Safe and Sound

First Financial Bank in Winnebago

Winnebago, MN
5
Star Rating
Winnebago, MN-based First Financial Bank in Winnebago is an FDIC-insured bank started in 1913. Regulatory filings show the bank having equity of $6.8 million on $44.8 million in assets, as of December 31, 2017.

Thanks to the efforts of 10 full-time employees, the bank has amassed loans and leases worth $28.4 million, $11.4 million of which are for real estate. The bank currently holds $37.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, First Financial Bank in Winnebago exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for account holders when a bank is experiencing economic instability. It follows then that a bank's level of capital is a valuable measurement of an institution's financial resilience. When looking at safety and soundness, the higher the capital, the better.

First Financial Bank in Winnebago exceeded the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 22 out of a possible 30 points.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. First Financial Bank in Winnebago's Tier 1 capital ratio was 20.51 percent, higher than the 6 percent level considered adequate by regulators, but lower 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 challenges.

Overall, First Financial Bank in Winnebago held equity amounting to 15.25 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.

Having lots of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and elevating the risk of a failure in the future.

First Financial Bank in Winnebago scored 36 out of a possible 40 points on Bankrate's test of asset quality, less than the national average of 37.49.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.47 percent of First Financial Bank in Winnebago's loans were noncurrent, meaning 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 to deal with 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 problematic loans. Unfortunately, the FDIC did not provide information on First Financial Bank in Winnebago's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand economic shocks. Obviously, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, First Financial Bank in Winnebago scored 16 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. First Financial Bank in Winnebago's most recent annualized quarterly return on equity was 7.12 percent, below the national average of 8.10 percent.

The bank recorded net income of $488,000 on total equity of $6.8 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 1.10 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.