News Details

Financial highlights

• Net Income increased 6% from the second quarter of 2014 and increased 34% from the third quarter of 2013.
• Income before taxes increased 6% from the second quarter of 2014 and increased 123% from the third quarter of 2013.
• Total assets increased to $447 million, up 2% from $439 million at June 30, 2014, and up 51% from $296 million a year ago.
• Net Loans receivables were $359 million at September 30, 2014, an increase of 13% from $318 million at June 30, 2014, and an increase of 56% from $230 million at September 30, 2013.
• Total deposits were $377 million at September 30, 2014, an increase of 1.3% from $372 million at June 30, 2014, and an increase of 43% from $263 million at September 30, 2013.
• Non-interest bearing deposits represented 43% of total deposits at September 30, 2014, compared to 41% at June 30, 2014, and 32% at September 30, 2013.
• Non-performing assets to total assets was 0.33% at September 30, 2014, compared to 0.32% at June 30, 2014, and 0.64% at September 30, 2013.

LOS ANGELES--(BUSINESS WIRE)-- Open Bank (OTCBB:OPBK) today reported that income before taxes increased to $2.1 million for the three months ended September 30, 2014, up 6.0% from $2.0 million for the three months ended June 30, 2014, and up 122.6% from $965 thousand for the three months ended September 30, 2013. Third quarter 2014 net income was $1.3 million, or $0.10 per diluted share. This compares with net income of $1.2 million, or $0.14 per diluted share for the second quarter of 2014, and net income of $950 thousand, or $0.12 per diluted share, for the third quarter of 2013. The $30 million in new capital raised during the second quarter of 2014 added 5 million additional shares of common stock and had a dilution impact in the third quarter of 2014, resulting in a decrease of the earnings per share. Pre-tax pre-provision income was $2.1 million for each of the third quarter 2014 and for the second quarter 2014, and $1.2 million for third quarter 2013.

“I am pleased to announce another solid quarter while maintaining a strong capital position,” stated Min Kim, President and Chief Executive Officer. “We continue to focus on growing our core business, and in July of 2014 opened our sixth full service branch, which is located in the heart of Koreatown on Olympic Blvd., Los Angeles. During the quarter we experienced modest growth in earnings and on our balance sheet. With the additional cash from the recent capital raise, we focused on growing our loan portfolio. Our gross loan portfolio increased $41 million to $364 million for the quarter from $323 million for the previous quarter. The asset growth during the third quarter was modest as we successfully grew our non-interest bearing deposits while reducing certain interest bearing deposits. Our net interest margin remains strong at 4.33%, and our capital position also remains well above regulatory guidelines for well-capitalized banks. At September 30, 2014, the bank had a total risk based capital ratio of 18.78%.”

Results of Operations

Net interest income was $4.4 million for the three months ended September 30, 2014, compared to $3.9 million for the second quarter of 2014, and $2.7 million for the third quarter of 2013. This represents increases of 12.4% from the second quarter of 2014 and 64.9% from the third quarter of 2013. The increases were primarily the result of increases in average interest earning assets, specifically loans. Average loans, including loans held for sale, increased to $343.6 million for the third quarter of 2014, an increase of $16.4 million, or 5.0%, from $327.2 million for the second quarter 2014, and an increase of $127.7 million, or 59.2%, from $215.9 million for the third quarter of 2013.

The net interest margin for the third quarter of 2014 was 4.33%, a 20 basis point increase from 4.13% for the second quarter of 2014, and an 8 basis decrease from 4.41% for the third quarter of 2013. There was certain non-recurring interest income recognized during the third quarter that positively impacted our net interest margin. Such interest income was driven from the SBA loans that were paid off during the quarter as the remaining discount accretion was recognized. Excluding this item, the net interest margin would be 4.13% for the quarter, same as the previous quarter. The yield on loans was 5.41% for the third quarter of 2014, compared to 5.15% for the second quarter of 2014, and 5.35% for the third quarter of 2013. The cost of interest-bearing liabilities remained the same at 0.71% for the second and third quarters of 2014 as well as for the third quarter of 2013. The following table shows the asset yields, liability cost, spread and margin.

No provision for loan losses was recorded for the third quarter of 2014. The provision for loan losses was $50 thousand for the second quarter of 2014, and $226 thousand for the third quarter of 2013. The reductions in the provision for loan losses reflected continued strength in asset quality. There were no loan charge-offs for the second and third quarters of 2014, and the third quarter of 2013. Loan recovery was $11 thousand for the third quarter of 2014, compared to $14 thousand for the second quarter of 2014, and $72 thousand for the third quarter of 2013.

Non-interest income for the third quarter 2014 was $2.0 million, compared to $2.6 million for the second quarter of 2014, and $1.6 million for the prior-year third quarter. The decrease from the preceding quarter was primarily attributable to a $448 thousand decrease in net gains on the sale of SBA loans, which was $1.3 million for the third quarter of 2014, compared to $1.8 million for the second quarter of 2014. Sales of SBA loans for the third quarter of 2014 were $17.5 million, compared to $22.3 million for the second quarter of 2014. Service charges on deposits increased $55 thousand, or 17%, to $384 thousand for the third quarter of 2014, compared to $329 thousand for the second quarter of 2014, primarily due to an increase in non-interest bearing deposit accounts with operational transactions.

The increase in non-interest income from the prior-year third quarter was primarily due to a $164 thousand increase in net gains on sale of SBA loans. Sales of SBA loans for the third quarter of 2013 were $19.3 million. Service charges and other deposit-related fees increased $295 thousand, or 331%, from $89 thousand for the prior-year third quarter. There was a significant increase in the number of demand deposit accounts as well as the transactions such as wire transfers.

Non-interest expense for the third quarter 2014 was $4.3 million, compared to $4.4 million for the second quarter of 2014, and $3.1 million for the prior-year third quarter. The decrease from the preceding quarter was primarily attributable to a decrease of $132 thousand, or 5%, in salaries and employee benefits, driven by a decrease in bonus reserves. The total number of full time employees was 102 as of September 30, 2014 and June 30, 2014, and 78 as of September 30, 2013.

The increase from the third quarter of 2013 was primarily due to increases in salaries and employee benefits and occupancy expenses. Salaries and employee benefits were $2.7 million for the third quarter of 2014, an increase of $695 thousand, or 35%, compared to $2.0 million for the third quarter of 2013. Occupancy expense increased $241 thousand compared to the third quarter of 2013. The increases were primarily due to an increase in full time employees, as the bank added three new branches over the same period.

The effective tax rate for the second and third quarters of 2014 was 41%. During the third quarter of 2013, the provision for income taxes was minimal due to tax benefits recognized from the reversal of deferred tax valuation allowance.

Balance Sheet

Total assets were $447.4 million at September 30, 2014, an increase of $8.1 million, or 1.8%, from $439.3 million at June 30, 2014, and an increase of $151.2 million, or 51.0%, from $296.2 million at September 30, 2013. Gross loans, net of unearned income, were $364.1 million at September 30, 2014, an increase of $40.8 million, or 12.6%, from $323.3 million at June 30, 2014, and an increase of $129.3 million, or 55.1%, from $234.8 million a year ago. New loan originations for the third quarter of 2014 amounted to $63.6 million, including SBA loan origination of $20.9 million, compared to $51.1 million, including SBA loan origination of $23.2 million, for the second quarter of 2014. The new loan originations for the third quarter of 2013 amounted to $81.9 million, including SBA loan origination of $18.7 million.

Total deposits were $376.9 million at September 30, 2014, an increase of $5.0 million, or 1%, from $372.0 million at June 30, 2014, and an increase of $113.7 million, or 43%, from $263.2 million at September 30, 2013. Although total deposits only grew 1% from the preceding quarter, non-interest bearing deposits grew 6.5%, which accounted for 43% of total deposits at September 30, 2014. This is compared to 41% at June 30, 2014, and 32% at September 30, 2013. With an ample amount of cash from the recent capital raise being invested in the overnight funds, the management strategically managed the deposit portfolio by adjusting money market rates and focusing in low or non-interest bearing accounts. This is the primary reason for the decrease in money market accounts during the quarter. The deposit mix is detailed in the table below at dates indicated.

At September 30, 2014, the leverage ratio was 14.85%, compared to 15.44% at June 30, 2014, and 10.83% at September 30, 2013; Tier 1 risk-based capital ratio was 17.52%, compared to 19.14% at June 30, 2014, and 10.85% at September 30, 2013; and total risk-based capital ratio was 18.78%, compared to 20.39% at June 30, 2014, and 12.11% at September 30, 2013.

At September 30, 2014, the tangible common equity represented 14.31% of tangible assets, compared to 14.23% at June 30, 2014, and 10.54% at September 30, 2013. 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 $1.5 million, or 0.33%, of total assets at September 30, 2014, compared to $1.4 million, or 0.32%, of total assets at June 30, 2014, and $1.9 million, or 0.64%, of total assets at September 30, 2013. There was no OREO at September 30, 2014, June 30, 2014, or September 30, 2013.

Non-performing loans to gross loans decreased to 0.40% at September 30, 2014, compared to 0.43% at June 30, 2014, and 0.80% at September 30, 2013. The decrease over a year ago was primarily attributable to sales of problem loans during 2013. The allowance for loan losses was $5.5 million at September 30, 2014 and June 30, 2014, and $5.0 million at September 30, 2013.

Total classified loans were $1.8 million, or 0.50% of gross loans, at September 30, 2014, compared to $2.9 million, or 0.89% of gross loans, at June 30, 2014, and $4.5 million, or 1.90% of gross loans, at September 30, 2013.

The allowance for loan losses was 1.51% of gross loans at September 30, 2014, compared to 1.69% at June 30, 2014, and 2.15% at September 30, 2013.

About Open Bank

Open Bank (the “Bank”) is engaged in the general commercial banking business in Los Angeles County 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.comMember 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.

* Annualized

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

Source: Open Bank