Asset Quality Score
This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization could be affected by problem assets, such as past-due mortgages.
A bank with large numbers of these types of assets may eventually be forced to use capital to absorb losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and elevating the chances of a failure in the future.
On Bankrate's test of asset quality, First United Bank and Trust Company scored 40 out of a possible 40 points, beating the national average of 37.62 points.
A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.12 percent of First United Bank and Trust Company's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.
Banks keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve 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. First United Bank and Trust Company's loan loss allowance was 1,165.38 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.