Safe and Sound

Dixon Bank

Dixon, KY
5
Star Rating
Dixon, KY-based Dixon Bank is an FDIC-insured bank founded in 1895. Regulatory filings show the bank having equity of $18.5 million on $83.7 million in assets, as of December 31, 2017.

Thanks to the efforts of 13 full-time employees, the bank has amassed loans and leases worth $19.8 million, $11.2 million of which are for real estate. The bank currently holds $65.0 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Dixon 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 major 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

When it comes to measuring an an institution's financial resilience, capital is key. It works as a cushion against losses and affords protection for accountholders during times of financial trouble for the bank. When looking at safety and soundness, the higher the capital, the better.

Dixon Bank racked up 30 out of a possible 30 points on our test to measure the adequacy of a bank's capital, better than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Dixon Bank's Tier 1 capital ratio was 49.28 percent, higher than the 6 percent level considered adequate by regulators, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic challenges.

Overall, Dixon Bank held equity amounting to 22.14 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these types of assets means a bank could have to use capital to cover losses, decreasing its cushion of equity. 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, resulting in reduced earnings and potentially more risk of a future failure.

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

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 2.93 percent of Dixon Bank's loans were noncurrent -- in other words, 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the reserve's size to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Dixon Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings can be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand economic trouble. Obviously, banks that are losing money have less ability to do those things.

Dixon Bank fell short of the national average on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

One important measure of a bank's earnings is return on equity, or net income (profit, basically) divided by the total amount of equity. Dixon Bank's most recent annualized quarterly return on equity was 4.22 percent, below the national average of 8.10 percent.

The bank earned net income of $775,000 on total equity of $18.5 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.92 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.