Asset Quality Score
This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.
A bank with lots of these types of assets may eventually have to use capital to cover losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, diminishing earnings and elevating the risk of a future failure.
On Bankrate's test of asset quality, Sterling Bank and Trust, FSB scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.
A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.03 percent of Sterling Bank and Trust, FSB'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 to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Sterling Bank and Trust, FSB's loan loss allowance was 2,357.22 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.