Asset Quality Score
Bankrate uses this test to determine the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.
Having extensive holdings of these types of assets suggests a bank may eventually have 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 thus aren't earning money, resulting in reduced earnings and potentially more risk of a failure in the future.
On Bankrate's asset quality test, The Milford National Bank and Trust Company scored 40 out of a possible 40 points, beating out the national average of 37.49 points.
A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.71 percent of The Milford National Bank and Trust Company'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 problem assets . That reserve's size can be a handy indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on The Milford National Bank and Trust Company's loan loss allowance in its most recent filings.