Open Bank Reports 2015 First Quarter Financial Results

Financial highlights

  • Net income for the first quarter of 2015 was $1.3 million, an increase of 32% from $984 thousand for the fourth quarter of 2014 and an increase of 27% from $1.0 million for the first quarter of 2014.
  • Total assets were $555 million at March 31, 2015, up 5.0% from $528 million at December 31, 2014, and up 44.6% from $384 million a year ago.
  • Net Loans receivables were $424 million at March 31, 2015, an increase of 3.9% from $408 million at December 31, 2014 and an increase of 43.5% from $295 million at March 31, 2014.
  • Total deposits were $453 million at March 31, 2015, an increase of 5.8% from $429 million at December 31, 2014 and an increase of 30.1% from $349 million at March 31, 2014.
  • Non-interest bearing deposits represented 36% of total deposits at March 31, 2015, compared to 41% at December 31, 2014 and 38% at March 31, 2014.
  • Non-performing assets to total assets was 0.25% at March 31, 2015, compared to 0.26% at December 31, 2014 and 0.38% at March 31, 2014.

LOS ANGELES--()--Open Bank (OTCQB:OPBK) today reported that the net income for the first quarter of 2015 was $1.3 million, or $0.10 per diluted share. This compares with net income of $984 thousand, or $0.08 per diluted share, for the fourth quarter of 2014, and net income of $1.0 million, or $0.13 per diluted share, for the first quarter of 2014. Pre-tax pre-provision income was $2.3 million for the first quarter 2015, $2.4 million for the fourth quarter 2014, and $2.0 million for the first quarter 2014.

“We had another solid quarter with our net income up 32% compared to the 4th quarter of 2014. I am pleased that we continue to report consistently strong earnings and solid credit quality,” stated Min Kim, President and Chief Executive Officer. “We opened our loan production offices in Dallas, Seattle and New York in April to further support out SBA loan productions. Also, we are currently planning an additional full branch in the Los Angeles Koreatown area. This will bring our total to 7 branches.”

   

First Quarter Financial Highlights
(in thousands, except per share data)

 
As of or for the Three Months Ended

March 31,
2015

     

December 31,
2014

     

March 31,
2014

 
Income Statement Data:    
Net interest income $ 5,049 $ 4,730     $ 3,642
Provision for loan losses 77 740 210
Non-interest income 1,819 1,831 2,061
Non-interest expense 4,582 4,127 3,743
Income before taxes 2,209 1,694 1,750
Provision for income taxes 909 710 727
Net Income $ 1,300 $ 984 $ 1,023
Balance Sheet Data:
Loans held for sale $ 3,264 $ 5,711 $ 12,122
Gross loans, net of unearned income 429,630 413,527 300,625
Allowance for loan losses 5,871 5,755 5,407
Total assets 554,668 528,192 383,630
Deposits 453,314 428,519 348,535
Shareholders’ equity 67,232 65,442 32,670
Credit Quality:
Nonperforming loans $ 1,410 $ 1,349 $ 1,476
Nonperforming assets 1,410 1,349 1,476
Performance Ratios:
Net interest margin 4.19% 4.35% 4.51%
Efficiency ratio 66.71% 62.91% 65.64%
Pre-tax pre-provision Income to average assets (annualized) 1.77% 2.10% 2.26%

Net charge-offs to average gross loans (annualized)

-0.04% 0.49% 0.04%

Nonperforming assets to gross loans plus OREO

0.33% 0.33% 0.49%
ALLL to nonperforming loans 417% 427% 366%
ALLL to gross loans 1.37% 1.39% 1.80%
Capital Ratios:
Tangible common equity to tangible assets 12.12% 12.39% 8.52%
Leverage ratio 12.81% 14.04% 8.68%
Common Equity Tier 1 ratio 15.11% N/A N/A
Tier 1 risk-based capital ratio 15.11% 15.42% 9.79%
Total risk-based capital ratio 16.36% 16.67% 11.04%
 

Results of Operations

Net interest income was $5.0 million for the three months ended March 31, 2015, compared to $4.7 million for the fourth quarter of 2014 and $3.6 million for the first quarter of 2014. This represents increases of 6.7% from the fourth quarter of 2014 and 38.6% from the first quarter of 2014, respectively. The increases were primarily the result of increases in average interest earning assets, mostly loans. Average gross loans increased to $417.1 million for the first quarter of 2015, an increase of $36.5 million, or 9.6% from $380.5 million for the fourth quarter 2014, and an increase of $110.5 million, or 36.1%, from $306.5 million for the first quarter of 2014.

The net interest margin for the first quarter of 2015 was 4.19%, a 16 basis point decrease from 4.35% for the fourth quarter of 2014, and a 32 basis decrease from 4.51% for the first quarter of 2014. The net interest margin compression was primarily due to the high level of cash/overnight fund balances during the first quarter of 2015, which have resulted in lower yield on interest-earning assets. The following table shows the asset yields, liability cost, spread and margin.

   
Three Months Ended
Mar. 31, 2015     Dec. 31, 2014     Mar. 31, 2014
 
Yield on net loans 5.21% 5.28%

5.26%

Yield on interest-earning assets 4.62% 4.72% 4.96%
Cost of interest-bearing liabilities 0.71% 0.70% 0.68%
Cost of deposits 0.47% 0.41% 0.48%
Net interest spread 3.91% 4.02% 4.28%
Net interest margin 4.19% 4.35% 4.51%
 

The bank recorded $77 thousand of provision for loan losses for the first quarter of 2015. This compares to the provision for loan losses of $740 thousand for the fourth quarter of 2014 and $210 thousand for the first quarter of 2014. The reduction in the provision for loan losses from the preceding quarter as well as the first quarter of 2014 reflected decreases in net charge-offs. There was a negative net charge-off (recovery) of $40 thousand during the first quarter of 2015. This compares with net charge off of $467 thousand during the fourth quarter and net charge-off of $32 thousand during the first quarter of 2014. During the fourth quarter of 2014, $474 thousand in one SBA loan was charged off.

Non-interest income for the first quarter 2015 was $1.8 million, compared to $1.8 million for the fourth quarter of 2014 and $2.1 million for the prior-year first quarter. The net gains on sale of SBA loans totaled $908 thousand for the first quarter of 2015, compared to $802 thousand for the preceding quarter. Sales of SBA loans for the first quarter of 2015 were $11.6 million, compared to $7.6 million for the fourth quarter of 2014. Service charges on deposits decreased $117 thousand, or 24.4%, to $362 thousand for the first quarter of 2015, compared to $479 thousand for the fourth quarter of 2014. The decrease is primarily due to closing of accounts from one large client, which had already been anticipated.

The decrease in non-interest income from the prior-year first quarter was primarily due to a $572 thousand decrease in net gains on sale of SBA loans. Sales of SBA loans for the first quarter of 2014 were $18.5 million with a net gain of $1.5 million. Service charges and other deposit related fees increased $213 thousand, or 143%, from $149 thousand for the prior-year first quarter. There was a significant increase in the number of demand deposit accounts as well as transactions such as wire transfers over those periods.

Non-interest expense for the first quarter 2015 was $4.6 million, compared to $4.1 million for the fourth quarter of 2014 and $3.7 million for the prior-year first quarter. The increase from the preceding quarter was primarily attributable to an increase of $268 thousand, or 9.9%, in salaries and employee benefits expense, driven by higher bonus reserves. During the fourth quarter of 2014, the reserve for 2014 profit sharing was lowered resulting in the reversal of expense that was previously reserved. The total number of full time employees was 103 as of March 31, 2015 and 101 as of December 31, 2014.

The increase in non-interest expense from the prior-year first quarter was primarily due to an increase in salaries and employee benefits expense, occupancy and FF&E expenses. Salaries and employee benefits expense increased $447 thousand, or 19%, from $2.5 million for the first quarter of 2014. The increase reflected an increase in the number of full-time employees from 83 as of March 31, 2014. Occupancy expense increased $112 thousand, or 39%, to $397 thousand for the first quarter of 2015, from $286 thousand for the first quarter of 2014. The increase was primarily due to an addition of new branch in mid-2014 as well as a relocation of headquarter office at the end of the first quarter of 2014, which resulted in higher lease expenses. FF&E expense increased primarily due to the bank’s continued expansion.

The effective tax rate for the first quarter was 41.2%, compared to 41.9% for the fourth quarter of 2014 and 41.5% for the first quarter of 2014.

Balance Sheet

Total assets were $554.7 million at March 31, 2015, an increase of $26.5 million, or 5.0%, from $528.2 million at December 31, 2014, and an increase of $171.0 million, or 44.6%, from $383.6 million at March 31, 2014. Gross loans, net of unearned income, were $429.6 million at March 31, 2015, an increase of $16.1 million, or 3.9%, from $413.5 million at December 31, 2014, and an increase of $129.0 million, or 42.9%, from $300.6 million a year ago. New loan originations for the first quarter of 2015 amounted to $46.1 million, including SBA loan origination of $13.3 million, compared to $71.0 million, including SBA loan origination of $17.9 million for the fourth quarter of 2014. The new loan originations for the first quarter of 2014 amounted to $44.1 million, including SBA loan origination of $13.2 million.

Total deposits were $453.3 million at March 31, 2015, an increase of $24.8 million, or 5.8%, from $428.5 million at December 31, 2014 and an increase of $104.8 million, or 30.1%, from $348.5 million at March 31, 2014. The bank borrowed $30.0 million from Federal Loan Home Bank (“FHLB”); $10.0 million of overnight borrowing and $20.0 million of term borrowing with three months remaining maturity.

Non-interest bearing deposits accounted for 35.6% of total deposits at March 31, 2015. This is compared to 40.7% at December 31, 2014 and 37.5% at March 31, 2014.

           

March 31,
2015

December 31,
2014

March 31,
2014

 

Non-interest bearing deposits

35.6% 40.7%

37.5%

Interest bearing demand deposits 35.7% 30.8% 32.1%
Savings 0.3% 0.3% 0.4%
Time deposits – Wholesale 19.5% 20.3% 23.7%
Time deposits over $100,000

6.9%

6.0%

4.6%

Other time deposits

2.1%

2.0%

1.7%

Total deposits 100.0% 100.0% 100.0%
 

Effective January 1, 2015, the Basel III capital rules revise the definition of capital, introduce a minimum CET1 capital ratio and change the risk weightings of certain balance sheet and off-balance sheet assets. The impact of changes in the risk weighting was minimal. At March 31, 2015, the bank continued to exceed all regulatory capital requirements to be classified as a “well-capitalized”, as summarized in the following table.

           

March 31,
2015

December 31,
2014

March 31,
2014

 
Tier 1 leverage capital ratio 12.81% 14.04% 8.68%
CET 1 capital ratio 15.11% N/A N/A
Tier 1 risk-based capital ratio 15.11% 15.42% 9.79%
Total risk-based capital ratio 16.36% 16.67% 11.04%
 

At March 31, 2015, the tangible common equity represented 12.12% of tangible assets, compared to 12.39% at December 31, 2014 and 8.52% at March 31, 2014. 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

Non-performing assets were $1.4 million, or 0.25% of total assets at March 31, 2015, compared to $1.3 million, or 0.26% of total assets at December 31, 2014 and $1.5 million, or 0.38% of total assets at March 31, 2014. There were no other real estate owned (“OREO”) at March 31, 2015, December 31, 2014 or March 31, 2014.

Non-performing loans to gross loans was 0.33% at March 31, 2015, compared to 0.33% at December 31, 2014 and 0.49% at March 31, 2014. Total classified loans were $1.7 million, or 0.38% of gross loans, at March 31, 2015, compared to $1.7 million, or 0.42% of gross loans at December 31, 2014 and $3.9 million, or 1.30% of gross loans at March 31, 2014.

The allowance for loan losses was $5.9 million at March 31, 2015, compared to $5.8 million at December 31, 2014, and $5.4 million at March 31, 2014. The allowance for loan losses was 1.37% of gross loans at March 31, 2014, compared to 1.39% at December 31, 2014 and 1.80% at March 31, 2014.

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, conference call slides, or the Form 8-K related to this document, all of 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 County and is focused on serving the banking needs of small- and medium-sized businesses, professionals, and residents with a particular emphasis on the Korean and other ethnic minority communities. The Bank has branches in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Gardena and Buena Park. The Bank commenced its operations on June 10, 2005 as First Standard Bank and changed its name to Open Bank on September 20, 2010. Its headquarters are 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. 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, 2015

December 31, 2014

$ change

% change

March 31, 2014

$ change

% change
(Unaudited) (Unaudited) (Audited)
Assets
 
Cash and due from banks $ 69,721 $ 64,748 $ 4,973 7.7 % $ 44,149 $ 25,572 57.9 %
Investment securities 29,961 22,863 7,098 31.0 % 11,590 18,371 158.5 %
Loans held for sale 3,264 5,711 (2,447 ) -42.8 % 12,122 (8,858 ) -73.1 %
Gross loans, net of unearned income 429,630 413,527 16,103 3.9 % 300,625 129,005 42.9 %
Allowance for loan losses (5,871 ) (5,755 ) (116 ) -2.0 % (5,407 ) (464 ) -8.6 %
Net loans receivable 423,759 407,772 15,987 3.9 % 295,218 128,541 43.5 %
Bank premises and equipment, net 4,830 4,953 (123 ) -2.5 % 3,423 1,407 41.1 %
Accrued interest receivable 1,280 1,175 105 8.9 % 929 351 37.8 %
FHLB and Pacific Coast Bankers Bank Stock, at cost 1,900 1,900 0 0.0 % 1,075 825 76.7 %
Servicing assets 4,808 4,670 138 3.0 % 4,032 776 19.2 %
Net deferred taxes 2,833 2,903 (70 ) -2.4 % 5,705 (2,872 ) -50.3 %
Other assets   12,312     11,497     815     7.1 %   5,387     6,925     128.6 %
Total assets $ 554,668   $ 528,192   $ 26,476     5.0 % $ 383,630   $ 171,038     44.6 %
 
Liabilities and Shareholders' Equity
 
Noninterest bearing demand $ 161,232 $ 174,449 $ (13,217 ) -7.6 % $ 130,795 $ 30,437 23.3 %
Savings 1,399 1,394 5 0.4 % 1,273 126 9.9 %
Money market and others 161,511 131,659 29,852 22.7 % 112,119 49,392 44.1 %
Time deposits of $100,000 or more 76,561 70,435 6,126 8.7 % 51,591 24,970 48.4 %
Other time deposits   52,611     50,582     2,029     4.0 %   52,757     (146 )   -0.3 %
Total deposits 453,314 428,519 24,795 5.8 % 348,535 104,779 30.1 %
Other borrowings 30,030 30,000 30 0.1 % - 30,030 NA
Other liabilities   4,092     4,231     (139 )   -3.3 %   2,425     1,667     68.7 %
Total liabilities 487,436 462,750 24,686 5.3 % 350,960 136,476 38.9 %
Total shareholders' equity   67,232     65,442     1,790     2.7 %   32,670     34,562     105.8 %
Total Liabilities and Shareholders' Equity $ 554,668   $ 528,192   $ 26,476     5.0 % $ 383,630   $ 171,038     44.6 %
 
Statement of Operations
(Dollars in thousand, except per share data)
Three Months Ended Twelve Months Ended
March 31, 2015 December 31, 2014 % change March 31, 2014 % change March 31, 2015 March 31, 2014 % change
Interest income $ 5,561 $ 5,134 8.3 % $ 4,005 38.9 % $ 5,561 $ 4,005 38.9 %
Interest expense   512     404     26.7 %   363     41.0 %   512     363   41.0 %
Net interest income   5,049     4,730     6.7 %   3,642     38.6 %   5,049     3,642   38.6 %
Provision for loan losses 77 740 -89.6 % 210 -63.3 % 77 210 -63.3 %
Non interest income 1,819 1,831 -0.7 % 2,061 -11.7 % 1,819 2,061 -11.7 %
Non interest expense   4,582     4,127     11.0 %   3,743     22.4 %   4,582     3,743   22.4 %
Income before income taxes 2,209 1,694 30.4 % 1,750 26.2 % 2,209 1,750 26.2 %
Provision for income taxes   909     710     28.0 %   727     25.0 %   909     727   25.0 %
Net income (loss) $ 1,300   $ 984     32.1 % $ 1,023     27.1 % $ 1,300   $ 1,023   27.1 %
 
Pre-tax Pre-provision Income $ 2,286 $ 2,434 -6.1 % $ 1,960 16.6 % $ 2,286 $ 1,960 16.6 %
 
Book Value $ 5.39 $ 5.27 $ 4.49 $ 5.39 $ 4.49
Basic EPS $ 0.10 $ 0.08 $ 0.14 $ 0.10 $ 0.14
Diluted EPS $ 0.10 $ 0.08 $ 0.13 $ 0.10 $ 0.13
 
Shares of common stock outstanding 12,463,574 12,411,089 7,275,484 12,463,574 7,275,484
Weighted Average Shares:
- Basic 12,423,085 12,400,245 7,261,017 12,423,085 7,261,017
- Diluted 13,073,444 13,104,355 8,002,473 13,073,444 8,002,473
 
Key Ratios
Return on average assets (ROA)* 1.01 % 0.85 % 0.16 % 1.18 % -0.17 % 1.01 % 1.18 % -0.17 %
ROA, excluding tax benefit * 1.71 % 1.46 % 0.25 % 2.01 % -0.30 % 1.71 % 2.01 % -0.30 %
Return on average equity (ROE) * 7.83 % 6.07 % 1.76 % 12.86 % -5.03 % 7.83 % 12.86 % -5.03 %
ROE, excluding tax benefit * 13.30 % 10.45 % 2.85 % 22.00 % -8.70 % 13.30 % 22.00 % -8.70 %
Net interest margin * 4.19 % 4.35 % -0.16 % 4.51 % -0.32 % 4.19 % 4.51 % -0.32 %
Efficiency ratio 66.71 % 62.91 % 3.80 % 65.64 % 1.07 % 66.71 % 65.64 % 1.07 %
Pre-tax Pre-provision Income to average assets 1.77 % 2.10 % -0.33 % 2.26 % -0.49 % 1.77 % 2.26 % -0.49 %
 
Tangible common equity to tangible assets 12.12 % 12.39 % -0.27 % 8.52 % 3.60 % 12.12 % 8.52 % 3.60 %
Tier 1 Leverage Ratio 12.81 % 14.04 % -1.23 % 8.68 % 4.13 % 12.81 % 8.68 % 4.13 %
Common Equity Tier 1 Ratio 15.11 % 15.11 %
Tier 1 Capital Ratio 15.11 % 15.42 % -0.31 % 9.79 % 5.32 % 15.11 % 9.79 % 5.32 %
Total Risk Based Capital Ratio 16.36 % 16.67 % -0.31 % 11.04 % 5.32 % 16.36 % 11.04 % 5.32 %
 
Asset Quality   3/31/2015     12/31/2014     9/30/2014     6/30/2014     3/31/2014  
Nonaccrual Loans 1,016 951 1,065 983 1,000
Loans 90 days or more past due, accruing - - - - -
Accruing Restructured Loans   394     397     401     409     476  
Total Non-Performing Loans 1,410 1,349 1,466 1,392 1,476
Other Real Estate Loans (OREO)   -     -     -     -     -  
Total Non-Performing Assets 1,410 1,349 1,466 1,392 1,476
 
Classified Loans 1,651 1,736 1,822 2,875 3,904
 
Non-Performing Assets/Total Assets 0.25 % 0.26 % 0.33 % 0.32 % 0.38 %
Non-Performing Loans/Gross Loans 0.33 % 0.33 % 0.40 % 0.43 % 0.49 %
Allowance for Loan Losses/Non-Performing Loans 417 % 427 % 374 % 393 % 366 %
Allowance for Loan Losses/Non-Performing Assets 417 % 427 % 374 % 393 % 366 %
Allowance for Loan Losses/Gross Loans 1.37 % 1.39 % 1.51 % 1.69 % 1.80 %
Classified Loans/Gross Loans 0.38 % 0.42 % 0.50 % 0.89 % 1.30 %
 
Net Charge-offs $ (40 ) $ 467 $ (11 ) $ (14 ) $ 32
Net Charge-offs to Average Gross Loans * -0.04 % 0.49 % -0.01 % -0.02 % 0.04 %
 
* Annualized
 

Contacts

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

Contacts

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