Safe and Sound

The First National Bank of Ava

Ava, IL
5
Star Rating
The First National Bank of Ava is an Ava, IL-based, FDIC-insured bank started in 1917. As of December 31, 2017, the bank held equity of $8.6 million on assets of $63.5 million.

Thanks to the work of 19 full-time employees, the bank holds loans and leases worth $35.8 million, including $21.6 million worth of real estate loans. U.S. bank customers currently have $54.6 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Ava exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three key criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of an institution's financial strength. It works as a buffer against losses and as protection for accountholders during times of financial instability for the bank. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, The First National Bank of Ava racked up 18 out of a possible 30 points, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First National Bank of Ava's Tier 1 capital ratio was 20.04 percent, exceeding 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 weather economic downturns.

Overall, The First National Bank of Ava held equity amounting to 13.47 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.

A bank with a large number of these types of assets could eventually be required to use capital to cover losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the risk of a future failure.

The First National Bank of Ava scored 36 out of a possible 40 points on Bankrate's asset quality test, coming in below the national average of 37.49.

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 3.43 percent of The First National Bank of Ava's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above 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 size of that reserve to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on The First National Bank of Ava's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses reduce a bank's ability to do those things.

The First National Bank of Ava did above-average on Bankrate's earnings test, achieving a score of 18 out of a possible 30.

One key measure of a bank's earnings is return on equity, calculated by dividing net income (profit, essentially) by total equity. The First National Bank of Ava's most recent annualized quarterly return on equity was 9.39 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $814,000 on total equity of $8.6 million. The bank had an annualized return on average assets, or ROA, of 1.27 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.