IPO Report: Opus Bank (OPB)

Opus Bank ($OPB) is a community bank formed from bankruptcy a little over three years ago headquartered in Irvine, CA.

Eight other new IPO companies are scheduled for the week of April 14, 2014. The full IPO calendar is available at IPOpremium.
The manager and joint managers are J.P. Morgan, Credit Suisse, Sandler O'Neill, Keefe Bruyette Woods.

OPB scheduled a $187 million IPO with a market capitalization of $907 million at a price range midpoint of $32.50 for Wednesday, April 16, 2014 on the Nasdaq.  FDIC registration statement, filed by OPB

Overview

Community bank formed from bankruptcy a little over three years ago.  New loans haven't been 'seasoned' yet.  Funded by private equity firms.

Valuation

Glossary

Pre-IPO grade-score summary

High P/E ratio, in-range price-to-tangible book value ratio.

Conclusion

Regional bank with 51% of the IPO is going to selling shareholders.  51% is a relatively high percentage and is a negative.

High P/E ratio, in-range price-to-tangible book value ratio.

The rating is neutral.

Business

OPB is a California-chartered commercial bank headquartered in Irvine, California.

Loan Portfolio

OPS's loan portfolio includes multifamily residential and commercial real estate loans, which are secured by mixed-use, shopping/retail centers, office buildings, industrial properties, and other types of commercial properties.

As of December 31, 2013, multifamily residential loans totaled $1.7 billion, or 60% of the loan portfolio, and commercial real estate loans totaled $420.9 million, or 15% of our loan portfolio. Nonperforming multifamily residential and commercial real estate loans as of December 31, 2013 amounted to $0 and $1.0 million, respectively, all of which was acquired in the acquisitions OPB  have completed, including those acquired in the Bay Cities Reorganization.

Multifamily residential and commercial real estate loans carry more risk as compared to residential mortgage lending.  

Seasoning Risk

As a result of organic growth in the loan portfolio over the past three years since OPB completed the Bay Cities Reorganization, a large portion of loans and lending relationships are of relatively recent origin.

In general, loans do not begin to show signs of credit deterioration or default until they have been outstanding for some period of time, a process referred to as “seasoning.”

Goals & mission

OPB’s goal is to build a premier regional bank in the western United States providing high-value, relationship-based banking products, services, and solutions to its clients to help them expand and grow; which include small and mid-sized companies, entrepreneurs, real estate investors, professionals, and high net worth individuals.

OPB’s mission is to partner with its clients and, through a consultative solution-based approach, help them achieve their business objectives by providing the high-touch, relationship-based and personalized service of a small community bank while delivering the sophisticated banking products, services, and solutions often associated with large national financial institutions.

OPB serves its clients through its headquarters in Irvine, California and 60 banking offices located in major metropolitan markets within California, Washington, and Arizona.

As of December 31, 2013, OPB had total assets of $3.7 billion, total loans of $2.9 billion, total deposits of $2.7 billion, and $668.8 million of stockholders’ equity.

Dividend Policy

No dividends are planned.

Competition

The primary markets OPB serves are in Southern California, the San Francisco Bay Area of California, the Seattle/Puget Sound region of Washington, Portland, Oregon and the Phoenix metropolitan area of Arizona.

These markets are highly competitive and contain not only a large number of community and regional banks, but also a significant presence of the country’s largest commercial banks.

OPB competes with other state and national financial institutions located in California, Washington, Oregon, Arizona and adjoining states, as well as savings associations, savings banks and credit unions for deposits and loans.

In addition, OPB competes with financial intermediaries, such as commercial and consumer finance companies, mortgage banking companies, insurance companies, securities firms, mutual funds and several government agencies as well as major retailers, all actively engaged in providing various types of loans and other financial services.

5% stockholders

Elliott Associates, L.P. , 6.52%

Elliott Opus Holdings LLC, 11.52%

Fortress Investment Group LLC, 23.21%

Starwood Capital Group Global, L.P., 16.52%

Abrams Capital Management, L.L.C., 9.68%

Mount Kellett Master Fund II, L.P., 9.24%

PMG Ventures Holdings, L.P., 10.86%

Use of proceeds

51% of the IPO is going to selling shareholders.  OPB expects to net $83 million from its IPO. Proceeds are allocated as follows:

to support growth in the western U.S. region, as well as for general corporate purposes and a contribution to the Opus Community Foundation.

OPB will not receive any proceeds from the sale of common stock by the selling shareholders.