Asset Quality Score
This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.
A bank with a large number of these kinds of assets may eventually be forced to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in reduced earnings and potentially more risk of a failure in the future.
On Bankrate's asset quality test, William Penn 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, 1.58 percent of William Penn 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 known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on William Penn Bank's loan loss allowance in its most recent filings.