EX-99.1 2 exhibit991.htm EXHIBIT 99.1 Exhibit 99.1

PRESS RELEASE

Available for Immediate Publication: October 23, 2006
Contacts:
Thomas T. Hawker, President / Chief Executive Officer (209) 725-2276
David A. Heaberlin, EVP / Treasurer and Chief Financial Officer (209) 725-7435
Web Site www.ccow.com


Capital Corp of the West Announces Third Quarter Results

Merced, California, October 23, 2006-Capital Corp of the West NASDAQ:NMS: CCOW) today announced $5,829,000 in net income for the third quarter ended September 30, 2006. This represents an increase of 7% when compared to the third quarter 2005. For the nine months ended September 30, 2006, net income grew by 13% to $17.640 million from $15.567 million in 2005. Fully diluted earnings per share for the third quarter of 2006 was $0.53 compared with $0.50 for the same period in 2005. For the first nine months of 2006, fully diluted earnings per share increased 12% to $1.61 versus $1.44 for the same period in 2005.

During the third quarter, the Company recorded a benefit payment related to bank owned life insurance of $179,000; an OREO after tax gain of $110,000 ($190,000 pretax); specific tax benefits associated with prior period state tax returns in the amount of $187,000 as well as certain loan interest reversals primarily related to prior periods in the after tax amount of $131,000 ($225,000 pretax). Excluding these matters, the third quarter earnings would have been $5.484 million or $0.50 per fully diluted share. In addition to this Q3 activity, the nine months results include the second quarter of 2006 net after tax gain of $361,000 related to the sale of a portion of our agency preferred stock investments and an ARM mutual fund. Without these Q2 and Q3 items, earnings for the first nine months of 2006 would have been $16.934 million or $1.55 per fully diluted share.

Tom Hawker, Chief Executive Officer, stated: “As with other financial institutions, Capital Corp of the West is experiencing the effects of 17 consecutive ¼ point increases in interest rates by the Federal Reserve since June 2004. In our last three earnings announcements, we have discussed the fact that, eventually, the rising interest rate environment could lead to a flattened yield curve and compression of our net interest margin. Although loan demand remains strong, the current competitive landscape creates a situation where we are limited in what we can charge our borrowers, while at the same time; our costs for deposits have risen significantly.”

“Our $99 million growth in deposits this quarter was aided by our ability to return an additional $50 million in deposits to our balance sheet that previously were being swept each day into an external third party investment. In addition, our continuing loan growth of $69 million is a testament to the economic vitality of the Central Valley. I look forward to discussing these and other matters at our scheduled conference call on October 23”, continued Mr. Hawker.

-1-

Dave Heaberlin, Chief Financial Officer, commented that “the net interest margin for the third quarter 2006 was 4.37% compared with 4.75% for the same period in 2005 and 4.84% for the second quarter of 2006. If the interest adjustment related to prior periods, as discussed above, is removed, the third quarter net interest margin equates to 4.43%. While interest earning assets have continued to grow; yields on interest earning assets increased to 7.42% for Q3 (7.51% for Q2) compared with 6.54% for Q3 2005 or a 13% increase. However, while interest bearing liabilities have also grown; the cost associated with these liabilities increased to 3.69% in Q3 (3.27% for Q2) compared with 2.24% for Q3 2005 or an increase of 65%. This margin compression appears primarily a function of the flattening of rising rate environment combined with the lagged impact of the repricing of our interest bearing liabilities.”

“Clearly the last several quarters have represented an ideal market for our margin performance during this interest rate cycle. It is interesting to note that the net interest margin for the first nine months of 2006 of 4.64% has now retreated to the approximate level of that reported for the same period in 2005.” stated Mr. Heaberlin.

Earnings Discussion

Net earnings were $5,829,000 or $0.53 per diluted share for the three months ended September 30, 2006. This compares to earnings of $5,453,000 or $0.50 per diluted share for the same period in 2005. Annualized return on average assets and return on average equity were 1.29% and 17.05% for the third quarter of 2006 compared with 1.39% and 18.84% for the same period in 2005.

The 2006 third quarter earnings of $5,829,000 reflect an increase in net interest income of $1,183,000 from the same period in 2005 that was driven by a $229,109,000 or a 16% increase in average interest earning assets. The taxable equivalent net interest margin for the third quarter of 2006 was 4.37%, a decrease of 38 basis points from the 4.75% achieved during the same period during 2005.

In comparing the 2006 to 2005 third quarter, noninterest expenses increased by $2,692,000 due primarily to increases in salaries and benefits of $1,755,000 that were the result of management and support staff increases necessary to accommodate branch expansion, normal salary progression, the addition of an asset based lending group in 2006, the addition of a General Counsel to the senior management team and equity compensation expense. In the third quarter of 2006, stock option expense of $131,000 was recorded. Equity compensation expense for the first nine months of 2006 aggregated $566,000. The $217,000 increase in premises and occupancy expense was due primarily to branch expansion and remodeling costs.

-2-

Our effective tax rate was 28% for the third quarter of 2006 compared with 34% for the same quarter of 2005. Income tax expense decreased $561,000 to $2,284,000 compared to the $2,845,000 recorded during the same quarter in 2005. The decrease in the 2006 tax rate compared to 2005 was primarily attributable to prior period tax credits recorded in the current quarter of $187,000 related to state housing tax credits earned between 2002 and 2004 that were not previously claimed on the Company’s state income tax returns. Amended returns will be filed with a corresponding claim for refund.
Credit Quality

The Company’s allowance for loan losses was $14,796,000 or 1.17% of total loans at September 30, 2006. Nonperforming assets totaled $3,393,000 or 0.18% of total assets while nonperforming loans stood at $3,333,000 or 0.26% of total loans. At September 30, 2006, the allowance for loan losses totaled 444% of nonperforming loans. This compares to an allowance for loan losses of $14,598,000 or 1.42% of total loans at September 30, 2005. At September 30, 2005, nonperforming assets totaled $2,111,000 or 0.13% of total assets, nonperforming loans totaled $2,051,000 or 0.20% of total loans and the allowance for loan losses totaled 712% of nonperforming loans.

Charge-offs for the third quarter of 2006 were $619,000 compared with charge-offs of $197,000 for the same period in 2005. The increased charge-offs occurred primarily in the commercial segment of the loan portfolio.

Book Values - Capital

The Company’s capital at September 30, 2006 stood at $142,073,000 compared with $117,979,000 as of September 30, 2005. Book value and tangible book value per share totaled $13.23 and $13.10 as of September 30, 2006 compared to $11.20 and $11.06 as of September 30, 2005. The Company’s tangible leverage capital ratio stood at 9.60% at September 30, 2006, compared with 8.53% as of September 30, 2005. The Company’s risk based capital ratio stood at 11.79% at September 30, 2006, compared with 11.50% as of September 30, 2005.

Conference Call Recording

Capital Corp of the West’s third quarter 2006 earnings conference call is scheduled for October 23, 2006 at 8:00 am PDT. Investors have the opportunity to listen to a recording of the conference call by going the web site of the company www.ccow.com just after the call and following the instructions to play back the recorded conference call. The recording will be available on the web site for 30 days following the conference call.

-3-

Safe Harbor

In addition to historical information, this discussion and analysis includes certain forward-looking statements that are subject to risks and uncertainties and include information about possible or assumed future results of operations. Many possible events or factors could affect the future financial results and performance of the Company. This could cause results or performance to differ materially from those expressed in our forward-looking statements. Words such as “expects”, “anticipates”, “believes”, “estimates”, “intends”, “plans”, “assumes”, “projects”, “predicts”, “forecasts”, variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements.

These statements are representative only on the date hereof, and the Company undertakes no obligation to update any forward-looking statements made. Some possible events or factors that could occur that may cause differences from expected results include the following: the Company’s loan growth is dependent on economic conditions, as well as various discretionary factors, such as decisions to sell, or purchase certain loans or loan portfolios; or sell or buy participations of loans; the quality and adequacy of management of the borrower, developments in the industry the borrower is involved in, product and geographic concentrations and the mix of the loan portfolio. The rate of charge-offs and provision expense can be affected by local, regional and international economic and market conditions, concentrations of borrowers, industries, products and geographical conditions, the mix of the loan portfolio and management’s judgments regarding the collectibility of loans. Liquidity requirements may change as a result of fluctuations in assets and liabilities and off-balance sheet exposures, which will impact the capital and debt financing needs of the Company and the mix of funding sources. Decisions to purchase, hold, or sell securities are also dependent on liquidity requirements and market volatility, as well as on and off-balance sheet positions. Factors that may impact interest rate risk include local, regional and international economic conditions, levels, mix, maturities, yields or rates of assets and liabilities and the wholesale and retail funding sources of the Company. The Company is also exposed to the potential of losses arising from adverse changes in market rates and prices which can adversely impact the value of financial products, including securities, loans, and deposits. In addition, the banking industry in general is subject to various monetary and fiscal policies and regulations, which include those determined by the Federal Reserve Board, the Federal Deposit Insurance Corporation and state regulators, whose policies and regulations could affect the Company’s results.

-4-

Other factors that may cause actual results to differ from the forward-looking statements include the following: competition with other local and regional banks, savings and loan associations, credit unions and other non-bank financial institutions, such as investment banking firms, investment advisory firms, brokerage firms, mutual funds and insurance companies, as well as other entities which offer financial services; interest rate, market and monetary fluctuations; inflation; market volatility; general economic conditions; introduction and acceptance of new banking-related products, services and enhancements; fee pricing strategies, mergers and acquisitions and their integration into the Company; civil disturbances or terrorist threats or acts, or apprehension about the possible future occurrences or acts of this type; outbreak or escalation of hostilities in which the United States is involved, any declaration of war by the U.S. Congress or any other national or international calamity, crisis or emergency; changes in laws and regulations; recently issued accounting pronouncements; government policies, regulations, and their enforcement (including Bank Secrecy Act-related matters, taxing statutes and regulations); restrictions on dividends that our subsidiaries are allowed to pay to us; the ability to satisfy requirements related to the Sarbanes-Oxley Act and other regulation on internal control; and management’s ability to manage these and other risks.

Reference Information

Capital Corp of the West, a bank holding company established November 1, 1995, is the parent company of County Bank, which has more than 28 years of service as “Central California’s Community Bank.” Currently County Bank has twenty three branch offices serving the counties of Fresno, Madera, Mariposa, Merced, Sacramento, Stanislaus, San Joaquin, San Francisco, Santa Clara and Tuolumne. As of the latest FDIC data, County Bank has 6.5% market share in the six Central California counties in which it has significant retail branches. This ranks County Bank fifth out of thirty-seven banking institutions in this market area. For further information about the Company’s financial performance, contact Tom Hawker, President and Chief Executive Officer at (209) 725-2276, or Dave Heaberlin, Treasurer and Chief Financial Officer, at (209) 725-7435.


-Financial Tables Follow-

-5-

Capital Corp of the West
Consolidated Balance Sheets
(Unaudited)
   
At September 30,
  
At June 30,
  
(Dollars in thousands, except per share data)
  
2006
  
2005
  
One Year Change
  
2006
  
Three Month Change
  
Assets
                      
Cash and noninterest-bearing deposits in other banks
  
$
46,104
  
$
51,916
  
$
(5,812
)
$
50,390
  
$
(4,286
)
Federal funds sold
    
49,690
    
4,760
    
44,930
    
25,185
    
24,505
  
Time deposits at other financial institutions
    
350
    
350
    
-
    
350
    
-
  
Investment securities available for sale, at fair value
    
263,526
    
237,792
    
25,734
    
265,746
    
(2,220
)
Investment securities held to maturity at cost, fair value of $170,327 and $184,634 at September 30, 2006 and 2005
    
172,578
    
183,779
    
(11,201
)
  
176,152
    
(3,574
)
Loans, net of allowance for loan losses of $14,796 and $14,598 at September 30, 2006 and 2005
   
1,251,404
    
1,012,633
    
238,771
    
1,182,358
    
69,046
  
Interest receivable
    
8,571
    
6,613
    
1,958
    
8,228
    
343
  
Premises and equipment, net
    
38,833
    
26,725
    
12,108
    
36,007
    
2,826
  
Intangible assets
    
1,405
    
1,439
    
(34
)
  
1,405
    
-
  
Cash value of life insurance
    
42,762
    
31,525
    
11,237
    
32,396
    
10,366
  
Investment in housing tax credit limited partnerships
    
8,440
    
8,217
    
223
    
8,623
    
(183
)
Other assets
    
29,996
    
15,335
    
14,661
    
19,713
    
10,283
  
Total assets
  
$
1,913,659
  
$
1,581,084
  
$
332,575
  
$
1,806,553
  
$
107,106
  
                                 
Liabilities and Shareholders’ Equity
                                
Deposits
                                
Noninterest-bearing demand
  
$
277,152
  
$
288,791
  
$
(11,639
)
$
295,016
  
$
(17,864
)
Negotiable orders of withdrawal
    
197,142
    
189,776
    
7,366
    
197,652
    
(510
)
Savings
    
404,199
    
372,761
    
31,438
    
332,740
    
71,459
  
Time, under $100
    
247,061
    
210,446
    
36,615
    
247,883
    
(822
)
Time, $100 and over
    
324,084
    
205,768
    
128,955
    
276,719
    
47,365
  
Brokered CD’s
    
124,258
    
20,966
    
103,292
  
$
124,724
    
(466
)
Total deposits
    
1,573,896
    
1,288,508
    
285,388
    
1,474,734
    
99,162
  
                                 
Federal funds purchased
    
-
    
21,750
    
(21,750
)
  
-
    
-
  
Other borrowings and subordinated debentures
    
184,589
    
139,895
    
25,835
    
187,351
    
(21,621
)
Accrued interest, taxes and other liabilities
    
13,101
    
12,952
    
149
    
11,538
    
1,563
  
Total liabilities
    
1,771,586
    
1,463,105
    
308,481
    
1,673,623
    
97,963
  
                                 
Preferred stock, no par value; 10,000,000 shares authorized; none Outstanding
    
-
    
-
    
-
    
-
    
-
  
Common stock, no par value; 20,000,000 shares authorized; 10,736,497 and 10,534,205 issued & outstanding at September 30, 2006 and 2005
    
63,904
    
58,982
    
4,922
    
63,276
    
628
  
Retained earnings
    
80,440
    
60,194
    
20,246
    
75,473
    
4,967
  
Accumulated other comprehensive (loss)
    
(2,271
)
  
(1,197
)
  
(1,074
)
  
(5,819
)
  
3,548
  
Total shareholders’ equity
    
142,073
    
117,979
    
24,094
    
132,930
    
9,143
  
Total liabilities and shareholders’ equity
  
$
1,913,659
  
$
1,581,084
  
$
332,575
  
$
1,806,553
  
$
107,106
  

-6-

Capital Corp of the West
Consolidated Statements of Income
(Unaudited)
   
For the Three Months Ended September 30,
  
For the Three Months Ended June 30,
  
(Dollars in thousands)
 
  
2006
 
  
2005
 
  
One Year Change
 
  
2006
 
  
Three Month Change
 
  
Interest income
  
$
31,021
  
$
23,487
  
$
7,534
  
$
30,406
  
$
615
  
Interest expense
    
12,871
    
6,520
    
6,351
    
10,930
    
1,941
  
Net interest income
    
18,150
    
16,967
    
1,183
    
19,476
    
(1,326
)
Provision for loan losses
    
200
    
1,035
    
(835
)
  
200
    
-
  
Noninterest income:
                                
Service charges on accounts
    
1,550
    
1,554
    
(4
)
  
1,504
    
46
  
Gain on sale of securities
    
-
    
-
    
-
    
622
    
(622
)
Gain on other real estate owned
    
190
    
-
    
190
    
-
    
190
  
Bank owned life insurance benefit payment
    
179
    
-
    
179
    
-
    
179
  
Gain on the sale of loans
    
11
    
60
    
(49
)
  
72
    
(61
)
All other income
    
1,225
    
1,052
    
173
    
1,225
    
-
  
Noninterest expenses:
                                
Salaries and related benefits
   
7,293
    
5,538
    
1,755
    
7,335
    
(42
)
Premises and occupancy
    
1,422
    
1,205
    
217
    
1,256
    
166
  
Equipment
   
1,096
    
1,035
    
61
    
1,042
    
54
  
Professional fees
   
478
    
418
    
60
    
554
    
(76
)
Marketing
    
360
    
231
    
129
    
466
    
(106
)
Intangible amortization
    
-
    
11
    
(11
)
  
12
    
(12
)
Supplies
    
237
    
236
    
1
    
303
    
(66
)
Charitable donations
    
264
    
178
    
86
    
291
    
(27
)
Other expenses
   
1,842
    
1,448
    
394
    
1,848
    
(6
)
Total noninterest expenses
    
12,992
    
10,300
    
2,692
    
13,107
    
(115
)
Income before income taxes
    
8,113
    
8,298
    
(185
)
  
9,592
    
(1,479
)
Provision for income taxes
    
2,284
    
2,845
    
(561
)
  
3,338
    
(1,054
)
NET INCOME
  
$
5,829
  
$
5,453
  
$
376
  
$
6,254
  
$
(425
)
Average common shares outstanding
    
10,731
    
10,506
    
225
    
10,687
    
44
  
EPS
  
$
0.54
  
$
0.52
  
$
0.02
  
$
0.59
  
$
(0.05
)
Effect of stock options
    
239
    
342
    
(103
)
  
264
    
(25
)
Diluted EPS
  
$
0.53
  
$
0.50
  
$
0.03
  
$
0.57
  
$
(0.04
)


-7-

Capital Corp of the West
Consolidated Statements of Income
(Unaudited)
   
Nine Months Ended
 
  
(Dollars in thousands)
 
  
September 2006
 
  
September 2005
 
  
One Year Change
 
  
Interest income
  
$
89,073
  
$
65,151
  
$
23,922
  
Interest expense
    
33,090
    
17,243
    
15,847
  
Net interest income
    
55,983
    
47,908
    
8,075
  
Provision for loan losses
    
400
    
1,356
    
(956
)
Noninterest income:
                    
Service charges on accounts
    
4,475
    
4,447
    
28
  
Gain on sale of securities
    
622
    
-
    
622
  
Gain on other real estate owned
    
190
    
-
    
190
  
Bank owned life insurance benefit payment
    
179
    
539
    
(360
)
Gain on the sale of loans
    
123
    
155
    
(32
)
All other income
    
3,621
    
2,534
    
1,087
  
Noninterest expenses:
                    
Salaries and related benefits
   
21,487
    
16,748
    
4,739
  
Premises and occupancy
    
3,866
    
3,256
    
610
  
Equipment
   
3,129
    
2,936
    
193
  
Professional fees
   
1,952
    
1,620
    
332
  
Marketing
    
1,213
    
855
    
358
  
Intangible amortization
    
23
    
34
    
(11
)
Supplies
    
776
    
808
    
(32
)
Charitable donations
    
773
    
573
    
200
  
Other expenses
    
5,355
    
4,480
    
875
  
Total noninterest expenses
    
38,574
    
31,310
    
7,264
  
Income before income taxes
    
26,219
    
22,917
    
3,302
  
Provision for income taxes
    
8,579
    
7,350
    
1,229
  
NET INCOME
  
$
17,640
  
$
15,567
  
$
2,073
  
Average common shares outstanding
    
10,673
    
10,480
    
193
  
EPS
  
$
1.65
  
$
1.49
  
$
0.16
  
Effect of stock options
    
274
    
329
    
55
  
Diluted EPS
  
$
1.61
  
$
1.44
  
$
0.17
  

-8-

Capital Corp of the West
Selected Financial Data

   
Three Months Ended,
  
Nine Months Ended,
  
   
September 30, 2006
  
June 30, 2006
  
September 30, 2005
  
September 30, 2006
  
September 30, 2005
  
Basic Earnings Per Share
  
$
0.54
  
$
0.59
  
$
0.52
  
$
1.65
  
$
1.49
  
Diluted Earnings Per Share
 
$
0.53
  
$
0.57
  
$
0.50
  
$
1.61
  
$
1.44
  
                                 
Annualized Return on:
                                
Average Assets
    
1.29
%
  
1.41
%
  
1.39
%
  
1.33
%
  
1.37
%
Average Equity
    
17.05
%
  
19.10
%
  
18.84
%
  
17.91
%
  
18.77
%
Net Interest Margin
    
4.37
%
  
4.84
%
  
4.75
%
  
4.64
%
  
4.67
%
Efficiency Ratio
   
61
%
  
57
%
  
52
%
  
59
%
  
56
%
Loan to Deposit Ratio
                                
Annualized Net Charge-offs to Average Loans
    
0.15
%
  
0.09
%
  
(0.06
)%
  
0.04
%
  
0.05
%

Capital / Shareholder information

   
September 30,
  
June 30,
  
   
2006
  
2005
  
2006
  
Book Value Per Share
 
$
13.23
  
$
11.20
  
$
12.40
  
Tangible Book Value Per Share
  
$
13.10
  
$
11.06
  
$
12.27
  
                     
Leverage Capital Ratio
    
9.60
%
  
8.53
%
  
9.57
%
Risk Based Capital Ratio
    
11.79
%
  
11.50
%
  
12.30
%
                     

Loan Portfolio Composition

(Dollars in thousands)
  
September 30, 2006
 
September 30, 2005
  
June 30, 2006
  
Loan Categories:
  
Dollar Amount
  
Percent of loans
  
Dollar Amount
  
Percent Of loans
  
Dollar Amount
  
Percent of loans
  
Commercial
  
$
334,688
    
26
%
$
262,875
    
26
%
$
324,846
    
27
%
Agricultural
    
87,039
    
7
    
75,654
    
7
    
82,241
    
7
  
Real estate construction
    
133,744
    
11
    
104,816
    
10
    
123,690
    
10
  
Real estate construction residential
    
38,949
    
3
    
53,476
    
5
    
38,286
    
3
  
Real estate mortgage
    
525,879
    
42
    
410,373
    
40
    
495,755
    
41
  
Real estate mortgage residential
    
41,602
    
3
    
38,831
    
4
    
39,258
    
3
  
Consumer
    
104,299
    
8
    
81,206
    
8
    
93,366
    
8
  
Total
    
1,266,200
    
100
%
  
1,027,231
    
100
%
  
1,197,442
    
100
%
Less allowance for loan losses
    
(14,796
)
        
(14,598
)
        
(15,084
)
      
Net loans
  
$
1,251,404
        
$
1,012,633
        
$
1,182,358
        


-9-


Nonperforming Assets/Loan to Deposit Ratio

   
September 30,
  
June 30,
  
(Dollars in thousands)
  
2006
  
2005
  
2006
  
Nonaccrual loans
  
$
3,333
  
$
2,042
  
$
1,593
  
Accruing loans past due 90 days or more
    
-
    
9
    
-
  
Total nonperforming loans
    
3,333
    
2,051
    
1,593
  
Other real estate owned
    
60
    
60
    
527
  
Total nonperforming assets
  
$
3,393
  
$
2,111
  
$
2,119
  
                     
Nonperforming loans to total loans
    
0.26
%
  
0.20
%
  
0.13
%
Nonperforming assets to total assets
    
0.18
%
  
0.13
%
  
0.12
%
Loan to deposit ratio
    
80.5
%
  
79.7
%
  
81.2
%


Allowance for Loan Loss Activity

   
Nine Months Ended September 30,
  
Three Months Ended September 30,
  
(Dollars in thousands)
  
2006
  
2005
  
2006
  
2005
  
Allowance for Loan Losses:
                  
Balance at beginning of period
  
$
14,776
  
$
13,605
  
$
15,084
  
$
13,404
  
Provision for loan losses
    
400
    
1,356
    
200
    
1,035
  
Charge-offs
    
(1,261
)
  
(1,318
)
  
(619
)
  
(197
)
Recoveries
    
881
    
955
    
131
    
356
  
Net (charge-offs) recoveries
   
(380
)
  
(363
)
  
(488
)
  
159
  
Balance at end of period
  
$
14,796
  
$
14,598
  
$
14,796
  
$
14,598
  
                           
Loans outstanding at period-end
  
$
1,266,200
  
$
1,027,231
  
$
1,266,200
  
$
1,027,231
  
Average loans outstanding
 
$
1,168,887
  
$
947,022
  
$
1,225,723
  
$
1,009,056
  
                           
Annualized net charge-offs to average loans
    
0.04
%
  
0.05
%
  
0.15
%
  
(0.06
)%
Allowance for loan losses / total loans
    
1.17
%
  
1.42
%
  
1.17
%
  
1.42
%
Allowance for loan losses / nonperforming loans
    
443.98
%
  
711.97
%
  
443.98
%
  
711.97
%


-10-

AVERAGE BALANCE SHEET & ANALYSIS OF NET INTEREST EARNINGS
   
Three months ended
  
Three months ended
  
   
September 30, 2006
  
September 30, 2005
  
   
 
Average
Balance
  
Taxable
Equivalent
Interest
  
Taxable
Equivalent
Yield/rate
  
 
Average
Balance
  
Taxable
Equivalent Interest
  
Taxable
Equivalent Yield/rate
  
   
(Dollars in thousands)
  
Assets
                          
Federal funds sold
  
$
7,613
    
100
    
5.21
%
$
2,101
  
$
19
    
3.59
%
Time deposits at other financial institutions
    
350
    
5
    
5.67
    
350
    
2
    
2.27
  
Taxable investment securities
   
337,085
    
3,958
    
4.66
    
338,311
    
3,474
    
4.07
  
Nontaxable investment securities
   
103,312
    
1,249
    
4.80
    
95,153
    
1,205
    
5.02
  
Loans, gross:
   
1,225,723
    
26,010
    
8.42
    
1,009,059
    
19,106
    
7.51
  
Total interest-earning assets
  
$
1,674,083
  
$
31,322
    
7.42
  
$
1,444,974
  
$
23,806
    
6.54
  
Allowance for loan losses
    
(14,868
)
              
(13,968
)
            
Cash and due from banks
    
43,274
                
46,720
              
Premises and equipment, net
    
37,647
                
25,860
              
Interest receivable and other assets
    
73,820
                
60,418
              
Total assets
  
$
1,813,956
              
$
1,564,004
              
                                       
Liabilities And Shareholders' Equity
                                      
Negotiable order of withdrawal
  
$
197,546
  
$
372
    
0.75
  
$
180,577
  
$
102
    
0.22
  
Savings deposits
    
333,695
    
2,259
    
2.69
    
371,188
    
1,406
    
1.50
  
Time deposits
    
666,501
    
7,507
    
4.47
    
430,752
    
3,321
    
3.06
  
Other borrowings
    
155,091
    
2,066
    
5.29
    
155,234
    
1,364
    
3.49
  
Subordinated Debentures
    
31,960
    
667
    
8.28
    
16,496
    
327
    
7.86
  
Total interest-bearing liabilities
    
1,384,793
    
12,871
    
3.69
    
1,154,247
    
6,520
    
2.24
  
                                       
Noninterest-bearing deposits
    
276,923
                
281,328
              
Accrued interest, taxes and other liabilities
    
15,471
                
12,660
              
Total liabilities
    
1,677,187
                
1,448,235
              
                                       
Total shareholders' equity
    
136,769
                
115,769
              
Total liabilities and shareholders' equity
  
$
1,813,956
              
$
1,564,004
              
                                       
Net interest income and margin
       
$
18,451
    
4.37
%
      
$
17,286
    
4.75
%

-11-

AVERAGE BALANCE SHEET & ANALYSIS OF NET INTEREST EARNINGS
   
Nine months ended
  
Nine months ended
  
   
September 30, 2006
  
September 30, 2005
  
   
 
Average
Balance
  
Taxable
Equivalent
Interest
  
Taxable
Equivalent
Yield/rate
  
 
Average
Balance
  
Taxable
Equivalent Interest
  
Taxable
Equivalent
Yield/rate
  
   
(Dollars in thousands)
  
Assets
                          
Federal funds sold
  
$
5,250
    
193
    
4.92
%
$
4,411
  
$
91
    
2.76
%
Time deposits at other financial institutions
    
350
    
14
    
5.35
    
855
    
17
    
2.66
  
Taxable investment securities
   
362,508
    
12,608
    
4.65
    
356,963
    
11,043
    
4.14
  
Nontaxable investment securities
   
102,481
    
3,757
    
4.90
    
87,993
    
3,344
    
5.08
  
Loans, gross:
   
1,168,887
    
73,440
    
8.40
    
947,022
    
51,572
    
7.28
  
Total interest-earning assets
  
$
1,639,476
  
$
90,012
    
7.34
  
$
1,397,244
  
$
66,067
    
6.32
  
Allowance for loan losses
    
(15,074
)
              
(13,658
)
            
Cash and due from banks
    
46,146
                
43,495
              
Premises and equipment, net
    
33,733
                
24,465
              
Interest receivable and other assets
    
69,644
                
59,095
              
Total assets
  
$
1,773,925
              
$
1,510,641
              
                                       
Liabilities And Shareholders' Equity
                                      
Negotiable order of withdrawal
  
$
205,209
  
$
1,038
    
0.68
  
$
174,734
  
$
160
    
0.12
  
Savings deposits
    
353,195
    
6,041
    
2.29
    
363,763
    
3,515
    
1.29
  
Time deposits
    
577,631
    
17,749
    
4.11
    
398,930
    
8,444
    
2.83
  
Other borrowings
    
187,414
    
6,856
    
4.89
    
166,113
    
4,152
    
3.34
  
Subordinated Debentures
    
22,160
    
1,407
    
8.49
    
16,496
    
972
    
7.88
  
Total interest-bearing liabilities
    
1,345,609
    
33,091
    
3.29
    
1,120,036
    
17,243
    
2.06
  
                                       
Noninterest-bearing deposits
    
281,828
                
268,343
              
Accrued interest, taxes and other liabilities
    
15,169
                
11,657
              
Total liabilities
                      
1,400,036
              
                                       
Total shareholders' equity
    
131,319
                
110,605
              
Total liabilities and shareholders' equity
  
$
1,773,925
              
$
1,510,641
              
                                       
Net interest income and margin
        
$
56,921
    
4.64
%
      
$
48,824
    
4.67
%


-12-