Opus Bank in Irvine, Calif., posted its first quarterly profit since mid-2016 as it slowly turned the corner from a rough finish to last year.

Still, the $8 billion-asset company’s first-quarter earnings fell 55% lower from a year earlier, to $7.7 million, reflecting charges tied to an expense-cutting effort and reductions in certain types of loan categories.

Noninterest expenses rose 62% to $50.1 million, including $1.8 million in expenses tied to the cost-cutting initiative. The company said the charges were tied to reductions focused on compensation and benefits and third-party vendors.

Opus did not provide details on the types of cuts it implemented.

Total loans fell 6% to $5.4 billion. The quarter included $333 million in loan payoffs, $39.7 million in loan sales and $5.1 million in net chargeoffs.

Opus, which has been exiting certain businesses, reduced the size of its technology loan portfolio by 36% from the end of last year, to $122 million. The company’s health care book decreased by 35% in that period, to $44.2 million, and the enterprise value loan portfolio shrank by 15%, to $778 million.

Stephen Gordon, CEO of Opus Bank.
Opus Bank, led by CEO Stephen Gordon, returned to profitability in the first quarter despite ongoing credit quality issues.

Noninterest income fell by 5% from a year earlier to $56.1 million. The net interest margin narrowed by 70 basis points, to 3.14%.

The company was able to get a better grip on credit issues that contributed to losses in the previous two quarters.

Opus continues to grapple with credit issues. Nonperforming assets, though down 8.5% from Dec. 31, were double what they were a year earlier, at $87 million. The loan-loss provision was $6 million, representing a substantial decline from $70 million in the fourth quarter but an increase from $5 million a year earlier.

Noninterest income more than doubled from a year earlier, to $12.5 million, including a $519,000 securities gain and $6.4 million in trust administration fees. The company lost nearly $300,000 from the quarter’s loan sales.

Opus’ efficiency ratio jumped to 71% at March 31 from 47.9% a year earlier.

The first-quarter results “represent another step forward in the process of restoring consistently strong financial performance metrics,” Stephen Gordon, Opus’ chairman, president and CEO, said in a Monday press release.

“During the fourth quarter … our bankers embraced our credit culture going forward and we began rebuilding the new loan funding pipeline,” Gordon added. “We still have much work ahead of us, but we believe that the significant actions taken thus far … have us on the path toward delivering the type of performance we are accustomed to achieving.”