Asset Quality Score
This test is intended 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 extensive holdings of these kinds of assets may eventually have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, diminishing earnings and elevating the risk of a future failure.
The First National Bank of Carmi beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .
The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.04 percent of The First National Bank of Carmi'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 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 problematic loans. The First National Bank of Carmi's loan loss allowance was 4,047.32 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.