Gateway Financial Holdings reports strong Q3 results
Gateway Financial Holdings, Inc. (Nasdaq: GBTS), the holding company for Gateway Bank & Trust Co., recorded stronger-than-anticipated results for the third quarter.
The provider of commercial and retail banking services in northeastern North Carolina and in the Tidewater area of southeastern Virginia reported net income for the third quarter of 2007 of $4.2 million, or $0.32 per share, well above the $0.23 two analysts polled by Thomson Financial were on average forecasting. Last year the company earned net income of $2.8 million, or $0.25 per share. (Per share results reflect the issuance of additional shares for the acquisition of The Bank of Richmond.)
The small cap attributed its robust earnings to reflect “exceptional” revenue growth from a 57.1% increase in loans over the past 12 months and increased revenues from its non-banking activities.
Total revenue, which the bank defines as net interest income and non-interest income, was $19.7 million, above an analyst’s estimate of $16.7 million polled by Thomson Financial. The current quarter’s revenue represents an increase of 41.5% above the $13.9 million reported for the third quarter of 2006.
Additionally, during the quarter Gateway said it made the decision to take advantage of market conditions and terminate an economic hedge position. The bank said the hedge produced volatile earnings from quarter to quarter and the company no longer felt it necessary from an interest rate risk standpoint to maintain its position. As a result, Gateway said that third quarter income included a gain of $1.3 million in the fair market value and net cash settlements on the economic hedge, and a fair market value gain of $576,000.
The small cap also noted that its interest rate margin stabilized and increased somewhat during the last two months of the quarter.
Excluding the hedge, earnings per share were $0.26, still managing to beat the Street’s $0.23 per share estimate.
Shares of Gateway Financial (GBTS) jumped 11.49%, or $1.50, to $14.55 at 12:40 p.m. ET. Shares of Gateway Financial have been trading in the range of $ for the past 52 weeks.
