Safe and Sound

Gateway Bank

Mendota Heights, MN
5
Star Rating
Mendota Heights, MN-based Gateway Bank is an FDIC-insured bank started in 2004. The bank has equity of $15.9 million on $174.0 million in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $152.1 million on deposit at 2 offices in MN run by 24 full-time employees. With that footprint, the bank holds loans and leases worth $130.0 million, including $74.1 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Gateway Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three key criteria Bankrate used to grade American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an a bank's financial stability, capital is important. It acts as a bulwark against losses and affords protection for depositors when a bank is experiencing financial trouble. From a safety and soundness perspective, more capital is preferred.

Gateway Bank received a score of 10 out of a possible 30 points on our test to measure capital adequacy, failing to reach the national average of 13.13.

One important measure of this buffer is a bank's Tier 1 capital ratio. Gateway Bank's Tier 1 capital ratio was 12.03 percent, above the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial difficulties.

Overall, Gateway Bank held equity amounting to 9.11 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 impact of problem assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these types of assets may eventually be forced to use capital to cover losses, decreasing its equity buffer. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, resulting in reduced earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Gateway Bank scored 40 out of a possible 40 points, exceeding 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, none of Gateway 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 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." How large that reserve is 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 Gateway Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's profitability has an effect on its safety and soundness. A bank can retain its earnings, increasing its capital buffer, or use them to deal with problematic loans, potentially making the bank better prepared to withstand economic shocks. Conversely, losses take away from a bank's ability to do those things.

On Bankrate's earnings test, Gateway Bank scored 24 out of a possible 30, beating the national average of 15.12.

Return on equity, calculated by dividing net income (profit, basically) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for Gateway Bank was 16.30 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $2.5 million on total equity of $15.9 million. The bank had an annualized return on average assets, or ROA, of 1.46 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.