Asset Quality Score
Bankrate uses this test to estimate the impact of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.
A bank with large numbers of these types of assets may eventually be required to use capital to absorb losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a future failure.
West Plains Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, better than 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, 0.01 percent of West Plains 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 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 handy indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. West Plains Bank's loan loss allowance was 13,733.33 percent of its total noncurrent loans, exceeding the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.