Asset Quality Score
In this test, Bankrate tries to determine the impact of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.
A bank with large numbers of these kinds of assets may eventually be forced to use capital to absorb losses, decreasing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, reducing earnings and increasing the risk of a future failure.
First Community Bank of Central Alabama exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 0.13 percent of First Community Bank of Central Alabama'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 . Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. First Community Bank of Central Alabama's loan loss allowance was 1,731.13 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.