Safe and Sound

Old Second National Bank

Aurora, IL
4
Star Rating
Old Second National Bank is an Aurora, IL-based, FDIC-insured bank founded in 1887. As of June 30, 2017, the bank had equity of $246.0 million on assets of $2.32 billion.

With 458 full-time employees in 24 offices in IL, the bank has amassed loans and leases worth $1.53 billion, including real estate loans of $1.20 billion. U.S. bank customers currently have $1.93 billion in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Old Second National Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank faired on the three key criteria Bankrate used to grade U.S. banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial resilience. It acts as a cushion against losses and provides protection for depositors during periods of financial trouble for the bank. When looking at safety and soundness, the more capital, the better.
Old Second National Bank finished below the national average of 13.38 on our test to measure capital adequacy, achieving a score of 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Old Second National Bank's Tier 1 capital ratio was 12.46 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather economic downturns.

Overall, Old Second National Bank held equity amounting to 10.60 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization could be affected by problem assets, such as unpaid mortgages.

A bank with a large number of these kinds of assets could eventually have to use capital to cover losses, decreasing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and elevating the risk of a future failure.

Old Second National Bank fell short of the national average of 37.62 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 0.95 percent of Old Second National Bank'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 1.04 percent.

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

Earnings score

A bank's ability to earn money affects its long-term survivability. Earnings can be retained by the bank, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank more resilient in tough times. However, banks that are losing money are less able to do those things.

Old Second National Bank scored 20 out of a possible 30 on Bankrate's earnings test, beating the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important measure of a bank's earnings. Old Second National Bank's most recent annualized quarterly return on equity was 10.79 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $12.7 million on total equity of $246.0 million. The bank experienced an annualized return on average assets, or ROA, of 1.11 percent, above the 1 percent deemed satisfactory in accordance with industry standards, but below the average for U.S. banks of 1.14 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.