Market Overview

Opus Bank Announces Third Quarter 2017 Results

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Opus Bank ("Opus") (NASDAQ:OPB) announced today net income of $20.5
million, or $0.54 per diluted share, for the third quarter of 2017
compared to net income of $18.2 million, or $0.48 per diluted share, for
the second quarter of 2017 and a net loss of $3.0 million, or $(0.09)
per diluted share, for the third quarter of 2016. Net income increased
by 53% to $46.4 million for the nine months ended September 30, 2017
from $30.4 million for the nine months ended September 30, 2016. Net
income for the third quarter of 2017 included a $4.8 million write-off
of other repossessed assets, a $3.9 million gain on the sale of deposits
and other assets primarily related to five banking offices, and a
$618,000 gain on the sale of investment securities. Additionally, net
income in the third quarter of 2017 included $569,000 of strategic
initiative related expenses primarily related to infrastructure
enhancements and the sale of banking offices during the quarter.

Stephen H. Gordon, Chairman, Chief Executive Officer and President of
Opus Bank, stated, "Our performance during the third quarter of 2017
represents the exceptional effort and determination of Opus' team
members. Return on average assets increased to 1.09% and return on
average tangible equity was 12.79%, driven by improved core
profitability, improved credit, lower expenses, and continued strong
contributions from Opus' diverse lines of business and sources of
noninterest income, including our alternative asset IRA custodian
subsidiary and our Merchant Banking division."

Mr. Gordon continued, "During the third quarter, we continued to rapidly
reduce the portfolio loan balances we previously announced as targeted
for planned exits, while our quarterly new loan fundings increased
sequentially and surpassed loan payoffs net of these planned exits. As
we enter the fourth quarter, our new loan pipeline continues its
seasonal ramp and currently sits at its highest level of the year. The
investments we made earlier this year to enhance our credit
administration, enterprise risk management, and banking operations are
now resulting in improved profitability, and despite carrying elevated
expenses associated with legacy issues, total noninterest expense
declined 6.4% from the prior quarter."

Mr. Gordon concluded, "We remain diligently focused on the work still
ahead of us. Our capital ratios remain healthy and continue to improve,
with total risk-based capital at 15.00% and Tier 1 leverage at 9.28%,
and tangible book value per share is approaching the peak levels of
2016. Furthermore, our balance sheet remains highly liquid and flexible,
and we are well positioned for a potential rising interest rate
environment, particularly due to our largely floating-rate loan
portfolio, our strong relationship-based core deposits, and low deposit
beta."

Third Quarter 2017 Highlights

  • Net income increased $2.3 million, or 13%, to $20.5 million for the
    third quarter of 2017 from $18.2 million for the second quarter of
    2017. Pre-tax pre-provision income increased $575,000, or 3%, to $22.6
    million for the third quarter of 2017 from $22.0 million for the
    second quarter of 2017.
  • Return on average assets increased to 1.09% for the third quarter of
    2017, compared to 0.94% for the second quarter of 2017, and return on
    average tangible equity increased to 12.79% for the third quarter of
    2017, compared to 11.89% for the second quarter of 2017.
  • Noninterest income increased 1% to $14.9 million, or 22% of total
    revenues, in the third quarter of 2017 from $14.7 million, or 21% of
    total revenues, in the prior quarter. Opus continued to generate
    strong noninterest income contributions from multiple and diverse
    sources during the third quarter of 2017, including $7.0 million of
    trust administrative fees from our alternative asset IRA custodian
    subsidiary, $2.0 million from our Merchant Banking division, $1.9
    million of treasury management and deposit account fees, $1.5 million
    of escrow and exchange fees, $1.0 million of loan fees, $697,000 in
    positive net equity warrant valuation changes, and a $301,000 dividend
    from FHLB stock. Additionally, total noninterest income included a
    $4.8 million other repossessed asset write-off, $3.9 million of gains
    related to the sale of deposits and real estate assets, and $618,000
    of gains on sales of investment securities.
  • Our alternative asset IRA custodian subsidiary grew Assets Under
    Custody ("AUC") by $1.0 billion during the third quarter of 2017 to
    over $16.0 billion and client accounts grew by more than 2,000 to over
    52,000 as of September 30, 2017.
  • Noninterest expense decreased $3.1 million, or 6%, during the third
    quarter of 2017 to $45.6 million compared to $48.7 million during the
    second quarter of 2017. Noninterest expense during the quarter
    included strategic initiative related expenses totaling $569,000,
    primarily in professional services.
  • Opus' efficiency ratio improved to 66.9% for the third quarter of
    2017, compared to 68.9% for the second quarter of 2017.
  • Our Tier 1 leverage ratio increased 70 basis points to 9.28%, Common
    Equity Tier 1 ratio increased 41 basis points to 11.01%, Tier 1
    risk-based ratio increased 85 basis points to 11.45%, and total
    risk-based capital ratio increased 92 basis points to 15.00%.
  • Tangible book value per as converted common share increased $0.59, or
    4%, to $17.22 as of September 30, 2017 from $16.63 as of June 30,
    2017, and has increased $1.38, or 9%, since December 31, 2016.
  • Enterprise value loans decreased $174.9 million, or 27%, to $479.3
    million as of September 30, 2017 from $654.2 million as of June 30,
    2017, and decreased $436.1 million, or 48%, from $915.4 million as of
    December 31, 2016.
  • Technology Banking loans decreased $17.3 million, or 26%, to $49.1
    million as of September 30, 2017 from $66.5 million as of June 30,
    2017, and decreased $141.4 million, or 74%, from $190.5 million as of
    December 31, 2016. Technology Banking loans have decreased $230.4
    million, or 82%, from their peak of $279.5 million as of June 30,
    2016. As of September 30, 2017, $19.2 million of Technology Banking
    loans were also included in enterprise value loan balances.
  • Healthcare Practice loans decreased $14.5 million, or 34%, to $28.5
    million as of September 30, 2017 from $43.1 million as of June 30,
    2017, and decreased $39.3 million, or 58%, from $67.8 million as of
    December 31, 2016. Healthcare Practice loans have decreased $108.1
    million, or 79%, from their peak of $136.6 million as of September 30,
    2016. As of September 30, 2017, $2.5 million of Healthcare Practice
    loans were also included in enterprise value loan balances.
  • Total criticized loans were $290.6 million as of September 30, 2017,
    compared to $289.0 million as of June 30, 2017, and $359.4 million at
    their peak as of March 31, 2017. Classified loans decreased $13.0
    million during the third quarter of 2017, while special mention loans
    increased $14.5 million.
  • Nonperforming assets decreased $3.9 million, or 6%, to $65.1 million
    as of September 30, 2017 from $69.0 million as of June 30, 2017, and
    decreased $30.0 million, or 32%, from $95.1 million as of December 31,
    2016. Nonperforming assets decreased to 0.89% of total assets as of
    September 30, 2017 from 0.90% of total assets as of June 30, 2017 and
    1.21% of total assets as of December 31, 2016.
  • Opus recorded net recoveries of $1.1 million in the third quarter of
    2017, compared to net charge-offs of $17.4 million in the second
    quarter of 2017.
  • Opus recorded a negative provision for loan losses of $10.6 million
    for the third quarter of 2017, compared to a negative provision of
    $7.1 million for the second quarter of 2017. Our allowance for loan
    losses was $78.2 million, or 1.54% of total loans, as of September 30,
    2017, compared to $87.7 million, or 1.68% of total loans, as of
    June 30, 2017, and $111.4 million, or 1.97% of total loans, as of
    December 31, 2016.
  • New loan fundings increased 4% to $375.4 million in the third quarter
    of 2017 compared to $362.2 million in the second quarter of 2017.
    Opus' loan origination pipeline entering the fourth quarter of 2017
    was at its highest level of the year.
  • During the third quarter of 2017, loan payoffs were $266.5 million,
    loan sales were $6.0 million, and planned exits of previously
    identified loan relationships were $161.2 million.
  • Total deposits decreased $264.2 million, or 4%, during the third
    quarter of 2017 to $6.1 billion as of September 30, 2017, partially
    driven by the sale of five banking offices to optimize our branch
    network that included $96.2 million in deposits, as well as the
    intentional reduction of $25.0 million of higher-cost, more rate
    sensitive deposits in our Fiduciary Banking division. As of
    September 30, 2017, core transaction account deposits were 93% of
    total deposits and business deposits were 61% of total deposits.
  • Opus' cost of deposits increased one basis point from the prior
    quarter to 0.45% and has increased only one basis point since the
    third quarter of 2016. Opus' cost of deposits has declined two basis
    points since the fourth quarter of 2015 when the Federal Reserve began
    raising its target Fed Funds interest rate.
  • Cash and investment securities totaled $1.6 billion as of
    September 30, 2017, compared to $1.8 billion as of June 30, 2017 and
    $775.3 million as of September 30, 2016. The average balance of
    investment securities increased $163.3 million, or 18%, from the prior
    quarter, as purchases were weighted toward the end of the second
    quarter of 2017.

Net Interest Income

Total net interest income was $53.3 million in the third quarter of
2017, compared to $56.0 million in the second quarter of 2017 and $60.7
million in the third quarter of 2016. Net interest income for the nine
months ended September 30, 2017 was $165.4 million, compared to $182.3
million for the nine months ended September 30, 2016.

Interest income from loans decreased $2.3 million, or 4%, to $55.6
million for the third quarter of 2017, as the average balance of loans
decreased $192.5 million, or 4%, from the prior quarter due to loan
payoffs and prepayments, including planned exits and loan sales. While
planned exits decrease our potential future credit volatility, they had
a negative impact on our loan interest income. Interest income from the
acquired loan portfolio increased by $398,000 from the prior quarter to
$2.4 million and decreased by $1.7 million from the third quarter of
2016, due to lower balances of acquired loans and fluctuations in
accretion generated from payoffs.

Interest income from cash and investment securities decreased $484,000,
or 7%, from the prior quarter to $6.8 million for the third quarter of
2017. Interest income from investment securities decreased $56,000, or
1%, during the third quarter to $5.2 million. While the average balance
of investment securities increased $163.3 million, or 18%, from the
prior quarter, due primarily to additional purchases of government
agency securities near the end of the second quarter of 2017, higher
prepayments during the third quarter of 2017 resulted in higher premium
amortization that offset increased interest income from higher average
balances. Interest income from cash decreased $428,000 from the prior
quarter to $1.6 million for the third quarter of 2017, as the average
balance of cash decreased $266.4 million, or 34%.

Interest expense decreased slightly to $9.0 million for the third
quarter of 2017, compared to $9.1 million for the second quarter of 2017
and the third quarter of 2016. Opus' interest expense remained
relatively flat from the linked-quarter and over the past year, as the
average balance of interest bearing liabilities decreased 4% and 3%,
respectively, and Opus' cost of interest bearing liabilities increased
by 2 basis points from both the linked-quarter and the year-ago periods.

Net interest margin decreased five basis points to 3.15% in the third
quarter of 2017 from 3.20% in the second quarter of 2017. The
linked-quarter change was primarily due to less interest recovered on
nonaccrual loans, lower net benefit from prepayments, planned exits, and
higher cost of funds, partially offset by higher balances of investment
securities and higher accretion on acquired loans. Opus' taxable
equivalent net interest margin was 3.17% in the third quarter of 2017,
compared to 3.22% in the second quarter of 2017.

Total loan yield during the third quarter of 2017 decreased six basis
points to 4.29% from 4.35% in the second quarter of 2017 and decreased 8
basis points from 4.37% in the third quarter of 2016. The decrease from
the second quarter of 2017 was due to a lower yield on originated loans,
partially offset by a higher yield on acquired loans. The yield on
originated loans decreased 10 basis points from the linked-quarter to
4.23%, due primarily to lower interest income recovered on nonaccrual
loans, lower net benefit from prepayment activity, planned exits, and
day count in the third quarter. Accretion income from the acquired loan
portfolio had a four basis point impact on net interest margin in the
third quarter of 2017, no impact in the second quarter of 2017, and a
nine basis point impact in third quarter of 2016.

The yield on investment securities decreased to 1.89% in the third
quarter of 2017, compared to 2.28% during the prior quarter, and 2.37%
during the year-ago period, while the yield on cash during the third
quarter of 2017 increased to 1.27%, compared to 1.07% during the prior
quarter and 0.51% during the year-ago period. The decrease in yield on
investment securities from the second quarter of 2017 was driven by
higher premium amortization due to accelerated prepayments of the
underlying loans, including the Freddie Mac security, which was
partially offset by interest on higher average balances of securities.
The Freddie Mac security relates to the sale of $509.0 million of Opus'
multifamily loans through a Freddie Mac sponsored transaction in which
one class of Freddie Mac guaranteed Structured Pass-Through Certificates
was issued and subsequently purchased entirely by Opus. The increase in
yield on interest-bearing cash during the third quarter of 2017 was
primarily driven by the Federal Reserve rate increase announced in June
2017.

Our cost of funds was 0.57% for the third quarter of 2017, an increase
of two basis points from the prior quarter and unchanged from the third
quarter of 2016. Our cost of deposits was 0.45% for the third quarter of
2017, up one basis point from the prior quarter and the third quarter of
2016.

Noninterest Income and Noninterest Expense

Noninterest income increased 1% to $14.9 million in the third quarter of
2017 from $14.7 million in the second quarter of 2017, and decreased 8%
from $16.3 million in the third quarter of 2016. Noninterest income for
the nine months ended September 30, 2017 increased 21% to $42.2 million,
compared to $34.8 million for the nine months ended September 30, 2016.
Noninterest income made up 22% of total revenues during the third
quarter of 2017, compared to 21% in the second quarter of 2017 and 21%
in the third quarter of 2016.

Noninterest income during the third quarter of 2017 included $7.0
million in trust administrative fees, compared to $6.7 million in the
second quarter of 2017, as our alternative asset IRA custodian
subsidiary grew AUC by $1.0 billion to $16.0 billion as of September 30,
2017. Opus' Merchant Banking division, which includes its broker-dealer
subsidiary, Opus Financial Partners, and its principal investing group,
Opus Equity Partners, which manages Opus' bank-sponsored SBIC Fund,
generated $2.0 million of noninterest income during the third quarter of
2017 compared to $842,000 during the second quarter of 2017.
Additionally, our Escrow and Exchange divisions generated $1.5 million
in noninterest income during each of the third and second quarters of
2017. Other noninterest income items included $697,000 of net equity
warrant valuation increases and a $301,000 FHLB dividend.

Total noninterest income during the third quarter of 2017 included a
$4.8 million loss on the write-off of intellectual property that was
previously foreclosed and recorded as repossessed assets during the
second quarter of 2017. Additionally, Opus recorded gains on the sale of
deposits and other assets primarily related to five banking offices
during the third quarter of 2017 totaling $3.9 million and gains on the
sale of investment securities totaling $618,000.

Noninterest expense decreased 6% to $45.6 million for the third quarter
of 2017, compared to $48.7 million for the second quarter of 2017, and
increased 8% from $42.3 million for the third quarter of 2016. Included
in noninterest expense during the third quarter of 2017 was $569,000 of
strategic initiative related expenses, primarily in professional
services. Lower noninterest expenses for the third quarter of 2017 was
primarily driven by a $1.2 million, or 5%, decrease in compensation and
benefits expense, and a $2.2 million, or 35%, decrease in professional
services expense. The linked-quarter decrease in professional services
expense was primarily driven by lower legal expense.

Cash and Investment Securities

Cash and investment securities totaled $1.6 billion as of September 30,
2017, compared to $1.8 billion as of June 30, 2017 and $775.3 million as
of September 30, 2016. Cash and cash equivalents decreased $185.1
million, or 28%, during the third quarter of 2017 to $470.2 million as
of September 30, 2017, and decreased $148.3 million, or 24%, from the
third quarter of 2016. Investment securities decreased $50.3 million, or
4%, during the third quarter of 2017 to $1.1 billion as of September 30,
2017, and increased $933.0 million, or 595%, from $156.8 million as of
September 30, 2016.

At the end of the second quarter of 2017, we had commitments to purchase
$103.3 million of investment securities that were included in other
liabilities, and settled in the third quarter of 2017. We had no such
commitments at the end of the third quarter, thus driving the
linked-quarter fluctuation in other liabilities and correspondingly,
total assets.

Loans

Total loans held-for-investment were $5.1 billion as of September 30,
2017, a decrease of $157.5 million, or 3%, from $5.2 billion as of
June 30, 2017 and a decrease of $1.2 billion, or 20%, from $6.3 billion
as of September 30, 2016. The decrease in total loans during the third
quarter of 2017 was driven by new loan fundings of $375.4 million being
offset by originated loan payoffs of $261.3 million, loan sales of $6.0
million, and planned exits of $161.2 million.

New loan fundings in the third quarter of 2017 increased 4% from the
prior quarter to $375.4 million, including $226.5 million from Income
Property Banking, $47.8 million from Commercial Banking, $45.1 million
from Public Finance, $28.4 million from Structured Finance, $8.4 million
from Media and Entertainment, $7.3 million from Healthcare Provider,
$5.8 million from Corporate Finance, and $5.8 million from Institutional
Syndications. Commercial business loans comprised $110.2 million, or
29%, of total new loan fundings in the third quarter. Loan commitments
originated during the third quarter totaled $367.0 million as compared
to $349.7 million during the second quarter of 2017 and $751.1 million
during the third quarter of 2016. As of September 30, 2017, our unfunded
commitments on originated loans totaled $455.3 million.

Our acquired loan portfolio totaled $141.1 million as of September 30,
2017, a decrease of 6% from $149.6 million as of June 30, 2017 and 24%
from $186.3 million as of September 30, 2016. As of September 30, 2017,
our acquired loan portfolio had a remaining discount of $2.4 million.

Deposits and Borrowings

Deposits totaled $6.1 billion as of September 30, 2017, a decrease of
$264.2 million, or 4%, from $6.3 billion as of June 30, 2017, and a
decrease of $429.9 million, or 7%, from $6.5 billion as of September 30,
2016. During the third quarter of 2017, Opus completed two transactions
in which a total of $96.2 million in deposits related to five banking
offices were sold. Additionally, during the third quarter of 2017 Opus
intentionally reduced the balances of certain higher-cost, more rate
sensitive deposits by $25.0 million, primarily in our Fiduciary Banking
division.

Total demand deposits, including both noninterest-bearing and
interest-bearing demand deposit accounts, were 53% of total deposits as
of September 30, 2017, unchanged from June 30, 2017 and up from 48% as
of September 30, 2016. As of September 30, 2017, business deposits
represented 61% of total deposits, compared to 60% as of June 30, 2017
and September 30, 2016.

Our loan to deposit ratio was 83% as of September 30, 2017 compared to
82% as of June 30, 2017 and 97% as of September 30, 2016.

Federal Home Loan Bank advances were unchanged at $10.0 million as of
September 30, 2017 compared to June 30, 2017 and decreased from $65.0
million as of September 30, 2016.

Asset Quality

During the third quarter of 2017, we continued to reduce our exposure to
previously de-emphasized loan portfolios. Total enterprise value loans
were reduced by $174.9 million, or 27%, during the third quarter of 2017
and totaled $479.3 million as of September 30, 2017. Technology Banking
loans were reduced by $17.3 million, or 26%, during the third quarter of
2017 and totaled $49.1 million as of September 30, 2017. Healthcare
Practice loans were reduced by $14.6 million, or 34%, during the third
quarter of 2017 and totaled $28.5 million as of September 30, 2017. As
of September 30, 2017, $19.2 million of Technology Banking loans and
$2.5 million of Healthcare Practice loans were also included in
enterprise value loan balances. Planned exits through loan payoffs and
sales totaled $161.2 million in the third quarter of 2017, as Opus
continued to reduce the balances of loans we previously announced as
targeted for planned exits. As a result of the successful exit of
previously identified loan relationships, the reserves associated with
these loans were released, which reduced the allowance for loan losses
as required under our methodology and contributed to the negative
provision for loan losses for the third quarter of 2017.

Our allowance for loan losses was $78.2 million, or 1.54% of our total
loan portfolio, as of September 30, 2017, compared to $87.7 million, or
1.68%, as of June 30, 2017 and $61.1 million, or 0.97%, as of
September 30, 2016. The reduction in the allowance for loan losses
during the third quarter of 2017 was driven by the negative provision
described below, partially offset by net recoveries of $1.1 million. Our
acquired loan portfolio had a remaining discount of $2.4 million as of
September 30, 2017. The coverage ratio for the total loan portfolio,
which includes the remaining discount on the acquired loan portfolio,
was 1.59% as of September 30, 2017 compared to 1.74% as of June 30, 2017
and 1.04% as of September 30, 2016. Our allowance for loan losses on
originated loans resulted in a coverage ratio of 1.58% as of
September 30, 2017, compared to 1.72% as of June 30, 2017 and 0.99% as
of September 30, 2016.

We recorded a negative provision of $10.6 million in the third quarter
of 2017, compared to a negative provision of $7.1 million in the second
quarter of 2017 and a provision expense of $40.4 million in the third
quarter of 2016. The negative provision during the third quarter of 2017
was driven by a $9.6 million decline in reserves as a result of the
changes in portfolio mix and decline in portfolio balances, including
planned exits of loan relationships, a $5.0 million decline due to lower
loss factors used to determine loan loss reserves on pass rated loans in
accordance with our allowance methodology, and a net recovery of $1.1
million. These factors were partially offset by $2.9 million from risk
rating migration and additions to specific reserves of $2.0 million. The
allowance on the acquired loan portfolio totaled $585,000 in the third
quarter of 2017, $468,000 in the second quarter of 2017, and $611,000 in
the third quarter of 2016.

Opus recorded net recoveries in the third quarter of 2017 of $1.1
million, compared to net charge-offs of $17.4 million during the second
quarter of 2017 and $39.0 million during the third quarter of 2016. Net
recoveries during the third quarter of 2017 consisted of $472,000 of
charge-offs and $1.5 million of recoveries, predominantly comprised of
commercial business loan relationships. The remaining balance of
originated loans for which charge-offs were previously recorded was $1.7
million as of September 30, 2017, comprised primarily of a Healthcare
Practice loan relationship.

Total nonperforming assets were $65.1 million, or 0.89% of total assets,
as of September 30, 2017, compared to $69.0 million, or 0.90% of total
assets, as of June 30, 2017 and $44.8 million, or 0.58% of total assets,
as of September 30, 2016. The change in nonperforming assets during the
quarter was primarily due to the write-off of other repossessed assets
foreclosed during the second quarter of 2017, partially offset by one
commercial business loan relationship placed on nonaccrual during the
third quarter of 2017. The ratio of the allowance for loan losses to
total nonperforming assets was 120.1% as of September 30, 2017, compared
to 127.2% as of June 30, 2017 and 136.4% as of September 30, 2016.

Total criticized loans increased $1.6 million, or 1%, to $290.6 million
as of September 30, 2017 compared to $289.0 million as of June 30, 2017,
and increased $143.2 million, or 97%, from $147.4 million as of
September 30, 2016. The net increase in total criticized loans during
the third quarter of 2017 was driven by $64.2 million of downgrades,
partially offset by $23.8 million of upgrades and $38.9 million of loan
exits, including payoffs, loan sales, and normal amortization during the
quarter. The net increase in total criticized loans during the third
quarter was comprised of a net increase in special mention loans of
$14.5 million, partially offset by a net decrease in classified loans of
$13.0 million. The increase in special mention loans was driven by $47.2
million of downgrades, partially offset by $12.4 million of upgrades and
$20.3 million of loan payoffs, normal amortization, and migration. The
decrease in classified loans was driven by upgrades of $11.4 million as
well as payoffs and amortization of $26.2 million, partially offset by
downgrades of $24.7 million.

The net increase in total criticized loans consisted of a $6.7 million
increase in real estate secured loans and a $5.1 million decrease in
commercial business loans. Commercial business loans comprised $12.4
million of loans upgraded out of criticized categories and $32.2 million
of loan payoffs and amortization, partially offset by $39.5 million of
downgrades during the third quarter of 2017. Real estate secured loans
comprised $24.8 million of downgrades during the third quarter of 2017,
partially offset by $11.4 million of loans upgraded out of criticized
categories and $6.6 million of loan payoffs and amortization.

Commercial Business Loans

Commercial business loans on nonaccrual increased to $52.9 million as of
September 30, 2017 from $51.4 million as of June 30, 2017 and were
mainly comprised of two Corporate Finance relationships totaling $21.8
million, two Technology Banking relationships totaling $17.7 million,
two Commercial Banking relationships totaling $11.5 million, and one
Healthcare Practice relationship totaling $1.7 million. Total criticized
commercial business loans as of September 30, 2017 were $187.5 million,
or 14% of total commercial business loans, compared to $192.5 million,
or 13%, as of June 30, 2017. As of September 30, 2017, we had specific
reserves of $18.6 million on $51.0 million of criticized commercial
business loans, compared to $16.6 million of specific reserves on $39.4
million of criticized commercial business loans as of June 30, 2017.

As of September 30, 2017, the total allowance recorded for commercial
business loans, which includes general and specific reserves, equaled
$56.4 million, or 4.3% of total commercial business loans, compared to
$66.6 million, or 4.4% of total commercial business loans, as of
June 30, 2017. At September 30, 2017, the $18.6 million of specific
reserves for commercial business loans were comprised of $7.7 million
for Technology Banking loans, $3.7 million for Commercial Banking loans,
and $7.2 million for Corporate Finance loans.

Commercial Real Estate Loans

Opus' $1.1 billion commercial real estate loan portfolio experienced no
charge-offs in the third quarter of 2017, no charge-offs in the second
quarter of 2017, and charge-offs of $2.9 million in the third quarter of
2016. Commercial real estate loans on nonaccrual totaled $11.5 million,
or 1.0% of total commercial real estate loans as of September 30, 2017,
compared to $11.6 million, or 1.0%, in the prior quarter. Total
criticized commercial real estate loans were $82.5 million as of
September 30, 2017, compared to $62.9 million as of June 30, 2017. The
increase in commercial real estate total criticized loans was comprised
of three loan relationships totaling $24.8 million downgraded into
special mention, primarily driven by one Healthcare loan relationship,
partially offset by $5.2 million of loan payoffs and amortization. As of
September 30, 2017, commercial real estate loans had no specific
reserves and a total allowance of $11.1 million, or 1.0% of total
commercial real estate loans, compared to no specific reserves and a
total allowance of $10.2 million, or 0.9% of total commercial real
estate loans, as of June 30, 2017, and no specific reserves and a total
allowance of $9.0 million, or 0.7% of total commercial real estate
loans, as of September 30, 2016.

Multifamily Loans

Opus' $2.4 billion multifamily loan portfolio has experienced no
charge-offs since our inception in 2010. There were no multifamily loans
on nonaccrual status as of September 30, 2017 and no delinquencies.
There were no specific reserves for loans within the multifamily
portfolio as of September 30, 2017 and total criticized multifamily
loans were $15.7 million, or 0.7% of total multifamily loans, compared
to $21.1 million, or 0.9% of total multifamily loans, as of June 30,
2017. The decrease in multifamily criticized loans was comprised of one
loan relationship totaling $4.0 million upgraded out of special mention.
As of September 30, 2017, our multifamily portfolio had a total
allowance of $9.0 million, or 0.4% of total multifamily loans, as
compared to $9.1 million, or 0.4%, in the prior quarter and $9.0
million, or 0.3%, as of September 30, 2016.

Capital

Our capital ratios increased from the prior quarter as a result of
increased retained earnings, lower loan balances from planned loan exits
and elevated loan payoffs, and improvements to the risk weightings of
loans in our multifamily portfolio. As of September 30, 2017, our Tier 1
leverage ratio was 9.28%, Common Equity Tier 1 ratio was 11.01% and
total risk-based capital ratio was 15.00%, compared to 8.58%, 10.60% and
14.08%, respectively, as of June 30, 2017. As of September 30, 2016, our
Tier 1 leverage, Common Equity Tier 1, and total risk-based capital
ratios were 8.11%, 9.15% and 12.22%, respectively. Stockholders' equity
totaled over $1.0 billion as of September 30, 2017, an increase of 2%
from $1.0 billion as of June 30, 2017 and an increase of 8% from $943.9
million as of September 30, 2016. Our tangible book value per as
converted common share increased to $17.22 as of September 30, 2017 from
$16.63 as of June 30, 2017 and $16.42 as of September 30, 2016.

On August 17, 2017, we entered into an agreement with certain entities
affiliated with Fortress Investment Group LLC ("Fortress") whereby Opus
Bank and Fortress agreed to exchange 1,405,500 shares of common stock,
no par value, held by Fortress for 28,110 newly issued shares of Opus'
Series A Non-Cumulative Non-Voting Preferred Stock, no par value, which
are convertible to common stock at an exchange ratio of 50 shares for
each share of Series A Preferred Stock. The exchange transaction was an
accommodation to Fortress to reduce its ownership of voting common stock
and had no effect on Opus' total stockholders' equity or diluted
earnings per share, and did not impact Fortress' beneficial ownership of
Opus' capital stock on a fully diluted basis.

During the first quarter of 2017, we adopted ASU 2016-09, Improvements
to Employee Share-Based Payment Accounting
("ASU 2016-09"). Under
ASU 2016-09, excess tax benefits and deficiencies relating to employee
share-based awards are recorded as income tax expense on a prospective
basis as compared to additional paid-in capital in every period prior to
2017. As a result, during the third quarter of 2017 we recognized tax
benefits of $18,000 in connection with the vesting of restricted stock
awards through income tax expense rather than additional paid-in
capital, which decreased our effective tax rate for the third quarter of
2017 by 0.06%. The adoption of ASU 2016-09 resulted in $248,000 and
$769,000 of tax deficiencies in the first and second quarters of 2017,
respectively, which increased our quarterly effective tax rates by 1.97%
and 2.64%. There was no impact to the financial results of any prior
periods reported.

Conference Call and Webcast Details
Date: Monday, October
23, 2017
Time: 8:00 a.m. PT (11:00 a.m. ET)

Phone Number: (855) 265-3237
Conference ID: 92534484
Webcast
URL: http://investor.opusbank.com/event

Analysts, investors, and the general public may listen to the Bank's
discussion of its third quarter performance and participate in the
question/answer session by using the phone number listed above or
through a live webcast of the conference available through a link on the
investor relations page of Opus' website at: http://investor.opusbank.com/event.
The webcast will include a slide presentation, enabling conference
participants to experience the discussion with greater impact. It is
recommended that participants dial into the conference call or log into
the webcast approximately 10 minutes prior to the call.

Replay Information: For those who are not able to listen to the call, an
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 92534484. The call replay will
be available through November 23, 2017.

About Opus Bank

Opus Bank is an FDIC insured California-chartered commercial bank with
$7.3 billion of total assets, $5.1 billion of total loans, and $6.1
billion in total deposits as of September 30, 2017. Opus Bank provides
superior ideas and solutions, and banking products 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, 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. 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 Merchant
Banking division and its broker-dealer subsidiary, Opus Financial
Partners, LLC, Member FINRA/SIPC. Opus Bank's alternative asset IRA
custodian subsidiary has over $16 billion of custodial assets and
approximately 52,000 client accounts, which are comprised of
self-directed investors, financial institutions, capital raisers and
financial advisors. Opus Bank operates 50 banking offices, including 31
in California, 16 in the Seattle/Puget Sound region in Washington, two
in the Phoenix metropolitan area of Arizona and one in Portland, Oregon.
Opus Bank 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 may
include forward-looking statements related to Opus' 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' filings with the Federal
Deposit Insurance Corporation, including, but not limited to, the risk
factors in Opus' annual report on Form 10-K. These filings are available
on the Investor Relations page of Opus' website at: http://investor.opusbank.com.

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

                       
Consolidated Statements of Income (Loss)
(unaudited)       For the three months ended For the nine months ended
($ in thousands, except per share amounts) September 30,
2017
June 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
Interest income:
Loans $ 55,566 $ 57,834 $ 68,191 $ 173,632 $ 201,560
Investment securities 5,156 5,212 939 13,436 1,984
Due from banks 1,627   2,055   641   5,643   1,955  
Total interest income 62,349   65,101   69,771   192,711   205,499  
Interest expense:
Deposits 7,099 7,122 6,917 21,402 19,747
Federal Home Loan Bank advances 25 25 232 117 1,443
Subordinated debt 1,923   1,923   1,923   5,768   1,964  
Total interest expense 9,047   9,070   9,072   27,287   23,154  
Net interest income 53,302 56,031 60,699 165,424 182,345
Provision (negative provision) for loan losses (10,646 ) (7,098 ) 40,446   (11,776 ) 56,319  
Net interest income after provision (negative provision) for loan
losses
63,948   63,129   20,253   177,200   126,026  
Noninterest income:
Fees and service charges on deposit accounts 1,863 1,984 2,025 5,770 5,892
Escrow and exchange fees 1,510 1,487 1,868 4,447 5,477
Trust administrative fees 6,961 6,717 7,285 20,060 13,550
Gain (loss) on sale of loans (3 ) 93 336 (209 ) 649
Gain (loss) on sale of assets 3,862 (82 ) 219 3,778 197
Gain (loss) from OREO and other repossessed assets (4,798 ) 78 15 (4,859 ) (38 )
Gain on sale of investment securities 618 39 1,175
Bank-owned life insurance, net 865 886 897 2,640 2,643
Other income 4,040   3,523   3,605   9,352   6,408  
Total noninterest income 14,918   14,725   16,250   42,154   34,778  
Noninterest expense:
Compensation and benefits 25,515 26,753 23,016 81,465 62,919
Professional services 4,005 6,189 2,937 14,733 7,834
Occupancy expense 3,777 4,108 3,557 11,664 9,992
Depreciation and amortization 1,755 1,789 2,021 5,429 5,302
Deposit insurance and regulatory assessments 1,208 812 1,059 4,082 3,366
Insurance expense 335 356 354 1,046 1,085
Data processing 858 821 830 2,463 2,499
Software licenses and maintenance 1,123 1,127 1,053 3,408 2,486
Office services 2,016 1,817 1,973 6,233 4,786
Amortization of other intangible assets 1,479 1,479 1,479 4,438 3,302
Advertising and marketing 587 584 555 1,831 1,150
Litigation expense (recovery) 43 (88 ) 444 84 124
Other expenses 2,915   2,980   3,051   7,536   6,742  
Total noninterest expense 45,616   48,727   42,329   144,412   111,587  
Income (loss) before income tax expense (benefit) 33,250 29,127 (5,826 ) 74,942 49,217
Income tax expense (benefit) 12,705   10,888   (2,805 ) 28,500   18,809  
Net income (loss) $ 20,545   $ 18,239   $ (3,021 ) $ 46,442   $ 30,408  
Basic earnings per common share $ 0.55 $ 0.49 $ (0.09 ) $ 1.26 $ 0.90
Diluted earnings per common share 0.54 0.48 (0.09 ) 1.23 0.87
Weighted average shares - basic 36,715,035 37,318,962 34,274,756 36,599,924 33,612,018
Weighted average shares - diluted 38,089,306 38,037,452 34,274,756 37,611,591 34,966,856
 
 
 
Consolidated Balance Sheets
(unaudited)       As of
($ in thousands, except share amounts) September 30,
2017
      June 30,
2017
      September 30,
2016
 
Assets
Cash and due from banks $ 42,918 $ 56,168 $ 49,753
Due from banks – interest-bearing 427,289 599,169 568,714
Investment securities available-for-sale, at fair value 1,089,844 1,140,182 156,813
Loans held-for-investment 5,060,556 5,218,091 6,290,107
Less allowance for loan losses (78,176 ) (87,745 ) (61,103 )
Loans held-for-investment, net 4,982,380 5,130,346 6,229,004
OREO and other repossessed assets 5,208 558
Premises and equipment, net 27,935 33,684 37,937
Goodwill 331,832 331,832 328,285
Other intangible assets, net 46,280 47,759 52,198
Deferred tax assets, net 48,379 51,807 32,652
Cash surrender value of bank owned life insurance, net 136,613 122,635 120,119
Accrued interest receivable 19,534 19,463 21,848
Federal Home Loan Bank stock 17,250 17,250 17,250
Other assets 140,946   120,956   94,078  
Total assets $ 7,311,200   $ 7,676,459   $ 7,709,209  
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing demand $ 849,886 $ 935,321 $ 931,063
Interest-bearing demand 2,351,910 2,410,155 2,185,216
Money market and savings 2,462,268 2,538,588 2,838,433
Time deposits 405,787   449,995   544,989  
Total deposits 6,069,851 6,334,059 6,499,701
Federal Home Loan Bank advances 10,000 10,000 65,000
Subordinated debt, net 132,678 132,612 132,391
Accrued interest payable 2,144 3,921 2,157
Other liabilities 73,525   194,096   66,102  
Total liabilities 6,288,198   6,674,688   6,765,351  
Stockholders' equity:
Preferred stock:
Authorized 200,000,000 shares; issued 28,722 and 612 and 612 shares,
respectively
26,875 581 581
Common stock, no par value per share:
Authorized 200,000,000 shares; issued 36,432,402 and 37,790,356 and
34,551,270 shares, respectively
702,455 728,749 678,291
Additional paid-in capital 62,216 60,173 54,349
Retained earnings 243,805 223,259 216,316
Treasury stock, at cost; 411,595 and 408,987 and 273,236 shares,
respectively
(10,244 ) (10,198 ) (7,001 )
Accumulated other comprehensive income (loss) (2,105 ) (793 ) 1,322  
Total stockholders' equity 1,023,002   1,001,771   943,858  
Total liabilities and stockholders' equity $ 7,311,200   $ 7,676,459   $ 7,709,209  
 
 
                             
Selected Financial Data
For the three months ended For the nine months ended
(unaudited) September 30,
2017
June 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
Return on average assets 1.09 % 0.94 % (0.16 )% 0.81 % 0.57 %
Return on average stockholders' equity 8.02 7.35 (1.25 ) 6.26 4.38
Return on average tangible equity (1) 12.79 11.89 (2.07 ) 10.16 6.89
Efficiency ratio (2) 66.87 68.87 55.01 69.57 51.39
Noninterest expense to average assets 2.43 2.52 2.24 2.51 2.07
Yield on interest-earning assets 3.68 3.72 4.04 3.69 4.18
Cost of deposits (3) 0.45 0.44 0.44 0.44 0.45
Cost of funds (4) 0.57 0.55 0.57 0.55 0.50
Net interest margin 3.15 3.20 3.52 3.16 3.71
Net interest margin, tax equivalent (5) 3.17 3.22 3.52 3.18 3.71
Loan to deposits 83.37 82.38 96.78 83.37 96.78
 
(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, FHLB advances and subordinated debt.
(5) Net interest margin, tax equivalent has been adjusted to a taxable
equivalent basis using a 35% tax rate.
 
 
 
Capital Ratios As of
(unaudited) September 30, 2017 (1)   June 30, 2017   September 30, 2016
Tier 1 leverage ratio 9.28% 8.58% 8.11%
Tier 1 risk-based capital ratio 11.45 10.60 9.15
Total risk-based capital ratio 15.00 14.08 12.22
Common Equity Tier 1 ratio 11.01 10.60 9.15
 
(1)     Ratios are preliminary until filing of our September 30, 2017 call
report.
 
 
                             
Loan Fundings
(unaudited) For the three months ended For the nine months ended
($ in thousands) September 30,
2017
June 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
Loans funded:
Real estate mortgage loans:
Single-family residential $ $ $ $ $
Multifamily residential 229,623 148,842 238,363 489,737 743,444
Commercial real estate 23,340 12,135 76,833 50,948 260,076
Construction and land loans 10,995 13,591 15,482 40,142 42,373
Commercial business loans 110,208 179,889 301,669 365,758 794,572
Small Business Administration loans 1,195 7,693 1,783 10,069 5,997
Consumer and other loans        
Total loan fundings $ 375,361   $ 362,150   $ 634,130   $ 956,654   $ 1,846,462
 
 
     
Composition of Loan Portfolio As of
(unaudited) September 30,
2017
      June 30,
2017
      September 30,
2016
($ in thousands) Amount       % of
Total loans
Amount       % of
Total loans
Amount       % of
Total loans
Originated loans held-for-investment
Real estate mortgage loans:
Single-family residential $ 62,739 1.2 % $ 66,484 1.3 % $ 85,970 1.4 %
Multifamily residential 2,342,071 46.3 2,250,464 43.1 2,780,139 44.2
Commercial real estate 1,095,996 21.7 1,161,241 22.3 1,301,001 20.7
Construction and land loans 96,374 1.9 84,687 1.6 93,070 1.5
Commercial business loans 1,298,486 25.7 1,484,361 28.4 1,824,645 29.0
Small Business Administration loans 23,532 0.5 20,962 0.4 18,609 0.3
Consumer and other loans 274   0.0   282   0.0   352   0.0  
Total originated loans 4,919,472 97.2 5,068,481 97.1 6,103,786 97.0
 
Acquired loans held-for-investment
Real estate mortgage loans:
Single-family residential 27,564 0.5 28,670 0.5 37,583 0.6
Multifamily residential 53,183 1.1 53,906 1.0 64,439 1.0
Commercial real estate 29,331 0.7 33,518 0.7 46,365 0.9
Construction and land loans 1,437 0.0 1,457 0.0 2,017 0.0
Commercial business loans 12,253 0.1 13,604 0.2 14,991 0.2
Small Business Administration loans 11,353 0.2 12,097 0.2 13,616 0.2
Consumer and other loans 5,963   0.1   6,358   0.1   7,310   0.1  
Total acquired loans 141,084   2.8   149,610   2.9   186,321   3.0  
Total gross loans $ 5,060,556   100.0 % $ 5,218,091   100.0 % $ 6,290,107   100.0 %
 
 
     
Composition of Deposits As of
(unaudited) September 30,
2017
      June 30,
2017
      September 30,
2016
($ in thousands) Amount       % of
Total deposits
Amount       % of
Total deposits
Amount       % of
Total deposits
 
Noninterest bearing $ 849,886 14.00 % $ 935,321 14.77 % $ 931,063 14.32 %
Interest bearing demand 2,351,910 38.75 2,410,155 38.05 2,185,216 33.62
Money market and savings 2,462,268 40.57 2,538,588 40.08 2,838,433 43.67
Time deposits 405,787   6.68   449,995   7.10   544,989   8.39  
Total deposits $ 6,069,851   100.00 % $ 6,334,059   100.00 % $ 6,499,701   100.00 %
 
 
               
Consolidated average balance sheet, interest, yield and rates
     

For the three months ended

September 30,

   

For the three months ended

June 30,

For the three months ended

September 30,

(unaudited) 2017 2017 2016
($ in thousands) Average
Balance
    Interest     Yields/
Rates
Average
Balance
    Interest Yields/
Rates
Average
Balance
Interest Yields/
Rates
Assets:
Interest-earning assets:
Due from banks $ 506,502 $ 1,627 1.27 % $ 772,900 $ 2,055 1.07 % $ 498,881 $ 641 0.51 %
Investment securities 1,079,627 5,156 1.89 916,362 5,212 2.28 157,334 939 2.37
Acquired loans 145,453 2,427 6.62 155,404 2,029 5.24 197,904 4,155 8.35
Originated Loans 4,989,405   53,139   4.23   5,171,997   55,805   4.33   6,014,394   64,036   4.24  
Total loans $ 5,134,858   $ 55,566   4.29   $ 5,327,401   $ 57,834     4.35   $ 6,212,298   $ 68,191     4.37  
Total interest-earning assets $ 6,720,987 $ 62,349 3.68 $ 7,016,663 $ 65,101 3.72 $ 6,868,513 $ 69,771 4.04
Noninterest-earning assets 725,659   728,489   661,332  
Total assets $ 7,446,646   $ 7,745,152   $ 7,529,845  
 
Liabilities and stockholders' equity:
Interest-bearing deposits
Interest-bearing demand $ 2,361,961 $ 1,089 0.18 % $ 2,393,563 $ 1,154 0.19 % $ 2,067,238 $ 810 0.16 %
Money market and savings 2,534,236 4,916 0.77 2,657,816 4,856 0.73 2,739,540 4,936 0.72
Time deposits 426,390   1,094   1.02   472,716   1,112   0.94   547,603   1,171   0.85  

Total interest-bearing deposits

$ 5,322,587 $ 7,099 0.53 $ 5,524,095 $ 7,122 0.52 $ 5,354,381 $ 6,917 0.51
Subordinated debt 132,641 1,923 5.75 132,575 1,923 5.82 132,350 1,923 5.78
FHLB advances 10,000   25   0.99   10,000   25   1.00   127,011   232   0.73  

Total interest-bearing liabilities

$ 5,465,228 $ 9,047 0.66 $ 5,666,670 $ 9,070 0.64 $ 5,613,742 $ 9,072 0.64
Noninterest-bearing deposits 881,752 934,961 889,051
Other liabilities 83,517   147,980   65,238  
Total liabilities $ 6,430,497 $ 6,749,611 $ 6,568,031
 
Total stockholders' equity $ 1,016,149   $ 995,541   $ 961,814  

Total liabilities and stockholders' equity

$ 7,446,646   $ 7,745,152   $ 7,529,845  
 
Net interest income $ 53,302   $ 56,031   $ 60,699  
 
Net interest spread (1) 3.02 % 3.08 % 3.40 %
 
Net interest margin (2) 3.15 % 3.20 % 3.52 %

Net interest margin, tax equivalent (3)

3.17 % 3.22 % 3.52 %
 
(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.
(3) Net interest margin, tax equivalent has been adjusted to a taxable
equivalent basis using a 35% tax rate.
 
 
Consolidated average balance sheet, interest, yield and rates
      For the nine months ended September 30,
2017       2016
(In thousands) Average
Balance
      Interest       Yields/
Rates
Average
Balance
      Interest       Yields/
Rates
Assets:
Interest-earning assets
Due from banks $ 741,916 $ 5,643 1.02 % $ 514,607 $ 1,955 0.51 %
Investment securities 906,566 13,436 1.98 151,855 1,984 1.75
Acquired loans 156,702 7,286 6.22 230,216 19,426 11.27
Originated Loans 5,185,848   166,346   4.29   5,668,443   182,134   4.29  
Total loans $ 5,342,550   $ 173,632   4.35   $ 5,898,659   $ 201,560     4.56  
Total interest-earning assets $ 6,991,032 $ 192,711 3.69 $ 6,565,121 $ 205,499 4.18
Noninterest-earning assets 696,662   621,784  
Total assets $ 7,687,694   $ 7,186,905  
 
Liabilities and stockholders' equity:
Interest-bearing deposits
Interest-bearing deposits $ 2,416,532 $ 3,376 0.19 % $ 1,705,134 $ 2,245 0.18 %
Money market and savings 2,650,565 14,729 0.74 2,658,903 14,059 0.71
Time deposits 467,310   3,297   0.94   553,581   3,443   0.83  

Total interest-bearing deposits

$ 5,534,407 $ 21,402 0.52 $ 4,917,618 $ 19,747 0.54
Subordinated debt 132,575 5,768 5.82 45,404 1,964 5.78
FHLB advances 15,842   117   0.99   338,650   1,443   0.57  
Total interest-bearing liabilities $ 5,682,824 $ 27,287 0.64 $ 5,301,672 $ 23,154 0.58
Noninterest-bearing deposits 912,496 896,089
Other liabilities 100,937   62,228  
Total liabilities $ 6,696,257 $ 6,259,989
 
Total stockholders' equity $ 991,437   $ 926,916  

Total liabilities and stockholders' equity

$ 7,687,694   $ 7,186,905  
 
Net interest income $ 165,424   $ 182,345  
 
Net interest spread (1) 3.05 % 3.60 %
 
Net interest margin (2) 3.16 % 3.71 %

Net interest margin, tax equivalent (3)

3.18 % 3.71 %
 
(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.
(3) Net interest margin, tax equivalent has been adjusted to a taxable
equivalent basis using a 35% tax rate.
 
 
           
Allowance for Loan Losses
(unaudited)       For the three months ended For the nine months ended
($ in thousands) September 30,
2017
      June 30,
2017
      September 30,
2016
September 30,
2017
September 30,
2016
Allowance for loan losses-balance at beginning of period $ 87,745 $ 112,230 $ 59,694 $ 111,410 $ 44,147
(Recapture) Provision for loan losses:
Acquired loans 117 (2 ) (173 ) 21 (469 )
Originated loans (10,763 ) (7,096 ) 40,619   (11,797 ) 56,788  
Total provision for loan losses (10,646 ) (7,098 ) 40,446 (11,776 ) 56,319
Charge-offs:
Acquired loans
Originated loans (472 ) (17,799 ) (39,075 ) (23,987 ) (39,440 )
Total charge-offs (472 ) (17,799 ) (39,075 ) (23,987 ) (39,440 )
Recoveries:
Acquired loans
Originated loans 1,549   412   38   2,529   77  
Total recoveries 1,549   412   38   2,529   77  
Total net recoveries (charge-offs) 1,077   (17,387 ) (39,037 ) (21,458 ) (39,363 )
Allowance for loan losses-balance at end of period $ 78,176   $ 87,745   $ 61,103   $ 78,176   $ 61,103  
 
 
 
Asset Quality Information
(unaudited)       As of
($ in thousands) September 30,
2017
      June 30,
2017
      September 30,
2016
Nonperforming assets
Nonaccrual loans $ 65,082 $ 63,754 $ 44,244
OREO and other repossessed assets   5,208   558  
Total nonperforming assets 65,082 68,962 44,802
Nonperforming assets to total assets 0.89 % 0.90 % 0.58 %
Accruing loans 90 days or more past due $ 478 $ 503 $ 720
Accruing troubled debt restructured loans 140 155 170
 
Allowance for loan losses - Originated loans 77,591 87,277 60,492
Allowance for loan losses - Acquired loans 585   468   611  
Total allowance for loan losses $ 78,176 $ 87,745 $ 61,103
Remaining acquisition discount on acquired loans $ 2,432 $ 2,971 $ 4,630
 
Allowance for loan losses to non-accrual loans 120.1 % 137.6 % 138.1 %
Allowance for loan losses acquired loans to acquired loans 0.41 0.31 0.33
Allowance for loan losses originated loans to originated loans 1.58 1.72 0.99
Total allowance for loan losses to total loans 1.54 1.68 0.97
Allowance for loan losses and remaining acquisition discount on
acquired loans to gross acquired loans (1)
2.10 2.25 2.74
Allowance for loan losses and remaining acquisition discount to
total gross loans (1)
1.59 1.74 1.04
 
(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.
 
 
 
Risk Rating by Loan Product
(Unaudited)
($ in thousands)       Pass      

Special

Mention

      Classified      

Total Loans

     

Nonaccrual

loans

     

Total

allowance

As of September 30, 2017
Real estate mortgage loans:
Single-family residential $ 89,507 $ 81 $ 715 $ 90,303 $ $ 236
Multifamily residential 2,379,520 12,553 3,181 2,395,254 8,990
Commercial real estate 1,042,854 58,454 24,019 1,125,327 11,476 11,067
Construction and land loans 97,811 97,811 1,068
Commercial business loans 1,123,254 49,099 138,386 1,310,739 52,859 56,437
Small Business Administration loans 31,792 872 2,221 34,885 356
Consumer and other loans 5,238   63   936   6,237   746   22
Total loans $ 4,769,976   $ 121,122   $ 169,458   $ 5,060,556   $ 65,081   $ 78,176
 
As of June 30, 2017
Real estate mortgage loans:
Single-family residential $ 94,347 $ 82 $ 725 $ 95,154 $ $ 247
Multifamily residential 2,283,268 16,556 4,546 2,304,370 9,127
Commercial real estate 1,131,835 46,231 16,693 1,194,759 11,581 10,220
Construction and land loans 78,685 7,459 86,144 1,327
Commercial business loans 1,305,418 35,286 157,261 1,497,965 51,409 66,551
Small Business Administration loans 29,896 898 2,265 33,059 249
Consumer and other loans 5,621   63   956   6,640   764   24
Total loans $ 4,929,070   $ 106,575   $ 182,446   $ 5,218,091   $ 63,754   $ 87,745
 
As of September 30, 2016
Real estate mortgage loans:
Single-family residential $ 121,795 $ 1,128 $ 630 $ 123,553 $ $ 333
Multifamily residential 2,842,445 2,133 2,844,578 9,025
Commercial real estate 1,320,721 15,690 10,955 1,347,366 7,175 9,043
Construction and land loans 95,069 18 95,087 944
Commercial business loans 1,726,305 51,168 62,163 1,839,636 36,628 41,535
Small Business Administration loans 29,423 1,045 1,757 32,225 188
Consumer and other loans 6,930   41   691   7,662   441   35
Total loans $ 6,142,688   $ 71,223   $ 76,196   $ 6,290,107   $ 44,244   $ 61,103
 
 
 
Risk Rating by Lending Division
(Unaudited)
($ in thousands)       Pass      

Special

Mention

      Classified     Total Loans      

Nonaccrual

loans

As of September 30, 2017
Income Property Banking $ 3,020,098 $ 19,802 $ 984 $ 3,040,884 $
Commercial Banking 388,323 52,340 53,515 494,178 11,543
Structured Finance 321,618 6,861 13,736 342,215 11,477
Healthcare Provider 222,044 34,075 25,999 282,118
Healthcare Practice 21,370 2,446 4,688 28,504 1,656
Corporate Finance 225,277 3,845 40,609 269,731 21,773
Institutional Syndication 258,355 (209 ) 1 258,146
Public Finance 127,147 127,147
Technology Banking 21,497 27,613 49,110 17,705
Other divisions (2) 164,247   1,753   2,523   168,523   927
Total loans $ 4,769,976   $ 121,122   $ 169,458   $ 5,060,556   $ 65,081
 
As of June 30, 2017
Income Property Banking $ 2,920,926 $ 21,465 $ 991 $ 2,943,382 $
Commercial Banking 443,247 33,697 60,962 537,906 12,078
Structured Finance 347,451 17,912 15,201 380,564 11,581
Healthcare Provider 305,456 25,466 18,633 349,555
Healthcare Practice 33,830 527 8,692 43,049 5,614
Corporate Finance 308,003 37,103 345,106 9,192
Institutional Syndication 297,382 (241 ) 1 297,141
Public Finance 84,524 84,524
Technology Banking 21,810 6,205 38,437 66,452 24,313
Other divisions (2) 166,441   1,303   2,668   170,412   976
Total loans $ 4,929,070   $ 106,575   $ 182,446   $ 5,218,091   $ 63,754
 
As of September 30, 2016
Income Property Banking $ 3,453,124 $ 4,239 $ $ 3,457,363 $
Commercial Banking 628,858 18,620 10,047 657,525 770
Structured Finance 499,460 11,602 511,062
Healthcare Provider 362,980 8,532 371,512
Healthcare Practice 111,943 4,320 20,315 136,578 14,221
Corporate Finance 431,637 12,616 1,119 445,372 1,119
Institutional Syndication 287,480 (427 ) (338 ) 1 286,715
Public Finance
Technology Banking 203,035 7,325 43,374 253,734 27,420
Other divisions (2) 164,171   4,396   1,679   170,246   714
Total loans $ 6,142,688   $ 71,223   $ 76,196   $ 6,290,107   $ 44,244
 
(1)     Represents unamortized net deferred loan origination fees on
syndicated lines of credit that have no outstanding principal
balances at period end.
(2) Other divisions is comprised of single-family residential loans,
consumer and other loans, and specialty banking divisions including
Business Banking and Media and Entertainment Banking.
 
 

Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted
accounting principles in the United States ("GAAP"). We believe that the
presentation of certain non-GAAP financial measures assists investors in
evaluating our financial results. These non-GAAP measures include our
return on average tangible equity and tangible book value per as
converted common share. These non-GAAP measures should be taken together
with the corresponding GAAP measures and should not be considered a
substitute of the GAAP measures.

The following tables present a reconciliation of the most comparable
GAAP financial measures and ratios to the non-GAAP financial measures
and ratios:

Non-GAAP return on average tangible equity            
(unaudited)       For the three months ended For the nine months ended
($ in thousands) September 30,
2017
      June 30,
2017
      September 30,
2016
September 30,
2017
September 30,
2016
Average tangible equity:
Average stockholders' equity $ 1,016,149 $ 995,541 $ 961,814 $ 991,437 $ 926,916
Less:
Average goodwill 331,832 331,832 328,285 331,832 308,584
Average other intangible assets 47,105   48,583   52,996   48,589   28,570  
Average tangible equity 637,212 615,126 580,533 611,016 589,762
Net income $ 20,545 $ 18,239 $ (3,021 ) $ 46,442 $ 30,408
Return on average stockholders' equity 8.02 % 7.35 % (1.25 )% 6.26 % 4.38 %
Non-GAAP return on average tangible equity 12.79 11.89 (2.07 ) 10.16 6.89
 
 
 
Non-GAAP tangible book value per as converted common share
(unaudited)       As of
($ In thousands, except share amounts) September 30,
2017
      June 30,
2017
      September 30,
2016
Tangible equity:
Total stockholders' equity $ 1,023,002 $ 1,001,771 $ 943,858
Less:
Goodwill 331,832 331,832 328,285
Other intangible assets, net 46,280   47,759   52,198
Tangible equity 644,890 622,180 563,375
Shares of common stock outstanding 36,020,807 37,381,369 34,278,034
Shares of common stock to be issued upon conversion of preferred
stock
1,436,100   30,600   30,600
Total as converted shares of common stock outstanding (1) 37,456,907   37,411,969   34,308,634
Book value per as converted common share 27.31 26.78 27.51
Tangible book value per as converted common share 17.22 16.63 16.42
 
(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.
 

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