Opus Bank Announces First Quarter 2019 Results

IRVINE, Calif.--()--Opus Bank ("Opus") (NASDAQ: “OPB”) announced today net income of $10.9 million, or $0.28 per diluted share, for the first quarter of 2019 compared to a net loss of $6.9 million, or $(0.20) per diluted share, for the fourth quarter of 2018 and net income of $12.9 million, or $0.34 per diluted share, for the first quarter of 2018. Net income during the first quarter of 2019 included a $1.4 million expense related to the settlement of a longstanding legal matter that originated in January 2013 and a $489,000 charge related to the exiting of a line of business included in Other Income. Together, these items impacted earnings by $0.04 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 May 23, 2019 to common stockholders, and a common-equivalent payment to its Series A Preferred stockholders of record as of May 9, 2019.

First Quarter 2019 Highlights

  • Loans held for investment increased 6%, or $296.3 million, compared to the prior quarter, driven by strong growth in multifamily loans.
  • Deposits increased 2%, or $124.9 million, compared to the prior quarter.
  • Net interest income increased 1% compared to the prior quarter, as higher interest income on loans and investment securities was partially offset by higher interest expense on deposits and borrowings.
  • Net interest margin expanded eight basis points to 3.15% compared to the prior quarter due to the benefit of loan repricing during the first quarter of 2019 and the repositioning of our securities portfolio in the fourth quarter of 2018. Our cost of deposits increased 13 basis points to 0.92% for the first quarter of 2019.
  • Noninterest expense increased 2% compared to the prior quarter, excluding a $1.4 million expense related to a legal settlement during the quarter and $10.5 million of expenses related to a restructuring charge taken in the fourth quarter of 2018. The increase was driven by seasonally higher employer taxes in the first quarter of 2019.
  • Nonperforming assets decreased 17% compared to the prior quarter to $23.3 million, or 0.30% of total assets compared to 0.39% of total assets in the prior quarter.
  • Enterprise Value loans decreased 14% compared to the prior quarter to $105.0 million.
  • Provision for loan losses was $2.2 million, largely driven by quarterly loan growth, as Opus recorded net recoveries of $1.6 million in the first quarter of 2019, compared to net charge-offs of $12.0 million in the prior quarter.
  • Tangible book value per common share increased $0.19 to $17.96, while our tangible common equity to tangible assets decreased 53 basis points to 8.88% due to growth in total assets during the first quarter of 2019.

Paul G. Greig, Chairman of the Board, Interim Chief Executive Officer and President of Opus Bank, stated, "Our solid core earnings performance during the first quarter of 2019 included higher net interest income, expanding net interest margin, and further improvements in credit quality. Strong quarterly loan growth was driven by high origination volume of multifamily loans, as well as unusually low prepayments during the first quarter. While we were successful in increasing our real estate lending during the quarter, our focus on disciplined underwriting has not changed. All of Opus’ team members are to be commended for the contributions to our first quarter performance.”

Loans

Total loans held-for-investment increased $296.3 million, or 6%, to $5.5 billion as of March 31, 2019, from $5.2 billion as of December 31, 2018, and increased $232.5 million, or 4%, from $5.2 billion as of March 31, 2018. The increase in total loans during the first quarter of 2019 was driven by new loan fundings of $538.0 million, partially offset by loan payoffs of $196.2 million, which included planned exits of $22.5 million.

Loan Balance Roll Forward        
(unaudited)     Three Months Ended
($ in millions)

March 31,
2019

December 31,
2018

September 30,
2018

June 30, 2018 March 31, 2018
 
Beginning loan balance $ 5,165.2 $ 5,159.9 $ 5,072.4 $ 5,229.0 $ 5,173.2
New loan fundings 538.0 412.3 435.7 295.6 452.3
Loan payoffs (173.7 ) (265.3 ) (197.4 ) (299.5 ) (219.2 )
Planned exits (22.5 ) (59.2 ) (60.6 ) (58.5 ) (52.2 )
Other1 (45.5 ) (82.5 ) (90.2 ) (94.2 ) (125.1 )
Ending loan balance $ 5,461.5   $ 5,165.2   $ 5,159.9   $ 5,072.4   $ 5,229.0  
 
[1] Includes normal amortization, paydowns, charge-offs, and loan sales that were not planned exits
 
 

New loan fundings in the first quarter of 2019 totaled $538.0 million, an increase of $125.7 million, or 30%, from the fourth quarter of 2018 and an increase of $85.7 million, or 19%, from the first quarter of 2018. Commercial Business loans comprised $56.9 million, or 11%, of total new loan fundings; and real estate related loans comprised $480.3 million, or 89%, of total new loan fundings in the first quarter of 2019. Quarterly loan payoffs were $173.7 million, excluding planned loan exits, compared to $265.3 million in the fourth quarter of 2018 and $219.2 million in the first quarter of 2018.

Loan commitments originated during the first quarter of 2019 totaled $550.3 million, compared to $399.8 million during the fourth quarter of 2018 and $439.2 million during the first quarter of 2018. Our unfunded commitments on loans totaled $418.4 million as of March 31, 2019.

Cash and Investment Securities

Cash and investment securities totaled $1.5 billion as of March 31, 2019, an increase of $179.3 million, or 13%, compared to December 31, 2018, and an increase of $125.5 million, or 9%, compared to March 31, 2018. Cash and cash equivalents as of March 31, 2019 increased $166.9 million, or 66%, to $421.5 million compared to December 31, 2018, and increased $129.3 million, or 44%, compared to March 31, 2018. The balance of investment securities was relatively unchanged from the prior period and the first quarter of 2018, increasing by $12.4 million compared to December 31, 2018, and decreasing by $3.8 million compared to March 31, 2018.

Deposits and Borrowings

Deposits increased $124.9 million, or 2%, to $6.1 billion as of March 31, 2019, from $6.0 billion as of December 31, 2018 and increased $33.2 million, or 1%, from $6.0 billion as of March 31, 2018. Deposit growth in the first quarter of 2019 was driven by our Retail Banking, Municipal Banking, and Commercial and Specialty Banking divisions. Noninterest bearing demand deposits and money market and savings increased 1% and 5%, respectively, in the first quarter of 2019, while interest checking account balances decreased 4% from the prior quarter. Time deposits increased $121.5 million compared to December 31, 2018. The average balance of deposits in the first quarter of 2019 decreased $84.3 million compared to the prior quarter, as deposit inflows occurred later in the period.

Our loan to deposit ratio was 90% as of March 31, 2019, compared to 87% as of December 31, 2018 and 87% as of March 31, 2018.

Federal Home Loan Bank (FHLB) advances increased to $330.0 million as of March 31, 2019, compared to a zero balance as of December 31, 2018 and $10.0 million as of March 31, 2018. The average balance of FHLB advances during the first quarter of 2019 was $122.0 million, compared to $33,000 in the fourth quarter of 2018 and $16.4 million in the first quarter of 2018.

Net Interest Income

Net interest income increased 1% to $50.8 million for the first quarter of 2019, compared to $50.4 million for the fourth quarter of 2018, and decreased 2% from $51.7 million for the first quarter of 2018.

Interest income from loans increased 2% to $57.0 million for the first quarter of 2019, driven by a 2% increase in the average balance of loans, the benefit of repricing of loans, and interest recaptured on nonaccrual loans, partially offset by fewer days in the first quarter.

Interest income from cash and investment securities increased 14% from the fourth quarter of 2018 to $9.9 million for the first quarter of 2019, driven primarily by a higher yield on investment securities as a result of the securities portfolio repositioning we executed near the end of the fourth quarter of 2018. The average balance of cash and cash equivalents decreased $84.9 million, or 27%, compared to the prior quarter, as excess cash was redeployed into higher yielding loans and investment securities.

Interest expense increased 15% to $16.1 million for the first quarter of 2019, compared to $14.0 million for the fourth quarter of 2018, and increased 79% compared to $9.0 million for the first quarter of 2018. The increase in interest expense during the first quarter of 2019 was driven by a higher rate on interest-bearing deposits, a change in the mix of deposits, and the addition of FHLB borrowings during the quarter.

Net Interest Margin

Net interest margin on a taxable equivalent basis increased eight basis points to 3.15% in the first quarter of 2019 from 3.07% in the fourth quarter of 2018, and decreased five basis points from 3.20% in the first quarter of 2018. The linked-quarter change was primarily driven by an 11 basis point increase in the average yield on loans due to the benefit of loan repricing, fewer days in the first quarter of 2019, and interest recaptured on nonaccrual loans, as well as a 61 basis point increase in the average yield on securities due to the repositioning of our securities portfolio in the fourth quarter of 2018 and lower premium amortization compared to the prior quarter. These were partially offset by a 15 basis point increase in our cost of funds, driven primarily by the increase in FHLB advances and lower balances of interest-bearing demand and money market deposits.

Noninterest Income

Noninterest income increased 228% to $11.1 million in the first quarter of 2019 from $3.4 million in the fourth quarter of 2018, and decreased 17% from $13.3 million in the first quarter of 2018. Noninterest income during the first quarter of 2019 included $6.7 million of trust administrative fees, $1.4 million from our Escrow & Exchange divisions, 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, as well as approximately $1.5 million of revenues generated by our Merchant Banking division that were not repeated in the first quarter of 2019. Included in Other Income during the first quarter of 2019 was a $49,000 net increase in equity warrant valuations, compared to a net decrease of $354,000 in the prior quarter, and an FHLB dividend of $304,000, compared to a dividend of $584,000 in the prior quarter. Additionally, Other Income included an expense of $489,000 primarily related to the exiting of Opus Financial Partners, the company's broker-dealer, as a line of business, which triggered an impairment charge on a sublet property. Opus Bank is discontinuing Opus Financial Partners as this line of business did not achieve adequate performance results and was not considered an effective use of capital.

Noninterest Expense

Noninterest expense decreased 15% to $45.4 million in the first quarter of 2019, compared to $53.7 million in the fourth quarter of 2018, and increased 3% from $44.1 million in the first quarter of 2018. Noninterest expense during the first quarter of 2019 included a $1.4 million expense related to a legal settlement during the quarter, while noninterest expense during the fourth quarter of 2018 included $10.5 million of expenses related to the restructuring charge taken in the fourth quarter. Excluding these items, noninterest expense increased 2% in the first quarter of 2019, primarily due to seasonally higher employer taxes during the first quarter.

Our efficiency ratio for the first quarter of 2019 was 70.6%, compared to 81.5% for the fourth quarter of 2018 and 65.5% for the first quarter of 2018.

Income Tax Expense

We recorded an income tax expense of $3.4 million in the first quarter of 2019, compared to an income tax benefit of $654,000 in the fourth quarter of 2018 as a result of the pre-tax loss we incurred for the quarter, and an income tax expense of $4.1 million in the first quarter of 2018. Our effective tax rate for the first quarter of 2019 was 24.0%.

Asset Quality

Total nonperforming assets decreased 17% to $23.3 million, or 0.30% of total assets, as of March 31, 2019, compared to $28.0 million, or 0.39% of total assets, as of December 31, 2018, and $63.8 million, or 0.87% of total assets, as of March 31, 2018. Total Enterprise Value loans were reduced by $17.0 million, or 14%, during the first quarter of 2019 and totaled $105.0 million as of March 31, 2019.

Total criticized loans increased $2.2 million, or 1%, to $152.5 million as of March 31, 2019, compared to $150.3 million as of December 31, 2018, and decreased $94.9 million, or 38%, from $247.4 million as of March 31, 2018. Special mention loans decreased $13.2 million in the first quarter of 2019, and classified loans increased $15.4 million. The decrease in special mention loans was driven by $11.3 million of loans downgraded to classified loans and payoffs, upgrades, and normal amortization of $1.9 million. The increase in classified loans was driven by downgrades of $26.2 million, partially offset by payoffs, charge-offs, upgrades, and normal amortization of $10.8 million.

Our allowance for loan losses was $58.5 million, or 1.07% of our total loan portfolio, as of March 31, 2019, compared to $54.7 million, or 1.06%, as of December 31, 2018 and $67.8 million, or 1.30%, as of March 31, 2018. The increase in the allowance for loan losses during the first quarter of 2019 compared to the prior quarter was driven by a provision for loan losses of $2.2 million and recoveries of $2.0 million which were partially offset by charge-offs of $383,000. The ratio of the allowance for loan losses to total nonaccrual loans was 251% as of March 31, 2019, compared to 195% as of December 31, 2018 and 106% as of March 31, 2018.

We recorded a provision expense for loan losses of $2.2 million in the first quarter of 2019, compared to a provision expense of $7.7 million in the fourth quarter of 2018 and a provision expense of $3.9 million in the first quarter of 2018. The provision expense during the first quarter of 2019 was primarily driven by net loan growth and risk rating migration, partially offset by net recoveries and planned loan exits.

Capital

As of March 31, 2019, Opus exceeded all 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) March 31, 2019¹  

December 31,
2018

  March 31,
2018
 
Tier 1 leverage ratio 9.86 % 9.69 % 9.53 % 5.00 %
Common Equity Tier 1 ratio 11.10 11.40 10.92 6.50
Tier 1 risk-based capital ratio 11.59 11.92 11.42 8.00
Total risk-based capital ratio 14.85 15.29 14.91 10.00
Tangible equity to tangible assets ratio 9.27 9.84 9.35 NA
Tangible common equity to tangible assets ratio 8.88 9.41 8.93 NA
 
[1] Regulatory capital ratios are preliminary until filing of our March 31, 2019 FDIC call report.
 
 

Stockholders’ equity totaled over $1.0 billion as of March 31, 2019 and increased $7.3 million from December 31, 2018 and $25.7 million from March 31, 2018. Our tangible book value per common share increased $0.19 to $17.96 as of March 31, 2019 compared to $17.77 as of December 31, 2018, and increased $0.79 compared to $17.17 as of March 31, 2018.

Conference Call and Webcast Details

Date: Monday, April 29, 2019
Time: 8:00 a.m. PT (11:00 a.m. ET)

Phone Number: (855) 265-3237
Conference ID: 5876447
Webcast URL: http://investor.opusbank.com/event

Analysts, investors, and the general public may listen to our discussion of Opus' 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 archived recording will be available beginning approximately two hours following the completion of the call. To listen to the call replay, dial (855) 859-2056, or for international callers dial (404) 537-3406. The access code for either replay number is 5876447. The call replay will be available through May 30, 2019.

About Opus Bank

Opus Bank is an FDIC insured California-chartered commercial bank with $7.7 billion of total assets, $5.5 billion of total loans, and $6.1 billion in total deposits as of March 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 47 banking offices, including 28 in California, 16 in the Seattle/Puget Sound region in Washington, two in the Phoenix metropolitan area of Arizona and one in Portland, Oregon. Opus Bank 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 47,000 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. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity that could cause actual results to differ materially from those indicated by the forward-looking statements, including, without limitation: market and economic conditions, changes in interest rates, our liquidity position, the management of our growth, the risks associated with our loan portfolio, local economic conditions affecting retail and commercial real estate, our geographic concentration in the western region of the United States, competition within the industry, dependence on key personnel, government legislation and regulation, the risks associated with any future acquisitions, the effect of natural disasters, and risks related to our technology and information systems. For a discussion of these and other risks and uncertainties, see Opus' filings with the Federal Deposit Insurance Corporation, including, but not limited to, the risk factors in Opus' Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation on February 28, 2019. If one or more of these or other risks or uncertainties materialize, or if Opus’ underlying assumptions prove to be incorrect, Opus’ actual results may vary materially from those indicated in these statements. These filings are available on the Investor Relations page of Opus' website at: investor.opusbank.com.

Opus undertakes no obligation to revise or publicly release any revision to these forward-looking statements, whether as a result of new information, future developments or otherwise.

Consolidated Statements of Income    
(unaudited)     For the three months ended
($ in thousands, except per share amounts)

March 31,
2019

December 31,
2018

March 31,
2018

Interest income:
Loans $ 57,007 $ 55,701 $ 54,637
Investment securities 8,577 6,931 5,094
Due from banks 1,324   1,758   951  
Total interest income 66,908   64,390   60,682  
Interest expense:
Deposits 13,425 12,038 7,018
Federal Home Loan Bank advances 756 48
Subordinated debt 1,923   1,923   1,923  
Total interest expense 16,104   13,961   8,989  
Net interest income 50,804 50,429 51,693
Provision for loan losses 2,197   7,659   3,914  
Net interest income after provision for loan losses 48,607   42,770   47,779  
Noninterest income:
Fees and service charges on deposit accounts 1,440 1,615 1,722
Escrow and exchange fees 1,353 1,422 1,360
Trust administrative fees 6,685 6,800 6,978
Gain (loss) on sale of loans (111 ) 147 (69 )
Gain (loss) on sale of assets (137 ) 1
Gain from OREO and other repossessed assets 118
Gain (loss) on sale of investment securities 113 (9,892 ) 182
Bank-owned life insurance, net 980 958 1,053
Other income 640   2,469   1,964  
Total noninterest income 11,100   3,382   13,309  
Noninterest expense:
Compensation and benefits 26,875 33,042 26,808
Professional services 2,216 5,045 1,716
Occupancy expense 3,830 4,023 4,006
Depreciation and amortization 1,833 1,700 1,599
Deposit insurance and regulatory assessments 773 914 1,131
Insurance expense 344 317 338
Data processing 565 815 440
Software licenses and maintenance 1,301 1,293 1,149
Office services 1,639 1,821 1,880
Amortization of other intangible assets 1,415 1,437 1,479
Advertising and marketing 723 824 957
Other expenses 3,896   2,436   2,574  
Total noninterest expense 45,410   53,667   44,077  
Income before income tax (benefit) expense 14,297 (7,515 ) 17,011
Income tax (benefit) expense 3,436   (654 ) 4,107  
Net income (loss) $ 10,861   $ (6,861 ) $ 12,904  
Basic earnings per common share $ 0.29 $ (0.20 ) $ 0.34
Diluted earnings per common share 0.28 (0.20 ) 0.34
Weighted average shares - basic 36,187,431 36,059,713 35,967,779
Weighted average shares - diluted 38,133,705 36,059,713 38,316,243
 
 
Consolidated Balance Sheets        
(unaudited) As of
($ in thousands, except share amounts) March 31,
2019
December 31,
2018
March 31,
2018
 
Assets
Cash and due from banks $ 42,862 $ 39,860 $ 43,462
Due from banks – interest-bearing 378,671 214,776 248,763
Investment securities available-for-sale, at fair value 1,093,915 1,081,546 1,097,741
Loans held-for-investment 5,461,500 5,165,210 5,228,994
Less allowance for loan losses (58,483 ) (54,664 ) (67,842 )
Loans held-for-investment, net 5,403,017 5,110,546 5,161,152
Premises and equipment, net 25,771 23,863 26,649
Goodwill 331,832 331,832 331,832
Other intangible assets, net 37,510 38,926 43,321
Deferred tax assets, net 15,924 24,171 28,740
Cash surrender value of bank owned life insurance, net 155,279 154,271 150,819
Accrued interest receivable 24,292 23,260 19,978
Federal Home Loan Bank stock 17,250 17,250 17,250
Other assets 161,582   120,602   128,054  
Total assets $ 7,687,905   $ 7,180,903   $ 7,297,761  
Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing demand $ 781,429 $ 771,141 $ 855,810
Interest-bearing demand 2,397,361 2,507,605 2,519,955
Money market and savings 2,099,058 1,995,684 2,267,648
Time deposits 798,918   677,458   400,203  
Total deposits 6,076,766 5,951,888 6,043,616
Federal Home Loan Bank advances 330,000 10,000
Subordinated debt, net 133,076 133,010 132,811
Accrued interest payable 2,702 4,032 2,118
Other liabilities 97,255   51,160   86,838  
Total liabilities 6,639,799   6,140,090   6,275,383  
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 37,227,637 and 36,637,870 and 36,460,468 shares, respectively 700,220 700,220 700,220
Additional paid-in capital 80,528 69,954 63,922
Retained earnings 267,021 260,304 254,701
Treasury stock, at cost; 1,048,657 and 577,495 and 458,887 shares, respectively (25,403 ) (14,983 ) (11,603 )
Accumulated other comprehensive loss (3,370 ) (3,792 ) (13,972 )
Total stockholders’ equity 1,048,106   1,040,813   1,022,378  
Total liabilities and stockholders’ equity $ 7,687,905   $ 7,180,903   $ 7,297,761  
 
 
Selected Financial Data        
As of or for the three months ended
(unaudited) March 31,
2019
December 31,
2018
March 31,
2018
Return on average assets 0.60 % (0.38 )% 0.72 %
Return on average stockholders' equity 4.19 (2.61 ) 5.11
Return on average tangible equity (1) 6.47 (4.06 ) 8.07
Efficiency ratio (2) 70.61 81.49 65.51
Noninterest expense to average assets 2.51 2.93 2.45
Yield on interest-earning assets (3) 4.13 3.92 3.75
Cost of deposits (4) 0.92 0.79 0.47
Cost of funds (5) 1.05 0.90 0.59
Net interest margin (3) 3.15 3.07 3.20
Loan to deposits 89.88 86.78 86.52
(1)   See computation in "Non-GAAP Financial Measures" section.
(2) The efficiency ratio is calculated by dividing noninterest expense less amortization of other intangible assets by the sum of tax-equivalent net interest income before provision for loan losses and noninterest income less gain (loss) on sale of loans, assets, OREO and other repossessed assets, and investment securities.
(3) Net interest margin and yield on interest-earning assets are presented on a tax equivalent basis using the federal effective tax rate.
(4) Calculated as interest expense on deposits divided by total average deposits.
(5) Calculated as total interest expense divided by average total deposits, FHLB advances and subordinated debt.
 
 
Loan Fundings        
(unaudited) For the three months ended
($ in thousands) March 31,
2019
December 31,
2018
March 31,
2018
Loans funded:
Real estate mortgage loans:
Multifamily residential $ 426,916 $ 252,315 $ 267,301
Commercial real estate 47,127 66,931 29,307
Construction and land loans 6,212 5,622 4,885
Commercial business loans 56,879 87,390 146,184
Small Business Administration loans 836   43   4,578
Total loan fundings $ 537,970   $ 412,301   $ 452,255
 
 
Composition of Deposits   As of
(unaudited) March 31,
2019
  December 31,
2018
  March 31,
2018
($ in thousands) Amount  

% of
Total
deposits

Amount  

% of
Total
deposits

Amount  

% of
Total
deposits

 
Noninterest bearing $ 781,429 12.9 % $ 771,141 13.0 % $ 855,810 14.2 %
Interest bearing demand 2,397,361 39.5 2,507,605 42.1 2,519,955 41.7
Money market and savings 2,099,058 34.5 1,995,684 33.5 2,267,648 37.5
Time deposits 798,918   13.1   677,458   11.4   400,203   6.6  
Total deposits $ 6,076,766   100.0 % $ 5,951,888   100.0 % $ 6,043,616   100.0 %
 
 
Consolidated average balance sheet, interest, yield and rates        
   

For the three months ended
March 31,

 

For the three months ended
December 31,

For the three months ended
March 31,

(unaudited) 2019 2018 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 $ 234,590 $ 1,324 2.29 % $ 319,456 $ 1,758 2.18 % $ 242,663 $ 951 1.59 %
Investment securities 1,101,044 8,577 3.16 1,080,262 6,931 2.55 1,103,477 5,094 1.87
Loans 5,266,475   57,411   4.42   5,159,541   56,102   4.31   5,236,608   54,893   4.25  
Total interest-earning assets $ 6,602,109 $ 67,312 4.13 $ 6,559,259 $ 64,791 3.92 $ 6,582,748 $ 60,938 3.75
Noninterest-earning assets 726,313   699,059   726,341  
Total assets $ 7,328,422   $ 7,258,318   $ 7,309,089  
 
Liabilities and stockholders’ equity:
Interest-bearing deposits
Interest-bearing demand $ 2,465,245 $ 2,811 0.46 % $ 2,509,049 $ 2,520 0.40 % $ 2,531,947 $ 1,277 0.20 %
Money market and savings 1,996,557 6,957 1.41 2,030,476 6,232 1.22 2,289,530 4,699 0.83
Time deposits 712,240   3,657   2.08   668,984   3,286   1.95   381,647   1,043   1.11  
Total interest bearing deposits $ 5,174,042 $ 13,425 1.05 $ 5,208,509 $ 12,038 0.92 $ 5,203,124 $ 7,019 0.55
Subordinated debt 133,042 1,923 5.86 132,976 1,923 5.74 132,777 1,923 5.87
FHLB advances 122,000   756   2.51   33     2.62   16,444   48   1.18  

Total interest-bearing liabilities

 

$ 5,429,084 $ 16,104 1.20 $ 5,341,517 $ 13,961 1.04 $ 5,352,345 $ 8,990 0.68
Noninterest-bearing deposits 766,716 816,516 832,888
Other liabilities 81,655   57,731   99,598  
Total liabilities $ 6,277,455 $ 6,215,764 $ 6,284,831
 
Total stockholders’ equity $ 1,050,967   $ 1,042,554   $ 1,024,258  

Total liabilities and stockholders’ equity

$ 7,328,422   $ 7,258,318   $ 7,309,089  
 
Net interest spread (2) 2.93 % 2.88 % 3.07 %
Net interest income and margin, tax equivalent (3, 4) $ 51,208   3.15 % $ 50,830   3.07 % $ 51,948   3.20 %
 
Reconciliation of tax equivalent net interest income to reported net interest income
Tax equivalent adjustment (404 ) (401 ) (255 )
Net interest income, as reported $ 50,804   $ 50,429   $ 51,693  
(1)   Interest income is presented on a taxable equivalent basis using the federal effective tax rate.
(2) Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
(3) Net interest margin is computed by dividing net interest income by total average interest-earning assets.
(4) Net interest margin, tax equivalent has been adjusted to a taxable equivalent basis using the federal effective tax rate.
 
 
Allowance for Loan Losses
(unaudited)     For the three months ended
($ in thousands) March 31,
2019
  December 31,
2018
  March 31,
2018
 
Allowance for loan losses-balance at beginning of period $ 54,664 $ 59,029 $ 75,930
Provision for loan losses 2,197 7,659 3,914
Charge-offs (383 ) (14,565 ) (14,155 )
Recoveries 2,005   2,541   2,153  
Total net recoveries (charge-offs) 1,622   (12,024 ) (12,002 )
Allowance for loan losses-balance at end of period $ 58,483   $ 54,664   $ 67,842  
 
 
Asset Quality Information        
(unaudited) As of
($ in thousands) March 31,
2019
December 31,
2018
March 31,
2018
Nonperforming assets
Nonaccrual loans $ 23,330 $ 28,016 $ 63,813
OREO and other repossessed assets      
Total nonperforming assets 23,330 28,016 63,813
 
Loans 30 - 89 days past due 4,652 2,634 13,304
Accruing loans 90 days or more past due 485 299
Accruing troubled debt restructured loans 139
 
Non performing loans to total loans 0.43 % 0.54 % 1.22 %
Non performing assets to total assets 0.30 0.39 0.87
Loans 30 - 89 days past due to total loans 0.09 0.05 0.25
Allowance for loan losses to total loans 1.07 1.06 1.30
Allowance for loan losses to non-accrual loans 250.68 195.12 106.31
Net charge-offs to average loans (annualized) (0.12 ) 0.92 0.93
 
 
Risk Rating by Loan Product
(Unaudited)
($ in thousands)   Pass  

Special
Mention

  Classified   Total Loans  

Nonaccrual
loans

 

Total
allowance

As of March 31, 2019
Real estate mortgage loans:
Single-family residential $ 59,696 $ 74 $ 485 $ 60,255 $ 254 $ 144
Multifamily residential 3,251,009 117 3,899 3,255,025 11,603
Commercial real estate 1,020,851 8,273 46,359 1,075,483 2,449 10,581
Construction and land loans 42,760 14,463 57,223 599
Commercial business loans 904,471 4,896 60,549 969,916 12,420 35,158
Small Business Administration loans 26,552 159 12,542 39,253 7,672 390
Consumer and other loans 3,639   57   649   4,345   535   8
Total loans $ 5,308,978   $ 28,039   $ 124,483   $ 5,461,500   $ 23,330   $ 58,483
 
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
 
As of March 31, 2018
Real estate mortgage loans:
Single-family residential $ 77,789 $ 79 $ 697 $ 78,565 $ $ 224
Multifamily residential 2,709,851 1,942 7,131 2,718,924 1,209 10,286
Commercial real estate 1,016,147 41,447 13,904 1,071,498 2,512 8,859
Construction and land loans 70,767 9,711 80,478 1,083
Commercial business loans 1,064,187 44,987 123,212 1,232,386 59,496 47,032
Small Business Administration loans 38,468 1,562 1,966 41,996 347
Consumer and other loans 4,351   61   735   5,147   596   11
Total loans $ 4,981,560   $ 99,789   $ 147,645   $ 5,228,994   $ 63,813   $ 67,842
 
 
Risk Rating by Lending Division
(Unaudited)
($ in thousands)     Pass  

Special
Mention

  Classified Total Loans  

Nonaccrual
loans

As of March 31, 2019
Income Property Banking $ 3,743,221 $ 117 $ 13,555 $ 3,756,893 $ 2,449
Commercial Banking 390,985 4,366 49,297 444,648 16,401
Structured Finance 315,583 14,464 330,047
Healthcare Banking 150,537 8,961 44,851 204,349
Corporate Finance 34,926 15,279 50,205 3,691
Institutional Syndication 313,332 313,332
Public Finance 223,584 223,584
Other divisions (2) 136,810   131   1,501   138,442   789
Total loans $ 5,308,978   $ 28,039   $ 124,483   $ 5,461,500   $ 23,330
 
As of December 31, 2018
Income Property Banking $ 3,460,915 $ 1,752 $ 11,874 $ 3,474,541 $ 2,462
Commercial Banking 381,901 6,837 39,782 428,520 16,034
Structured Finance 295,715 13,457 309,172
Healthcare Banking 167,964 9,352 44,370 221,686
Corporate Finance 36,260 9,699 6,088 52,047 3,671
Institutional Syndication 319,877 319,877
Public Finance 221,995 221,995
Other divisions (2) 130,251   134   6,987   137,372   5,849
Total loans $ 5,014,878   $ 41,231   $ 109,101   $ 5,165,210   $ 28,016
 
As of March 31, 2018
Income Property Banking $ 3,230,456 $ 6,938 $ 15,358 $ 3,252,752 $ 3,721
Commercial Banking 401,996 27,478 52,107 481,581 18,882
Structured Finance 304,420 15,487 319,907
Healthcare Banking 231,086 33,489 34,744 299,319
Corporate Finance 132,250 14,916 22,443 169,609 21,675
Institutional Syndication 339,451 (145 ) (1 ) 339,306
Public Finance 178,539 178,539
Technology Banking 19,232 9,944 29,176 7,649
Other divisions (2) 144,130   1,481   13,194   158,805   11,886
Total loans $ 4,981,560   $ 99,789   $ 147,645   $ 5,228,994   $ 63,813
(1)   Represents unamortized net deferred loan origination fees on syndicated lines of credit that have no outstanding principal balances at period end.
(2) Other divisions is comprised of single family residential loans, consumer and other loans, and specialty banking divisions including Business Banking and Media and Entertainment Banking.
 
 

Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles in the United States ("GAAP"). We believe that the presentation of certain non-GAAP financial measures assists investors in evaluating our financial results. These non-GAAP measures include our return on average tangible equity, 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 return on average tangible equity
(unaudited)     For the three months ended
($ in thousands) March 31,
2019
  December 31,
2018
  March 31,
2018
Average tangible equity:
Average stockholders' equity $ 1,050,967 $ 1,042,554 $ 1,024,258
Less:
Average goodwill 331,832 331,832 331,832
Average other intangible assets 38,234   39,663   44,083  
Average tangible equity $ 680,901 $ 671,059 $ 648,343
Net income (loss) $ 10,861 $ (6,861 ) $ 12,904
Return on average stockholders' equity 4.19 % (2.61 )% 5.11 %
Non-GAAP return on average tangible equity 6.47 % (4.06 )% 8.07 %
 
 
Non-GAAP tangible book value per common share
(unaudited)     As of
($ In thousands, except share amounts) March 31,
2019
  December 31,
2018
  March 31,
2018
Tangible equity:
Total stockholders' equity $ 1,048,106 $ 1,040,813 $ 1,022,378
Less:
Preferred stock 29,110   29,110   29,110
Common equity 1,018,996 1,011,703 993,268
Less:
Goodwill 331,832 331,832 331,832
Other intangible assets, net 37,510   38,926   43,321
Tangible common equity 649,654 640,945 618,115
Shares of common stock outstanding 36,178,980 36,060,375 36,001,581
 
Book value per common share $ 28.17 $ 28.06 $ 27.59
Tangible book value per common share 17.96 17.77 17.17
 
 
Non-GAAP tangible common equity ratio
(unaudited)     As of
($ In thousands) March 31,
2019
  December 31,
2018
  March 31,
2018
Total assets $ 7,687,905 $ 7,180,903 $ 7,297,761
Less:
Goodwill 331,832 331,832 331,832
Other intangible assets, net 37,510   38,926   43,321  
Tangible assets 7,318,563 6,810,145 6,922,608
 
Total stockholders' equity 1,048,106 1,040,813 1,022,378
Less:
Goodwill 331,832 331,832 331,832
Other intangible assets, net 37,510   38,926   43,321  
Tangible equity 678,764 670,055 647,225
Less: preferred stock 29,110   29,110   29,110  
Tangible common equity 649,654 640,945 618,115
 
Total stockholders' equity to total assets 13.63 % 14.49 % 14.01 %
Tangible equity to tangible assets ratio 9.27 % 9.84 % 9.35 %
 
Total common equity to total assets 13.25 % 14.09 % 13.61 %
Tangible common equity to tangible assets ratio 8.88 % 9.41 % 8.93 %

Contacts

Kevin L. Thompson
EVP, Chief Financial Officer
949-251-8196

Brett G. Villaume
SVP, Director of Investor Relations
949-224-8866

$Cashtags

Contacts

Kevin L. Thompson
EVP, Chief Financial Officer
949-251-8196

Brett G. Villaume
SVP, Director of Investor Relations
949-224-8866