Asset Quality Score
In this test, Bankrate tries to determine the effect of troubled 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 a large number of these kinds of assets could eventually be forced to use capital to absorb losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and elevating the risk of a failure in the future.
On Bankrate's asset quality test, Liberty Bank Minnesota 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, 0.15 percent of Liberty Bank Minnesota'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 troubled assets . 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 at-risk loans. Unfortunately, the FDIC did not provide information on Liberty Bank Minnesota's loan loss allowance in its most recent filings.