Asset Quality Score
In this test, Bankrate tries to determine the effect of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.
Having lots of these kinds of assets suggests a bank could have to use capital to absorb 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 failure in the future.
West Iowa Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out the national average of 37.49.
A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.06 percent of West Iowa 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 . How large that reserve is can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. West Iowa Bank's loan loss allowance was 1,717.65 percent of its total noncurrent loans, higher than the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.