Asset Quality Score
In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having lots of these types of assets could eventually require a bank to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.
First American State Bank scored 24 out of a possible 40 points on Bankrate's asset quality test, failing to reach 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, 0.01 percent of First American 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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. First American State Bank's loan loss allowance was 9,820.00 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.