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Opus Bank Reports Fourth Quarter and Year End 2018 Results

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Opus Bank ("Opus") (NASDAQ:OPB) announced today a net loss of $6.9
million, or $(0.20) per diluted share, for the fourth quarter of 2018
and net income of $30.9 million, or $0.81 per diluted share, for the
year ended December 31, 2018, compared to net income of $9.4 million, or
$0.25 per diluted share, for the third quarter of 2018 and net income of
$47.6 million, or $1.26 per diluted share, for the year ended
December 31, 2017.

Net loss for the fourth quarter of 2018 included a pre-tax restructuring
charge of $20.4 million related to the previously announced CEO
transition, corporate strategy initiatives and actions intended to make
Opus more profitable and efficient over time. These actions and
initiatives address recent changes in interest rates and are expected to
better enable the company to contain expense growth and improve
operating leverage, helping Opus continue to remain competitive in
today's business environment. The table below provides detail on the
restructuring charge incurred during the fourth quarter of 2018. These
items impacted net income for the fourth quarter and year ended
December 31, 2018 by $17.2 million, or $0.47 per diluted share.

 
Type of Cost Amount

(in millions)

Bond Portfolio Repositioning $ 9.9
CEO Transition 7.1
Noninterest Expense Reduction Initiative 2.0
Professional Services and other charges   1.4
Total Restructuring Charge $ 20.4
 

Additionally, Opus announced today that its Board of Directors has
approved the payment of a quarterly cash dividend of $0.11 per common
share payable on February 21, 2019 to common stockholders and to its
Series A Preferred stockholders of record as of February 7, 2019.

Fourth Quarter and Year End 2018 Highlights

  • Net interest income increased 3.2% compared to the prior
    quarter, driven by increases in interest income on loans and
    investment securities.
  • Net interest margin expanded nine basis points to 3.07% compared
    to the prior quarter due to the benefit of loan repricing during the
    fourth quarter and lower premium amortization on investment
    securities, partially offset by a higher cost of deposits.
  • Loans held for investment grew 5.0% on an annualized basis,
    excluding the impact of planned loan exits during the fourth quarter.
  • We repositioned our investment securities portfolio through the
    sale of $314.7 million available-for-sale securities yielding
    approximately 2.3%, resulting in the recognition through the income
    statement of $9.9 million of unrealized losses during the fourth
    quarter. Proceeds from the sale were reinvested in investment grade
    securities having an approximate yield of 4.0%, while the duration of
    the portfolio increased modestly from 3.3 years to 3.5 years. We
    anticipate a pre-tax income benefit of approximately $5.5 million in
    2019 and a loss earn-back period of less than two years.
  • We implemented a cost reduction initiative during the fourth
    quarter of 2018
    which is designed to make Opus more efficient and
    contain operating expense growth. As a result of these cost
    reductions, we expect that year-over-year expenses will remain
    relatively flat while continuing to allow us to fund necessary
    infrastructure enhancements that will improve our customer experience.
  • Enterprise Value loans decreased 34%, or $62.5 million, compared
    to the prior quarter to $122.0 million as of December 31, 2018, and
    decreased 71%, or $295.7 million, compared to December 31, 2017.
  • Nonperforming assets decreased 38%, or $17.1 million, compared
    to the prior quarter to $28.0 million, and decreased 52%, or $30.3
    million, compared to December 31, 2017. NPAs to assets decreased 22
    basis points to 0.39% as of December 31, 2018, and decreased 39 basis
    points compared to 0.78% as of December 31, 2017.
  • Total criticized loans decreased 19%, or $34.7 million, compared
    to the prior quarter to $150.3 million as of December 31, 2018, and
    decreased 40%, or $99.4 million, compared to December 31, 2017.
  • Provision for loan losses was $7.7 million for the fourth quarter
    of 2018,
    driven primarily by net charge-offs of $12.0 million.
    Three Enterprise Value loan relationships drove 96% of loan
    charge-offs during the quarter.
  • Tangible book value per share increased $0.13 to $17.81 and
    tangible common equity to tangible assets increased 36 basis points to
    9.41%. The repositioning of our investment securities portfolio during
    the fourth quarter of 2018 had a negligible impact to shareholders'
    equity.

Paul G. Greig, Chairman of the Board, Interim Chief Executive Officer
and President of Opus Bank, stated, "Our fourth quarter results included
a sizable restructuring charge, much of which was related to actions
intended to make Opus a more profitable institution and more closely
align operations with our long-term strategic goals. We saw positive
core earnings trends during the quarter, including higher net interest
income, an expanding net interest margin, and improved credit metrics."

Mr. Greig added, "As Interim CEO, I have worked closely with Opus'
executive management team to insure the day-to-day operations of the
Company continue to function smoothly. The Board of Directors is making
progress in the search for a permanent CEO and we have already received
strong interest from well-qualified candidates for the position."

Loans

Total loans held-for-investment were $5.2 billion as of December 31,
2018, compared to $5.2 billion as of both September 30, 2018 and
December 31, 2017. New loan fundings during the fourth quarter of 2018
totaled $412.3 million and were partially offset by originated loan
payoffs of $265.3 million and planned exits of $59.2 million, resulting
in a $5.3 million increase in loans held-for-investment compared to
September 30, 2018. New loan fundings for the year ended December 31,
2018 totaled $1.6 billion, which were offset by originated loan payoffs
of $981.4 million and planned exits of $230.5 million, resulting in an
$8.0 million decrease in loans held-for-investment compared to
December 31, 2017.

 
Loan Balance Roll Forward        
(unaudited)   Three Months Ended
($ in millions) December 31,
2018
September 30,
2018
June 30,
2018

March 31,
2018

December 31,
2017

 
Beginning loan balance $ 5,159.9 $ 5,072.4 $ 5,229.0 $ 5,173.2 $ 5,060.6
New loan fundings 412.3 435.7 295.6 452.3 502.3
Loan payoffs (265.3 ) (197.4 ) (299.5 ) (219.2 ) (237.8 )
Planned exits (59.2 ) (60.6 ) (58.5 ) (52.2 ) (80.6 )
Other1 (82.5 ) (90.2 ) (94.2 ) (125.1 ) (71.3 )
Ending loan balance $ 5,165.2   $ 5,159.9   $ 5,072.4   $ 5,229.0   $ 5,173.2  
 
[1]   Includes normal amortization, paydowns, charge-offs, and loan sales
that were not planned exits
 

New loan fundings in the fourth quarter of 2018 totaled $412.3 million,
a 5% decrease compared to the prior quarter. New loan fundings for the
year ended December 31, 2018 totaled $1.6 billion, compared to $1.5
billion for the year ended December 31, 2017. Commercial business loans
comprised $87.4 million, or 21%, of total new loan fundings in the
fourth quarter of 2018. Loan commitments originated during the fourth
quarter of 2018 totaled $399.8 million compared to $438.6 million during
the third quarter of 2018 and $454.1 million during the fourth quarter
of 2017. As of December 31, 2018, our unfunded commitments on originated
loans totaled $378.2 million.

Cash and Investment Securities

Cash and investment securities totaled $1.3 billion as of December 31,
2018, compared to $1.6 billion as of both September 30, 2018 and
December 31, 2017. The decrease from the prior quarter was driven by a
decrease in cash and cash equivalents of $278.6 million, or 52%, during
the fourth quarter of 2018 to $254.6 million as of December 31, 2018,
partially offset by an increase in investment securities of $62.7
million, or 6%, from the prior quarter to $1.1 billion as of
December 31, 2018. The decrease in cash and investment securities from
the prior year was driven by a decrease in cash and cash equivalents of
$246.1 million, or 49%, from December 31, 2017, as well as a decrease in
investment securities of $45.7 million, or 4%.

During the fourth quarter of 2018 we repositioned our investment
securities portfolio through the sale of $314.7 million
available-for-sale securities yielding approximately 2.3%, resulting in
a pre-tax loss of $9.9 million. Proceeds from the sale were reinvested
in investment grade securities having an approximate yield of 4.0%. The
duration of the investment securities portfolio increased modestly from
3.3 years to 3.5 years. The impact on shareholders' equity as a result
of the securities portfolio repositioning was negligible, as the
unrealized loss position of the securities we sold was recognized
through the income statement as a component of noninterest income.

Deposits and Borrowings

Deposits totaled $6.0 billion as of December 31, 2018, a decrease of
$190.4 million, or 3%, compared to $6.1 billion as of September 30,
2018, and an increase of $8.0 million, or 0%, compared to $5.9 billion
as of December 31, 2018. The decrease in deposits from the prior quarter
was primarily driven by decreases in deposits from PENSCO (our
alternative asset IRA custodian subsidiary), our Retail Banking
division, and our Fiduciary Banking division, which were partially
offset by an increase in deposits from our Commercial and Specialty
Banking divisions.

Total demand deposits, including both noninterest-bearing and
interest-bearing demand deposit accounts, measured 55% of total deposits
as of December 31, 2018, compared to 56% as of September 30, 2018 and
55% as of December 31, 2017. As of December 31, 2018, business deposits
represented 62% of total deposits.

Our loan to deposit ratio measured 87% as of December 31, 2018, compared
to 84% as of September 30, 2018 and 87% as of December 31, 2017.

Net Interest Income

Net interest income increased 3.2% to $50.4 million for the fourth
quarter of 2018, compared to $48.9 million for the third quarter of
2018, and decreased 3.0% from $52.0 million for the fourth quarter of
2017. Net interest income for the year ended December 31, 2018 was
$200.5 million, compared to $217.4 million for the year ended
December 31, 2017.

Interest income from loans increased 3% to $55.7 million for the fourth
quarter of 2018, driven by a 1.3% increase in the average balances of
loans and a seven basis point increase in loan yield. Interest income
from loans decreased 4% to $218.3 million for the year ended
December 31, 2018, as loan payoffs and prepayments, including planned
exits and loan sales, and continued runoff of the acquired loan
portfolio resulted in lower average balances of loans compared to the
prior year.

Interest income from cash and investment securities increased $1.3
million, or 18%, to $8.7 million for the fourth quarter of 2018 compared
to the prior quarter, driven by a higher yield on investment securities
and lower premium amortization due to lower prepayment activity.
Interest income from cash and investment securities for the year ended
December 31, 2018 increased $2.2 million, or 8%, to $28.5 million
compared to the year ended December 31, 2017, driven by a higher yield
and higher average balances of investment securities.

Interest expense increased $1.3 million, or 11%, to $14.0 million for
the fourth quarter of 2018, compared to $12.6 million for the third
quarter of 2018, and increased $5.1 million, or 58%, compared to $8.8
million for the fourth quarter of 2017. Opus' interest expense increased
compared to each of the linked-quarter and the fourth quarter of 2017,
as the cost of funds increased nine basis points compared to the prior
quarter and 34 basis points compared to the fourth quarter of 2017.
Interest expense increased $10.1 million, or 28%, for the year ended
December 31, 2018 compared to the year ended December 31, 2017, driven
by higher cost of deposits.

Net Interest Margin

Net interest margin on a taxable equivalent basis increased nine basis
points to 3.07% in the fourth quarter of 2018 compared to 2.98% in the
third quarter of 2018. The linked-quarter change was primarily driven by
an increase in the yield on loans due to the Federal Reserve rate
increase in September 2018, as well as lower lost interest on nonaccrual
loans and an increase in the yield on investment securities due to lower
premium amortization. These were partially offset by an eight basis
point increase in the cost of deposits in the fourth quarter of 2018.
Net interest margin was 3.08% for the year ended December 31, 2018
compared to 3.17% for the prior year, as the cost of funds increased 19
basis points to 0.75% and was partially offset by a 10 basis point
increase in the yield on interest earning assets to 3.79%.

Noninterest Income

Noninterest income decreased to $3.4 million in the fourth quarter of
2018 compared to $11.5 million in the third quarter of 2018 and $12.6
million in the fourth quarter of 2017. Noninterest income during the
fourth quarter of 2018 included a $9.9 million loss on the sale of
investment securities related to the repositioning of our securities
portfolio during the fourth quarter. Noninterest income during the
fourth quarter of 2018 also included $6.8 million of trust
administrative fees, $1.6 million of treasury management and deposit
account fees, $1.4 million from our Escrow and Exchange divisions, and
$1.6 million from our Merchant Banking division. Other noninterest
income in the fourth quarter of 2018 included a net decrease in equity
warrant valuations of $354,000, compared to a net decrease of $746,000
in the prior quarter, and an FHLB dividend of $584,000 compared to a
dividend of $301,000 in the prior quarter. Excluding the aforementioned
loss on the sale of investment securities related to the repositioning
of our securities portfolio during the fourth quarter, noninterest
income increased 16% from the prior quarter.

Noninterest income for the year ended December 31, 2018 decreased to
$41.1 million compared to $54.8 million for the year ended December 31,
2017. The decrease in noninterest income compared to the prior year was
primarily driven by the $9.9 million loss on the sale of investment
securities during the fourth quarter of 2018.

Noninterest Expense

Noninterest expense increased to $53.7 million for the fourth quarter of
2018, compared to $43.7 million for the third quarter of 2018 and $46.2
million for the fourth quarter of 2017. Noninterest expense during the
fourth quarter of 2018 included $10.5 million of expenses related to the
restructuring charge taken this quarter. Excluding these expenses, as
well as $525,000 of expenses related to severance and retention costs
and banking office optimization during the third quarter of 2018,
noninterest expense was flat compared to the prior quarter.

During the fourth quarter of 2018, we implemented a cost reduction
initiative and will be reinvesting much of the anticipated savings,
which will allow us to hold year-over-year expenses relatively flat
while continuing to fund necessary infrastructure enhancements that will
improve our customer experience.

Income Tax Expense

During the fourth quarter of 2018, we recorded an income tax benefit of
$654,000 as a result of the pre-tax loss we incurred for the quarter,
compared to an income tax benefit of $972,000 recorded in the third
quarter of 2018 that was driven by $2.3 million of net discrete income
tax items relating to the re-measurement of our initial estimate of
deferred tax assets in connection with the Tax Cuts and Jobs Act in the
fourth quarter of 2017.

Asset Quality

Nonaccrual loans decreased $17.1 million, or 37.9%, to $28.0 million, or
0.54% of total loans, as of December 31, 2018, compared to $45.1
million, or 0.87% of total loans, as of September 30, 2018. Total
criticized loans decreased $34.7 million, or 18.8%, to $150.3 million as
of December 31, 2018, compared to $185.1 million as of September 30,
2018. We also continued to reduce our exposure to previously
de-emphasized loan portfolios during the fourth quarter of 2018; total
Enterprise Value loans were reduced by $62.5 million, or 34%, during the
fourth quarter of 2018 and totaled $122.0 million as of December 31,
2018. Planned exits through loan payoffs and sales totaled $59.2 million
during the fourth quarter of 2018, as we continued to reduce the balance
of loans we previously announced as targeted for planned exits.

Our allowance for loan losses was $54.7 million, or 1.06% of our total
loan portfolio, as of December 31, 2018, compared to $59.0 million, or
1.14% of total loans, as of September 30, 2018 and $75.9 million, or
1.47% of total loans, as of December 31, 2017. The reduction in the
allowance for loan losses during the fourth quarter of 2018 was driven
by charge-offs of $14.6 million that were partially offset by a
provision for loan losses of $7.7 million and recoveries of $2.5 million.

We recorded a provision expense of $7.7 million in the fourth quarter of
2018, compared to a provision expense of $8.2 million in the third
quarter of 2018 and a provision expense of $3.0 million in the fourth
quarter of 2017. The provision expense during the fourth quarter of 2018
was driven by net charge-offs of $12.0 million, $2.8 million from risk
rating migration, $2.1 million due to higher loss factors used to
determine loan loss reserves in accordance with our allowance
methodology, and $1.9 million due to changes in portfolio mix and
fundings. These factors were partially offset by a $6.6 million decline
in reserves as a result of planned exits of loan relationships and a
$4.5 million decline in specific reserves.

We recorded net charge-offs of $12.0 million during the fourth quarter
of 2018, compared to net charge-offs of $8.4 million during the third
quarter of 2018, and net charge-offs of $5.2 million during the fourth
quarter of 2017. Charge-offs during the fourth quarter of 2018 were
predominantly comprised of three commercial business loan relationships
that were also categorized as Enterprise Value loans.

Total nonperforming assets decreased to $28.0 million, or 0.39% of total
assets, as of December 31, 2018, compared to $45.1 million, or 0.61% of
total assets, as of September 30, 2018 and $58.3 million, or 0.78% of
total assets, as of December 31, 2017. The decline in nonperforming
assets during the quarter was primarily due to the resolution of five
commercial business loan relationships, 88% of which were Enterprise
Value loans. The ratio of the allowance for loan losses to total
nonperforming assets was 195.1% as of December 31, 2018, compared to
130.8% as of September 30, 2018 and 130.3% as of December 31, 2017.

Total criticized loans decreased $34.7 million, or 19%, to $150.3
million as of December 31, 2018, compared to $185.1 million as of
September 30, 2018, and decreased $99.4 million, or 40%,
from $249.8 million as of December 31, 2017. The net decrease in total
criticized loans during the fourth quarter of 2018 was driven by $20.6
million of upgrades and $48.7 million of loan exits, including payoffs,
loan sales, and normal amortization during the quarter, partially offset
by $34.6 million of downgrades. Special mention loans decreased $29.4
million in the fourth quarter of 2018 and classified loans decreased
$5.3 million. The decrease in special mention loans was driven by $17.1
million of upgrades, $19.8 million of loan payoffs, normal amortization,
and migration, and $3.4 million of loans downgraded from special mention
to classified loans, partially offset by $10.9 million of downgrades.
The decrease in classified loans was driven by upgrades of $3.5 million
as well as payoffs, sales, and amortization of $28.9 million, partially
offset by downgrades of $27.1 million.

The net decrease in total criticized loans consisted primarily of a
$40.8 million decrease in commercial business loans and a $1.1 million
decrease in SBA loans, partially offset by a $7.1 million increase in
real estate secured loans. Commercial business loans comprised $12.0
million of loans upgraded out of criticized categories and $38.1 million
of loan payoffs, charge-offs, and amortization, partially offset by $9.3
million of downgrades during the fourth quarter of 2018. Real estate
secured loans comprised $24.9 million of loans downgraded to criticized
categories, partially offset by $8.4 million of loans upgraded from
criticized categories and $9.4 million of loan payoffs and amortization
during the fourth quarter of 2018.

Capital

As of December 31, 2018, Opus exceeded all regulatory capital
requirements under Basel III and was considered to be a
"well-capitalized" financial institution, as summarized in the table
below:

   
Capital Ratios As of

Well-Capitalized
Regulatory
Requirements

(unaudited) December 31,
2018
  September 30,
2018
  December 31,
2017
Tier 1 leverage ratio 9.69 % 9.89 % 9.44 % 5.00 %
Common Equity Tier 1 ratio 11.40 % 11.75 % 10.94 % 6.50 %
Tier 1 risk-based capital ratio 11.92 % 12.27 % 11.42 % 8.00 %
Total risk-based capital ratio 15.29 % 15.75 % 14.97 % 10.00 %
Tangible equity to tangible assets ratio 9.84 % 9.47 % 9.10 % NA
Tangible common equity to tangible assets ratio 9.41 % 9.05 % 8.69 % NA
 
[1]   Regulatory capital ratios are preliminary until filing of our
December 31, 2018 FDIC call report.
 

Stockholders' equity totaled over $1.0 billion as of December 31, 2018,
unchanged from both September 30, 2018 and December 31, 2017.
Accumulated other comprehensive loss decreased $13.8 million in the
fourth quarter of 2018 to $3.8 million, primarily driven by the
repositioning of our investment securities portfolio during the fourth
quarter, which offset an $11.0 million decrease in retained earnings.
Our tangible book value per as converted common share increased to
$17.81 as of December 31, 2018 from $17.68 as of September 30, 2018 and
$17.26 as of December 31, 2017.

Conference Call and Webcast Details

Date: Monday, January 28, 2019
Time: 8:00 a.m. PT (11:00 a.m. ET)

Phone Number: (855) 265-3237
Conference ID: 1468516
Webcast
URL: http://investor.opusbank.com/event

Analysts, investors, and the general public may listen to a discussion
of Opus' fourth quarter and annual performance and participate in the
question/answer session by using the phone number listed below 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 two 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 1468516. The call replay will be
available through February 28, 2019.

About Opus Bank

Opus Bank is an FDIC insured California-chartered commercial bank with
$7.2 billion of total assets, $5.2 billion of total loans, and $6.0
billion in total deposits as of December 31, 2018. Opus Bank provides
superior ideas and solutions, and banking products to its clients
through its Retail Bank, Commercial Bank, and Merchant 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 approximately $14 billion of
custodial assets and approximately 48,000 client accounts, which are
comprised of self-directed investors, financial institutions, capital
raisers and financial advisors. Opus Bank operates 47 banking offices,
including 28 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 includes
forward-looking statements related to Opus' plans, beliefs and goals.
Forward-looking statements are neither historical facts nor assurances
of future performance. Opus generally identifies forward-looking
statements by terminology such as "outlook," "believes," "expects,"
"potential," "continues," "may," "will," "could," "should," "seeks,"
"approximately," "predicts," "intends," "plans," "estimates,"
"anticipates" or the negative version of those words or other comparable
words. Any forward‐looking statements contained in this release and the
aforementioned conference call and webcast are based on the historical
performance of Opus and its subsidiaries or on its current plans,
beliefs, estimates, expectations and goals, including, without
limitation: our expectations regarding our corporate strategy and cost
reduction initiatives; expectations regarding the repositioning of our
investment securities portfolio; our expectation that the actions
related to the restructuring charge will make Opus a more profitable
institution and more closely align operations with our long-term
strategic goals; and that our belief that our Board of Directors is
making progress in the search for a permanent CEO. Such forward-looking
statements are subject to various risks and uncertainties and
assumptions relating to our operations, financial results, financial
condition, business prospects, growth strategy and liquidity that could
cause actual results to differ materially from those indicated by the
forward-looking statements, including, without limitation: market and
economic conditions, changes in interest rates, our liquidity position,
the management of our growth, the risks associated with our loan
portfolio, local economic conditions affecting retail and commercial
real estate, our geographic concentration in the western region of the
United States, competition within the industry, dependence on key
personnel, government legislation and regulation, the risks associated
with any future acquisitions, the effect of natural disasters, and risks
related to our technology and information systems. For a discussion of
these and other risks and uncertainties, see Opus' filings with the
Federal Deposit Insurance Corporation, including, but not limited to,
the risk factors in Opus' Annual Report on Form 10-K filed with the
Federal Deposit Insurance Corporation on March 14, 2018. If one or more
of these or other risks or uncertainties materialize, or if Opus'
underlying assumptions prove to be incorrect, Opus' actual results may
vary materially from those indicated in these statements. These filings
are available on the Investor Relations page of Opus' website at:
investor.opusbank.com.

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

 
Consolidated Statement of Operations      
(unaudited)   Three Months Ended Year Ended
($ in thousands, except per share amounts) December 31,
2018
  September 30,
2018
December 31,
2017
December 31,
2018
December 31,
2017
Interest income:
Loans $ 55,701 $ 54,110 $ 53,592 $ 218,255 $ 227,224
Investment securities 6,931 5,280 5,975 22,353 19,411
Due from banks 1,758   2,113   1,265   6,148   6,908  
Total interest income 64,390   61,503   60,832   246,756   253,543  
Interest expense:
Deposits 12,038 10,702 6,855 38,163 28,259
Federal Home Loan Bank advances (5 ) 68 374 185
Subordinated debt 1,923   1,923   1,923   7,690   7,690  
Total interest expense 13,961   12,620   8,846   46,227   36,134  
Net interest income 50,429 48,883 51,986 200,529 217,409
Provision (negative provision) for loan

losses

7,659   8,241   2,955   19,601   (8,823 )
Net interest income after provision

(negative provision) for loan losses

42,770   40,642   49,031   180,928   226,232  
Noninterest income:

Fees and service charges on deposit

accounts

1,615 1,735 1,822 6,855 7,592
Escrow and exchange fees 1,422 1,548 1,568 5,829 6,015
Trust administrative fees 6,800 6,884 6,879 27,503 26,939
Gain (loss) on sale of loans 147 (2 ) (22 ) (211 )
Gain (loss) on sale of assets (137 ) (6 ) (137 ) 3,773
Gain (loss) from OREO and other

repossessed assets

86 203 (4,773 )
Gain (loss) on sale of securities (9,892 ) 330 (9,710 ) 1,505
Bank-owned life insurance, net 958 1,048 1,088 4,104 3,728
Other income 2,469   246   861   6,454   10,212  
Total noninterest income 3,382   11,461   12,626   41,079   54,780  
Noninterest expense:
Compensation and benefits 33,042 26,004 25,273 111,325 106,738
Professional services 5,045 2,489 5,308 11,869 20,041
Occupancy expense 4,023 3,764 3,617 15,545 15,281
Depreciation and amortization 1,700 1,652 1,585 6,714 7,014

Deposit insurance and regulatory

assessments

914 977 799 3,981 4,881
Insurance expense 317 337 341 1,327 1,387
Data processing 815 230 689 1,803 3,151
Software licenses and maintenance 1,293 1,371 1,148 4,939 4,556
Office services 1,821 1,642 1,750 7,189 7,983
Amortization of other intangible assets 1,437 1,479 1,479 5,875 5,918
Advertising and marketing 824 909 1,395 3,533 3,226
Other expenses 2,436   2,809   2,799   10,450   10,419  
Total noninterest expense 53,667   43,663   46,183   184,550   190,595  
Income (loss) before income tax

expense (benefit)

(7,515 ) 8,440 15,474 37,457 90,417
Income tax expense (benefit) (654 ) (972 ) 14,273   6,539   42,774  
Net income (loss) $ (6,861 ) $ 9,412   $ 1,201   $ 30,918   $ 47,643  
Basic earnings (loss) per common share $ (0.20 ) $ 0.25 $ 0.03 $ 0.82 $ 1.29
Diluted earnings (loss) per common share (0.20 ) 0.25 0.03 0.81 1.26
Weighted average shares - basic 36,059,713 36,115,204 35,935,614 36,028,025 36,432,482
Weighted average shares - diluted 36,059,713 38,362,739 38,229,787 38,270,650 37,770,993
 
 
Consolidated Balance Sheets      
(unaudited) As of
($ in thousands, except share amounts) December 31,
2018
September 30,
2018
December 31,
2017
 
Assets
Cash and due from banks $ 39,860 $ 57,126 $ 45,828
Due from banks – interest-bearing 214,776 476,129 454,941
Investment securities available-for-sale, at fair value 1,081,546 1,018,855 1,127,288
Loans held-for-investment 5,165,210 5,159,881 5,173,193
Less allowance for loan losses (54,664 ) (59,029 ) (75,930 )
Loans held-for-investment, net 5,110,546 5,100,852 5,097,263
Premises and equipment, net 23,863 24,955 27,644
Goodwill 331,832 331,832 331,832
Other intangible assets, net 38,926 40,362 44,800
Deferred tax assets, net 24,171 22,847 24,260
Cash surrender value of bank owned life insurance, net 154,271 153,289 149,744
Accrued interest receivable 23,260 21,680 19,317
Federal Home Loan Bank stock 17,250 17,250 17,250
Other assets 120,602   129,897   146,642  
Total assets $ 7,180,903   $ 7,395,074   $ 7,486,809  
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing demand $ 771,141 $ 890,925 $ 817,330
Interest-bearing demand 2,507,605 2,564,737 2,435,293
Money market and savings 1,995,684 2,031,468 2,307,258
Time deposits 677,458   655,172   384,057  

Total deposits

5,951,888 6,142,302 5,943,938
Federal Home Loan Bank advances 290,000
Subordinated debt, net 133,010 132,944 132,745
Accrued interest payable 4,032 2,350 4,086
Other liabilities 51,160   80,428   92,576  
Total liabilities 6,140,090   6,358,024   6,463,345  
Stockholders' equity:
Preferred stock:
Authorized 200,000,000 shares; issued 31,111 and 31,111 and 31,111
shares, respectively
29,110 29,110 29,110
Common stock, no par value per share:
Authorized 200,000,000 shares; issued 36,637,870 and 36,635,132 and
36,330,546 shares, respectively
700,220 700,220 700,220
Additional paid-in capital 69,954 68,975 63,545
Retained earnings 260,304 271,304 245,006
Treasury stock, at cost; 577,495 and 576,547 and 415,387 shares,
respectively
(14,983 ) (14,965 ) (10,354 )
Accumulated other comprehensive income (loss) (3,792 ) (17,594 ) (4,063 )
Total stockholders' equity 1,040,813   1,037,050   1,023,464  
Total liabilities and stockholders' equity $ 7,180,903   $ 7,395,074   $ 7,486,809  
 
 
Selected Financial Data  
As of or for the three months ended   As of or for the year ended
(unaudited) December 31,
2018
  September 30,
2018
  December 31,
2017
December 31,
2018
  December 31,
2017
Return on average assets (0.38 )% 0.51 % 0.06 % 0.43 % 0.63 %
Return on average assets, tax adjusted (1) (0.38 ) 0.51 0.55 0.43 0.74
Return on average stockholders' equity (2.61 ) 3.59 0.46 2.99 4.76
Return on average stockholders' equity, tax adjusted (1) (2.61 ) 3.59 3.91 2.99 5.65
Return on average tangible equity (2) (4.06 ) 5.60 0.73 4.68 7.66
Return on average tangible equity, tax adjusted (1) (4.06 ) 5.60 6.16 4.68 9.10
Efficiency ratio (3) 99.73 72.36 71.48 76.38 70.02
Noninterest expense to average assets 2.93 2.39 2.49 2.54 2.51
Yield on interest-earning assets (4) 3.92 3.75 3.68 3.79 3.69
Cost of deposits (5) 0.79 0.71 0.45 0.64 0.45
Cost of funds (6) 0.90 0.81 0.56 0.75 0.56
Net interest margin (4) 3.07 2.98 3.15 3.08 3.17
Loans to deposits 86.78 84.01 87.03 86.78 87.03
 
(1)     Tax adjusted for the three months and year ended December 31, 2017
due to impacts from the Tax Cuts and Jobs Act. See computation in
"Non-GAAP Financial Measures" section.
(2) See computation in "Non-GAAP Financial Measures" section.
(3) The efficiency ratio is calculated by dividing noninterest expense
by the sum of net interest income before provision for loan losses
and noninterest income.
(4) Net interest margin and yield on interest-earning assets are
presented on a tax equivalent basis using the federal effective tax
rate.
(5) Calculated as interest expense on deposits divided by total average
deposits.
(6) Calculated as total interest expense divided by average total
deposits, FHLB advances, and subordinated debt.
 
 
Loan Fundings          
(unaudited) Three Months Ended Year Ended
($ in thousands) December 31,
2018
September 30,
2018
December 31,
2017
December 31,
2018
December 31,
2017
Loans funded:
Real estate mortgage loans:
Single-family residential $ $ $ $ $
Multifamily residential 252,315 257,775 300,539 924,629 790,275
Commercial real estate 66,931 55,807 58,103 203,017 109,052
Construction and land loans 5,622 5,674 8,170 28,538 48,312
Commercial business loans 87,390 112,791 131,728 427,636 497,487
Small Business Administration loans 43 3,644 3,768 12,040 13,837
Consumer and other loans        
Total loan fundings $ 412,301   $ 435,691   $ 502,308   $ 1,595,860   $ 1,458,963
 
 
Composition of Loan Portfolio   As of
(unaudited) December 31,
2018
  September 30,
2018
  December 31,
2017
($ 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 $ 43,042 0.8 % $ 44,001 0.9 % $ 59,497 1.2 %
Multifamily residential 2,884,636 55.8 2,808,463 54.4 2,495,818 48.3
Commercial real estate 1,043,060 20.2 1,058,389 20.5 1,079,637 20.9
Construction and land loans 70,271 1.4 73,668 1.4 94,348 1.8
Commercial business loans 986,363 19.1 1,030,793 20.0 1,284,500 24.8
Small Business Administration loans 31,512 0.6 33,263 0.6 27,152 0.5
Consumer and other loans 18   0.0   34   0.0   96   0.0  
Total originated loans 5,058,902 97.9 5,048,611 97.8 5,041,048 97.5
 
Acquired loans held-for-investment
Real estate mortgage loans:
Single-family residential 18,871 0.4 19,697 0.4 22,964 0.4
Multifamily residential 46,761 0.9 48,209 0.9 52,453 1.0
Commercial real estate 21,303 0.4 23,413 0.5 27,889 0.6
Construction and land loans 286 0.0 288 0.0 1,418 0.0
Commercial business loans 6,380 0.1 6,039 0.1 10,978 0.2
Small Business Administration loans 8,299 0.2 8,907 0.2 10,957 0.2
Consumer and other loans 4,408   0.1   4,717   0.1   5,486   0.1  
Total acquired loans 106,308   2.1   111,270   2.2   132,145   2.5  
Total gross loans $ 5,165,210   100.0 % $ 5,159,881   100.0 % $ 5,173,193   100.0 %
 
Composition of Deposits   As of
(unaudited) December 31,
2018
  September 30,
2018
  December 31,
2017
($ in thousands) Amount   % of
Total deposits
Amount   % of
Total deposits
Amount   % of
Total deposits
 
Noninterest bearing $ 771,141 13.0 % $ 890,925 14.5 % $ 817,330 13.7 %
Interest bearing demand 2,507,605 42.1 2,564,737 41.8 2,435,293 41.0
Money market and savings 1,995,684 33.5 2,031,468 33.0 2,307,258 38.8
Time deposits 677,458   11.4   655,172   10.7   384,057   6.5  
Total deposits $ 5,951,888   100.0 % $ 6,142,302   100.0 % $ 5,943,938   100.0 %
 
Consolidated average balance sheet, interest, yield and rates        
                 
For the three months ended December 31,   For the three months ended September 30, For the three months ended December 31,
(unaudited) 2018   2018 2017
($ in thousands) Average
Balance
  Interest (1)   Yields/
Rates
Average
Balance
  Interest (1) Yields/
Rates
Average
Balance
Interest (1) Yields/
Rates
Assets:
Interest-earning assets:
Due from banks $ 319,456 $ 1,758 2.18 % $ 430,991 $ 2,113 1.95 % $ 381,265 $ 1,265 1.32 %
Investment securities 1,080,262 6,931 2.55 1,027,950 5,280 2.04 1,141,865 5,975 2.08
Acquired loans 109,265 1,857 6.74 116,050 1,807 6.18 135,977 2,089 6.10
Originated Loans 5,050,276   54,245   4.26   4,975,101   52,665   4.20   4,947,185   51,916   4.16  
Total loans $ 5,159,541   $ 56,102   4.31   $ 5,091,151   $ 54,472     4.24   $ 5,083,162   $ 54,005   4.22  
Total interest-earning assets 6,559,259 $ 64,791 3.92 6,550,092 $ 61,865 3.75 6,606,292 $ 61,245 3.68
Noninterest-earning assets 699,059   704,117   743,798  
Total assets $ 7,258,318   $ 7,254,209   $ 7,350,090  
 
Liabilities and stockholders' equity:
Interest-bearing deposits
Interest-bearing demand $ 2,509,049 $ 2,520 0.40 % $ 2,546,443 $ 2,279 0.36 % $ 2,456,936 $ 1,137 0.18 %
Money market and savings 2,030,476 6,232 1.22 2,015,781 5,753 1.13 2,356,079 4,689 0.79
Time deposits 668,984   3,286   1.95   594,089   2,670   1.78   393,755   1,029   1.04  
Total interest-bearing

deposits

$ 5,208,509 $ 12,038 0.92 $ 5,156,313 $ 10,702 0.82 $ 5,206,770 $ 6,855 0.52
Subordinated debt 132,976 1,923 5.74 132,909 1,923 5.74 132,711 1,923 5.75
FHLB advances 33     2.62     (5 ) 0.00   21,989   68   1.23  
Total interest-bearing

liabilities

$ 5,341,517 $ 13,961 1.04 $ 5,289,222 $ 12,620 0.95 $ 5,361,470 $ 8,846 0.65
Noninterest-bearing deposits 816,516 855,036 852,057
Other liabilities 57,731   70,443   103,795  
Total liabilities $ 6,215,764 $ 6,214,701 $ 6,317,322
 
Total stockholders' equity $ 1,042,554   $ 1,039,508   $ 1,032,768  
Total liabilities and
stockholders' equity
$ 7,258,318   $ 7,254,209   $ 7,350,090  
 
Net interest spread (2) 2.88 % 2.80 % 3.03 %
Net interest income and margin, tax equivalent (3,4) $ 50,830   3.07 % $ 49,245   2.98 % $ 52,399   3.15 %
 
Reconciliation of tax equivalent net interest income to reported net
interest income
Tax equivalent adjustment (401 ) (362 ) (413 )
Net interest income, as reported $ 50,429   $ 48,883   $ 51,986  
 
(1)   Interest income is presented on a taxable equivalent basis using the
federal effective tax rate.
(2) Net interest spread represents the average yield on interest-earning
assets less the average rate on interest-bearing liabilities.
(3) Net interest margin is computed by dividing net interest income by
total average interest-earning assets.
(4) Net interest margin, tax equivalent has been adjusted to a taxable
equivalent basis using the federal effective tax rate.
 
 
Consolidated average balance sheet, interest, yield and rates    
   
For the year ended December 31,
(unaudited) 2018   2017
($ In thousands) Average
Balance
  Interest (1)   Yields/
Rates
Average
Balance
Interest (1) Yields/
Rates
Assets:
Interest-earning assets
Due from banks $ 323,780 $ 6,148 1.90 % $ 651,012 $ 6,908 1.06 %
Investment securities 1,066,317 22,353 2.10 965,874 19,411 2.01
Acquired loans 120,129 7,239 6.03 151,478 9,376 6.19
Originated Loans 5,040,400   212,410   4.21   5,125,692   218,997   4.27  
Total loans $ 5,160,529   $ 219,649   4.26   $ 5,277,170   $ 228,373   4.33  
Total interest-earning assets $ 6,550,626 $ 248,150 3.79 $ 6,894,056 $ 254,692 3.69
Noninterest-earning assets 707,658   708,590  
Total assets $ 7,258,284   $ 7,602,646  
 
Liabilities and stockholders' equity:
Interest-bearing deposits
Interest-bearing demand $ 2,521,073 $ 7,877 0.31 % $ 2,426,716 $ 4,513 0.19 %
Money market and savings 2,114,774 21,713 1.03 2,576,338 19,420 0.75
Time deposits 523,511   8,573   1.64   448,770   4,326   0.96  
Total interest bearing deposits $ 5,159,358 $ 38,163 0.74 $ 5,451,824 $ 28,259 0.52
Subordinated debt 132,877 7,690 5.79 132,609 7,690 5.80
FHLB advances 21,296   374   1.76   17,392   185   1.06  
Total interest-bearing liabilities $ 5,313,531 $ 46,227 0.87 $ 5,601,825 $ 36,134 0.65
Noninterest-bearing deposits 837,869 897,262
Other liabilities 73,204   101,704  
Total liabilities $ 6,224,604 $ 6,600,791
 
Total stockholders' equity 1,033,680   1,001,855  
Total liabilities and stockholders' equity $ 7,258,284   $ 7,602,646  
 
Net interest spread (2) 2.92 % 3.04 %
Net interest income and margin, tax equivalent (3,4) $ 201,923   3.08 % $ 218,558   3.17 %
 
Reconciliation of tax equivalent net interest income to reported net
interest income
Tax equivalent adjustment (1,394 ) (1,149 )
Net interest income, as reported $ 200,529   $ 217,409  
 
 
(1) Interest income is presented on a taxable equivalent basis using the
federal effective tax rate.
(2) Net interest spread represents the average yield on interest-earning
assets less the average rate on interest-bearing liabilities.
(3) Net interest margin is computed by dividing net interest income by
total average interest-earning assets.
(4) Net interest margin, tax equivalent has been adjusted to a taxable
equivalent basis using the federal effective tax rate.
 
 
Allowance for Loan Losses            
(unaudited)
Three Months Ended Year Ended
($ in thousands)    

December 31,

2018

September 30,
2018

December 31,
2017

December 31,
2018

December 31,
2017

Allowance for loan losses - balance at beginning of period $ 59,029 $ 59,197 $ 78,176 $ 75,930 $ 111,410
(Recapture) Provision for loan losses:
Acquired loans 12 (179 ) (27 ) 267 (6 )
Originated loans 7,647   8,420   2,982   19,334   (8,817 )
Total provision for loan losses 7,659 8,241 2,955 19,601 (8,823 )
Charge-offs:
Acquired loans
Originated loans (14,565 ) (10,023 ) (5,821 ) (51,251 ) (29,808 )
Total charge-offs (14,565 ) (10,023 ) (5,821 ) (51,251 ) (29,808 )
Recoveries:
Acquired loans
Originated loans 2,541   1,614   620   10,384   3,151  
Total recoveries 2,541   1,614   620   10,384   3,151  
Total net charge-offs (12,024 ) (8,409 ) (5,201 ) (40,867 ) (26,657 )
Allowance for loan losses - balance at end of period $ 54,664   $ 59,029   $ 75,930   $ 54,664   $ 75,930  
 
 
Asset Quality Information        
(unaudited) As of and for the quarter ended
($ in thousands) December 31,
2018
September 30,
2018
December 31,
2017
Nonperforming assets
Nonaccrual loans $ 28,016 $ 45,136 $ 58,274
OREO and other repossessed assets      

Total nonperforming assets

28,016 45,136 58,274
 
Loans 30 - 89 days past due 2,634 9,856 12,805
Accruing loans 90 days or more past due 485 390 299
Accruing troubled debt restructured loans 138 139
 
Nonperforming loans to total loans 0.54 % 0.87 % 1.13 %
Nonperforming assets to total assets 0.39 0.61 0.78
Loans 30-89 days past due to total loans 0.05 0.19 0.25
Allowance for loan losses to total loans 1.06 1.14 1.47
Allowance for loan losses to non-accrual loans 195.12 130.78 130.30
Net charge-offs to average loans (annualized) 0.92 0.66 0.41
 
Risk Rating by Loan Product
(Unaudited)
($ in thousands)   Pass  

Special Mention

  Classified   Total Loans   Nonaccrual loans   Total allowance
As of December 31, 2018
Real estate mortgage loans:
Single-family residential $ 61,471 $ 76 $ 366 $ 61,913 $ $ 178
Multifamily residential 2,929,173 120 2,104 2,931,397 10,236
Commercial real estate 1,007,274 9,904 47,185 1,064,363 2,462 10,663
Construction and land loans 57,100 13,457 70,557 698
Commercial business loans 927,437 17,455 47,851 992,743 18,039 32,545
Small Business Administration loans 28,727 161 10,923 39,811 6,973 336
Consumer and other loans   3,696   58   672   4,426   542   8
Total loans $ 5,014,878 $ 41,231 $ 109,101 $ 5,165,210 $ 28,016 $ 54,664
 
As of September 30, 2018
Real estate mortgage loans:
Single-family residential $ 63,199 $ 77 $ 422 $ 63,698 $ $ 171
Multifamily residential 2,852,490 2,066 2,116 2,856,672 9,677
Commercial real estate 1,033,707 17,848 30,247 1,081,802 2,512 9,009
Construction and land loans 60,644 13,313 73,957 904
Commercial business loans 930,748 36,105 69,979 1,036,832 35,085 38,966
Small Business Administration loans 30,028 1,162 10,979 42,169 6,973 295
Consumer and other loans   3,992   59   700   4,751   566   7
Total loans $ 4,974,808 $ 70,630 $ 114,443 $ 5,159,881 $ 45,136 $ 59,029
 
As of December 31, 2017
Real estate mortgage loans:
Single-family residential $ 81,681 $ 80 $ 700 $ 82,461 $ $ 254
Multifamily residential 2,539,405 5,657 3,209 2,548,271 9,097
Commercial real estate 1,056,889 44,759 5,878 1,107,526 8,908
Construction and land loans 95,766 95,766 961
Commercial business loans 1,110,445 41,251 143,782 1,295,478 57,618 56,334
Small Business Administration loans 34,527 1,597 1,985 38,109 363
Consumer and other loans   4,723   62   797   5,582   656   13
Total loans $ 4,923,436 $ 93,406 $ 156,351 $ 5,173,193 $ 58,274 $ 75,930
 
Risk Rating by Lending Division
(Unaudited)
($ in thousands)   Pass   Special Mention   Classified Total Loans   Nonaccrual loans
As of December 31, 2018
Income Property Banking $ 3,460,915 $ 1,752 $ 11,874 $ 3,474,541 $ 2,462
Commercial Banking 381,901 6,837 39,782 428,520 16,034
Structured Finance 295,715 13,457 309,172
Healthcare Provider 149,274 9,352 43,176 201,802
Healthcare Practice 18,690 1,194 19,884
Corporate Finance 36,260 9,699 6,088 52,047 3,671
Institutional Syndication 319,877 319,877
Public Finance 221,995 221,995
Technology Banking
Other divisions (2)   130,251   134   6,987     137,372   5,849
Total loans $ 5,014,878 $ 41,231 $ 109,101   $ 5,165,210 $ 28,016
 
As of September 30, 2018
Income Property Banking $ 3,368,520 $ 9,808 $ 10,855 $ 3,389,183 $ 2,512
Commercial Banking 348,436 15,424 48,849 412,709 19,431
Structured Finance 312,703 22,483 335,186
Healthcare Provider 195,977 40,734 236,711 13,359
Healthcare Practice 19,124 1,226 20,350
Corporate Finance 53,162 22,658 4,654 80,474 3,959
Institutional Syndication 329,804 329,804
Public Finance 225,143 225,143
Technology Banking 899 899
Other divisions (2)   121,939   257   7,226     129,422   5,875
Total loans $ 4,974,808 $ 70,630 $ 114,443   $ 5,159,881 $ 45,136
 
As of December 31, 2017
Income Property Banking $ 3,140,183 $ 18,811 $ 2,250 $ 3,161,244 $
Commercial Banking 414,183 22,903 47,742 484,828 11,477
Structured Finance 339,410 1,084 340,494
Healthcare Provider 220,329 33,648 23,792 277,769
Healthcare Practice 22,673 2,640 25,313 1,638
Corporate Finance 184,058 11,866 44,162 240,086 25,655
Institutional Syndication 289,397 (177 ) (1 ) 289,220
Public Finance 148,454 148,454
Technology Banking 21,238 25,009 46,247 18,677
Other divisions (2)   143,511   6,178   9,849     159,538   827
Total loans $ 4,923,436 $ 93,406 $ 156,351   $ 5,173,193 $ 58,274
(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 assessing our financial
results. These non-GAAP measures include our tax adjusted return on
average assets, tax adjusted return on average equity, tax adjusted
return on average tangible equity, 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 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 tax adjusted return on average assets
(unaudited)  

Three Months Ended

  Year Ended
($ in thousands)

December 31,
2018

  September 30,
2018
  December 31,
2017
December 31,
2018
  December 31,
2017
Average assets $ 7,258,318 $ 7,254,209 $ 7,350,090 $ 7,258,284 $ 7,602,646
Tax adjusted net income
Net income $ (6,861 ) 9,412 $ 1,201 $ 30,918 $ 47,643
Less: Adjustments due to the Tax

Cuts and Jobs Act

          8,968         8,968  
Tax adjusted net income (6,861 ) 9,412 10,169 30,918 56,611
Return on average assets (0.38 )% 0.51 % 0.06 % 0.43 % 0.63 %
Non-GAAP tax adjusted return on average assets (1) (0.38 )% 0.51 % 0.55 % 0.43 % 0.74 %
(1)   Tax adjusted for the three months and year ended December 31, 2017
due to impacts of the Tax Cuts and Jobs Act.
 
Non-GAAP return on average tangible equity
(unaudited)   Three Months Ended   Year Ended
($ in thousands) December 31,
2018
  September 30,
2018
  December 31,
2017
December 31,
2018
  December 31,
2017
Average tangible equity:
Average stockholders' equity $ 1,042,554 $ 1,039,508 $ 1,032,768 $ 1,033,680 $ 1,001,855
Less:
Average goodwill 331,832 331,832 331,832 331,832 331,832
Average other intangible assets   39,663     41,139     45,551     41,859     47,823  
Average tangible equity 671,059 666,537 655,385 659,989 622,200
Tax adjusted net income:
Net income (6,861 ) 9,412 1,201 30,918 47,643
Less: Adjustments due to the Tax Cuts
and Jobs Act
          8,968         8,968  
Tax adjusted net income (6,861 ) 9,412 10,169 30,918 56,611
 
Return on average stockholders' equity (2.61 )% 3.59 % 0.46 % 2.99 % 4.76 %
Non-GAAP Return on average tangible equity (4.06 ) 5.60 0.73 4.68 7.66
 
Non-GAAP tax adjusted return on average stockholders' equity (1) (2.61 )% 3.59 % 3.91 % 2.99 % 5.65 %
Non-GAAP tax adjusted return on average tangible equity (1) (4.06 ) 5.60 6.16 4.68 9.10
(1)   Tax adjusted for the three months and year ended December 31, 2017
due to impacts of the Tax Cuts and Jobs Act.
 
Non-GAAP tangible book value per as converted common share
(unaudited)   As of
($ in thousands, except share amounts) December 31,
2018
  September 30,
2018
  December 31,
2017
Tangible equity:
Total stockholders' equity $ 1,040,813 $ 1,037,050 $ 1,023,464
Less:
Goodwill 331,832 331,832 331,832
Other intangible assets, net   38,926   40,362   44,800
Tangible equity 670,055 664,856 646,832
Shares of common stock outstanding 36,060,375 36,058,585 35,915,159

Shares of common stock to be issued upon conversion of preferred
stock

  1,555,550   1,555,550   1,555,550

Total as converted shares of common stock outstanding (1)

  37,615,925   37,614,135   37,470,709
Book value per as converted common share $ 27.67 $ 27.57 $ 27.31
Tangible book value per as converted common share 17.81 17.68 17.26
(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.
 
Non-GAAP tangible common equity ratio
(unaudited)   As of
($ In thousands) December 31,
2018
  September 30,
2018
  December 31,
2017
Total assets $ 7,180,903 $ 7,395,074 $ 7,486,809
Less:
Goodwill 331,832 331,832 331,832
Other intangible assets, net   38,926     40,362     44,800  
Tangible assets 6,810,145 7,022,880 7,110,177
 
Total stockholders' equity 1,040,813 1,037,050 1,023,464
Less:
Goodwill 331,832 331,832 331,832
Other intangible assets, net   38,926     40,362     44,800  
Tangible equity 670,055 664,856 646,832
Less: preferred stock   29,110     29,110     29,110  
Tangible common equity 640,945 635,746 617,722
 
Tangible equity to tangible assets ratio 9.84 % 9.47 % 9.10 %
Tangible common equity to tangible assets ratio 9.41 % 9.05 % 8.69 %
 

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