Asset Quality Score
This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.
A bank with lots of these kinds of assets may eventually have to use capital to cover losses, cutting down on its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a failure in the future.
The Bank of Jackson 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, 0.05 percent of The Bank of Jackson'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 . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. The Bank of Jackson's loan loss allowance was 3,883.33 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.