IRVINE, Calif.--(BUSINESS WIRE)--
Opus Bank ("Opus") (NASDAQ: “OPB”) announced today net income of $7.7 million, or $0.21 per diluted share, for the first quarter of 2017 compared to a net loss of $19.0 million, or $(0.55) per diluted share, for the fourth quarter of 2016 and net income of $17.3 million, or $0.51 per diluted share, for the first quarter of 2016. Net income for the first quarter of 2017 included strategic initiative related expenses of $1.8 million, comprised primarily of severance and other expenses associated with the implementation of an overhead reduction strategy to right size and reduce Opus' noninterest expense forward run-rate. Additionally, the adoption of a new accounting standard for the tax impact associated with stock-based compensation that went into effect in 2017 resulted in $248,000 of additional tax expense in the first quarter of 2017 and increased our effective tax rate by 1.97%. Excluding these two items, net income for the first quarter of 2017 was $9.0 million, or $0.24 per diluted share.
Stephen H. Gordon, Founding Chairman, Chief Executive Officer and President of Opus Bank, stated, “We are proud to announce our results for the first quarter of 2017, as they are the culmination of a collaborative and proactive effort by the entire Opus team and represent another step forward in the process of restoring consistently strong financial performance metrics. During the fourth quarter of 2016, we took decisive action to bolster our credit infrastructure and to assess our loan portfolios. Additionally, during the first quarter, we initiated an expense reduction strategy that we expect to reduce our noninterest expense forward run-rate. As 2017 is progressing, we have already begun to realize positive results from these efforts, including a reduction of the portfolio loan balances we previously announced as targeted for planned exits. Technology Banking, Healthcare Practice, and other loan relationships we have identified as enterprise value, were reduced significantly during the first quarter. During the fourth quarter of 2016, we articulated and our bankers embraced our credit culture going forward and we began rebuilding the new loan funding pipeline. Our bankers remain keenly focused on Opus’ core value proposition to be a partner and trusted advisor to our clients in major metro markets up and down the West Coast.”
Gordon continued, “Our balance sheet remains strong. We entered the first quarter having completed the Freddie Mac transaction in the fourth quarter of 2016 and increased cash through continued strong core deposit growth and loan payoffs during the quarter, resulting in a balance sheet with a tremendous amount of liquidity and flexibility. With over $1 billion in cash and nearly $900 million in investment securities at the end of the first quarter, we now enter the second quarter with a larger loan pipeline than at the start of the year and are proactively managing our balance sheet and prudently making loans with appropriate risk-adjusted return metrics, which we anticipate will benefit net interest margin and earnings in coming quarters. Additionally during the quarter, we completed a private placement of common stock, further bolstering our capital ratios."
Gordon concluded, “We still have much work ahead of us, but we believe that the significant actions taken thus far and our positive results in the first quarter have us on the path toward delivering the type of performance we are accustomed to achieving and that shareholders have historically expected from us.”
First Quarter 2017 Highlights
- Opus continued to actively manage its portfolio of criticized loans, reduce balances in our Technology Banking and Healthcare Practice portfolios, as well as our enterprise value loan relationships. During the first quarter of 2017, Technology Banking loans decreased by $68.2 million, or 36%, to $122.2 million and Healthcare Practice loans decreased by $23.6 million, or 35%, to $44.2 million. Total enterprise value loans decreased by $137.3 million, or 15%, to $778.1 million.
- Provision for loan losses was $6.0 million for the first quarter of 2017 compared to $69.5 million in the prior quarter. Our allowance for loan losses was $112.2 million, or 2.07% of total loans, as of March 31, 2017 compared to $111.4 million, or 1.97% of total loans, as of December 31, 2016.
- Net charge-offs were $5.1 million in the first quarter of 2017, compared to $19.2 million in the fourth quarter of 2016. Technology Banking and Healthcare Practice loans accounted for $4.3 million and $669,000 of net charge-offs, respectively.
- Total criticized loans increased to $359.4 million as of March 31, 2017 compared to $317.3 million as of December 31, 2016. The linked-quarter increase was driven by $12.0 million of commercial business loans and $29.8 million of real estate secured loans. The real estate secured loans were primarily comprised of $14.9 million of commercial real estate, $8.2 million of multifamily, and $7.3 million of construction loans.
- Total nonperforming assets decreased to $87.0 million, or 1.09% of total assets, as of March 31, 2017 compared to $95.1 million, or 1.21% of total assets, as of December 31, 2016.
- New loan fundings were $219.1 million in the first quarter of 2017 compared to $429.9 million in the fourth quarter of 2016. Lower loan fundings during the first quarter of 2017 were the result of normal seasonality and the timing of our strategy shift in our C&I lending activities to more traditional commercial banking loan relationships. Loan commitments originated totaled $209.7 million in the first quarter of 2017 as compared to $499.9 million in the fourth quarter of 2016. Opus has entered the second quarter with a significantly larger loan pipeline than at the start of the year.
- Loan payoffs of $333.2 million and loan sales of $39.7 million in the first quarter of 2017 included efforts to de-risk our loan portfolio by proactively reducing Technology Banking loans, Healthcare Practice loans, and enterprise value loans.
- Total deposits grew $38.4 million, or 1%, during the first quarter of 2017 to over $6.7 billion as of March 31, 2017. Total demand deposits, which are comprised of noninterest bearing and interest bearing demand deposits, increased by $72.5 million during the first quarter of 2017 to $3.5 billion, and total demand deposits increased to 52% of total deposits as of March 31, 2017, up from 51% as of December 31, 2016.
- Net interest margin decreased 22 basis points to 3.14% for the first quarter of 2017 compared to 3.36% for the fourth quarter of 2016. The linked-quarter change was due to lower contribution from originated loans primarily as a result of the Freddie Mac multifamily loan transaction that closed near the end of the fourth quarter 2016, as well as liquidity from loan payoffs and deposit growth that was invested in interest-earning cash and investment securities.
- Noninterest income was $12.5 million in the first quarter of 2017 and included $6.4 million of trust administrative fees, $1.9 million of deposit account fees, $1.5 million of escrow and exchange fees, $829,000 of fee income from our Merchant Banking division, and a $519,000 gain on the sale of investment securities, offset by net equity warrant valuation reductions of $387,000 and a loss on the sale of loans of $299,000. Trust administrative fees, which includes interest earned on custodial deposits held at other banks, decreased from the prior quarter as a result of the transfer of $279.1 million of ancillary custodial cash balances to Opus in the fourth quarter of 2016.
- Noninterest expense during the first quarter of 2017 totaled $50.1 million compared to $51.2 million in the fourth quarter of 2016. During the first quarter of 2017 we incurred $1.8 million of expenses, including $1.6 million of severance and related expenses, as we undertook various strategic initiatives to reduce Opus' noninterest expense forward run-rate. The reductions to our noninterest expense forward run-rate are now being realized in the second quarter of 2017 and are expected to be fully realized in the fourth quarter of 2017.
- Opus' capital ratios remain in excess of regulatory thresholds for a well-capitalized institution. Our Tier 1 leverage ratio, Common Equity Tier 1 ratio, and total risk-based capital ratios were 8.19%, 9.87%, and 13.26%, compared to 7.54%, 8.78%, and 12.11% as of December 31, 2016, respectively. On February 15, 2017, Opus issued approximately 2.9 million shares of its common stock at $18.50 per share through a private placement, resulting in net proceeds of $50.5 million.
Net Interest Income
Total net interest income decreased 7% to $56.1 million in the first quarter of 2017 from $60.2 million in the fourth quarter of 2016, and decreased 5% from $59.1 million in the first quarter of 2016. The linked-quarter decline was primarily due to a shift in the mix of interest earning assets between originated loans and cash and investment securities as a result of the Freddie Mac transaction in the fourth quarter of 2016, and loan prepayments and payoffs in the first quarter of 2017, that drove a decline in interest income from originated loans, while increasing interest income from cash and investment securities. The Freddie Mac transaction relates to the sale of $509.0 million of Opus' multifamily loans through a Freddie Mac sponsored transaction ("the Freddie Mac transaction") in which one class of Freddie Mac guaranteed Structured Pass-Through Certificates was issued and subsequently purchased entirely by Opus.
Interest income from originated loans was $57.4 million during the first quarter of 2017, compared to $64.2 million during the fourth quarter of 2016 and $57.9 million in the year ago period. The linked-quarter decline was driven by a decrease in the average balance of originated loans of $651.0 million due to the Freddie Mac transaction, $333.2 million of loan payoffs, and $39.7 million of loan sales during the first quarter of 2017, partially offset by $219.1 million in new loan fundings.
Interest income from cash and investment securities increased to $5.0 million during the first quarter of 2017, compared to $2.1 million during the fourth quarter of 2016 and $1.0 million during the first quarter of 2016. Interest income from investment securities was impacted by $2.3 million of premium amortization during the first quarter of 2017, which was primarily driven by prepayments on the Freddie Mac security, compared to $276,000 during the prior quarter. As a result of the Freddie Mac transaction, as well as $302.1 million of investment securities purchases during the first quarter of 2017, the average balance of our investment securities increased by $516.6 million in the first quarter of 2017. Purchases of securities occurred near the end of the first quarter, resulting in interest income contributed on an average balance of $719.8 million, compared to a quarter end balance of $900.0 million, which is expected to contribute higher interest income in the second quarter of 2017. Additionally, the average balance of interest earning cash increased $260.8 million as a result of liquidity generated by loan payoffs and deposit growth during the first quarter of 2017.
Interest income from the acquired loan portfolio decreased by $188,000 from the prior quarter and decreased by $4.4 million from the first quarter of 2016. Accretion income from the acquired loan portfolio totaled $673,000 during the first quarter of 2017, compared to $717,000 during the fourth quarter of 2016 and $3.7 million during the first quarter of 2016.
Interest expense was $9.2 million for the first quarter of 2017, unchanged from the prior quarter, and an increase from $7.1 million for the first quarter of 2016. The increase in interest expense from the year-ago period was primarily due to the issuance of $132 million of subordinated debt at the end of the second quarter 2016 and growth in the deposit portfolio.
Net interest margin decreased 22 basis points to 3.14% in the first quarter of 2017 from 3.36% in the fourth quarter of 2016. The linked-quarter change was primarily due to lower contribution from originated loans primarily as a result of the Freddie Mac multifamily loan transaction, as well as liquidity from loan payoffs and deposit growth that was invested in interest-earning cash and investment securities.
Total loan yield during the first quarter of 2017 increased 10 basis points to 4.39% from 4.29% in the fourth quarter of 2016 and decreased 30 basis points from 4.69% in the first quarter of 2016. The increase from the fourth quarter of 2016 was primarily due to fewer loans placed on nonaccrual and fewer days during the first quarter of 2017. Accretion income from the acquired loan portfolio contributed 0.04% to net interest margin in the first quarter of 2017 and the fourth quarter of 2016, and 0.25% in the first quarter of 2016. The yields on investment securities and interest-bearing cash during the first quarter of 2017 was 1.73% and 0.84%, respectively, compared to 2.34% and 0.55% during the prior quarter, and 1.20% and 0.50% during the year-ago period. The decrease in yield on investment securities was primarily driven by elevated prepayment activity during the first quarter of 2017 which drove higher premium amortization. The increase in yield on interest-bearing cash during the first quarter was primarily driven by the Fed rate increases announced in December 2016 and March 2017.
Our cost of funds was 0.54% during the first quarter of 2017, unchanged from the prior quarter and an increase of five basis points from 0.49% during the first quarter of 2016, primarily due to interest expense on the subordinated debt. Our cost of deposits increased one basis point to 0.44% for the first quarter of 2017 compared to 0.43% for the fourth quarter of 2016, and decreased four basis points from 0.48% for the first quarter of 2016.
Noninterest Income and Noninterest Expense
Noninterest income decreased to $12.5 million in the first quarter of 2017 as compared to $27.1 million in the fourth quarter of 2016, and increased from $5.3 million in the first quarter of 2016. Noninterest income in the fourth quarter of 2016 included $15.2 million of gains on the sale of loans, primarily associated with the Freddie Mac transaction. Excluding gains on the sale of loans and investment securities, noninterest income increased 3% from the prior quarter.
Noninterest income during the first quarter of 2017 included $6.4 million in trust administrative fees generated by our alternative asset IRA custodian subsidiary, compared to $6.6 million in the fourth quarter of 2016. Trust administrative fees decreased from the prior quarter as a result of the transfer of $279.1 million of ancillary custodial cash balances to Opus in the fourth quarter of 2016. Opus' Merchant Banking division, which includes its broker-dealer subsidiary, Opus Financial Partners, and its principal investing group, Opus Equity Partners, which manages Opus' bank-sponsored SBIC Fund, generated $829,000 of noninterest fee income. Additionally, our Escrow and Exchange divisions generated $1.5 million in noninterest income during the first quarter of 2017, compared to $1.7 million in the fourth quarter of 2016 and $1.6 million in the first quarter of 2016. Net equity warrant valuation changes reduced total noninterest income by $387,000 during the first quarter of 2017.
Noninterest expense totaled $50.1 million in the first quarter of 2017 compared to $51.2 million in the fourth quarter of 2016 and $30.9 million in the first quarter of 2016. During the first quarter of 2017, management undertook an expense reduction strategy focused on compensation and benefits and third-party vendors. These actions resulted in $1.8 million of severance and other related expenses during the first quarter of 2017. The reductions to our noninterest expense forward run-rate are now being realized in the second quarter of 2017 and are expected to be fully realized in the fourth quarter of 2017. Noninterest expense during the fourth quarter of 2016 included approximately $3.0 million in expenses related to the Freddie Mac transaction, as well as $957,000 of other strategic initiative related expenses.
Loans
Total loans held-for-investment were $5.4 billion as of March 31, 2017, a decrease of $237.0 million, or 4%, from $5.7 billion as of December 31, 2016 and a decrease of $330.3 million, or 6%, from $5.8 billion as of March 31, 2016. The decrease in total loans during the first quarter of 2017 was driven by new loan fundings of $219.1 million being offset by payoffs of $333.2 million, loan sales of $39.7 million, and net loan charge-offs of $5.1 million. During the first quarter, Opus continued to reduce the balances of loans within its Technology and Healthcare Practice portfolios, as well as other loan relationships previously identified as enterprise value loans. Technology Banking loans were reduced by $68.2 million and totaled $122.2 million as of March 31, 2017, Healthcare Practice loans were reduced by $23.6 million and totaled $44.2 million as of March 31, 2017, and total enterprise value loans were reduced by $137.3 million and totaled $778.1 million as of March 31, 2017.
New loan fundings were $219.1 million, including $102.8 million from Income Property Banking, $41.2 million from Institutional Syndications, $37.0 million from Structured Finance, $15.5 million from Public Finance, $11.0 million from Commercial Banking, $5.6 million from Media and Entertainment, $3.9 million from Healthcare Provider, and $1.1 million from Corporate Finance. Loan commitments originated during the first quarter totaled $209.7 million as compared to $499.9 million during the fourth quarter of 2016 and $630.1 million during the first quarter of 2016. As of March 31, 2017, our unfunded commitments on originated loans totaled $548.5 million.
Our acquired loan portfolio totaled $160.3 million as of March 31, 2017, a decrease of 9% from $176.9 million as of December 31, 2016 and 34% from $243.2 million as of March 31, 2016. As of March 31, 2017, our acquired loan portfolio had a remaining discount of $3.1 million.
Deposits and Borrowings
Deposits totaled $6.7 billion as of March 31, 2017, an increase of $38.4 million, or 1%, from $6.7 billion as of December 31, 2016, and an increase of $1.5 billion, or 28%, from $5.2 billion as of March 31, 2016. Deposit growth during the first quarter of 2017 was driven by $142.1 million from Media & Entertainment Banking and $30.1 million from our alternative asset IRA custodian subsidiary. Total demand deposits, including both noninterest-bearing and interest-bearing demand deposit accounts, increased $72.5 million, or 2%, during the first quarter of 2017, and now comprise 52% of total deposits as of March 31, 2017, an increase from 51% as of December 31, 2016 and an increase from 40% as of March 31, 2016. As of March 31, 2017, business deposits represented 53% of total deposits, unchanged from December 31, 2016, and an increase from 51% as of March 31, 2016.
Our loan to deposit ratio decreased to 81% as of March 31, 2017 compared to 85% as of December 31, 2016 and 110% as of March 31, 2016.
Federal Home Loan Bank advances decreased to $10.0 million as of March 31, 2017 compared to $65.0 million as of December 31, 2016 and $750.0 million as of March 31, 2016.
Asset Quality
During the first quarter of 2017, we significantly reduced the balances of loans in our Technology Banking and Healthcare Practice portfolios, as well as our enterprise value loan relationships. The Technology Banking loan portfolio was reduced by $68.2 million, or 36%, to $122.2 million, and the Healthcare Practice loan portfolio was reduced by $23.6 million, or 35%, to $44.2 million. Loans categorized as enterprise value loans were reduced by $137.3 million, or 15%, during the first quarter. Lower loan balances in these portfolios reduced the allowance for loan losses by $9.4 million in the first quarter of 2017.
Our allowance for loan losses was $112.2 million, or 2.07% of our total loan portfolio, as of March 31, 2017 compared to $111.4 million, or 1.97%, as of December 31, 2016 and $48.8 million, or 0.85%, as of March 31, 2016. Our acquired loan portfolio had a remaining discount of $3.1 million as of March 31, 2017. The coverage ratio for the total loan portfolio, which includes the remaining discount on the acquired loan portfolio, was 2.12% as of March 31, 2017 compared to 2.03% as of December 31, 2016 and 1.03% as of March 31, 2016. Our allowance for loan losses on originated loans resulted in a coverage ratio of 2.12% as of March 31, 2017, compared to 2.02% as of December 31, 2016 and 0.87% as of March 31, 2016.
We recorded a provision for loan losses of $6.0 million in the first quarter of 2017 compared to $69.5 million in the fourth quarter of 2016 and $4.9 million in the first quarter of 2016. The provision for loan losses during the first quarter was driven by $5.1 million of net charge-offs, $12.0 million from risk rating migration, $812,000 in changes to specific reserves, and $1.2 million in higher reserves for increased loss factors. These factors were partially offset by a $13.1 million decline in reserves as a result of the decline in loan portfolio balances, including planned exits of loan relationships. The provision recapture on the acquired loan portfolio totaled $94,000 in the first quarter of 2017, $47,000 in the fourth quarter of 2016 and $151,000 in the first quarter of 2016.
Net charge-offs recorded during the first quarter of 2017 totaled $5.1 million, compared to $19.2 million during the fourth quarter of 2016 and $302,000 during the first quarter of 2016. Net charge-offs during the first quarter of 2017 included $4.5 million for loans that had specific reserves or charge-offs recorded in prior quarters. Technology and Healthcare Practice loans accounted for $4.3 million and $669,000 of the current quarter net charge-offs, respectively. The remaining balance of Opus originated loans for which charge-offs were previously recorded was $16.2 million as of March 31, 2017, comprised of four relationships in our Technology and Healthcare Practice divisions.
Total criticized loans were $359.4 million as of March 31, 2017 compared to $317.3 million as of December 31, 2016 and $127.9 million as of March 31, 2016. The net change in total criticized loans of $42.1 million during the quarter was comprised of a net decrease in special mention loans of $846,000 and a net increase in classified loans of $43.0 million. The net increase in criticized loans consisted of a $12.0 million increase in commercial business loans and a $29.8 million increase in real estate secured loans.
The net increase in criticized loans was derived from $91.5 million of downgrades offset by $49.4 million of criticized loans that were resolved through payoffs, loan sales, charge-offs and normal amortization during the quarter. Commercial business loans comprised $57.2 million of loans downgraded into criticized categories during the first quarter of 2017, primarily driven by five loan relationships in our Technology, Healthcare Provider, and Commercial Banking portfolios. A total of $33.8 million of real estate secured loans were downgraded into criticized categories, including $17.4 million of commercial real estate loans, $9.0 million of multifamily loans, and $7.4 million of construction loans.
Total nonperforming assets were $87.0 million, or 1.09% of total assets, as of March 31, 2017, compared to $95.1 million, or 1.21% of total assets, as of December 31, 2016 and $42.8 million, or 0.62% of total assets, as of March 31, 2016.
Commercial Business Loans
Commercial business loans accounted for $4.7 million of Opus’ net charge-offs in the first quarter of 2017, down from $19.0 million in the fourth quarter of 2016. Of the net charge-offs recorded on commercial business loans during the first quarter of 2017, $4.3 million was related to two Technology Banking division relationships that had either specific reserves or charge-offs recorded in prior quarters and experienced a reduction in the value of the collateral supporting the loans during the quarter. Two Healthcare Practice loans comprised $329,000 of the net charge-offs recorded on commercial business loans during the first quarter and had not experienced specific reserves or charge-offs in prior quarters. As of March 31, 2017, commercial business loan relationships that have experienced charge-offs had a remaining balance of $16.2 million.
Commercial business loans on nonaccrual declined from $82.0 million as of December 31, 2016 to $73.7 million as of March 31, 2017 and were mainly comprised of three Technology Banking relationships totaling $27.0 million, two Corporate Finance relationships totaling $24.9 million, four Commercial Banking relationships totaling $15.9 million, and two Healthcare Practice relationships totaling $5.6 million. Total criticized commercial business loans as of March 31, 2017 were $276.6 million, or 18% of total commercial business loans, compared to $264.7 million, or 15%, as of December 31, 2016. Increases in criticized loans and related specific reserves were driven by deterioration during the current quarter in the underlying financial performance of the individual businesses or changes in financial circumstances during the quarter. Commercial business loans downgraded to criticized during the first quarter of 2017 were primarily driven by five relationships in Technology Banking, Healthcare Provider and Commercial Banking divisions. As of March 31, 2017, we had specific reserves of $24.6 million on criticized commercial business loans compared to $23.8 million of specific reserves as of December 31, 2016.
As of March 31, 2017, the total allowance recorded for commercial business loans, which includes general and specific reserves, equaled $90.6 million, or 5.8% of total commercial business loans, compared to $91.2 million, or 5.2% of total commercial business loans, as of December 31, 2016. At March 31, 2017, there were specific reserves of $24.6 million for commercial business loans, comprised of $11.3 million for Corporate Finance loans, $5.7 million for Technology Banking loans and $7.5 million for other Commercial Banking loans.
Commercial Real Estate Loans
Net charge-offs in Opus’ $1.3 billion commercial real estate loan portfolio were $340,000 in the first quarter of 2017, compared to $189,000 in the fourth quarter of 2016 and none in the first quarter of 2016. Net charge-offs of commercial real estate loans in the first quarter of 2017 consisted entirely of Healthcare Practice loans. Commercial real estate loans on nonaccrual totaled $12.3 million, or 1.0% of total commercial real estate loans as of March 31, 2017, unchanged from the prior quarter. Total criticized commercial real estate loans were $51.7 million as of March 31, 2017 compared to $36.8 million as of December 31, 2016. The increase in criticized loans was driven by $17.4 million of downgrades of three loan relationships, partially offset by $2.5 million of loan sales, payoffs, charge-offs and normal amortization. As of March 31, 2017, commercial real estate loans had no specific reserves and a total allowance of $10.1 million, or 0.8% of total commercial real estate loans, compared to no specific reserves and a total allowance of $9.6 million, or 0.7% of total commercial real estate loans, as of December 31, 2016, and $395,000 of specific reserves and a total allowance of $6.3 million, or 0.5% of total commercial real estate loans, as of March 31, 2016.
Multifamily Loans
Opus’ $2.3 billion multifamily loan portfolio has experienced zero charge-offs since our inception in 2010. There were no multifamily loans on nonaccrual status as of March 31, 2017 and no delinquencies. There were no specific reserves for loans within the multifamily portfolio as of March 31, 2017 and total criticized multifamily loans were $19.1 million, or 0.8% of total multifamily loans, compared to $10.9 million, or 0.5% of total multifamily loans, as of December 31, 2016. The increase in criticized loans was due to six loan relationships downgraded into special mention due to borrowers executing a strategy of vacating units to perform improvements on the properties with the goal of increasing net operating income and improving property values. As of March 31, 2017, our multifamily portfolio had a total allowance of $9.6 million, or 0.4% of total multifamily loans, as compared to $8.9 million, or 0.4%, in the prior quarter and $9.2 million, or 0.3%, as of March 31, 2016.
Capital
Our capital ratios continue to exceed bank regulatory requirements for a well-capitalized institution. As of March 31, 2017, our Tier 1 leverage ratio was 8.19%, Common Equity Tier 1 ratio was 9.87% and total risk-based capital ratio was 13.26%, compared to 7.54%, 8.78% and 12.11%, respectively, as of December 31, 2016. As of March 31, 2016, our Tier 1 leverage, Common Equity Tier 1 ratio and total risk-based capital ratios were 9.30%, 10.80% and 11.70%, respectively. Stockholders’ equity totaled $985.6 million as of March 31, 2017, an increase of 6% from $925.9 million as of December 31, 2016 and an increase of 12% from $881.7 million as of March 31, 2016. Our tangible book value per as converted common share increased to $16.23 as of March 31, 2017 from $15.84 as of December 31, 2016 and decreased from $18.73 as of March 31, 2016. Opus will not be paying a dividend in connection with the first quarter.
On February 15, 2017, Opus completed its previously announced private placement of 2,864,865 shares of its common stock at $18.50 per share to a limited number of institutional accredited investors, resulting in net proceeds of $50.5 million.
During the first quarter of 2017, we adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). Under ASU 2016-09, excess tax benefits and deficiencies relating to employee share-based awards are recorded as income tax expense on a prospective basis as compared to additional paid-in capital in the comparable prior periods reported. As a result, we recognized $248,000 of tax deficiencies in connection with the vesting of restricted stock awards through income tax expense rather than additional paid-in capital, which totaled $0.01 of diluted earnings per share and increased our effective tax rate for the first quarter of 2017 by 1.97%. The adoption of ASU 2016-09 had no impact to the financial results of any prior periods reported. The financial impact of the ASU is dependent upon the vesting of restricted stock awards and our stock price.
Conference Call and Webcast Details
Date: Monday, April 24,
2017
Time: 8:00 a.m. PT (11:00 a.m. ET)
Phone Number: (855) 265-3237
Conference ID: 6923153
Webcast
URL: http://investor.opusbank.com/event
Analysts, investors, and the general public may listen to the Bank's discussion of its first quarter performance and participate in the question/answer session by using the phone number listed above or through a live webcast of the conference available through a link on the investor relations page of Opus' website at: http://investor.opusbank.com/event. The webcast will include a slide presentation, enabling conference participants to experience the discussion with greater impact. It is recommended that participants dial into the conference call or log into the webcast approximately 10 minutes prior to the call.
Replay Information: For those who are not able to listen to the call, an archive of the call will be available beginning approximately 2 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 6923153. The call replay will be available through May 25, 2017.
About Opus Bank
Opus Bank is an FDIC insured California-chartered commercial bank with $8.0 billion of total assets, $5.4 billion of total loans, and $6.7 billion in total deposits as of March 31, 2017. Opus Bank provides superior ideas and solutions, and banking products to its clients through its Retail Bank, Commercial Bank, Merchant Bank and Correspondent Bank. Opus Bank offers a suite of treasury and cash management and depository solutions and a wide range of loan products, including commercial, healthcare, media and entertainment, corporate finance, multifamily residential, commercial real estate and structured finance, and is an SBA preferred lender. Opus Bank offers commercial escrow services and facilitates 1031 Exchange transactions through its Escrow and Exchange divisions. Opus Bank provides clients with financial and advisory services related to raising equity capital, targeted acquisition and divestiture strategies, general mergers and acquisitions, debt and equity financing, balance sheet restructuring, valuation, strategy and performance improvement through its Merchant Banking Division and its broker-dealer subsidiary, Opus Financial Partners, LLC, Member FINRA/SIPC. Opus Bank’s alternative asset IRA custodian subsidiary has over $13 billion of custodial assets and approximately 48,000 client accounts, which are comprised of self-directed investors, financial institutions, capital raisers and financial advisors. Opus Bank operates 56 banking offices, including 32 in California, 21 in the Seattle/Puget Sound region in Washington, two in the Phoenix metropolitan area of Arizona and one in Portland, Oregon. Opus Bank is an Equal Housing Lender. For additional information about Opus Bank, please visit our website: www.opusbank.com.
Forward Looking Statements
This release and the aforementioned conference call and webcast may include forward-looking statements related to Opus’ plans, beliefs and goals, which involve certain risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors: competitive pressure in the banking industry; changes in the interest rate environment; the health of the economy, either nationally or regionally; the deterioration of credit quality, which would cause an increase in the provision for possible loan and lease losses; changes in the regulatory environment; changes in business conditions, particularly in California real estate; volatility of rate sensitive deposits; asset/liability matching risks and liquidity risks; and changes in the securities markets. For a discussion of these and other risks and uncertainties, see Opus' filings with the Federal Deposit Insurance Corporation, including, but not limited to, the risk factors in Opus' annual report on Form 10-K. These filings are available on the Investor Relations page of Opus' website at: http://investor.opusbank.com.
Opus undertakes no obligation to revise or publicly release any revision to these forward-looking statements.
| Consolidated Statements of Income (Loss) | ||||||||||||||
| (unaudited) | For the three months ended | |||||||||||||
| ($ in thousands, except per share amounts) |
March 31, |
December 31, |
March 31, |
|||||||||||
| Interest income: | ||||||||||||||
| Loans | $ | 60,232 | $ | 67,192 | $ | 65,139 | ||||||||
| Investment securities | 3,069 | 1,194 | 445 | |||||||||||
| Due from banks | 1,961 | 946 | 575 | |||||||||||
| Total interest income | 65,262 | 69,332 | 66,159 | |||||||||||
| Interest expense: | ||||||||||||||
| Deposits | 7,181 | 7,090 | 6,333 | |||||||||||
| Federal Home Loan Bank advances | 67 | 160 | 723 | |||||||||||
| Subordinated debt | 1,923 | 1,922 | — | |||||||||||
| Total interest expense | 9,171 | 9,172 | 7,056 | |||||||||||
| Net interest income | 56,091 | 60,160 | 59,103 | |||||||||||
| Provision for loan losses | 5,968 | 69,459 | 4,943 | |||||||||||
| Net interest income after provision for loan losses | 50,123 | (9,299 | ) | 54,160 | ||||||||||
| Noninterest income: | ||||||||||||||
| Fees and service charges on deposit accounts | 1,922 | 1,951 | 1,938 | |||||||||||
| Escrow and exchange fees | 1,450 | 1,737 | 1,620 | |||||||||||
| Trust administrative fees | 6,382 | 6,622 | — | |||||||||||
| Gain (loss) on sale of loans | (299 | ) | 15,187 | — | ||||||||||
| Loss on sale of assets | (2 | ) | (2 | ) | (7 | ) | ||||||||
| Loss from real estate owned, net | (147 | ) | (27 | ) | (24 | ) | ||||||||
| Gain on sale of investment securities | 519 | — | — | |||||||||||
| Bank-owned life insurance, net | 890 | 850 | 811 | |||||||||||
| Other income | 1,788 | 765 | 985 | |||||||||||
| Total noninterest income | 12,503 | 27,083 | 5,323 | |||||||||||
| Noninterest expense: | ||||||||||||||
| Compensation and benefits | 29,197 | 26,068 | 17,728 | |||||||||||
| Professional services | 4,540 | 6,982 | 2,293 | |||||||||||
| Occupancy expense | 3,780 | 3,617 | 2,999 | |||||||||||
| Depreciation and amortization | 1,884 | 1,867 | 1,475 | |||||||||||
| Deposit insurance and regulatory assessments | 2,062 | 1,799 | 1,060 | |||||||||||
| Insurance expense | 355 | 357 | 325 | |||||||||||
| Data processing | 783 | 882 | 870 | |||||||||||
| Software licenses and maintenance | 1,157 | 975 | 631 | |||||||||||
| Office services | 2,400 | 2,114 | 889 | |||||||||||
| Amortization of other intangible assets | 1,479 | 1,479 | 627 | |||||||||||
| Advertising and marketing | 660 | 727 | 228 | |||||||||||
| Litigation expense (recovery) | 129 | 121 | (50 | ) | ||||||||||
| Other expenses | 1,635 | 4,172 | 1,778 | |||||||||||
| Total noninterest expense | 50,061 | 51,160 | 30,853 | |||||||||||
| Income (loss) before income tax expense (benefit) | 12,565 | (33,376 | ) | 28,630 | ||||||||||
| Income tax expense (benefit) | 4,908 | (14,422 | ) | 11,350 | ||||||||||
| Net income (loss) | $ | 7,657 | $ | (18,954 | ) | $ | 17,280 | |||||||
| Basic earnings (loss) per common share | $ | 0.21 | $ | (0.55 | ) | $ | 0.53 | |||||||
| Diluted earnings (loss) per common share | 0.21 | (0.55 | ) | 0.51 | ||||||||||
| Weighted average shares - basic | 35,755,228 | 34,285,683 | 32,521,972 | |||||||||||
| Weighted average shares - diluted | 36,687,680 | 34,285,683 | 33,786,500 | |||||||||||
| Consolidated Balance Sheets | ||||||||||||||
| (unaudited) | As of | |||||||||||||
| ($ in thousands, except share amounts) |
March 31, |
December 31, |
March 31, |
|||||||||||
| Assets | ||||||||||||||
| Cash and due from banks | $ | 47,747 | $ | 47,986 | $ | 38,221 | ||||||||
| Due from banks – interest-bearing | 978,416 | 887,137 | 463,198 | |||||||||||
| Investment securities available-for-sale, at fair value | 899,967 | 666,589 | 145,587 | |||||||||||
| Loans held-for-investment | 5,432,108 | 5,669,067 | 5,762,410 | |||||||||||
| Less allowance for loan losses | (112,230 | ) | (111,410 | ) | (48,788 | ) | ||||||||
| Loans held-for-investment, net | 5,319,878 | 5,557,657 | 5,713,622 | |||||||||||
| Real estate owned | 288 | 428 | 1,446 | |||||||||||
| Premises and equipment, net | 33,941 | 33,978 | 30,225 | |||||||||||
| Goodwill | 331,832 | 331,832 | 262,115 | |||||||||||
| Other intangible assets, net | 49,239 | 50,718 | 9,472 | |||||||||||
| Deferred tax assets, net | 56,830 | 55,954 | 46,707 | |||||||||||
| Cash surrender value of bank owned life insurance, net | 121,908 | 120,969 | 117,804 | |||||||||||
| Accrued interest receivable | 20,098 | 20,814 | 19,178 | |||||||||||
| Federal Home Loan Bank stock | 17,250 | 17,250 | 20,250 | |||||||||||
| Other assets | 106,288 | 91,251 | 62,639 | |||||||||||
| Total assets | $ | 7,983,682 | $ | 7,882,563 | $ | 6,930,464 | ||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||
| Deposits: | ||||||||||||||
| Noninterest-bearing demand | $ | 1,023,891 | $ | 899,159 | $ | 913,175 | ||||||||
| Interest-bearing demand | 2,453,251 | 2,505,468 | 1,164,835 | |||||||||||
| Money market and savings | 2,748,181 | 2,761,808 | 2,605,349 | |||||||||||
| Time deposits | 494,829 | 515,326 | 556,424 | |||||||||||
| Total deposits | 6,720,152 | 6,681,761 | 5,239,783 | |||||||||||
| Federal Home Loan Bank advances | 10,000 | 65,000 | 750,000 | |||||||||||
| Subordinated debt, net | 132,546 | 132,479 | — | |||||||||||
| Accrued interest payable | 2,053 | 4,108 | 348 | |||||||||||
| Other liabilities | 133,303 | 73,280 | 58,675 | |||||||||||
| Total liabilities | 6,998,054 | 6,956,628 | 6,048,806 | |||||||||||
| Stockholders’ equity: | ||||||||||||||
| Preferred stock: | ||||||||||||||
| Authorized 200,000,000 shares; issued 612 and 612 and 612 shares, respectively | 581 | 581 | 581 | |||||||||||
| Common stock, no par value per share: | ||||||||||||||
| Authorized 200,000,000 shares; issued 37,547,040 and 34,565,063 and 32,767,746 shares, respectively | 728,749 | 678,291 | 621,677 | |||||||||||
| Additional paid-in capital | 59,041 | 56,582 | 49,082 | |||||||||||
| Retained earnings | 205,020 | 197,363 | 216,222 | |||||||||||
| Treasury stock, at cost; 328,666 and 287,942 and 234,494 shares, respectively | (8,344 | ) | (7,509 | ) | (5,732 | ) | ||||||||
| Accumulated other comprehensive income (loss) | 581 | 627 | (172 | ) | ||||||||||
| Total stockholders’ equity | 985,628 | 925,935 | 881,658 | |||||||||||
| Total liabilities and stockholders’ equity | $ | 7,983,682 | $ | 7,882,563 | $ | 6,930,464 | ||||||||
| Selected Financial Data | |||||||||||
| For the three months ended | |||||||||||
| (unaudited) |
March 31, |
December 31, |
March 31, |
||||||||
| Return on average assets | 0.39 | % | (0.97 | )% | 1.03 | % | |||||
| Return on average stockholders' equity | 3.23 | (7.87 | ) | 7.91 | |||||||
| Return on average tangible equity (1) | 5.35 | (13.03 | ) | 11.46 | |||||||
| Efficiency ratio (2) | 72.98 | 58.64 | 47.89 | ||||||||
| Noninterest expense to average assets | 2.58 | 2.61 | 1.84 | ||||||||
| Yield on interest-earning assets | 3.66 | 3.87 | 4.29 | ||||||||
| Cost of deposits (3) | 0.44 | 0.43 | 0.48 | ||||||||
| Cost of funds (4) | 0.54 | 0.54 | 0.49 | ||||||||
| Net interest margin | 3.14 | 3.36 | 3.84 | ||||||||
| Loan to deposits | 80.83 | 84.84 | 109.97 | ||||||||
| (1) | See computation in "Non-GAAP Financial Measures" section. | |
| (2) | The efficiency ratio is calculated by dividing noninterest expense by the sum of net interest income before provision for loan losses and noninterest income. | |
| (3) | Calculated as interest expense on deposits divided by total average deposits. | |
| (4) | Calculated as total interest expense divided by average total deposits, FHLB advances and subordinated debt. |
| Capital Ratios | As of | ||||||||||
| (unaudited) | March 31, 2017 (1) | December 31, 2016 | March 31, 2016 | ||||||||
| Tier 1 leverage ratio | 8.19 | % | 7.54 | % | 9.30 | % | |||||
| Tier 1 risk-based capital ratio | 9.87 | 8.78 | 10.80 | ||||||||
| Total risk-based capital ratio | 13.26 | 12.11 | 11.70 | ||||||||
| Common Equity Tier 1 ratio | 9.87 | 8.78 | 10.80 | ||||||||
| (1) | Ratios are preliminary until filing of our March 31, 2017 call report. |
| Loan Fundings | |||||||||||
| (unaudited) | For the three months ended | ||||||||||
| ($ in thousands) |
March 31, |
December 31, |
March 31, |
||||||||
| Loans funded: | |||||||||||
| Real estate mortgage loans: | |||||||||||
| Single-family residential | $ | — | $ | — | $ | — | |||||
| Multifamily residential | 111,272 | 185,244 | 219,519 | ||||||||
| Commercial real estate | 15,473 | 83,813 | 111,620 | ||||||||
| Construction and land loans | 15,556 | 17,069 | 14,387 | ||||||||
| Commercial business loans | 75,661 | 143,742 | 201,955 | ||||||||
| Small Business Administration loans | 1,181 | — | 4,215 | ||||||||
| Consumer and other loans | — | — | — | ||||||||
| Total loan fundings | $ | 219,143 | $ | 429,868 | $ | 551,696 | |||||
| Composition of Loan Portfolio | As of | |||||||||||||||||||
| (unaudited) |
March 31, |
December 31, |
March 31, |
|||||||||||||||||
| ($ in thousands) |
Amount |
% of Total loans |
Amount |
% of Total loans |
Amount |
% of Total loans |
||||||||||||||
| Originated loans held-for-investment | ||||||||||||||||||||
| Real estate mortgage loans: | ||||||||||||||||||||
| Single-family residential | $ | 69,046 | 1.3 | % | $ | 79,065 | 1.4 | % | $ | 97,276 | 1.7 | % | ||||||||
| Multifamily residential | 2,285,039 | 42.1 | 2,241,095 | 39.5 | 2,665,566 | 46.3 | ||||||||||||||
| Commercial real estate | 1,251,877 | 23.0 | 1,311,064 | 23.1 | 1,179,003 | 20.5 | ||||||||||||||
| Construction and land loans | 100,303 | 1.8 | 110,005 | 1.9 | 70,409 | 1.2 | ||||||||||||||
| Commercial business loans | 1,550,120 | 28.5 | 1,732,348 | 30.6 | 1,480,860 | 25.7 | ||||||||||||||
| Small Business Administration loans | 15,123 | 0.3 | 18,257 | 0.3 | 25,422 | 0.4 | ||||||||||||||
| Consumer and other loans | 296 | 0.0 | 338 | 0.0 | 669 | 0.0 | ||||||||||||||
| Total originated loans | 5,271,804 | 97.0 | 5,492,172 | 96.9 | 5,519,205 | 95.8 | ||||||||||||||
| Acquired loans held-for-investment | ||||||||||||||||||||
| Real estate mortgage loans: | ||||||||||||||||||||
| Single-family residential | 30,457 | 0.6 | 34,713 | 0.6 | 44,499 | 0.8 | ||||||||||||||
| Multifamily residential | 56,480 | 1.0 | 61,882 | 1.1 | 73,341 | 1.3 | ||||||||||||||
| Commercial real estate | 37,205 | 0.8 | 42,579 | 0.8 | 62,178 | 1.1 | ||||||||||||||
| Construction and land loans | 1,980 | 0.0 | 2,001 | 0.0 | 2,046 | 0.0 | ||||||||||||||
| Commercial business loans | 14,864 | 0.2 | 15,821 | 0.3 | 18,505 | 0.3 | ||||||||||||||
| Small Business Administration loans | 12,862 | 0.2 | 13,159 | 0.2 | 34,895 | 0.6 | ||||||||||||||
| Consumer and other loans | 6,456 | 0.1 | 6,740 | 0.1 | 7,741 | 0.1 | ||||||||||||||
| Total acquired loans | 160,304 | 3.0 | 176,895 | 3.1 | 243,205 | 4.2 | ||||||||||||||
| Total gross loans | $ | 5,432,108 | 100.0 | % | $ | 5,669,067 | 100.0 | % | $ | 5,762,410 | 100.0 | % | ||||||||
| Composition of Deposits | As of | |||||||||||||||||||
| (unaudited) |
March 31, |
December 31, |
March 31, |
|||||||||||||||||
| ($ in thousands) | Amount |
% of Total deposits |
Amount |
% of Total deposits |
Amount |
% of |
||||||||||||||
| Noninterest bearing | $ | 1,023,891 | 15.24 | % | $ | 899,159 | 13.46 | % | $ | 913,175 | 17.43 | % | ||||||||
| Interest bearing demand | 2,453,251 | 36.51 | 2,505,468 | 37.50 | 1,164,835 | 22.23 | ||||||||||||||
| Money market and savings | 2,748,181 | 40.89 | 2,761,808 | 41.33 | 2,605,349 | 49.72 | ||||||||||||||
| Time deposits | 494,829 | 7.36 | 515,326 | 7.71 | 556,424 | 10.62 | ||||||||||||||
| Total deposits | $ | 6,720,152 | 100.00 | % | $ | 6,681,761 | 100.00 | % | $ | 5,239,783 | 100.00 | % | ||||||||
| Consolidated average balance sheet, interest, yield and rates | |||||||||||||||||||||||||||||
|
For the three months ended |
For the three months ended |
For the three months ended |
|||||||||||||||||||||||||||
| (unaudited) | 2017 | 2016 | 2016 | ||||||||||||||||||||||||||
| ($ in thousands) |
Average Balance |
Interest |
Yields/ Rates |
Average Balance |
Interest |
Yields/ Rates |
Average Balance |
Interest |
Yields/ Rates |
||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||
| Due from banks | $ | 951,235 | $ | 1,961 | 0.84 | % | $ | 690,414 | $ | 946 | 0.55 | % | $ | 458,569 | $ | 575 | 0.50 | % | |||||||||||
| Investment securities | 719,754 | 3,069 | 1.73 | 203,139 | 1,194 | 2.34 | 149,228 | 445 | 1.20 | ||||||||||||||||||||
| Acquired loans | 169,511 | 2,831 | 6.77 | 182,925 | 3,019 | 6.57 | 260,243 | 7,279 | 11.25 | ||||||||||||||||||||
| Originated Loans | 5,400,662 | 57,401 | 4.31 | 6,051,628 | 64,173 | 4.22 | 5,327,366 | 57,860 | 4.37 | ||||||||||||||||||||
| Total loans | $ | 5,570,173 | $ | 60,232 | 4.39 | $ | 6,234,553 | $ | 67,192 | 4.29 | $ | 5,587,609 | $ | 65,139 | 4.69 | ||||||||||||||
| Total interest-earning assets | $ | 7,241,162 | $ | 65,262 | 3.66 | $ | 7,128,106 | $ | 69,332 | 3.87 | $ | 6,195,406 | $ | 66,159 | 4.29 | ||||||||||||||
| Noninterest-earning assets | 634,841 | 681,694 | 555,493 | ||||||||||||||||||||||||||
| Total assets | $ | 7,876,003 | $ | 7,809,800 | $ | 6,750,899 | |||||||||||||||||||||||
| Liabilities and stockholders’ equity: | |||||||||||||||||||||||||||||
| Interest-bearing deposits | |||||||||||||||||||||||||||||
| Interest-bearing demand | $ | 2,495,540 | $ | 1,133 | 0.18 | % | $ | 2,380,363 | $ | 1,010 | 0.17 | % | $ | 1,205,116 | $ | 687 | 0.23 | % | |||||||||||
| Money market and savings | 2,762,146 | 4,957 | 0.73 | 2,773,442 | 4,963 | 0.71 | 2,588,103 | 4,504 | 0.70 | ||||||||||||||||||||
| Time deposits | 503,673 | 1,091 | 0.88 | 525,230 | 1,117 | 0.85 | 562,824 | 1,142 | 0.82 | ||||||||||||||||||||
| Total interest bearing deposits | $ | 5,761,359 | $ | 7,181 | 0.51 | $ | 5,679,035 | $ | 7,090 | 0.50 | $ | 4,356,043 | $ | 6,333 | 0.58 | ||||||||||||||
| Subordinated debt | 132,507 | 1,923 | 5.89 | 132,437 | 1,922 | 5.77 | — | — | — | ||||||||||||||||||||
| FHLB advances | 27,722 | 67 | 0.98 | 65,033 | 160 | 0.98 | 539,615 | 723 | 0.54 | ||||||||||||||||||||
|
Total interest-bearing
liabilities |
$ | 5,921,588 | $ | 9,171 | 0.63 | $ | 5,876,505 | $ | 9,172 | 0.62 | $ | 4,895,658 | $ | 7,056 | 0.58 | ||||||||||||||
| Noninterest-bearing deposits | 921,208 | 910,158 | 915,522 | ||||||||||||||||||||||||||
| Other liabilities | 71,180 | 64,441 | 61,443 | ||||||||||||||||||||||||||
| Total liabilities | $ | 6,913,976 | $ | 6,851,104 | $ | 5,872,623 | |||||||||||||||||||||||
| Total stockholders’ equity | $ | 962,027 | $ | 958,696 | $ | 878,276 | |||||||||||||||||||||||
|
Total liabilities and stockholders’ equity |
$ | 7,876,003 | $ | 7,809,800 | $ | 6,750,899 | |||||||||||||||||||||||
| Net interest income | $ | 56,091 | $ | 60,160 | $ | 59,103 | |||||||||||||||||||||||
| Net interest spread (1) | 3.03 | % | 3.25 | % | 3.71 | % | |||||||||||||||||||||||
| Net interest margin (2) | 3.14 | % | 3.36 | % | 3.84 | % | |||||||||||||||||||||||
| (1) | Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities. | |
| (2) | Net interest margin is computed by dividing net interest income by total average interest-earning assets. |
| Allowance for Loan Losses | |||||||||||
| (unaudited) | For the three months ended | ||||||||||
| ($ in thousands) |
March 31, |
December 31, |
March 31, |
||||||||
| Allowance for loan losses-balance at beginning of period | 111,410 | 61,103 | 44,147 | ||||||||
| (Recapture) Provision for loan losses: | |||||||||||
| Acquired loans | (94 | ) | (47 | ) | (151 | ) | |||||
| Originated loans | 6,062 | 69,506 | 5,094 | ||||||||
| Total provision for loan losses | 5,968 | 69,459 | 4,943 | ||||||||
| Charge-offs: | |||||||||||
| Acquired loans | — | — | — | ||||||||
| Originated loans | (5,716 | ) | (19,770 | ) | (333 | ) | |||||
| Total charge-offs | (5,716 | ) | (19,770 | ) | (333 | ) | |||||
| Recoveries: | |||||||||||
| Acquired loans | — | — | — | ||||||||
| Originated loans | 568 | 618 | 31 | ||||||||
| Total recoveries | 568 | 618 | 31 | ||||||||
| Total net charge-offs | (5,148 | ) | (19,152 | ) | (302 | ) | |||||
| Allowance for loan losses-balance at end of period | 112,230 | 111,410 | 48,788 | ||||||||
| Asset Quality Information | ||||||||||||||
| (unaudited) | As of | |||||||||||||
| ($ in thousands) |
March 31, |
December 31, |
March 31, |
|||||||||||
| Nonperforming assets | ||||||||||||||
| Nonaccrual loans | $ | 86,740 | $ | 94,667 | $ | 41,345 | ||||||||
| Real estate owned | 288 | 428 | 1,446 | |||||||||||
| Total nonperforming assets | 87,028 | 95,095 | 42,791 | |||||||||||
| Nonperforming assets to total assets | 1.09 | % | 1.21 | % | 0.62 | % | ||||||||
| Accruing loans 90 days or more past due | $ | 296 | $ | 596 | $ | 1,315 | ||||||||
| Accruing troubled debt restructured loans | 160 | 165 | 648 | |||||||||||
| Allowance for loan losses - Originated loans | 111,760 | 110,846 | 47,858 | |||||||||||
| Allowance for loan losses - Acquired loans | 470 | 564 | 930 | |||||||||||
| Total allowance for loan losses | $ | 112,230 | $ | 111,410 | $ | 48,788 | ||||||||
| Remaining acquisition discount on acquired loans | $ | 3,082 | $ | 3,728 | $ | 10,659 | ||||||||
| Allowance for loan losses to non-accrual loans | 129.4 | % | 117.7 | % | 118.0 | % | ||||||||
| Allowance for loan losses acquired loans to acquired loans | 0.29 | 0.32 | 0.38 | |||||||||||
| Allowance for loan losses originated loans to originated loans | 2.12 | 2.02 | 0.87 | |||||||||||
| Total allowance for loan losses to total loans | 2.07 | 1.97 | 0.85 | |||||||||||
| Allowance for loan losses and remaining acquisition discount on acquired loans to gross acquired loans (1) | 2.17 | 2.38 | 4.57 | |||||||||||
| Allowance for loan losses and remaining acquisition discount to total gross loans (1) | 2.12 | 2.03 | 1.03 | |||||||||||
| (1) | Remaining acquisition discount is added back to acquired loans held for investment to calculate gross loans and added to allowance for loan losses to calculate the coverage ratios. |
| Risk Rating by Loan Product | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| ($ in thousands) | Pass |
Special |
Classified | Total Loans |
Nonaccrual |
Total |
||||||||||||||
| As of March 31, 2017 | ||||||||||||||||||||
| Real estate mortgage loans: | ||||||||||||||||||||
| Single-family residential | $ | 98,684 | $ | 83 | $ | 736 | $ | 99,503 | $ | — | $ | 254 | ||||||||
| Multifamily residential | 2,322,418 | 8,318 | 10,783 | 2,341,519 | — | 9,631 | ||||||||||||||
| Commercial real estate | 1,237,392 | 34,514 | 17,176 | 1,289,082 | 12,276 | 10,087 | ||||||||||||||
| Construction and land loans | 94,931 | 7,352 | — | 102,283 | — | 1,469 | ||||||||||||||
| Commercial business loans | 1,288,371 | 32,210 | 244,403 | 1,564,984 | 73,708 | 90,569 | ||||||||||||||
| Small Business Administration loans | 25,152 | 983 | 1,850 | 27,985 | — | 191 | ||||||||||||||
| Consumer and other loans | 5,736 | 65 | 951 | 6,752 | 756 | 29 | ||||||||||||||
| Total loans | $ | 5,072,684 | $ | 83,525 | $ | 275,899 | $ | 5,432,108 | $ | 86,740 | $ | 112,230 | ||||||||
| As of December 31, 2016 | ||||||||||||||||||||
| Real estate mortgage loans: | ||||||||||||||||||||
| Single-family residential | $ | 112,298 | $ | 1,125 | $ | 355 | $ | 113,778 | $ | — | $ | 308 | ||||||||
| Multifamily residential | 2,292,041 | 244 | 10,692 | 2,302,977 | — | 8,881 | ||||||||||||||
| Commercial real estate | 1,316,879 | 18,580 | 18,184 | 1,353,643 | 12,284 | 9,643 | ||||||||||||||
| Construction and land loans | 111,997 | 9 | — | 112,006 | — | 1,161 | ||||||||||||||
| Commercial business loans | 1,483,510 | 63,205 | 201,454 | 1,748,169 | 81,964 | 91,188 | ||||||||||||||
| Small Business Administration loans | 28,692 | 1,168 | 1,556 | 31,416 | — | 200 | ||||||||||||||
| Consumer and other loans | 6,369 | 40 | 669 | 7,078 | 419 | 29 | ||||||||||||||
| Total loans | $ | 5,351,786 | $ | 84,371 | $ | 232,910 | $ | 5,669,067 | $ | 94,667 | $ | 111,410 | ||||||||
| As of March 31, 2016 | ||||||||||||||||||||
| Real estate mortgage loans: | ||||||||||||||||||||
| Single-family residential | $ | 137,951 | $ | 2,386 | $ | 1,438 | $ | 141,775 | $ | — | $ | 404 | ||||||||
| Multifamily residential | 2,732,649 | 6,258 | — | 2,738,907 | — | 9,235 | ||||||||||||||
| Commercial real estate | 1,225,643 | 3,663 | 11,875 | 1,241,181 | 11,875 | 6,262 | ||||||||||||||
| Construction and land loans | 72,420 | 35 | — | 72,455 | — | 654 | ||||||||||||||
| Commercial business loans | 1,405,189 | 38,762 | 55,414 | 1,499,365 | 28,727 | 31,918 | ||||||||||||||
| Small Business Administration loans | 53,710 | 1,341 | 5,266 | 60,317 | — | 193 | ||||||||||||||
| Consumer and other loans | 6,905 | 238 | 1,267 | 8,410 | 743 | 122 | ||||||||||||||
| Total loans | $ | 5,634,467 | $ | 52,683 | $ | 75,260 | $ | 5,762,410 | $ | 41,345 | $ | 48,788 | ||||||||
| Risk Rating by Lending Division | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| ($ in thousands) | Pass |
Special |
Classified | Total Loans |
Nonaccrual |
||||||||||||||||
| As of March 31, 2017 | |||||||||||||||||||||
| Income Property Banking | $ | 2,910,884 | $ | 20,132 | $ | 7,803 | $ | 2,938,819 | $ | 696 | |||||||||||
| Commercial Banking | 476,078 | 24,301 | 69,900 | 570,279 | 15,946 | ||||||||||||||||
| Structured Finance | 441,257 | 10,945 | 15,322 | 467,524 | 11,580 | ||||||||||||||||
| Healthcare Provider | 354,611 | 13,480 | 55,057 | 423,148 | — | ||||||||||||||||
| Healthcare Practice | 35,260 | 539 | 8,358 | 44,157 | 5,624 | ||||||||||||||||
| Corporate Finance | 346,405 | 2,389 | 52,668 | 401,462 | 24,932 | ||||||||||||||||
| Institutional Syndication | 289,162 | (322 | ) |
1 |
(274 | ) |
1 |
288,566 | — | ||||||||||||
| Technology Banking | 47,296 | 10,818 | 64,108 | 122,222 | 26,968 | ||||||||||||||||
| Other divisions (2) | 171,731 | 1,243 | 2,957 | 175,931 | 994 | ||||||||||||||||
| Total loans | $ | 5,072,684 | $ | 83,525 | $ | 275,899 | $ | 5,432,108 | $ | 86,740 | |||||||||||
| As of December 31, 2016 | |||||||||||||||||||||
| Income Property Banking | $ | 2,912,605 | $ | 245 | $ | 6,883 | $ | 2,919,733 | $ | 704 | |||||||||||
| Commercial Banking | 585,985 | 20,658 | 37,474 | 644,117 | 15,993 | ||||||||||||||||
| Structured Finance | 493,126 | 3,603 | 16,160 | 512,889 | 11,580 | ||||||||||||||||
| Healthcare Provider | 389,722 | 23,821 | 41,034 | 454,577 | — | ||||||||||||||||
| Healthcare Practice | 54,856 | 550 | 12,375 | 67,781 | 6,191 | ||||||||||||||||
| Corporate Finance | 377,312 | 2,484 | 56,349 | 436,145 | 27,492 | ||||||||||||||||
| Institutional Syndication | 273,901 | (374 | ) |
1 |
(306 | ) |
1 |
273,221 | — | ||||||||||||
| Technology Banking | 99,341 | 29,809 | 61,319 | 190,469 | 31,781 | ||||||||||||||||
| Other divisions (2) | 164,938 | 3,575 | 1,622 | 170,135 | 926 | ||||||||||||||||
| Total loans | $ | 5,351,786 | $ | 84,371 | $ | 232,910 | $ | 5,669,067 | $ | 94,667 | |||||||||||
| As of March 31, 2016 | |||||||||||||||||||||
| Income Property Banking | $ | 3,322,052 | $ | 6,763 | $ | — | $ | 3,328,815 | $ | — | |||||||||||
| Commercial Banking | 519,085 | 8,287 | 24,273 | 551,645 | 7,612 | ||||||||||||||||
| Structured Finance | 473,788 | 35 | — | 473,823 | — | ||||||||||||||||
| Healthcare Provider | 312,359 | — | — | 312,359 | — | ||||||||||||||||
| Healthcare Practice | 54,876 | 2,312 | 24,228 | 81,416 | 11,824 | ||||||||||||||||
| Corporate Finance | 292,062 | 6,177 | 3,292 | 301,531 | — | ||||||||||||||||
| Institutional Syndication | 282,822 | 265 | (403 | ) |
1 |
282,684 | — | ||||||||||||||
| Technology Banking | 206,766 | 24,642 | 21,165 | 252,573 | 21,165 | ||||||||||||||||
| Other divisions (2) | 170,657 | 4,202 | 2,705 | 177,564 | 744 | ||||||||||||||||
| Total loans | $ | 5,634,467 | $ | 52,683 | $ | 75,260 | $ | 5,762,410 | $ | 41,345 | |||||||||||
| (1) | Represents unamortized net deferred loan origination fees on syndicated lines of credit that have no outstanding principal balances at period end. | |
| (2) | Other divisions is comprised of single family residential loans, consumer and other loans, and specialty banking divisions with portfolio balances under $50 million, which includes Business Banking, Media and Entertainment Banking and Public Finance. |
Non-GAAP Financial Measures
Our accounting and reporting policies conform to generally accepted accounting principles in the United States ("GAAP"). We believe that the presentation of certain non-GAAP financial measures assists investors in evaluating our financial results. These non-GAAP measures include our return on average tangible equity, net interest income excluding acquisition accounting and tangible book value per as converted common share. These non-GAAP measures should be taken together with the corresponding GAAP measures and should not be considered a substitute of the GAAP measures.
The following tables present a reconciliation of the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios:
| Non-GAAP return on average tangible equity | ||||||||||||||
| (unaudited) | For the three months ended | |||||||||||||
| ($ in thousands) |
March 31, 2017 |
December 31, 2016 |
March 31, 2016 |
|||||||||||
| Average tangible equity: | ||||||||||||||
| Average stockholders' equity | $ | 962,027 | $ | 958,696 | $ | 878,276 | ||||||||
| Less: | ||||||||||||||
| Average goodwill | 331,832 |
|
328,324 |
262,115 | ||||||||||
| Average other intangible assets | 50,112 | 51,463 | 9,803 | |||||||||||
| Average tangible equity | 580,083 | 578,909 | 606,358 | |||||||||||
| Net income | $ | 7,657 | $ | (18,954 | ) | $ | 17,280 | |||||||
| Return on average stockholders' equity | 3.23 | % | (7.87 | )% | 7.91 | % | ||||||||
| Non-GAAP return on average tangible equity | 5.35 | (13.03 | ) | 11.46 | ||||||||||
| Non-GAAP net interest margin | ||||||||||||||
| (unaudited) | For the three months ended | |||||||||||||
| ($ in thousands) |
March 31, |
December 31, |
March 31, |
|||||||||||
| Net interest income | $ | 56,091 | $ | 60,160 | $ | 59,103 | ||||||||
| Less: Accretion/amortization of acquisition discount/premium (1) | (673 | ) | (717 | ) | (3,724 | ) | ||||||||
| Non-GAAP net interest income | 55,418 | 59,443 | 55,379 | |||||||||||
| Average interest earning assets | $ | 7,241,162 | $ | 7,128,106 | $ | 6,195,406 | ||||||||
| Add: Average unamortized acquisition discounts | 3,550 | 4,382 | 14,376 | |||||||||||
| Non-GAAP average interest-earning assets | 7,244,712 | 7,132,488 | 6,209,782 | |||||||||||
| Net interest margin impact | 0.04 | % | 0.04 | % | 0.25 | % | ||||||||
| (1) | Accretion income on acquired loans only includes interest income recognized in excess of what would be accrued under the contractual terms as a result of acquisition accounting and loan exits through full payoff or charge-off, foreclosure or sale. |
| Non-GAAP tangible book value per as converted common share | |||||||||||
| (unaudited) | As of | ||||||||||
| ($ In thousands, except share amounts) |
March 31, 2017 |
December 31, 2016 |
March 31, 2016 |
||||||||
| Tangible equity: | |||||||||||
| Total stockholders' equity | $ | 985,628 | $ | 925,935 | $ | 881,658 | |||||
| Less: | |||||||||||
| Goodwill | 331,832 | 331,832 | 262,115 | ||||||||
| Other intangible assets, net | 49,239 | 50,718 | 9,472 | ||||||||
| Tangible equity | 604,557 | 543,385 | 610,071 | ||||||||
| Shares of common stock outstanding | 37,218,374 | 34,277,121 | 32,533,252 | ||||||||
| Shares of common stock to be issued upon conversion of preferred stock | 30,600 | 30,600 | 30,600 | ||||||||
| Total as converted shares of common stock outstanding (1) | 37,248,974 | 34,307,721 | 32,563,852 | ||||||||
| Book value per as converted common share | 26.46 | 26.99 | 27.07 | ||||||||
| Tangible book value per as converted common share | 16.23 | 15.84 | 18.73 | ||||||||
| (1) | Common stock outstanding includes additional shares of common stock that would be issued upon conversion of all outstanding shares of preferred stock to common stock and excludes shares issuable upon exercise of warrants and options. |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170424005662/en/
