Asset Quality Score
In this test, Bankrate tries to determine the effect of troubled assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with lots of these kinds of assets could eventually be forced to use capital to absorb losses, diminishing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, decreasing earnings and increasing the risk of a failure in the future.
Commercial Bank scored 40 out of a possible 40 points on Bankrate's asset quality test, exceeding the national average of 37.62.
A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of June 30, 2017, 0.15 percent of Commercial 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 1.04 percent.
Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." Comparing the that reserve's size to the total amount of at-risk loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Commercial Bank's loan loss allowance was 939.58 percent of its total noncurrent loans, above the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.