Asset Quality Score
This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by problem assets, such as past-due loans.
Having a large number of these kinds of assets could eventually force a bank to use capital to cover losses, shrinking its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in lower earnings and potentially more risk of a future failure.
On Bankrate's test of asset quality, The Wanda State Bank scored 40 out of a possible 40 points, beating the national average of 37.49 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, 0.12 percent of The Wanda State Bank'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. The Wanda State Bank's loan loss allowance was 1,642.00 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.