Asset Quality Score
In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having a large number of these kinds of assets could eventually require a bank to use capital to cover losses, diminishing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, reducing earnings and elevating the chances of a failure in the future.
Exchange Bank scored 36 out of a possible 40 points on Bankrate's asset quality test, less than 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, 1.48 percent of Exchange Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.
Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Exchange Bank's loan loss allowance in its most recent filings.