Safe and Sound

First Financial Bank

Bessemer, AL
3
Star Rating
First Financial Bank is a Bessemer, AL-based, FDIC-insured bank founded in 1965. Regulatory filings show the bank having equity of $15.9 million on $174.0 million in assets, as of December 31, 2017.

U.S. bank customers have $140.3 million on deposit at 8 offices in AL run by 70 full-time employees. With that footprint, the bank has amassed loans and leases worth $67.5 million, including real estate loans of $55.9 million.

Overall, Bankrate believes that, as of December 31, 2017, First Financial Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank fared on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is a key measurement of a bank's financial strength. It works as a buffer against losses and provides protection for accountholders when a bank is experiencing financial instability. When looking at safety and soundness, the more capital, the better.

First Financial Bank received a score of 10 out of a possible 30 points on our test to measure the adequacy of a bank's capital, failing to reach the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. First Financial Bank's Tier 1 capital ratio was 15.91 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 downturns.

Overall, First Financial Bank held equity amounting to 9.15 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 past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

A bank with large numbers of these kinds of assets could eventually be required to use capital to cover losses, reducing its buffer 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 reduced earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, First Financial Bank scored 28 out of a possible 40 points, less than the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 1.95 percent of First Financial Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a helpful 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 affects its long-term survivability. Earnings can be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand economic shocks. Conversely, losses take away from a bank's ability to do those things.

First Financial Bank did below-average on Bankrate's earnings test, achieving a score of 14 out of a possible 30.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. First Financial Bank's most recent annualized quarterly return on equity was 7.00 percent, below the national average of 8.10 percent.

The bank recorded net income of $1.1 million on total equity of $15.9 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.63 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.