Asset Quality Score
This test's purpose is to try to understand 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 mortgages.
A bank with a large number of these types of assets may eventually have to use capital to absorb losses, decreasing 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, reducing earnings and elevating the risk of a future failure.
The First National Bank of Allendale scored 40 out of a possible 40 points on Bankrate's asset quality test, better than 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, 0.06 percent of The First National Bank of Allendale'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 to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. The First National Bank of Allendale's loan loss allowance was 1,726.14 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.