Square 1 Financial in Durham, N.C., followed a simple formula in the third quarter: loan growth equals higher profits.
The $3 billion-asset company, located in the heart of the Research Triangle area, specializes in commercial lending to life sciences and other technology firms.
It reported net income of $8.8 million, a 26% increase from a year earlier. One of the principal reasons was a 25% leap in total loans, to $1.3 billion, which helped raise net interest income by 35.4%, to $27.9 million.
Net interest margin increased by five basis points, to 4%, primarily because of accounting adjustments tied to agency mortgage-backed securities.
However, total noninterest income shrank by 17.8%, to $5.5 million, which the firm blamed on lower income from venture capital investments caused by unrealized losses.
Meanwhile, the bank's credit quality improved. It lowered its provision for loan losses by 12%, to $2.5 million.