Asset Quality Score
In this test, Bankrate tries to estimate the effect of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.
Having lots of these types of assets means a bank could eventually have to use capital to absorb losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in depressed earnings and potentially more risk of a failure in the future.
Enterprise Bank beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 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, 0.03 percent of Enterprise 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 . Comparing the size of that reserve to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Enterprise Bank's loan loss allowance was 4,000.00 percent of its total noncurrent loans, above the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.