Asset Quality Score
In this test, Bankrate tries to estimate the effect of troubled assets, such as past-due mortgages, on the bank's loan loss reserves and overall capitalization.
Having extensive holdings of these kinds of assets suggests a bank could have to use capital to cover losses, reducing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.
On Bankrate's asset quality test, Lake Area Bank scored 32 out of a possible 40 points, coming in 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, 0.51 percent of Lake Area 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 problem assets . That reserve's size can be a helpful 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 Lake Area Bank's loan loss allowance in its most recent filings.