Magazine article American Banker

2Q Earnings: Commercial Loans Rise, Profit Dips at Greater Bay

Magazine article American Banker

2Q Earnings: Commercial Loans Rise, Profit Dips at Greater Bay

Article excerpt

A focus on commercial lending paid off for Greater Bay Bancorp in the second quarter even though it reported a sharply lower profit.

The East Palo Alto, Calif., company, which is being acquired by Wells Fargo & Co., said Tuesday that its loan book rose 6% in the quarter and commercial loans and leases rose 17%.

But its net income fell 34% from a year earlier, to $17.5 million, and its net interest margin fell sharply. Earnings per share were 37 cents, missing Wall Street estimates by 2 cents.

Brent Christ, an analyst at Fox-Pitt, Kelton Inc., said in an interview Tuesday, "From a loan-growth perspective they seem to have had the best traction that they have seen in quite a while."

The $7.3 billion-asset Greater Bay hired 16 people last year in its commercial banking business development group as it pursued loan and revenue growth.

In 2004 it hired a former Wells Fargo banker, Colleen Anderson, to head its community bank group.

Mr. Christ and Joe Morford, an analyst at Royal Bank of Canada's RBC Capital Markets Inc., said Greater Bay's second-quarter report would not derail the Wells deal.

On the contrary, the performance was better than recent quarters, they said.

"It definitely seems like things have stabilized," Mr. Morford said. "The loan growth was encouraging."

After a string of disappointing quarters in 2006, Greater Bay president and chief executive officer Byron Scordelis revealed in March that the company had hired a consultant to assess its long-term strategy. Two months later it struck the deal with Wells, which agreed to pay $1. …

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