Asset Quality Score
Bankrate uses this test to estimate the effect of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having a large number of these types of assets means a bank could have to use capital to cover losses, shrinking its equity buffer. 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, diminishing earnings and elevating the chances of a failure in the future.
On Bankrate's test of asset quality, Kingsley State Bank scored 40 out of a possible 40 points, above 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, 0.01 percent of Kingsley 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 known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the reserve's size to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Kingsley State Bank's loan loss allowance was 21,015.38 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.