Market Overview

OP Bancorp Earns Record Net Income of $3.8 Million in the Second Quarter of 2018

Share:

2018 Second Quarter Highlights:

  • Net income totaled $3.8 million or $0.23 per diluted common share
    for the second quarter of 2018.
  • Net interest margin was 4.46% for the second quarter of 2018.
  • Total assets were $979 million at June 30, 2018, up 2.4% from $957
    million at March 31, 2018, and up 17.2% from $835 million at June 30,
    2017.
  • Net loans receivable were $816 million at June 30, 2018, up 4.1%
    from $784 million at March 31, 2018 and up 17.7% from $694 million at
    June 30, 2017.
  • Total deposits were $823 million at June 30, 2018, up 0.6% from
    $818 million at March 31, 2018 and up 12.3% from $733 million at June
    30, 2017.
  • Noninterest bearing deposits at June 30, 2018 were $270 million or
    32.8% of total deposits.
  • Nonperforming assets to total assets were 0.10% at June 30, 2018.

OP Bancorp (the "Company") (NASDAQ:OPBK), the holding company of Open
Bank (the "Bank"), today reported unaudited financial results for the
second quarter and first six months of 2018. Net income for the second
quarter of 2018 was $3.8 million, or $0.23 per diluted common share,
compared with net income of $3.2 million, or $0.22 per diluted share for
the first quarter of 2018, and net income of $2.5 million, or $0.18 per
diluted share for the second quarter of 2017.

"We are happy to announce another strong quarter, with record net income
of $3.8 million for the three months ended June 30, 2018, a 53.9%
increase compared to $2.5 million for the same period last year. Our
loan growth continues to be strong, growing 4.1% quarter-over-quarter
and 17.6% year-over-year, while maintaining an excellent asset quality,"
commented Min Kim, President and Chief Executive Officer of OP Bancorp
and Open Bank.

Financial Highlights (unaudited)                  
(Dollars in thousands, except per share data)   As of or for the Three Months Ended  
June 30, March 31, June 30,
  2018     2018     2017  
Income Statement Data:
Interest income $ 12,062 $ 11,180 $ 9,601
Interest expense   2,075     1,621     1,007  
Net interest income 9,987 9,559 8,594
Provision for loan losses 33 575 170
Noninterest income 2,783 2,212 2,210
Noninterest expense     7,478       6,811       6,553  
Income before taxes 5,259 4,385 4,081
Provision for income taxes     1,468       1,169       1,618  
Net Income   $ 3,791     $ 3,216     $ 2,463  
Diluted earnings per share $ 0.23 $ 0.22 $ 0.18
Balance Sheet Data:
Loans held for sale $ 8,718 $ 18,571 $ 3,549
Gross loans, net of unearned income 826,040 793,751 702,413
Allowance for loan losses 9,723 9,716 8,556
Total assets 979,441 956,842 835,418
Deposits 823,373 818,280 732,940
Shareholders' equity 121,393 117,260 86,738
Performance Ratios:
Return on average assets (annualized) 1.61 % 1.43 % 1.24 %
Return on average equity (annualized) 12.70 % 13.64 % 11.55 %
Net interest margin (annualized) 4.46 % 4.56 % 4.58 %
Efficiency ratio (1) 58.56 % 57.86 % 60.65 %
Credit Quality:
Nonperforming loans $ 991 $ 592 $ 781
Nonperforming assets 991 592 781
Net charge-offs to average gross loans (annualized) 0.01 % 0.00 % 0.00 %
Nonperforming assets to gross loans plus OREO 0.12 % 0.07 % 0.11 %
ALL to nonperforming loans 981 % 1641 % 1096 %
ALL to gross loans 1.18 % 1.22 % 1.22 %
Capital Ratios:
Total risk-based capital ratio 16.09 % 16.17 % 13.60 %
Tier 1 risk-based capital ratio 14.90 % 14.93 % 12.36 %
Common equity tier 1 ratio 14.90 % 14.93 % 12.36 %
Leverage ratio 12.91 % 13.09 % 10.89 %
 
(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 Six Months Ended
June 30, June 30,
  2018   2017
Income Statement Data:
Interest income $ 23,242 $ 18,786
Interest expense   3,695   1,985
Net interest income 19,547 16,801
Provision for loan losses 609 711
Noninterest income 4,996 4,453
Noninterest expense     14,290     12,941
Income before taxes 9,644 7,602
Provision for income taxes     2,637     2,993
Net Income   $ 7,007   $ 4,609
Diluted earnings per share $ 0.45 $ 0.33
Performance Ratios:
Return on average assets (annualized) 1.52 % 1.17 %
Return on average equity (annualized) 13.11 % 10.98 %
Net interest margin (annualized) 4.51 % 4.53 %
Efficiency ratio (1) 58.22 % 60.89 %
 
(1) Represents noninterest expense divided by the sum of net
interest income and noninterest income.
 

Results of Operations

Net interest income before provision for loan losses for the second
quarter of 2018 was $10.0 million, an increase of $428 thousand, or
4.5%, compared to $9.6 million for the first quarter of 2018, primarily
due to an $882 thousand increase in interest income, partially offset by
a $454 thousand increase in interest expense.

Interest income from the contractual interest rates on loans increased
$861 thousand, or 8.5%, during the second quarter, reflecting a 5.4%
increase in average loans, including loans held for sale, and a 10 basis
point increase in the average contractual interest rate from the
increase in Fed funds rate in June 2018 of 25 basis points. The amount
of discount accretion on SBA loans decreased $86 thousand during the
quarter due to a reduction in SBA loan payoffs during the second quarter
of 2018. The reported interest income on loans, net of SBA discount
accretions and other components, increased $822 thousand during the
quarter.

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
June 30, 2018     March 31, 2018     June 30, 2017
(Dollars in thousands)

Interest
& Fees

    Yield

Interest
& Fees

    Yield

Interest
& Fees

    Yield
Contractual interest rate $ 11,046   5.34 % $ 10,185   5.24 % $ 8,693   5.03 %
SBA discount accretion 481 0.23 % 567 0.29 % 533 0.31 %
Amortization of net deferred fees/(costs) 98 0.05 % 51 0.03 % 51 0.03 %
Interest recognized on nonaccrual loans 9 0.00 % 20 0.01 % 48 0.03 %
Prepayment penalties and late fees   36   0.02 %   25   0.01 %   13   0.01 %
Yield on loans (as reported) $ 11,670   5.64 % $ 10,848   5.58 % $ 9,338   5.40 %
 
    Six Months Ended
June 30, 2018     June 30, 2017
(Dollars in thousands)

Interest &
Fees

    Yield

Interest &
Fees

    Yield
Contractual interest rate $ 21,229   5.29 % $ 17,440   5.10 %
SBA discount accretion 1,048 0.26 % 655 0.19 %
Amortization of net deferred fees/(costs) 150 0.04 % 81 0.02 %
Interest recognized on nonaccrual loans 29 0.01 % 72 0.02 %
Prepayment penalties and late fees   61   0.02 %   18   0.01 %
Yield on loans (as reported) $ 22,517   5.61 % $ 18,266   5.34 %
 

Interest expense for the second quarter of 2018 increased $454 thousand
compared to the first quarter of 2018, due to an increase of $26.8
million, or 5.0% in average balance of interest-bearing liabilities and
an increase of 25 basis points in average cost of interest-bearing
liabilities, primarily due to the aforementioned increase in Fed funds
rate.

Net interest margin for the second quarter of 2018 decreased 10 basis
points to 4.46% from 4.56% for the first quarter of 2018, primarily due
to the increase in the cost of interest-bearing liabilities, partially
offset by the increase in the reported yield on loans.

Net interest income before provision for loan losses for the second
quarter of 2018 increased $1.4 million, or 16.2%, to $10.0 million,
compared to $8.6 million for the second quarter of 2017, primarily due
to a $2.5 million or 25.6%, increase in interest income, partially
offset by an increase of $1.1 million in interest expense.

The increase in interest income was primarily due to a 19.7% increase in
average loans, including loans held for sale, and a 24 basis point
increase in the yield on average loans to 5.64% from 5.40% for the
second quarter of 2017.

The increase in interest expense was due to a 26.1% increase in average
interest-bearing liabilities and a 57 basis point increase in the cost
of interest-bearing liabilities. The increases in the average yields on
loans and average cost of deposits were 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 December 2017, March 2018
and June 2018.

Net interest margin for the second quarter of 2018 decreased 12 basis
points to 4.46% from 4.58% for the second quarter of 2017.

Net interest income for the six months ended June 30, 2018 increased
$2.7 million, or 16.3%, to $19.5 million, compared to $16.8 million for
the same period last year, primarily due to a $4.5 million, or 23.7%,
increase in interest income, partially offset by an increase of $1.7
million in interest expense.

The increase in interest income for the six months ended June 30, 2018
was primarily due to a 17.3% increase in average loans, including loans
held for sale, and a 27 basis point increase in the yield on average
loans to 5.61% from 5.34% for the six months ended June 30, 2017. The
increase in interest expense was due to a 21.7% increase in average
interest bearing liabilities and a 47 basis point increase in the cost
of average interest-bearing liabilities to 1.36% from 0.89% for the six
months ended June 30, 2017.

The following table shows the asset yields, liability costs, spreads and
margins.

    Three Months Ended         Percentage Change  
June 30,     March 31,     June 30, Q2-18     Q2-18
2018   2018   2017   vs. Q1-18   vs. Q2-17  
Yield on loans   5.64 %   5.58 %   5.40 %   0.06 %   0.24 %
Yield on interest-earning assets 5.39 % 5.34 % 5.11 % 0.05 % 0.28 %
Cost of interest-bearing liabilities 1.48 % 1.23 % 0.91 % 0.25 % 0.57 %
Cost of deposits 1.02 % 0.81 % 0.57 % 0.21 % 0.45 %
Cost of funds 1.02 % 0.83 % 0.57 % 0.19 % 0.45 %
Net interest spread 3.91 % 4.11 % 4.20 % -0.20 % -0.29 %
Net interest margin 4.46 % 4.56 % 4.58 % -0.10 % -0.12 %
 
    Six Months Ended       Percentage Change
June 30,     June 30, 2018 YTD
2018 2017 vs. 2017 YTD
Yield on loans   5.61 %   5.34 %   0.27 %
Yield on interest-earning assets 5.36 % 5.06 % 0.30 %
Cost of interest-bearing liabilities 1.36 % 0.89 % 0.47 %
Cost of deposits 0.91 % 0.57 % 0.34 %
Cost of funds 0.92 % 0.57 % 0.35 %
Net interest spread 4.00 % 4.17 % -0.17 %
Net interest margin 4.51 % 4.53 % -0.02 %
 

The provision for loan losses for the second quarter of 2018 decreased
$542 thousand to $33 thousand from $575 thousand for the first quarter
of 2018. The provision for loan losses for the second quarter of 2018
decreased $137 thousand compared to $170 thousand for the second quarter
of 2017.

Noninterest income for the second quarter of 2018 was $2.8 million, an
increase of $571 thousand, or 25.8%, from $2.2 million for the first
quarter of 2018, primarily due to an increase in gain on sale of SBA
loans, partially offset by a decrease in service fees on deposits. Gain
on sale of SBA loans increased $739 thousand to $1.7 million for the
second quarter of 2018 from $989 thousand for the first quarter of 2018.
We sold $24.8 million in SBA loans with an average premium of 8.60% in
the second quarter of 2018, compared to the sale of $13.4 million in SBA
loans with an average premium of 8.66% in the first quarter of 2018.
Service charges on deposit accounts decreased $139 thousand during the
quarter due to decreased activities on noninterest bearing deposit
accounts.

Noninterest income for the second quarter of 2018 increased $574
thousand, or 26.0%, compared to $2.2 million for the second quarter of
2017, primarily due to a $576 thousand increase in gain on sale of SBA
loans from $1.2 million in the second quarter of 2017. We sold $16.2
million in SBA loans with an average premium of 8.63% in the second
quarter of 2017.

Noninterest expense for the second quarter of 2018 was $7.5 million, an
increase of $667 thousand, or 9.8%, compared to $6.8 million for the
first quarter of 2018. The increase was primarily due to a $404 thousand
increase in salary and employee benefits, a $94 thousand increase in
other expenses, an $86 thousand increase in promotion and advertising
and a $57 thousand increase in foundation donation and other
contributions. The increases in salary and employee benefits, other
expenses, and promotion and advertising were primarily driven by
supporting continued growth of the Company, and the increase in
foundation donation and other contributions was in line with the
increase in net income for the second quarter of 2018.

Noninterest expense for the second quarter of 2018 increased $926
thousand, or 14.1%, compared to $6.6 million for the second quarter of
2017. The increase was primarily due to a $490 thousand increase in
salary and employee benefits, a $138 thousand increase in other expenses
and a $133 thousand increase in foundation donation and other
contributions, which were in line with the growth of the Company.

Income tax provision for the second quarter of 2018 was $1.5 million,
compared to $1.2 million for the first quarter of 2018 and $1.6 million
for the second quarter of 2017. The effective tax rate for the second
quarter of 2018 was 27.9%, compared to 26.7% for the first quarter of
2018 and 39.6% for the second quarter of 2017.

Balance Sheet

Total assets were $979.4 million at June 30, 2018, an increase of $22.6
million, or 2.4%, from $956.8 million at March 31, 2018, and an increase
of $144.0 million, or 17.2%, from $835.4 million at June 30, 2017. Gross
loans, net of unearned income, were $826.0 million at June 30, 2018, an
increase of $32.2 million, or 4.1%, from $793.8 million at March 31,
2018, and an increase of $123.6 million, or 17.6%, from $702.4 million
at June 30, 2017.

New loan originations for the second quarter of 2018 totaled $92.0
million, including SBA loan originations of $29.3 million, compared to
$100.9 million, including SBA loan originations of $16.4 million for the
first quarter of 2018. New loan originations for the second quarter of
2017 were $69.6 million, including SBA loan originations of $24.1
million. Loan payoffs for the second quarter of 2018 were $30.1 million,
compared to $32.2 million for the first quarter of 2018, and $32.4
million for the second quarter of 2017.

Total deposits were $823.4 million at June 30, 2018, an increase of $5.1
million, or 0.6%, from $818.3 million at March 31, 2018, and an increase
of $90.4 million, or 12.3%, from $732.9 million at June 30, 2017.
Noninterest bearing deposits were $270.1 million at June 30, 2018, a
decrease of $18.9 million, or 6.5%, from $289.0 million at March 31,
2018, and a decrease of $16.8 million, or 5.8%, from $286.9 million at
June 30, 2017.

Noninterest bearing deposits accounted for 32.8% of total deposits at
June 30, 2018, compared to 35.3% at March 31, 2018 and 39.1% at June 30,
2017.

    As of  
June 30,     March 31,     June 30,
2018   2018   2017  
Noninterest bearing deposits   32.8 %   35.3 %   39.1 %
Interest bearing demand deposits 29.7 % 32.0 % 34.6 %
Savings 0.4 % 0.5 % 0.7 %
Time deposits over $250,000 17.2 % 15.2 % 11.7 %
Other time deposits   19.9 %   17.0 %   13.9 %
Total deposits   100.0 %   100.0 %   100.0 %
 

The Company had a $25 million advance from the Federal Home Loan Bank
("FHLB") at June 30, 2018, which was paid off on July 2, 2018 as
scheduled. The Company had advances of $10 million at March 31, 2018 and
June 30, 2017.

The Company's consolidated capital ratios exceeded regulatory guidelines
and the Bank's capital ratios exceeded the regulatory guidelines for a
well-capitalized financial institution under the Basel III regulatory
requirements at June 30, 2018, as summarized in the following table.

                Financial     Basel III
Institution Minimal
Basel III Requirement (1)
Regulatory Effective
Capital Ratios OP Bancorp Open Bank Guidelines January 1, 2019
Total risk-based 16.09 % 16.08 %   10.00 %   10.50 %
Tier 1 risk-based 14.90 % 14.89 % 8.00 % 8.50 %
Common equity tier 1 Risk-Based 14.90 % 14.89 % 6.50 % 7.00 %
Leverage 12.91 % 12.90 % 5.00 % 4.00 %
 
(1) Requirements for both the Company and the Bank include a 2.5%
capital conservation buffer, except the leverage ratio.
 

Asset Quality

Nonperforming loans were $991 thousand at June 30, 2018, an increase of
$399 thousand from $592 thousand at March 31, 2018 and an increase of
$210 thousand from $781 thousand at June 30, 2017.

Nonperforming assets were $991 thousand, or 0.10% of total assets, at
June 30, 2018, $592 thousand, or 0.06% of total assets, at March 31,
2018 and $781 thousand, or 0.09% of total assets, at June 30, 2017.
There was no other real estate owned ("OREO") at June 30, 2018, March
31, 2018, or June 30, 2017.

Nonperforming loans to gross loans were 0.12% at June 30, 2018, compared
to 0.07% at March 31, 2018 and 0.11% at June 30, 2017. Total classified
loans were $3.6 million, or 0.44% of gross loans, at June 30, 2018,
compared to $3.4 million, or 0.43% of gross loans, at March 31, 2018 and
$2.6 million, or 0.36% of gross loans, at June 30, 2017.

The allowance for loan losses was $9.7 million at June 30, 2018 and at
March 31, 2018, and $8.6 million at June 30, 2017. The allowance for
loan losses was 1.18% of gross loans at June 30, 2018 and 1.22% of gross
loans at March 31, 2018 and at June 30, 2017. The allowance for loan
losses was 981% of nonperforming assets at June 30, 2018, 1,641% at
March 31, 2018 and 1,096% at June 30, 2017.

About OP Bancorp

OP Bancorp, the holding company for Open Bank (the "Bank"), is a
California corporation whose common stock is quoted on the Nasdaq Global
Market under the ticker symbol, "OPBK." The Bank is engaged in the
general commercial banking business in Los Angeles, Orange, and Santa
Clara 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 eight full branch offices in Downtown Los
Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Gardena,
Buena Park, and Santa Clara. 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.

Cautionary Note Regarding Forward-Looking Statements

Certain matters set forth herein (including any exhibits hereto)
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, including
forward-looking statements relating to the Company's current business
plans and expectations regarding future operating results.
Forward-looking statements may include, but are not limited to, the use
of forward-looking language, such as "likely result in," "expects,"
"anticipates," "estimates," "forecasts," "projects," "intends to," or
may include other similar words or phrases, such as "believes," "plans,"
"trend," "objective," "continues," "remains," or similar expressions, or
future or conditional verbs, such as "will," "would," "should," "could,"
"may," "might," "can," or similar verbs. These forward-looking
statements are subject to risks and uncertainties that could cause
actual results, performance or achievements to differ materially from
those projected. These risks and uncertainties, some of which are beyond
our control, include, but are not limited to: business and economic
conditions, particularly those affecting the financial services industry
and our primary market areas; our ability to successfully manage our
credit risk and the sufficiency of our allowance for loan loss; factors
that can impact the performance of our loan portfolio, including real
estate values and liquidity in our primary market areas, the financial
health of our commercial borrowers and the success of construction
projects that we finance, including any loans acquired in acquisition
transactions; our ability to effectively execute our strategic plan and
manage our growth; interest rate fluctuations, which could have an
adverse effect on our profitability; liquidity issues, including
fluctuations in the fair value and liquidity of the securities we hold
for sale and our ability to raise additional capital, if necessary;
external economic and/or market factors, such as changes in monetary and
fiscal policies and laws, including the interest rate policies of the
Federal Reserve, inflation or deflation, changes in the demand for
loans, and fluctuations in consumer spending, borrowing and savings
habits, which may have an adverse impact on our financial condition;
continued or increasing competition from other financial institutions,
credit unions, and non-bank financial services companies, many of which
are subject to different regulations than we are; challenges arising
from unsuccessful attempts to expand into new geographic markets,
products, or services; restraints on the ability of the Bank to pay
dividends to us, which could limit our liquidity; increased capital
requirements imposed by banking regulators, which may require us to
raise capital at a time when capital is not available on favorable terms
or at all; a failure in the internal controls we have implemented to
address the risks inherent to the business of banking; inaccuracies in
our assumptions about future events, which could result in material
differences between our financial projections and actual financial
performance; changes in our management personnel or our inability to
retain motivate and hire qualified management personnel; disruptions,
security breaches, or other adverse events, failures or interruptions
in, or attacks on, our information technology systems; disruptions,
security breaches, or other adverse events affecting the third-party
vendors who perform several of our critical processing functions; an
inability to keep pace with the rate of technological advances due to a
lack of resources to invest in new technologies; risks related to
potential acquisitions; incremental costs and obligations associated
with operating as a public company; the impact of any claims or legal
actions to which we may be subject, including any effect on our
reputation; compliance with governmental and regulatory requirements,
including the Dodd-Frank Act and others relating to banking, consumer
protection, securities and tax matters, and our ability to maintain
licenses required in connection with commercial mortgage origination,
sale and servicing operations; changes in federal tax law or policy; and
our ability the manage the foregoing and other factors set forth in the
Company's public reports including its Registration Statement on Form
S-1 effective as of March 27, 2018, and particularly the discussion of
risk factors within that document. If any of these risks or
uncertainties materializes or if any of the assumptions underlying such
forward-looking statements proves to be incorrect, our results could
differ materially from those expressed in, implied or projected by such
forward-looking statements. We assume no obligation to update such
forward-looking statements. Any forward-looking statements presented
herein are made only as of the date of this press release, and we do not
undertake any obligation to update or revise any forward-looking
statements to reflect changes in assumptions, the occurrence of
unanticipated events, or otherwise, except as required by law.

Consolidated Balance Sheet (unaudited)                        
(Dollars in thousands)
6/30/2018 3/31/2018 % change 6/30/2017 % change
Assets
Cash and due from banks $ 61,252 $ 69,900 -12.4 % $ 67,533 -9.3 %
Securities available for sale, at fair value 45,006 36,938 21.8 % 32,557 38.2 %
Other investments 7,226 6,746 7.1 % 4,287 68.6 %
Loans held for sale 8,718 18,571 -53.1 % 3,549 145.6 %
Real Estate Loans 465,125 455,663 2.1 % 382,212 21.7 %
SBA Loans 125,378 113,491 10.5 % 109,659 14.3 %
C & I Loans 117,353 114,747 2.3 % 103,788 13.1 %
Home Mortgage Loans 114,710 106,187 8.0 % 102,422 12.0 %
Consumer & Other Loans   3,474   3,663   -5.2 %   4,332   -19.8 %
Gross loans, net of unearned income 826,040 793,751 4.1 % 702,413 17.6 %
Allowance for loan losses   (9,723 )   (9,716 )   0.1 %   (8,556 )   13.6 %
Net loans receivable 816,317 784,035 4.1 % 693,857 17.6 %
Premises and equipment, net 4,818 4,707 2.4 % 4,654 3.5 %
Accrued interest receivable 2,598 2,504 3.8 % 2,031 27.9 %
Servicing assets 6,994 6,725 4.0 % 6,964 0.4 %
Company owned life insurance 11,243 11,165 0.7 % 10,930 2.9 %
Deferred tax assets 4,239 4,003 5.9 % 3,534 19.9 %
Other assets   11,030   11,548   -4.5 %   5,522   99.7 %
Total assets $ 979,441 $ 956,842   2.4 % $ 835,418   17.2 %
 
Liabilities and Shareholders' Equity
Noninterest bearing deposits $ 270,144 $ 289,012 -6.5 % $ 286,900 -5.8 %
Savings 3,097 3,914 -20.9 % 5,130 -39.6 %
Money market and others 244,620 261,506 -6.5 % 253,315 -3.4 %
Time deposits over $250,000 141,823 124,637 13.8 % 85,918 65.1 %
Other time deposits   163,689   139,211   17.6 %   101,677   61.0 %
Total deposits 823,373 818,280 0.6 % 732,940 12.3 %
Other borrowings 25,000 10,000 150.0 % 10,000 150.0 %
Accrued interest payable 873 558 56.5 % 366 138.5 %
Other liabilities   8,802   10,744   -18.1 %   5,374   63.8 %
Total liabilities 858,048 839,582 2.2 % 748,680 14.6 %
 
Common stock 90,894 90,677 0.2 % 67,829 34.0 %
Additional paid-in capital 5,720 5,526 3.5 % 5,015 14.1 %
Retained earnings 25,631 21,840 17.4 % 13,996 83.1 %
Accumulated other comprehensive loss   (852 )   (783 )   8.8 %   (102 )   735.3 %
Total shareholders' equity 121,393 117,260 3.5 % 86,738 40.0 %
                   
Total Liabilities and Shareholders' Equity $ 979,441 $ 956,842   2.4 % $ 835,418   17.2 %
 
Consolidated Statements of Income (unaudited)                              
(Dollars in thousands, except per share data) Three Months Ended
6/30/2018 3/31/2018 % change 6/30/2017 % change
Interest income
Interest and fees on loans $ 11,670 $ 10,848 7.6 % $ 9,338 25.0 %
Interest on securities available for sale 208 188 10.6 % 147 41.5 %
Other interest income   184   144   27.8 %   116   58.6 %
Total interest income 12,062 11,180 7.9 % 9,601 25.6 %
Interest expense
Interest on deposits 2,060 1,534 34.3 % 1,001 105.8 %
Interest on borrowed funds   15   87   -82.8 %   6   150.0 %
Total interest expense   2,075   1,621   28.0 %   1,007   106.1 %
Net interest income 9,987 9,559 4.5 % 8,594 16.2 %
Provision for loan losses   33   575   -94.3 %   170   -80.6 %
Net interest income after provision for loan losses 9,954 8,984 10.8 % 8,424 18.2 %
Noninterest income
Service charges on deposits 398 537 -25.9 % 388 2.6 %
Loan servicing fees, net of amortization 372 324 14.8 % 374 -0.5 %
Gain on sale of loans 1,728 989 74.7 % 1,152 50.0 %
Other income   285   362   -21.3 %   295   -3.4 %
Total noninterest income 2,783 2,212 25.8 % 2,209 26.0 %
Noninterest expense
Salaries and employee benefits 4,615 4,211 9.6 % 4,125 11.9 %
Occupancy and equipment 1,064 1,026 3.7 % 969 9.8 %
Data processing and communication 297 331 -10.3 % 335 -11.3 %
Professional fees 166 152 9.2 % 146 13.7 %
FDIC insurance and regulatory assessments 104 96 8.3 % 100 4.0 %
Promotion and advertising 231 145 59.3 % 155 49.0 %
Directors' fees 209 209 0.0 % 201 4.0 %
Foundation donation and other contributions 386 329 17.3 % 253 52.6 %
Other expenses   406   312   30.1 %   268   51.5 %
Total noninterest expense   7,478   6,811   9.8 %   6,552   14.1 %
Income before income taxes 5,259 4,385 19.9 % 4,081 28.9 %
Provision for income taxes   1,468   1,169   25.6 %   1,618   -9.3 %
Net income (loss) $ 3,791 $ 3,216   17.9 % $ 2,463   53.9 %
 
Book value per share $ 7.77 $ 7.55 2.9 % $ 6.65 16.8 %
Basic EPS $ 0.24 $ 0.23 4.3 % $ 0.18 33.3 %
Diluted EPS $ 0.23 $ 0.22 4.5 % $ 0.18 27.8 %
 
Shares of common stock outstanding 15,629,215 15,530,527 0.6 % 13,045,833 19.8 %
Weighted Average Shares:
- Basic 15,577,775 13,292,083 17.2 % 13,008,985 19.7 %
- Diluted 16,110,460 13,826,956 16.5 % 13,409,230 20.1 %
 
Key Ratios                              
(Dollars in thousands, except ratios) Three Months Ended
6/30/2018 3/31/2018 % change 6/30/2017 % change
Return on average assets (ROA)* 1.61 % 1.43 % 0.18 % 1.24 % 0.37 %
Return on average equity (ROE) * 12.70 % 13.64 % -0.94 % 11.55 % 1.15 %
Net interest margin * 4.46 % 4.56 % -0.10 % 4.58 % -0.12 %
Efficiency ratio 58.56 % 57.86 % 0.70 % 60.65 % -2.09 %
 
Total Risk Based Capital Ratio 16.09 % 16.17 % -0.08 % 13.60 % 2.49 %
Tier 1 Capital Ratio 14.90 % 14.93 % -0.03 % 12.36 % 2.54 %
Common Equity Tier 1 Ratio 14.90 % 14.93 % -0.03 % 12.36 % 2.54 %
Tier 1 Leverage Ratio 12.91 % 13.09 % -0.18 % 10.89 % 2.02 %
 
* Annualized
 
Consolidated Statements of Income (unaudited)                  
(Dollars in thousands, except per share data) Six Months Ended
6/30/2018 6/30/2017 % change
Interest income
Interest and fees on loans $ 22,517 $ 18,267 23.3 %
Interest on securities available for sale 396 290 36.6 %
Other interest income   329   229   43.7 %
Total interest income 23,242 18,786 23.7 %
Interest expense
Interest on deposits 3,593 1,972 82.2 %
Interest on borrowed funds   102   13   684.6 %
Total interest expense   3,695   1,985   86.1 %
Net interest income 19,547 16,801 16.3 %
Provision for loan losses   609   711   -14.3 %
Net interest income after provision for loan losses 18,938 16,090 17.7 %
Noninterest income
Service charges on deposits 935 807 15.9 %
Loan servicing fees, net of amortization 696 740 -5.9 %
Gain on sale of loans 2,717 2,345 15.9 %
Other income   648   561   15.5 %
Total noninterest income 4,996 4,453 12.2 %
Noninterest expense
Salaries and employee benefits 8,826 8,148 8.3 %
Occupancy and equipment 2,089 1,933 8.1 %
Data processing and communication 627 666 -5.9 %
Professional fees 318 286 11.2 %
FDIC insurance and regulatory assessments 200 200 0.0 %
Promotion and advertising 377 300 25.7 %
Directors' fees 418 396 5.6 %
Foundation donation and other contributions 715 468 52.8 %
Other expenses   720   544   32.4 %
Total noninterest expense   14,290   12,941   10.4 %
Income before income taxes 9,644 7,602 26.9 %
Provision for income taxes   2,637   2,993   -11.9 %
Net income (loss) $ 7,007 $ 4,609   52.0 %
 
Book value per share $ 7.77 $ 6.65 16.8 %
Basic EPS $ 0.47 $ 0.34 38.2 %
Diluted EPS $ 0.45 $ 0.33 36.4 %
 
Shares of common stock outstanding 15,629,215 13,045,833 19.8 %
Weighted Average Shares:
- Basic 14,441,241 12,967,695 11.4 %
- Diluted 14,951,581 13,365,453 11.9 %
 
Key Ratios            
(Dollars in thousands, except ratios) Six Months Ended
6/30/2018 6/30/2017 % change
Return on average assets (ROA)* 1.52 % 1.17 % 0.35 %
Return on average equity (ROE) * 13.11 % 10.98 % 2.13 %
Net interest margin * 4.51 % 4.53 % -0.02 %
Efficiency ratio 58.22 % 60.89 % -2.67 %
 
Total Risk Based Capital Ratio 16.09 % 13.60 % 2.49 %
Tier 1 Capital Ratio 14.90 % 12.36 % 2.54 %
Common Equity Tier 1 Ratio 14.90 % 12.36 % 2.54 %
Tier 1 Leverage Ratio 12.91 % 10.89 % 2.02 %
 
* Annualized
 
Asset Quality                    
(Dollars in thousands, except ratios) Three Months Ended
6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Nonaccrual Loans $ 642 $ 241 $ 683 $ 377 $ 421
Loans 90 days or more past due, accruing - - - - -
Accruing restructured loans   349   351   354   357   360
Nonperforming loans 991 592 1,037 734 781
Other real estate loans (OREO)   -     -   -     -     -
Nonperforming assets 991 592 1,037 734 781
 
Classified loans 3,606 3,356 2,088 2,138 2,561
 
Nonperforming assets/total assets 0.10 % 0.06 % 0.12 % 0.08 % 0.09 %
Nonperforming assets/gross loans plus OREO 0.12 % 0.07 % 0.14 % 0.10 % 0.11 %
Nonperforming loans/gross loans 0.12 % 0.07 % 0.14 % 0.10 % 0.11 %
Allowance for loan losses/nonperforming loans 981 % 1641 % 881 % 1214 % 1096 %
Allowance for loan losses/nonperforming assets 981 % 1641 % 881 % 1214 % 1096 %
Allowance for loan losses/gross loans 1.18 % 1.22 % 1.22 % 1.21 % 1.22 %
Classified loans/gross loans 0.44 % 0.43 % 0.28 % 0.29 % 0.36 %
 
Net charge-offs $ 26 $ (2 ) $ 92 $ (75 ) $ (6 )
Net charge-offs to average gross loans * 0.01 % 0.00 % 0.05 % -0.04 % 0.00 %
 
* Annualized
 
Average Balance Sheet, Interest and Yield/Rate Analysis
(Dollars in thousands)     Three Months Ended
June 30, 2018   March 31, 2018     June 30, 2017

Average
Balance

     

Interest
and Fees

     

Yield/
Rate

 

Average
Balance

     

Interest
and Fees

     

Yield/
Rate

Average
Balance

     

Interest
and Fees

     

Yield/
Rate

Earning assets:      
Federal funds sold and other investments $ 26,857 $ 184 2.72 % $ 21,887 $ 144 2.64 % $ 25,988 $ 116 1.78 %
Securities available for sale   40,372   208   2.06   38,211   188   1.97   33,216   147   1.77
Total investments 67,229 392 2.33 60,098 332 2.21 59,204 263 1.77
Real estate 464,899 6,008 5.18 444,224 5,535 5.05 366,033 4,393 4.81
SBA 143,604 2,714 7.58 134,935 2,550 7.67 118,438 2,171 7.35
C & I 107,546 1,473 5.49 100,187 1,366 5.53 101,290 1,382 5.47
Home Mortgage 110,476 1,425 5.16 104,254 1,345 5.16 103,213 1,331 5.16
Consumer   3,608   50   5.56   3,630   52   5.68   4,492   61   5.45
Loans (1)   830,133   11,670   5.64   787,230   10,848   5.58   693,466   9,338   5.40
Total earning assets 897,362 12,062 5.39 847,328 11,180 5.34 752,670 9,601 5.11
Noninterest-earning assets   46,970   52,084   42,296
Total assets $ 944,332 $ 899,412 $ 794,966
 
Interest-bearing liabilities:
NOW and savings deposits $ 6,615 4 0.24 % $ 6,404 4 0.25 % $ 5,951 4 0.27 %
Money market deposits 253,162 804 1.27 260,912 708 1.10 249,679 547 0.88
Time deposits   298,535   1,252   1.68   243,597   822   1.37   186,896   450   0.97
Total interest-bearing deposits 558,312 2,060 1.48 510,913 1,534 1.22 442,526 1,001 0.91
Borrowings   3,132   15   1.92   23,779   87   1.49   2,804   6   0.86
Total interest-bearing liabilities 561,444 2,075 1.48 534,692 1,621 1.23 445,330 1,007 0.91
 
Noninterest-bearing liabilities:
Noninterest-bearing deposits 254,700 260,221 258,912
Other noninterest-bearing liabilities   8,814   10,180   5,400
Total noninterest-bearing liabilities 263,514 270,401 264,312
Shareholders' equity   119,374   94,319   85,324
Total liabilities and shareholders' equity $ 944,332 $ 899,412 $ 794,966
                       
Net interest income / interest rate spreads $ 9,987 3.91 % $ 9,559 4.11 % $ 8,594 4.20 %
           
Net interest margin   4.46 %   4.56 %   4.58 %
 
Cost of deposits & cost of funds:
Total deposits / cost of deposits $ 813,012 $ 2,060 1.02 % $ 771,134 $ 1,534 0.81 % $ 701,438 $ 1,001 0.57 %
Total funding liabilities / cost of funds $ 816,144 $ 2,075 1.02 % $ 794,913 $ 1,622 0.83 % $ 704,242 $ 1,007 0.57 %
 
(1) Includes loans held for sale.
 
Average Balance Sheet, Interest and Yield/Rate Analysis
(Dollars in thousands)     Six Months Ended
June 30, 2018     June 30, 2017

Average
Balance

     

Interest
and Fees

     

Yield/
Rate

Average
Balance

     

Interest
and Fees

     

Yield/
Rate

Earning assets:    
Federal funds sold and other investments $ 24,386 $ 327 2.67 % $ 24,088 $ 228 1.89 %
Securities available for sale   39,297   397   2.02   33,979   291   1.71
Total investments 63,683 724 2.26 58,067 519 1.79
Real estate 454,619 11,543 5.12 364,069 8,637 4.78
SBA 139,293 5,264 7.62 116,579 4,193 7.25
C & I 103,887 2,839 5.51 99,871 2,612 5.27
Home Mortgage 107,382 2,770 5.16 104,132 2,698 5.18
Consumer   3,619   101   5.63   4,652   126   5.46
Loans (1)   808,800   22,517   5.61   689,303   18,266   5.34
Total earning assets 872,483 23,241 5.36 747,370 18,785 5.06
Noninterest-earning assets   49,512   40,104
Total assets $ 921,995 $ 787,474
 
Interest-bearing liabilities:
NOW and savings deposits $ 6,511 7 0.22 % $ 5,706 7 0.25 %
Money market deposits 257,015 1,512 1.19 254,032 1,090 0.87
Time deposits   271,218   2,074   1.54   187,254   874   0.94
Total interest-bearing deposits 534,744 3,593 1.35 446,992 1,971 0.89
Borrowings   13,398   102   1.54   3,515   13   0.75
Total interest-bearing liabilities 548,142 3,695 1.36 450,507 1,984 0.89
 
Noninterest-bearing liabilities:
Noninterest-bearing deposits 257,445 247,615
Other noninterest-bearing liabilities   9,493   5,391
Total noninterest-bearing liabilities 266,938 253,006
Shareholders' equity   106,915   83,961
Total liabilities and shareholders' equity $ 921,995 $ 787,474
               
Net interest income / interest rate spreads $ 19,546 4.00 % $ 16,801 4.17 %
       
Net interest margin   4.51 %   4.53 %
 
Cost of deposits & cost of funds:
Total deposits / cost of deposits $ 792,189 $ 3,593 0.91 % $ 694,607 $ 1,971 0.57 %
Total funding liabilities / cost of funds $ 805,587 $ 3,695 0.92 % $ 698,122 $ 1,984 0.57 %
 
(1) Includes loans held for sale.
 

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