- Reduced nonperforming assets by $13.7 million, or 65%,
from the prior quarter to 0.10% of total assets
- Enterprise Value loans decreased 44% from the prior quarter to
$35.9 million
- Credit improvement resulted in a negative provision for loan
losses of $7.7 million
- Noninterest expense decreased 13% from the prior quarter
following expense reduction initiative undertaken in the second
quarter of 2019
Opus Bank ("Opus") (Nasdaq: “OPB”) announced today net income of
$22.0 million, or $0.57 per diluted share, for the third quarter of
2019, compared to net income of $8.7 million, or $0.23 per diluted
share, for the second quarter of 2019. Net income during the third
quarter of 2019 included gains of $220,000 on the sale of
securities, loans and other assets, and additional income tax
expense related to the previously announced expense reduction
initiative undertaken in the second quarter of 2019 that increased
our effective tax rate by approximately one percentage point.
Together, these items negatively impacted earnings by $0.01 per
diluted share for the third quarter.
Additionally, Opus announced today that its Board of Directors
has approved the payment of a quarterly cash dividend of $0.11 per
common share payable on November 21, 2019 to common stockholders of
record as of November 7, 2019, and a common-equivalent payment to
its Series A Preferred stockholders.
Earnings Summary
(unaudited)
For the three months ended
($ in thousands, except per share
data)
September 30, 2019
June 30, 2019
September 30, 2018
Net income
$
21,998
$
8,686
$
9,412
Earnings per diluted share
0.57
0.23
0.25
Return on average assets ("ROAA")
1.13
%
0.45
%
0.51
%
Return on average stockholders' equity
8.12
%
3.29
%
3.59
%
Return on average tangible common equity1
("ROATCE")
12.88
%
5.28
%
5.86
%
Efficiency ratio1
61.82
%
71.32
%
69.49
%
Adjusted Earnings1
Adjusted net income
$
22,280
$
13,308
$
7,636
Adjusted earnings per diluted share
0.58
0.35
0.20
Adjusted return on average assets
1.14
%
0.68
%
0.42
%
Adjusted return on average stockholders'
equity
8.24
%
5.04
%
2.91
%
Adjusted return on average tangible common
equity
13.06
%
8.08
%
4.75
%
Adjusted efficiency ratio
61.63
%
63.55
%
68.40
%
[1] See reconciliation of non-GAAP
financial measures to corresponding GAAP measures on pages
15-16.
Paul W. Taylor, President and Chief Executive Officer of Opus
Bank, stated, "I am pleased to announce that Opus recorded
quarterly earnings per share of $0.57, an increase from $0.23 in
the second quarter. As a result of the progress we made in reducing
the balances of Enterprise Value loans and nonperforming assets, we
recorded a negative provision for loan losses of $7.7 million in
the third quarter. Additionally, we significantly reduced overhead
expenses after taking the painful but necessary actions in the
second quarter to bring Opus more in line with peer efficiency
levels. We also generated greater noninterest income from PENSCO
and our Escrow and Exchange divisions in the third quarter. These
accomplishments resulted in an ROAA of 1.13%, ROATCE of 12.9%, and
efficiency ratio of 61.8% for the third quarter of 2019.”
Mr. Taylor continued, “Overall loan growth slowed in the third
quarter, due to rate management and elevated payoffs. Yet, our
Commercial Banking division originated $99.1 million of loans
during the quarter and is continuing to gain traction, despite
heavy competition from peers. The intentional runoff of Enterprise
Value loans has clouded the progress we are making in remixing our
loan portfolio toward a greater percentage of Commercial Business
loans, but we expect this headwind will lessen in 2020. In spite of
the challenging interest rate environment, I am confident that our
profitability will continue to improve.”
Loans
Average loans increased $72.3 million, or 1.3%, from the prior
quarter to $5.8 billion for the third quarter of 2019, and
increased $725.9 million, or 14.3%, from $5.1 billion for the third
quarter of 2018. The increase in loans during the third quarter of
2019 compared to the prior quarter was driven by new loan fundings
of $406.1 million, partially offset by loan payoffs of $300.0
million.
Loan Balance Roll Forward
(unaudited)
Three Months Ended
($ in millions)
September 30,
2019
June 30, 2019
March 31, 2019
December 31, 2018
September 30,
2018
Beginning loan balance
$
5,789.0
$
5,461.5
$
5,165.2
$
5,159.9
$
5,072.4
New loan fundings
406.1
703.6
538.0
412.3
435.7
Loan payoffs
(300.0
)
(192.8
)
(173.7
)
(265.3
)
(197.4
)
Other1
(93.1
)
(183.3
)
(68.0
)
(141.7
)
(150.8
)
Ending loan balance
$
5,802.0
$
5,789.0
$
5,461.5
$
5,165.2
$
5,159.9
[1] Includes amortization, planned exits,
charge-offs, and transfers to held-for-sale
New loan fundings in the third quarter of 2019 totaled $406.1
million, a decrease of $297.5 million, or 42%, from the second
quarter of 2019 and a decrease of $29.6 million, or 7%, from the
third quarter of 2018. The decrease in new loan fundings compared
to the prior quarter was primarily driven by fewer multifamily loan
originations. Our Commercial Banking division funded $99.1 million
of new loans during the third quarter of 2019 and has originated
$275.2 million of loans through the first nine months of 2019. Loan
growth during the third quarter of 2019 was also impacted by
elevated loan payoffs of $300.0 million, compared to payoffs of
$192.8 million in the second quarter of 2019 and $197.4 million in
the third quarter of 2018.
Investment Securities
The average balance of investment securities decreased $37.2
million, or 3.4%, during the third quarter of 2019 to $1.0 billion
compared to the prior quarter, and increased $15.9 million, or
1.5%, compared to the third quarter of 2018. The decrease in
investment securities compared to the second quarter of 2019 was
primarily driven by the sale of lower yielding securities and
accelerated amortization from higher paydowns. Investment
securities composed 14.8% of average interest earning assets during
the third quarter of 2019, as compared to 15.3% during the second
quarter of 2019.
Deposits and Borrowings
Average deposits increased $79.8 million, or 1.3%, during the
third quarter of 2019 to $6.2 billion compared to the prior
quarter, and increased $234.1 million, or 3.9%, compared to the
third quarter of 2018. Deposit growth during the third quarter of
2019 was primarily driven by interest-bearing demand, money market,
and savings deposits generated by our Retail Banking division,
Commercial Banking division, and PENSCO. The average balance of
certificates of deposit decreased $13.9 million, or 1.6%, from the
prior quarter, and average noninterest-bearing demand deposits
decreased $9.6 million, or 1.3%, from the prior quarter.
Noninterest-bearing demand deposits measured 12.2% of total
deposits as of September 30, 2019, as compared to 11.9% of total
deposits as of June 30, 2019.
Our loan to deposit ratio was 92.5% as of September 30, 2019,
compared to 93.0% as of June 30, 2019 and 84.0% as of September 30,
2018.
The average balance of Federal Home Loan Bank (FHLB) advances
decreased 38% during the third quarter of 2019 to $217.9 million,
compared to $351.9 million in the second quarter of 2019, and
increased from a zero balance in the third quarter of 2018.
Net Interest Income
Net interest income decreased 1.9% to $49.6 million for the
third quarter of 2019, compared to $50.5 million for the second
quarter of 2019, and increased 1.4% compared to $48.9 million for
the third quarter of 2018. Interest income from loans increased
0.8% to $61.7 million for the third quarter of 2019, compared to
$61.2 million for the second quarter of 2019, driven primarily by a
net benefit from loan prepayments during the quarter and an
increase in the average balance of loans, while interest income
from investment securities and interest-earning cash decreased
14.6% to $8.4 million for the third quarter of 2019, compared to
$9.8 million for the second quarter of 2019, driven primarily by
lower average balances and higher premium amortization.
Interest expense increased 0.1% to $20.5 million for the third
quarter of 2019, compared to $20.4 million for the second quarter
of 2019, and increased 62% compared to $12.6 million for the third
quarter of 2018. Interest expense on deposits increased 5.3% from
the prior quarter to $17.2 million, driven by higher average
balances and cost of deposits, partially offset by an $849,000
decrease in interest expense on FHLB advances during the third
quarter of 2019 due to lower average balances.
Net Interest Margin
The current interest rate environment, including the Federal
Reserve's rate cuts in the third quarter of 2019 and the flattening
yield curve, continue to negatively impact our net interest margin
(NIM). Taxable equivalent NIM decreased six basis points to 2.82%
in the third quarter of 2019 from 2.88% in the second quarter of
2019, and decreased 16 basis points from 2.98% in the third quarter
of 2018. The linked-quarter change was primarily driven by a seven
basis point decrease in the yield on interest earning assets to
3.97%, primarily resulting from a 26 basis point decrease in the
yield on investment securities to 2.84%. Our cost of funds was
unchanged from the prior quarter at 1.23%. While our cost of
deposits increased three basis points during the third quarter of
2019 to 1.09%, primarily due to higher rates paid on money market
and time deposits, our cost of borrowings decreased due to lower
average balances of FHLB advances.
Noninterest Income
Noninterest income increased 9% to $13.1 million in the third
quarter of 2019 from $12.0 million in the second quarter of 2019,
and increased 14% from $11.5 million in the third quarter of 2018.
The increase in noninterest income compared to the prior quarter
was primarily driven by a 6% increase in trust administrative fees
from PENSCO, our alternative asset IRA custodian subsidiary, to
$7.2 million, and an 8% increase in escrow and exchange fees to
$1.6 million. Noninterest income for third quarter of 2019 included
$220,000 in gains on the sale of securities, loans, and other
assets, compared to a loss of $50,000 for the second quarter of
2019.
Noninterest Expense
Noninterest expense decreased 13% to $40.1 million in the third
quarter of 2019, compared to $46.3 million in the second quarter of
2019, and decreased 8% compared to $43.7 million in the third
quarter of 2018. During the second quarter of 2019, we executed a
cost reduction initiative and incurred other strategic action
related expenses totaling $4.9 million. On an adjusted basis, after
giving effect to the expenses described above, noninterest expense
decreased 4% compared to the second quarter of 2019. During the
third quarter of 2019, the FDIC issued small bank assessment
credits based on the reserve ratio of the Deposit Insurance Fund
exceeding 1.38%, which resulted in a $397,000 decrease in our
deposit insurance and regulatory assessments expense compared to
the second quarter of 2019. Our efficiency ratio for the third
quarter of 2019 was 61.8%, or 61.6% on an adjusted basis, compared
to 71.3% for the second quarter of 2019, or 63.5% on an adjusted
basis.
Income Tax Expense
We recorded an income tax expense of $8.3 million in the third
quarter of 2019, compared to an income tax expense of $4.2 million
in the second quarter of 2019 and a negative income tax expense of
$972,000 in the third quarter of 2018. Our effective tax rate for
the third quarter of 2019 was 27.3%, compared to 32.7% for the
second quarter of 2019 and (11.5)% for the third quarter of 2018.
The previously announced expense reduction initiative in the second
quarter of 2019 increased our effective tax rate in the third
quarter of 2019 by approximately one percentage point due to annual
compensation that exceeded the deductible threshold under Internal
Revenue Code Section 162(m).
Asset Quality
Total nonperforming assets decreased 65% to $7.4 million as of
September 30, 2019, compared to $21.2 million as of June 30, 2019,
and decreased 84% compared to $45.1 million as of September 30,
2018. Our ratio of nonperforming assets to total assets decreased
to 0.10% as of September 30, 2019, compared to 0.27% and 0.61% as
of June 30, 2019 and September 30, 2018, respectively. Total
criticized loans decreased $36.6 million, or 27%, to $101.4 million
as of September 30, 2019, compared to $137.9 million as of June 30,
2019. Classified loans decreased $40.1 million in the third quarter
of 2019, while special mention loans increased $3.5 million from
the prior quarter. Total Enterprise Value loans decreased $28.6
million, or 44%, during the third quarter of 2019 compared to the
prior quarter and totaled $35.9 million as of September 30,
2019.
Our allowance for loan losses was $45.2 million, or 0.78% of
loans, as of September 30, 2019, compared to $57.7 million, or
1.00% of loans, as of June 30, 2019, and $59.0 million, or 1.14% of
loans, as of September 30, 2018. Net charge-offs during the third
quarter of 2019 were $4.9 million, or 0.33% of average loans
annualized, compared to net charge-offs of $4.0 million, or 0.28%
of average loans annualized, for the second quarter of 2019, and
$8.4 million, or 0.66% of average loans annualized, for the third
quarter of 2018. The ratio of the allowance for loan losses to
total nonaccrual loans was 609% as of September 30, 2019, compared
to 273% as of June 30, 2019 and 131% as of September 30, 2018.
We recorded a negative provision for loan losses of $7.7 million
in the third quarter of 2019, compared to a provision expense of
$3.3 million and $8.2 million in the second quarter of 2019 and
third quarter of 2018, respectively. The negative provision expense
during the third quarter of 2019 was primarily driven by planned
loan exits and the release of specific reserves related to
Enterprise Value loan relationships resolved during the quarter,
partially offset by net charge-offs and new loan production.
Capital
As of September 30, 2019, Opus exceeded all minimum regulatory
capital requirements under Basel III and was considered to be a
"well-capitalized" financial institution, as summarized in the
table below:
Capital Ratios
As of
Well-Capitalized Regulatory
Requirements
(unaudited)
September 30,
2019¹
June 30, 2019
September 30,
2018
Tier 1 leverage ratio
9.70
%
9.30
%
9.89
%
5.00%
Common Equity Tier 1 ratio
11.71
11.07
11.75
6.50
Tier 1 risk-based capital ratio
12.20
11.56
12.27
8.00
Total risk-based capital ratio
15.26
14.77
15.75
10.00
Tangible equity to tangible assets
ratio
9.67
9.26
9.47
NA
Tangible common equity to tangible assets
ratio
9.28
8.87
9.05
NA
[1] Regulatory capital ratios are
preliminary until filing of our September 30, 2019 FDIC call
report.
Stockholders’ equity totaled $1.1 billion as of September 30,
2019 and increased $21.7 million and $46.0 million compared to June
30, 2019 and September 30, 2018, respectively. Our tangible book
value per common share increased $0.62 to $18.94 as of September
30, 2019, compared to $18.32 as of June 30, 2019 and increased
$1.31 compared to $17.63 as of September 30, 2018.
Conference Call and Webcast Details
Date: Monday, October 28, 2019 Time: 8:00 a.m. PT (11:00 a.m.
ET)
Phone Number: (833) 628-4594 Conference ID: 2222128 Webcast URL:
http://investor.opusbank.com/event
Analysts, investors, and the general public may listen to our
discussion of Opus' third 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. 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 2222128. The call replay will be available
through November 28, 2019.
About Opus Bank
Opus Bank is an FDIC insured California-chartered commercial
bank with $7.8 billion of total assets, $5.8 billion of total
loans, and $6.3 billion in total deposits as of September 30, 2019.
Opus Bank provides commercial and retail banking products and
solutions to its clients in western markets from its headquarters
in Irvine, California and through 46 banking offices, including 28
in California, 16 in the Seattle/Puget Sound region in Washington,
one in the Phoenix metropolitan area of Arizona and one in
Portland, Oregon. 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. Additionally, Opus Bank’s wholly-owned
subsidiary, PENSCO Trust Company, has approximately $14 billion of
custodial IRA assets and approximately 46,000 client accounts,
which are comprised of self-directed investors, financial
institutions, capital raisers and financial advisors. 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 lessening headwinds related to the
intentional runoff of Enterprise Value loans and expectations
regarding improvement in our profitability. 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, risks that
our expected efficiencies and savings from our expense reduction
initiatives will be less than anticipated, 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, risks related to our technology and information systems,
and the management of our operating expenses, including the
effectiveness of certain strategic cost reduction initiatives. 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
February 28, 2019. 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 nine months
ended
($ in thousands, except per share
amounts)
September 30,
2019
June 30, 2019
September 30,
2018
September 30,
2019
September 30,
2018
Interest income:
Loans
$
61,655
$
61,157
$
54,110
$
179,819
$
162,554
Investment securities
7,471
8,359
5,280
24,407
15,422
Due from banks
900
1,447
2,113
3,671
4,390
Total interest income
70,026
70,963
61,503
207,897
182,366
Interest expense:
Deposits
17,225
16,359
10,702
47,010
26,125
Federal Home Loan Bank advances
1,316
2,165
(5
)
4,237
374
Subordinated debt
1,923
1,923
1,923
5,768
5,768
Total interest expense
20,464
20,447
12,620
57,015
32,267
Net interest income
49,562
50,516
48,883
150,882
150,099
Provision (negative provision) for loan
losses
(7,698
)
3,281
8,241
(2,219
)
11,942
Net interest income after provision
(negative provision) for loan losses
57,260
47,235
40,642
153,101
138,157
Noninterest income:
Fees and service charges on deposit
accounts
1,483
1,505
1,735
4,428
5,240
Escrow and exchange fees
1,623
1,506
1,548
4,482
4,407
Trust administrative fees
7,244
6,829
6,884
20,758
20,703
Gain (loss) on sale of loans
218
(56
)
—
52
(169
)
Gain (loss) on sale of assets
1
—
—
1
—
Gain (loss) from OREO and other
repossessed assets
—
—
—
—
203
Gain (loss) on sale of investment
securities
1
6
—
120
182
Bank-owned life insurance, net
1,014
994
1,048
2,987
3,145
Other income
1,485
1,211
246
3,336
3,986
Total noninterest income
13,069
11,995
11,461
36,164
37,697
Noninterest expense:
Compensation and benefits
23,316
29,095
26,004
79,286
78,283
Professional services
2,101
1,099
2,489
5,416
6,824
Occupancy expense
3,835
3,581
3,764
11,246
11,521
Depreciation and amortization
1,713
1,704
1,652
5,249
5,014
Deposit insurance and regulatory
assessments
122
519
977
1,414
3,066
Insurance expense
334
335
337
1,013
1,011
Data processing
948
1,058
230
2,570
987
Software licenses and maintenance
1,197
1,217
1,371
3,716
3,646
Office services
1,720
1,679
1,642
5,038
5,369
Amortization of other intangible
assets
1,211
1,415
1,479
4,041
4,438
Advertising and marketing
838
833
909
2,395
2,709
Other expenses
2,737
3,784
2,809
10,415
8,014
Total noninterest expense
40,072
46,319
43,663
131,799
130,882
Income before income tax expense
30,257
12,911
8,440
57,466
44,972
Income tax expense (benefit)
8,259
4,225
(972
)
15,921
7,193
Net income
$
21,998
$
8,686
$
9,412
$
41,545
$
37,779
Basic earnings per common share
$
0.58
$
0.23
$
0.25
$
1.09
$
1.00
Diluted earnings per common share
0.57
0.23
0.25
1.08
0.99
Weighted average shares - basic
36,282,166
36,254,474
36,115,204
36,241,645
36,043,060
Weighted average shares - diluted
38,230,784
38,238,324
38,362,739
38,205,990
38,338,423
Consolidated Balance Sheets
(unaudited)
As of
($ in thousands, except share amounts)
September 30,
2019
June 30, 2019
September 30,
2018
Assets
Cash and due from banks
$
43,295
$
40,358
$
57,126
Due from banks – interest-bearing
243,051
219,329
476,129
Investment securities available-for-sale,
at fair value
1,010,253
1,051,067
1,018,855
Loans
5,801,956
5,788,986
5,159,881
Less allowance for loan losses
(45,156
)
(57,724
)
(59,029
)
Loans, net
5,756,800
5,731,262
5,100,852
Loans held-for-sale
—
79,103
—
Premises and equipment, net
23,811
24,656
24,955
Goodwill
331,832
331,832
331,832
Other intangible assets, net
34,884
36,095
40,362
Deferred tax assets, net
1,595
14,237
22,847
Cash surrender value of bank owned life
insurance, net
157,382
156,369
153,289
Accrued interest receivable
25,109
26,510
21,680
Federal Home Loan Bank stock
17,250
17,250
17,250
Other assets
126,081
128,893
129,897
Total assets
$
7,771,343
$
7,856,961
$
7,395,074
Liabilities and Stockholders’
Equity
Deposits:
Noninterest-bearing demand
$
763,038
$
738,235
$
890,925
Interest-bearing demand
2,516,614
2,577,873
2,564,737
Money market and savings
2,129,341
2,027,341
2,031,468
Time deposits
860,808
879,910
655,172
Total deposits
6,269,801
6,223,359
6,142,302
Federal Home Loan Bank advances
200,000
350,000
—
Subordinated debt, net
133,209
133,143
132,944
Accrued interest payable
2,408
4,980
2,350
Other liabilities
82,882
84,151
80,428
Total liabilities
6,688,300
6,795,633
6,358,024
Stockholders’ equity:
Preferred stock:
Authorized 200,000,000 shares; issued
31,111 and 31,111 and 31,111 shares, respectively
29,110
29,110
29,110
Common stock, no par value per share:
Authorized 200,000,000 shares; issued
37,394,513 and 37,338,920 and 36,635,132 shares, respectively
700,220
700,220
700,220
Additional paid-in capital
83,966
82,755
68,975
Retained earnings
289,303
271,495
271,304
Treasury stock, at cost; 1,107,915 and
1,087,701 and 576,547 shares, respectively
(26,638
)
(26,217
)
(14,965
)
Accumulated other comprehensive income
(loss)
7,082
3,965
(17,594
)
Total stockholders’ equity
1,083,043
1,061,328
1,037,050
Total liabilities and stockholders’
equity
$
7,771,343
$
7,856,961
$
7,395,074
Selected Financial Data
(unaudited)
As of or for the three months
ended
As of or for the nine months
ended
September 30,
2019
June 30, 2019
September 30,
2018
September 30,
2019
September 30,
2018
Yield on interest-earning assets1
3.97
%
4.04
%
3.75
%
4.05
%
3.74
%
Net interest margin1
2.82
2.88
2.98
2.94
3.09
Cost of deposits2
1.09
1.06
0.71
1.03
0.58
Cost of funds3
1.23
1.23
0.81
1.18
0.70
Noninterest expense to average assets
2.05
2.38
2.39
2.31
2.41
Loan to deposits
92.54
93.02
84.01
92.54
84.01
(1) Yield on interest-earning assets and
net interest margin are presented on a tax equivalent basis using
the federal effective tax rate.
(2) Calculated as interest expense on
deposits divided by total average deposits.
(3) Calculated as total interest expense
divided by average total deposits, FHLB advances and subordinated
debt.
Loan Fundings
(unaudited)
For the three months
ended
For the nine months
ended
($ in thousands)
September 30,
2019
June 30, 2019
September 30,
2018
September 30,
2019
September 30,
2018
Real estate mortgage loans:
Multifamily residential
$
256,235
$
569,719
$
257,775
$
1,252,870
$
672,314
Commercial real estate
74,159
75,185
55,807
196,471
134,060
Construction and land loans
6,670
7,331
5,674
20,213
25,415
Commercial business loans
66,744
48,725
112,791
172,348
339,772
Small Business Administration loans
2,269
2,642
3,644
5,747
11,997
Total loan fundings
$
406,077
$
703,602
$
435,691
$
1,647,649
$
1,183,558
Composition of Loan Portfolio
As of
(unaudited)
September 30,
2019
June 30, 2019
September 30,
2018
($ in thousands)
Amount
% of Total
loans
Amount
% of Total
loans
Amount
% of Total
loans
Real estate mortgage loans:
Single-family residential
$
51,361
0.9
%
$
58,829
1.0
%
$
63,698
1.2
%
Multifamily residential
3,699,824
63.8
3,608,683
62.3
2,856,672
55.4
Commercial real estate:
Owner occupied
279,262
4.8
296,772
5.1
157,368
3.0
Non-owner occupied
829,718
14.3
823,647
14.2
924,434
17.9
Construction and land loans
51,714
0.9
45,100
0.8
73,956
1.4
Commercial business loans
856,364
14.7
918,428
15.9
1,036,832
20.1
Small Business Administration loans
29,958
0.5
33,658
0.6
42,170
0.8
Consumer and other loans
3,755
0.1
3,869
0.1
4,751
0.1
Total loans
$
5,801,956
100.0
%
$
5,788,986
100.0
%
$
5,159,881
100.0
%
Consolidated average balance sheet,
interest, yield and rates
(unaudited)
For the three months ended
September 30,
For the three months ended
June 30,
For the three months ended
September 30,
2019
2019
2018
($ in thousands)
Average Balance
Interest (1)
Yields/ Rates
Average Balance
Interest (1)
Yields/ Rates
Average Balance
Interest (1)
Yields/ Rates
Assets:
Interest-earning assets:
Due from banks
$
180,479
$
900
1.98
%
$
254,059
$
1,447
2.28
%
$
430,991
$
2,113
1.95
%
Investment securities
1,043,830
7,471
2.84
1,081,031
8,359
3.10
1,027,950
5,280
2.04
Loans
5,817,041
62,109
4.24
5,744,728
61,561
4.30
5,091,151
54,472
4.24
Total interest-earning assets
7,041,350
70,480
3.97
7,079,818
71,367
4.04
6,550,092
61,865
3.75
Noninterest-earning assets
710,047
713,721
704,117
Total assets
$
7,751,397
$
7,793,539
$
7,254,209
Liabilities and stockholders’ equity:
Interest-bearing deposits
Interest-bearing demand
$
2,556,920
$
3,333
0.52
%
$
2,483,757
$
3,200
0.52
%
$
2,546,443
$
2,279
0.36
%
Money market and savings
2,064,316
8,843
1.70
2,034,212
8,150
1.61
2,015,781
5,753
1.13
Time deposits
869,974
5,049
2.30
883,839
5,009
2.27
594,089
2,670
1.78
Total interest bearing deposits
5,491,210
17,224
1.24
5,401,808
16,359
1.21
5,156,313
10,702
0.82
Subordinated debt
133,168
1,923
5.73
133,102
1,923
5.79
132,909
1,923
5.74
FHLB advances
217,935
1,316
2.40
351,868
2,165
2.47
—
(5
)
0.00
Total interest-bearing liabilities
5,842,313
20,463
1.39
5,886,778
20,447
1.39
5,289,222
12,620
0.95
Noninterest-bearing deposits
754,284
763,894
855,036
Other liabilities
80,365
84,531
70,443
Total liabilities
6,676,961
6,735,203
6,214,701
Total stockholders’ equity
1,074,436
1,058,336
1,039,508
Total liabilities and stockholders’
equity
$
7,751,397
$
7,793,539
$
7,254,209
Net interest spread (2)
2.58
%
2.65
%
2.80
%
Net interest income and margin, tax
equivalent (3, 4)
$
50,017
2.82
%
$
50,920
2.88
%
$
49,245
2.98
%
Reconciliation of tax equivalent net
interest income to reported net interest income
Tax equivalent adjustment
(454
)
(404
)
(362
)
Net interest income, as reported
$
49,563
$
50,516
$
48,883
(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
(unaudited)
For the nine months ended
September 30,
2019
2018
(In thousands)
Average Balance
Interest (1)
Yields/ Rates
Average Balance
Interest (1)
Yields/ Rates
Assets:
Interest-earning assets:
Due from banks
$
222,845
$
3,671
2.20
%
$
325,237
$
4,390
1.80
%
Investment securities
1,075,092
24,407
3.04
1,061,619
15,422
1.94
Loans
5,611,431
181,082
4.31
5,160,861
163,548
4.24
Total interest-earning assets
$
6,909,368
$
209,160
4.05
$
6,547,717
$
183,360
3.74
Noninterest-earning assets
716,634
710,556
Total assets
$
7,626,002
$
7,258,273
Liabilities and stockholders’ equity:
Interest-bearing deposits
Interest-bearing demand
$
2,502,310
$
9,344
0.50
%
$
2,525,125
$
5,356
0.28
%
Money market and savings
2,031,942
23,952
1.58
2,143,182
15,482
0.97
Time deposits
822,596
13,714
2.23
474,488
5,287
1.49
Total interest bearing deposits
$
5,356,848
$
47,010
1.17
$
5,142,795
$
26,125
0.68
Subordinated debt
133,105
5,768
5.79
132,843
5,768
5.81
FHLB advances
230,952
4,237
2.45
28,462
374
1.76
Total interest-bearing liabilities
$
5,720,905
$
57,015
1.33
$
5,304,100
$
32,267
0.81
Noninterest-bearing deposits
761,585
845,065
Other liabilities
82,180
78,418
Total liabilities
$
6,564,670
$
6,227,583
Total stockholders’ equity
$
1,061,332
$
1,030,690
Total liabilities and stockholders’
equity
$
7,626,002
$
7,258,273
Net interest spread (2)
2.72
%
2.93
%
Net interest income and margin, tax
equivalent (3, 4)
$
152,145
2.94
%
$
151,093
3.09
%
Reconciliation of tax equivalent net
interest income to reported net interest income
Tax equivalent adjustment
(1,263
)
(994
)
Net interest income, as reported
$
150,882
$
150,099
(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 nine months
ended
($ in thousands)
September 30,
2019
June 30, 2019
September 30,
2018
September 30,
2019
September 30,
2018
Allowance for loan losses-balance at
beginning of period
$
57,724
$
58,483
$
59,197
$
54,664
$
75,930
Provision for loan losses
(7,698
)
3,281
8,241
(2,219
)
11,942
Charge-offs
(5,923
)
(4,697
)
(10,023
)
(11,004
)
(36,686
)
Recoveries
1,053
657
1,614
3,715
7,843
Total net (charge-offs) recoveries
(4,870
)
(4,040
)
(8,409
)
(7,289
)
(28,843
)
Allowance for loan losses-balance at end
of period
$
45,156
$
57,724
$
59,029
$
45,156
$
59,029
Asset Quality Information
(unaudited)
As of
($ in thousands)
September 30,
2019
June 30, 2019
September 30,
2018
Nonperforming assets
Nonaccrual loans
$
7,420
$
21,161
$
45,136
OREO and other repossessed assets
—
—
—
Total nonperforming assets
$
7,420
$
21,161
$
45,136
Loans 30 - 89 days past due
$
1,941
$
1,140
$
9,856
Accruing loans 90 days or more past
due
—
—
390
Accruing troubled debt restructured
loans
—
—
138
Non performing loans to total loans
0.13
%
0.37
%
0.87
%
Non performing assets to total assets
0.10
0.27
0.61
Loans 30 - 89 days past due to total
loans
0.03
0.02
0.19
Allowance for loan losses to total
loans
0.78
1.00
1.14
Allowance for loan losses to non-accrual
loans
608.57
272.78
130.78
Net charge-offs to average loans
(annualized)
0.33
0.28
0.66
Risk Rating by Loan Product
(Unaudited)
($ in thousands)
Pass
Special Mention
Classified
Total Loans
Nonaccrual loans
Total allowance
As of September 30, 2019
Real estate mortgage loans:
Single-family residential
$
50,840
$
70
$
451
$
51,361
$
217
$
120
Multifamily residential
3,698,947
—
877
3,699,824
—
13,418
Commercial real estate
1,062,001
8,414
38,565
1,108,980
2,423
9,806
Construction and land loans
33,980
17,734
—
51,714
—
574
Commercial business loans
829,574
6,577
20,213
856,364
—
19,935
Small Business Administration loans
22,147
156
7,655
29,958
4,290
1,299
Consumer and other loans
3,100
55
600
3,755
490
4
Total loans
$
5,700,589
$
33,006
$
68,361
$
5,801,956
$
7,420
$
45,156
As of June 30, 2019
Real estate mortgage loans:
Single-family residential
$
58,286
$
73
$
470
$
58,829
$
247
$
140
Multifamily residential
3,604,675
115
3,893
3,608,683
3,011
13,204
Commercial real estate
1,062,817
11,281
46,321
1,120,419
2,436
11,072
Construction and land loans
29,116
15,984
—
45,100
—
521
Commercial business loans
867,106
1,855
49,467
918,428
10,625
31,459
Small Business Administration loans
25,847
157
7,654
33,658
4,330
1,324
Consumer and other loans
3,190
56
623
3,869
512
4
Total loans
$
5,651,037
$
29,521
$
108,428
$
5,788,986
$
21,161
$
57,724
As of September 30, 2018
Real estate mortgage loans:
Single-family residential
$
63,199
$
77
$
422
$
63,698
$
—
$
171
Multifamily residential
2,852,490
2,066
2,116
2,856,672
—
9,677
Commercial real estate
1,033,707
17,848
30,247
1,081,802
2,512
9,009
Construction and land loans
60,644
13,313
—
73,957
—
904
Commercial business loans
930,748
36,105
69,979
1,036,832
35,085
38,966
Small Business Administration loans
30,028
1,162
10,979
42,169
6,973
295
Consumer and other loans
3,992
59
700
4,751
566
7
Total loans
$
4,974,808
$
70,630
$
114,443
$
5,159,881
$
45,136
$
59,029
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 net income, earnings per
diluted share, return on average assets, return on average
stockholders' equity, return on average tangible common equity,
efficiency ratio, tangible book value per common share, and
tangible common equity ratio. 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 tangible book value per common
share
(unaudited)
As of
($ In thousands, except share amounts)
September 30, 2019
June 30, 2019
September 30, 2018
Tangible equity:
Total stockholders' equity
$
1,083,043
$
1,061,328
$
1,037,050
Less:
Preferred stock
29,110
29,110
29,110
Common equity
1,053,933
1,032,218
1,007,940
Less:
Goodwill
331,832
331,832
331,832
Other intangible assets, net
34,884
36,095
40,362
Tangible common equity
687,217
664,291
635,746
Shares of common stock outstanding
36,286,598
36,251,219
36,058,585
Book value per common share
$
29.04
$
28.47
$
27.95
Tangible book value per common share
18.94
18.32
17.63
Non-GAAP tangible common equity
ratio
(unaudited)
As of
($ In thousands)
September 30, 2019
June 30, 2019
September 30, 2018
Total assets
$
7,771,343
$
7,856,961
$
7,395,074
Less:
Goodwill
331,832
331,832
331,832
Other intangible assets, net
34,884
36,095
40,362
Tangible assets
7,404,627
7,489,034
7,022,880
Total stockholders' equity
1,083,043
1,061,328
1,037,050
Less:
Goodwill
331,832
331,832
331,832
Other intangible assets, net
34,884
36,095
40,362
Tangible equity
716,327
693,401
664,856
Less: preferred stock
29,110
29,110
29,110
Tangible common equity
687,217
664,291
635,746
Total stockholders' equity to total
assets
13.94
%
13.51
%
14.02
%
Tangible equity to tangible assets
ratio
9.67
%
9.26
%
9.47
%
Total common equity to total assets
13.56
%
13.14
%
13.63
%
Tangible common equity to tangible assets
ratio
9.28
%
8.87
%
9.05
%
Non-GAAP Financial Measures
(unaudited)
For the three months
ended
For the nine months
ended
($ in thousands)
September 30,
2019
June 30, 2019
September 30,
2018
September 30,
2019
September 30,
2018
Net income
$
21,998
$
8,686
$
9,412
$
41,545
$
37,779
Adjustments to noninterest income:
Impairment
—
—
—
489
—
(Gains) and losses on sales of securities,
loans, and other repossessed assets
(220
)
50
—
(174
)
(215
)
Adjustments to noninterest expense:
Strategic actions
119
4,891
548
4,920
2,298
Litigation (recovery)
—
—
116
1,431
(2,734
)
Pre-tax adjustments
(101
)
4,941
664
6,666
(651
)
Tax effect
383
(319
)
(2,440
)
(345
)
(2,536
)
Tax-effected adjustments (1)
282
4,622
(1,776
)
6,321
(3,187
)
Adjusted net income
$
22,280
$
13,308
$
7,636
$
47,866
$
34,592
Average assets
$
7,751,397
$
7,793,539
$
7,254,209
$
7,626,002
$
7,258,273
Average stockholders' equity
1,074,436
1,058,336
1,039,508
1,061,332
1,030,690
Less:
Average preferred stock
29,110
29,110
29,110
29,100
29,110
Average goodwill
331,832
331,832
331,832
331,832
331,832
Average other intangible assets
35,639
36,956
41,139
36,933
42,598
Average tangible common equity
$
677,855
$
660,438
$
637,427
$
663,467
$
627,150
Earnings per diluted share
$
0.57
$
0.23
$
0.25
$
1.08
$
0.99
Adjusted earnings per diluted share
0.58
0.35
0.19
1.25
0.91
Return on average assets
1.13
%
0.45
%
0.51
%
0.73
%
0.70
%
Adjusted return on average assets
1.14
0.68
0.42
0.84
0.64
Return on average equity
8.12
3.29
3.59
5.23
4.90
Adjusted return on average equity
8.23
5.04
2.91
6.03
4.49
Return on average tangible common
equity
12.88
5.27
5.86
8.37
8.05
Adjusted return on average tangible common
equity
13.04
8.08
4.75
9.65
7.37
Efficiency ratio (2)
61.82
71.32
69.49
67.91
67.05
Adjusted efficiency ratio
61.63
63.55
68.40
64.36
67.28
(1) The tax effect of adjustments was
computed using the combined federal and state marginal tax rate of
26.1%, 25.5%, 16.1%, 25.4% and 22.0% for the three months ended
September 30, 2019, June 30, 2019, and September 30, 2018 and the
nine months ended September 30, 2019 and September 30, 2018,
respectively, adjusted for the tax effect of nondeductible
strategic action expenses.
(2) The efficiency ratio equals
noninterest expense adjusted to exclude the amortization of other
intangible assets divided by the sum of tax-equivalent net interest
income and noninterest income adjusted to exclude the gains and
losses on the sale of investment securities, loans, and other
repossessed assets.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191028005230/en/
Kevin L. Thompson EVP, Chief Financial Officer 949-251-8196
Brett G. Villaume SVP, Director of Investor Relations
949-224-8866
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