Safe and Sound

First National Bank

Cloverdale, IN
4
Star Rating
First National Bank is an FDIC-insured bank founded in 1913 and currently based in Cloverdale, IN. The bank has equity of $27.5 million on assets of $309.3 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 74 full-time employees in 7 offices in IN, the bank holds loans and leases worth $157.5 million, including real estate loans of $133.9 million. The bank currently holds $279.9 million in deposits from U.S. customers.

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

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is key. It works as a cushion against losses and as protection for depositors during times of economic trouble for the bank. When looking at safety and soundness, more capital is preferred.

First National Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, racking up 8 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First National Bank's Tier 1 capital ratio was 17.19 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, First National Bank held equity amounting to 8.89 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these types of assets suggests a bank could eventually have to use capital to cover losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.

First National Bank beat out the national average of 37.49 on Bankrate's test of asset quality, 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, 0.09 percent of First 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 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled 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. First National Bank's loan loss allowance was 2,800.00 percent of its total noncurrent loans, above the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, First National Bank scored 10 out of a possible 30, less than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for First National Bank was 4.29 percent, below the national average of 8.10 percent.

The bank earned net income of $1.2 million on total equity of $27.5 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.39 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.