Safe and Sound

Oak Bank

Chicago, IL
5
Star Rating
Oak Bank is an FDIC-insured bank started in 1970 and currently based in Chicago, IL. As of December 31, 2017, the bank held equity of $34.8 million on $195.1 million in assets.

With 32 full-time employees, the bank holds loans and leases worth $139.7 million, including real estate loans of $125.8 million. U.S. bank customers currently have $158.1 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Oak Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three major criteria Bankrate used to score American banks on safety and soundness.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

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

Oak Bank beat out the national average of 13.13 points on our test to measure the adequacy of a bank's capital, racking up 26 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Oak Bank's Tier 1 capital ratio was 22.00 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Oak Bank held equity amounting to 17.83 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate 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 be forced to use capital to cover losses, shrinking its equity cushion. 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, pushing down earnings and increasing the chances of a future failure.

Oak Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.21 percent of Oak Bank's loans were noncurrent, meaning 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 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 useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Oak Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, increasing its capital cushion, or put them to work addressing problematic loans, potentially making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

On Bankrate's earnings test, Oak Bank scored 12 out of a possible 30, below the national average of 15.12.

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Oak Bank was 5.39 percent, below the national average of 8.10 percent.

The bank reported net income of $1.8 million on total equity of $34.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.95 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.