Asset Quality Score
Bankrate uses this test to determine the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with extensive holdings of these kinds of assets could eventually be forced to use capital to cover losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.
Shelby County State Bank did better than the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .
The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.03 percent of Shelby County State 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Shelby County State Bank's loan loss allowance was 2,596.55 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.