Asset Quality Score
In this test, Bankrate tries to determine the impact of troubled assets, such as past-due loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with large numbers of these kinds of assets could eventually be required to use capital to absorb losses, reducing its equity buffer. 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, California Bank of Commerce scored 40 out of a possible 40 points, beating out the national average of 37.49 points.
The percentage of problem assets a bank holds compared to its total assets is a useful indicator of asset quality.As of December 31, 2017, 0.07 percent of California Bank of Commerce'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 troubled assets known as an "allowance for loan and lease losses." How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. California Bank of Commerce's loan loss allowance was 1,921.49 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.