Total Assets Exceed $1.3 Billion, Up 34 Percent
Loans Surpass $1 Billion, Up 38 Percent
VIRGINIA BEACH, Va., April 25, 2007 (PRIME NEWSWIRE) -- Gateway Financial Holdings, Inc. (Nasdaq:GBTS), the holding company for Gateway Bank & Trust Co., reported net income for the first quarter of 2007 of $2.5 million compared with $224,000 for the prior year first quarter, an increase of $2.3 million. Earnings performance was driven by exceptional revenue growth from a 38% increase in loans over the past 12 months resulting from the Company's expanding network of financial centers, and increased revenues from Gateway's non-banking activities. Diluted earnings per share were $0.22 for the first quarter of 2007 compared with $0.02 for the first quarter of the prior year. The first quarter of 2006 results were negatively affected by a loss on the market value and net cash settlement on economic hedge of $1.82 million that resulted from the $150 million interest rate swap agreement entered into on December 30, 2005 to hedge variable rate loans included in Gateway's loan portfolio. During the first quarter of 2007, Gateway had a net gain on the market value and net cash settlement of the economic hedge of $189,000. The gain or loss from the economic hedge has been reported as a component of non-interest income in accordance with GAAP. Diluted earnings per share, excluding the gain of $189,000 in the first quarter of 2007, and the loss on the market value and net cash settlement on economic hedge of $1.82 million in the first quarter of 2006 (net of income taxes using a 37.5% blended rate), were $0.21 and $0.12 per share, respectively, an increase of 75%. Due to the volatility and lack of earnings comparability caused by the economic hedge, management believes presentation of an adjusted, non-GAAP, diluted earnings per share provides useful information to investors.
Commenting on these results, D. Ben Berry, Chairman, President and CEO of Gateway Financial Holdings, stated, "We are thrilled to report another quarter of record earnings, with 38% loan growth year-over-year, and with the same impeccable asset quality that is a hallmark of Gateway's performance. We continue to hire the best bankers, identify markets with superior growth potential, expand our franchise, and diversify our product offerings. As a result of this growth, and expansion of our non-banking activities, we have grown our revenues 59% over the past 12 months, while controlling non-interest expenses, which grew only 22% year-over-year. In fact, our non-interest expenses actually decreased $31,000 as compared with the fourth quarter of last year. We are now beginning to achieve the economies on our bottom line of the significant expansion we have undertaken over the past few years, while continuing to grow in a strategic manner."
ROAA was 0.83% for the first quarter of 2007 compared with 0.11% for the first quarter of the prior year. ROAA, excluding the gain of $189,000 in the first quarter of 2007, and the loss on the market value and net cash settlement on economic hedge of $1.82 million in the first quarter of 2006 (net of income taxes using a 37.5% blended rate), was 0.79% and 0.60%, respectively, an increase of 32%. ROAE was 9.21% for the first quarter of 2007 compared with 0.89% for the first quarter of the prior year. ROAE, excluding the impact of the aforementioned economic hedge, was 8.78% and 5.39%, respectively, an increase of 63%. Due to the volatility and lack of earnings comparability caused by the economic hedge, management believes presentation of an adjusted, non-GAAP, ROAA and ROAE provides useful information to investors.
Mr. Berry continued, "We look forward to closing The Bank of Richmond acquisition during the second quarter, which expands our footprint into the demographically attractive Richmond area. Additionally, we plan on opening a full financial center in Wilmington and two more financial centers in Raleigh during the second half of the year. Gateway's strategy continues to focus both on profit growth and franchise growth, as we continue to expand at an impressive rate, while maintaining exceptional asset quality and improving profitability."
Revenues and Net Interest Margin
Total revenue, defined as net interest income and non-interest income, was $14.7 million for the first quarter of 2007, an increase of 59% above the $9.2 million reported for the first quarter of 2006. Net interest income was $10 million, a $1.8 million or 22.1% increase over the $8.2 million reported for the first quarter of 2006. The increase is attributable to a 33% increase in average earning assets, driven by the $304 million or 42.3% increase in average loans over the past 12 months. The increase in net interest income resulting from the increased volume was partially offset by a decrease in net interest margin of 30 basis points year-over-year to 3.62%. The margin compression resulted from the impact of higher interest rates on Gateway's cost of funds, exacerbated by the inverted yield curve environment. Short-term rates have remained high, resulting in higher re-pricing of maturing deposits during the last half of 2006 and the first quarter of 2007, while variable rate loans have not re-priced since June 29, 2006, when the Federal Reserve Board last increased short term rates. Additionally, competition has increased for high quality loans, resulting in more aggressive pricing during the quarter. On a linked quarter basis, the net interest margin decreased by 15 basis points.
Non-interest income for the first quarter of 2007 was $4.6 million, an increase of $3.6 million or 359% above the prior year first quarter. Excluding the affect of the gain and loss and net cash settlement on economic hedge for both quarters, proforma non-interest income increased $1.6 million or 57.5% year-over-year to $4.5 million in the first quarter of 2007. Due to the volatility and lack of comparability caused by the economic hedge, management believes presentation of an adjusted, non-GAAP, non-interest income provides useful information to investors. The increase was primarily related to Gateway's non-banking activities. Revenue from Gateway's insurance operations increased $580,000 or 78.3% to $1.3 million resulting from performance bonuses related to 2006 and our franchise expansion; as well as the two acquisitions of Virginia agencies in the fourth quarter of 2006, and the title insurance company during the first quarter of 2007. Gateway launched its new mortgage subsidiary, Gateway Financial Mortgage, during the second quarter of 2006. Revenue from the mortgage operation increased $760,000 or 441% to $932,000 from the $172,200 reported in the first quarter of 2006 from its 49% owned mortgage company joint venture. Additionally, the mortgage operation showed a profit for the first time of approximately $250,000 for the quarter, as compared with a loss of $326,000 during 2006. Revenues from the brokerage operations increased $155,000 or 140% to $266,000 in the first quarter of 2007 as compared with the first quarter of the prior year, in part as a result of hiring a new investment broker in Virginia during the first quarter of 2006. Additionally, Gateway had $92,000 higher income from BOLI during the first quarter of 2007 primarily as a result of $7 million additional BOLI purchased during the third quarter of 2006.
Non-Interest Expenses
Non-interest expense for the first quarter of 2007 was $9.5 million, up $1.7 million, or 21.5%, from the $7.8 million reported in the prior year first quarter. These increased expenses reflect Gateway's significant infrastructure expansion throughout 2006. During 2006, Gateway opened six de novo financial centers, built a new state-of-the-art operations center, opened a private banking center, launched a new mortgage subsidiary, and added 80 new employees, bringing the total FTEs to 327 at December 31, 2006. Salaries and benefits increased 41.8%, and occupancy and equipment costs rose 17%, almost all of which was related to expansion activities. Data processing fees increased a nominal 5.8%, reflecting a re-negotiation of data processing contracts which offset much of the cost of increased volume associated with the franchise expansion. Other expenses actually decreased $158,000 in the first quarter of 2007 as compared with the first quarter of last year. This decrease was primarily the result of lower promotional, professional and consulting expenses which decreased $515,000 during the first quarter of 2007 as compared with the first quarter of 2006. The decrease was primarily the result of the discontinuation of the Haberfeld High Performance checking account program at the end of 2006 ($210,000), lower accounting and auditing fees related to Sarbanes-Oxley 404 compliance, and other consulting services that were eliminated. Gateway's efficiency ratio was 66.26% for the first quarter of 2007, down significantly from the 88.95% for the first quarter of 2006. However, the efficiency ratio was negatively affected in 2006 by the loss and net cash settlement on economic hedge which is reported as a reduction of non-interest income. Excluding the impact of the loss and net cash settlement on economic hedge of $1.82 million for the first quarter of 2006 and the net gain on the economic hedge in the first quarter of 2007 of $189,000, the efficiency ratio would have been 67.15% for the first quarter of 2007, as compared with 73.39% for the first quarter of 2006. Due to the volatility and lack of comparability caused by the economic hedge, management believes presentation of an adjusted, non-GAAP, proforma efficiency ratio provides useful information to investors. As a percentage of average assets, non-interest expense has dropped from 3.39% in the first quarter of 2006 to 3.14% for the first quarter of 2007.
On a linked quarter basis, non-interest expenses actually decreased by $31,000. This decrease is reflective of not opening any new financial centers during the last two quarters, and the decrease in promotional, professional and consulting costs discussed above. FTEs only increased by 18 (5.5%) to 345 during the first quarter of 2007. During this same time period, total revenue (excluding the impact of the gain and loss on economic hedge in the respective quarters) increased to $14.5 million from $13 million, an increase of 11.5%.
Loan and Asset Growth
At March 31, 2007, total assets were $1.32 billion, an increase of $336.3 million, or 34.1%, above the $986.3 million reported twelve months ago. This increase was primarily related to loans which increased $300 million, or 38.3%, to $1.1 billion. For the quarter, loans grew $89.0 million or 9.0% (35.8% annualized).
Commenting on this growth, Mr. Berry emphasized, "Our results are reflective of the continued vibrancy of the markets we serve, the knowledge, expertise and performance of our lenders who serve them, and the strategic investments we have made in building a solid regional footprint. These key elements are fundamental to our strategy, as we continue to gain market share from major national competitors."
All of this growth was organic, with over 50% of the increase derived from the financial centers opened in 2006, and primarily in the Raleigh, Wilmington, and Virginia Beach markets. The local economies in these market areas continue to experience robust growth. Population growth in the Raleigh-Cary MSA, Virginia Beach MSA and Wilmington MSA are projected to be 17.6%, 5.3% and 15.7%, respectively, over the next five years. Additionally, 59% of this growth was derived from commercial real estate loans (up $87.5 million) and commercial and industrial loans (up $89 million) since the first quarter of last year. At December 31, 2006, commercial loans (CRE, construction and C&I) totaled $781 million, or 72% of the loan portfolio.
Mr. Berry continued, "Although we have a higher concentration of real estate loans, our Chief Credit and Risk Officers have over 30 years of experience of underwriting loans of this type in the markets we serve, giving us a high comfort level with our real estate loan concentration. We continually monitor risk within the commercial real estate loan portfolio by analyzing its portfolio 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. Additionally, we have insurance to cover LTV exceptions on lot loans which reduces our risk."
Asset Quality
For the quarter, net loan charges-offs were $416,000 or 0.16% of average loans, and non-performing loans were $1.55 million or 0.14% of total loans at March 31, 2007; down $1.72 million or 52% from the $3.24 million (0.33% of total loans) reported at December 31, 2006.
Mr. Berry added, "Asset quality remains a top priority at Gateway. In addition to operating in markets with robust economies, as part of our strategic planning process, we seek out prime locations and identify and hire outstanding bankers and lenders. They are experienced in each market they serve, and astute and highly skilled business people, whose client base has proven to be exceptionally loyal. 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. I would like to also reiterate that we have essentially no sub-prime or Alt-A mortgage loans. Our asset quality remains outstanding, both for a bank over $1 billion in assets and relative to our peer group."
At March 31, 2007, the allowance for loan losses was $10.2 million, or 0.95% of total loans (excluding loans held for sale).
Deposit Growth and Borrowings
Deposits rose $215.1 million, or 28.3%, over the past twelve months to $975.2 million; with core deposits (including retail CDs) up $114.3 million (20.9%) to $660.5 million, and jumbo CDs up $43.4 million (28.3%) to $196.5 million at March 31, 2007. Brokered deposits, primarily used to fund loan growth in the loan production offices and the Raleigh private banking center, grew $57.5 million to $118.3 million at March 31, 2007. Core deposits comprised 67.7% of total deposits at March 31, 2007, while jumbo CDs were 20.1%. Borrowings, including junior subordinated debentures, totaled $227.7 million at March 31, 2007, up $108.3 million from twelve months ago. The Company issued an additional $15 million of junior subordinated debentures during the second quarter of 2006 related to proceeds received from the sale of trust preferred securities by its third Statutory Trust subsidiary. The increase in borrowings was used to fund franchise expansion in 2006 and supplement deposits to fund loan growth over the past 12 months.
Early Adoption of Accounting Standard
Effective January 1, 2007, Gateway elected early adoption of Statements of Financial Accounting Standards ("SFAS") No. 159. SFAS No. 159, which was issued in February 2007, generally permits the measurement of selected eligible financial instruments at fair value at specified election dates. Upon adoption of SFAS No. 159, Gateway selected the fair value measurement option for various pre-existing financial assets and liabilities, including investment securities in the available for sale portfolio totaling approximately $51 million, and junior subordinated debentures issued to capital trusts (commonly known as "trust preferred securities") of $15.5 million. The initial fair value measurement of these items resulted in, approximately, a $1.23 million cumulative-effect adjustment, net of tax, recorded as a reduction in retained earnings as of January 1, 2007. Under SFAS No. 159, this one-time charge was not recognized in current earnings. As a result of Gateway's fair value measurement election for the above financial instruments, Gateway recorded trading gains of approximately $280,000 in the first quarter for the change in fair value of the trading securities and income of $41,000 related to the change in fair value of the junior subordinated debentures from the election date of January 1, 2007 through March 31, 2007. The trading gains and debt fair value adjustments were recorded as a component of non-interest income. Gateway believes its adoption of this standard will have a positive impact on its ability to manage the market and interest rate risks and liquidity associated with certain financial instruments (primarily investments with short durations and low market volatility); improve its financial reporting; and remain competitive in the marketplace during the remainder of 2007, as well as future periods.
Stockholders' Equity
Stockholders' equity at March 31, 2007 totaled $111.5 million, an increase of $9.0 million, or 8.8%, from March 31, 2006. At March 31, 2007, Gateway had 11,039,858 shares outstanding; stockholders' equity equaled 8.43% of total assets, and the total risk-based capital ratio was 11.98%, well in excess of the "well-capitalized" regulatory threshold.
Mr. Berry concluded, "We are pleased with our overall performance this quarter and the earnings we generated. Despite the negative effect of an inverted yield curve and margin compression that all financial institutions are feeling, we were still able to substantially increase our earnings during the first quarter over the prior year. We were especially pleased with the results from our Mortgage Company, which generated a profit for the first time this quarter, during economic times in which many more seasoned mortgage operations have struggled in face of sub-prime loans and uncertain economic conditions. Our franchise continues to grow. And with our expenses stabilizing, our revenues continuing to grow, and our maturing financial centers becoming increasingly profitable, we look forward to 2007 being an excellent year for Gateway."
Webcast and Conference Call Information
Gateway's executive management team will host a conference call and simultaneous webcast on Wednesday, April 25 at 10:00 AM Eastern Time to discuss the quarterly results. The webcast can be accessed live on the Company's website, www.gwfh.com, on the Investor Relations page. A replay will be available approximately two hours after the live conference call ends, and will be archived on the Company's website for one month.
About the Company
Gateway Financial Holdings, Inc. is the parent company of Gateway Bank & Trust Co., a regional community bank with a total of twenty-four full-service financial centers -- thirteen in Virginia: Virginia Beach (7), Chesapeake (3), Suffolk, Norfolk and Emporia; and eleven in North Carolina: Elizabeth City (3), Edenton, Kitty Hawk (2), Moyock, Nags Head, Plymouth, Roper and Raleigh, in addition to a private banking center in Raleigh. The Bank provides insurance through its Gateway Insurance Services, Inc. subsidiary, brokerage services through its Gateway Investment Services, Inc. subsidiary, and mortgage banking services through its Gateway Financial Mortgage, Inc. subsidiary. The common stock of the Corporation is traded on the Nasdaq Global Market under the symbol GBTS. For further information, visit the Corporation's web site at www.gwfh.com.
Forward-Looking Statements
Statements contained in this news release, which are not historical facts, are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Amounts herein could vary as a result of market and other factors. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. Such forward-looking statements may be identified by the use of such words as "believe," "expect," anticipate," "should," "planned," "estimated," and "potential." Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, expected or anticipated revenue, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions; regulatory and shareholder approval of acquisitions; 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
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
2007 2006 2006 2006 2006
-------- -------- -------- -------- --------
(Dollars in
thousands
except per
share data)
EARNINGS
Net
interest
income $ 10,039 9,971 9,493 9,312 8,222
Provision
for loan
losses $ 1,200 800 600 800 1,200
Non
Interest
income $ 4,649 2,545 4,416 1,296 1,013
Gain
(loss)
and net
cash
settle-
ments on
economic
hedge 189 (502) 1,601 (1,198) (1,819)
Loss on
disposi-
tion of
premises
and
equip-
ment $ - (292) - - -
Proforma
non-
interest
income
(c) $ 4,460 3,339 2,815 2,494 2,832
Non
Interest
expense $ 9,526 9,557 9,018 8,559 7,840
Pre-tax
income $ 3,962 2,159 4,291 1,249 195
Net
income $ 2,514 1,403 2,778 864 224
Basic
earnings
per
share
(a) $ 0.23 0.13 0.26 0.08 0.02
Diluted
earnings
per
share(a) $ 0.22 0.13 0.25 0.08 0.02
Proforma
diluted
earnings
per
share
(a) (c) $ 0.21 0.17 0.16 0.14 0.12
Weighted
avg.
basic
shares
out-
stand-
ing (a) 10,990,371 10,889,605 10,805,652 10,789,189 10,762,140
Weighted
average
diluted
shares
(a) 11,263,502 11,157,077 11,097,299 11,131,691 11,113,498
PERFORMANCE
RATIOS
Return on
average
assets 0.83% 0.48% 1.03% 0.37% 0.11%
Proforma
return
on
average
assets(c) 0.79% 0.66% 0.66% 0.63% 0.60%
Return on
average
common
equity 9.21% 5.20% 10.57% 3.41% 0.89%
Proforma
return
on
average
common
equity
(c) 8.78% 7.03% 6.77% 6.29% 5.39%
Net
interest
margin
(fully
tax-
equi-
valent) 3.62% 3.77% 3.84% 3.94% 3.92%
Non-
interest
expense
to
average
assets 3.14% 3.30% 3.38% 3.35% 3.39%
Efficiency
ratio 66.26% 73.94% 64.20% 79.99% 88.95%
Proforma
efficiency
ratio(b) 67.15% 71.15% 72.56% 71.87% 73.39%
Full-time
equi-
valent
employ-
ees 345 327 310 299 280
CAPITAL
Period-end
equity to
assets 8.41% 9.05% 9.43% 9.62% 10.39%
Tier 1
leverage
capital
ratio 11.40% 11.38% 12.02% 12.48% 12.01%
Tier 1
risk-
based
capital
ratio 11.11% 12.11% 13.05% 13.75% 13.02%
Total
risk-
based
capital
ratio 11.98% 12.99% 13.94% 14.63% 13.89%
Book
value
per
share(a) $ 10.10 9.99 9.80 9.45 9.48
Cash
dividend
per
share(a) $ 0.05 0.05 0.05 0.03 0.03
ASSET
QUALITY
Gross
loan
charge-
offs $ 426 95 58 86 66
Net loan
charge-
offs $ 416 89 53 76 60
Net loan
charge-
offs to
average
loans
(annual-
ized) 0.16% 0.04% 0.02% 0.04% 0.03%
Allowance
for loan
losses $ 10,189 9,405 8,694 8,147 7,423
Allowance
for loan
losses
to total
loans 0.95% 0.95% 0.97% 0.96% 0.95%
Nonper-
forming
loans $ 1,554 3,269 420 138 2,681
NPL to
total
loans 0.14% 0.33% 0.05% 0.02% 0.34%
Other
real
estate
and re-
possessed
assets $ 0 0 0 0 0
END OF
PERIOD
BALANCES
Loans
(before
allow-
ance) $1,083,638 994,592 896,080 852,381 783,614
Total
earning
assets
(before
allow-
ance) $1,216,893 1,103,363 1,031,613 984,515 908,052
Total
assets $1,322,613 1,207,477 1,125,144 1,062,241 986,311
Deposits $ 975,222 923,725 834,093 836,528 760,078
Stock-
holders'
equity $ 111,466 109,640 106,058 102,240 102,456
AVERAGE
BALANCES
Loans
(before
allow-
ance) $1,022,556 936,642 860,038 822,938 718,642
Total
earning
assets
(before
allow-
ance) $1,125,833 1,049,235 980,105 947,402 846,652
Total
assets $1,231,223 1,148,128 1,066,917 1,022,762 924,764
Deposits
(Excludes
non-int.
DDA) $ 823,785 753,959 729,485 703,226 614,034
Stock-
holder's
equity $ 110,655 107,124 104,227 102,820 102,347
Year to Date
12 Mos. 12 Mos.
2006 2005
---------- ----------
(Dollars in thousands except per share data)
EARNINGS
Net interest income $ 36,998 23,303
Provision for loan losses $ 3,400 2,200
Non Interest income $ 9,270 8,067
Gain (loss) and net cash
settlements on economic hedge $ (1,918) -
Loss on disposition of premises
and equipment $ (292) -
Proforma non-interest
income (b) $ 11,480 8,067
Non Interest expense $ 34,974 23,266
Pre-tax income $ 7,894 5,904
Net income $ 5,269 3,939
Basic earnings per share (a) $ 0.49 0.48
Diluted earnings per share (a) $ 0.47 0.46
Proforma diluted earnings
per share (a) (c) $ 0.60 0.46
Weighted avg. basic shares
outstanding (a) 10,811,980 8,214,118
Weighted average diluted shares (a) 11,121,703 8,556,012
PERFORMANCE RATIOS
Return on average assets 0.51% 0.58%
Proforma return on average assets (c) 0.64% 0.58%
Return on average common equity 5.06% 5.77%
Proforma return on average
common equity (c) 6.38% 5.77%
Net interest margin
(fully tax-equivalent) 3.87% 3.81%
Non-interest expense to
average assets 3.35% 3.43%
Efficiency ratio 75.80% 74.17%
Proforma efficiency ratio (b) 72.75% 74.17%
Full-time equivalent employees 327 247
CAPITAL
Period-end equity to assets 9.08% 10.19%
Tier 1 leverage capital ratio 11.38% 13.73%
Tier 1 risk-based capital ratio 12.11% 14.31%
Total risk-based capital ratio 12.99% 15.17%
Book value per share (a) $ 9.99 9.46
Cash dividend per share (a) $ 0.16 0.09
ASSET QUALITY
Gross loan charge-offs $ 305 87
Net loan charge-offs $ 278 80
Net loan charge-offs to average
loans (annualized) 0.04% 0.02%
Allowance for loan losses $ 9,405 6,283
Allowance for loan losses
to total loans 0.95% 0.94%
Nonperforming loans $ 3,269 204
NPL to total loans 0.33% 0.03%
Other real estate and
repossessed assets $ 0 0
END OF PERIOD BALANCES
Loans (before allowance) $ 994,592 666,652
Total earning assets
(before allowance) $ 1,103,363 802,398
Total assets $ 1,207,477 883,373
Deposits $ 923,725 646,262
Stockholders' equity $ 109,640 98,744
AVERAGE BALANCES
Loans (before allowance) $ 835,527 523,492
Total earning assets
(before allowance) $ 956,765 611,104
Total assets $ 1,043,318 679,020
Deposits (Excludes non-int. DDA) $ 695,824 446,071
Stockholder's equity $ 104,207 68,258
(a) All references to share and per share amounts have been adjusted
to reflect the effect of an 11-for-10 stock split effective in
the form of a 10% stock dividend distributed on May 15, 2006 and
June 20, 2005.
(b) 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.
(c) 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.
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED
March 31,
2007 2006
----------- ----------
Unaudited Unaudited
(Amounts in (000), except
share and per share data)
INTEREST INCOME
Loans, including fees $ 20,384 $ 13,730
Investment securities - taxable 908 1,226
- tax-exempt 70 62
Interest-earning bank deposits 34 38
Other interest and dividends 184 148
----------- ----------
Total interest income 21,580 15,204
INTEREST EXPENSE
Money market, NOW and savings 2,256 1,397
Time deposits 6,874 4,057
Short term debt 275 603
Long-term debt 2,136 925
----------- ----------
Total interest expense 11,541 6,982
----------- ----------
Net interest income 10,039 8,222
Provision for loan losses 1,200 1,200
----------- ----------
Net interest income after
provision for loan losses 8,839 7,022
NON INTEREST INCOME
Service charges on accounts 877 715
Mortgage operations 932 172
Insurance operations 1,321 741
Brokerage operations 266 111
Gain on sales of securities 163 653
Gain (loss) and net cash
settlements on economic hedge 189 (1,819)
Gain from trading securities 280 -
Other income 621 440
----------- ----------
Total non interest income 4,649 1,013
NON INTEREST EXPENSE
Salaries and benefits 5,259 3,708
Occupancy and equipment 1,810 1,542
Data processing fees 453 428
Other expense 2,004 2,162
----------- ----------
Total non interest expense 9,526 7,840
----------- ----------
Income before income taxes 3,962 195
Income tax expense (benefit) 1,448 (29)
----------- ----------
Net income $ 2,514 $ 224
----------- ----------
Basic earnings per
share (a) $0.23 $0.02
Diluted earnings per
share (a) $0.22 $0.02
Weighted avg. basic
shares outstanding (a) 10,990,371 10,762,140
Weighted average
diluted shares (a) 11,263,502 11,113,498
(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 10% stock dividend distributed on May 15, 2006.
GATEWAY FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31, March 31,
2007 2006(a) 2006
----- ----- ----
Unaudited Unaudited
(Dollar amounts in thousands)
ASSETS
Cash and due from banks $ 20,527 $ 22,077 11,675
Interest-earnings
deposits in other banks 3,416 4,717 942
---------- ---------- ----------
Total cash and cash
equivalents 23,943 26,794 12,617
Trading securities 50,732 - -
Securities available for
sale 65,335 93,475 114,597
Federal Home Loan Bank
stock 10,101 6,970 5,980
Federal Reserve Bank
stock 3,671 3,609 2,919
Loans 1,083,638 994,592 783,614
Allowance for loan losses (10,189) (9,405) (7,423)
---------- ---------- ----------
Total loans, net 1,073,449 985,187 776,191
Premises and equipment,
net 39,589 38,456 33,905
Bank owned life insurance
policies 25,312 25,051 17,355
Goodwill and intangible
assets 13,352 12,615 10,266
Accrued interest
receivable 8,920 8,742 6,551
Other assets 8,209 6,578 5,930
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Total assets $1,322,613 $1,207,477 986,311
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LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 117,994 $ 108,007 83,780
Interest-bearing 857,228 815,718 676,298
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Total deposits 975,222 923,725 760,078
Short term debt 45,000 14,500 47,001
Long-term debt 182,746 152,429 72,465
Accrued expenses and
other liabilities 8,179 7,183 4,311
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Total liabilities 1,211,147 1,097,837 883,855
STOCKHOLDERS' EQUITY
Common stock 102,328 101,669 98,866
Retained earnings 9,307 8,708 5,043
Accumulated other
comprehensive loss (169) (737) (1,453)
---------- ---------- ----------
Total stockholders'
equity 111,466 109,640 102,456
Total liabilities and
stockholders' equity $1,322,613 $1,207,477 986,311
---------- ---------- ----------
(a) Derived from audited financial statements.