Highlights for the Quarter Include: * Total Assets Exceed $1.99 Billion, Up 6.7% from December 31, 2007 * Loans Exceed $1.6 Billion, Up 7.4% from year end * Deposits Exceed $1.5 Billion, Up 10.4% on a linked quarter basis * Asset Quality Remains Strong - Net Charge-offs at 0.03%, NPL's at 0.40% * Non-interest Income Increases to 35.2% of Total Revenue
VIRGINIA BEACH, Va., April 24, 2008 (PRIME NEWSWIRE) -- Gateway Financial Holdings, Inc. (Nasdaq:GBTS), the holding company for Gateway Bank & Trust Co., reported net income for the first quarter of 2008 of $3.1 million compared with $2.5 million for the prior year first quarter, an increase of $600,000. The increase includes gains from securities sales during the first quarter of $800,000 ($492,000 net of income taxes using a 38.5% blended tax rate) and a fair value gain of $1.6 million ($984,000 net of income taxes using a 38.5% blended tax rate) related to certain trust preferred securities that the Company had elected fair value option treatment effective January 1, 2007.
Diluted earnings per share were $0.20 for the first quarter of 2008 compared with $0.22 for the first quarter of the prior year, reflecting in part the issuance of additional shares used as part of the consideration for the acquisition of The Bank of Richmond, completed on June 1 of 2007.
Commenting on these results, D. Ben Berry, Chairman, President and CEO of Gateway Financial Holdings, stated, "Although our first quarter performance was enhanced through securities gains, they were used as a natural hedge to offset margin compression and build our loan loss reserve, as the 200 basis point reductions in interest rates negatively affected our net interest income during the quarter. At the same time, despite the continued credit issues that have plagued our industry as a whole, our asset quality has remained excellent and continues to be a hallmark of Gateway's performance.
"In the face of this difficult environment, we continued to execute our strategic growth plan, with a 55.2% increase in average loans over the past twelve months; coupled with the expansion of our non-banking activities, which have helped grow our revenues 32.8% during the same period while growing our balance sheet in excess of 50% in slowing economic times. We operate in solid and stable markets of superior growth potential. Although we have consciously slowed the growth of de novo branches and overall balance sheet growth in the most recent quarter, our strategic investments in these markets during the recent past will allow us to continue to expand our franchise, while maintaining exceptional asset quality. These investments include our maturing financial centers, which are becoming increasingly profitable each quarter; the five de novo financial centers that were added over the past 12 months; and the six financial centers and loan production office added through The Bank of Richmond acquisition which was completed in June 2007."
ROAA was 0.65% for the first quarter of 2008, as compared with 0.83% for the first quarter of the prior year. ROAE was 7.38% for the first quarter of 2008, as compared with 9.21% for the first quarter of the prior year.
Revenues, Net Interest Margin, and Non-interest Income
Total revenue, defined as net interest income and non-interest income was $19.5 million for the first quarter of 2008, an increase of 32.8% above the $14.7 million reported for the first quarter of 2007. Net interest income for the first quarter of 2008 was $12.6 million, a $2.6 million or 25.8% increase over the $10.0 million reported for the first quarter of 2007. The increase in net interest income was primarily attributable to $559.0 million or 54.7% increase in average loans to $1.58 billion for the first quarter of 2008 from $1.02 billion for the 2007 quarter. While net interest earnings increased due to the aforementioned growth in loans, the net interest margin decreased 72 basis points from 3.62% for the first quarter of 2007 to 2.90% for the first quarter of 2008.
On a linked quarter basis, the net interest margin has decreased 50 basis points. The margin compression resulted from the 300 basis points drop in interest rates that have occurred since September of last year, including 125 basis points reduction that occurred during an eight-day period in January. The reduction in interest rates has had an immediate effect on revenues related to variable loans (which approximated 63% of the loan portfolio at quarter-end); however, there has been continued pressure on deposit pricing as a result of competition and liquidity issues that have affected certain areas of the financial sector, and pricing on deposit products has remained higher than normal related to the prime rate, further compressing the margin.
Management anticipates further margin compression to ease and stabilize during the second quarter and expects the margin to improve during the second half of 2008 as time deposits mature and re-price at lower interest rates and the Bank is able to take advantage of a steeper yield curve, particularly in the second half of 2008.
Non-interest income for the first quarter of 2008 was $6.9 million, an increase of $2.2 million or 47.9% higher than the first quarter of the prior year. The increase was primarily related to Gateway's insurance operations and gains from securities sales and fair value related to certain trust preferred securities that the Company had elected fair value option treatment effective January 1, 2007. A comparison of non-interest income for the first quarter of 2008 as compared with the same period in 2007 was as follows (in thousands):
2008 2007 % Change
------- ------- ---------
Service charges on accounts $ 906 $ 877 3.3%
Mortgage operations 763 932 (18.1%)
Insurance operations 1,646 1,321 24.6%
Brokerage operations 91 266 (65.8%)
Gain on sales of securities
and trading gains 851 443 92.1%
Fair value gain on trust
preferred securities 1,586 42 3676.2%
Gain and cash settlements
on economic hedge -- 189 --
Other 1,035 579 78.8%
------- ------- ---------
Total $ 6,878 $ 4,649 47.9%
======= ======= =========
The increase from Gateway's insurance operations resulted from higher performance bonuses in the first quarter of 2008 as compared to 2007; internal growth from cross-selling customers and building our customer base in our markets as our franchise has expanded, as well as growing the business in the two Virginia agencies acquired in the fourth quarter of 2006; and a full quarter of operations in 2008 for the title insurance company acquired during February 2007.
The decrease in revenue from the mortgage operation in the first quarter of 2008 as compared with the first quarter of the prior year was attributed to the nationwide issues that affected the mortgage industry during the last half of 2007 and has continued into 2008. Although Gateway Bank Mortgage 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 first quarter of 2008. Additionally, underwriting and approval time has increased the timeline for getting mortgages closed, which has also delayed revenues.
The decrease in brokerage operations was the result of the departure of a broker in our North Carolina operations that left the Bank at the end of the third quarter of last year.
Gateway recognized a gain in the fair value of certain of its trust preferred securities of $1.6 million during the first quarter of 2008. Gateway elected the fair value option for certain trust preferred securities effective January 1, 2007, and under the accounting standards are required to mark these securities to market through the income statement as a component of non-interest income. As a result of the unusual credit conditions that the financial industry has faced over the past several months, the credit spreads on these debt securities have widened significantly resulting in a gain related to the fair value of the securities. At the time the fair value option was elected at the beginning of 2007, credit spreads on these types of securities were approximately 135 to 155 basis points over 3-month LIBOR. Currently, the credit spreads are 425 to 450 basis points over 3-month LIBOR, and the markets are very illiquid.
The increase in other income for the first quarter of 2008 as compared with the first quarter of 2007 was the result of gains of $154,000 related to the sale of government sponsored loans (no such sales in the first quarter of 2007), $98,000 higher fee income, and $137,000 higher income from BOLI that resulted from $14 million of additional BOLI purchased during January of 2008.
For the first quarter of 2008, non-interest income comprised 35.2% of total revenues as compared with 31.7% for the first quarter of 2007. The increase was primarily associated with the higher securities and fair value gains recognized during the first quarter of 2008.
Non-interest Expenses
Non-interest expense was $13.4 million for the first quarter of 2008, up $3.9 million or 40.9% from the $9.5 million reported for the first quarter of last year. Of this increase, approximately $1.0 million (or approximately 26% of the increase) represented non-interest expenses related to The Bank of Richmond which was acquired in June 2007.
A comparison of non-interest expense for the first quarter of 2008 as compared with the first and fourth quarters of 2007 was as follows (in thousands):
March 31, Dec. 31, March 31, % Change % Change
2008 2007 2007 12/31/07 3/31/07
--------- --------- --------- --------- ---------
Salaries and
benefits $ 7,366 $ 7,058 $ 5,259 4.3% 40.1%
Occupancy and
equipment 2,418 2,274 1,810 6.3% 33.6%
Data processing
fees 660 573 453 15.2% 45.7%
Other 2,982 2,740 2,004 8.8% 48.8%
--------- --------- --------- --------- ---------
Total $13,426 $12,645 $ 9,526 6.2% 40.9%
========= ========= ========= ===================
The rate of growth in non-interest expenses has slowed in the first quarter of 2008 to 6.2% on a linked quarter basis. The increase in salaries and benefits on a linked quarter basis was primarily related to two of the new 2007 de novo financial centers and loan production office that were added in the fourth quarter, and two additional financial centers that were opened during the first quarter of 2008. FTE's have increased from 420 at the end of the year to 460 at the end of the first quarter of 2008. The increase in occupancy and equipment and data processing costs was primarily as a result of adding four of the five new de novo financial centers since the end of the third quarter of last year.
The increase in salaries and benefits as compared with the first quarter of 2007 was primarily related to expansion activities and The Bank of Richmond acquisition. The Bank opened three new de novo financial centers and a loan production office during the second half of 2007 and two additional financial centers during the first quarter of 2008, 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 345 at the end of the first quarter of 2007 to 460 at the end of the first quarter of 2008, including approximately 40 related to The Bank of Richmond, which added approximately $790,000 to salaries and benefits for the first quarter (37% of the increase). The increase in occupancy and equipment and data processing costs was primarily as a result of adding the five de novo financial centers since the first quarter of last year and The Bank of Richmond financial centers in June of 2007. In addition to the added expenses related to The Bank of Richmond since the merger, the increase in other expenses for the first quarter of 2008 as compared with the same period in 2007 was primarily related to $213,000 in higher FDIC insurance premiums; $118,000 increase in franchise taxes from our expansion in Virginia and greater capital base; $163,000 increase in business development and travel expenses; $62,000 greater advertising and marketing expenses; and $37,000 increase in intangibles amortization from the acquisitions that have occurred since the first quarter of last year.
Gateway's efficiency ratio for the first quarter of 2008 was 68.81%, up slightly from 66.26% for the first quarter of 2007. As a percentage of average assets, non-interest expense has dropped from 3.14% for the first quarter of 2007 to 2.79% for the first quarter of 2008 as Gateway continues to gain economies of scale from its maturing financial centers.
Loan and Asset Growth
For the first quarter, loans grew $112.9 million or 7.4% and have increased $551.7 million (50.9%) since March 31, 2007. Overall assets increased $124.6 million (6.7%) in the first quarter and have increased $670.2 million (50.7%) since March 31, 2007. At March 31, 2008, total assets were $1.99 billion. The growth in loans and assets reflects growth in the franchise (in particular Raleigh and Wilmington, North Carolina, and the Hampton Roads area of Virginia), as well as the acquisition of The Bank of Richmond. Of the increases since March 31, 2007, $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 12 months was approximately $385 million or 35.5%.
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 of last year and has remained solid during the first quarter of this year. Our loan pipeline continues to reflect steady demand in most of our markets. This growth continues to be 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 on a linked quarter basis and over the past 12 months is as follows (in thousands):
March 31, December 31, March 31,
2008 2007 2007
----------------- ----------------- -----------------
Percent Percent Percent
of of of
Amount Total Amount Total Amount Total
---------- ----- ---------- ----- ---------- -----
Construction,
acquisition,
&
Development $ 665,663 40.7% $ 604,335 39.7% $ 421,764 38.9%
Commercial
Real
Estate 337,942 20.6% 321,806 21.1% 249,451 23.1%
Commercial
and
Industrial 272,480 16.7% 261,763 17.2% 163,823 15.1%
Residential
Mortgage 210,837 12.9% 193,549 12.7% 129,732 12.0%
Home
Equity 117,689 7.2% 113,191 7.4% 92,237 8.5%
Consumer 20,598 1.3% 22,133 1.5% 15,093 1.4%
Mortgage
loans
held for
sale 10,109 0.6% 5,624 0.4% 11,538 1.0%
---------- ---- ---------- ---- ---------- ----
Total
loans $1,635,318 100% $1,522,401 100% $1,083,638 100%
========== ==== ========== ==== ========== ====
As indicated in the above table, commercial loans represented the majority of the growth over the past 12 months, 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. With that being said, as part of our overall risk management of the bank, we have decided to reduce our exposure in construction and development loans and slowing growth in this area for the remainder of the year."
Asset Quality
Non-performing loans were $6.6 million at March 31, 2008 as compared with $3.4 million at December 31, 2007. Non-performing loans equaled 0.40% of loans at March 31, 2008, up from the 0.22% of loans at December 31, 2007. Other real estate and repossessed assets equaled $623,000 at March 31, 2008, up from $482,000 in the prior quarter. For the first quarter, net loan charge-offs were $110,000 or 0.03% annualized of average loans, as compared with net charge-offs in the first quarter of 2007 of $416,000 or 0.16%. Total past dues were 0.56% at March 31, 2008, up from 0.29% of loans outstanding at December 31, 2007. At March 31, 2008, the allowance for loan losses was $16.8 million, or 1.04% of total loans (excluding loans held for sale), up from $15.3 million or 1.01% of total loans at the beginning of the year. Of the non-performing loans, approximately 70% are from the Outer Banks region, and approximately $4.8 million or 73% are represented by six borrowers.
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. Although our non-performing loans increased somewhat to 0.40% of loans, it is still much better than our peer group average; and our net charge-offs were only 3 basis points for the quarter. Despite our increase in NPLs, we still have over 250% reserve coverage for the entire NPL balance, and the majority is well collateralized with personal guarantees. In this current environment of astronomical charge-offs within our industry, our asset quality remains outstanding, both for a $2 billion bank in assets and relative to our peer group. This continues to be a credit to the outstanding bankers and lenders we hire, and our conservative underwriting standards. 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 seasoned customers from the prior financial institutions for which they worked."
Deposit Growth and Borrowings
Deposits increased $146.1 million or 10.4% during the first quarter of 2008, and have increased $579.8 million, or 59.5%, over the past twelve months to $1.55 billion. Core deposits (including retail CDs) were up $261.8 million (39.6%) since March 31, 2007 to $922.3 million, and jumbo CDs were up $71.5 million (36.4%) over the past 12 months to $268.0 million at March 31, 2008. 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 $246.5 million over the past 12 months to $364.8 million at March 31, 2008. Of this growth, approximately half or $123.1 million has occurred in the first quarter of this year and has been in brokered money market accounts that carry an interest rate of 16 basis points over the fed funds rate. These brokered accounts have been used to fund growth during the first quarter as they have been less expensive than retail deposits, and have acted as a natural hedge against our variable loan portfolio during the falling rate environment we have experienced during the first quarter. Core deposits comprised 59.3% of total deposits at March 31, 2008, jumbo CDs were 17.2%, and brokered deposits were 23.5%. Borrowings, including junior subordinated debentures, totaled $258.5 million at March 31, 2008, up $30.8 million from twelve months ago. The majority of this increase was related to the $25 million of junior subordinated debentures (trust preferred securities) issued during the second quarter of 2007 which was used to fund the cash portion of The Bank of Richmond acquisition. Additionally, $10 million was borrowed on a line of credit with a correspondent bank that was used to fund a portion of the financial center expansion and other premises and equipment purchases.
Stockholders' Equity
Stockholders' equity at March 31, 2008 totaled $165.6 million, an increase of $53.9 million, or 48.3%, from March 31, 2007. 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 2007, and net income over the last 12 months. The Company has repurchased approximately 400,000 shares of common stock over the past 12 months at a net cost of $5.6 million. At March 31, 2008, Gateway had 12,655,985 shares of common stock outstanding; stockholders' equity equaled 8.31% of total assets, and the total risk-based capital ratio was 10.64%. All regulatory capital ratios remain in excess of the "well-capitalized" regulatory threshold.
Mr. Berry concluded, "We are very pleased with our first quarter performance in this very challenging operating environment, which we anticipate will continue throughout 2008; however, we feel our Company with a well-capitalized equity base, strong asset quality, and well managed balance sheet, is well-positioned to continue to execute its strategic plan of expanding our franchise and enhancing 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 Thursday, April 24 at 10:00 AM Eastern Time to discuss the 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-five full-service financial centers -- twenty in Virginia: Virginia Beach (7), Richmond (6), Chesapeake (3), Suffolk, Norfolk and Emporia (2); and fifteen in North Carolina: Elizabeth City (3), Edenton, Kitty Hawk (2), Moyock, Nags Head, Plymouth, Roper, Wilmington, Chapel Hill, and Raleigh (3). 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 Agency, 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
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
2008 2007 2007 2007 2007
---------- ---------- ---------- ---------- ----------
(Dollar amounts in thousand,
except share and per share data)
EARNINGS
Net
interest
income $ 12,634 $ 13,778 $ 13,559 $ 11,709 $ 10,039
Provision
for
loan
losses $ 1,600 $ 1,600 $ 750 $ 1,350 $ 1,200
Non
Interest
income $ 6,878 $ 3,881 $ 6,118 $ 3,117 $ 4,649
Gain
(loss)
and net
cash
settle-
ments
on
economic
hedge $ -- $ -- $ 1,343 $ (948) $ 189
Gain
(loss)
on dis-
position
of
premises
and
equip-
ment $ 8 $ -- $ -- $ -- $ --
Proforma
non-
interest
income
(1) $ 6,870 $ 3,881 $ 4,775 $ 4,065 $ 4,460
Non
Interest
expense $ 13,426 $ 12,645 $ 12,353 $ 10,417 $ 9,526
Pre-tax
income $ 4,486 $ 3,414 $ 6,574 $ 3,059 $ 3,962
Net
income $ 3,123 $ 2,270 $ 4,216 $ 2,019 $ 2,514
Basic
earnings
per
share $ 0.21 $ 0.17 $ 0.33 $ 0.17 $ 0.23
Diluted
earnings
per
share $ 0.20 $ 0.17 $ 0.32 $ 0.17 $ 0.22
Proforma
diluted
earnings
per
share
(2) $ 0.20 $ 0.17 $ 0.26 $ 0.22 $ 0.21
Weighted
avg.
basic
shares
out-
stand-
ing 12,502,990 12,589,210 12,630,561 11,608,656 10,990,371
Weighted
average
diluted
shares 12,863,436 13,000,662 13,096,695 11,950,358 11,263,502
PERFORMANCE
RATIOS
Return on
average
assets 0.65% 0.51% 0.98% 0.55% 0.83%
Proforma
return
on
average
assets
(2) 0.65% 0.51% 0.78% 0.72% 0.79%
Return on
average
common
equity 7.38% 6.18% 11.96% 6.97% 9.21%
Proforma
return
on
average
common
equity
(2) 7.38% 6.18% 9.58% 9.02% 8.78%
Net
interest
margin
(fully
tax-
equiva-
lent) 2.90% 3.40% 3.49% 3.50% 3.62%
Non-
interest
income
to total
revenue 35.25% 21.98% 31.09% 21.02% 31.65%
Proforma
non-
interest
income
to total
revenue
(1) 35.22% 21.98% 26.05% 25.77% 30.76%
Non-
interest
expense
to
average
assets 2.79% 2.82% 2.86% 2.86% 3.14%
Efficiency
ratio 68.81% 71.61% 62.09% 70.26% 66.26%
Proforma
effi-
ciency
ratio (1) 68.84% 71.61% 66.63% 66.04% 67.15%
Full-time
equi-
valent
employ-
ees 460 420 413 422 345
CAPITAL
Period-
end
equity
to
assets 8.31% 8.80% 8.12% 7.98% 8.41%
Tier 1
leverage
capital
ratio 9.05% 9.76% 8.57% 9.83% 11.40%
Tier 1
risk-
based
capital
ratio 9.76% 10.43% 9.65% 9.39% 11.11%
Total
risk-
based
capital
ratio 10.64% 11.40% 11.12% 10.82% 11.98%
Book
value
per
common
share
(3) $ 11.25 $ 11.24 $ 11.15 $ 10.89 $ 10.10
Cash
dividend
per
share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.05
ASSET
QUALITY
Gross
loan
charge-
offs $ 123 $ 350 $ 50 $ 329 $ 426
Net loan
charge-
offs $ 110 $ 307 $ 44 $ 321 $ 416
Net loan
charge-
offs to
average
loans
(annual-
ized) 0.03% 0.08% 0.01% 0.11% 0.16%
Allowance
for loan
losses $ 16,829 $ 15,339 $ 14,046 $ 13,340 $ 10,189
Allowance
for loan
losses
to total
loans 1.04% 1.01% 1.00% 0.99% 0.95%
Nonper-
forming
loans $ 6,574 $ 3,407 $ 2,817 $ 874 $ 1,554
NPL to
total
loans 0.40% 0.22% 0.20% 0.06% 0.14%
Other
real
estate
and
reposs-
essed
assets $ 623 $ 482 $ 350 $ 350 $ --
END OF
PERIOD
BALANCES
Loans
(before
allow-
ance) $1,635,318 $1,522,401 $1,407,861 $1,354,160 $1,083,638
Total
earning
assets
(before
allow-
ance) $1,796,664 $1,688,701 $1,572,937 $1,585,126 $1,216,893
Total
assets $1,992,800 $1,868,185 $1,737,245 $1,749,258 $1,322,836
Deposits $1,554,997 $1,408,919 $1,353,297 $1,411,231 $ 975,222
Stock-
holders'
equity $ 165,620 $ 164,407 $ 141,101 $ 139,799 $ 111,689
AVERAGE
BALANCES
Loans
(before
allow-
ance) $1,581,520 $1,453,957 $1,376,807 $1,190,439 $ 1,022,556
Total
earning
assets
(before
allow-
ance) $1,745,212 $1,607,473 $1,543,071 $1,342,961 $1,125,833
Total
assets $1,938,216 $1,781,477 $1,711,453 $1,461,595 $1,231,818
Interest-
Bearing
Deposits $1,358,445 $1,224,835 $1,268,285 $1,000,075 $ 823,785
Stock-
holder's
equity $ 165,509 $ 145,656 $ 139,815 $ 116,165 $ 110,655
(1) Proforma non-interest income and proforma efficiency ratio are
non-GAAP measures that exclude 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 exclude 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 Statement of Operations
Three Months Ended
March 31, March 31,
2008 2007
----------- -----------
Unaudited Unaudited
(Dollar amounts in thousand,
except share and per share data)
INTEREST INCOME
Loans, including fees $ 27,573 $ 20,384
Trading account securities 268 512
Investment securities - taxable 1,600 396
- tax-exempt 118 70
Interest-earning bank deposits 40 34
Other interest and dividends 263 184
----------- -----------
Total interest income 29,861 21,580
----------- -----------
INTEREST EXPENSE
Money market, NOW and savings 3,070 2,256
Time deposits 10,980 6,874
Short-term debt 296 275
Long-term debt 2,881 2,136
----------- -----------
Total interest expense 17,227 11,541
----------- -----------
Net interest income 12,634 10,039
Provision for loan losses 1,600 1,200
----------- -----------
Net interest income after
provision for loan losses 11,034 8,839
----------- -----------
NON INTEREST INCOME
Service charges on accounts 906 877
Mortgage operations 763 932
Insurance operations 1,646 1,321
Brokerage operations 91 266
Gain on sales of securities 800 163
Gain and net cash settlements
on economic hedge -- 189
Gain on disposition of premises
and equipment 8 --
Gain from trading securities 51 280
Fair value gain on trust
preferred securities 1,586 42
Other income 1,027 579
----------- -----------
Total non interest income 6,878 4,649
NON INTEREST EXPENSE
Salaries and benefits 7,366 5,259
Occupancy and equipment 2,418 1,810
Data processing fees 660 453
Other expense 2,982 2,004
----------- -----------
Total non interest expense 13,426 9,526
----------- -----------
Income before income taxes 4,486 3,962
Income taxes 1,363 1,448
----------- -----------
Net income $ 3,123 $ 2,514
Dividends on preferred stock 506 --
----------- -----------
Net income available to
common shareholders $ 2,617 $ 2,514
=========== ===========
Basic earnings per share $ 0.21 $ 0.23
Diluted earnings per share $ 0.20 $ 0.22
Weighted avg. basic
shares outstanding 12,502,990 10,990,371
Weighted average diluted shares 12,863,436 11,263,502
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31, Dec. 31, March 31,
2008 2007 * 2007
---------- ---------- ----------
Unaudited Unaudited
(Dollar amounts in thousands)
ASSETS
Cash and due from banks $ 24,054 $ 19,569 $ 20,527
Interest-earnings deposits
in other banks 2,803 1,092 3,416
---------- ---------- ----------
Total cash and cash
equivalents 26,857 20,661 23,943
Trading securities 25,210 23,011 50,732
Securities available for sale 116,206 126,750 65,335
Federal Home Loan Bank stock 11,179 10,312 10,101
Federal Reserve Bank stock 5,948 5,348 3,671
Loans 1,635,318 1,522,401 1,083,638
Allowance for loan losses (16,829) (15,339) (10,189)
---------- ---------- ----------
Total loans, net 1,618,489 1,507,062 1,073,449
Premises and equipment, net 73,818 73,614 39,589
Bank owned life insurance
policies 40,502 26,105 25,312
Goodwill and intangible
assets 50,921 51,075 13,352
Accrued interest receivable 11,589 12,330 8,920
Other assets 12,081 11,917 8,432
---------- ---------- ----------
Total assets $1,992,800 $1,868,185 $1,322,836
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 134,040 $ 123,885 $ 117,994
Interest-bearing 1,420,957 1,285,034 857,228
---------- ---------- ----------
Total deposits 1,554,997 1,408,919 975,222
Short-term debt 5,000 33,000 45,000
Long-term debt 253,517 249,102 182,746
Accrued expenses and
other liabilities 13,666 12,757 8,179
---------- ---------- ----------
Total liabilities 1,827,180 1,703,778 1,211,147
STOCKHOLDERS' EQUITY
Non-Cumulative, Perpetual
Preferred Stock 23,182 23,182 --
Common stock 127,446 127,258 102,328
Retained earnings 16,359 14,991 9,530
Accumulated other
comprehensive loss (1,367) (1,024) (169)
---------- ---------- ----------
Total stockholders' equity 165,620 164,407 111,689
---------- ---------- ----------
Total liabilities and
stockholders' equity $1,992,800 $1,868,185 $1,322,836
========== ========== ==========
* Derived from audited financial statements.