Asset Quality Score
Bankrate uses this test to determine the impact of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.
Having large numbers of these kinds of assets may eventually force a bank to use capital to cover losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, pushing down earnings and increasing the chances of a future failure.
On Bankrate's asset quality test, United Farmers State Bank scored 40 out of a possible 40 points, above the national average of 37.49 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, 0.11 percent of United Farmers State Bank'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 problem assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. United Farmers State Bank's loan loss allowance was 1,414.86 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.