EX-99.1 2 form8k_072606earnings.txt QUARTERLY EARNINGS Provident Financial Services, Inc. Announces Quarterly Earnings, Fifth Stock Repurchase Program and Declares Quarterly Cash Dividend JERSEY CITY, NJ, July 27, 2006 - Provident Financial Services, Inc. (NYSE:PFS) (the "Company") reported basic and diluted earnings per share of $0.22 for the quarter ended June 30, 2006, representing increases of 5.5% and 5.4%, respectively, compared to basic and diluted earnings per share of $0.21 and $0.20, respectively, for the quarter ended June 30, 2005. Basic and diluted earnings per share were $0.44 and $0.43, respectively, for the six months ended June 30, 2006, representing increases of 2.0% and 1.9%, respectively, compared to basic and diluted earnings per share of $0.43 and $0.42, respectively, for the six months ended June 30, 2005. Net income for the three months ended June 30, 2006 totaled $13.5 million, a decrease of $251,000, or 1.8%, compared to $13.8 million reported for the same period in 2005. Net income was $27.3 million for the six months ended June 30, 2006, a decrease of $1.5 million, or 5.1%, compared to $28.8 million for the same period in 2005. The earnings and per share data for 2005 were impacted by the acceptance of a Voluntary Resignation Initiative ("VRI") by certain officers of the Company, which resulted in an after-tax charge of $815,000, or $0.01 per share. Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "This past quarter our net interest margin expanded, both loan and deposit balances grew and we continued to reduce overhead costs. In light of the ever-more-challenging interest rate and competitive environments, we believe that this progress, while moderate in each category, is significant." Pantozzi added, "The Federal Reserve has remained steadfast in its policy of raising short-term rates, resulting in an inverted yield curve. Our response has been to continue to de-leverage our balance sheet to preserve our net interest margin and manage non-interest expenses to enhance efficiency." Authorization of Fifth Stock Repurchase Program The Company's Board of Directors authorized the Company's fifth stock repurchase program. This program will commence upon completion of the Company's current repurchase program, under which 1.6 million shares remain to be purchased. Under the new authorization, the Company may repurchase 5% of the amount of shares of common stock currently outstanding, or approximately 3.3 million shares. Repurchases will be made from time to time and will be effectuated through open market purchases, unsolicited negotiated transactions, or in such other manner deemed appropriate by management. Completion of the repurchase program will not be limited to a specific time period. The Company's repurchase activities will take into account SEC safe harbor rules and guidance for issuer repurchases. Declaration of Quarterly Dividend The Company's Board of Directors declared a quarterly cash dividend of $0.10 per common share payable on August 31, 2006, to stockholders of record as of the close of business on August 15, 2006. Balance Sheet Summary Total assets were $5.86 billion at June 30, 2006, compared to $6.05 billion at December 31, 2005, as reductions in cash and securities balances were used to fund repayments of borrowings and common stock repurchases. Total investments decreased $210.5 million, or 13.7%, during the six months ended June 30, 2006. The decrease was primarily attributable to paydowns on mortgage-backed securities and maturities of debt securities. In addition, the Company sold $37.0 million of primarily mortgage-backed securities during the second quarter as part of its ongoing interest rate risk management process. The Company's net loans increased $32.5 million, or 0.9%, to $3.74 billion at June 30, 2006, from $3.71 billion at December 31, 2005, driven by loan originations of $651.4 million and loan purchases of $41.0 million. Net increases of $65.4 million in commercial and multi-family mortgage loans, $26.7 million in commercial loans and $28.1 million in consumer loans were partially offset by decreases of $68.0 million in residential mortgage loans and $19.0 million in construction loans. Commercial real estate, construction and commercial loans represented 39.1% of the loan portfolio at June 30, 2006, compared to 38.0% at March 31, 2006 and 37.5% at December 31, 2005. At June 30, 2006, the Company's unfunded loan pipeline totaled $791.3 million, including $293.0 million in construction loan commitments, $198.0 million in commercial loan commitments and $98.2 million in commercial mortgage commitments. This compares with an unfunded loan pipeline of $769.2 million at March 31, 2006. 1 Borrowed funds decreased $147.8 million, or 15.2%, during the six months ended June 30, 2006, as a result of maturities, calls and paydowns on amortizing obligations. Total deposits increased $10.9 million, or 0.3%, during the six months ended June 30, 2006. Total deposits were $3.93 billion at June 30, 2006, with core deposits, consisting of savings and demand deposit accounts, representing 60.8% of total deposits. Common stock repurchases for the three and six months ended June 30, 2006, totaled 2.9 million shares at an average cost of $18.10 per share and 3.8 million shares at an average cost of $18.16 per share, respectively. At June 30, 2006, book value per share and tangible book value per share were $15.76 and $9.11, respectively. Results of Operations Net Interest Margin The net interest margin improved two basis points to 3.33% for the quarter ended June 30, 2006, from 3.31% for the quarter ended March 31, 2006. The net interest margin for the quarter ended June 30, 2006 decreased one basis point compared with the net interest margin of 3.34% for the quarter ended June 30, 2005. The weighted average rate for interest-earning assets was 5.52% for the three months ended June 30, 2006, compared with 5.35% for the trailing quarter and 5.01% for the three months ended June 30, 2005. The weighted average rate for interest-bearing liabilities was 2.61% for the quarter ended June 30, 2006, compared with 2.43% for the trailing quarter and 1.97% for the second quarter of 2005. For the six months ended June 30, 2006, the net interest margin was 3.33%. This was a decrease of three basis points compared with the net interest margin of 3.36% for the six months ended June 30, 2005. The weighted average rate for interest-earning assets was 5.45% for the six months ended June 30, 2006, compared with 4.99% for the six months ended June 30, 2005. The weighted average rate for interest-bearing liabilities was 2.52% for the six months ended June 30, 2005, compared with 1.93% for the same period in 2005. The higher rates on interest-earning assets and interest-bearing liabilities reflect the increases in market interest rates experienced throughout the past year. Non-Interest Income Non-interest income totaled $7.3 million for the quarter ended June 30, 2006, a decrease of $268,000, or 3.5%, compared to the same period in 2005. Decreases in net gains on securities sales of $1.2 million and fee income of $460,000 were partially offset by a $1.4 million increase in other income for the quarter ended June 30, 2006, compared with the same period in 2005. During the second quarter of 2006, the Company sold $35.3 million in lower-yielding mortgage-backed securities, resulting in a loss of $1.6 million. The proceeds were used to repay borrowings as the Company continued its near-term efforts to de-leverage the balance sheet and protect the net interest margin. The decrease in fee income was primarily attributable to a $429,000 reduction in commercial loan prepayment fee income compared with the same period in 2005. The increase in other income was primarily attributable to gains recognized on the call of FHLB advances resulting from the accelerated accretion of related purchase accounting adjustments. For the six months ended June 30, 2006, non-interest income totaled $14.6 million, an increase of $895,000, or 6.5%, compared to the same period in 2005. Increases in other income of $1.3 million and fee income of $655,000 were partially offset by a reduction in securities gains of $1.1 million. The increase in other income was primarily attributable to gains recognized on the call of FHLB advances. The increase in fee income was primarily attributable to deposit fees, equity fund fees and fees related to the outsourcing of the official check function. The decrease in gains on securities sales was due to losses recorded on the sales of mortgage-backed securities during the quarter ended June 30, 2006. Non-Interest Expense For the three months ended June 30, 2006, non-interest expense decreased $3.3 million, or 9.9%, to $29.9 million, compared to $33.2 million for the three months ended June 30, 2005. Compensation and employee benefits expense decreased $1.8 million, primarily due to a $1.4 million expense recognized in the second quarter of 2005 in connection with the VRI. Other non-interest expense decreased $336,000 for the quarter ended June 30, 2006, compared with the same period in 2005, as a result of reductions in printing and supplies expense, consultant fees, insurance, and telephone expense. Net occupancy expense decreased $326,000 for the quarter ended June 30, 2006, compared with the same period in 2005, primarily as a result of reductions in software and equipment maintenance costs and utilities expense. Amortization of intangibles decreased $288,000 for the quarter ended June 30, 2006, compared with the same period in 2005, as a result of scheduled reductions in core deposit intangible amortization and a reduction 2 in mortgage servicing rights amortization resulting from slower principal repayments. Advertising expense decreased $249,000 for the quarter ended June 30, 2006, compared with the same period in 2005, due to the timing of marketing initiatives. Data processing expense decreased $238,000 for the quarter ended June 30, 2006, compared with the same period in 2005, primarily due to the outsourcing of items processing in the fourth quarter of 2005. For the six months ended June 30, 2006, non-interest expense decreased $4.5 million, or 6.9%, to $60.1 million, compared to $64.6 million for the same period in 2005. Compensation and employee benefits expense decreased $2.5 million for the six months ended June 30, 2006, compared with the same period in 2005, as a result of reductions in staff and the expense recorded in the second quarter of 2005 in connection with the VRI. The Company employed 893 full-time equivalent employees at June 30, 2006, compared to 912 full-time equivalent employees at June 30, 2005. For the six months ended June 30, 2006, benefits expense decreased $670,000 due primarily to reductions in employee health insurance costs, and stock-based compensation decreased $186,000 compared with the same period in 2005. Amortization of intangibles decreased $848,000 for the six months ended June 30, 2006, compared with the same period in 2005, as a result of scheduled reductions in the amortization of core deposit intangibles. Net occupancy expense decreased $411,000 for the six months ended June 30, 2006, compared with the same period in 2005, primarily as a result of reductions in software and equipment maintenance costs and utilities expense. Data processing expense decreased $474,000 for the six months ended June 30, 2006, compared with the same period in 2005, primarily due to the outsourcing of items processing in the fourth quarter of 2005. The Company's annualized non-interest expense as a percentage of average assets improved to 2.04% for the quarter ended June 30, 2006, compared with 2.12% for the same period in 2005. For the six months ended June 30, 2006, non-interest expense as a percentage of average assets was 2.05%, compared with 2.07% for the same period in 2005. The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income) was 59.91% for the quarter ended June 30, 2006, compared with 62.08% for the same period in 2005. For the six months ended June 30, 2006, the efficiency ratio was 59.73%, compared with 60.46% for the same period in 2005. Asset Quality The Company continues to emphasize asset quality. Total non-performing loans at June 30, 2006 were $5.7 million, or 0.15% of total loans, compared to $6.0 million, or 0.16% of total loans at December 31, 2005, and $7.3 million, or 0.20% of total loans at June 30, 2005. At June 30, 2006 and December 31, 2005, the Company's allowance for loan losses was 0.86% of total loans, compared with 0.91% of total loans at June 30, 2005. The Company recorded provisions for loan losses of $565,000 and $1.1 million for the three and six months ended June 30, 2006, respectively, compared with provisions of $400,000 for both the three and six months ended June 30, 2005. For the three and six months ended June 30, 2006, net charge-offs totaled $214,000 and $845,000, respectively, compared with net charge-offs of $884,000 and $813,000 for the same periods in 2005. The increase in the loan loss provision for the three and six months ended June 30, 2006, compared with the same periods in 2005, was attributable to loan growth as well as a shift in the composition of the loan portfolio from retail to commercial loans. About the Company Provident Financial Services, Inc. is the holding company for The Provident Bank, a community-oriented bank offering a full range of retail and commercial loan and deposit products. The Bank currently operates 76 full service branches throughout northern and central New Jersey. Post Earnings Conference Call Representatives of the Company will hold a conference call for investors at 10:00 a.m. Eastern Time on July 27, 2006 regarding highlights of the Company's second quarter 2006 financial results. The call may be accessed by dialing 1-877-407-8035 (Domestic) or 1-201-689-8035 (International). Internet access to the call is also available (listen only) at www.providentnj.com by going to Investor Relations and clicking on Webcast. 3 Forward Looking Statements Certain statements contained herein are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "estimate," "anticipate," "continue," or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 4 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Condition June 30, 2006 (Unaudited) and December 31, 2005 (Dollars in Thousands)
Assets June 30, 2006 December 31, 2005 ------------------------------- -------------------------- Cash and due from banks $ 101,580 $ 107,353 Federal funds sold -- -- Short-term investments 2,332 9,915 ------------------------------- -------------------------- Total cash and cash equivalents 103,912 117,268 ------------------------------- -------------------------- Investment securities (market value of $394,587 at June 30, 2006 (unaudited) and $407,972 at December 31, 2005) 404,990 410,914 Securities available for sale, at fair value 887,852 1,082,957 Federal Home Loan Bank stock 34,290 43,794 Loans 3,771,933 3,739,122 Less allowance for loan losses 32,255 31,980 ------------------------------- -------------------------- Net loans 3,739,678 3,707,142 ------------------------------- -------------------------- Foreclosed assets, net 484 670 Banking premises and equipment, net 58,957 60,949 Accrued interest receivable 20,950 23,155 Intangible assets 432,353 435,838 Bank-owned life insurance 113,604 111,075 Other assets 63,113 58,612 ------------------------------- -------------------------- Total assets $ 5,860,183 $ 6,052,374 ================================ ========================= Liabilities and Stockholders' Equity Deposits: Demand deposits $ 1,071,567 $ 1,109,507 Savings deposits 1,319,633 1,363,997 Certificates of deposit of $100,000 or more 361,947 304,229 Other time deposits 1,179,211 1,143,725 --------------------------------- ------------------------- Total deposits 3,932,358 3,921,458 Mortgage escrow deposits 19,796 18,121 Borrowed funds 822,346 970,108 Subordinated debentures 26,109 26,444 Other liabilities 35,855 39,948 --------------------------------- ------------------------- Total liabilities 4,836,464 4,976,079 --------------------------------- ------------------------- Stockholders' Equity: Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued -- -- Common stock, $0.01 par value, 200,000,000 shares authorized, 79,879,017 shares issued and 64,937,658 shares outstanding at June 30, 2006, and 79,879,017 shares issued and 68,661,880 shares outstanding at December 31, 2005 799 799 Additional paid-in capital 966,411 964,555 Retained earnings 409,852 395,589 Accumulated other comprehensive loss (13,302) (8,906) Treasury stock at cost (268,086) (167,113) Unallocated common stock held by Employee Stock Ownership Plan (71,955) (73,316) Common Stock acquired by the Stock Award Plan -- (35,313) Common Stock acquired by the Directors' Deferred Fee Plan (13,056) (13,224) Deferred compensation - Directors' Deferred Fee Plan 13,056 13,224 ------------------------------- -------------------------- Total stockholders' equity 1,023,719 1,076,295 ------------------------------- -------------------------- Total liabilities and stockholders' equity $ 5,860,183 $ 6,052,374 =============================== ==========================
5 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Income Three and Six Months Ended June 30, 2006 and 2005 (Unaudited) (Dollars in Thousands, Except Per Share Data)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------ --------------------------------- 2006 2005 2006 2005 ---------- ------------ ---------- ------------ (Unaudited) (Unaudited) Interest income: Real estate secured loans $ 40,436 $ 38,636 $ 79,729 $ 76,914 Commercial loans 6,538 5,283 12,936 10,236 Consumer loans 8,632 7,251 16,798 14,501 Investment securities 4,218 4,218 8,516 8,650 Securities available for sale 10,833 12,850 22,162 26,630 Other short-term investments 26 170 95 316 Federal funds 11 418 52 536 ---------- ----------- ---------- --------- Total interest income 70,694 68,826 140,288 137,783 ---------- ----------- ---------- --------- Interest expense: Deposits 19,577 14,111 37,238 27,016 Borrowed funds 8,011 8,385 16,154 16,927 Subordinated debentures 412 359 819 704 ---------- ----------- ---------- --------- Total interest expense 28,000 22,855 54,211 44,647 ---------- ----------- ---------- --------- Net interest income 42,694 45,971 86,077 93,136 Provision for loan losses 565 400 1,120 400 ---------- ----------- ---------- --------- Net interest income after provision for loan losses 42,129 45,571 84,957 92,736 ---------- ----------- ---------- --------- Non-interest income: Fees 5,725 6,185 11,532 10,877 Bank-owned life insurance 1,270 1,256 2,529 2,552 Net (loss) gain on securities transactions (1,145) 69 (1,140) (62) Other income 1,434 42 1,696 355 ---------- ----------- ---------- --------- Total non-interest income 7,284 7,552 14,617 13,722 ---------- ----------- ---------- --------- Non-interest expense: Compensation and employee benefits 16,074 17,921 32,431 34,965 Net occupancy expense 4,455 4,781 9,270 9,681 Data processing expense 1,969 2,207 3,853 4,327 Amortization of intangibles 1,570 1,858 3,138 3,986 Advertising and promotion 1,225 1,474 2,266 2,204 Other operating expenses 4,651 4,987 9,190 9,442 ---------- ----------- ---------- --------- Total non-interest expense 29,944 33,228 60,148 64,605 ---------- ----------- ---------- --------- Income before income tax 19,469 19,895 39,426 41,853 expense Income tax expense 5,951 6,126 12,106 13,062 ---------- ----------- ---------- --------- Net income $ 13,518 $ 13,769 $ 27,320 $ 28,791 ========== =========== ========== ========= Basic earnings per share $ 0.22 $ 0.21 $ 0.44 $ $0.43 Average basic shares outstanding 62,099,369 66,724,470 62,766,137 67,444,677 Diluted earnings per share $ 0.22 $ 0.20 $ 0.43 $ 0.42 Average diluted shares outstanding 62,838,312 67,479,362 63,505,949 68,202,721
6 PROVIDENT FINANCIAL SERVICES, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share data) (Unaudited) At or for the Three At or for the Six Months Ended Months Ended June 30, June 30, ------------------------------------------------------------- 2006 2005 2006 2005 ---- ---- ---- ---- INCOME STATEMENT: Net interest income $ 42,694 $ 45,971 $ 86,077 $ 93,136 Provision for loan losses 565 400 1,120 400 Non-interest income 7,284 7,552 14,617 13,722 Non-interest expense 29,944 33,228 60,148 64,605 Income before income tax expense 19,469 19,895 39,426 41,853 Net income 13,518 13,769 27,320 28,791 Basic earnings per share $ 0.22 $0.21 $ 0.44 $ 0.43 Diluted earnings per share $ 0.22 $0.20 $ 0.43 $ 0.42 Interest rate spread 2.91% 3.04% 2.93% 3.06% Net interest margin 3.33% 3.34% 3.33% 3.36% PROFITABILITY: Annualized return on average assets 0.92% 0.88% 0.93% 0.92% Annualized return on average equity 5.15% 4.98% 5.18% 5.20% Annualized non-interest expense to average assets 2.04% 2.12% 2.05% 2.07% Efficiency ratio (1) 59.91% 62.08% 59.73% 60.46% ASSET QUALITY: Non-performing loans $ 5,662 $ 7,345 Foreclosed assets 484 584 Non-performing loans to total loans 0.15% 0.20% Non-performing assets to total assets 0.10% 0.13% Allowance for loan losses $ 32,255 $ 33,353 Allowance for loan losses to non-performing loans 569.68% 454.09% Allowance for loan losses to total loans 0.86% 0.91% AVERAGE BALANCE SHEET DATA: Assets $5,880,409 $6,274,548 $5,918,612 $6,306,501 Loans, net 3,720,034 3,660,106 3,704,856 3,657,375 Earning assets 5,126,437 5,489,415 5,165,843 5,521,664 Core deposits 2,372,524 2,590,589 2,384,355 2,594,026 Borrowings 883,387 1,124,017 921,502 1,146,110 Interest-bearing liabilities 4,307,573 4,645,019 4,340,594 4,671,454 Stockholders' equity 1,053,734 1,106,380 1,062,904 1,115,876 Average yield on interest- earning assets 5.52% 5.01% 5.45% 4.99% Average cost of interest- bearing liabilities 2.61% 1.97% 2.52% 1.93%
7 Notes (1) Efficiency Ratio Calculation
Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2006 2005 2006 2005 ---- ---- ---- ---- Net interest income $42,694 $45,971 $ 86,077 $ 93,136 Non-interest income 7,284 7,552 14,617 13,722 ------- ------- -------- -------- Total income $49,978 $53,523 $100,694 $106,858 ======= ======= ======== ======== Non-interest expense $29,944 $33,228 $ 60,148 $ 64,605 ======= ======= ======== ======== Expense/Income: 59.91% 62.08% 59.73% 60.46% ======= ======= ======== ========
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Average Quarterly Balance NET INTEREST MARGIN ANALYSIS (Unaudited) (Dollars in thousands) June 30, 2006 March 31, 2006 Average Average Average Average Balance Interest Yield Balance Interest Yield ------------------------------------------ ---------------------------------------- Interest-Earning Assets: Federal Funds Sold and Other Short-Term Investments $ 3,123 $ 37 4.74% $ 10,454 $ 110 4.27% Investment Securities (1) 408,362 4,218 4.13 413,060 4,298 4.16 Securities Available for Sale 959,237 10,310 4.30 1,051,893 10,781 4.10 Federal Home Loan Bank Stock 35,681 523 5.88 40,771 548 5.45 Net Loans (2) Total Mortgage Loans 2,755,527 40,436 5.88 2,761,335 39,293 5.68 Total Commercial Loans 389,013 6,538 6.74 370,684 6,398 6.90 Total Consumer Loans 575,494 8,632 6.01 557,491 8,166 5.93 ---------- ----------- ----------- --------- Total Interest-Earning Assets 5,126,437 70,694 5.52 $ 5,205,688 69,594 5.35 ---------- ----------- ----------- --------- Non-Interest Earning Assets: Cash and Due from Banks 79,196 76,598 Other Assets 674,776 674,955 ---------- ----------- Total Assets $ 5,880,409 $ 5,957,241 ========== =========== Interest-Bearing Liabilities: Demand Deposits $ 585,784 1,735 1.19% $ 598,991 1,689 1.14% Savings Deposits 1,318,684 4,212 1.28 1,337,729 3,807 1.15 Time Deposits 1,519,718 13,630 3.60 1,477,221 12,165 3.34 ---------- ----------- ------------ ---------- Total Deposits 3,424,186 19,577 2.29 3,413,941 17,661 2.10 ----------- ---------- Borrowed Funds: Total Borrowings 883,387 8,423 3.82 960,041 8,550 3.61 ---------- ----------- ----------- --------- Total Interest-Bearing Liabilities 4,307,573 28,000 2.61 4,373,982 26,211 2.43 ----------- ---- --------- ---- Non-Interest Bearing Liabilities 519,102 511,083 Total Liabilities 4,826,674 4,885,065 Stockholders' Equity 1,053,734 1,072,176 ----------- ------------ Total Liabilities & Stockholders' Equity $ 5,880,409 $ 5,957,241 Net interest income $ 42,694 $ 43,383 ========= ========== Net interest rate spread 2.91% 2.92% ==== ==== Net interest-earning assets $ 818,864 $ 831,706 =========== ============= Net interest margin (3) 3.33% 3.31% ==== ==== Ratio of interest-earning assets to interest-bearing liabilities 1.19x 1.19X ------------------------------------------------------------------------------------------------------------------------------------
(1) Average outstanding balance amounts shown are amortized cost. (2) Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrualloans. (3) Annualized net interest income divided by average interest-earning assets. 9 The following table summarizes the net interest margin for the previous year, inclusive 6/30/2006 3/31/2006 12/31/2005 9/30/2005 6/30/2005 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. -------- -------- -------- -------- -------- Interest-Earning Assets: Securities 4.13% 4.15% 4.02% 3.88% 3.86% Net Loans 6.01% 5.84% 5.73% 5.69% 5.58% Total Interest-Earning Assets 5.52% 5.35% 5.20% 5.11% 5.01% Interest-Bearing Liabilities Total Deposits 2.29% 2.10% 1.97% 1.79% 1.61% Total Borrowings 3.82% 3.61% 3.37% 3.18% 3.12% Total Interest-Bearing Liabilities 2.61% 2.43% 2.29% 2.13% 1.97% Interest Rate Spread 2.91% 2.92% 2.91% 2.98% 3.04% Net Interest Margin 3.33% 3.31% 3.27% 3.31% 3.34% Ratio of Interest-Earning Assets to total Interest-Bearing Liabilities 1.19x 1.19x 1.19x 1.18x 1.18x
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Average YTD Balance NET INTEREST MARGIN ANALYSIS (Unaudited) (Dollars in thousands) June 30, 2006 June 30, 2005 Average Average Average Average Balance Interest Yield Balance Interest Yield ------------------------------------------ ---------------------------------------- Interest-Earning Assets: Federal Funds Sold and Other Short-Term Investments $ 6,768 $ 147 4.38% $ 64,317 $ 852 2.67% Investment Securities (1) 410,698 8,516 4.15 432,569 8,650 4.01 Securities Available for Sale 1,005,309 21,091 4.20 1,321,009 25,694 3.89 Federal Home Loan Bank Stock 38,212 1,071 5.65 46,394 936 4.07 Net Loans (2) Total Mortgage Loans 2,758,415 79,729 5.80 2,779,021 76,914 5.53 Total Commercial Loans 379,899 12,936 6.87 352,667 10,236 5.77 Total Consumer Loans 566,542 16,798 5.98 525,687 14,501 5.56 ---------- -------- ------------ -------- Total Interest-Earning Assets 5,165,843 140,288 5.45 5,521,664 137,783 4.99 -------- -------- -------- ---- Non-Interest Earning Assets: Cash and Due from Banks 77,904 101,759 Other Assets 674,865 683,078 ---------- ------------ Total Assets $5,918,612 $ 6,306,501 ========== ============ Interest-Bearing Liabilities: Demand Deposits $ 592,351 3,425 1.17% $ 610,748 2,441 0.81% Savings Deposits 1,328,154 8,019 1.22 1,519,749 7,626 1.01 Time Deposits 1,498,587 25,794 3.47 1,394,847 16,949 2.45 ---------- -------- ------------ -------- Total Deposits 3,419,092 37,238 2.20 3,525,344 27,016 1.55 -------- -------- Borrowed Funds: Total Borrowings 921,502 16,973 3.71 1,146,110 17,631 3.10 ---------- -------- ------------ -------- Total Interest-Bearing Liabilities 4,340,594 54,211 2.52 4,671,454 44,647 1.93 -------- ---- -------- ---- Non-Interest Bearing Liabilities 515,114 519,171 ---------- ------------ Total Liabilities 4,855,708 5,190,625 Stockholders' Equity 1,062,904 1,115,876 ---------- ------------ Total Liabilities & Stockholders'Equity $ 5,918,612 $ 6,306,501 =========== ============ Net interest income $ 86,077 $ 93,136 ========= ======== Net interest rate spread 2.93% 3.06% ==== ==== Net interest-earning assets $ 825,249 $ 850,210 =========== ============ Net interest margin (3) 3.33% 3.36% ==== ==== Ratio of interest-earning assets to interest-bearing liabilities 1.19x 1.18x ------------------------------------------------------------------------------------------------------------------------------------ (1) Average outstanding balance amounts shown are amortized cost. (2) Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans. (3) Annualized net interest income divided by average interest-earning assets. ====================================================================================================================================
11 The following table summarizes the YTD net interest margin for the previous three years, inclusive.
Six Months Ended ---------------------------------------- 6/30/06 6/30/05 6/30/04 ------- ------- ------- Interest-Earning Assets: Securities 4.22% 3.88% 3.35% Net Loans 5.94% 5.56% 5.70% Total Interest-Earning Assets 5.45% 4.99% 4.68% Interest-Bearing Liabilities: Total Deposits 2.20% 1.55% 1.35% Total Borrowings 3.71% 3.10% 2.79% Total Interest-Bearing Liabilities 2.52% 1.93% 1.68% Interest Rate Spread 2.93% 3.06% 3.00% Net Interest Margin 3.33% 3.36% 3.39% Ratio of Interest-Earning Assets to Total Interest-Bearing Liabilities 1.19x 1.18x 1.30x
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