Asset Quality Score
In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid loans, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with a large number of these kinds of assets may eventually have to use capital to cover losses, reducing its cushion of equity. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, reducing earnings and elevating the risk of a future failure.
On Bankrate's asset quality test, Encore Bank scored 40 out of a possible 40 points, above the national average of 37.49 points.
A handy indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.40 percent of Encore 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 1.01 percent.
Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . The size of that reserve can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Encore Bank's loan loss allowance in its most recent filings.