Asset Quality Score
In this test, Bankrate tries to determine the impact of problem assets, such as unpaid mortgages, on the bank's capitalization and allocated loan loss reserves.
Having lots of these types of assets may eventually force a bank to use capital to cover losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, diminishing earnings and increasing the risk of a future failure.
Signature Bank of Arkansas fell below the national average of 37.49 on Bankrate's asset quality test, racking up 32 out of a possible 40 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, 0.12 percent of Signature Bank of Arkansas'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 troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Signature Bank of Arkansas's loan loss allowance was 1,256.00 percent of its total noncurrent loans, exceeding the national average. All things being equal, a higher ratio of loan loss allowance to noncurrent loans is better.