Asset Quality Score
In this test, Bankrate tries to determine the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with extensive holdings of these types of assets could eventually be required to use capital to cover losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and increasing the chances of a failure in the future.
On Bankrate's asset quality test, Heritage Bank & Trust scored 40 out of a possible 40 points, above the national average of 37.49 points.
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, 0.46 percent of Heritage Bank & Trust'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 problem assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Heritage Bank & Trust's loan loss allowance in its most recent filings.