IRVINE, Calif.--(BUSINESS WIRE)--

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.

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.

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:

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:

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: .

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.

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.

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.

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.