Op bancorp announces record q4 earnings of $2.26 million and reports
unaudited fourth quarter 2016 results
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 2016 was $2.26 million, or $0.17 per diluted common share. this compares with net income of $2.05 million, or $0.15 per diluted share, for the third quarter of 2016, and net income of $1.56 million, or $0.12 per diluted share, for the fourth quarter of 2015. pre-tax pre-provision income was $4.0 million for the fourth quarter 2016, compared to $4.1 million for the third quarter 2016, and $2.6 million for the fourth quarter 2015. “we are very pleased to report record fourth quarter and record year to date earnings of $2.3 million and $7.4 million, respectively. we finished the year with total assets of $760 million, a 23% increase from the prior year-end. we had strong growth in both loans and deposits, with a 33% increase in net loans and a 27% increase in deposits year over year. our non-interest bearing deposits increased 59% from the prior year-end and accounted for over 37% of total deposits at december 31, 2016. we have managed to grow our loan portfolio and our deposits to record highs while tightly managing our net interest margin.” stated min kim, president and chief executive officer. “we believe that our strong growth in both loans and deposits is the result of our high level of customer service and effective cross selling program. quarter financial highlights (in thousands, except per share data) december 31, 2016 september 30, 2016 december 31, 2015 results of operations net interest income before loan loss provision was $7.9 million for the three months ended december 31, 2016, compared to $7.4 million for the third quarter of 2016, and $6.0 million for the fourth quarter of 2015. the increases from the third quarter of 2016 and the fourth quarter of 2015 were primarily the result of continued growth in interest earning assets, mostly loans. average gross loans were $657 million for the fourth quarter of 2016, an increase of $49 million, or 8.1%, from $608 million for the third quarter of 2016 and an increase of $151 million, or 29.9%, from $506 million for the fourth quarter of 2015. the net interest margin for the fourth quarter of 2016 was 4.41%, a 5 basis point decrease from 4.46% for the third quarter of 2016, and a 39 basis point increase from 4.02% for the fourth quarter of 2015. excluding impacts from non-recurring items, such as loan payoffs and fhlb special dividend, the net interest margin for the fourth quarter of 2016 was 4.29%, up 1 basis point compared to 4.28% for the third quarter of 2016, and up 40 basis points from 3.89% for the fourth quarter of 2015. the net interest margin expansion from the fourth quarter of 2015 was attributable to improved yields on earning assets due to higher average gross loans and lower average fed funds in the fourth quarter of 2016, and lower cost of funds due to significantly higher non-interest bearing deposits for the fourth quarter of 2016. average gross loans, net of unearned income, increased to 92% of earning assets for the fourth quarter 2016, compared to 86% for the fourth quarter 2015. average fed funds was 2% of earning assets in the fourth quarter of 2016, compared to 7% in the fourth quarter of 2015. average non-interest bearing deposits was 36% of average total deposits for the fourth quarter of 2016, compared to 30% for the fourth quarter of 2015. the following table shows the asset yields, liability costs, spreads and margins. december 31,2016 september 30,2016 december 31,2015 non-interest income was $2.5 million for the fourth quarter of 2016, up 5.5% compared to $2.4 million for the third quarter of 2016, and up 27.4% from $2.0 million for the fourth quarter of 2015. the increase from the fourth quarter of 2015 was primarily attributable to higher net gain on sale of sba loans. net gain on sale of sba loans totaled $1.5 million for the fourth quarter of 2016 and for the third quarter of 2016 and $1.2 million for the fourth quarter of 2015. sale of sba loans for the fourth quarter of 2016 was $21.4 million, compared to $25.3 million for the third quarter of 2016 and $19.6 million for the fourth quarter of 2015. the average premium on the sale of sba loans for the fourth quarter of 2016 was 8.2%, compared to 8.3% for the third quarter of 2016 and for the fourth quarter of 2015. non-interest expense was $6.4 million for the fourth quarter of 2016, compared to $5.7 million for the third quarter of 2016 and $5.3 million for the fourth quarter of 2015. the increase from the third quarter 2016 was primarily due to increased accruals for unused vacation and bank-wide campaign incentives, and the increase from the fourth quarter of 2015 was due to increased operating expenses to support continued growth of the company. the effective tax rate for the fourth quarter of 2016 was 38.4%, compared to 40.4% for the third quarter of 2016 and 41.1% for the fourth quarter of 2015. the lower fourth quarter tax rate reflects certain tax adjustments from the prior year. balance sheet total assets were $759.7 million at december 31, 2016, an increase of $38.0 million, or 5.3% from $721.7 million at september 30, 2016, and an increase of $142.3 million, or 23.1%, from $617.4 million at december 31, 2015. gross loans, net of unearned income, were $674.2 million at december 31, 2016, an increase of $47.1 million, or 7.5%, from $627.2 million at september 30, 2016, and an increase of $166.9 million, or 32.9%, from $507.3 million at december 31, 2015. new loan originations for the fourth quarter of 2016 totaled $82.3 million, including sba loan originations of $29.5 million, compared to $93.2 million, including sba loan originations of $21.5 million for the third quarter of 2016. new loan originations for the fourth quarter of 2015 were $65.7 million, including sba loan originations of $32.8 million. total deposits were $661.8 million at december 31, 2016, an increase of $34.9 million, or 5.6% from $626.9 million at september 30, 2016, and an increase of $142.1 million, or 27.3%, from $519.7 million at december 31, 2015. non-interest bearing deposits were $247.4 million at december 31, 2016, an increase of $19.6 million, or 8.6%, from $227.7 million at september 30, 2016, and an increase of $92.2 million, or 59.4% from $155.1 million at december 31, 2015. non-interest bearing deposits accounted for 37.4% of total deposits at december 31, 2016, compared to 36.3% at september 30, 2016 and 29.9% at december 31, 2015. december 31,2016 september 30,2016 december 31,2015 29.9 % borrowings from the federal home loan bank (“fhlb”) were $10 million at december 31, 2016 and september 30, 2016, and $20.0 million at december 31, 2015. at december 31, 2016, the company continued to exceed all regulatory capital requirements to be classified as “well-capitalized,” as summarized in the following table. december 31,2016 september 30,2016 december 31,2015 at december 31, 2016, the tangible common equity represented 10.70% of tangible assets, compared to 10.92% at september 30, 2016 and 11.74% at december 31, 2015. the tangible common equity to tangible assets ratio is a non-gaap financial measure that represents common equity less goodwill and other net intangible assets divided by total assets less goodwill and other net intangible assets. management reviews the tangible common equity to tangible assets ratio to evaluate the company’s capital levels. asset quality loan loss provision for the fourth quarter of 2016 was $323 thousand, compared to $677 thousand for the third quarter of 2016 and no loan loss provision for the fourth quarter of 2015. non-performing assets were $576 thousand, or 0.08% of total assets, at december 31, 2016 and $968 thousand, or 0.13% of total assets, at september 30, 2016 and $1.0 million, or 0.17% of total assets, at december 31, 2015. there was no other real estate owned (“oreo”) at december 31, 2016, september 30, 2016, or december 31, 2015. non-performing loans to gross loans were 0.09% at december 31, 2016, compared to 0.15% at september 30, 2016 and 0.20% at december 31, 2015. total classified loans were $2.3 million, or 0.34% of gross loans, at december 31, 2016, compared to $1.3 million, or 0.21% of gross loans, at september 30, 2016 and $0.8 million, or 0.16% of gross loans, at december 31, 2015. the allowance for loan losses was $7.9 million at december 31, 2016, compared to $7.6 million at september 30, 2016 and $6.4 million at december 31, 2015. the allowance for loan losses was 1.17% of gross loans at december 31, 2016 and 1.21% at september 30, 2016 and 1.26% at december 31, 2015. use of non-gaap financial measures. this document may contain gaap financial measures and non-gaap financial measures where management believes it to be helpful in understanding the company’s results of operations or financial position. where non-gaap financial measures are used, the comparable gaap financial measure, as well as the reconciliation to the comparable gaap financial measure, can be found in this earnings release, which can be found on open bank’s website at www.myopenbank.com. about op bancorp op bancorp, the holding company for open bank, is a california corporation whose common stock is traded on the otcqb under the ticker symbol, “opbk.” open bank (the "bank") is engaged in the general commercial banking business in los angeles and orange counties and is focused on serving the banking needs of small- and medium-sized businesses, professionals, and residents with a particular emphasis on korean and other ethnic minority communities. the bank currently operates with seven full branch offices in downtown los angeles, los angeles fashion district, los angeles koreatown, gardena and buena park. the bank also has two loan production offices in seattle, washington and dallas, texas. the bank commenced its operations on june 10, 2005 as first standard bank and changed its name to open bank in october 2010. its headquarters is located at 1000 wilshire blvd., suite 500, los angeles, california 90017. phone 213.892.9999; www.myopenbank.com member fdic, equal housing lender safe harbor statement this press release contains certain forward-looking information about op bancorp that is intended to be covered by the safe harbor for “forward-looking statements” provided by the private securities litigation reform act of 1995. all statements other than statements of historical fact are forward-looking statements, including statements about the company’s successful implementation of its strategies resulting in significant increase in non-interest bearing deposits. these forward-looking statements may include, but are not limited to, such words as "believes," "expects," "anticipates," "intends," "plans," "estimates," "may," "will," "should," "could," "predicts," "potential," "continue," or the negative of such terms and other comparable terminology or similar expressions and may include statements about the company’s focus on exploring new opportunities, building customer relationship through core deposits, growing core deposits, and improving asset quality. forward-looking statements are not guarantees. such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of op bancorp such as the ability of the new branch to attract sufficient number of customers, deposits and new business to become profitable. op bancorp cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. if any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, op bancorp’s results could differ materially from those expressed in, or implied or projected by such forward-looking statements. op bancorp assumes no obligation to update such forward-looking statements, except as required by law. key ratios * annualized
