Asset Quality Score
Bankrate uses this test to estimate the effect of problem assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.
Having extensive holdings of these types of assets could eventually require a bank to use capital to cover losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, reducing earnings and increasing the chances of a future failure.
On Bankrate's asset quality test, The Andover Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.
A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.33 percent of The Andover Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The Andover Bank's loan loss allowance in its most recent filings.