Safe and Sound

Bank of Morton

Morton, MS
5
Star Rating
Bank of Morton is an FDIC-insured bank started in 1904 and currently headquartered in Morton, MS. Regulatory filings show the bank having equity of $9.7 million on $66.8 million in assets, as of December 31, 2017.

With 17 full-time employees, the bank currently holds loans and leases worth $50.0 million, including real estate loans of $40.6 million. U.S. bank customers currently have $54.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Morton exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for an analysis of how the bank did on the three major criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders when a bank is struggling financially. Therefore, a bank's level of capital is a valuable measurement of a bank's financial strength. When looking at safety and soundness, more capital is preferred.

On our test to measure the adequacy of a bank's capital, Bank of Morton scored 20 out of a possible 30 points, beating the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Bank of Morton's Tier 1 capital ratio was 21.63 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to weather economic difficulties.

Overall, Bank of Morton held equity amounting to 14.58 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as unpaid loans.

Having lots of these kinds of assets means a bank may eventually have to use capital to absorb losses, decreasing 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 failure in the future.

On Bankrate's asset quality test, Bank of Morton scored 32 out of a possible 40 points, below 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, 1.05 percent of Bank of Morton'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 maintain a reserve known as an "allowance for loan and lease losses" to deal with problem assets . Comparing the size of that reserve to the total amount of at-risk loans can be a useful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Bank of Morton's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially making the bank better able to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

On Bankrate's test of earnings, Bank of Morton scored 30 out of a possible 30, above the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Bank of Morton was 21.64 percent, above the national average of 8.10 percent.

The bank reported net income of $2.0 million on total equity of $9.7 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 3.06 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above 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.