Asset Quality Score
In this test, Bankrate tries to estimate the effect of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having large numbers of these kinds of assets could eventually require a bank to use capital to cover losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and increasing the chances of a failure in the future.
On Bankrate's test of asset quality, The Security State Bank scored 40 out of a possible 40 points, better than 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 The Security 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. The Security State Bank's loan loss allowance was 5,260.00 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.