Safe and Sound

Milford Building and Loan Association

Milford, IL
3
Star Rating
Milford Building and Loan Association is an FDIC-insured bank founded in 1883 and currently headquartered in Milford, IL. Regulatory filings show the bank having equity of $2.5 million on $27.1 million in assets, as of December 31, 2017.

Thanks to the efforts of 5 full-time employees, the bank has amassed loans and leases worth $21.4 million, $21.6 million of which are for real estate. The bank currently holds $23.3 million in deposits from U.S. customers.

Overall, Bankrate believes that, as of December 31, 2017, Milford Building and Loan Association exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for account holders when a bank is struggling financially. Therefore, when it comes to measuring an an institution's financial resilience, capital is crucial. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Milford Building and Loan Association received a score of 10 out of a possible 30 points, failing to reach the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Milford Building and Loan Association's Tier 1 capital ratio was 16.97 percent, above the 6 percent level considered adequate by regulators, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather economic downturns.

Overall, Milford Building and Loan Association held equity amounting to 9.06 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the effect of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with a large number of these kinds of assets could eventually have to use capital to absorb losses, shrinking 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, resulting in depressed earnings and potentially more risk of a future failure.

Milford Building and Loan Association scored 28 out of a possible 40 points on Bankrate's test of asset quality, falling short of the national average of 37.49.

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, 2.20 percent of Milford Building and Loan Association's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the reserve's size to the total amount of at-risk loans can be a widely used indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Milford Building and Loan Association's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or use them to address problematic loans, likely making the bank more resilient in times of trouble. Obviously, banks that are losing money have less ability to do those things.

Milford Building and Loan Association fell short of the national average on Bankrate's earnings test, achieving a score of 10 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by total equity, is one important way to measure a bank's earnings. Milford Building and Loan Association's most recent annualized quarterly return on equity was 4.48 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $108,000 on total equity of $2.5 million. The bank had an annualized return on average assets, or ROA, of 0.39 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.