Axos Financial (AX) 8-K BOFI Holding, Inc. Announces Record Fourth Quarter Net Income of $11.1 million

BOFI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Unaudited)
	At June 30,
(Dollars in thousands)	2013			2012
ASSETS
Cash and due from banks	$	196,264		$	20,638
Federal funds sold	5,430			14,788
Total cash and cash equivalents	201,694			35,426
Securities:
Trading	7,111			5,838
Available for sale	185,607			164,159
Held to maturity fair value $271,854 in June 2013 and $318,252 in June 2012	275,691			313,032
Stock of the Federal Home Loan Bank, at cost	27,750			20,680
Loans held for sale, carried at fair value	36,665			38,469
Loans held for sale, carried at lower of cost or fair value	40,326			40,712
Loans—net of allowance for loan losses of $14,182 as of June 2013 and $9,636 as of June 2012	2,256,918			1,720,563
Accrued interest receivable	9,763			7,872
Furniture, equipment and software—net	6,418			4,408
Deferred income tax	23,555			15,095
Cash surrender value of life insurance	5,445			5,266
Other real estate owned and reposessed vehicles	2,006			1,157
Other assets	11,822			14,168
TOTAL ASSETS	$	3,090,771		$	2,386,845
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	81,524		$	12,439
Interest bearing	2,010,475			1,602,649
Total deposits	2,091,999			1,615,088
Securities sold under agreements to repurchase	110,000			120,000
Advances from the Federal Home Loan Bank	590,417			422,000
Subordinated debentures	5,155			5,155
Accrued interest payable	1,674			1,802
Accounts payable and accrued liabilities	23,264			16,180
Total liabilities	2,822,509			2,180,225
STOCKHOLDERS’ EQUITY:
Preferred stock—1,000,000 shares authorized;
Series A— $10,000 stated value and liquidation preference per share; 515 shares issued  and  shares outstanding as of June 2013 and June 2012	5,063			5,063
Series B—$1,000 stated value and liquidation preference per share; 22,000 shares authorized; 20,132 shares issued and outstanding as of June 2012	—			19,439
Common stock—$0.01 par value; 25,000,000 shares authorized; 14,638,229 shares issued and 13,733,325 shares outstanding as of June 2013; 12,321,578 shares issued and 11,512,536 shares outstanding as of June 2012	146			123
Additional paid-in capital	156,297			105,683
Accumulated other comprehensive gain (loss) — net of tax	(10,800		)	(5,435		)
Retained earnings	127,813			88,357
Treasury stock, at cost; 904,904 shares as of June 2013 and 809,042 shares as of June 2012	(10,257		)	(6,610		)
Total stockholders’ equity	268,262			206,620
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	3,090,771		$	2,386,845

BOFI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	Year Ended June 30,
(Dollars in thousands, except earnings per share)	2013			2012				2011
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	113,503		$	89,308			$	60,508
Investments	22,151			26,425				32,427
Total interest and dividend income	135,654			115,733				92,935
INTEREST EXPENSE:
Deposits	22,868			24,889				22,276
Advances from the Federal Home Loan Bank	5,939			5,955				6,263
Other borrowings	5,219			5,701				5,883
Total interest expense	34,026			36,545				34,422
Net interest income	101,628			79,188				58,513
Provision for loan losses	7,550			8,063				5,800
Net interest income, after provision for loan losses	94,078			71,125				52,713
NON-INTEREST INCOME:
Realized gain (loss) on sale of mortgage-backed securities	212			—				2,420
Other-than-temporary loss on securities:
Total impairment losses	(8,080		)	(3,583		)		(5,942		)
Loss recognized in other comprehensive loss	4,579			780				4,401
Net impairment loss recognized in earnings	(3,501		)	(2,803		)		(1,541		)
Fair value gain (loss) on trading securities	1,274			785				651
Total unrealized loss on securities	(2,227		)	(2,018		)		(890		)
Prepayment penalty fee income	1,742			863				1,073
Gain on sale - other	1,130			—				—
Mortgage banking income	22,953			16,708				4,731
Banking service fees and other income	3,900			817				659
Total non-interest income	27,710			16,370				7,993
NON-INTEREST EXPENSE:
Salaries, employee benefits and stock-based compensation	28,874			20,339				14,524
Professional services	3,531			2,213				2,108
Occupancy and equipment	2,086			1,133				834
Data processing and internet	2,773			2,251				983
Advertising and promotional	4,084			2,703				1,025
Depreciation and amortization	1,904			1,316				618
Real estate owned and repossessed vehicles	505			2,382				1,554
FDIC and regulatory fees	2,125			1,527				2,017
Other general and administrative	7,705			4,094				2,871
Total non-interest expense	53,587			37,958				26,534
INCOME BEFORE INCOME TAXES	68,201			49,537				34,172
INCOME TAXES	27,910			20,061				13,593
NET INCOME	$	40,291		$	29,476			$	20,579
NET INCOME ATTRIBUTABLE TO COMMON STOCK	$	39,456		$	28,205			$	20,270
COMPREHENSIVE INCOME	$	34,926		$	25,012		15,565.00	$	15,565
Basic earnings per share	$	3.00		$	2.45			$	1.88
Diluted earnings per share	$	2.89		$	2.33			$	1.87

BOFI HOLDING, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) 

	For the Quarters Ended June 30,
(Dollars in thousands, except earnings per share)	2013			2012
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	30,905		$	23,805
Investments	5,558			6,199
Total interest and dividend income	36,463			30,004
INTEREST EXPENSE:
Deposits	5,833			5,612
Advances from the Federal Home Loan Bank	1,366			1,449
Other borrowings	1,259			1,353
Total interest expense	8,458			8,414
Net interest income	28,005			21,590
Provision for loan losses	1,500			2,100
Net interest income, after provision for loan losses	26,505			19,490
NON-INTEREST INCOME:
Realized gain (loss) on sale of mortgage-backed securities	(208		)	—
Other-than-temporary loss on securities:
Total impairment losses	(3,410		)	(744		)
Loss recognized in other comprehensive loss	2,139			464
Net impairment loss recognized in earnings	(1,271		)	(280		)
Fair value gain (loss) on trading securities	(82		)	(145		)
Total unrealized loss on securities	(1,353		)	(425		)
Prepayment penalty fee income	557			548
Gain on sale - other	853			—
Mortgage banking income	5,823			4,493
Banking service fees and other income	2,194			342
Total non-interest income	7,866			4,958
NON-INTEREST EXPENSE:
Salaries, employee benefits and stock-based compensation	8,043			5,387
Professional services	1,027			671
Occupancy and equipment	553			277
Data processing and internet	831			602
Advertising and promotional	1,154			851
Depreciation and amortization	625			339
Real estate owned and repossessed vehicles	158			379
FDIC and regulatory fees	623			439
Other general and administrative	2,339			1,067
Total non-interest expense	15,353			10,012
INCOME BEFORE INCOME TAXES	19,018			14,436
INCOME TAXES	7,886			5,871
NET INCOME	$	11,132		$	8,565
NET INCOME ATTRIBUTABLE TO COMMON STOCK	$	11,055		$	8,187
COMPREHENSIVE INCOME	$	7,834		$	3,826
Basic earnings per share	$	0.79		$	0.69
Diluted earnings per share	$	0.78		$	0.64

BOFI HOLDING, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Year Ended June 30,
(Dollars in thousands)	2013			2012			2011
NET INCOME	$	40,291		$	29,476		$	20,579
Change in unrealized loss on securities:
Net unrealized holding gains (losses) arising during the period	(8,943		)	(7,412		)	(8,326		)
Income tax expense (benefit) related to items of other comprehensive income	(3,578		)	(2,948		)	(3,312		)
Total other comprehensive income (loss), net of tax	(5,365		)	(4,464		)	(5,014		)
Comprehensive income	$	34,926		$	25,012		$	15,565

BOFI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
	Convertible Preferred Stock					Common Stock						Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Income Tax			Treasury Stock			Total
						Number of Shares
(Dollars in thousands)	Shares		Amount			Issued	Treasury		Outstanding	Amount
Balance as of June 30, 2010	515		$	5,063		10,827,673	(642,698	)	10,184,975	$	108	$	84,605	$	39,882		$	4,043		$	(3,893	)	$	129,808
Net income	—		—			—	—		—	—		—		20,579			—			—			20,579
Net unrealized loss from investment securities—net of income tax expense	—		—			—	—		—	—		—		—			(5,014		)	—			(5,014		)
Cash dividends on preferred stock	—		—			—	—		—	—		—		(309		)	—			—			(309		)
Stock-based compensation expense	—		—			—	—		—	—		2,153		—			—			—			2,153
Restricted stock grants	—		—			195,909	(72,933	)	122,976	3		314		—			—			(1,040		)	(723		)
Stock option exercises and tax benefits of equity compensation	—		—			128,381	—		128,381	1		1,271		—			—			—			1,272
Balance as of June 30, 2011	515		$	5,063		11,151,963	(715,631	)	10,436,332	$	112	$	88,343	$	60,152		$	(971	)	$	(4,933	)	$	147,766
Net income	—		—			—	—		—	—		—		29,476			—			—			29,476
Net unrealized loss from investment securities—net of income tax expense	—		—			—	—		—	—		—		—			(4,464		)	—			(4,464		)
Cash dividends on preferred stock	—		—			—	—		—	—		—		(1,271		)	—			—			(1,271		)
Issuance of convertible preferred stock	20,182		19,487			—	—		—	—		—		—			—			—			19,487
Issuance of common stock	—		—			862,500	—		862,500	9		13,335		—			—			—			13,344
Convert preferred stock to common stock	(50	)	(48		)	3,096	—		3,096	1		47		—			—			—			—
Stock-based compensation expense	—		—			—	—		—	—		2,493		—			—			—			2,493
Restricted stock grants	—		—			229,497	(93,411	)	136,086	1		659		—			—			(1,677		)	(1,017		)
Stock option exercises and tax benefits of equity compensation	—		—			74,522	—		74,522	—		806		—			—			—			806
Balance as of June 30, 2012	20,647		$	24,502		12,321,578	(809,042	)	11,512,536	$	123	$	105,683	$	88,357		$	(5,435	)	$	(6,610	)	$	206,620
Net income	—		—			—	—		—	—		—		40,291			—			—			40,291
Net unrealized loss from investment securities—net of income tax expense	—		—			—	—		—	—		—		—			(5,365		)	—			(5,365		)
Cash dividends on preferred stock	—		—			—	—		—	—		—		(835		)	—			—			(835		)
Issuance of convertible preferred stock	1,857		18,544			—	—		—	—		—		—			—			—			18,544
Issuance of common stock	—		—			200,000	—		200,000	2		6,763		—			—			—			6,765
Convert preferred stock to common stock	(21,989	)	(37,983		)	1,855,411	—		1,855,411	18		37,965		—			—			—			—
Stock-based compensation expense	—		—			—	—		—	—		3,297		—			—			—			3,297
Restricted stock grants	—		—			234,105	(95,862	)	138,243	3		2,173		—			—			(3,647		)	(1,471		)
Stock option exercises and tax benefits of equity compensation	—		—			27,135	—		27,135	—		416		—			—			—			416
Balance as of June 30, 2013	515		$	5,063		14,638,229	(904,904	)	13,733,325	$	146	$	156,297	$	127,813		$	(10,800	)	$	(10,257	)	$	268,262

BOFI HOLDING, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Year Ended June 30,
(Dollars in thousands)	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	40,291		$	29,476		$	20,579
Adjustments to reconcile net income to net cash used in operating activities:
Accretion of discounts on securities	(7,687		)	(11,177		)	(16,663		)
Net accretion of discounts on loans	(3,443		)	(1,950		)	(3,861		)
Stock-based compensation expense	3,297			2,493			2,153
Valuation of financial instruments carried at fair value	(1,273		)	(785		)	(651		)
Net gain on sale of investment securities	(212		)	—			(2,420		)
Impairment charge on securities	3,501			2,803			1,541
Provision for loan losses	7,550			8,063			5,800
Deferred income taxes	(4,882		)	(2,328		)	(226		)
Origination of loans held for sale	(1,085,941		)	(664,622		)	(216,868		)
Unrealized gain on loans held for sale	284			(549		)	(350		)
Gain on sales of loans held for sale	(24,367		)	(16,159		)	(4,953		)
Proceeds from sale of loans held for sale	1,081,954			590,066			214,261
(Gain) Loss on sale of other real estate and foreclosed assets	(372		)	1,878			2,116
Depreciation and amortization of furniture, equipment and software	1,904			1,316			618
Net changes in assets and liabilities which provide (use) cash:
Accrued interest receivable	(1,891		)	(1,295		)	(1,537		)
Other assets	3,466			(163		)	1,213
Accrued interest payable	(128		)	(435		)	258
Accounts payable and accrued liabilities	3,699			7,097			3,105
Net cash provided by (used) in operating activities	15,750			(56,271		)	4,115
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities	(79,533		)	(78,367		)	(284,034		)
Proceeds from sales of available-for-sale mortgage-backed securities	2,775			—			16,523
Proceeds from repayment of securities	88,106			118,409			323,636
Purchase of stock of the Federal Home Loan Bank	(14,868		)	(8,437		)	(66		)
Proceeds from redemption of stock of Federal Home Loan Bank	7,798			3,220			2,751
Origination of loans held for investment	(953,012		)	(732,820		)	(608,901		)
Proceeds from sale of loans held for investment	—			83,985			—
Origination of mortgage warehouse loans, net	(101,612		)	(6		)	—
Proceeds from sales of other real estate owned and repossessed assets	3,151			8,401			3,484
Purchases of loans, net of discounts and premiums	(1,541		)	—			(124,784		)
Principal repayments on loans	541,076			278,240			163,348
Purchases of furniture, equipment and software	$	(3,914	)	$	(2,571	)	$	(3,150	)
Net cash used in investing activities	(511,574		)	(329,946		)	(511,193		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	476,911			274,763			372,145
Proceeds from the Federal Home Loan Bank advances	327,417			225,000			332,000
Repayment of the Federal Home Loan Bank advances	(159,000		)	(108,000		)	(210,000		)
Proceeds from other borrowings and securities sold under agreements to repurchase	—			—			2,500
Repayments of other borrowings and securities sold under agreements to repurchase	(10,000		)	(12,500		)	—
Proceeds from exercise of common stock options	260			726			922
Proceeds from issuance of common stock	6,765			13,344			4
Proceeds from issuance of preferred stock	18,544			19,487			—
Tax benefit from exercise of common stock options and vesting of restricted stock grants	2,332			740			663
Cash dividends on preferred stock	(1,137		)	(969		)	(309		)
Net cash provided by financing activities	662,092			412,591			497,925
NET CHANGE IN CASH AND CASH EQUIVALENTS	166,268			26,374			(9,153		)
CASH AND CASH EQUIVALENTS—Beginning of year	35,426			9,052			18,205
CASH AND CASH EQUIVALENTS—End of year	$	201,694		$	35,426		$	9,052
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on deposits and borrowed funds	$	34,154		$	36,980		$	34,164
Income taxes paid	$	35,830		$	15,255		$	13,697
Transfers to other real estate and repossessed vehicles	$	4,466		$	1,817		$	11,746
Transfers from loans held for investment to loans held for sale	$	4,654		$	81,029		$	6,911
Transfers from loans held for sale to loans held for investment	$	40,779		$	29,786		$	—
Preferred stock dividends declared but not paid	$	—		$	302		$	—
Transfer from preferred stock to common stock	$	18		$	—		$	—
Transfer from preferred stock to additional paid-in capital	$	37,965		$	—		$	—

LOANS 

The following table sets forth the composition of the loan portfolio as of the dates indicated:

(Unaudited) (Dollars in thousands)	June 30, 2013			June 30, 2012
Single family real estate secured:
Mortgage	$	1,070,668		$	808,710
Home equity	22,537			29,167
Warehouse and other	204,878			61,106
Multifamily real estate secured	768,023			687,661
Commercial real estate secured	29,000			35,174
Auto and RV secured	18,530			24,324
Factoring	108,144			48,549
Commercial & Industrial	78,721			45,723
Other	419			85
Total	2,300,920			1,740,499
Allowance for loan losses	(14,182		)	(9,636		)
Unaccreted discounts and loan fees	(29,820		)	(10,300		)
Net loans	$	2,256,918		$	1,720,563

SECURITIES

The amortized cost, carrying amount and fair value for the major categories of securities trading, available for sale, and held to maturity at June 30, 2013 and June 30, 2012 were:

	June 30, 2013
(Unaudited)	Trading		Available for sale									Held to maturity
(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Carrying Amount		Unrecognized Gains		Unrecognized Losses			Fair Value
Mortgage-backed securities (RMBS):
U.S agencies1	$	—	$	70,517	$	1,143	$	(1,778	)	$	69,882	$	54,825	$	2,386	$	—		$	57,211
Non-agency2	—		45,271		4,221		(208		)	49,284		184,742		5,758		(15,986		)	174,514
Total mortgage-backed securities	—		115,788		5,364		(1,986		)	119,166		239,567		8,144		(15,986		)	231,725
Other debt securities:
U.S. agencies1	—		25,049		14		—			25,063		—		—		—			—
Municipal	—		11,062		41		—			11,103		36,124		4,005		—			40,129
Non-agency	7,111		29,646		630		(1		)	30,275		—		—		—			—
Total other debt securities	7,111		65,757		685		(1		)	66,441		36,124		4,005		—			40,129
Total debt securities	$	7,111	$	181,545	$	6,049	$	(1,987	)	$	185,607	$	275,691	$	12,149	$	(15,986	)	$	271,854
	June 30, 2012
(Unaudited)	Trading		Available for sale									Held to maturity
(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Carrying Amount		Unrecognized Gains		Unrecognized Losses			Fair Value
Mortgage-backed securities (RMBS):
U.S agencies1	$	—	$	56,456	$	1,852	$	(264	)	$	58,044	$	67,037	$	3,576	$	—		$	70,613
Non-agency2	—		75,755		7,671		(299		)	83,127		209,804		12,469		(13,643		)	208,630
Total mortgage-backed securities	—		132,211		9,523		(563		)	141,171		276,841		16,045		(13,643		)	279,243
Other debt securities:
U.S. agencies1	—		10,033		4		—			10,037		—		—		—			—
Municipal	—		5,749		—		(249		)	5,500		36,191		2,818		—			39,009
Non-agency	5,838		7,444		7		—			7,451		—		—		—			—
Total other debt securities	5,838		23,226		11		(249		)	22,988		36,191		2,818		—			39,009
Total debt securities	$	5,838	$	155,437	$	9,534	$	(812	)	$	164,159	$	313,032	$	18,863	$	(13,643	)	$	318,252

¹U.S. government-backed or government sponsored enterprises including Fannie Mae, Freddie Mac and Ginnie Mae.

²Private sponsors of securities collateralized primarily by pools of 1-4 family residential first mortgages . Primarily supersenior securities secured by prime, Alt-A or pay-option ARM mortgages.

DEPOSITS

The following table sets for the composition of the deposit portfolio as of the dates indicated:

(Unaudited)	June 30, 2013			June 30, 2012
(Dollars in thousands)	Amount	Rate*		Amount		Rate*
Non-interest bearing	81,524	—	%	$	12,439	—	%
Interest bearing:
Demand	311,539	0.50	%	94,888		0.52	%
Savings	641,534	0.67	%	583,955		0.72	%
	953,073	0.61	%	678,843		0.69	%
Time deposits:
Under $100	183,754	1.36	%	224,140		1.85	%
$100 or more	873,648	1.52	%	699,666		1.75	%
Total time deposits	1,057,402	1.50	%	923,806		1.78	%
Total interest bearing	2,010,475	1.08	%	$	1,602,649	1.32	%
Total deposits	2,091,999	1.04	%	1,615,088		1.31	%

^*Based on weighted-average stated interest rates at end of period.

The number of deposit accounts at the end of each of the last five fiscal years is set forth below:

	At June 30,
(Unaudited)	2013	2012	2011	2010	2009
Checking and savings accounts	23,567	19,931	16,105	17,192	10,685
Time deposits	11,103	12,341	16,793	10,554	12,757
Total number of deposit accounts	34,670	32,272	32,898	27,746	23,442

AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID

The following tables set forth, for the periods indicated, information regarding (i) average balances; (ii) the total amount of interest income from interest-earning assets and the weighted average yields on such assets; (iii) the total amount of interest expense on interest-bearing liabilities and the weighted average rates paid on such liabilities; (iv) net interest income; (v) interest rate spread; and (vi) net interest margin:

	For the Fiscal Years Ended June 30,
	2013						2012						2011
(Unaudited)(Dollars in thousands)	Average Balance1		Interest Income / Expense		Average Yields Earned / Rates Paid		Average Balance1		Interest Income / Expense		Average Yields Earned / Rates Paid		Average Balance1		Interest Income / Expense		Average Yields Earned / Rates Paid
Assets:
Loans2,3	$	2,157,974	$	113,503	5.26	%	$	1,607,523	$	89,308	5.56	%	$	1,013,645	$	60,508	5.97	%
Federal funds sold	17,017		30		0.18	%	12,297		10		0.08	%	8,407		11		0.13	%
Interest-earning deposits in other financial institutions	23,632		47		0.20	%	295		—		—	%	384		—		—	%
Mortgage-backed and other investment securities4	462,946		21,588		4.66	%	506,223		26,353		5.21	%	556,518		32,353		5.81	%
Stock of the FHLB, at cost	22,594		486		2.15	%	16,683		62		0.37	%	16,845		63		0.37	%
Total interest-earning assets	2,684,163		135,654		5.05	%	2,143,021		115,733		5.40	%	1,595,799		92,935		5.82	%
Non-interest-earning assets	70,896						46,464						38,741
Total assets	$	2,755,059					$	2,189,485					$	1,634,540
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	826,797	$	6,399	0.77	%	$	504,835	$	4,388	0.87	%	$	344,964	$	3,015	0.87	%
Time deposits	1,065,669		16,469		1.55	%	1,003,728		20,501		2.04	%	776,638		19,261		2.48	%
Securities sold under agreements to repurchase	114,247		5,068		4.44	%	125,820		5,552		4.41	%	130,000		5,736		4.41	%
Advances from the FHLB	436,383		5,939		1.36	%	333,866		5,955		1.78	%	226,005		6,263		2.77	%
Other borrowings	5,155		151		2.93	%	5,155		149		2.89	%	5,167		147		2.84	%
Total interest-bearing liabilities	2,448,251		34,026		1.39	%	1,973,404		36,545		1.85	%	1,482,774		34,422		2.32	%
Non-interest-bearing demand deposits	45,299						13,796						5,813
Other non-interest-bearing liabilities	18,681						16,152						7,230
Stockholders’ equity	242,828						186,133						138,723
Total liabilities and stockholders’ equity	$	2,755,059					$	2,189,485					$	1,634,540
Net interest income			$	101,628					$	79,188					$	58,513
Interest rate spread5					3.66	%					3.55	%					3.50	%
Net interest margin6					3.79	%					3.70	%					3.67	%

¹Average balances are obtained from daily data.

² Loans include loans held for sale, loan premiums and unearned fees.

³Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loan fee income is not significant. Also includes $32.8 million of Community Reinvestment Act loans which are taxed at a reduced rate.

⁴Includes $5.5 million of municipal securities which are taxed at a reduced rate.

⁵Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.

⁶Net interest margin represents net interest income as a percentage of average interest-earning assets.

AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID

The following table presents information regarding (i) average balances; (ii) the total amount of interest income from interest-earning assets and the weighted average yields on such assets; (iii) the total amount of interest expense on interest-bearing liabilities and the weighted average rates paid on such liabilities; (iv) net interest income; (v) interest rate spread; and (vi) net interest margin:

	For the three months ended June 30,
	2013						2012
(Unaudited) (Dollars in thousands)	Average Balance2		Interest Income / Expense1		Average Yields Earned / Rates Paid		Average Balance2		Interest Income / Expense1		Average Yields Earned / Rates Paid
Assets:
Loans3,4	$	2,319,512	$	30,905	5.33	%	$	1,742,445	$	23,805	5.46	%
Federal funds sold	61		1		6.56	%	9,381		1		0.04	%
Interest-earning deposits in other financial institutions	82,348		47		0.23	%	388		—		—	%
Mortgage-backed and other investment securities5	456,673		5,293		4.64	%	499,698		6,177		4.94	%
Stock of the FHLB, at cost	24,073		217		3.61	%	18,786		21		0.45	%
Total interest-earning assets	2,882,667		36,463		5.06	%	2,270,698		30,004		5.29	%
Non-interest-earning assets	79,611						49,125
Total assets	$	2,962,278					$	2,319,823
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	904,197	$	1,569	0.69	%	$	633,244	$	1,191	0.75	%
Time deposits	1,120,986		4,264		1.52	%	937,971		4,421		1.89	%
Securities sold under agreements to repurchase	110,017		1,223		4.45	%	120,045		1,315		4.38	%
Advances from the FHLB	458,481		1,366		1.19	%	384,605		1,449		1.51	%
Other borrowings	5,155		36		2.79	%	5,155		38		2.95	%
Total interest-bearing liabilities	2,598,836		8,458		1.30	%	2,081,020		8,414		1.62	%
Non-interest-bearing demand deposits	72,071						10,475
Other non-interest-bearing liabilities	20,904						19,539
Stockholders’ equity	270,467						208,789
Total liabilities and stockholders’ equity	$	2,962,278					$	2,319,823
Net interest income			$	28,005					$	21,590
Interest rate spread6					3.76	%					3.67	%
Net interest margin7					3.89	%					3.80	%

¹Annualized.

²Average balances are obtained from daily data.

³Loans include loans held for sale, loan premiums and unearned fees.

⁴Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loan fee income is not significant. Also, includes $32.8 million of Community Reinvestment Act loans which are taxed at a reduced rate.

⁵Includes $5.5 million of municipal securities which are taxed at a reduced rate.

⁶Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.

⁷Net interest margin represents net interest income as a percentage of average interest-earning assets.