Local Banks Post Gains, Remain Cautious
By Tom Shean, The Virginian-Pilot, Norfolk, Va.
Oct. 24–Two of the region’s community banks, TowneBank and Gateway Financial Holdings Inc., reported higher third-quarter net income Tuesday, citing strong loan growth and subdued levels of non performing assets.
However, both institutions noted that the pace of economic growth in Hampton Roads has slowed from what it was a year ago, possibly hampering continued loan growth.
The downturn in housing activity appears to be affecting other sectors of the region’s economy and eventually could affect the quality of bank loans, said Bob Aston, chairman and chief executive officer of Portsmouth-based TowneBank.
“It would be foolish not to think that the industry won’t see some uptick in credit losses,” Aston said.
At Virginia Beach-based Gateway Financial, Chairman and Chief Executive Ben Berry said the region’s economy has been stable but isn’t as vibrant as it was a few years ago. Gateway, he said, has focused more of its expansion plans on the Raleigh, Chapel Hill and Wilmington, N.C., markets, where loan demand has been especially strong.
The parent of Gateway Bank & Trust Co. reported a 52 percent increase in its third-quarter earnings, due largely to a 57 percent rise in loans. Gateway’s share price jumped $1.55, or almost 12 percent, to close at $14.60.
Its net income for the recent quarter totaled $4.22 million, or 32 cents a share. That’s up from $2.78 million, or 25 cents a share, for the same period last year.
Berry attributed part of the the bank’s loan growth to Gateway’s practice of hiring veteran lending officers who bring seasoned loan portfolios with them from other banks. Gateway said it planned to open at least five branches during 2008, including one in Chesapeake during the first quarter.
TowneBank, the largest bank based in Hampton Roads, said it earned $5.99 million for the July-through-September period, an 8.5 percent increase from $5.52 million for the year-earlier quarter. Earnings per share were 24 cents, up from 22 cents.
The bank’s net interest income rose 11 percent, to $21.99 million. However, its net interest margin, a key earnings measure, narrowed from the 2006 third quarter. That was because the mix of its deposits has been changing and TowneBank relies more heavily on certificates of deposit than it did a year ago, Aston said.
Also, with the falloff in residential real estate activity, the volume of less-expensive deposits held in escrow accounts at TowneBank has declined, he noted.
The bank’s non interest income for the recent quarter rose 3.7 percent despite a falloff in commission revenue from its GSH Residential Real Estate brokerage subsidiary. However, GSH continues to generate significant business for the bank’s mortgage and insurance-agency subsidiaries, Aston said.
Tom Shean, (757) 446-2379, tom.shean@pilotonline.com
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