Asset Quality Score
Bankrate uses this test to determine the effect of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having extensive holdings of these kinds of assets could eventually force a bank to use capital to absorb losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and elevating the chances of a future failure.
On Bankrate's test of asset quality, First National Bank of Waterloo scored 36 out of a possible 40 points, falling short of the national average of 37.62 points.
A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.38 percent of First National Bank of Waterloo'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 1.04 percent.
Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on First National Bank of Waterloo's loan loss allowance in its most recent filings.