Garnet Capital Advisors Blog

Some banks reported higher second-quarter earnings thanks to loan growth.


Many financial institutions across the country are reporting higher second quarter profits and revenues thanks to their increased activity in the loan market.

Charlotte-based Bank of America earned $5.3 billion in the second quarter, a huge jump compared to $2.3 billion from the same time last year. Shares of the bank increased to 45 cents per share in the second quarter, up 26 cents a share from last year, exceeding analysts' expectations.

Everbank Financial in Jacksonville, Fla., reported a net income of $41.6 million for the second quarter, with revenues jumping to $253 million - a 10 percent increase from a year before. These increases in profits come at the heels of a change in the bank's valuation of mortgage servicing rights.

Earlier this year, Wells Fargo - the largest mortgage lender in the US - reported an increase in 2014 fourth quarter profits and revenues. The San Francisco-based financial institution reported a net income of $5.7 billion, up from $5.6 billion from the same time the year before.

Loan Growth Offsetting Increased Expenses

With steep litigation costs in relation to mortgage loans, banks have been faced with the issue of having to come up with ways to offset such expenses. Historically low interest rates have also had a huge impact on profits and revenues for financial institutions and lenders across the country, and have depressed the value of holdings.


Banks have done well amidst this low interest rate environment by growing loans.

Bank of America said its expenses - aside from those related to litigation costs - dropped 6 percent from the same time last year, and its costs of mortgage portfolio servicing sank 37 percent.

Operating expenses for First United Corporation decreased by $400,000 in the second quarter this year. Gross loans for the bank increased $5.1 million from the same quarter in 2014.

Many banks have faced pressure from relentlessly low interest rates that have put a damper on interest revenue but helped mortgage refinancing activity. This past quarter, a long-awaited uptick in long-term interest rates certainly improved results. Although more recent events in China have reversed that effect. In the meantime, growing loan portfolios have helped lenders like Bank of America and Wells Fargo to boost revenues over the past few months.

In fact, total loans for Wells Fargo made in the fourth quarter of 2014 represented a value of $849.4 billion, an increase of 4 percent from the year before. Commercial loans for the lender increased at a rate of 10.3 percent (up from 6.8 percent from the same time the year prior), and consumer loans increased at a pace of 6 percent.

Buying and Selling Loan Portfolios to Boost Profits

By originating loans and selling them to investors shortly after they're funded, banks can effectively earn a profit from loan origination fees and gain on sale pricing. On the other hand, banks can also earn higher margins by purchasing higher-interest, shorter-term loans.

When buying and selling loan portfolios and financial assets, however, the right contacts need to be accessed to get the right deal done. Banks reviewing non-core and non-performing loan portfolios require independent and objective advice to optimize value sales proceeds.

At Garnet Capital, we'll find the best way to find loans, choose investors, prepare pre-sale paperwork, and help manage the process. Financial institutions buying or selling loan portfolios benefit from our guidance from start to finish.

Work with our team at Garnet Capital to get the best advice on loan contracts, debt versus equity financing, and all financial aspects of your deals to ensure your sales and acquisitions are profitable ones.