Asset Quality Score
This test is intended to try to understand how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as past-due loans.
Having lots of these kinds of assets means a bank could have to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and elevating the risk of a failure in the future.
Peoples Bank & Trust Company scored 40 out of a possible 40 points on Bankrate's asset quality test, beating the national average of 37.49.
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, 0.06 percent of Peoples Bank & Trust Company'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 known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Peoples Bank & Trust Company's loan loss allowance was 2,491.43 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.