Open Bank Reports First Quarter 2016 Results

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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--(BUSINESS WIRE)-- 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.

“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	%