Asset Quality Score
In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.
A bank with lots of these types of assets could eventually be forced to use capital to cover losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the chances of a failure in the future.
On Bankrate's test of asset quality, Inwood National Bank scored 40 out of a possible 40 points, beating out the national average of 37.49 points.
A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.04 percent of Inwood National Bank's loans were noncurrent, meaning 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 . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of at-risk loans. Inwood National Bank's loan loss allowance was 2,525.50 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.