Asset Quality Score
In this test, Bankrate tries to determine the impact of problem assets, such as unpaid 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 have to use capital to absorb losses, decreasing its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a failure in the future.
On Bankrate's asset quality test, Murphy Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.
A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.39 percent of Murphy 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Murphy Bank's loan loss allowance in its most recent filings.