Safe and Sound

Morgan Federal Bank

Fort Morgan, CO
3
Star Rating
Morgan Federal Bank is a Fort Morgan, CO-based, FDIC-insured bank dating back to 1935. The bank has equity of $12.6 million on $112,264,000 in assets, according to June 30, 2017, regulatory filings.

With 25 full-time employees, the bank has amassed loans and leases worth $51.6 million, including real estate loans of $46.4 million. U.S. bank customers currently have $96.6 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Morgan Federal Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial fortitude, capital is essential. It works as a buffer against losses and affords protection for accountholders when a bank is experiencing financial instability. When it comes to safety and soundness, more capital is preferred.
Morgan Federal Bank received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, coming in below the national average of 13.38.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Morgan Federal Bank's Tier 1 capital ratio was 20.13 percent, exceeding the 6 percent level regulators consider adequate, but under the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to financial headwinds.

Overall, Morgan Federal Bank held equity amounting to 11.25 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid mortgages.

A bank with large numbers of these kinds of assets could eventually have to use capital to cover losses, reducing 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 interest for the bank, resulting in reduced earnings and potentially more risk of a failure in the future.

Morgan Federal Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating out the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of June 30, 2017, none of Morgan Federal Bank'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 1.04 percent.

Banks keep a reserve to handle troubled assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of problematic loans can be a useful indicator when evaluating a bank's ability to manage troubled assets. Morgan Federal Bank's loan loss allowance was 36,500.00 percent of its total noncurrent loans, above the national average. All things being equal, the higher the ratio of loan loss allowance to noncurrent loans, the better.

Earnings score

A bank's ability to earn money has an effect on its long-term survivability. Earnings can be retained by the bank, expanding its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Losses, on the other hand, take away from a bank's ability to do those things.

Morgan Federal Bank scored 16 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 16.52.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. Morgan Federal Bank's most recent annualized quarterly return on equity was 8.10 percent, below the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $504,000 on total equity of $12.6 million. The bank had an annualized return on average assets, or ROA, of 0.89 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.14 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.