* Total Assets Exceed $1.2 Billion, Up 37% * Loan Growth Up 49%
VIRGINIA BEACH, Va., Jan. 23, 2007 (PRIME NEWSWIRE) -- Gateway Financial Holdings, Inc. (Nasdaq:GBTS), the holding company for Gateway Bank & Trust Co., reported net income for the 2006 fiscal year of $5.3 million compared with $3.9 million for the prior fiscal year, an increase of $1.4 million, or 34%. Earnings performance was driven by exceptional revenue growth from a 49% increase in loans during the year resulting from the Company's expanding network of financial centers and increased revenues from Gateway's non-banking activities. Diluted earnings per share were $0.47 for 2006 compared with $0.46 for the prior year. Per share results reflect the December 2005 stock offering of 2.3 million shares which increased the weighted average diluted shares from 8,556,012 shares for the 2005 fiscal year to 11,121,703 shares for 2006, an increase of 30.0%. The 2006 results were negatively affected by a loss on the market value and net cash settlement of $1.92 million that resulted from the $150 million interest rate swap agreement entered into on December 30, 2005 to hedge variable rate loans included in Gateway's loan portfolio. Additionally, the Company incurred a loss on disposition of premises and equipment when it wrote off $291,733 of obsolete equipment and leasehold improvements during the fourth quarter. The economic hedge and loss on disposition of premises and equipment have been reported as a component of non-interest income in accordance with GAAP. Diluted earnings per share, excluding the loss on the market value and net cash settlement on economic hedge of $1.92 million and the loss on disposition of premises and equipment of $291,733 (net of income taxes using a 37.5% blended rate), were $0.60 per share. Due to the volatility and lack of earnings comparability caused by the current year's economic hedge loss and the non-recurring nature of the loss on disposition of premises and equipment, management believes presentation of an adjusted, non-GAAP, diluted earnings per share provides useful information to investors.
For the fourth quarter of 2006, the Company reported net income of $1.4 million, compared with $1.2 million for the same period in 2005, an increase of $200,000 or 15%. Diluted earnings per share were $0.13 for the current quarter, which was slightly lower than the diluted earnings per share of $0.14 for the comparable quarter of 2005. Per share results were impacted by the December 2005 stock offering, which increased average diluted shares outstanding for the fourth quarter of 2006 by 25.1%, from 8,917,917 shares for the fourth quarter of 2005 to 11,157,077 for the 2006 fourth quarter. Current quarter results were also negatively affected by the loss on economic hedge, which had a market value and cash settlement loss of $502,350 in the fourth quarter. Additionally, the Company incurred a loss on disposition of premises and equipment when it wrote off $291,733 of obsolete equipment and leasehold improvements during the fourth quarter. Both of these losses were reported as components of non-interest income, and in the aggregate resulted in a reduction of non-interest income and pre-tax income of $794,083 in the fourth quarter. Diluted earnings per share, excluding the loss on the market value and net cash settlement on economic hedge and disposition of premises and equipment of $794,083, (net of income taxes using a 37.5% blended rate) were $0.17 per share. Due to the volatility and lack of earnings comparability caused by the current quarter's economic hedge loss and the non-recurring nature of the loss on disposition of premises and equipment, management believes presentation of an adjusted, non-GAAP, diluted earnings per share provides useful information to investors.
Commenting on these results, D. Ben Berry, Chairman, President and CEO of Gateway Financial Holdings, stated, "Despite the significant costs associated with investing in our franchise expansion and the negative effect of the economic hedge, we are pleased to report another record year of net income growth. This year had a special significance for us as our assets surpassed the $1 billion mark during the second quarter with the majority of this growth being organically generated through our expanding network of financial centers which we built in markets we identified for their superior growth potential."
Mr. Berry continued, "This 2006 expansion of our geographic footprint included the opening of six full-service financial centers, a private banking center, the launching of a new Mortgage subsidiary, the opening of a new state-of-the-art Operations Center, and two new loan production offices. Additionally, we acquired two insurance agencies in Virginia during the fourth quarter which will add to our non-interest income in 2007 and beyond. Subsequent to the end of the year, we signed a definitive agreement to acquire The Bank of Richmond which expands our footprint into the demographically attractive Richmond area. Gateway's strategy continues to focus on profit growth as well as franchise growth as we continue to expand our franchise at an impressive rate, while maintaining exceptional asset quality and improving profitability."
Revenues and Net Interest Margin
Total revenue, defined as net interest income and non-interest income, was $46.3 million for 2006, an increase of 47.5% above the $31.4 million reported for 2005. Net interest income was $37 million, a $13.7 million or 58.8% increase over the $23.3 million reported for 2005. The increase reflects a 56.6% increase in average earning assets, driven by the $312 million or 59.6% increase in average loans, combined with a 6-basis point improvement in the net interest margin year-over-year to 3.87%.
Non-interest income for 2006 was $9.3 million, an increase of $1.2 million or 14.9% above the prior fiscal year. Excluding the affect of the loss and net cash settlement on economic hedge and loss on disposition of premises and equipment, non-interest income increased $3.4 million or 42.3% year-over-year. Service charge income increased $986,000 or 42.7%, directly related to the increase in transactional deposit accounts and our franchise expansion. Revenue from Gateway's insurance operations increased $495,000 or 20.7% to $2.9 million resulting from our franchise expansion, as well as the two acquisitions of Virginia agencies in the fourth quarter. Gateway launched its new mortgage subsidiary, Gateway Financial Mortgage, during the second quarter, accounting for an increase in revenues in 2006 of $748,000 or 89.5% to $1.6 million from the $836,000 reported in 2005. Revenues from the brokerage operations increased $88,000 or 13.4% in 2006, primarily as a result of hiring a new investment broker in Virginia during the first quarter. Additionally, Gateway had $185,000 higher income from BOLI primarily as a result of $7 million additional BOLI purchased during the third quarter.
For the fourth quarter of 2006, total revenue was $12.5 million compared with $9.4 million for the fourth quarter of 2005, an increase of 32.9%. Net interest income increased 40.8% to $10 million, reflecting a 42.5% growth in average earning assets and despite a 19-basis point drop in net interest margin from 3.96% in the fourth quarter of 2005 to 3.77% in the fourth quarter of 2006. Driving the growth in earning assets was a 46.0% growth in average loans which increased to $936.6 million in the 2006 fourth quarter from $641.4 million in the 2005 fourth quarter. Although Gateway is inherently short-term asset sensitive, the margin compression resulted from the impact of higher interest rates on Gateway's cost of funds, exacerbated by the inverted yield curve environment throughout 2006. Short-term rates have remained high, resulting in higher re-pricing of maturing deposits during the last half of the year, while variable rate loans have not re-priced since June 29, 2006, when the Federal Reserve Board last increased short term rates. Non-interest income was $2.5 million for the fourth quarter compared with $2.3 million in the prior-year period, an increase of 8.9%. Excluding the loss and net cash settlement on economic hedge and the loss on disposition of premises and equipment, fourth quarter non-interest income increased $1 million or 42.9% from the prior year fourth quarter, mainly attributed to increased service charges and Gateway's non-banking activities discussed above. Insurance operations revenue increased 30.5% to $781,000 and revenue from the mortgage operations increased 286% to $690,000 in the fourth quarter of 2006 as compared with the fourth quarter of 2005. These percentage increases in the fourth quarter were greater than the increases for the entire year as a result of the mortgage operation not commencing operations until the end of the second quarter, and the two insurance agency acquisitions in the fourth quarter of this year.
Non-Interest Expenses
Non-interest expense for 2006 was $35 million, up $11.7 million, or 50.3%, from the $23.3 million reported in the prior fiscal year. These increased expenses reflect Gateway's significant infrastructure expansion. Over the last twelve months, Gateway opened six de novo financial centers, built a new state-of-the-art operations center, opened a private banking center, launched a new mortgage subsidiary, and added 80 new employees, bringing the total FTEs to 327 at December 31, 2006. Salaries and benefits increased 49.2%, and occupancy, equipment, and data processing costs rose 53.9%, almost all of which was related to expansion activities. The $3 million increase in other expense included $1.03 million of expenses related to the Haberfeld High Performance checking account program in 2006 (there were none of these expenses in 2005), and an increase of $237,000 related to other promotional and advertising expenses; increased franchise taxes related to the Virginia financial center expansion of approximately $500,000; increased consulting and professional costs of $318,000; and increased travel and business development expenses of $340,000. Gateway will continue to benefit in 2007 from the Haberfeld program; however, expenses related to the program going forward into 2007 will be minimal. Gateway's efficiency ratio was 75.80% for the year, up slightly from the 74.17% for 2005. However, the efficiency ratio was negatively affected in 2006 by the loss and net cash settlement on economic hedge which is reported as a reduction of non-interest income. Excluding the impact of the loss and net cash settlement on economic hedge of $1.92 million, the efficiency ratio would have been 72.75% for 2006. For the fourth quarter of 2006, non-interest expense was $9.6 million compared with $6.8 million in the fourth quarter of 2005, an increase of 40.2%. However, on a linked quarter basis, non-interest expense only increased $539,000 or 6%.
Loan and Asset Growth
At December 31, 2006, total assets were $1.2 billion, an increase of $323.6 million, or 36.6%, above the $883.4 million reported twelve months ago. This increase was primarily related to loans which increased $327.9 million, or 49.2%, to $994.6 million. All of this growth was organic, with over 50% of the increase derived from the financial centers opened over the past twelve months; and 43% of this growth was derived from commercial real estate loans, which were up $141 million. At December 31, 2006, commercial loans (CRE, construction and C&I) totaled $696 million, or 70% of the loan portfolio.
Deposit Growth and Borrowings
Deposits rose $277.5 million, or 42.9%, over the past twelve months to $923.8 million; with core deposits (including retail CDs) up $138.5 million (28.6%) to $623.1 million, and jumbo CDs up $53.8 million (35.5%) to $205.5 million at year-end. Brokered deposits, primarily used to fund loan growth in the Wilmington loan production office and the Raleigh private banking center, grew $85.2 million to $95.2 million. Core deposits comprised 67.5% of total deposits at December 31, 2006, while jumbo CDs were 22.2%. Borrowings, including junior subordinated debentures, totaled $166.9 million at December 31, 2006, up $32.3 million or 24% from twelve months ago. The Company issued an additional $15 million of junior subordinated debentures during the second quarter related to proceeds received from the sale of trust preferred securities by its third Statutory Trust subsidiary, which accounted for approximately half of the increased borrowings. The remainder of the borrowings was used to fund franchise expansion and supplement deposits to fund loan growth.
Asset Quality
Mr. Berry added, "Asset quality remains a top priority at Gateway. In addition to operating in markets with robust economies that continue to provide Gateway with exceptional opportunities for high-quality loan growth, as part of our strategic planning process, we seek out prime locations and identify and hire outstanding bankers and lenders. They are experienced in each market they serve, and astute and highly skilled business people, whose client base has proven to be exceptionally loyal."
For the year, net loan charges-offs were 0.04% of average loans; and non-performing loans were $3.3 million (or 0.33%) of total loans at December 31, 2006. Mr. Berry continued, "Our asset quality remains outstanding, both for a bank over $1 billion in assets and relative to our peer group. This quarter, we placed a $2.6 million relationship on non-performing status. However, we are well-collateralized by marketable real estate and further supported by a personal guaranty, and we anticipate that any losses associated with this group of loans will be minimal."
At December 31, 2006, the allowance for loan losses was $9.4 million, or 0.95% of total loans.
Shareholder Returns and Equity
Mr. Berry further stated, "Our commitment to shareholders remains strong, as evidenced by our second quarter stock dividend and our quarterly cash dividend, which was increased 66.7% during the year. We maintain a strong capital base which allows us to continue our investment in franchise growth. We believe this franchise growth maximizes shareholder value and provides the most attractive return to Gateway investors."
Stockholders' equity at December 31, 2006 totaled $109.3 million, an increase of $10.5 million, or 10.6%, from twelve months ago. At December 31, 2006, Gateway had 10,978,014 shares outstanding; stockholders' equity equaled 9.05% of total assets, and the total risk-based capital ratio was 13.0%, well in excess of the "well-capitalized" regulatory threshold.
Mr. Berry concluded, "We are pleased with our overall performance this year and the earnings we generated. Despite the negative effect of the economic hedge and the significant costs associated with the franchise expansion this year, we were still able to increase our earnings 34% over the prior year. This performance is a tribute to our strong management team and their hard work over the past year. Our franchise continues to grow with our recently announced acquisition of The Bank of Richmond, our plans to convert our loan production office in Wilmington, North Carolina into a full-service financial center in the third quarter of 2007, and expand further in Raleigh during the latter part of 2007. Our expenses are stabilizing, and our maturing financial centers are becoming increasingly profitable. And as always, we will continue to be receptive to strategic opportunities that further enhance our franchise and increase shareholder value. We look forward to 2007 being an excellent year for Gateway."
Web Cast and Conference Call Information
Gateway's executive management team will host a conference call and simultaneous web cast on Tuesday, January 23 at 10:00 AM Eastern Time to discuss the year-end results. The web cast can be accessed live on the Company's website, www.gwfh.com, on the Investor Relations page. A replay will be available approximately two hours after the live conference call ends, and will be archived on the Company's website for one month.
About the Company
Gateway Financial Holdings, Inc. is the parent company of Gateway Bank & Trust Co., a regional community bank with a total of twenty-four full-service financial centers -- thirteen in Virginia: Virginia Beach (7), Chesapeake (3), Suffolk, Norfolk and Emporia; and eleven in North Carolina: Elizabeth City (3), Edenton, Kitty Hawk (2), Moyock, Nags Head, Plymouth, Roper and Raleigh, in addition to a private banking center in Raleigh. The Bank provides insurance through its Gateway Insurance Services, Inc. subsidiary, brokerage services through its Gateway Investment Services, Inc. subsidiary, and mortgage banking services through its Gateway Financial Mortgage, Inc. subsidiary. The common stock of the Corporation is traded on the Nasdaq Global Market under the symbol GBTS. For further information, visit the Corporation's web site at www.gwfh.com.
Forward-Looking Statements
Statements contained in this news release, which are not historical facts, are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Amounts herein could vary as a result of market and other factors. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. Such forward-looking statements may be identified by the use of such words as "believe," "expect," anticipate," "should," "planned," "estimated," and "potential." Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, expected or anticipated revenue, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products and services. The Company undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL HIGHLIGHTS Quarterly ---------------------------------------------- 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 2006 2006 2006 2006 ---------- ---------- ---------- ---------- (Dollars in thousands except per share data) EARNINGS Net interest income $ 9,971 9,493 9,312 8,222 Provision for loan losses $ 800 600 800 1,200 Non-Interest income $ 2,545 4,416 1,296 1,013 Gain (loss) and net cash settlements on economic hedge $ (502) 1,601 (1,198) (1,819) Loss on disposition of premises and equipment $ (292) 0 0 0 Proforma non-interest income (b) $ 3,339 2,815 2,494 2,832 Non-Interest expense $ 9,557 9,018 8,559 7,840 Pre-tax income $ 2,159 4,291 1,249 195 Net income $ 1,403 2,778 864 224 Basic earnings per share (a) $ 0.13 0.26 0.08 0.02 Diluted earnings per share (a) $ 0.13 0.25 0.08 0.02 Proforma diluted earnings per share (c) $ 0.17 0.16 0.14 0.12 Weighted avg. basic shares outstanding (a) 10,889,605 10,805,652 10,789,189 10,762,140 Weighted average diluted shares (a) 11,157,077 11,097,299 11,131,691 11,113,498 PERFORMANCE RATIOS Return on average assets 0.48% 1.03% 0.37% 0.11% Return on average common equity 5.20% 10.57% 3.41% 0.89% Net interest margin (fully tax-equivalent) 3.77% 3.84% 3.94% 3.92% Non-interest expense to average assets 3.30% 3.38% 3.35% 3.39% Efficiency ratio 73.94% 64.20% 79.99% 88.95% Proforma efficiency ratio (b) 71.15% 72.56% 71.87% 73.39% Full-time equivalent employees 327 310 299 280 CAPITAL Period-end equity to assets 9.05% 9.43% 9.62% 10.39% Tier 1 leverage capital ratio 11.38% 12.02% 12.48% 12.01% Tier 1 risk-based capital ratio 12.12% 13.05% 13.75% 13.02% Total risk-based capital ratio 13.00% 13.94% 14.63% 13.89% Book value per share (a) $ 9.95 9.80 9.45 9.48 Cash dividend per share (a) $ 0.05 0.05 0.03 0.03 ASSET QUALITY Gross loan charge-offs $ 95 58 86 66 Net loan charge-offs $ 89 53 76 60 Net loan charge-offs to average loans (annualized) 0.04% 0.02% 0.04% 0.03% Allowance for loan losses $ 9,405 8,694 8,147 7,423 Allowance for loan losses to total loans 0.95% 0.97% 0.96% 0.95% Nonperforming loans $ 3,269 420 138 2,681 NPL to total loans 0.33% 0.05% 0.02% 0.34% Other real estate and repossessed assets $ 0 0 0 0 END OF PERIOD BALANCES Loans (before allowance) $ 994,592 896,080 852,381 783,614 Total earning assets (before allowance) $1,102,742 1,031,613 984,515 908,052 Total assets $1,206,939 1,125,144 1,062,241 986,311 Deposits $ 923,725 834,093 836,528 760,078 Stockholders' equity $ 109,258 106,058 102,240 102,456 AVERAGE BALANCES Loans (before allowance) $ 936,642 860,038 822,938 718,642 Total earning assets (before allowance) $1,049,235 980,105 947,402 846,652 Total assets $1,148,128 1,066,917 1,022,762 924,764 Deposits (Excludes non-int. DDA) $ 753,959 729,485 703,226 614,034 Stockholder's equity $ 107,124 104,227 102,820 102,347 Year to Date Quarterly ----------------------- 4th Qtr 12 Mos. 12 Mos. 2005 2006 2005 ----------- ---------- ---------- (Dollars in thousands except per share data) EARNINGS Net interest income $ 7,080 36,998 23,303 Provision for loan losses $ 750 3,400 2,200 Non-Interest income $ 2,337 9,270 8,067 Gain (loss) and net cash settlements on economic hedge $ 0 (1,918) 0 Loss on disposition of premises and equipment $ 0 (292) 0 Proforma non-interest income (b) $ 2,337 11,480 8,067 Non-Interest expense $ 6,817 34,974 23,266 Pre-tax income $ 1,850 7,894 5,904 Net income $ 1,220 5,269 3,939 Basic earnings per share (a) $ 0.14 0.49 0.48 Diluted earnings per share (a) $ 0.14 0.47 0.46 Proforma diluted earnings per share (c) $ 0.14 0.60 0.46 Weighted avg. basic shares outstanding (a) 8,486,740 10,811,980 8,214,118 Weighted average diluted shares (a) 8,917,917 11,121,703 8,556,012 PERFORMANCE RATIOS Return on average assets 0.60% 0.51% 0.58% Return on average common equity 6.22% 5.06% 5.77% Net interest margin (fully tax-equivalent) 3.96% 3.87% 3.81% Non-interest expense to average assets 3.37% 3.35% 3.43% Efficiency ratio 71.64% 75.80% 74.17% Proforma efficiency ratio (b) 71.64% 72.75% 74.17% Full-time equivalent employees 247 310 247 CAPITAL Period-end equity to assets 11.19% 9.05% 11.19% Tier 1 leverage capital ratio 13.73% 11.38% 13.73% Tier 1 risk-based capital ratio 14.31% 12.12% 14.31% Total risk-based capital ratio 15.17% 13.00% 15.17% Book value per share (a) $ 9.45 9.95 9.46 Cash dividend per share (a) $ 0.03 0.16 0.09 ASSET QUALITY Gross loan charge-offs $ 32 305 87 Net loan charge-offs $ 29 278 80 Net loan charge-offs to average loans (annualized) 0.02% 0.04% 0.02% Allowance for loan losses $ 6,283 9,405 6,283 Allowance for loan losses to total loans 0.94% 0.95% 0.94% Nonperforming loans $ 204 3,269 204 NPL to total loans 0.03% 0.33% 0.03% Other real estate and repossessed assets $ 0 0 0 END OF PERIOD BALANCES Loans (before allowance) $ 666,652 994,592 666,652 Total earning assets (before allowance) $ 802,398 1,102,742 802,398 Total assets $ 883,373 1,206,939 883,373 Deposits $ 646,262 923,725 646,262 Stockholders' equity $ 98,744 109,258 98,744 AVERAGE BALANCES Loans (before allowance) $ 641,354 835,527 523,492 Total earning assets (before allowance) $ 736,239 956,765 611,104 Total assets $ 809,546 1,043,318 679,020 Deposits (Excludes non-int. DDA) $ 523,402 695,824 446,071 Stockholder's equity $ 77,895 104,204 68,258 (a) All references to share and per share amounts have been adjusted to reflect the effect of an 11-for-10 stock split effected in the form of a 10% stock dividend distributed on May 15, 2006 and June 20, 2005. (b) Proforma non-interest income is a non-GAAP measure that excludes the gain (loss) and net cash settlements on economic hedge and loss on disposition of premises and equipment. (c) Proforma diluted earnings per share is a non-GAAP measure that excludes the gain (loss) and net cash settlements on economic hedge and loss on disposition of premises and equipment, net of income taxes using a 37.5% blended rate. GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED December 31, 2006 2005 ------------ ------------ Unaudited Unaudited (Amounts in (000), except share and per share data) INTEREST INCOME Loans, including fees $ 19,350 $ 11,675 Investment securities - taxable 1,045 697 - tax-exempt 57 62 Interest-earning bank deposits 30 24 Other interest and dividends 160 85 ------------ ------------ Total interest income 20,642 12,543 INTEREST EXPENSE Money market, NOW and savings 2,319 1,143 Time deposits 5,953 3,192 Short term debt 266 259 Long-term debt 2,133 868 ------------ ------------ Total interest expense 10,671 5,462 ------------ ------------ Net interest income 9,971 7,081 Provision for loan losses 800 750 ------------ ------------ Net interest income after provision for loan losses 9,171 6,331 NON-INTEREST INCOME Service charges on accounts 856 671 Insurance operations 781 598 Mortgage operations 690 242 Brokerage operations 227 226 Net gain on sales of securities 189 199 Loss and net cash settlements on economic hedge (502) 0 Loss on disposition of premises and equipment (292) 0 Other income 596 400 ------------ ------------ Total non-interest income 2,545 2,336 NON-INTEREST EXPENSE Salaries and benefits 4,813 3,488 Occupancy and equipment 1,796 1,242 Data processing fees 393 279 Other expense 2,555 1,808 ------------ ------------ Total non-interest expense 9,557 6,817 ------------ ------------ Income before income taxes 2,159 1,850 Income taxes 756 630 ------------ ------------ Net income $ 1,403 $ 1,220 ------------ ------------ Basic earnings per share (a) $ 0.13 $ 0.14 Diluted earnings per share (a) $ 0.13 $ 0.14 Weighted avg. basic shares outstanding (a) 10,889,605 8,486,740 Weighted average diluted shares (a) 11,157,077 8,917,917 (a) All references to share and per share amounts have been adjusted to reflect the effect of an 11-for-10 stock split effected in the form of a 10% stock dividend distributed on May 15, 2006 and June 20, 2005. GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF OPERATIONS TWELVE MONTHS ENDED December 31, 2006 2005* ------------ ------------ Unaudited (Amounts in (000), except share and per share data) INTEREST INCOME Loans, including fees $ 67,517 $ 36,358 Investment securities - taxable 4,632 2,731 - tax-exempt 238 204 Interest-earning bank deposits 140 138 Other interest and dividends 570 248 ------------ ------------ Total interest income 73,097 39,679 INTEREST EXPENSE Money market, NOW and savings 7,918 3,579 Time deposits 20,571 9,115 Short term debt 2,429 1,140 Long-term debt 5,181 2,542 ------------ ------------ Total interest expense 36,099 16,376 ------------ ------------ Net interest income 36,998 23,303 Provision for loan losses 3,400 2,200 ------------ ------------ Net interest income after provision for loan losses 33,598 21,103 NON-INTEREST INCOME Service charges on accounts 3,294 2,308 Insurance operations 2,883 2,388 Mortgage operations 1,584 836 Brokerage operations 744 656 Net gain on sales of securities 842 282 Loss and net cash settlements on economic hedge (1,918) -- Loss on disposition of premises and equipment (292) -- Other income 2,133 1,597 ------------ ------------ Total non-interest income 9,270 8,067 NON-INTEREST EXPENSE Salaries and benefits 17,287 11,583 Occupancy and equipment 6,865 4,592 Data processing fees 1,652 941 Other expense 9,170 6,150 ------------ ------------ Total non-interest expense 34,974 23,266 ------------ ------------ Income before income taxes 7,894 5,904 Income taxes 2,625 1,965 ------------ ------------ Net income $ 5,269 $ 3,939 ------------ ------------ Basic earnings per share (a) $ 0.49 $ 0.48 Diluted earnings per share (a) $ 0.47 $ 0.46 Weighted avg. basic shares outstanding (a) 10,811,980 8,214,118 Weighted average diluted shares (a) 11,121,703 8,556,012 (a) All references to share and per share amounts have been adjusted to reflect the effect of an 11-for-10 stock split effected in the form of a 10% stock dividend distributed on May 15, 2006 and June 20, 2005. * Derived from audited financial statements GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS December 31, 2006 2005* ---------- ---------- Unaudited (Dollar amounts in thousands) ASSETS Cash and due from banks $ 22,077 $ 18,475 Interest-earnings deposits in other banks 4,717 3,668 ---------- ---------- Total cash and cash equivalents 26,794 22,143 Securities available for sale 92,854 123,773 Federal Home Loan Bank stock 6,970 6,208 Federal Reserve Bank stock 3,609 2,097 Loans 994,592 666,652 Allowance for loan losses (9,405) (6,283) ---------- ---------- Total loans, net 985,187 660,369 Premises and equipment, net 38,456 29,551 Bank owned life insurance policies 25,051 17,187 Accrued interest receivable 8,742 5,883 Other assets 19,276 16,162 ---------- ---------- Total assets $1,206,939 $ 883,373 ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing $ 108,007 $ 89,162 Interest-bearing 815,718 557,100 ---------- ---------- Total deposits 923,725 646,262 Short term debt 14,500 62,000 Long-term debt 152,429 72,665 Accrued expenses and other liabilities 7,027 3,702 ---------- ---------- Total liabilities 1,097,681 784,629 STOCKHOLDERS' EQUITY Common stock 101,476 94,109 Retained earnings 8,901 5,113 Deferred Compensation - restricted stock -- (43) Accumulated other comprehensive loss (1,119) (435) ---------- ---------- Total stockholders' equity 109,258 98,744 Total liabilities and stockholders' equity $1,206,939 $ 883,373 ---------- ---------- * Derived from audited financial statements.