % $ 14,278 5.99 % $ 13,066 6.01 % twelve months ended december 31, 2019 december 31, 2018 (dollars in thousands) interest & fees yield interest & fees yield contractual interest rate $ 52,622 5.63 % $ 45,147 5.41 % sba discount accretion 2,518 0.27 % 2,626 0.31 % amortization of net deferred fees/(costs) 232 0.02 % 215 0.03 % interest recognized on nonaccrual loans (12 ) 0.00 % (47 ) -0.01 % prepayment penalties and other fees 360 0.04 % 167 0.02 % yield on loans (as reported) $ 55,720 5.96 % $ 48,108 5.76 % net interest margin for the fourth quarter of 2019 decreased 14 basis points to 3.99% from 4.13% for the third quarter of 2019 primarily due to a greater decrease in the reported yield on interest-earning assets compared to a decrease in the cost of interest-bearing liabilities as a result of the cumulative market rate decreases by the federal reserve in august, september, and october 2019. net interest income before the provision for loan losses for the fourth quarter of 2019 was $11.1 million, a decrease of $141,000, or 1.3%, compared to the third quarter of 2019, primarily due to a $409,000 decrease in interest income, partially offset by a $268,000 decrease in interest expense. interest income on securities available for sale and other interest income decreased $126,000, or 15.1%, during the fourth quarter of 2019 compared to the third quarter of 2019. the decrease was primarily due to the aforementioned decrease in fed funds rate and a $128,000 decrease in other interest income as a result of a $6.8 million, or 8.7%, decrease in the average balance of fed funds sold and other investments, compared to the third quarter of 2019. interest income from the contractual interest rates on loans decreased $155,000, or 1.1%, during the fourth quarter of 2019 compared to the third quarter of 2019, reflecting a 22 basis point decrease in the average contractual interest rate, primarily resulting from the cumulative rate cuts by the federal reserve in late 2019. the amount of discount accretion on sba loans decreased $128,000 during the fourth quarter of 2019 due to a decrease in sba loan payoffs. the reported interest income on loans, net of sba discount accretions and other components, decreased $283,000 during the fourth quarter of 2019. interest expense for the fourth quarter of 2019 decreased $268,000, or 6.9%, compared to the third quarter of 2019, due to a decrease of 17 basis points in the average cost of interest-bearing liabilities, primarily due to the decrease in the fed funds rate. net interest margin for the fourth quarter of 2019 decreased 51 basis points to 3.99% from 4.50% for the fourth quarter of 2018, primarily due to a decrease in the reported yield on interest-earning assets as a result of cumulative market rate decreases of 75 basis points through three rate cuts by the federal reserve in late 2019. net interest income before provision for loan losses for the fourth quarter of 2019 increased $152,000, or 1.4%, to $11.1 million, compared to $10.9 million for the fourth quarter of 2018, primarily due to a $929,000 increase in interest income, partially offset by a $731,000 increase in interest expense. interest income on securities available for sale and other interest income decreased $46,000, or 6.1%, for the fourth quarter of 2019 compared to the fourth quarter of 2018. the decrease was primarily due to a $40,000 decrease in other interest income as a result of a 126 basis point decrease in the yield on the average balance of fed funds sold and other investments and a $6,000 decrease in interest income on securities available for sale from purchases of lower yielding securities during the fourth quarter of 2019. the increase of $929,000 in interest income on loans in the fourth quarter of 2019 was primarily due to a $110.6 million, or 12.8%, increase in the balance of average loans, including loans held for sale, compared to the fourth quarter of 2018, partially offset by a 30 basis point decrease in the yield on average loans to 5.71% for the fourth quarter of 2019 from 6.01% for the same period of 2018. the increase of $731,000 in interest expense in the fourth quarter of 2019, compared to the fourth quarter of 2018 was due to a $104.2 million, or 17.3%, increase in the average balance of the total interest-bearing liabilities and a 13 basis point increase in the cost of interest-bearing liabilities. the following tables show the asset yields, liability costs, spreads and margins for the periods indicated. three months ended percentage change december 31, september 30, december 31, q4-19 q4-19 2019 2019 2018 vs. q3-19 vs. q4-18 yield on loans 5.71 % 5.99 % 6.01 % -0.28 % -0.30 % yield on interest-earning assets 5.30 % 5.56 % 5.69 % -0.26 % -0.39 % cost of interest-bearing liabilities 2.03 % 2.20 % 1.90 % -0.17 % 0.13 % cost of deposits 1.44 % 1.58 % 1.32 % -0.14 % 0.12 % cost of funds 1.44 % 1.58 % 1.32 % -0.14 % 0.12 % net interest spread 3.27 % 3.36 % 3.79 % -0.09 % -0.52 % net interest margin 3.99 % 4.13 % 4.50 % -0.14 % -0.51 % twelve months ended percentage change december 31, december 31, 2019 ytd 2019 2018 vs. 2018 ytd yield on loans 5.96 % 5.76 % 0.20 % yield on interest-earning assets 5.56 % 5.49 % 0.07 % cost of interest-bearing liabilities 2.13 % 1.59 % 0.54 % cost of deposits 1.52 % 1.09 % 0.43 % cost of funds 1.52 % 1.09 % 0.43 % net interest spread 3.43 % 3.90 % -0.47 % net interest margin 4.19 % 4.49 % -0.30 % the company recorded the provision for loan losses of $411,000 for the fourth quarter of 2019 compared to $290,000 for the third quarter of 2019 and $220,000 for the fourth quarter of 2018. the increases in the provision for loan losses from the third quarter of 2019, and the fourth quarter of 2018 were primarily due to a greater loan growth during the fourth quarter. noninterest income for the fourth quarter of 2019 was $2.5 million, a decrease of $219,000, or 8.0%, from $2.7 million for the third quarter of 2019, primarily due to a decrease of $187,000 in gain on sale of loans and a decrease of $172,000 in other income as result of a loss on sale of other real estate owned (“oreo”), partially offset by an increase of $90,000 in loan servicing fees and an increase of $50,000 in service charges on deposits. gain on sale of loans decreased $187,000 to $1.5 million for the fourth quarter of 2019 from $1.7 million for the third quarter of 2019. the company sold $23.9 million in sba loans with an average premium of 7.73% in the fourth quarter of 2019, compared to the sale of $22.2 million in sba loans with an average premium of 8.85% in the third quarter of 2019. noninterest income for the fourth quarter of 2019 increased $463,000 to $2.5 million compared to $2.1 million for the fourth quarter of 2018, primarily due to an increase of $499,000 in gain on sale of sba loans and an increase of $261,000 in loan servicing fees, partially offset by a decrease of $319,000 in other income. gain on sale of loans for the fourth quarter of 2018 was $1.0 million from the sale of $24.7 million in sba loans with an average premium of 5.65%. loan servicing fees, net of amortization, increased $261,000 to $333,000 for the fourth quarter of 2019 from $72,000 for the fourth quarter of 2018, primarily due to a decrease in the amortization of sba servicing assets from the decrease in sba loan payoffs. noninterest expense for the fourth quarter of 2019 was $7.7 million, a decrease of $759,000, or 9.0%, compared to the third quarter of 2019. the decrease was primarily due to a decrease of $944,000 in salary and employee benefits, partially offset by an increase of $92,000 in fdic insurance and regulatory assessments, and an increase of $81,000 in corporate promotion and advertising expenses. the decrease in salary and employee benefits expense was primarily due to adjustments in management incentive accruals that are tied to the company’s actual financial performance. noninterest expense for the fourth quarter of 2019 increased $97,000, or 1.3%, to $7.7 million, compared to $7.6 million for the fourth quarter of 2018. the increase was primarily due to an increase of $161,000 in occupancy and equipment expense and an increase of $137,000 in data processing and communication expense, partially offset by a decrease of $162,000 in salary and employee benefits. the increases in occupancy and equipment expense and data processing and communication expense were primarily attributable to new loan production offices and a new branch opening in 2019. income tax provision was $1.3 million for the fourth quarter of 2019, $1.2 million for the third quarter of 2019, and $1.4 million for the fourth quarter of 2018. the effective tax rate for the fourth quarter of 2019 was 24.2%, compared to 23.6% for the third quarter of 2019 and 27.4% for the fourth quarter of 2018. the lower effective tax rates for the third and fourth quarters of 2019 compared to the fourth of 2018 were primarily due to additional tax benefits from an increase in non-qualified stock option exercises in 2019. balance sheet total assets at december 31, 2019, were $1.18 billion, an increase of $27.6 million, or 2.4%, compared to $1.15 billion at september 30, 2019, and an increase of $135.3 million, or 13.0%, compared to $1.04 billion at december 31, 2018. gross loans, net of unearned income, were $990.1 million at december 31, 2019, an increase of $25.8 million, or 2.7%, from $964.4 million at september 30, 2019, and an increase of $115.1 million, or 13.2%, from $875.1 million at december 31, 2018. new loan originations for the fourth quarter of 2019 totaled $98.4 million, including sba loan originations of $26.3 million, compared to $100.9 million, including sba loan originations of $30.9 million, for the third quarter of 2019, and $62.4 million, including sba loan originations of $23.5 million, for the fourth quarter of 2018. loan payoffs for the fourth quarter of 2019 were $35.9 million, compared to $38.7 million for the third quarter of 2019, and $13.2 million for the fourth quarter of 2018. total deposits were $1.02 billion at december 31, 2019, an increase of $24.7 million, or 2.5%, from $996.0 million at september 30, 2019, and an increase of $115.5 million, or 12.8%, from $905.2 million at december 31, 2018. noninterest bearing deposits were $294.3 million at december 31, 2019, compared to $296.8 million at september 30, 2019, and $285.1 million at december 31, 2018. noninterest bearing deposits accounted for 28.8% of total deposits at december 31, 2019, compared to 29.8% at september 30, 2019, and 31.5% at december 31, 2018. the following table shows the company’s deposits by type as a percentage of total deposits as of the periods indicated. as of december 31, september 30, december 31, 2019 2019 2018 noninterest bearing deposits 28.8 % 29.8 % 31.5 % interest bearing demand deposits 28.6 % 27.6 % 28.9 % savings 0.5 % 0.3 % 0.4 % time deposits over $250,000 20.9 % 22.1 % 18.1 % other time deposits 21.2 % 20.2 % 21.1 % total deposits 100.0 % 100.0 % 100.0 % the company had no borrowings from the federal home loan bank (“fhlb”) at december 31, 2019, september 30, 2019, and december 31, 2018. the adoption of the new lease accounting standard asu 2016-02, leases (topic 842) effective january 1, 2019, resulted in the recognition of $7.7 million and $9.6 million in right-of-use assets and lease liabilities, respectively, on the balance sheet. with the new branch opening, the company had right-of-use assets and lease liabilities of $8.3 million and $10.1 million, respectively, at december 31, 2019. 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 december 31, 2019, 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 15.18 % 14.96 % 10.00 % 10.50 % tier 1 risk-based 14.16 % 13.93 % 8.00 % 8.50 % common equity tier 1 risk-based 14.16 % 13.93 % 6.50 % 7.00 % leverage 12.14 % 11.95 % 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 second stock repurchase program on august 28, 2019, which authorizes the company to repurchase up to 475,000 shares of its common stock following the completion of the company’s first stock repurchase program in august 2019. since the announcement of the second stock repurchase program, the company has repurchased an aggregate of 278,924 shares of its common stock at an average repurchase price of $9.58 per share through january 23, 2020. asset quality nonperforming loans were $1.55 million at december 31, 2019, a decrease of $22,000 from $1.57 million at september 30, 2019, and a decrease of $366,000 from $1.9 million at december 31, 2018. the company had no oreo at december 31, 2019 and 2018 but had $1.8 million in oreo at september 30, 2019. the company sold oreo of $1.8 million during the fourth quarter of 2019 with a loss of $145,000. nonperforming assets were $1.5 million, or 0.13% of total assets, at december 31, 2019, $3.4 million, or 0.29% of total assets, at september 30, 2019, and $1.9 million, or 0.18% of total assets, at december 31, 2018. nonperforming loans to gross loans were 0.16% at december 31, 2019, and september 30, 2019, compared to 0.22% at december 31, 2018. total classified loans were $3.5 million, or 0.35% of gross loans, at december 31, 2019, compared to $3.2 million, or 0.34% of gross loans, at september 30, 2019, and $3.6 million, or 0.41% of gross loans, at december 31, 2018. the following tables shows the trend of classified loans by loan type as of the date stated. as of december 31, september 30, june 30, march 31, december 31, 2019 2019 2019 2019 2018 classified loans by loan type (dollars in thousands) commercial real estate $ — $ — $ — $ — $ — sba loans—real estate 2,036 2,247 2,264 2,281 2,000 sba loans—non-real estate 33 36 41 49 57 commercial and industrial 697 710 1,892 1,906 1,516 home mortgage 698 256 — — — consumer — — — — — total classified loans $ 3,464 $ 3,249 $ 4,197 $ 4,236 $ 3,573 sba guarantee balance retained sba loans—real estate 363 516 524 534 392 sba loans—non-real estate 33 36 41 49 57 total sba unsold guarantee portion $ 396 $ 552 $ 565 $ 583 $ 449 total classified loans, net of sba guarantee balance retained $ 3,068 $ 2,697 $ 3,632 $ 3,653 $ 3,124 the allowance for loan losses was $10.1 million at december 31, 2019, compared to $9.6 million at september 30, 2019, and at december 31, 2018. the allowance for loan losses was 1.02% of gross loans at december 31, 2019, 1.00% at september 30, 2019 and 1.10% at december 31, 2018. the allowance for loan losses was 649% of nonperforming assets at december 31, 2019, 285% at september 30, 2019, and 503% at december 31, 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, 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 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 the holding company; 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 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, 2018 and in our other subsequent filings with the securities and exchange commission. 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) as of 12/31/2019 9/30/2019 % change 12/31/2018 % change assets cash and cash equivalents $ 86,036 $ 89,107 -3.4 % $ 77,726 10.7 % securities available for sale, at fair value 56,549 52,295 8.1 % 55,336 2.2 % other investments 9,176 9,173 0.0 % 7,260 26.4 % loans held for sale 2,100 368 470.7 % 752 179.3 % real estate loans 630,668 594,447 6.1 % 503,834 25.2 % sba loans 132,268 136,232 -2.9 % 127,375 3.8 % c & i loans 103,852 107,730 -3.6 % 113,975 -8.9 % home mortgage loans 120,686 123,092 -2.0 % 127,298 -5.2 % consumer & other loans 2,664 2,869 -7.1 % 2,577 3.4 % gross loans, net of unearned income 990,138 964,370 2.7 % 875,059 13.2 % allowance for loan losses (10,050 ) (9,640 ) 4.3 % (9,636 ) 4.3 % net loans receivable 980,088 954,730 2.7 % 865,423 13.2 % premises and equipment, net 5,226 5,367 -2.6 % 4,633 12.8 % accrued interest receivable 3,166 3,140 0.8 % 3,068 3.2 % servicing assets 7,024 6,959 0.9 % 6,987 0.5 % company owned life insurance 10,618 10,551 0.6 % 11,394 -6.8 % deferred tax assets 3,189 2,358 35.2 % 3,672 -13.2 % other real estate owned (oreo) - 1,817 -100.0 % - 0.0 % operating right-of-use assets (1) 8,254 8,606 -4.1 % - 100.0 % other assets 8,094 7,463 8.5 % 7,935 2.0 % total assets $ 1,179,520 $ 1,151,934 2.4 % $ 1,044,186 13.0 % liabilities and shareholders' equity noninterest bearing deposits $ 294,281 $ 296,831 -0.9 % $ 285,132 3.2 % savings 4,753 3,316 43.3 % 3,421 38.9 % money market and others 291,865 274,698 6.2 % 261,349 11.7 % time deposits over $250,000 213,345 219,547 -2.8 % 164,281 29.9 % other time deposits 216,467 201,601 7.4 % 190,993 13.3 % total deposits 1,020,711 995,993 2.5 % 905,176 12.8 % accrued interest payable 2,686 2,541 5.7 % 1,715 56.6 % operating lease liabilities (1) 10,126 10,335 -2.0 % - 100.0 % other liabilities 5,421 5,472 -0.9 % 7,508 -27.8 % total liabilities 1,038,944 1,014,341 2.4 % 914,399 13.6 % common stock 86,381 87,085 -0.8 % 91,209 -5.3 % additional paid-in capital 7,524 7,154 5.2 % 6,249 20.4 % retained earnings 46,483 43,086 7.9 % 32,877 41.4 % accumulated other comprehensive income(loss) 188 268 -29.9 % (548 ) -134.3 % total shareholders' equity 140,576 137,593 2.2 % 129,787 8.3 % total liabilities and shareholders' equity $ 1,179,520 $ 1,151,934 2.4 % $ 1,044,186 13.0 % (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. (dollars in thousands, except per share data) three months ended 12/31/2019 9/30/2019 % change 12/31/2018 % change interest income interest and fees on loans $ 13,995 $ 14,278 -2.0 % $ 13,066 7.1 % interest on securities available for sale 334 332 0.6 % 340 -1.8 % other interest income 374 502 -25.5 % 414 -9.7 % total interest income 14,703 15,112 -2.7 % 13,820 6.4 % interest expense interest on deposits 3,625 3,893 -6.9 % 2,894 25.3 % interest on borrowed funds - - 0.0 % - 0.0 % total interest expense 3,625 3,893 -6.9 % 2,894 25.3 % net interest income 11,078 11,219 -1.3 % 10,926 1.4 % provision for loan losses 411 290 41.7 % 220 86.8 % net interest income after provision for loan losses 10,667 10,929 -2.4 % 10,706 -0.4 % noninterest income service charges on deposits 519 469 10.7 % 497 4.4 % loan servicing fees, net of amortization 333 243 37.0 % 72 362.5 % gain on sale of loans 1,527 1,714 -10.9 % 1,028 48.5 % other income 134 306 -56.2 % 453 -70.4 % total noninterest income 2,513 2,732 -8.0 % 2,050 22.6 % noninterest expense salaries and employee benefits 4,405 5,349 -17.6 % 4,567 -3.5 % occupancy and equipment 1,207 1,232 -2.0 % 1,046 15.4 % data processing and communication 420 385 9.1 % 283 48.4 % professional fees 268 261 2.7 % 308 -13.0 % fdic insurance and regulatory assessments 71 (21 ) -438.1 % 99 -28.3 % promotion and advertising 263 182 44.5 % 215 22.3 % directors’ fees 228 228 0.0 % 218 4.6 % foundation donation and other contributions 417 402 3.7 % 356 17.1 % other expenses 386 406 -4.9 % 476 -18.9 % total noninterest expense 7,665 8,424 -9.0 % 7,568 1.3 % income before income taxes 5,515 5,237 5.3 % 5,188 6.3 % provision for income taxes 1,334 1,237 7.8 % 1,423 -6.3 % net income $ 4,181 $ 4,000 4.5 % $ 3,765 11.0 % book value per share $ 8.95 $ 8.76 2.2 % $ 8.18 9.4 % basic eps $ 0.26 $ 0.25 4.0 % $ 0.23 13.0 % diluted eps $ 0.26 $ 0.24 8.3 % $ 0.23 13.0 % shares of common stock outstanding 15,703,276 15,711,580 -0.1 % 15,860,306 -1.0 % weighted average shares: - basic 15,697,531 15,768,654 -0.5 % 15,801,406 -0.7 % - diluted 15,899,419 16,007,486 -0.7 % 16,201,408 -1.9 % key ratios (dollars in thousands, except ratios) three months ended 12/31/2019 9/30/2019 % change 12/31/2018 % change return on average assets (roa)* 1.45 % 1.41 % 0.04 % 1.49 % -0.04 % return on average equity (roe) * 12.05 % 11.74 % 0.31 % 11.84 % 0.21 % net interest margin * 3.99 % 4.13 % -0.14 % 4.50 % -0.51 % efficiency ratio 56.40 % 60.39 % -3.99 % 58.33 % -1.93 % total risk based capital ratio 15.18 % 15.36 % -0.18 % 16.26 % -1.08 % tier 1 capital ratio 14.16 % 14.35 % -0.19 % 15.13 % -0.97 % common equity tier 1 ratio 14.16 % 14.35 % -0.19 % 15.13 % -0.97 % tier 1 leverage ratio 12.14 % 12.11 % 0.03 % 12.88 % -0.74 % * annualized consolidated statements of income (unaudited) (dollars in thousands, except per share data) twelve months ended 12/31/2019 12/31/2018 % change interest income interest and fees on loans $ 55,720 $ 48,108 15.8 % interest on securities available for sale 1,353 985 37.4 % other interest income 1,706 975 75.0 % total interest income 58,779 50,068 17.4 % interest expense interest on deposits 14,507 8,964 61.8 % interest on borrowed funds - 147 -100.0 % total interest expense 14,507 9,111 59.2 % net interest income 44,272 40,957 8.1 % provision for loan losses 1,102 1,267 -13.0 % net interest income after provision for loan losses 43,170 39,690 8.8 % noninterest income service charges on deposits 2,015 1,916 5.2 % loan servicing fees, net of amortization 1,186 1,078 10.0 % gain on sale of loans 5,905 4,880 21.0 % other income 2,320 1,455 59.5 % total noninterest income 11,426 9,329 22.5 % noninterest expense salaries and employee benefits 20,267 18,195 11.4 % occupancy and equipment 4,648 4,111 13.1 % data processing and communication 1,530 1,231 24.3 % professional fees 980 921 6.4 % fdic insurance and regulatory assessments 259 405 -36.0 % promotion and advertising 806 814 -1.0 % directors’ fees 908 851 6.7 % foundation donation and other contributions 1,586 1,441 10.1 % other expenses 1,536 1,593 -3.6 % total noninterest expense 32,520 29,562 10.0 % income before income taxes 22,076 19,457 13.5 % provision for income taxes 5,319 5,204 2.2 % net income $ 16,757 $ 14,253 17.6 % book value per share $ 8.95 $ 8.18 9.4 % basic eps $ 1.04 $ 0.92 13.0 % diluted eps $ 1.03 $ 0.89 15.7 % shares of common stock outstanding 15,703,276 15,860,306 -1.0 % weighted average shares: - basic 15,741,926 15,104,939 4.2 % - diluted 15,935,314 15,551,063 2.5 % key ratios (dollars in thousands, except ratios) twelve months ended 12/31/2019 12/31/2018 % change return on average assets (roa)* 1.51 % 1.49 % 0.02 % return on average equity (roe) * 12.42 % 12.27 % 0.15 % net interest margin * 4.19 % 4.49 % -0.30 % efficiency ratio 58.39 % 58.79 % -0.40 % total risk based capital ratio 15.18 % 16.26 % -1.08 % tier 1 capital ratio 14.16 % 15.13 % -0.97 % common equity tier 1 ratio 14.16 % 15.13 % -0.97 % tier 1 leverage ratio 12.14 % 12.88 % -0.74 % asset quality (dollars in thousands, except ratios) three months ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 nonaccrual loans $ 1,215 $ 1,234 $ 1,218 $ 1,239 $ 1,571 loans 90 days or more past due, accruing - - - - - accruing restructured loans 333 336 338 341 343 nonperforming loans 1,548 1,570 1,556 1,580 1,914 other real estate owned (oreo) - 1,817 - 1,146 - nonperforming assets 1,548 3,387 1,556 2,726 1,914 classified loans 3,464 3,249 4,197 4,236 3,573 nonperforming assets/total assets 0.13 % 0.29 % 0.14 % 0.25 % 0.18 % nonperforming assets/gross loans plus oreo 0.16 % 0.35 % 0.16 % 0.30 % 0.22 % nonperforming loans/gross loans 0.16 % 0.16 % 0.16 % 0.17 % 0.22 % allowance for loan losses/nonperforming loans 649 % 614 % 612 % 609 % 503 % allowance for loan losses/nonperforming assets 649 % 285 % 612 % 353 % 503 % allowance for loan losses/gross loans 1.02 % 1.00 % 1.01 % 1.05 % 1.10 % classified loans/gross loans 0.35 % 0.34 % 0.44 % 0.46 % 0.41 % net charge-offs $ (1 ) $ 175 $ 495 $ 17 $ 135 net charge-offs to average gross loans * 0.00 % 0.07 % 0.21 % 0.01 % 0.06 % * annualized accruing delinquent loans 30-89 days past due 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 30-59 days $ 3,899 $ 2,580 $ 1,065 $ 2,073 $ 449 60-89 days 126 580 2,207 - - total 4,025 3,160 3,272 2,073 449 average balance sheet, interest and yield/rate analysis (dollars in thousands) three months ended december 31, 2019 september 30, 2019 december 31, 2018 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 $ 71,426 $ 374 2.06 % $ 78,216 $ 502 2.52 % $ 49,167 $ 414 3.32 % securities available for sale 57,381 334 2.33 54,472 332 2.44 52,995 340 2.56 total investments 128,807 708 2.18 132,688 834 2.49 102,162 754 2.93 real estate loans 607,022 8,175 5.34 573,102 7,978 5.52 494,817 6,768 5.43 sba loans 142,910 2,880 8.00 144,439 3,213 8.83 136,644 3,163 9.18 c & i loans 99,215 1,379 5.51 102,311 1,489 5.77 104,371 1,513 5.75 home mortgage loans 121,485 1,520 5.00 123,336 1,546 5.01 124,172 1,578 5.08 consumer & other loans 2,778 41 5.86 3,239 52 6.39 2,829 44 6.21 loans (1) 973,410 13,995 5.71 946,427 14,278 5.99 862,833 13,066 6.01 total interest-earning assets 1,102,217 14,703 5.30 1,079,115 15,112 5.56 964,995 13,820 5.69 noninterest-earning assets 51,026 51,680 44,175 total assets $ 1,153,243 $ 1,130,795 $ 1,009,170 interest-bearing liabilities: now and savings deposits $ 6,032 4 0.20 % $ 5,321 3 0.25 % $ 5,383 3 0.25 % money market deposits 283,814 1,144 1.60 275,259 1,295 1.87 246,801 1,048 1.68 time deposits 417,092 2,477 2.36 420,922 2,595 2.45 350,597 1,843 2.08 total interest-bearing deposits 706,938 3,625 2.03 701,502 3,893 2.20 602,781 2,894 1.90 borrowings 4 - 1.55 120 - 0.00 1 - 2.24 total interest-bearing liabilities 706,942 3,625 2.03 701,622 3,893 2.20 602,782 2,894 1.90 noninterest-bearing liabilities: noninterest-bearing deposits 289,592 275,316 269,538 other noninterest-bearing liabilities 17,902 17,628 9,681 total noninterest-bearing liabilities 307,494 292,944 279,219 shareholders’ equity 138,807 136,229 127,169 total liabilities and shareholders’ equity $ 1,153,243 $ 1,130,795 $ 1,009,170 net interest income / interest rate spreads $ 11,078 3.27 % $ 11,219 3.36 % $ 10,926 3.79 % net interest margin 3.99 % 4.13 % 4.50 % cost of deposits & cost of funds: total deposits / cost of deposits $ 996,530 $ 3,625 1.44 % $ 976,818 $ 3,893 1.58 % $ 872,319 $ 2,894 1.32 % total funding liabilities / cost of funds $ 996,534 $ 3,625 1.44 % $ 976,938 $ 3,893 1.58 % $ 872,320 $ 2,894 1.32 % (1) the average loan balance includes loans held for sale. average balance sheet, interest and yield/rate analysis (dollars in thousands) twelve months ended december 31, 2019 december 31, 2018 average balance interest and fees yield/ rate average balance interest and fees yield/ rate interest-earning assets: federal funds sold and other investments $ 67,301 $ 1,706 2.54 % $ 33,110 $ 975 2.95 % securities available for sale 54,994 1,353 2.46 44,046 985 2.24 total investments 122,295 3,059 2.50 77,156 1,960 2.54 real estate loans 565,617 31,139 5.51 472,062 24,784 5.25 sba loans 138,985 12,089 8.70 140,381 11,404 8.12 c & i loans 103,097 6,020 5.84 104,706 5,862 5.60 home mortgage loans 124,703 6,290 5.04 114,630 5,864 5.12 consumer & other loans 2,843 182 6.40 3,358 194 5.78 loans (1) 935,245 55,720 5.96 835,137 48,108 5.76 total interest-earning assets 1,057,540 58,779 5.56 912,293 50,068 5.49 noninterest-earning assets 48,924 47,260 total assets $ 1,106,464 $ 959,553 interest-bearing liabilities: now and savings deposits $ 5,316 13 0.24 % $ 6,080 15 0.25 % money market deposits 273,068 4,895 1.79 253,809 3,508 1.38 time deposits 401,840 9,599 2.39 304,407 5,441 1.79 total interest-bearing deposits 680,224 14,507 2.13 564,296 8,964 1.59 borrowings 32 - 0.09 8,736 147 1.67 total interest-bearing liabilities 680,256 14,507 2.13 573,032 9,111 1.59 noninterest-bearing liabilities: noninterest-bearing deposits 276,073 260,697 other noninterest-bearing liabilities 15,221 9,622 total noninterest-bearing liabilities 291,294 270,319 shareholders’ equity 134,914 116,202 total liabilities and shareholders’ equity $ 1,106,464 $ 959,553 net interest income / interest rate spreads $ 44,272 3.43 % $ 40,957 3.90 % net interest margin 4.19 % 4.49 % cost of deposits & cost of funds: total deposits / cost of deposits $ 956,297 $ 14,507 1.52 % $ 824,993 $ 8,964 1.09 % total funding liabilities / cost of funds $ 956,329 $ 14,507 1.52 % $ 833,729 $ 9,111 1.09 % (1) the average loan balance includes loans held for sale.
