It was a banner third quarter at Great Lakes Bancorp, the parent of Greater Buffalo Savings Bank.
The Buffalo-based thrift said profits more than tripled to $1.2 million, or 30 cents per share, as Great Lakes poured extra cash into making more loans and doubling the volume of investment securities on its books. Profits rose 88 percent just from the second quarter because of the rapid expansion.
"We've been very encouraged by the continual growth that we've had," said Chief Executive Andrew W. Dorn Jr. "We've continued to receive a tremendous reception from the community."
Total assets rose by $164.1 million, or 33.2 percent, just in the quarter, and nearly doubled from a year ago, to $658 million, at a thrift that opened its doors just five years ago. Great Lakes now has seven branches in the city and suburbs.
Great Lakes launched a strategy in May to boost its income and stimulate growth by raising capital and borrowing money to invest in higher-yielding assets. The company had been flush with cash after issuing $16 million in common stock and selling $12 million in trust preferred securities -- a form of investment which bank regulators count as capital -- during the first and second quarters. It also borrowed $50 million from the Federal Home Loan Bank of New York in September, a quasi-governmental agency, to invest in securities.
Officials turned around and deployed the money as quickly as they could, given the slow growth market for loans. Total loans rose 45 percent from a year ago to $286 million, including $16.8 million just in the three months from July to October. But primarily officials bought short-term mortgage investment securities, more than doubling the portfolio to $309 million and earning a rate 2.22 percent over what it paid for borrowing the money.
Wall Street analysts sometimes criticize the heavy use of securities to grow earnings because it's not core to a bank's business of making loans, which can also produce higher profits. Great Lakes even acknowledges that using securities lowers its overall yield on earning assets.
But the move adds more than $1 million to the company's pre-tax income annually. And it's a fast way to ensure the excess cash is earning something for the bank instead of sitting around, at least until officials can replace the borrowing with low-cost deposits and put themoney to better use through loans.
"We don't want to leave our capital idle," Dorn said.
Deposits rose 56 percent from a year ago to $476 million, including $81.8 million just in the quarter.
The thrift continues to expand its branch network to bring in more customers. It's completing construction on a new Kenmore office to replace a smaller location, and is also developing a site in Amherst at Klein and Transit roads.
It also signed contracts to buy two additional sites in Amherst on Niagara Falls Boulevard at Irvington Drive, and on Stahl Road at Millersport Highway and Campbell Boulevard.
Officials are still working on getting sites in Cheektowaga, Lancaster and either Hamburg or Orchard Park.
Meanwhile, Lee Storch, former executive vice president and chief operating officer at the thrift, has left the company to pursue other management opportunities. Both he and Dorn said the company isn't large enough to justify both a chief operating officer and a hands-on CEO like Dorn. Both said the departure was amicable and mutual.