Asset Quality Score
This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid loans.
A bank with lots of these types of assets could eventually be required to use capital to absorb losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.
On Bankrate's test of asset quality, First Carolina Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.
A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.28 percent of First Carolina Bank's loans were noncurrent, meaning 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 troubled assets . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on First Carolina Bank's loan loss allowance in its most recent filings.