SAFE & SOUND® STAR RATINGS™

Memorandum on findings

1ST FINANCIAL
1232 Wentzville Pkwy
Wentzville, MO 63385-3868

STAR RATING: 3 starstarstar
Predictive Indicator neutral
As of June 30, 2014
Credit Union ID 24774
INTRODUCTION

A credit union is a nonprofit, cooperative financial institution, owned and administered by individual members, who must meet eligibility requirements to join. Credit unions pay no federal income tax. Community development credit unions are chartered to serve the needs of low income members who reside in financially distressed or under-served communities.

The Bankrate proprietary credit union rating model analyzes capitalization, asset quality, earnings, and liquidity to produce composite and component "Star" ratings that can be used as a measure of the rated entity's financial safety and soundness. Additionally, early warning components of the model highlight operating characteristics of immediate concern and recommended follow-up actions. The analyses are not adjusted for TARP funding and those institutions receiving funds may receive ratings that would differ were the TARP funds adjusted out of the analyses. You can check whether or not this institution has received TARP funding and whether or not they have paid it back at http://projects.propublica.org/bailout/list/index.

INSTITUTIONAL HIGHLIGHTS
Institution Name 1ST FINANCIAL
Report Date June 30, 2014
Report Period 6 months
Star Composite Rating, Percentile Rank 3 /10.79
Predictive Indicator neutral
Earnings Rating, Percentile Rank 2 /36.84
Asset Quality Rating, Percentile Rank 4 /38.70
Capital Rating, Percentile Rank 1 /12.91
Liquidity Rating, Percentile Rank 2 /6.55
Institution Asset Size 199.6316 million
Deposits 181.6217 million
Loans 159.5209 million
Equity 15.0844 million
Net Profit/Loss 993.1220 thousand

COMPONENT HIGHLIGHTS

Component star rating: 1 star
Capital highlights

Capitalization stands as protection against loss for credit union members, creditors and, if applicable, the insurer. Regulators place a high degree of importance upon assessments of capitalization.

Key measures of Capital AdequacyRatio (%)Assessment
Net Capital / Assets 7.56Below Peer Norm
Capital (1) / Assets 8.64Below Peer Norm
(1) Includes loan loss allowance.

Component star rating: 4 starstarstarstar
Asset quality highlights

Asset quality is a major determinant of the viability of any banking institution. Poor asset quality will have a very direct impact upon other components and regulators invest substantial amounts of time and resources in gauging the quality of loans and investments.

Key Asset Quality information and ratios:Ratio (%)Assessment
Nonperforming Asset Ratio (2)16.31Somewhat Higher Than Standard
Loss Reserve Coverage (3)151.30Much Better Than Normal
Asset Growth Rate -1.69Below Normal
(2) Nonperforming Assets/Equity plus Loss Reserves

(3) Loan Loss reserves/Delinquent Loans


Component star rating: 2 starstar
Earnings highlights

A credit union's profitability is critical to building capital and establishing adequate loss reserves.

Key Earnings information and ratios:Ratio (%)Assessment
Return on Average Assets 0.15Substantially Below Average
Overhead / Average Assets 4.66Significantly Higher Than Average
Note: The earnings assessment is based on the latest four quarters of income and expense.


Component star rating: 2 starstar
Liquidity highlights

Liquidity provides funding for normal operations and represents a reserve for unanticipated disintermediation.

Key measures of Liquidity:Ratio (%)Assessment
Balance Sheet Liquidity6.09below average

Early warning highlights

Early warning indicators identify areas of potential concern, which may lead to financial deterioration and thus, require inquiry or in depth investigation.
For this institution we have noted:

  • Capital Adequacy
  • Overhead

Institution Commentary

OVERVIEW of Institution
1ST FINANCIAL is a federally chartered credit union, which, as of June 30, 2014, reported total assets of approximately $199.6316 million. At that date, loans and deposits held by the institution amounted to $159.5209 million and $181.6217 million, respectively. Equity, the difference between a credit union's total assets and total liabilities, was determined to have been $15.0844 million, which was 7.56% of total assets.

COMPOSITE SUMMARY
Bankrate believes that, as of June 30, 2014, this credit union exhibited a generally satisfactory condition, characterized by well below standard capitalization, good asset quality, lower than normal profitability, and lower than normal liquidity.

CAPITAL ANALYSIS
Balance sheet structural changes, through the one year period of time ended June 30, 2014, have had little or no positive, and quite possibly a negative, impact upon the institution's capital position. Our analytical methodology does take into account the quantity, quality, durability, and direction of net worth, and, as set forth above, we have determined, based upon our series of tests, that this credit union demonstrates well below standard capitalization. Notwithstanding any of the information contained within this section, we believe, based on our analysis, that the institution should consider plans for enhancing reported capitalization.

ASSET QUALITY ANALYSIS
The institution reveals, as previously stated, good asset quality. That conclusion incorporates our analysis of data depicting regional economic conditions as well as our computations of June 30, 2014 nonperforming asset ratio and much better than normal reserve coverage for nonperforming loans.

Credit card lending activities should not, based on our analysis of asset quality trends and conditions, have a substantial negative impact upon future results.

EARNINGS ANALYSIS
For the year ended June 30, 2014, this institution recorded a net profit of $296.11 thousand, which represented a return on average assets (ROA) of 0.15%. Year earlier four quarter results amounted to a net loss of -$617,117, or a -0.30% ROA. ROA is the key measurement of profitability within the credit union industry, and the industry's ROA, for the six months ended June 30, 2014, approximated 0.81%.


We have concluded that, for the four quarters ending June 30 2014, the institution achieved a substantially below average return on average assets. A significantly higher than average overhead ratio is in evidence. We have noted that the insitution's profitability performance, between the twelve months ending June 30 , 2013 and the twelve months ending June 30 , 2014 exceeded the industry peer comparison.

LIQUIDITY ANALYSIS
As of June 30, 2014, the institution displayed below average balance sheet liquidity.

Accounting principles require some securities to be categorized as "Available-for-Sale." Changes in market value of these securities are reflected through the GAAP (Generally Accepted Accounting Principles) net worth of the institution. Based upon the credit union's present balance sheet, changes in the value of the current level of securities reported as are likely to have a substantial impact upon future net worth of the credit union.

INSTITUTION SUMMARY
This credit union has been rated generally satisfactory.
Negative factors that impacted that rating follow:

  • Capitalization
  • Earnings
  • Liquidity
As noted previously, early warning indicators possibly requiring specific investigation include:
  • Capital Adequacy
  • Overhead

As stated, we have determined a Composite Star rating for this credit union of 3 starstarstar , indicative of a generally satisfactory financial condition. At times, conditions of financial institutions change rapidly and significantly. Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings. However, in view of early warning indicators set forth within this report, in combination with the institution's financial data, we believe that the Star rating for this institution is unlikely to change within the ensuing twelve month period.

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