Safe and Sound

Gateway State Bank

Clinton, IA
4
Star Rating
Gateway State Bank is a Clinton, IA-based, FDIC-insured bank founded in 1907. The bank has equity of $16.1 million on assets of $157.3 million, according to December 31, 2017, regulatory filings.

Thanks to the work of 30 full-time employees in 4 offices in IA, the bank holds loans and leases worth $105.5 million, including $72.4 million worth of real estate loans. U.S. bank customers currently have $125.9 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Gateway State Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three key criteria Bankrate used to grade American banks.

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial fortitude, capital is key. It acts as a buffer against losses and provides protection for accountholders during periods of financial instability for the bank. When it comes to safety and soundness, more capital is better.

On our test to measure capital adequacy, Gateway State Bank received a score of 10 out of a possible 30 points, less than the national average of 13.13.

A bank's Tier 1 capital ratio is a commonly used measure of this buffer. Gateway State Bank's Tier 1 capital ratio was 13.93 percent, exceeding the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, Gateway State Bank held equity amounting to 10.25 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to try to understand how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as past-due loans.

A bank with large numbers of these types of assets may eventually be forced to use capital to absorb losses, decreasing its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and increasing the risk of a future failure.

Gateway State Bank exceeded the national average of 37.49 on Bankrate's test of asset quality, racking up 40 out of a possible 40 points .

A widely used indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.54 percent of Gateway State Bank'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 troubled assets . Comparing the reserve's size to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Gateway State Bank's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance affects its safety and soundness. A bank can retain its earnings, expanding its capital cushion, or put them to work addressing problematic loans, potentially making the bank better able to withstand economic shocks. Obviously, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Gateway State Bank scored 14 out of a possible 30, below the national average of 15.12.

One important measure of a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by the total amount of equity. The most recent annualized quarterly return on equity for Gateway State Bank was 6.81 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $1.1 million on total equity of $16.1 million. The bank had an annualized return on average assets, or ROA, of 0.67 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.