Asset Quality Score
In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.
Having large numbers of these kinds of assets may eventually force a bank to use capital to absorb losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and elevating the chances of a failure in the future.
On Bankrate's asset quality test, Security State Bank of Hibbing scored 32 out of a possible 40 points, less than 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, 5.14 percent of Security State Bank of Hibbing's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above 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 how large that reserve is to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Security State Bank of Hibbing's loan loss allowance in its most recent filings.