Asset Quality Score
In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.
A bank with large numbers of these kinds of assets may eventually be forced to use capital to absorb losses, cutting down on its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.
On Bankrate's test of asset quality, American Bank scored 40 out of a possible 40 points, beating the national average of 37.62 points.
The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 0.03 percent of American 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 1.04 percent.
Banks maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of problematic loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. American Bank's loan loss allowance was 5,432.14 percent of its total noncurrent loans, above the national average. All else being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.