Asset Quality Score
In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's capitalization and allocated loan loss reserves.
A bank with a large number of these types of assets could eventually be forced 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 interest for the bank, pushing down earnings and increasing the risk of a future failure.
The Union State Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, better than the national average of 37.49.
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, 0.13 percent of The Union State Bank'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 to deal with problem 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 troubled assets, especially when compared to the total amount of problematic loans. The Union State Bank's loan loss allowance was 1,305.36 percent of its total noncurrent loans, above the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.