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 extensive holdings of these kinds of assets may eventually require a bank to use capital to absorb 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.
Kaw Valley State Bank and Trust Company did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .
A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.03 percent of Kaw Valley State Bank and 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 helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Kaw Valley State Bank and Trust Company's loan loss allowance was 4,529.41 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.