Asset Quality Score
This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.
A bank with large numbers of these kinds of assets could eventually be forced to use capital to cover losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the risk of a future failure.
Bank of Lumber City scored 40 out of a possible 40 points on Bankrate's asset quality test, beating the national average of 37.49.
A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.87 percent of Bank of Lumber City'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 problem assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Bank of Lumber City's loan loss allowance in its most recent filings.