Asset Quality Score
In this test, Bankrate tries to determine the impact of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with large numbers of these kinds of assets could eventually be forced to use capital to cover losses, decreasing 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.
New Era Bank beat out the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .
A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.05 percent of New Era 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 maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. New Era Bank's loan loss allowance was 1,694.64 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.