Opus Bank ("Opus") (NASDAQ: “OPB”) announced today net income of
$15.5 million, or $0.40 per diluted share, for the second quarter
of 2018 compared to net income of $12.9 million, or $0.34 per
diluted share, for the first quarter of 2018 and net income of
$18.2 million, or $0.48 per diluted share, for the second quarter
of 2017. Net income for the six months ended June 30, 2018 was
$28.4 million, or $0.74 per diluted share, compared to $25.9
million, or $0.69 per diluted share, for the first six months of
2017. Net income during the second quarter of 2018 included
strategic initiative-related expenses of $180,000 and a reduction
to our income tax expense of $268,000 resulting from excess tax
benefits from the vesting of non-qualified stock awards.
Additionally, Opus announced today that its Board of Directors
has approved the payment of a quarterly cash dividend of $0.11 per
common share payable on August 16, 2018 to common stockholders and
to its Series A Preferred stockholders of record as of August 2,
2018.
Second Quarter 2018 Highlights
- Net interest income after provision
for loan losses increased to $49.7 million from $47.8 million
in the prior quarter.
- Noninterest expense decreased to
$43.1 million from $44.1 million in the prior quarter.
- Return on average assets increased
to 0.86% for the second quarter, compared to 0.72% in the prior
quarter, and return on average tangible equity increased to 9.49%
for the second quarter, compared to 8.07% in the prior
quarter.
- Nonperforming assets decreased $23.8
million, or 37%, to 0.56% of total assets, down from 0.87% in
the prior quarter.
- Total criticized loans decreased
$48.3 million, or 20%, to $199.1 million, including reductions
in both special mention and classified loan categories.
- Enterprise Value loans decreased
$75.6 million, or 23%, to $260.3 million.
- We recorded a negative loan loss
provision of $213,000 for the second quarter.
- Total loans decreased $156.6
million, or 3%, as loan prepayments and payoffs of $357.9
million, which included $58.5 million of planned exits, outpaced
quarterly new loan fundings of $295.6 million. Loan originations
were unusually low during the month of May, but rebounded in June
to more than triple May's level.
- Our new loan fundings pipeline
increased approximately 40% entering the third quarter compared
to our loan pipeline at the start of the second quarter.
- Total deposits decreased $109.4
million, or 2%, primarily due to seasonal outflows of balances
related to two clients and are anticipated to return in future
periods.
- Assets Under Custody at PENSCO Trust
Company, our alternative asset IRA custodian subsidiary, decreased
to $14.0 billion. Importantly, the trust administrative fee
income component of our noninterest income will not be materially
affected, as the related account fees were capped and minimal.
Additionally, the dollar amount of PENSCO's ancillary custodial
cash balances held as deposits at Opus Bank were materially
unchanged, and the cost of deposits stayed flat.
- Tier 1 leverage and total risk-based
capital ratios increased to 9.85% and 15.86%,
respectively.
Stephen H. Gordon, Chief Executive Officer and President of Opus
Bank, stated, “We are pleased with our results for the second
quarter and first half of 2018, highlighted by significant
improvements in our credit quality and growth in our earnings. We
experienced meaningful reductions in our nonaccrual, total
criticized, and Enterprise Value loans, and at the end of the
quarter had only $2 million in remaining Technology loans. Despite
our challenges, including elevated loan prepayments and increased
competition for deposits, Opus’ earnings and profitability ratios
increased from the prior quarter.”
Mr. Gordon continued, “We added 21 Commercial and Business
bankers during the first six months of the year and are already
seeing early successes as they begin to ramp up their activity. We
anticipate they will continue to increase their contributions as we
head into 2019 and complement the already deep talent that exists
across our collaborative, synergistic lines of business.”
Mr. Gordon concluded, “Opus’ dedicated team members are the
driving force behind our performance and I am extremely grateful to
them for their tireless efforts and commitment. Given our healthy
capital ratios, improved asset quality, and quarterly earnings, the
Board of Directors has approved the payment of a quarterly cash
dividend of $0.11 per common share.”
Loans
Total loans held-for-investment decreased $156.6 million, or 3%,
to $5.1 billion as of June 30, 2018, from $5.2 billion as of
March 31, 2018, and decreased $145.7 million, or 3%, from $5.2
billion as of June 30, 2017. The decrease in total loans
during the second quarter of 2018 was driven by new loan fundings
of $295.6 million, offset by loan payoffs of $358.0 million, which
included planned exits of $58.5 million.
Loan Balance Roll Forward
(unaudited)
Three Months Ended
($ in millions)
June 30,2018
March 31,2018
December 31,2017
September 30,2017
June 30,2017
Beginning loan balance $ 5,229.0 $ 5,173.2 $ 5,060.6 $
5,218.1 $ 5,432.1 New loan fundings 295.6 452.3 502.3 375.4 362.2
Loan payoffs (299.5 ) (219.2 ) (237.8 ) (267.1 ) (357.0 ) Loan
sales¹ — — — (6.0 ) (15.8 ) Planned exits (58.5 ) (52.2 ) (80.6 )
(161.2 ) (137.2 ) Other² (94.2 ) (125.1 ) (71.3 ) (98.6 ) (66.2 )
Ending loan balance $ 5,072.4 $ 5,229.0 $ 5,173.2
$ 5,060.6 $ 5,218.1 [1] Loan sales that
were not planned exits [2] Includes normal amortization, paydowns,
and charge-offs
New loan fundings in the second quarter of 2018 totaled $295.6
million, a decrease of $156.6 million, or 35%, from the first
quarter of 2018 and a decrease of $66.5 million, or 18%, from the
second quarter of 2017. Commercial Business loans comprised $80.8
million, or 27%, of total new loan fundings; and real estate
related loans comprised $211.0 million, or 71%, of total new loan
fundings in the second quarter. Although we experienced an atypical
decline in the level of second quarter new loan fundings, our
pipeline of new loan fundings entering the third quarter was
approximately 40% greater than at the start of the second
quarter.
Loan commitments originated during the second quarter of 2018
totaled $306.5 million, compared to $439.2 million during the first
quarter of 2018 and $349.7 million during the second quarter of
2017. Our unfunded commitments on originated loans totaled $421.3
million as of June 30, 2018, compared to $413.6 million as of
March 31, 2018 and $469.4 million as of June 30, 2017.
Our acquired loan portfolio totaled $121.6 million as of
June 30, 2018, a decrease of 5% from $128.6 million as of
March 31, 2018 and 19% from $149.6 million as of June 30,
2017. The acquired loan portfolio had a remaining discount of $2.0
million as of June 30, 2018.
Cash and Investment Securities
Cash and investment securities totaled $1.4 billion as of
June 30, 2018, unchanged from the prior quarter, and a
decrease from $1.8 billion as of June 30, 2017. Cash and cash
equivalents as of June 30, 2018 increased $108.8 million, or 37%,
to $401.0 million compared to March 31, 2018, and decreased $254.3
million, or 39%, from June 30, 2017. The increase in cash and cash
equivalents in the second quarter of 2018 was primarily driven by
paydowns and amortization within both our loan and securities
portfolios. Investment securities decreased $73.9 million, or 7%,
as of June 30, 2018 to $1.0 billion compared to March 31, 2018, and
decreased $116.3 million, or 10%, from $1.1 billion as of
June 30, 2017. During the second quarter of 2018, we purchased
$20.0 million of investment grade securities with a weighted
average rate of 3.38% and an average duration of approximately 2.6
years.
Deposits and Borrowings
Deposits decreased $109.4 million, or 2%, to $5.9 billion as of
June 30, 2018, from $6.0 billion as of March 31, 2018.
The linked-quarter decrease in total deposits was primarily driven
by two Commercial Banking relationships that experience seasonal
deposit outflows during the second quarter of 2018 totaling $172.0
million, which are anticipated to return beginning in the third
quarter.
Total demand deposits, including both noninterest-bearing and
interest-bearing, increased to 57% of total deposits as of
June 30, 2018, compared to 56% as of March 31, 2018 and
53% as of June 30, 2017. As of June 30, 2018, business
deposits represented 63% of total deposits.
Our loan to deposit ratio was 85% as of June 30, 2018
compared to 87% as of March 31, 2018 and 82% as of
June 30, 2017.
Federal Home Loan Bank (FHLB) advances had zero balance as of
June 30, 2018, compared to $10.0 million as of March 31,
2018 and June 30, 2017, respectively. The average balance of
FHLB advances during the second quarter of 2018 was $69.1 million,
compared to $16.4 million during the first quarter of 2018 and
$10.0 million during the second quarter of 2017.
Net Interest Income
Net interest income was $49.5 million for the second quarter of
2018, compared to $51.7 million for the first quarter of 2018 and
$56.0 million for the second quarter of 2017.
Interest income from loans decreased $830,000, or 2%, from the
prior quarter to $53.8 million for the second quarter of 2018,
driven by lower average loan balances as a result of loan payoffs
and prepayments, including planned exits, and a lower net benefit
from prepayments, partially offset by the positive impact on our
loan yield of repricing due to rate increases. While planned exits
decrease our potential future credit volatility, they had a
negative impact on our loan interest income. Planned exits of $58.5
million for the second quarter of 2018 had a weighted average rate
of 5.97%.
Interest income from cash and investment securities increased
$329,000, or 5%, from the prior quarter to $6.4 million for the
second quarter of 2018. Interest income from investment securities
decreased $46,000, or 1%, from the prior quarter to $5.0 million
for the second quarter of 2018, driven by lower average balances of
investment securities compared to the prior quarter. Interest
income from cash increased $375,000 from the prior quarter to $1.3
million for the second quarter of 2018, as the average balance of
cash increased $57.3 million, or 24%.
Interest expense increased 19% to $10.7 million for the second
quarter of 2018, compared to $9.0 million for the first quarter of
2018, and increased 18% compared to $9.1 million for the second
quarter of 2017. The increase in interest expense during the second
quarter of 2018 was driven by a shift in deposit mix due to the
seasonal outflow from two, low-cost Commercial Banking clients and
an increase in higher-cost Municipal Banking balances and CDs.
These effects were partially offset by a $14.1 million, or 2%,
increase in the average balance of noninterest-bearing DDAs during
the second quarter.
Net Interest Margin
Net interest margin on a taxable equivalent basis decreased 13
basis points to 3.07% in the second quarter of 2018 from 3.20% in
the first quarter of 2018, and decreased 15 basis points from 3.22%
in the second quarter of 2017. The linked-quarter change was
primarily driven by a 10 basis point increase in the cost of
deposits to 0.57%, higher loan prepayments during the quarter, and
the impact of planned loan exits. These were partially offset by
the positive impact on our loan portfolio of rising interest rates,
which had an 11 basis point impact on the originated loan yield and
benefited net interest margin by seven basis points during the
second quarter of 2018. As of June 30, 2018, approximately 31.4% of
our loan portfolio was comprised of loans that are contractually
scheduled to mature or reset within the next 12 months.
Additionally, the tax equivalent weighted average rate on new loan
fundings during the second quarter of 2018 was 4.79%, compared to
4.17% for the first quarter of 2018.
Noninterest Income
Noninterest income decreased 3% to $12.9 million in the second
quarter of 2018 from $13.3 million in the first quarter of 2018,
and decreased 12% from $14.7 million in the second quarter of 2017.
Noninterest income during the second quarter of 2018 included $1.8
million of treasury management and deposit account fees, $6.8
million in trust administrative fees from our alternative asset IRA
custodian subsidiary, $1.5 million from our Escrow and Exchange
divisions, and $774,000 from our Merchant Banking division.
Noninterest income made up 21% of total revenues during the
second quarter of 2018, compared to 20% in the first quarter of
2018 and 21% in the second quarter of 2017.
Noninterest Expense
Noninterest expense decreased 2% to $43.1 million in the second
quarter of 2018, compared to $44.1 million in the first quarter of
2018, and decreased 11% from $48.7 million in the second quarter of
2017. The linked-quarter decrease in noninterest expense was
primarily driven by lower compensation and benefits expenses
related to employer taxes and severance expense compared to the
first quarter of 2018. The first quarter of 2018 included a $2.9
million recovery from the settlement of a legal matter within
professional services expense. Noninterest expense during the
second quarter of 2018 also included $180,000 of strategic
initiative related expenses related to banking office optimization
and infrastructure improvements.
Income Tax Expense
Our effective tax rate was 21% for the second quarter of 2018,
compared to 24% for the first quarter of 2018 and 37% for the
second quarter of 2017. Income tax expense for the second quarter
of 2018 was reduced by excess tax benefits of $268,000 from the
vesting of non-qualified stock awards.
Asset Quality
Asset quality improved significantly during the second quarter
of 2018. Nonaccrual loans decreased $23.8 million, or 37%, to $40.0
million, or 0.79% of total loans, as of June 30, 2018, compared to
$63.8 million, or 1.22% of total loans, as of March 31, 2018. Total
criticized loans decreased $48.3 million, or 20%, to $199.1 million
as of June 30, 2018, compared to $247.4 million as of March 31,
2018. We also continued to reduce our exposure to previously
de-emphasized loan portfolios during the second quarter of 2018;
total Enterprise Value loans were reduced by $75.6 million, or 23%,
during the second quarter of 2018 and totaled $260.3 million as of
June 30, 2018. Planned exits through loan payoffs and sales
totaled $58.5 million in the second quarter of 2018, as we
continued to reduce the balances of loans we previously announced
as targeted for planned exits.
Our allowance for loan losses was $59.2 million, or 1.17% of our
total loan portfolio, as of June 30, 2018, compared to $67.8
million, or 1.30%, as of March 31, 2018 and $87.7 million, or
1.68%, as of June 30, 2017. The reduction in the allowance for
loan losses during the second quarter of 2018 was driven by
charge-offs of $12.5 million and a negative provision for loan
losses of $213,000, partially offset by recoveries of $4.1
million.
We recorded a negative provision expense of $213,000 in the
second quarter of 2018, compared to a provision expense of $3.9
million in the first quarter of 2018 and a negative provision
expense of $7.1 million in the second quarter of 2017. The negative
provision expense during the second quarter of 2018 was driven by a
$7.0 million decline in reserves as a result of the changes in
portfolio mix, fundings, and planned exits of loan relationships,
and a reduction of $5.6 million in specific reserves. These factors
were partially offset by $8.4 million of net charge-offs, $3.1
million due to higher loss factors used to determine loan loss
reserves in accordance with our methodology, $470,000 from risk
rating migration, and $434,000 of provision for acquired loans.
We recorded net charge-offs of $8.4 million in the second
quarter of 2018, compared to net charge-offs of $12.0 million in
the first quarter of 2018 and $17.4 million in the second quarter
of 2017. Charge-offs during the second quarter of 2018 were
predominantly comprised of four Commercial Banking division loan
relationships and two Corporate Finance loan relationships, which
previously had specific reserves totaling $6.8 million.
Total nonperforming assets were $40.0 million, or 0.56% of total
assets, as of June 30, 2018, compared to $63.8 million, or
0.87% of total assets, as of March 31, 2018, and $69.0
million, or 0.90% of total assets, as of June 30, 2017. The
ratio of the allowance for loan losses to total nonaccrual loans
was 148% as of June 30, 2018, compared to 106% as of
March 31, 2018 and 138% as of June 30, 2017.
Total criticized loans decreased $48.3 million, or 20%, to
$199.1 million as of June 30, 2018 compared to $247.4 million
as of March 31, 2018, and decreased $89.9 million, or 31%,
from $289.0 million as of June 30, 2017. The net decrease in
total criticized loans during the second quarter of 2018 was driven
by $38.6 million of upgrades and $43.5 million of loan exits,
including payoffs, loan sales, charge-offs, and normal amortization
during the quarter, partially offset by $33.8 million of
downgrades. Special mention loans decreased $38.0 million in the
second quarter of 2018 and classified loans decreased $10.4
million. The decrease in special mention loans was driven by $22.2
million of upgrades and $24.4 million of loan payoffs, normal
amortization, and migration, partially offset by $8.6 million of
downgrades. The decrease in classified loans was driven by upgrades
of $16.4 million as well as payoffs, charge-offs, and normal
amortization of $35.4 million, partially offset by downgrades of
$41.4 million.
The net decrease in total criticized loans consisted primarily
of a $39.4 million decrease in commercial business loans and a
$16.2 million decrease in real estate secured loans, partially
offset by a $7.4 million increase in SBA loans. Commercial business
loans comprised $14.7 million of loans upgraded out of criticized
categories and $38.2 million of loan exits, including loan payoffs,
loan sales, charge-offs, and normal amortization, partially offset
by $13.5 million of downgrades during the second quarter of 2018.
Real estate secured loans comprised $23.7 million of loans upgraded
out of criticized categories and $5.2 million of loan payoffs and
amortization, partially offset by $12.7 million of downgrades
during the second quarter of 2018.
Capital
As of June 30, 2018, our Tier 1 leverage ratio was 9.85%,
Common Equity Tier 1 ratio was 11.80%, and total risk-based capital
ratio was 15.86%, compared to 9.53%, 10.92%, and 14.91%,
respectively, as of March 31, 2018. As of June 30, 2017,
our Tier 1 leverage, Common Equity Tier 1, and total risk-based
capital ratios were 8.58%, 10.77%, and 14.28%, respectively.
Stockholders’ equity totaled over $1.0 billion as of June 30,
2018, unchanged from March 31, 2018 and June 30, 2017.
Our tangible book value per as converted common share was $17.53 as
of June 30, 2018 compared to $17.23 as of March 31, 2018
and $16.63 as of June 30, 2017.
Conference Call and Webcast Details
Date: Monday, July 23, 2018Time: 8:00 a.m. PT (11:00 a.m.
ET)
Phone Number: (855) 265-3237Conference ID: 6088969Webcast URL:
http://investor.opusbank.com/event
Analysts, investors, and the general public may listen to our
discussion of Opus' second quarter performance and participate in
the question/answer session by using the phone number listed above
or through a live webcast of the conference available through a
link on the investor relations page of Opus' website at:
http://investor.opusbank.com/event.
The webcast will include a slide presentation, enabling conference
participants to experience the discussion with greater impact. It
is recommended that participants dial into the conference call or
log into the webcast approximately 10 minutes prior to the
call.
Replay Information: For those who are not able to listen to the
call, an archived recording will be available beginning
approximately two hours following the completion of the call. To
listen to the call replay, dial (855) 859-2056, or for
international callers dial (404) 537-3406. The access code for
either replay number is 6088969. The call replay will be available
through August 23, 2018.
About Opus Bank
Opus Bank is an FDIC insured California-chartered commercial
bank with $7.2 billion of total assets, $5.1 billion of total
loans, and $5.9 billion in total deposits as of June 30, 2018.
Opus Bank provides superior ideas and solutions, and banking
products to its clients through its Retail Bank, Commercial Bank,
and Merchant Bank. Opus Bank offers a suite of treasury and cash
management and depository solutions and a wide range of loan
products, including commercial, healthcare, media and
entertainment, corporate finance, multifamily residential,
commercial real estate and structured finance, and is an SBA
preferred lender. Opus Bank offers commercial escrow services and
facilitates 1031 Exchange transactions through its Escrow and
Exchange divisions. Opus Bank provides clients with financial and
advisory services related to raising equity capital, targeted
acquisition and divestiture strategies, general mergers and
acquisitions, debt and equity financing, balance sheet
restructuring, valuation, strategy and performance improvement
through its Merchant Banking division and its broker-dealer
subsidiary, Opus Financial Partners, LLC, Member FINRA/SIPC. Opus
Bank’s alternative asset IRA custodian subsidiary has $14 billion
of custodial assets and over 49,000 client accounts, which are
comprised of self-directed investors, financial institutions,
capital raisers and financial advisors. Opus Bank operates 50
banking offices, including 31 in California, 16 in the
Seattle/Puget Sound region in Washington, two in the Phoenix
metropolitan area of Arizona and one in Portland, Oregon. Opus Bank
is an Equal Housing Lender. For additional information about Opus
Bank, please visit our website: www.opusbank.com.
Forward Looking Statements
This release and the aforementioned conference call and webcast
includes forward-looking statements related to Opus’ plans, beliefs
and goals. Forward-looking statements are neither historical facts
nor assurances of future performance. Opus generally identifies
forward-looking statements by terminology such as “outlook,”
“believes,” “expects,” “potential,” “continues,” “may,” “will,”
“could,” “should,” “seeks,” “approximately,” “predicts,” “intends,”
“plans,” “estimates,” “anticipates” or the negative version of
those words or other comparable words. Any forward‐looking
statements contained in this release and the aforementioned
conference call and webcast are based on the historical performance
of Opus and its subsidiaries or on its current plans, beliefs,
estimates, expectations and goals, including, without limitation:
our expectations regarding the seasonality of certain clients; and
our expectations regarding the performance of our bankers. Such
forward-looking statements are subject to various risks and
uncertainties and assumptions relating to our operations, financial
results, financial condition, business prospects, growth strategy
and liquidity that could cause actual results to differ materially
from those indicated by the forward-looking statements, including,
without limitation: market and economic conditions, changes in
interest rates, our liquidity position, the management of our
growth, the risks associated with our loan portfolio, local
economic conditions affecting retail and commercial real estate,
our geographic concentration in the western region of the United
States, competition within the industry, dependence on key
personnel, government legislation and regulation, the risks
associated with any future acquisitions, the effect of natural
disasters, and risks related to our technology and information
systems. For a discussion of these and other risks and
uncertainties, see Opus' filings with the Federal Deposit Insurance
Corporation, including, but not limited to, the risk factors in
Opus' Annual Report on Form 10-K filed with the Federal Deposit
Insurance Corporation on March 14, 2018. If one or more of these or
other risks or uncertainties materialize, or if Opus’ underlying
assumptions prove to be incorrect, Opus’ actual results may vary
materially from those indicated in these statements. These filings
are available on the Investor Relations page of Opus' website at:
investor.opusbank.com.
Opus undertakes no obligation to revise or publicly release any
revision to these forward-looking statements, whether as a result
of new information, future developments or otherwise.
Consolidated Statements of
Income (unaudited)
For the three months ended
For the six months ended ($ in thousands, except per share
amounts)
June 30, 2018 March 31, 2018
June 30, 2017 June 30, 2018 June
30, 2017 Interest income: Loans $ 53,807 $ 54,637 $
57,834 $ 108,444 $ 118,066 Investment securities 5,048 5,094 5,212
10,142 8,280 Due from banks 1,326 951 2,055
2,277 4,016 Total interest income 60,181
60,682 65,101 120,863 130,362 Interest
expense: Deposits 8,403 7,018 7,122 15,423 14,303 Federal Home Loan
Bank advances 332 48 25 379 92 Subordinated debt 1,923 1,923
1,923 3,845 3,845 Total interest
expense 10,658 8,989 9,070 19,647
18,240 Net interest income 49,523 51,693 56,031 101,216
112,122 Provision (negative provision) for loan losses (213 ) 3,914
(7,098 ) 3,700 (1,130 ) Net interest income after
provision (negative provision) for loan losses 49,736 47,779
63,129 97,516 113,252 Noninterest
income: Fees and service charges on deposit accounts 1,783 1,722
1,984 3,505 3,907 Escrow and exchange fees 1,498 1,360 1,487 2,858
2,937 Trust administrative fees 6,841 6,978 6,717 13,819 13,099
Gain (loss) on sale of loans (100 ) (69 ) 93 (169 ) (206 ) Gain
(loss) on sale of assets — 1 (82 ) — (84 ) Gain (loss) from OREO
and other repossessed assets 84 118 78 203 (69 ) Gain on sale of
investment securities — 182 39 182 557 Bank-owned life insurance,
net 1,045 1,053 886 2,097 1,775 Other income 1,776 1,964
3,523 3,741 5,312 Total noninterest
income 12,927 13,309 14,725 26,236
27,228 Noninterest expense: Compensation and benefits 25,472
26,808 26,753 52,280 55,949 Professional services 2,619 1,716 6,189
4,336 10,729 Occupancy expense 3,751 4,006 4,108 7,757 7,887
Depreciation and amortization 1,763 1,599 1,789 3,362 3,674 Deposit
insurance and regulatory assessments 959 1,131 812 2,089 2,874
Insurance expense 335 338 356 673 711 Data processing 318 440 821
758 1,604 Software licenses and maintenance 1,126 1,149 1,127 2,275
2,285 Office services 1,847 1,880 1,817 3,726 4,216 Amortization of
other intangible assets 1,479 1,479 1,479 2,959 2,959 Advertising
and marketing 843 957 584 1,800 1,244 Litigation expense (recovery)
9 (14 ) (88 ) (5 ) 42 Other expenses 2,620 2,588
2,980 5,210 4,615 Total noninterest expense
43,141 44,077 48,727 87,220 98,789
Income before income tax expense 19,522 17,011 29,127 36,532
41,691 Income tax expense 4,058 4,107 10,888
8,165 15,795 Net income $ 15,464 $ 12,904
$ 18,239 $ 28,367 $ 25,896 Basic
earnings per common share $ 0.41 $ 0.34 $ 0.49 $ 0.76 $ 0.71
Diluted earnings per common share 0.40 0.34 0.48 0.74 0.69 Weighted
average shares - basic 36,027,569 35,967,779 37,318,962 35,997,839
36,541,414 Weighted average shares - diluted 38,316,721 38,316,243
38,037,452 38,317,160 37,367,238
Consolidated Balance Sheets (unaudited)
As of ($ in
thousands, except share amounts)
June 30,2018
March 31,2018
June 30,2017
Assets Cash and due from banks $ 58,516 $ 43,462 $
56,168 Due from banks – interest-bearing
342,483
248,763 599,169 Investment securities available-for-sale, at fair
value 1,023,882 1,097,741 1,140,182 Loans held-for-investment
5,072,366 5,228,994 5,218,091 Less allowance for loan losses
(59,197 ) (67,842 ) (87,745 ) Loans held-for-investment, net
5,013,169 5,161,152 5,130,346 OREO and other repossessed assets — —
5,208 Premises and equipment, net 25,718 26,649 33,684 Goodwill
331,832 331,832 331,832 Other intangible assets, net 41,842 43,321
47,759 Deferred tax assets, net 26,450 28,740 51,807 Cash surrender
value of bank owned life insurance, net 152,215 150,819 122,635
Accrued interest receivable 19,915 19,978 19,463 Federal Home Loan
Bank stock 17,250 17,250 17,250 Other assets 140,054 128,054
120,956 Total assets $ 7,193,326 $ 7,297,761
$ 7,676,459
Liabilities and Stockholders’
Equity Deposits: Noninterest-bearing demand $ 844,905 $ 855,810
$ 935,321 Interest-bearing demand 2,523,488 2,519,955 2,410,155
Money market and savings 2,047,309 2,267,648 2,538,588 Time
deposits 518,481 400,203 449,995 Total
deposits 5,934,183 6,043,616 6,334,059 Federal Home Loan Bank
advances — 10,000 10,000 Subordinated debt, net 132,877 132,811
132,612 Accrued interest payable 4,008 2,118 3,921 Other
liabilities 89,201 86,838 194,096 Total
liabilities 6,160,269 6,275,383 6,674,688
Stockholders’ equity: Preferred stock: Authorized 200,000,000
shares; issued 31,111 and 31,111 and 612 shares, respectively
29,110 29,110 581 Common stock, no par value per share: Authorized
200,000,000 shares; issued 36,618,447 and 36,460,468 and 37,790,356
shares, respectively 704,267 700,220 728,749 Additional paid-in
capital 63,933 63,922 60,173 Retained earnings 266,033 254,701
223,259 Treasury stock, at cost; 568,794 and 458,887 and 408,987
shares, respectively (14,666 ) (11,603 ) (10,198 ) Accumulated
other comprehensive income (loss) (15,620 ) (13,972 ) (793 ) Total
stockholders’ equity 1,033,057 1,022,378 1,001,771
Total liabilities and stockholders’ equity $ 7,193,326
$ 7,297,761 $ 7,676,459
Selected Financial Data As of or for
the three months ended As of or for the six months ended
(unaudited)
June 30, 2018 March 31,
2018 June 30, 2017 June 30, 2018
June 30, 2017 Return on average assets 0.86 % 0.72 %
0.94 % 0.79 % 0.67 % Return on average stockholders' equity 6.03
5.11 7.35 5.57 5.33 Return on average tangible equity (1) 9.49 8.07
11.89 8.79 8.74 Efficiency ratio (2) 69.08 67.81 68.87 68.43 70.89
Noninterest expense to average assets 2.40 2.45 2.52 2.42 2.55
Yield on interest-earning assets (3) 3.73 3.75 3.74 3.74 3.70 Cost
of deposits (4) 0.57 0.47 0.44 0.52 0.44 Cost of funds (5) 0.70
0.59 0.55 0.64 0.55 Net interest margin (3) 3.07 3.20 3.22 3.14
3.18 Loan to deposits 85.48 86.52 82.38 85.48 82.38 (1)
See computation in "Non-GAAP Financial Measures" section.
(2) The efficiency ratio is calculated by dividing noninterest
expense by the sum of net interest income before provision for loan
losses and noninterest income. (3) Net interest margin and yield on
interest-earning assets are presented on a tax equivalent basis
using the federal effective tax rate. (4) Calculated as interest
expense on deposits divided by total average deposits. (5)
Calculated as total interest expense divided by average total
deposits, FHLB advances and subordinated debt.
Capital Ratios As of (unaudited)
June 30,
2018(1) March 31, 2018 June 30,
2017 Tier 1 leverage ratio 9.85 % 9.53 % 8.58 % Tier 1
risk-based capital ratio 12.33 11.42 10.77 Total risk-based capital
ratio 15.86 14.91 14.28 Common Equity Tier 1 ratio 11.80 10.92
10.77 (1) Ratios are preliminary until filing of our June
30, 2018 FDIC call report.
Loan Fundings (unaudited)
For the three months
ended For the six months ended ($ in thousands)
June 30,2018
March 31,2018
June 30,2017
June 30,2018
June 30,2017
Loans funded: Real estate mortgage loans: Single-family residential
$ — $ — $ — $ — $ — Multifamily residential 147,238 267,301 148,842
414,539 260,114 Commercial real estate 48,946 29,307 12,135 78,253
27,608 Construction and land loans 14,856 4,885 13,591 19,741
29,147 Commercial business loans 80,797 146,184 179,889 226,981
255,550 Small Business Administration loans 3,775 4,578 7,693 8,353
8,874 Consumer and other loans — — — —
— Total loan fundings $ 295,612 $ 452,255 $ 362,150
$ 747,867 $ 581,293
Composition of
Loan Portfolio As of (unaudited)
June 30,
2018 March 31, 2018 June
30, 2017 ($ in thousands)
Amount %
ofTotal loans Amount % ofTotal
loans Amount % ofTotal loans
Originated loans held-for-investment Real estate mortgage loans:
Single-family residential $ 46,815 0.9 % $ 56,913 1.1 % $ 66,484
1.3 % Multifamily residential 2,641,314 52.1 2,667,313 51.0
2,250,464 43.1 Commercial real estate 1,060,824 20.9 1,044,276 20.0
1,161,241 22.3 Construction and land loans 93,697 1.8 79,080 1.5
84,687 1.6 Commercial business loans 1,075,271 21.2 1,221,517 23.4
1,484,361 28.4 Small Business Administration loans 32,815 0.6
31,278 0.6 20,962 0.4 Consumer and other loans 38 0.0
53 0.0 282 0.0 Total originated loans
4,950,774 97.6 5,100,430 97.5 5,068,481 97.1 Acquired loans
held-for-investment Real estate mortgage loans: Single-family
residential 20,758 0.4 21,653 0.4 28,670 0.5 Multifamily
residential 50,038 1.0 51,611 1.0 53,906 1.0 Commercial real estate
24,056 0.5 27,221 0.5 33,518 0.7 Construction and land loans 1,380
0.0 1,398 0.0 1,457 0.0 Commercial business loans 10,225 0.2 10,869
0.2 13,604 0.2 Small Business Administration loans 10,409 0.2
10,718 0.2 12,097 0.2 Consumer and other loans 4,726 0.1
5,094 0.1 6,358 0.1 Total
acquired loans 121,592 2.4 128,564 2.5
149,610 2.9 Total gross loans $ 5,072,366
100.0 % $ 5,228,994 100.0 % $ 5,218,091 100.0 %
Composition of Deposits As of
(unaudited)
June 30,2018
March 31,2018
June 30,2017
($ in thousands)
Amount % ofTotal
deposits Amount % ofTotal deposits
Amount % ofTotal deposits
Noninterest bearing $ 844,905 14.3 % $ 855,810 14.2 % $ 935,321
14.8 % Interest bearing demand 2,523,488 42.5 2,519,955 41.7
2,410,155 38.0 Money market and savings 2,047,309 34.5 2,267,648
37.5 2,538,588 40.1 Time deposits 518,481 8.7 400,203
6.6 449,995 7.1 Total deposits $
5,934,183 100.0 % $ 6,043,616 100.0 % $ 6,334,059
100.0 %
Consolidated
average balance sheet, interest, yield and rates
For the three months endedJune
30,
For the three months endedMarch
31,
For the three months endedJune
30,
(unaudited)
2018 2018 2017 ($ in thousands)
AverageBalance
Interest(1)
Yields/Rates AverageBalance
Interest(1)
Yields/Rates AverageBalance
Interest (1) Yields/Rates Assets:
Interest-earning assets: Due from banks $ 299,987 $ 1,326
1.77 % $ 242,663 $ 951 1.59 % $ 772,900 $ 2,055 1.07 % Investment
securities 1,054,258 5,048 1.92 1,103,477 5,094 1.87 916,362 5,212
2.28 Acquired loans 124,564 1,797 5.79 130,918 1,779 5.51 155,404
2,029 5.24 Originated Loans 5,031,860 52,387 4.18
5,105,690 53,114 4.22 5,171,997
56,104 4.35 Total loans $ 5,156,424 $ 54,184
4.21 $ 5,236,608 $ 54,893 4.25
$ 5,327,401 $ 58,133 4.38 Total
interest-earning assets $ 6,510,669 $ 60,558 3.73 $ 6,582,748 $
60,938 3.75 $ 7,016,663 $ 65,400 3.74 Noninterest-earning assets
701,454 726,341 728,489 Total assets $
7,212,123 $ 7,309,089 $ 7,745,152
Liabilities and stockholders’ equity: Interest-bearing deposits
Interest-bearing demand $ 2,496,827 $ 1,801 0.29 % $ 2,531,947 $
1,277 0.20 % $ 2,393,563 $ 1,154 0.19 % Money market and savings
2,127,242 5,028 0.95 2,289,530 4,699 0.83 2,657,816 4,856 0.73 Time
deposits 445,392 1,574 1.42 381,647
1,043 1.11 472,716 1,112 0.94
Total interest bearing deposits $ 5,069,461 $ 8,403 0.66 $
5,203,124 $ 7,019 0.55 $ 5,524,095 $ 7,122 0.52 Subordinated debt
132,843 1,923 5.81 132,777 1,923 5.87 132,575 1,923 5.82 FHLB
advances 69,121 332 1.93 16,444 48
1.18 10,000 25 1.00
Total interest-bearing liabilities
$ 5,271,425 $ 10,658 0.81 $ 5,352,345 $ 8,990 0.68 $ 5,666,670 $
9,070 0.64 Noninterest-bearing deposits 847,027 832,888 934,961
Other liabilities 65,535 99,598 147,980 Total
liabilities $ 6,183,987 $ 6,284,831 $ 6,749,611 Total
stockholders’ equity $ 1,028,136 $ 1,024,258 $
995,541 Total liabilities andstockholders’ equity $
7,212,123 $ 7,309,089 $ 7,745,152 Net
interest spread (2) 2.92 % 3.07 % 3.10 %
Net interest income and margin, tax
equivalent (3, 4)
$ 49,900 3.07 % $ 51,948 3.20 % $ 56,330 3.22
%
Reconciliation of tax equivalent net
interest income to reported net interest income
Tax equivalent adjustment (377 ) (255 ) (299 ) Net interest income,
as reported $ 49,523 $ 51,693 $ 56,031
(1) Interest income is presented on a taxable equivalent
basis using the federal effective tax rate. (2) Net interest spread
represents the average yield on interest-earning assets less the
average rate on interest-bearing liabilities. (3) Net interest
margin is computed by dividing net interest income by total average
interest-earning assets. (4) Net interest margin, tax equivalent
has been adjusted to a taxable equivalent basis using the federal
effective tax rate.
Consolidated average balance
sheet, interest, yield and rates For the six months
ended June 30, 2018 2017 (In thousands)
AverageBalance
Interest(1)
Yields/Rates AverageBalance
Interest(1)
Yields/Rates Assets: Interest-earning assets Due from
banks $ 271,483 $ 2,277 1.69 % $ 861,574 $ 4,016 0.94 % Investment
securities 1,078,732 10,142 1.90 818,601 8,280 2.04 Acquired loans
127,723 3,577 5.65 162,419 4,860 6.03 Originated Loans 5,068,571
105,499 4.20 5,285,698 113,544
4.33 Total loans $ 5,196,294 $ 109,076 4.23
$ 5,448,117 $ 118,404 4.38 Total
interest-earning assets $ 6,546,509 $ 121,495 3.74 $ 7,128,292 $
130,700 3.70 Noninterest-earning assets 713,829 681,924
Total assets $ 7,260,338 $ 7,810,216
Liabilities and stockholders’ equity: Interest-bearing deposits
Interest-bearing deposits $ 2,514,290 $ 3,078 0.25 % $ 2,444,270 $
2,287 0.19 % Money market and savings 2,207,938 9,728 0.89
2,709,693 9,813 0.73 Time deposits 413,696 2,617 1.28
488,109 2,203 0.91 Total interest
bearing deposits $ 5,135,924 $ 15,423 0.61 $ 5,642,072 $ 14,303
0.51 Subordinated debt 132,810 3,845 5.84 132,541 3,845 5.85 FHLB
advances 42,928 379 1.78 18,812 92
0.99 Total interest-bearing liabilities $ 5,311,662 $
19,647 0.75 $ 5,793,425 $ 18,240 0.63 Noninterest-bearing deposits
839,997 928,123 Other liabilities 82,472 109,791
Total liabilities $ 6,234,131 $ 6,831,339 Total
stockholders’ equity $ 1,026,207 $ 978,877 Total
liabilities andstockholders’ equity $ 7,260,338 $ 7,810,216
Net interest spread (2) 2.99 % 3.07 %
Net interest income and margin, tax
equivalent (3, 4)
$ 101,848 3.14 % $ 112,460 3.18 %
Reconciliation of tax equivalent net
interest income to reported net interest income
Tax equivalent adjustment (632 ) (338 ) Net interest income, as
reported $ 101,216 $ 112,122 (1)
Interest income is presented on a taxable equivalent basis using
the federal effective tax rate. (2) Net interest spread represents
the average yield on interest-earning assets less the average rate
on interest-bearing liabilities. (3) Net interest margin is
computed by dividing net interest income by total average
interest-earning assets. (4) Net interest margin, tax equivalent
has been adjusted to a taxable equivalent basis using the federal
effective tax rate.
Allowance for Loan
Losses (unaudited)
For the three months ended
For the six months ended ($ in thousands)
June 30,2018
March 31,2018
June 30,2017
June 30,2018
June 30,2017
Allowance for loan losses-balance at beginning of period $
67,842 $ 75,930 $ 112,230 $ 75,930 $ 111,410 (Recapture) Provision
for loan losses: Acquired loans 434 — (2 ) 434 (96 ) Originated
loans (647 ) 3,914 (7,096 ) 3,267 (1,034 ) Total
provision for loan losses (213 ) 3,914 (7,098 ) 3,701 (1,130 )
Charge-offs: Acquired loans — — — — — Originated loans (12,508 )
(14,155 ) (17,799 ) (26,663 ) (23,515 ) Total charge-offs (12,508 )
(14,155 ) (17,799 ) (26,663 ) (23,515 ) Recoveries: Acquired loans
— — — — — Originated loans 4,076 2,153 412
6,229 980 Total recoveries 4,076 2,153
412 6,229 980 Total net recoveries
(charge-offs) (8,432 ) (12,002 ) (17,387 ) (20,434 ) (22,535 )
Allowance for loan losses-balance at end of period $ 59,197
$ 67,842 $ 87,745 $ 59,197 $ 87,745
Asset Quality Information
(unaudited)
As of ($ in thousands)
June 30,2018
March 31,2018
June 30,2017
Nonperforming assets Nonaccrual loans $ 39,992 $ 63,813 $ 63,754
OREO and other repossessed assets — — 5,208
Total nonperforming assets 39,992 63,813 68,962 Loans 30 -
89 days past due 5,761 13,304 202 Accruing loans 90 days or more
past due 436 299 503 Accruing troubled debt restructured loans 139
139 155 Non performing loans to total loans 0.79 % 1.22 %
1.22 % Non performing assets to total assets 0.56 % 0.87 % 0.90 %
Loans 30 - 89 days past due to total loans 0.11 % 0.25 % 0.00 %
Allowance for loan losses to total loans 1.17 % 1.30 % 1.68 %
Allowance for loan losses to non-accrual loans 148.02 % 106.31 %
137.6 % Net charge-offs to average loans (annualized) 0.66 % 0.93 %
1.31 %
Risk Rating by Loan Product (Unaudited)
($ in thousands)
Pass
SpecialMention
Classified Total Loans
Nonaccrualloans
Totalallowance
As of June 30, 2018 Real estate mortgage loans: Single-family
residential $ 66,812 $ 78 $ 683 $ 67,573 $ — $ 183 Multifamily
residential 2,687,143 2,081 2,128 2,691,352 — 9,395 Commercial real
estate 1,042,675 11,096 31,109 1,084,880 2,512 9,282 Construction
and land loans 83,575 11,502 — 95,077 — 1,202 Commercial business
loans 956,730 34,859 93,907 1,085,496 36,902 38,506 Small Business
Administration loans 32,337 2,138 8,749 43,224 — 622 Consumer and
other loans 3,990 60 714 4,764 578
7 Total loans $ 4,873,262 $ 61,814 $ 137,290
$ 5,072,366 $ 39,992 $ 59,197 As of
March 31, 2018 Real estate mortgage loans: Single-family
residential $ 77,789 $ 79 $ 697 $ 78,565 $ — $ 224 Multifamily
residential 2,709,851 1,942 7,131 2,718,924 1,209 10,286 Commercial
real estate 1,016,147 41,447 13,904 1,071,498 2,512 8,859
Construction and land loans 70,767 9,711 — 80,478 — 1,083
Commercial business loans 1,064,187 44,987 123,212 1,232,386 59,496
47,032 Small Business Administration loans 38,468 1,562 1,966
41,996 — 347 Consumer and other loans 4,351 61 735
5,147 596 11 Total loans $ 4,981,560 $
99,789 $ 147,645 $ 5,228,994 $ 63,813 $
67,842 As of June 30, 2017 Real estate mortgage loans:
Single-family residential $ 94,347 $ 82 $ 725 $ 95,154 $ — $ 247
Multifamily residential 2,283,268 16,556 4,546 2,304,370 — 9,127
Commercial real estate 1,131,835 46,231 16,693 1,194,759 11,581
10,220 Construction and land loans 78,685 7,459 — 86,144 — 1,327
Commercial business loans 1,305,418 35,286 157,261 1,497,965 51,409
66,551 Small Business Administration loans 29,896 898 2,265 33,059
— 249 Consumer and other loans 5,621 63 956
6,640 764 24 Total loans $ 4,929,070 $ 106,575
$ 182,446 $ 5,218,091 $ 63,754 $ 87,745
Risk Rating by Lending Division (Unaudited) ($
in thousands)
Pass
SpecialMention
Classified Total Loans
Nonaccrualloans
As of June 30, 2018 Income Property Banking $ 3,231,386 $ 6,475 $
10,901 $ 3,248,762 $ 2,512 Commercial Banking 395,460 25,838 49,288
470,586 14,272 Structured Finance 294,396 17,262 — 311,658 —
Healthcare Provider 217,496 — 47,775 265,271 — Healthcare Practice
20,539 — 946 21,485 — Corporate Finance 103,321 11,529 12,968
127,818 11,645 Institutional Syndication 292,657 — — 292,657 —
Public Finance 192,180 — — 192,180 — Technology Banking — — 2,000
2,000 — Other divisions (2) 125,827 710 13,412
139,949 11,563 Total loans $ 4,873,262 $ 61,814
$ 137,290 $ 5,072,366 $ 39,992 March
31, 2018 Income Property Banking $ 3,230,456 $ 6,938 $ 15,358 $
3,252,752 $ 3,721 Commercial Banking 401,996 27,478 52,107 481,581
18,882 Structured Finance 304,420 15,487 — 319,907 — Healthcare
Provider 209,912 33,489 33,771 277,172 — Healthcare Practice 21,174
— 973 22,147 — Corporate Finance 132,250 14,916 22,443 169,609
21,675 Institutional Syndication 339,451 — (145 ) 1 339,306 —
Public Finance 178,539 — — 178,539 — Technology Banking 19,232 —
9,944 29,176 7,649 Other divisions (2) 144,130 1,481
13,194 158,805 11,886 Total loans $ 4,981,560
$ 99,789 $ 147,645 $ 5,228,994 $ 63,813
As of June 30, 2017 Income Property Banking $ 2,920,926 $ 21,465 $
991 $ 2,943,382 $ — Commercial Banking 443,247 33,697 60,962
537,906 12,078 Structured Finance 347,451 17,912 15,201 380,564
11,581 Healthcare Provider 305,456 25,466 18,633 349,555 —
Healthcare Practice 33,830 527 8,692 43,049 5,614 Corporate Finance
308,003 — 37,103 345,106 9,192 Institutional Syndication 297,382 —
(241 ) 1 297,141 — Public Finance 84,524 — — 84,524 — Technology
Banking 21,810 6,205 38,437 66,452 24,313 Other divisions (2)
166,441 1,303 2,668 170,412 976 Total
loans $ 4,929,070 $ 106,575 $ 182,446 $
5,218,091 $ 63,754 (1) Represents unamortized
net deferred loan origination fees on syndicated lines of credit
that have no outstanding principal balances at period end. (2)
Other divisions is comprised of single family residential loans,
consumer and other loans, and specialty banking divisions including
Business Banking and Media and Entertainment Banking.
Non-GAAP Financial Measures
Our accounting and reporting policies conform to generally
accepted accounting principles in the United States ("GAAP"). We
believe that the presentation of certain non-GAAP financial
measures assists investors in evaluating our financial results.
These non-GAAP measures include our return on average tangible
equity and tangible book value per as converted common share. These
non-GAAP measures should be taken together with the corresponding
GAAP measures and should not be considered a substitute of the GAAP
measures.
The following tables present a reconciliation of the most
comparable GAAP financial measures and ratios to the non-GAAP
financial measures and ratios:
Non-GAAP return on average tangible equity
(unaudited)
For the three months ended For the six
months ended ($ in thousands)
June 30,2018
March 31,2018
June 30,2017
June 30,2018
June 30,2017
Average tangible equity: Average stockholders' equity $ 1,028,136 $
1,024,258 $ 995,541 $ 1,026,207 $ 978,877 Less: Average goodwill
331,832 331,832 331,832 331,832 331,832 Average other intangible
assets 42,606 44,083 48,583 43,340
49,343 Average tangible equity $ 653,698 $ 648,343 $ 615,126
651,035 597,702 Net income $ 15,464 $ 12,904 $ 18,239 $ 28,367 $
25,896 Return on average stockholders' equity 6.03 % 5.11 % 7.35 %
5.57 % 5.33 % Non-GAAP return on average tangible equity 9.49 %
8.07 % 11.89 % 8.79 8.74
Non-GAAP tangible book
value per as converted common share (unaudited)
As
of ($ In thousands, except share amounts)
June 30,2018
March 31,2018
June 30,2017
Tangible equity: Total stockholders' equity $ 1,033,057 $ 1,022,378
$ 1,001,771 Less: Goodwill 331,832 331,832 331,832 Other intangible
assets, net 41,842 43,321 47,759 Tangible equity
659,383 647,225 622,180 Shares of common stock outstanding
36,049,653 36,001,581 37,381,369 Shares of common stock to be
issued upon conversion of preferred stock 1,555,550
1,555,550 30,600 Total as converted shares of common stock
outstanding (1) 37,605,203 37,557,131 37,411,969 Book
value per as converted common share $ 27.47 $ 27.22 $ 26.78
Tangible book value per as converted common share 17.53 17.23 16.63
(1) Common stock outstanding includes additional
shares of common stock that would be issued upon conversion of all
outstanding shares of preferred stock to common stock and excludes
shares issuable upon exercise of warrants and options.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180723005179/en/
Opus BankKevin L. Thompson, 949-251-8196EVP, Chief Financial
OfficerorBrett G. Villaume, 949-224-8866SVP, Director of Investor
Relations
Opus Bank (NASDAQ:OPB)
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