Asset Quality Score
Bankrate uses this test to determine the effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.
Having large numbers of these types of assets could eventually force a bank to use capital to absorb losses, cutting down on 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 reduced earnings and potentially more risk of a failure in the future.
On Bankrate's test of asset quality, First Central Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.07 percent of First Central 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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve 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. First Central Bank's loan loss allowance was 3,127.59 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.