Asset Quality Score
This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due mortgages.
A bank with extensive holdings of these types of assets may eventually be forced to use capital to absorb losses, reducing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and elevating the chances of a failure in the future.
On Bankrate's asset quality test, Liberty Trust & Savings Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.
A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, none of Liberty Trust & Savings 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Liberty Trust & Savings Bank's loan loss allowance was 144,500.00 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.