Asset Quality Score
In this test, Bankrate tries to determine the impact of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.
Having a large number of these kinds of assets could eventually force a bank to use capital to absorb losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the chances of a failure in the future.
Bank of Frankewing scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out the national average of 37.49.
A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.11 percent of Bank of Frankewing'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 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 troubled assets. Bank of Frankewing's loan loss allowance was 1,563.51 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.