Asset Quality Score
This test is intended to estimate how the bank's capitalization and allocated loan loss reserves could be affected by problem assets, such as unpaid mortgages.
Having lots of these types of assets means a bank may have to use capital to cover losses, shrinking its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, decreasing earnings and increasing the risk of a future failure.
On Bankrate's test of asset quality, Foundation One Bank scored 40 out of a possible 40 points, exceeding 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, 0.06 percent of Foundation One 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 . How large that reserve is 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. Foundation One Bank's loan loss allowance was 1,347.06 percent of its total noncurrent loans, higher than the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.