Op bancorp earns $1.90 million in the fourth quarter of 2017
Los angeles--(business wire)--op bancorp (the “company”) (otcqb: opbk), the holding company of open bank (the “bank”), today reported that net income for the fourth quarter of 2017 was $1.90 million, or $0.13 per diluted common share. this compares with net income of $2.73 million, or $0.19 per diluted share, for the third quarter of 2017, and net income of $2.26 million, or $0.16 per diluted share, for the fourth quarter of 2016. on december 22, 2017, h.r.1, formerly known as the tax cuts and jobs act (the “tax act”), was signed into law, which among other items reduces the federal corporate tax rate to 21% from 34%, effective january 1, 2018. u.s. generally accepted accounting principles requires companies to revalue certain tax-related assets as of the date of enactment of the new legislation with resulting tax effects accounted for in the reporting period of enactment. as a result, we recorded an adjustment of $1.3 million to reduce the net deferred tax assets, which increased income tax expense and reduced the earnings for the fourth quarter of 2017 by approximately $0.10 per diluted share. “we are pleased announce another solid quarter with healthy assets and earnings growth. notwithstanding our tax expense of $1.3 million from the adjustment to reduce the net deferred tax assets as a result of the new tax act enacted in the fourth quarter, we earned net income of $1.90 million. our income before taxes for the fourth quarter was $5.09 million, a 39% increase from the fourth quarter of 2016,” stated min kim, president and chief executive officer. quarter financial highlights (in thousands, except per share data) december 31,2017 september 30,2017 december 31,2016 _____________________(1) represents a non-gaap financial measure. results of operations net interest income before loan loss provision for the fourth quarter of 2017 was $9.7 million, an increase of $493 thousand, or 5.4%, compared to $9.2 million for the third quarter of 2017. the increase in net interest income was primarily due to a 5.0% increase in average loans, including loans held-for-sale, coupled with a 6 basis point increase in average loan yields, offset by a 6 basis point increase in average cost of funds. the average yields on loans increased to 5.63% for the fourth quarter of 2017, compared to 5.57% for the third quarter of 2017, due to a 25 basis point market rate increase by the federal reserve in december 2017. the net interest margin for the fourth quarter of 2017 was 4.69%, a 1 basis point increase from 4.68% for the third quarter of 2017. the increase in the net interest margin was primarily due to the federal reserve market rate increase, which affected the repricing of our earning assets to a greater extent than the repricing of our liabilities, and an increase of noninterest-bearing funding sources. the average balance of noninterest-bearing deposits increased $7.8 million, or 3.0%, during the fourth quarter of 2017. net interest income before provision for loan losses for the fourth quarter of 2017 increased $1.8 million, or 23.1%, compared to $7.9 million for the fourth quarter of 2016. the increase in net interest income was primarily due to a 15.2% increase in average loans, including loans held-for-sale, coupled with a 53 basis point increase in average loan yields from 5.10% for the fourth quarter of 2016, offset by an 18 basis point increase in average cost of funds. the increase in the average yields on loans was primarily due to cumulative market rate increases by the federal reserve of 75 basis points through three rate hikes of 25 basis points in each of march 2017, june 2017 and december 2017. the net interest margin for the fourth quarter of 2017 increased 28 basis points from 4.41% for the fourth quarter of 2016. the increase in the net interest margin was primarily due to the federal reserve market rate increases during 2017 and an increase of noninterest-bearing funding sources. the average balance of noninterest-bearing deposits increased $32.4 million, or 13.7%, during 2017. the following table shows the asset yields, liability costs, spreads and margins. december 31,2017 september 30,2017 december 31,2016 ______________________(1) includes loans held for sale the provision for loan losses for the fourth quarter of 2017 was $322 thousand, compared to $278 thousand for the third quarter of 2017 and $323 thousand for the fourth quarter of 2016. noninterest income for the fourth quarter of 2017 was $2.28 million, an increase of $23 thousand, or 1.0%, from $2.26 million for the third quarter of 2017, due to increases in gain on sale of sba loans and service charges on deposit accounts, offset by a decrease in loan servicing income. gain on sale of sba loans increased $215 thousand to $1.4 million for the fourth quarter of 2017 from $1.2 million for the third quarter of 2017. we sold $18.6 million in sba loans with an average premium of 9.35% in the fourth quarter of 2017 compared to the sale of $15.0 million in sba loans with an average premium of 9.97% in the third quarter of 2017. service charges on deposit accounts increased $61 thousand due to noninterest-bearing accounts and related activities during the fourth quarter of 2017. loan servicing income, net of amortization, decreased $248 thousand, primarily due to an increase in servicing assets amortization on sba loan payoffs. noninterest income for the fourth quarter of 2017 decreased $255 thousand, or 10%, compared to $2.5 million for the fourth quarter of 2016, due to decreases in loan servicing income and gain on sale of sba loans, offset by an increase in service charges on deposit accounts. loan servicing income, net of amortization, decreased $369 thousand, primarily due to an increase in servicing assets amortization on sba loan payoffs. gain on sale of sba loans decreased $59 thousand compared to $1.4 million for the fourth quarter of 2016. we sold $21.4 million in sba loans with an average premium of 8.15% in the fourth quarter of 2016. service charges on deposit accounts increased $102 thousand due to noninterest-bearing accounts and related activities during 2017. noninterest expense for the fourth quarter of 2017 was $6.6 million, a decrease of $172 thousand, or 2.6%, compared to $6.7 million for the third quarter of 2017. the decrease was primarily due to $202 thousand decrease in salary and employee benefits, $83 thousand decrease in foundation donation and other contributions, partially offset by $85 thousand increase in other operations expenses. noninterest expense for the fourth quarter increased $143 thousand, or 2.2%, compared to $6.4 million for the fourth quarter of 2016. the increase was primarily due to $124 thousand increase in occupancy, $114 thousand increase in business development, $99 thousand increase in other operations expenses, partially offset by $174 thousand decrease in salary and employee benefits. tax provision for the fourth quarter of 2017 was $3.2 million, compared to $1.7 million for the third quarter of 2017 and $1.4 million for the fourth quarter of 2016. the effective tax rate for the fourth quarter of 2017 was 62.6%, compared to 38.6% for the third quarter of 2017 and 38.4% for the fourth quarter of 2016. as noted previously, the provision for the fourth quarter of 2017 includes the additional income tax expense of $1.3 million resulting from the adjustment to reduce the net deferred tax assets due to the tax act. balance sheet total assets were $901 million at december 31, 2017, an increase of $21.9 million, or 2.5%, from $879.1 million at september 30, 2017, and an increase of $139.7 million, or 18.4%, from $761.3 million at december 31, 2016. gross loans, net of unearned income, were $748.0 million at december 31, 2017, an increase of $12.0 million, or 1.6%, from $736.1 million at september 30, 2017, and an increase of $73.8 million, or 10.9%, from $674.2 million at december 31, 2016. new loan originations for the fourth quarter of 2017 totaled $57.1 million, including sba loan originations of $18.0 million, compared to $87.5 million, including sba loan originations of $34.6 million for the third quarter of 2017. new loan originations for the fourth quarter of 2016 were $82.3 million, including sba loan originations of $29.5 million. loan payoffs for the fourth quarter of 2017 were $22.9 million, compared to $28.2 million for the third quarter of 2017, and $20.5 million for the fourth quarter of 2016. total deposits were $773.3 million at december 31, 2017, an increase of $18.8 million, or 2.5%, from $754.5 million at september 30, 2017, and an increase of $111.5 million, or 16.9%, from $661.8 million at december 31, 2016. noninterest bearing deposits were $289.4 million at december 31, 2017, an increase of $256 thousand, or 0.1%, from $289.2 million at september 30, 2017, and an increase of $42.0 million, or 17.0%, from $247.4 million at december 31, 2016. noninterest bearing deposits accounted for 37.4% of total deposits at december 31, 2017, compared to 38.3% at september 30, 2017 and 37.4% at december 31, 2016. december 31,2017 september 30,2017 december 31,2016 37.4 % total deposits there was $25 million in borrowing from the federal home loan bank (“fhlb”) at december 31, 2017 and september 30, 2017 and $10 million at december 31, 2016. at december 31, 2017, the company continued to exceed all regulatory capital requirements to be classified as “well-capitalized,” as summarized in the following table. december 31,2017 september 30,2017 december 31,2016 at december 31, 2017, the tangible common equity represented 10.15% of tangible assets, compared to 10.18% at september 30, 2017 and 10.68% at december 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 nonperforming assets were $1.0 million, or 0.12% of total assets, at december 31, 2017, $734 thousand, or 0.08% of total assets, at september 30, 2017 and $576 thousand, or 0.08% of total assets, at december 31, 2016. there was no other real estate owned (“oreo”) at december 31, 2017, september 30, 2017, or december 31, 2016. nonperforming loans to gross loans were 0.14% at december 31, 2017, compared to 0.10% at september 30, 2017 and 0.09% at december 31, 2016. total classified loans were $2.1 million, or 0.28% of gross loans, at december 31, 2017, compared to $2.1 million, or 0.29% of gross loans, at september 30, 2017 and $2.3 million, or 0.34% of gross loans, at december 31, 2016. the allowance for loan losses was $9.1 million at december 31, 2017, compared to $8.9 million at september 30, 2017 and $7.9 million at december 31, 2016. the allowance for loan losses was 1.22% of gross loans at december 31, 2017 and 1.21% at september 30, 2017 and 1.17% at december 31, 2016. the allowance for loan losses was 881% of nonperforming assets at december 31, 2017 and 1,214% at september 30, 2017 and 1,373% at december 31, 2016. about op bancorp op bancorp, the holding company for open bank, is a california corporation whose common stock is traded on the otcqb under the ticker symbol, “opbk.” open bank (the "bank") is engaged in the general commercial banking business in los angeles and orange counties and is focused on serving the banking needs of small- and medium-sized businesses, professionals, and residents with a particular emphasis on korean and other ethnic minority communities. the bank currently operates with seven full branch offices in downtown los angeles, los angeles fashion district, los angeles koreatown, gardena and buena park. the bank also has three loan production offices in seattle, washington, dallas, texas, and atlanta, georgia. the bank commenced its operations on june 10, 2005 as first standard bank and changed its name to open bank in october 2010. its headquarters is located at 1000 wilshire blvd., suite 500, los angeles, california 90017. phone 213.892.9999; www.myopenbank.com member fdic, equal housing lender forward-looking statements this press release contains certain forward-looking information about op bancorp. all statements other than statements of historical fact are forward-looking statements. 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. 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 our 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. december 31, 2017 september 30, 2017 $ change $ change
