Asset Quality Score
In this test, Bankrate tries to determine the impact of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.
A bank with a large number of these types of assets may eventually have to use capital to absorb losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, pushing down earnings and elevating the risk of a failure in the future.
Freedom National Bank beat out the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .
A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.01 percent of Freedom National Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Freedom National Bank's loan loss allowance was 8,536.36 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.