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OP Bancorp Reports Fourth Quarter and Year End Financial Result of 2019

Company Release - 1/23/2020 5:00 PM ET

2019 Fourth Quarter Highlights:

  • Net income totaled $4.2 million or $0.26 per diluted common share, up 4.5%, compared to $4.0 million or $0.24 per diluted common share for the third quarter of 2019
  • Net interest margin was 3.99% compared to 4.13% for the third quarter of 2019
  • Return on average assets was 1.45% and return on average equity was 12.05% compared to 1.41% and 11.74%, respectively, for the third quarter of 2019
  • Total assets increased 2.4% to $1.18 billion at December 31, 2019, from $1.15 billion at September 30, 2019
  • Net loans receivable increased 2.7% to $980.1 million at December 31, 2019, from $954.7 million at September 30, 2019
  • Total deposits increased 2.5% to $1.02 billion at December 31, 2019, from $996.0 million at September 30, 2019
  • Nonperforming assets to total assets was 0.13% compared to 0.29% at September 30, 2019

2019 Full Year Highlights:

  • Net income totaled $16.8 million or $1.03 per diluted common share, up 17.6%, compared to $14.3 million or $0.89 per diluted common share for the full year of 2018
  • Excluding a one-time gain on company owned life insurance of $1.2 million, net income totaled $15.5 million or $0.95 per diluted common share, up 9.0%, compared to the full year of 2018
  • Net interest margin was 4.19% compared to 4.49% for the full year of 2018
  • Return on average assets was 1.51% and return on average equity was 12.42% compared to 1.49% and 12.27%, respectively, for the full year of 2018
  • Excluding a one-time gain on company owned life insurance of $1.2 million, return on average assets was 1.40% and return on average equity was 11.51%
  • Total assets increased 13.0% to $1.18 billion at December 31, 2019, from $1.04 billion at December 31, 2018
  • Net loans receivable increased 13.2% to $980.1 million at December 31, 2019, from $865.4 billion at December 31, 2018
  • Total deposits increased 12.8% to $1.02 billion at December 31, 2019, from $905.2 million at December 31, 2018
  • Nonperforming assets to total assets was 0.13% compared to 0.18% at December 31, 2018

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

%