Asset Quality Score
In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.
A bank with a large number of these kinds of assets may eventually have to use capital to absorb losses, diminishing its equity buffer. 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, reducing earnings and elevating the risk of a future failure.
Central Pacific Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.49.
The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.09 percent of Central Pacific 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 keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing how large that reserve is to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Central Pacific Bank's loan loss allowance was 1,497.48 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.