Asset Quality Score
In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.
Having a large number of these kinds of assets could eventually force a bank to use capital to absorb losses, cutting down on 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 lower earnings and potentially more risk of a failure in the future.
On Bankrate's test of asset quality, Business First Bank scored 36 out of a possible 40 points, coming in below the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.30 percent of Business First Bank's loans were noncurrent, meaning 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Business First Bank's loan loss allowance in its most recent filings.