investor relations overview

A Message from the President & CEO

I am proud to report on our solid performance for 2019. Net income was $3,723,317, or $1.56 per share, which reflects similar results from last year’s strong earnings of $3,823,456, or $1.57 per share. Return on average assets was 0.91% and return on average equity was 9.21%. Earnings were negatively impacted in the net interest margin by the dramatic increase in interest expense that we anticipated and I commented on in last year’s annual report as a result of rapidly rising short-term rates throughout 2018. This and the successful growth of new deposits in general, contributed to interest expense on deposits rising by 87% over 2018’s results. Earnings were favorably impacted by strong loan demand that facilitated liquidating some lower yielding securities at a gain and redeploying those funds into higher yielding loan assets.

The start of 2019 was very challenging as the flat yield curve persisted throughout the entire year. Despite this headwind, we were encouraged that the local economy improved at a pace not seen since before the financial crisis. As 2019 progressed, the Federal Reserve Bank realized that they had raised short-term rates too aggressively as the national economy slowed into the second quarter. They reversed their policy mid-year and began lowering short-term rates to help prevent a potential recession. This occurred at an opportune time for the bank as the improving local economy mixed nicely with our strong marketing efforts, improved customer service, and technological advances to fuel record balance sheet growth.

I believe the condition of our balance sheet is strong and the trends established in 2019 show great promise for the future. Assets grew $30.7 million, or 7.8%, net loans grew $17.0 million, or 8.4%, and deposits grew $38.3 million, or 11.7%, as we hit record highs in each of those categories during the year. We accomplished all this while reducing other borrowings $11.2 million, or 42.8%, and increasing stockholders’ equity. Our total risk-based capital, an indicator of the amount of risk a bank has taken on, is double the required minimum to operate as a well-capitalized financial institution. I believe this conservative capital position has us well prepared if a downturn in the economy occurs in the near future.

As I have reported several times over the past few years, our transformation began back in 2016. However, the full breadth of our strategy didn’t gain momentum until late 2018 and into early 2019 as we unveiled our new branding, logo, and website in addition to many new products and services. Some of those services include new and improved online account opening platforms, the ability to take mortgage loan applications directly from our popular mobile app, and improved person-to-person payment capabilities  through Zelle. These “high tech” items, added to our emphasis on traditional “high touch” customer service, underpinned our successful operations for the year. We are excited to report that we grew net households in every quarter in 2019, grew our market share in deposits in every market we serve, and regained the #1 deposit ranking in Ashtabula County, as measured by the FDIC. Other major accomplishments included hitting our 25th consecutive year as a Bauer 5-Star rated bank and being recognized again by American Banker magazine as a top 200 public community bank with assets under $2 billion, as measured by a 3-year return on average equity. 2019 was also the 2nd largest gross loan production year in our 135-year history, originating nearly $65 million in new loans. Credit quality remains strong, with year-end delinquency rates below 0.50% of our total loan portfolio. Finally, we operated in a very efficient manner in 2019, as total noninterest expenses actually decreased from 2018. None of these accomplishments would have been possible without the hard work and dedication of our greatest asset, our employees. They worked tirelessly on executing our plan and ensuring the year was a successful one.

Due to our strong earnings and capital position, we continued our strong dividend performance with a total cash dividend declared in 2019 of $0.73 per share. Since the formation of the holding company, this is the 37th year of paying and increasing the dividend from the prior year. Since 2015, the bank has paid approximately $8.7 million in dividends to shareholders. Our strong earnings and capital position has also made it possible to provide liquidity to you, our shareholder. Many thinly-traded community banks do not have the financial capacity to keep up with the costs associated with running a successful bank today as well as having the ability of providing liquidity to its shareholders. As a result of our financial stability, we have been fortunate to do both while maintaining the payment of the cash dividend. Our strategic plan, established in 2019, provides operational realities and shareholder relations well.

We also rolled out a new dividend reinvestment plan (DRIP) in 2019. This plan offers you the opportunity to have your dividends reinvested into Andover Bancorp, Inc. stock, should you choose to do so. The plan offers you direct enrollment and transaction capabilities, eliminating broker fees and solicitations. This program is completely voluntary and you may terminate your participation in the plan at any time. The plan is administered by our transfer agent, American Stock Transfer & Trust Company, LLC (AST). To enroll, simply go to for more information. If you have any questions, please contact our plan administrator at 800.278.4353, or Rich Kotila, Senior Vice President and General Counsel of Andover Bank, at 844.259.5473.

As I discussed in last year’s annual message, change is inevitable. While I’m proud of the results mentioned earlier, we realize that to compete in today’s highly competitive financial services arena, it is so important to keep growing revenue, operating as efficiently as possible, and providing what the marketplace demands. While we are still interested in potential acquisitions and mergers, the overall environment for this to occur is not ideal for small banks. With growing revenue in mind, we have done well to upgrade our retail operations over the past few years, but through the strategic planning process, we realize that an emphasis on commercial lending, especially in higher growth markets, is crucial to relevance. To that end, we will continue to look for ways to expand our loan and deposit product offerings to small and intermediate-sized businesses, especially in our newer markets that promise stronger growth potential than our legacy markets.

It truly is an honor and privilege to serve as President & CEO of an institution that has been serving this area for the past 135 years. Our success has been fueled by our conservative, common-sense approach to banking espoused so well by our board of directors, the extraordinary efforts of our greatest asset, our employees, and the capital and confidence provided by you, our shareholders, which allow us to continue to focus on and meet our mission statement that remains as relevant today as it did over 30 years ago when it was crafted.

Stephen E. Varckette
President and
Chief Executive Officer