Asset Quality Score
In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.
Having a large number of these kinds of assets may eventually require a bank to use capital to cover losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.
On Bankrate's test of asset quality, First Chatham Bank scored 0 out of a possible 40 points, below the national average of 37.49 points.
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, 1.05 percent of First Chatham 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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." 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 First Chatham Bank's loan loss allowance in its most recent filings.