Asset Quality Score
Bankrate uses this test to estimate the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having large numbers of these types of assets suggests a bank could have to use capital to cover losses, cutting down on its cushion of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, diminishing earnings and increasing the chances of a future failure.
On Bankrate's asset quality test, Community State Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.
A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.15 percent of Community 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 problem 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 widely used indicator when evaluating a bank's ability to manage troubled assets. Community State Bank's loan loss allowance was 1,844.88 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.