Asset Quality Score
This test is intended to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.
Having a large number of these types of assets may eventually force a bank to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and elevating the chances of a failure in the future.
State Bank of Cerro Gordo scored above the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .
The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.05 percent of State Bank of Cerro Gordo'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 troubled assets . Comparing the reserve's size to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. State Bank of Cerro Gordo's loan loss allowance was 1,466.67 percent of its total noncurrent loans, above the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.