Asset Quality Score
In this test, Bankrate tries to determine the effect of problem assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with a large number of these types of assets may eventually have to use capital to absorb losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, diminishing earnings and increasing the chances of a future failure.
On Bankrate's test of asset quality, The Peoples National Bank of New Lexington scored 40 out of a possible 40 points, beating the national average of 37.49 points.
A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.52 percent of The Peoples National Bank of New Lexington'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 to handle problem assets known as an "allowance for loan and lease losses." How large that reserve is can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on The Peoples National Bank of New Lexington's loan loss allowance in its most recent filings.