VIRGINIA BEACH, Va., April 24, 2006 (PRIMEZONE) -- Gateway Financial Holdings, Inc. (Nasdaq:GBTS), the holding company for Gateway Bank & Trust Co., reported net income for the first quarter of 2006 of $1.4 million compared with $802,000 for the first quarter of 2005, an increase of $557,000, or 69.5%. Earnings performance was driven by strong revenue growth from the Company's rapidly expanding branch network and a 75% increase in loans outstanding. Diluted earnings per share were $0.13 for the first quarter of 2006 compared with $0.10 for the prior-year period, an increase of 30.0%. Per share results were affected by the fourth quarter 2005 public offering of 2,000,000 shares of common stock, and the 300,000 shares issued in January 2006 as a result of the underwriter exercising its over-allotment option. These additional shares increased weighted average diluted shares by 31.5%, from 7,680,432 shares for the first quarter of 2005 to 10,102,718 for the current quarter.
Commenting on these results, D. Ben Berry, Chairman, President and CEO of Gateway Financial Holdings, stated, "We are pleased to report another record quarter, our eighth consecutive quarter of net income growth. This has been a time of tremendous achievement for Gateway; in this last quarter alone, we opened three full-service financial centers -- in Raleigh, Norfolk and Virginia Beach -- in addition to our first private banking center in Raleigh, and a state-of-the-art operations center capable of supporting a company three times our present size. Loan and deposit growth have been exceptionally strong year over year, up 75.5% and 74.4%, respectively; this momentum has continued into the first quarter of 2006, with loans and deposits up 17.5% and 17.6%, respectively, since December 31, 2005."
Mr. Berry noted that Gateway's strategy focuses on profit growth as well as franchise growth. "We place a high priority on two areas of our business: the generation of low-cost transaction accounts and asset quality. This quarter, we signed an exclusive agreement for our entire geographical franchise to implement the Haberfeld High Performance Checking (HPC) checking account acquisition and profitability strategy, which we have been using company-wide since mid-January. HPC, combined with the introduction of highly successful money market and commercial sweep account programs, have contributed to the growth of low-cost transaction accounts, which increased by $43.9 million, or 15.8%, in the first quarter.
"Asset quality remains an ongoing top priority at Gateway," continued Berry. "We are fortunate that we operate in markets with robust economies, but much of the credit for our sound asset quality belongs to the outstanding bankers and lenders at Gateway. This quarter, we added $1.2 million to our loan loss provision, which was directly related to the increase in loans during the quarter, and not an indication of asset quality deterioration. We only charged off $66,000 of loans; however, non-performing assets increased to 0.40% of total assets at quarter-end."
Total revenue, defined as net interest income and non-interest income, for the first quarter of 2006 was $11.1 million, an increase of 74.8% above the $6.3 million reported for the first quarter of 2005. Net interest income was $8.3 million, a $3.6 million or 76.7% increase over the $4.7 million reported for the prior-year period. The increase reflects a 67.6% increase in average earning assets, driven by the $337.1 million increase in average loans, combined with a 20-basis point improvement in the net interest margin to 3.95%. Commenting on the interest rate margin, Mr. Berry noted, "We are very proud of our improving net interest margin over the past year despite a flattening-to-inverted yield curve environment."
Non-interest income for the quarter was $2.8 million, an increase of $1.2 million or 69.5% above the prior-year first quarter. Excluding securities gains of $653,000 in the current quarter and $24,000 in the 2005 period, non-interest income increased $532,000, or 32.3%. Much of this increase was driven by the expansion of banking activities; service charge income increased $254,000 or 55.1%, directly related to the increase in transactional deposit accounts. Other income grew $278,000, or 23.4%, primarily from growth in Gateway's insurance operations.
Non-interest expense for the first quarter of 2006 was $7.8 million, up $3.0 million, or 63.3%, from the $4.8 million reported in the first quarter of 2005. These increased expenses reflect the significant infrastructure expansion. Over the last twelve months, Gateway opened seven de novo branches and added 75 new employees, bringing the total FTEs to 280. Salaries and benefits increased 50.2%, and occupancy and equipment rose 48.4%, again related to expansion activities. The $1.1 million increase in other expense includes the $210,000 cost of implementing the Haberfeld program, one-time costs of $150,000 associated with the opening of four new banking offices and the operations center, and a $300,000 increase in fees for professional services, primarily related to Sarbanes-Oxley compliance. Additionally, there were one-time signing bonuses paid to attract high-quality bankers to staff the new financial centers; these bonuses totaled $135,000 in the first quarter. Mr. Berry added, "These experienced bankers have been instrumental in the generation of Gateway's quality loan growth. Because of their lending expertise and the quality of service they provide, they have a following of seasoned clients that become a source of new loan and deposit relationships when they join Gateway. In total, there were approximately $500,000 of one-time costs associated with the above items. Gateway's efficiency ratio rose to 74.25% for the first quarter of 2006, primarily as a result of these one-time expenses, from 72.92% for the fourth quarter of 2005, and 74.49% for the year-ago quarter.
At March 31, 2006, total assets were $986.3 million, an increase of $394.9 million, or 66.8%, above the $591.4 million reported twelve months ago. Loans increased $337.1 million, or 75.5%, to $783.6 million; 100% of this growth was organic, with 52% of the increase derived from the financial centers opened over the past twelve months. Year-to date, loans increased have $117.0 million, or 17.5%; the majority of growth was derived from commercial real estate loans, which increased $74.2 million, or 33.5%. Commercial loans (CRE, construction and C&I) comprised 67.1% of loans at March 31, 2006.
Deposits rose $324.2 million, or 74.4%, over the past twelve months, to $760.1 million. Year-to-date, deposits grew 17.6%, with core deposits (including retail CDs) up 12.7%; jumbo CDs were $153.0 million at quarter-end, virtually unchanged from year-end, while brokered deposits grew $50.8 million to $60.8 million. Brokered deposits were used primarily to fund loan growth in the Wilmington loan production office and the Raleigh private banking center. Core deposits comprised 71.9% of total deposits at March 31, 2006, while jumbo CDs were 20.2%. Borrowings, including junior subordinated debentures, totaled $119.5 million at March 31, 2006, an increase of $29.1 million or 32.2% from twelve months ago.
Commenting on asset quality, Mr. Berry said, "Our asset quality remains excellent. Over the past twelve months, we charged off only $134,000 of loans; this is outstanding for a bank with nearly $1 billion of assets. 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 we will not have any losses associated with this group of loans." Past due and non-accrual loans were $3.1 million, or 0.40% of total loans at March 31, 2006, compared with $1.1 million, or 0.24% of loans for the year-ago quarter. Net charge-offs were $60,000 this quarter, or 0.01% of loans annualized compared with $6,000 for the first quarter of 2005. At March 31, 2006, the allowance for loan losses was $7.4 million, or 0.95% of total loans.
Stockholders' equity at March 31, 2006 totaled $102.5 million, an increase of $38.2 million, or 59.5%, from twelve months ago. The 2.0 million new shares issued this past December added approximately $30.0 million to Gateway's capital base. Additionally, the underwriter exercised its over-allotment option in January 2006, and an additional 300,000 shares were issued, adding another $4.5 million to capital. At March 31, 2005, Gateway had 9,804,871 shares outstanding; stockholders' equity equaled 10.39% of total assets, and the total risk-based capital ratio was 13.89%, well in excess of the "well-capitalized" regulatory threshold.
Mr. Berry concluded, "We are pleased with our performance this quarter and the $1.4 million we earned. This was an unusually active quarter for us. We expanded our franchise and incurred a high level of one-time expenses associated with this expansion, and we added $1.2 million to our loan loss reserve. We anticipate continued strong loan and deposit growth from all of our markets, and look forward to the positive contributions that our newest financial centers will add.
"Plans continue for further expansion in the Greater Raleigh/ Durham/ Chapel Hill area over the next 24 to 36 months, as well as two additional financial centers we plan to open in Kitty Hawk and Chesapeake during the second quarter. We also plan to convert our loan production offices in Wilmington, North Carolina, and Williamsburg, Virginia into full-service branches later in 2006. We are well-positioned, well-capitalized, and replete with opportunities. 2006 should be 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, April 25 at 2:00 PM Eastern Time to discuss first quarter 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 full-service regional community bank with a total of twenty-one financial centers -- eleven in Virginia: Virginia Beach (6), Chesapeake (2), Suffolk, Norfolk and Emporia; and ten in North Carolina: Elizabeth City (3), Edenton, Kitty Hawk, Moyock, Nags Head, Plymouth, Roper and Raleigh, in addition to a private banking center in Raleigh. The Bank also provides insurance through its Gateway Insurance Services, Inc. subsidiary and brokerage services through its Gateway Investment Services, Inc. subsidiary. The common stock of the Corporation is traded on the Nasdaq National 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
First Quarter 2006
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL HIGHLIGHTS
Quarterly
----------------------------------
1st Qtr 4th Qtr 3rd Qtr
2006 2005 2005
---------- --------- ---------
(Dollars in thousands except per share data)
EARNINGS
Net interest income $ 8,252 7,080 6,134
Provision for loan losses $ 1,200 750 550
Non Interest income $ 2,832 2,337 2,007
Non Interest expense $ 7,840 6,817 6,031
Pre-tax income $ 2,044 1,850 1,560
Net income $ 1,359 1,220 1,015
Basic earnings per share (a) $ 0.14 0.16 0.14
Diluted earnings per share (a) $ 0.13 0.16 0.13
Weighted avg. basic shares
outstanding (a) 9,783,764 7,715,218 7,406,785
Weighted average diluted
shares (a) 10,102,718 8,107,197 7,775,253
PERFORMANCE RATIOS
Return on average assets 0.60% 0.60% 0.56%
Return on average common equity 5.38% 6.22% 6.08%
Net interest margin (fully tax-
equivalent) 3.95% 3.96% 3.78%
Efficiency ratio 74.25% 72.92% 73.49%
Full-time equivalent employees 280 247 225
CAPITAL
Period-end equity to assets 10.39% 11.19% 9.08%
Tier 1 leverage capital ratio 12.01% 13.73% 11.50%
Tier 1 risk-based capital ratio 13.02% 14.31% 11.89%
Total risk-based capital ratio 13.89% 15.17% 12.80%
Book value per share (a) $ 10.43 10.40 9.01
Cash dividend per share (a) $ 0.03 0.03 0.02
ASSET QUALITY
Gross loan charge-offs $ 66 32 38
Net loan charge-offs $ 60 29 36
Net loan charge-offs to
average loans 0.01% 0.01% 0.01%
Allowance for loan losses $ 7,423 6,283 5,562
Allowance for loan losses to
total loans 0.95% 0.94% 0.94%
Past due and nonaccrual loans $ 3,116 359 390
Past due and nonaccrual loans to
total loans 0.40% 0.05% 0.07%
Other real estate and
repossessed assets $ 0 0 0
END OF PERIOD BALANCES
Loans (before allowance) $ 783,614 666,652 590,439
Total earning assets
(before allowance) $ 908,052 802,398 669,534
Total assets $ 986,311 882,422 740,279
Deposits $ 760,078 646,262 588,058
Stockholders' equity $ 102,456 98,744 67,193
AVERAGE BALANCES
Loans (before allowance) $ 718,642 641,354 559,498
Total earning assets
(before allowance) $ 846,652 736,239 643,044
Total assets $ 924,764 809,546 718,237
Deposits (Excludes non-int. DDA) $ 614,034 523,402 572,354
Stockholders' equity $ 102,347 77,895 66,302
2nd Qtr 1st Qtr
2005 2005
--------- ---------
EARNINGS
Net interest income 5,418 4,671
Provision for loan losses 500 400
Non Interest income 2,052 1,671
Non Interest expense 5,617 4,801
Pre-tax income 1,353 1,141
Net income 902 802
Basic earnings per share (a) 0.12 0.11
Diluted earnings per share (a) 0.12 0.10
Weighted avg. basic shares outstanding (a) 7,379,836 7,362,187
Weighted average diluted shares (a) 7,737,240 7,680,432
PERFORMANCE RATIOS
Return on average assets 0.56% 0.57%
Return on average common equity 5.49% 5.04%
Net interest margin (fully tax-equivalent) 3.76% 3.75%
Efficiency ratio 73.87% 74.49%
Full-time equivalent employees 217 205
CAPITAL
Period-end equity to assets 9.75% 10.86%
Tier 1 leverage capital ratio 11.79% 12.41%
Tier 1 risk-based capital ratio 12.49% 14.46%
Total risk-based capital ratio 13.38% 15.40%
Book value per share (a) 8.94 8.72
Cash dividend per share (a) 0.02 0.02
ASSET QUALITY
Gross loan charge-offs 10 7
Net loan charge-offs 9 6
Net loan charge-offs to average loans 0.00% 0.00%
Allowance for loan losses 5,048 4,557
Allowance for loan losses to total loans 0.95% 1.02%
Past due and nonaccrual loans 618 1,078
Past due and nonaccrual loans to total loans 0.12% 0.24%
Other real estate and repossessed assets 0 0
END OF PERIOD BALANCES
Loans (before allowance) 532,227 446,526
Total earning assets (before allowance) 609,254 530,732
Total assets 678,560 591,445
Deposits 525,115 435,868
Stockholders' equity 66,148 64,218
AVERAGE BALANCES
Loans (before allowance) 495,090 413,995
Total earning assets (before allowance) 577,865 505,049
Total assets 638,491 573,470
Deposits (Excludes non-int. DDA) 463,356 429,363
Stockholders' equity 65,163 64,594
Annual
------------------------
12 Mos. 12 Mos.
2005 2004
--------- ---------
EARNINGS
Net interest income $ 23,303 12,941
Provision for loan losses $ 2,200 1,425
Non Interest income $ 8,067 5,857
Non Interest expense $ 23,266 14,653
Pre-tax income $ 5,904 2,720
Net income $ 3,939 2,010
Basic earnings per share (a) $ 0.53 0.41
Diluted earnings per share (a) $ 0.51 0.37
Weighted avg. basic shares
outstanding (a) 7,467,380 4,926,636
Weighted average diluted
shares (a) 7,778,193 5,370,973
PERFORMANCE RATIOS
Return on average assets 0.58% 0.49%
Return on average common equity 5.77% 5.12%
Net interest margin (fully
tax-equivalent) 3.81% 3.59%
Efficiency ratio 73.69% 78.93%
Full-time equivalent employees 247 191
CAPITAL
Period-end equity to assets 11.19% 12.01%
Tier 1 leverage capital ratio 13.73% 13.89%
Tier 1 risk-based capital ratio 14.31% 16.41%
Total risk-based capital ratio 15.17% 17.40%
Book value per share (a) $ 10.40 8.78
Cash dividend per share (a) $ 0.09 0.02
ASSET QUALITY
Gross loan charge-offs $ 87 175
Net loan charge-offs $ 80 21
Net loan charge-offs to
average loans 0.02% 0.01%
Allowance for loan losses $ 6,283 4,163
Allowance for loan losses to
total loans 0.94% 1.09%
Past due and nonaccrual loans $ 359 913
Past due and nonaccrual loans to
total loans 0.05% 0.24%
Other real estate and
repossessed assets $ 0 0
END OF PERIOD BALANCES
Loans (before allowance) $ 666,652 381,956
Total earning assets
(before allowance) $ 802,398 478,852
Total assets $ 882,422 535,728
Deposits $ 646,262 406,259
Stockholders' equity $ 98,744 64,318
AVERAGE BALANCES
Loans (before allowance) $ 523,492 301,466
Total earning assets
(before allowance) $ 611,104 360,455
Total assets $ 679,020 407,699
Deposits (Excludes non-int. DDA) $ 446,071 255,681
Stockholders' equity $ 68,258 39,226
(a) All references to share and per share amounts have been
adjusted to reflect the effect of an 11-for-10 stock split
effective in the form of a stock dividend distributed on June 20,
2005.
Gateway Financial Holdings, Inc. and Subsidiary
First Quarter 2006
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in (000), except per share data)
THREE MONTHS ENDED
Mar. 31,
2006 2005
----------- -----------
Unaudited Unaudited
INTEREST INCOME
Loans, including fees $ 13,760 $ 6,506
Investment securities - taxable 1,226 770
- tax-exempt 62 48
Interest-earning bank deposits 38 8
Other interest and dividends 148 48
----------- -----------
Total interest income 15,234 7,380
INTEREST EXPENSE
Money market, NOW and savings 1,397 663
Time deposits 4,057 1,360
Short-term debt 603 378
Long-term debt 925 308
----------- -----------
Total interest expense 6,982 2,709
----------- -----------
Net interest income 8,252 4,671
Provision for loan losses 1,200 400
----------- -----------
Net interest income after
provision for loan losses 7,052 4,271
NON INTEREST INCOME
Service charges on accounts 715 461
Net gain on sales of securities 653 24
Other income 1,464 1,186
----------- -----------
Total non interest income 2,832 1,671
NON INTEREST EXPENSE
Salaries and benefits 3,708 2,469
Occupancy and equipment 1,542 1,039
Data processing fees 428 229
Other expense 2,162 1,064
----------- -----------
Total non interest expense 7,840 4,801
----------- -----------
Income before income taxes 2,044 1,141
Income taxes 685 339
----------- -----------
Net income $ 1,359 $ 802
----------- -----------
Basic earnings per share (a) $ 0.14 $ 0.11
Diluted earnings per share (a) $ 0.13 $ 0.10
Weighted avg. basic shares
outstanding (a) 9,783,764 7,362,187
Weighted average diluted shares (a) 10,102,718 7,680,432
(a) All references to share and per share amounts have been
adjusted to reflect the effect of an 11-for-10 stock split
effective in the form of a stock dividend distributed on June 20,
2005.
Gateway Financial Holdings, Inc. and Subsidiary
First Quarter 2006
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MAR 31, DECEMBER 31, MAR 31,
2006 2005 2005
-------- -------- --------
Unaudited Audited Unaudited
(Dollar amounts in thousands)
ASSETS
Cash and due from banks $ 11,675 $ 18,475 $ 9,985
Interest-earning deposits
in other banks 942 3,668 1,066
-------- -------- --------
Total cash and cash equivalents 12,617 22,143 11,051
Securities available for sale 114,597 123,773 78,757
Securities held to maturity 0 0 0
Federal Home Loan Bank stock 5,980 6,208 3,661
Federal Reserve Bank stock 2,919 2,097 722
Total loans and leases 783,614 666,652 446,526
Allowance for loan losses (7,423) (6,283) (4,557)
-------- -------- --------
Total loans, net 776,191 660,369 441,969
Premises and equipment, net 33,905 29,551 20,156
Bank owned life insurance policies 17,355 17,187 16,635
Accrued interest receivable 6,551 5,883 3,230
Other assets 16,196 15,211 15,264
-------- -------- --------
Total assets $986,311 $882,422 $591,445
-------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 83,780 $ 89,162 $ 61,228
Interest-bearing 676,298 557,100 374,640
-------- -------- --------
Total deposits 760,078 646,262 435,868
Short-term debt 47,001 62,000 62,511
Long-term debt 72,465 72,665 27,865
Accrued expenses and
other liabilities 4,311 2,751 983
-------- -------- --------
Total liabilities 883,855 783,678 527,227
STOCKHOLDERS' EQUITY
Common stock 98,866 94,066 62,786
Retained earnings 6,178 5,113 2,711
Accumulated other
comprehensive loss (2,588) (435) (1,279)
-------- -------- --------
Total stockholders' equity 102,456 98,744 64,218
Total liabilities and
stockholders' equity $986,311 $882,422 $591,445
-------- -------- --------