Asset Quality Score
In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.
Having large numbers of these types of assets could eventually force a bank 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 thus aren't earning money, resulting in depressed earnings and potentially more risk of a failure in the future.
On Bankrate's test of asset quality, Orrstown Bank scored 36 out of a possible 40 points, coming in below 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, 0.97 percent of Orrstown 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 deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Orrstown Bank's loan loss allowance in its most recent filings.