Asset Quality Score
In this test, Bankrate tries to determine the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.
Having extensive holdings of these types of assets could 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 no longer earning money, resulting in reduced earnings and potentially more risk of a future failure.
On Bankrate's test of asset quality, The North Salem State Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.14 percent of The North Salem State 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 keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. The North Salem State Bank's loan loss allowance was 1,228.12 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.