News
Email
Print
Yadkin Valley bank has 54% drop in net income
Freddie Mac exposure, lower fee income are cited as the main causes
ADVERTISEMENT
Published: November 8, 2008
Lower fee income and an exposure to Freddie Mac's stock decline contributed to a 54 percent decrease in net income in the third quarter for Yadkin Valley Financial Corp., the bank reported yesterday.
The bank, based in Elkin, reported net income of $1.8 million compared with $3.9 million in the third quarter of 2007. Diluted earnings were down 22 cents to 15 cents a share.
The bank said that its earnings were reduced by 6 cents because it took a $972,800 pretax charge on investments in Freddie Mac perpetual preferred shares.
The average earnings forecast was 24 cents a share by analysts surveyed by Zacks Investment Research.
Yadkin Valley's share price fell 20 cents to close at $13.87 yesterday.
Freddie Mac and Fannie Mae buy home loans from banks, and then repackage those loans as mortgage-backed securities which they either hold on their own books or sell to investors around the world. This process provides banks with more money to make more home loans, greatly expanding home ownership.
Both institutions were placed into a government conservatorship in September, a move that could end up costing taxpayers billions of dollars.
Yadkin Valley reported that nonperforming assets were $12.7 million on Sept. 30, up from $6.9 million on June 30 and $2.6 million on Sept. 30, 2007. Nonperforming loans were $9.7 million on Sept. 30, up from $4.8 million on June 30 and $1.7 million on Sept. 30, 2007.
The bank said that listing a $3.8 million commercial loan connected to the lumber industry as nonperforming accounted for the bulk of the increase in nonperforming loans.
The bank did lower its provision for loan losses to $1.3 million from $1.7 million on June 30.
Revenue from loans declined 1 percent to $10.6 million, while revenue from fees was off 14 percent to $3 million. Noninterest expenses rose 18 percent to $9.8 million, primarily from integration costs connected to its proposed purchase of American Community Bancshares.
"I am pleased with our third-quarter performance in light of the challenging economic environment," said Bill Long, the president and chief executive of Yadkin Valley. "We believe our asset quality continues to outperform our peers.
"As the economic conditions across our markets have slowed and the housing market continues to soften, we anticipate that our nonperforming loans will remain higher than historical levels, yet manageable, during the fourth quarter."
Buddy Howard, an analyst with Equity Research Services of Raleigh, said that Yadkin Valley had a respectable quarter given the turmoil in the banking industry.
"Earnings were obviously down from the year-ago level, but then again, they have been for just about every bank," Howard said.
"Importantly, there was some earnings improvement from the second quarter of 2008. The company's asset quality has held up reasonably well, as has loan growth."
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
■ The Associated Press contributed to this article.
Email
Print
ADVERTISEMENT
See community events or add your own! Click here!
Advertisement
