Asset Quality Score
Bankrate uses this test to determine the effect of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having large numbers of these types of assets could eventually force a bank to use capital to absorb losses, diminishing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.
Farmers & Merchants Bank of Craig County scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out 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, none of Farmers & Merchants Bank of Craig County'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 to handle troubled assets known as an "allowance for loan and lease losses." How large that reserve is 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. Farmers & Merchants Bank of Craig County's loan loss allowance was 48,700.00 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.