Safe and Sound

The Andover Bank

Andover, OH
4
Star Rating
The Andover Bank is an FDIC-insured bank founded in 1884 and currently headquartered in Andover, OH. As of December 31, 2017, the bank had equity of $39.9 million on assets of $410.6 million.

Thanks to the efforts of 88 full-time employees in 10 offices in multiple states, the bank holds loans and leases worth $197.8 million, including $168.9 million worth of real estate loans. The bank currently holds $331.7 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, The Andover 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 key criteria Bankrate used to evaluate U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

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

On our test to measure capital adequacy, The Andover Bank received a score of 10 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a widely followed measure of this buffer. The Andover Bank's Tier 1 capital ratio was 19.95 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic difficulties.

Overall, The Andover Bank held equity amounting to 9.72 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.

Having extensive holdings of these types of assets could eventually require a bank to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, reducing earnings and increasing the chances of a future failure.

On Bankrate's asset quality test, The Andover Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.33 percent of The Andover 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 known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The Andover Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

The Andover Bank beat the national average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The Andover Bank's most recent annualized quarterly return on equity was 9.55 percent, above the national average of 8.10 percent.

The bank reported net income of $3.9 million on total equity of $39.9 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.95 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.