Asset Quality Score
In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.
A bank with extensive holdings of these kinds of assets could eventually be forced to use capital to absorb losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the chances of a failure in the future.
On Bankrate's test of asset quality, Piedmont Federal Savings Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.16 percent of Piedmont Federal Savings 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 keep 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 at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Piedmont Federal Savings Bank's loan loss allowance in its most recent filings.