Asset Quality Score
In this test, Bankrate tries to determine the impact of troubled assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.
Having extensive holdings of these kinds of assets could eventually force a bank to use capital to absorb losses, reducing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the risk of a failure in the future.
On Bankrate's asset quality test, Salem Five Cents Savings Bank scored 40 out of a possible 40 points, beating the national average of 37.49 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, 0.40 percent of Salem Five Cents Savings 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 known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Salem Five Cents Savings Bank's loan loss allowance in its most recent filings.