Asset Quality Score
This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.
A bank with a large number of these types of assets could eventually have 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 money, decreasing earnings and elevating the risk of a future failure.
On Bankrate's asset quality test, Washington State Bank scored 40 out of a possible 40 points, beating out 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, 0.42 percent of Washington 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 keep a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a handy 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 Washington State Bank's loan loss allowance in its most recent filings.