Safe and Sound

Clayton Bank and Trust

Knoxville, TN
5
Star Rating
Knoxville, TN-based Clayton Bank and Trust is an FDIC-insured bank started in 1889. As of June 30, 2017, the bank held equity of $164.1 million on $880,017,000 in assets.

U.S. bank customers have $655.6 million on deposit at 16 offices in TN run by 187 full-time employees. With that footprint, the bank holds loans and leases worth $773.5 million, $472.8 million of which are for real estate.

Overall, Bankrate believes that, as of June 30, 2017, Clayton Bank and Trust exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank faired on the three key 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 a bank's financial fortitude, capital is important. It acts as a bulwark against losses and affords protection for accountholders during times of economic instability for the bank. When it comes to safety and soundness, the more capital, the better.
Clayton Bank and Trust beat out the national average of 13.38 points on our test to measure the adequacy of a bank's capital, achieving a score of 28 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Clayton Bank and Trust's Tier 1 capital ratio was 17.80 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. A higher capital ratio means the bank will be better able to weather economic headwinds.

Overall, Clayton Bank and Trust held equity amounting to 18.65 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

A bank with a large number of these types of assets could eventually be forced to use capital to cover losses, reducing 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 money, pushing down earnings and elevating the chances of a future failure.

Clayton Bank and Trust exceeded the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 1.29 percent of Clayton Bank and Trust'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 1.04 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a handy 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 Clayton Bank and Trust's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, likely making the bank better able to withstand financial shocks. Conversely, losses reduce a bank's ability to do those things.

On Bankrate's test of earnings, Clayton Bank and Trust scored 30 out of a possible 30, exceeding the national average of 16.52.

One widely used way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by the total amount of equity. The most recent annualized quarterly return on equity for Clayton Bank and Trust was 21.60 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $17.2 million on total equity of $164.1 million. The bank experienced an annualized return on average assets, or ROA, of 3.88 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 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.