- New loan fundings from our Commercial Banking division were
$130 million for the fourth quarter of 2019, an increase from $99
million in the prior quarter
- Average deposits increased $165 million, or 3%, from the prior
quarter
- Efficiency ratio was 61.3% for the fourth quarter of 2019
- Nonperforming assets to total assets was 0.07% as of December
31, 2019
- Credit improvement resulted in a negative provision for loan
losses of $2.7 million for the fourth quarter
Opus Bank ("Opus") (Nasdaq: OPB) announced today net income of
$20.3 million, or $0.53 per diluted share, for the fourth quarter
of 2019, compared to net income of $22.0 million, or $0.57 per
diluted share, for the third quarter of 2019. Net income for the
year ended December 31, 2019 was $61.8 million, or $1.62 per
diluted share, compared to net income of $30.9 million, or $0.81
per diluted share, for the year ended December 31, 2018. Net income
during the fourth quarter of 2019 included a negative provision for
loan losses of $2.7 million, compared to a negative provision for
loan losses of $7.7 million in the prior quarter. Net income during
the fourth quarter of 2019 also included a pre-tax gain of $851,000
on the sale of a bank operations building, which positively
impacted earnings by $0.02 per diluted share.
Additionally, Opus announced today that its Board of Directors
has approved the payment of a quarterly cash dividend of $0.11 per
common share payable on February 20, 2020 to common stockholders of
record as of February 6, 2020, and a common-equivalent payment to
its Series A Preferred stockholders.
Earnings Summary
(unaudited)
For the three months ended
($ in thousands, except per share
data)
December 31, 2019
September 30, 2019
December 31, 2018
Net income
$
20,289
$
21,998
$
(6,861
)
Earnings per diluted share
0.53
0.57
(0.20
)
Return on average assets ("ROAA")
1.02
%
1.13
%
(0.38
%)
Return on average stockholders' equity
7.37
%
8.12
%
(2.61
%)
Return on average tangible common equity1
("ROATCE")
11.54
%
12.88
%
(4.24
%)
Efficiency ratio1
61.30
%
61.82
%
81.49
%
Adjusted Earnings1
Adjusted net income
$
19,553
$
22,280
$
10,167
Adjusted earnings per diluted share
0.51
0.58
0.27
Adjusted return on average assets
0.98
%
1.14
%
0.56
%
Adjusted return on average stockholders'
equity
7.10
%
8.23
%
3.87
%
Adjusted return on average tangible common
equity
11.12
%
13.04
%
6.28
%
Adjusted efficiency ratio
61.17
%
61.63
%
65.03
%
[1] See reconciliation of non-GAAP
financial measures to corresponding GAAP measures on pages
14-16.
Paul W. Taylor, President and Chief Executive Officer of Opus
Bank, stated, "The steps we took during 2019 to reduce expenses and
improve Opus’ profitability are beginning to yield positive
results, as we reported fourth quarter 2019 earnings per diluted
share of $0.53, an ROAA of 1.02% and an efficiency ratio of 61.3%.
Noninterest expense decreased 1% from the prior quarter, while
continued credit quality improvement resulted in a negative
provision for loan losses of $2.7 million for the fourth quarter of
2019."
Mr. Taylor continued, “Our Commercial Banking division increased
quarterly loan fundings in the fourth quarter to $130 million, up
from $99 million last quarter, and we anticipate continued progress
in growing our commercial loan and deposit portfolios. I am
confident that profitability and growth will continue to improve in
2020.”
Loans
Average loans decreased $37.3 million, or 0.6%, compared to the
prior quarter to $5.8 billion for the fourth quarter of 2019, and
increased $620.2 million, or 12.0%, compared to $5.2 billion for
the fourth quarter of 2018. On a period-end basis, loans increased
$98.6 million, or 1.7%, compared to the prior quarter to $5.9
billion as of December 31, 2019, and increased $735.3 million, or
14.2%, compared to December 31, 2018. The decrease in the average
balance of loans compared to the third quarter of 2019 was
primarily driven by the timing of new loan fundings, which occurred
later in the fourth quarter of 2019.
Loan Balance Roll Forward
(unaudited)
Three Months Ended
($ in millions)
December 31,
2019
September 30,
2019
June 30, 2019
March 31, 2019
December 31, 2018
Beginning loan balance
$
5,802.0
$
5,789.0
$
5,461.5
$
5,165.2
$
5,159.9
New loan fundings
409.5
406.1
703.6
538.0
412.3
Loan payoffs
(271.7
)
(300.0
)
(192.8
)
(173.7
)
(265.3
)
Other1
(39.3
)
(93.1
)
(183.3
)
(68.0
)
(141.7
)
Ending loan balance
$
5,900.5
$
5,802.0
$
5,789.0
$
5,461.5
$
5,165.2
[1] Includes amortization, planned exits,
charge-offs, and transfers to held-for-sale
New loan fundings in the fourth quarter of 2019 totaled $409.5
million, an increase of $3.4 million, or 0.8%, from the third
quarter of 2019 and a decrease of $2.8 million, or 0.7%, from the
fourth quarter of 2018. New loan fundings for the year ended
December 31, 2019 totaled $2.1 billion, compared to $1.6 billion
for the year ended December 31, 2018. Our Commercial Banking
division funded $129.9 million of new loans during the fourth
quarter of 2019 and $405.0 million during the year ended December
31, 2019. Loan growth during the fourth quarter of 2019 was also
impacted by loan payoffs of $271.7 million, compared to payoffs of
$300.0 million in the third quarter of 2019 and $265.3 million in
the fourth quarter of 2018.
Investment Securities
The average balance of investment securities decreased $21.4
million, or 2.0%, during the fourth quarter of 2019 to $1.0 billion
compared to the prior quarter, and decreased $57.8 million, or
5.4%, compared to the fourth quarter of 2018. On a period-end
basis, investment securities increased $29.3 million, or 2.9%, from
the prior quarter to $1.0 billion as of December 31, 2019, and
decreased $42.0 million, or 3.9%, compared to December 31, 2018.
The decrease in the average balance of investment securities
compared to the third quarter of 2019 was primarily driven by the
timing of sales that took place at the end of the third quarter,
offset by the purchase of $65.0 million of investment securities
during the fourth quarter of 2019.
Deposits and Borrowings
Average deposits increased $164.8 million, or 2.6%, during the
fourth quarter of 2019 to $6.4 billion compared to the prior
quarter, and increased $385.3 million, or 6.4%, compared to the
fourth quarter of 2018. Deposit growth during the fourth quarter of
2019 was primarily driven by an increase of $73.5 million, or 2.9%,
in average interest-bearing demand and an increase of $113.1
million, or 5.5%, in average money market and savings deposits,
primarily driven by our Commercial Banking division and PENSCO. The
average balance of noninterest-bearing demand deposits increased
$6.1 million, or 0.8%, compared to the prior quarter, while the
average balance of certificates of deposit decreased $27.8 million,
or 3.2%. Noninterest-bearing demand deposits measured 11.9% of
total deposits as of December 31, 2019, compared to 12.2% of total
deposits as of September 30, 2019.
Our loan to deposit ratio measured 91.2% as of December 31,
2019, compared to 92.5% as of September 30, 2019 and 86.8% as of
December 31, 2018.
The average balance of Federal Home Loan Bank (FHLB) advances
decreased 8.2% in the fourth quarter of 2019 to $200.0 million,
compared to $217.9 million in the third quarter of 2019, and
increased from $33,000 in the fourth quarter of 2018.
Net Interest Income (Fully Taxable-Equivalent)
Net interest income was $50.1 million for the fourth quarter of
2019, compared to $50.0 million and $50.8 million in the third
quarter of 2019 and fourth quarter of 2018, respectively. Interest
income from loans decreased 3.1% to $60.2 million for the fourth
quarter of 2019, compared to $62.1 million for the third quarter of
2019, driven primarily by the difference in rate between new loan
fundings and loan payoffs, the impact of loan repricing during the
quarter, lower average loan balances, and a lower net benefit from
prepayments. Interest income from investment securities and
interest-earning cash increased 11.9% to $9.4 million for the
fourth quarter of 2019, driven primarily by higher average cash
balances and lower premium amortization compared to the prior
quarter.
Interest expense decreased 4.9% to $19.5 million for the fourth
quarter of 2019, compared to $20.5 million for the third quarter of
2019, and increased 39.4% compared to $14.0 million for the fourth
quarter of 2018. The decrease in interest expense from the prior
quarter was driven primarily by a 5.2% decrease in interest expense
on deposits to $16.3 million for the fourth quarter of 2019, due to
a 9 basis point lower average rate on interest-bearing deposits
that was partially offset by higher average balances of deposits.
Interest expense on FHLB advances decreased 8.8% compared to the
prior quarter to $1.2 million for the fourth quarter of 2019, due
to lower average balances.
Net Interest Margin (Fully Taxable-Equivalent)
Net interest margin (NIM) decreased six basis points to 2.76% in
the fourth quarter of 2019 from 2.82% in the third quarter of 2019,
and decreased 31 basis points from 3.07% in the fourth quarter of
2018, as the current interest rate environment continues to impact
our NIM. The linked-quarter change was primarily driven by an 11
basis point decrease in the yield on loans to 4.13%, partially
offset by a nine basis point decrease in our cost of
interest-bearing deposits to 1.15%.
Noninterest Income
Noninterest income increased 6.1% to $13.9 million in the fourth
quarter of 2019, compared to $13.1 million in the third quarter of
2019, and increased 309.9% compared to $3.4 million in the fourth
quarter of 2018. Noninterest income during the fourth quarter of
2019 included an $851,000 gain on the sale of assets related to the
disposition of a bank operations building during the quarter. On an
adjusted basis, excluding the above mentioned gain and $220,000 in
gains on the sale of securities, loans, and other assets during the
third quarter of 2019, noninterest income increased $162,000, or
1.3%, from the prior quarter. Noninterest income during the fourth
quarter of 2019 also included $7.3 million of trust administrative
fees, $1.5 million from escrow and exchange fees, and $1.4 million
of treasury management and deposit account fees. Noninterest income
during the fourth quarter of 2018 included a $9.9 million loss on
the sale of investment securities related to the repositioning of
our securities portfolio.
Noninterest Expense
Noninterest expense decreased 1.0% to $39.7 million for the
fourth quarter of 2019, compared to $40.1 million for the third
quarter of 2019, and decreased 26.1% compared to $53.7 million for
the fourth quarter of 2018. During the fourth quarter of 2019, we
utilized $461,000 of the FDIC small bank assessment credit,
compared to $692,000 in the third quarter of 2019. Noninterest
expense during the fourth quarter of 2018 included $10.5 million of
expenses related to restructuring charges and a cost reduction
initiative.
Our efficiency ratio for the fourth quarter of 2019 was 61.3%,
or 61.2% on an adjusted basis, compared to 61.8% for the third
quarter of 2019, or 61.6% on an adjusted basis.
Income Tax Expense
We recorded an income tax expense of $6.2 million in the fourth
quarter of 2019, compared to an income tax expense of $8.3 million
in the third quarter of 2019, and an income tax benefit of $654,000
in the fourth quarter of 2018. Our effective tax rate for the
fourth quarter of 2019 was 23.3%, compared to 27.3% for the third
quarter of 2019.
Asset Quality
Total nonperforming assets decreased 19.5% to $6.0 million as of
December 31, 2019, compared to $7.4 million as of September 30,
2019 and $28.0 million as of December 31, 2018. Our ratio of
nonperforming assets to total assets decreased to 0.07% as of
December 31, 2019, compared to 0.10% and 0.39% as of September 30,
2019 and December 31, 2018, respectively. Total criticized loans
decreased $27.9 million, or 27.5%, to $73.5 million as of December
31, 2019, compared to $101.4 million as of September 30, 2019.
Classified loans decreased $35.2 million in the fourth quarter of
2019, while special mention loans increased $7.3 million from the
prior quarter.
Our allowance for loan losses was $40.8 million, or 0.69% of our
total loan portfolio, as of December 31, 2019, compared to $45.2
million, or 0.78% of total loans, as of September 30, 2019 and
$54.7 million, or 1.06% of total loans, as of December 31, 2018.
Net charge-offs during the fourth quarter of 2019 were $1.6
million, or 0.11% of average loans annualized, compared to net
charge-offs of $4.9 million, or 0.33% of average loans annualized,
for the third quarter of 2019, and $12.0 million, or 0.92% of
average loans annualized, for the fourth quarter of 2018.
The ratio of the allowance for loan losses to total
nonperforming assets was 683.7% as of December 31, 2019, compared
to 608.6% as of September 30, 2019 and 195.1% as of December 31,
2018.
We recorded a negative provision for loan losses of $2.7 million
in the fourth quarter of 2019, compared to a negative provision for
loan losses of $7.7 million in the third quarter of 2019 and a
provision expense of $7.7 million in the fourth quarter of 2018.
The negative provision expense during the fourth quarter of 2019
was primarily driven by loan exits, partially offset by net
charge-offs and new loan production.
Capital
As of December 31, 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)
December 31, 2019¹
September 30,
2019
December 31,
2018
Tier 1 leverage ratio
9.70%
9.70%
9.69%
5.00%
Common Equity Tier 1 ratio
11.68%
11.71%
11.40%
6.50%
Tier 1 risk-based capital ratio
12.17%
12.20%
11.92%
8.00%
Total risk-based capital ratio
15.08%
15.26%
15.29%
10.00%
Tangible equity to tangible assets
ratio
9.62%
9.67%
9.84%
NA
Tangible common equity to tangible assets
ratio
9.24%
9.28%
9.41%
NA
[1] Regulatory capital ratios are
preliminary until filing of our December 31, 2019 FDIC call
report.
Stockholders’ equity totaled $1.1 billion as of December 31,
2019 and increased $16.1 million and $58.3 million compared to
September 30, 2019 and December 31, 2018, respectively. Our
tangible book value per common share increased $0.44 to $19.38 as
of December 31, 2019, compared to $18.94 as of September 30, 2019,
and increased $1.61 compared to $17.77 as of December 31, 2018.
Conference Call and Webcast Details
Date: Monday, January 27, 2020 Time: 8:00 a.m. PT (11:00 a.m.
ET)
Phone Number: (888) 317-6016 Conference ID: 9367183 Webcast URL:
https://services.choruscall.com/links/opb200127.html
Analysts, investors, and the general public may listen to a
discussion of Opus’ fourth quarter 2019 and annual performance by
using the phone number or webcast link listed above. 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
conference call, an archive recording will be available beginning
approximately one hour following the completion of the call. To
listen to the call replay, dial (877) 344-7529, or for
international callers dial (412) 317-0088. The access code for
either replay number is 10137350. The call replay will be available
through February 27, 2020.
About Opus Bank
Opus Bank is an FDIC insured California-chartered commercial
bank with $8.0 billion of total assets, $5.9 billion of total
loans, and $6.5 billion in total deposits as of December 31, 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 of continued progress in growing our commercial
loan and deposit portfolios and our belief that profitability and
growth will improve in 2020. 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, as such risk factors may be
amended, supplemented or superseded from time to time by other
reports Opus files with the Federal Deposit Insurance Corporation.
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 Statement of
Income
(unaudited)
Three Months Ended
Year Ended
($ in thousands, except per share
amounts)
December 31,
2019
September 30,
2019
December 31,
2018
December 31,
2019
December 31,
2018
Interest income:
Loans
$
59,694
$
61,655
$
55,701
$
239,513
$
218,255
Investment securities
7,726
7,471
6,931
32,134
22,353
Due from banks
1,637
900
1,758
5,308
6,148
Total interest income
69,057
70,026
64,390
276,955
246,756
Interest expense:
Deposits
16,334
17,225
12,038
63,346
38,163
Federal Home Loan Bank advances
1,200
1,316
—
5,437
374
Subordinated debt
1,923
1,923
1,923
7,690
7,690
Total interest expense
19,457
20,464
13,961
76,473
46,227
Net interest income
49,600
49,562
50,429
200,482
200,529
Provision (negative provision) for loan
losses
(2,685
)
(7,698
)
7,659
(4,905
)
19,601
Net interest income after provision
(negative provision) for loan losses
52,285
57,260
42,770
205,387
180,928
Noninterest income:
Fees and service charges on deposit
accounts
1,441
1,483
1,615
5,868
6,855
Escrow and exchange fees
1,545
1,623
1,422
6,027
5,829
Trust administrative fees
7,308
7,244
6,800
28,065
27,503
Gain (loss) on sale of loans
—
218
147
52
(22
)
Gain (loss) on sale of assets
851
1
(137
)
852
(137
)
Gain from OREO and other repossessed
assets
—
—
—
—
203
Gain (loss) on sale of securities
—
1
(9,892
)
120
(9,710
)
Bank-owned life insurance, net
1,252
1,014
958
4,239
4,104
Other income
1,465
1,485
2,469
4,803
6,454
Total noninterest income
13,862
13,069
3,382
50,026
41,079
Noninterest expense:
Compensation and benefits
23,557
23,316
33,042
102,843
111,325
Professional services
2,048
2,101
5,045
7,465
11,869
Occupancy expense
3,917
3,835
4,023
15,163
15,545
Depreciation and amortization
1,712
1,713
1,700
6,961
6,714
Deposit insurance and regulatory
assessments
60
122
914
1,474
3,981
Insurance expense
341
334
317
1,354
1,327
Data processing
1,043
948
815
3,612
1,803
Software licenses and maintenance
1,253
1,197
1,293
4,969
4,939
Office services
1,641
1,720
1,821
6,679
7,189
Amortization of other intangible
assets
1,009
1,211
1,437
5,050
5,875
Advertising and marketing
897
838
824
3,292
3,533
Other expenses
2,200
2,737
2,436
12,616
10,450
Total noninterest expense
39,678
40,072
53,667
171,478
184,550
Income (loss) before income tax expense
(benefit)
26,469
30,257
(7,515
)
83,935
37,457
Income tax expense (benefit)
6,180
8,259
(654
)
22,101
6,539
Net income (loss)
$
20,289
$
21,998
$
(6,861
)
$
61,834
$
30,918
Basic earnings (loss) per common share
$
0.54
$
0.58
$
(0.20
)
$
1.64
$
0.82
Diluted earnings (loss) per common
share
0.53
0.57
(0.20
)
1.62
0.81
Weighted average shares - basic
36,324,267
36,282,166
36,059,713
36,262,559
36,028,025
Weighted average shares - diluted
38,299,878
38,230,784
36,059,713
38,242,481
38,270,650
Consolidated Balance Sheets
(unaudited)
As of
($ in thousands, except share amounts)
December 31,
2019
September 30,
2019
December 31,
2018
Assets
Cash and due from banks
$
30,451
$
43,295
$
39,860
Due from banks – interest-bearing
317,190
243,051
214,776
Investment securities available-for-sale,
at fair value
1,039,596
1,010,253
1,081,546
Loans
5,900,520
5,801,956
5,165,210
Less allowance for loan losses
(40,844
)
(45,156
)
(54,664
)
Loans, net
5,859,676
5,756,800
5,110,546
Premises and equipment, net
21,339
23,811
23,863
Goodwill
331,832
331,832
331,832
Other intangible assets, net
33,875
34,884
38,926
Deferred tax assets, net
8,107
1,595
24,171
Cash surrender value of bank owned life
insurance, net
190,435
157,382
154,271
Accrued interest receivable
25,690
25,109
23,260
Federal Home Loan Bank stock
17,250
17,250
17,250
Other assets
116,959
126,081
120,602
Total assets
$
7,992,400
$
7,771,343
$
7,180,903
Liabilities and Stockholders’
Equity
Deposits:
Noninterest-bearing demand
$
768,936
$
763,038
$
771,141
Interest-bearing demand
2,680,793
2,516,614
2,507,605
Money market and savings
2,196,603
2,129,341
1,995,684
Time deposits
827,261
860,808
677,458
Total deposits
6,473,593
6,269,801
5,951,888
Federal Home Loan Bank advances
200,000
200,000
—
Subordinated debt, net
133,275
133,209
133,010
Accrued interest payable
4,175
2,408
4,032
Other liabilities
82,210
82,882
51,160
Total liabilities
6,893,253
6,688,300
6,140,090
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
37,571,545 and 37,394,513 and 36,637,870 shares, respectively
700,220
700,220
700,220
Additional paid-in capital
87,702
83,966
69,954
Retained earnings
305,399
289,303
260,304
Treasury stock, at cost; 1,223,930 and
1,107,915 and 577,495 shares, respectively
(29,611
)
(26,638
)
(14,983
)
Accumulated other comprehensive income
(loss)
6,327
7,082
(3,792
)
Total stockholders’ equity
1,099,147
1,083,043
1,040,813
Total liabilities and stockholders’
equity
$
7,992,400
$
7,771,343
$
7,180,903
Selected Financial Data
As of or for the three months
ended
As of or for the year
ended
(unaudited)
December 31,
2019
September 30,
2019
December 31,
2018
December 31,
2019
December 31,
2018
Yield on interest-earning assets 1
3.83
%
3.97
%
3.92
%
3.99
%
3.79
%
Net interest margin 1
2.76
2.82
3.07
2.90
3.08
Cost of deposits 2
1.01
1.09
0.79
1.02
0.64
Cost of funds 3
1.14
1.23
0.90
1.17
0.75
Noninterest expense to average assets
1.99
2.05
2.93
2.23
2.54
Loans to deposits
91.15
92.54
86.78
91.15
86.78
- Yield on interest-earning assets and net interest margin are
presented on a tax equivalent basis using the federal effective tax
rate.
- Calculated as interest expense on deposits divided by total
average deposits.
- Calculated as total interest expense divided by average total
deposits, FHLB advances, and subordinated debt.
Loan Fundings
(unaudited)
Three Months Ended
Year Ended
($ in thousands)
December 31,
2019
September 30,
2019
December 31,
2018
December 31,
2019
December 31,
2018
Real estate mortgage loans:
Multifamily residential
$
216,651
$
256,235
$
252,315
$
1,469,521
$
924,629
Commercial real estate
88,139
74,159
66,931
284,610
203,017
Construction and land loans
4,154
6,670
5,622
24,367
28,538
Commercial business loans
93,939
66,744
87,390
266,287
427,636
Small Business Administration loans
6,594
2,269
43
12,341
12,040
Total loan fundings
$
409,477
$
406,077
$
412,301
$
2,057,126
$
1,595,860
Composition of Loan Portfolio
As of
(unaudited)
December 31,
2019
September 30,
2019
December 31,
2018
($ in thousands)
Amount
% of Total
loans
Amount
% of Total
loans
Amount
% of Total
loans
Real estate mortgage loans:
Single-family residential
$
49,949
0.9
%
$
51,361
0.9
%
$
61,913
1.2
%
Multifamily residential
3,784,461
64.1
3,699,824
63.8
2,931,397
56.7
Commercial real estate:
Owner occupied
279,744
4.7
279,262
4.8
164,988
3.2
Non-owner occupied
792,824
13.4
829,718
14.3
899,375
17.4
Construction and land loans
55,739
0.9
51,714
0.9
70,557
1.4
Commercial business loans
901,006
15.3
856,364
14.7
992,743
19.2
Small Business Administration loans
33,641
0.6
29,958
0.5
39,811
0.8
Consumer and other loans
3,156
0.1
3,755
0.1
4,426
0.1
Total loans
$
5,900,520
100.0
%
$
5,801,956
100.0
%
$
5,165,210
100.0
%
Consolidated average balance sheet,
interest, yield and rates
For the three months ended
December 31,
For the three months ended
September 30,
For the three months ended
December 31,
(unaudited)
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
$
406,763
$
1,637
1.60
%
$
180,479
$
900
1.98
%
$
319,456
$
1,758
2.18
%
Investment securities
1,022,444
7,726
3.00
1,043,830
7,471
2.84
1,080,262
6,931
2.55
Loans
$
5,779,765
$
60,167
4.13
$
5,817,041
$
62,109
4.24
$
5,159,541
$
56,102
4.31
Total interest-earning assets
7,208,972
$
69,530
3.83
7,041,350
$
70,480
3.97
6,559,259
$
64,791
3.92
Noninterest-earning assets
711,169
710,047
699,059
Total assets
$
7,920,141
$
7,751,397
$
7,258,318
Liabilities and stockholders’ equity:
Interest-bearing deposits
Interest-bearing demand
$
2,630,401
$
3,005
0.45
%
$
2,556,920
$
3,333
0.52
%
$
2,509,049
$
2,520
0.40
%
Money market and savings
2,177,402
8,540
1.56
2,064,316
8,843
1.70
2,030,476
6,232
1.22
Time deposits
842,160
4,789
2.26
869,974
5,049
2.30
668,984
3,286
1.95
Total interest-bearing deposits
$
5,649,963
$
16,334
1.15
$
5,491,210
$
17,224
1.24
$
5,208,509
$
12,038
0.92
Subordinated debt
133,236
1,923
5.72
133,168
1,923
5.73
132,976
1,923
5.74
FHLB advances
200,033
1,200
2.38
217,935
1,316
2.40
33
—
2.62
Total interest-bearing liabilities
$
5,983,232
$
19,457
1.29
$
5,842,313
$
20,463
1.39
$
5,341,518
$
13,961
1.04
Noninterest-bearing deposits
760,361
754,284
816,516
Other liabilities
83,688
80,365
57,731
Total liabilities
$
6,827,281
$
6,676,961
$
6,215,764
Total stockholders’ equity
$
1,092,860
$
1,074,436
$
1,042,554
Total liabilities and stockholders’
equity
$
7,920,141
$
7,751,397
$
7,258,318
Net interest spread (2)
2.54
%
2.58
%
2.88
%
Net interest income and margin, tax
equivalent (3,4)
$
50,073
2.76
%
$
50,017
2.82
%
$
50,830
3.07
%
Reconciliation of tax equivalent net
interest income to reported net interest income
Tax equivalent adjustment
(473)
(454)
(401)
Net interest income, as reported
$
49,600
$
49,563
$
50,429
- Interest income is presented on a taxable equivalent basis
using the federal effective tax rate.
- Net interest spread represents the average yield on
interest-earning assets less the average rate on interest-bearing
liabilities.
- Net interest margin is computed by dividing net interest income
by total average interest-earning assets.
- 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 year ended December
31,
(unaudited)
2019
2018
($ In thousands)
Average Balance
Interest (1)
Yields/ Rates
Average Balance
Interest (1)
Yields/ Rates
Assets:
Interest-earning assets
Due from banks
$
269,202
$
5,308
1.97
%
$
323,780
$
6,148
1.90
%
Investment securities
1,061,822
32,134
3.03
1,066,317
22,353
2.10
Loans
5,653,861
241,248
4.27
5,160,529
219,649
4.26
Total interest-earning assets
$
6,984,885
$
278,690
3.99
$
6,550,626
$
248,150
3.79
Noninterest-earning assets
715,256
707,658
Total assets
$
7,700,141
$
7,258,284
Liabilities and stockholders’ equity:
Interest-bearing deposits
Interest-bearing demand
$
2,534,596
$
12,349
0.49
%
$
2,521,073
$
7,877
0.31
%
Money market and savings
2,068,606
32,494
1.57
2,114,774
21,713
1.03
Time deposits
827,527
18,503
2.24
523,511
8,573
1.64
Total interest bearing deposits
$
5,430,729
$
63,346
1.17
$
5,159,358
$
38,163
0.74
Subordinated debt
133,138
7,690
5.78
132,877
7,690
5.79
FHLB advances
223,159
5,437
2.44
21,296
374
1.76
Total interest-bearing liabilities
$
5,787,026
$
76,473
1.32
$
5,313,531
$
46,227
0.87
Noninterest-bearing deposits
761,277
837,869
Other liabilities
82,559
73,204
Total liabilities
$
6,630,862
$
6,224,604
Total stockholders’ equity
1,069,279
1,033,680
Total liabilities and stockholders’
equity
$
7,700,141
$
7,258,284
Net interest spread (2)
2.67
%
2.92
%
Net interest income and margin, tax
equivalent (3,4)
$
202,217
2.90
%
$
201,923
3.08
%
Reconciliation of tax equivalent net
interest income to reported net interest income
Tax equivalent adjustment
(1,735
)
(1,394
)
Net interest income, as reported
$
200,482
$
200,529
- Interest income is presented on a taxable equivalent basis
using the federal effective tax rate.
- Net interest spread represents the average yield on
interest-earning assets less the average rate on interest-bearing
liabilities.
- Net interest margin is computed by dividing net interest income
by total average interest-earning assets.
- Net interest margin, tax equivalent has been adjusted to a
taxable equivalent basis using the federal effective tax rate.
Allowance for Loan Losses
(unaudited)
Three Months Ended
Year Ended
($ in thousands)
December 31, 2019
September 30, 2019
December 31, 2018
December 31, 2019
December 31, 2018
Allowance for loan losses - balance at
beginning of period
$
45,156
$
57,724
$
59,029
$
54,664
$
75,930
Provision (negative provision) for loan
losses
(2,685
)
(7,698
)
7,659
(4,905
)
19,601
Charge-offs
(1,772
)
(5,923
)
(14,565
)
(12,775
)
(51,251
)
Recoveries
145
1,053
2,541
3,860
10,384
Total net charge-offs
(1,627
)
(4,870
)
(12,024
)
(8,915
)
(40,867
)
Allowance for loan losses - balance at end
of period
$
40,844
$
45,156
$
54,664
$
40,844
$
54,664
Asset Quality Information
(unaudited)
As of and for the quarter
ended
($ in thousands)
December 31,
2019
September 30,
2019
December 31,
2018
Nonperforming assets
Nonaccrual loans
$
5,974
$
7,420
$
28,016
OREO and other repossessed assets
—
—
—
Total nonperforming assets
$
5,974
$
7,420
$
28,016
Loans 30 - 89 days past due
$
4,490
$
1,941
$
2,634
Accruing loans 90 days or more past
due
—
—
485
Nonperforming loans to total loans
0.10
%
0.13
%
0.54
%
Nonperforming assets to total assets
0.07
0.10
0.39
Loans 30-89 days past due to total
loans
0.08
0.03
0.05
Allowance for loan losses to total
loans
0.69
0.78
1.06
Allowance for loan losses to nonaccrual
loans
683.70
608.57
195.12
Net charge-offs to average loans
(annualized)
0.11
0.33
0.92
Risk Rating by Loan Product
(Unaudited)
($ in thousands)
Pass
Special Mention
Classified
Total Loans
Nonaccrual loans
Total allowance
As of December 31, 2019
Real estate mortgage loans:
Single-family residential
$
49,442
$
69
$
438
$
49,949
$
215
$
114
Multifamily residential
3,783,589
—
872
3,784,461
—
14,191
Commercial real estate
1,052,918
12,753
6,897
1,072,568
2,409
6,598
Construction and land loans
36,983
18,756
—
55,739
—
602
Commercial business loans
874,118
8,471
18,417
901,006
—
18,799
Small Business Administration loans
27,525
154
5,962
33,641
2,842
538
Consumer and other loans
2,489
53
614
3,156
508
2
Total loans
$
5,827,064
$
40,256
$
33,200
$
5,900,520
$
5,974
$
40,844
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 December 31, 2018
Real estate mortgage loans:
Single-family residential
$
61,471
$
76
$
366
$
61,913
$
—
$
178
Multifamily residential
2,929,173
120
2,104
2,931,397
—
10,236
Commercial real estate
1,007,274
9,904
47,185
1,064,363
2,462
10,663
Construction and land loans
57,100
13,457
—
70,557
—
698
Commercial business loans
927,437
17,455
47,851
992,743
18,039
32,545
Small Business Administration loans
28,727
161
10,923
39,811
6,973
336
Consumer and other loans
3,696
58
672
4,426
542
8
Total loans
$
5,014,878
$
41,231
$
109,101
$
5,165,210
$
28,016
$
54,664
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)
December 31,
2019
September 30,
2019
December 31,
2018
Tangible equity:
Total stockholders' equity
$
1,099,147
$
1,083,043
$
1,040,813
Less:
Preferred stock
29,110
29,110
29,110
Common equity
1,070,037
1,053,933
1,011,703
Less:
Goodwill
331,832
331,832
331,832
Other intangible assets, net
33,875
34,884
38,926
Tangible common equity
704,330
687,217
640,945
Shares of common stock outstanding
36,347,615
36,286,598
36,060,375
Book value per common share
$
29.44
$
29.04
$
28.06
Tangible book value per common share
19.38
18.94
17.77
Non-GAAP tangible common equity
ratio
(unaudited)
As of
($ In thousands)
December 31,
2019
September 30,
2019
December 31,
2018
Total assets
$
7,992,400
$
7,771,343
$
7,180,903
Less:
Goodwill
331,832
331,832
331,832
Other intangible assets, net
33,875
34,884
38,926
Tangible assets
7,626,693
7,404,627
6,810,145
Total stockholders' equity
1,099,147
1,083,043
1,040,813
Less:
Goodwill
331,832
331,832
331,832
Other intangible assets, net
33,875
34,884
38,926
Tangible equity
733,440
716,327
670,055
Less: preferred stock
29,110
29,110
29,110
Tangible common equity
$
704,330
$
687,217
$
640,945
Total stockholders' equity to total
assets
13.75
%
13.94
%
14.49
%
Tangible equity to tangible assets
ratio
9.62
%
9.67
%
9.84
%
Total common equity to total assets
13.39
%
13.56
%
14.09
%
Tangible common equity to tangible assets
ratio
9.24
%
9.28
%
9.41
%
Non-GAAP Financial Measures
(unaudited)
For the three months
ended
For the year ended
($ in thousands)
December 31,
2019
September 30,
2019
December 31,
2018
December 31,
2019
December 31,
2018
Net income
$
20,289
$
21,998
$
(6,861
)
$
61,834
$
30,918
Adjustments to noninterest income:
Impairment
—
—
—
489
—
(Gains) and losses on sales of securities,
loans, and other repossessed assets
(851
)
(220
)
9,882
(1,024
)
9,667
Adjustments to noninterest expense:
Strategic actions
81
119
10,547
5,000
12,845
Litigation (recovery)
—
—
—
1,431
(2,734
)
Pre-tax adjustments
(770
)
(101
)
20,429
5,896
19,778
Tax effect
34
383
(3,401
)
(273
)
(6,103
)
Tax-effected adjustments (1)
(736
)
282
17,028
5,623
13,675
Adjusted net income
$
19,553
$
22,280
$
10,167
$
67,457
$
44,593
Average assets
$
7,920,141
$
7,751,397
$
7,258,318
$
7,700,141
$
7,258,284
Average stockholders' equity
1,092,860
1,074,436
1,042,554
1,069,279
1,033,680
Less:
Average preferred stock
29,110
29,110
29,110
29,110
29,110
Average goodwill
331,832
331,832
331,832
331,832
331,832
Average other intangible assets
34,467
35,639
39,663
36,312
41,859
Average tangible common equity
$
697,451
$
677,855
$
641,949
$
672,025
$
630,879
Earnings per diluted share
$
0.53
$
0.57
$
(0.20
)
$
1.62
$
0.81
Adjusted earnings per diluted share
0.51
0.58
0.27
1.76
1.18
Return on average assets
1.02
%
1.13
%
(0.38
)%
0.80
%
0.43
%
Adjusted return on average assets
0.98
1.14
0.56
0.88
0.61
Return on average stockholders' equity
7.37
8.12
(2.61
)
5.78
2.99
Adjusted return on average stockholders'
equity
7.10
8.23
3.87
6.31
4.31
Return on average tangible common
equity
11.54
12.88
(4.24
)
9.20
4.90
Adjusted return on average tangible common
equity
11.12
13.04
6.28
10.04
7.07
Efficiency ratio (2)
61.30
61.82
81.49
66.25
70.72
Adjusted efficiency ratio
61.17
61.63
65.03
63.56
66.71
- The tax effect of adjustments was computed using the combined
federal and state marginal tax rate of 23.9%, 26.1%, 21.3%, 24.9%
and 22.1% for the three months ended December 31, 2019, September
30, 2019, and December 31, 2018 and the year ended December 31,
2019 and December 31, 2018, respectively, adjusted for the tax
effect of nondeductible strategic action expenses.
- 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/20200127005143/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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