Safe and Sound

Optima Bank & Trust Company

Portsmouth, NH
4
Star Rating
Optima Bank & Trust Company is an FDIC-insured bank started in 2008 and currently headquartered in Portsmouth, NH. Regulatory filings show the bank having equity of $31.3 million on assets of $495.9 million, as of December 31, 2017.

Thanks to the efforts of 78 full-time employees in 5 offices in NH, the bank holds loans and leases worth $417.2 million, $396.9 million of which are for real estate. The bank currently holds $458.5 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Optima Bank & Trust Company exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three important criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a useful measurement of an institution's financial strength. It works as a bulwark against losses and affords protection for depositors when a bank is struggling financially. When it comes to safety and soundness, more capital is better.

Optima Bank & Trust Company fell short of the national average of 13.13 on our test to measure capital adequacy, receiving a score of 4 out of a possible 30 points.

A bank's Tier 1 capital ratio is an essential measure of this buffer. Optima Bank & Trust Company's Tier 1 capital ratio was 9.35 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial downturns.

Overall, Optima Bank & Trust Company held equity amounting to 6.30 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having lots of these types of assets means a bank may eventually have to use capital to cover losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Optima Bank & Trust Company scored 40 out of a possible 40 points, beating the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.28 percent of Optima Bank & Trust Company's loans were noncurrent -- in other words, 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Optima Bank & Trust Company's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to deal with problematic loans, likely making the bank better prepared to withstand financial shocks. Conversely, losses take away from a bank's ability to do those things.

Optima Bank & Trust Company underperformed the average on Bankrate's test of earnings, achieving a score of 14 out of a possible 30.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Optima Bank & Trust Company was 6.28 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.9 million on total equity of $31.3 million. The bank experienced an annualized return on average assets, or ROA, of 0.41 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.