Asset Quality Score
In this test, Bankrate tries to determine the impact of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.
A bank with lots of these types of assets could eventually have to use capital to cover losses, diminishing its buffer of equity. 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, diminishing earnings and increasing the risk of a failure in the future.
The State Bank of Faribault did better than the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .
The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.09 percent of The State Bank of Faribault'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 troubled assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. The State Bank of Faribault's loan loss allowance was 1,978.90 percent of its total noncurrent loans, above the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.