Asset Quality Score
Bankrate uses this test to determine the effect of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.
Having extensive holdings of these kinds of assets may eventually force a bank to use capital to absorb losses, diminishing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the chances of a failure in the future.
Central State Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.
The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.06 percent of Central State Bank'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 1.01 percent.
Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Central State Bank's loan loss allowance was 2,323.89 percent of its total noncurrent loans, exceeding the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.