Safe and Sound

First Financial Bank

El Dorado, AR
5
Star Rating
First Financial Bank is an El Dorado, AR-based, FDIC-insured bank founded in 1934. The bank holds equity of $123.5 million on $914.7 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $668.4 million on deposit at 10 offices in multiple states run by 294 full-time employees. With that footprint, the bank has amassed loans and leases worth $779.1 million, including real estate loans of $693.5 million.

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

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial strength, capital is crucial. It acts as a bulwark against losses and as protection for depositors when a bank is experiencing economic instability. When it comes to safety and soundness, the more capital, the better.

On our test to measure capital adequacy, First Financial Bank scored 18 out of a possible 30 points, beating the national average of 13.13.

A bank's Tier 1 capital ratio is an essential measure of this buffer. First Financial Bank's Tier 1 capital ratio was 20.60 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial challenges.

Overall, First Financial Bank held equity amounting to 13.50 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

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

Having lots of these types of assets means a bank could eventually have to use capital to absorb losses, decreasing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a future failure.

On Bankrate's asset quality test, First Financial Bank scored 40 out of a possible 40 points, exceeding 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, 2.59 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 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 troubled assets, especially when compared to the total amount of problematic loans. 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 safety and soundness. A bank can retain its earnings, increasing its capital buffer, or put them to work addressing problematic loans, potentially making the bank better able to withstand financial trouble. Banks that are losing money, however, have less ability to do those things.

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

One important way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for First Financial Bank was 23.34 percent, above the national average of 8.10 percent.

The bank earned net income of $27.8 million on total equity of $123.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 3.04 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.