Asset Quality Score
Bankrate uses this test to estimate the impact of troubled assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.
A bank with lots of these types of assets could eventually be required 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 interest for the bank, decreasing earnings and increasing the chances of a future failure.
F & M Bank did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .
A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.10 percent of F & M Bank'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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. F & M Bank's loan loss allowance was 1,330.16 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.