Asset Quality Score
In this test, Bankrate tries to estimate the impact of problem assets, such as unpaid mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.
A bank with large numbers of these kinds of assets could eventually be required to use capital to cover losses, decreasing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, decreasing earnings and increasing the chances of a failure in the future.
On Bankrate's asset quality test, SouthPoint Bank scored 40 out of a possible 40 points, above the national average of 37.49 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, 0.04 percent of SouthPoint 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 keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of problem loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. SouthPoint Bank's loan loss allowance was 3,876.09 percent of its total noncurrent loans, exceeding the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.