Safe and Sound

First Bank

Erick, OK
5
Star Rating
Erick, OK-based First Bank is an FDIC-insured bank founded in 1902. The bank holds equity of $8.4 million on assets of $74.0 million, according to December 31, 2017, regulatory filings.

Thanks to the efforts of 31 full-time employees in 4 offices in OK, the bank has amassed loans and leases worth $50.3 million, including $26.2 million worth of real estate loans. The bank currently holds $61.2 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three important criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for account holders during times of financial instability for the bank. It follows then that when it comes to measuring an a bank's financial resilience, capital is useful. When it comes to safety and soundness, the higher the capital, the better.

First Bank achieved a score of 14 out of a possible 30 points on our test to measure capital adequacy, above the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Bank's Tier 1 capital ratio was 15.26 percent, higher than the 6 percent level considered adequate by regulators, but less than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, First Bank held equity amounting to 11.40 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

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

A bank with large numbers of these kinds of assets could eventually be required to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the risk of a future failure.

First Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, better than the national average of 37.49.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 1.01 percent of First Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's exactly equal to the national average.

Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on First Bank'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, giving a boost to its capital buffer, or be used to deal with problematic loans, likely making the bank better able to withstand financial trouble. However, banks that are losing money have less ability to do those things.

First Bank outperformed the average on Bankrate's earnings test, achieving a score of 26 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for First Bank was 16.94 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $1.4 million on total equity of $8.4 million. The bank experienced an annualized return on average assets, or ROA, of 1.84 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.