Safe and Sound

Optum Bank, Inc.

Salt Lake City, UT
4
Star Rating
Optum Bank, Inc. is a Salt Lake City, UT-based, FDIC-insured bank founded in 2003. As of June 30, 2017, the bank held equity of $939.5 million on $7,775,727,000 in assets.

With 158 full-time employees, the bank has amassed loans and leases worth $523.2 million, including real estate loans of $284.9 million. U.S. bank customers currently have $6.41 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Optum Bank, Inc. exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank faired on the three key criteria Bankrate used to score American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial resilience, capital is valuable. It works as a buffer against losses and provides protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, the higher the capital, the better.
On our test to measure capital adequacy, Optum Bank, Inc. received a score of 6 out of a possible 30 points, less than the national average of 13.38.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Optum Bank, Inc.'s Tier 1 capital ratio was 15.40 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Optum Bank, Inc. held equity amounting to 12.08 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to absorb losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and increasing the risk of a failure in the future.

Optum Bank, Inc. beat out the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.34 percent of Optum Bank, Inc.'s loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Optum Bank, Inc.'s loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank more resilient in tough times. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, Optum Bank, Inc. scored 20 out of a possible 30, better than the national average of 16.52.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. Optum Bank, Inc.'s most recent annualized quarterly return on equity was 12.73 percent, above the national average of 9.28 percent.

The bank reported net income of $56.0 million on total equity of $939.5 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.49 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.