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 troubled assets, such as unpaid mortgages.
Having lots of these kinds of assets may eventually require a bank to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a future failure.
On Bankrate's test of asset quality, Community 1st Bank scored 40 out of a possible 40 points, better than 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, 0.12 percent of Community 1st Bank's loans were noncurrent, meaning 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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Community 1st Bank's loan loss allowance was 1,210.94 percent of its total noncurrent loans, higher than the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.