Provident Financial Services, Inc. Announces Increased Quarterly Earnings and Declares Quarterly Cash Dividend

JERSEY CITY, NJ, October 29, 2010 - Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $13.5 million, or $0.24 per basic and diluted share for the quarter ended September 30, 2010, compared to net income of $8.7 million, or $0.15 per basic and diluted share for the quarter ended September 30, 2009.

For the nine months ended September 30, 2010, the Company reported net income of $37.6 million, or $0.66 per basic and diluted share.  Excluding a non-cash goodwill impairment charge recorded in the first quarter of 2009, net operating income for the nine months ended September 30, 2009 was $23.9 million, or $0.43 per basic and diluted share.  The Company recognized a $152.5 million, or $2.71 per share goodwill impairment charge during the quarter ended March 31, 2009.  This accounting charge resulted in a net loss of $128.6 million, or $2.29 per basic and diluted share for the nine months ended September 30, 2009.

The third quarter and year-to-date results for the period ended September 30, 2010 benefitted from lower funding costs, with net interest income increasing $7.7 million and $23.5 million, respectively, as compared with the same periods in 2009.  This improvement was partially offset by increases in the provision for loan losses of $2.1 million and $8.5 million for the three and nine months ended September 30, 2010, respectively, compared with the same periods in 2009, due to increases in non-performing loans, downgrades in credit risk ratings, and an increase in commercial loans as a percentage of the total loan portfolio.  In addition, prior year earnings and per share data for the nine months ended September 30, 2009, were impacted by an industry-wide special assessment imposed by the FDIC as part of a plan to restore the deposit insurance fund.  The cost of this special assessment to the Company in the second quarter of 2009 was $1.9 million, or $0.03 per basic and diluted share, net of tax.

Christopher Martin, Chairman, President and Chief Executive Officer, commented, “Our solid third quarter results are attributable to the continued improvement in our net interest income, modest expansion of our net interest margin and our ongoing management of funding costs and expenses.”  Martin added, “As the national and local economic outlook remains weak and the pace of the recovery continues to lag, we increased our allowance for loan losses during the third quarter, while further strengthening our capital position.”

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.11 per common share payable on November 30, 2010, to stockholders of record as of the close of business on November 15, 2010.

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Balance Sheet Summary

Total assets at September 30, 2010 were $6.78 billion, a decrease of $53.9 million from $6.84 billion at December 31, 2009, due primarily to decreases in loans, other assets, cash and cash equivalents, partially offset by an increase in securities available for sale.

Cash and cash equivalents decreased $16.3 million to $107.4 million at September 30, 2010, from $123.7 million at December 31, 2009.  The Company utilized these funds to purchase securities available for sale and repay maturing borrowings.

Total investments increased $42.3 million, or 2.5%, during the nine months ended September 30, 2010.  The increase was primarily due to purchases of Agency-guaranteed mortgage-backed securities.  The Company sold $18.1 million of Agency-guaranteed mortgage-backed securities as part of its interest rate risk management process during the first quarter of 2010, resulting in net gains of $817,000.

The Company’s net loans decreased $47.6 million, or 1.1%, to $4.28 billion at September 30, 2010, from $4.32 billion at December 31, 2009.  Loan originations totaled $759.8 million and loan purchases totaled $69.1 million for the nine months ended September 30, 2010.  Compared with December 31, 2009, residential mortgage loans decreased $77.5 million, construction loans decreased $61.9 million, commercial loans decreased $46.1 million, and consumer loans decreased $17.9 million, while commercial mortgage and multi-family mortgage loans increased $85.9 and $78.2 million, respectively.  The decrease in residential mortgage loans was due in part to the sale of $12.4 million of newly originated 30-year fixed-rate loans as part of the Company’s ongoing interest rate risk management process.  Commercial real estate, commercial and construction loans represented 54.3% of the loan portfolio at September 30, 2010, compared to 52.5% at December 31, 2009.

At September 30, 2010, the Company’s unfunded loan commitments totaled $823.7 million, including $317.3 million in commercial loan commitments, $133.9 million in commercial mortgage commitments, and $74.6 million in construction loan commitments.  Unfunded loan commitments at June 30, 2010 were $745.1 million.

Other assets decreased $25.8 million, or 29.4%, to $61.8 million at September 30, 2010, from $87.6 million at December 31, 2009, primarily due to the settlement of equity fund redemptions that were pending as of December 31, 2009, the amortization of prepaid FDIC insurance, and income tax accruals.

Total deposits at September 30, 2010 were $4.90 billion, an increase of $5.4 million from December 31, 2009.  Core deposits, consisting of savings and demand deposit accounts, increased $183.2 million, or 5.4%, to $3.57 billion at September 30, 2010, compared with December 31, 2009.  The majority of the core deposit increase occurred in retail and business checking deposits.  Time deposits decreased $177.8 million, or 11.8%, to $1.33 billion at September 30, 2010, with the majority of the decrease occurring in the 15-month and shorter maturity categories.  The Company remains focused on cultivating core deposit relationships, while strategically permitting the run-off of certain higher-cost, single-service time deposits.Core deposits represented 72.9% of total deposits at September 30, 2010, compared to 69.2% at December 31, 2009.

2

Borrowed funds were reduced by $95.6 million, or 9.6%, during the nine months ended September 30, 2010, to $903.6 million, as the Company deployed excess liquidity arising from increased core deposit funding, and cash inflows from the loan portfolio.  Borrowed funds represented 13.3% of total assets at September 30, 2010, a reduction from 14.6% at December 31, 2009.

Common stock repurchases for the nine months ended September 30, 2010 totaled 17,600 shares at an average cost of $10.86 per share.  At September 30, 2010, 2.1 million shares remained eligible for repurchase under the current Board authorization.  At September 30, 2010, book value per share and tangible book value per share were $15.37 and $9.45, respectively, compared with $14.79 and $8.80, respectively, at December 31, 2009.

Results of Operations

Net Interest Margin

The net interest margin for the quarter ended September 30, 2010 was 3.50%, an increase of 2 basis points from 3.48% for the quarter ended June 30, 2010, and a 49 basis point increase from 3.01% for the quarter ended September 30, 2009.  The increase in the net interest margin for the three months ended September 30, 2010, versus the trailing quarter and the quarter ended September 30, 2009, was primarily attributable to decreases in the cost of interest-bearing liabilities.  The weighted average yield on interest-earning assets was 4.74% for the three months ended September 30, 2010, compared with 4.81% for the trailing quarter and 4.84% for the three months ended September 30, 2009.  The weighted average cost of interest-bearing liabilities was 1.42% for the quarter ended September 30, 2010, compared with 1.51% for the trailing quarter and 2.07% for the third quarter of 2009.  The average cost of deposits for the three months ended September 30, 2010 was 1.05%, compared with 1.13% for the trailing quarter and 1.73% for the same period last year.  The average cost of borrowings for the three months ended September 30, 2010 was 3.15%, compared with 3.27% for the trailing quarter and 3.50% for the same period last year.

For the nine months ended September 30, 2010, the net interest margin increased 43 basis points to 3.45%, compared with 3.02% for the nine months ended September 30, 2009.  The weighted average yield on interest-earning assets declined 22 basis points to 4.78% for the nine months ended September 30, 2010, compared with 5.00% for the nine months ended September 30, 2009.  However, the weighted average cost of interest-bearing liabilities declined 72 basis points to 1.52% for the nine months ended September 30, 2010, compared with 2.24% for the same period in 2009.  The average cost of deposits for the nine months ended September 30, 2010 was 1.15%, compared with 1.90% for the same period last year.  The average cost of borrowings for the nine months ended September 30, 2010 was 3.26%, compared with 3.52% for the same period last year.

Non-Interest Income

Non-interest income totaled $7.8 million for the quarter ended September 30, 2010, a decrease of $785,000 compared to the same period in 2009.  Fee income for the quarter ended September 30, 2010 decreased $635,000, or 9.5%, compared to the same period in 2009, primarily as a result of a decrease in equity fund income due to the redemption of equity fund holdings in late 2009.  In addition, net gains on securities transactions declined $179,000 for the quarter ended September 30, 2010, compared with the same quarter in 2009.  Other income for the quarter ended September 30, 2010 totaled $482,000, a decrease of $522,000 compared to the same period in 2009.  The decrease in other income was primarily attributable to a reduction in gains resulting from fewer loan sales.  Income related to Bank-owned life insurance decreased $150,000 for the three month period ended September 30, 2010, compared to the same period in 2009, as a result of reductions in crediting rates.  Partially offsetting these decreases for the current quarter ended September 30, 2010, the Company did not incur an other-than-temporary impairment charge on investment securities, while a $701,000 charge was recognized in the third quarter of 2009.

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For the nine months ended September 30, 2010, non-interest income totaled $23.8 million, a decrease of $634,000, or 2.6%, compared to the same period in 2009.  Other income declined $1.3 million for the nine months ended September 30, 2010, compared with the same period in 2009, primarily as a result of a reduction in gains resulting from fewer loan sales and a non-recurring gain recognized on the sale of a Bank-owned parcel of land in 2009.  Fee income for the nine months ended September 30, 2010 decreased $710,000, or 3.9%, compared to the same period in 2009, primarily as a result of a decrease in equity fund income due to the redemption of equity fund holdings in late 2009.  In addition, net gains on securities transactions declined $541,000 for the nine months ended September 30, 2010, compared with the same period in 2009.  These net gains on securities transactions totaled $833,000 for the nine months ended September 30, 2010, compared with net gains of $1.4 million for the same period in 2009.  The Company recognized other-than-temporary impairment charges on securities of $170,000 and $1.5 million during the nine months ended September 30, 2010 and 2009, respectively.  Income related to Bank-owned life insurance increased $557,000 for the nine month period ended September 30, 2010, compared to the same period in 2009, as a result of appreciation in the cash surrender value and the receipt of policy claim proceeds in the second quarter of 2010.

Non-Interest Expense

For the three months ended September 30, 2010, non-interest expense decreased $1.9 million, or 5.3%, to $34.1 million, compared to $36.0 million for the three months ended September 30, 2009.  FDIC insurance expense decreased $617,000 for the three months ended September 30, 2010, compared with the same period in 2009.  Compensation and benefits expense decreased $493,000 for the three months ended September 30, 2010, compared with the same period in 2009, due to costs associated with the retirement of two senior executives in the prior year quarter.  This reduction was partially offset by an increase in the accrual for incentive compensation in the quarter ended September 30, 2010.  Amortization of intangibles decreased $273,000 for the three months ended September 30, 2010, compared with the same period of 2009, as a result of scheduled reductions in core deposit intangible amortization.  In addition, data processing expense decreased $180,000 for the three months ended September 30, 2010, compared with the same period in 2009, and other operating expenses decreased $166,000 for the quarter ended September 30, 2010, compared with the same period last year.

Non-interest expense for the nine months ended September 30, 2010 was $102.8 million.  Excluding the $152.5 million non-cash goodwill impairment charge recorded in the first quarter of 2009, non-interest expense decreased $4.6 million, or 4.3%, from $107.4 million for the nine months ended September 30, 2009.  FDIC insurance expense decreased $2.1 million for the nine months ended September 30, 2010, compared with the same period in 2009.  In the prior year period, a special assessment was imposed on the Company as part of an industry-wide plan to restore the deposit insurance fund.  The FDIC special assessment of $3.1 million was accrued during the quarter ended June 30, 2009 and paid September 30, 2009.  The decrease was partially offset by an increase in expense resulting from an increase in FDIC premium rates and a larger deposit base subject to assessment.  In addition, amortization of intangibles decreased $1.1 million for the nine months ended September 30, 2010, compared with the same period of 2009, as a result of scheduled reductions in core deposit intangible amortization and the non-recurring acceleration in core deposit intangible amortization related to the sale of branches in 2009.  Other operating expenses totaled $17.0 million for the nine months ended September 30, 2010, a decrease of $656,000 from the same prior year period.  This reduction was primarily due to non-recurring costs incurred in the nine months ended September 30, 2009 related to the dissolution of a real estate joint venture.

4

Asset Quality

Total non-performing loans at September 30, 2010 were$103.5million, or 2.38% of total loans, compared with $93.2 million, or 2.15% of total loans at June 30, 2010, $84.5 million, or 1.93% of total loans at December 31, 2009, and $78.2 million, or 1.81% of total loans at September 30, 2009.  The $10.3 million increase in non-performing loans at September 30, 2010, compared with the trailing quarter, was attributable to a $10.6 million increase in non-performing commercial loans.  The increase was primarily due to a single relationship with a manufacturing entity that totaled $9.7 million, which is secured by real estate and business assets.  At September 30, 2010, impaired loans totaled $50.1 million with related specific reserves of $7.8 million, compared with impaired loans totaling $38.8 million with related specific reserves of $4.4 million at June 30, 2010.  At September 30, 2010, the Company’s allowance for loan losses was 1.58% of total loans, compared with 1.42% of total loans at June 30, 2010, 1.39% of total loans at December 31, 2009 and 1.29% of total loans at September 30, 2009.

The Company recorded provisions for loan losses of $8.6 million and $26.6 million for the three and nine months ended September 30, 2010, respectively, compared with provisions of $6.5 million and $18.1 million for the three and nine months ended September 30, 2009, respectively.  For the three and nine months ended September 30, 2010, the Company had net charge-offs of $1.3 million and $18.6 million, respectively, compared with net charge-offs of $2.8 and $10.1 million, respectively, for the same periods in 2009.  The allowance for loan losses increased $8.0 million to $68.8 million at September 30, 2010, from $60.7 million at December 31, 2009.  The increase in the loan loss provision for the three and nine months ended September 30, 2010, compared with the same periods in 2009, was attributable to an increase in non-performing loans, downgrades in credit risk ratings and an increase in commercial loans as a percentage of the loan portfolio to 54.3% at September 30, 2010, from 50.9% at September 30, 2009.  At September 30, 2010, the Company held $5.7 million of foreclosed assets, compared with $6.4 million at December 31, 2009.

Income Tax Expense

For the three months ended September 30, 2010, the Company’s income tax expense was $4.7 million, compared with $2.8 million for the same period in 2009.  For the nine months ended September 30, 2010, the Company’s income tax expense was $12.8 million, compared with $7.4 million for the same period in 2009.  The increase in income tax expense was attributable to higher pre-tax income and a higher effective tax rate. The Company’s effective tax rates were 25.9% and 25.4%, respectively, for the three and nine months ended September 30, 2010, compared with 24.1% and 23.6%, excluding the impact of the goodwill impairment charge recognized in the first quarter of 2009, which was not tax deductible, for the three and nine months ended September 30, 2009, respectively.  The increase in the effective tax rate is attributable to a higher projection of taxable income for the full year 2010.

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 81 full service branches throughout northern and central New Jersey.

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Post Earnings Conference Call

Representatives of the Company will hold a conference call for investors at 10:00 a.m. Eastern Time on October 29, 2010 regarding highlights of the Company’s third quarter 2010 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 cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made. The Company advises 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.

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PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Condition
September 30, 2010 (Unaudited) and December 31, 2009
(Dollars in Thousands)
Assets				September 30, 2010			December 31, 2009
Cash and due from banks			$	106,754		$	120,823
Short-term investments				650			2,920
		Total cash and cash equivalents		107,404			123,743
Investment securities held to maturity (fair value of
	$350,664 at September 30, 2010 (unaudited) and $344,385 at December 31, 2009)			334,405			335,074
Securities available for sale, at fair value				1,375,781			1,333,163
Federal Home Loan Bank stock				34,629			34,276
Loans				4,344,657			4,384,194
	Less allowance for loan losses			68,764			60,744
		Net loans		4,275,893			4,323,450
Foreclosed assets, net				5,682			6,384
Banking premises and equipment, net				72,539			76,280
Accrued interest receivable				23,787			25,797
Intangible assets				355,028			358,058
Bank-owned life insurance				135,334			132,346
Other assets				61,813			87,601
		Total assets	$	6,782,295		$	6,836,172
Liabilities and Stockholders’ Equity
Deposits:
	Demand deposits		$	2,687,168		$	2,522,732
	Savings deposits			887,606			868,835
	Certificates of deposit of $100,000 or more			423,441			469,313
	Other time deposits			906,341			1,038,297
		Total deposits		4,904,556			4,899,177
Mortgage escrow deposits				18,639			18,713
Borrowed funds				903,610			999,233
Other liabilities				34,442			34,494
		Total liabilities		5,861,247			5,951,617
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 59,922,431 shares outstanding at
September 30, 2010, and 59,821,850 shares outstanding at
December 31, 2009					832		832
Additional paid-in capital					1,016,659		1,014,856
Retained earnings					325,408		307,751
Accumulated other comprehensive income					22,825		7,731
Treasury stock at cost					(385,109)		(384,973)
Unallocated common stock held by Employee Stock
Ownership Plan					(59,567)		(61,642)
Common stock acquired by the Directors’ Deferred Fee Plan					(7,505)		(7,575)
Deferred compensation – Directors’ Deferred Fee Plan					7,505		7,575
		Total stockholders’ equity			921,048		884,555
		Total liabilities and stockholders’
		equity	$		6,782,295	$	6,836,172

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PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2010 and 2009 (Unaudited)
(Dollars in Thousands, Except Per Share Data)
					Three Months Ended				Nine Months Ended
					September 30,				September 30,
					2010		2009		2010		2009
					(Unaudited)				(Unaudited)
Interest income:
	Real estate secured loans			$	40,426	$	39,286	$	120,360	$	119,566
	Commercial loans				10,457		11,108		30,964		32,176
	Consumer loans				7,085		7,722		21,487		23,819
	Investment securities				3,166		3,327		9,633		10,119
	Securities available for sale and FHLB stock				10,683		11,497		33,649		32,876
	Other short-term investments				—		1		—		13
	Deposits				80		98		222		215
	Federal funds sold				—		—		—		24
		Total interest income			71,897		73,039		216,315		218,808
Interest expense:
	Deposits				11,571		18,807		37,341		58,136
	Borrowed funds				7,291		8,922		23,030		28,266
		Total interest expense			18,862		27,729		60,371		86,402
		Net interest income			53,035		45,310		155,944		132,406
Provision for loan losses					8,600		6,500		26,600		18,100
		Net interest income after
			provision for loan losses		44,435		38,810		129,344		114,306
Non-interest income:
	Fees				6,017		6,652		17,637		18,347
	Bank-owned life insurance				1,288		1,438		4,514		3,957
	Net gain on securities transactions				16		195		833		1,374
	Other-than-temporary impairment losses on securities				—		(701)		(3,116)		(6,167)
	Portion of loss recognized in other comprehensive income (before taxes)				—		—		2,946		4,665
	Net impairment losses on securities recognized in earnings				—		(701)		(170)		(1,502)
	Other income				482		1,004		971		2,243
		Total non-interest income			7,803		8,588		23,785		24,419
Non-interest expense:
	Goodwill impairment				—		—		—		152,502
	Compensation and employee benefits				17,764		18,257		52,589		52,518
	Net occupancy expense				4,884		4,966		14,942		15,270
	Data processing expense				2,174		2,354		6,699		7,010
	FDIC Insurance				1,833		2,450		5,667		7,810
	Advertising and promotion				1,037		1,117		2,923		3,147
	Amortization of intangibles				842		1,115		2,966		4,020
	Other operating expenses				5,547		5,713		16,988		17,644
		Total non-interest expense			34,081		35,972		102,774		259,921
		Income (loss) before income tax    expense			18,157		11,426		50,355		(121,196)
Income tax expense					4,694		2,750		12,765		7,402
		Net income (loss)		$	13,463	$	8,676	$	37,590	$	(128,598)
Basic earnings (loss) per share				$	0.24	$	0.15	$	0.66	$	(2.29)
Average basic shares outstanding					56,610,647		56,311,141		56,533,545		56,240,746
Diluted earnings (loss) per share				$	0.24	$	0.15	$	0.66	$	(2.29)
Average diluted shares outstanding					56,610,647		56,311,141		56,533,545		56,240,746

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PROVIDENT FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share data) (Unaudited)
		At or for the Three Months Ended September 30,		At or for the Nine Months Ended September 30,
		2010	2009	2010	2009
STATEMENTS OF OPERATIONS:
Net interest income		$53,035	$45,310	$155,944	$132,406
Provision for loan losses		8,600	6,500	26,600	18,100
Non-interest income		7,803	8,588	23,785	24,419
Non-interest expense (1)		34,081	35,972	102,774	107,419
Operating income before income tax expense (2)		18,157	11,426	50,355	31,306
Operating income (2)		13,463	8,676	37,590	23,904
Goodwill impairment charge		—	—	—	152,502
Net income (loss)		13,463	8,676	37,590	(128,598)
Operating basic and diluted earnings per share (1)		$0.24	$0.15	$0.66	$0.43
Per share impact of goodwill impairment charge		—	—	—	$(2.71)
Basic and diluted earnings (loss) per share		$0.24	$0.15	$0.66	$(2.29)
Interest rate spread		3.32%	2.77%	3.26%	2.76%
Net interest margin		3.50%	3.01%	3.45%	3.02%
PROFITABILITY:
Annualized return on average assets (1)		0.79%	0.51%	0.74%	0.48%
Annualized return on average equity (1)		5.81%	3.92%	5.55%	3.46%
Annualized non-interest expense to average assets (1)		2.00%	2.12%	2.03%	2.17%
Efficiency ratio (1), (3)		56.02%	66.74%	57.18%	68.50%
ASSET QUALITY:
Non-accrual loans				$103,510	$78,232
90+ and still accruing loans				—	—
Non-performing loans				103,510	78,232
Foreclosed assets				5,682	7,044
Non-performing loans to
	total loans			2.38%	1.81%
Non-performing assets to
	total assets			1.61%	1.25%
Allowance for loan losses				$68,764	$55,731
Allowance for loan losses to
	non-performing loans			66.43%	71.24%
Allowance for loan losses to
	total loans			1.58%	1.29%
AVERAGE BALANCE SHEET DATA:
Assets		$6,768,690	$6,727,683	$6,769,162	$6,605,478
Loans, net		4,252,198	4,285,034	4,266,402	4,308,987
Earning assets		6,044,710	6,007,418	6,040,489	5,841,099
Core deposits		3,520,564	3,122,561	3,468,413	2,909,058
Borrowings		917,076	1,012,184	943,390	1,072,858
Interest-bearing liabilities		5,271,933	5,318,038	5,299,019	5,162,803
Stockholders’ equity		919,077	877,875	905,150	923,357
Average yield on interest-earning assets		4.74%	4.84%	4.78%	5.00%
Average cost of interest-bearing liabilities		1.42%	2.07%	1.52%	2.24%

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Notes
(1) Excluding a $152.2 million non-cash goodwill impairment charge for the nine months ended September 30, 2009.
(2) Operating Income Reconciliation
		Three Months Ended September 30,		Nine Months Ended September 30,
		2010	2009	2010	2009
Net income (loss)		$13,463	$8,676	$37,590	$(128,598)
Goodwill impairment		—	—	—	152,502
Operating income		$13,463	$8,676	$37,590	$23,904
(3) Efficiency Ratio Calculation
		Three Months Ended September 30,		Nine Months Ended September30,
		2010	2009	2010	2009
Net interest income		$53,035	$45,310	$155,944	$132,406
Non-interest income		7,803	8,588	23,785	24,419
Total income		$60,838	$53,898	$179,729	$156,825
Non-interest expense (1)		$34,081	$35,972	$102,774	$107,419
	Expense/Income:	56.02%	66.74%	57.18%	68.50%

10

Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands)		September 30, 2010						June 30, 2010
		Average			Average			Average			Average
		Balance		Interest	Yield/Cost			Balance		Interest	Yield/Cost
Interest-Earning Assets:
Deposits	$	126,661	$	80	0.25	%	$	115,592	$	72	0.25	%
Federal Funds Sold and
Other Short-Term Investments		1,772		-	0.01			2,682			0.01
Investment Securities (1)		332,888		3,166	3.80			333,329		3,218	3.86
Securities Available for Sale		1,295,983		10,289	3.18			1,250,489		10,843	3.47
Federal Home Loan Bank Stock		35,208		394	4.44			34,329		362	4.23
Net Loans (2)
Total Mortgage Loans		2,982,551		40,426	5.40			2,978,512		40,220	5.41
Total Commercial Loans		705,135		10,457	5.88			712,443		10,170	5.73
Total Consumer Loans		564,512		7,085	4.96			570,335		7,126	5.01
Total Interest-Earning Assets		6,044,710		71,897	4.74			5,997,711		72,011	4.81
Non-Interest-Earning Assets:
Cash and Due from Banks		87,488						94,960
Other Assets		636,492						651,756
Total Assets	$	6,768,690					$	6,744,427
Interest-Bearing Liabilities:
Demand Deposits	$	2,096,265		4,476	0.85	%	$	2,065,300		4,798	0.93	%
Savings Deposits		894,724		1,014	0.45			889,736		1,050	0.47
Time Deposits		1,363,868		6,081	1.77			1,392,841		6,416	1.85
Total Deposits		4,354,857		11,571	1.05			4,347,877		12,264	1.13
Total Borrowings		917,076		7,291	3.15			931,795		7,606	3.27
Total Interest-Bearing Liabilities		5,271,933		18,862	1.42			5,279,672		19,870	1.51
Non-Interest-Bearing Liabilities		577,680						562,532
Total Liabilities		5,849,613						5,842,204
Stockholders’ Equity		919,077						902,223
Total Liabilities & Stockholders’ Equity	$	6,768,690					$	6,744,427
Net interest income			$	53,035					$	52,141
Net interest rate spread					3.32	%					3.30	%
Net interest-earning assets	$	772,777					$	718,039
Net interest margin (3)					3.50	%					3.48	%
Ratio of interest-earning assets to
interest-bearing liabilities		1.15	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.

11

The following table summarizes the net interest margin for the previous year, inclusive.
	9/30/10	6/30/10	3/31/10	12/31/09	9/30/09
	3rd Qtr.	2nd Qtr.	1st Qtr.	4th Qtr.	3rd Qtr.
Interest-Earning Assets:
Securities	3.11%	3.34%	3.37%	3.40%	3.47%
Net Loans	5.42%	5.41%	5.40%	5.39%	5.40%
Total Interest-Earning Assets	4.74%	4.81%	4.80%	4.79%	4.84%
Interest-Bearing Liabilities:
Total Deposits	1.05%	1.13%	1.26%	1.47%	1.73%
Total Borrowings	3.15%	3.27%	3.36%	3.43%	3.50%
Total Interest-Bearing Liabilities	1.42%	1.51%	1.64%	1.83%	2.07%
Interest Rate Spread	3.32%	3.30%	3.16%	2.96%	2.77%
Net Interest Margin	3.50%	3.48%	3.35%	3.16%	3.01%
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities	1.15x	1.14x	1.14x	1.13x	1.13x

12

Average YTD Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands)		September 30, 2010						September 30, 2009
		Average			Average			Average			Average
		Balance		Interest	Yield/Cost			Balance		Interest	Yield/Cost
Interest-Earning Assets:
Deposits	$	118,380	$	222	0.25	%	$	115,006	$	215	0.25	%
Federal Funds Sold and
Other Short-Term Investments		2,384		—	0.01			33,258		37	0.15
Investment Securities (1)		333,367		9,633	3.85			340,032		10,119	3.97
Securities Available for Sale		1,285,272		32,405	3.36			1,007,469		31,520	4.17
Federal Home Loan Bank Stock		34,684		1,244	4.80			36,347		1,356	4.99
Net Loans (2)
Total Mortgage Loans		2,978,981		120,360	5.39			2,975,721		119,566	5.36
Total Commercial Loans		716,370		30,964	5.78			729,263		32,176	5.90
Total Consumer Loans		571,051		21,487	5.03			604,003		23,819	5.27
Total Interest-Earning Assets		6,040,489		216,315	4.78			5,841,099		218,808	5.00
Non-Interest-Earning Assets:
Cash and Due from Banks		78,556						87,762
Other Assets		650,117						676,617
Total Assets	$	6,769,162					$	6,605,478
Interest-Bearing Liabilities:
Demand Deposits	$	2,063,915		14,172	0.92	%	$	1,561,951		17,012	1.46	%
Savings Deposits		885,575		3,172	0.48			875,710		5,119	0.78
Time Deposits		1,406,139		19,997	1.90			1,652,284		36,005	2.91
Total Deposits		4,355,629		37,341	1.15			4,089,945		58,136	1.90
Total Borrowings		943,390		23,030	3.26			1,072,858		28,266	3.52
Total Interest-Bearing Liabilities		5,299,019		60,371	1.52			5,162,803		86,402	2.24
Non-Interest-Bearing Liabilities		564,993						519,318
Total Liabilities		5,864,012						5,682,121
Stockholders’ Equity		905,150						923,357
Total Liabilities & Stockholders'  Equity	$	6,769,162					$	6,605,478
Net interest income			$	155,944					$	132,406
Net interest rate spread					3.26	%					2.76	%
Net interest-earning assets	$	741,470					$	678,296
Net interest margin (3)					3.45	%					3.02	%
Ratio of interest-earning assets to
interest-bearing liabilities		1.14	x					1.13	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 andinclude non-accrual loans.

(3)Annualized net interest income divided by average interest-earning assets

13

The following table summarizes the YTD net interest margin for the previous three years, inclusive.
	Nine Months Ended
	9/30/10	9/30/09	9/30/08
Interest-Earning Assets:
Securities	3.27%	3.76%	4.64%
Net Loans	5.41%	5.44%	5.81%
Total Interest-Earning Assets	4.78%	5.00%	5.54%
Interest-Bearing Liabilities:
Total Deposits	1.15%	1.90%	2.49%
Total Borrowings	3.26%	3.52%	3.83%
Total Interest-Bearing Liabilities	1.52%	2.24%	2.80%
Interest Rate Spread	3.26%	2.76%	2.74%
Net Interest Margin	3.45%	3.02%	3.08%
Ratio of Interest-Earning Assets to
Total Interest-Bearing Liabilities	1.14x	1.13x	1.14x

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