Safe and Sound

First Financial Bank

El Dorado, AR
5
Star Rating
El Dorado, AR-based First Financial Bank is an FDIC-insured bank started in 1934. Regulatory filings show the bank having equity of $119.7 million on assets of $909.6 million, as of June 30, 2017.

With 288 full-time employees in 10 offices in multiple states, the bank currently holds loans and leases worth $780.9 million, including real estate loans of $709.9 million. U.S. bank customers currently have $674.0 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, First Financial Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank faired on the three key criteria Bankrate used to grade American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a bulwark against losses and affords protection for depositors when a bank is experiencing economic instability. It follows then that a bank's level of capital is an essential measurement of a bank's financial fortitude. From a safety and soundness perspective, more capital is better.
On our test to measure the adequacy of a bank's capital, First Financial Bank racked up 16 out of a possible 30 points, beating out the national average of 13.38.

One important measure of this buffer is a bank's Tier 1 capital ratio. First Financial Bank's Tier 1 capital ratio was 20.59 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to weather financial challenges.

Overall, First Financial Bank held equity amounting to 13.16 percent of its assets, which exceeded the national average of 12.10 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 large numbers of these types of assets may eventually have to use capital to absorb losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, First Financial Bank scored 36 out of a possible 40 points, falling short of the national average of 37.62 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 2.45 percent of First Financial Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the the size of that reserve to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on First Financial Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank more resilient in times of trouble. Conversely, losses lessen a bank's ability to do those things.

First Financial Bank scored 30 out of a possible 30 on Bankrate's test of earnings, beating the national average of 16.52.

Return on equity, calculated by dividing net income (profit, basically) by total equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for First Financial Bank was 23.01 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $13.4 million on total equity of $119.7 million. The bank had an annualized return on average assets, or ROA, of 2.93 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.