Asset Quality Score
In this test, Bankrate tries to determine the effect of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.
A bank with large numbers of these kinds of assets could eventually have to use capital to absorb losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, decreasing earnings and increasing the chances of a future failure.
On Bankrate's test of asset quality, The Village Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.07 percent of The Village 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 the reserve's size to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage problem assets. The Village Bank's loan loss allowance was 1,327.22 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.