Safe and Sound

The First National Bank of Ottawa

Ottawa, IL
4
Star Rating
The First National Bank of Ottawa is an Ottawa, IL-based, FDIC-insured bank founded in 1865. The bank holds equity of $32.0 million on assets of $286.7 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 78 full-time employees in 8 offices in IL, the bank currently holds loans and leases worth $209.3 million, including real estate loans of $145.7 million. The bank currently holds $251.8 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Ottawa exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to score U.S. banks.

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SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a valuable measurement of a bank's financial resilience. It works as a cushion against losses and provides protection for depositors when a bank is struggling financially. When looking at safety and soundness, more capital is better.

The First National Bank of Ottawa fell short of the national average of 13.13 on our test to measure capital adequacy, scoring 10 out of a possible 30 points.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. The First National Bank of Ottawa's Tier 1 capital ratio was 14.49 percent, above the 6 percent level regulators consider adequate, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial challenges.

Overall, The First National Bank of Ottawa held equity amounting to 11.16 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with extensive holdings of these types of assets may eventually have to use capital to absorb losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, The First National Bank of Ottawa scored 36 out of a possible 40 points, falling short of the national average of 37.49 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, 0.89 percent of The First National Bank of Ottawa'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 problem assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The First National Bank of Ottawa's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. Earnings may be retained by the bank, expanding its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand financial shocks. Banks that are losing money, however, have less ability to do those things.

The First National Bank of Ottawa exceeded the national average on Bankrate's earnings test, achieving a score of 20 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. The First National Bank of Ottawa's most recent annualized quarterly return on equity was 11.03 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $3.4 million on total equity of $32.0 million. The bank reported an annualized return on average assets, or ROA, of 1.18 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.