Asset Quality Score
In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having a large number of these types of assets suggests a bank may eventually have to use capital to absorb losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, diminishing earnings and increasing the risk of a failure in the future.
Rose Hill Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating the national average of 37.49.
A handy 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 Rose Hill 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 known as an "allowance for loan and lease losses" to deal with troubled assets . 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 at-risk loans. Rose Hill Bank's loan loss allowance was 1,508.87 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.