Asset Quality Score
This test's purpose is to try to understand how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.
A bank with extensive holdings of these types of assets may eventually be required to use capital to absorb losses, shrinking its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, pushing down earnings and increasing the risk of a future failure.
On Bankrate's test of asset quality, First Capital Bank scored 40 out of a possible 40 points, better than 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, 0.05 percent of First Capital 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 troubled assets . That reserve's size can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. First Capital Bank's loan loss allowance was 1,811.02 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.