Asset Quality Score
This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.
Having a large number of these types of assets could eventually require a bank to use capital to absorb losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and elevating the risk of a failure in the future.
Labette Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, above the national average of 37.49.
The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 0.08 percent of Labette 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 keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Labette Bank's loan loss allowance was 1,336.27 percent of its total noncurrent loans, exceeding the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.