Lending was up at nearly all of the area’s banks during the second quarter as pent-up demand for mortgages following an unseasonably cold first quarter helped prop up earnings.

Four out of seven area banks posted rising second-quarter profits, while the other three posted double-digit drops in earnings.

“This quarter was almost boring — and that’s a good thing,” said Matthew Schultheis, an analyst for Boenning & Scattergood. “Companies did what was expected of them: The banks we expected to be fast-growing were fast-growing. The ones that were expected to be a notch down? That’s what they did.”

At Cardinal Bank, mortgage banking operations accounted for $2.14 million in profits during the second quarter, up from a loss of $167,000 the quarter before, when winter storms blanketed the Eastern Seaboard. (However, mortgage activity is still markedly lower than it was during the second quarter of last year, when it accounted for $2.38 million in profits.)

“We saw a rebound in mortgage banking activity as production volumes have increased from the first quarter,” Bernard H. Clineburg, chairman and chief executive of Cardinal Financial, said in a statement. “The environment for mortgage banking earnings remains challenging.”

Overall, Cardinal Financial posted a 14 percent decline in second-quarter profits, which it attributed to $2.4 million in costs associated with its recent purchase of United Financial Banking Cos.

Net loans grew at every local bank during the second quarter, ranging from McLean-based Capital One Financial, where lending rose 1 percent, to Bethesda-based Eagle Bancorp, where loans were up 19 percent. (Severn Bancorp did not report net loans for the second quarter.)

“D.C. banks are growing at a faster pace than the rest of the universe,” said Catherine Mealor, managing director at investment bank Keefe, Bruyette & Woods.

Severn Bancorp posted the most dramatic rise in earnings after selling off $50 million in underperforming loans and foreclosed properties late last year.

During the most recent quarter, profits at the Annapolis-based bank more-than-tripled to $824,000, or 2 cents per share, from $232,000, or 1 cent per share, a year earlier.

Earnings also rose at Capital One Financial and Eagle Bancorp, which posted increases of 8 percent and 11 percent, respectively.

Demand for new home purchases has been on the rise at Eagle Bank, which has been hiring mortgage originators in recent months to keep up.

“As the level of refinance transactions wane, [home] purchase transactions have increased and now make up approximately 65 percent of our volume” compared to 17 percent in the same period last year, Ron Paul, the chairman and chief executive of Eagle Bank, said in a call with investors.

Paul added that the bank may lay off employees following Eagle’s recent purchase of Virginia Heritage Bank, but said that he expects mortgage demand to rise in the second half of this year.

Source: Yahoo Finance

Capital Business


This chart shows Severn’s stock price in the second quarter of this year. The highest day was April 24, in which the price rose to $4.91.