Asset Quality Score
In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with lots of these kinds of assets could eventually be required to use capital to cover losses, shrinking its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, decreasing earnings and increasing the chances of a future failure.
On Bankrate's asset quality test, TOWN SQUARE BANK scored 36 out of a possible 40 points, failing to reach the national average of 37.49 points.
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, 1.91 percent of TOWN SQUARE BANK's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.
Banks maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on TOWN SQUARE BANK's loan loss allowance in its most recent filings.