Asset Quality Score
In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.
A bank with extensive holdings of these kinds of assets could eventually have to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and increasing the risk of a failure in the future.
AVB Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.
A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.01 percent of AVB 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 1.01 percent.
Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. AVB Bank's loan loss allowance was 23,546.67 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.