VIRGINIA BEACH, Va., Oct. 24, 2006 (PRIMEZONE) -- Gateway Financial Holdings, Inc. (Nasdaq:GBTS), the holding company for Gateway Bank & Trust Co., reported net income for the third quarter of 2006 of $2.78 million compared with $1.02 million for the 2005 third quarter, an increase of $1.76 million, or 173.7 percent. Diluted earnings per share were $0.25 compared with $0.12 for the year-ago quarter, up 108.3 percent. Per share results reflect the December 2005 stock offering of 2.3 million shares, which increased average diluted shares outstanding from 8,552,862 shares for the third quarter of 2005 to 11,097,299 for the current quarter, an increase of 29.7 percent.
For the first nine months of 2006, the Company reported net income of $3.87 million, up $1.15 million, or 42.2 percent, from the $2.72 million reported for the year-earlier nine-month period. Diluted earnings per share were $0.35 for the 2006 nine-month period compared with $0.32 last year, an increase of 9.4 percent. Per share results also reflect the 2005 stock offering, which increased average diluted shares outstanding for the first nine months of 2006 by 30.8 percent, from 8,489,787 shares for the first nine months of 2005 to 11,104,389 for the current nine-month period.
2006 results include a market value gain and net cash market settlement of $1.60 million before tax for the third quarter and a pre-tax loss of $1.42 million for the year-to-date period resulting from a $150 million interest rate swap agreement entered into on December 31, 2005 to hedge variable rate loans on Gateway's books; this has been reported as a component of non-interest income in accordance with GAAP.
Results also reflect strong loan growth, an expanding margin and outstanding asset quality. Despite the negative impact of the swap agreement for the first nine months of 2006, year-to-date net income still reflects an increase of $1.15 million or 42.2 percent.
D. Ben Berry, chairman and chief executive officer of Gateway Financial Holdings, Inc., commented on the quarter. "We continue to outperform the entire Southeast banking community with our growth. While most banks are retrenching in this uncertain environment, we consider this to be a favorable opportunity for expansion. We hire the best bankers, identify the most favorable branch locations, expand our franchise, and diversify our product offerings. We are thrilled to report another quarter of record earnings, with over fifty percent loan growth year-over-year, and with the same impeccable asset quality that is a hallmark of Gateway's performance. The accounting for the swap transaction has resulted in volatile earnings from quarter to quarter but it has not obscured the enormous progress we have made this year."
For the third quarter of 2006, total revenue, comprised of net interest income and non-interest income, was $13.9 million, an increase of 70.9 percent above the $8.14 million reported for the prior-year third quarter. Excluding the third quarter gain of $1.60 million from the swap transaction, total revenue was $12.3 million, an increase of 51.2 percent compared to the year-ago period. Net interest income was $9.49 million, up 54.8 percent over the prior-year period, reflecting a 52.4 percent increase in average earning assets, combined with a 6-basis point improvement in the net interest margin to 3.84 percent.
Non-interest income for the third quarter was $4.42 million, an increase of 120.0 percent above the prior-year; excluding the impact of the swap, non-interest income increased $808,000, or 40.3 percent, year-over-year. Service charge income increased $252,000 or 40.4 percent, while other income grew $620,000, or 47.0 percent. Growth of other income was primarily driven by an increase of $252,000 in mortgage revenues from Gateway Financial Mortgage which commenced operations in the second quarter of this year, as well as increases in insurance, brokerage, and BOLI related revenues. For the nine-month period, pro forma non-interest income increased 42.1 percent to $8.14 million, excluding the $1.4 million loss from the swap.
Non-interest expense for the third quarter of 2006 was $9.02 million, up $3.0 million, or 49.5 percent, from the $6.03 million reported in the third quarter of 2005, reflecting Gateway's investment in its banking franchise and infrastructure over the past twelve months. Salaries and benefits increased 54.1 percent, driven by an increase in FTEs to 310 from 225 at September, 2005, while occupancy and equipment rose 55.8 percent. Other expense increased $561,000 or 32.9 percent, primarily as a result of the Haberfeld High Performance Checking Program ($232,000), and higher advertising and professional services expenses. Expenses as a percent of average assets have remained remarkably steady over the past five quarters, despite the opening of seven banking offices over the past twelve months; expenses stand at 3.38 percent of average assets for the most recent quarter.
At September 30, 2006, total assets were $1.13 billion, an increase of $384.9 million, or 52.0 percent, above the $740.3 million reported twelve months ago. Loans increased $305.6 million, or 51.8 percent year-over-year. For the nine-month period year-to date, loans increased $229.4 million, or 34.4 percent (45.9 percent annualized), with commercial accounts, namely, C&I, CRE and construction loans, accounting for 69 percent of Gateway's loan portfolio at September 30, 2006.
Deposits rose $246.0 million, or 41.8 percent, over the past twelve months, to $834.1 million. Year-to-date, deposits grew $187.8 million or 29.1 percent (38.9 percent annualized). Growth of core deposits has outpaced wholesale deposits, mainly as a result of Gateway's success at building retail money market and commercial sweep accounts. Since year-end 2005, core deposits grew $150 million, or 42.7 percent (annualized) with savings and money market accounts contributing $104 million of that growth.
Gateway continues to maintain asset quality at consistently outstanding levels while at the same time reporting exceptional growth in its loan portfolio. Mr. Berry noted that the Company continues to build reserves relative to market risks and growth, although there has been no sign of weakness to Gateway's loan portfolio. He added, "The economy is slowing and we believe this is a prudent step to take. However, the expertise of our lenders and our credit administration staff is our first line of defense in protecting Gateway from problem loans." Nonperforming loans were $420,000 this quarter, or 0.05 percent of total loans, compared with $138,000 or 0.02 percent in the previous quarter, and $390,000 or 0.07 percent at September 30, 2005. Net loan charge-offs have also been consistently low; this quarter, they were $53,000 or 0.02 percent (annualized) of average loans; this compares with $76,000, or 0.04 percent of average loans in the previous quarter, and $36,000, or 0.03 percent, for the year-ago quarter. Loan loss reserves were $8.7 million or 0.97 percent of total loans at September 30, 2006. Gateway has been building reserves throughout 2006, which have increased from 0.94 percent at year-end 2005.
Stockholders' equity at June 30, 2006 totaled $106.1 million, up $38.9 million, or 57.8 percent, from twelve months ago. The 2.3 million new shares issued this past December, including the over-allotment, added approximately $34.5 million to Gateway's capital base. At September 30, 2006, Gateway had 10,824,678 shares outstanding; stockholders' equity equaled 9.43 percent of total assets, and the total risk-based capital ratio was 13.94 percent, well in excess of the "well-capitalized" regulatory threshold. Mr. Berry concluded, "Although our markets are moderating somewhat, we still see good growth opportunities ahead. Our branch configuration is set for the near-term, although we are prepared to move forward with two additional loan production offices before year-end. Our efforts are now focused more than ever on expanding our share of the dynamic markets we have already entered, and our bankers are prepared for growth even as conditions tighten."
Web Cast and Conference Call Information
Gateway's executive management team will host a conference call and simultaneous web cast on Tuesday, October 24 at 10:00 AM Eastern Time to discuss third 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 two hours following the completion of the conference call through Midnight, ET, October 31, 2006 by dialing 877-660-6853, Account number 286 Conference ID number 215608. The webcast will also be available for 30 days on the Investor Relations page of the Company's website, www.gwfh.com
About the Company
Gateway Financial Holdings, Inc. is the parent company of Gateway Bank & Trust Co., a regional community bank with a total of twenty-four full-service financial centers -- thirteen in Virginia: Virginia Beach (7), Chesapeake (3), Suffolk, Norfolk and Emporia; and eleven in North Carolina: Elizabeth City (3), Edenton, Kitty Hawk (2), Moyock, Nags Head, Plymouth, Roper and Raleigh, in addition to a private banking center in Raleigh. The Bank provides insurance through its Gateway Insurance Services, Inc. subsidiary, brokerage services through its Gateway Investment Services, Inc. subsidiary, and mortgage banking services through its Gateway Financial Mortgage, Inc. subsidiary. The common stock of the Corporation is traded on the Nasdaq Global Market under the symbol GBTS. For further information, visit the Corporation's web site at www.gwfh.com.
Forward-Looking Statements
Statements contained in this news release, which are not historical facts, are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Amounts herein could vary as a result of market and other factors. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. Such forward-looking statements may be identified by the use of such words as "believe," "expect," anticipate," "should," "planned," "estimated," and "potential." Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, expected or anticipated revenue, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company's operations, pricing, products and services. The Company undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
Gateway Financial Holdings, Inc. and Subsidiary
Third Quarter 2006
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL HIGHLIGHTS
Quarterly
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
2006 2006 2006 2005 2005
---------- ---------- --------- --------- ---------
(Dollars in thousands except per share data)
EARNINGS
Net interest
income $ 9,493 9,312 8,222 7,080 6,134
Provision for
loan losses $ 600 800 1,200 750 550
Non Interest
income $ 4,416 1,296 1,013 2,337 2,007
Non Interest
expense $ 9,018 8,559 7,840 6,817 6,031
Pre-tax
income $ 4,291 1,249 195 1,850 1,560
Net income $ 2,778 864 224 1,220 1,015
Basic earnings
per share(a) $ 0.26 0.08 0.02 0.14 0.12
Diluted
earnings
per share(a) $ 0.25 0.08 0.02 0.14 0.12
Weighted avg.
basic shares
outstand-
ing(a) 10,805,652 10,789,189 10,762,140 8,486,740 8,147,547
Weighted
average
diluted
shares(a) 11,097,299 11,131,691 11,113,498 8,841,860 8,552,862
PERFORMANCE RATIOS
Return on
average
assets 1.03% 0.37% 0.11% 0.60% 0.56%
Return on
average
common
equity 10.57% 3.41% 0.89% 6.22% 6.08%
Net interest
margin
(fully
tax-
equivalent) 3.84% 3.94% 3.92% 3.96% 3.78%
Non-int.
expense to
average
assets 3.38% 3.35% 3.39% 3.37% 3.36%
Efficiency
ratio 64.20% 79.99% 88.95% 71.64% 74.67%
Full-time
equivalent
employees 310 299 280 247 225
CAPITAL
Period-end
equity to
assets 9.43% 9.62% 10.39% 11.19% 9.08%
Tier 1
leverage
capital
ratio 12.02% 12.48% 12.01% 13.73% 11.50%
Tier 1 risk-
based
capital
ratio 13.05% 13.75% 13.02% 14.31% 11.89%
Total risk-
based
capital
ratio 13.94% 14.63% 13.89% 15.17% 12.80%
Book value
per share(a) $ 9.80 9.45 9.48 9.45 8.19
Cash dividend
per share(a) $ 0.05 0.03 0.03 0.03 0.02
ASSET QUALITY
Gross loan
charge-offs $ 58 86 66 32 38
Net loan
charge-offs $ 53 76 60 29 36
Net charge-
offs to
avg. loans
(annualized) 0.02% 0.04% 0.03% 0.02% 0.03%
Allowance for
loan losses $ 8,694 8,147 7,423 6,283 5,562
Allowance for
loan losses
to total
loans 0.97% 0.96% 0.95% 0.94% 0.94%
Nonperforming
loans $ 420 138 2,681 204 390
NPL to total
loans 0.05% 0.02% 0.34% 0.03% 0.07%
Other real
estate and
repossessed
assets $ 0 0 0 0 0
END OF PERIOD BALANCES
Loans
(before
allowance) $ 896,080 852,381 783,614 666,652 590,439
Total earning
assets
(before
allowance) $1,031,613 984,515 908,052 802,398 669,534
Total assets$1,125,144 1,062,241 986,311 883,373 740,279
Deposits $ 834,093 836,528 760,078 646,262 588,058
Stockholders'
equity $ 106,058 102,240 102,456 98,744 67,193
AVERAGE BALANCES
Loans
(before
allowance) $ 860,038 822,938 718,642 641,354 559,498
Total earning
assets
(before
allowance) $ 980,105 947,402 846,652 736,239 643,044
Total
assets $1,066,917 1,022,762 924,764 809,546 718,237
Deposits
(Excludes
non-int.
DDA) $ 729,485 703,226 614,034 523,402 572,354
Stockholder's
equity $ 104,227 102,820 102,347 77,895 66,302
(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
April 28, 2006 and June 20, 2005.
Year to Date
9 Mos. 9 Mos.
2006 2005
---------- ----------
(Dollars in thousands except per share data)
EARNINGS
Net interest income $ 27,027 16,222
Provision for loan losses $ 2,600 1,450
Non Interest income $ 6,725 5,731
Non Interest expense $ 25,417 16,449
Pre-tax income $ 5,735 4,054
Net income $ 3,866 2,719
Basic earnings per share(a) $ 0.36 0.33
Diluted earnings per share(a) $ 0.35 0.32
Weighted avg. basic shares outstanding(a) 10,785,821 8,122,424
Weighted average diluted shares(a) 11,104,389 8,489,787
PERFORMANCE RATIOS
Return on average assets 0.51% 0.57%
Return on average common equity 5.02% 5.56%
Net interest margin (fully
tax-equivalent) 3.91% 3.77%
Non-int. expense to average assets 3.35% 3.42%
Efficiency ratio 72.88% 73.63%
Full-time equivalent employees 310 225
CAPITAL
Period-end equity to assets 9.43% 9.08%
Tier 1 leverage capital ratio 12.02% 11.50%
Tier 1 risk-based capital ratio 13.05% 11.89%
Total risk-based capital ratio 13.94% 12.80%
Book value per share(a) $ 9.80 8.19
Cash dividend per share(a) $ 0.11 0.06
ASSET QUALITY
Gross loan charge-offs $ 210 55
Net loan charge-offs $ 189 51
Net charge-offs to avg. loans (annualized) 0.03% 0.01%
Allowance for loan losses $ 8,694 5,562
Allowance for loan losses to total
loans 0.97% 0.94%
Nonperforming loans $ 426 76
NPL to total loans 0.05% 0.01%
Other real estate and repossessed
assets $ 0 0
END OF PERIOD BALANCES
Loans (before allowance) $ 896,080 590,439
Total earning assets (before allowance) $ 1,038,661 669,644
Total assets $ 1,125,144 740,279
Deposits $ 834,093 588,058
Stockholders' equity $ 106,058 67,193
AVERAGE BALANCES
Loans (before allowance) $ 801,057 490,060
Total earning assets (before allowance) $ 925,208 575,748
Total assets $ 1,011,698 640,684
Deposits (Excludes non-int. DDA) $ 682,668 417,976
Stockholder's equity $ 103,060 65,397
(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
April 28, 2006 and June 20, 2005.
Gateway Financial Holdings, Inc. and Subsidiary
Third Quarter 2006 and FY 2005 Results
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED
September 30,
2006 2005
----------- -----------
Unaudited
(Amounts in (000), except per share data)
INTEREST INCOME
Loans, including fees $ 17,834 $ 9,885
Investment securities - taxable 1,161 620
- tax-exempt 58 28
Interest-earning bank deposits 37 83
Other interest and dividends 130 46
----------- -----------
Total interest income 19,220 10,662
INTEREST EXPENSE
Money market, NOW and savings 2,259 992
Time deposits 5,541 2,715
Short term Debt 685 32
Long-term debt 1,242 789
----------- -----------
Total interest expense 9,727 4,528
----------- -----------
Net interest income 9,493 6,134
Provision for loan losses 600 550
----------- -----------
Net interest income after
provision for loan losses 8,893 5,584
NON INTEREST INCOME
Service charges on accounts 875 623
Net gain on sales of securities 0 64
Loss and net cash settlements on
economic hedge 1,601 --
Other income 1,940 1,320
----------- -----------
Total non interest income 4,416 2,007
NON INTEREST EXPENSE
Salaries and benefits 4,534 2,943
Occupancy and equipment 1,812 1,163
Data processing fees 405 219
Other expense 2,267 1,706
----------- -----------
Total non interest expense 9,018 6,031
----------- -----------
Income before income taxes 4,291 1,560
Income taxes 1,513 545
----------- -----------
Net income $ 2,778 $ 1,015
----------- -----------
Basic earnings per share (a) $ 0.26 $ 0.12
Diluted earnings per share (a) $ 0.25 $ 0.12
Weighted avg. basic shares outstanding (a) 10,805,652 8,147,547
Weighted average diluted shares (a) 11,097,299 8,552,862
NINE MONTHS ENDED
September 30,
2006 2005
----------- -----------
Unaudited
(Amounts in (000), except per share data)
INTEREST INCOME
Loans, including fees $ 48,167 $ 24,683
Investment securities - taxable 3,587 2,034
- tax-exempt 181 142
Interest-earning bank deposits 110 114
Other interest and dividends 410 163
----------- -----------
Total interest income 52,455 27,136
INTEREST EXPENSE
Money market, NOW and savings 5,599 2,436
Time deposits 14,618 5,923
Short term Debt 2,588 881
Long-term debt 2,623 1,674
----------- -----------
Total interest expense 25,428 10,914
----------- -----------
Net interest income 27,027 16,222
Provision for loan losses 2,600 1,450
----------- -----------
Net interest income after provision
for loan losses 24,427 14,772
NON INTEREST INCOME
Service charges on accounts 2,438 1,637
Net gain on sales of securities 653 83
Loss and net cash settlements on
economic hedge (1,416) --
Other income 5,050 4,011
----------- -----------
Total non interest income 6,725 5,731
NON INTEREST EXPENSE
Salaries and benefits 12,474 8,095
Occupancy and equipment 5,069 3,350
Data processing fees 1,259 662
Other expense 6,615 4,342
----------- -----------
Total non interest expense 25,417 16,449
----------- -----------
Income before income taxes 5,735 4,054
Income taxes 1,869 1,335
----------- -----------
Net income $ 3,866 $ 2,719
=========== ===========
Basic earnings per share (a) $ 0.36 $ 0.33
Diluted earnings per share (a) $ 0.35 $ 0.32
Weighted avg. basic shares outstanding (a) 10,785,821 8,122,424
Weighted average diluted shares (a) 11,104,389 8,489,787
(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 April
28, 2006 and June 20, 2005.
Gateway Financial Holdings, Inc. and Subsidiary
Third Quarter 2006 & FY 2005 Results
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, December 31, September 30,
2006 2005 2005
----------- ----------- -----------
Unaudited Audited Unaudited
(Dollar amounts in thousands)
ASSETS
Cash and due from banks $ 16,659 $ 18,475 $ 13,406
Interest-earnings deposits
in other banks 20,992 3,668 3,382
----------- ----------- -----------
Total cash and cash
equivalents 37,651 22,143 16,788
Securities available for sale 104,930 123,773 71,224
Federal Home Loan Bank stock 6,002 6,208 3,877
Federal Reserve Bank stock 3,609 2,097 722
Loans 896,080 666,652 590,439
Allowance for loan losses (8,694) (6,283) (5,562)
----------- ----------- -----------
Total loans, net 887,386 660,369 584,877
Premises and equipment, net 37,253 29,551 27,110
Bank owned life insurance
policies 24,788 17,187 17,040
Accrued interest receivable 7,525 5,883 4,491
Other assets 16,000 16,162 14,150
----------- ----------- -----------
Total assets $ 1,125,144 $ 883,373 $ 740,279
----------- ----------- -----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 98,738 $ 89,162 $ 78,818
Interest-bearing 735,355 557,100 509,240
----------- ----------- -----------
Total deposits 834,093 646,262 588,058
Short term debt 53,001 62,000 6,202
Long-term debt 127,429 72,665 77,465
Accrued expenses and
other liabilities 4,563 3,702 1,361
----------- ----------- -----------
Total liabilities 1,019,086 784,629 673,086
STOCKHOLDERS' EQUITY
Common stock 99,219 94,109 63,757
Retained earnings 7,850 5,113 4,117
Deferred Compensation
- restricted stock -- (43) (61)
Accumulated other
comprehensive loss (1,011) (435) (620)
----------- ----------- -----------
Total stockholders' equity 106,058 98,744 67,193
Total liabilities and
stockholders' equity $ 1,125,144 $ 883,373 $ 740,279
----------- ----------- -----------