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Opus Bank Announces Fourth Quarter and Full Year 2019 Financial Results

Company Release - 1/27/2020 7:00 AM ET
  • New loan fundings from our Commercial Banking division were $130 million for the fourth quarter of 2019, an increase from $99 million in the prior quarter
  • Average deposits increased $165 million, or 3%, from the prior quarter
  • Efficiency ratio was 61.3% for the fourth quarter of 2019
  • Nonperforming assets to total assets was 0.07% as of December 31, 2019
  • Credit improvement resulted in a negative provision for loan losses of $2.7 million for the fourth quarter

IRVINE, Calif.--(BUSINESS WIRE)-- Opus Bank ("Opus") (Nasdaq: OPB) announced today net income of $20.3 million, or $0.53 per diluted share, for the fourth quarter of 2019, compared to net income of $22.0 million, or $0.57 per diluted share, for the third quarter of 2019. Net income for the year ended December 31, 2019 was $61.8 million, or $1.62 per diluted share, compared to net income of $30.9 million, or $0.81 per diluted share, for the year ended December 31, 2018. Net income during the fourth quarter of 2019 included a negative provision for loan losses of $2.7 million, compared to a negative provision for loan losses of $7.7 million in the prior quarter. Net income during the fourth quarter of 2019 also included a pre-tax gain of $851,000 on the sale of a bank operations building, which positively impacted earnings by $0.02 per diluted share.

Additionally, Opus announced today that its Board of Directors has approved the payment of a quarterly cash dividend of $0.11 per common share payable on February 20, 2020 to common stockholders of record as of February 6, 2020, and a common-equivalent payment to its Series A Preferred stockholders.

Earnings Summary

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

For the three months ended

($ in thousands, except per share data)

 

December 31, 2019

 

September 30, 2019

 

December 31, 2018

Net income

 

$

20,289

 

 

$

21,998

 

 

$

(6,861

)

Earnings per diluted share

 

 

0.53

 

 

 

0.57

 

 

 

(0.20

)

Return on average assets ("ROAA")

 

 

1.02

%

 

 

1.13

%

 

 

(0.38

%)

Return on average stockholders' equity

 

 

7.37

%

 

 

8.12

%

 

 

(2.61

%)

Return on average tangible common equity1 ("ROATCE")

 

 

11.54

%

 

 

12.88

%

 

 

(4.24

%)

Efficiency ratio1

 

 

61.30

%

 

 

61.82

%

 

 

81.49

%

 

 

 

 

 

 

 

Adjusted Earnings1

 

 

 

 

 

 

Adjusted net income

 

$

19,553

 

 

$

22,280

 

 

$

10,167

 

Adjusted earnings per diluted share

 

 

0.51

 

 

 

0.58

 

 

 

0.27

 

Adjusted return on average assets

 

 

0.98

%

 

 

1.14

%

 

 

0.56

%

Adjusted return on average stockholders' equity

 

 

7.10

%

 

 

8.23

%

 

 

3.87

%

Adjusted return on average tangible common equity

 

 

11.12

%

 

 

13.04

%

 

 

6.28

%

Adjusted efficiency ratio

 

 

61.17

%

 

 

61.63

%

 

 

65.03

%

 

 

 

 

 

 

 

[1] See reconciliation of non-GAAP financial measures to corresponding GAAP measures on pages 14-16.

Paul W. Taylor, President and Chief Executive Officer of Opus Bank, stated, "The steps we took during 2019 to reduce expenses and improve Opus’ profitability are beginning to yield positive results, as we reported fourth quarter 2019 earnings per diluted share of $0.53, an ROAA of 1.02% and an efficiency ratio of 61.3%. Noninterest expense decreased 1% from the prior quarter, while continued credit quality improvement resulted in a negative provision for loan losses of $2.7 million for the fourth quarter of 2019."

Mr. Taylor continued, “Our Commercial Banking division increased quarterly loan fundings in the fourth quarter to $130 million, up from $99 million last quarter, and we anticipate continued progress in growing our commercial loan and deposit portfolios. I am confident that profitability and growth will continue to improve in 2020.”

Loans

Average loans decreased $37.3 million, or 0.6%, compared to the prior quarter to $5.8 billion for the fourth quarter of 2019, and increased $620.2 million, or 12.0%, compared to $5.2 billion for the fourth quarter of 2018. On a period-end basis, loans increased $98.6 million, or 1.7%, compared to the prior quarter to $5.9 billion as of December 31, 2019, and increased $735.3 million, or 14.2%, compared to December 31, 2018. The decrease in the average balance of loans compared to the third quarter of 2019 was primarily driven by the timing of new loan fundings, which occurred later in the fourth quarter of 2019.

Loan Balance Roll Forward

 

 

 

 

 

 

 

 

(unaudited)

 

Three Months Ended

($ in millions)

 

December 31,
2019

 

September 30,
2019

 

June 30,
2019

 

March 31,
2019

 

December 31,
2018

 

 

 

 

 

 

 

 

 

 

 

Beginning loan balance

 

$

5,802.0

 

 

$

5,789.0

 

 

$

5,461.5

 

 

$

5,165.2

 

 

$

5,159.9

 

New loan fundings

 

 

409.5

 

 

 

406.1

 

 

 

703.6

 

 

 

538.0

 

 

 

412.3

 

Loan payoffs

 

 

(271.7

)

 

 

(300.0

)

 

 

(192.8

)

 

 

(173.7

)

 

 

(265.3

)

Other1

 

 

(39.3

)

 

 

(93.1

)

 

 

(183.3

)

 

 

(68.0

)

 

 

(141.7

)

Ending loan balance

 

$

5,900.5

 

 

$

5,802.0

 

 

$

5,789.0

 

 

$

5,461.5

 

 

$

5,165.2

 

 

 

 

 

 

 

 

 

 

 

 

[1] Includes amortization, planned exits, charge-offs, and transfers to held-for-sale

New loan fundings in the fourth quarter of 2019 totaled $409.5 million, an increase of $3.4 million, or 0.8%, from the third quarter of 2019 and a decrease of $2.8 million, or 0.7%, from the fourth quarter of 2018. New loan fundings for the year ended December 31, 2019 totaled $2.1 billion, compared to $1.6 billion for the year ended December 31, 2018. Our Commercial Banking division funded $129.9 million of new loans during the fourth quarter of 2019 and $405.0 million during the year ended December 31, 2019. Loan growth during the fourth quarter of 2019 was also impacted by loan payoffs of $271.7 million, compared to payoffs of $300.0 million in the third quarter of 2019 and $265.3 million in the fourth quarter of 2018.

Investment Securities

The average balance of investment securities decreased $21.4 million, or 2.0%, during the fourth quarter of 2019 to $1.0 billion compared to the prior quarter, and decreased $57.8 million, or 5.4%, compared to the fourth quarter of 2018. On a period-end basis, investment securities increased $29.3 million, or 2.9%, from the prior quarter to $1.0 billion as of December 31, 2019, and decreased $42.0 million, or 3.9%, compared to December 31, 2018. The decrease in the average balance of investment securities compared to the third quarter of 2019 was primarily driven by the timing of sales that took place at the end of the third quarter, offset by the purchase of $65.0 million of investment securities during the fourth quarter of 2019.

Deposits and Borrowings

Average deposits increased $164.8 million, or 2.6%, during the fourth quarter of 2019 to $6.4 billion compared to the prior quarter, and increased $385.3 million, or 6.4%, compared to the fourth quarter of 2018. Deposit growth during the fourth quarter of 2019 was primarily driven by an increase of $73.5 million, or 2.9%, in average interest-bearing demand and an increase of $113.1 million, or 5.5%, in average money market and savings deposits, primarily driven by our Commercial Banking division and PENSCO. The average balance of noninterest-bearing demand deposits increased $6.1 million, or 0.8%, compared to the prior quarter, while the average balance of certificates of deposit decreased $27.8 million, or 3.2%. Noninterest-bearing demand deposits measured 11.9% of total deposits as of December 31, 2019, compared to 12.2% of total deposits as of September 30, 2019.

Our loan to deposit ratio measured 91.2% as of December 31, 2019, compared to 92.5% as of September 30, 2019 and 86.8% as of December 31, 2018.

The average balance of Federal Home Loan Bank (FHLB) advances decreased 8.2% in the fourth quarter of 2019 to $200.0 million, compared to $217.9 million in the third quarter of 2019, and increased from $33,000 in the fourth quarter of 2018.

Net Interest Income (Fully Taxable-Equivalent)

Net interest income was $50.1 million for the fourth quarter of 2019, compared to $50.0 million and $50.8 million in the third quarter of 2019 and fourth quarter of 2018, respectively. Interest income from loans decreased 3.1% to $60.2 million for the fourth quarter of 2019, compared to $62.1 million for the third quarter of 2019, driven primarily by the difference in rate between new loan fundings and loan payoffs, the impact of loan repricing during the quarter, lower average loan balances, and a lower net benefit from prepayments. Interest income from investment securities and interest-earning cash increased 11.9% to $9.4 million for the fourth quarter of 2019, driven primarily by higher average cash balances and lower premium amortization compared to the prior quarter.

Interest expense decreased 4.9% to $19.5 million for the fourth quarter of 2019, compared to $20.5 million for the third quarter of 2019, and increased 39.4% compared to $14.0 million for the fourth quarter of 2018. The decrease in interest expense from the prior quarter was driven primarily by a 5.2% decrease in interest expense on deposits to $16.3 million for the fourth quarter of 2019, due to a 9 basis point lower average rate on interest-bearing deposits that was partially offset by higher average balances of deposits. Interest expense on FHLB advances decreased 8.8% compared to the prior quarter to $1.2 million for the fourth quarter of 2019, due to lower average balances.

Net Interest Margin (Fully Taxable-Equivalent)

Net interest margin (NIM) decreased six basis points to 2.76% in the fourth quarter of 2019 from 2.82% in the third quarter of 2019, and decreased 31 basis points from 3.07% in the fourth quarter of 2018, as the current interest rate environment continues to impact our NIM. The linked-quarter change was primarily driven by an 11 basis point decrease in the yield on loans to 4.13%, partially offset by a nine basis point decrease in our cost of interest-bearing deposits to 1.15%.

Noninterest Income

Noninterest income increased 6.1% to $13.9 million in the fourth quarter of 2019, compared to $13.1 million in the third quarter of 2019, and increased 309.9% compared to $3.4 million in the fourth quarter of 2018. Noninterest income during the fourth quarter of 2019 included an $851,000 gain on the sale of assets related to the disposition of a bank operations building during the quarter. On an adjusted basis, excluding the above mentioned gain and $220,000 in gains on the sale of securities, loans, and other assets during the third quarter of 2019, noninterest income increased $162,000, or 1.3%, from the prior quarter. Noninterest income during the fourth quarter of 2019 also included $7.3 million of trust administrative fees, $1.5 million from escrow and exchange fees, and $1.4 million of treasury management and deposit account fees. Noninterest income during the fourth quarter of 2018 included a $9.9 million loss on the sale of investment securities related to the repositioning of our securities portfolio.

Noninterest Expense

Noninterest expense decreased 1.0% to $39.7 million for the fourth quarter of 2019, compared to $40.1 million for the third quarter of 2019, and decreased 26.1% compared to $53.7 million for the fourth quarter of 2018. During the fourth quarter of 2019, we utilized $461,000 of the FDIC small bank assessment credit, compared to $692,000 in the third quarter of 2019. Noninterest expense during the fourth quarter of 2018 included $10.5 million of expenses related to restructuring charges and a cost reduction initiative.

Our efficiency ratio for the fourth quarter of 2019 was 61.3%, or 61.2% on an adjusted basis, compared to 61.8% for the third quarter of 2019, or 61.6% on an adjusted basis.

Income Tax Expense

We recorded an income tax expense of $6.2 million in the fourth quarter of 2019, compared to an income tax expense of $8.3 million in the third quarter of 2019, and an income tax benefit of $654,000 in the fourth quarter of 2018. Our effective tax rate for the fourth quarter of 2019 was 23.3%, compared to 27.3% for the third quarter of 2019.

Asset Quality

Total nonperforming assets decreased 19.5% to $6.0 million as of December 31, 2019, compared to $7.4 million as of September 30, 2019 and $28.0 million as of December 31, 2018. Our ratio of nonperforming assets to total assets decreased to 0.07% as of December 31, 2019, compared to 0.10% and 0.39% as of September 30, 2019 and December 31, 2018, respectively. Total criticized loans decreased $27.9 million, or 27.5%, to $73.5 million as of December 31, 2019, compared to $101.4 million as of September 30, 2019. Classified loans decreased $35.2 million in the fourth quarter of 2019, while special mention loans increased $7.3 million from the prior quarter.

Our allowance for loan losses was $40.8 million, or 0.69% of our total loan portfolio, as of December 31, 2019, compared to $45.2 million, or 0.78% of total loans, as of September 30, 2019 and $54.7 million, or 1.06% of total loans, as of December 31, 2018. Net charge-offs during the fourth quarter of 2019 were $1.6 million, or 0.11% of average loans annualized, compared to net charge-offs of $4.9 million, or 0.33% of average loans annualized, for the third quarter of 2019, and $12.0 million, or 0.92% of average loans annualized, for the fourth quarter of 2018.

The ratio of the allowance for loan losses to total nonperforming assets was 683.7% as of December 31, 2019, compared to 608.6% as of September 30, 2019 and 195.1% as of December 31, 2018.

We recorded a negative provision for loan losses of $2.7 million in the fourth quarter of 2019, compared to a negative provision for loan losses of $7.7 million in the third quarter of 2019 and a provision expense of $7.7 million in the fourth quarter of 2018. The negative provision expense during the fourth quarter of 2019 was primarily driven by loan exits, partially offset by net charge-offs and new loan production.

Capital

As of December 31, 2019, Opus exceeded all minimum regulatory capital requirements under Basel III and was considered to be a "well-capitalized" financial institution, as summarized in the table below:

Capital Ratios

 

As of

 

Well-Capitalized
Regulatory
Requirements

(unaudited)

 

December 31,
2019¹

 

September 30,
2019

 

December 31,
2018

 

Tier 1 leverage ratio

 

9.70%

 

9.70%

 

9.69%

 

5.00%

Common Equity Tier 1 ratio

 

11.68%

 

11.71%

 

11.40%

 

6.50%

Tier 1 risk-based capital ratio

 

12.17%

 

12.20%

 

11.92%

 

8.00%

Total risk-based capital ratio

 

15.08%

 

15.26%

 

15.29%

 

10.00%

Tangible equity to tangible assets ratio

 

9.62%

 

9.67%

 

9.84%

 

NA

Tangible common equity to tangible assets ratio

 

9.24%

 

9.28%

 

9.41%

 

NA

 

 

 

 

 

 

 

 

 

[1] Regulatory capital ratios are preliminary until filing of our December 31, 2019FDIC call report.

Stockholders’ equity totaled $1.1 billion as of December 31, 2019 and increased $16.1 million and $58.3 million compared to September 30, 2019 and December 31, 2018, respectively. Our tangible book value per common share increased $0.44 to $19.38 as of December 31, 2019, compared to $18.94 as of September 30, 2019, and increased $1.61 compared to $17.77 as of December 31, 2018.

Conference Call and Webcast Details

Date: Monday, January 27, 2020
Time: 8:00 a.m. PT (11:00 a.m. ET)

Phone Number: (888) 317-6016
Conference ID: 9367183
Webcast URL: https://services.choruscall.com/links/opb200127.html

Analysts, investors, and the general public may listen to a discussion of Opus’ fourth quarter 2019 and annual performance by using the phone number or webcast link listed above. It is recommended that participants dial into the conference call or log into the webcast approximately 10 minutes prior to the call.

Replay Information: For those who are not able to listen to the conference call, an archive recording will be available beginning approximately one hour following the completion of the call. To listen to the call replay, dial (877) 344-7529, or for international callers dial (412) 317-0088. The access code for either replay number is 10137350. The call replay will be available through February 27, 2020.

About Opus Bank

Opus Bank is an FDIC insured California-chartered commercial bank with $8.0 billion of total assets, $5.9 billion of total loans, and $6.5 billion in total deposits as of December 31, 2019. Opus Bank provides commercial and retail banking products and solutions to its clients in western markets from its headquarters in Irvine, California and through 46 banking offices, including 28 in California, 16 in the Seattle/Puget Sound region in Washington, one in the Phoenix metropolitan area of Arizona and one in Portland, Oregon. Opus Bank offers a suite of treasury and cash management and depository solutions, and a wide range of loan products, including commercial, healthcare, media and entertainment, corporate finance, multifamily residential, commercial real estate and structured finance, and is an SBA preferred lender. Opus Bank offers commercial escrow services and facilitates 1031 Exchange transactions through its Escrow and Exchange divisions. Additionally, Opus Bank’s wholly-owned subsidiary, PENSCO Trust Company, has approximately $14 billion of custodial IRA assets and approximately 46,000 client accounts, which are comprised of self-directed investors, financial institutions, capital raisers and financial advisors. Opus Bank is an Equal Housing Lender. For additional information about Opus Bank, please visit our website: www.opusbank.com.

Forward Looking Statements

This release and the aforementioned conference call and webcast includes forward-looking statements related to Opus’ plans, beliefs and goals. Forward-looking statements are neither historical facts nor assurances of future performance. Opus generally identifies forward-looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this release and the aforementioned conference call and webcast are based on the historical performance of Opus and its subsidiaries or on its current plans, beliefs, estimates, expectations and goals, including without limitation: our expectations of continued progress in growing our commercial loan and deposit portfolios and our belief that profitability and growth will improve in 2020. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity that could cause actual results to differ materially from those indicated by the forward-looking statements, including, without limitation: market and economic conditions, changes in interest rates, our liquidity position, the management of our growth, the risks associated with our loan portfolio, risks that our expected efficiencies and savings from our expense reduction initiatives will be less than anticipated, local economic conditions affecting retail and commercial real estate, our geographic concentration in the western region of the United States, competition within the industry, dependence on key personnel, government legislation and regulation, the risks associated with any future acquisitions, the effect of natural disasters, risks related to our technology and information systems, and the management of our operating expenses, including the effectiveness of certain strategic cost reduction initiatives. For a discussion of these and other risks and uncertainties, see Opus' filings with the Federal Deposit Insurance Corporation, including, but not limited to, the risk factors in Opus' Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation on February 28, 2019, as such risk factors may be amended, supplemented or superseded from time to time by other reports Opus files with the Federal Deposit Insurance Corporation. If one or more of these or other risks or uncertainties materialize, or if Opus’ underlying assumptions prove to be incorrect, Opus’ actual results may vary materially from those indicated in these statements. These filings are available on the Investor Relations page of Opus' website at: investor.opusbank.com.

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

Consolidated Statement of Income

 

 

 

 

 

 

(unaudited)

 

Three Months Ended

 

Year Ended

($ in thousands, except per share amounts)

 

December 31,
2019

 

September 30,
2019

 

December 31,
2018

 

December 31,
2019

 

December 31,
2018

Interest income:

 

 

 

 

 

 

 

 

 

 

Loans

 

$

59,694

 

 

$

61,655

 

 

$

55,701

 

 

$

239,513

 

 

$

218,255

 

Investment securities

 

 

7,726

 

 

 

7,471

 

 

 

6,931

 

 

 

32,134

 

 

 

22,353

 

Due from banks

 

 

1,637

 

 

 

900

 

 

 

1,758

 

 

 

5,308

 

 

 

6,148

 

Total interest income

 

 

69,057

 

 

 

70,026

 

 

 

64,390

 

 

 

276,955

 

 

 

246,756

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

16,334

 

 

 

17,225

 

 

 

12,038

 

 

 

63,346

 

 

 

38,163

 

Federal Home Loan Bank advances

 

 

1,200

 

 

 

1,316

 

 

 

 

5,437

 

 

 

374

 

Subordinated debt

 

 

1,923

 

 

 

1,923

 

 

 

1,923

 

 

 

7,690

 

 

 

7,690

 

Total interest expense

 

 

19,457

 

 

 

20,464

 

 

 

13,961

 

 

 

76,473

 

 

 

46,227

 

Net interest income

 

 

49,600

 

 

 

49,562

 

 

 

50,429

 

 

 

200,482

 

 

 

200,529

 

Provision (negative provision) for loan losses

 

 

(2,685

)

 

 

(7,698

)

 

 

7,659

 

 

 

(4,905

)

 

 

19,601

 

Net interest income after provision
(negative provision) for loan losses

 

 

52,285

 

 

 

57,260

 

 

 

42,770

 

 

 

205,387

 

 

 

180,928

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

Fees and service charges on deposit
accounts

 

 

1,441

 

 

 

1,483

 

 

 

1,615

 

 

 

5,868

 

 

 

6,855

 

Escrow and exchange fees

 

 

1,545

 

 

 

1,623

 

 

 

1,422

 

 

 

6,027

 

 

 

5,829

 

Trust administrative fees

 

 

7,308

 

 

 

7,244

 

 

 

6,800

 

 

 

28,065

 

 

 

27,503

 

Gain (loss) on sale of loans

 

 

 

218

 

 

 

147

 

 

 

52

 

 

 

(22

)

Gain (loss) on sale of assets

 

 

851

 

 

 

1

 

 

 

(137

)

 

 

852

 

 

 

(137

)

Gain from OREO and other repossessed assets

 

 

 

 

 

 

203

 

Gain (loss) on sale of securities

 

 

 

1

 

 

 

(9,892

)

 

 

120

 

 

 

(9,710

)

Bank-owned life insurance, net

 

 

1,252

 

 

 

1,014

 

 

 

958

 

 

 

4,239

 

 

 

4,104

 

Other income

 

 

1,465

 

 

 

1,485

 

 

 

2,469

 

 

 

4,803

 

 

 

6,454

 

Total noninterest income

 

 

13,862

 

 

 

13,069

 

 

 

3,382

 

 

 

50,026

 

 

 

41,079

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

23,557

 

 

 

23,316

 

 

 

33,042

 

 

 

102,843

 

 

 

111,325

 

Professional services

 

 

2,048

 

 

 

2,101

 

 

 

5,045

 

 

 

7,465

 

 

 

11,869

 

Occupancy expense

 

 

3,917

 

 

 

3,835

 

 

 

4,023

 

 

 

15,163

 

 

 

15,545

 

Depreciation and amortization

 

 

1,712

 

 

 

1,713

 

 

 

1,700

 

 

 

6,961

 

 

 

6,714

 

Deposit insurance and regulatory assessments

 

 

60

 

 

 

122

 

 

 

914

 

 

 

1,474

 

 

 

3,981

 

Insurance expense

 

 

341

 

 

 

334

 

 

 

317

 

 

 

1,354

 

 

 

1,327

 

Data processing

 

 

1,043

 

 

 

948

 

 

 

815

 

 

 

3,612

 

 

 

1,803

 

Software licenses and maintenance

 

 

1,253

 

 

 

1,197

 

 

 

1,293

 

 

 

4,969

 

 

 

4,939

 

Office services

 

 

1,641

 

 

 

1,720

 

 

 

1,821

 

 

 

6,679

 

 

 

7,189

 

Amortization of other intangible assets

 

 

1,009

 

 

 

1,211

 

 

 

1,437

 

 

 

5,050

 

 

 

5,875

 

Advertising and marketing

 

 

897

 

 

 

838

 

 

 

824

 

 

 

3,292

 

 

 

3,533

 

Other expenses

 

 

2,200

 

 

 

2,737

 

 

 

2,436

 

 

 

12,616

 

 

 

10,450

 

Total noninterest expense

 

 

39,678

 

 

 

40,072

 

 

 

53,667

 

 

 

171,478

 

 

 

184,550

 

Income (loss) before income tax
expense (benefit)

 

 

26,469

 

 

 

30,257

 

 

 

(7,515

)

 

 

83,935

 

 

 

37,457

 

Income tax expense (benefit)

 

 

6,180

 

 

 

8,259

 

 

 

(654

)

 

 

22,101

 

 

 

6,539

 

Net income (loss)

 

$

20,289

 

 

$

21,998

 

 

$

(6,861

)

 

$

61,834

 

 

$

30,918

 

Basic earnings (loss) per common share

 

$

0.54

 

 

$

0.58

 

 

$

(0.20

)

 

$

1.64

 

 

$

0.82

 

Diluted earnings (loss) per common share

 

 

0.53

 

 

 

0.57

 

 

 

(0.20

)

 

 

1.62

 

 

 

0.81

 

Weighted average shares - basic

 

 

36,324,267

 

 

 

36,282,166

 

 

 

36,059,713

 

 

 

36,262,559

 

 

 

36,028,025

 

Weighted average shares - diluted

 

 

38,299,878

 

 

 

38,230,784

 

 

 

36,059,713

 

 

 

38,242,481

 

 

 

38,270,650

 

Consolidated Balance Sheets

 

 

 

 

 

 

(unaudited)

 

As of

($ in thousands, except share amounts)

 

December 31,
2019

 

September 30,
2019

 

December 31,
2018

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

30,451

 

 

$

43,295

 

 

$

39,860

 

Due from banks – interest-bearing

 

 

317,190

 

 

 

243,051

 

 

 

214,776

 

Investment securities available-for-sale, at fair value

 

 

1,039,596

 

 

 

1,010,253

 

 

 

1,081,546

 

Loans

 

 

5,900,520

 

 

 

5,801,956

 

 

 

5,165,210

 

Less allowance for loan losses

 

 

(40,844

)

 

 

(45,156

)

 

 

(54,664

)

Loans, net

 

 

5,859,676

 

 

 

5,756,800

 

 

 

5,110,546

 

Premises and equipment, net

 

 

21,339

 

 

 

23,811

 

 

 

23,863

 

Goodwill

 

 

331,832

 

 

 

331,832

 

 

 

331,832

 

Other intangible assets, net

 

 

33,875

 

 

 

34,884

 

 

 

38,926

 

Deferred tax assets, net

 

 

8,107

 

 

 

1,595

 

 

 

24,171

 

Cash surrender value of bank owned life insurance, net

 

 

190,435

 

 

 

157,382

 

 

 

154,271

 

Accrued interest receivable

 

 

25,690

 

 

 

25,109

 

 

 

23,260

 

Federal Home Loan Bank stock

 

 

17,250

 

 

 

17,250

 

 

 

17,250

 

Other assets

 

 

116,959

 

 

 

126,081

 

 

 

120,602

 

Total assets

 

$

7,992,400

 

 

$

7,771,343

 

 

$

7,180,903

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing demand

 

$

768,936

 

 

$

763,038

 

 

$

771,141

 

Interest-bearing demand

 

 

2,680,793

 

 

 

2,516,614

 

 

 

2,507,605

 

Money market and savings

 

 

2,196,603

 

 

 

2,129,341

 

 

 

1,995,684

 

Time deposits

 

 

827,261

 

 

 

860,808

 

 

 

677,458

 

Total deposits

 

 

6,473,593

 

 

 

6,269,801

 

 

 

5,951,888

 

Federal Home Loan Bank advances

 

 

200,000

 

 

 

200,000

 

 

Subordinated debt, net

 

 

133,275

 

 

 

133,209

 

 

 

133,010

 

Accrued interest payable

 

 

4,175

 

 

 

2,408

 

 

 

4,032

 

Other liabilities

 

 

82,210

 

 

 

82,882

 

 

 

51,160

 

Total liabilities

 

 

6,893,253

 

 

 

6,688,300

 

 

 

6,140,090

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock:

 

 

 

 

 

 

Authorized 200,000,000 shares; issued 31,111 and 31,111 and 31,111 shares, respectively

 

 

29,110

 

 

 

29,110

 

 

 

29,110

 

Common stock, no par value per share:

 

 

 

 

 

 

Authorized 200,000,000 shares; issued 37,571,545 and 37,394,513 and 36,637,870 shares, respectively

 

 

700,220

 

 

 

700,220

 

 

 

700,220

 

Additional paid-in capital

 

 

87,702

 

 

 

83,966

 

 

 

69,954

 

Retained earnings

 

 

305,399

 

 

 

289,303

 

 

 

260,304

 

Treasury stock, at cost; 1,223,930 and 1,107,915 and 577,495 shares, respectively

 

 

(29,611

)

 

 

(26,638

)

 

 

(14,983

)

Accumulated other comprehensive income (loss)

 

 

6,327

 

 

 

7,082

 

 

 

(3,792

)

Total stockholders’ equity

 

 

1,099,147

 

 

 

1,083,043

 

 

 

1,040,813

 

Total liabilities and stockholders’ equity

 

$

7,992,400

 

 

$

7,771,343

 

 

$

7,180,903

 

Selected Financial Data

 

 

 

 

 

 

 

 

 

 

 

 

As of or for the three months ended

 

As of or for the year ended

(unaudited)

 

December 31,
2019

 

September 30,
2019

 

December 31,
2018

 

December 31,
2019

 

December 31,
2018

Yield on interest-earning assets 1

 

3.83

%

 

3.97

%

 

3.92

%

 

3.99

%

 

3.79

%

Net interest margin 1

 

2.76

 

 

2.82

 

 

3.07

 

 

2.90

 

 

3.08

 

Cost of deposits 2

 

1.01

 

 

1.09

 

 

0.79

 

 

1.02

 

 

0.64

 

Cost of funds 3

 

1.14

 

 

1.23

 

 

0.90

 

 

1.17

 

 

0.75

 

Noninterest expense to average assets

 

1.99

 

 

2.05

 

 

2.93

 

 

2.23

 

 

2.54

 

Loans to deposits

 

91.15

 

 

92.54

 

 

86.78

 

 

91.15

 

 

86.78

 

  1. Yield on interest-earning assets and net interest margin are presented on a tax equivalent basis using the federal effective tax rate.
  2. Calculated as interest expense on deposits divided by total average deposits.
  3. Calculated as total interest expense divided by average total deposits, FHLB advances, and subordinated debt.

 

Loan Fundings

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

Three Months Ended

 

Year Ended

($ in thousands)

 

December 31,
2019

 

September 30,
2019

 

December 31,
2018

 

December 31,
2019

 

December 31,
2018

Real estate mortgage loans:

 

 

 

 

 

 

 

 

 

 

Multifamily residential

 

$

216,651

 

$

256,235

 

$

 

 

252,315

 

$

1,469,521

 

$

924,629

Commercial real estate

 

 

88,139

 

 

74,159

 

 

66,931

 

 

284,610

 

 

203,017

Construction and land loans

 

 

4,154

 

 

6,670

 

 

5,622

 

 

24,367

 

 

28,538

Commercial business loans

 

 

93,939

 

 

66,744

 

 

87,390

 

 

266,287

 

 

427,636

Small Business Administration loans

 

 

6,594

 

 

2,269

 

 

43

 

 

12,341

 

 

12,040

Total loan fundings

 

$

409,477

 

$

406,077

 

$

 

412,301

 

$

2,057,126

 

$

1,595,860

Composition of Loan Portfolio

 

As of

(unaudited)

 

December 31,
2019

 

September 30,
2019

 

December 31,
2018

($ in thousands)

 

Amount

 

% of
Total loans

 

Amount

 

% of
Total loans

 

Amount

 

% of
Total loans

Real estate mortgage loans:

 

 

 

 

 

 

 

 

 

 

 

 

Single-family residential

 

$

49,949

 

0.9

%

 

$

51,361

 

0.9

%

 

$

61,913

 

1.2

%

Multifamily residential

 

 

3,784,461

 

64.1

 

 

 

3,699,824

 

63.8

 

 

 

2,931,397

 

56.7

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

Owner occupied

 

 

279,744

 

4.7

 

 

 

279,262

 

4.8

 

 

 

164,988

 

3.2

 

Non-owner occupied

 

 

792,824

 

13.4

 

 

 

829,718

 

14.3

 

 

 

899,375

 

17.4

 

Construction and land loans

 

 

55,739

 

0.9

 

 

 

51,714

 

0.9

 

 

 

70,557

 

1.4

 

Commercial business loans

 

 

901,006

 

15.3

 

 

 

856,364

 

14.7

 

 

 

992,743

 

19.2

 

Small Business Administration loans

 

 

33,641

 

0.6

 

 

 

29,958

 

0.5

 

 

 

39,811

 

0.8

 

Consumer and other loans

 

 

3,156

 

0.1

 

 

 

3,755

 

0.1

 

 

 

4,426

 

0.1

 

Total loans

 

$

5,900,520

 

100.0

%

 

$

5,801,956

 

100.0

%

 

$

5,165,210

 

100.0

%

Consolidated average balance sheet, interest, yield and rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended
December 31,

 

For the three months ended
September 30,

 

For the three months ended
December 31,

(unaudited)

 

2019

 

2019

 

2018

($ in thousands)

 

Average
Balance

 

Interest (1)

 

Yields/
Rates

 

Average
Balance

 

Interest (1)

 

Yields/
Rates

 

Average
Balance

 

Interest (1)

 

Yields/
Rates

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due from banks

 

$

406,763

 

 

$

1,637

 

 

1.60

%

 

$

180,479

 

 

$

900

 

 

1.98

%

 

$

319,456

 

 

$

1,758

 

 

2.18

%

Investment securities

 

1,022,444

 

 

7,726

 

 

3.00

 

 

1,043,830

 

7,471

 

 

2.84

 

 

1,080,262

 

 

6,931

 

 

2.55

 

Loans

 

$

5,779,765

 

 

$

60,167

 

 

4.13

 

 

$

5,817,041

 

 

$

62,109

 

 

4.24

 

 

$

5,159,541

 

 

$

56,102

 

 

4.31

 

Total interest-earning assets

 

7,208,972

 

 

$

69,530

 

 

3.83

 

 

7,041,350

 

$

70,480

 

 

3.97

 

 

6,559,259

 

 

$

64,791

 

 

3.92

 

Noninterest-earning assets

 

711,169

 

 

 

 

 

 

710,047

 

 

 

 

 

 

699,059

 

 

 

 

 

Total assets

 

$

7,920,141

 

 

 

 

 

 

$

7,751,397

 

 

 

 

 

 

$

7,258,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand

 

$

2,630,401

 

 

$

3,005

 

 

0.45

%

 

$

2,556,920

 

 

$

3,333

 

 

0.52

%

 

$

2,509,049

 

 

$

2,520

 

 

0.40

%

Money market and savings

 

2,177,402

 

 

8,540

 

 

1.56

 

 

2,064,316

 

 

8,843

 

 

1.70

 

 

2,030,476

 

 

6,232

 

 

1.22

 

Time deposits

 

842,160

 

 

4,789

 

 

2.26

 

 

869,974

 

 

5,049

 

 

2.30

 

 

668,984

 

 

3,286

 

 

1.95

 

Total interest-bearing deposits

 

$

5,649,963

 

 

$

16,334

 

 

1.15

 

 

$

5,491,210

 

 

$

17,224

 

 

1.24

 

 

$

5,208,509

 

 

$

12,038

 

 

0.92

 

Subordinated debt

 

133,236

 

 

1,923

 

 

5.72

 

 

133,168

 

 

1,923

 

 

5.73

 

 

132,976

 

 

1,923

 

 

5.74

 

FHLB advances

 

200,033

 

 

1,200

 

 

2.38

 

 

217,935

 

 

1,316

 

 

2.40

 

 

33

 

 

 

 

2.62

 

Total interest-bearing liabilities

 

$

5,983,232

 

 

$

19,457

 

 

1.29

 

 

$

5,842,313

 

 

$

20,463

 

 

1.39

 

 

$

5,341,518

 

 

$

13,961

 

 

1.04

 

Noninterest-bearing deposits

 

760,361

 

 

 

 

 

 

754,284

 

 

 

 

 

816,516

 

 

 

 

 

Other liabilities

 

83,688

 

 

 

 

 

 

80,365

 

 

 

 

 

 

57,731

 

 

 

 

 

Total liabilities

 

$

6,827,281

 

 

 

 

 

 

$

6,676,961

 

 

 

 

 

 

$

6,215,764

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

$

1,092,860

 

 

 

 

 

 

$

1,074,436

 

 

 

 

 

 

$

1,042,554

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

7,920,141

 

 

 

 

 

 

$

7,751,397

 

 

 

 

 

 

$

7,258,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest spread (2)

 

 

 

 

 

2.54

%

 

 

 

 

 

2.58

%

 

 

 

 

 

2.88

%

Net interest income and margin, tax equivalent (3,4)

 

 

 

$

50,073

 

 

2.76

%

 

 

 

$

50,017

 

 

2.82

%

 

 

 

$

50,830

 

 

3.07

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of tax equivalent net interest income to reported net interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax equivalent adjustment

 

 

 

(473)

 

 

 

 

 

 

(454)

 

 

 

 

 

 

(401)

 

 

 

Net interest income, as reported

 

 

 

$

49,600

 

 

 

 

 

 

$

49,563

 

 

 

 

 

 

$

50,429

 

 

 

  1. Interest income is presented on a taxable equivalent basis using the federal effective tax rate.
  2. Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
  3. Net interest margin is computed by dividing net interest income by total average interest-earning assets.
  4. Net interest margin, tax equivalent has been adjusted to a taxable equivalent basis using the federal effective tax rate.

 

Consolidated average balance sheet, interest, yield and rates

     

 

 

 

 

 

 

 

 

For the year ended December 31,

(unaudited)

 

2019

 

2018

($ In thousands)

 

Average
Balance

 

Interest (1)

 

Yields/
Rates

 

Average
Balance

 

Interest (1)

 

Yields/
Rates

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

 

Due from banks

 

$

269,202

 

$

5,308

 

 

1.97

%

 

$

323,780

 

$

6,148

 

 

1.90

%

Investment securities

 

 

1,061,822

 

 

32,134

 

 

3.03

 

 

 

1,066,317

 

 

22,353

 

 

2.10

 

Loans

 

 

5,653,861

 

 

241,248

 

 

4.27

 

 

 

5,160,529

 

 

219,649

 

 

4.26

 

Total interest-earning assets

 

$

6,984,885

 

$

278,690

 

 

3.99

 

 

$

6,550,626

 

$

248,150

 

 

3.79

 

Noninterest-earning assets

 

 

715,256

 

 

 

 

 

 

707,658

 

 

 

 

Total assets

 

$

7,700,141

 

 

 

 

 

$

7,258,284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand

 

$

2,534,596

 

$

12,349

 

 

0.49

%

 

$

2,521,073

 

$

7,877

 

 

0.31

%

Money market and savings

 

 

2,068,606

 

 

32,494

 

 

1.57

 

 

 

2,114,774

 

 

21,713

 

 

1.03

 

Time deposits

 

 

827,527

 

 

18,503

 

 

2.24

 

 

 

523,511

 

 

8,573

 

 

1.64

 

Total interest bearing deposits

 

$

5,430,729

 

$

63,346

 

 

1.17

 

 

$

5,159,358

 

$

38,163

 

 

0.74

 

Subordinated debt

 

 

133,138

 

 

7,690

 

 

5.78

 

 

 

132,877

 

 

7,690

 

 

5.79

 

FHLB advances

 

 

223,159

 

 

5,437

 

 

2.44

 

 

 

21,296

 

 

374

 

 

1.76

 

Total interest-bearing liabilities

 

$

5,787,026

 

$

76,473

 

 

1.32

 

 

$

5,313,531

 

$

46,227

 

 

0.87

 

Noninterest-bearing deposits

 

 

761,277

 

 

 

 

 

 

837,869

 

 

 

 

Other liabilities

 

 

82,559

 

 

 

 

 

 

73,204

 

 

 

 

Total liabilities

 

$

6,630,862

 

 

 

 

 

$

6,224,604

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

1,069,279

 

 

 

 

 

 

1,033,680

 

 

 

 

Total liabilities and stockholders’ equity

 

$

7,700,141

 

 

 

 

 

$

7,258,284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest spread (2)

 

 

 

 

 

2.67

%

 

 

 

 

 

2.92

%

Net interest income and margin, tax equivalent (3,4)

 

 

 

$

202,217

 

 

2.90

%

 

 

 

$

201,923

 

 

3.08

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of tax equivalent net interest income to reported net interest income

 

 

 

 

 

 

 

 

 

 

 

 

Tax equivalent adjustment

 

 

 

 

(1,735

)

 

 

 

 

 

 

(1,394

)

 

 

Net interest income, as reported

 

 

 

$

200,482

 

 

 

 

 

 

$

200,529

 

 

 

  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)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

($ in thousands)

 

December 31,
2019

 

September 30,
2019

 

December 31,
2018

 

December 31,
2019

 

December 31,
2018

Allowance for loan losses - balance at beginning of period

 

$

 

45,156

 

 

$

 

57,724

 

 

$

 

59,029

 

 

$

 

54,664

 

 

$

 

75,930

 

Provision (negative provision) for loan losses

 

 

(2,685

)

 

 

(7,698

)

 

 

7,659

 

 

 

(4,905

)

 

 

19,601

 

Charge-offs