Opus Bank Announces Third Quarter 2015 Results

IRVINE, Calif.--(BUSINESS WIRE)-- Opus Bank (“Opus”) (NASDAQ: OPB) announced today net income of $14.7 million, or $0.44 per diluted share, for the third quarter of 2015 compared to $17.5 million, or $0.52 per diluted share, for the second quarter of 2015 and $7.7 million, or $0.23 per diluted share, for the third quarter of 2014. The reduction in net income as compared to the second quarter of 2015 was mainly due to $6.7 million lower accretion income from the sale of acquired loans and $1.8 million higher provision expense for specific loan relationships and risk rating changes. Net income increased by 39% to $43.3 million for the nine months ended September 30, 2015 from $31.2 million for the nine months ended September 30, 2014. Pre-tax pre-provision earnings decreased 8% to $31.8 million for the third quarter of 2015 from $34.5 million in the prior quarter, while increasing 64% to $88.0 million for the nine months ended September 30, 2015 from $53.6 million for the nine months ended September 30, 2014. Additionally, Opus announced that its Board of Directors approved increasing its quarterly cash dividend by 20% to $0.12 per share payable on November 19, 2015 to common and preferred shareholders of record as of November 5, 2015.

Quarter and Year to Date 2015 Highlights

• Total assets increased by 6% to a record $6.2 billion at September 30, 2015 from $5.8 billion at June 30, 2015 and by 31% from $4.7 billion at September 30, 2014, driven by continued strong loan and deposit growth.
• New loan fundings were a record $638.3 million in the third quarter of 2015, an increase of 17% from $543.8 million in the second quarter of 2015 and an increase of 40% from $455.4 million in the third quarter of 2014. The weighted average rate on new loan fundings during the third quarter of 2015 was 4.41%, up 7 basis points compared to 4.34% during the second quarter of 2015 and up 23 bps compared to 4.18% during the third quarter of 2014. Commercial and Specialty Banking divisions represented 48% of new loan fundings during the third quarter of 2015, continuing the strategic shift in the mix of loans that has resulted in 8 basis points expansion in the yield on our originated loan portfolio for the first nine months of 2015 compared to the same period in 2014. Loan commitments originated during the third quarter of 2015 were a record $807.0 million, an increase of 35% from $598.9 million in the second quarter of 2015 and 58% from $511.7 million during the third quarter of 2014.
• Total loans held-for-investment, which includes our acquired loan portfolio, increased by $372.4 million, or 8%, during the third quarter to a record $5.0 billion and increased by $1.3 billion, or 34%, from September 30, 2014. Our originated loan portfolio grew by $414.4 million to $4.7 billion at September 30, 2015, an increase of 10% from June 30, 2015 and 45% from September 30, 2014.
• The loan origination pipeline remains robust entering the fourth quarter and continues to reflect the growth and maturation of our Commercial and Specialty Banking divisions, which increased to 59% of the pipeline on October 1, 2015 from 58% at July 1, 2015.
• Our asset quality remains strong, with nonperforming assets totaling $16.8 million, or 0.27%, of total assets at September 30, 2015 compared to $12.6 million, or 0.22%, at June 30, 2015 and $12.7 million, or 0.27%, at September 30, 2014. Provision expense for the third quarter of 2015 was $7.6 million compared to $5.8 million for the second quarter of 2015. The current quarter provision was driven by loan growth and changes in specific reserves and individual risk ratings. Our ratio of allowance for loan losses to total loans increased to 0.74% as of September 30, 2015 and our coverage ratio was 1.16%, which includes the $21.6 million remaining discount on the acquired loan portfolio.
• Total deposits grew $356.4 million, or 8%, during the third quarter to a record $4.9 billion at September 30, 2015 and increased by $1.4 billion, or 41%, from September 30, 2014. Noninterest bearing plus interest bearing demand deposits (“total demand deposits”) increased by $196.7 million, or 12%, during the third quarter to $1.8 billion and comprised 37% of total deposits as of September 30, 2015, up from 35% at June 30, 2015. As of September 30, 2015, deposit balances associated with our Escrow and Exchange divisions totaled $554.7 million, an increase of $33.7 million from June 30, 2015. Deposits related to our Commercial and Specialty Banking divisions, including Escrow and Exchange, increased by $278.3 million during the third quarter of 2015, up 17% from June 30, 2015. Business deposits increased 14% during the third quarter and represented 50% of our total deposits at September 30, 2015, compared to 47% at June 30, 2015 and 38% at September 30, 2014. Our cost of deposits decreased one basis point from the second quarter of 2015 to 0.48% for the third quarter of 2015.
• Total net interest income decreased 6% to $51.4 million for the third quarter of 2015 compared to $55.0 million for the second quarter of 2015 due to lower accretion income from the acquired loan portfolio in the third quarter of 2015 compared to the second quarter, and increased 34% from $38.3 million for the third quarter of 2014. Interest income from our originated loan portfolio totaled $48.5 million, an increase of $5.3 million, or 12%, from the second quarter of 2015 and $16.3 million, or 51%, from the third quarter of 2014. Interest income from the acquired loan portfolio decreased to $8.3 million for the third quarter of 2015 from $16.9 million in the second quarter of 2015 and from $10.8 million for the third quarter of 2014. During the third quarter of 2015, we continued to opportunistically manage the acquired loan portfolio and recognized $3.0 million of accretion income from loans that closed through prepayment, foreclosure and sale compared to $10.1 million during the second quarter of 2015. Net interest income increased 31% to $151.6 million for the nine months ended September 30, 2015 from $115.5 million for the nine months ended September 30, 2014.
• Net interest margin decreased 49 basis points to 3.80% for the third quarter of 2015 from 4.29% in the second quarter of 2015 and increased one basis point from 3.79% in the third quarter of 2014. The decrease from the prior quarter was due to lower accretion income from the acquired loan portfolio. Contractual net interest margin, which excludes the impact of accretion and amortization of acquisition discounts and premiums, increased 11 basis points to 3.49% in the third quarter of 2015 from 3.38% in the second quarter of 2015 primarily due to an increase in the yield on originated loans and prepayment fees, offset by day count and decline in the acquired loan portfolio. Net interest margin decreased 21 basis points to 3.98% for the nine months ended September 30, 2015 from 4.19% for the nine months ended September 30, 2014 due to lower contribution from the acquired loan portfolio. Contractual net interest margin increased 2 basis points to 3.44% for the nine months ended September 30, 2015 from 3.42% for the nine months ended September 30, 2014 primarily due to improved shift in mix and higher balances of, and yield on, originated loans and prepayments, offset by lower contribution from the acquired loan portfolio.
• Noninterest income during the third quarter of 2015 totaled $7.3 million compared to $8.1 million in the second quarter of 2015 and $3.9 million in the third quarter of 2014. Noninterest income during the third quarter included $1.6 million in fees generated through our Escrow and Exchange divisions, $571,000 of advisory fee income from our Merchant Banking division, which includes our broker-dealer subsidiary Opus Financial Partners, and $1.1 million in net equity warrant valuation changes. The decrease in total noninterest income from the prior quarter was due to a $779,000 reduction in fee income from our Real Estate Capital Markets group and a $760,000 decrease in dividends received from the Federal Home Loan Bank of San Francisco (“FHLB”) due to a special dividend received in the prior quarter. Noninterest income increased 89% to $18.7 million for the nine months ended September 30, 2015 from $9.9 million for the nine months ended September 30, 2014.
• Our efficiency ratio was 45.8% for the third quarter of 2015 compared to 45.3% for the second quarter of 2015 and 59.5% for the third quarter of 2014. For the nine months ended September 30, 2015 our efficiency ratio was 48.3% compared to 57.3% for the nine months ended September 30, 2014. Noninterest expense to average assets decreased to 1.8% in the third quarter of 2015 compared to 2.0% during the second quarter of 2015 and 2.2% during the third quarter of 2014. Noninterest expense to average assets decreased to 2.0% for the nine months ended September 30, 2015 from 2.3% for the nine months ended September 30, 2014.
• Return on average tangible equity was 10.1% for the third quarter of 2015 compared to 12.5% for the second quarter of 2015 and 5.7% for the third quarter of 2014. Return on average tangible equity was 10.3% for the nine months ended September 30, 2015 compared to 8.6% for the nine months ended September 30, 2014. Return on average assets was 0.98% for the third quarter of 2015 compared to 1.23% for the second quarter of 2015 and 0.67% for the third quarter of 2014. Return on average assets was 1.03% for the nine months ended September 30, 2015 as compared to 0.99% for the nine months ended September 30, 2014.
• Our loan-to-deposit ratio was unchanged from the prior quarter at 101% as of September 30, 2015.
• Our balance sheet is well positioned for rising interest rates as it continues to remain asset sensitive as of September 30, 2015. The mix, duration, repricing characteristics, amortization schedules and increased cash flows related to our loan and deposit portfolios result in positive outcomes under all our interest rate modeling scenarios.
• Our tangible book value per as-converted share at September 30, 2015 increased to $17.89 from $17.48 at June 30, 2015 and $16.80 at September 30, 2014.

Stephen H. Gordon, Founding Chairman, Chief Executive Officer and President of Opus Bank, stated, “Our third quarter was highlighted by record new loan fundings, driven by the continued shift in loan mix toward our Commercial and Specialty Banking activities. This continued growth in our commercial client base contributed to an additional 11 basis point expansion to our contractual net interest margin as originated loan yields increased and our cost of deposits decreased further, with commercial business deposits growing to now represent 50% of our total deposits.” Gordon added, “As we continue to execute on our plan to leverage our infrastructure, distribution and client base, we continue to display meaningful scalability through our efficiency and performance metrics, with our efficiency ratio now in the mid-40s and our nonperforming asset ratio at 0.27%, both well below our West Coast regional and high-growth national peers.” Gordon concluded, “Given where Opus was positioned at quarter-end and line of sight into our anticipated growth during the remainder of 2015 and into 2016, we are pleased to announce today that the Board of Directors has approved increasing our quarterly cash dividend by 20% to $0.12 per share, which reflects our strong capital position, asset quality, liquidity, increasing earnings power and return metrics, and confidence in our ability to execute our business strategy and growth plans.”

Net Interest Income

Net interest income was $51.4 million in the third quarter of 2015, a decrease of 6% from $55.0 million in the second quarter of 2015 and an increase of 34% from $38.3 million in the third quarter of 2014. Interest income from originated loans increased by $5.3 million, or 12%, from the second quarter of 2015 and $16.3 million, or 51%, from the third quarter of 2014 due to our continued loan growth and success in strategically shifting our loan mix. Interest income from the acquired loan portfolio decreased by $8.6 million from the prior quarter and $2.4 million from the prior year's third quarter due to lower accretion income from loans that closed through prepayment, foreclosure and sale. During the third quarter of 2015 we sold $14.5 million of acquired loans that generated $1.4 million of accretion income, compared to the sale of $35.7 million of acquired loans that generated $8.2 million of accretion income during the second quarter of 2015. Interest expense was $6.3 million for the third quarter of 2015 compared to $6.1 million for the second quarter of 2015 and $5.4 million for the third quarter of 2014. The increase in interest expense was driven by growth of $200.1 million in average interest bearing deposits from June 30, 2015 and $1.1 billion from September 30, 2014.

Net interest income for the nine months ended September 30, 2015 totaled $151.6 million, an increase of $36.1 million, or 31%, from $115.5 million for the nine months ended September 30, 2014. Interest income for the nine months ended September 30, 2015 totaled $170.0 million, an increase of $40.3 million, or 31%, from $129.7 million during the nine months ended September 30, 2014 due to an increase of $46.0 million in interest income from the originated loan portfolio offset by a decrease of $7.5 million of interest income from the acquired loan portfolio. Interest expense for the nine months ended September 30, 2015 totaled $18.4 million, an increase of $4.2 million, or 30%, from $14.2 million during the nine months ended September 30, 2014 due to increased average deposit balances.

Net interest margin decreased 49 basis points to 3.80% in the third quarter of 2015 from 4.29% in the second quarter of 2015 and increased one basis point from 3.79% in the third quarter of 2014. Total loan yield during the third quarter of 2015 decreased to 4.71% from 5.42% in the second quarter of 2015 and 4.81% in the third quarter of 2014 due to lower accretion income received from the acquired loan portfolio, offset partially by higher yield on originated loans. Accretion income from the acquired loan portfolio contributed 0.31% to the net interest margin during the third quarter of 2015 compared to 0.91% in the second quarter of 2015 and 0.42% in the third quarter of 2014. Contractual net interest margin, which excludes the impact of accretion and amortization of acquisition discounts and premiums on the acquired loan portfolio, increased 11 basis points to 3.49% in the third quarter of 2015 from 3.38% in the prior quarter and increased 12 basis points from 3.37% in the third quarter of 2014. The yield on originated loans increased 5 basis points to 4.33% during the third quarter of 2015 primarily due to the improved mix of higher-yielding Commercial and Specialty Banking division loans and prepayment fees compared to the second quarter. Our cost of funds decreased to 0.49% during the third quarter of 2015 as compared to 0.50% during the second quarter of 2015 and 0.57% during the third quarter of 2014, and declined further to 0.48% at the end of the third quarter. Our cost of deposits decreased one basis point to 0.48% for the third quarter of 2015 as compared to 0.49% for the second quarter of 2015 and 0.56% for the third quarter of 2014, and declined further to 0.47% at the end of the third quarter.

Net interest margin decreased to 3.98% for the nine months ended September 30, 2015 from 4.19% for the nine months ended September 30, 2014. The yield on originated loans increased to 4.32% for the nine months ended September 30, 2015 compared to 4.24% for the nine months ended September 30, 2014. The yield on the acquired loan portfolio increased 165 basis points to 12.05% for the first nine months of 2015 from the same period in 2014. Accretion income from the acquired loan portfolio contributed 0.54% and 0.77% to net interest margin during the nine months ended September 30, 2015 and 2014, respectively. Contractual net interest margin increased 2 basis points to 3.44% for the nine months ended September 30, 2015 compared to 3.42% for the nine months ended September 30, 2014. Our cost of funds decreased to 0.51% for the nine months ended September 30, 2015 from 0.55% for the nine months ended September 30, 2014.

Noninterest Income and Noninterest Expense

Noninterest income totaled $7.3 million in the third quarter of 2015 as compared to $8.1 million in the second quarter of 2015 and $3.9 million in the third quarter of 2014. Noninterest income totaled $18.7 million for the nine months ended September 30, 2015 compared to $9.9 million for the nine months ended September 30, 2014. Noninterest income during the third quarter of 2015 included $1.6 million in fees generated through our Escrow and Exchange divisions, $571,000 of advisory fee income from our Merchant Banking division, including our broker-dealer subsidiary Opus Financial Partners, and net equity warrant valuation adjustments of $1.1 million. Offsetting these were decreases of $760,000 in FHLB dividends and $779,000 in revenue from our Real Estate Capital Markets group.

Noninterest expense totaled $26.9 million in the third quarter of 2015, a decrease of 6% from $28.6 million in the second quarter of 2015 and an increase of 7% from $25.1 million in the third quarter of 2014. Noninterest expense for the nine months ended September 30, 2015 was $82.2 million, an increase of 14% from $71.8 million for the nine months ended September 30, 2014. The decrease in noninterest expense from the prior quarter was primarily driven by lower compensation and benefits expenses.

Loans

Total loans held-for-investment, net of the allowance for loan losses, grew to $5.0 billion at September 30, 2015, an increase of 8% from $4.6 billion at June 30, 2015 and an increase of 34% from $3.7 billion at September 30, 2014.

Our originated loan portfolio totaled $4.7 billion as of September 30, 2015, an increase of 10% from $4.3 billion as of June 30, 2015 and 45% from $3.2 billion as of September 30, 2014. Our loan growth during the quarter was a result of record new loan fundings of $638.3 million, including $331.1 million from Income Property Banking, $85.7 million from Corporate Finance, $63.8 million from Technology Banking, $45.0 million from Structured Finance, $40.6 million from Commercial Banking, $34.3 million from Institutional Syndications and $33.2 million from Healthcare Banking. Our Commercial and Specialty Banking divisions contributed 48% of new loan fundings during the third quarter of 2015 compared to 47% during the second quarter of 2015 and 46% during the third quarter of 2014. Loan commitments originated during the third quarter totaled a record $807.0 million as compared to $598.9 million during the second quarter of 2015 and $511.7 million during the third quarter of 2014. At September 30, 2015, our unfunded commitments on originated loans totaled $491.8 million. As of September 30, 2015, originated loans made up 94% of our total loan portfolio as compared to 92% as of June 30, 2015 and 86% as of September 30, 2014.

Our acquired loan portfolio totaled $322.6 million as of September 30, 2015, a decrease of 12% from $364.6 million at June 30, 2015 and 37% from $508.6 million at September 30, 2014. At September 30, 2015, unfunded commitments on acquired loans totaled $21.9 million.

Deposits and Borrowings

Deposits totaled $4.9 billion as of September 30, 2015, an increase of 8% from $4.6 billion as of June 30, 2015 and 41% from $3.5 billion as of September 30, 2014. Total demand deposits increased to 37% of total deposits at September 30, 2015 from 35% at June 30, 2015 and 24% at September 30, 2014. During the third quarter of 2015, demand deposits from our Escrow and Exchange divisions increased by $33.6 million, which brought the total deposit balances from these divisions to $554.7 million at a weighted average cost of 0.04%. Deposits related to our Commercial and Specialty Banking divisions, including Escrow and Exchange, increased by $278.3 million during the third quarter of 2015, up 17% from June 30, 2015. At September 30, 2015, business deposits represented 50% of total deposits, as compared to 47% at June 30, 2015 and 38% at September 30, 2014. Our loan-to-deposit ratio was 101% as of September 30, 2015, unchanged from the end of the prior quarter and down from 106% as of September 30, 2014.

FHLB advances totaled $340.0 million as of September 30, 2015 compared to $365.0 million as of June 30, 2015 and $410.0 million at September 30, 2014.

Asset Quality

We continue to experience strong asset quality as our loan portfolio seasons, evidenced by the low balance of nonperforming assets and stable ratio of nonperforming assets to total assets of 0.27% as of September 30, 2015 compared to 0.22% at June 30, 2015 and 0.27% at September 30, 2014. We recorded a total provision for loan losses of $7.6 million in the third quarter of 2015 compared to $5.8 million in the second quarter of 2015 and $4.5 million in the third quarter of 2014. The provision recapture on the acquired loan portfolio totaled $709,000 in the third quarter of 2015, $387,000 during the second quarter of 2015 and $509,000 in the third quarter of 2014 due to continued improvement in expected cash flows and credit performance. A provision for loan losses of $8.3 million was recorded on the originated loan portfolio during the third quarter of 2015 compared to $6.2 million in the second quarter of 2015 and $5.1 in the third quarter of 2014. The provision for loan losses during the current quarter on the originated loan portfolio was comprised of $2.3 million for portfolio growth and $6.0 million for changes in specific reserves, individual risk ratings and loss factors.

Our allowance for loan losses represented 0.74% of our total loan portfolio at September 30, 2015 as compared to 0.66% at June 30, 2015 and 0.58% at September 30, 2014. Our acquired loan portfolio has a remaining discount of $21.6 million at September 30, 2015. The coverage ratio for the total loan portfolio, which includes the remaining discount on the acquired loan portfolio, at September 30, 2015 was 1.16% compared to 1.22% at June 30, 2015 and 1.82% at September 30, 2014, declining as the originated loan portfolio continues to increase as a percentage of the total loan portfolio. Our allowance for loan losses on originated loans resulted in a coverage ratio of 0.76% at September 30, 2015, an increase from 0.67% at June 30, 2015 and 0.58% at September 30, 2014.

Capital

Our capital ratios continue to be strong and well in excess of bank regulatory requirements. Beginning in the first quarter of 2015, we calculated our capital ratios under the FDIC Regulatory Capital Interim Final Rule (Basel III). As of September 30, 2015, our Tier 1 leverage ratio was 9.96%, Common Equity Tier 1 ratio was 11.45% and total risk-based capital ratio was 12.22%, compared to 9.98%, 11.08% and 12.92%, respectively, as of June 30, 2015. As of September 30, 2014 under Basel I rules, our Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios were 11.74%, 13.98% and 14.59%, respectively. Stockholders’ equity totaled $851.9 million as of September 30, 2015, an increase of 2% from $838.9 million as of June 30, 2015 and an increase of 9% from $784.5 million as of September 30, 2014, primarily driven by strong net income. Our tangible book value per as converted common share increased to $17.89 as of September 30, 2015 from $17.48 as of June 30, 2015 and $16.80 at September 30, 2014.

Additionally, on October 22, 2015 the Board of Directors approved increasing our quarterly cash dividend by 20% to $0.12 per share payable on November 19, 2015 to common and preferred shareholders of record as of November 5, 2015.

Conference Call and Webcast DetailsDate: Monday, October 26, 2015Time: 8:00 a.m. PT (11:00 a.m. ET)

Phone Number: 855-265-3237Conference Id: 46350116Webcast URL: http://investor.opusbank.com/events.cfm

Analysts, investors, and the general public may listen to a discussion of Opus' third quarter earnings and 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's website at: http://investor.opusbank.com/events.cfm. 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 46350116. The call replay will be available through November 27, 2015.

About Opus Bank

Opus Bank is an FDIC insured California-chartered commercial bank with $6.2 billion of total assets, $5.0 billion of total loans, and $4.9 billion in total deposits as of September 30, 2015. Opus Bank provides high-value, relationship-based banking products, services, and solutions 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 business, healthcare, technology, 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 broker-dealer subsidiary, Opus Financial Partners. Opus Bank is an Equal Housing Lender. Opus Bank operates 58 client experience centers, including two in the Phoenix metropolitan area of Arizona, 33 in California and 22 in the Seattle/Puget Sound region in Washington and one in Portland, Oregon. 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 the Opus’s 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's filings with the Federal Deposit Insurance Corporation, including, but not limited to, the risk factors in Opus's annual report on Form 10-K. These filings are available on the Investor Relations page of Opus's website at: investor.opusbank.com.

Opus undertakes no obligation to revise or publicly release any revision to these forward-looking statements.

Consolidated Statements of Income
(unaudited)				For the three months ended																	For the nine months ended
				September 30,					June 30,						September 30,						September 30,						September 30,
($ in thousands, except per share amounts)				2015					2015						2014						2015						2014
Interest income:
Loans				$	56,852				$	60,097					$	42,989					$	167,468					$	128,902
Investment securities					616					686						478						1,793						351
Due from banks					228					279						177						732						433
Total interest income					57,696					61,062						43,644						169,993						129,686
Interest expense:
Deposits					5,686					5,487						4,737						16,618						12,481
Federal Home Loan Bank advances					579					597						631						1,774						1,690
Total interest expense					6,265					6,084						5,368						18,392						14,171
Net interest income					51,431					54,978						38,276						151,601						115,515
Provision for loan losses					7,595					5,797						4,548						16,953						4,334
Net interest income after provision for loan losses					43,836					49,181						33,728						134,648						111,181
Noninterest income:
Service charges on deposit accounts					1,667					1,683						1,543						4,887						4,570
Escrow and exchange fees					1,630					1,668						—						3,298						—
(Loss) gain on sale of assets					—					(28	)					254						106						495
Gain (loss) from real estate owned, net					73					(261	)					8						(125	)					567
Gain (loss) on sale of investment securities					438					363						(301	)					800						(301	)
Bank-owned life insurance, net					870					689						447						2,273						885
Other income					2,617					3,963						1,910						7,422						3,681
Total noninterest income					7,295					8,077						3,861						18,661						9,897
Noninterest expense:
Compensation and benefits					14,691					16,467						13,568						45,852						40,708
Professional services					1,580					1,774						1,671						5,320						3,126
Occupancy expense					3,042					2,950						2,852						8,757						8,473
Depreciation and amortization					1,415					1,383						1,335						4,124						4,007
Deposit insurance and regulatory assessments					884					859						712						2,515						1,952
Insurance expense					303					303						287						912						827
Data processing					762					862						760						2,441						2,242
Software licenses and maintenance					570					489						391						1,513						1,329
Office services					990					1,025						533						3,023						2,652
Amortization of core deposit intangibles					627					627						627						1,881						1,881
Advertising and marketing					410					227						751						875						1,405
Litigation expense (recovery)					—					25						(102	)					275						(2,125	)
Other expenses					1,609					1,589						1,672						4,726						5,365
Total noninterest expense					26,883					28,580						25,057						82,214						71,842
Income before income tax expense					24,248					28,678						12,532						71,095						49,236
Income tax expense					9,537					11,194						4,864						27,823						18,045
Net income				$	14,711				$	17,484					$	7,668					$	43,272					$	31,191
Basic earnings per common share				$	0.45				$	0.54					$	0.24					$	1.35					$	1.02
Diluted earnings per common share					0.44					0.52						0.23						1.30						1.00
Weighted average shares - basic					28,725,211					28,684,002						28,100,634						28,523,213						26,046,941
Weighted average shares - diluted					33,657,401					33,537,721						32,773,382						33,365,666						31,308,491

Consolidated Balance Sheets
(unaudited)				As of
				September 30,						June 30,						September 30,
($ in thousands, except share amounts)				2015						2015						2014
Assets
Cash and due from banks				$	31,595					$	31,742					$	31,904
Due from banks – interest-bearing					399,822						424,046						287,054
Investment securities available-for-sale, at fair value					220,982						234,766						190,326
Loans held-for-sale					—						—						2,500
Loans held-for-investment					5,001,607						4,629,232						3,728,108
Less allowance for loan losses					(36,809	)					(30,660	)					(21,568	)
Loans held-for-investment, net					4,964,798						4,598,572						3,706,540
Real estate owned					4,235						3,965						6,535
Premises and equipment, net					33,511						33,979						34,617
Goodwill					262,115						262,115						238,528
Core deposit intangible, net					10,726						11,354						13,235
Deferred tax assets, net					55,358						61,707						83,543
Cash surrender value of bank owned life insurance, net					115,564						94,560						61,055
Accrued interest receivable					16,871						15,531						13,310
Federal Home Loan Bank stock					17,250						17,250						30,645
Other assets					50,328						43,300						25,844
Total assets				$	6,183,155					$	5,832,887					$	4,725,636
Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing demand				$	868,533					$	803,082					$	608,160
Interest-bearing demand					945,361						814,095						222,258
Money market and savings					2,549,149						2,369,962						2,054,113
Time deposits					584,710						604,263						621,170
Total deposits					4,947,753						4,591,402						3,505,701
Federal Home Loan Bank advances					340,000						365,000						410,000
Accrued interest payable					352						354						382
Other liabilities					43,179						37,187						25,054
Total liabilities					5,331,284						4,993,943						3,941,137
Stockholders’ equity:
Preferred stock:
Authorized 200,000,000 shares; issued 72,411 and 72,411 and 72,411 shares, respectively					68,768						68,768						68,768
Common stock, no par value per share:
Authorized 200,000,000 shares; issued 28,946,023 and 28,930,431 and 28,237,391 shares, respectively					550,248						550,248						536,498
Additional paid-in capital					46,685						44,947						39,618
Retained earnings					191,035						179,559						142,334
Treasury stock, at cost; 208,004 and 207,784, and 136,459 shares, respectively					(4,846	)					(4,838	)					(2,613	)
Accumulated other comprehensive (loss) income					(19	)					260						(106	)
Total stockholders’ equity					851,871						838,944						784,499
Total liabilities and stockholders’ equity				$	6,183,155					$	5,832,887					$	4,725,636

Selected Financial Data
				For the three months ended															For the nine months ended
				September 30,					June 30,					September 30,					September 30,					September 30,
(unaudited)				2015					2015					2014					2015					2014
Return on average assets				0.98	%				1.23	%				0.67	%				1.03	%				0.99	%
Return on average stockholders' equity				6.87					8.42					3.88					6.97					5.64
Return on average tangible equity (1)				10.12					12.54					5.72					10.25					8.59
Efficiency ratio (2)				45.78					45.32					59.46					48.29					57.29
Noninterest expense to average assets				1.79					2.01					2.19					1.95					2.29
Yield on interest-earning assets				4.26					4.76					4.32					4.47					4.71
Cost of deposits (3)				0.48					0.49					0.56					0.50					0.54
Cost of funds (4)				0.49					0.50					0.57					0.51					0.55
Net interest margin				3.80					4.29					3.79					3.98					4.19

(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 and FHLB advances.

Capital Ratios				As of
				September 30,					June 30,					September 30,
(unaudited)				2015 (2)					2015					2014
				(Under Basel III) (1)										(Under Basel I) (1)
Tier 1 leverage ratio				9.96	%				9.98	%				11.74	%
Tier 1 risk-based capital ratio				11.45					12.21					13.98
Total risk-based capital ratio				12.22					12.92					14.59
Common Equity Tier 1 ratio (3)				10.34					11.08					n/a

(1) The capital ratios beginning March 31, 2015 reflect the adoption of Basel III in effect beginning January 1, 2015 while ratios for the prior period represents the previous capital rules under Basel I.

(2) Ratios are preliminary until filing of our September 30, 2015 call report.

(3) The Common Equity Tier 1 ratio is a new ratio required under Basel III and represents common equity, less goodwill and intangible assets net of any deferred tax liabilities, divided by risk-weighted assets.

Loan Fundings
(unaudited)				For the three months ended															For the nine months ended
				September 30,					June 30,					September 30,					September 30,					September 30,
($ in thousands)				2015					2015					2014					2015					2014
Loans funded:
Real estate mortgage loans:
Single-family residential				$	—				$	—				$	—				$	—				$	29,092
Multifamily residential					261,349					219,988					178,701					627,168					594,089
Commercial real estate					76,346					134,734					122,373					284,575					276,137
Construction and land loans					19,291					2,604					93					24,140					1,593
Commercial business loans					279,760					186,448					154,249					712,254					340,012
Small Business Administration loans					1,547					60					—					2,433					3,637
Consumer and other loans					—					—					—					—					680
Total loan fundings				$	638,293				$	543,834				$	455,416				$	1,650,570				$	1,245,240

Composition of Loan Portfolio				As of
				September 30,										June 30,										September 30,
(unaudited)				2015										2015										2014
									% of										% of										% of
($ in thousands)				Amount					Total loans					Amount					Total loans					Amount					Total loans
Originated loans held-for-investment
Real estate mortgage loans:
Single-family residential				$	108,749				2.2	%				$	114,227				2.5	%				$	133,150				3.6	%
Multifamily residential					2,452,731				49.0						2,347,656				50.7						1,993,522				53.5
Commercial real estate					959,682				19.2						896,659				19.4						609,872				16.3
Construction and land loans					39,431				0.8						20,045				0.4						6,106				0.2
Commercial business loans					1,089,040				21.8						857,442				18.5						451,069				12.1
Small Business Administration loans					26,538				0.5						25,860				0.6						25,095				0.7
Consumer and other loans					2,853				0.1						2,747				0.1						649				0.0
Total originated loans					4,679,024				93.6						4,264,636				92.2						3,219,463				86.4
Acquired loans held-for-investment
Real estate mortgage loans:
Single-family residential					66,559				1.3						85,476				1.8						138,424				3.7
Multifamily residential					88,102				1.8						93,113				2.0						104,291				2.8
Commercial real estate					80,684				1.6						94,459				2.1						126,584				3.4
Construction and land loans					2,118				0.0						2,121				0.0						4,063				0.1
Commercial business loans					24,424				0.5						24,876				0.5						31,117				0.8
Small Business Administration loans					52,292				1.0						55,718				1.2						69,210				1.9
Consumer and other loans					8,404				0.2						8,833				0.2						34,956				0.9
Total acquired loans					322,583				6.4						364,596				7.8						508,645				13.6
Total gross loans				$	5,001,607				100.0	%				$	4,629,232				100.0	%				$	3,728,108				100.0	%

Composition of Deposits				As of
				September 30,										June 30,										September 30,
(unaudited)				2015										2015										2014
									% of										% of										% of
($ in thousands)				Amount					Total deposits					Amount					Total deposits					Amount					Total deposits
Noninterest bearing				$	868,533				17.55	%				$	803,082				17.49	%				$	608,160				17.35	%
Interest bearing demand					945,361				19.11						814,095				17.73						222,258				6.34
Money market and savings					2,549,149				51.52						2,369,962				51.62						2,054,113				58.59
Time deposits					584,710				11.82						604,263				13.16						621,170				17.72
Total deposits				$	4,947,753				100.0	%				$	4,591,402				100.0	%				$	3,505,701				100.0	%

Consolidated average balance sheet, interest, yield and rates
				For the three months ended															For the three months ended															For the three months ended
				September 30,															June 30,															September 30,
(unaudited)				2015															2015															2014
				Average										Yields/					Average										Yields/					Average										Yields/
($ in thousands)				Balance					Interest					Rates					Balance					Interest					Rates					Balance					Interest					Rates
Assets:
Interest-earning assets:
Due from banks				$	360,817				$	228				0.25	%				$	445,758				$	279				0.25	%				$	280,686				$	177				0.25	%
Investment securities					229,937					616				1.06						254,617					686				1.08						183,952					478				1.03
Acquired loans					340,331					8,340				9.72						400,551					16,930				16.95						519,500					10,786				8.24
Originated Loans					4,443,460					48,512				4.33						4,042,875					43,167				4.28						3,027,740					32,203				4.22
Total loans				$	4,783,791				$	56,852				4.71					$	4,443,426				$	60,097				5.42					$	3,547,240				$	42,989				4.81
Total interest-earning assets				$	5,374,545				$	57,696				4.26					$	5,143,801				$	61,062				4.76					$	4,011,878				$	43,644				4.32
Noninterest-earning assets					568,521															565,195															525,307
Total assets				$	5,943,066														$	5,708,996														$	4,537,185
Liabilities and stockholders’ equity:
Interest-bearing deposits
Interest-bearing demand				$	839,105				$	393				0.19	%				$	745,927				$	343				0.18	%				$	227,025				$	65				0.11	%
Money market and savings					2,457,731					4,071				0.66						2,333,423					3,897				0.67						1,948,809					3,418				0.70
Time deposits					592,281					1,222				0.82						609,660					1,247				0.82						618,481					1,254				0.80
Total interest bearing deposits				$	3,889,117				$	5,686				0.58					$	3,689,010				$	5,487				0.60					$	2,794,315				$	4,737				0.67
FHLB advances					349,674					579				0.66						365,000					597				0.66						380,245					631				0.66
Total interest-bearing liabilities				$	4,238,791				$	6,265				0.59					$	4,054,010				$	6,084				0.60					$	3,174,560				$	5,368				0.67
Noninterest-bearing deposits					809,179															785,516															558,484
Other liabilities					45,319															36,554															20,203
Total liabilities				$	5,093,289														$	4,876,080														$	3,753,247
Total stockholders’ equity				$	849,777														$	832,916														$	783,938
Total liabilities and stockholders’ equity				$	5,943,066														$	5,708,996														$	4,537,185
Net interest income									$	51,431														$	54,978														$	38,276
Net interest spread (1)														3.67	%														4.16	%														3.65	%
Net interest margin (2)														3.80	%														4.29	%														3.79	%

(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.

Consolidated average balance sheet, interest, yield and rates
				For the nine months ended September 30,
(unaudited)				2015															2014
				Average										Yields/					Average										Yields/
(In thousands)				Balance					Interest					Rates					Balance					Interest					Rates
Assets:
Interest-earning assets
Due from banks				$	390,113				$	732				0.25	%				$	228,254				$	433				0.25	%
Investment securities					226,201					1,793				1.06						199,069					351				0.24
Acquired loans					397,423					35,826				12.05						556,728					43,294				10.40
Originated Loans					4,073,160					131,642				4.32						2,698,267					85,608				4.24
Total loans				$	4,470,583				$	167,468				5.01					$	3,254,995				$	128,902				5.29
Total interest-earning assets				$	5,086,897				$	169,993				4.47					$	3,682,318				$	129,686				4.71
Noninterest-earning assets					557,172															516,684
Total assets				$	5,644,069														$	4,199,002
Liabilities and stockholders’ equity:
Interest-bearing deposits
Interest-bearing demand				$	681,053				$	1,018				0.20	%				$	230,148				$	195				0.11	%
Money market and savings					2,364,937					11,869				0.67						1,685,948					8,441				0.67
Time deposits					607,357					3,731				0.82						631,964					3,845				0.81
Total interest bearing deposits				$	3,653,347				$	16,618				0.61					$	2,548,060				$	12,481				0.65
FHLB advances					363,249					1,774				0.65						344,258					1,690				0.66
Total interest-bearing liabilities				$	4,016,596				$	18,392				0.61					$	2,892,318				$	14,171				0.66
Noninterest-bearing deposits					762,363															547,777
Other liabilities					34,536															20,126
Total liabilities				$	4,813,495														$	3,460,221
Total stockholders’ equity					830,574															738,781
Total liabilities and stockholders’ equity				$	5,644,069														$	4,199,002
Net interest income									$	151,601														$	115,515
Net interest spread (1)														3.86	%														4.05	%
Net interest margin (2)														3.98	%														4.19	%

(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.

Asset Quality Information
(unaudited)				As of
				September 30,						June 30,						September 30,
($ in thousands)				2015						2015						2014
Nonperforming assets
Nonaccrual loans				$	12,541					$	8,624					$	6,182
Real estate owned					4,235						3,965						6,535
Total nonperforming assets					16,776						12,589						12,717
Nonperforming assets to total assets					0.27	%					0.22	%					0.27	%
Accruing loans 90 days or more past due				$	546					$	814					$	2,758
Accruing troubled debt restructured loans					286						291						66
Allowance for loan losses - Originated loans					35,369						28,512						18,719
Allowance for loan losses - Acquired loans					1,440						2,148						2,849
Total allowance for loan losses					36,809						30,660						21,568
Remaining acquisition discount on acquired loans				$	21,603					$	26,090					$	47,132
Allowance for loan losses to non-accrual loans					293.5	%					355.5	%					348.9	%
Allowance for loan losses acquired loans to acquired loans					0.45						0.59						0.56
Allowance for loan losses originated loans to originated loans					0.76						0.67						0.58
Total allowance for loan losses to total loans					0.74						0.66						0.58
Allowance for loan losses and remaining acquisition discount on acquired loans to gross acquired loans (1)					6.69						7.23						8.99
Allowance for loan losses and remaining acquisition discount to total gross loans (1)					1.16						1.22						1.82

(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.

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 assessing 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 ratios and should not be considered a substitute of the GAAP measures and ratios.

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																		For the nine months ended
				September 30,						June 30,						September 30,						September 30,						September 30,
($ in thousands)				2015						2015						2014						2015						2014
Average tangible equity:
Average stockholders' equity				$	849,777					$	832,916					$	783,938					$	830,574					$	738,781
Less:
Average goodwill					262,115						262,115						238,528						254,425						238,528
Average core deposit intangibles					11,058						11,680						13,603						11,686						14,242
Average tangible equity					576,604						559,121						531,807						564,463						486,011
Net income				$	14,711					$	17,484					$	7,668					$	43,272					$	31,191
Return on average stockholders' equity					6.87	%					8.42	%					3.88	%					6.97	%					5.64	%
Non-GAAP return on average tangible equity					10.12						12.54						5.72						10.25						8.58

Non-GAAP net interest margin
(unaudited)				For the three months ended																			For the nine months ended
				September 30,						June 30,						September 30,							September 30,						September 30,
($ in thousands)				2015						2015						2014							2015						2014
Net interest income				$	51,431					$	54,978					$		38,276					$	151,601					$	115,515
Less: Accretion/amortization of acquisition discount/premium (1)					(3,873	)					(11,356	)				(3,813			)					(19,681	)					(20,015	)
Non-GAAP net interest income					47,558						43,622					34,463								131,920						95,500
Average interest earning assets				$	5,374,545					$	5,143,801					$		4,011,878					$	5,086,897					$	3,682,318
Add: Average unamortized acquisition discounts					25,407						37,488					48,373								35,854						55,948
Non-GAAP average interest-earning assets					5,399,952						5,181,289					4,060,251								5,122,751						3,738,266
Net interest margin impact					0.31	%					0.91	%				0.42			%					0.54	%					0.77	%

(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
				September 30,					June 30,					September 30,
($ In thousands, except share amounts)				2015					2015					2014
Tangible equity:
Total stockholders' equity				$	851,871				$	838,944				$	784,499
Less:
Goodwill					262,115					262,115					238,528
Core deposit intangibles					10,726					11,354					13,235
Tangible equity					579,030					565,475					532,736
Shares of common stock outstanding					28,738,019					28,722,647					28,100,932
Shares of common stock to be issued upon conversion of preferred stock					3,620,550					3,620,550					3,620,550
Total as converted shares of common stock outstanding (1)					32,358,569					32,343,197					31,721,482
Book value per as converted common share					26.33					25.94					24.73
Tangible book value per as converted common share					17.89					17.48					16.80

(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/20151026005314/en/

Opus Bank
Ms. Nicole M. Carrillo, 949-251-8133
EVP, Chief Financial Officer
or
Mr. Brett G. Villaume, 949-224-8866
SVP, Director of Investor Relations

Source: Opus Bank