Safe and Sound

Gates Banking and Trust Company

Gates, TN
5
Star Rating
Started in 1904, Gates Banking and Trust Company is an FDIC-insured bank based in Gates, TN. The bank holds equity of $5.0 million on assets of $45.4 million, according to December 31, 2017, regulatory filings.

With 10 full-time employees, the bank has amassed loans and leases worth $13.3 million, including real estate loans of $10.7 million. U.S. bank customers currently have $40.3 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Gates Banking and Trust Company exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a look at how the bank fared on the three major criteria Bankrate used to grade U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

Find out

THE INSTITUTION'S SCORE

Capital Score

Capital works as a cushion against losses and provides protection for account holders during times of economic instability for the bank. It follows then that when it comes to measuring an a bank's financial resilience, capital is key. From a safety and soundness perspective, the more capital, the better.

On our test to measure the adequacy of a bank's capital, Gates Banking and Trust Company received a score of 12 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. Gates Banking and Trust Company's Tier 1 capital ratio was 20.64 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial downturns.

Overall, Gates Banking and Trust Company held equity amounting to 10.91 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the effect of problem assets, such as past-due mortgages, on the bank's capitalization and allocated loan loss reserves.

Having extensive holdings of these types of assets may eventually force a bank to use capital to cover losses, cutting down on its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in diminished earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Gates Banking and Trust Company scored 40 out of a possible 40 points, beating the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, none of Gates Banking and Trust Company'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 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . 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 at-risk loans. Unfortunately, the FDIC did not provide information on Gates Banking and Trust Company'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, expanding its capital cushion, or use them to deal with problematic loans, potentially making the bank better prepared to withstand financial trouble. However, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Gates Banking and Trust Company scored 18 out of a possible 30, beating 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 Gates Banking and Trust Company was 8.55 percent, above the national average of 8.10 percent.

The bank earned net income of $432,000 on total equity of $5.0 million for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 0.97 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.