Asset Quality Score
In this test, Bankrate tries to determine the effect of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.
A bank with extensive holdings of these types of assets could eventually be required to use capital to absorb losses, decreasing 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 elevating the risk of a failure in the future.
On Bankrate's test of asset quality, Essex Bank scored 36 out of a possible 40 points, falling short of the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.15 percent of Essex Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above 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 . That reserve's size can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Essex Bank's loan loss allowance in its most recent filings.