Asset Quality Score
In this test, Bankrate tries to estimate the effect of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.
Having extensive holdings of these kinds of assets suggests a bank could eventually have to use capital to absorb losses, decreasing its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.
On Bankrate's test of asset quality, The Farmers Bank of Milton scored 32 out of a possible 40 points, coming in below 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, 4.08 percent of The Farmers Bank of Milton's loans were noncurrent -- in other words, 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 maintain a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a useful indicator when evaluating a bank's ability to manage troubled assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The Farmers Bank of Milton's loan loss allowance in its most recent filings.