investor relations overview

A Message from the President & CEO

On behalf of the board of directors of Andover Bancorp, Inc. and the employees of Andover Bank, I am excited to announce record earnings for the 2nd consecutive year. Net income of $5,392,801 increased 27% over last year’s earnings of $4,258,282. Earnings per share of $2.42 increased 31% over last year’s $1.85 per share. Return on average assets was 0.98% and return on average equity was 11.32%. Record profitability was driven by strong growth in the balance sheet that resulted in an increase to our net interest margin, supplemental income from the Paycheck Protection Program (PPP), and a significant decline in our cost of deposits. In fact, interest expense dropped by $672,258, or 43%, as a direct result of the low interest rate environment in which we have operated since the onset of the pandemic.

The pandemic and its impact have created many challenges for us. Guided by our mission statement and the directors’ continued commitment to improve the communities we serve, I am extremely proud of our ongoing response to these challenges. We made over 500 loans in support of small businesses in our area through the PPP program. These funds served as a crucial lifeline for many at-risk companies negatively impacted by the virus. We also helped hundreds of clients cope with economic hardship. As a result of our proactive efforts, we received an Outstanding rating under the Community Reinvestment Act (CRA) from the Federal Reserve Bank of Cleveland. This marked the first time in our history to receive this highest rating, awarded to banks that provide exceptional lending and community development services for their communities. Rising to the Challenge has always been in our DNA, and our greatest asset, our employees, did not disappoint over the past year. I am truly grateful for the opportunity to work alongside them.

Financially, 2021 was a very successful year. However, record profitability was not our high point. In the backdrop of the pandemic, the bank advanced numerous strategic initiatives designed to meet our long-term objectives. We significantly enhanced our small business banking capabilities over the past year. I’m excited to announce that in April we will open our first Loan Production Office (LPO) in Stow, Ohio. This venture is very important for us as we look to expand our geographical footprint into new markets and plan to grow our commercial loan portfolio to complement our strong retail lending operation.

Due to our expansion plans, and as a part of our ongoing effort to create shareholder value, we executed a subordinated debt borrowing on very attractive terms to bolster our capital position and to continue our aggressive share buyback strategy. Since 2019, we have repurchased nearly $5 million in Andover Bancorp, Inc. stock at an average cost under its book value. This means these transactions have been immediately accretive to earnings per share. In December, we announced a formal $3 million share repurchase program that further demonstrates our confidence in our business model and the bank’s intrinsic value.

We continued the success of our marketing and service initiative that began a number of years ago. Our goal has been to offer exceptional service through a combination of enhanced technology and hands-on service that our customers have come to expect. As a result of these efforts, we achieved our 3rd straight year of positive net household growth, which drives balance sheet expansion and revenue growth. We also advanced numerous digital services and cybersecurity enhancements needed in today’s mobile society. Finally, we were recognized by Bauer Financial as a 5-Star rated financial institution for the 28th consecutive year.

We experienced record balance sheet growth for the 3rd consecutive year. Total assets increased by $48.0 million, or 9%, net loans increased by $5.8 million, or 2%, and deposits increased by $49.5 million, or 11%. For the second year in a row, we had record loan originations, making more than $95 million in new loans. This growth was made possible by a combination of factors, including government stimulus and the success of our marketing efforts mentioned earlier. Stockholder equity decreased by $2.3 million, primarily from the fair market value adjustment to our securities portfolio due to rising interest rates at the conclusion of 2021.

Asset quality remains exceptionally strong, as our delinquency rate continues to be well below 1%. In addition to a low delinquency rate, net charge-offs for the year were just over $10,000 on a loan portfolio of over $260 million. These results again compare favorably to our peer group and continue to indicate that we are not only profitable, but operate in a safe and sound manner.

As a result of our strong earnings and capital position, we continued our record dividend performance with a total dividend declared for 2021 of $0.74 per share, an increase of 0.68% over the $0.735 per share dividend declared in 2020. We are pleased to announce that this is our 39th year of paying and increasing the dividend from the prior year. Our focus remains on growing earnings per share, to provide you, our valued shareholder, with an acceptable return on your equity, cash flow through dividends, and market liquidity, reflected most recently by our share buyback program. Collectively, these factors demonstrate the long-term financial strength and stability of your investment in the bank.

As you can see, 2021 was not only a challenging year, but also an extremely busy and productive year. The overall state of the bank is strong and we remain well-positioned as the economy evolves and the pandemic subsides. We expect that our diligent efforts over the past year will continue to support profitable operations and our ultimate goal of independence. I extend my special thanks to our board of directors, whose guidance and vision have been invaluable, and to our management and staff who made the extraordinary results depicted in this report possible.

We appreciate the continued support of your local community bank and look forward to 2022 with great anticipation and continued enthusiasm.

Stephen E. Varckette
President and
Chief Executive Officer