EX-99.1 2 form8kexh_102308.txt PRESS RELEASE FOR FORM 8-K (10 23 08) NEWS RELEASE CONTACT: Kenneth J. Wagner, SVP Investor Relations Provident Financial Services, Inc. (201) 915-5344 FOR RELEASE: 7:43 A.M. Eastern Time: October 23, 2008 Provident Financial Services, Inc. Announces Quarterly Earnings and Declares Quarterly Cash Dividend JERSEY CITY, NJ, October 23, 2008 ---/PRNewswire/First Call/ - Provident Financial Services, Inc. (NYSE:PFS) (the "Company") reported basic and diluted earnings per share of $0.23 for the quarter ended September 30, 2008, compared to basic and diluted earnings per share of $0.14 for the quarter ended September 30, 2007. Basic and diluted earnings per share were $0.61 for the nine months ended September 30, 2008, compared to basic and diluted earnings per share of $0.55 for the nine months ended September 30, 2007. Net income for the three months ended September 30, 2008 totaled $13.2 million, compared to $8.3 million reported for the same period in 2007. Net income was $34.2 million for the nine months ended September 30, 2008, compared to $32.7 million for the same period in 2007. Earnings and per share data for the nine months ended September 30, 2008 reflect severance costs totaling $503,000, net of tax, recognized during the second quarter of 2008. In addition, the Company recorded other-than-temporary impairment charges on investments in a debt security issued by Lehman Brothers Holdings, Inc. and the common stock of two publicly-traded financial institutions totaling $869,000, net of tax, during the quarter ended September 30, 2008. Results for the nine months ended September 30, 2008, were also impacted by a $180,000 net after-tax gain recorded in connection with the ownership and mandatory redemption of a portion of the Company's Class B Visa, Inc. shares as part of Visa's initial public offering in the first quarter of 2008, and a $175,000 net after-tax gain resulting from the sale of a branch office in the first quarter of 2008. Earnings and per share data for the three and nine months ended September 30, 2007 were impacted by severance charges totaling $1.9 million, net of tax. Earnings and per share data for the nine months ended September 30, 2007 were further impacted by the settlement of an insurance claim which resulted in a recovery of $3.5 million, net of tax, related to a fraud loss that occurred and was recognized in 2002, and one-time expenses of $246,000, net of tax, related to the April 1, 2007 acquisition of First Morris Bank & Trust ("First Morris"). Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "Our third quarter operating results reflect the basic strategies of our business: expanding net interest margin, managing overhead expenses, adhering to conservative lending standards and maintaining our well-capitalized status, as defined by our regulators. We neither originate nor hold any sub-prime mortgages, trust preferred securities, or common or preferred stock issued by Fannie Mae or Freddie Mac. In comparison to the trailing quarter, our results also reflect growth in total loans outstanding, growth in total core deposits and improvement in our efficiency ratio. We remain mindful of the unsettled economic environment, and, in response, have made prudent and appropriate additions to our loan loss allowance. At the same time, we have maintained our ability and willingness to lend to quality borrowers, as well as our commitment to enhancing core customer relationships. We believe these are the appropriate strategies for achieving earnings momentum and returning long-term stockholder value." Declaration of Quarterly Dividend The Company's Board of Directors declared a quarterly cash dividend of $0.11 per common share payable on November 28, 2008, to stockholders of record as of the close of business on November 14, 2008. Balance Sheet Summary Total assets increased to $6.45 billion at September 30, 2008, compared to $6.36 billion at December 31, 2007, due primarily to increases in loans and securities available for sale. Total investments increased $62.1 million, or 5.3%, during the nine months ended September 30, 2008. The increase included $55.2 million of residential mortgage loan pools that were securitized by the Company in the first quarter of 2008 and are held as securities available for sale. The Company's net loans increased $79.3 million, or 1.9%, to $4.33 billion at September 30, 2008, from $4.26 billion at December 31, 2007, as year-to-date loan originations and purchases more than offset the securitization of $55.2 million of conforming one- to four-family 30-year fixed-rate residential mortgage loans during the first quarter of 2008. Loan originations totaled $952.6 million and loan purchases totaled $228.4 million for the nine months ended September 30, 2008. Compared with December 31, 2007, commercial mortgage and multi-family loans increased $136.9 million, and residential mortgage loans increased $81.9 million, while construction loans decreased $80.1 million, commercial loans decreased $40.4 million, and consumer loans decreased $17.5 million. Commercial real estate, construction and commercial loans represented 44.7% of the loan portfolio at September 30, 2008, compared to 45.2% at December 31, 2007. At September 30, 2008, the Company's unfunded loan pipeline totaled $728.9 million, including $238.0 million in commercial loan commitments, $119.6 million in construction loan commitments and $93.2 million in commercial mortgage commitments. The unfunded loan pipeline at June 30, 2008 was $763.4 million. Total deposits decreased $88.9 million, or 2.1%, during the nine months ended September 30, 2008, however core deposits increased $51.8 million, or 2.0%, to $2.64 billion at September 30, 2008. Total deposits were $4.14 billion at September 30, 2008, with core deposits, consisting of savings and demand deposit accounts, representing 63.8% of total deposits. Borrowed funds increased $169.7 million, or 15.8%, during the nine months ended September 30, 2008. Common stock repurchases for the nine months ended September 30, 2008 totaled 101,000 shares at an average cost of $14.30 per share. At September 30, 2008, book value per share and tangible book value per share were $17.04 and $8.38, respectively, compared with $16.78 and $8.05, respectively, at December 31, 2007. Results of Operations Net Interest Margin The net interest margin increased 17 basis points to 3.27% for the quarter ended September 30, 2008, from 3.10% for the quarter ended June 30, 2008. The net interest margin for the quarter ended September 30, 2008 increased 30 basis points compared with the net interest margin of 2.97% for the quarter ended September 30, 2007. The weighted average yield on interest-earning assets was 5.51% for the three months ended September 30, 2008, compared with 5.50% for the trailing quarter and 5.87% for the three months ended September 30, 2007. The weighted average cost of interest-bearing liabilities was 2.55% for the quarter ended September 30, 2008, compared with 2.74% for the trailing quarter and 3.34% for the third quarter of 2007. For the nine months ended September 30, 2008, the net interest margin was 3.08%. This was an increase of 8 basis points compared with the net interest margin of 3.00% for the nine months ended September 30, 2007. The weighted average yield on interest-earning assets was 5.54% for the nine months ended September 30, 2008, compared with 5.80% for the nine months ended September 30, 2007. The weighted average cost of interest-bearing liabilities was 2.80% for the nine months ended September 30, 2008, compared with 3.25% for the same period in 2007. The average cost of interest-bearing deposits for the three months ended September 30, 2008 was 2.19%, compared with 2.41% for the trailing quarter and 3.17% for the same period last year. The average cost of borrowings for the three months ended September 30, 2008 was 3.62%, compared with 3.84% for the trailing quarter and 4.16% for the same period last year. The average cost of interest-bearing deposits for the nine months ended September 30, 2008 was 2.49%, compared with 3.06% for the same period last year. The average cost of borrowings for the nine months ended September 30, 2008 was 3.83%, compared with 4.17% for the same period last year. Non-Interest Income Non-interest income totaled $7.8 million for the quarter ended September 30, 2008, a decrease of $298,000 compared to the same period in 2007. Net losses on securities transactions totaled $966,000 for the quarter ended September 30, 2008, compared with net gains of $2,000 for the same period last year. The net securities losses for the current quarter included $1.4 million of other-than-temporary impairment charges recognized on investments in a debt security issued by Lehman Brothers Holdings, Inc. and the common stock of two publicly-traded financial institutions. Partially offsetting the net securities losses, fee income for the quarter ended September 30, 2008 increased $846,000, or 13.1%, compared to the same period in 2007, primarily as a result of increases in the value of equity fund holdings. In addition, other income declined $157,000 for the quarter ended September 30, 2008, compared with the same period in 2007, as a result of a non-recurring gain on the sale of real estate recognized in 2007. 2 For the nine months ended September 30, 2008, non-interest income totaled $23.2 million, a decrease of $6.8 million, or 22.6%, compared to the same period in 2007. In 2007, the Company recorded a one-time gain on an insurance settlement of $5.9 million, before taxes, related to the resolution of previously disclosed litigation. In addition, net losses on securities transactions totaled $565,000 for the nine months ended September 30, 2008, compared with net losses of $61,000 for the same period in 2007. Non-Interest Expense For the three months ended September 30, 2008, non-interest expense decreased $3.7 million, or 10.5%, to $32.0 million, compared to $35.7 million for the three months ended September 30, 2007. For the three months ended September 30, 2008, compensation and benefits expense decreased $4.3 million, compared with the same period in 2007. Compensation and benefits expense decreased as a result of previous staff reductions and lower stock-based compensation costs. The Company recorded $3.2 million in severance charges during the quarter ended September 30, 2007. Amortization of intangibles decreased $304,000 for the three months ended September 30, 2008, compared with the same period in 2007, as a result of scheduled reductions in the amortization of core deposit intangibles. Partially offsetting these decreases, other operating expenses increased $427,000 for the quarter ended September 30, 2008, compared with the same period in 2007, due primarily to expenses related to foreclosed assets. For the nine months ended September 30, 2008, non-interest expense decreased $2.0 million, or 2.0%, to $97.2 million, compared to $99.2 million for the nine months ended September 30, 2007. Compensation and benefits expense decreased $4.0 million, as a result of previous staff reductions and lower stock-based compensation costs. The Company incurred $773,000 in pre-tax severance costs during the second quarter of 2008, compared with $3.2 million in severance charges recognized during the quarter ended September 30, 2007. Advertising costs decreased $352,000 for the nine months ended September 30, 2008, compared with the same period in 2007, as prior year costs included charges related to the First Morris acquisition. Amortization of intangibles decreased $209,000 for the nine months ended September 30, 2008, compared with the same period in 2007, as a result of scheduled reductions in the amortization of core deposit intangibles. Partially offsetting these decreases, other operating expenses increased $1.4 million for the nine months ended September 30, 2008, compared with the same period in 2007, due to increases in several categories, including an expense of $356,000 associated with the Company's proportionate share of a litigation reserve established by Visa, as well as increases in attorney fees and costs associated with foreclosed assets. Net occupancy expense increased $1.2 million for the nine months ended September 30, 2008, compared with the same period in 2007, due primarily to the addition of nine branch locations in connection with the acquisition of First Morris. The Company's annualized non-interest expense as a percentage of average assets improved to 1.98% for the quarter ended September 30, 2008, compared with 2.30% for the same period in 2007. For the nine months ended September 30, 2008, non-interest expense as a percentage of average assets was 2.04%, compared with 2.21% for the same period in 2007. The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income) improved to 60.16% for the quarter ended September 30, 2008, compared with 75.41% for the same period in 2007. For the nine months ended September 30, 2008, the efficiency ratio was 64.66%, compared with 67.65% for the same period in 2007. Asset Quality Total non-performing loans at September 30, 2008 were $35.3 million, or 0.81% of total loans, compared with $34.6 million, or 0.81% of total loans at December 31, 2007, and $11.0 million, or 0.26% of total loans at September 30, 2007. At September 30, 2008, the Company's allowance for loan losses was 0.99% of total loans, compared with 0.95% of total loans at December 31, 2007, and 0.89% of total loans at September 30, 2007. The Company recorded provisions for loan losses of $3.8 million and $6.6 million for the three and nine months ended September 30, 2008, respectively, compared with provisions of $1.3 million and $2.8 million for the three and nine months ended September 30, 2007, respectively. For the three and nine months ended September 30, 2008, the Company had net charge-offs of $1.6 million and $4.1 million, respectively, compared with net charge-offs of $473,000 and $468,000 for the same periods in 2007. The allowance for loan losses increased $2.5 million, to $43.3 million at September 30, 2008, from $40.8 million at December 31, 2007. The increase in the loan loss provision for the three and nine months ended September 30, 2008, compared with the same periods in 2007, was attributable to an increase in non-performing loans, growth in the loan portfolio, and an increase in commercial loans as a percentage of the loan portfolio to 44.7% at September 30, 2008, from 44.0% at September 30, 2007, as well as ongoing uncertainty with respect to general economic conditions. At September 30, 2008, the Company held $3.6 million of foreclosed assets, compared with $1.0 million at December 31, 2007, and $5.9 million at June 30, 2008. The increase in foreclosed assets at September 30, 2008, compared with December 31, 2007, was primarily attributable to one commercial real estate line of credit secured by a number of properties that was previously classified as impaired. 3 Income Tax Expense For the three months ended September 30, 2008, the Company's income tax expense was $4.2 million, compared with $2.1 million for the same period in 2007. For the nine months ended September 30, 2008, the Company's income tax expense was $12.3 million, compared with $11.9 million for the same period in 2007. The increase in income tax expense was primarily attributable to increased income before income taxes. For the three and nine months ended September 30, 2008, the Company's effective tax rates were 24.2% and 26.5%, respectively, compared with 20.2% and 26.7% for the three and nine months ended September 30, 2007, respectively. The effective tax rates for the three and nine months ended September 30, 2008 were favorably impacted by the utilization of capital losses on securities transactions. The effective tax rates for the three and nine months ended September 30, 2007 reflected a larger proportion of the Company's income being derived from tax-exempt sources, primarily as a result of lower pre-tax income in 2007 due to $3.2 million in severance charges recorded during the quarter ended September 30, 2007. 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 83 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 October 23, 2008 regarding highlights of the Company's third quarter 2008 financial results. The call may be accessed by dialing 1-800-860-2442 (Domestic) or 1-412-858-4600 (International). Internet access to the call is also available (listen only) at www.providentnj.com by going to Investor Relations and clicking on Webcast. 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 September 30, 2008 (Unaudited) and December 31, 2007 (Dollars in Thousands)
Assets September 30, 2008 December 31, 2007 --------------------------------- ---------------------------- Cash and due from banks $ 84,970 $ 83,737 Federal funds sold -- 18,000 Short-term investments 3,664 38,892 --------------------------------- ---------------------------- Total cash and cash equivalents 88,634 140,629 --------------------------------- ---------------------------- Investment securities held to maturity (market value of $347,193 at September 30, 2008 (unaudited) and $359,666 at December 31, 2007) 354,112 358,491 Securities available for sale, at fair value 832,659 769,615 Federal Home Loan Bank stock 43,149 39,764 Loans 4,378,148 4,296,291 Less allowance for loan losses 43,329 40,782 --------------------------------- ---------------------------- Net loans 4,334,819 4,255,509 --------------------------------- ---------------------------- Foreclosed assets, net 3,556 1,041 Banking premises and equipment, net 77,078 79,138 Accrued interest receivable 23,587 24,665 Intangible assets 516,031 520,722 Bank-owned life insurance 125,654 121,674 Other assets 51,826 48,143 --------------------------------- ---------------------------- Total assets $ 6,451,105 $ 6,359,391 ================================= ============================ Liabilities and Stockholders' Equity Deposits: Demand deposits $ 1,732,534 $ 1,553,625 Savings deposits 904,596 1,031,725 Certificates of deposit of $100,000 or more 431,744 480,362 Other time deposits 1,067,003 1,159,108 --------------------------------- ---------------------------- Total deposits 4,135,877 4,224,820 Mortgage escrow deposits 19,648 18,075 Borrowed funds 1,244,794 1,075,104 Other liabilities 35,218 40,598 --------------------------------- ---------------------------- Total liabilities 5,435,537 5,358,597 --------------------------------- ---------------------------- 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, 83,209,293 shares issued and 59,609,837 shares outstanding at September 30, 2008, and 59,646,936 shares outstanding at December 31, 2007 832 832 Additional paid-in capital 1,013,080 1,009,120 Retained earnings 451,856 437,503 Accumulated other comprehensive income 186 4,335 Treasury stock at cost (384,852) (383,407) Unallocated common stock held by Employee Stock Ownership Plan (65,534) (67,589) Common Stock acquired by the Directors' Deferred Fee Plan (7,690) (7,759) Deferred compensation - Directors' Deferred Fee Plan 7,690 7,759 -------------------------------- ---------------------------- Total stockholders' equity 1,015,568 1,000,794 -------------------------------- ---------------------------- Total liabilities and stockholders' equity $ 6,451,105 $ 6,359,391 ================================ ============================
5 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Income Three and Nine Months Ended September 30, 2008 and 2007 (Unaudited) (Dollars in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ --------------------------------- 2008 2007 2008 2007 ------------- --------------- -------------- ---------------- (Unaudited) (Unaudited) Interest income: Real estate secured loans $ 42,465 42,791 124,406 125,315 Commercial loans 10,665 11,547 32,568 29,880 Consumer loans 9,106 10,227 27,932 29,061 Investment securities 3,606 3,802 10,860 11,664 Securities available for sale 10,770 9,418 32,372 28,614 Other short-term investments 26 37 329 115 Federal funds -- 5 164 110 ------------- --------------- -------------- ---------------- Total interest income 76,638 77,827 228,631 224,759 ------------- --------------- -------------- ---------------- Interest expense: Deposits 20,133 30,307 68,945 83,663 Borrowed funds 11,154 8,237 32,577 24,501 ------------- --------------- -------------- ---------------- Total interest expense 31,287 38,544 101,522 108,164 ------------- --------------- -------------- ---------------- Net interest income 45,351 39,283 127,109 116,595 Provision for loan losses 3,800 1,300 6,600 2,800 ------------- --------------- -------------- ---------------- Net interest income after provision for loan losses 41,551 37,983 120,509 113,795 ------------- --------------- -------------- ---------------- Non-interest income: Fees 7,281 6,435 18,287 18,599 Gain on insurance settlement -- -- -- 5,947 Bank-owned life insurance 1,320 1,339 3,980 4,026 Net (loss) gain on securities transactions (966) 2 (565) (61) Other income 140 297 1,525 1,490 ------------- --------------- -------------- ---------------- Total non-interest income 7,775 8,073 23,227 30,001 ------------- --------------- -------------- ---------------- Non-interest expense: Compensation and employee benefits 16,591 20,842 50,768 54,784 Net occupancy expense 5,195 4,938 15,626 14,451 Data processing expense 2,296 2,249 6,903 6,913 Amortization of intangibles 1,373 1,677 4,706 4,915 Advertising and promotion 1,160 1,089 2,989 3,341 Other operating expenses 5,343 4,916 16,210 14,775 ------------- --------------- -------------- ---------------- Total non-interest expense 31,958 35,711 97,202 99,179 ------------- --------------- -------------- ---------------- Income before income tax 17,368 10,345 46,534 44,617 expense Income tax expense 4,205 2,085 12,325 11,932 ------------- --------------- -------------- ---------------- Net income $ 13,163 $8,260 34,209 $32,685 ============= =============== ============== ================ Basic earnings per share $ 0.23 $ 0.14 0.61 $ 0.55 Average basic shares outstanding 56,078,691 58,968,076 56,006,174 59,787,076 Diluted earnings per share $ 0.23 $ 0.14 0.61 $ 0.55 Average diluted shares outstanding 56,078,870 58,968,076 56,006,234 59,787,076
6 PROVIDENT FINANCIAL SERVICES, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Dollars in thousands, except share data) (Unaudited)
At or for the Three At or for the Nine Months Ended Months Ended September 30, September 30, ---------------------------------------------------------------- 2008 2007 2008 2007 ---- ---- ---- ---- INCOME STATEMENT: Net interest income $45,351 $39,283 $127,109 $116,595 Provision for loan losses 3,800 1,300 6,600 2,800 Non-interest income 7,775 8,073 23,227 30,001 Non-interest expense 31,958 35,711 97,202 99,179 Income before income tax expense 17,368 10,345 46,534 44,617 Net income 13,163 8,260 34,209 32,685 Basic earnings per share $0.23 $0.14 $0.61 $0.55 Diluted earnings per share $0.23 $0.14 $0.61 $0.55 Interest rate spread 2.96% 2.53% 2.74% 2.55% Net interest margin 3.27% 2.97% 3.08% 3.00% PROFITABILITY: Annualized return on average assets 0.82% 0.53% 0.72% 0.73% Annualized return on average equity 5.17% 3.18% 4.53% 4.22% Annualized non-interest expense to average assets 1.98% 2.30% 2.04% 2.21% Efficiency ratio (1) 60.16% 75.41% 64.66% 67.65% ASSET QUALITY: Non-accrual loans $35,281 $11,023 Non-performing loans 35,281 11,023 Foreclosed assets 3,556 600 Non-performing loans to total loans 0.81% 0.26% Non-performing assets to total assets 0.60% 0.19% Allowance for loan losses $43,329 $37,591 Allowance for loan losses to non-performing loans 122.81% 341.02% Allowance for loan losses to total loans 0.99% 0.89% AVERAGE BALANCE SHEET DATA: Assets $6,419,753 $6,159,799 $6,365,479 $6,008,416 Loans, net 4,293,132 4,117,244 4,244,900 3,975,486 Earning assets 5,548,275 5,283,844 5,501,514 5,174,565 Core deposits 2,636,521 2,580,743 2,611,346 2,469,072 Borrowings 1,227,084 785,760 1,136,553 785,636 Interest-bearing liabilities 4,889,180 4,580,544 4,837,484 4,443,964 Stockholders' equity 1,012,422 1,029,610 1,009,190 1,036,157 Average yield on interest-earning assets 5.51% 5.87% 5.54% 5.80% Average cost of interest-bearing liabilities 2.55% 3.34% 2.80% 3.25%
7 Notes (1) Efficiency Ratio Calculation
Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2008 2007 2008 2007 ---- ---- ---- ---- Net interest income $45,351 $39,283 $127,109 $116,595 Non-interest income 7,775 8,073 23,227 30,001 ----- ----- ------ ------ Total income $53,126 $47,356 $150,336 $146,596 ======= ======= ======== ======== Non-interest expense $31,958 $35,711 $97,202 $99,179 ======= ======= ======= ======= Expense/Income: 60.16% 75.41% 64.66% 67.65% ====== ====== ====== ======
8 Average Quarterly Balance NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) September 30, 2008 June 30, 2008 ------------------------------------------ ---------------------------------------- Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost ------------------------------------------ ---------------------------------------- Interest-Earning Assets: Federal Funds Sold and Other Short-Term Investments $ 4,651 $ 26 2.28 % $ 12,227 $ 93 3.05 % Investment Securities (1) 354,603 3,606 4.07 354,012 3,601 4.07 Securities Available for Sale 854,981 10,212 4.78 887,401 10,557 4.76 Federal Home Loan Bank Stock 40,908 558 5.43 34,537 758 8.83 Net Loans (2) Total Mortgage Loans 3,001,010 42,465 5.65 2,901,165 40,554 5.60 Total Commercial Loans 670,535 10,665 6.33 679,636 10,621 6.29 Total Consumer Loans 621,587 9,106 5.83 623,037 9,147 5.90 ------------- ----------- ------------- ----------- Total Interest-Earning Assets 5,548,275 76,638 5.51 5,492,015 75,331 5.50 ----------- -------------- ---------- -------------- Non-Interest Earning Assets: Cash and Due from Banks 84,333 74,823 Other Assets 787,145 784,470 ------------- -------------- Total Assets $ 6,419,753 $ 6,351,308 ============= ============== Interest-Bearing Liabilities: Demand Deposits $ 1,249,566 5,725 1.82 % $ 1,178,700 5,110 1.74 % Savings Deposits 920,365 2,273 0.98 965,877 2,446 1.02 Time Deposits 1,492,165 12,135 3.24 1,570,383 14,666 3.76 ------------- ----------- -------------- ---------- Total Deposits 3,662,096 20,133 2.19 3,714,960 22,222 2.41 Total Borrowings 1,227,084 11,154 3.62 1,102,742 10,540 3.84 ------------- ----------- -------------- ---------- Total Interest-Bearing Liabilities 4,889,180 31,287 2.55 4,817,702 32,762 2.74 ----------- -------------- ---------- -------------- Non-Interest Bearing Liabilities 518,151 524,333 ------------- -------------- Total Liabilities 5,407,330 5,342,035 Stockholders' Equity 1,012,422 1,009,273 ------------- -------------- Total Liabilities & Stockholders' Equity $ 6,419,753 $ 6,351,308 ============= ============== Net interest income $ 45,351 $ 42,569 =========== ========== Net interest rate spread 2.96 % 2.76 % ==== ==== Net interest-earning assets $ 659,095 $ 674,313 ============= ============== Net interest margin (3) 3.27 % 3.10 % ==== ==== Ratio of interest-earning assets to interest-bearing liabilities 1.13 x 1.14 x ------------------------------------------------------------------------------------------------------------------------------------
(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. 9 The following table summarizes the net interest margin for the previous year, inclusive.
9/30/08 6/30/08 3/31/08 12/31/07 9/30/07 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. -------- -------- -------- -------- -------- Interest-Earning Assets: Securities 4.59% 4.66% 4.67% 4.55% 4.55% Net Loans 5.78% 5.76% 5.90% 6.09% 6.24% Total Interest-Earning Assets 5.51% 5.50% 5.63% 5.76% 5.87% Interest-Bearing Liabilities Total Deposits 2.19% 2.41% 2.87% 3.11% 3.17% Total Borrowings 3.62% 3.84% 4.06% 4.19% 4.16% Total Interest-Bearing Liabilities 2.55% 2.74% 3.14% 3.33% 3.34% Interest Rate Spread 2.96% 2.76% 2.49% 2.43% 2.53% Net Interest Margin 3.27% 3.10% 2.87% 2.84% 2.97% Ratio of Interest-Earning Assets to Interest-Bearing Liabilities 1.13x 1.14x 1.14x 1.14x 1.15x
10 Average YTD Balance NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) September 30, 2008 September 30, 2007 ------------------------------------------ ---------------------------------------- Average Average Average Average Balance Interest Yield Balance Interest Yield ------------------------------------------ ---------------------------------------- Interest-Earning Assets: Federal Funds Sold and Other Short-Term Investments $ 20,182 $ 493 3.27 % $ 5,561 $ 225 5.40 % Investment Securities (1) 354,656 10,860 4.08 377,502 11,664 4.12 Securities Available for Sale 843,576 30,300 4.79 785,987 26,876 4.56 Federal Home Loan Bank Stock 38,200 2,072 7.25 30,029 1,738 7.74 Net Loans (2) Total Mortgage Loans 2,933,316 124,406 5.66 2,795,469 125,315 5.98 Total Commercial Loans 683,942 32,568 6.36 554,718 29,880 7.20 Total Consumer Loans 627,642 27,932 5.93 625,299 29,061 6.21 ------------- --------------- ---------- Total Interest-Earning Assets 5,501,514 228,631 5.54 5,174,565 224,759 5.80 ------------ -------------- ---------- ----------- Non-Interest Earning Assets: Cash and Due from Banks 80,175 89,151 Other Assets 783,790 774,700 ------------- --------------- Total Assets $ 6,365,479 $ 6,008,416 ============= =============== Interest-Bearing Liabilities: Demand Deposits $ 1,181,644 17,315 1.96 % $ 787,590 14,152 2.40 % Savings Deposits 961,161 7,830 1.09 1,207,087 14,757 1.63 Time Deposits 1,558,126 43,800 3.75 1,663,651 54,754 4.40 ------------- ------------ --------------- ---------- Total Deposits 3,700,931 68,945 2.49 3,658,328 83,663 3.06 Total Borrowings 1,136,553 32,577 3.83 785,636 24,501 4.17 ------------- ------------ --------------- ---------- Total Interest-Bearing Liabilities 4,837,484 101,522 2.80 4,443,964 108,164 3.25 ------------ ------------- ---------- ----------- Non-Interest Bearing Liabilities 518,805 528,295 ------------- --------------- Total Liabilities 5,356,289 4,972,259 Stockholders' Equity 1,009,190 1,036,157 ------------- --------------- Total Liabilities & Stockholders' Equity $ 6,365,479 $ 6,008,416 ============= =============== Net interest income $ 127,109 $ 116,595 ============ ========== Net interest rate spread 2.74 % 2.55 % ==== ==== Net interest-earning assets $ 664,030 $ 730,601 ============= =============== Net interest margin (3) 3.08 % 3.00 % ==== ==== Ratio of interest-earning assets to interest-bearing liabilities 1.14 X 1.16 x ------------------------------------------------------------------------------------------------------------------------------------
(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.
Nine Months Ended ---------------------------------------- 9/30/08 9/30/07 9/30/06 Interest-Earning Assets: Securities 4.64% 4.50% 4.26% Net Loans 5.81% 6.19% 5.98% Total Interest-Earning Assets 5.54% 5.80% 5.51% Interest-Bearing Liabilities: Total Deposits 2.49% 3.06% 2.34% Total Borrowings 3.83% 4.17% 3.78% Total Interest-Bearing Liabilities 2.80% 3.25% 2.64% Interest Rate Spread 2.74% 2.55% 2.87% Net Interest Margin 3.08% 3.00% 3.28% Ratio of Interest-Earning Assets to Total Interest-Bearing Liabilities 1.14x 1.16x 1.19x
12