Comptroller orders Old Second to raise its capital ratio

by Keith Beebe
KANE COUNTY—It was less than a month ago when Old Second Bank was ordered by the U.S. Office of the Comptroller of Currency to raise its capital ratio to 8.75 percent by Sept. 30, but Old Second Bancorp President and CEO Bill Skoglund thinks things are already looking better for the largest bank in Kane County.

“They’re asking us to raise our regulatory capital ratio. As of March 31, our total capital was at 11.97 percent, and our leverage ratio was at 8.64 percent, after being at 8.1 percent at the end of (last) year, so we’re almost at the (8.97) ratio, and we think we can get to that in a very short time,” he said. “I think we’ll be there before Sept. 30.”

A capital ratio of 8.75 is what federal regulators want to see, and Skoglund said the bank was first notified about its capital ratio in December 2009.

“We, as a public company, made a public announcement of it in June 2010, when we were looking to get some capital,” he said.

The FDIC website defines any total risk-based capital ratio equal to or greater than 8 percent as “adequately capitalized.” According to the website, the standing of “well capitalized” is reserved for any total risk-based capital ratio equal to or greater than 10 percent.

Despite Old Second’s slightly sub-par capital ratio, Skoglund maintains that their leverage ratio is far better than the ratios found in banks that are forced to close.

“They don’t close banks with these kinds of ratios. Banks that get closed, they have ratios of 2 percent or less,” he said. “We’re a long way from that, but this is an agreement that they want us to raise these ratios.

Skoglund said some of Old Second Bank’s losses were due to construction and development loans.

“We’re through that now,” he said. “The economy’s seeming to get a little bit better. We’re starting to see some businesses start to make money now, and they’re starting to hire people. We’re starting to see commercial real estate value stabilize, which is big for us.”