Safe and Sound

The Clay City Banking Co.

Clay City, IL
4
Star Rating
Started in 1892, The Clay City Banking Co. is an FDIC-insured bank headquartered in Clay City, IL. Regulatory filings show the bank having equity of $13.4 million on assets of $139.7 million, as of December 31, 2017.

Thanks to the efforts of 34 full-time employees in 4 offices in IL, the bank holds loans and leases worth $110.5 million, $71.9 million of which are for real estate. The bank currently holds $122.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Clay City Banking Co. exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to score American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for depositors during periods of financial trouble for the bank. It follows then that a bank's level of capital is a useful measurement of a bank's financial fortitude. When looking at safety and soundness, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, The Clay City Banking Co. received a score of 10 out of a possible 30 points, lower than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. The Clay City Banking Co.'s Tier 1 capital ratio was 11.94 percent, above the 6 percent level regulators consider adequate, but lower 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, The Clay City Banking Co. held equity amounting to 9.58 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.

Having extensive holdings of these types of assets may eventually require a bank to use capital to absorb losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a future failure.

The Clay City Banking Co. fell below the national average of 37.49 on Bankrate's test of asset quality, racking up 32 out of a possible 40 points .

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, 1.13 percent of The Clay City Banking Co.'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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problem loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on The Clay City Banking Co.'s loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. Earnings may be retained by the bank, expanding its capital buffer, or be used to address problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

The Clay City Banking Co. scored 18 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

One important 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 The Clay City Banking Co. was 8.86 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $1.1 million on total equity of $13.4 million. The bank had an annualized return on average assets, or ROA, of 0.84 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.