Asset Quality Score
In this test, Bankrate tries to determine the effect of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.
A bank with extensive holdings of these kinds of assets may eventually be forced to use capital to absorb losses, reducing 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, reducing earnings and increasing the risk of a future failure.
Bank of Sunset and Trust Company scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.
A handy 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 Bank of Sunset and Trust Company'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 . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Bank of Sunset and Trust Company's loan loss allowance was 10,066.67 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.