Safe and Sound

The First National Bank of Dighton

Dighton, KS
5
Star Rating
The First National Bank of Dighton is an FDIC-insured bank started in 1888 and currently headquartered in Dighton, KS. As of December 31, 2017, the bank held equity of $12.6 million on assets of $56.8 million.

Thanks to the work of 12 full-time employees, the bank has amassed loans and leases worth $25.6 million, including real estate loans of $6.2 million. The bank currently holds $43.9 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The First National Bank of Dighton exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to score American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is useful. It works as a cushion against losses and affords protection for depositors during times of economic instability for the bank. From a safety and soundness perspective, the higher the capital, the better.

The First National Bank of Dighton racked up 30 out of a possible 30 points on our test to measure capital adequacy, beating out the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The First National Bank of Dighton's Tier 1 capital ratio was 33.86 percent, above the 6 percent level regulators consider adequate, and higher than 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, The First National Bank of Dighton held equity amounting to 22.27 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these kinds of assets could eventually be forced to use capital to absorb losses, shrinking 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 money, resulting in diminished earnings and potentially more risk of a future failure.

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

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.16 percent of The First National Bank of Dighton'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 problem assets known as an "allowance for loan and lease losses." How large that reserve is 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 The First National Bank of Dighton'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 cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand financial trouble. However, banks that are losing money are less able to do those things.

The First National Bank of Dighton fell behind the national average on Bankrate's earnings test, achieving a score of 8 out of a possible 30.

One key way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The First National Bank of Dighton's most recent annualized quarterly return on equity was 3.53 percent, below the national average of 8.10 percent.

The bank earned net income of $443,000 on total equity of $12.6 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.77 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.