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 mortgages.
Having extensive holdings of these types of assets means a bank could have to use capital to absorb losses, decreasing its buffer of equity. 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, resulting in depressed earnings and potentially more risk of a failure in the future.
1st Bank & Trust exceeded the national average of 37.62 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .
A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.12 percent of 1st Bank & Trust'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 to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is 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. 1st Bank & Trust's loan loss allowance was 937.61 percent of its total noncurrent loans, exceeding the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.