Opus Bank Announces First Quarter 2016 Results

IRVINE, Calif.--(BUSINESS WIRE)-- Opus Bank ("Opus") (NASDAQ: OPB) announced today net income of $17.3 million, or $0.51 per diluted share, for the first quarter of 2016 compared to $16.7 million, or $0.50 per diluted share, for the fourth quarter of 2015 and $11.1 million, or $0.34 per diluted share, for the first quarter of 2015. Net income in the first quarter included $1.2 million of merger and strategic initiative related expenses, including costs associated with the acquisition of PENSCO Services, LLC and its wholly-owned subsidiary PENSCO Trust Company ("PENSCO"), which closed on April 13, 2016, as well as severance associated with our expense reduction and efficiency improvement strategy announced on January 11, 2016, and $3.4 million of seasonal compensation and benefits expenses. Additionally, Opus announced that its Board of Directors approved increasing its quarterly cash dividend by 20% to $0.18 per share payable on May 19, 2016 to common and preferred shareholders of record as of May 5, 2016.

Recent Developments

• On April 13, 2016, Opus completed the acquisition of PENSCO, a leading tech-enabled alternative asset IRA custodian, with approximately $10.7 billion of custodial assets and over 45,000 clients with investments in over 40,000 unique asset types comprised of private equity, real estate, notes, cash and other non-exchange traded assets. Pursuant to the terms of the agreement, Opus paid consideration comprised of 1,664,615 shares of Opus Bank common stock and approximately $46.4 million in cash. PENSCO operates as a wholly-owned subsidiary of Opus Bank and represents Opus' entry into wealth services.
• As a result of PENSCO's primary purpose as an alternative asset IRA custodian, as of April 22, 2016, $739 million of PENSCO's $1.15 billion of ancillary custodial client cash balances had already transitioned to Opus, bringing total demand deposits, which are comprised of noninterest and interest bearing demand accounts, to 46% of total deposits compared to 40% at March 31, 2016, meaningfully decreasing Opus' overall cost of deposits. As of April 22, 2016, PENSCO ancillary custodial client cash balances at Opus totaled $802 million.
• Our loan to deposit ratio decreased to 98% as of April 22, 2016 from 110% as of March 31, 2016 as a result of the transition of PENSCO ancillary custodial client cash balances and additional deposit inflows associated with our Fiduciary Banking and Correspondent Banking divisions.
• As of April 22, 2016, Opus paid off $220 million of the $750 million of FHLB advances outstanding at March 31, 2016 and plans to pay off an additional $465 million of maturing FHLB advances by the end of the second quarter of 2016 as Opus had readied its balance sheet to absorb the purchase of PENSCO. The execution of this strategy will further reduce Opus' cost of funds.

First Quarter 2016 Highlights

• Contractual net interest margin, which excludes the impact of accretion income from the acquired loan portfolio, increased 17 basis points to 3.59% for the first quarter of 2016 from 3.42% in the fourth quarter of 2015 and increased 13 basis point from 3.46% in the first quarter of 2015, as we experienced the first full-quarter benefit from the Fed rate increase in December 2015 and greater contribution from the originated loan portfolio. GAAP net interest margin decreased 2 basis points to 3.84% for the first quarter of 2016 compared to 3.86% in the fourth quarter of 2015, primarily due to lower accretion income from the acquired loan portfolio.
• New loan fundings were $551.7 million in the first quarter of 2016 compared to $468.4 million in the first quarter of 2015. Loan commitments of $630.1 million were originated during the first quarter of 2016 compared to $526.6 million in the first quarter of 2015. While the first quarter normally represents Opus' lowest quarter of new loan fundings and commitments originated, the levels achieved in the first quarter of 2016 were both record highs for first quarter volumes of any year.
• Commercial and Specialty Banking divisions represented 54% of new loan fundings and represented 60% of total new loan commitments originated during the first quarter of 2016.
• Total loans held-for-investment, including acquired loans, increased by $266.6 million, or 5%, during the first quarter of 2016 to $5.8 billion and increased by $1.4 billion, or 32%, from the first quarter of 2015. Originated loans increased by $291.8 million, or 6%, during the first quarter of 2016 to $5.5 billion, and increased by $1.6 billion, or 40%, from the first quarter of 2015.
• Total assets increased 4% to a record $6.9 billion at March 31, 2016 from $6.6 billion at December 31, 2015 and increased 25% from $5.6 billion at March 31, 2015.
• The loan origination pipeline remains robust entering the second quarter and continues to reflect the growth and maturation of our Commercial and Specialty Banking divisions, which increased to 61% of the pipeline on April 1, 2016 from 57% at January 1, 2016.
• Average total deposits increased $131.1 million, or 3%, from the fourth quarter of 2015 to $5.3 billion.
• Net interest income increased 4% to $59.1 million for the first quarter of 2016 compared to $56.7 million for the fourth quarter of 2015. Interest income from originated loans increased 11% due to higher average balances and an 11 basis point increase in the yield on originated loans. Interest income from the acquired loan portfolio decreased 29% from the fourth quarter of 2015 due to lower balances of acquired loans and lower accretion income. During the first quarter of 2016, we recognized $3.1 million of accretion income from loans that closed through prepayment, foreclosure and sale, compared to $5.5 million during the fourth quarter of 2015.
• Noninterest income during the first quarter of 2016 totaled $5.3 million compared to $6.0 million in the fourth quarter of 2015 and $3.3 million in the first quarter of 2015.
• Noninterest expense was $30.9 million in the first quarter of 2016 compared to $28.0 million in the fourth quarter of 2015. The increase from the prior quarter was primarily due to $1.2 million of merger and strategic initiative related expenses, which includes costs associated with the acquisition of PENSCO, as well as severance associated with our expense reduction and efficiency improvement strategy, and $3.4 million of seasonal compensation and benefits expenses.
• Our efficiency ratio was 47.9% for the first quarter of 2016 compared to 44.7% for the fourth quarter of 2015 and 55.2% for the first quarter of 2015. Excluding $1.2 million in merger and strategic initiative related expenses, including severance associated with our expense reduction and efficiency improvement strategy, and $3.4 million in seasonal compensation and benefits expense during the first quarter of 2016, our adjusted efficiency ratio was 40.8%, compared to 43.1% in the fourth quarter of 2015.
• Return on average tangible equity increased to 11.5% for the first quarter of 2016 compared to 11.2% for the fourth quarter of 2015 and 8.1% for the first quarter of 2015. Return on average assets was 1.03% for the first quarter of 2016 and the fourth quarter of 2015 compared to 0.85% for the first quarter of 2015.
• Nonperforming assets totaled 0.62% of total assets at March 31, 2016 compared to 0.37% at December 31, 2015 and 0.23% at March 31, 2015. The linked quarter increase was due to one loan relationship placed on nonaccrual during the first quarter of 2016 for which the required allowance remained materially unchanged from the fourth quarter of 2015.
• Provision expense for the first quarter of 2016 was $4.9 million compared to $8.0 million for the fourth quarter of 2015. Net charge-offs were $302,000 for the first quarter of 2016, or 0.02% of average loans (annualized), compared to $676,000 and 0.05% of average loans (annualized), respectively, during the fourth quarter of 2015.
• Our allowance for loan losses increased to 0.85% of loans as of March 31, 2016 from 0.80% as of December 31, 2015, and our coverage ratio, which includes the remaining discount on the acquired loan portfolio, was 1.03% as of March 31, 2016, compared to 1.08% as of December 31, 2015.
• Our tangible book value per as-converted share at March 31, 2016 increased to $18.73 from $18.28 at December 31, 2015 and $17.08 at March 31, 2015.

Stephen H. Gordon, Founding Chairman, Chief Executive Officer and President of Opus Bank, stated, “We entered 2016 having achieved a record $763 million of new loan fundings during the final quarter of 2015. While the first quarter normally represents Opus’ lowest quarter of loan fundings during the year, we completed the first quarter of 2016 having achieved our highest level of first quarter loan fundings in our 5½ year history, along with a 17 basis point increase in our contractual net interest margin and a very robust loan pipeline to fuel anticipated future growth. Our earnings for the first quarter of 2016, when adjusted for merger and strategic initiative related expenses, as well as seasonal compensation and benefits costs, resulted in an adjusted efficiency ratio that exemplifies our ability to meaningfully scale our revenue growth and returns.”

Gordon added, “We are very excited to have completed the acquisition of PENSCO and to now begin the realization of our mutual benefits and vision. This transformational acquisition brings Opus to now having over $7 billion of assets on-balance sheet, nearly $11 billion of custodial assets off-balance sheet and a new source of diversified revenue through our entry into the wealth services business with the addition of over 45,000 new clients.”

Gordon concluded, “We are pleased to announce today that the Board of Directors has approved increasing our quarterly cash dividend by 20% to $0.18 per share, which reflects our strong capital position, asset quality, liquidity, increasing earnings power and return metrics, and confidence in our ability to meaningfully scale revenue while increasing our return on capital.”

Net Interest Income

Net interest income increased 4% to $59.1 million in the first quarter of 2016 from $56.7 million in the fourth quarter of 2015 and increased 31% from $45.2 million in the first quarter of 2015. Interest income from originated loans increased by $5.6 million, or 11%, from the fourth quarter of 2015 and $17.9 million, or 45%, from the first quarter of 2015 due to our continued loan growth and success in strategically shifting our loan mix. Interest income from the acquired loan portfolio decreased by $3.0 million from the prior quarter and $3.3 million from the prior year's first quarter due to lower balances of acquired loans and lower accretion income from loans that closed through prepayment, foreclosure and sale. During the first quarter of 2016 we sold $13.2 million of acquired loans that generated $1.2 million of accretion income, compared to the sale of $8.4 million of acquired loans that contributed $4.6 million of accretion income during the fourth quarter of 2015. Interest expense was $7.1 million for the first quarter of 2016 compared to $6.7 million for the fourth quarter of 2015 and $6.0 million for the first quarter of 2015. The increase in interest expense was driven by growth of $130.8 million in average interest bearing deposits from the fourth quarter of 2015 and $979.8 million from the first quarter of 2015.

Contractual net interest margin, which excludes the impact of accretion of acquisition discounts on the acquired loan portfolio, increased 17 basis points to 3.59% for the first quarter of 2016 from 3.42% in the prior quarter and increased 13 basis points from 3.46% in the first quarter of 2015. The linked-quarter change in contractual net interest margin was due to the continued strategic shift in the mix of the originated loan portfolio, higher net benefit from prepayments, the number of days in the quarter and the full quarterly benefit from the Fed rate increase in December 2015. Net interest margin decreased 2 basis points to 3.84% in the first quarter of 2016 from 3.86% in the fourth quarter of 2015 and decreased 3 basis points from 3.87% in the first quarter of 2015, primarily due to lower accretion income from the acquired loan portfolio. Total loan yield during the first quarter of 2016 decreased to 4.69% from 4.80% in the fourth quarter of 2015 and from 4.90% in the first quarter of 2015 due to lower interest and accretion income received from the acquired loan portfolio, offset partially by higher yield on originated loans. Accretion income from the acquired loan portfolio contributed 0.25% to net interest margin during the first quarter of 2016 compared to 0.44% in the fourth quarter of 2015 and 0.41% in the first quarter of 2015. The yield on originated loans increased 11 basis points to 4.37% during the first quarter of 2016 primarily due to improved mix of higher-yielding Commercial and Specialty Banking division loans, the net benefit from higher prepayments compared to the fourth quarter of 2015, the full-quarter benefit of the Fed rate increase in December 2015 and the number of days during the quarter. Our cost of funds increased one basis point to 0.49% during the first quarter of 2016 from 0.48% during the fourth quarter of 2015 and decreased from 0.55% during the first quarter of 2015. Our cost of deposits increased one basis point to 0.48% for the first quarter of 2016 as compared to 0.47% for the fourth quarter of 2015, and decreased from 0.54% for the first quarter of 2015.

Noninterest Income and Noninterest Expense

Noninterest income totaled $5.3 million in the first quarter of 2016 as compared to $6.0 million in the fourth quarter of 2015 and $3.3 million in the first quarter of 2015. Noninterest income during the first quarter of 2016 included $1.9 million in service charges on deposit accounts, $1.6 million in fees generated through our Escrow and Exchange divisions and $811,000 in income from bank owned life insurance. Additionally, the fourth quarter of 2015 included a gain of $399,000 on the sale of loans that was not repeated during the first quarter of 2016.

Noninterest expense totaled $30.9 million in the first quarter of 2016 compared to $28.0 million in the fourth quarter of 2015 and $26.8 million in the first quarter of 2015. The increase in noninterest expense from the prior quarter was primarily driven by $1.2 million of merger and strategic initiative related expenses, which includes costs associated with the acquisition of PENSCO, as well as severance associated with our previously announced expense reduction and efficiency improvement strategy, and $3.4 million of seasonal compensation and benefits expenses. Seasonal compensation and benefits expenses included higher employer taxes, lower origination-related deferred compensation associated with seasonally lower loan originations and adjustments for annual incentive compensation payouts.

Loans

Total loans held-for-investment, net of the allowance for loan losses, grew 5% to $5.7 billion at March 31, 2016 from $5.5 billion at December 31, 2015 and grew 32% from $4.3 billion at March 31, 2015.

Our originated loan portfolio totaled $5.5 billion as of March 31, 2016, an increase of 6% from $5.2 billion as of December 31, 2015 and 40% from $3.9 billion as of March 31, 2015. Our loan growth during the quarter was the result of strong new loan fundings of $551.7 million, including $253.2 million from Income Property Banking, $79.5 million from Structured Finance, $61.1 million from Institutional Syndications, $55.3 million from Commercial Banking, $47.4 million from Healthcare Banking, $49.1 million from Corporate Finance, and $4.0 million from Technology Banking. Our Commercial and Specialty Banking divisions contributed 54% of new loan fundings during the first quarter of 2016 and the fourth quarter of 2015 and 58% during the first quarter of 2015. Loan commitments originated during the first quarter totaled $630.1 million as compared to $819.9 million during the fourth quarter of 2015 and $526.6 million during the first quarter of 2015. At March 31, 2016, our unfunded commitments on originated loans totaled $581.2 million. As of March 31, 2016, originated loans made up 96% of our total loan portfolio as compared to 95% as of December 31, 2015 and 90% as of March 31, 2015.

Our acquired loan portfolio totaled $243.2 million as of March 31, 2016, a decrease of 9% from $268.4 million at December 31, 2015 and 43% from $425.1 million at March 31, 2015. At March 31, 2016, our acquired loan portfolio has a remaining discount of $10.7 million.

Deposits and Borrowings

Deposits totaled $5.2 billion as of March 31, 2016, a decrease of 1% from $5.3 billion as of December 31, 2015 and an increase of 21% from $4.3 billion as of March 31, 2015. The decrease in total deposits during the first quarter of 2016 was attributable to certain client deposit relationships moving balances out at quarter end that then returned immediately at the beginning of this second quarter. Average total deposits increased $131.1 million, or 3%, during the first quarter of 2016 to $5.3 billion, which more accurately reflects deposit generation during the period.

Total demand deposits, including both noninterest-bearing and interest-bearing DDAs, equaled 40% of total deposits at March 31, 2016, unchanged from the prior quarter-end and up from 32% at March 31, 2015. Demand deposits from our Escrow and Exchange divisions totaled $667.1 million as of March 31, 2016. Additionally, our Municipal Banking division grew deposits to $306.2 million, an increase of 9% from the prior quarter. At March 31, 2016, business deposits represented 51% of total deposits, as compared to 52% at December 31, 2015 and 43% at March 31, 2015. Our loan to deposit ratio was 110% as of March 31, 2016 compared to 104% as of December 31, 2015 and 101% as of March 31, 2015. As of April 22, 2016, following the close of the PENSCO acquisition and the increase in our total demand deposits, our loan to deposit ratio decreased to 98%.

FHLB advances totaled $750.0 million as of March 31, 2016 compared to $420.0 million as of December 31, 2015 and $365.0 million at March 31, 2015. As of April 22, 2016, Opus paid off $220 million of the $750 million of FHLB advances outstanding at March 31, 2016. Opus plans to pay off an additional $465 million of maturing FHLB advances by the end of the second quarter of 2016 as Opus had readied its balance sheet to absorb the purchase of PENSCO. The execution of this strategy will further reduce Opus' cost of funds.

Asset Quality

We continue to experience strong asset quality as our loan portfolio seasons, evidenced by the low balance of nonperforming assets and low ratio of nonperforming assets to total assets. Nonperforming assets totaled $42.8 million, or 0.62% of total assets as of March 31, 2016, compared to $24.3 million, or 0.37% of total assets as of December 31, 2015, and $12.7 million, or 0.23% of total assets as of March 31, 2015. The increase in nonperforming assets during the first quarter of 2016 was due to one current loan relationship placed on nonaccrual during the first quarter of 2016 for which the required allowance remains materially unchanged from the fourth quarter of 2015.

We recorded a total provision for loan losses of $4.9 million in the first quarter of 2016 compared to $8.0 million in the fourth quarter of 2015 and $3.6 million in the first quarter of 2015. The provision recapture on the acquired loan portfolio totaled $151,000 in the first quarter of 2016, $359,000 during the fourth quarter of 2015 and $202,000 in the first quarter of 2015. A provision for loan losses of $5.1 million was recorded on the originated loan portfolio during the first quarter of 2016 compared to $8.4 million in the fourth quarter of 2015 and $3.8 million in the first quarter of 2015. The provision for loan losses during the current quarter on the originated loan portfolio was comprised of $1.9 million for portfolio growth and $3.2 million for changes in specific reserves, individual risk ratings and loss factors. Net charge-offs totaled $302,000, or 0.02% of average loans (annualized), for the first quarter of 2016 compared to $676,000 and 0.05%, respectively, during the fourth quarter of 2015.

Our allowance for loan losses represented 0.85% of our total loan portfolio at March 31, 2016 as compared to 0.80% at December 31, 2015 and 0.57% at March 31, 2015. We have continued to see the allowance as a percentage of total loans increase due to our strategic shift in the mix of our loan portfolio toward more commercial business loans, which require a higher allowance relative to our multifamily loans. At March 31, 2016, the total originated loan portfolio was comprised of 48% multifamily loans with the remaining portfolio comprised primarily of commercial business loans. This compares to 49% multifamily loans as of December 31, 2015 and 58% multifamily loans as of March 31, 2015. The coverage ratio for the total loan portfolio, which includes the remaining discount on the acquired loan portfolio, at March 31, 2016 was 1.03% compared to 1.08% at December 31, 2015 and 1.45% at March 31, 2015, declining as the originated loan portfolio continues to increase as a percentage of total loans. Our allowance for loan losses on originated loans resulted in a coverage ratio of 0.87% at March 31, 2016, an increase from 0.82% at December 31, 2015 and 0.57% at March 31, 2015.

Capital

Our capital ratios continue to be strong and well in excess of bank regulatory requirements. As of March 31, 2016, our Tier 1 leverage ratio was 9.30%, Common Equity Tier 1 ratio was 10.76% and total risk-based capital ratio was 11.65%, compared to 9.59%, 10.81% and 11.65%, respectively, as of December 31, 2015. As of March 31, 2015, our Tier 1 leverage, Common Equity Tier 1 ratio and total risk-based capital ratios were 10.40%, 11.79% and 13.55%, respectively. Stockholders’ equity totaled $881.7 million as of March 31, 2016, an increase of 2% from $867.0 million as of December 31, 2015 and an increase of 7% from $824.5 million as of March 31, 2015. Our tangible book value per as converted common share increased to $18.73 as of March 31, 2016 from $18.28 as of December 31, 2015 and $17.08 at March 31, 2015.

Additionally, on April 21, 2016 the Board of Directors approved increasing our quarterly cash dividend by 20% to $0.18 per share payable on May 19, 2016 to common and preferred shareholders of record as of May 5, 2016.

Conference Call and Webcast DetailsDate: Monday, April 25, 2016Time: 8:00 a.m. PT (11:00 a.m. ET)

Phone Number: (855) 265-3237Conference Id: 77996612Webcast URL: http://investor.opusbank.com/event

Analysts, investors, and the general public may listen to a discussion of Opus' first quarter earnings and performance and participate in the question/answer session by using the phone number listed above or through a live webcast of the conference available through a link on the investor relations page of Opus's website at: http://investor.opusbank.com/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 77996612. The call replay will be available through May 25, 2016.

About Opus Bank

Opus Bank is an FDIC insured California-chartered commercial bank with $6.9 billion of total assets, $5.8 billion of total loans, and $5.2 billion in total deposits as of March 31, 2016. Opus Bank provides high-value, relationship-based banking products, services, and solutions to its clients through its Retail Bank, Commercial Bank, Merchant Bank, and Correspondent Bank. Opus Bank offers a suite of treasury and cash management and depository solutions and a wide range of loan products, including commercial, healthcare, technology, multifamily residential, commercial real estate, and structured finance, and is an SBA preferred lender. Opus Bank offers commercial escrow services and facilitates 1031 Exchange transactions through its Escrow and Exchange divisions. Opus Bank provides clients with financial and advisory services related to raising equity capital, targeted acquisition and divestiture strategies, general mergers and acquisitions, debt and equity financing, balance sheet restructuring, valuation, strategy, and performance improvement through its Merchant Banking division and its broker-dealer subsidiary, Opus Financial Partners. Opus Bank’s subsidiary, PENSCO Trust Company, is a leading tech-enabled alternative asset IRA custodian with approximately $11 billion of custodial assets and over 45,000 clients, which are comprised of self-directed investors, financial institutions, capital raisers, and financial advisors. Opus Bank operates 58 client experience centers, including 33 in California, 22 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 the Opus’s plans, beliefs and goals, which involve certain risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors: competitive pressure in the banking industry; changes in the interest rate environment; the health of the economy, either nationally or regionally; the deterioration of credit quality, which would cause an increase in the provision for possible loan and lease losses; changes in the regulatory environment; changes in business conditions, particularly in California real estate; volatility of rate sensitive deposits; asset/liability matching risks and liquidity risks; and changes in the securities markets. For a discussion of these and other risks and uncertainties, see Opus's filings with the Federal Deposit Insurance Corporation, including, but not limited to, the risk factors in Opus's annual report on Form 10-K. These filings are available on the Investor Relations page of Opus's website at: investor.opusbank.com.

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

Consolidated Statements of Income
(unaudited)				For the three months ended
($ in thousands, except per share amounts)				March 31, 2016						December 31, 2015						March 31, 2015
Interest income:
Loans				$	65,139					$	62,532					$	50,518
Investment securities				445						552						492
Due from banks				575						333						225
Total interest income				66,159						63,417						51,235
Interest expense:
Deposits				6,333						6,136						5,447
Federal Home Loan Bank advances				723						557						597
Total interest expense				7,056						6,693						6,044
Net interest income				59,103						56,724						45,191
Provision for loan losses				4,943						8,014						3,560
Net interest income after provision for loan losses				54,160						48,710						41,631
Noninterest income:
Service charges on deposit accounts				1,938						1,694						1,536
Escrow and exchange fees				1,620						1,777						—
Gain on sale of loans				—						399						—
(Loss) gain on sale of assets				(7		)				14						134
Gain (loss) from real estate owned, net				(24		)				153						63
Gain (loss) on sale of investment securities				—						—						—
Bank-owned life insurance, net				811						923						715
Other income				985						1,048						842
Total noninterest income				5,323						6,008						3,290
Noninterest expense:
Compensation and benefits				17,728						14,979						14,694
Professional services				2,293						1,926						1,966
Occupancy expense				2,999						3,011						2,766
Depreciation and amortization				1,475						1,484						1,325
Deposit insurance and regulatory assessments				1,060						975						772
Insurance expense				325						317						307
Data processing				870						842						817
Software licenses and maintenance				631						579						453
Office services				889						985						1,008
Amortization of core deposit intangibles				627						627						627
Advertising and marketing				228						291						238
Litigation expense (recovery)				(50		)				18						250
Other expenses				1,778						2,000						1,530
Total noninterest expense				30,853						28,034						26,753
Income before income tax expense				28,630						26,684						18,168
Income tax expense				11,350						10,012						7,092
Net income				$	17,280					$	16,672					$	11,076
Basic earnings per common share				$	0.53					$	0.51					$	0.35
Diluted earnings per common share				0.51						0.50						0.34
Weighted average shares - basic				32,521,972						30,429,049						28,154,150
Weighted average shares - diluted				33,786,500						33,670,728						32,857,377

Consolidated Balance Sheets
(unaudited)				As of
($ in thousands, except share amounts)				March 31, 2016						December 31, 2015						March 31, 2015
Assets
Cash and due from banks				$	38,221					$	33,419					$	32,963
Due from banks – interest-bearing				463,198						451,458						382,318
Investment securities available-for-sale, at fair value				145,587						151,761						254,104
Loans held-for-sale				—						—						—
Loans held-for-investment				5,762,410						5,495,804						4,356,843
Less allowance for loan losses				(48,788		)				(44,147		)				(24,878		)
Loans held-for-investment, net				5,713,622						5,451,657						4,331,965
Real estate owned				1,446						1,251						4,277
Premises and equipment, net				30,225						31,008						34,180
Goodwill				262,115						262,115						262,115
Core deposit intangible, net				9,472						10,099						11,981
Deferred tax assets, net				46,707						48,813						71,963
Cash surrender value of bank owned life insurance, net				117,804						116,760						92,760
Accrued interest receivable				19,178						18,056						15,552
Federal Home Loan Bank stock				20,250						17,250						30,414
Other assets				62,639						56,186						36,982
Total assets				$	6,930,464					$	6,649,833					$	5,561,574
Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing demand				$	913,175					$	975,588					$	825,094
Interest-bearing demand				1,164,835						1,161,272						565,669
Money market and savings				2,605,349						2,598,852						2,322,850
Time deposits				556,424						571,336						612,263
Total deposits				5,239,783						5,307,048						4,325,876
Federal Home Loan Bank advances				750,000						420,000						365,000
Accrued interest payable				348						332						345
Other liabilities				58,675						55,415						45,842
Total liabilities				6,048,806						5,782,795						4,737,063
Stockholders’ equity:
Preferred stock:
Authorized 200,000,000 shares; issued 612 and 612 and 72,411 shares, respectively				581						581						68,768
Common stock, no par value per share:
Authorized 200,000,000 shares; issued 32,767,746 and 32,717,359 and 28,743,456 shares, respectively				621,677						621,677						550,248
Additional paid-in capital				49,082						46,371						43,659
Retained earnings				216,222						203,823						164,337
Treasury stock, at cost; 234,494 and 217,168, and 144,127 shares, respectively				(5,732		)				(5,189		)				(2,839		)
Accumulated other comprehensive (loss) income				(172		)				(225		)				338
Total stockholders’ equity				881,658						867,038						824,511
Total liabilities and stockholders’ equity				$	6,930,464					$	6,649,833					$	5,561,574

Selected Financial Data
				For the three months ended
(unaudited)				March 31, 2016					December 31, 2015					March 31, 2015
Return on average assets				1.03	%				1.03	%				0.85	%
Return on average stockholders' equity				7.91					7.66					5.56
Return on average tangible equity(1)				11.46					11.19					8.06
Efficiency ratio(2)				47.89					44.69					55.18
Noninterest expense to average assets				1.84					1.74					2.06
Yield on interest-earning assets				4.29					4.31					4.39
Cost of deposits(3)				0.48					0.47					0.54
Cost of funds(4)				0.49					0.48					0.55
Net interest margin				3.84					3.86					3.87
Loan to deposits				109.97					103.56					100.72

(1)			See computation in "Non-GAAP Financial Measures" section.
(2)			The efficiency ratio is calculated by dividing noninterest expense by the sum of net interest income before provision for loan losses and noninterest income.
(3)			Calculated as interest expense on deposits divided by total average deposits.
(4)			Calculated as total interest expense divided by average total deposits and FHLB advances.

Capital Ratios				As of
(unaudited)				March 31, 2016 (1)					December 31, 2015					March 31, 2015
Tier 1 leverage ratio				9.30	%				9.59	%				10.40	%
Tier 1 risk-based capital ratio				10.76					10.81					12.91
Total risk-based capital ratio				11.65					11.65					13.55
Common Equity Tier 1 ratio				10.76					10.81					11.79

(1)			Ratios are preliminary until filing of our March 31, 2016 call report.

Loan Fundings
(unaudited)				For the three months ended
($ in thousands)				March 31, 2016						December 31, 2015						March 31, 2015
Loans funded:
Real estate mortgage loans:
Single-family residential				$	—					$	—					$	—
Multifamily residential				219,519						279,088						145,831
Commercial real estate				111,620						146,371						73,495
Construction and land loans				14,387						16,684						2,245
Commercial business loans				201,955						318,927						246,046
Small Business Administration loans				4,215						1,980						826
Consumer and other loans				—						—						—
Total loan fundings				$	551,696					$	763,050					$	468,443

Composition of Loan Portfolio				As of
(unaudited)				March 31, 2016									December 31, 2015									March 31, 2015
($ 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				$	97,276				1.7	%			$	100,988				1.8	%			$	119,610				2.7	%
Multifamily residential				2,665,566					46.3				2,584,667					47.0				2,264,517					52.0
Commercial real estate				1,179,003					20.5				1,113,250					20.3				795,634					18.3
Construction and land loans				70,409					1.2				56,095					1.0				10,102					0.2
Commercial business loans				1,480,860					25.7				1,348,666					24.5				712,658					16.4
Small Business Administration loans				25,422					0.4				23,347					0.4				26,682					0.6
Consumer and other loans				669					0.0				397					0.0				2,561					0.1
Total originated loans				5,519,205					95.8				5,227,410					95.1				3,931,764					90.2
Acquired loans held-for-investment
Real estate mortgage loans:
Single-family residential				44,499					0.8				50,016					0.9				122,693					2.8
Multifamily residential				73,341					1.3				76,498					1.4				95,435					2.2
Commercial real estate				62,178					1.2				63,520					1.2				100,794					2.3
Construction and land loans				2,046					0.0				2,061					0.0				2,789					0.1
Commercial business loans				18,505					0.2				19,898					0.4				25,908					0.6
Small Business Administration loans				34,895					0.6				48,781					0.9				58,867					1.4
Consumer and other loans				7,741					0.1				7,620					0.1				18,593					0.4
Total acquired loans				243,205					4.2				268,394					4.9				425,079					9.8
Total gross loans				$	5,762,410				100.0	%			$	5,495,804				100.0	%			$	4,356,843				100.0	%

Composition of Deposits				As of
(unaudited)				March 31, 2016									December 31, 2015									March 31, 2015
($ in thousands)				Amount					% of Total deposits				Amount					% of Total deposits				Amount					% of Total deposits
Noninterest bearing				$	913,175				17.43	%			$	975,588				18.38	%			$	825,094				19.07	%
Interest bearing demand				1,164,835					22.23				1,161,272					21.88				565,669					13.08
Money market and savings				2,605,349					49.72				2,598,852					48.97				2,322,850					53.70
Time deposits				556,424					10.62				571,336					10.77				612,263					14.15
Total deposits				$	5,239,783				100.00	%			$	5,307,048				100.00	%			$	4,325,876				100.00	%

Consolidated average balance sheet, interest, yield and rates
			For the three months ended March 31,														For the three months ended December 31,														For the three months ended March 31,
(unaudited)			2016														2015														2015
($ in thousands)			Average Balance					Interest					Yields/ Rates				Average Balance					Interest					Yields/ Rates				Average Balance					Interest					Yields/ Rates
Assets:
Interest-earning assets:
Due from banks			$	458,569				$	575				0.50	%			$	458,586				$	333				0.29	%			$	363,796				$	225				0.25	%
Investment securities			149,228					445					1.20				202,828					552					1.08				193,651					492					1.03
Acquired loans			260,243					7,279					11.25				299,382					10,247					13.58				452,620					10,555					9.46
Originated Loans			5,327,366					57,860					4.37				4,874,189					52,285					4.26				3,725,252					39,963					4.35
Total loans			$	5,587,609				$	65,139				4.69				$	5,173,571				$	62,532				4.80				$	4,177,872				$	50,518				4.90
Total interest-earning assets			$	6,195,406				$	66,159				4.29				$	5,834,985				$	63,417				4.31				$	4,735,319				$	51,235				4.39
Noninterest-earning assets			555,493														556,088														537,460
Total assets			$	6,750,899													$	6,391,073													$	5,272,779
Liabilities and stockholders’ equity:
Interest-bearing deposits:
Interest-bearing demand			$	1,205,116				$	687				0.23	%			$	1,042,901				$	602				0.23	%			$	453,894				$	282				0.25	%
Money market and savings			2,588,103					4,504					0.70				2,600,594					4,346					0.66				2,301,946					3,903					0.69
Time deposits			562,824					1,142					0.82				581,747					1,188					0.81				620,438					1,262					0.82
Total interest-bearing deposits			$	4,356,043				$	6,333				0.58				$	4,225,242				$	6,136				0.58				$	3,376,278				$	5,447				0.65
FHLB advances			539,615					723					0.54				337,772					557					0.65				375,333					597					0.65
Total interest-bearing liabilities			$	4,895,658				$	7,056				0.58				$	4,563,014				$	6,693				0.58				$	3,751,611				$	6,044				0.65
Noninterest-bearing deposits			915,522														915,233														691,095
Other liabilities			61,443														49,294														21,497
Total liabilities			$	5,872,623													$	5,527,541													$	4,464,203
Total stockholders’ equity			$	878,276													$	863,532													$	808,576
Total liabilities and stockholders’ equity			$	6,750,899													$	6,391,073													$	5,272,779
Net interest income								$	59,103													$	56,724													$	45,191
Net interest spread(1)													3.71	%													3.73	%													3.74	%
Net interest margin(2)													3.84	%													3.86	%													3.87	%

(1)			Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
(2)			Net interest margin is computed by dividing net interest income by total average interest-earning assets.

Asset Quality Information
(unaudited)				As of
($ in thousands)				March 31, 2016						December 31, 2015						March 31, 2015
Nonperforming assets
Nonaccrual loans				$	41,345					$	23,050					$	8,411
Real estate owned				1,446						1,251						4,277
Total nonperforming assets				42,791						24,301						12,688
Nonperforming assets to total assets				0.62		%				0.37		%				0.23		%
Accruing loans 90 days or more past due				$	1,315					$	324					$	1,188
Accruing troubled debt restructured loans				648						281						296
Allowance for loan losses - Originated loans				47,858						43,066						22,342
Allowance for loan losses - Acquired loans				930						1,081						2,536
Total allowance for loan losses				48,788						44,147						24,878
Remaining acquisition discount on acquired loans				$	10,659					$	15,409					$	39,031
Allowance for loan losses to non-accrual loans				118.0		%				191.53		%				295.78		%
Allowance for loan losses acquired loans to acquired loans				0.38						0.40						0.60
Allowance for loan losses originated loans to originated loans				0.87						0.82						0.57
Total allowance for loan losses to total loans				0.85						0.80						0.57
Allowance for loan losses and remaining acquisition discount on acquired loans to gross acquired loans(1)				4.57						5.81						8.96
Allowance for loan losses and remaining acquisition discount to total gross loans(1)				1.03						1.08						1.45

(1)			Remaining acquisition discount is added back to acquired loans held for investment to calculate gross loans and added to allowance for loan losses to calculate the coverage ratios.

Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles in the United States ("GAAP"). We believe that the presentation of certain non-GAAP financial measures assists investors in evaluating our financial results. These non-GAAP measures include our return on average tangible equity, net interest income excluding acquisition accounting and tangible book value per as converted common share. These non-GAAP measures should be taken together with the corresponding GAAP measures and 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
($ in thousands)				March 31, 2016						December 31, 2015						March 31, 2015
Average tangible equity:
Average stockholders' equity				$	878,276					$	863,532					$	808,576
Less:
Average goodwill				262,115						262,115						238,790
Average core deposit intangibles				9,803						10,401						12,334
Average tangible equity				606,358						591,016						557,452
Net income				$	17,280					$	16,672					$	11,076
Return on average stockholders' equity				7.91		%				7.66		%				5.56		%
Non-GAAP return on average tangible equity				11.46						11.19						8.06

Non-GAAP net interest margin
(unaudited)				For the three months ended
($ in thousands)				March 31, 2016						December 31, 2015						March 31, 2015
Net interest income				$	59,103					$	56,724					$	45,191
Less: Accretion/amortization of acquisition discount/premium(1)				(3,724		)				(6,225		)				(4,452		)
Non-GAAP net interest income				55,379						50,499						40,739
Average interest earning assets				$	6,195,406					$	5,834,985					$	4,735,319
Add: Average unamortized acquisition discounts				14,376						24,559						42,453
Non-GAAP average interest-earning assets				6,209,782						5,859,544						4,777,772
Net interest margin impact				0.25		%				0.44		%				0.41		%

(1)			Accretion income on acquired loans only includes interest income recognized in excess of what would be accrued under the contractual terms as a result of acquisition accounting and loan exits through full payoff or charge-off, foreclosure or sale.

Non-GAAP tangible book value per as converted common share
(unaudited)				As of
($ In thousands, except share amounts)				March 31, 2016						December 31, 2015						March 31, 2015
Tangible equity:
Total stockholders' equity				$	881,658					$	867,038					$	824,511
Less:
Goodwill				262,115						262,115						262,115
Core deposit intangibles				9,472						10,099						11,981
Tangible equity				610,071						594,824						550,415
Shares of common stock outstanding				32,533,252						32,500,191						28,599,329
Shares of common stock to be issued upon conversion of preferred stock				30,600						30,600						3,620,550
Total as converted shares of common stock outstanding(1)				32,563,852						32,530,791						32,219,879
Book value per as converted common share				27.07						26.65						25.59
Tangible book value per as converted common share				18.73						18.28						17.08

(1)			Common stock outstanding includes additional shares of common stock that would be issued upon conversion of all outstanding shares of preferred stock to common stock and excludes shares issuable upon exercise of warrants and options.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160425005410/en/

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

Source: Opus Bank

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