Asset Quality Score
In this test, Bankrate tries to determine the impact of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with a large number of these types of assets may eventually be forced to use capital to absorb losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the chances of a future failure.
On Bankrate's asset quality test, Andover State Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.02 percent of Andover State 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 to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is 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. Andover State Bank's loan loss allowance was 4,681.25 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.