Safe and Sound

Opus Bank

Irvine, CA
4
Star Rating
Opus Bank is an Irvine, CA-based, FDIC-insured bank started in 1993. Regulatory filings show the bank having equity of $1.02 billion on $7.49 billion in assets, as of December 31, 2017.

Thanks to the work of 797 full-time employees in 52 offices in multiple states, the bank has amassed loans and leases worth $5.10 billion, including $3.87 billion worth of real estate loans. The bank currently holds $5.95 billion in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Opus Bank exhibited a good condition, earning 4 out of 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 American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors when a bank is experiencing economic instability. It follows then that a bank's level of capital is a valuable measurement of an institution's financial resilience. From a safety and soundness perspective, the higher the capital, the better.

Opus Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, less than the national average of 13.13.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Opus Bank's Tier 1 capital ratio was 10.94 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, Opus Bank held equity amounting to 13.67 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

Having a large number of these types of assets could eventually force a bank to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

Opus Bank scored 36 out of a possible 40 points on Bankrate's test of asset quality, coming in below the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 1.13 percent of Opus Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Opus Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's ability to earn money affects its safety and soundness. Earnings may be retained by the bank, increasing its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, reduce a bank's ability to do those things.

Opus Bank fell behind the national average on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Opus Bank was 4.80 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $47.6 million on total equity of $1.02 billion. The bank reported an annualized return on average assets, or ROA, of 0.62 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.