Opus Bank (OPB) Misses Q1 EPS by 2c

Opus Bank (NASDAQ: OPB) reported Q1 EPS of $0.34, $0.02 worse than the analyst estimate of $0.36.

First Quarter 2018 Highlights

• Pre-tax pre-provision earnings increased 14% from the prior quarter to $20.9 million and increased 13% from the first quarter of 2017.
• Net interest margin increased five basis points to 3.20%, as the yield on Opus' originated loans increased six basis points to 4.22%, while our cost of deposits increased two basis points to 0.47%.
• New loan fundings were $452.3 million, an increase of 106% from the first quarter of 2017.
• Total loans increased $55.8 million, driven by new loan fundings exceeding loan payoffs and sales of $271.4 million, which included planned exits of $52.2 million. Excluding planned exits, total loans would have increased by $108.0 million in the first quarter of 2018.
• Total deposits increased $99.7 million, primarily driven by growth in low- or no-cost commercial business demand deposits.
• Noninterest expense decreased 5% to $44.1 million and the efficiency ratio decreased to 68%, compared to 71% in the prior quarter.
• Enterprise Value loans decreased $81.7 million, or 20%, in the first quarter of 2018 to $336.0 million.
• Provision for loan losses was $3.9 million, compared to $3.0 million for the prior quarter. Net charge-offs were $12.0 million in the first quarter of 2018, of which 95% were Enterprise Value or Technology loans with $8.2 million of specific reserves.
• Opus' effective tax rate was 24% for the first quarter.

Stephen H. Gordon, Chief Executive Officer and President of Opus Bank, stated, “Opus’ first quarter results marked a successful beginning to 2018, demonstrated by our disciplined growth and improving profitability, displaying continued momentum from 2017. We achieved $452 million in new loan fundings during the quarter, more than double the level achieved in the first quarter of 2017. New loan fundings exceeded loan payoffs of $271 million, which included planned exits of $52 million, as we successfully reduced the balances of Enterprise Value loans by 20% in the first quarter. Deposit growth of $100 million was driven by low- or no-cost commercial business demand deposits, which enabled our overall cost of deposits to increase by only two basis points. We also began to realize the benefit of our asset sensitive balance sheet, as our net interest margin expanded by five basis points during the quarter.”

Mr. Gordon continued, “Consistent with past years, we estimate our quarterly loan production will ramp over the course of 2018, driven by our leading multifamily banking division and bolstered by the contributions from numerous commercial bankers hired throughout our footprint over the recent quarters. Deposit and full relationship growth is a high priority across the organization, including and especially among our Commercial and Specialty Banking teams, and is expected to ramp throughout 2018. Our cost of deposits will likely increase in coming quarters, but at a slower rate than our loan yields increase. With our portfolio of Enterprise Value loans that are not eligible for retention continuing to shrink, we anticipate planned exits will have less of a negative impact on our quarterly net loan growth, loan yield, and overall credit expenses. As we entered the second quarter, the weighted average rate of our new loan fundings pipeline was 34-basis-points higher than at the start of the first quarter, which we anticipate will contribute to a higher net interest margin going forward. Our noninterest expense run rate was reduced in the first quarter, and we remain confident in our ability to drive our efficiency ratio below 65%.”

Mr. Gordon concluded, “I thank all of the many Opus team members responsible for our strong start to the year, as we take great pride in their tireless efforts and commitment. Based on our earnings, strong capital levels and overall performance in the first quarter of 2018, I am proud to announce Opus’ Board has authorized a 10% increase in our quarterly cash dividend to $0.11 per diluted share.”

For earnings history and earnings-related data on Opus Bank (OPB) click here.

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