Asset Quality Score
Bankrate uses this test to determine the effect of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.
A bank with a large number of these types of assets may eventually have to use capital to cover losses, shrinking its equity cushion. 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 diminished earnings and potentially more risk of a future failure.
Freedom Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating the national average of 37.49.
The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.04 percent of Freedom Bank'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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Freedom Bank's loan loss allowance was 2,869.50 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.