Asset Quality Score
In this test, Bankrate tries to estimate the impact of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
Having lots of these kinds of assets could eventually force a bank to use capital to absorb losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, reducing earnings and elevating the chances of a failure in the future.
Bank of Commerce 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, 0.07 percent of Bank of Commerce'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 known as an "allowance for loan and lease losses" to deal with troubled assets . The size of that reserve can be a widely used indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Bank of Commerce's loan loss allowance was 1,501.52 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.