Opus Bank (OPB) Sees Q3 Impact from Loan Charge-Offs
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Opus Bank (“Opus”) (NASDAQ: OPB) announced today that earnings for the third quarter 2016, which will be announced on October 24, 2016 before the market opens, will include a $0.59 per diluted share impact from loan charge-offs and is expected to result in a net loss of approximately $0.05 per diluted share for the third quarter of 2016.
As part of the credit review process of impaired loans, new developments supported charge-offs being recognized on eight loan relationships through the allowance for loan losses at September 30, 2016. Charge-offs were recorded on these eight loan relationships, which have been impacting the provision for loan losses and earnings for the past eight quarters and include three of the same loan relationships that were discussed during Opus' second quarter 2016 earnings conference call. Charge-offs for the eight loan relationships totaled $38.8 million and had specific reserves of $16.7 million previously recorded. In addition, these charge-offs increased the reserve levels recorded against the remaining loan portfolio by $13.6 million as a result of higher loss factors incorporated into our allowance for loan losses methodology to reflect the charge-offs in the third quarter of 2016.
Two loan relationships originated by our Technology Banking division, which we previously announced would be deemphasized, contributed $22.2 million, or 57%, of the charge-offs and $8.1 million, or 60%, of the increased reserves as a result of higher loss factors. The remaining six loan relationships that had $16.6 million of charge-offs were from across our Commercial and Specialty Banking divisions. These eight loan relationships had a remaining balance of $19.1 million as of September 30, 2016 and have been charged off to the estimated fair value of each loan's underlying collateral.
Total nonperforming assets decreased 44% to $44.8 million, or 0.58% of total assets, as of September 30, 2016 compared to $79.4 million, or 1.06% of total assets, as of June 30, 2016. Total delinquencies decreased 55% to $21.7 million as of September 30, 2016 compared to $48.5 million as of June 30, 2016, and total criticized loans were $147.4 million as of September 30, 2016 compared to $146.5 million as of June 30, 2016. The ratio of our allowance for loan losses to total loans was 0.94% as of September 30, 2016 compared to 0.97% as of June 30, 2016. Our coverage ratio, which includes the remaining discount on the acquired loan portfolio, was 1.01% as of September 30, 2016 compared to 1.07% as of June 30, 2016.
Our Tier 1 leverage ratio is expected to be 8.16%, Common Equity Tier 1 ratio is expected to be 9.24% and total risk-based capital ratio is expected to be 12.29% as of September 30, 2016, compared to 8.52%, 9.74% and 12.93%, respectively, as of June 30, 2016.
Management will discuss in full detail these charge-offs, the provision for loan losses and Opus’ credit quality during the third quarter 2016 earnings conference call scheduled for Monday, October 24, 2016 at 7:00 AM Pacific Time.
Conference Call Details:
Date: Monday, October 24, 2016Time: 7:00 a.m. PT (10:00 a.m. ET)Phone Number: (855) 265-3237Conference Id: 88807026Webcast URL: http://investor.opusbank.com/event
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 88807026. The call replay will be available through November 24, 2016.
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