Safe and Sound

Andalusia Community Bank

Andalusia, IL
5
Star Rating
Andalusia Community Bank is an FDIC-insured bank started in 1979 and currently headquartered in Andalusia, IL. As of December 31, 2017, the bank held equity of $6.3 million on assets of $39.3 million.

Thanks to the efforts of 12 full-time employees in 2 offices in IL, the bank currently holds loans and leases worth $26.4 million, $23.4 million of which are for real estate. U.S. bank customers currently have $32.8 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Andalusia Community Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank did on the three important criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial stability, capital is essential. It works as a buffer against losses and provides protection for accountholders when a bank is struggling financially. From a safety and soundness perspective, more capital is better.

Andalusia Community Bank did better than the national average of 13.13 points on our test to measure the adequacy of a bank's capital, scoring 24 out of a possible 30 points.

One commonly used measure of this buffer is a bank's Tier 1 capital ratio. Andalusia Community Bank's Tier 1 capital ratio was 26.57 percent, exceeding the 6 percent level regulators consider adequate, and exceeding the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic challenges.

Overall, Andalusia Community Bank held equity amounting to 16.04 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid loans.

A bank with extensive holdings of these types of assets may eventually have to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's asset quality test, Andalusia Community Bank scored 32 out of a possible 40 points, lower than the national average of 37.49 points.

A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 4.32 percent of Andalusia Community Bank'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of at-risk loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. 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 ability to earn money affects its safety and soundness. Earnings may be retained by the bank, boosting its capital cushion, or be used to address problematic loans, likely making the bank better able to withstand economic trouble. Losses, on the other hand, diminish a bank's ability to do those things.

Andalusia Community Bank scored 18 out of a possible 30 on Bankrate's test of earnings, beating the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. Andalusia Community Bank's most recent annualized quarterly return on equity was 9.02 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $545,000 on total equity of $6.3 million. The bank experienced an annualized return on average assets, or ROA, of 1.36 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.