Asset Quality Score
Bankrate uses this test to estimate the effect of troubled assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.
A bank with a large number of these types of assets could eventually have to use capital to absorb losses, cutting down on its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in diminished earnings and potentially more risk of a failure in the future.
On Bankrate's asset quality test, Pinnacle Bank scored 40 out of a possible 40 points, better than 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, 0.10 percent of Pinnacle 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 known as an "allowance for loan and lease losses" to deal with problem assets . How large that reserve is can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Pinnacle Bank's loan loss allowance was 1,423.51 percent of its total noncurrent loans, higher than the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.