Safe and Sound

Old Second National Bank

Aurora, IL
4
Star Rating
Old Second National Bank is an Aurora, IL-based, FDIC-insured bank started in 1887. As of December 31, 2017, the bank held equity of $261.6 million on $2.37 billion in assets.

U.S. bank customers have $1.95 billion on deposit at 25 offices in IL run by 450 full-time employees. With that footprint, the bank currently holds loans and leases worth $1.60 billion, including real estate loans of $1.27 billion.

Overall, Bankrate believes that, as of December 31, 2017, Old Second National Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is useful. It acts as a bulwark against losses and provides protection for depositors during times of financial trouble for the bank. When it comes to safety and soundness, the higher the capital, the better.

Old Second National Bank received a score of 12 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Old Second National Bank's Tier 1 capital ratio was 12.88 percent, above the 6 percent level considered adequate by regulators, 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 difficulties.

Overall, Old Second National Bank held equity amounting to 11.06 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these kinds of assets may eventually be required to use capital to cover losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the risk of a future failure.

Old Second National Bank fell short of the national average of 37.49 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 useful indicator of asset quality.As of December 31, 2017, 0.90 percent of Old Second National 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 problem assets . Comparing the reserve's size 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

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank more resilient in times of trouble. However, banks that are losing money have less ability to do those things.

Old Second National Bank exceeded the national average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. Old Second National Bank's most recent annualized quarterly return on equity was 9.92 percent, above the national average of 8.10 percent.

The bank reported net income of $24.3 million on total equity of $261.6 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.05 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.