Asset Quality Score
This test's purpose is 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 past-due loans.
Having a large number of these kinds of assets means a bank may have to use capital to cover losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and increasing the risk of a future failure.
On Bankrate's test of asset quality, Elk State Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.
A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.56 percent of Elk State 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 1.01 percent.
Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Elk State Bank's loan loss allowance in its most recent filings.