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Edited Transcript of XBKS earnings conference call or presentation 24-Apr-08 2:00pm GMT

Thomson Reuters StreetEvents

Q1 2008 Gateway Financial Holdings, Inc. Earnings Conference Call

Norfolk Jan 2, 2018 (Thomson StreetEvents) -- Edited Transcript of Xenith Bankshares Inc earnings conference call or presentation Thursday, April 24, 2008 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ben Berry

Gateway Financial Holdings, Inc. - Chairman & CEO

* Ted Salter

Gateway Financial Holdings, Inc. - Senior EVP & CFO

* Frank Horne

Gateway Financial Holdings, Inc. - Senior EVP & Chief Credit Officer

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Conference Call Participants

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* Fred Milligan

Sanders, Morris Harris - Analyst

* Sam Caldwell

KBW - Analyst

* Lozan Aleksandrov

FIG Partners - Analyst

* Walter Walsh

Gabelli Partners - Analyst

* Allan Bach

Davenport & Company - Analyst

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Presentation

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Operator [1]

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Welcome to the Gateway Financial Holdings Incorporated first-quarter and year-end results conference call. There will be a question-and-answer period at the end of the presentation. (OPERATOR INSTRUCTIONS).

Before we begin today's call, I would like to remind everyone that this call may involve certain forward-looking statements such as projections on revenue, earnings and capital structure, as well as statements on the plans and objectives of the Company or its management, statements on economic performance and statements regarding the underlying assumptions of the Company's business. The Company's actual results could differ materially from any forward-looking statements made to date due to several important factors described in the Company's latest Securities and Exchange Commission's filings. The Company assumes no obligations to update any forward-looking statements made during this call.

If anyone does not already have a copy of the press release issued by Gateway today, you can access it at the Company's Web site at www.GWFH.com. On the conference today from Gateway Financial Holdings Inc., we have Ben Berry, Chairman and CEO; Teddy Salter, CFO; and David Twiddy, President and COO.

We will begin this call with management's prepared remarks and then open the call up for questions. At this point, I would like to turn the call over to Mr. Berry. Go ahead, sir.

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [2]

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Good morning, and thank you for joining us for our earnings conference call.

We are pleased to report first-quarter 2008 net income of $3.1 million compared with $2.5 million for the prior year quarter, a 24% increase. Highlights for the quarter include total assets exceeded $1.99 billion, up 6.7% from December 31, 2007.

Loans exceeded $1.6 billion, up 7.4% from year end. Deposits exceeded $1.5 billion, up 10.4% on a linked quarter basis. Asset quality remains strong. Net charge-offs were 3 basis points, and non-performing loans were 41 basis points. Non-interest income increased 35.2% of total revenues.

In the face of this difficult environment, we continue to execute our strategic growth plan and expanded our non-banking activities. As a percentage of average assets, non-interest expenses dropped from 3.14% for the first quarter of 2007 to 2.79% for the first quarter of 2008.

We continue to gain economies of scale from maturing financial centers. Expense control is certainly a major area of focus for 2008 and beyond. Despite the adverse economic and competitive climate, Gateway has been able to maintain strong balance sheet growth and asset quality.

Loan growth in our markets picked back up in the fourth quarter of last year and has remained solid during the first quarter of this year. Our loan pipeline continues to reflect steady demand in most of our markets. We operate in the attractive markets, such as Raleigh, [Carrie], Chapel Hill MSAs, the Virginia Beach, Norfolk, Chesapeake, Suffolk, Virginia MSA, the Richmond MSA and the Wilmington, North Carolina MSA. These markets all have strong population growth and household incomes.

I also want to point out that Virginia was recently named by CNBC as the best state in the country in which to do business.

I also want to point out we have no sub-prime loans, no structured investment vehicles and no collateralized debt obligations.

I also want to point out that market diversification is another strength of our Company from a risk management standpoint.

Another one of our major focuses is on attracting demand deposit accounts and transactional accounts, which we will reprice along with our variable-rate loans as well as generate additional service charge income.

In the first quarter, we took steps to place floors on all variable-rate loans to help offset current and future projected cuts in the Fed funds rate.

Our net interest margin declined 50 basis points on a linked quarter basis. We see this area as stabilizing in the second quarter. Our should also see improvement in the last two quarters of 2008, reflecting the repricing of CDs and a steeper yield curve.

With regard to asset quality, at the end of the quarter, our loan loss allowance was up 1.04% of total loans from 1.01% of total loans at the beginning of the year. We plan to build our loan loss reserve to 1.10% by year end.

Of the non-performing loans, approximately 70% are from the Outer Banks region and approximately $4.8 million or 73% are represented by only six borrowers. Asset quality remains, and will always be, a top priority at Gateway Bank.

Although our non-performing loans increased somewhat to 41 basis points of total loans, it is still much better than our peer group average, and our net charge-offs were only 3 basis points for the quarter. To be specific, the peer group median for banks $1 billion through $5 billion in the United States, that ratio is 0.76%, and the average is 1.12%.

Our major lending focus will be on commercial industrial loans, portfolio jumbo residential mortgages and owner-occupied real estate that have personal guarantees of the owners and are repaid from cash flow and not the sale of assets. We plan to reduce our exposure in the construction loan category. This includes residential and commercial construction loans, acquisition and development loans, raw land loans and lot loans to 28% of total loans outstanding by year end. This will be done by normal paydowns and not seeking any new lending relationships for loans of this type. I want to emphasize though that this is a risk management decision and not an asset quality issue, as we are pleased with the performance of our loans in these categories.

All of our loans are monitored daily. Our internal loan review process and our independent loan review processes, have been in place for a number of years, to ensure credit quality and spot potential problem assets.

We were very pleased with our first-quarter performance in this very challenging operating environment, which we anticipate will continue through 2008. We feel our Company with a well-capitalized equity base, strong asset quality, and a well-managed balance sheet is well positioned to continue to execute its strategic plan of expanding our franchise and enhancing shareholder value.

Also, in addition to Mr. Twiddy and Mr. Salter, I have asked Frank Warren, our Chief Credit Officer to be here. He's here today. In addition to us, Frank will be available to answer specific questions with regard to the loan portfolio.

But at this time, I'll turn it over to Ted Salter, our Chief Financial Officer.

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Ted Salter, Gateway Financial Holdings, Inc. - Senior EVP & CFO [3]

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Thank you, Ben and good morning, everyone. As Ben just indicated, we had another very good quarter with earnings of $3.1 million, which represented a 24.2% increase over the first quarter of last year.

I'm going to spend some time this morning and focus on some of the key areas where I think we continue to be very success in the execution of our business strategy that has produced these earnings, as well as add some additional color in some other key areas.

First, I want to focus on our revenue and our balance sheet growth. Our loan growth has remained steady in the first quarter, growing 7.4% or $112.9 million and has grown $552 million over the past 12 months, including $167 million, which was acquired through The Bank of Richmond in June of last year. The majority of this first-quarter growth is coming from the greater Hampton Roads area in Richmond, Virginia, as well as in Raleigh and Wilmington, North Carolina. The economies in these areas appear to be holding up very well, and we continue to see a steady pipeline of opportunities from these regions. CRE, construction, and C&I loans continue to represent the largest portion of this growth. The loan growth has been the primary driver for our asset growth, which grew $124.6 million in the first quarter and $670 million over the past 12 months. It has been indicated to $1.99 billion at the end of the quarter.

As a result of the 55% growth in our earning assets, which has primarily been the loans, net interest income has increased $2.6 million or 25.8% over the first quarter of the prior year, and our overall revenues have increased $4.8 million or 32.8% over the first quarter of last year. These increases were in spite of the 300 basis point drop in interest rates in September of last year, that negatively affected our interest rate income and interest rate margin.

The increases in our noninterest income was related to increased service charges, higher insurance revenues and the security gains that I'm going to go over in a little more detail in a few minutes. But first I want to spend a couple of minutes and go through and address our interest rate margin.

It's Ben just indicated, our margin was 2.9% for the quarter, which was a decrease of 50 basis points on a linked quarter basis and 72 basis points lower as compared with the first quarter of last year. This margin compression was primarily the result of the 300 basis point drop in interest rates since the Fed started cutting rates in September of last year, including 125 basis points over an eight-day period in January. With approximately 63% of our loans being variable that reprice immediately, the rate cuts dropped our overall loan yield to 6.99% in the first quarter from 7.93% in the fourth quarter of last year and 8.08% in the first quarter of last year.

In response to these cuts, we have dropped rates on the majority of our transaction deposit accounts as much as our markets will bear and still be competitive to grow deposit accounts to support our growth. The cost of funds from these accounts has dropped to an average of 2.7% for the first quarter as compared to 3.42% in the fourth quarter of last year. Our CDs, however, are repricing at a much slower rate, as obviously they were repriced over time as the CDs mature; as well as we had to keep renewing rates higher than we would typically in more normalized markets.

Average CD rates have dropped to 4.88% this quarter from 5.07% for the fourth quarter of last year. The fact that these rates have had to be kept artificially higher to gather deposits and support our growth in this competitive environment, that's added to our margin compression for the quarter.

The good news in all of this is we feel like the worst is behind us, and our margin compression will mitigate in the second quarter and we would expect to see it start to increase during the second half of this year. Even though we are an asset-sensitive bank on a very short-term basis, basically meaning six months or less, we become somewhat liability sensitive after six months up to a year. And basically what that says is although you get an initial margin compression from falling rates because of the short-term asset sensitivity, because the majority of our variable loans and CDs mature within a year time period, the effects of the following rates will lessen. And as we become more liability sensitive in the nine to 12-month range, and we should see the margins improve.

Now that the most significant portion of interest rate cuts are behind us, and we are several months into cutting our deposit costs, the structure of our balance sheet will allow us to manage the margin upwards over the next six to nine months. Specifically, we are doing several things to manage our balance sheets.

Ben indicated that as we review our credit relationships, we are putting floors on all of our -- or trying to put floors on the majority of our renewing loans or either converting them to fixed rates in the 6.5 to 7% range. It's basically looking at that same pricing structure on new loans. Most of our CDs that continue to mature in the 5% plus range, and they will reprice at least 200 basis points or more than our existing rates.

We are also funding a portion of our growth with wholesale funding and a cost of 16 basis points over Fed funds rate. This has and will continue to provide a natural hedge against any further rate reductions. Additionally, money-market specials that had been priced at above market rates to attract business with 60-month guarantees on pricing will start to run out and reprice at much lower rates tied to Fed funds over the next two quarters. Also, a steeper yield curve during the last half of the year will allow us to earn a much greater spread on structured leverage transactions and investments. So we feel very positive in effect about where our interest rate margin is going to go between now and the end of the year.

I want to switch gears now for a minute and discuss the gains on the securities sales and the fair value gains we had during the quarter. The same -- basically the same economic and market conditions that caused the interest rate cuts that negatively affected our margin produced significant increases in values in our fixed income investment portfolio. We took advantage of this and sold some securities at an $800,000 gain, which provided a natural hedge against some of our margin compression.

We also had a fair value gain of $1.6 million related to certain of our trust preferred debt securities that we elected for fair value option treatment last year. Under the accounting standards, the fair values of these securities are marked-to-market each quarter through the income statement as a component of noninterest income. As a result of the unusual credit conditions in the marketplace and the drop in interest rates, the credit spreads on these securities have widened significantly.

To give you an example, a typical trust preferred issuance in the first quarter of last year would have had a spread of 135 to 155 basis points over LIBOR versus spreads today, which are in the 425 to 450 basis point range over LIBOR, and that's if you can get a transaction done at all because the markets are very liquid at this time. This spread widening has resulted in increased value on these debt securities.

We've been focused on our asset quality statistics, but I would just like to reemphasize that despite the steady loan growth that we've had over the past couple of years, our asset quality remains exceptional, especially in light of the huge charge-offs within our industry that have continued into the first quarter of this year. Net loan charge-offs are only 3 basis points of average loans outstanding as compared to 16 basis points for the first quarter of last year and 8 basis points for the fourth quarter of last year.

Non-performing loans were 40 basis points of loans outstanding at month end and were concentrated to a few lenders, primarily in our Outer Banks regions. These credits are well collateralized with real estate and the majority have personal guarantees.

We recorded a loan loss provision of $1.6 million for the first quarter, which was a direct result of our loan growth as compared with only $110,000 in net charge-offs. We increased our reserve to 1.04% of loans outstanding from 1.01% at the beginning of the year, and our loan loss reserve currently provides 250% coverage over our existing NPL balance.

Another key factor in our first-quarter earnings performance was our expense control and maturing of our financial centers as we continue to grow our business. We currently have 35 service centers, of which 27 are over two years old, which represents a 77% maturity. This compares with a couple of years ago when only about 50% of our financial centers were mature. As a result, our noninterest expenses as a percentage of assets has dropped to 2.79% for the first quarter as compared with 3.14% for the first quarter of last year. We continue to gain economies of scale from these maturing financial centers, and even though our noninterest expense is higher from a dollar standpoint, associated with our franchise growth, they are steadily reducing as a percentage of our revenues and asset size.

Lastly, the bank remains well capitalized with a total risk-based capital ratio of 10.64%. The $23.2 million of additional capital we raised in December of last year has enabled us to continue to strategically grow and execute our business plan.

I appreciate your time this morning and now I'm going to turn it back over to Ben for some wrap-up and questions.

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [4]

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Thank you very much, Teddy. I don't have any further comments this morning, so at this time, I'd like to go ahead and open it up for questions.

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Questions and Answers

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Operator [1]

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(OPERATOR INSTRUCTIONS). Fred Milligan, Sanders, Morris Harris.

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Fred Milligan, Sanders, Morris Harris - Analyst [2]

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Good morning. Core deposits, what happened with them in the quarter? Up or down?

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [3]

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I will let Mr. Salter address that.

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Ted Salter, Gateway Financial Holdings, Inc. - Senior EVP & CFO [4]

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Core deposits were -- well, our CDs dropped down a little bit and that was by design as we let some non-relationship higher cost type CDs roll off out of the bank and replace them with some of the wholesale funding I was referring to, at Fed funds over 16 basis points. Our transaction accounts, core transaction accounts increased a little over $30 million, meaning noninterest DDA, money-markets and NOWs increased approximately $30 million during the quarter.

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Fred Milligan, Sanders, Morris Harris - Analyst [5]

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Okay. And how about real estate values in the areas that you are in?

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [6]

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Well we think they are holding up very well, Fred. We -- when loans come up for renewal or whatever, we're ordering new appraisals and we're watching that very carefully. But I would reiterate that Raleigh, the Raleigh market in Richmond and some of the other markets have actually had some appreciation in them. To what extent, I don't know, but we haven't seen much decline there. And again, we feel pretty comfortable about where our real estate is at this point.

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Fred Milligan, Sanders, Morris Harris - Analyst [7]

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Okay, show. Thanks.

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Operator [8]

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(OPERATOR INSTRUCTIONS). Sam Caldwell, KBW.

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Sam Caldwell, KBW - Analyst [9]

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I wanted to ask a little more breakdown on the NPAs that you guys mentioned, that 70% of them were in the Outer Banks. What types of loans are those?

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [10]

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I'm going to ask Frank to address that, Sam. He's got that data right with him.

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Frank Horne, Gateway Financial Holdings, Inc. - Senior EVP & Chief Credit Officer [11]

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Good morning, Sam. The -- we had -- about 55% of the NPAs were in the construction and development category. We had about 20% in the 1 to 4 family, with about 18% in commercial real estate, and then the balance in C&I and consumer.

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Sam Caldwell, KBW - Analyst [12]

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Great. And what are your past due trends and classified loan trends, watchlist trends, any of that stuff looking like this quarter compared to last quarter?

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Frank Horne, Gateway Financial Holdings, Inc. - Senior EVP & Chief Credit Officer [13]

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They seem to be holding well. The past dues popped up this month, but we had a couple items that should not have been up there. More of administrative past dues. If we were to back those out, we would have gone from 56 to 34 basis points. And it's kind of been holding at that lower level. These were past due -- but they should not have been there.

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [14]

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They just didn't get processed, Sam. That was the customer was in, but it was just one of those things. And we just elected to be very conservative in our reporting process.

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Sam Caldwell, KBW - Analyst [15]

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Okay. Great.

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Operator [16]

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Lozan Aleksandrov, FIG Partners.

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Lozan Aleksandrov, FIG Partners - Analyst [17]

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If I can follow up on the NPAs question, can you tell if tell us a little bit about how the values of the ones that were moved to non-performing status coming relative to what you kept these loans on the books for?

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Frank Horne, Gateway Financial Holdings, Inc. - Senior EVP & Chief Credit Officer [18]

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Yes. And all of these -- all of our NPAs are secured by real estate, with the exception of about $200,000 to $225,000, but they are guaranteed with -- we expect to collect those as well. All of them are -- have personal guarantees. We're finding that the real estate is -- on these, that these new ones, are supporting the credit. So we have seen very little loss, some losses, but very little losses in the real estate loans that are -- that we have foreclosed on so far, as you can tell within our net charge-offs.

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Lozan Aleksandrov, FIG Partners - Analyst [19]

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Sure, yes, it's been great. Yes.

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [20]

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And I wanted to comment, we have a lot of relationships with the attorneys on the Outer Banks. And actually, one of the attorneys in that area is on our Corporate Board and they are seeing trends that real estate transactions picking up significantly, which is certainly a good sign. So that's one of the best places to look, is how much -- how many real estate loans that are being closed by the attorneys. So that is -- I don't specifics other than we do check with them about once a month and things in that particular market are picking up.

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Lozan Aleksandrov, FIG Partners - Analyst [21]

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Great. And if there are any of the reserve additions specifically allocated to any of the new NPAs, so it is just relative to the regular growth that you see in your loan portfolio?

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [22]

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It's just relative to economic conditions that we just are erring on the side of just being cautious.

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Lozan Aleksandrov, FIG Partners - Analyst [23]

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Okay, great. And if I can just switch gears for a second then, this is probably a question for Teddy. Can you tell us a little more of the gain on the trust preferred? You mentioned some details in the press release and also on the call. But I guess I was just wondering how big is the gain relative to the total value of the trust preferred? And also I mean, is that kind of -- do you see that gain as pertaining or is it going to be -- do you think it's going to reverse in the next couple of quarters or how do you think about it?

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Ted Salter, Gateway Financial Holdings, Inc. - Senior EVP & CFO [24]

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The cumulative gain for this year, as I indicated, was $1.6 million. We had some gain last year. I think cumulatively, it's something over $2 million now.

That gain will reverse. It will reverse and it will reverse as those credit spreads start to become more normalized. So yes, the gain will reverse, but it will not reverse until we get more normalized credit spreads. Those securities are valued on a quarterly basis. They're done by an outside firm that does a lot of net present value calculations based on the LIBOR swap rates going out over the next 20 years in existing spreads versus the spreads that are on those securities, the actual spreads on the securities. So long story short, they will reverse sometime in the future. When, I have no idea. Or they could go up some more depending on where the spreads go.

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Lozan Aleksandrov, FIG Partners - Analyst [25]

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And roughly how much was the gain relative to the total value of the trust preferred securities you have on the balance sheet?

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Frank Horne, Gateway Financial Holdings, Inc. - Senior EVP & Chief Credit Officer [26]

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The total trust preferreds were about $55 million.

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Lozan Aleksandrov, FIG Partners - Analyst [27]

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$55 million? Okay. Thank you for taking my questions today.

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Operator [28]

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Walter Walsh, Gabelli.

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Walter Walsh, Gabelli Partners - Analyst [29]

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Thank you very much for your time. Mr. Berry, we had spoken about The Bank of Richmond acquisition. It looked to be very much on track when I spoke to you last. I wonder if you can just comment on that. And if you see any situation -- possibilities of growth through acquisition of banks in North Carolina, South Carolina, that area.

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [30]

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I would say the Richmond franchise continues to grow; loans and deposits are right on plan with what we had projected it to be. We felt like two to three years, that unit would go from a $200 million unit of the bank to $400 million to $500 million, and it's still on track there. We continue to be able to attract quality people.

One of the things about Richmond, it is a deposit-rich market. It has the third highest deposit level of the MSAs in the Southeast. In terms of population, it is not the largest, obviously, but that is what attracted us to that market in addition to a number of other things.

With regards to acquisitions, we have -- South Carolina is a little different state in terms of the regulatory environment. Like North Carolina and Virginia have a compact, an agreement between both states, so it is easy to do deals across state lines in North Carolina and Virginia.

South Carolina, you have to operate under either an OCC charter or you have to have an institution chartered in that state.

But we have looked at some opportunities in South Carolina. We will continue to look at opportunities in those three -- in the three states -- Virginia, North Carolina and South Carolina. But again, we will look at institutions maybe that have a higher level of capital and have low-cost funding. But maybe due to issues such as Sarbanes-Oxley and things of that nature, they might have had all the fun they can stand, and we may be interested in taking a look at them.

But we think some banks will have some issues. We hope not, but we will just keep our eyes open. And we had to look at each case separately and see what makes sense in terms of our strategic plan and for our shareholders.

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Walter Walsh, Gabelli Partners - Analyst [31]

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Thank you very much.

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Operator [32]

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Allan Bach, Davenport & Company.

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Allan Bach, Davenport & Company - Analyst [33]

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Thanks for taking my call. A couple questions for you. I guess first, outside of the construction portfolio, could you give some general comments on what you are seeing in the loan pipeline?

And then second, you guys gave some good comments on the margin and what you're looking for, for the rest of the year. I was wondering if you guys might be having any internal conversations about how to position the portfolio for a potential increase in interest rates in 2009 or even farther out than that?

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [34]

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I'll let Frank address the loan pipeline and then we will talk about the positioning of the portfolio for in terms of rising rates, which we do think rates will start to go back up. But we think we've probably got another 25 basis points cut coming in the next week when the Fed next meets. So -- but Frank, go ahead and take the pipeline question.

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Frank Horne, Gateway Financial Holdings, Inc. - Senior EVP & Chief Credit Officer [35]

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Okay. Regarding the pipeline, we certainly do not see much in the construction and development area and as Ben said earlier, we are mainly concentrated -- focused to reduce that -- those type loans off our balance sheet.

What we are seeing is we're seeing some C&I type lending, commercial and industrial, and we're seeing some owner-occupied properties. For the most part, that's the two big line items that we're seeing right now.

And we're seeing it pretty much across the board. The Raleigh markets, Richmond and Virginia Beach markets is where we're getting most of the growth or at least the pipelines now.

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [36]

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Allan, I would comment on one other thing. The larger banks, the mega banks are -- obviously, it's well-documented the issues they've had and they're trying to protect their capital base. And it appears to us in the markets we serve, they have kind of backed away from the C&I lending and other types of loans right now because of capital issues. And we see an opportunity right now to really attract a lot of demands deposit relationships as well as good commercial loan type -- the old C&I stuff that I call commercial loan type opportunities to individuals, corporations, and partnerships and those kind of things. So that looks pretty promising, what we see out there.

With regard to loan pricing, we pretty well are -- I believe our mix we were, in terms of what floats and what is fixed, we were liked at 64% variable, and 36, 37% fixed. We think that we still want to position ourselves for the rates going up.

I think the other thing we'll look a lot harder though with us is funding. And when we see the rates we feel like have bottomed out, we will go out and be aggressive in the market of locking in some long-term funding for quite some time, which obviously would help our margin over a period of time. But I would say we try to adjust the fixed and floating-rate loans, but probably 60/40 with 60 being variable and 40 fixed is probably where we come in at, just as a rough barometer.

But at the same time, our portfolio, loan portfolio is relatively short. I think we have on average, and Teddy, what it's $80 million to $100 million repricing per month?

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Ted Salter, Gateway Financial Holdings, Inc. - Senior EVP & CFO [37]

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Yes, and I think that that is a key factor as we look at our loan relationships, is we have over $1 million of variable loans and they all -- they reprice every year. So we are able to work with the pricing within a year timeframe, so strategies that we may be using today, we can change three, four, six months from now and start reflecting it on loans as they renew at that point in time.

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [38]

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And we use pricing models. And again, we have been able to pretty well get the pricing we need on loans with the floors we put in and those kind of things, it's worked very effectively. But that's kind of where we are with regard to that strategy.

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Allan Bach, Davenport & Company - Analyst [39]

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Very good. Thank you very much.

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Operator [40]

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Gentlemen, there are no further questions in queue at this time. I would like to turn it back over to Mr. Berry for closing comments.

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Ben Berry, Gateway Financial Holdings, Inc. - Chairman & CEO [41]

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Okay. Thank you very much. We appreciate your interest in our Company. We appreciate your questions. And should you have any further questions, please feel free to give me a call. I think my number is on the press release or Teddy's or feel free to call David or Frank. If you can't find the number, we will give it to you. So thank you for your interest in our Company and wish everybody a good day.

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Operator [42]

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Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.