Asset Quality Score
Bankrate uses this test to determine 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.
A bank with extensive holdings of these types of assets may eventually be required to use capital to cover losses, reducing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, pushing down earnings and elevating the risk of a future failure.
The First State Bank & Trust Co. of Larned scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out 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, 0.11 percent of The First State Bank & Trust Co. of Larned'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 problem assets . How large that reserve is can be a widely used indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. The First State Bank & Trust Co. of Larned's loan loss allowance was 1,830.59 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.