Exhibit 99.1
Heritage Commerce Corp Earns $3.2 Million in Third Quarter 2007
San Jose, CA – November 1, 2007 — Heritage Commerce Corp (Nasdaq: HTBK), parent company of Heritage Bank of Commerce, today reported that improving asset quality and strong growth in loans and deposits contributed to a profit for the third quarter of 2007. Net income was $3.2 million, or $0.24 per diluted share, for the three months ended September 30, 2007, compared to $4.4 million, or $0.36 per diluted share, for the same quarter a year ago. For the first nine months of 2007, net income was $11.3 million, or $0.91 per diluted share, compared to $12.9 million, or $1.08 per diluted share, for the same period a year ago. The quarterly results reflect costs related to the acquisition of Diablo Valley Bank (DVB), costs associated with hiring new senior bankers, and the Company’s strategic shift from loan sales to retention of SBA loan production, which it announced last quarter.
“There was a lot of activity reflected in the quarterly results due to our expansion in the East Bay, which included opening a new branch office in Walnut Creek, hiring a number of senior bankers, and integrating Diablo Valley Bank. Additionally, we implemented our SBA lending division strategy change and rebuilt the SBA lending team,” said Walter Kaczmarek, President and Chief Executive Officer. “The continued improvement in asset quality is another highlight for the quarter, with a decline in non-performing loans and a sizable loan recovery in the quarter.”
The following items impacted the third quarter and year-to-date results:
| ¨ | The DVB acquisition increased total common shares outstanding by 1.7 million compared to June 30, 2006, a 15% increase. |
| ¨ | The DVB acquisition resulted in a charge of $184,000 pre-tax, for the amortization of the mark-to-market purchase accounting adjustments of the loan and deposit portfolios. This cost is reflected in net interest income and reduced the net interest margin in the quarter by 6 basis points. |
| ¨ | The DVB acquistion also resulted in an aggregate charge of $382,000 pre-tax, which included the core deposit intangible (CDI) amortization of $167,000, consulting agreement expense of $192,000, which expires on December 31, 2007, non-compete agreement expense of $20,000 and amortization of mark-to-market purchase accounting adjustments of the DVB building of $3,000. |
| ¨ | Compensation expense inccreased due to the DVB acquistion and front end costs associated with the addition of senior bankers for the Company's East Bay expansion and SBA team. |
| · | Third quarter one-time compensation expense for DVB employees who are no longer with the Company totaled $419,000 pre-tax. |
| · | Up front expenses associated with the hiring of new bankers for the East Bay expansion and SBA team totaled $467,000 in the third quarter of 2007. |
| ¨ | Gains from sale of loans dropped substantially, reflecting the strategic shift to retain SBA loan production. In the third quarter of 2007, gains on sale generated $60,000 in operating income. In the third quarter a year ago, the Company generated gains on sale of loans of $832,000. |
| ¨ | The tax provision for the third quarter included additional income tax expense of $181,000, due to preliminary findings from an audit by the State of California Franchise Tax Board. |
| ¨ | Strong asset quality and a sizeable recovery from a previously charged-off loan produced a reverse provision for loan losses of $500,000 in the third quarter and $736,000 in the first nine months of 2007, compared to no provision in the third quarter and a reverse provision of $603,000 in the first nine months a year ago. |
Third Quarter 2007 Financial Highlights:
| ¨ | Credit quality improved on several metrrics |
| · | Nonperforming loans dropped to $2.9 million, or 0.30% of total loans, at September 30, 2007, compared to $5.8 million or 0.62% of total loans at June 30, 2007, and $3.0 million, or 0.42% of total loans a year ago. |
| · | Nonperforming assets totaled $3.4 million, or 0.25% of total assets at September 30, 2007, compared to $6.3 million, or 0.47% of total assets at June 30, 2007, and $3.0 million, or 0.28% of total assets a year ago. |
| · | Recoveries were $868,000, or 0.37% of average loans, for the third quarter of 2007, compared to net recoveries of $281,000, or 0.16% of average loans, for the third quarter of 2006. |
| ¨ | Commericial loans increased 6% in the quarter and 35% year-over-year, and now account for 40% of total loans. |
| ¨ | Deposits grew 26% year-over-year to $1.10 billion, reflecting the strong core deposit base acquired with DVB. |
| ¨ | The conversion of DVB's operating systems into Heritage Bank of Commerce's platform was sucessfully accomplished in August 2007. |
Operating Results
Net interest income increased 8% to $13.8 million for the third quarter of 2007. Year to date net interest income grew 1% to $37.9 million. The Company’s mark-to-market purchase accounting adjustments on loan and deposit portfolios acquired from DVB reduced quarterly net interest income by $184,000. The amortization expense is expected to decline significantly, beginning in the fourth quarter of 2007.
The third quarter of 2007 net interest margin was 4.65%, down 46 basis points compared to 5.11% for the second quarter this year and 57 basis points from 5.22% in the third quarter a year ago. The Company’s net interest margin was reduced 6 basis points as a result of the mark-to-market purchase accounting adjustments on loan and deposit portfolios due to the DVB acquisition. 2007 year-to-date, the net interest margin decreased 11 basis points to 4.92% from 5.03% for the first nine months of 2006. The decrease in net interest margin was due to the higher yield on deposit accounts. As a result, the average interest rate on savings and money market deposits increased 43 basis points to 3.43% for the third quarter of 2007, from 3.00% for the second quarter of 2007.
Noninterest income was $1.6 million for the third quarter of 2007, compared to $2.3 million for both the immediate prior quarter and the third quarter of 2006. In the first nine months of 2007, noninterest income was $6.4 million, compared to $7.5 million in the first nine months a year ago. The net gain on sale of SBA loans was $60,000 in the third quarter of 2007, compared to $832,000 in the third quarter of 2006. The loans sold in the third quarter of 2007 were in the held for sale portfolio at June 30, 2007. Total gain on sale of loans was $1.8 million in the first nine months of 2007, compared to $3.2 million a year ago, which included $672,000 from the sale of specialty loans in January 2006.
Noninterest expense increased to $10.5 million for the third quarter of 2007, compared to $8.3 million for the third quarter of 2006 and $8.5 million for the second quarter of 2007. In the first nine months of 2007, noninterest expense increased to $27.3 million from $25.6 million for the first nine months a year ago. DVB related charges accounted for $382,000, including $167,000 for core deposit amortization, $192,000 for consulting agreement, $20,000 for non-compete agreement and $3,000 for mark-to-market purchase accounting adjustments for the DVB building. Compensation expense increased 25% from the second quarter to the third quarter and increased 18% compared to the third quarter a year ago. Compensation expense increased 5% for the first nine months of 2007 compared to a year ago. The increase in compensation expense was primarily due to the acquisition of DVB and the addition of senior bankers during the third quarter of 2007.
The tax provision for the third quarter of 2007 was 40% of pre-tax income, compared to approximately 35% for the second quarter of 2007. The increase in 2007 was primarily due to adjustments resulting from an audit of the Company’s California state tax returns by the State of California Franchise Tax Board.
The efficiency ratio was 68.2% in the third quarter of 2007, compared to 58.0% in the second quarter of 2007, and 55.0% in the third quarter of 2006. The efficiency ratio for the first nine months of 2007 increased to 61.6% from 56.7% a year ago.
The annualized returns on average assets (ROAA) and average equity (ROAE) for the third quarter of 2007 were 0.96% and 7.56%, compared to 1.61% and 14.43% for the quarter ended September 30, 2006, respectively. ROAA and ROAE for the first nine months of 2007 were 1.31% and 10.60%, compared to 1.57% and 14.76% for the first nine months of 2006, respectively. The annualized returns on average tangible assets (ROATA) and average tangible equity (ROATE) for the third quarter of 2007 were 1.00% and 10.55%, compared to 1.61% and 14.43% for the quarter ended September 30, 2006, respectively. ROATA and ROATE for the first nine months of 2007 were 1.33% and 12.12%, compared to 1.57% and 14.76% for the first nine months of 2006, respectively.
At September 30, 2007, total assets were $1.33 billion, compared to $1.06 billion a year ago, and $1.35 billion at June 30, 2007. Total deposits were $1.10 billion at September 30, 2007, compared to $876 million at September 30, 2006, and $1.12 billion at June 30, 2007. Total loans were $955 million at September 30, 2007, compared to $714 million a year ago and $940 million at June 30, 2007. The Company had $6.1 million in SBA loans held for sale as of June 30, 2007, of which $2.5 million were sold in the third quarter of 2007 and the balance reclassified to the loan portfolio because the loans either no longer qualified for sale or did not have an acceptable premium for sale. The Company did not have any subprime loans or subprime exposure in the securities portfolio at September 30, 2007.
Nonperforming assets totaled $3.4 million, or 0.25% of total assets, at September 30, 2007, compared to $3.0 million, or 0.28% of total assets, a year ago, and $6.3 million, or 0.47% of total assets, at June 30, 2007.
The allowance for loan losses was $11.5 million at September 30, 2007, representing 1.20% of total loans and 398% of nonperforming loans compared to $9.4 million at September 30, 2006, representing 1.31% of total loans and 317% of nonperforming loans. At June 30, 2007, the allowance for loan losses was $11.1 million or 1.18% of total loans and 192% of nonperforming loans. Net recoveries in the third quarter of 2007 were $868,000, or 0.37% of average loans, compared to net recoveries of $281,000, or 0.16% of average loans, in the third quarter of 2006. Net charge-offs were $35,000, or 0.02% of average loans, in the quarter ended June 30, 2007.
Shareholders’ equity increased 41% to $168 million, or $9.18 tangible book value per share, at September 30, 2007, compared to $119 million, or $10.22 tangible book value per share, a year ago, and $170 million, or $9.12 tangible book value per share, at June 30, 2007. Capital ratios continue to be above the well-capitalized guidelines established by regulatory agencies. The leverage ratio at September 30, 2007 was 11.19%, compared to 13.24% at September 30, 2006, and 14.29% at June 30, 2007.
During the third quarter of 2007, the Company repurchased 279,500 shares of its common stock at an average price of $21.39 under the previously announced common stock repurchase program. The Company’s Board of Directors has authorized the purchase of up to $30 million of its common stock over two years. The repurchase program expires in July 2009. Shares were purchased on the open market using available cash. The repurchase program may be modified, suspended or terminated by the Board of Directors at any time without notice. The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations.
Heritage Commerce Corp, a bank holding company established in February 1998, is the parent company of Heritage Bank of Commerce, established in 1994 and headquartered in San Jose with full-service branches in Los Gatos, Fremont, Danville, Pleasanton, Walnut Creek, Morgan Hill, Gilroy, Mountain View, and Los Altos. Heritage Bank of Commerce is also an SBA Preferred Lender ranked the fourth largest SBA lender in Northern California and fourteenth in the State of California, with Loan Production Offices in San Jose, Chico, Fremont, Fresno, Sacramento and Santa Rosa, California. For more information, please visit www.heritagecommercecorp.com.
Forward Looking Statement Disclaimer
This release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include, but are not necessarily limited to, the Company’s ability to sustain dividend payments, fluctuations in interest rates and monetary policy established by the Federal Reserve, inflation, government regulations, general economic conditions, competition within the business areas in which the Company is conducting its operations, including the real estate market in California, the ability to recognize identified cost savings, and other factors beyond the Company's control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. For a discussion of factors which could cause results to differ, please see the Company's reports on Forms 10-K and 10-Q as filed with the Securities and Exchange Commission and the Company's press releases. Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.
Member FDIC
| | | For the Three Months Ended: | | Percent Change From: | | | For the Nine Months Ended: | |
CONSOLIDATED INCOME STATEMENTS | | Sept. 30, | | June 30, | | Sept. 30, | | June 30, | | Sept. 30, | | | Sept. 30, | | Sept. 30, | | Percent | |
(in $000's, unaudited) | | | 2007 | | | 2007 | | | 2006 | | | 2007 | | | 2006 | | | | 2007 | | | 2006 | | | Change | |
| Interest Income | | $ | 22,105 | | $ | 18,317 | | $ | 18,568 | | | 21 | % | | 19 | % | | $ | 57,656 | | $ | 54,220 | | | 6 | % |
| Interest Expense | | | 8,324 | | | 5,924 | | | 5,754 | | | 41 | % | | 45 | % | | | 19,751 | | | 16,589 | | | 19 | % |
| Net Interest Income | | | 13,781 | | | 12,393 | | | 12,814 | | | 11 | % | | 8 | % | | | 37,905 | | | 37,631 | | | 1 | % |
| Provision for Loan Losses | | | (500) | | | 0 | | | 0 | | | N/ | A | | N/ | A | | | (736) | | | (603) | | | 22 | % |
| Net Interest income after Provision for Loan Losses | | | 14,281 | | | 12,393 | | | 12,814 | | | 15 | % | | 11 | % | | | 38,641 | | | 38,234 | | | 1 | % |
| Noninterest Income: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gain on Sale of SBA Loans | | | 60 | | | 695 | | | 832 | | | -91 | % | | -93 | % | | | 1,766 | | | 2,499 | | | -29 | % |
| Gain on Sale of Capital Group Loan Portfolio | | | 0 | | | 0 | | | 0 | | | N/ | A | | N/ | A | | | - | | | 672 | | | -100 | % |
| Servicing Income | | | 546 | | | 534 | | | 412 | | | 2 | % | | 33 | % | | | 1,596 | | | 1,321 | | | 21 | % |
| Increase in Cash Surrender Value of Life Insurance | | | 374 | | | 353 | | | 363 | | | 6 | % | | 3 | % | | | 1,071 | | | 1,070 | | | 0 | % |
| Service Charges and Other Fees on Deposit Accounts | | | 344 | | | 336 | | | 354 | | | 2 | % | | -3 | % | | | 954 | | | 1,008 | | | -5 | % |
| Other | | | 315 | | | 344 | | | 338 | | | -8 | % | | -7 | % | | | 1,028 | | | 880 | | | 17 | % |
| Total Noninterest Income | | | 1,639 | | | 2,262 | | | 2,299 | | | -28 | % | | -29 | % | | | 6,415 | | | 7,450 | | | -14 | % |
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| Noninterest Expense: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Salaries & Employee Benefits | | | 5,840 | | | 4,685 | | | 4,941 | | | 25 | % | | 18 | % | | | 15,413 | | | 14,703 | | | 5 | % |
| Occupancy & Equipment | | | 1,168 | | | 889 | | | 913 | | | 31 | % | | 28 | % | | | 2,933 | | | 2,721 | | | 8 | % |
| Other | | | 3,510 | | | 2,926 | | | 2,458 | | | 20 | % | | 43 | % | | | 8,972 | | | 8,141 | | | 10 | % |
| Total Noninterest Expense | | | 10,518 | | | 8,500 | | | 8,312 | | | 24 | % | | 27 | % | | | 27,318 | | | 25,565 | | | 7 | % |
| Income Before Income Taxes | | | 5,402 | | | 6,155 | | | 6,801 | | | -12 | % | | -21 | % | | | 17,738 | | | 20,119 | | | -12 | % |
| Provision for Income Taxes | | | 2,162 | | | 2,140 | | | 2,448 | | | 1 | % | | -12 | % | | | 6,450 | | | 7,201 | | | -10 | % |
Net Income | | $ | 3,240 | | $ | 4,015 | | $ | 4,353 | | | -19 | % | | -26 | % | | $ | 11,288 | | $ | 12,918 | | | -13 | % |
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PER SHARE DATA | | | | | | | | | | | | | | | | | | | | | | | | | | |
(unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic Earnings Per Share | | $ | 0.24 | | $ | 0.34 | | $ | 0.37 | | | -29 | % | | -35 | % | | $ | 0.92 | | $ | 1.09 | | | -16 | % |
| Diluted Earnings Per Share | | $ | 0.24 | | $ | 0.33 | | $ | 0.36 | | | -27 | % | | -33 | % | | $ | 0.91 | | $ | 1.08 | | | -16 | % |
| Common Shares Outstanding at Period-End | | | 13,123,396 | | | 13,375,163 | | | 11,681,297 | | | -2 | % | | 12 | % | | | 13,123,396 | | | 11,681,297 | | | 12 | % |
| Book Value Per Share | | $ | 12.83 | | $ | 12.72 | | $ | 10.22 | | | 1 | % | | 26 | % | | $ | 12.83 | | $ | 10.22 | | | 26 | % |
| Tangible Book Value Per Share | | $ | 9.18 | | $ | 9.12 | | $ | 10.22 | | | 1 | % | | -10 | % | | $ | 9.18 | | $ | 10.22 | | | -10 | % |
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KEY FINANCIAL RATIOS | | | | | | | | | | | | | | | | | | | | | | | | | | |
(unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Annualized Return on Average Equity | | | 7.56 | % | | 12.17 | % | | 14.43 | % | | -38 | % | | -48 | % | | | 10.60 | % | | 14.76 | % | | -28 | % |
| Annualized Return on Average Tangible Equity | | | 10.55 | % | | 12.66 | % | | 14.43 | % | | -17 | % | | -27 | % | | | 12.12 | % | | 14.76 | % | | -18 | % |
| Annualized Return on Average Assets | | | 0.96 | % | | 1.50 | % | | 1.61 | % | | -36 | % | | -40 | % | | | 1.31 | % | | 1.57 | % | | -17 | % |
| Annualized Return on Average Tangible Assets | | | 1.00 | % | | 1.50 | % | | 1.61 | % | | -33 | % | | -38 | % | | | 1.33 | % | | 1.57 | % | | -15 | % |
| Net Interest Margin | | | 4.65 | % | | 5.11 | % | | 5.22 | % | | -9 | % | | -11 | % | | | 4.92 | % | | 5.03 | % | | -2 | % |
| Efficiency Ratio | | | 68.21 | % | | 58.00 | % | | 55.00 | % | | 18 | % | | 24 | % | | | 61.64 | % | | 56.71 | % | | 9 | % |
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AVERAGE BALANCES | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in $000's, unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average Assets | | $ | 1,336,195 | | $ | 1,075,271 | | $ | 1,074,903 | | | 24 | % | | 24 | % | | $ | 1,150,486 | | $ | 1,102,942 | | | 4 | % |
| Tangilble Average Assets | | $ | 1,287,936 | | $ | 1,070,251 | | $ | 1,074,903 | | | 20 | % | | 20 | % | | $ | 1,132,664 | | $ | 1,102,942 | | | 3 | % |
| Average Earning Asset | | $ | 1,175,396 | | $ | 972,016 | | $ | 973,556 | | | 21 | % | | 21 | % | | $ | 1,029,042 | | $ | 1,000,106 | | | 3 | % |
| Average Total Loans | | $ | 933,675 | | $ | 730,337 | | $ | 706,857 | | | 28 | % | | 32 | % | | $ | 788,180 | | $ | 703,795 | | | 12 | % |
| Average Loans Held For Sale | | $ | 5,348 | | $ | 12,823 | | $ | 32,534 | | | -58 | % | | -84 | % | | $ | 12,288 | | $ | 34,477 | | | -64 | % |
| Average Deposits | | $ | 1,107,662 | | $ | 880,079 | | $ | 886,976 | | | 26 | % | | 25 | % | | $ | 944,822 | | $ | 911,852 | | | 4 | % |
| Average Demand Deposits - Noninterest Bearing | | $ | 263,465 | | $ | 223,415 | | $ | 218,766 | | | 18 | % | | 20 | % | | $ | 234,943 | | $ | 227,588 | | | 3 | % |
| Average Interest Bearing Deposits | | $ | 844,197 | | $ | 656,664 | | $ | 668,210 | | | 29 | % | | 26 | % | | $ | 709,879 | | $ | 684,264 | | | 4 | % |
| Average Interest Bearing Liabilities | | $ | 878,799 | | $ | 696,773 | | $ | 713,712 | | | 26 | % | | 23 | % | | $ | 749,847 | | $ | 734,619 | | | 2 | % |
| Average Equity | | $ | 170,136 | | $ | 132,347 | | $ | 119,690 | | | 29 | % | | 42 | % | | $ | 142,377 | | $ | 117,048 | | | 22 | % |
| Tangible Average Equity | | $ | 121,877 | | $ | 127,196 | | $ | 119,690 | | | -4 | % | | 2 | % | | $ | 124,555 | | $ | 117,048 | | | 6 | % |
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| | | End of Period: | | | Percent Change From: | |
CONSOLIDATED BALANCE SHEETS | | Sept. 30, | | | June 30, | | | Sept. 30, | | | June 30, | | | Sept. 30, | |
(in $000's, unaudited) | | 2007 | | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
ASSETS | | | | | | | | | | | | | | | |
| Cash and Due from Banks | | $ | 51,627 | | | $ | 45,881 | | | $ | 41,438 | | | | 13 | % | | | 25 | % |
| Federal Funds Sold | | | 42,600 | | | | 57,810 | | | | 41,000 | | | | -26 | % | | | 4 | % |
| Securities Available-for-Sale, at Fair Value | | | 150,116 | | | | 169,498 | | | | 173,723 | | | | -11 | % | | | -14 | % |
| Loans Held For Sale | | | 0 | | | | 6,095 | | | | 23,108 | | | | -100 | % | | | -100 | % |
| Loans: | | | | | | | | | | | | | | | | | | | | |
| Commercial Loans | | | 378,777 | | | | 358,095 | | | | 281,488 | | | | 6 | % | | | 35 | % |
| Real Estate-Mortgage | | | 325,327 | | | | 330,422 | | | | 227,732 | | | | -2 | % | | | 43 | % |
| Real Estate-Land and Construction | | | 205,925 | | | | 203,457 | | | | 160,137 | | | | 1 | % | | | 29 | % |
| Home Equity | | | 39,771 | | | | 42,474 | | | | 41,784 | | | | -6 | % | | | -5 | % |
| Consumer Loans | | | 4,131 | | | | 4,715 | | | | 1,387 | | | | -12 | % | | | 198 | % |
| Total Loans | | | 953,931 | | | | 939,163 | | | | 712,528 | | | | 2 | % | | | 34 | % |
| Deferred Loan Costs, net | | | 727 | | | | 504 | | | | 1,172 | | | | 44 | % | | | -38 | % |
| Loans, Net of Deferred Costs | | | 954,658 | | | | 939,667 | | | | 713,700 | | | | 2 | % | | | 34 | % |
| Allowance for Loan Losses | | | (11,472 | ) | | | (11,104 | ) | | | (9,379 | ) | | | 3 | % | | | 22 | % |
| Net Loans | | | 943,186 | | | | 928,563 | | | | 704,321 | | | | 2 | % | | | 34 | % |
| Company Owned Life Insurance | | | 38,270 | | | | 37,900 | | | | 35,805 | | | | 1 | % | | | 7 | % |
| Premises & Equipment, Net | | | 9,441 | | | | 9,186 | | | | 2,494 | | | | 3 | % | | | 279 | % |
| Goodwill | | | 42,996 | | | | 43,172 | | | | 0 | | | 0 | % | | N/ | A |
| Intangible Assets | | | 4,863 | | | | 5,049 | | | | 0 | | | -4 | % | | N/ | A |
| Accrued Interest Receivable and Other Assets | | | 43,320 | | | | 43,777 | | | | 40,939 | | | | -1 | % | | | 6 | % |
Total Assets | | $ | 1,326,419 | | | $ | 1,346,931 | | | $ | 1,062,828 | | | | -2 | % | | | 25 | % |
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LIABILITIES & SHAREHOLDERS' EQUITY | | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | | | | | | | | | | | | | | | | | | |
| Demand Deposits-Noninterest Bearing | | $ | 263,244 | | | $ | 266,404 | | | $ | 226,297 | | | | -1 | % | | | 16 | % |
| Demand Deposits-Interest Bearing | | | 146,410 | | | | 162,003 | | | | 133,636 | | | | -10 | % | | | 10 | % |
| Savings and Money Market | | | 468,263 | | | | 448,528 | | | | 349,436 | | | | 4 | % | | | 34 | % |
| Time Deposits, Under $100 | | | 32,341 | | | | 33,735 | | | | 31,522 | | | | -4 | % | | | 3 | % |
| Time Deposits, $100 and Over | | | 138,327 | | | | 143,544 | | | | 101,198 | | | | -4 | % | | | 37 | % |
| Brokered Deposits, $100 and Over | | | 52,179 | | | | 65,439 | | | | 34,009 | | | | -20 | % | | | 53 | % |
| Total Deposits | | | 1,100,764 | | | | 1,119,653 | | | | 876,098 | | | | -2 | % | | | 26 | % |
| Securities Sold under Agreement to Repurchase | | | 10,900 | | | | 10,900 | | | | 21,800 | | | | 0 | % | | | -50 | % |
| Notes Payable To Subsidiary Grantor Trusts | | | 23,702 | | | | 23,702 | | | | 23,702 | | | | 0 | % | | | 0 | % |
| Accrued Interest Payable and Other Liabilities | | | 22,678 | | | | 22,522 | | | | 21,892 | | | | 1 | % | | | 4 | % |
| Total Liabilities | | | 1,158,044 | | | | 1,176,777 | | | | 943,492 | | | | -2 | % | | | 23 | % |
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| Shareholders' Equity: | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | | 98,093 | | | | 103,498 | | | | 62,959 | | | | -5 | % | | | 56 | % |
| Accumulated Other Comprehensive Loss | | | (1,258 | ) | | | (2,446 | ) | | | (2,306 | ) | | | -49 | % | | | -45 | % |
| Retained Earnings | | | 71,540 | | | | 69,102 | | | | 58,683 | | | | 4 | % | | | 22 | % |
| Total Shareholders' Equity | | | 168,375 | | | | 170,154 | | | | 119,336 | | | | -1 | % | | | 41 | % |
Total Liabilities & Shareholders' Equity | | $ | 1,326,419 | | | $ | 1,346,931 | | | $ | 1,062,828 | | | | -2 | % | | | 25 | % |
| | | | | | | | | | | | | | | | | | | | | |
CREDIT QUALITY DATA | | | | | | | | | | | | | | | | | | | | |
(in $000's, unaudited) | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual Loans | | $ | 2,862 | | | $ | 3,192 | | | $ | 2,083 | | | | -10 | % | | | 37 | % |
| Loans Over 90 Days Past Due and Still Accruing | | | 18 | | | | 2,604 | | | | 879 | | | -99 | % | | -98 | % |
| Total Nonperforming Loans | | | 2,880 | | | | 5,796 | | | | 2,962 | | | | -50 | % | | | -3 | % |
| Other Real Estate Owned | | | 487 | | | | 487 | | | | 0 | | | 0 | % | | N/ | A |
Total Nonperforming Assets | | $ | 3,367 | | | $ | 6,283 | | | $ | 2,962 | | | | -46 | % | | | 14 | % |
| Net Charge-offs (Recoveries) | | $ | (868 | ) | | $ | 35 | | | $ | (281 | ) | | | 2580 | % | | | 209 | % |
| Net Charge-offs (Recoveries) as Percent of Average Loans | | | -0.37 | % | | | 0.02 | % | | | -0.16 | % | | | 1950 | % | | | 131 | % |
| Allowance for Loan Losses to Total Loans | | | 1.20 | % | | | 1.18 | % | | | 1.31 | % | | | 2 | % | | | -8 | % |
| Allowance for Loan Losses to Nonperforming Loans | | | 398.33 | % | | | 191.58 | % | | | 316.64 | % | | | 108 | % | | | 26 | % |
| Nonperforming Assets to Total Assets | | | 0.25 | % | | | 0.47 | % | | | 0.28 | % | | | -47 | % | | | -11 | % |
| Nonperforming Loans to Total Loans | | | 0.30 | % | | | 0.62 | % | | | 0.42 | % | | | -52 | % | | | -29 | % |
| | | | | | | | | | | | | | | | | | | | | |
OTHER PERIOD-END STATISTICS | | | | | | | | | | | | | | | | | | | | |
(unaudited) | | | | | | | | | | | | | | | | | | | | |
| Shareholders' Equity / Total Assets | | | 12.69 | % | | | 12.63 | % | | | 11.23 | % | | | 0 | % | | | 13 | % |
| Loan to Deposit Ratio | | | 86.73 | % | | | 83.92 | % | | | 81.46 | % | | | 3 | % | | | 6 | % |
| Noninterest Bearing Deposits / Total Deposits | | | 23.91 | % | | | 23.79 | % | | | 25.83 | % | | | 1 | % | | | -7 | % |
| Leverage Ratio | | | 11.19 | % | | | 14.29 | % | | | 13.24 | % | | | -22 | % | | | -15 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended | | | For the Three Months Ended | |
| | | September 30, 2007 | | | September 30, 2006 | |
| | | | | Interest | | Average | | | | | Interest | | Average | |
| NET INTEREST INCOME AND NET INTEREST MARGIN | | Average | | Income/ | | Yield/ | | | Average | | Income/ | | Yield/ | |
(in $000's unaudited) | | Balance | | Expense | | Rate | | | Balance | | Expense | | Rate | |
| Assets: | | | | | | | | | | | | | | | | | | | | |
| Loans, gross | | $ | 939,023 | | $ | 19,282 | | | 8.15 | % | | $ | 739,121 | | $ | 15,958 | | | 8.57 | % |
| Securities | | | 166,782 | | | 1,919 | | | 4.56 | % | | | 189,491 | | | 2,013 | | | 4.21 | % |
| Interest bearing deposits in other financial institutions | | | 2,908 | | | 31 | | | 4.23 | % | | | 2,849 | | | 36 | | | 5.01 | % |
| Federal funds sold | | | 66,683 | | | 873 | | | 5.19 | % | | | 42,095 | | | 561 | | | 5.29 | % |
| Total interest earning assets | | | 1,175,396 | | $ | 22,105 | | | 7.46 | % | | $ | 973,556 | | $ | 18,568 | | | 7.57 | % |
| Cash and due from banks | | | 40,334 | | | | | | | | | | 36,575 | | | | | | | |
| Premises and equipment, net | | | 9,430 | | | | | | | | | | 2,450 | | | | | | | |
| Other assets | | | 111,035 | | | | | | | | | | 62,322 | | | | | | | |
| Total assets | | $ | 1,336,195 | | | | | | | | | $ | 1,074,903 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Liabilities and shareholders' equity: | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand, interest bearing | | $ | 153,352 | | $ | 863 | | | 2.23 | % | | $ | 140,205 | | $ | 783 | | | 2.22 | % |
| Savings and money market | | | 460,596 | | | 3,981 | | | 3.43 | % | | | 357,003 | | | 2,676 | | | 2.97 | % |
| Time deposits, under $100 | | | 33,379 | | | 327 | | | 3.89 | % | | | 30,987 | | | 264 | | | 3.38 | % |
| Time deposits, $100 and over | | | 137,605 | | | 1,786 | | | 5.15 | % | | | 105,984 | | | 979 | | | 3.66 | % |
| Brokered time deposits, $100 and over | | | 59,265 | | | 706 | | | 4.73 | % | | | 34,031 | | | 325 | | | 3.79 | % |
| Notes payable to subsidiary grantor trusts | | | 23,702 | | | 585 | | | 9.79 | % | | | 23,702 | | | 587 | | | 9.83 | % |
| Securities sold under agreement to repurchase | | | 10,900 | | | 76 | | | 2.77 | % | | | 21,800 | | | 140 | | | 2.55 | % |
| Total interest bearing liabilities | | | 878,799 | | $ | 8,324 | | | 3.76 | % | | | 713,712 | | $ | 5,754 | | | 3.20 | % |
| Demand, noninterest bearing | | | 263,465 | | | | | | | | | | 218,766 | | | | | | | |
| Other liabilities | | | 23,795 | | | | | | | | | | 22,735 | | | | | | | |
| Total liabilities | | | 1,166,059 | | | | | | | | | | 955,213 | | | | | | | |
| Shareholders' equity: | | | 170,136 | | | | | | | | | | 119,690 | | | | | | | |
| Total liabilities and shareholders' equity | | $ | 1,336,195 | | | | | | | | | $ | 1,074,903 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income / margin | | | | | $ | 13,781 | | | 4.65 | % | | | | | $ | 12,814 | | | 5.22 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | For the Nine Months Ended | | | For the Nine Months Ended | |
| | | September 30, 2007 | | | September 30, 2006 | |
| | | | | Interest | | Average | | | | | Interest | | Average | |
| NET INTEREST INCOME AND NET INTEREST MARGIN | | Average | | Income/ | | Yield/ | | | Average | | Income/ | | Yield/ | |
(in $000's unaudited) | | Balance | | Expense | | Rate | | | Balance | | Expense | | Rate | |
| Assets: | | | | | | | | | | | | | | |
| Loans, gross | | $ | 800,468 | | $ | 49,541 | | | 8.27 | % | | $ | 738,272 | | $ | 46,023 | | | 8.33 | % |
| Securities | | | 170,650 | | | 5,853 | | | 4.59 | % | | | 195,394 | | | 5,782 | | | 3.96 | % |
| Interest bearing deposits in other financial institutions | | | 2,928 | | | 104 | | | 4.75 | % | | | 2,805 | | | 96 | | | 4.58 | % |
| Federal funds sold | | | 54,996 | | | 2,158 | | | 5.25 | % | | | 63,635 | | | 2,319 | | | 4.87 | % |
| Total interest earning assets | | | 1,029,042 | | $ | 57,656 | | | 7.49 | % | | $ | 1,000,106 | | $ | 54,220 | | | 7.25 | % |
| Cash and due from banks | | | 36,299 | | | | | | | | | | 36,584 | | | | | | | |
| Premises and equipment, net | | | 5,116 | | | | | | | | | | 2,439 | | | | | | | |
| Other assets | | | 80,029 | | | | | | | | | | 63,813 | | | | | | | |
| Total assets | | $ | 1,150,486 | | | | | | | | | $ | 1,012,942 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Liabilities and shareholders' equity: | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Demand, interest bearing | | $ | 143,685 | | $ | 2,409 | | | 2.24 | % | | $ | 148,879 | | $ | 2,451 | | | 2.20 | % |
| Savings and money market | | | 369,268 | | | 8,721 | | | 3.16 | % | | | 359,642 | | | 7,455 | | | 2.77 | % |
| Time deposits, under $100 | | | 31,873 | | | 917 | | | 3.85 | % | | | 32,475 | | | 761 | | | 3.13 | % |
| Time deposits, $100 and over | | | 113,694 | | | 3,865 | | | 4.55 | % | | | 108,419 | | | 2,729 | | | 3.37 | % |
| Brokered time deposits, $100 and over | | | 51,359 | | | 1,757 | | | 4.57 | % | | | 34,849 | | | 983 | | | 3.77 | % |
| Notes payable to subsidiary grantor trusts | | | 23,702 | | | 1,749 | | | 9.87 | % | | | 23,702 | | | 1,724 | | | 9.72 | % |
| Securities sold under agreement to repurchase | | | 16,266 | | | 333 | | | 2.74 | % | | | 26,653 | | | 486 | | | 2.44 | % |
| Total interest bearing liabilities | | | 749,847 | | $ | 19,751 | | | 3.52 | % | | | 734,619 | | $ | 16,589 | | | 3.02 | % |
| Demand, noninterest bearing | | | 234,943 | | | | | | | | | | 227,588 | | | | | | | |
| Other liabilities | | | 23,319 | | | | | | | | | | 23,687 | | | | | | | |
| Total liabilities | | | 1,008,109 | | | | | | | | | | 985,894 | | | | | | | |
| Shareholders' equity: | | | 142,377 | | | | | | | | | | 117,048 | | | | | | | |
| Total liabilities and shareholders' equity | | $ | 1,150,486 | | | | | | | | | $ | 1,102,942 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest income / margin | | | | | $ | 37,905 | | | 4.92 | % | | | | | $ | 37,631 | | | 5.03 | % |
| | | | | | | | | | | | | | | | | | | | | |
