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 troubled assets, such as unpaid loans.
A bank with lots of these kinds of assets could eventually be forced to use capital to cover losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and elevating the risk of a future failure.
On Bankrate's test of asset quality, Katahdin Trust Company scored 36 out of a possible 40 points, below 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, 0.79 percent of Katahdin Trust Company'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 problem assets . The size of that reserve 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 Katahdin Trust Company's loan loss allowance in its most recent filings.