Highlights of the Year Include: * Total Assets Exceed $1.8 Billion, Up 54.7% * Loans Exceed $1.5 Billion, Up 53.1% * Deposits Exceed $1.4 Billion, Up 52.5% * Non-interest Income Increases to 26.6% of Total Revenue
VIRGINIA BEACH, Va., Jan. 25, 2008 (PRIME NEWSWIRE) -- Gateway Financial Holdings, Inc. (Nasdaq:GBTS), the holding company for Gateway Bank & Trust Co., reported net income for the 2007 fiscal year of $11.0 million compared with $5.3 million for the prior fiscal year, an increase of $5.8 million. The increase in earnings reflected the exceptional revenue growth from a 51.1% increase in average loans over the past 12 months, and increased revenues from Gateway's non-banking activities. Additionally, 2007 income included a gain of $584,000 in the fair value and net cash settlements on the economic hedge (which was terminated in September 2007), and fair value gains of $960,000 and $355,000, respectively, related to trust preferred securities and trading securities that the Company had elected fair value option treatment effective January 1, 2007.
Diluted earnings per share were $0.89 for 2007 compared with $0.47 for the prior year, an increase of 89.4%. Per share results reflect the issuance of additional shares used as part of the consideration for the acquisition of The Bank of Richmond that was completed on June 1 of 2007.
The aforementioned gain from the economic hedge has been reported as a component of non-interest income in accordance with GAAP. Additionally, the fourth quarter of 2006 included a non-recurring loss on disposition of premises and equipment. Due to the volatility and lack of earnings comparability caused by the economic hedge and the non-recurring nature of the loss on disposition of premises and equipment, management believes presentation of adjusted, non-GAAP proforma information throughout this press release (including diluted earnings per share, ROAA, ROAE, non-interest income, percentage of non-interest income to total revenues, and efficiency ratio) that excludes the effect of the economic hedge and loss on premises and equipment provides useful information to investors. Diluted earnings per share, excluding the gain on the fair value and net cash settlement on the economic hedge of $584,000 for 2007, and the loss of $1.9 million on the economic hedge and loss of $292,000 from the disposition of premises and equipment in 2006 (net of income taxes using a 37.5% blended rate), were $0.86 and $0.60 per share, respectively, an increase of 43.3%.
Commenting on these results, D. Ben Berry, Chairman, President and CEO of Gateway Financial Holdings, Inc. stated, "The outstanding earnings for the year were a direct result of executing our strategic growth plan including the expansion of our non-banking activities, which has grown our revenues 44.5% over the past 12 months. Our maturing financial centers are becoming increasingly profitable each quarter which is a major contributor to this growth. Three de novo financial centers were added this year, in addition to the six financial centers and loan production office added through The Bank of Richmond acquisition which was completed in June 2007. Gateway continues to focus on expanding at an impressive rate, while maintaining exceptional asset quality and improving profitability."
ROAA was 0.71% for the 2007 fiscal year, as compared with 0.51% for the prior year. ROAE was 8.45% for the 2007 fiscal year, as compared with 5.06% for the 2006 fiscal year. Both periods in 2007 and 2006 were affected by the fair value and cash settlements on the economic hedge as discussed above. Proforma ROAA, excluding the impact of the economic hedge on both periods and the loss on disposition of premises and equipment for 2006 (net of income taxes using a 37.5% blended rate), was 0.69%; as compared with 0.64% for 2006. Proforma ROAE, excluding the impact of the economic hedge and loss on disposition of premises and equipment on net income, was 8.17% for 2007, as compared with 6.38% for 2006.
For the fourth quarter of 2007, the Company reported net income of $2.3 million, up $867,000 from the $1.4 million reported for the same period in 2006. Diluted earnings per share were $0.17 for the current quarter, an increase of 30.8% over the $0.13 diluted earnings per share for the comparable quarter of 2006. Diluted earnings per share for the 2006 fourth quarter excluding the loss of $502,000 related to the economic hedge and the loss on disposition of premises and equipment of $292,000 (net of income taxes using a 37.5% blended rate) were $0.17. Earnings per share results for the quarter also reflect the stock issuance for the acquisition of The Bank of Richmond in 2007. The fourth quarter of 2007 was negatively affected by a $522,000 non-recurring restructuring charge related to personnel changes. Additionally, the Company added $1.6 million to its loan loss reserve in the fourth quarter, which was double the amount in the fourth quarter of the prior year, in response to its loan growth and the evaluation of various qualitative risk factors affecting the economies, real estate values, delinquencies, and other demographics in the market areas the Bank serves.
ROAA was 0.51% for the fourth quarter of 2007 compared with 0.48% for the fourth quarter of the prior year. ROAE was 6.18% the fourth quarter of 2007, as compared with 5.20% for the same period of 2006. Proforma ROAA, excluding the impact of the economic hedge and the disposition of premises of equipment in the fourth quarter of 2006 (net of income taxes using a 37.5% blended rate), was 0.66%. Proforma ROAE, excluding the impact of the economic hedge and disposition of premises and equipment on net income, was 7.03% for 2006.
Revenues, Net Interest Margin and Non-Interest Income
Total revenue, defined as net interest income and non-interest income, was $66.9 million for 2007, an increase of $20.6 million or 44.5% from the $46.3 million reported for 2006. Net interest income was $49.1 million for 2007, a $12.1 million or 32.7% increase over the $37.0 million reported for 2006. The increase in net interest income was driven by the $427 million or 51.1% increase in average loans to $1.3 billion for 2007 from $835.5 million for 2006. The increase in net interest income resulting from the increased volume was partially offset by a decrease in net interest margin of 38 basis points year-over-year to 3.49%. The margin compression resulted from the 100 basis points drop in interest rates that occurred during the last four months of the year, coupled with the impact that higher short-term interest rates has had on Gateway's cost of funds for the majority of the year. There has been continued pressure on deposit pricing and pricing on some deposit products has lagged the decrease in the prime rate, which have an immediate affect on variable loans (which approximated 63% of the loan portfolio at year-end).
Total revenue was $17.7 million for the fourth quarter of 2007, an increase of 41.1% above the $12.5 million reported for the fourth quarter of 2006. Net interest income for the fourth quarter of 2007 was $13.8 million, a $3.8 million or 38.2% increase over the $10.0 million reported for the fourth quarter of 2006. The increase in net interest income was primarily attributable to $517.3 million or 55.3% increase in average loans to $1.45 billion for the fourth quarter of 2007 from $936.6 million for the 2006 quarter. The net interest margin decreased 37 bps from 3.77% for the fourth quarter of 2006. On a linked quarter basis, the net interest margin decreased 9 basis points to 3.40% from 3.49% for the third quarter. These decreases in margin are for the same reasons as discussed above, however, the increase in cost of funds has mitigated somewhat in the fourth quarter as higher cost brokered CDs have matured and been replaced with lower cost FHLB advances and lower cost transaction accounts.
Gateway has continuously sought to introduce new products and services in order to better serve its customers as well as enhance the overall diversification of its revenue and decrease the reliance on spread income. As a result of this effort, non-interest income (on a proforma basis, excluding the impact of the economic hedge and a loss on disposition of premises and equipment) as a percentage of total revenues, was 25.9% for 2007 as compared with 23.7% for 2006.
For the fourth quarter of 2007, non-interest income comprised 22.0% of total revenues as compared with 25.1% for the fourth quarter of 2006 (on a proforma basis, excluding the impact of the economic hedge and the loss on disposition of premises and equipment). This decrease was in part due to reduced revenue from the mortgage and brokerage operations reflecting market conditions.
Non-interest income for the 2007 fiscal year was $17.8 million, an increase of $8.5 million or 91.6% higher than the prior year. Non-interest income for the fourth quarter of 2007 was $3.9 million, an increase of $1.3 million or 52.5% higher than the prior year fourth quarter. The increase was primarily related to Gateway's non-banking activities and changes in the fair valuations on the economic hedge between the periods. A comparison of non-interest income for the fourth quarter and the year-ended December 31, 2007 as compared with the same periods of 2006 are as follows (in thousands):
---------------------------------------------------------------------
NON-INTEREST INCOME
---------------------------------------------------------------------
(in 4th Quarter 4th Quarter % 12 mos. 12 mos. %
thousands) 12/31/07 12/31/06 change 12/31/07 12/31/06 change
---------------------------------------------------------------------
Services
charges on
accounts $ 1,016 $ 856 18.7% $ 3,938 $ 3,294 19.6%
Mortgage
operations 584 690 (15.4%) 3,029 1,584 91.2%
Insurance
operations 1,119 781 43.3% 5,245 2,883 81.9%
Brokerage
operations 122 227 (46.3%) 794 744 6.7%
Gain and
net cash
settlements
on economic
hedge 0 (502) N/A 584 (1,918) N/A
Gain from
trading and
securities
sales (1) 189 N/A 518 842 (38.5%)
All other
income 1,041 304 242% 3,657 1,841 98.6%
------- ------- ------- -------
Total non-
interest
income $ 3,881 $ 2,545 52.5% $17,765 $ 9,270 91.6%
======= ======= ======= =======
---------------------------------------------------------------------
The increase from Gateway's insurance operations resulted from internal growth from cross-selling customers and building our customer base in our markets as our franchise has expanded, as well as the acquisition of two Virginia agencies in the fourth quarter of 2006, and a title insurance company during the first quarter of 2007.
The decrease in revenue from the mortgage operation in the fourth quarter was attributed to the nationwide issues that affected the mortgage industry during the last half of 2007. Although Gateway Bank Mortgage, Inc. does essentially no sub-prime lending, the limited access to the secondary markets (especially for jumbo mortgages) had a negative effect on selling mortgages in the secondary market, thus slowing revenues in the fourth quarter. The increase in mortgage revenues for the full year of 2007 was the result of having a full year of operations in 2007, as compared with six months in 2006. Gateway Bank Mortgage commenced operations during the second quarter of 2006.
The increase in other income was primarily the result of a gain in the fair value of its trust preferred securities of $334,000 during the 2007 fourth quarter and $960,000 for the entire year. Gateway elected the fair value option for certain trust preferred securities effective January 1, 2007. As a result of the unusual credit conditions the financial industry has faced over the past several months, the credit spreads on these debt securities widened significantly resulting in a gain related to the fair value of the securities. Additionally, Gateway had $189,000 higher income from BOLI for the entire year of 2007 as a result of $7.0 million of additional BOLI purchased during the third quarter of 2006.
Non-Interest Expenses
Non-interest expense was $44.9 million for 2007, up $10.0 million or 28.5% from the $35.0 million reported for 2006. Non-interest expense for the fourth quarter of 2007 was $12.6 million, up $3.1 million, or 32.3% from the $9.6 million reported in the prior year fourth quarter. Of these increases, approximately $2.4 million for the entire year, and $1 million in the fourth quarter represented non-interest expenses related to The Bank of Richmond which was acquired in June 2007. Additionally, the fourth quarter of 2007 included a non-recurring restructuring charge of $522,000 related to personnel changes. Excluding the impact from the additional expenses from The Bank of Richmond and the above mentioned restructuring charge, non-interest expenses increased approximately $1.6 million or 16.4% in the fourth quarter.
A comparison of non-interest expense for the fourth quarter and year-ended December 31, 2007 as compared with the same periods of 2006 are as follows (in thousands):
---------------------------------------------------------------------
NON-INTEREST EXPENSE
---------------------------------------------------------------------
(in 4th Quarter 4th Quarter % 12 mos. 12 mos. %
thousands) 12/31/07 12/31/06 Change 12/31/07 12/31/06 Change
---------------------------------------------------------------------
Salaries
and
benefits $ 7,058 $4,813 46.6% $24,978 $17,287 44.5%
Occupancy
and
equipment 2,273 1,796 26.6% 8,254 6,865 20.2%
Data
processing
fees 573 393 45.8% 1,990 1,652 20.5%
Other
Expense 2,741 2,555 7.3% 9,719 9,170 6.0%
------- ------ ------- -------
Total Non-
Interest
Expense $12,645 $9,557 32.3% $44,941 $34,974 28.5%
======= ====== ======= =======
---------------------------------------------------------------------
The increase in salaries and benefits for the quarter and the entire year was primarily related to expansion activities and The Bank of Richmond acquisition. The Bank opened three new de novo financial centers during the second half of 2007, in addition to the six financial centers and a loan production office it acquired with The Bank of Richmond merger. FTE's have increased from 327 at the end of 2006 to 420 at the end of 2007, including approximately 40 related to The Bank of Richmond, which added $600,000 to salaries and benefits for the fourth quarter and $1.6 million for the year. Excluding the impact from The Bank of Richmond personnel additions and the restructuring charge, salaries and benefits increased 23.4% in the fourth quarter and 32.2% for the entire year. The increase in occupancy and equipment and data processing costs was primarily as a result of adding the three additional financial centers during the second half of the year and The Bank of Richmond financial centers in June. In addition to the added expenses related to The Bank of Richmond since the merger, the increase in other expenses was primarily related to $690,000 in higher FDIC insurance premiums for the year ($283,000 for the fourth quarter); $204,000 higher franchise taxes for the year from our expansion in Virginia; and $160,000 higher intangibles amortization from the acquisitions that have occurred since December of last year. These higher other expenses were offset partially by lower promotional, professional and consulting expenses which were in the aggregate $1.3 million lower in 2007 as compared with the prior year. This decrease was primarily from the discontinuation of the Haberfeld High Performance checking account program at the end of 2006, less advertising, and lower auditing and accounting expenses primarily from streamlining the Sarbanes-Oxley 404 internal control audit process.
Gateway's efficiency ratio for the entire year of 2007 was 67.22%, down from 75.80% for 2006. Excluding the impact of the gain and net cash settlement on the economic hedge on both years, the efficiency ratio was 67.82% for 2007 as compared with 72.75% for 2006. As a percentage of average assets, non-interest expense has dropped from 3.35% for the 2006 fiscal year to 2.90% for 2007.
Gateway's efficiency ratio was 71.61% for the fourth quarter of 2007, down from the 73.94% for the fourth quarter of 2006, or essentially equal to the 71.15% excluding the impact of the gain and net cash settlement on the economic hedge in the fourth quarter of 2006. The efficiency ratio in the fourth quarter of 2007 was negatively affected by the $522,000 non-recurring restructuring charge previously discussed.
Loan and Asset Growth
For the fourth quarter, loans grew $114.5 million or 5.5% and for the entire year loans increased $527.8 million (53.1%). Overall assets increased $130.9 million (8.1%) in the fourth quarter and $660.7 million (54.7%) for the entire year. At December 31, 2007, total assets were $1.87 billion. The growth in loans and assets reflects growth in the franchise (in particular Raleigh and Wilmington N.C, and the Hampton Roads area of Virginia), as well as the acquisition of The Bank of Richmond. Of these increases $167 million of the loan growth and $236 million of the assets growth was acquired through The Bank of Richmond, therefore, organic loan growth over the past year was approximately $360 million or 36.2%.
Mr. Berry emphasized, "Despite the adverse economic and competitive climate, Gateway has been able to maintain strong balance sheet growth. Loan growth picked back up in the fourth quarter as it typically does following the historically slower summer season. This growth is a direct result of our strategic expansion plan of establishing a presence in attractive markets such as the Raleigh-Cary MSA, Virginia Beach MSA and Wilmington MSA, where population growth is projected to be 19.4%, 5.1% and 17.7%, respectively, over the next five years according to ESRI. Overall our markets remain solid and steady, as their local economies reflect consistent growth."
A break-down of the loan composition and growth over the past 12 months is as follows (in thousands):
--------------------------------------------------------------------
LOAN COMPOSITION
--------------------------------------------------------------------
(in Balance Balance %
thousands) 12/31/07 12/31/06 Increase Change
--------------------------------------------------------------------
Construction,
Acquisition &
Development $ 604,336 $381,788 $222,548 58.3%
Commercial
Real Estate 321,805 229,752 92,053 40.1%
C & I 261,763 137,327 124,436 90.6%
Residential
Mortgage 193,549 128,920 64,629 50.1%
Home Equity 113,191 85,882 27,309 31.8%
Consumer 22,133 15,347 6,786 44.2%
Mortgage loans
held for sale 5,624 15,576 (9,952) (63.9%)
---------- -------- --------
Total loans $1,522,401 $994,592 $527,809 53.1%
========== ======== ========
--------------------------------------------------------------------
As indicated in the above table, commercial loans represented the majority of the growth in 2007, spread between construction, acquisition and development, CRE, and C & I. This growth was concentrated mainly in the Raleigh, Wilmington, Richmond, and greater Hampton Roads areas.
Mr. Berry continued, "With the steady growth in our markets, Gateway does have a higher concentration of construction and real estate loans. Accordingly, we continually monitor risk within this portfolio by analyzing its concentration characteristics, such as exposures within the different loan types, the amount of speculative loans, and the amount of owner-occupied loans compared to non-owner occupied loans. Our Chief Credit Officer has over 20 years of experience in underwriting loans of this type in the markets we serve, giving us a high comfort level with our real estate loan concentration. Additionally, we have insurance to cover LTV exceptions on lot loans which reduces our risk."
Asset Quality
Non-performing loans were $3.4 million at December 31, 2007 as compared with $2.8 million at September 30, 2007. Non-performing loans equaled 0.22% of loans at December 31, 2007, up slightly from the 0.20% of loans at September 30, 2007. Other real estate and repossessed assets equaled $482,000 at December 31, 2007, up $132,000 from the prior quarter. For the fourth quarter, net loan charge-offs were $307,000 or 0.08% of average loans, and for the entire year were $1.09 million or 0.09% of average loans; as compared with net charge-offs in the fourth quarter and the entire year of 2006 of 0.04%. Total past dues were 0.29% of loans outstanding at December 31, 2007. At December 31, 2007, the allowance for loan losses was $15.3 million, or 1.01% of total loans (excluding loans held for sale), up from $9.4 million or 0.95% of total loans at the beginning of the year.
Mr. Berry added, "Asset quality remains a top priority at Gateway. I have said many times, we will compete on interest rates on loans, but we will not sacrifice credit quality; and our asset quality numbers support this strategy. Our non-performing loans have essentially held steady at 0.22% of loans, which is less than half of our peer group average; and our net charge-offs were less than 10 basis points for the year. In this current environment of astronomical charge-offs within our industry, our asset quality remains outstanding, both for a bank with over $1 billion in assets and relative to our peer group. This continues to be a credit to the outstanding bankers and lenders we hire. Their experience shows them to be the best bankers in each market we serve. A substantial amount of our loan growth comes from these bankers bringing to Gateway existing portfolios and seasoned customers from the prior financial institutions for which they worked. Our strategy has been and will continue to be -- we buy bankers, and not banks. I would like to also reiterate that we have substantially no sub-prime or Alt-A mortgage loans."
Deposit Growth and Borrowings
Deposits increased $485.2 million, or 52.5%, over the past twelve months to $1.41 billion, and for the fourth quarter increased $55.6 million. Core deposits (including retail CDs) were up $288.6 million (31.2%) to $911.8 million, and jumbo CDs were up $65.8 million (32.0%) over the past 12 months to $271.3 million at December 31, 2007. Of these increases, $123 million of core deposits and $54.6 million of jumbo CDs were acquired upon the acquisition of The Bank of Richmond. Brokered deposits, primarily used to fund loan growth in the loan production offices and the Raleigh private banking center, grew $130.7 million over the past 12 months to $225.9 million at December 31, 2007. Loans from the loan production offices and Wilmington (which opened as a full financial center in the fourth quarter) aggregated $233.0 million at December 31, 2007, an increase of $155.0 million over the past 12 months; and loans from the Raleigh private banking center were $196.6 million at December 31, 2007, an increase of $95.8 million since December 31st of the prior year. Our reliance on brokered deposits to fund loan growth in these offices should lessen with the opening of the second financial center in Raleigh at the end of June, which has gathered $9.1 million of deposits during the last half of the year; the opening of the first financial center in Wilmington in the fourth quarter, which has gathered $4.6 million in deposits since it opened, and the opening of our third financial center in Raleigh at the end of the year. Core deposits comprised 64.7% of total deposits at December 31, 2007, jumbo CDs were 19.3%, and brokered CDs were 16.0%. Borrowings, including junior subordinated debentures, totaled $282.1 million at December 31, 2007, up $115.2 million from twelve months ago. The Company issued an additional $25 million of junior subordinated debentures (trust preferred securities) during the second quarter which was used to fund the cash portion of The Bank of Richmond acquisition. The remaining increase in borrowings was primarily in low cost convertible FHLB advances and overnight Fed funds purchases used to supplement deposits to fund loan growth, acquire investment securities, and fund the financial center expansion and other premises and equipment purchases.
Stockholders' Equity
Stockholders' equity at December 31, 2007 totaled $164.4 million, an increase of $54.8 million, or 50%, from December 31, 2006. The increase was primarily related to the issuance of $29.8 million of common stock (including the value of assumed stock options) to former Bank of Richmond shareholders as the common stock portion of the merger consideration, a private placement of $23.2 million of non-cumulative, perpetual preferred stock in December, and net income for the year. The Company has repurchased approximately 400,000 shares of common stock during the year at a net cost of $5.6 million. At December 31, 2007, Gateway had 12,558,849 shares of common stock outstanding; stockholders' equity equaled 8.80% of total assets, and the total risk-based capital ratio was 11.32%. All regulatory capital ratios remain in excess of the "well-capitalized" regulatory threshold.
Mr. Berry concluded, "Our ability to raise $23.2 million in capital in a short time period during the fourth quarter in this challenging environment is reflective of our overall financial performance this past year and the record earnings we generated. This performance is a tribute to our strong management team and their hard work. While 2008 appears to be a challenging environment for financial institutions, we feel our Company is well-positioned to strategically expand our franchise and enhance the value to our shareholders."
Web Cast and Conference Call Information
Gateway's executive management team will host a conference call and simultaneous web cast on Friday, January 25 at 10:00 AM Eastern Time to discuss the full year and quarterly results. The web cast can be accessed live on the Company's website, http://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 thirty-three full-service financial centers -- nineteen in Virginia: Virginia Beach (7), Richmond (6), Chesapeake (3), Suffolk, Norfolk and Emporia; and fourteen in North Carolina: Elizabeth City (3), Edenton, Kitty Hawk (2), Moyock, Nags Head, Plymouth, Roper, Wilmington and Raleigh (3), and 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, title insurance through its Gateway Title Company, Inc. subsidiary, and mortgage banking services through its Gateway Bank Mortgage, Inc. subsidiary. The common stock of the Corporation is traded on the Nasdaq Global Select Market under the symbol GBTS. For further information, visit the Corporation's web site at http://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 4th Qtr
2007 2007 2007 2007 2006
---------- ---------- ---------- ---------- ----------
(Dollars in thousands
except per share data)
EARNINGS
Net
interest
income $ 13,778 13,559 11,709 10,039 9,971
Provision
for loan
losses $ 1,600 750 1,350 1,200 800
Non Interest
income $ 3,881 6,118 3,117 4,649 2,545
Gain (loss)
and net
cash
settlements
on economic
hedge -- 1,343 (948) 189 (502)
Loss on
disposition
of premises
and
equipment -- -- -- -- (292)
Proforma
non-
interest
income (1) 3,881 4,775 4,065 4,460 3,339
Non
Interest
expense $ 12,645 12,353 10,417 9,526 9,557
Pre-tax
income $ 3,414 6,574 3,059 3,962 2,159
Net income $ 2,270 4,216 2,019 2,514 1,403
Basic
earnings
per share $ 0.17 0.33 0.17 0.23 0.13
Diluted
earnings
per share $ 0.17 0.32 0.17 0.22 0.13
Proforma
diluted
earnings
per
share (2) $ 0.17 0.26 0.22 0.21 0.17
Weighted
avg. basic
shares out-
standing 12,589,210 12,630,561 11,608,656 10,990,371 10,889,605
Weighted
average
diluted
shares 13,000,662 13,096,695 11,950,358 11,263,502 11,157,077
PERFORMANCE RATIOS
Return on
average
assets 0.51% 0.98% 0.55% 0.83% 0.48%
Proforma
return on
average
assets (2) 0.51% 0.78% 0.72% 0.79% 0.66%
Return on
average
common
equity 6.18% 11.96% 6.97% 9.21% 5.20%
Proforma
return on
average
common
equity (2) 6.18% 9.58% 9.02% 8.78% 7.03%
Net interest
margin
(fully
tax-
equivalent) 3.40% 3.49% 3.50% 3.62% 3.77%
Non-interest
income to
total
revenue 21.98% 31.09% 21.02% 31.65% 20.33%
Proforma
non-
interest
income to
total
revenue (1) 21.98% 26.05% 25.77% 30.76% 25.09%
Non-interest
expense to
average
assets 2.82% 2.86% 2.86% 3.14% 3.30%
Efficiency
ratio 71.61% 62.09% 70.26% 66.26% 73.94%
Proforma
efficiency
ratio (1) 71.61% 66.63% 66.04% 67.15% 71.15%
Full-time
equivalent
employees 420 413 422 345 327
CAPITAL
Period-end
equity to
assets 8.80% 8.12% 7.98% 8.41% 9.05%
Tier 1
leverage
capital
ratio 9.72% 8.57% 9.83% 11.40% 11.38%
Tier 1
risk-based
capital
ratio 10.35% 9.65% 9.39% 11.11% 12.11%
Total
risk-based
capital
ratio 11.32% 11.12% 10.82% 11.98% 12.99%
Book value
per common
share (3) $ 11.24 11.15 10.89 10.10 9.99
Cash
dividend
per share $ 0.08 0.08 0.08 0.05 0.05
ASSET QUALITY
Gross loan
charge-
offs $ 350 50 329 426 95
Net loan
charge-
offs $ 307 44 321 416 89
Net loan
charge-offs
to average
loans
(annualized) 0.08% 0.01% 0.11% 0.16% 0.04%
Allowance
for loan
losses $ 15,339 14,046 13,340 10,189 9,405
Allowance
for loan
losses to
total
loans 1.01% 1.00% 0.99% 0.95% 0.95%
Nonperform-
ing loans $ 3,407 2,817 874 1,554 3,269
NPL to
total
loans 0.22% 0.20% 0.06% 0.14% 0.33%
Other real
estate and
repossessed
assets $ 482 350 350 0 0
END OF PERIOD BALANCES
Loans
(before
allowance) $1,522,401 1,407,861 1,354,160 1,083,638 994,592
Total
earning
assets
(before
allowance) $1,688,701 1,572,937 1,585,126 1,216,893 1,103,363
Total
assets $1,868,185 1,737,245 1,749,258 1,322,836 1,207,477
Deposits $1,408,918 1,353,297 1,411,231 975,222 923,725
Stockholders'
equity $ 164,407 141,101 139,799 111,689 109,640
AVERAGE BALANCES
Loans
(before
allowance) $1,453,957 1,376,807 1,190,439 1,022,556 936,642
Total
earning
assets
(before
allowance) $1,607,473 1,543,071 1,342,961 1,125,833 1,049,235
Total
assets $1,781,477 1,711,453 1,461,595 1,231,223 1,148,128
Interest-
Bearing
Deposits $1,224,835 1,268,285 1,000,075 823,785 753,959
Stock-
holder's
equity $ 145,656 139,815 116,165 110,655 107,124
Year to Date
12 mos 12 mos
2007 2006
---------- ----------
(Dollars in thousands except per share data)
EARNINGS
Net interest income $ 49,085 36,998
Provision for loan losses $ 4,900 3,400
Non Interest income $ 17,765 9,270
Gain (loss) and net cash
settlements on economic hedge 584 (1,918)
Loss on disposition of premises
and equipment -- (292)
Proforma non-interest income (1) 17,181 11,480
Non Interest expense $ 44,941 34,974
Pre-tax income $ 17,009 7,894
Net income $ 11,019 5,269
Basic earnings per share $ 0.91 0.49
Diluted earnings per share $ 0.89 0.47
Proforma diluted earnings
per share (2) $ 0.86 0.60
Weighted avg. basic shares
outstanding 11,960,932 10,811,980
Weighted average diluted shares 12,346,870 11,121,703
PERFORMANCE RATIOS
Return on average assets 0.71% 0.51%
Proforma return on average
assets (2) 0.69% 0.64%
Return on average common equity 8.45% 5.06%
Proforma return on average
common equity (2) 8.17% 6.38%
Net interest margin
(fully tax-equivalent) 3.49% 3.87%
Non-interest income to
total revenue 26.57% 20.03%
Proforma non-interest income
to total revenue (1) 25.93% 23.68%
Non-interest expense to
average assets 2.90% 3.35%
Efficiency ratio 67.23% 75.80%
Proforma efficiency ratio (1) 67.82% 72.75%
Full-time equivalent employees 420 327
CAPITAL
Period-end equity to assets 8.80% 9.05%
Tier 1 leverage capital ratio 9.72% 11.38%
Tier 1 risk-based capital ratio 10.35% 12.11%
Total risk-based capital ratio 11.32% 12.99%
Book value per common share (3) $ 11.24 9.99
Cash dividend per share $ 0.29 0.16
ASSET QUALITY
Gross loan charge-offs $ 1,155 305
Net loan charge-offs $ 1,088 278
Net loan charge-offs to average
loans (annualized) 0.09% 0.04%
Allowance for loan losses $ 15,339 9,405
Allowance for loan losses
to total loans 1.01% 0.95%
Nonperforming loans $ 3,407 3,269
NPL to total loans 0.22% 0.33%
Other real estate and
repossessed assets $ 482 0
END OF PERIOD BALANCES
Loans (before allowance) $1,522,401 994,592
Total earning assets
(before allowance) $1,688,701 1,103,363
Total assets $1,868,185 1,207,477
Deposits $1,408,918 923,725
Stockholders' equity $ 164,407 109,640
AVERAGE BALANCES
Loans (before allowance) $1,262,516 835,527
Total earning assets
(before allowance) $1,405,758 956,765
Total assets $1,549,747 1,043,318
Interest-Bearing Deposits $1,082,206 695,824
Stockholder's equity $ 130,391 104,207
(1) Proforma non-interest income and proforma efficiency ratio are
non-GAAP measures that excludes the gain (loss) and net cash
settlements on economic hedge and loss on disposition of premises
and equipment, that management believes provides more comparable,
useful information to investors.
(2) Proforma diluted earnings per share, ROAA, and ROAE are non-GAAP
measures 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, that
management believes provides more comparable, useful information
to investors.
(3) Book value per common share calculation subtracts the liquidation
value of $23.3 million of the non-cumulative, perpetual
preferred stock from net assets.
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
Dec. 31, 2007 Dec. 31, 2006
------------- -------------
Unaudited Unaudited
INTEREST INCOME (Amounts in (000), except share and per share data)
Loans, including fees $ 29,060 $ 19,350
Trading account securities 415 --
Investment securities - taxable 1,302 1,045
- tax-exempt 118 57
Interest-earning bank deposits 24 30
Other interest and dividends 254 160
-------- --------
Total interest income 31,173 20,642
INTEREST EXPENSE
Money market, NOW and savings 3,274 2,319
Time deposits 10,801 5,953
Short term debt 402 266
Long-term debt 2,918 2,133
-------- --------
Total interest expense 17,395 10,671
-------- --------
Net interest income 13,778 9,971
Provision for loan losses 1,600 800
-------- --------
Net interest income after provision
for loan losses 12,178 9,171
NON INTEREST INCOME
Service charges on accounts 1,016 856
Mortgage operations 584 690
Insurance operations 1,119 781
Brokerage operations 122 227
Gain on sales of securities -- 189
Loss and net cash settlements on
economic hedge -- (502)
Loss on disposition of premises
and equipment -- (292)
Loss from trading securities (1) --
Other income 1,041 596
-------- --------
Total non interest income 3,881 2,545
NON INTEREST EXPENSE
Salaries and benefits 7,058 4,813
Occupancy and equipment 2,273 1,796
Data processing fees 573 393
Other expense 2,741 2,555
-------- --------
Total non interest expense 12,645 9,557
-------- --------
Income before income taxes 3,414 2,159
Income taxes 1,144 756
-------- --------
Net income $ 2,270 $ 1,403
======== ========
Basic earnings per share $ 0.17 $ 0.13
Diluted earnings per share $ 0.17 $ 0.13
Weighted avg. basic shares outstanding 12,589,210 10,889,605
Weighted average diluted shares 13,000,662 11,157,077
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Twelve Months Ended
Dec. 31, 2007 Dec. 31, 2006*
------------- -------------
Unaudited
INTEREST INCOME (Amounts in (000), except share and per share data)
Loans, including fees $102,041 $ 67,517
Trading account securities 1,902 --
Investment securities - taxable 4,007 4,632
- tax-exempt 423 238
Interest-earning bank deposits 341 140
Other interest and dividends 845 570
-------- --------
Total interest income 109,559 73,097
INTEREST EXPENSE
Money market, NOW and savings 11,491 7,918
Time deposits 38,103 20,571
Short term debt 1,367 2,429
Long-term debt 9,513 5,181
-------- --------
Total interest expense 60,474 36,099
-------- --------
Net interest income 49,085 36,998
Provision for loan losses 4,900 3,400
-------- --------
Net interest income after provision
for loan losses 44,185 33,598
NON INTEREST INCOME
Service charges on accounts 3,938 3,294
Mortgage operations 3,029 1,584
Insurance operations 5,245 2,883
Brokerage operations 794 744
Gain on sales of securities 163 842
Gain (loss) and net cash settlements on
economic hedge 584 (1,918)
Loss on disposition of premises and equipment -- (292)
Gain from trading securities 355 --
Other income 3,657 2,133
-------- --------
Total non interest income 17,765 9,270
-------- --------
NON INTEREST EXPENSE
Salaries and benefits 24,978 7,287
Occupancy and equipment 8,254 6,865
Data processing fees 1,990 1,652
Other expense 9,719 9,170
-------- --------
Total non interest expense 44,941 34,974
-------- --------
Income before income taxes 17,009 7,894
Income tax expense 5,990 2,625
-------- --------
Net income $ 11,019 $ 5,269
======== ========
Basic earnings per share $ 0.91 $ 0.49
Diluted earnings per share $ 0.89 $ 0.47
Weighted avg. basic shares
outstanding 11,960,932 10,811,980
Weighted average diluted shares 12,346,870 11,121,703
* Derived from audited financial statements.
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2007 2006*
----- -----
Unaudited
(Dollar amounts in thousands)
ASSETS
Cash and due from banks $ 19,569 $ 22,077
Interest-earnings deposits in
other banks 1,092 4,717
---------- ----------
Total cash and cash equivalents 20,661 26,794
Trading securities 23,011 --
Securities available for sale 126,537 93,475
Federal Home Loan Bank stock 10,312 6,970
Federal Reserve Bank stock 5,348 3,609
Loans 1,522,401 994,592
Allowance for loan losses (15,339) (9,405)
---------- ----------
Total loans, net 1,507,062 985,187
Premises and equipment, net 73,614 38,456
Bank owned life insurance policies 26,105 25,051
Goodwill and intangible assets 51,075 12,615
Accrued interest receivable 12,330 8,742
Other assets 12,130 6,578
---------- ----------
Total assets $ 1,868,185 $ 1,207,477
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 123,885 $ 108,007
Interest-bearing 1,285,033 815,718
---------- ----------
Total deposits 1,408,918 923,725
Short term debt 33,000 14,500
Long-term debt 249,102 152,429
Accrued expenses and other
liabilities 12,758 7,183
---------- ----------
Total liabilities 1,703,778 1,097,837
STOCKHOLDERS' EQUITY
Non-Cumulative, Perpetual Preferred
Stock 23,182 0
Common stock 127,258 101,669
Retained earnings 14,991 8,708
Accumulated other comprehensive loss (1,024) (737)
---------- ----------
Total stockholders' equity 164,407 109,640
Total liabilities and stockholders'
equity $ 1,868,185 $ 1,207,477
=========== ===========
* Derived from audited financial statements.