Asset Quality Score
Bankrate uses this test to estimate the impact of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.
A bank with large numbers of these types of assets may eventually be forced to use capital to absorb losses, decreasing its cushion of equity. 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 diminished earnings and potentially more risk of a failure in the future.
On Bankrate's test of asset quality, American Riviera Bank scored 40 out of a possible 40 points, exceeding the national average of 37.49 points.
A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.14 percent of American Riviera 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 maintain a reserve to handle troubled assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful 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 American Riviera Bank's loan loss allowance in its most recent filings.