Safe and Sound

Andover State Bank

Andover, KS
4
Star Rating
Andover, KS-based Andover State Bank is an FDIC-insured bank started in 1916. The bank holds equity of $7.0 million on $81,326,000 in assets, according to June 30, 2017, regulatory filings.

With 18 full-time employees in 2 offices in KS, the bank has amassed loans and leases worth $63.6 million, including real estate loans of $53.4 million. U.S. bank customers currently have $70.6 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Andover State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for an analysis of how the bank faired on the three major criteria Bankrate used to grade American banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and as protection for accountholders during times of financial trouble for the bank. Therefore, when it comes to measuring an an institution's financial stability, capital is key. From a safety and soundness perspective, more capital is better.
Andover State Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, lower than the national average of 13.38.

A bank's Tier 1 capital ratio is a widely used measure of this buffer. Andover State Bank's Tier 1 capital ratio was 10.65 percent, higher than the 6 percent level considered adequate by regulators, but lower than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial downturns.

Overall, Andover State Bank held equity amounting to 8.57 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization could be affected by troubled assets, such as past-due mortgages.

A bank with large numbers of these kinds of assets could eventually be required to use capital to absorb losses, shrinking its buffer of equity. 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 failure in the future.

On Bankrate's test of asset quality, Andover State Bank scored 40 out of a possible 40 points, beating out the national average of 37.62 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.06 percent of Andover State Bank'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 1.04 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Andover State Bank's loan loss allowance was 1,786.49 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, potentially making the bank more resilient in times of trouble. Losses, on the other hand, lessen a bank's ability to do those things.

Andover State Bank scored 10 out of a possible 30 on Bankrate's test of earnings, below the national average of 16.52.

One important way to measure a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Andover State Bank was 4.21 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $146,000 on total equity of $7.0 million. The bank had an annualized return on average assets, or ROA, of 0.35 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.