Asset Quality Score
This test is intended to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.
Having lots of these types of assets may eventually force a bank to use capital to absorb losses, shrinking its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.
On Bankrate's test of asset quality, American Continental Bank scored 40 out of a possible 40 points, better than the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.10 percent of American Continental 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 to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. American Continental Bank's loan loss allowance was 1,903.47 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.