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 large numbers of these kinds of assets may eventually be required to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in diminished earnings and potentially more risk of a failure in the future.
On Bankrate's test of asset quality, First Foundation Bank scored 40 out of a possible 40 points, beating out 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, 0.35 percent of First Foundation 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on First Foundation Bank's loan loss allowance in its most recent filings.