Asset Quality Score
In this test, Bankrate tries to determine the impact of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having lots of these types of assets may eventually force a bank to use capital to cover losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.
Terrabank, National Association scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating the national average of 37.49.
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, 0.02 percent of Terrabank, National Association'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 problematic loans can be a widely used indicator when evaluating a bank's ability to manage problem assets. Terrabank, National Association's loan loss allowance was 5,696.00 percent of its total noncurrent loans, above the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.