SAFE & SOUND® STAR RATINGS™
Memorandum on findings
ADAMS COUNTY BUILDING AND LOAN COMPANY, THE
WEST UNION, Ohio 45693STAR RATING:
Federal Reserve System Identifier 312570
HOLDING COMPANY INFORMATION
(Based on data from the previous quarter.)
This bank is not owned by a holding company.
U.S. commercial banks are chartered under either federal or state jurisdiction for the purposes of accepting funds for deposit and extending loans to either individual or business borrowers. Banks are subject to credit, interest rate, and operational risk, and, because of both their public purpose and their importance to the nation’s economy, banks become the object of intense regulatory scrutiny.
U.S. thrift institutions are chartered under either federal or state jurisdiction for the primary purpose of utilizing deposited funds to issue loans secured by real estate. Currently, real estate-backed loans account for approximately 44% of total thrift industry assets, and one-to-four family residential mortgages comprise nearly 62% of the industry’s real estate loan portfolio. Thrift institutions are subject to credit, interest rate, and operational risk, and, during the last twenty years, thrifts have made great strides toward reducing historic mismatches between asset and liability maturities.
The Bankrate proprietary commercial bank rating model analyzes capitalization,
asset quality, earnings, and liquidity and produces composite and component
"Star" ratings that can be used as a measure of the rated entity's financial
safety and soundness. Additionally, early warning components of the model
highlight operating characteristics of immediate concern and recommended
follow-up actions. "The analyses are not adjusted for TARP funding and those
institutions receiving funds may receive ratings that would differ were the
TARP funds adjusted out of the analyses. You can check whether or not this
institution has received TARP funding and whether or not they have paid it
back at http://projects.propublica.org/bailout/list/index."
|ADAMS COUNTY BUILDING AND LOAN COMPANY, THE|
Component star rating:
Bank profitability is critical to building capital, establishing adequate loss reserves, and providing dividends to shareholders.
(1) = As a percentage of average assets
|Return on Equity||0.86||Below Average|
|Net Interest Margin||3.69||Mid-Range|
|Level of Non-interest Income (1)||0.05||Substantially Below Normal|
|Overhead (1)||3.36||Well Below Standard|
Note: All ratios are based on the latest four quarters of income and expense
Component star rating:
Asset quality highlights
Asset quality is a major determinant of the viability of any banking institution. Poor asset quality will have a very direct impact upon the other components and bank regulators invest substantial amounts of time and resources in gauging the quality of a bank's loans and investments.
(2) = Nonperforming Assets/Equity plus Loss Reserves
|Nonperforming Asset Ratio (2)||21.64||Higher Than Standard|
|Loss Reserve Coverage (3)||28.94||Substantially Below Normal|
|Asset Growth Rate||-6.44||Below Normal|
(3) = Loan Loss Reserves/Nonperforming Loans
Bank capitalization stands as a protection against loss for bank customers, creditors, shareholders, and the Federal Deposit Insurance Corporation (FDIC). Regulators place a high degree of importance upon assessments of capitalization and assign regulatory benchmarks as determinants of capital adequacy.
|Net Worth to Total Assets||16.82||Well Above Peer Norm|
|Regulatory Capital Ratio||26.73||Substantially Exceeded Requirement|
Liquidity provides funding for normal bank operations and represents a reserve for unanticipated disintermediation. Liquidity can be both an asset and a liability concept.
|Balance Sheet Liquidity||22.16||Better Than Normal|
|Purchased Liabilities||0.00||No Greater Than Average Dependence|
Early warning highlights
Early warning indicators identify areas of potential concern, which may lead to financial deterioration and thus, require inquiry or in-depth investigation.
For this bank we have noted:
- Non-Interest Income
- Farm Loans
OVERVIEW of Institution
ADAMS COUNTY BUILDING AND LOAN COMPANY, THE is a
chartered banking institution, which, as of
reported $24.3640 million in total assets.
At that date, loans and deposits held by the bank amounted to
$12.3660 million and $20.2120 million,
respectively. The bank's
equity base of $4.0970 million produced an Equity/Assets ratio of
16.82%, as of that date.
Bankrate believes that, as of
this bank exhibited a sound condition, characterized by
lower than normal overall, sustainable profitability,
questionable asset quality,
very strong capitalization and
For the twelve months ended
the bank recorded net income
of $35.0000 thousand. The bank experienced a return on average assets (ROA) of
0.14% over the latest four quarters. Year earlier
twelve month results amounted to a net income
of $95.0000 thousand, or a
ROA over the most recent four quarters at that time. An ROA of at least 1.0% is deemed satisfactory in accordance with banking
industry standards, and the industry's annualized ROA for the twelve months
of 2014 was approximately 1.03% for commercial banks
and 1.13% for thrift institutions.
We have concluded that for the four quarters ending
the bank achieved a below average
return on equity.
We deem net interest margin to have been mid-range.
Noninterest income was substantially below normal, and management should be questioned as to the outlook for this source of revenue.
We also observed overhead ratios that were well below standard, a sign of strict expense control.
Importantly, net interest margins, noninterest income components, and overhead expense levels
represent operating factors that combine to impact overall operating results.
ASSET QUALITY ANALYSIS
The bank revealed, as previously stated, questionable
asset quality. Our conclusion with respect to asset quality incorporates our analysis
of data depicting regional economic conditions as well as our computations of
a higher than standard
2014 nonperforming asset ratio,
substantially below normal
reserve coverage for nonperforming loans; and
apparently acceptable quality, or no greater than average,
holdings of commercial real estate and construction loans, two categories
that can intensify credit risk.
Farm loan exposure does warrant information regarding crop and livestock
conditions as well as analyses of category performance and loss reserve adequacy.
Loan yield can measure financial reward versus credit risk. Excessive loan yield may be an
indicator of existing or future problems. Our loan review indicates that the bank has assumed a
seemingly prudent position between credit risk and financial reward.
For the one year period ended
2014, the bank reported
an approximately normal rate of growth in equity capital.
Balance sheet structural changes, through the one year period of time ended
the bank's capital position. Our analytical methodology does take into account the quantity,
quality, and durability of net worth, and, as set forth above, we have determined, based upon
our series of tests, that the bank demonstrates
capitalization. We have calculated the bank's
Total Risk-Based Capital position, a computation used by industry regulators, and have concluded
that this bank substantially exceeded
the requirement, set by regulation, for this test.
2014, the bank displayed
Better Than Normal
balance sheet liquidity and a
No Greater Than Average Dependence
upon wholesale, or non-core liabilities, which include all borrowings, such as Federal Home
Loan Bank Advances, and CD's greater than $250,000.
Accounting principles require some securities to be categorized as "Available-for-Sale."
Changes in market value of these securities are reflected through the GAAP (Generally
Accepted Accounting Principles) net worth of the institution. Based upon the bank's
present balance sheet, changes in the value of the current level of securities reported
might not have a substantial impact
upon future net worth of the bank.
This bank has been rated
Negative factors that impacted that rating follow:
Positive factors that impacted that rating follow:
As noted previously, early warning indicators, possibly requiring specific
- Non-Interest Income
- Farm Loans
As stated, we have determined a composite Star rating for this bank of
, indicative of a
financial condition. At times, financial conditions of banks change rapidly and significantly.
Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings.
However, in view of early warning indicators set forth within this report, in combination with
the institution's financial data, we believe that the Star rating for this institution is
unlikely to change
within the ensuing twelve month period.