Asset Quality Score
This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by troubled assets, such as unpaid mortgages.
Having extensive holdings of these types of assets may eventually force a bank to use capital to absorb losses, shrinking its buffer of equity. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the chances of a future failure.
On Bankrate's test of asset quality, Bank of Marin scored 40 out of a possible 40 points, beating the national average of 37.49 points.
A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.02 percent of Bank of Marin'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 troubled assets . Comparing the reserve's size to the total amount of problematic loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Bank of Marin's loan loss allowance was 3,883.50 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.