Open Bank Reports First Quarter 2016 Results

Financial highlights

  • Net income totaled $1.32 million for the first quarter of 2016, or $0.10 per diluted common share, up 1.5% from $1.30 million for the first quarter of 2015.
  • Total assets were $654 million at March 31, 2016, up 6% from $617 million at December 31, 2015, and up 18% from $555 million at March 31, 2015.
  • Net Loans receivable were $520 million at March 31, 2016, up 4% from $501 million at December 31, 2015, and up 23% from $424 million at March 31, 2015.
  • Total deposits were $555 million at March 31, 2016, up 7% from $520 million at December 31, 2015, and up 23% from $453 million at March 31, 2015.
  • Non-interest bearing deposits were $174 million at March 31, 2016, up 13% from $155 million at December 31, 2015, and up 8% from $161 million at March 31, 2015.
  • Non-performing assets to total assets were 0.15% at March 31, 2016 and 0.17% at December 31, 2015 and 0.25% at March 31, 2015.

LOS ANGELES--()--Open Bank (OTCQB:OPBK) today reported that net income for the first quarter of 2016 was $1.32 million, or $0.10 per diluted share. This compares with net income of $1.56 million, or $0.12 per diluted share, for the fourth quarter of 2015, and net income of $1.30 million, or $0.10 per diluted share, for the first quarter of 2015. Pre-tax pre-provision income was $2.4 million for the first quarter 2016, $2.6 million for the fourth quarter 2015, and $2.3 million for the first quarter 2015.

“For the remainder of 2016, we intend to continue to focus on successfully executing our strategies in order to build a solid foundation for our continued growth.”

“We are pleased to see continued strong growth in total assets, net loans receivables and total deposits, which are up 18%, 23% and 23% respectively from March 31, 2015. For 2016, we will continue to focus on building a relationship-driven business and on growing our non-interest bearing deposits. I believe that the significant increase in our non-interest bearing deposits during the first quarter of 2016 is testament to the success of our strategy. Although our new loan originations for the first quarter of 2016 were lower than in the prior quarter, we continue to see solid loan growth,” stated Min Kim, President and Chief Executive Officer. “For the remainder of 2016, we intend to continue to focus on successfully executing our strategies in order to build a solid foundation for our continued growth.”

     

Quarter Financial Highlights

(in thousands, except per share data)

 
As of or for the Three Months Ended

March 31,

2016

     

December 31,

2015

     

March 31,

2015

 
Income Statement Data:
Net interest income $ 6,220 $ 5,962 $ 5,049
Provision for loan losses 230 - 77
Non-interest income 1,808 1,988 1,819
Non-interest expense 5,604   5,309   4,582  
Income before taxes 2,194 2,641 2,209
Provision for income taxes 875   1,085   909  
Net Income $ 1,319   $ 1,556   $ 1,300  
Balance Sheet Data:
Loans held for sale $ 7,588 $ 5,579 $ 3,264
Gross loans, net of unearned income 526,937 507,286 429,630
Allowance for loan losses 6,621 6,390 5,871
Total assets 654,340 617,350 554,668
Deposits 555,260 519,721 453,314
Shareholders’ equity 74,179 72,479 67,232
Credit Quality:
Nonperforming loans $ 1,003 $ 1,039 $ 1,410
Nonperforming assets 1,003 1,039 1,410
Performance Ratios:
Net interest margin 4.12 % 4.02 % 4.19 %
Efficiency ratio 69.81 % 66.78 % 66.71 %
Pre-tax pre-provision Income to average assets (annualized) 1.52 % 1.70 % 1.77 %
Net charge-offs to average gross loans (annualized) 0.00 % 0.00 % -0.04 %
Nonperforming assets to gross loans plus OREO 0.19 % 0.20 % 0.33 %
ALLL to nonperforming loans 660 % 615 % 417 %
ALLL to gross loans 1.26 % 1.26 % 1.37 %
Capital Ratios:
Tangible common equity to tangible assets 11.34 % 11.74 % 12.12 %
Leverage ratio 11.63 % 11.70 % 12.81 %
Common Equity Tier 1 ratio 13.93 % 14.28 % N/A
Tier 1 risk-based capital ratio 13.93 % 14.28 % 15.11 %
Total risk-based capital ratio 15.18 % 15.53 % 16.36 %
 

Results of Operations

Net interest income was $6.2 million for the three months ended March 31, 2016, compared to $6.0 million for the fourth quarter of 2015 and $5.0 million for the first quarter of 2015. The increases from the fourth quarter of 2015 and the first quarter of 2015 were primarily the result of continued growth in interest earning assets, mostly loans. Average gross loans were $528 million for the first quarter of 2016, compared to $506 million for the fourth quarter of 2015 and $425 million for the first quarter of 2015, which represented an increase of $22 million, or 4.4%, and $103 million, or 24.3%, respectively.

The net interest margin for the first quarter of 2016 was 4.12%, a 10 basis point increase from 4.02% for the fourth quarter of 2015 and a 7 basis point decrease from 4.19% for the first quarter of 2015. The net interest margin expansion from the prior quarter is attributable to an improved mix of earning assets and lower cost of funds. The net interest margin compression from the first quarter of 2015 was primarily due to increased cost of funds. Total cost of funds increased to 0.82% for the first quarter of 2016, compared to 0.71% for the same quarter of 2015. Most of the increase was in the time deposit accounts, mainly due to the increased market rates. The following table shows the asset yields, liability costs, spread and margin.

                Three Months Ended

March 31,

2016

     

December 31,

2015

     

March 31,

2015

 
Yield on net loans 5.21 % 5.22 % 5.21 %
Yield on interest-earning assets 4.66 % 4.59 % 4.62 %
Cost of interest-bearing liabilities 0.82 % 0.87 % 0.71 %
Cost of deposits 0.59 % 0.62 % 0.47 %
Net interest spread 3.84 % 3.72 % 3.91 %
Net interest margin 4.12 % 4.02 % 4.19 %
 

Non-interest income was $1.8 million for the first quarter of 2016, compared to $2.0 million for the fourth quarter of 2015 and $1.8 million for the first quarter of 2015. The decrease in non-interest income from the fourth quarter of 2015 was primarily attributable to lower net gain on sale of SBA loans.

Net gain on sale of SBA loans totaled $944 thousand for the first quarter of 2016, compared to $1.2 million for the fourth quarter of 2015 and $908 thousand for the first quarter of 2015. Sale of SBA loans for the first quarter of 2016 was $12.7 million, compared to $19.6 million for the fourth quarter of 2015 and $11.6 million for the first quarter of 2015. The average premium on the sale of SBA loans for the first quarter of 2016 increased 1.8% to 10.2%, compared to 8.3% for the fourth quarter of 2015. The average premium on the sale of SBA loans for the first quarter of 2015 was 10.3%.

Non-interest expense for the first quarter of 2016 was $5.6 million, compared to $5.3 million for the fourth quarter of 2015 and $4.6 million for the first quarter of 2015. The increases from the fourth quarter of 2015 and the first quarter of 2015 were primarily due to increased operating expenses to support continued growth in loans and deposits.

Total salaries and employee benefits expenses for the first quarter of 2016 increased $168 thousand, or 5.0%, to $3.5 million from $3.3 million for the fourth quarter of 2015, and $676 thousand, or 23.9%, from $2.8 million for the first quarter of 2015. The increase reflects an increased number of full time equivalent employees of 120.5 at March 31, 2016, compared to 115.5 at December 31, 2015 and 102.5 at March 31, 2015.

Occupancy expenses for the first quarter of 2016 were $648 thousand, a decrease of $25 thousand, or 3.6%, from $673 thousand for the fourth quarter of 2015, and an increase of $251 thousand, or 63.1%, from $397 thousand for the first quarter of 2015. The decrease from the prior quarter was attributable to certain expense accruals. The increase from the first quarter prior year was primarily due to branch expansions during past couple years. FF&E expenses, professional services and data processing fees also increased primarily due to the bank’s continued expansion.

The effective tax rate for the first quarter of 2016 was 39.9%, compared to 41.1% for the fourth quarter of 2015 and 41.2% for the first quarter of 2015.

Balance Sheet

Total assets were $654.3 million at March 31, 2016, an increase of $37 million, or 6.0%, from $617.4 million at December 31, 2015, and an increase of $100 million, or 18.0%, from $554.7 million at March 31, 2015. Gross loans, net of unearned income, were $526.9 million at March 31, 2016, an increase of $19.7 million, or 3.9%, from $507.3 million at December 31, 2015, and an increase of $97.3 million, or 22.6%, from $429.6 million at March 31, 2015.

New loan originations for the first quarter of 2016 amounted to $56.9 million, including SBA loan originations of $20.6 million, compared to $65.7 million, including SBA loan originations of $32.8 million for the fourth quarter of 2015. New loan originations for the first quarter of 2015 were $46.1 million, including SBA loan originations of $13.3 million.

Total deposits were $555.3 million at March 31, 2016, an increase of $35.5 million, or 6.8%, from $519.7 million at December 31, 2015, and an increase of $101.9 million, or 22.5%, from $453.3 million at March 31, 2015. Non-interest bearing deposits were $174.5 million at March 31, 2016, an increase of $19.4 million, or 12.5%, from $155.1 million at December 31, 2015, and an increase of $13.3 million, or 8.2%, from $161 million at March 31, 2015.

At March 31, 2016, the bank retained its borrowings of $20.0 million from the Federal Home Loan Bank (“FHLB”), which will mature during the second and the third quarters of 2016.

Non-interest bearing deposits accounted for 31.4% of total deposits at March 31, 2016, compared to 29.9% at December 31, 2015 and 35.6% at March 31, 2015.

               

March 31,

2016

     

December 31,

2015

     

March 31,

2015

 
Non-interest bearing deposits 31.4 % 29.9 %

35.6

%

Interest bearing demand deposits 34.3 % 34.5 % 35.6 %
Savings 0.3 % 0.4 % 0.3 %
Time deposits over $250,000 13.0 % 13.2 % 16.9 %
Other time deposits 21.0 % 22.0 % 11.6 %
Total deposits 100.0 % 100.0 % 100.0 %
 

At March 31, 2016, the bank continued to exceed all regulatory capital requirements to be classified as “well-capitalized,” as summarized in the following table.

               

March 31,

2016

     

December 31,

2015

     

March 31,

2015

 
Tier 1 leverage capital ratio 11.63 % 11.70 % 12.81 %
CET 1 capital ratio 13.93 % 14.28 % 15.11 %
Tier 1 risk-based capital ratio 13.93 % 14.28 % 15.11 %
Total risk-based capital ratio 15.18 % 15.53 % 16.36 %
 

At March 31, 2016, the tangible common equity represented 11.34% of tangible assets, compared to 11.74% at December 31, 2015 and 12.12% at March 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 bank’s capital levels.

Asset Quality

The loan loss provision of $230 thousand was made during the first quarter of 2016, compared to $77 thousand for the first quarter of 2015. No provision for loan losses was made during the fourth quarter of 2015. Non-performing assets were $1.0 million, or 0.15% of total assets, at March 31, 2016, compared to $1.0 million, or 0.17% of total assets, at December 31, 2015 and $1.4 million, or 0.25% of total assets, at March 31, 2015. There was no other real estate owned (“OREO”) at March 31, 2016, December 31, 2015, or March 31, 2015.

Non-performing loans to gross loans were 0.19% at March 31, 2016, compared to 0.20% at December 31, 2015 and 0.33% at March 31, 2015. Total classified loans were $1.2 million, or 0.23% of gross loans, at March 31, 2016, compared to $827 thousand, or 0.16% of gross loans, at December 31, 2015 and $1.7 million, or 0.38% of gross loans, at March 31, 2015.

The allowance for loan losses was $6.6 million at March 31, 2016, compared to $6.4 million at December 31, 2015 and $5.9 million at March 31, 2015. The allowance for loan losses was 1.26% of gross loans at March 31, 2016, compared to 1.26% at December 31, 2015 and 1.37% at March 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 Open Bank’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 Open Bank

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 Flushing, New York. 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

This press release contains certain forward-looking information about Open Bank 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 bank’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 bank’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 Open Bank such as the ability of the new branch to attract sufficient number of customers, deposits and new business to become profitable. Open Bank 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, Open Bank’s results could differ materially from those expressed in, or implied or projected by such forward-looking statements. Open Bank assumes no obligation to update such forward-looking statements, except as required by law.

                           
Balance Sheet
(Dollars in thousand, except per share data) March 31, 2016 December 31, 2015

$ change

% change March 31, 2015

$ change

% change
(Unaudited) (Unaudited) (Audited)
Assets
 
Cash and due from banks $ 54,353 $ 37,399 $ 16,954 45.3 % $ 69,721 $ (15,368 ) -22.0 %
Investment securities 42,495 43,889 (1,394 ) -3.2 % 29,961 12,534 41.8 %
Loans held for sale 7,588 5,579 2,009 36.0 % 3,264 4,324 132.5 %
Gross loans, net of unearned income 526,937 507,286 19,651 3.9 % 429,630 97,307 22.6 %
Allowance for loan losses (6,621 ) (6,390 ) (231 ) -3.6 % (5,871 ) (750 ) -12.8 %
Net loans receivable 520,316 500,896 19,420 3.9 % 423,759 96,557 22.8 %
Bank premises and equipment, net 5,721 5,892 (171 ) -2.9 % 4,830 891 18.4 %
Accrued interest receivable 1,650 1,562 88 5.6 % 1,280 370 28.9 %
FHLB and Pacific Coast Bankers Bank Stock, at cost 2,655 2,655 0 0.0 % 1,900 755 39.7 %
Servicing assets 5,672 5,551 121 2.2 % 4,808 864 18.0 %
Net deferred taxes 1,506 1,635 (129 ) -7.9 % 2,833 (1,327 ) -46.8 %
Other assets   12,384     12,292     92     0.7 %   12,312     72   0.6 %
Total assets $ 654,340   $ 617,350   $ 36,990     6.0 % $ 554,668   $ 99,672   18.0 %
 
Liabilities and Shareholders' Equity
 

Non-interest bearing deposits

$ 174,498 $ 155,147 $ 19,351 12.5 % $ 161,232 $ 13,266 8.2 %
Savings 1,692 2,000 (308 ) -15.4 % 1,399 293 20.9 %
Money market and others 190,077 179,833 10,244 5.7 % 161,511 28,566 17.7 %
Time deposits greater than $250,000 72,419 68,390 4,029 5.9 % 76,561 (4,142 ) -5.4 %
Other time deposits   116,574     114,351     2,223     1.9 %   52,611     63,963   121.6 %
Total deposits 555,260 519,721 35,539 6.8 % 453,314 101,946 22.5 %
Other borrowings 20,000 20,000 0 0.0 % 30,030.00 (10,030 ) -33.4 %
Other liabilities   4,901     5,150     (249 )   -4.8 %   4,092     809   19.8 %
Total liabilities 580,161 544,871 35,290 6.5 % 487,436 92,725 19.0 %
Total shareholders' equity   74,179     72,479     1,700     2.3 %   67,232     6,947   10.3 %
Total Liabilities and Shareholders' Equity $ 654,340   $ 617,350   $ 36,990     6.0 % $ 554,668   $ 99,672   18.0 %
 
Statement of Operations
(Dollars in thousand, except per share data)
Three Months Ended
March 31, 2016 December 31, 2015 % change March 31, 2015 % change
Interest income $ 7,032 $ 6,811 3.2 % $ 5,561 26.5 %
Interest expense   812     849     -4.4 %   512     58.6 %
Net interest income   6,220       5,962     4.3 %   5,049     23.2 %
Provision for loan losses 230 - 0.0 % 77 198.7 %

Non-interest income

1,808 1,988 -9.1 % 1,819 -0.6 %

Non-interest expense

  5,604     5,309     5.6 %   4,582     22.3 %
Income before income taxes 2,194 2,641 -16.9 % 2,209 -0.7 %
Provision for income taxes   875     1,085     -19.4 %   909     -3.7 %
Net income (loss) $ 1,319   $ 1,556     -15.2 % $ 1,300     1.5 %
 
Pre-tax Pre-provision Income $ 2,424 $ 2,641 -8.2 % $ 2,286 6.0 %
 
Book Value $ 5.83 $ 5.71 $ 5.39
Basic EPS $ 0.10 $ 0.12 $ 0.10
Diluted EPS $ 0.10 $ 0.12 $ 0.10
 
Shares of common stock outstanding 12,715,495 12,682,510 12,463,574
Weighted Average Shares:
- Basic 12,698,882 12,662,733 12,423,085
- Diluted 13,115,588 13,107,695 13,073,444
 
 
               
Three Months Ended
March 31, 2016     December 31, 2015 % change March 31, 2015 % change
Key Ratios
Return on average assets (ROA)* 0.83 % 1.00 % -0.17 % 1.01 % -0.18 %

Return on average equity (ROE)*

7.19 % 8.69 % -1.50 % 7.83 % -0.64 %

Net interest margin*

4.12 % 4.02 % 0.10 % 4.19 % -0.07 %
Efficiency ratio 69.81 % 66.78 % 3.03 % 66.71 % 3.10 %
Pre-tax Pre-provision Income to average assets 1.52 % 1.70 % -0.18 % 1.77 % -0.25 %
 
Tangible common equity to tangible assets 11.34 % 11.74 % -0.40 % 12.12 % -0.78 %
Tier 1 Leverage Ratio 11.63 % 11.70 % -0.07 % 12.81 % -1.18 %
Common Equity Tier 1 Ratio 13.93 % 14.28 % -0.35 % 15.11 % -1.18 %
Tier 1 Capital Ratio 13.93 % 14.28 % -0.35 % 15.11 % -1.18 %
Total Risk Based Capital Ratio 15.18 % 15.53 % -0.35 % 16.36 % -1.18 %
 
Average Balances
Investments $ 78,095 $ 82,758 -5.6 % $ 62,536 24.9 %
Gross loans, including loans held for sale 528,103 505,861 4.4 % 424,806 24.3 %
Interest earning assets 606,198 588,619 3.0 % 487,342 24.4 %
Total assets $ 637,009 $ 620,549 2.7 % $ 516,791 23.3 %
 

Non-interest bearing deposits

$ 161,583 $ 156,402 3.3 % $ 153,491 5.3 %
Interest bearing deposits 376,783 366,801 2.7 % 272,682 38.2 %
Total deposits 538,366 523,203 2.9 % 426,173 26.3 %
Interest bearing liabilities 396,786 386,804 2.6 % 292,905 35.5 %
Shareholders' equity 73,411 71,568 2.6 % 66,461 10.5 %
Net interest earning assets $ 209,412 $ 201,815 3.8 % $ 194,436 7.7 %
 
Asset Quality 3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015
Nonaccrual Loans 624 657 617 767 1,016
Loans 90 days or more past due, accruing - - - - -
Accruing Restructured Loans   379     382     386     390     394  
Total Non-Performing Loans 1,003 1,039 1,003 1,157 1,410
Other Real Estate Loans (OREO)   -     -     -     -     -  
Total Non-Performing Assets 1,003 1,039 1,003 1,157 1,410
 
Classified Loans 1,203 827 758 1,382 1,651
 
Non-Performing Assets/Total Assets 0.15 % 0.17 % 0.17 % 0.20 % 0.25 %
Non-Performing Assets/(Gross Loans +OREO) 0.19 % 0.20 % 0.20 % 0.25 % 0.33 %
Non-Performing Loans/Gross Loans 0.19 % 0.20 % 0.20 % 0.25 % 0.33 %
Allowance for Loan Losses/Non-Performing Loans 660 % 615 % 637 % 508 % 417 %
Allowance for Loan Losses/Non-Performing Assets 660 % 615 % 637 % 508 % 417 %
Allowance for Loan Losses/Gross Loans 1.26 % 1.26 % 1.26 % 1.26 % 1.37 %
Classified Loans/Gross Loans 0.23 % 0.16 % 0.15 % 0.30 % 0.38 %
 
Net Charge-offs $ (1 ) $ (3 ) $ (31 ) $ (8 ) $ (40 )

Net Charge-offs to Average Gross Loans*

0.00 % 0.00 % -0.03 % -0.01 % -0.04 %
 

* Annualized

Contacts

Open Bank
Christine Oh
EVP & CFO
213-892-1192
Christine.oh@myopenbank.com

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