Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

The official story of Opus Bank's origins is familiar to anyone who's listened to the pitches from the small banks and fintech startups that promised to heroically fill the voids left in the financial system by large lenders that were too busy licking crisis-era wounds to tend to small-fry customers.  

"The banking system has somewhat lost its way" because of the financial crisis, the bank' chairman and chief executive officer, Stephen H. Gordon, said in a promotional video a few months after the Irivine, California-based bank's initial public offering in 2014. “A great bank, a great financial leader, could emerge from the ashes, and that's Opus.”   

It's the type of sentiment that perhaps could be perceived as either touching or obnoxious, depending on how soiled with ash your perspective of the industry is. But there's a thin line between being ambitious and obnoxious, and the two are by no means mutually exclusive -- much like the goal in one of the bank's marketing slogans: "We can put California back on the map."  (Which must have come as a shock to local cartographers.)

At any rate, until this week, things seemed to have been progressing apace. The bank said hello to the world in 2010 after Gordon led a group of investors including Elliott Management, Fortress Investment Group and Starwood Capital in a $460 million recapitalization and rebranding of the former Bay Cities National Bank. It raised $163 million at $30 a share in its 2014 IPO and an additional $200 million at $36.50 a share 11 months ago. Mostly through acquisitions, the tiny bank began increasing deposits and assets at a rate that made it seem like the type of firm to keep an eye on:

Building a Bank
Opus Bank has increased assets at a fast clip since its IPO in 2014
Source: Bloomberg

The bank consistently posted profits since it went public, and with costs at less than 50 cents on the dollar of revenue, its efficiency ratio was enviable. In addition to its bread-and-butter of funding multifamily housing projects, the bank has focused on serving entrepreneurial clients with what Gordon called an "investment banker type of approach" that involves more than just making loans.

The most intriguing announcement came in August when Opus said its newly formed media and entertainment banking division was participating in funding for a $400 million credit facility for the Weinstein Company, the filmmaking brothers whose financial plotlines have been known to contain enough drama to rival their best films. Other advertised clients include charming and lovable West Coast entrepreneurs like craft brewersjuice bars, organic food distributors and a creative advertising agency focused on Hollywood. Conference-call transcripts show other relationships with tiny, cash-burning technology companies like Identiv Inc. and Sphere 3D Corp., whose shares have lost 95 percent from their peak in 2014.

It is mostly, but not entirely, the book of loans to the technology industry that is causing shareholders' crisis of confidence in Opus Bank. The shares have been in a near free fall this week, losing almost a third of their value in four days and dragging the stock far below the prices of its IPO and secondary offering. 

Face Plant
Opus Bank shares have collapsed this week after charge-offs for bad loans caused a third-quarter loss
Source: Bloomberg

The first signs of trouble came in the bank's earnings report in July, when two soured tech loans were among four relationships with unidentified clients that required an increase in loan-loss provisions that reduced profit and caused the bank to "de-emphasize" its technology business. Then on Monday, the bank pre-announced that it would post a third-quarter loss because of $38.8 million in charge-offs on bad loans among eight relationships, more than double the $16.7 million in reserves set aside for those loans. Two of the soured relationships were in technology, accounting for 57 percent of the charge-offs, while the other six were in the commercial and specialty banking divisions.

The bank is scheduled to report full results on Monday, and Gordon faces an uphill battle to assure investors that there aren't more shoes to drop in the future. Analysts, who as of last week were unanimous in rating the shares a "buy" or equivalent, have jumped ship fast. There are now four "buys" and three "holds," according to ratings tracked by Bloomberg. The company's stock is trading at about 85 percent of its book value, a sign either of deep value or deep skepticism. 

Ultimately, it may be tempting to look at Opus, along with other signs of credit deterioration disclosed by LendingClub this week, as some sort of canaries in the coal mine for the broader financial system. However, the canaries in the credit coal mines can be a mysterious species, so the troubles of these two upstarts could turn out simply to be growing pains of youngsters trying desperately to play in the big kids' leagues. 

Such pedestrian troubles are the more common story in the real world. The scrappy upstart who overcomes tremendous odds to take over the world lives on, though, in rejected scripts and Hollywood dreams.  

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Michael P. Regan in New York at

To contact the editor responsible for this story:
Daniel Niemi at