Safe and Sound

Bank of the Orient

San Francisco, CA
5
Star Rating
San Francisco, CA-based Bank of the Orient is an FDIC-insured bank founded in 1971. The bank has equity of $80.4 million on assets of $736.5 million, according to December 31, 2017, regulatory filings.

With 134 full-time employees in 8 offices in multiple states, the bank holds loans and leases worth $625.8 million, including real estate loans of $476.9 million. U.S. bank customers currently have $612.5 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of the Orient exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to evaluate U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of a bank's financial fortitude. It acts as a cushion against losses and provides protection for depositors when a bank is experiencing financial instability. When it comes to safety and soundness, the higher the capital, the better.

Bank of the Orient received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of the Orient's Tier 1 capital ratio was 12.28 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic difficulties.

Overall, Bank of the Orient held equity amounting to 10.91 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with lots of these types of assets could eventually be forced to use capital to cover losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Bank of the Orient scored 40 out of a possible 40 points, better than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.25 percent of Bank of the Orient'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 1.01 percent.

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

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank more resilient in tough times. Banks that are losing money, however, have less ability to do those things.

Bank of the Orient received above-average marks on Bankrate's earnings test, achieving a score of 22 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. Bank of the Orient's most recent annualized quarterly return on equity was 15.47 percent, above the national average of 8.10 percent.

The bank earned net income of $11.0 million on total equity of $80.4 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.67 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 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.