OP Bancorp Earns Record Net Income of $3.8 Million in the Second Quarter of 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 [phone]; 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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