Asset Quality Score
Bankrate uses this test to estimate the impact of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.
A bank with extensive holdings of these kinds of assets may eventually be required to use capital to cover losses, shrinking 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, resulting in depressed earnings and potentially more risk of a future failure.
On Bankrate's asset quality test, First Bank of Boaz scored 40 out of a possible 40 points, above the national average of 37.49 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, 0.05 percent of First Bank of Boaz'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 problem 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 at-risk loans. First Bank of Boaz's loan loss allowance was 3,377.78 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.