Asset Quality Score
In this test, Bankrate tries to determine the effect of problem assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.
A bank with lots of these types of assets may eventually be required to use capital to absorb losses, reducing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, reducing earnings and elevating the chances of a failure in the future.
On Bankrate's test of asset quality, The First National Bank of South Miami scored 40 out of a possible 40 points, better than the national average of 37.49 points.
A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.68 percent of The First National Bank of South Miami'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 troubled assets . How large that reserve is 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. Unfortunately, the FDIC did not provide information on The First National Bank of South Miami's loan loss allowance in its most recent filings.