Asset Quality Score
Bankrate uses this test to estimate the impact of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having lots of these kinds of assets suggests a bank may eventually have to use capital to cover losses, diminishing its buffer of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the risk of a failure in the future.
Exchange Bank & Trust scored 40 out of a possible 40 points on Bankrate's test of asset quality, exceeding the national average of 37.49.
A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.09 percent of Exchange Bank & Trust'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 known as an "allowance for loan and lease losses" to deal with troubled assets . 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 troubled assets. Exchange Bank & Trust's loan loss allowance was 1,457.65 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.