Safe and Sound

Andalusia Community Bank

Andalusia, IL
4
Star Rating
Andalusia, IL-based Andalusia Community Bank is an FDIC-insured bank started in 1979. As of June 30, 2017, the bank held equity of $5.9 million on $39,753,000 in assets.

With 13 full-time employees in 2 offices in IL, the bank currently holds loans and leases worth $25.6 million, including real estate loans of $22.3 million. U.S. bank customers currently have $33.7 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Andalusia Community Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three major criteria Bankrate used to score U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial strength, capital is useful. It acts as a buffer against losses and as protection for accountholders when a bank is struggling financially. When looking at safety and soundness, more capital is better.
Andalusia Community Bank scored above the national average of 13.38 points on our test to measure the adequacy of a bank's capital, receiving a score of 20 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Andalusia Community Bank's Tier 1 capital ratio was 24.69 percent, above the 6 percent level regulators consider adequate, but less than the national average of 25.16 percent. A higher capital ratio suggests the bank will be better able to weather economic headwinds.

Overall, Andalusia Community Bank held equity amounting to 14.87 percent of its assets, which exceeded the national average of 12.10 percent.

Asset Quality Score

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

Having a large number of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's asset quality test, Andalusia Community Bank scored 36 out of a possible 40 points, failing to reach the national average of 37.62 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 3.48 percent of Andalusia Community 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 1.04 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Andalusia Community Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its long-term survivability. Earnings may be retained by the bank, boosting its capital buffer, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's earnings test, Andalusia Community Bank scored 6 out of a possible 30, lower than the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one widely used measure of a bank's earnings. The most recent annualized quarterly return on equity for Andalusia Community Bank was 2.93 percent, below the national average of 9.28 percent.

The bank recorded net income of $86,000 on total equity of $5.9 million for the twelve months ended June 30, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.43 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below 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.