Safe and Sound

Andover State Bank

Andover, KS
4
Star Rating
Andover State Bank is an FDIC-insured bank started in 1916 and currently based in Andover, KS. As of December 31, 2017, the bank held equity of $7.0 million on $83.8 million in assets.

U.S. bank customers have $71.9 million on deposit at 2 offices in KS run by 19 full-time employees. With that footprint, the bank has amassed loans and leases worth $68.2 million, including $59.5 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Andover State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is important. It acts as a buffer against losses and as protection for accountholders during periods of economic instability for the bank. From a safety and soundness perspective, the more capital, the better.

Andover State Bank received a score of 8 out of a possible 30 points on our test to measure capital adequacy, falling short of the national average of 13.13.

One essential measure of this buffer is a bank's Tier 1 capital ratio. Andover State Bank's Tier 1 capital ratio was 10.28 percent, exceeding the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, Andover State Bank held equity amounting to 8.38 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

A bank with a large number of these types of assets may eventually be forced to use capital to absorb losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the chances of a future failure.

On Bankrate's asset quality test, Andover State Bank scored 40 out of a possible 40 points, beating the national average of 37.49 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, 0.02 percent of Andover State Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Andover State Bank's loan loss allowance was 4,681.25 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or use them to address problematic loans, likely making the bank better able to withstand financial trouble. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's test of earnings, Andover State Bank scored 10 out of a possible 30, less than the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Andover State Bank was 4.23 percent, below the national average of 8.10 percent.

The bank earned net income of $295,000 on total equity of $7.0 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.36 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.