10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-38437

OP BANCORP

(Exact Name of Registrant as Specified in its Charter)

California	81-3114676
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1000 Wilshire Blvd., Suite 500, Los Angeles, CA	90017
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (213) 892-9999

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Common Stock, no par value Trading Symbol(s) OPBK Name of each exchange on which registered NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of November 8, 2019, there were 15,702,743 outstanding shares of the Registrant’s common stock.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Income and Comprehensive Income	6
	Consolidated Statements of Changes in Shareholders’ Equity	7
	Consolidated Statements of Cash Flows	9
	Notes to Unaudited Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	55
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	57
Signatures		58

2

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, 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 Open Bank to pay dividends to the holding company, 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;

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• 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 to the manage the foregoing.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report. Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this report. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

4

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

OP BANCORP

CONSOLIDATED BALANCE SHEETS (unaudited)

As of September 30, 2019 and December 31, 2018

	September 30, 2019		December 31, 2018
	(Dollars in thousands, except share data)
ASSETS
Cash and cash equivalents	$	89,107	$	77,726
Securities available for sale, at fair value		52,295		55,336
Other investments		9,173		7,260
Loans held for sale		368		752
Loans receivable, net of allowance of $9,640 at September 30, 2019 and $9,636    at December 31, 2018		954,730		865,423
Premises and equipment, net		5,367		4,633
Accrued interest receivable		3,140		3,068
Servicing assets		6,959		6,987
Company owned life insurance (COLI)		10,551		11,394
Deferred tax assets		2,358		3,672
Other real estate owned (OREO)		1,817		—
Operating right-of-use assets (1)		8,606		—
Other assets		7,463		7,935
Total assets	$	1,151,934	$	1,044,186
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits:
Noninterest bearing	$	296,831	$	285,132
Interest bearing:
Savings		3,316		3,421
Money market and others		274,698		261,349
Time deposits greater than $250,000		219,547		164,281
Other time deposits		201,601		190,993
Total deposits		995,993		905,176
Accrued interest payable		2,541		1,715
Operating lease liabilities (1)		10,335		—
Other liabilities		5,472		7,508
Total liabilities		1,014,341		914,399
Shareholders’ equity
Preferred stock – no par value; 10,000,000 shares authorized; no shares    issued or outstanding at September 30, 2019 and December 31, 2018		—		—
Common stock – no par value; 50,000,000 shares authorized; 15,711,580 and    15,860,306 shares issued and outstanding at September 30, 2019 and December    31, 2018, respectively		87,085		91,209
Additional paid-in capital		7,154		6,249
Retained earnings		43,086		32,877
Accumulated other comprehensive loss		268		(548	)
Total shareholders’ equity		137,593		129,787
Total liabilities and shareholders' equity	$	1,151,934	$	1,044,186
(1) The adoption of ASU 2016-02, Leases (Topic 842) in the first quarter of 2019 resulted in the recognition of right-of-use assets and lease liabilities on balance sheet.

See accompanying notes to consolidated financial statements

5

OP BANCORP

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)

For the Three and Nine Months Ended September 30, 2019 and 2018

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(Dollars in thousands, except share data)
Interest income
Interest and fees on loans	$	14,278		$	12,524		$	41,725		$	35,042
Interest on investment securities		332			249			1,019			645
Other interest income		502			233			1,333			561
Total interest income		15,112			13,006			44,077			36,248
Interest expense
Interest on deposits		3,893			2,477			10,883			6,071
Interest on borrowed funds		—			44			—			146
Total interest expense		3,893			2,521			10,883			6,217
Net interest income		11,219			10,485			33,194			30,031
Provision for loan losses		290			439			691			1,047
Net interest income after provision for loan losses		10,929			10,046			32,503			28,984
Noninterest income
Service charges on deposits		469			484			1,495			1,419
Loan servicing fees, net of amortization		243			310			853			1,006
Gain on sale of loans		1,714			1,135			4,379			3,852
Other income		306			355			2,185			1,002
Total noninterest income		2,732			2,284			8,912			7,279
Noninterest expense
Salaries and employee benefits		5,349			4,803			15,862			13,629
Occupancy and equipment		1,232			976			3,441			3,065
Data processing and communication		385			320			1,110			948
Professional fees		261			294			711			612
FDIC insurance and regulatory assessments		(21	)		106			188			306
Promotion and advertising		182			222			543			598
Directors’ fees		228			216			680			633
Foundation donation and other contributions		402			369			1,169			1,084
Other expenses		406			399			1,151			1,118
Total noninterest expense		8,424			7,705			24,855			21,993
Income before income taxes		5,237			4,625			16,560			14,270
Income tax expense		1,237			1,144			3,984			3,781
Net income	$	4,000		$	3,481		$	12,576		$	10,489
Earnings per share - Basic	$	0.25		$	0.22		$	0.78		$	0.68
Earnings per share - Diluted	$	0.24		$	0.21		$	0.77		$	0.66
Other comprehensive income (loss):
Change in unrealized income (loss) on securities available for sale		119			(257	)		1,158			(863	)
Tax effect		(35	)		76			(342	)		180
Total other comprehensive income (loss)		84			(181	)		816			(683	)
Comprehensive income	$	4,084		$	3,300		$	13,392		$	9,806

See accompanying notes to consolidated financial statements

6

OP BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

	Common Stock						Additional					Accumulated Other			Total
	Shares Outstanding			Amount			Paid-in Capital		Retained Earnings			Comprehensive Income (Loss)			Shareholders’ Equity
Balance at January 1, 2019		15,860,306		$	91,209		$	6,249	$	32,877		$	(548	)	$	129,787
Net income		—			—			—		4,740			—			4,740
Stock issued under stock-based    compensation plans		118,162			292			—		—			—			292
Stock-based compensation		—			—			377		—			—			377
Repurchase of common stock		(258,885	)		(2,381	)		—		—			—			(2,381	)
Cash dividends declared		—			—			—		(793	)		—			(793	)
Change in unrealized loss on securities    available for sale net of reclassifications    and tax effects		—			—			—		—			354			354
Balance at March 31, 2019		15,719,583		$	89,120		$	6,626	$	36,824		$	(194	)	$	132,376
Net income		—			—			—		3,836			—			3,836
Stock issued under stock-based    compensation plans		77,809			—			—		—			—			—
Stock-based compensation		—			—			339		—			—			339
Repurchase of common stock		(74,385	)		(665	)		—		—			—			(665	)
Cash dividends declared		—			—			—		(782	)		—			(782	)
Change in unrealized loss on securities    available for sale net of reclassifications    and tax effects		—			—			—		—			378			378
Balance at June 30, 2019		15,723,007		$	88,455		$	6,965	$	39,878		$	184		$	135,482
Net income		—			—			—		4,000			—			4,000
Stock issued under stock-based    compensation plans		145,190			72			—		—			—			72
Stock-based compensation		—			—			189		—			—			189
Repurchase of common stock		(156,617	)		(1,442	)		—		—			—			(1,442	)
Cash dividends declared		—			—			—		(792	)		—			(792	)
Change in unrealized loss on securities    available for sale net of reclassifications    and tax effects		—			—			—		—			84			84
Balance at September 30, 2019		15,711,580		$	87,085		$	7,154	$	43,086		$	268		$	137,593

See accompanying notes to consolidated financial statements

7

OP BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

(continued)

	Common Stock					Additional				Accumulated Other			Total
	Shares Outstanding		Amount			Paid-in Capital		Retained Earnings		Comprehensive Income (Loss)			Shareholders’ Equity
Balance at January 1, 2018		13,190,527	$	67,926		$	5,280	$	18,624	$	(350	)	$	91,480
Net income		—		—			—		3,216		—			3,216
Stock issued under stock offering, net    of expenses		2,300,000		22,637			—		—		—			22,637
Stock issued under stock-based    compensation plans		40,000		114			—		—		—			114
Stock-based compensation		—		—			246		—		—			246
Change in unrealized loss on securities    available for sale net of reclassifications    and tax effects		—		—			—		—		(433	)		(433	)
Balance at March 31, 2018		15,530,527	$	90,677		$	5,526	$	21,840	$	(783	)	$	117,260
Net income		—		—			—		3,791		—			3,791
Stock issued under stock offering, net    of expenses		—		(64	)		—		—		—			(64	)
Stock issued under stock-based    compensation plans		98,688		281			—		—		—			281
Stock-based compensation		—		—			194		—		—			194
Change in unrealized loss on securities    available for sale net of reclassifications    and tax effects		—		—			—		—		(69	)		(69	)
Balance at June 30, 2018		15,629,215	$	90,894		$	5,720	$	25,631	$	(852	)	$	121,393
Net income		—		—			—		3,481		—			3,481
Stock issued under stock offering, net    of expenses		—		(4	)		—		—		—			(4	)
Stock issued under stock-based    compensation plans		141,361		119			—		—		—			119
Stock-based compensation		—		—			167		—		—			167
Change in unrealized loss on securities    available for sale net of reclassifications    and tax effects		—		—			—		—		(181	)		(181	)
Balance at September 30, 2018		15,770,576	$	91,009		$	5,887	$	29,112	$	(1,033	)	$	124,975

See accompanying notes to consolidated financial statements

8

OP BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

For the Nine Months ended September 30, 2019 and 2018

	Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities
Net income	$	12,576		$	10,489
Adjustments to reconcile net income to net cash and cash equivalents provided    by operating activities:
Provision for loan losses		691			1,047
Depreciation and amortization of premises and equipment		835			762
Amortization of net premiums on securities		183			183
Stock-based compensation		905			606
Gain on sales of loans		(4,379	)		(3,852	)
Earnings on company owned life insurance (COLI)		(1,445	)		(231	)
Origination of loans held for sale		(63,204	)		(51,051	)
Proceeds from sales of loans held for sale		66,415			65,769
Amortization of servicing assets		1,581			1,295
Net change in fair value of equity investment with readily determinable fair value		(137	)		—
Net change in:
Accrued interest receivable		(73	)		(319	)
Deferred tax assets		1,313			(874	)
Other assets		129			(2,402	)
Accrued interest payable		826			772
Other liabilities		(307	)		1,177
Net cash from operating activities		15,909			23,371
Cash flows from investing activities
Net change in loans receivable		(91,815	)		(102,630	)
Proceeds from matured, called, or paid-down securities available for sale		9,006			4,845
Proceeds from COLI		2,288			—
Purchase of securities available for sale		(4,989	)		(13,262	)
Purchase of equity investments		(1,000	)		—
Purchase of premises and equipment, net		(1,569	)		(1,039	)
Purchase of other investments		(776	)		(416	)
Net cash from investing activities		(88,855	)		(112,502	)
Cash flows from financing activities
Net change in deposits		90,817			123,585
Cash received from stock option exercises		364			514
Repayment of Federal Home Loan Bank advances		—			(25,000	)
Issuance of common stock, net of expenses		—			22,569
Repurchase of common stock		(4,488	)		—
Cash dividend paid on common stock		(2,366	)		—
Net cash from financing activities		84,327			121,668
Net change in cash and cash equivalents		11,381			32,537
Cash and cash equivalents at beginning of period		77,726			63,250
Cash and cash equivalents at end of period	$	89,107		$	95,787
Supplemental cash flow information
Cash paid during the period for:
Income taxes	$	3,465		$	5,379
Interest	$	10,056		$	5,444
Supplemental noncash disclosure:
Transfer from loan receivable to OREO	$	1,817		$	—
The adoption of ASU 2016-02, leases (Topic 842) recognition right-of-use assets	$	8,606		$	—
Transfer from securities available for sale to other investments	$	—		$	2,486

See accompanying notes to consolidated financial statements

9

OP BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1. Business Description

OP Bancorp (the “Company”) is a California corporation whose common stock is quoted on the Nasdaq Global Market under the ticker symbol, “OPBK.” The Company was formed to acquire 100% of the voting equity of Open Bank (the “Bank”) and commenced operation as a bank holding company on June 1, 2016. This transaction was treated as an internal reorganization as all shareholders of the Bank became shareholders of the Company. The Company has no operations other than ownership of the Bank. The Bank is a California state-chartered and FDIC-insured financial institution, which began its operations on June 10, 2005. Headquartered in downtown Los Angeles, California, the Company operates primarily in the traditional banking business arena that includes accepting deposits and making loans and investments. The Company’s primary deposit products are demand and time deposits, and the primary lending products are commercial business loans to small to medium sized businesses. The Company is operating with nine full service branches, eight of which are located in California, in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Gardena, Buena Park and Santa Clara. The Company opened a ninth full service branch in Carrollton, Texas in April, 2019. The Company also has four loan production offices in Atlanta, Georgia, Aurora, Colorado, and Lynwood and Seattle, Washington.

On March 27, 2018, the Company completed its initial public offering of common stock, pursuant to which an aggregate of 2,300,000 shares of its common stock were sold at a public offering price of $11.00 per share, for aggregate net proceeds of approximately $22.6 million, after deducting underwriter discounts and commissions paid by it of approximately $1.7 million and other offering expenses of approximately $925,000.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited consolidated financial statements and notes thereto of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form 10-Q and conform to practices within the banking industry and include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair presentation of financial results for the interim periods presented, including eliminating intercompany transactions and balances. The results of operations for the interim periods are not necessarily indicative of the results for the full year. These interim unaudited financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2018, included in the Companys’ Annual Report on Form 10-K for the year ended December 31, 2018.

Use of Estimates:  To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Concentration of Risk:  Most of the Company’s customers are located within Los Angeles County and the surrounding area. The concentration of loans originated in this area may subject the Company to the risk of adverse impacts of economic, regulatory or other developments that could occur in Southern California.  The Company has significant concentration in commercial real estate loans. The Company obtains what it believes to be sufficient collateral to secure potential losses. The extent and value of the collateral obtained varies based upon the details underlying each loan agreement.

Reclassifications:  Some items in the prior period financial statements were reclassified to conform to the current presentation.  Reclassification had no effect on prior year net income or shareholders’ equity.

There has been no significant or material changes to the Company’s accounting policies during the three months ended September 30, 2019, as compared to the Summary of Significant Accounting Policies as described in “Note 2 of the Notes to Consolidated Financial Statements” in the Company’s unaudited consolidated financial statements included in its Quarterly Report on Form 10-Q for the period ended June 30, 2019.

Recent Accounting Pronouncements:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). The objective of ASU 2016-13 is to provide financial statement users with decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit. ASU 2016-13 includes provisions that require financial assets measured at amortized cost (such as loans and held to maturity (HTM) debt securities) to be presented at the net amount expected to be collected. This will be accomplished through recognition of an estimate of all current expected credit losses. The estimate will include forecasted information for the timeframe that an entity is able to develop reasonable and

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supportable forecasts. This is a change from the current practice of recognizing incurred losses based on the probable initial recognition threshold under current GAAP. In addition, credit losses on available for sale (AFS) debt securities will be recorded through an allowance for credit losses rather than as a write-down. Under ASU 2016-13, an entity will be able to record reversals of credit losses in current period income when the estimate of credit losses declines, whereas current GAAP prohibits reflecting those improvements in current period earnings.

ASU 2016-13 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019, initially, and early adoption is permitted for fiscal years, including interim periods, beginning after December 15, 2018. ASU 2016-13 will be applied through a cumulative effect adjustment to retained earnings (modified-retrospective approach), except for debt securities for which an other-than-temporary impairment had been recognized before the effective date. A prospective transition approach is required for these debt securities. The Company is currently evaluating the effects of ASU 2016-13 on its financial statements and disclosures, including software solutions, data requirements and loss estimation methodologies. The company has engaged a third party advisor to develop a new expected loss model. While the effects cannot yet be quantified, the Company expects ASU 2016-13 to add complexity and costs to its current credit loss evaluation process. On July 2019, FASB proposed the effective date delay to January 2020 for SEC filers, excluding smalller reporting companies (SRCs), and January 2023 for all other entities including SRCs, and on October 2019, FASB voted to approve the proposed delay. The Board will draft a final ASU for vote by written ballot. The Compnay expects the adoption date would be January 2023.  

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”. ASU 2018-13 adds, modifies, and removes disclosure requirements for fair value measurements. ASU 2018-13 is effective annual periods in fiscal years beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted upon the issuance of ASU 2018-13. The Company does not expect this ASU to have a material impact on its financial statements and disclosures.

In February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842).  Under the new guidance, lessees will be required to recognize the following for all leases, with the exception of short-term leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Under the new guidance, lessor accounting is largely unchanged. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements.  ASU No. 2018-10 provides improvements related to ASU No. 2016-02 to increase stakeholders’ awareness of the amendments and to expedite the improvements.  The amendments affect narrow aspects of the guidance issued in ASU No. 2016-02.  ASU No. 2018-11 allows entities adopting ASU No. 2016-02 to choose an additional (and optional) transition method, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.  ASU No. 2018-11 also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met.  The amendments in these updates become effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The Company elected the optional transition method permitted by ASU No. 2018-11.  Under this method, an entity shall recognize and measure leases that exist at the application date and prior comparative periods are not adjusted.  In addition, the Company elected to adopt the package of practical expedients to leases that commenced before the effective date: (1) an entity need not reassess whether any expired or existing contracts contain leases; (2) an entity need not reassess the lease classification for any expired or existing leases; and, (3) an entity need not reassess initial direct costs for any existing leases. The Company also elected the practical expedient, which must be applied consistently to all leases, to use hindsight in determining the lease term and in assessing impairment of our right-of-use assets.  We also elected to adopt a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under Topic 840 contain a lease under this Topic. At the adoption date, the Company reported a lease liability of approximately $9.9 million, a right-of-use asset of approximately $8.0 million, and no cumulative-effect adjustment to retained earnings. See Note 5, “Leases” for further details.

In March 2017, the FASB issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20) (ASU 2017-08). ASU 2017-08 amends the amortization period for certain purchased callable debt securities held at a premium. Prior to the issuance of this guidance, premiums were amortized as an adjustment of yield over the contractual life of the instrument. ASU 2017-08 requires premiums on purchased callable debt securities that have explicit, noncontingent call features that are callable at fixed prices to be amortized to the earliest call date. There are no accounting changes for securities held at a discount. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted. ASU 2017-08 will be applied through a cumulative effect adjustment through equity (modified-retrospective approach). The Company did not have callable debt securities held at a premium at December 31, 2018 or September 30, 2019.

11

Note 3. Securities

The following table summarizes the amortized cost, fair value, and the corresponding amounts of gross unrealized gains and losses for available for sale securities as of September 30, 2019 and December 31, 2018:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of September 30, 2019:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	5,998	$	—	$	(6	)	$	5,992
Mortgage-backed securities: residential		12,160		61		(24	)		12,197
Collateralized mortgage obligations: residential		33,757		395		(46	)		34,106
Total available for sale	$	51,915	$	456	$	(76	)	$	52,295

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of December 31, 2018:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	6,994	$	—	$	(88	)	$	6,906
Mortgage-backed securities: residential		14,465		—		(336	)		14,129
Collateralized mortgage obligations: residential		34,655		156		(510	)		34,301
Total available for sale	$	56,114	$	156	$	(934	)	$	55,336

There were no sales of securities available for sale in the three or nine months ended September 30, 2019 or 2018. The amortized cost and estimated fair value of securities available for sale at September 30, 2019, by contractual maturity, are shown below. Securities without a contractual maturity are shown separately.

	Amortized Cost		Fair Value
As of September 30, 2019:	(Dollars in thousands)
Available for sale:
Within one year	$	3,998	$	3,995
One to five years		2,000		1,997
Mortgage-backed securities: residential		12,160		12,197
Collateralized mortgage obligations		33,757		34,106
Total available for sale	$	51,915	$	52,295

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At September 30, 2019 and December 31, 2018, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

The following table summarizes securities with unrealized losses as of September 30, 2019 and December 31, 2018, aggregated by length of time in a continuous unrealized loss position:

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
As of September 30, 2019:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	1,000	$	—		$	3,992	$	(6	)	$	4,992	$	(6	)
Mortgage-backed securities: residential		1,176		—			3,442		(24	)		4,618		(24	)
Collateralized mortgage obligations		2,140		(14	)		4,014		(32	)		6,154		(46	)
Total available for sale	$	4,316	$	(14	)	$	11,448	$	(62	)	$	15,764	$	(76	)

12

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
As of December 31, 2018:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	—	$	—		$	6,906	$	(88	)	$	6,906	$	(88	)
Mortgage-backed securities: residential		3,209		(23	)		10,920		(313	)		14,129		(336	)
Collateralized mortgage obligations		3,348		(26	)		14,544		(484	)		17,892		(510	)
Total available for sale	$	6,557	$	(49	)	$	32,370	$	(885	)	$	38,927	$	(934	)

The Company believes that the unrealized losses are temporary, arising mainly from fluctuations in interest rates and do not reflect a deterioration of credit quality of the issuers. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The fair value is expected to recover as the securities approach maturity. Management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement, and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. As of September 30, 2019, management believes no securities with unrealized losses were OTTI.

There were no securities pledged as collateral as of September 30, 2019 or December 31, 2018.

Other investments as of September 30, 2019 and December 31, 2018, consisted of the following:

	September 30, 2019		December 31, 2018
	(Dollars in thousands)
FHLB stock	$	5,358	$	4,582
PCBB stock		190		190
Mutual fund - CRA qualified		3,625		2,488
Total other investments	$	9,173	$	7,260

13

Note 4. Loans

The composition of the loan portfolio was as follows at September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
	(Dollars in thousands)
Real estate:
Commercial real estate	$	594,447		$	503,834
SBA loans—real estate		124,963			117,834
Total real estate		719,410			621,668
SBA loans—non-real estate		11,269			9,541
Commercial and industrial		107,730			113,975
Home mortgage		123,092			127,298
Consumer		2,869			2,577
Gross loans receivable		964,370			875,059
Allowance for loan losses		(9,640	)		(9,636	)
Loans receivable, net	$	954,730		$	865,423

No loans were outstanding to related parties as of September 30, 2019 or December 31, 2018.

The activity in the allowance for loan losses for the three and nine months ended September 30, 2019 and 2018 was as follows:

					SBA
	Commercial		SBA Loans		Loans Non-			Commercial			Home
	Real Estate		Real Estate		Real Estate			and Industrial			Mortgage		Consumer			Total
	(Dollars in thousands)
Three months ended September    30, 2019:
Beginning balance	$	5,554	$	933	$	119		$	1,266		$	1,609	$	44		$	9,525
Provision for loan losses		102		—		(2	)		171			26		(7	)		290
Charge-offs		—		—		—			(175	)		—		—			(175	)
Recoveries		—		—		—			—			—		—			—
Ending balance	$	5,656	$	933	$	117		$	1,262		$	1,635	$	37		$	9,640
Three months ended September    30, 2018:
Beginning balance	$	4,804	$	978	$	536		$	1,877		$	1,489	$	39		$	9,723
Provision for loan losses		271		30		89			43			12		(6	)		439
Charge-offs		—		—		(57	)		(565	)		—		—			(622	)
Recoveries		—		—		6			5			—		—			11
Ending balance	$	5,075	$	1,008	$	574		$	1,360		$	1,501	$	33		$	9,551

14

						SBA
	Commercial		SBA Loans			Loans Non-			Commercial			Home
	Real Estate		Real Estate			Real Estate			and Industrial			Mortgage			Consumer			Total
	(Dollars in thousands)
Nine months ended September    30, 2019:
Beginning balance	$	4,805	$	894		$	505		$	1,746		$	1,653		$	33		$	9,636
Provision for loan losses		851		59			(388	)		184			(18	)		3			691
Charge-offs		—		(20	)		—			(668	)		—			—			(688	)
Recoveries		—		—			—			—			—			1			1
Ending balance	$	5,656	$	933		$	117		$	1,262		$	1,635		$	37		$	9,640
Nine months ended September     30, 2018:
Beginning balance	$	4,801	$	1,082		$	538		$	1,265		$	1,408		$	45		$	9,139
Provision for loan losses		274		(74	)		112			654			93			(12	)		1,047
Charge-offs		—		—			(85	)		(565	)		—			—			(650	)
Recoveries		—		—			9			6			—			—			15
Ending balance	$	5,075	$	1,008		$	574		$	1,360		$	1,501		$	33		$	9,551

15

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment as of September 30, 2019 and December 31, 2018:

	Loans Individually Evaluated for Impairment		Loans Collectively Evaluated for Impairment		Total
As of September 30, 2019:	(Dollars in thousands)
Allowance for loan losses:
Commercial real estate	$	—	$	5,656	$	5,656
SBA loans—real estate		—		933		933
SBA loans—non-real estate		—		117		117
Commercial and industrial		336		926		1,262
Home mortgage		—		1,635		1,635
Consumer		—		37		37
Total	$	336	$	9,304	$	9,640
Loans:
Commercial real estate	$	—	$	595,903	$	595,903
SBA loans—real estate		488		125,085		125,573
SBA loans—non-real estate		36		11,295		11,331
Commercial and industrial		336		107,646		107,982
Home mortgage		—		123,581		123,581
Consumer		—		2,875		2,875
Total	$	860	$	966,385	$	967,245
As of December 31, 2018:
Allowance for loan losses:
Commercial real estate	$	—	$	4,805	$	4,805
SBA loans—real estate		—		894		894
SBA loans—non-real estate		362		143		505
Commercial and industrial		836		910		1,746
Home mortgage		—		1,653		1,653
Consumer		—		33		33
Total	$	1,198	$	8,438	$	9,636
Loans:
Commercial real estate	$	—	$	505,229	$	505,229
SBA loans—real estate		834		117,159		117,993
SBA loans—non-real estate		57		9,875		9,932
Commercial and industrial		1,516		112,781		114,297
Home mortgage		—		127,806		127,806
Consumer		—		2,586		2,586
Total	$	2,407	$	875,436	$	877,843

16

The following table presents information related to impaired loans by class of loans as of and for the threeand ninemonths ended September 30, 2019 and 2018. The difference between the unpaid principal balance (net of partial charge-offs) and the recorded investment in the loans is not considered to be material. The difference between interest income recognized and cash basis interest recognized was immaterial.

					Average		Interest
	Recorded		Allowance		Recorded		Income
	Investment		Allocated		Investment		Recognized
As of and for the three months ended September 30, 2019:	(Dollars in thousands)
With no related allowance recorded:
SBA loans—real estate	$	488	$	—	$	493	$	—
SBA loans—non-real estate		36		—		28		—
With an allowance recorded:
Commercial and industrial		336		336		337		5
Total	$	860	$	336	$	858	$	5
As of and for the three months ended September 30, 2018:
With no related allowance recorded:
SBA loans—real estate	$	134	$	—	$	138	$	—
Commercial and industrial		748		—		749		11
With an allowance recorded:
SBA loans—non-real estate		434		434		434		—
Commercial and industrial		345		345		348		5
Total	$	1,661	$	779	$	1,669	$	16

					Average		Interest
	Recorded		Allowance		Recorded		Income
	Investment		Allocated		Investment		Recognized
As of and for the nine months ended September 30, 2019:	(Dollars in thousands)
With no related allowance recorded:
SBA loans—real estate	$	488	$	—	$	505	$	—
SBA loans—non-real estate		36		—		46		—
With an allowance recorded:
Commercial and industrial		336		336		339		15
Total	$	860	$	336	$	890	$	15
As of and for the nine months ended September 30, 2018:
With no related allowance recorded:
Home mortgage	$	134	$	—	$	137	$	—
Consumer		748		—		749		33
With an allowance recorded:
SBA loans—non-real estate		434		434		443		—
Commercial and industrial		345		345		350		14
Total	$	1,661	$	779	$	1,679	$	47

17

The following table presents the recorded investment in nonaccrual loans and loans past due greater than 90 days still accruing interest, by class of loans, as ofSeptember 30, 2019 and December 31, 2018:

	Nonaccrual		Loans >90 Days Past Due & Still Accruing		Total
As of September 30, 2019:	(Dollars in thousands)
SBA loans—real estate	$	488	$	—	$	488
SBA loans—non-real estate		36		—		36
Commercial and industrial		710		—		710
Total	$	1,234	$	—	$	1,234
As of December 31, 2018:
SBA loans—real estate	$	834	$	—	$	834
SBA loans—non-real estate		57		—		57
Commercial and industrial		680		—		680
Total	$	1,571	$	—	$	1,571

Nonaccrual loans and loans past due greater than 90 days still accruing interest include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table represents the aging of the recorded investment in past due loans as of September 30, 2019 and December 31, 2018:

	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
As of September 30, 2019:	(Dollars in thousands)
Commercial real estate	$	472	$	—	$	—	$	472	$	595,431	$	595,903
SBA—real estate		1,293		580		—		1,873		123,700		125,573
SBA—non-real estate		3		—		—		3		11,328		11,331
Commercial and industrial		374		—		—		374		107,608		107,982
Home mortgage		437		—		710		1,147		122,434		123,581
Consumer		—		—		—		—		2,875		2,875
	$	2,579	$	580	$	710	$	3,869	$	963,376	$	967,245
As of December 31, 2018:
Commercial real estate	$	—	$	—	$	—	$	—	$	505,229	$	505,229
SBA—real estate		—		—		311		311		117,682		117,993
SBA—non-real estate		—		—		—		—		9,932		9,932
Commercial and industrial		—		—		680		680		113,617		114,297
Home mortgage		449		—		—		449		127,357		127,806
Consumer		—		—		—		—		2,586		2,586
	$	449	$	—	$	991	$	1,440	$	876,403	$	877,843

Troubled Debt Restructurings: As of September 30, 2019 and December 31, 2018, the Company had a recorded investment in troubled debt restructurings of $336,000 and $343,000, respectively. As of September 30, 2019 and December 31, 2018, the Company has allocated $336,000 and $343,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings, respectively. The Company has not committed to lend any additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

Modifications made were primarily extensions of existing payment modifications on loans previously identified as troubled debt restructurings. There were no new loans identified as trouble debt restructurings during the three and nine months ended September 30, 2019 or 2018. There were no payment defaults during the three and nine months ended September 30, 2019 or 2018 of loans that had been modified as troubled debt restructurings within the previous twelve months.

18

Credit Quality Indicators: The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For consumer loans, a credit grade is established at inception, and generally only adjusted based on performance. The Company analyzes loans individually by classifying the loans according to their credit risk. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention—Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard—Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful—Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

As of September 30, 2019 and December 31, 2018, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Pass		Special Mention		Substandard		Doubtful		Total
As of September 30, 2019:	(Dollars in thousands)
Commercial real estate	$	595,903	$	—	$	—	$	—	$	595,903
SBA loans—real estate		122,553		773		2,247		—		125,573
SBA loans—non-real estate		11,281		14		36		—		11,331
Commercial and industrial		106,379		893		710		—		107,982
Home mortgage		123,325		—		256		—		123,581
Consumer		2,875		—		—		—		2,875
	$	962,316	$	1,680	$	3,249	$	—	$	967,245
As of December 31, 2018:
Commercial real estate	$	505,229	$	—	$	—	$	—	$	505,229
SBA loans—real estate		115,993		—		2,000		—		117,993
SBA loans—non-real estate		9,859		16		57		—		9,932
Commercial and industrial		112,781		—		1,516		—		114,297
Home mortgage		127,806		—		—		—		127,806
Consumer		2,586		—		—		—		2,586
	$	874,254	$	16	$	3,573	$	—	$	877,843

Note 5. Leases

On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), using the optional transition method permitted by ASU No. 2018-11, Leases (Topic 842): Targeted Improvements.

The Company’s operating leases are real estate leases which are comprised of its headquarters and office facilities from nonaffiliated parties with remaining lease terms ranging from 1 to 10 years as of September 30, 2019. Certain lease arrangements contain extension option which are typically around 5 years. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term.

At September 30, 2019, operating right-of-use (“ROU”) assets and related liabilities were $8.6 million and $10.3 million, respectively. Short-term operating leases, which are defined as leases with term of twelve months or less, were not recognized as ROU assets with related lease liabilities as permitted under ASU No. 2016-02. The lease payments on short-term operating leases are immaterial. The Company did not have any finance leases at September 30, 2019.

19

Operating lease ROU assets represent the Company’s right to use the underlying asset during the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at the lease commencement based on the present value of the remaining lease payments using the Company’s incremental borrowing rate at the lease commencement date. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term and is recorded in occupancy expense in the consolidated statements of income. The Company’s occupancy expense also includes variable lease costs which is comprised of the Company's share of actual costs for utilities, common area maintenance, property taxes, and insurance that are not included in lease liabilities and are expensed as incurred. Variable lease costs can also include rent escalations based on changes to indices, such as the Consumer Price Index, where the Company estimates future rent increases and records the actual difference to variable costs.

The table below summarized the Company’s total lease cost:

	Three Months Ended		Nine Months Ended
(Dollars in thousands)	September 30, 2019		September 30, 2019
Operating lease cost	$	444	$	1,287
Variable lease cost		211		548
Total lease cost	$	655	$	1,835

The table below summarizes other information related to the Company’s operating leases:

	Three Months Ended		Nine Months Ended
(Dollars in thousands)	September 30, 2019		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	493	$	1,408
Weighted average remaining lease term - operating leases			6.0 years
Weighted average discount rate - operating leases				2.98	%

Rent expense was $655,000 and $545,000 for the three months ended September 30, 2019 and 2018, respectively, and $1.8 million and $1.6 million for the nine months ended September 30, 2019 and 2018, respectively.

The table below summarizes the remaining contractually obligated lease payments and a reconciliation to the lease liability reported on the consolidated balance sheet as of September 30, 2019:

(Dollars in thousands)	September 30, 2019
2019 remaining	$	301
2020		2,002
2021		2,032
2022		2,028
2023		1,816
Thereafter		3,343
Total lease payments		11,522
Discount to present value		(1,187	)
Total lease liability	$	10,335

20

Rent commitments related to the lease of the Company’s main office and branch facilities, before considering renewal options and additional lessor charges as of December 31, 2018, were as follows:

(Dollars in thousands)	December 31, 2018
2019	$	1,709
2020		1,757
2021		1,742
2022		1,685
2023		1,455
Thereafter		2,669
Total	$	11,017

Note 6. Premises and equipment

The Company’s premises and equipment consisted of the following as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
	(Dollars in thousands)
Leasehold improvements	$	6,505		$	5,518
Furniture and fixtures		3,155			2,791
Equipment and others		2,329			2,111
Total cost		11,989			10,420
Accumulated depreciation		(6,622	)		(5,787	)
Net book value	$	5,367		$	4,633

Total depreciation expense included in occupancy and equipment expenses was $297,000 and $273,000 for the three months ended September 30, 2019 and 2018, respectively, and $835,000 and $762,000 for the nine months ended September 30, 2019 and 2018,respectively.

Note 7. Servicing Assets

Activity for loan servicing assets during the three and nine months ended September 30, 2019 and 2018 is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
		2019			2018			2019			2018
	(Dollars in thousands)
Beginning balance	$	6,996		$	6,994		$	6,987		$	6,771
Additions		552			588			1,553			1,621
Amortized to expense		(589	)		(485	)		(1,581	)		(1,295	)
Ending balance	$	6,959		$	7,097		$	6,959		$	7,097

There was no valuation allowance recorded against the carrying value of the servicing assets as of September 30, 2019 or 2018.

The fair value of the servicing assets was $8.3 million at September 30, 2019, which was determined using discount rates ranging from 1.8% to 10.0% and prepayment speeds ranging from 13.4% to 14.6%, depending on the stratification of the specific assets.

The fair value of the servicing assets was $8.6 million at September 30, 2018, which was determined using discount rates ranging from 4.7% to 11.0% and prepayment speeds ranging from 11.4% to 13.3%, depending on the stratification of the specific assets.

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Note 8. Deposits

The scheduled maturities of time deposits were as follows as of September 30, 2019:

	September 30, 2019
	(Dollars in thousands)
2019 remaining	$	124,973
2020		288,900
2021		5,458
2022		972
2023		724
Thereafter		121
Total	$	421,148

Deposits from principal officers, directors, and their affiliates as of September 30, 2019 and December 31, 2018 were $1.10 million and $778,000, respectively.

Note 9. Borrowing arrangements

As of September 30, 2019, the Company had no borrowings from the Federal Home Loan Bank of San Francisco.The Company has a letter of credit with the FHLB in the amount of $49,000,000 to secure a public deposit.

The Company had available borrowings from the following institutions as of September 30, 2019:

	September 30, 2019
	(Dollars in thousands)
Federal Home Loan Bank—San Francisco	$	232,865
Federal Reserve Bank		120,289
Pacific Coast Bankers Bank		8,000
Zions Bank		5,500
Total	$	366,654

The Company has pledged approximately $811.5 million of loans as collateral for these lines of credit as of September 30, 2019.

Note 10. Income Taxes

The Company’s income tax expense was $1.2 million and $1.1 million for the three months ended September 30, 2019 and 2018, respectively, and $4.0 million and $3.8 million for the nine months ended September 30, 2019 ad 2018, respectively. The effective income tax rate was 23.6% and 24.7% for the three months ended September 30, 2019 and 2018, respectively, and 24.1% and 26.5% for the nine months ended September 30, 2019 and 2018, respectively.

The Company is subject to U.S. Federal income tax as well as various state taxing jurisdictions. The Company is no longer subject to examination by Federal taxing authorities for tax years prior to 2016 and for state taxing authorities for tax years prior to 2015.

There were no significant unrealized tax benefits recorded as of September 30, 2019 and 2018, and the Company does not expect any significant increase in unrealized tax benefits in the next twelve months.

Note 11. Commitments and Contingencies

Off-Balance-Sheet Credit Risk: The commitments and contingent liabilities include various commitments to extend credit and standby letters of credit, which arise in the normal course of business. Commitments to extend credit are legally binding loan commitments with set expiration dates. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. They are intended to be disbursed, subject to certain conditions, upon request of the borrower.

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The Company evaluates the creditworthiness of each customer. Collateral, if deemed necessary by the Company upon the extension of credit, is obtained based on management’s evaluation of the borrower. Collateral for commercial and industrial loans may vary, but may include securities, accounts receivable, inventory, property, plant and equipment, and income producing commercial or other properties. The following table shows the distribution of undisbursed loan commitments as of the dates indicated:

	September 30, 2019		December 31, 2018
	(Dollars in thousands)
Commitments to extend credit	$	76,094	$	60,789
Standby letter of credit		3,983		1,790
Commercial letter of credit		973		1,209
Total undisbursed loan commitments	$	81,050	$	63,788

The majority of these off-balance sheet commitments have a variable interest rate. Management does not anticipate any material losses as a result of these transactions.

Note 12. Stock-based Compensation

The Company has two stock-based compensation plans currently in effect as of September 30, 2019, as described further below. Total compensation cost that has been charged against earnings for these plans was $189,000 and $167,000 in the three months ended September 30, 2019 and 2018, respectively, and $905,000 and $606,000 for the nine months ended September 30, 2019 and 2018, respectively.

2005 Plan: In 2005, the Board of Directors and shareholders of the Bank approved a stock option plan for the benefit of directors and employees of the Bank (the “2005 Plan”). The 2005 Plan was assumed by the Company in 2016 at the time of the bank holding company reorganization. Under the 2005 Plan, the Bank was authorized to grant options to purchase up to 770,000 shares of the Company’s common stock.  

The exercise prices of the options may not be less than 100 percent of the fair value of the Company’s common stock at the date of grant. The options, when granted, vest either immediately or ratably over five years from the date of the grant and expire after ten years if not exercised. The 2005 plan was expired in 2015 and no share is available for grant.

A summary of the transactions under the 2005 Plan for the nine months ended September 30, 2019 is as follows:

				Weighted
	Number of			Average		Aggregate
	Options			Exercise		Intrinsic
	Outstanding			Price		Value
	(Dollars in thousands, except per share data)
Outstanding, as of January 1, 2019		250,000		$	4.00
Options granted		—			—
Options exercised		(95,000	)		2.20
Options forfeited		—			—
Options expired		—			—
Outstanding, as of September 30, 2019		155,000			4.70	$	787
Fully vested and expected to vest		155,000			4.70	$	787
Vested		155,000		$	4.70	$	787

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Information related to the 2005 Plan for the periods indicated follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
	(Dollars in thousands)
Intrinsic value of options exercised	$	206	$	234	$	593	$	487
Cash received from option exercises		72		119		179		195
Tax benefit realized from option exercised		5		—		5		—

The weighted average remaining contractual term of stock options outstanding under the 2005 Plan at September 30, 2019 was 2.77 years. The weighted average remaining contractual term of stock options that were exercisable at September 30, 2019 was 2.77 years. All of the stock options that are outstanding under the 2005 Plan were fully vested as of September 30, 2019.

2010 Plan: In 2010, the Board of Directors of the Bank approved a new equity incentive plan for granting stock options and restricted stock awards to key employees, officers, and non-employee directors of the Bank (the “2010 Plan”). In 2013, the 2010 Plan was amended and approved by the shareholders to increase the number of shares authorized to be issued under from 1,350,000 shares of common stock to 2,500,000 shares of common stock. The 2010 Plan was assumed by the Company in 2016 at the time of the bank holding company reorganization.

The exercise prices of stock options granted under the plan may not be less than 100% of the fair value of the Company’s stock at the date of grant. The options, when granted, vest ratably over five years from the date of the grant and expire after ten years if not exercised. There were no stock options granted under the 2010 Plan during the nine months ended September 30, 2019 or 2018.

Restricted stock awards issued under the 2010 Plan may or may not be subject to vesting provisions. Awards which were granted in the nine months ended September 30, 2019 and 2018 vest at the end of three years from the date of the grant. In the nine months ended September 30, 2019 and 2018, 3,000 shares were granted at weighted average fair value of $8.15 and 148,000 shares were granted at weighted average fair value of $12.7, respectively. Owners of the restricted stock awards shall have all of the rights of a shareholder including the right to vote the shares and to all dividends (cash or stock). Compensation expense related to restricted stock awards will be recognized over the vesting period of the awards based on the fair value of the Company’s common stock at the issue date.

A summary of stock options outstanding under the 2010 Plan for the nine months ended September 30, 2019 is as follows:

				Weighted
	Number of			Average		Aggregate
	Options			Exercise		Intrinsic
	Outstanding			Price		Value
	(Dollars in thousands, except per share data)
Outstanding, as of January 1, 2019		620,000		$	4.57
Options granted		—			—
Options exercised		(165,000	)		1.12
Options forfeited		—			—
Options expired		—			—
Outstanding, as of September 30, 2019		455,000			5.20	$	2,085
Fully vested and expected to vest		440,000			5.10	$	2,058
Vested		395,000		$	4.77	$	1,978

Information related to stock options exercised under the 2010 Plan for the periods indicated follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
	(Dollars in thousands)
Intrinsic value of options exercised	$	—	$	—	$	1,090	$	876
Cash received from option exercises		—		—		185		319
Tax benefit realized from option exercised		—		—		285		160

The weighted average remaining contractual term of stock options outstanding under the 2010 Plan at September 30, 2019 was 2.59 years. The weighted average remaining contractual term of stock options that were exercisable at September 30, 2019 was 2.30 years.

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A summary of the changes in the Company’s non-vested restricted stock awards under the 2010 Plan for the nine months ended September 30, 2019 is as follows:

	Shares Issued			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
	(Dollars in thousands, except share data)
Non-vested, as of January 1, 2019		436,000		$	8.19
Awards granted		3,000			8.15
Awards vested		(141,500	)		5.91
Awards forfeited		(8,000	)		10.10
Non-vested, as of September 30, 2019		289,500		$	9.25	$	2,831

Information related to non-vested restricted stock awards under the 2010 Plan for the periods indicated follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
	(Dollars in thousands)
Tax benefit realized from awards vested	$	141	$	272	$	144	$	285

There were 95,427 shares available for grant under the 2010 Plan as of September 30, 2019 (in either stock options or restricted stock awards). As of September 30, 2019, the Company had approximately $1.9 million of unrecognized compensation cost related to unvested stock options and restricted stock awards under the 2010 Plan. The Company expects to recognize these costs over a weighted average period of 1.20 years.

Note 13. Employee Benefit Plan

The Company established a 401(k) profit sharing plan (the “401(k) Plan”) which is open to all eligible employees who are at least 21 years old and have completed 90 days of service. Each employee is allowed to contribute to the 401(k) Plan up to the maximum percentage allowable, not to exceed the limits of applicable IRS Code Sections. Each year, the Company may, in its discretion, make matching contributions to the 401(k) Plan. Total employer contributions to the 401(k) Plan amounted to $449,000 and $356,000 for the nine months ended September 30, 2019 and 2018, respectively.

Note 14. Revenue Recognition

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit, and investment securities, as well as revenue related to mortgage servicing activities and revenue on bank owned life insurance, as these activities are subject to other GAAP discussed elsewhere within the disclosures. Descriptions of the Company’s revenue-generating activities that are within the scope of ASC 606, which are presented in the Company’s income statements as components of noninterest income are as follows:

Service charges on deposits:  Income from service charges on deposits is within the scope of ASC 606. These include general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue on these types of fees are recognized when the Company’s performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed. Payment for such performance obligations are generally received at the time the performance obligations are satisfied. Total revenues from services charges on deposits in the nine months ended September 30, 2019 and 2018, on a dollar and percentage of total revenue basis was $545,000 or 1.3%, and $558,000 or 1.5%, respectively, of service charges on deposits is related to these revenue streams.  Service charges on deposits also include overdraft and NSF fees. Overdraft fees are charged when a depositor has a draw on their account that has inadequate funds.  In certain instances, the Company, at its sole discretion, may pay to the party requesting the draw on the deposit account, the balance of the draw for which there are inadequate funds rather than denying

25

payment of the item. The Company then charges a fee for this short term extension of credit to the depositor for not complying with the balance requirements stipulated in the deposit agreement with the Bank, and as well as to cover the cost of advancing those funds. NSF fees are charged to customers when in the event of a draw on the customer's account that has insufficient funds to meet the payment of the draw (such as through written checks or ACH transactions), the Company returns the item rather than paying the balance of the draw for which the customer has inadequate funds.  This typically happens when the customer has fairly sizable draws or multiple draws on an account that has inadequate funds to meet the demands for payment. Total revenues from service charges on deposits from overdraft and NSF fees for the nine months ended September 30, 2019 and 2018, on a dollar and percentage of total revenue basis was $707,000, or 1.7%, and $861,000, or 2.3%, respectively.

Wire transfer fee income: This revenue stream is generated through the processing of customers’ incoming and outgoing wire transfers. Income generated from wire transfer fees is within the scope of ASC 606 and approximately $243,000, or 0.6%, and $243,000, or 0.7% of total revenues for the nine months ended September 30, 2019 and 2018, respectively, is included in other income in noninterest income.

Other revenue streams that are recorded in other income in noninterest income include revenue generated from letters of credit and income on bank owned life insurance. These revenue streams are either not material or out of scope of ASC 606.

Note 15. Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1—Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2—Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value:

Securities Available for Sale: The fair values of investment securities are determined by matrix pricing, which is a mathematical technique used to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Management obtains the fair values of investment securities on a monthly basis from a third-party pricing service.

Other Investment: The Company has equity investment with readily determinable fair value. The fair value for the equity investment with readily determinable fair value is obtained from unadjusted quoted prices in active markets on the date of measurement and classified as Level 1.

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s judgment, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the credit department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

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Assets and liabilities measured at fair value on a recurring basis as ofSeptember 30, 2019 and December31, 2018 are summarized below:

			Fair Value Measuring Using
			Quoted		Significant Other		Significant
			Prices in		Observable		Unobservable
	Total		Active Markets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
As of September 30, 2019:
U.S. Government sponsored agency securities	$	5,992	$	—	$	5,992	$	—
Mortgage-backed securities - residential		12,197		—		12,197		—
Collateralized mortgage obligations		34,106		—		34,106		—
Other investments:
Mutual fund - CRA qualified		3,625		3,625		—		—
As of December 31, 2018:
U.S. Government sponsored agency securities	$	6,906	$	—	$	6,906	$	—
Mortgage-backed securities - residential		14,129		—		14,129		—
Collateralized mortgage obligations		34,301		—		34,301		—
Other investments:
Mutual fund - CRA qualified		2,488		2,488		—		—

There were no transfers between Level 1 and Level 2 in the nine months ended September 30, 2019 or 2018. There were no other assets or liabilities, except OREO measured at fair value on a non-recurring basis as of September 30, 2019 or December 31, 2018. OREO is reported at fair value. The value was based on third party appraisal, which the Company classifies as a Level 3 nonrecurring fair value measurement.

Financial Instruments: The carrying amounts and estimated fair values of financial instruments not carried at fair value as of September 30, 2019 are as follows:

	Carrying Amount		Level 1		Level 2		Level 3		Value
As of September 30, 2019:	(Dollars in thousands)
Financial Assets:
Cash and cash equivalents	$	89,107	$	89,107	$	—	$	—	$	89,107
Loans held for sale		368		—		397		—		397
Loans receivable, net		954,730		—		—		980,317		980,317
Accrued interest receivable		3,140		19		246		2,875		3,140
Financial Liabilities:
Deposit	$	995,993	$	—	$	997,256	$	—	$	997,256
Accrued interest payable		2,541		—		2,541		—		2,541

The carrying amounts and estimated fair values of financial instruments not carried at fair value at December 31, 2018 are as follows:

	Carrying Amount		Level 1		Level 2		Level 3		Value
As of December 31, 2018:	(Dollars in thousands)
Financial Assets:
Cash and cash equivalents	$	77,726	$	77,726	$	—	$	—	$	77,726
Loans held for sale		752		—		806		—		806
Loans receivable, net		865,423		—		—		862,394		862,394
Accrued interest receivable		3,068		44		240		2,784		3,068
Financial Liabilities:
Deposit	$	905,176	$	—	$	904,466	$	—	$	904,466
Accrued interest payable		1,715		—		1,715		—		1,715

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Note 16. Regulatory Capital Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Under the Basel III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was 0.625% in 2016 and increased 0.625% annually until 2019. As of September 30, 2019, the capital conservation buffer for the Company is 2.50%. Management believes as of September 30, 2019 and December 31, 2018, the Bank met all capital adequacy requirements to which they are subject to. Based on recent changes to the Federal Reserve’s definition of a “Small Bank Holding Company” that increased the threshold to $3 billion in assets, the Company is not currently subject to separate minimum capital measurements. At such time as the Company reaches the $3 billion asset level, it will again be subject to capital measurements independent of the Bank. For comparison purposes, the Company’s ratios are included in following discussion as well, all of which would have exceeded the “well-capitalized” level had the Company been subject to separate capital minimums. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of September 30, 2019 and December 31, 2018, the Company and Bank meet all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At September 30, 2019 and December 31, 2018, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

Actual and required capital amounts (in thousands) and ratios, exclusive of the capital conservation buffer, are presented below as of September 30, 2019 and December 31, 2018:

						Required for					Minimum
						Capital Adequacy					To be Considered
	Actual					Purposes					"Well Capitalized"
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2019:
Total capital (to risk-weighted assets)
Consolidated	$	146,641		15.36	%	N/A		N/A			N/A		N/A
Bank		143,407		15.03	%		76,332		8.00	%		95,415		10.00	%
Tier 1 capital (to risk-weighted assets)
Consolidated		136,922		14.35	%	N/A		N/A			N/A		N/A
Bank		133,688		14.01	%		57,249		6.00	%		76,332		8.00	%
Common equity Tier 1 capital (to risk-weighted    assets)
Consolidated		136,922		14.35	%	N/A		N/A			N/A		N/A
Bank		133,688		14.01	%		42,937		4.50	%		62,020		6.50	%
Tier 1 capital (to average assets)
Consolidated		136,922		12.11	%	N/A		N/A			N/A		N/A
Bank		133,688		11.83	%		45,212		4.00	%		56,515		5.00	%

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						Required for					Minimum
						Capital Adequacy					To be Considered
	Actual					Purposes					"Well Capitalized"
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2018:
Total capital (to risk-weighted assets)
Consolidated	$	139,593		16.26	%	N/A		N/A			N/A		N/A
Bank		139,538		16.25	%		68,686		8.00	%		85,857		10.00	%
Tier 1 capital (to risk-weighted assets)
Consolidated		129,893		15.13	%	N/A		N/A			N/A		N/A
Bank		129,838		15.12	%		51,514		6.00	%		68,686		8.00	%
Common equity Tier 1 capital (to risk-weighted    assets)
Consolidated		129,893		15.13	%	N/A		N/A			N/A		N/A
Bank		129,838		15.12	%		38,636		4.50	%		55,807		6.50	%
Tier 1 capital (to average assets)
Consolidated		129,893		12.88	%	N/A		N/A			N/A		N/A
Bank		129,838		12.87	%		40,346		4.00	%		50,432		5.00	%

Note 17. Earnings per Share

The two-class method is used in the calculation of basic and diluted earnings per share. Under the two-class method, earnings available to common shares are allocated between common shares and participating securities. The Company’s restricted stock awards are considered participating securities as the unvested awards have non-forfeitable rights to dividends, paid or unpaid, on unvested awards. The factors used in the earnings per share computation follow:

	Three Months Ended
	September 30,
(Dollars in thousands, except share data)	2019			2018
Basic
Net income	$	4,000		$	3,481
Undistributed earnings allocated to participating securities		(81	)		(107	)
Net income allocated to common shares		3,919			3,374
Weighted average common shares outstanding		15,768,654			15,714,226
Basic earnings per common share	$	0.25		$	0.22
Diluted
Net income allocated to common shares	$	3,918		$	3,375
Weighted average common shares outstanding for basic earnings per common share		15,768,654			15,714,226
Add: Dilutive effects of assumed exercises of stock options		238,832			520,700
Average shares and dilutive potential common shares		16,007,486			16,234,926
Diluted earnings per common share	$	0.24		$	0.21

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	Nine Months Ended
	September 30,
(Dollars in thousands, except share data)	2019			2018
Basic
Net income	$	12,576		$	10,489
Undistributed earnings allocated to participating securities		(309	)		(320	)
Net income allocated to common shares		12,267			10,169
Weighted average common shares outstanding		15,756,886			14,870,232
Basic earnings per common share	$	0.78		$	0.68
Diluted
Net income allocated to common shares	$	12,267		$	10,169
Weighted average common shares outstanding for basic earnings per common share		15,756,886			14,870,232
Add: Dilutive effects of assumed exercises of stock options		235,129			506,750
Average shares and dilutive potential common shares		15,992,015			15,376,982
Diluted earnings per common share	$	0.77		$	0.66

No shares of common stock were antidilutive for the three and nine months ended September 30, 2019, and for the three months and nine months ended September 30, 2018.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

Completion of Initial Public Offering

On March 27, 2018, we completed our initial public offering of common stock, pursuant to which we sold an aggregate of 2,300,000 shares of our common stock at a public offering price of $11.00 per share, for aggregate net proceeds of approximately $22.6 million, after deducting underwriter discounts and commissions paid by us of approximately $1.7 million and other offering expenses of approximately $925,000.

Critical Accounting Policies and Estimates

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and conform to general practices within the industry in which we operate. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statement. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements.

The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 2 of our unaudited consolidated financial statements included in the Quarterly Report on Form 10-Q for the period ended June 30, 2019.

Allowance for Loan Losses

The allowance for loan losses (“ALL”) is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The ALL is maintained at a level that management believes is appropriate to provide for known and inherent incurred loan losses as of the date of the consolidated balance sheet and we have established methodologies for the determination of its adequacy. The methodologies are set forth in a formal policy and take into consideration the need for an overall general valuation allowance as well as specific allowances that are determined on an individual loan basis.

The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. While management uses available information to recognize losses on loans, changes in economic or other conditions may necessitate revision of the estimate in future periods.

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Selected Financial Data

Financial Highlights (unaudited)
(Dollars in thousands, except per share data)	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2019			2018			2019			2018
Income Statement Data:
Interest income	$	15,112		$	13,006		$	44,077		$	36,248
Interest expense		3,893			2,521			10,883			6,217
Net interest income		11,219			10,485			33,194			30,031
Provision for loan losses		290			439			691			1,047
Noninterest income		2,732			2,284			8,912			7,279
Noninterest expense		8,424			7,705			24,855			21,993
Income before taxes		5,237			4,625			16,560			14,270
Provision for income taxes		1,237			1,144			3,984			3,781
Net Income	$	4,000		$	3,481		$	12,576		$	10,489
Diluted earnings per share	$	0.24		$	0.21		$	0.77		$	0.66
Performance Ratios:
Return on average assets (annualized)		1.41	%		1.42	%		1.54	%		1.48	%
Return on average equity (annualized)		11.74	%		11.28	%		12.55	%		12.43	%
Net interest margin (annualized)		4.13	%		4.44	%		4.25	%		4.49	%
Efficiency ratio (1)		60.39	%		60.34	%		59.03	%		58.95	%

(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)	As of
	September 30,			December 30,
	2019			2018
Balance Sheet Data:
Loans held for sale	$	368		$	752
Gross loans, net of unearned income		964,370			875,059
Allowance for loan losses		9,640			9,636
Total assets		1,151,934			1,044,186
Deposits		995,993			905,176
Shareholders’ equity		137,593			129,787
Credit Quality:
Nonperforming loans	$	1,570		$	1,914
Nonperforming assets		3,387			1,914
Net charge-offs to average gross loans (annualized)		0.07	%		0.06	%
Nonperforming assets to gross loans plus OREO		0.35	%		0.22	%
ALL to nonperforming loans		614	%		503	%
ALL to gross loans		1.00	%		1.10	%
Capital Ratios:
Leverage ratio		12.11	%		12.88	%
Common equity tier 1 ratio		14.35	%		15.13	%
Tier 1 risk-based capital ratio		14.35	%		15.13	%
Total risk-based capital ratio		15.36	%		16.26	%

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Results of Operations—Comparison for the Three Months Ended September 30, 2019 and 2018

The following discussion of our results of operations compares the three months ended September 30, 2019 to the three months ended September 30, 2018.

We reported net income for the three months ended September 30, 2019 of $4.0 million, or $0.24 per diluted common share, compared to the net income of $3.5 million, or $0.21 per diluted common share, for the three months ended September 30, 2018, an increase of $519,000, or 14.9%. The increase was primarily due to a $734,000 increase in net interest income, a $448,000 increase in noninterest income and a $149,000 decrease in provision for loan losses, partially offset by a $719,000 increase in noninterest expense, and a $93,000 increase in income tax expense.

Net Interest Income

The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of the Company’s total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets). We seek to maximize net interest income without exposing the Company to an excessive level of interest rate risk through our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity and repricing options of all classes of interest-bearing assets and liabilities. Our net interest margin is also adversely impacted by the reversal of interest on nonaccrual loans and the reinvestment of loan payoffs into lower yielding investment securities and other short-term investments.

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The following table presents, for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields, (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates, (iii) net interest income, (iv) the interest rate spread, and (v) the net interest margin.

	Three Months Ended September 30,
	2019							2018
(Dollars in thousands)	Average Balance		Interest and Fees		Yield / Rate			Average Balance		Interest and Fees		Yield / Rate
Interest earning assets:
Federal Funds sold and other investments (1)	$	78,216	$	502		2.52	%	$	34,216	$	233		2.68	%
Securities available for sale		54,472		332		2.44			44,441		249		2.24
Total investments		132,688		834		2.49			78,657		482		2.43
Real estate loans		573,102		7,978		5.52			483,625		6,472		5.31
SBA loans		144,439		3,213		8.83			146,259		2,978		8.08
C & I loans		102,311		1,489		5.77			106,654		1,510		5.65
Home Mortgage loans		123,336		1,546		5.01			119,346		1,515		5.08
Consumer loans		3,239		52		6.39			3,373		49		5.75
Total loans (2)		946,427		14,278		5.99			859,257		12,524		5.79
Total earning assets		1,079,115		15,112		5.56			937,914		13,006		5.51
Noninterest-earning assets		51,680							45,913
Total assets	$	1,130,795						$	983,827
Interest-bearing liabilities:
NOW and Savings	$	5,321	$	3		0.25	%	$	5,929	$	4		0.25	%
Money market deposits		275,259		1,295		1.87			254,510		948		1.48
Time deposits		420,922		2,595		2.45			323,512		1,525		1.87
Total interest-bearing deposits		701,502		3,893		2.20			583,951		2,477		1.68
Borrowings		120		—		0.00			8,300		44		2.09
Total interest-bearing liabilities		701,622		3,893		2.20			592,251		2,521		1.69
Noninterest-bearing liabilities:
Noninterest-bearing deposits		275,316							258,252
Other noninterest-bearing liabilities		17,628							9,817
Total noninterest-bearing liabilities		292,944							268,069
Shareholders’ equity		136,229							123,507
Total liabilities and shareholders’ equity	$	1,130,795						$	983,827
Net interest income / interest rate spreads			$	11,219		3.36	%			$	10,485		3.82	%
Net interest margin						4.13	%						4.44	%
Cost of deposits & cost of funds:
Total deposits / cost of deposits	$	976,818	$	3,893		1.58	%	$	842,203	$	2,477		1.17	%
Total funding liabilities / cost of funds	$	976,938	$	3,893		1.58	%	$	850,503	$	2,521		1.18	%

(1) Includes income and average balances for Federal Home Loan Bank (“FHLB”) and Pacific Coast Bankers Bank (“PCBB”) stock, CRA qualified mutual fund, term federal funds, interest-earning time deposits and other miscellaneous interest-earning assets.

(2) Average loan balances include non-accrual loans and loans held for sale.

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Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing rates and volumes on our net interest income during the period shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volume and rate have been allocated to volume and rate ratably.

	Three Months Ended September 30,
	2019 over 2018
	Change due to:
(Dollars in thousands)	Volume			Rate			Interest Variance
Interest earning assets:
Federal Funds sold and other investments	$	284		$	(15	)	$	269
Securities available for sale		58			25			83
Total investments		342			10			352
Real estate loans		1,241			265			1,506
SBA loans		(37	)		272			235
C & I loans		(61	)		40			(21	)
Home Mortgage loans		52			(21	)		31
Consumer loans		(2	)		5			3
Total loans		1,193			561			1,754
Total earning assets		1,535			571			2,106
NOW and Savings		—			(1	)		(1	)
Money market deposits		82			265			347
Time deposits		527			543			1,070
Total interest-bearing deposits		609			807			1,416
Borrowings		(22	)		(22	)		(44	)
Total interest-bearing liabilities		587			785			1,372
Net interest income	$	948		$	(214	)	$	734

Interest income increased $2.1 million, or 16.2%, to $15.1 million for the three months ended September 30, 2019 from $13.0 million for the same period in 2018, primarily due to the growth in average loans and securities and an increase in the average yields on loans and securities.

Average loans increased $87.2 million, or 10.1%, to $946.4 million for the three months ended September 30, 2019 from $859.3 million for the same period in 2018. Average total investments including Federal Funds and securities available for sale increased $54.0 million, or 68.7%, to $132.7 million for the three months ended September 30, 2019 from $78.7 million for the same period in 2018. Average interest-earning assets increased $141.2 million, or 15.1%, to $1.08 billion for the three months ended September 30, 2019 from $937.9 million for the same period in 2018. The increase in average loans was primarily due to new loan production, and the increase in average total investments was primarily due to a $42.9 million increase in Federal Funds.

The average yield on loans increased 20 basis points to 5.99% for the three months ended September 30, 2019 from 5.79% for the same period in 2018, primarily due to market interest rate increases by the Federal Reserve in September and December 2018. The rate cuts by Federal Reserve of 25 basis points each in August and September of 2019 did not have a full impact on the yields on interest-earning assets. The average yield on securities increased 20 basis points to 2.44% for the three months ended September 30, 2019 from 2.24% for the same period in 2018, attributable primarily to purchases of higher yielding securities.

The average yield on Federal Funds and other investments for the three months ended September 30, 2019 and September 30, 2018 were 2.52% and 2.68% respectively. The average Federal Funds balance for the three months ended September 30, 2019 was $70.0 million with an average yield of 2.15% compared to the average Federal Funds balance of $27.0 million for the same period in 2018 with an average yield of 1.97%. The increase in the average yield was primarily due to aforementioned market rate increases by the Federal Reserve.

35

The average yield on interest-earning assets increased 5 basis points to 5.56% for the three months ended September 30, 2019 from 5.51% for the same period in 2018.

Interest expense increased $1.4 million, or 54.4%, to $3.9 million for the three months ended September 30, 2019 from $1.4 million for the same period in 2018, primarily due tothe growth in average interest-bearing deposits and higher rates paid on interest-bearing deposits due to aforementioned market rate increases by the Federal Reserve.

Average interest-bearing liabilities increased $109.4 million, or 18.5%, to $701.6 million for the three months ended September 30, 2019, compared with $592.3 million for the same period in 2018. The increase in average interest-bearing liabilities resulted primarily from a $97.4 million increase in average time deposits, partially offset by an $8.2 million decrease in average borrowings. Average noninterest-bearing demand deposits increased $17.1 million, or 6.6%, to $275.3 million for the three months ended September 30, 2019 compared to $258.3 million for the same period in 2018.

The average cost of interest-bearing liabilities increased 51 basis points to 2.20% for the three months ended September 30, 2019 from 1.69% for the same period in 2018.

Net interest income increased $734,000, or 7.0%, for the three months ended September 30, 2019, to $11.2 million compared to $10.5 million for the same period in 2018. The net interest spread and net interest margin for the three months ended September 30, 2019 were 3.36% and 4.13%, respectively, compared with 3.82% and 4.44%, respectively, for the same period in 2018.

Provision for Loan Losses

Credit risk is inherent in the business of making loans. We establish an allowance for loan losses through charges to earnings, which are shown in the Consolidated Statements of Income and Comprehensive Income as the provision for loan losses. Specifically, identifiable and quantifiable known losses are promptly charged off against the allowance. The provision for loan losses is determined by conducting a quarterly evaluation of the adequacy of our allowance for loan losses and charging the shortfall, if any, to the current quarter’s expense. This has the effect of creating variability in the amount and frequency of charges to earnings. The provision for loan losses and level of allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, management’s assessment of the quality of the loan portfolio, the valuation of problem loans and the general economic conditions in our market area.

The provision for loan losses for the three months ended September 30, 2019 was $290,000 compared to $439,000 for the same period in 2018, a decrease of $149,000, or 33.9%. The provision for loan losses for the three month ended September 30, 2019 was primarily due to loan balance growth during the period. The provision for loan losses for the same period in 2018 was due to loan balance growth as well as net charge-off of $611,000 during the period.

Noninterest Income

While interest income remains the largest single component of total revenues, noninterest income is also an important component. A portion of our noninterest income is associated with SBA lending activity, consisting of gains on the sale of loans sold in the secondary market and servicing income from loans sold with servicing retained. The servicing assets that result from the sales of SBA loans with servicing retained are amortized over the expected term of the loans using a method approximating the interest method. Servicing income generally declines as the respective loans are repaid. Other sources of noninterest income include loan servicing fees, service charges and fees, and gains on the sale of securities.

Noninterest income for the three months ended September 30, 2019 increased $448,000, or 19.6%, to $2.7 million compared to the same period in 2018. The increase was primarily attributable to an increase of $579,000 in gain on sale of loans, partially offset by a decrease of $67,000 in loan servicing fees, and a decrease of $49,000 in other income. We sold $22.2 million in SBA loans with a gain on sale of $1.7 million for the three months ended September 30, 2019 compared to selling $22.8 million in SBA loans with a gain on sale of $1.1 million for the same period in 2018.

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The following table sets forth the various components of our noninterest income for the three months ended September 30, 2019 and 2018:

	Three Months Ended September 30,
(Dollars in thousands)	2019		2018		Increase (decrease)
Noninterest income:
Service charges on deposit accounts	$	469	$	484	$	(15	)
Loan servicing fees, net of amortization		243		310		(67	)
Gain on sale of loans		1,714		1,135		579
Other income and fees		306		355		(49	)
Total noninterest income	$	2,732	$	2,284	$	448

Noninterest Expense

Noninterest expense for the three months ended September 30, 2019 was $8.4 million compared to $7.7 million for the same period in 2018, an increase of $719,000 or 9.3%. The increase was primarily attributable to increased salaries and employee benefits, and occupancy and equipment expenses, partially offset by decreased FDIC insurance and regulatory assessments.

The following table sets forth the major components of our noninterest expense for the three months ended September 30, 2019 and 2018:

	Three Months Ended September 30,
(Dollars in thousands)	2019			2018		Increase (decrease)
Noninterest expense:
Salaries and employee benefits	$	5,349		$	4,803	$	546
Occupancy and equipment		1,232			976		256
Data processing and communication		385			320		65
Professional fees		261			294		(33	)
FDIC insurance and regulatory assessments		(21	)		106		(127	)
Promotion and advertising		182			222		(40	)
Directors' fees and stock-based compensation		228			216		12
Foundation donation and other contributions		402			369		33
Other expenses		406			399		7
Total noninterest expense		8,424			7,705		719

Salaries and employee benefits expense for the three months ended September 30, 2019 increased $546,000, or 11.4%, to $5.3 million from $4.8 million for the same period in 2018. This increase was attributable to an increase in the number of employees to support continued growth, annual salary adjustments, and increased benefit costs. The average number of full-time equivalent employees was 170.0 and 150.0 in the three months ended September 30, 2019 and 2018, respectively.

Occupancy and equipment expenses for the three months ended September 30, 2019 were $1.2 million, a $256,000, or 26.2% increase compared to the same period in 2018. Data processing and communication expenses increased $65,000, or 20.3%, to $385,000 for the three months ended September 30, 2019 compared to $320,000 for the same period in 2018. Those increases in expenses were primarily attributable to support both the new loan production offices and a new branch that opened in 2019.

FDIC insurance and regulatory assessments for the three months ended September 30, 2019 decreased $127,000, or 119.8% from $106,000 for the same period in 2018. The decrease was due to the small bank assessment credits that was applied to offset the FDIC assessments starting June 30, 2019.

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Income Tax Expense

Income tax expense was $1.2 million and $1.1 million for the three months ended September 30, 2019 and 2018, respectively. The effective income tax rate was 23.6% and 24.7% for the three months ended September 30, 2019 and 2018, respectively. The decrease in the effective tax rate for the three months ended September 30, 2019 compared to the same period in 2018 was primarily due to an adjustment from the difference between the tax provision and tax return for the year of 2018.

Results of Operations—Comparison for the Nine Months Ended September 30, 2019 and 2018

The following discussion of our results of operations compares the nine months ended September 30, 2019 to the nine months ended September 30, 2018.

We reported net income for the nine months ended September 30, 2019 of $12.6 million compared to net income of $10.5 million for the nine months ended September 30, 2018, an increase of $2.1 million or 19.9%. The increase was primarily due to a $3.2 million increase in net interest income, a $1.6 million increase in noninterest income, and a $356,000 decrease in provision for loan losses, partially offset by a $2.9 million increase in noninterest expense, and a $203,000 increase in income tax expense.

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Net Interest Income

The following table presents, for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields, (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates, (iii) net interest income. (iv) the interest rate spread, and (v) the net interest margin.

	Nine Months Ended September 30,
	2019							2018
(Dollars in thousands)	Average Balance		Interest and Fees		Yield / Rate			Average Balance		Interest and Fees		Yield / Rate
Interest earning assets:
Federal Funds sold and other investments (1)	$	65,911	$	1,332		2.67	%	$	27,699	$	561		2.69	%
Securities available for sale		54,190		1,019		2.51			41,030		645		2.10
Total investments		120,101		2,351		2.60			68,729		1,206		2.33
Real estate loans		551,663		22,964		5.57			464,394		18,016		5.19
SBA loans		137,663		9,209		8.94			141,641		8,242		7.78
C & I loans		104,405		4,641		5.94			104,819		4,348		5.55
Home Mortgage loans		125,788		4,770		5.06			111,414		4,286		5.13
Consumer loans		2,864		141		6.58			3,536		150		5.67
Loans (2)		922,383		41,725		6.05			825,804		35,042		5.67
Total earning assets		1,042,484		44,076		5.65			894,533		36,248		5.41
Noninterest-earning assets		48,215							48,300
Total assets	$	1,090,699						$	942,833
Interest-bearing liabilities:
NOW and Savings	$	5,075	$	10		0.25	%	$	6,314	$	12		0.24	%
Money market deposits		269,446		3,751		1.86			256,171		2,460		1.28
Time deposits		396,701		7,122		2.40			288,841		3,599		1.67
Total interest-bearing deposits		671,222		10,883		2.17			551,326		6,071		1.47
Borrowings		41		—		0.00			11,680		146		1.67
Total interest-bearing liabilities		671,263		10,883		2.17			563,006		6,217		1.48
Noninterest-bearing liabilities:
Noninterest-bearing deposits		271,517							257,717
Other noninterest-bearing liabilities		14,317							9,603
Total noninterest-bearing liabilities		285,834							267,320
Shareholders’ equity		133,602							112,507
Total liabilities and shareholders’ equity	$	1,090,699						$	942,833
Net interest income / interest rate spreads			$	33,193		3.48	%			$	30,031		3.93	%
Net interest margin						4.25	%						4.49	%
Cost of deposits & cost of funds:
Total deposits / cost of deposits	$	942,739	$	10,883		1.54	%	$	809,043	$	6,071		1.00	%
Total funding liabilities / cost of funds	$	942,780	$	10,883		1.54	%	$	820,723	$	6,217		1.10	%

(1) Includes income and average balances for Federal Home Loan Bank (“FHLB”) and Pacific Coast Bankers Bank (“PCBB”) stock, CRA qualified mutual fund, term Federal Funds, interest-earning time deposits and other miscellaneous interest-earning assets.

(2) Average loan balances include non-accrual loans and loans held for sale.

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The following tables set forth the effects of changing rates and volumes on our net interest income during the period shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volume and rate have been allocated to volumeand rate ratably.

	Nine Months Ended September 30,
	2019 over 2018
	Change due to:
(Dollars in thousands)	Volume			Rate			Interest Variance
Interest earning assets:
Federal Funds sold and other investments	$	775		$	(4	)	$	771
Securities available for sale		233			141			374
Total investments		1,008			137			1,145
Real estate loans		3,561			1,387			4,948
SBA loans		(237	)		1,204			967
C & I loans		(17	)		310			293
Home Mortgage loans		544			(60	)		484
Consumer loans		(31	)		22			(9	)
Loans		3,820			2,863			6,683
Total earning assets		4,828			3,000			7,828
NOW and Savings		(1	)		(1	)		(2	)
Money market deposits		132			1,159			1,291
Time deposits		1,623			1,900			3,523
Total interest-bearing deposits		1,754			3,058			4,812
Borrowings		(73	)		(73	)		(146	)
Total interest-bearing liabilities		1,681			2,985			4,666
Net interest income	$	3,147		$	15		$	3,162

Interest income increased $7.8 million, or 21.6%, to $44.1 million for the nine months ended September 30, 2019 from $36.2 million for the same period in 2018, primarily due to the growth in average loans and securities and an increase in the average yields on loans and securities.

Average loans increased $96.6 million, or 11.7%, to $922.4 million for the nine months ended September 30, 2019 from $825.8 million for the same period in 2018. Average total investments including Federal Funds and securities available for sale increased $51.4 million, or 74.7%, to $120.1 million for the nine months ended September 30, 2019 from $68.7 million for the same period in 2018. Average interest-earning assets increased $148.0 million, or 16.5%, to $1.04 billion for the nine months ended September 30, 2019 from $894.5 million for the same period in 2018. The increase in average loans was primarily due to new loan production, and the increase in average total investments was due to purchases of available for sale securities and Federal Funds.

The average yield on loans increased 38 basis points to 6.05% for the nine months ended September 30, 2019 from 5.67% for the same period in 2018, primarily due to market interest rate increases by the Federal Reserve in September and December 2018. The rate cuts by Federal Reserve of 25 basis points each in August and September of 2019 did not have a full impact on the yields on interest-earning assets. The average yield on securities increased 41 basis points to 2.51% for the nine months ended September 30, 2019 from 2.10% for the same period in 2018, attributable primarily to purchasing higher yielding securities.

The average yield on Federal Funds and other investments for the nine months ended September 30, 2019 and September 30, 2018 were 2.67% and 2.69% respectively. The average Federal Funds balance for the nine months ended September 30, 2019 was $58.1 million with an average yield of 2.29% compared to the average Federal Funds balance of $20.7 million for the same period in 2018 with an average yield of 1.81%. The increase in the average yield was primarily due to aforementioned market rate increases by the Federal Reserve.

The average yield on interest-earning assets increased 24 basis points to 5.65% for the nine months ended September 30, 2019 from 5.41% for the same period in 2018.

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Interest expense increased $4.7 million, or 75.1%, to $10.9 million for the nine months ended September 30, 2019 from $6.2 million for the same period in 2018, primarily due tothe growth in average interest-bearing deposits and higher rates paid on interest-bearing deposits due to aforementioned market rate increases by the Federal Reserve.

Average interest-bearing liabilities increased $108.3 million, or 19.2%, to $671.3 million for the nine months ended September 30, 2019, compared with $563.0 million for the same period in 2018. The increase in average interest-bearing liabilities resulted primarily from a $119.9 million increase in average time deposits, partially offset by an $11.6 million decrease in average borrowings. Average noninterest-bearing demand deposits increased $13.8 million, or 5.4%, to $275.3 million for the nine months ended September 30, 2019 compared to $257.7 million for the same period in 2018.

The average cost of interest-bearing liabilities increased 69 basis points to 2.17% for the nine months ended September 30, 2019 from 1.48% for the same period in 2018.

Net interest income increased $3.2 million, or 10.5%, for the nine months ended September 30, 2019, to $33.2 million compared to $30.0 million for the same period in 2018. The net interest spread and net interest margin for the nine months ended September 30, 2019 were 3.48% and 4.25%, respectively, compared with 3.93% and 4.49%, respectively, for the same period in 2018.

Provision for Loan Losses

The provision for loan losses for the nine months ended September 30, 2019 was $691,000 compared to $1.0 million for the same period in 2018, a decrease of $356,000, or 34.0%. The provision for loan losses for the nine months ended September 30, 2019 was primarily due to loan balance growth during the period, partially offset by a decrease in specific reserve for an SBA commercial loan upon the confirmation of SBA government guarantee. For the nine months ended September 30, 2019, we had a decrease in the required reserve for loan losses as a percentage of gross loans for 2019 as overall loss factors, including qualitative factors, used in 2019 were lower than those for the same period of 2018. The provision for loan losses for the same period in 2018 was due to an increase in loan balance as well as an increase in the required reserve for loan losses as a percentage of gross loans for 2018. The allowance for loan losses as a percentage of gross loans was 1.05% and 1.16% at September 30, 2019 and 2018, respectively.

Noninterest Income

Noninterest income for the nine months ended September 30, 2019 was $8.9 million, an increase of $1.6 million, or 22.4%, compared to $7.3 million for the same period in 2018. The increase was primarily attributable to one time gain on company owned life insurance of $1.2 million, a $527,000 increase in gain on sale of loans, and a $76,000 increase in service charges on deposit accounts, partially off by a decrease of $153,000 in loan servicing fees. Service charges on deposit accounts increased $76,000 to $1.5 million in the nine months ended September 30, 2019, compared to $1.4 million in the same period in 2018, primarily due to increased activities on noninterest bearing deposit accounts.

We sold $61.1 million in SBA loans with a gain on sale of $4.3 million for nine months ended September 30, 2019 and $61.0 million in SBA loans with a gain on sale of $3.8 million for the same period in 2018.

The following table sets forth the various components of our noninterest income for the nine months ended September 30, 2019 and 2018:

	Nine Months Ended September 30,
(Dollars in thousands)	2019		2018		Increase (decrease)
Noninterest income:
Service charges on deposit accounts	$	1,495	$	1,419	$	76
Loan servicing fees, net of amortization		853		1,006		(153	)
Gain on sale of loans		4,379		3,852		527
Other income and fees		2,185		1,002		1,183
Total noninterest income	$	8,912	$	7,279	$	1,633

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Noninterest Expense

Noninterest expense for the nine months ended September 30, 2019 was $24.9 million compared to $22.0 million for the same period in 2018, an increase of $2.9 million, or 13.0%. The increase was primarily attributable to increased salaries and employee benefits, occupancy and equipment expenses, and data processing and communication expenses, partially offset by decreased FDIC insurance and regulatory assessments.

The following table sets forth the major components of our noninterest expense for the nine months ended September 30, 2019 and 2018:

	Nine Months Ended September 30,
(Dollars in thousands)	2019		2018		Increase (decrease)
Noninterest expense:
Salaries and employee benefits	$	15,862	$	13,629	$	2,233
Occupancy and equipment		3,441		3,065		376
Data processing and communication		1,110		948		162
Professional fees		711		612		99
FDIC insurance and regulatory assessments		188		306		(118	)
Promotion and advertising		543		598		(55	)
Directors' fees and stock-based compensation		680		633		47
Foundation donation and other contributions		1,169		1,084		85
Other expenses		1,151		1,118		33
Total noninterest expense		24,855		21,993		2,862

Salaries and employee benefits expense for the nine months ended September 30, 2019 increased $2.2 million, or 16.4%, to $15.9 million from $13.6 million for the same period in 2018. This increase was attributable to an increase in the number of employees to support continued growth, annual salary adjustments, and increased benefit costs. The average number of full-time equivalent employees was 164.0 and 141.0 in the nine months ended September 30, 2019 and 2018, respectively.

Occupancy and equipment expense increased $376,000, or 12.3%, to $3.4 million for the nine months ended September 30, 2019 compared to $3.1 million for the same period in 2018. Data processing and communication expenses increased $162,000, or 17.1% to $1.1 million for the nine months ended September 30, 2019 compared to $948,000 for the same period in 2018. Those increases were primarily attributable to support the new loan production offices and a new branch opened in 2019.

FDIC insurance and regulatory assessments for the nine months ended September 30, 2019 decreased $118,000, or 38.6% from $306,000 for the same period in 2018. The decrease was due to the small bank assessment credits that was applied to offset the FDIC assessments starting June 30, 2019.

Income Tax Expense

Income tax expense was $4.0 million and $3.8 million for the nine months ended September 30, 2019 and 2018, respectively. The effective income tax rate was 24.1% and 26.5% for the nine months ended September 30, 2019 and 2018, respectively. The decrease in the effective tax rate for the nine months ended September 30, 2019, compared to the same period in 2018 was primarily due to an adjustment from the difference between the tax provision and actual tax return for the year of 2018.

Financial Condition

Total assets increased $107.7 million, or 10.3%, to $1.15 billion at September 30, 2019 compared to $1.04 billion at December 31, 2018. This increase primarily resulted from an increase of $89.3 million, or 10.2%, in gross loans. We funded our asset growth primarily with an increase of $90.8 million in deposits during the nine months ended September 30, 2019.

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Investment portfolio

The securities portfolio is the second largest component of our interest earning assets, and the structure and composition of this portfolio is important to an analysis of our financial condition. The portfolio serves the following purposes: (i) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender; (ii) it provides liquidity to even out cash flows from the loan and deposit activities of customers; (iii) it can be used as an interest rate risk management tool, because it provides a large base of assets, the maturity and interest rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and our other funding sources; and (iv) it is an alternative interest-earning use of funds when loan demand is weak or when deposits grow more rapidly than loans.

We classify our securities as either available-for-sale or held-to-maturity at the time of purchase. Accounting guidance requires available-for-sale securities to be marked to fair value with an offset to accumulated other comprehensive income (loss), a component of shareholders’ equity. Monthly adjustments are made to reflect changes in the fair value of our available-for-sale securities.

All of the securities in our investment portfolio were classified as available-for-sale at September 30, 2019. There were no held-to-maturity securities in our investment portfolio at September 30, 2019. All available-for-sale securities are carried at fair value. Securities available-for-sale consist primarily of US government-sponsored agency securities, home mortgage-backed securities and collateralized mortgage obligations.

Securities available-for-sale decreased $3.0 million, or 5.5%, to $52.3 million at September 30, 2019 from $55.3 million at December 31, 2018, primarily due to the paydowns on home mortgage-backed securities. No issuer of the available-for-sale securities, other than FNMA and FHLMC, comprised more than 10% of our shareholders’ equity as of September 30, 2019 or December 31, 2018.

The following table summarizes the fair value of the available-for-sale securities portfolio as of the dates presented.

	September 30, 2019							December 31, 2018
	Amortized		Fair		Unrealized			Amortized		Fair		Unrealized
(Dollars in thousands)	Cost		Value		Gain/(Loss)			Cost		Value		Gain/(Loss)
Available for sale
U.S. Government agencies	$	5,998	$	5,992	$	(6	)	$	6,994	$	6,906	$	(88	)
Mortgage-backed securities: residential		12,160		12,197		37			14,465		14,129		(336	)
Collateralized mortgage obligations		33,757		34,106		349			34,655		34,301		(354	)
Total available for sale	$	51,915	$	52,295	$	380		$	56,114	$	55,336	$	(778	)

Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. At September 30, 2019, we evaluated the securities which had an unrealized loss for other than temporary impairment (OTTI) and determined all decline in value to be temporary. We anticipate full recovery of amortized cost with respect to these securities by maturity, or sooner in the event of a more favorable market interest rate environment. We do not intend to sell these securities and it is not more likely than not that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity.

The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities as of the dates presented. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	As of September 30, 2019
	Due in One Year					Due after One Year					Due after Five Years
	or Less					Through Five Years					Through Ten Years					Due after Ten Years
			Weighted					Weighted					Weighted					Weighted
	Amortized		Average			Amortized		Average			Amortized		Average			Amortized		Average
(Dollars in thousands)	Cost		Yield			Cost		Yield			Cost		Yield			Cost		Yield
Available for sale
U.S. Government agencies	$	3,998		1.73	%	$	2,000		1.65	%	$	—		—	%	$	—		—	%
Mortgage-backed securities - residential		—		—	%		—		—	%		6,703		1.98	%		5,457		3.14	%
Collateralized mortgage obligations		—		—	%		—		—	%		1,129		1.71	%		32,628		2.65	%
Total available for sale	$	3,998		1.73	%	$	2,000		1.65	%	$	7,832		1.94	%	$	38,085		2.72	%

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We have not used interest rate swaps or other derivative instruments to hedge fixed rate loans or securities to otherwise mitigate interest rate risk.

Loans

Our loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition.

At September 30, 2019, gross loans including deferred costs totaled $964.4 million compared to $875.1 million at December 31, 2018, an increase of $89.3 million, or 10.2%. The increase in our gross loans resulted from organic growth in commercial real estate and SBA loans.

The loan distribution table that follows sets forth our gross loans outstanding, and the percentage distribution in each category as of the dates indicated:

	September 30, 2019						December 31, 2018
(Dollars in thousands)	Amount			% of Total			Amount			% of Total
Real estate:
Commercial real estate	$	594,447			62	%	$	503,834			58	%
SBA loan - real estate		124,963			13	%		117,834			13	%
Total real estate		719,410			75	%		621,668			71	%
SBA loan - non-real estate		11,269			1	%		9,541			1	%
Commercial and industrial		107,730			11	%		113,975			13	%
Home mortgage		123,092			13	%		127,298			15	%
Consumer		2,869		<1%				2,577		<1%
Gross loans		964,370			100	%		875,059			100	%
Allowance for loan losses		(9,640	)					(9,636	)
Net loans	$	954,730					$	865,423

The following tables presents the maturity distribution of our loans as of September 30, 2019 and December 31, 2018. The table shows the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates.

	As of September 30, 2019
					Due after One Year
	Due in One Year or Less				Through Five Years				Due after Five Years
			Adjustable				Adjustable				Adjustable
(Dollars in thousands)	Fixed Rate		Rate		Fixed Rate		Rate		Fixed Rate		Rate		Total
Real estate:
Commercial real estate	$	24,542	$	27,041	$	224,895	$	176,985	$	91,485	$	49,499	$	594,447
SBA loans - real estate		—		—		—		—		—		124,963		124,963
Total real estate		24,542		27,041		224,895		176,985		91,485		174,462		719,410
SBA loan - non-real estate		—		—		—		665		—		10,604		11,269
Commercial and industrial		—		44,501		169		39,205		—		23,855		107,730
Home mortgage		—		—		—		—		117,418		5,674		123,092
Consumer		—		876		—		899		—		1,094		2,869
Gross loans	$	24,542	$	72,418	$	225,064	$	217,754	$	208,903	$	215,689	$	964,370

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	As of December 31, 2018
					Due after One Year
	Due in One Year or Less				Through Five Years				Due after Five Years
			Adjustable				Adjustable				Adjustable
(Dollars in thousands)	Fixed Rate		Rate		Fixed Rate		Rate		Fixed Rate		Rate		Total
Real estate:
Commercial real estate	$	26,460	$	39,204	$	201,385	$	133,085	$	49,598	$	54,102	$	503,834
SBA loans - real estate		—		—		—		—		—		117,834		117,834
Total real estate		26,460		39,204		201,385		133,085		49,598		171,936		621,668
SBA loan - non-real estate		—		—		—		703		—		8,838		9,541
Commercial and industrial		—		69,358		1,675		32,278		—		10,664		113,975
Home mortgage		—		—		—		—		122,886		4,412		127,298
Consumer		—		1,030		—		1,110		—		437		2,577
Gross loans	$	26,460	$	109,592	$	203,060	$	167,176	$	172,484	$	196,287	$	875,059

Our loan portfolio is concentrated in commercial real estate, commercial (primarily manufacturing, wholesale, and services-oriented entities), SBA loans (unguaranteed portion) with the remaining balance in home mortgage, and consumer loans. We do not have any material concentrations by industry or group of industries in the loan portfolio. However, 87.4% of our gross loans are secured by real property as of September 30, 2019, compared to 85.6% as of December 31, 2018.

We have established concentration limits in the loan portfolio for commercial real estate loans, commercial and industrial loans, and unsecured lending, among others. All loan types are within established limits. We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur.

Commercial real estate loans include owner-occupied and non-occupied commercial real estate. We originate both fixed and adjustable rate loans. Adjustable rate loans are based on the Wall Street Journal prime rate. At September 30, 2019, approximately 57% of the commercial real estate portfolio consisted of fixed-rate loans. Our policy maximum loan-to-value, or LTV, is 70% for commercial real estate loans. At September 30, 2019, our average loan to value for commercial real estate loans was approximately 54%. Our commercial real estate loan portfolio totaled $594.4 million at September 30, 2019 compared to $503.8 million at December 31, 2018.

We are designated an SBA Preferred Lender under the SBA Preferred Lender Program. We offer mostly SBA 7(a) variable-rate loans. We generally sell the 75% guaranteed portion of the SBA loans that we originate. Our SBA loans are typically made to small-sized manufacturing, wholesale, retail, hotel/motel and service businesses for working capital needs or business expansions. SBA loans have maturities up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collateral may also include inventory, accounts receivable and equipment, and may include personal guarantees. Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and included in our CRE Concentration Guidance.

As of September 30, 2019, our SBA portfolio totaled $136.2 million compared to $127.4 million as of December 31, 2018, an increase of $8.9 million, or 7.0%. We originated $83.1 million of SBA loans in the nine months ended September 30, 2019 compared to $76.0 million in the nine months ended September 30, 2018.

Commercial and industrial loans totaled $107.7 million at September 30, 2019 compared to $114.0 million at December 31, 2018.

We originate mainly non-qualified, alternative documentation single-family home mortgage loans (“home mortgage”) primarily through broker relationships, but also through our branch network. The loan product is a five-year or seven-year hybrid adjustable rate mortgage which reprices after five years to the one-year LIBOR plus certain spreads. We originate the non-qualified single-family home mortgage loans held by us for investment. Home mortgage loans totaled $123.1 million at September 30, 2019 compared to $127.3 million at December 31, 2018, a decrease of $4.2 million, or 3.3%.

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Loan Servicing

As of September 30, 2019, and December 31, 2018, we serviced $340.8 million and $328.5 million respectively, of SBA loans for others. Activities for loan servicing rights for the three months and nine months ended September 30, 2019 and 2018 were as follows:

	Three Months Ended September 30,									Nine Months Ended September 30,
(Dollars in thousands)	2019			2018			Increase (decrease)			2019			2018			Increase (decrease)
Beginning balance	$	6,996		$	6,994		$	2		$	6,987		$	6,771		$	216
Additions		552			588			(36	)		1,553			1,621			(68	)
Amortized to expense		(589	)		(485	)		(104	)		(1,581	)		(1,295	)		(286	)
Ending balance	$	6,959		$	7,097		$	(138	)	$	6,959		$	7,097		$	(138	)

Loan servicing rights are included in accrued interest receivable and other assets on our consolidated balance sheets and reported net of amortization.

Allowance for loan losses

The allowance for loan losses is an estimate of probable incurred losses in the loan portfolio. Loans are charged-off against the allowance when management believes a loan balance is uncollectible. Subsequent recoveries, if any, are credited to the allowance for loan losses. Management’s methodology for estimating the allowance balance consists of several key elements, which include specific allowances on individual impaired loans and the formula driven allowances on pools of loans with similar risk characteristics. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off.

The allowance for loan losses is determined on a quarterly basis and reflects management’s estimate of probable incurred credit losses inherent in the loan portfolio. We also rely on internal and external loan review procedures to further assess individual loans and loan pools, and economic data for overall industry and geographic trends. The computation includes elements of judgment and high levels of subjectivity.

A loan is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans include loans on non-accrual status and performing restructured loans. Income from loans on non-accrual status is recognized to the extent cash is received and when the loan’s principal balance is deemed collectible. Depending on a particular loan’s circumstances, we measure impairment of a loan based upon either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. A loan is considered collateral dependent when repayment of the loan is based solely on the liquidation of the collateral. Fair value, where possible, is determined by independent appraisals, typically on an annual basis. Between appraisal periods, the fair value may be adjusted based on specific events, such as if deterioration of quality of the collateral comes to our attention as part of our problem loan monitoring process, or if discussions with the borrower lead us to believe the last appraised value no longer reflects the actual market value for the collateral. The impairment amount on a collateral-dependent loan is charged-off to the allowance if deemed not collectible and the impairment amount on a loan that is not collateral-dependent is set up as a specific reserve.

In cases where a borrower experiences financial difficulties and we make certain concessionary modifications to contractual terms, the loan is classified as a troubled debt restructuring. These concessions may include a reduction of the interest rate, principal or accrued interest, extension of the maturity date or other actions intended to minimize potential losses. Loans restructured at a rate equal to or greater than that of a new loan with comparable risk at the time the loan is modified may be excluded from restructured loan disclosures in years subsequent to the restructuring if the loans are in compliance with their modified terms. A restructured loan is considered impaired despite its accrual status and a specific reserve is calculated based on the present value of expected cash flows discounted at the loan’s effective interest rate or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. Interest income on impaired loans is accrued as earned, unless the loan is placed on non-accrual status.

The allowance for loan losses was $9.6 million at September 30, 2019, in line with the allowance for loan losses of $9.6 million at December 31, 2018. The allowance for loan losses was 1.00% of gross loans at September 30, 2019 compared to 1.10% at December 31, 2018.

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In determining the allowance and the related provision for loan losses, we consider two principal elements: (i) valuation allowances based upon probable losses identified during the review of impaired commercial and industrial, commercial real estate, construction and land development loans;and (ii) allocations, by loan classes, on loan portfolios based on historical loan loss experience and qualitative factors.

It is the policy of management to maintain the allowance for loan losses at a level adequate for risks inherent in the loan portfolio. The Federal Reserve Board and the California Department of Business Oversight also review the allowance for loan losses as an integral part of their examination process. Based on information currently available, management believes that our allowance for loan losses is adequate. However, the loan portfolio can be adversely affected if California economic conditions and the real estate market in our market area were to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased loan losses, which could adversely affect our future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty.

Analysis of the Allowance for Loan Losses.

The following table provides an analysis of the allowance for loan losses, provision for loan losses and net charge-offs, by category, for the three and nine months ended September 30, 2019 and 2018.

	For the Three Months Ended September 30,
	2019										2018
						Net										Net
	Beginning					Charge-		Ending			Beginning					Charge-		Ending
(Dollars in thousands)	Balance		Provision			offs		Balance			Balance		Provision			offs		Balance
Real estate:
Commercial real estate	$	5,554	$	102		$	—	$	5,656		$	4,804	$	271		$	—	$	5,075
SBA loans - real estate		933		—			—		933			978		30			—		1,008
Total real estate		6,487		102			—		6,589			5,782		301			—		6,083
SBA loan - non-real estate		119		(2	)		—		117			536		89			51		574
Commercial and industrial		1,266		171			175		1,262			1,877		43			560		1,360
Home mortgage		1,609		26			—		1,635			1,489		12			—		1,501
Consumer		44		(7	)		—		37			39		(6	)		—		33
Total	$	9,525	$	290		$	175	$	9,640		$	9,723	$	439		$	611	$	9,551
Gross loans								$	964,370									$	850,018
Average gross loans									946,427										859,257
Net charge-offs to average    gross loans (1)									0.07	%									0.28	%
Allowance for loans losses to    gross loans									1.00	%									1.12	%

(1) Net charge-offs are loan charge-offs net of loan recoveries and average loan balances include non-accrual loans and loans held for sale.

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	As of and For the Nine Months Ended September 30,
	2019											2018
						Net											Net
	Beginning					Charge-			Ending			Beginning					Charge-		Ending
(Dollars in thousands)	Balance		Provision			offs			Balance			Balance		Provision			offs		Balance
Real estate:
Commercial real estate	$	4,805	$	851		$	—		$	5,656		$	4,801	$	274		$	—	$	5,075
SBA loans - real estate		894		59			20			933			1,082		(74	)		—		1,008
Total real estate		5,699		910			20			6,589			5,883		200			—		6,083
SBA loan - non-real estate		505		(388	)		—			117			538		112			76		574
Commercial and industrial		1,746		184			668			1,262			1,265		654			559		1,360
Home mortgage		1,653		(18	)		—			1,635			1,408		93			—		1,501
Consumer		33		3			(1	)		37			45		(12	)		—		33
Total	$	9,636	$	691		$	687		$	9,640		$	9,139	$	1,047		$	635	$	9,551
Gross loans									$	964,370									$	850,018
Average gross loans										922,383										825,804
Net charge-offs to average    gross loans (1)										0.15	%									0.15	%
Allowance for loans losses to    gross loans										1.00	%									1.12	%

(1) Net charge-offs are loan charge-offs net of loan recoveries and average loan balances include non-accrual loans and loans held for sale.

Non-performing Loans

Loans are considered delinquent when principal or interest payments are past due 30 days or more. Delinquent loans may remain on accrual status between 30 days and 90 days past due. Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Typically, the accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on non-accrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on non-accrual loans is subsequently recognized only to the extent that cash is received, and the loan’s principal balance is deemed collectible. Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned (“OREO”) until sold, and is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. We had one OREO property of $1.8 million at September 30, 2019 and no OREO at December 31, 2018.

Non-performing loans include loans 90 days past due and still accruing, loans accounted for on a non-accrual basis and accruing restructured loans. Non-performing assets consist of non-performing loans plus OREO. Non-performing loans were $1.6 million at September 30, 2019 compared to $1.9 million at December 31, 2018.

Classified loans were $3.2 million at September 30, 2019, a decrease of $325,000 compared to $3.6 million at December 31, 2018. The decrease was due to a mix of transfers to OREO, paid-offs, and charged-offs of $1.8 million for two commercial loans and three SBA loans, partially offset by an addition of $1.4 million for one commercial loan and one SBA real estate loan both secured by real estate, advanced to a single borrower relationship, and one home mortgage loan in 2019.

48

The following table sets forth the allocation of our non-performing assets among our different asset categories as of the dates indicated. Non-performing loans include non-accrual loans, loans past due 90 days or more and still accruing interest, and loans modified under troubled debt restructurings.

(Dollars in thousands)	September 30, 2019			December 31, 2018
Non-accrual loans	$	1,234		$	1,571
Past due loans 90 days or more and still accruing		—			—
Accruing troubled debt restructured loans		336			343
Total non-performing loans		1,570			1,914
Other real estate owned		1,817			—
Total non-performing assets	$	3,387		$	1,914
Non-performing loans to gross loans		0.16	%		0.22	%
Non-performing assets to total assets		0.29	%		0.18	%
Allowance for loan losses to non-performing loans		614	%		503	%

Deposits

We gather deposits primarily through our branch locations. We offer a variety of deposit products including demand deposits accounts, interest-bearing products, savings accounts and certificate of deposits. We focus our efforts to originate noninterest demand deposits accounts through marketing to our existing and new loan customers, customer referrals, and the involvement of our marketing staff in various community networks.

Total deposits at September 30, 2019 were $996.0 million, representing an increase of $90.8 million, or 10.0%, compared to $905.2 million at December 31, 2018. As of September 30, 2019, 29.8% of total deposits were comprised of noninterest-bearing demand accounts, 27.9% of interest-bearing transaction accounts and 42.3% of time deposits.

The following tables summarize our average deposit balances and weighted average rates for the three and nine months ended September 30, 2019 and 2018:

	Three Months Ended September 30,
	2019					2018
			Weighted					Weighted
	Average		Average			Average		Average
(Dollars in thousands)	Balance		Rate			Balance		Rate
Noninterest-bearing demand	$	275,316		―	%	$	258,252		―	%
Interest-bearing:
NOW and Savings deposits		5,321		0.25			5,929		0.25
Money market		275,259		1.87			254,510		1.48
Time deposits ($250,000 or less)		201,122		2.43			177,027		1.85
Time deposits (more than $250,000)		219,800		2.46			146,485		1.90
Total interest-bearing		701,502		2.20			583,951		1.68
Total deposits	$	976,818		1.58	%	$	842,203		1.17	%

	Nine Months Ended September 30,
	2019					2018
			Weighted					Weighted
	Average		Average			Average		Average
(Dollars in thousands)	Balance		Rate			Balance		Rate
Noninterest-bearing demand	$	271,517		―	%	$	257,717		―	%
Interest-bearing:
NOW and Savings deposits		5,075		0.25			6,314		0.24
Money market		269,446		1.86			256,171		1.28
Time deposits ($250,000 or less)		197,581		2.37			155,653		1.65
Time deposits (more than $250,000)		199,120		2.43			133,188		1.68
Total interest-bearing		671,222		2.17			551,326		1.47
Total deposits	$	942,739		1.54	%	$	809,043		1.00	%

49

The following tables set forth the maturity of time deposits as of September 30, 2019 and December 31, 2018:

	As of September 30, 2019
	Maturity Within:
	Three		Three to		Six to 12		After
(Dollars in thousands)	Months		Six Months		Months		12 Months		Total
Time deposits ($250,000 or less)	$	67,270	$	36,496	$	87,775	$	10,060	$	201,601
Time deposits (greater than $250,000)		57,703		62,186		90,213		9,445		219,547
Total time deposits	$	124,973	$	98,682	$	177,988	$	19,505	$	421,148

	As of December 31, 2018
	Maturity Within:
	Three		Three to		Six to 12		After
(Dollars in thousands)	Months		Six Months		Months		12 Months		Total
Time deposits ($250,000 or less)	$	57,343	$	52,236	$	69,706	$	11,708	$	190,993
Time deposits (greater than $250,000)		75,043		26,564		57,629		5,045		164,281
Total time deposits	$	132,386	$	78,800	$	127,335	$	16,753	$	355,274

Borrowed Funds

Other than deposits, we also utilized FHLB advances as a supplementary funding source to finance our operations. The advances from the FHLB are collateralized by residential and commercial real estate loans. At September 30, 2019 and December 31, 2018, we had maximum borrowing capacity from the FHLB of $392.3 million and $357.1 million, respectively. We had no borrowings from FHLB at September 30, 2019 or at December 31, 2018.

Liquidity

Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders.

Our liquidity position is supported by management of liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, Federal Funds sold, and fair value of unpledged investment securities. Other available sources of liquidity include wholesale deposits, and additional borrowings from correspondent banks, FHLB advances, and the Federal Reserve discount window.

At September 30, 2019 and December 31, 2018, our gross loan to deposit ratio was 96.8% and 96.7%, respectively.

50

Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, and increases in customer deposits. Other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.

We had $13.5 million of unsecured Federal Funds lines with no amounts advanced as of September 30, 2019 and as of December 31, 2018, respectively. In addition, on such dates we had lines of credit from the Federal Reserve discount window of $120.3 million and $107.7 million, respectively. The Federal Reserve discount window lines were collateralized by a pool of commercial real estate loans and commercial and industrial loans totaling $200.0 million and $179.4 million as of September 30, 2019 and December 31, 2018, respectively. We did not have any borrowings outstanding with the Federal Reserve at September 30, 2019 or December 31, 2018, and our borrowing capacity is limited only by eligible collateral.

At September 30, 2019 and December 31, 2018, we had no borrowings from the FHLB. Based on the values of loans pledged as collateral, we had $232.9 million and $209.7 million of additional borrowing availability with the FHLB as of September 30, 2019 and December 31, 2018, respectively. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts.

Capital Requirements

We are subject to various regulatory capital requirements administered by the federal and state banking regulators. Failure to meet regulatory capital requirements may result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for “prompt corrective action” (described below), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies. The capital amounts and classifications are subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors. Qualitative measures established by regulation to ensure capital adequacy required us to maintain minimum amounts and ratio of CET1 capital, Tier 1 capital and total capital to risk-weighted assets and of Tier 1 capital to average consolidated assets, referred to as the “leverage ratio.”

The Dodd-Frank Act and new banking regulations promulgated by the U.S. federal banking regulators to implement the Basel III Capital Rules have established strengthened capital standards for banks and bank holding companies and require more capital to be held in the form of common stock. These provisions, which generally became applicable to us on January 1, 2015, impose meaningfully more stringent regulatory capital requirements than those applicable to us prior to that date. In addition, the Basel III Capital Rules implemented a concept known as the “capital conservation buffer.” In general, banks and bank holding companies are required to hold a buffer of common equity Tier 1 capital equal to 2.5% of risk-weighted assets over each minimum capital ratio to avoid being subject to limits on capital distributions (e.g., dividends, stock buybacks, etc.) and certain discretionary bonus payments to executive officers. For community banks, the capital conservation buffer requirement commenced on January 1, 2016, with a gradual phase-in with full compliance with the capital conservation buffer required by January 1, 2019.

51

The table below also summarizes the capital requirements applicable to us and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as our and the Bank’s capital ratios as of September 30, 2019 and December 31, 2018. We and the Bank exceeded all regulatory capital requirements under the Basel III Capital Rules and were considered to be “well-capitalized” as of the dates reflected in the table below. As of September 30, 2019, the FDIC categorized us as well-capitalized under the prompt corrective action framework. There have been no conditions or events since September 30, 2019 that management believes would change this classification.

																Regulatory
																Capital Ratio
																Requirements,
						Regulatory					Minimum					including fully
						Capital Ratio					To be Considered					phased in Capital
	Actual					Requirements					"Well Capitalized"					Conservation Buffer
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2019:
Total capital (to risk-weighted assets)
Consolidated	$	146,641		15.36	%	N/A		N/A			N/A		N/A			N/A		N/A
Bank		143,407		15.03	%		76,331		8.00	%		95,415		10.00	%		100,186		10.50	%
Tier 1 capital (to risk-weighted assets)
Consolidated		136,922		14.35	%	N/A		N/A			N/A		N/A			N/A		N/A
Bank		133,688		14.01	%		57,249		6.00	%		76,332		8.00	%		81,103		8.50	%
CET1 capital (to risk-weighted assets)
Consolidated		136,922		14.35	%	N/A		N/A			N/A		N/A			N/A		N/A
Bank		133,688		14.01	%		42,937		4.50	%		62,020		6.50	%		66,790		7.00	%
Tier 1 capital (to average assets)
Consolidated		136,922		12.11	%	N/A		N/A			N/A		N/A			N/A		N/A
Bank		133,688		11.83	%		45,212		4.00	%		56,515		5.00	%		45,212		4.00	%

																Regulatory
																Capital Ratio
																Requirements,
						Regulatory					Minimum					including fully
						Capital Ratio					To be Considered					phased in Capital
	Actual					Requirements					"Well Capitalized"					Conservation Buffer
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2018:
Total capital (to risk-weighted assets)
Consolidated	$	139,593		16.26	%	N/A		N/A			N/A		N/A			N/A		N/A
Bank		139,538		16.25	%		68,686		8.00	%		85,857		10.00	%		90,150		10.50	%
Tier 1 capital (to risk-weighted assets)
Consolidated		129,893		15.13	%	N/A		N/A			N/A		N/A			N/A		N/A
Bank		129,838		15.12	%		51,514		6.00	%		68,686		8.00	%		72,979		8.50	%
CET1 capital (to risk-weighted assets)
Consolidated		129,893		15.13	%	N/A		N/A			N/A		N/A			N/A		N/A
Bank		129,838		15.12	%		38,636		4.50	%		55,807		6.50	%		60,100		7.00	%
Tier 1 capital (to average assets)
Consolidated		129,893		12.88	%	N/A		N/A			N/A		N/A			N/A		N/A
Bank		129,838		12.87	%		40,346		4.00	%		50,432		5.00	%		40,346		4.00	%

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Contractual Obligations

The following tables contain supplemental information regarding our total contractual obligations as of September 30, 2019 and December 31, 2018:

	Payments Due at September 30, 2019
	Within		One to		Three to		After Five
(Dollars in thousands)	One Year		Three Years		Five Years		Years		Total
Deposits without a stated maturity	$	574,845	$	—	$	—	$	—	$	574,845
Time deposits		401,643		18,566		375		564		421,148
Operating lease commitments		1,798		4,074		3,586		2,064		11,522
Commitments to fund investment for Low Income Housing    Tax Credit		164		12		21		10		207
Total contractual obligations	$	978,450	$	22,652	$	3,982	$	2,638	$	1,007,722

	Payments Due at December 31, 2018
	Within		One to		Three to		After Five
(Dollars in thousands)	One Year		Three Years		Five Years		Years		Total
Deposits without a stated maturity	$	549,902	$	—	$	—	$	—	$	549,902
Time deposits		338,521		16,001		752		—		355,274
Operating lease commitments		1,709		3,499		3,140		2,669		11,017
Commitments to fund investment for Low Income Housing    Tax Credit		442		10		15		22		489
Total contractual obligations	$	890,574	$	19,510	$	3,907	$	2,691	$	916,682

We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels. We expect to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. We have in place various borrowing mechanisms for both short-term and long-term liquidity needs.

Off-Balance Sheet Arrangements

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in our consolidated balance sheet. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if we deem collateral is necessary upon extension of credit, is based on management’s credit evaluation of the counterparty.

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. They are intended to be disbursed, subject to certain condition, upon request of the borrower.

The following table summarized commitments as of the dates presented.

(Dollars in thousands)	September 30, 2019		December 31, 2018
Commitments to extend credit	$	76,094	$	60,789
Standby letters of credit		3,983		1,790
Other commercial letters of credit		973		1,209
Total	$	81,050	$	63,788

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. We have identified interest rate risk as our primary source of market risk.

Interest Rate Risk

Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay home mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and LIBOR (basis risk).

Our board’s asset liability committee, or ALM, establishes broad policy limits with respect to interest rate risk. Our management’s asset liability committee, or ALCO, establishes specific operating guidelines within the parameters of the policies set by the ALM. In general, we seek to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities. Our ALCO monitors the level of interest rate risk sensitivity on a quarterly basis to ensure compliance with the ALM-approved risk limits. The policy requires a periodic review of all key assumptions used, such as identifying appropriate interest rate scenarios, setting loan prepayment rates based on historical analysis, and noninterest-bearing and interest-bearing deposit durations based on historical analysis.

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.

An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on our interest-earning assets would reprice upward more quickly than rates paid on our interest-bearing liabilities, thus expanding our net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on our interest-bearing liabilities would reprice upward more quickly than rates earned on our interest-earning assets, thus compressing our net interest margin.

Interest rate risk measurement is calculated and reported to the ALCO and ALM at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.

Evaluation of Interest Rate Risk

We use a net interest income simulation model to measure and evaluate potential changes in our net interest income. We run various hypothetical interest rate scenarios at least quarterly and compare these results against a scenario with no changes in interest rates. We use two approaches to model interest rate risk: Earnings at Risk, or EAR, and Economic Value of Equity, or EVE. Under EAR, net interest income is modeled utilizing various assumptions for assets and liabilities. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE is a period end measurement.

Our simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (i) the timing of changes in interest rates; (ii) shifts or rotations in the yield curve; (iii) re-pricing characteristics for market-rate-sensitive instruments; (iv) varying loan prepayment speeds for different interest rate scenarios; and (v) the overall growth and mix of assets and liabilities. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.

54

Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of September 30, 2019 and December 31, 2018 are presented in the following table. The projections assume (i) immediate, parallel shifts downward of the yield curve of 100 basis points and (ii) immediate, parallel shifts upward of the yield curve of 100, 200, 300 and 400 basis points over 12 months. In the current interest rate environment, a downward shift of the yield curve of 200, 300 and 400 basis points does not provide us with meaningful results. In a downward parallel shift of the yield curve, interest rate at the short-end of the yield curve are not modeled to decline any further than 0%.

	Net Interest Income Sensitivity						Economic Value of Equity Sensitivity
	September 30, 2019			December 31, 2018			September 30, 2019			December 31, 2018
+400 basis points		20.17	%		16.25	%		2.86	%		(2.94	)%
+300 basis points		16.01	%		13.16	%		4.64	%		(0.01	)%
+200 basis points		11.38	%		9.32	%		5.51	%		1.55	%
+100 basis points		6.21	%		5.11	%		4.39	%		2.62	%
-100 basis points		(5.77	) %		(3.30	)%		(10.35	) %		(4.38	)%

We are within board-established policy limits for the all rate scenarios. The EAR reported at September 30, 2019 projects that our earnings are expected to be sensitive to changes in interest rates over the next year. In recent periods, the amount of fixed rate assets decreased resulting in a position shift to be slightly more asset sensitive.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures  

The Company’s management, including our President and Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered in this report.  Based on such evaluation, our President and Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective as of that date to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and its Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting  

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

55

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we are or may be involved in various legal or regulatory proceedings, claims, including claims related to, employment, wage-hour and labor law claims, lender liability claims, and consumer and privacy claims, some which may be styled as “class action” or representative cases.  We evaluate all claims and lawsuits with respect to their potential merits, our potential defenses and counterclaims, settlement or litigation potential and the expected effect on us.  The outcome of any claims or litigation, regardless of the merits, is inherently uncertain.  We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.  The outcomes of our legal proceedings and other contingencies are, however, inherently unpredictable and subject to significant uncertainties.  The Company presently does not have any adverse pending legal actions.

Item 1A. Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the other factors discussed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2018. There were no material changes from risk factors previously disclosed in our Form 10-K. The risk factors identified are in addition to those contained in any other cautionary statements, written or oral, which may be or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 25, 2019, the Company announced that the board of directors approved a stock repurchase program that authorizes the Company to repurchase up to 400,000 shares of its common stock in open market. During the first, second, and third quarter of 2019, the Company repurchased an aggregate of 395,000 shares at an average price of $9.10 per share. The first stock repurchase program was terminated as of August 23, 2019.

On August 28, 2019, the Company’s Board of Directors approved another stock repurchase program that authorized the Company to repurchase up to 475,000 shares of its common stock. During the third quarter of 2019, the Company repurchased an aggregate of 94,887 shares at an average price of $9.26 per share.

The Company may purchase share in open market transactions, through block trades, in privately negotiated transactions, or by other trading plans as determined by the Company’s management. The repurchase program may be suspended, terminated, or modified at any time. The time of purchases and amount of share repurchase may be affected by variety factors including market conditions, price, trading volume and regulatory requirements.

The following table summarizes share repurchase activities for the three months ended September 30, 2019.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Publicly Announced Program		Approximate Number of Shares that May Yet Be Purchased Under the Program
	(Dollars in thousands, except per share data)
July 1, 2019 to July 31, 2019		—	$	—	$	—		—
August 1, 2019 to August 31, 2019		61,730		9.05		61,730		—
September 1, 2019 to September 30, 2019		94,887		9.26		94,887		371,276
Total		156,617	$	9.18	$	156,617		371,276

Item 3. Defaults Upon Senior Securities

Not Applicable

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

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Item 6. Exhibits

Exhibit Number	Description
3.1	Articles of Incorporation of OP Bancorp included as Exhibit 3.1 to the Registration Statement on Form S-1 filed March 5, 2018 and incorporated herein by reference.
3.2	Amended and Restated Bylaws of OP Bancorp included as Exhibit 3.2 to the Registration Statement on Form S-1 filed March 5, 2018 and incorporated herein by reference.
31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

57

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Company Name
Date:  November 8, 2019	By:	/s/ Min J. Kim
		Min J. Kim
		President and Chief Executive Officer
Date:  November 8, 2019	By:	/s/ Christine Oh
		Christine Oh
		Chief Financial Officer

58

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Min J. Kim, certify that:

1. I have reviewed this quarterly report on Form 10-Q of OP Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 8, 2019	By:	/s/ Min J. Kim
		Min J. Kim
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christine Oh, certify that:

1. I have reviewed this quarterly report on Form 10-Q of OP Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 8, 2019	By:	/s/ Christine Oh
		Christine Oh
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OP Bancorp (the “Company”) on Form 10-Q for the period ending September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to her knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:  November 8, 2019	By:	/s/ Min J. Kim
		Min J. Kim
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Op Bancorp (the “Company”) on Form 10-Q for the period ending September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to her knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date:  November 8, 2019	By:	/s/ Christine Oh
		Christine Oh
		Chief Financial Officer

XML

Securities - Schedule of Other Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Investments Debt And Equity Securities [Abstract]
FHLB stock	$ 5,358	$ 4,582
PCBB stock	190	190
Mutual fund - CRA qualified	3,625	2,488
Total other investments	$ 9,173	$ 7,260

XML

Loans - Schedule of Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses Individually Evaluated for Impairment	$ 336		$ 1,198
Allowance for Loan Collectively Evaluated for Impairment	9,304		8,438
Total	9,640	$ 9,525	9,636	$ 9,551	$ 9,723	$ 9,139
Loans Individually Evaluated for Impairment	860		2,407
Loans Collectively Evaluated for Impairment	966,385		875,436
Total	967,245		877,843
Commercial Real Estate
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Collectively Evaluated for Impairment	5,656		4,805
Total	5,656	5,554	4,805	5,075	4,804	4,801
Loans Collectively Evaluated for Impairment	595,903		505,229
Total	595,903		505,229
SBA Loans-Real Estate
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Collectively Evaluated for Impairment	933		894
Total	933	933	894	1,008	978	1,082
Loans Individually Evaluated for Impairment	488		834
Loans Collectively Evaluated for Impairment	125,085		117,159
Total	125,573		117,993
SBA Loans—Non-Real Estate
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses Individually Evaluated for Impairment			362
Allowance for Loan Collectively Evaluated for Impairment	117		143
Total	117	119	505	574	536	538
Loans Individually Evaluated for Impairment	36		57
Loans Collectively Evaluated for Impairment	11,295		9,875
Total	11,331		9,932
Commercial and Industrial
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for loan losses Individually Evaluated for Impairment	336		836
Allowance for Loan Collectively Evaluated for Impairment	926		910
Total	1,262	1,266	1,746	1,360	1,877	1,265
Loans Individually Evaluated for Impairment	336		1,516
Loans Collectively Evaluated for Impairment	107,646		112,781
Total	107,982		114,297
Home Mortgage
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Collectively Evaluated for Impairment	1,635		1,653
Total	1,635	1,609	1,653	1,501	1,489	1,408
Loans Collectively Evaluated for Impairment	123,581		127,806
Total	123,581		127,806
Consumer
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Collectively Evaluated for Impairment	37		33
Total	37	$ 44	33	$ 33	$ 39	$ 45
Loans Collectively Evaluated for Impairment	2,875		2,586
Total	$ 2,875		$ 2,586

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Stock-based Compensation - Summary of Stock-based Compensation Stock Options Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of options outstanding, Beginning of period	250,000
Number of options outstanding, Exercised	(95,000)
Number of options outstanding, Ending of year	155,000
Number of options outstanding, Full vested and expected to vest	155,000
Number of options outstanding, Vested	155,000
2005 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average exercise price, Outstanding beginning	$ 4.00
Weighted average exercise price, Exercised	2.20
Weighted average exercise price, Outstanding ending	4.70
Weighted average exercise price, Full vested and expected to vest	4.70
Weighted average exercise price, Vested	$ 4.70
Aggregate intrinsic value, Outstanding	$ 787
Aggregate intrinsic value, Fully vested and expected to vest	787
Aggregate intrinsic value, Vested	$ 787
2010 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of options outstanding, Beginning of period	620,000
Number of options outstanding, Granted	0	0
Number of options outstanding, Exercised	(165,000)
Number of options outstanding, Ending of year	455,000
Number of options outstanding, Full vested and expected to vest	440,000
Number of options outstanding, Vested	395,000
Weighted average exercise price, Outstanding beginning	$ 4.57
Weighted average exercise price, Exercised	1.12
Weighted average exercise price, Outstanding ending	5.20
Weighted average exercise price, Full vested and expected to vest	5.10
Weighted average exercise price, Vested	$ 4.77
Aggregate intrinsic value, Outstanding	$ 2,085
Aggregate intrinsic value, Fully vested and expected to vest	2,058
Aggregate intrinsic value, Vested	$ 1,978

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Borrowing Arrangements - Summary of Borrowings Available to the Company from Institutions (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Debt Disclosure [Line Items]
Amount of borrowings	$ 366,654
Federal Home Loan Bank—San Francisco
Debt Disclosure [Line Items]
Amount of borrowings	232,865
Federal Reserve Bank
Debt Disclosure [Line Items]
Amount of borrowings	120,289
Pacific Coast Bankers Bank
Debt Disclosure [Line Items]
Amount of borrowings	8,000
Zions Bank
Debt Disclosure [Line Items]
Amount of borrowings	$ 5,500

XML

Servicing Assets - Additional Information (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Servicing Assets At Amortized Value [Line Items]
Valuation allowance against carrying value of servicing assets	$ 0	$ 0
Servicing asset at fair value, amount	$ 8,300,000	$ 8,600,000
Minimum
Servicing Assets At Amortized Value [Line Items]
Fair value of servicing assets, discount rates	1.80%	4.70%
Fair value of servicing assets, prepayment speed	13.40%	11.40%
Maximum
Servicing Assets At Amortized Value [Line Items]
Fair value of servicing assets, discount rates	10.00%	11.00%
Fair value of servicing assets, prepayment speed	14.60%	13.30%

XML

Loans (Tables)

9 Months Ended

Sep. 30, 2019

Receivables [Abstract]

Composition of Loan Portfolio

The composition of the loan portfolio was as follows at September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
	(Dollars in thousands)
Real estate:
Commercial real estate	$	594,447		$	503,834
SBA loans—real estate		124,963			117,834
Total real estate		719,410			621,668
SBA loans—non-real estate		11,269			9,541
Commercial and industrial		107,730			113,975
Home mortgage		123,092			127,298
Consumer		2,869			2,577
Gross loans receivable		964,370			875,059
Allowance for loan losses		(9,640	)		(9,636	)
Loans receivable, net	$	954,730		$	865,423

Schedule of Activity in Allowance for Loan Losses

The activity in the allowance for loan losses for the three and nine months ended September 30, 2019 and 2018 was as follows:

					SBA
	Commercial		SBA Loans		Loans Non-			Commercial			Home
	Real Estate		Real Estate		Real Estate			and Industrial			Mortgage		Consumer			Total
	(Dollars in thousands)
Three months ended September    30, 2019:
Beginning balance	$	5,554	$	933	$	119		$	1,266		$	1,609	$	44		$	9,525
Provision for loan losses		102		—		(2	)		171			26		(7	)		290
Charge-offs		—		—		—			(175	)		—		—			(175	)
Recoveries		—		—		—			—			—		—			—
Ending balance	$	5,656	$	933	$	117		$	1,262		$	1,635	$	37		$	9,640
Three months ended September    30, 2018:
Beginning balance	$	4,804	$	978	$	536		$	1,877		$	1,489	$	39		$	9,723
Provision for loan losses		271		30		89			43			12		(6	)		439
Charge-offs		—		—		(57	)		(565	)		—		—			(622	)
Recoveries		—		—		6			5			—		—			11
Ending balance	$	5,075	$	1,008	$	574		$	1,360		$	1,501	$	33		$	9,551

						SBA
	Commercial		SBA Loans			Loans Non-			Commercial			Home
	Real Estate		Real Estate			Real Estate			and Industrial			Mortgage			Consumer			Total
	(Dollars in thousands)
Nine months ended September    30, 2019:
Beginning balance	$	4,805	$	894		$	505		$	1,746		$	1,653		$	33		$	9,636
Provision for loan losses		851		59			(388	)		184			(18	)		3			691
Charge-offs		—		(20	)		—			(668	)		—			—			(688	)
Recoveries		—		—			—			—			—			1			1
Ending balance	$	5,656	$	933		$	117		$	1,262		$	1,635		$	37		$	9,640
Nine months ended September     30, 2018:
Beginning balance	$	4,801	$	1,082		$	538		$	1,265		$	1,408		$	45		$	9,139
Provision for loan losses		274		(74	)		112			654			93			(12	)		1,047
Charge-offs		—		—			(85	)		(565	)		—			—			(650	)
Recoveries		—		—			9			6			—			—			15
Ending balance	$	5,075	$	1,008		$	574		$	1,360		$	1,501		$	33		$	9,551

Schedule of Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Segment

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment as of September 30, 2019 and December 31, 2018:

	Loans Individually Evaluated for Impairment		Loans Collectively Evaluated for Impairment		Total
As of September 30, 2019:	(Dollars in thousands)
Allowance for loan losses:
Commercial real estate	$	—	$	5,656	$	5,656
SBA loans—real estate		—		933		933
SBA loans—non-real estate		—		117		117
Commercial and industrial		336		926		1,262
Home mortgage		—		1,635		1,635
Consumer		—		37		37
Total	$	336	$	9,304	$	9,640
Loans:
Commercial real estate	$	—	$	595,903	$	595,903
SBA loans—real estate		488		125,085		125,573
SBA loans—non-real estate		36		11,295		11,331
Commercial and industrial		336		107,646		107,982
Home mortgage		—		123,581		123,581
Consumer		—		2,875		2,875
Total	$	860	$	966,385	$	967,245
As of December 31, 2018:
Allowance for loan losses:
Commercial real estate	$	—	$	4,805	$	4,805
SBA loans—real estate		—		894		894
SBA loans—non-real estate		362		143		505
Commercial and industrial		836		910		1,746
Home mortgage		—		1,653		1,653
Consumer		—		33		33
Total	$	1,198	$	8,438	$	9,636
Loans:
Commercial real estate	$	—	$	505,229	$	505,229
SBA loans—real estate		834		117,159		117,993
SBA loans—non-real estate		57		9,875		9,932
Commercial and industrial		1,516		112,781		114,297
Home mortgage		—		127,806		127,806
Consumer		—		2,586		2,586
Total	$	2,407	$	875,436	$	877,843

Schedule of Information Related to Impaired Loans by Class of Loans

The following table presents information related to impaired loans by class of loans as of and for the three and nine months ended September 30, 2019 and 2018. The difference between the unpaid principal balance (net of partial charge-offs) and the recorded investment in the loans is not considered to be material. The difference between interest income recognized and cash basis interest recognized was immaterial.

					Average		Interest
	Recorded		Allowance		Recorded		Income
	Investment		Allocated		Investment		Recognized
As of and for the three months ended September 30, 2019:	(Dollars in thousands)
With no related allowance recorded:
SBA loans—real estate	$	488	$	—	$	493	$	—
SBA loans—non-real estate		36		—		28		—
With an allowance recorded:
Commercial and industrial		336		336		337		5
Total	$	860	$	336	$	858	$	5
As of and for the three months ended September 30, 2018:
With no related allowance recorded:
SBA loans—real estate	$	134	$	—	$	138	$	—
Commercial and industrial		748		—		749		11
With an allowance recorded:
SBA loans—non-real estate		434		434		434		—
Commercial and industrial		345		345		348		5
Total	$	1,661	$	779	$	1,669	$	16

					Average		Interest
	Recorded		Allowance		Recorded		Income
	Investment		Allocated		Investment		Recognized
As of and for the nine months ended September 30, 2019:	(Dollars in thousands)
With no related allowance recorded:
SBA loans—real estate	$	488	$	—	$	505	$	—
SBA loans—non-real estate		36		—		46		—
With an allowance recorded:
Commercial and industrial		336		336		339		15
Total	$	860	$	336	$	890	$	15
As of and for the nine months ended September 30, 2018:
With no related allowance recorded:
Home mortgage	$	134	$	—	$	137	$	—
Consumer		748		—		749		33
With an allowance recorded:
SBA loans—non-real estate		434		434		443		—
Commercial and industrial		345		345		350		14
Total	$	1,661	$	779	$	1,679	$	47

Schedule of Recorded Investment in Nonaccrual Loans and Loans Past Due Greater Than 90 Days Still Accruing Interest by Class of Loans

The following table presents the recorded investment in nonaccrual loans and loans past due greater than 90 days still accruing interest, by class of loans, as of September 30, 2019 and December 31, 2018:

	Nonaccrual		Loans >90 Days Past Due & Still Accruing		Total
As of September 30, 2019:	(Dollars in thousands)
SBA loans—real estate	$	488	$	—	$	488
SBA loans—non-real estate		36		—		36
Commercial and industrial		710		—		710
Total	$	1,234	$	—	$	1,234
As of December 31, 2018:
SBA loans—real estate	$	834	$	—	$	834
SBA loans—non-real estate		57		—		57
Commercial and industrial		680		—		680
Total	$	1,571	$	—	$	1,571

Schedule of Aging of Recorded Investment in Past Due Loans

The following table represents the aging of the recorded investment in past due loans as of September 30, 2019 and December 31, 2018:

	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
As of September 30, 2019:	(Dollars in thousands)
Commercial real estate	$	472	$	—	$	—	$	472	$	595,431	$	595,903
SBA—real estate		1,293		580		—		1,873		123,700		125,573
SBA—non-real estate		3		—		—		3		11,328		11,331
Commercial and industrial		374		—		—		374		107,608		107,982
Home mortgage		437		—		710		1,147		122,434		123,581
Consumer		—		—		—		—		2,875		2,875
	$	2,579	$	580	$	710	$	3,869	$	963,376	$	967,245
As of December 31, 2018:
Commercial real estate	$	—	$	—	$	—	$	—	$	505,229	$	505,229
SBA—real estate		—		—		311		311		117,682		117,993
SBA—non-real estate		—		—		—		—		9,932		9,932
Commercial and industrial		—		—		680		680		113,617		114,297
Home mortgage		449		—		—		449		127,357		127,806
Consumer		—		—		—		—		2,586		2,586
	$	449	$	—	$	991	$	1,440	$	876,403	$	877,843

Schedule of Risk Category of Loans by Class of Loans

As of September 30, 2019 and December 31, 2018, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Pass		Special Mention		Substandard		Doubtful		Total
As of September 30, 2019:	(Dollars in thousands)
Commercial real estate	$	595,903	$	—	$	—	$	—	$	595,903
SBA loans—real estate		122,553		773		2,247		—		125,573
SBA loans—non-real estate		11,281		14		36		—		11,331
Commercial and industrial		106,379		893		710		—		107,982
Home mortgage		123,325		—		256		—		123,581
Consumer		2,875		—		—		—		2,875
	$	962,316	$	1,680	$	3,249	$	—	$	967,245
As of December 31, 2018:
Commercial real estate	$	505,229	$	—	$	—	$	—	$	505,229
SBA loans—real estate		115,993		—		2,000		—		117,993
SBA loans—non-real estate		9,859		16		57		—		9,932
Commercial and industrial		112,781		—		1,516		—		114,297
Home mortgage		127,806		—		—		—		127,806
Consumer		2,586		—		—		—		2,586
	$	874,254	$	16	$	3,573	$	—	$	877,843

XML

Regulatory Capital Matters

9 Months Ended

Sep. 30, 2019

Regulatory Capital Requirements [Abstract]

Regulatory Capital Matters

Note 16. Regulatory Capital Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Under the Basel III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was 0.625% in 2016 and increased 0.625% annually until 2019. As of September 30, 2019, the capital conservation buffer for the Company is 2.50%. Management believes as of September 30, 2019 and December 31, 2018, the Bank met all capital adequacy requirements to which they are subject to. Based on recent changes to the Federal Reserve’s definition of a “Small Bank Holding Company” that increased the threshold to $3 billion in assets, the Company is not currently subject to separate minimum capital measurements. At such time as the Company reaches the $3 billion asset level, it will again be subject to capital measurements independent of the Bank. For comparison purposes, the Company’s ratios are included in following discussion as well, all of which would have exceeded the “well-capitalized” level had the Company been subject to separate capital minimums. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of September 30, 2019 and December 31, 2018, the Company and Bank meet all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At September 30, 2019 and December 31, 2018, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

Actual and required capital amounts (in thousands) and ratios, exclusive of the capital conservation buffer, are presented below as of September 30, 2019 and December 31, 2018:

						Required for					Minimum
						Capital Adequacy					To be Considered
	Actual					Purposes					"Well Capitalized"
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2019:
Total capital (to risk-weighted assets)
Consolidated	$	146,641		15.36	%	N/A		N/A			N/A		N/A
Bank		143,407		15.03	%		76,332		8.00	%		95,415		10.00	%
Tier 1 capital (to risk-weighted assets)
Consolidated		136,922		14.35	%	N/A		N/A			N/A		N/A
Bank		133,688		14.01	%		57,249		6.00	%		76,332		8.00	%
Common equity Tier 1 capital (to risk-weighted    assets)
Consolidated		136,922		14.35	%	N/A		N/A			N/A		N/A
Bank		133,688		14.01	%		42,937		4.50	%		62,020		6.50	%
Tier 1 capital (to average assets)
Consolidated		136,922		12.11	%	N/A		N/A			N/A		N/A
Bank		133,688		11.83	%		45,212		4.00	%		56,515		5.00	%

						Required for					Minimum
						Capital Adequacy					To be Considered
	Actual					Purposes					"Well Capitalized"
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2018:
Total capital (to risk-weighted assets)
Consolidated	$	139,593		16.26	%	N/A		N/A			N/A		N/A
Bank		139,538		16.25	%		68,686		8.00	%		85,857		10.00	%
Tier 1 capital (to risk-weighted assets)
Consolidated		129,893		15.13	%	N/A		N/A			N/A		N/A
Bank		129,838		15.12	%		51,514		6.00	%		68,686		8.00	%
Common equity Tier 1 capital (to risk-weighted    assets)
Consolidated		129,893		15.13	%	N/A		N/A			N/A		N/A
Bank		129,838		15.12	%		38,636		4.50	%		55,807		6.50	%
Tier 1 capital (to average assets)
Consolidated		129,893		12.88	%	N/A		N/A			N/A		N/A
Bank		129,838		12.87	%		40,346		4.00	%		50,432		5.00	%

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Stock-based Compensation

9 Months Ended

Sep. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based Compensation

Note 12. Stock-based Compensation

The Company has two stock-based compensation plans currently in effect as of September 30, 2019, as described further below. Total compensation cost that has been charged against earnings for these plans was $189,000 and $167,000 in the three months ended September 30, 2019 and 2018, respectively, and $905,000 and $606,000 for the nine months ended September 30, 2019 and 2018, respectively.

2005 Plan: In 2005, the Board of Directors and shareholders of the Bank approved a stock option plan for the benefit of directors and employees of the Bank (the “2005 Plan”). The 2005 Plan was assumed by the Company in 2016 at the time of the bank holding company reorganization. Under the 2005 Plan, the Bank was authorized to grant options to purchase up to 770,000 shares of the Company’s common stock.  

The exercise prices of the options may not be less than 100 percent of the fair value of the Company’s common stock at the date of grant. The options, when granted, vest either immediately or ratably over five years from the date of the grant and expire after ten years if not exercised. The 2005 plan was expired in 2015 and no share is available for grant.

A summary of the transactions under the 2005 Plan for the nine months ended September 30, 2019 is as follows:

				Weighted
	Number of			Average		Aggregate
	Options			Exercise		Intrinsic
	Outstanding			Price		Value
	(Dollars in thousands, except per share data)
Outstanding, as of January 1, 2019		250,000		$	4.00
Options granted		—			—
Options exercised		(95,000	)		2.20
Options forfeited		—			—
Options expired		—			—
Outstanding, as of September 30, 2019		155,000			4.70	$	787
Fully vested and expected to vest		155,000			4.70	$	787
Vested		155,000		$	4.70	$	787

Information related to the 2005 Plan for the periods indicated follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
	(Dollars in thousands)
Intrinsic value of options exercised	$	206	$	234	$	593	$	487
Cash received from option exercises		72		119		179		195
Tax benefit realized from option exercised		5		—		5		—

The weighted average remaining contractual term of stock options outstanding under the 2005 Plan at September 30, 2019 was 2.77 years. The weighted average remaining contractual term of stock options that were exercisable at September 30, 2019 was 2.77 years. All of the stock options that are outstanding under the 2005 Plan were fully vested as of September 30, 2019.

2010 Plan: In 2010, the Board of Directors of the Bank approved a new equity incentive plan for granting stock options and restricted stock awards to key employees, officers, and non-employee directors of the Bank (the “2010 Plan”). In 2013, the 2010 Plan was amended and approved by the shareholders to increase the number of shares authorized to be issued under from 1,350,000 shares of common stock to 2,500,000 shares of common stock. The 2010 Plan was assumed by the Company in 2016 at the time of the bank holding company reorganization.

The exercise prices of stock options granted under the plan may not be less than 100% of the fair value of the Company’s stock at the date of grant. The options, when granted, vest ratably over five years from the date of the grant and expire after ten years if not exercised. There were no stock options granted under the 2010 Plan during the nine months ended September 30, 2019 or 2018.

Restricted stock awards issued under the 2010 Plan may or may not be subject to vesting provisions. Awards which were granted in the nine months ended September 30, 2019 and 2018 vest at the end of three years from the date of the grant. In the nine months ended September 30, 2019 and 2018, 3,000 shares were granted at weighted average fair value of $8.15 and 148,000 shares were granted at weighted average fair value of $12.7, respectively. Owners of the restricted stock awards shall have all of the rights of a shareholder including the right to vote the shares and to all dividends (cash or stock). Compensation expense related to restricted stock awards will be recognized over the vesting period of the awards based on the fair value of the Company’s common stock at the issue date.

A summary of stock options outstanding under the 2010 Plan for the nine months ended September 30, 2019 is as follows:

				Weighted
	Number of			Average		Aggregate
	Options			Exercise		Intrinsic
	Outstanding			Price		Value
	(Dollars in thousands, except per share data)
Outstanding, as of January 1, 2019		620,000		$	4.57
Options granted		—			—
Options exercised		(165,000	)		1.12
Options forfeited		—			—
Options expired		—			—
Outstanding, as of September 30, 2019		455,000			5.20	$	2,085
Fully vested and expected to vest		440,000			5.10	$	2,058
Vested		395,000		$	4.77	$	1,978

Information related to stock options exercised under the 2010 Plan for the periods indicated follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
	(Dollars in thousands)
Intrinsic value of options exercised	$	—	$	—	$	1,090	$	876
Cash received from option exercises		—		—		185		319
Tax benefit realized from option exercised		—		—		285		160

The weighted average remaining contractual term of stock options outstanding under the 2010 Plan at September 30, 2019 was 2.59 years. The weighted average remaining contractual term of stock options that were exercisable at September 30, 2019 was 2.30 years.

A summary of the changes in the Company’s non-vested restricted stock awards under the 2010 Plan for the nine months ended September 30, 2019 is as follows:

	Shares Issued			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
	(Dollars in thousands, except share data)
Non-vested, as of January 1, 2019		436,000		$	8.19
Awards granted		3,000			8.15
Awards vested		(141,500	)		5.91
Awards forfeited		(8,000	)		10.10
Non-vested, as of September 30, 2019		289,500		$	9.25	$	2,831

Information related to non-vested restricted stock awards under the 2010 Plan for the periods indicated follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
	(Dollars in thousands)
Tax benefit realized from awards vested	$	141	$	272	$	144	$	285

There were 95,427 shares available for grant under the 2010 Plan as of September 30, 2019 (in either stock options or restricted stock awards). As of September 30, 2019, the Company had approximately $1.9 million of unrecognized compensation cost related to unvested stock options and restricted stock awards under the 2010 Plan. The Company expects to recognize these costs over a weighted average period of 1.20 years.

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Deposits

9 Months Ended

Sep. 30, 2019

Banking And Thrift [Abstract]

Deposits

Note 8. Deposits

The scheduled maturities of time deposits were as follows as of September 30, 2019:

	September 30, 2019
	(Dollars in thousands)
2019 remaining	$	124,973
2020		288,900
2021		5,458
2022		972
2023		724
Thereafter		121
Total	$	421,148

Deposits from principal officers, directors, and their affiliates as of September 30, 2019 and December 31, 2018 were $1.10 million and $778,000, respectively.

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Business Description

9 Months Ended

Sep. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Business Description

Note 1. Business Description

OP Bancorp (the “Company”) is a California corporation whose common stock is quoted on the Nasdaq Global Market under the ticker symbol, “OPBK.” The Company was formed to acquire 100% of the voting equity of Open Bank (the “Bank”) and commenced operation as a bank holding company on June 1, 2016. This transaction was treated as an internal reorganization as all shareholders of the Bank became shareholders of the Company. The Company has no operations other than ownership of the Bank. The Bank is a California state-chartered and FDIC-insured financial institution, which began its operations on June 10, 2005. Headquartered in downtown Los Angeles, California, the Company operates primarily in the traditional banking business arena that includes accepting deposits and making loans and investments. The Company’s primary deposit products are demand and time deposits, and the primary lending products are commercial business loans to small to medium sized businesses. The Company is operating with nine full service branches, eight of which are located in California, in Downtown Los Angeles, Los Angeles Fashion District, Los Angeles Koreatown, Gardena, Buena Park and Santa Clara. The Company opened a ninth full service branch in Carrollton, Texas in April, 2019. The Company also has four loan production offices in Atlanta, Georgia, Aurora, Colorado, and Lynwood and Seattle, Washington.

On March 27, 2018, the Company completed its initial public offering of common stock, pursuant to which an aggregate of 2,300,000 shares of its common stock were sold at a public offering price of $11.00 per share, for aggregate net proceeds of approximately $22.6 million, after deducting underwriter discounts and commissions paid by it of approximately $1.7 million and other offering expenses of approximately $925,000.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Loans receivable, allowance	$ 9,640	$ 9,636
Cash, FDIC insured amount	$ 250,000	$ 250,000
Preferred stock, par value
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares, issued	15,711,580	15,860,306
Common stock, shares, outstanding	15,711,580	15,860,306

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Loans

9 Months Ended

Sep. 30, 2019

Receivables [Abstract]

Loans

Note 4. Loans

The composition of the loan portfolio was as follows at September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
	(Dollars in thousands)
Real estate:
Commercial real estate	$	594,447		$	503,834
SBA loans—real estate		124,963			117,834
Total real estate		719,410			621,668
SBA loans—non-real estate		11,269			9,541
Commercial and industrial		107,730			113,975
Home mortgage		123,092			127,298
Consumer		2,869			2,577
Gross loans receivable		964,370			875,059
Allowance for loan losses		(9,640	)		(9,636	)
Loans receivable, net	$	954,730		$	865,423

No loans were outstanding to related parties as of September 30, 2019 or December 31, 2018.

The activity in the allowance for loan losses for the three and nine months ended September 30, 2019 and 2018 was as follows:

					SBA
	Commercial		SBA Loans		Loans Non-			Commercial			Home
	Real Estate		Real Estate		Real Estate			and Industrial			Mortgage		Consumer			Total
	(Dollars in thousands)
Three months ended September    30, 2019:
Beginning balance	$	5,554	$	933	$	119		$	1,266		$	1,609	$	44		$	9,525
Provision for loan losses		102		—		(2	)		171			26		(7	)		290
Charge-offs		—		—		—			(175	)		—		—			(175	)
Recoveries		—		—		—			—			—		—			—
Ending balance	$	5,656	$	933	$	117		$	1,262		$	1,635	$	37		$	9,640
Three months ended September    30, 2018:
Beginning balance	$	4,804	$	978	$	536		$	1,877		$	1,489	$	39		$	9,723
Provision for loan losses		271		30		89			43			12		(6	)		439
Charge-offs		—		—		(57	)		(565	)		—		—			(622	)
Recoveries		—		—		6			5			—		—			11
Ending balance	$	5,075	$	1,008	$	574		$	1,360		$	1,501	$	33		$	9,551

						SBA
	Commercial		SBA Loans			Loans Non-			Commercial			Home
	Real Estate		Real Estate			Real Estate			and Industrial			Mortgage			Consumer			Total
	(Dollars in thousands)
Nine months ended September    30, 2019:
Beginning balance	$	4,805	$	894		$	505		$	1,746		$	1,653		$	33		$	9,636
Provision for loan losses		851		59			(388	)		184			(18	)		3			691
Charge-offs		—		(20	)		—			(668	)		—			—			(688	)
Recoveries		—		—			—			—			—			1			1
Ending balance	$	5,656	$	933		$	117		$	1,262		$	1,635		$	37		$	9,640
Nine months ended September     30, 2018:
Beginning balance	$	4,801	$	1,082		$	538		$	1,265		$	1,408		$	45		$	9,139
Provision for loan losses		274		(74	)		112			654			93			(12	)		1,047
Charge-offs		—		—			(85	)		(565	)		—			—			(650	)
Recoveries		—		—			9			6			—			—			15
Ending balance	$	5,075	$	1,008		$	574		$	1,360		$	1,501		$	33		$	9,551

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment as of September 30, 2019 and December 31, 2018:

	Loans Individually Evaluated for Impairment		Loans Collectively Evaluated for Impairment		Total
As of September 30, 2019:	(Dollars in thousands)
Allowance for loan losses:
Commercial real estate	$	—	$	5,656	$	5,656
SBA loans—real estate		—		933		933
SBA loans—non-real estate		—		117		117
Commercial and industrial		336		926		1,262
Home mortgage		—		1,635		1,635
Consumer		—		37		37
Total	$	336	$	9,304	$	9,640
Loans:
Commercial real estate	$	—	$	595,903	$	595,903
SBA loans—real estate		488		125,085		125,573
SBA loans—non-real estate		36		11,295		11,331
Commercial and industrial		336		107,646		107,982
Home mortgage		—		123,581		123,581
Consumer		—		2,875		2,875
Total	$	860	$	966,385	$	967,245
As of December 31, 2018:
Allowance for loan losses:
Commercial real estate	$	—	$	4,805	$	4,805
SBA loans—real estate		—		894		894
SBA loans—non-real estate		362		143		505
Commercial and industrial		836		910		1,746
Home mortgage		—		1,653		1,653
Consumer		—		33		33
Total	$	1,198	$	8,438	$	9,636
Loans:
Commercial real estate	$	—	$	505,229	$	505,229
SBA loans—real estate		834		117,159		117,993
SBA loans—non-real estate		57		9,875		9,932
Commercial and industrial		1,516		112,781		114,297
Home mortgage		—		127,806		127,806
Consumer		—		2,586		2,586
Total	$	2,407	$	875,436	$	877,843

The following table presents information related to impaired loans by class of loans as of and for the three and nine months ended September 30, 2019 and 2018. The difference between the unpaid principal balance (net of partial charge-offs) and the recorded investment in the loans is not considered to be material. The difference between interest income recognized and cash basis interest recognized was immaterial.

					Average		Interest
	Recorded		Allowance		Recorded		Income
	Investment		Allocated		Investment		Recognized
As of and for the three months ended September 30, 2019:	(Dollars in thousands)
With no related allowance recorded:
SBA loans—real estate	$	488	$	—	$	493	$	—
SBA loans—non-real estate		36		—		28		—
With an allowance recorded:
Commercial and industrial		336		336		337		5
Total	$	860	$	336	$	858	$	5
As of and for the three months ended September 30, 2018:
With no related allowance recorded:
SBA loans—real estate	$	134	$	—	$	138	$	—
Commercial and industrial		748		—		749		11
With an allowance recorded:
SBA loans—non-real estate		434		434		434		—
Commercial and industrial		345		345		348		5
Total	$	1,661	$	779	$	1,669	$	16

					Average		Interest
	Recorded		Allowance		Recorded		Income
	Investment		Allocated		Investment		Recognized
As of and for the nine months ended September 30, 2019:	(Dollars in thousands)
With no related allowance recorded:
SBA loans—real estate	$	488	$	—	$	505	$	—
SBA loans—non-real estate		36		—		46		—
With an allowance recorded:
Commercial and industrial		336		336		339		15
Total	$	860	$	336	$	890	$	15
As of and for the nine months ended September 30, 2018:
With no related allowance recorded:
Home mortgage	$	134	$	—	$	137	$	—
Consumer		748		—		749		33
With an allowance recorded:
SBA loans—non-real estate		434		434		443		—
Commercial and industrial		345		345		350		14
Total	$	1,661	$	779	$	1,679	$	47

The following table presents the recorded investment in nonaccrual loans and loans past due greater than 90 days still accruing interest, by class of loans, as of September 30, 2019 and December 31, 2018:

	Nonaccrual		Loans >90 Days Past Due & Still Accruing		Total
As of September 30, 2019:	(Dollars in thousands)
SBA loans—real estate	$	488	$	—	$	488
SBA loans—non-real estate		36		—		36
Commercial and industrial		710		—		710
Total	$	1,234	$	—	$	1,234
As of December 31, 2018:
SBA loans—real estate	$	834	$	—	$	834
SBA loans—non-real estate		57		—		57
Commercial and industrial		680		—		680
Total	$	1,571	$	—	$	1,571

Nonaccrual loans and loans past due greater than 90 days still accruing interest include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table represents the aging of the recorded investment in past due loans as of September 30, 2019 and December 31, 2018:

	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
As of September 30, 2019:	(Dollars in thousands)
Commercial real estate	$	472	$	—	$	—	$	472	$	595,431	$	595,903
SBA—real estate		1,293		580		—		1,873		123,700		125,573
SBA—non-real estate		3		—		—		3		11,328		11,331
Commercial and industrial		374		—		—		374		107,608		107,982
Home mortgage		437		—		710		1,147		122,434		123,581
Consumer		—		—		—		—		2,875		2,875
	$	2,579	$	580	$	710	$	3,869	$	963,376	$	967,245
As of December 31, 2018:
Commercial real estate	$	—	$	—	$	—	$	—	$	505,229	$	505,229
SBA—real estate		—		—		311		311		117,682		117,993
SBA—non-real estate		—		—		—		—		9,932		9,932
Commercial and industrial		—		—		680		680		113,617		114,297
Home mortgage		449		—		—		449		127,357		127,806
Consumer		—		—		—		—		2,586		2,586
	$	449	$	—	$	991	$	1,440	$	876,403	$	877,843

Troubled Debt Restructurings: As of September 30, 2019 and December 31, 2018, the Company had a recorded investment in troubled debt restructurings of $336,000 and $343,000, respectively. As of September 30, 2019 and December 31, 2018, the Company has allocated $336,000 and $343,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings, respectively. The Company has not committed to lend any additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

Modifications made were primarily extensions of existing payment modifications on loans previously identified as troubled debt restructurings. There were no new loans identified as trouble debt restructurings during the three and nine months ended September 30, 2019 or 2018. There were no payment defaults during the three and nine months ended September 30, 2019 or 2018 of loans that had been modified as troubled debt restructurings within the previous twelve months.

Credit Quality Indicators: The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. For consumer loans, a credit grade is established at inception, and generally only adjusted based on performance. The Company analyzes loans individually by classifying the loans according to their credit risk. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention—Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard—Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful—Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

As of September 30, 2019 and December 31, 2018, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Pass		Special Mention		Substandard		Doubtful		Total
As of September 30, 2019:	(Dollars in thousands)
Commercial real estate	$	595,903	$	—	$	—	$	—	$	595,903
SBA loans—real estate		122,553		773		2,247		—		125,573
SBA loans—non-real estate		11,281		14		36		—		11,331
Commercial and industrial		106,379		893		710		—		107,982
Home mortgage		123,325		—		256		—		123,581
Consumer		2,875		—		—		—		2,875
	$	962,316	$	1,680	$	3,249	$	—	$	967,245
As of December 31, 2018:
Commercial real estate	$	505,229	$	—	$	—	$	—	$	505,229
SBA loans—real estate		115,993		—		2,000		—		117,993
SBA loans—non-real estate		9,859		16		57		—		9,932
Commercial and industrial		112,781		—		1,516		—		114,297
Home mortgage		127,806		—		—		—		127,806
Consumer		2,586		—		—		—		2,586
	$	874,254	$	16	$	3,573	$	—	$	877,843

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Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

2005 Plan

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Summary of Stock-based Compensation Stock Options Activity

A summary of the transactions under the 2005 Plan for the nine months ended September 30, 2019 is as follows:

				Weighted
	Number of			Average		Aggregate
	Options			Exercise		Intrinsic
	Outstanding			Price		Value
	(Dollars in thousands, except per share data)
Outstanding, as of January 1, 2019		250,000		$	4.00
Options granted		—			—
Options exercised		(95,000	)		2.20
Options forfeited		—			—
Options expired		—			—
Outstanding, as of September 30, 2019		155,000			4.70	$	787
Fully vested and expected to vest		155,000			4.70	$	787
Vested		155,000		$	4.70	$	787

Summary of Information Related to Stock Option Plan

Information related to the 2005 Plan for the periods indicated follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
	(Dollars in thousands)
Intrinsic value of options exercised	$	206	$	234	$	593	$	487
Cash received from option exercises		72		119		179		195
Tax benefit realized from option exercised		5		—		5		—

2010 Plan

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Summary of Stock-based Compensation Stock Options Activity

A summary of stock options outstanding under the 2010 Plan for the nine months ended September 30, 2019 is as follows:

				Weighted
	Number of			Average		Aggregate
	Options			Exercise		Intrinsic
	Outstanding			Price		Value
	(Dollars in thousands, except per share data)
Outstanding, as of January 1, 2019		620,000		$	4.57
Options granted		—			—
Options exercised		(165,000	)		1.12
Options forfeited		—			—
Options expired		—			—
Outstanding, as of September 30, 2019		455,000			5.20	$	2,085
Fully vested and expected to vest		440,000			5.10	$	2,058
Vested		395,000		$	4.77	$	1,978

Summary of Information Related to Stock Option Plan

Information related to stock options exercised under the 2010 Plan for the periods indicated follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
	(Dollars in thousands)
Intrinsic value of options exercised	$	—	$	—	$	1,090	$	876
Cash received from option exercises		—		—		185		319
Tax benefit realized from option exercised		—		—		285		160

Summary of Changes in Non-vested Restricted Stock Awards

A summary of the changes in the Company’s non-vested restricted stock awards under the 2010 Plan for the nine months ended September 30, 2019 is as follows:

	Shares Issued			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
	(Dollars in thousands, except share data)
Non-vested, as of January 1, 2019		436,000		$	8.19
Awards granted		3,000			8.15
Awards vested		(141,500	)		5.91
Awards forfeited		(8,000	)		10.10
Non-vested, as of September 30, 2019		289,500		$	9.25	$	2,831

2010 Plan | Restricted Stock Awards

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Summary of Information Related to Non-vested Restricted Stock Awards

Information related to non-vested restricted stock awards under the 2010 Plan for the periods indicated follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018
	(Dollars in thousands)
Tax benefit realized from awards vested	$	141	$	272	$	144	$	285

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Business Description - Additional Information (Details)		3 Months Ended	9 Months Ended
	Mar. 27, 2018 USD ($) $ / shares shares	Mar. 31, 2018 shares	Sep. 30, 2019 Branch Office
Business Description [Line Items]
Operations commenced date			Jun. 01, 2016
Number of full service branches | Branch			9
Number of loan production offices | Office			4
Common Stock
Business Description [Line Items]
Stock issued under stock offering, net of expenses, shares | shares		2,300,000
Proceeds from issuance initial public offering	$ 22,600,000
Initial Public Offering | Common Stock
Business Description [Line Items]
Stock issued under stock offering, net of expenses, shares | shares	2,300,000
Stock price per shre | $ / shares	$ 11.00
Payments for underwriting discounts and commissions	$ 1,700,000
Payments of stock offering expenses	$ 925,000
Open Bank
Business Description [Line Items]
Percentage of voting equity interests acquired			100.00%
Operations commenced date			Jun. 10, 2005

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Leases - Summary of Rent Commitments Related to Lease (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Leases [Abstract]
2019	$ 1,709
2020	1,757
2021	1,742
2022	1,685
2023	1,455
Thereafter	2,669
Total	$ 11,017

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Leases - Additional Information (Details) - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jan. 01, 2019
Lessee Lease Description [Line Items]
Remaining operating lease terms		6 years		6 years
Operating lease liabilities	[1]	$ 10,335,000		$ 10,335,000
Operating right-of-use assets	[1]	8,606,000		8,606,000
Operating lease rent expense		$ 655,000	$ 545,000	$ 1,800,000	$ 1,600,000
ASU 2016-02
Lessee Lease Description [Line Items]
Lease renewal term		5 years		5 years
Operating lease, existence of option to terminate [true false]				true
Operating lease, Option to terminate description				Certain lease arrangements contain extension option which are typically around 5 years.
Operating lease liabilities						$ 9,900,000
Operating right-of-use assets		$ 8,606,000		$ 8,606,000		$ 8,000,000
ASU 2016-02 | Minimum
Lessee Lease Description [Line Items]
Remaining operating lease terms		1 year		1 year
ASU 2016-02 | Maximum
Lessee Lease Description [Line Items]
Remaining operating lease terms		10 years		10 years

[1] The adoption of ASU 2016-02, Leases (Topic 842) in the first quarter of 2019 resulted in the recognition of right-of-use assets and lease liabilities on balance sheet.

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Employee Benefit Plan - Additional Information (Details) - 401 (k) Plan - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Defined Contribution Plan Disclosure [Line Items]
Eligibility age of employees for plan	21 years
Employee minimum service period	90 days
Employer contribution amount	$ 449,000	$ 356,000

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Fair Value of Financial Instruments - Carrying Amounts and Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Financial Assets:
Cash and cash equivalents	$ 89,107	$ 77,726
Loans held for sale	397	806
Loans receivable, net	980,317	862,394
Accrued interest receivable	3,140	3,068
Financial Liabilities:
Deposit	997,256	904,466
Accrued interest payable	2,541	1,715
Carrying Amount
Financial Assets:
Cash and cash equivalents	89,107	77,726
Loans held for sale	368	752
Loans receivable, net	954,730	865,423
Accrued interest receivable	3,140	3,068
Financial Liabilities:
Deposit	995,993	905,176
Accrued interest payable	2,541	1,715
Level 1
Financial Assets:
Cash and cash equivalents	89,107	77,726
Accrued interest receivable	19	44
Level 2
Financial Assets:
Loans held for sale	397	806
Accrued interest receivable	246	240
Financial Liabilities:
Deposit	997,256	904,466
Accrued interest payable	2,541	1,715
Level 3
Financial Assets:
Loans receivable, net	980,317	862,394
Accrued interest receivable	$ 2,875	$ 2,784

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Earnings Per Share - Additional Information (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings Per Share [Abstract]
Antidilutive shares of common stock excluded from computation of earnings per share	0	0	0	0

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Borrowing Arrangements

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Borrowing Arrangements

Note 9. Borrowing arrangements

As of September 30, 2019, the Company had no borrowings from the Federal Home Loan Bank of San Francisco.The Company has a letter of credit with the FHLB in the amount of $49,000,000 to secure a public deposit.

The Company had available borrowings from the following institutions as of September 30, 2019:

	September 30, 2019
	(Dollars in thousands)
Federal Home Loan Bank—San Francisco	$	232,865
Federal Reserve Bank		120,289
Pacific Coast Bankers Bank		8,000
Zions Bank		5,500
Total	$	366,654

The Company has pledged approximately $811.5 million of loans as collateral for these lines of credit as of September 30, 2019.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)		Sep. 30, 2018 USD ($)
Cash flows from operating activities
Net income	$ 12,576		$ 10,489
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Provision for loan losses	691		1,047
Depreciation and amortization of premises and equipment	835		762
Amortization of net premiums on securities	183		183
Stock-based compensation	905		606
Gain on sales of loans	(4,379)		(3,852)
Earnings on company owned life insurance (COLI)	(1,445)		(231)
Origination of loans held for sale	(63,204)		(51,051)
Proceeds from sales of loans held for sale	66,415		65,769
Amortization of servicing assets	1,581		1,295
Net change in fair value of equity investment with readily determinable fair value	(137)
Net change in:
Accrued interest receivable	(73)		(319)
Deferred tax assets	1,313		(874)
Other assets	129		(2,402)
Accrued interest payable	826		772
Other liabilities	(307)		1,177
Net cash from operating activities	15,909		23,371
Cash flows from investing activities
Net change in loans receivable	(91,815)		(102,630)
Proceeds from matured, called, or paid-down securities available for sale	9,006		4,845
Proceeds from COLI	2,288
Purchase of securities available for sale	(4,989)		(13,262)
Purchase of equity investments	(1,000)
Purchase of premises and equipment, net	(1,569)		(1,039)
Purchase of other investments	(776)		(416)
Net cash from investing activities	(88,855)		(112,502)
Cash flows from financing activities
Net change in deposits	90,817		123,585
Cash received from stock option exercises	364		514
Repayment of Federal Home Loan Bank advances			(25,000)
Issuance of common stock, net of expenses			22,569
Repurchase of common stock	(4,488)
Cash dividend paid on common stock	(2,366)
Net cash from financing activities	84,327		121,668
Net change in cash and cash equivalents	11,381		32,537
Cash and cash equivalents at beginning of period	77,726		63,250
Cash and cash equivalents at end of period	89,107		95,787
Supplemental cash flow information
Income taxes	3,465		5,379
Interest	10,056		5,444
Supplemental noncash disclosure:
Transfer from loan receivable to OREO	1,817
The adoption of ASU 2016-02, leases (Topic 842) recognition right-of-use assets	8,606	[1]
Transfer from securities available for sale to other investments			$ 2,486
ASU 2016-02
Supplemental noncash disclosure:
The adoption of ASU 2016-02, leases (Topic 842) recognition right-of-use assets	$ 8,606

[1] The adoption of ASU 2016-02, Leases (Topic 842) in the first quarter of 2019 resulted in the recognition of right-of-use assets and lease liabilities on balance sheet.

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CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands		Sep. 30, 2019	Dec. 31, 2018
ASSETS
Cash and cash equivalents		$ 89,107	$ 77,726
Securities available for sale, at fair value		52,295	55,336
Other investments		9,173	7,260
Loans held for sale		368	752
Loans receivable, net of allowance of $9,640 at September 30, 2019 and $9,636 at December 31, 2018		954,730	865,423
Premises and equipment, net		5,367	4,633
Accrued interest receivable		3,140	3,068
Servicing assets		6,959	6,987
Company owned life insurance (COLI)		10,551	11,394
Deferred tax assets		2,358	3,672
Other real estate owned (OREO)		1,817
Operating right-of-use assets	[1]	8,606
Other assets		7,463	7,935
Total assets		1,151,934	1,044,186
Deposits:
Noninterest bearing		296,831	285,132
Interest bearing:
Savings		3,316	3,421
Money market and others		274,698	261,349
Time deposits greater than $250,000		219,547	164,281
Other time deposits		201,601	190,993
Total deposits		995,993	905,176
Accrued interest payable		2,541	1,715
Operating lease liabilities	[1]	10,335
Other liabilities		5,472	7,508
Total liabilities		1,014,341	914,399
Shareholders’ equity
Preferred stock – no par value; 10,000,000 shares authorized; no shares issued or outstanding at September 30, 2019 and December 31, 2018
Common stock – no par value; 50,000,000 shares authorized; 15,711,580 and 15,860,306 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		87,085	91,209
Additional paid-in capital		7,154	6,249
Retained earnings		43,086	32,877
Accumulated other comprehensive loss		268	(548)
Total shareholders’ equity		137,593	129,787
Total liabilities and shareholders' equity		$ 1,151,934	$ 1,044,186

[1] The adoption of ASU 2016-02, Leases (Topic 842) in the first quarter of 2019 resulted in the recognition of right-of-use assets and lease liabilities on balance sheet.

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Note 5. Leases

On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), using the optional transition method permitted by ASU No. 2018-11, Leases (Topic 842): Targeted Improvements.

The Company’s operating leases are real estate leases which are comprised of its headquarters and office facilities from nonaffiliated parties with remaining lease terms ranging from 1 to 10 years as of September 30, 2019. Certain lease arrangements contain extension option which are typically around 5 years. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term.

At September 30, 2019, operating right-of-use (“ROU”) assets and related liabilities were $8.6 million and $10.3 million, respectively. Short-term operating leases, which are defined as leases with term of twelve months or less, were not recognized as ROU assets with related lease liabilities as permitted under ASU No. 2016-02. The lease payments on short-term operating leases are immaterial. The Company did not have any finance leases at September 30, 2019.

Operating lease ROU assets represent the Company’s right to use the underlying asset during the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at the lease commencement based on the present value of the remaining lease payments using the Company’s incremental borrowing rate at the lease commencement date. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term and is recorded in occupancy expense in the consolidated statements of income. The Company’s occupancy expense also includes variable lease costs which is comprised of the Company's share of actual costs for utilities, common area maintenance, property taxes, and insurance that are not included in lease liabilities and are expensed as incurred. Variable lease costs can also include rent escalations based on changes to indices, such as the Consumer Price Index, where the Company estimates future rent increases and records the actual difference to variable costs.

The table below summarized the Company’s total lease cost:

	Three Months Ended		Nine Months Ended
(Dollars in thousands)	September 30, 2019		September 30, 2019
Operating lease cost	$	444	$	1,287
Variable lease cost		211		548
Total lease cost	$	655	$	1,835

The table below summarizes other information related to the Company’s operating leases:

	Three Months Ended		Nine Months Ended
(Dollars in thousands)	September 30, 2019		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	493	$	1,408
Weighted average remaining lease term - operating leases			6.0 years
Weighted average discount rate - operating leases				2.98	%

Rent expense was $655,000 and $545,000 for the three months ended September 30, 2019 and 2018, respectively, and $1.8 million and $1.6 million for the nine months ended September 30, 2019 and 2018, respectively.

The table below summarizes the remaining contractually obligated lease payments and a reconciliation to the lease liability reported on the consolidated balance sheet as of September 30, 2019:

(Dollars in thousands)	September 30, 2019
2019 remaining	$	301
2020		2,002
2021		2,032
2022		2,028
2023		1,816
Thereafter		3,343
Total lease payments		11,522
Discount to present value		(1,187	)
Total lease liability	$	10,335

Rent commitments related to the lease of the Company’s main office and branch facilities, before considering renewal options and additional lessor charges as of December 31, 2018, were as follows:

(Dollars in thousands)	December 31, 2018
2019	$	1,709
2020		1,757
2021		1,742
2022		1,685
2023		1,455
Thereafter		2,669
Total	$	11,017

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Employee Benefit Plan

9 Months Ended

Sep. 30, 2019

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plan

Note 13. Employee Benefit Plan

The Company established a 401(k) profit sharing plan (the “401(k) Plan”) which is open to all eligible employees who are at least 21 years old and have completed 90 days of service. Each employee is allowed to contribute to the 401(k) Plan up to the maximum percentage allowable, not to exceed the limits of applicable IRS Code Sections. Each year, the Company may, in its discretion, make matching contributions to the 401(k) Plan. Total employer contributions to the 401(k) Plan amounted to $449,000 and $356,000 for the nine months ended September 30, 2019 and 2018, respectively.

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Summary of Distribution of Undisbursed Loan Commitments

The following table shows the distribution of undisbursed loan commitments as of the dates indicated:

	September 30, 2019		December 31, 2018
	(Dollars in thousands)
Commitments to extend credit	$	76,094	$	60,789
Standby letter of credit		3,983		1,790
Commercial letter of credit		973		1,209
Total undisbursed loan commitments	$	81,050	$	63,788

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

The factors used in the earnings per share computation follow:

	Three Months Ended
	September 30,
(Dollars in thousands, except share data)	2019			2018
Basic
Net income	$	4,000		$	3,481
Undistributed earnings allocated to participating securities		(81	)		(107	)
Net income allocated to common shares		3,919			3,374
Weighted average common shares outstanding		15,768,654			15,714,226
Basic earnings per common share	$	0.25		$	0.22
Diluted
Net income allocated to common shares	$	3,918		$	3,375
Weighted average common shares outstanding for basic earnings per common share		15,768,654			15,714,226
Add: Dilutive effects of assumed exercises of stock options		238,832			520,700
Average shares and dilutive potential common shares		16,007,486			16,234,926
Diluted earnings per common share	$	0.24		$	0.21

	Nine Months Ended
	September 30,
(Dollars in thousands, except share data)	2019			2018
Basic
Net income	$	12,576		$	10,489
Undistributed earnings allocated to participating securities		(309	)		(320	)
Net income allocated to common shares		12,267			10,169
Weighted average common shares outstanding		15,756,886			14,870,232
Basic earnings per common share	$	0.78		$	0.68
Diluted
Net income allocated to common shares	$	12,267		$	10,169
Weighted average common shares outstanding for basic earnings per common share		15,756,886			14,870,232
Add: Dilutive effects of assumed exercises of stock options		235,129			506,750
Average shares and dilutive potential common shares		15,992,015			15,376,982
Diluted earnings per common share	$	0.77		$	0.66

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Premises and Equipment - Schedule of Premises and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Property Plant And Equipment [Line Items]
Total cost	$ 11,989	$ 10,420
Accumulated depreciation	(6,622)	(5,787)
Net book value	5,367	4,633
Leasehold Improvements
Property Plant And Equipment [Line Items]
Total cost	6,505	5,518
Furniture and Fixtures
Property Plant And Equipment [Line Items]
Total cost	3,155	2,791
Equipment and Others
Property Plant And Equipment [Line Items]
Total cost	$ 2,329	$ 2,111

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Leases - Summary of Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Leases [Abstract]
Operating lease cost	$ 444	$ 1,287
Variable lease cost	211	548
Total lease cost	$ 655	$ 1,835

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Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Basic
Net income	$ 4,000	$ 3,836	$ 4,740	$ 3,481	$ 3,791	$ 3,216	$ 12,576	$ 10,489
Undistributed earnings allocated to participating securities	(81)			(107)			(309)	(320)
Net income allocated to common shares	$ 3,919			$ 3,374			$ 12,267	$ 10,169
Weighted average common shares outstanding	15,768,654			15,714,226			15,756,886	14,870,232
Basic earnings per common share	$ 0.25			$ 0.22			$ 0.78	$ 0.68
Diluted
Net income allocated to common shares	$ 3,918			$ 3,375			$ 12,267	$ 10,169
Weighted average common shares outstanding	15,768,654			15,714,226			15,756,886	14,870,232
Add: Dilutive effects of assumed exercises of stock options	238,832			520,700			235,129	506,750
Average shares and dilutive potential common shares	16,007,486			16,234,926			15,992,015	15,376,982
Diluted earnings per common share	$ 0.24			$ 0.21			$ 0.77	$ 0.66

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Stock-based Compensation - Summary of Changes in Non-vested Restricted Stock Awards (Details) - 2010 Plan - Restricted Stock Awards - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares issued, Non-vested beginning of period	436,000
Shares issued, Awards granted	3,000	148,000
Shares issued, Awards vested	(141,500)
Shares issued, Awards forfeited	(8,000)
Shares issued, Non-vested end of period	289,500
Weighted average grant date fair value, Non-vested beginning of period	$ 8.19
Weighted average grant date fair value, Awards granted	8.15
Weighted average grant date fair value, Awards vested	5.91
Weighted average grant date fair value, Awards forfeited	10.10
Weighted average grant date fair value, Non-vested end of period	$ 9.25
Aggregate intrinsic value, Non-vested end of year	$ 2,831

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Fair Value of Financial Instruments - Additional Information (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018
Fair Value Disclosures [Abstract]
Fair value assets transfers between level 1 to level 2	$ 0		$ 0
Fair value liabilities transfers between level 1 to level 2	0		$ 0
Other assets measured at fair value	0	$ 0
Liabilities measured at fair value	$ 0	$ 0

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Securities - Schedule of Securities With Unrealized Losses (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Schedule Of Available For Sale Securities [Line Items]
Fair Value, Less Than 12 Months	$ 4,316	$ 6,557
Unrealized Losses, Less Than 12 Months	(14)	(49)
Fair Value, 12 Months or Longer	11,448	32,370
Unrealized Losses, 12 Months or Longer	(62)	(885)
Total Fair Value	15,764	38,927
Total Unrealized Losses	(76)	(934)
U.S. Government Sponsored Agency Securities
Schedule Of Available For Sale Securities [Line Items]
Fair Value, Less Than 12 Months	1,000
Fair Value, 12 Months or Longer	3,992	6,906
Unrealized Losses, 12 Months or Longer	(6)	(88)
Total Fair Value	4,992	6,906
Total Unrealized Losses	(6)	(88)
Mortgage-backed Securities, Residential
Schedule Of Available For Sale Securities [Line Items]
Fair Value, Less Than 12 Months	1,176	3,209
Unrealized Losses, Less Than 12 Months		(23)
Fair Value, 12 Months or Longer	3,442	10,920
Unrealized Losses, 12 Months or Longer	(24)	(313)
Total Fair Value	4,618	14,129
Total Unrealized Losses	(24)	(336)
Collateralized Mortgage Obligations
Schedule Of Available For Sale Securities [Line Items]
Fair Value, Less Than 12 Months	2,140	3,348
Unrealized Losses, Less Than 12 Months	(14)	(26)
Fair Value, 12 Months or Longer	4,014	14,544
Unrealized Losses, 12 Months or Longer	(32)	(484)
Total Fair Value	6,154	17,892
Total Unrealized Losses	$ (46)	$ (510)

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Loans - Schedule of Activity in Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance	$ 9,525	$ 9,723	$ 9,636	$ 9,139
Provision for loan losses	290	439	691	1,047
Charge-offs	(175)	(622)	(688)	(650)
Recoveries		11	1	15
Ending balance	9,640	9,551	9,640	9,551
Commercial Real Estate
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance	5,554	4,804	4,805	4,801
Provision for loan losses	102	271	851	274
Ending balance	5,656	5,075	5,656	5,075
SBA Loans-Real Estate
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance	933	978	894	1,082
Provision for loan losses		30	59	(74)
Charge-offs			(20)
Ending balance	933	1,008	933	1,008
SBA Loans—Non-Real Estate
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance	119	536	505	538
Provision for loan losses	(2)	89	(388)	112
Charge-offs		(57)		(85)
Recoveries		6		9
Ending balance	117	574	117	574
Commercial and Industrial
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance	1,266	1,877	1,746	1,265
Provision for loan losses	171	43	184	654
Charge-offs	(175)	(565)	(668)	(565)
Recoveries		5		6
Ending balance	1,262	1,360	1,262	1,360
Home Mortgage
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance	1,609	1,489	1,653	1,408
Provision for loan losses	26	12	(18)	93
Ending balance	1,635	1,501	1,635	1,501
Consumer
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning balance	44	39	33	45
Provision for loan losses	(7)	(6)	3	(12)
Recoveries			1
Ending balance	$ 37	$ 33	$ 37	$ 33

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Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Income tax expense	$ 1,237,000	$ 1,144,000	$ 3,984,000	$ 3,781,000
Effective income tax rate	23.60%	24.70%	24.10%	26.50%
Unrealized tax benefits	$ 0	$ 0	$ 0	$ 0

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Deposits - Schedule of Maturities of Time Deposits (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Deposits [Abstract]
2019 remaining	$ 124,973
2020	288,900
2021	5,458
2022	972
2023	724
Thereafter	121
Total	$ 421,148

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Stock-based Compensation - Summary of Information Related to Stock Option Plan (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Cash received from option exercises			$ 364	$ 514
2005 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Intrinsic value of options exercised	$ 206	$ 234	593	487
Cash received from option exercises	72	119	179	195
Tax benefit realized from option exercised	5		5
2010 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Intrinsic value of options exercised			1,090	876
Cash received from option exercises			185	319
Tax benefit realized from option exercised			285	160
2010 Plan | Restricted Stock Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Tax benefit realized from awards vested	$ 141	$ 272	$ 144	$ 285

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Summary of Lease, Cost

The table below summarized the Company’s total lease cost:

	Three Months Ended		Nine Months Ended
(Dollars in thousands)	September 30, 2019		September 30, 2019
Operating lease cost	$	444	$	1,287
Variable lease cost		211		548
Total lease cost	$	655	$	1,835

Summary of Other Information Related to Operating Leases

The table below summarizes other information related to the Company’s operating leases:

	Three Months Ended		Nine Months Ended
(Dollars in thousands)	September 30, 2019		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	493	$	1,408
Weighted average remaining lease term - operating leases			6.0 years
Weighted average discount rate - operating leases				2.98	%

Summary of Remaining Contractually Obligated Lease Payments and Reconciliation to Lease liability

The table below summarizes the remaining contractually obligated lease payments and a reconciliation to the lease liability reported on the consolidated balance sheet as of September 30, 2019:

(Dollars in thousands)	September 30, 2019
2019 remaining	$	301
2020		2,002
2021		2,032
2022		2,028
2023		1,816
Thereafter		3,343
Total lease payments		11,522
Discount to present value		(1,187	)
Total lease liability	$	10,335

Summary of Rent Commitments Related to Lease

Rent commitments related to the lease of the Company’s main office and branch facilities, before considering renewal options and additional lessor charges as of December 31, 2018, were as follows:

(Dollars in thousands)	December 31, 2018
2019	$	1,709
2020		1,757
2021		1,742
2022		1,685
2023		1,455
Thereafter		2,669
Total	$	11,017

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Earnings Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Note 17. Earnings per Share

The two-class method is used in the calculation of basic and diluted earnings per share. Under the two-class method, earnings available to common shares are allocated between common shares and participating securities. The Company’s restricted stock awards are considered participating securities as the unvested awards have non-forfeitable rights to dividends, paid or unpaid, on unvested awards. The factors used in the earnings per share computation follow:

	Three Months Ended
	September 30,
(Dollars in thousands, except share data)	2019			2018
Basic
Net income	$	4,000		$	3,481
Undistributed earnings allocated to participating securities		(81	)		(107	)
Net income allocated to common shares		3,919			3,374
Weighted average common shares outstanding		15,768,654			15,714,226
Basic earnings per common share	$	0.25		$	0.22
Diluted
Net income allocated to common shares	$	3,918		$	3,375
Weighted average common shares outstanding for basic earnings per common share		15,768,654			15,714,226
Add: Dilutive effects of assumed exercises of stock options		238,832			520,700
Average shares and dilutive potential common shares		16,007,486			16,234,926
Diluted earnings per common share	$	0.24		$	0.21

	Nine Months Ended
	September 30,
(Dollars in thousands, except share data)	2019			2018
Basic
Net income	$	12,576		$	10,489
Undistributed earnings allocated to participating securities		(309	)		(320	)
Net income allocated to common shares		12,267			10,169
Weighted average common shares outstanding		15,756,886			14,870,232
Basic earnings per common share	$	0.78		$	0.68
Diluted
Net income allocated to common shares	$	12,267		$	10,169
Weighted average common shares outstanding for basic earnings per common share		15,756,886			14,870,232
Add: Dilutive effects of assumed exercises of stock options		235,129			506,750
Average shares and dilutive potential common shares		15,992,015			15,376,982
Diluted earnings per common share	$	0.77		$	0.66

No shares of common stock were antidilutive for the three and nine months ended September 30, 2019, and for the three months and nine months ended September 30, 2018.

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Deposits (Tables)

9 Months Ended

Sep. 30, 2019

Banking And Thrift [Abstract]

Schedule of Maturities of Time Deposits

The scheduled maturities of time deposits were as follows as of September 30, 2019:

	September 30, 2019
	(Dollars in thousands)
2019 remaining	$	124,973
2020		288,900
2021		5,458
2022		972
2023		724
Thereafter		121
Total	$	421,148

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018 are summarized below:

			Fair Value Measuring Using
			Quoted		Significant Other		Significant
			Prices in		Observable		Unobservable
	Total		Active Markets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
As of September 30, 2019:
U.S. Government sponsored agency securities	$	5,992	$	—	$	5,992	$	—
Mortgage-backed securities - residential		12,197		—		12,197		—
Collateralized mortgage obligations		34,106		—		34,106		—
Other investments:
Mutual fund - CRA qualified		3,625		3,625		—		—
As of December 31, 2018:
U.S. Government sponsored agency securities	$	6,906	$	—	$	6,906	$	—
Mortgage-backed securities - residential		14,129		—		14,129		—
Collateralized mortgage obligations		34,301		—		34,301		—
Other investments:
Mutual fund - CRA qualified		2,488		2,488		—		—

Summary of Carrying Amounts and Estimated Fair Values of Financial Instruments Not Carried at Fair Value

Financial Instruments: The carrying amounts and estimated fair values of financial instruments not carried at fair value as of September 30, 2019 are as follows:

	Carrying Amount		Level 1		Level 2		Level 3		Value
As of September 30, 2019:	(Dollars in thousands)
Financial Assets:
Cash and cash equivalents	$	89,107	$	89,107	$	—	$	—	$	89,107
Loans held for sale		368		—		397		—		397
Loans receivable, net		954,730		—		—		980,317		980,317
Accrued interest receivable		3,140		19		246		2,875		3,140
Financial Liabilities:
Deposit	$	995,993	$	—	$	997,256	$	—	$	997,256
Accrued interest payable		2,541		—		2,541		—		2,541

The carrying amounts and estimated fair values of financial instruments not carried at fair value at December 31, 2018 are as follows:

	Carrying Amount		Level 1		Level 2		Level 3		Value
As of December 31, 2018:	(Dollars in thousands)
Financial Assets:
Cash and cash equivalents	$	77,726	$	77,726	$	—	$	—	$	77,726
Loans held for sale		752		—		806		—		806
Loans receivable, net		865,423		—		—		862,394		862,394
Accrued interest receivable		3,068		44		240		2,784		3,068
Financial Liabilities:
Deposit	$	905,176	$	—	$	904,466	$	—	$	904,466
Accrued interest payable		1,715		—		1,715		—		1,715

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($)		Jan. 02, 2019	Sep. 30, 2019	Jan. 01, 2019
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Operating lease liabilities	[1]		$ 10,335,000
Operating right-of-use assets	[1]		8,606,000
ASU 2016-02
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Operating lease liabilities				$ 9,900,000
Operating right-of-use assets			$ 8,606,000	$ 8,000,000
Cumulative-effect adjustment to retained earnings		$ 0

[1] The adoption of ASU 2016-02, Leases (Topic 842) in the first quarter of 2019 resulted in the recognition of right-of-use assets and lease liabilities on balance sheet.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 11. Commitments and Contingencies

Off-Balance-Sheet Credit Risk: The commitments and contingent liabilities include various commitments to extend credit and standby letters of credit, which arise in the normal course of business. Commitments to extend credit are legally binding loan commitments with set expiration dates. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. They are intended to be disbursed, subject to certain conditions, upon request of the borrower.

The Company evaluates the creditworthiness of each customer. Collateral, if deemed necessary by the Company upon the extension of credit, is obtained based on management’s evaluation of the borrower. Collateral for commercial and industrial loans may vary, but may include securities, accounts receivable, inventory, property, plant and equipment, and income producing commercial or other properties. The following table shows the distribution of undisbursed loan commitments as of the dates indicated:

	September 30, 2019		December 31, 2018
	(Dollars in thousands)
Commitments to extend credit	$	76,094	$	60,789
Standby letter of credit		3,983		1,790
Commercial letter of credit		973		1,209
Total undisbursed loan commitments	$	81,050	$	63,788

The majority of these off-balance sheet commitments have a variable interest rate. Management does not anticipate any material losses as a result of these transactions.

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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Interest income
Interest and fees on loans	$ 14,278	$ 12,524	$ 41,725	$ 35,042
Interest on investment securities	332	249	1,019	645
Other interest income	502	233	1,333	561
Total interest income	15,112	13,006	44,077	36,248
Interest expense
Interest on deposits	3,893	2,477	10,883	6,071
Interest on borrowed funds		44		146
Total interest expense	3,893	2,521	10,883	6,217
Net interest income	11,219	10,485	33,194	30,031
Provision for loan losses	290	439	691	1,047
Net interest income after provision for loan losses	10,929	10,046	32,503	28,984
Noninterest income
Service charges on deposits	469	484	1,495	1,419
Loan servicing fees, net of amortization	243	310	853	1,006
Gain on sale of loans	1,714	1,135	4,379	3,852
Other income	306	355	2,185	1,002
Total noninterest income	2,732	2,284	8,912	7,279
Noninterest expense
Salaries and employee benefits	5,349	4,803	15,862	13,629
Occupancy and equipment	1,232	976	3,441	3,065
Data processing and communication	385	320	1,110	948
Professional fees	261	294	711	612
FDIC insurance and regulatory assessments	(21)	106	188	306
Promotion and advertising	182	222	543	598
Directors’ fees	228	216	680	633
Foundation donation and other contributions	402	369	1,169	1,084
Other expenses	406	399	1,151	1,118
Total noninterest expense	8,424	7,705	24,855	21,993
Income before income taxes	5,237	4,625	16,560	14,270
Income tax expense	1,237	1,144	3,984	3,781
Net income	$ 4,000	$ 3,481	$ 12,576	$ 10,489
Earnings per share - Basic	$ 0.25	$ 0.22	$ 0.78	$ 0.68
Earnings per share - Diluted	$ 0.24	$ 0.21	$ 0.77	$ 0.66
Other comprehensive income (loss):
Change in unrealized income (loss) on securities available for sale	$ 119	$ (257)	$ 1,158	$ (863)
Tax effect	(35)	76	(342)	180
Total other comprehensive income (loss)	84	(181)	816	(683)
Comprehensive income	$ 4,084	$ 3,300	$ 13,392	$ 9,806

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Servicing Assets

9 Months Ended

Sep. 30, 2019

Servicing Asset [Abstract]

Servicing Assets

Note 7. Servicing Assets

Activity for loan servicing assets during the three and nine months ended September 30, 2019 and 2018 is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
		2019			2018			2019			2018
	(Dollars in thousands)
Beginning balance	$	6,996		$	6,994		$	6,987		$	6,771
Additions		552			588			1,553			1,621
Amortized to expense		(589	)		(485	)		(1,581	)		(1,295	)
Ending balance	$	6,959		$	7,097		$	6,959		$	7,097

There was no valuation allowance recorded against the carrying value of the servicing assets as of September 30, 2019 or 2018.

The fair value of the servicing assets was $8.3 million at September 30, 2019, which was determined using discount rates ranging from 1.8% to 10.0% and prepayment speeds ranging from 13.4% to 14.6%, depending on the stratification of the specific assets.

The fair value of the servicing assets was $8.6 million at September 30, 2018, which was determined using discount rates ranging from 4.7% to 11.0% and prepayment speeds ranging from 11.4% to 13.3%, depending on the stratification of the specific assets.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited consolidated financial statements and notes thereto of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form 10-Q and conform to practices within the banking industry and include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair presentation of financial results for the interim periods presented, including eliminating intercompany transactions and balances. The results of operations for the interim periods are not necessarily indicative of the results for the full year. These interim unaudited financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2018, included in the Companys’ Annual Report on Form 10-K for the year ended December 31, 2018.

Use of Estimates:  To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Concentration of Risk:  Most of the Company’s customers are located within Los Angeles County and the surrounding area. The concentration of loans originated in this area may subject the Company to the risk of adverse impacts of economic, regulatory or other developments that could occur in Southern California.  The Company has significant concentration in commercial real estate loans. The Company obtains what it believes to be sufficient collateral to secure potential losses. The extent and value of the collateral obtained varies based upon the details underlying each loan agreement.

Reclassifications:  Some items in the prior period financial statements were reclassified to conform to the current presentation.  Reclassification had no effect on prior year net income or shareholders’ equity.

There has been no significant or material changes to the Company’s accounting policies during the three months ended September 30, 2019, as compared to the Summary of Significant Accounting Policies as described in “Note 2 of the Notes to Consolidated Financial Statements” in the Company’s unaudited consolidated financial statements included in its Quarterly Report on Form 10-Q for the period ended June 30, 2019.

Recent Accounting Pronouncements:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). The objective of ASU 2016-13 is to provide financial statement users with decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit. ASU 2016-13 includes provisions that require financial assets measured at amortized cost (such as loans and held to maturity (HTM) debt securities) to be presented at the net amount expected to be collected. This will be accomplished through recognition of an estimate of all current expected credit losses. The estimate will include forecasted information for the timeframe that an entity is able to develop reasonable and supportable forecasts. This is a change from the current practice of recognizing incurred losses based on the probable initial recognition threshold under current GAAP. In addition, credit losses on available for sale (AFS) debt securities will be recorded through an allowance for credit losses rather than as a write-down. Under ASU 2016-13, an entity will be able to record reversals of credit losses in current period income when the estimate of credit losses declines, whereas current GAAP prohibits reflecting those improvements in current period earnings.

ASU 2016-13 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019, initially, and early adoption is permitted for fiscal years, including interim periods, beginning after December 15, 2018. ASU 2016-13 will be applied through a cumulative effect adjustment to retained earnings (modified-retrospective approach), except for debt securities for which an other-than-temporary impairment had been recognized before the effective date. A prospective transition approach is required for these debt securities. The Company is currently evaluating the effects of ASU 2016-13 on its financial statements and disclosures, including software solutions, data requirements and loss estimation methodologies. The company has engaged a third party advisor to develop a new expected loss model. While the effects cannot yet be quantified, the Company expects ASU 2016-13 to add complexity and costs to its current credit loss evaluation process. On July 2019, FASB proposed the effective date delay to January 2020 for SEC filers, excluding smalller reporting companies (SRCs), and January 2023 for all other entities including SRCs, and on October 2019, FASB voted to approve the proposed delay. The Board will draft a final ASU for vote by written ballot. The Compnay expects the adoption date would be January 2023.  

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”. ASU 2018-13 adds, modifies, and removes disclosure requirements for fair value measurements. ASU 2018-13 is effective annual periods in fiscal years beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted upon the issuance of ASU 2018-13. The Company does not expect this ASU to have a material impact on its financial statements and disclosures.

In February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842).  Under the new guidance, lessees will be required to recognize the following for all leases, with the exception of short-term leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Under the new guidance, lessor accounting is largely unchanged. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements.  ASU No. 2018-10 provides improvements related to ASU No. 2016-02 to increase stakeholders’ awareness of the amendments and to expedite the improvements.  The amendments affect narrow aspects of the guidance issued in ASU No. 2016-02.  ASU No. 2018-11 allows entities adopting ASU No. 2016-02 to choose an additional (and optional) transition method, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.  ASU No. 2018-11 also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met.  The amendments in these updates become effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The Company elected the optional transition method permitted by ASU No. 2018-11.  Under this method, an entity shall recognize and measure leases that exist at the application date and prior comparative periods are not adjusted.  In addition, the Company elected to adopt the package of practical expedients to leases that commenced before the effective date: (1) an entity need not reassess whether any expired or existing contracts contain leases; (2) an entity need not reassess the lease classification for any expired or existing leases; and, (3) an entity need not reassess initial direct costs for any existing leases. The Company also elected the practical expedient, which must be applied consistently to all leases, to use hindsight in determining the lease term and in assessing impairment of our right-of-use assets.  We also elected to adopt a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under Topic 840 contain a lease under this Topic. At the adoption date, the Company reported a lease liability of approximately $9.9 million, a right-of-use asset of approximately $8.0 million, and no cumulative-effect adjustment to retained earnings. See Note 5, “Leases” for further details.

In March 2017, the FASB issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20) (ASU 2017-08). ASU 2017-08 amends the amortization period for certain purchased callable debt securities held at a premium. Prior to the issuance of this guidance, premiums were amortized as an adjustment of yield over the contractual life of the instrument. ASU 2017-08 requires premiums on purchased callable debt securities that have explicit, noncontingent call features that are callable at fixed prices to be amortized to the earliest call date. There are no accounting changes for securities held at a discount. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted. ASU 2017-08 will be applied through a cumulative effect adjustment through equity (modified-retrospective approach). The Company did not have callable debt securities held at a premium at December 31, 2018 or September 30, 2019.

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Revenue Recognition - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Service charges on deposits	$ 469,000	$ 484,000	$ 1,495,000	$ 1,419,000
Noninterest income	$ 2,732,000	$ 2,284,000	8,912,000	7,279,000
Service Fees and Transaction-Based Fees Income
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Service charges on deposits			$ 545,000	$ 558,000
Percentage on revenue			1.30%	1.50%
Overdraft and NSF Fees Income
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Service charges on deposits			$ 707,000	$ 861,000
Percentage on revenue			1.70%	2.30%
Wire Transfer Fee Income
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Percentage on revenue			0.60%	0.70%
Noninterest income			$ 243,000	$ 243,000

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Regulatory Capital Matters - Additional Information (Details)	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2016
Regulatory Capital Requirements [Abstract]
Capital conservation buffer	2.50%	0.625%
Capital conservation buffer, percentage of annual increase until 2019	0.625%

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Servicing Assets - Schedule of Activity for Loan Servicing Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Servicing Asset [Abstract]
Beginning balance	$ 6,996	$ 6,994	$ 6,987	$ 6,771
Additions	552	588	1,553	1,621
Amortized to expense	(589)	(485)	(1,581)	(1,295)
Ending balance	$ 6,959	$ 7,097	$ 6,959	$ 7,097

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Leases - Summary of Remaining Contractually Obligated Lease Payments and Reconciliation to Lease liability (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Leases [Abstract]
2019 remaining	$ 301
2020	2,002
2021	2,032
2022	2,028
2023	1,816
Thereafter	3,343
Total lease payments	11,522
Discount to present value	(1,187)
Total lease liability	$ 10,335	[1]

[1] The adoption of ASU 2016-02, Leases (Topic 842) in the first quarter of 2019 resulted in the recognition of right-of-use assets and lease liabilities on balance sheet.

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Loans - Schedule of Risk Category of Loans by Class of Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Financing Receivable Recorded Investment [Line Items]
Total	$ 967,245	$ 877,843
Commercial Real Estate
Financing Receivable Recorded Investment [Line Items]
Total	595,903	505,229
SBA Loans-Real Estate
Financing Receivable Recorded Investment [Line Items]
Total	125,573	117,993
SBA Loans—Non-Real Estate
Financing Receivable Recorded Investment [Line Items]
Total	11,331	9,932
Commercial and Industrial
Financing Receivable Recorded Investment [Line Items]
Total	107,982	114,297
Home Mortgage
Financing Receivable Recorded Investment [Line Items]
Total	123,581	127,806
Consumer
Financing Receivable Recorded Investment [Line Items]
Total	2,875	2,586
Pass
Financing Receivable Recorded Investment [Line Items]
Total	962,316	874,254
Pass | Commercial Real Estate
Financing Receivable Recorded Investment [Line Items]
Total	595,903	505,229
Pass | SBA Loans-Real Estate
Financing Receivable Recorded Investment [Line Items]
Total	122,553	115,993
Pass | SBA Loans—Non-Real Estate
Financing Receivable Recorded Investment [Line Items]
Total	11,281	9,859
Pass | Commercial and Industrial
Financing Receivable Recorded Investment [Line Items]
Total	106,379	112,781
Pass | Home Mortgage
Financing Receivable Recorded Investment [Line Items]
Total	123,325	127,806
Pass | Consumer
Financing Receivable Recorded Investment [Line Items]
Total	2,875	2,586
Special Member
Financing Receivable Recorded Investment [Line Items]
Total	1,680	16
Special Member | SBA Loans-Real Estate
Financing Receivable Recorded Investment [Line Items]
Total	773
Special Member | SBA Loans—Non-Real Estate
Financing Receivable Recorded Investment [Line Items]
Total	14	16
Special Member | Commercial and Industrial
Financing Receivable Recorded Investment [Line Items]
Total	893
Substandard
Financing Receivable Recorded Investment [Line Items]
Total	3,249	3,573
Substandard | SBA Loans-Real Estate
Financing Receivable Recorded Investment [Line Items]
Total	2,247	2,000
Substandard | SBA Loans—Non-Real Estate
Financing Receivable Recorded Investment [Line Items]
Total	36	57
Substandard | Commercial and Industrial
Financing Receivable Recorded Investment [Line Items]
Total	710	$ 1,516
Substandard | Home Mortgage
Financing Receivable Recorded Investment [Line Items]
Total	$ 256

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Stock-based Compensation - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2013	Dec. 31, 2012
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense	$ 189,000	$ 167,000	$ 905,000	$ 606,000
2005 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation shares authorized under stock option plans	770,000		770,000
Percent of the fair value options granted			100.00%
Shares available for grant	0		0
Weighted average remaining contractual term stock options outstanding			2 years 9 months 7 days
Weighted average remaining contractual life for options exercisable			2 years 9 months 7 days
2005 Plan | Employee Stock Option
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period			5 years
Stock options, when granted, expiration period			10 years
2010 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share-based compensation shares authorized under stock option plans	95,427		95,427		2,500,000	1,350,000
Percent of the fair value options granted			100.00%
Weighted average remaining contractual term stock options outstanding			2 years 7 months 2 days
Weighted average remaining contractual life for options exercisable			2 years 3 months 18 days
Number of options outstanding, Granted			0	0
Unrecognized compensation costs related to unvested stock options	$ 1,900,000		$ 1,900,000
Unrecognized compensation costs weighted average period			1 year 2 months 12 days
2010 Plan | Employee Stock Option
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period			5 years
Stock options, when granted, expiration period			10 years
2010 Plan | Restricted Stock Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period			3 years	3 years
Restricted stock awards granted			3,000	148,000
Weighted average fair value of Restricted shares granted			$ 8.15	$ 12.7

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Borrowing Arrangements - Additional Information (Details)	Sep. 30, 2019 USD ($)
Debt Disclosure [Abstract]
Federal home loan bank borrowings	$ 0
Letter of credit	49,000,000
Collateral pledged	$ 811,500,000

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Securities - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Schedule Of Available For Sale Securities [Line Items]
Proceeds from sale of available-for-sale securities	$ 0	$ 0	$ 0	$ 0
Other than temporary impairments unrealized losses on securities			0
Collateral Pledged
Schedule Of Available For Sale Securities [Line Items]
Number of securities pledged as collateral	$ 0		$ 0		$ 0
Stockholder's Equity | Credit Concentration Risk | Non-US Government and Agency Securities
Schedule Of Available For Sale Securities [Line Items]
Concentration risk, percentage			10.00%		10.00%

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Loans - Composition of Loan Portfolio (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable	$ 964,370	$ 875,059
Allowance for loan losses	(9,640)	(9,636)
Loans receivable, net	954,730	865,423
Real Estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable	719,410	621,668
Real Estate | Commercial Real Estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable	594,447	503,834
Real Estate | SBA Loans—Real Estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable	124,963	117,834
SBA Loans—Non-Real Estate
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable	11,269	9,541
Commercial and Industrial
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable	107,730	113,975
Home Mortgage
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable	123,092	127,298
Consumer
Loans And Leases Receivable Disclosure [Line Items]
Gross loans receivable	$ 2,869	$ 2,577

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Loans - Schedule of Information Related to Impaired Loans by Class of Loans (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Financing Receivable Impaired [Line Items]
Recorded investment	$ 860	$ 1,661	$ 860	$ 1,661
Allowance Allocated	336	779	336	779
Average Recorded Investment	858	1,669	890	1,679
Interest Income Recognized	5	16	15	47
SBA Loans—Real Estate
Financing Receivable Impaired [Line Items]
Recorded investment, With no related allowance recorded	488	134	488	134
Average Recorded Investment, With no related allowance recorded	493	138	505
SBA Loans-Non-Real Estate
Financing Receivable Impaired [Line Items]
Recorded investment, With no related allowance recorded	36	434	36	434
Allowance Allocated		434		434
Average Recorded Investment, With no related allowance recorded	28		46
Average Recorded Investment, With an allowance recorded		434		443
Commercial And Industrial
Financing Receivable Impaired [Line Items]
Recorded investment, With no related allowance recorded		748		748
Recorded investment, With an allowance recorded	336	345	336	345
Allowance Allocated	336	345	336	345
Average Recorded Investment, With no related allowance recorded		749
Average Recorded Investment, With an allowance recorded	337	348	339	350
Interest Income Recognized, With no related allowance recorded		11
Interest Income Recognized, With an allowance recorded	$ 5	5	$ 15	14
Home Mortgage
Financing Receivable Impaired [Line Items]
Recorded investment, With no related allowance recorded		134		134
Average Recorded Investment, With no related allowance recorded				137
Consumer
Financing Receivable Impaired [Line Items]
Recorded investment, With no related allowance recorded		$ 748		748
Average Recorded Investment, With no related allowance recorded				749
Interest Income Recognized, With no related allowance recorded				$ 33

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Servicing Assets (Tables)

9 Months Ended

Sep. 30, 2019

Servicing Asset [Abstract]

Schedule of Activity for Loan Servicing Assets

Activity for loan servicing assets during the three and nine months ended September 30, 2019 and 2018 is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
		2019			2018			2019			2018
	(Dollars in thousands)
Beginning balance	$	6,996		$	6,994		$	6,987		$	6,771
Additions		552			588			1,553			1,621
Amortized to expense		(589	)		(485	)		(1,581	)		(1,295	)
Ending balance	$	6,959		$	7,097		$	6,959		$	7,097

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Securities (Tables)

9 Months Ended

Sep. 30, 2019

Investments Debt And Equity Securities [Abstract]

Schedule of Amortized Cost, Fair Value, and the Corresponding Amounts of Gross Unrealized Gains and Losses

The following table summarizes the amortized cost, fair value, and the corresponding amounts of gross unrealized gains and losses for available for sale securities as of September 30, 2019 and December 31, 2018:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of September 30, 2019:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	5,998	$	—	$	(6	)	$	5,992
Mortgage-backed securities: residential		12,160		61		(24	)		12,197
Collateralized mortgage obligations: residential		33,757		395		(46	)		34,106
Total available for sale	$	51,915	$	456	$	(76	)	$	52,295

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of December 31, 2018:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	6,994	$	—	$	(88	)	$	6,906
Mortgage-backed securities: residential		14,465		—		(336	)		14,129
Collateralized mortgage obligations: residential		34,655		156		(510	)		34,301
Total available for sale	$	56,114	$	156	$	(934	)	$	55,336

Schedule of Amortized Cost and Estimated Fair Value of Securities Available for Sale

There were no sales of securities available for sale in the three or nine months ended September 30, 2019 or 2018. The amortized cost and estimated fair value of securities available for sale at September 30, 2019, by contractual maturity, are shown below. Securities without a contractual maturity are shown separately.

	Amortized Cost		Fair Value
As of September 30, 2019:	(Dollars in thousands)
Available for sale:
Within one year	$	3,998	$	3,995
One to five years		2,000		1,997
Mortgage-backed securities: residential		12,160		12,197
Collateralized mortgage obligations		33,757		34,106
Total available for sale	$	51,915	$	52,295

Schedule of Securities With Unrealized Losses

The following table summarizes securities with unrealized losses as of September 30, 2019 and December 31, 2018, aggregated by length of time in a continuous unrealized loss position:

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
As of September 30, 2019:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	1,000	$	—		$	3,992	$	(6	)	$	4,992	$	(6	)
Mortgage-backed securities: residential		1,176		—			3,442		(24	)		4,618		(24	)
Collateralized mortgage obligations		2,140		(14	)		4,014		(32	)		6,154		(46	)
Total available for sale	$	4,316	$	(14	)	$	11,448	$	(62	)	$	15,764	$	(76	)

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
As of December 31, 2018:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	—	$	—		$	6,906	$	(88	)	$	6,906	$	(88	)
Mortgage-backed securities: residential		3,209		(23	)		10,920		(313	)		14,129		(336	)
Collateralized mortgage obligations		3,348		(26	)		14,544		(484	)		17,892		(510	)
Total available for sale	$	6,557	$	(49	)	$	32,370	$	(885	)	$	38,927	$	(934	)

Schedule of Other Investments

Other investments as of September 30, 2019 and December 31, 2018, consisted of the following:

	September 30, 2019		December 31, 2018
	(Dollars in thousands)
FHLB stock	$	5,358	$	4,582
PCBB stock		190		190
Mutual fund - CRA qualified		3,625		2,488
Total other investments	$	9,173	$	7,260

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Note 15. Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1—Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2—Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value:

Securities Available for Sale: The fair values of investment securities are determined by matrix pricing, which is a mathematical technique used to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Management obtains the fair values of investment securities on a monthly basis from a third-party pricing service.

Other Investment: The Company has equity investment with readily determinable fair value. The fair value for the equity investment with readily determinable fair value is obtained from unadjusted quoted prices in active markets on the date of measurement and classified as Level 1.

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s judgment, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the credit department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.

Assets and liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018 are summarized below:

			Fair Value Measuring Using
			Quoted		Significant Other		Significant
			Prices in		Observable		Unobservable
	Total		Active Markets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
	(Dollars in thousands)
As of September 30, 2019:
U.S. Government sponsored agency securities	$	5,992	$	—	$	5,992	$	—
Mortgage-backed securities - residential		12,197		—		12,197		—
Collateralized mortgage obligations		34,106		—		34,106		—
Other investments:
Mutual fund - CRA qualified		3,625		3,625		—		—
As of December 31, 2018:
U.S. Government sponsored agency securities	$	6,906	$	—	$	6,906	$	—
Mortgage-backed securities - residential		14,129		—		14,129		—
Collateralized mortgage obligations		34,301		—		34,301		—
Other investments:
Mutual fund - CRA qualified		2,488		2,488		—		—

There were no transfers between Level 1 and Level 2 in the nine months ended September 30, 2019 or 2018. There were no other assets or liabilities, except OREO measured at fair value on a non-recurring basis as of September 30, 2019 or December 31, 2018. OREO is reported at fair value. The value was based on third party appraisal, which the Company classifies as a Level 3 nonrecurring fair value measurement.

Financial Instruments: The carrying amounts and estimated fair values of financial instruments not carried at fair value as of September 30, 2019 are as follows:

	Carrying Amount		Level 1		Level 2		Level 3		Value
As of September 30, 2019:	(Dollars in thousands)
Financial Assets:
Cash and cash equivalents	$	89,107	$	89,107	$	—	$	—	$	89,107
Loans held for sale		368		—		397		—		397
Loans receivable, net		954,730		—		—		980,317		980,317
Accrued interest receivable		3,140		19		246		2,875		3,140
Financial Liabilities:
Deposit	$	995,993	$	—	$	997,256	$	—	$	997,256
Accrued interest payable		2,541		—		2,541		—		2,541

The carrying amounts and estimated fair values of financial instruments not carried at fair value at December 31, 2018 are as follows:

	Carrying Amount		Level 1		Level 2		Level 3		Value
As of December 31, 2018:	(Dollars in thousands)
Financial Assets:
Cash and cash equivalents	$	77,726	$	77,726	$	—	$	—	$	77,726
Loans held for sale		752		—		806		—		806
Loans receivable, net		865,423		—		—		862,394		862,394
Accrued interest receivable		3,068		44		240		2,784		3,068
Financial Liabilities:
Deposit	$	905,176	$	—	$	904,466	$	—	$	904,466
Accrued interest payable		1,715		—		1,715		—		1,715

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Commitments and Contingencies - Summary of Distribution of Undisbursed Loan Commitments (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Undisbursed loan commitments	$ 81,050	$ 63,788
Commitments to Extend Credit
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Undisbursed loan commitments	76,094	60,789
Standby Letter of Credit
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Undisbursed loan commitments	3,983	1,790
Commercial Letter of Credit
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]
Undisbursed loan commitments	$ 973	$ 1,209

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Deposits - Additional Information (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Principal Officers, Directors, and Affiliates
Time Deposits [Line Items]
Deposits from principal officers, directors, and their affiliates	$ 1,100,000	$ 778,000

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Loans - Schedule of Recorded Investment in Nonaccrual Loans and Loans Past Due Greater Than 90 Days Still Accruing Interest by Class of Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Financing Receivable Recorded Investment Past Due [Line Items]
Nonaccrual	$ 1,234	$ 1,571
Total	1,234	1,571
SBA Loans—Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Nonaccrual	488	834
Total	488	834
SBA Loans-Non-Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Nonaccrual	36	57
Total	36	57
Commercial And Industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Nonaccrual	710	680
Total	$ 710	$ 680

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Securities - Schedule of Amortized Cost and Estimated Fair Value of Securities Available for Sale (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Schedule Of Available For Sale Securities [Line Items]
Within one year, Amortized Cost	$ 3,998
One to five years, Amortized Cost	2,000
Available for sale, Amortized Cost	51,915	$ 56,114
Within one year, Fair Value	3,995
One to five years, Fair Value	1,997
Available for sale, Fair Value	52,295	55,336
Mortgage-backed Securities, Residential
Schedule Of Available For Sale Securities [Line Items]
Available for sale, Amortized Cost	12,160	14,465
Available for sale, Fair Value	12,197	$ 14,129
Collateralized Mortgage Obligations
Schedule Of Available For Sale Securities [Line Items]
Available for sale, Amortized Cost	33,757
Available for sale, Fair Value	$ 34,106

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Loans - Additional Information (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($) Contract	Sep. 30, 2018 USD ($) Contract	Sep. 30, 2019 USD ($) Contract	Sep. 30, 2018 USD ($) Contract	Dec. 31, 2018 USD ($)
Accounts Notes Loans And Financing Receivable Gross Allowance And Net [Abstract]
Loans	$ 0		$ 0		$ 0
Recorded investment in troubled debt restructurings	336,000		336,000		343,000
Specific reserves to customers whose loan terms have been modified in troubled debt restructurings	$ 336,000		$ 336,000		$ 343,000
Loans identified as trouble debt restructurings | Contract	0	0	0	0
Financing receivable, modifications, subsequent default, recorded investment	$ 0	$ 0	$ 0	$ 0

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation: The accompanying unaudited consolidated financial statements and notes thereto of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form 10-Q and conform to practices within the banking industry and include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair presentation of financial results for the interim periods presented, including eliminating intercompany transactions and balances. The results of operations for the interim periods are not necessarily indicative of the results for the full year. These interim unaudited financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2018, included in the Companys’ Annual Report on Form 10-K for the year ended December 31, 2018.

Use of Estimates

Use of Estimates:  To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Concentration of Risk

Concentration of Risk:  Most of the Company’s customers are located within Los Angeles County and the surrounding area. The concentration of loans originated in this area may subject the Company to the risk of adverse impacts of economic, regulatory or other developments that could occur in Southern California.  The Company has significant concentration in commercial real estate loans. The Company obtains what it believes to be sufficient collateral to secure potential losses. The extent and value of the collateral obtained varies based upon the details underlying each loan agreement.

Reclassifications

Reclassifications:  Some items in the prior period financial statements were reclassified to conform to the current presentation.  Reclassification had no effect on prior year net income or shareholders’ equity.

There has been no significant or material changes to the Company’s accounting policies during the three months ended September 30, 2019, as compared to the Summary of Significant Accounting Policies as described in “Note 2 of the Notes to Consolidated Financial Statements” in the Company’s unaudited consolidated financial statements included in its Quarterly Report on Form 10-Q for the period ended June 30, 2019.

Recent Accounting Pronouncements

Recent Accounting Pronouncements:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). The objective of ASU 2016-13 is to provide financial statement users with decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit. ASU 2016-13 includes provisions that require financial assets measured at amortized cost (such as loans and held to maturity (HTM) debt securities) to be presented at the net amount expected to be collected. This will be accomplished through recognition of an estimate of all current expected credit losses. The estimate will include forecasted information for the timeframe that an entity is able to develop reasonable and supportable forecasts. This is a change from the current practice of recognizing incurred losses based on the probable initial recognition threshold under current GAAP. In addition, credit losses on available for sale (AFS) debt securities will be recorded through an allowance for credit losses rather than as a write-down. Under ASU 2016-13, an entity will be able to record reversals of credit losses in current period income when the estimate of credit losses declines, whereas current GAAP prohibits reflecting those improvements in current period earnings.

ASU 2016-13 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019, initially, and early adoption is permitted for fiscal years, including interim periods, beginning after December 15, 2018. ASU 2016-13 will be applied through a cumulative effect adjustment to retained earnings (modified-retrospective approach), except for debt securities for which an other-than-temporary impairment had been recognized before the effective date. A prospective transition approach is required for these debt securities. The Company is currently evaluating the effects of ASU 2016-13 on its financial statements and disclosures, including software solutions, data requirements and loss estimation methodologies. The company has engaged a third party advisor to develop a new expected loss model. While the effects cannot yet be quantified, the Company expects ASU 2016-13 to add complexity and costs to its current credit loss evaluation process. On July 2019, FASB proposed the effective date delay to January 2020 for SEC filers, excluding smalller reporting companies (SRCs), and January 2023 for all other entities including SRCs, and on October 2019, FASB voted to approve the proposed delay. The Board will draft a final ASU for vote by written ballot. The Compnay expects the adoption date would be January 2023.  

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”. ASU 2018-13 adds, modifies, and removes disclosure requirements for fair value measurements. ASU 2018-13 is effective annual periods in fiscal years beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted upon the issuance of ASU 2018-13. The Company does not expect this ASU to have a material impact on its financial statements and disclosures.

In February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842).  Under the new guidance, lessees will be required to recognize the following for all leases, with the exception of short-term leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.  Under the new guidance, lessor accounting is largely unchanged. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements.  ASU No. 2018-10 provides improvements related to ASU No. 2016-02 to increase stakeholders’ awareness of the amendments and to expedite the improvements.  The amendments affect narrow aspects of the guidance issued in ASU No. 2016-02.  ASU No. 2018-11 allows entities adopting ASU No. 2016-02 to choose an additional (and optional) transition method, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.  ASU No. 2018-11 also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met.  The amendments in these updates become effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The Company elected the optional transition method permitted by ASU No. 2018-11.  Under this method, an entity shall recognize and measure leases that exist at the application date and prior comparative periods are not adjusted.  In addition, the Company elected to adopt the package of practical expedients to leases that commenced before the effective date: (1) an entity need not reassess whether any expired or existing contracts contain leases; (2) an entity need not reassess the lease classification for any expired or existing leases; and, (3) an entity need not reassess initial direct costs for any existing leases. The Company also elected the practical expedient, which must be applied consistently to all leases, to use hindsight in determining the lease term and in assessing impairment of our right-of-use assets.  We also elected to adopt a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under Topic 840 contain a lease under this Topic. At the adoption date, the Company reported a lease liability of approximately $9.9 million, a right-of-use asset of approximately $8.0 million, and no cumulative-effect adjustment to retained earnings. See Note 5, “Leases” for further details.

In March 2017, the FASB issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20) (ASU 2017-08). ASU 2017-08 amends the amortization period for certain purchased callable debt securities held at a premium. Prior to the issuance of this guidance, premiums were amortized as an adjustment of yield over the contractual life of the instrument. ASU 2017-08 requires premiums on purchased callable debt securities that have explicit, noncontingent call features that are callable at fixed prices to be amortized to the earliest call date. There are no accounting changes for securities held at a discount. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018, and early adoption is permitted. ASU 2017-08 will be applied through a cumulative effect adjustment through equity (modified-retrospective approach). The Company did not have callable debt securities held at a premium at December 31, 2018 or September 30, 2019.

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Revenue Recognition

9 Months Ended

Sep. 30, 2019

Revenue From Contract With Customer [Abstract]

Revenue Recognition

Note 14. Revenue Recognition

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit, and investment securities, as well as revenue related to mortgage servicing activities and revenue on bank owned life insurance, as these activities are subject to other GAAP discussed elsewhere within the disclosures. Descriptions of the Company’s revenue-generating activities that are within the scope of ASC 606, which are presented in the Company’s income statements as components of noninterest income are as follows:

Service charges on deposits:  Income from service charges on deposits is within the scope of ASC 606. These include general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue on these types of fees are recognized when the Company’s performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed. Payment for such performance obligations are generally received at the time the performance obligations are satisfied. Total revenues from services charges on deposits in the nine months ended September 30, 2019 and 2018, on a dollar and percentage of total revenue basis was $545,000 or 1.3%, and $558,000 or 1.5%, respectively, of service charges on deposits is related to these revenue streams.  Service charges on deposits also include overdraft and NSF fees. Overdraft fees are charged when a depositor has a draw on their account that has inadequate funds.  In certain instances, the Company, at its sole discretion, may pay to the party requesting the draw on the deposit account, the balance of the draw for which there are inadequate funds rather than denying payment of the item. The Company then charges a fee for this short term extension of credit to the depositor for not complying with the balance requirements stipulated in the deposit agreement with the Bank, and as well as to cover the cost of advancing those funds. NSF fees are charged to customers when in the event of a draw on the customer's account that has insufficient funds to meet the payment of the draw (such as through written checks or ACH transactions), the Company returns the item rather than paying the balance of the draw for which the customer has inadequate funds.  This typically happens when the customer has fairly sizable draws or multiple draws on an account that has inadequate funds to meet the demands for payment. Total revenues from service charges on deposits from overdraft and NSF fees for the nine months ended September 30, 2019 and 2018, on a dollar and percentage of total revenue basis was $707,000, or 1.7%, and $861,000, or 2.3%, respectively.  

Wire transfer fee income: This revenue stream is generated through the processing of customers’ incoming and outgoing wire transfers. Income generated from wire transfer fees is within the scope of ASC 606 and approximately $243,000, or 0.6%, and $243,000, or 0.7% of total revenues for the nine months ended September 30, 2019 and 2018, respectively, is included in other income in noninterest income.

Other revenue streams that are recorded in other income in noninterest income include revenue generated from letters of credit and income on bank owned life insurance. These revenue streams are either not material or out of scope of ASC 606.

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Premises and Equipment (Tables)

9 Months Ended

Sep. 30, 2019

Property Plant And Equipment [Abstract]

Schedule of Premises and Equipment

The Company’s premises and equipment consisted of the following as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
	(Dollars in thousands)
Leasehold improvements	$	6,505		$	5,518
Furniture and fixtures		3,155			2,791
Equipment and others		2,329			2,111
Total cost		11,989			10,420
Accumulated depreciation		(6,622	)		(5,787	)
Net book value	$	5,367		$	4,633

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Securities - Schedule of Amortized Cost, Fair Value, and the Corresponding Amounts of Gross Unrealized Gains and Losses (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	$ 51,915	$ 56,114
Gross Unrealized Gains	456	156
Gross Unrealized Losses	(76)	(934)
Fair Value	52,295	55,336
U.S. Government Sponsored Agency Securities
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	5,998	6,994
Gross Unrealized Losses	(6)	(88)
Fair Value	5,992	6,906
Mortgage-backed Securities, Residential
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	12,160	14,465
Gross Unrealized Gains	61
Gross Unrealized Losses	(24)	(336)
Fair Value	12,197	14,129
Collateralized Mortgage Obligations, Residential
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	33,757	34,655
Gross Unrealized Gains	395	156
Gross Unrealized Losses	(46)	(510)
Fair Value	$ 34,106	$ 34,301

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Borrowing Arrangements (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Summary of Borrowings Available to the Company from Institutions

The Company had available borrowings from the following institutions as of September 30, 2019:

	September 30, 2019
	(Dollars in thousands)
Federal Home Loan Bank—San Francisco	$	232,865
Federal Reserve Bank		120,289
Pacific Coast Bankers Bank		8,000
Zions Bank		5,500
Total	$	366,654

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Regulatory Capital Matters (Tables)

9 Months Ended

Sep. 30, 2019

Regulatory Capital Requirements [Abstract]

Summary of Actual and Required Capital Amounts and Ratios, Exclusive of Capital Conservation Buffer

Actual and required capital amounts (in thousands) and ratios, exclusive of the capital conservation buffer, are presented below as of September 30, 2019 and December 31, 2018:

						Required for					Minimum
						Capital Adequacy					To be Considered
	Actual					Purposes					"Well Capitalized"
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2019:
Total capital (to risk-weighted assets)
Consolidated	$	146,641		15.36	%	N/A		N/A			N/A		N/A
Bank		143,407		15.03	%		76,332		8.00	%		95,415		10.00	%
Tier 1 capital (to risk-weighted assets)
Consolidated		136,922		14.35	%	N/A		N/A			N/A		N/A
Bank		133,688		14.01	%		57,249		6.00	%		76,332		8.00	%
Common equity Tier 1 capital (to risk-weighted    assets)
Consolidated		136,922		14.35	%	N/A		N/A			N/A		N/A
Bank		133,688		14.01	%		42,937		4.50	%		62,020		6.50	%
Tier 1 capital (to average assets)
Consolidated		136,922		12.11	%	N/A		N/A			N/A		N/A
Bank		133,688		11.83	%		45,212		4.00	%		56,515		5.00	%

						Required for					Minimum
						Capital Adequacy					To be Considered
	Actual					Purposes					"Well Capitalized"
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2018:
Total capital (to risk-weighted assets)
Consolidated	$	139,593		16.26	%	N/A		N/A			N/A		N/A
Bank		139,538		16.25	%		68,686		8.00	%		85,857		10.00	%
Tier 1 capital (to risk-weighted assets)
Consolidated		129,893		15.13	%	N/A		N/A			N/A		N/A
Bank		129,838		15.12	%		51,514		6.00	%		68,686		8.00	%
Common equity Tier 1 capital (to risk-weighted    assets)
Consolidated		129,893		15.13	%	N/A		N/A			N/A		N/A
Bank		129,838		15.12	%		38,636		4.50	%		55,807		6.50	%
Tier 1 capital (to average assets)
Consolidated		129,893		12.88	%	N/A		N/A			N/A		N/A
Bank		129,838		12.87	%		40,346		4.00	%		50,432		5.00	%

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Securities

9 Months Ended

Sep. 30, 2019

Investments Debt And Equity Securities [Abstract]

Securities

Note 3. Securities

The following table summarizes the amortized cost, fair value, and the corresponding amounts of gross unrealized gains and losses for available for sale securities as of September 30, 2019 and December 31, 2018:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of September 30, 2019:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	5,998	$	—	$	(6	)	$	5,992
Mortgage-backed securities: residential		12,160		61		(24	)		12,197
Collateralized mortgage obligations: residential		33,757		395		(46	)		34,106
Total available for sale	$	51,915	$	456	$	(76	)	$	52,295

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of December 31, 2018:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	6,994	$	—	$	(88	)	$	6,906
Mortgage-backed securities: residential		14,465		—		(336	)		14,129
Collateralized mortgage obligations: residential		34,655		156		(510	)		34,301
Total available for sale	$	56,114	$	156	$	(934	)	$	55,336

There were no sales of securities available for sale in the three or nine months ended September 30, 2019 or 2018. The amortized cost and estimated fair value of securities available for sale at September 30, 2019, by contractual maturity, are shown below. Securities without a contractual maturity are shown separately.

	Amortized Cost		Fair Value
As of September 30, 2019:	(Dollars in thousands)
Available for sale:
Within one year	$	3,998	$	3,995
One to five years		2,000		1,997
Mortgage-backed securities: residential		12,160		12,197
Collateralized mortgage obligations		33,757		34,106
Total available for sale	$	51,915	$	52,295

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At September 30, 2019 and December 31, 2018, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

The following table summarizes securities with unrealized losses as of September 30, 2019 and December 31, 2018, aggregated by length of time in a continuous unrealized loss position:

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
As of September 30, 2019:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	1,000	$	—		$	3,992	$	(6	)	$	4,992	$	(6	)
Mortgage-backed securities: residential		1,176		—			3,442		(24	)		4,618		(24	)
Collateralized mortgage obligations		2,140		(14	)		4,014		(32	)		6,154		(46	)
Total available for sale	$	4,316	$	(14	)	$	11,448	$	(62	)	$	15,764	$	(76	)

	Less Than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
As of December 31, 2018:	(Dollars in thousands)
Available for sale:
U.S. Government sponsored agency securities	$	—	$	—		$	6,906	$	(88	)	$	6,906	$	(88	)
Mortgage-backed securities: residential		3,209		(23	)		10,920		(313	)		14,129		(336	)
Collateralized mortgage obligations		3,348		(26	)		14,544		(484	)		17,892		(510	)
Total available for sale	$	6,557	$	(49	)	$	32,370	$	(885	)	$	38,927	$	(934	)

The Company believes that the unrealized losses are temporary, arising mainly from fluctuations in interest rates and do not reflect a deterioration of credit quality of the issuers. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The fair value is expected to recover as the securities approach maturity. Management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement, and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. As of September 30, 2019, management believes no securities with unrealized losses were OTTI.

There were no securities pledged as collateral as of September 30, 2019 or December 31, 2018.

Other investments as of September 30, 2019 and December 31, 2018, consisted of the following:

	September 30, 2019		December 31, 2018
	(Dollars in thousands)
FHLB stock	$	5,358	$	4,582
PCBB stock		190		190
Mutual fund - CRA qualified		3,625		2,488
Total other investments	$	9,173	$	7,260

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 10. Income Taxes

The Company’s income tax expense was $1.2 million and $1.1 million for the three months ended September 30, 2019 and 2018, respectively, and $4.0 million and $3.8 million for the nine months ended September 30, 2019 ad 2018, respectively. The effective income tax rate was 23.6% and 24.7% for the three months ended September 30, 2019 and 2018, respectively, and 24.1% and 26.5% for the nine months ended September 30, 2019 and 2018, respectively.

The Company is subject to U.S. Federal income tax as well as various state taxing jurisdictions. The Company is no longer subject to examination by Federal taxing authorities for tax years prior to 2016 and for state taxing authorities for tax years prior to 2015.

There were no significant unrealized tax benefits recorded as of September 30, 2019 and 2018, and the Company does not expect any significant increase in unrealized tax benefits in the next twelve months.

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Beginning balance at Dec. 31, 2017	$ 91,480	$ 67,926	$ 5,280	$ 18,624	$ (350)
Beginning balance, shares at Dec. 31, 2017		13,190,527
Net income	3,216			3,216
Stock issued under stock offering, net of expenses	22,637	$ 22,637
Stock issued under stock offering, net of expenses, shares		2,300,000
Stock issued under stock-based compensation plans	114	$ 114
Stock issued under stock-based compensation plans, shares		40,000
Stock-based compensation	246		246
Change in unrealized loss on securities available for sale net of reclassifications and tax effects	(433)				(433)
Ending balance at Mar. 31, 2018	117,260	$ 90,677	5,526	21,840	(783)
Ending balance, shares at Mar. 31, 2018		15,530,527
Beginning balance at Dec. 31, 2017	91,480	$ 67,926	5,280	18,624	(350)
Beginning balance, shares at Dec. 31, 2017		13,190,527
Net income	10,489
Ending balance at Sep. 30, 2018	124,975	$ 91,009	5,887	29,112	(1,033)
Ending balance, shares at Sep. 30, 2018		15,770,576
Beginning balance at Mar. 31, 2018	117,260	$ 90,677	5,526	21,840	(783)
Beginning balance, shares at Mar. 31, 2018		15,530,527
Net income	3,791			3,791
Stock issued under stock offering, net of expenses	(64)	$ (64)
Stock issued under stock-based compensation plans	281	$ 281
Stock issued under stock-based compensation plans, shares		98,688
Stock-based compensation	194		194
Change in unrealized loss on securities available for sale net of reclassifications and tax effects	(69)				(69)
Ending balance at Jun. 30, 2018	121,393	$ 90,894	5,720	25,631	(852)
Ending balance, shares at Jun. 30, 2018		15,629,215
Net income	3,481			3,481
Stock issued under stock offering, net of expenses	(4)	$ (4)
Stock issued under stock-based compensation plans	119	$ 119
Stock issued under stock-based compensation plans, shares		141,361
Stock-based compensation	167		167
Change in unrealized loss on securities available for sale net of reclassifications and tax effects	(181)				(181)
Ending balance at Sep. 30, 2018	124,975	$ 91,009	5,887	29,112	(1,033)
Ending balance, shares at Sep. 30, 2018		15,770,576
Beginning balance at Dec. 31, 2018	129,787	$ 91,209	6,249	32,877	(548)
Beginning balance, shares at Dec. 31, 2018		15,860,306
Net income	4,740			4,740
Stock issued under stock-based compensation plans	292	$ 292
Stock issued under stock-based compensation plans, shares		118,162
Stock-based compensation	377		377
Repurchase of common stock	(2,381)	$ (2,381)
Repurchase of common stock, shares		(258,885)
Cash dividends declared	(793)			(793)
Change in unrealized loss on securities available for sale net of reclassifications and tax effects	354				354
Ending balance at Mar. 31, 2019	132,376	$ 89,120	6,626	36,824	(194)
Ending balance, shares at Mar. 31, 2019		15,719,583
Beginning balance at Dec. 31, 2018	129,787	$ 91,209	6,249	32,877	(548)
Beginning balance, shares at Dec. 31, 2018		15,860,306
Net income	12,576
Ending balance at Sep. 30, 2019	137,593	$ 87,085	7,154	43,086	268
Ending balance, shares at Sep. 30, 2019		15,711,580
Beginning balance at Mar. 31, 2019	132,376	$ 89,120	6,626	36,824	(194)
Beginning balance, shares at Mar. 31, 2019		15,719,583
Net income	3,836			3,836
Stock issued under stock-based compensation plans, shares		77,809
Stock-based compensation	339		339
Repurchase of common stock	(665)	$ (665)
Repurchase of common stock, shares		(74,385)
Cash dividends declared	(782)			(782)
Change in unrealized loss on securities available for sale net of reclassifications and tax effects	378				378
Ending balance at Jun. 30, 2019	135,482	$ 88,455	6,965	39,878	184
Ending balance, shares at Jun. 30, 2019		15,723,007
Net income	4,000			4,000
Stock issued under stock-based compensation plans	72	$ 72
Stock issued under stock-based compensation plans, shares		145,190
Stock-based compensation	189		189
Repurchase of common stock	(1,442)	$ (1,442)
Repurchase of common stock, shares		(156,617)
Cash dividends declared	(792)			(792)
Change in unrealized loss on securities available for sale net of reclassifications and tax effects	84				84
Ending balance at Sep. 30, 2019	$ 137,593	$ 87,085	$ 7,154	$ 43,086	$ 268
Ending balance, shares at Sep. 30, 2019		15,711,580

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 08, 2019
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Trading Symbol	OPBK
Entity Registrant Name	OP Bancorp
Entity Central Index Key	0001722010
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Common Stock, Shares Outstanding		15,702,743
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	001-38437
Entity Tax Identification Number	81-3114676
Entity Address, Address Line One	1000 Wilshire Blvd.
Entity Address, Address Line Two	Suite 500
Entity Address, City or Town	Los Angeles
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90017
City Area Code	213
Local Phone Number	892-9999
Document Quarterly Report	true
Document Transition Report	false
Entity Incorporation, State or Country Code	CA
Title of 12(b) Security	Common Stock, no par value
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes

XML

Premises and Equipment

9 Months Ended

Sep. 30, 2019

Property Plant And Equipment [Abstract]

Premises and Equipment

Note 6. Premises and equipment

The Company’s premises and equipment consisted of the following as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018
	(Dollars in thousands)
Leasehold improvements	$	6,505		$	5,518
Furniture and fixtures		3,155			2,791
Equipment and others		2,329			2,111
Total cost		11,989			10,420
Accumulated depreciation		(6,622	)		(5,787	)
Net book value	$	5,367		$	4,633

Total depreciation expense included in occupancy and equipment expenses was $297,000 and $273,000 for the three months ended September 30, 2019 and 2018, respectively, and $835,000 and $762,000 for the nine months ended September 30, 2019 and 2018,respectively.

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Fair Value of Financial Instruments - Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other investments:
Mutual fund - CRA qualified	$ 3,625	$ 2,488
Fair Value, Measurements, Recurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
U.S. Government sponsored agency securities	5,992	6,906
Mortgage-backed securities - residential	12,197	14,129
Collateralized mortgage obligations	34,106	34,301
Other investments:
Mutual fund - CRA qualified	3,625	2,488
Fair Value, Measurements, Recurring | Quoted Prices in Active Markets (Level 1)
Other investments:
Mutual fund - CRA qualified	3,625	2,488
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
U.S. Government sponsored agency securities	5,992	6,906
Mortgage-backed securities - residential	12,197	14,129
Collateralized mortgage obligations	$ 34,106	$ 34,301

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Regulatory Capital Matters - Summary of Actual and Required Capital Amounts and Ratios, Exclusive of Capital Conservation Buffer (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Consolidated
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Total capital (to risk-weighted assets), Actual Amount	$ 146,641	$ 139,593
Tier 1 capital (to risk-weighted assets), Actual Amount	136,922	129,893
Common equity Tier 1 capital (to risk-weighted assets), Actual Amount	136,922	129,893
Tier 1 capital (to average assets), Actual Amount	$ 136,922	$ 129,893
Total capital (to risk-weighted assets), Actual Ratio	15.36%	16.26%
Tier 1 capital (to risk-weighted assets), Actual Ratio	14.35%	15.13%
Common equity Tier 1 capital (to risk-weighted assets), Actual Ratio	14.35%	15.13%
Tier 1 capital (to average assets), Actual Ratio	12.11%	12.88%
Bank
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Total capital (to risk-weighted assets), Actual Amount	$ 143,407	$ 139,538
Tier 1 capital (to risk-weighted assets), Actual Amount	133,688	129,838
Common equity Tier 1 capital (to risk-weighted assets), Actual Amount	133,688	129,838
Tier 1 capital (to average assets), Actual Amount	$ 133,688	$ 129,838
Total capital (to risk-weighted assets), Actual Ratio	15.03%	16.25%
Tier 1 capital (to risk-weighted assets), Actual Ratio	14.01%	15.12%
Common equity Tier 1 capital (to risk-weighted assets), Actual Ratio	14.01%	15.12%
Tier 1 capital (to average assets), Actual Ratio	11.83%	12.87%
Total capital (to risk-weighted assets), Amount, Required for Capital Adequacy Purposes	$ 76,332	$ 68,686
Tier 1 capital (to risk-weighted assets), Amount, Required for Capital Adequacy Purposes	57,249	51,514
Common equity Tier 1 capital (to risk-weighted assets), Amount, Required for Capital Adequacy Purposes	42,937	38,636
Tier 1 capital (to average assets), Amount, Required for Capital Adequacy Purposes	$ 45,212	$ 40,346
Total capital (to risk-weighted assets), Ratio, Required for Capital Adequacy Purposes	8.00%	8.00%
Tier 1 capital (to risk-weighted assets), Ratio, Required for Capital Adequacy Purposes	6.00%	6.00%
Common equity Tier 1 capital (to risk-weighted assets), Ratio, Required for Capital Adequacy Purposes	4.50%	4.50%
Tier 1 capital (to average assets), Ratio, Required for Capital Adequacy Purposes	4.00%	4.00%
Total capital (to risk-weighted assets), Amount, Minimum To be Considered "Well Capitalized"	$ 95,415	$ 85,857
Tier 1 capital (to risk-weighted assets), Amount, Minimum To be Considered "Well Capitalized"	76,332	68,686
Common equity Tier 1 capital (to risk-weighted assets), Amount, Minimum To be Considered "Well Capitalized"	62,020	55,807
Tier 1 capital (to average assets), Amount, Minimum To be Considered "Well Capitalized"	$ 56,515	$ 50,432
Total capital (to risk-weighted assets), Ratio, Minimum To be Considered "Well Capitalized"	10.00%	10.00%
Tier 1 capital (to risk-weighted assets), Ratio, Minimum To be Considered "Well Capitalized"	8.00%	8.00%
Common equity Tier 1 capital (to risk-weighted assets), Ratio, Minimum To be Considered "Well Capitalized"	6.50%	6.50%
Tier 1 capital (to average assets), Ratio, Minimum To be Considered "Well Capitalized"	5.00%	5.00%

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Leases - Summary of Other Information Related to Operating Leases (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 493	$ 1,408
Weighted average remaining lease term - operating leases	6 years	6 years
Weighted average discount rate - operating leases	2.98%	2.98%

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Loans - Schedule of Aging of Recorded Investment in Past Due Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	$ 3,869	$ 1,440
Loans Not Past Due	963,376	876,403
Total	967,245	877,843
Commercial Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	472
Loans Not Past Due	595,431	505,229
Total	595,903	505,229
SBA Loans-Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	1,873	311
Loans Not Past Due	123,700	117,682
Total	125,573	117,993
SBA Loans—Non-Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	3
Loans Not Past Due	11,328	9,932
Total	11,331	9,932
Commercial and Industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	374	680
Loans Not Past Due	107,608	113,617
Total	107,982	114,297
Home Mortgage
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	1,147	449
Loans Not Past Due	122,434	127,357
Total	123,581	127,806
Consumer
Financing Receivable Recorded Investment Past Due [Line Items]
Loans Not Past Due	2,875	2,586
Total	2,875	2,586
30-59 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	2,579	449
30-59 Days Past Due | Commercial Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	472
30-59 Days Past Due | SBA Loans-Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	1,293
30-59 Days Past Due | SBA Loans—Non-Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	3
30-59 Days Past Due | Commercial and Industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	374
30-59 Days Past Due | Home Mortgage
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	437	449
60-89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	580
60-89 Days Past Due | SBA Loans-Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	580
> 90 Days Pass Due
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	710	991
> 90 Days Pass Due | SBA Loans-Real Estate
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans		311
> 90 Days Pass Due | Commercial and Industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans		$ 680
> 90 Days Pass Due | Home Mortgage
Financing Receivable Recorded Investment Past Due [Line Items]
Past Due Loans	$ 710

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Premises and Equipment - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Property Plant And Equipment [Abstract]
Depreciation expense	$ 297,000	$ 273,000	$ 835,000	$ 762,000