Asset Quality Score
This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as past-due mortgages.
A bank with lots of these types of assets may eventually be required to use capital to absorb losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.
Bank of Star City scored 40 out of a possible 40 points on Bankrate's asset quality test, better than 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, 0.04 percent of Bank of Star 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 maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Bank of Star City's loan loss allowance was 6,192.31 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.