Exhibit 99.1
FOR IMMEDIATE RELEASE
| | | | |
| CONTACT: | | Kevin T. Thompson | | Tim Dirrim |
| | Executive Vice President | | Vice President |
| | Chief Financial Officer | | Corporate Communications |
| | Sky Financial Group, Inc. | | Sky Financial Group, Inc. |
| | (419) 254-6068 | | (419) 327-6330 |
Sky Financial Group Reports 2006 Third Quarter Earnings
| | • | | Core Operating Earnings of $.48 per Share |
| | • | | Net Income of $.50 per Share Includes Derivative Gains |
| | • | | Union Federal Acquisition Complete – Adds $2.2 Billion in Assets |
October 18, 2006 - Bowling Green, Ohio - Sky Financial Group, Inc. (NASDAQ: SKYF) today reported core operating earnings of $52.9 million for the third quarter of 2006 versus $50.4 million for the same period in 2005. Core operating earnings per diluted share for the third quarter of 2006 were $.48 versus $.47 for the third quarter of 2005. Core operating earnings reflect net income adjusted to exclude merger-related expenses and derivative gains and losses on swaps that are not representative of ongoing operations. For the 2006 third quarter, on a core operating earnings basis, annualized return on assets and return on equity were 1.33% and 13.06%, respectively, compared with 1.32% and 13.22%, respectively, for the same period in 2005.
Cash operating earnings, which reflect core operating earnings excluding amortization of intangibles, were $55.3 million, or $.51 per diluted share, in the third quarter of 2006 compared to $52.9 million, or $.49 per diluted share, in the third quarter of 2005. On a cash operating basis, the annualized return on average tangible equity was 21.02% for the third quarter of 2006 compared with 21.87% for the same period in 2005.
“We are pleased with our strong operating results this past quarter,” stated Marty E. Adams, chairman, president and chief executive officer. “Growth in our fee businesses and an overall focus on expense control helped us overcome the difficult interest rate environment, which pressured our net interest margin during the quarter. We are also excited to be adding over $2 billion in assets and 42 offices to Sky’s Indiana footprint with our Union Federal Bank acquisition, which was completed late yesterday.”
Net income for the third quarter of 2006 was $54.6 million, or $.50 per diluted share, compared to $50.3 million, or $.46 per diluted share, for the third quarter of 2005. Annualized return on assets and return on equity for the third quarter were 1.37% and 13.48%, respectively, compared with 1.31% and 13.20%, respectively, for the same period in 2005. The third quarter of 2006 was impacted by Sky Financial’s
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breakage of certain derivative instruments, which resulted in a gain of $3.3 million ($2.1 million after tax) recorded as derivative gains on swaps.
For the nine months ended September 30, 2006, Sky reported net income of $150.3 million, or $1.38 per diluted share versus $128.9 million, or $1.20 per diluted share for the first nine months of 2005. Core operating earnings, which reflect net income adjusted to exclude merger-related expenses and derivative gains and losses on swaps that are not representative of ongoing operations, were $155.4 million, or $1.42 per diluted share, for the current year-to-date versus $129.6 million, or $1.20 per diluted share, for the first nine months of 2005.
Third Quarter Results
Net interest income for the third quarter was $132.0 million, up 1.2% from $130.4 million in the third quarter of 2005. The net interest margin for the third quarter was 3.65%, down 10 basis points from the second quarter of 2006 and the third quarter of 2005. The decrease in the net interest margin performance was primarily the result of funding costs increasing greater than earning asset yields. In 2006, funding costs have risen due to rising rates, a migration in deposits to higher cost products and the early issuance of trust preferred securities to fund the Union Federal Bank acquisition.
Average earning assets increased 4.0% over the third quarter of 2005 due to organic growth and acquisitions. Average loans for the quarter increased 4.4% from the same quarter last year, with organic growth contributing 4.0% in addition to the acquisitions. Average deposits grew 4.3% from the third quarter of 2005, which included organic growth of 3.8% in addition to the acquisitions.
Non-interest revenues, which included $3.6 million of derivative gains and losses on swaps, were $60.9 million, up from $52.2 million in the third quarter of 2005. Non-interest revenues on a core-operating basis, excluding the derivative gains and losses on swaps recorded during the quarter, were $57.4 million, up 9.9% from $52.2 million in the third quarter of 2005. Compared to the third quarter of 2005, service charges on deposits were up 13.0% from higher volumes in deposit accounts, continued growth in transaction accounts and fee increases on certain types of accounts. In addition, trust services income was up 4.2% from higher trust assets compared to the prior year. Brokerage and insurance commissions were up 9.1% due mostly to acquisitions in late 2005 and early 2006. Other income increased 31.5% over the third quarter of 2005 due to a $1.2 million gain on the early extinguishment of debt, higher debit card fees and higher gains on the sales of loans. Mortgage banking revenues were down 18.8% mainly due to lower origination and sales revenue and lower recaptures of impairment during the third quarter of 2006, partially offset by lower amortization compared to the third quarter of 2005.
Non-interest expenses for the third quarter, which included $0.9 million of merger, integration and restructuring expenses related to the pending acquisition of Union Federal Bank were $101.9 million compared to $97.4 million in the third quarter of 2005. Excluding the merger, integration and restructuring expenses, the third quarter non-interest expenses were up 3.7% or $3.6 million over the third quarter of
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2005. Expenses increased over the third quarter of 2005 mainly due to higher costs of group health benefits, the addition of approximately 23 full-time equivalent employees from acquisitions in the third and fourth quarters of 2005 and by the addition of seven new financial centers over the last twelve months. These higher costs were partially offset by a continued focus on controlling operating expenses and a 5.4% decrease in other operating expenses primarily the result of a $2.4 million state franchise tax benefit. The efficiency ratio, on a cash operating basis, excluding the merger, integration and restructuring expenses, the derivative gains on swaps and amortization of intangible assets, was 51.13% for the third quarter, compared to 50.96% for the same quarter in 2005.
Credit Quality
The provision for credit losses for the third quarter was $9.4 million, increasing from $8.7 million in the same quarter in 2005. The higher provision was the result of an increase in total loans compared to the previous year and higher charge-offs during the quarter. Net credit losses for the quarter were $9.9 million, or .35% annualized to average total loans, compared to $8.0 million, or .29%, for the third quarter of 2005. At September 30, 2006, non-performing loans to total loans was 1.13% versus 1.11% at June 30, 2006 and 1.16% at September 30, 2005. Total non-performing loans at September 30, 2006, were $127.3 million, an increase of $2.5 million from $124.8 million at June 30, 2006 and an increase of $0.7 million from $126.6 million at September 30, 2005. The allowance for credit losses to non-performing loans at September 30, 2006, was 113% versus 116% at June 30, 2006 and 121% at September 30, 2005. Non-performing loans continue to reflect the non-accrual status of $15.4 million of loans with payments guaranteed by surety bonds issued by an insurance company, which remains in litigation.
Continued Expansion
On October 17, Sky Financial completed its acquisition of Union Federal Bank of Indianapolis and its parent company, Waterfield Mortgage Company, Inc., Ft. Wayne, Indiana. Sky Financial purchased Waterfield’s retail and commercial banking business conducted primarily through Union Federal Bank, which added approximately $2.2 billion in assets. The aggregate purchase price was approximately $321.5 million. Shareholders of Waterfield will be entitled to receive $80.07 in cash plus 4.38 shares of Sky Financial common stock for each Waterfield share. The acquisition of Union Federal Bank expands Sky Financial’s Indiana presence into the growing Indianapolis market with the addition of 42 branches in this area. In addition, Sky Financial expects the addition of Union Federal Bank operations to be neutral to Sky Financial’s EPS results of operations for the fourth quarter, excluding expected one-time acquisition charges of approximately $.05 to $.06 per diluted share.
In August, Sky Financial announced its intent to acquire Wells River and its wholly-owned subsidiary, Perpetual Savings Bank, a $74.7 million bank that operates three full-service branches in Columbiana County. Sky anticipates the closing of this transaction will occur in the fourth quarter of 2006.
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On October 2, 2006, Sky announced the acquisition of Lindig Benefit Consultants located in Worthington, Ohio. The full-service insurance agency was merged with and into Sky’s existing insurance business, effective September 30, 2006.
Outlook For 2006
Commenting on 2006, Kevin T. Thompson, chief financial officer, stated, “We look forward to completing the integration of Union Federal and finishing 2006 with a solid fourth quarter financial performance. We are narrowing our projection of 2006 diluted earnings per share on a core operating basis, to $1.90 to $1.91 per diluted share, excluding the one-time charges associated with the acquisition of Union Federal Bank.”
Conference Call
Today, October 18, 2006, at 3 p.m. ET, Mr. Adams and members of Sky’s leadership team will host a conference call to provide an overview of 2006 third quarter performance and a business outlook. Participants are encouraged to call in beginning at 2:45 p.m. by dialing (800) 289-0468 (confirmation code: 508345). R.S.V.P. is not required. The webcast can be accessed via the Investor Relations/Webcasts section (http://investor.skyfi.com/medialist.cfm) of the Sky website. A replay of the call will be available from 7 p.m., October 18, until midnight, October 23 by calling (888) 203-1112 (confirmation code: 508345). The event will be archived on the Sky website indefinitely. For supplemental financial tables, please refer to the Investor Relations/Press Releases (http://investor.skyfi.com/releases.cfm) section on Sky’s web site.
Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this press release contains certain non-GAAP financial measures. Sky believes that providing certain non-GAAP financial measures provides investors with information useful in understanding Sky’s financial performance, its performance trends and financial position. Specifically, Sky provides measures based on “core operating earnings,” which exclude merger-related expenses, derivative gains and losses on swaps and discontinued operations that are not reflective of ongoing operations or not expected to recur. In addition, Sky provides measures based on “cash operating earnings,” which further adjusts core operating earnings to exclude the effect of amortization of intangibles. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the financial tables.
Accounting Correction
During the second quarter of 2006, Sky Financial identified and corrected immaterial accounting errors related to certain derivative hedging relationships. The misstatements related to Sky Financial’s interpretation and application of the “shortcut” method of hedge accounting under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Sky Financial determined that these hedges did not qualify for hedge accounting using the “shortcut” method. As a result, changes in the
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market value of the derivatives should have been recorded through non-interest income with no corresponding offset to the hedged item. Sky Financial evaluated the impact of these errors and concluded that the impact was not material to prior quarterly and annual periods. Accordingly, a loss of $9.9 million ($6.6 million after tax) was recorded as a derivatives loss on swaps in the second quarter of 2006 to correct the cumulative impact of these errors. During the third quarter of 2006, Sky Financial redesignated a portion of the affected derivatives as hedges using the long-haul method of hedge accounting. For the remaining swaps not redesignated as hedges, Sky Financial terminated the swaps. The breakage of these instruments during the third quarter resulted in a gain of $3.3 million ($2.1 million after tax) recorded as derivative gains on swaps.
Forward-looking Statement
The information in this press release contains forward-looking statements including certain projections, plans and forecasts of expected future performance that are not historical facts and are subject to a number of risks and uncertainties. These forward-looking statements include, but are not limited to, the Company’s 2006 earnings per share projections. Actual results and performance could differ materially from those contemplated or implied by these forward-looking statements. For a summary of important factors that could affect Sky’s forward-looking statements, please refer to Sky’s filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov). Sky undertakes no obligation to update or revise these statements following the date of this release.
About Sky Financial Group, Inc.
Sky Financial Group is an $18.1 billion diversified financial holding company with its headquarters located in Bowling Green, Ohio. Sky’s asset size places it among the 40 largest publicly-held bank holding companies in the nation. Sky operates over 330 financial centers and over 400 ATMs serving communities in Ohio, Pennsylvania, Michigan, Indiana and West Virginia. Sky’s financial service affiliates include: Sky Bank, commercial and retail banking; Sky Trust, asset management services; and Sky Insurance, retail and commercial insurance agency services. Sky is located on the web at www.skyfi.com.
-end-
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Summary Financials-Third Quarter 2006
SKY FINANCIAL GROUP, INC.
STATEMENTS OF INCOME (Unaudited)
| | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | Percent Change | | | Nine Months Ended September 30 | | Percent Change | |
(Dollars in thousands, except per share data) | | 2006 | | 2005 | | | 2006 | | | 2005 | |
Interest income | | $ | 254,134 | | $ | 212,358 | | 19.7 | % | | $ | 731,324 | | | $ | 606,981 | | 20.5 | % |
Interest expense | | | 122,155 | | | 81,939 | | 49.1 | | | | 333,289 | | | | 224,555 | | 48.4 | |
| | | | | | | | | | | | | | | | | | | |
Net interest income | | | 131,979 | | | 130,419 | | 1.2 | | | | 398,035 | | | | 382,426 | | 4.1 | |
Provision for credit losses | | | 9,445 | | | 8,725 | | 8.3 | | | | 26,075 | | | | 45,442 | | (42.6 | ) |
| | | | | | | | | | | | | | | | | | | |
Net interest income after provision for credit losses | | | 122,534 | | | 121,694 | | 0.7 | | | | 371,960 | | | | 336,984 | | 10.4 | |
| | | | | | | | | | | | | | | | | | | |
Non-interest income | | | | | | | | | | | | | | | | | | | |
Trust services income | | | 5,835 | | | 5,598 | | 4.2 | | | | 17,728 | | | | 16,407 | | 8.1 | |
Service charges and fees on deposit accounts | | | 16,701 | | | 14,786 | | 13.0 | | | | 45,226 | | | | 40,991 | | 10.3 | |
Mortgage banking income | | | 6,240 | | | 7,681 | | (18.8 | ) | | | 18,321 | | | | 19,360 | | (5.4 | ) |
Brokerage and insurance commissions | | | 15,156 | | | 13,896 | | 9.1 | | | | 50,828 | | | | 44,654 | | 13.8 | |
Net securities gains (losses) | | | 18 | | | 147 | | (87.8 | ) | | | (67 | ) | | | 2,109 | | (103.2 | ) |
Derivative gains (losses) on swaps | | | 3,570 | | | — | | 100.0 | | | | (6,360 | ) | | | — | | 100.0 | |
Net cash settlement on swaps | | | 159 | | | — | | 100.0 | | | | (40 | ) | | | — | | 100.0 | |
Other income | | | 13,254 | | | 10,082 | | 31.5 | | | | 37,911 | | | | 31,657 | | 19.8 | |
| | | | | | | | | | | | | | | | | | | |
Total non-interest income | | | 60,933 | | | 52,190 | | 16.8 | | | | 163,547 | | | | 155,178 | | 5.4 | |
| | | | | | | | | | | | | | | | | | | |
Non-interest expenses | | | | | | | | | | | | | | | | | | | |
Salaries and employee benefits | | | 57,593 | | | 53,120 | | 8.4 | | | | 173,212 | | | | 161,304 | | 7.4 | |
Occupancy and equipment expense | | | 17,364 | | | 16,754 | | 3.6 | | | | 52,141 | | | | 51,193 | | 1.9 | |
Merger, integration and restructuring expense | | | 941 | | | 122 | | 671.3 | | | | 1,485 | | | | 1,153 | | 28.8 | |
Other operating expenses | | | 25,966 | | | 27,444 | | (5.4 | ) | | | 83,125 | | | | 85,283 | | (2.5 | ) |
| | | | | | | | | | | | | | | | | | | |
Total non-interest expense | | | 101,864 | | | 97,440 | | 4.5 | | | | 309,963 | | | | 298,933 | | 3.7 | |
| | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 81,603 | | | 76,444 | | 6.7 | | | | 225,544 | | | | 193,229 | | 16.7 | |
Income taxes | | | 27,034 | | | 26,099 | | 3.6 | | | | 75,262 | | | | 64,379 | | 16.9 | |
| | | | | | | | | | | | | | | | | | | |
Net income | | $ | 54,569 | | $ | 50,345 | | 8.4 | | | $ | 150,282 | | | $ | 128,850 | | 16.6 | |
| | | | | | | | | | | | | | | | | | | |
SHARE DATA: | | | | | | | | | | | | | | | | | | | |
Earnings per share | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.50 | | $ | 0.47 | | 6.4 | % | | $ | 1.39 | | | $ | 1.21 | | 14.9 | % |
Diluted | | | 0.50 | | | 0.46 | | 8.7 | | | | 1.37 | | | | 1.20 | | 14.2 | |
Core operating earnings per share* | | | | | | | | | | | | | | | | | | | |
Basic | | | 0.49 | | | 0.47 | | 4.2 | | | | 1.43 | | | | 1.22 | | 17.2 | |
Diluted | | | 0.48 | | | 0.47 | | 2.1 | | | | 1.42 | | | | 1.20 | | 18.3 | |
Cash operating earnings per share* | | | | | | | | | | | | | | | | | | | |
Basic | | | 0.51 | | | 0.49 | | 4.1 | | | | 1.50 | | | | 1.28 | | 17.2 | |
Diluted | | | 0.51 | | | 0.49 | | 4.1 | | | | 1.49 | | | | 1.27 | | 17.3 | |
Cash dividend declared per common share | | | 0.23 | | | 0.22 | | — | | | | 0.69 | | | | 0.66 | | — | |
Average shares outstanding | | | | | | | | | | | | | | | | | | | |
Basic | | | 108,564,000 | | | 107,236,000 | | — | | | | 108,455,000 | | | | 106,443,000 | | — | |
Diluted | | | 109,345,000 | | | 108,431,000 | | — | | | | 109,305,000 | | | | 107,620,000 | | — | |
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Summary Financials-Third Quarter 2006
PERFORMANCE RATIOS:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | | Nine Months Ended
September 30 | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Net Income | | $ | 54,569 | | | $ | 50,345 | | | $ | 150,282 | | | $ | 128,850 | |
Return on average equity | | | 13.48 | % | | | 13.20 | % | | | 12.66 | % | | | 11.70 | % |
Return on average assets | | | 1.37 | % | | | 1.31 | % | | | 1.28 | % | | | 1.14 | % |
Efficiency ratio | | | 52.59 | | | | 53.11 | | | | 54.97 | | | | 55.35 | |
Net interest margin (FTE) | | | 3.65 | % | | | 3.75 | % | | | 3.72 | % | | | 3.72 | % |
CORE OPERATING * | | | | | | | | | | | | | | | | |
Core operating earnings | | $ | 52,860 | | | $ | 50,424 | | | $ | 155,381 | | | $ | 129,599 | |
Return on average equity | | | 13.06 | % | | | 13.22 | % | | | 13.09 | % | | | 11.77 | % |
Return on average assets | | | 1.33 | | | | 1.32 | | | | 1.32 | | | | 1.15 | |
Efficiency ratio | | | 53.09 | | | | 53.04 | | | | 54.10 | | | | 55.13 | |
CASH OPERATING* | | | | | | | | | | | | | | | | |
Cash operating earnings | | $ | 55,283 | | | $ | 52,902 | | | $ | 162,799 | | | $ | 136,735 | |
Return on average tangible equity | | | 21.02 | % | | | 21.87 | % | | | 21.28 | % | | | 19.45 | % |
Return on average tangible assets | | | 1.44 | | | | 1.43 | | | | 1.44 | | | | 1.26 | |
Efficiency ratio | | | 51.13 | | | | 50.96 | | | | 52.10 | | | | 53.10 | |
PERIOD END BALANCE SHEETS (Unaudited)
(Dollars in thousands)
| | | | | | | | | | | |
| | | September 30 | | | Percent Change | |
| | | 2006 | | | 2005 | | |
Cash and due from banks | | $ | 272,903 | | | $ | 289,089 | | | (5.6 | )% |
Interest-earning deposits with banks | | | 12,980 | | | | 14,196 | | | (8.6 | ) |
Loans held for sale | | | 16,515 | | | | 20,685 | | | (20.2 | ) |
Securities available for sale | | | 3,221,525 | | | | 3,052,117 | | | 5.6 | |
Total loans | | | 11,305,636 | | | | 10,914,530 | | | 3.6 | |
Allowance for credit losses | | | (144,310 | ) | | | (153,351 | ) | | (5.9 | ) |
| | | | | | | | | | | |
Net loans | | | 11,161,326 | | | | 10,761,179 | | | 3.7 | |
Premises and equipment | | | 166,865 | | | | 165,517 | | | 0.8 | |
Goodwill and other intangibles | | | 580,306 | | | | 582,798 | | | (0.4 | ) |
Other assets | | | 488,211 | | | | 451,384 | | | 8.2 | |
| | | | | | | | | | | |
Total assets | | $ | 15,920,631 | | | $ | 15,336,965 | | | 3.8 | |
| | | | | | | | | | | |
Total interest-earning assets | | $ | 14,556,656 | | | $ | 14,001,528 | | | 4.0 | |
| | | | | | | | | | | |
Non-interest-bearing deposits | | $ | 1,665,760 | | | $ | 1,722,735 | | | (3.3 | ) |
Interest-bearing deposits | | | 9,730,664 | | | | 9,132,059 | | | 6.6 | |
| | | | | | | | | | | |
Total deposits | | | 11,396,424 | | | | 10,854,794 | | | 5.0 | |
Repos and federal funds purchased | | | 904,827 | | | | 780,585 | | | 15.9 | |
Debt and FHLB advances | | | 1,781,640 | | | | 1,963,594 | | | (9.3 | ) |
Other liabilities | | | 192,785 | | | | 220,937 | | | (12.7 | ) |
Shareholders’ equity | | | 1,644,955 | | | | 1,517,055 | | | 8.4 | |
| | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 15,920,631 | | | $ | 15,336,965 | | | 3.8 | |
| | | | | | | | | | | |
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Summary Financials-Third Quarter 2006
AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | | Percent Change | | | Nine Months Ended
September 30 | | | Percent Change | |
| | | 2006 | | | 2005 | | | | 2006 | | | 2005 | | |
Cash and due from banks | | $ | 243,811 | | | $ | 266,045 | | | (8.4 | )% | | $ | 243,460 | | | $ | 247,303 | | | (1.6 | )% |
Interest-earning deposits with banks | | | 12,951 | | | | 30,680 | | | (57.8 | ) | | | 13,514 | | | | 34,429 | | | (60.7 | ) |
Federal funds sold | | | 533 | | | | 1,033 | | | (48.4 | ) | | | 2,090 | | | | 1,403 | | | 49.0 | |
Loans held for sale | | | 16,110 | | | | 27,661 | | | (41.8 | ) | | | 15,180 | | | | 23,830 | | | (36.3 | ) |
Securities available for sale | | | 3,152,411 | | | | 3,042,872 | | | 3.6 | | | | 3,136,041 | | | | 3,058,160 | | | 2.5 | |
Total loans | | | 11,265,283 | | | | 10,791,361 | | | 4.4 | | | | 11,202,769 | | | | 10,706,296 | | | 4.6 | |
Allowance for credit losses | | | (144,362 | ) | | | (152,901 | ) | | (5.6 | ) | | | (143,982 | ) | | | (151,252 | ) | | (4.8 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Net loans | | | 11,120,921 | | | | 10,638,460 | | | 4.5 | | | | 11,058,787 | | | | 10,555,044 | | | 4.8 | |
Premises and equipment | | | 166,983 | | | | 167,698 | | | (0.4 | ) | | | 166,544 | | | | 161,534 | | | 3.1 | |
Goodwill and other intangibles | | | 582,235 | | | | 577,631 | | | 0.8 | | | | 585,278 | | | | 556,352 | | | 5.2 | |
Other assets | | | 506,848 | | | | 445,424 | | | 13.8 | | | | 499,122 | | | | 436,019 | | | 14.5 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 15,802,803 | | | $ | 15,197,504 | | | 4.0 | | | $ | 15,720,016 | | | $ | 15,074,074 | | | 4.3 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total interest-earning assets | | $ | 14,447,288 | | | $ | 13,893,607 | | | 4.0 | | | $ | 14,369,594 | | | $ | 13,824,118 | | | 3.9 | |
| | | | | | | | | | | | | | | | | | | | | | |
Non-interest-bearing deposits | | $ | 1,655,915 | | | $ | 1,679,171 | | | (1.4 | ) | | $ | 1,658,487 | | | $ | 1,622,080 | | | 2.2 | |
Interest-bearing deposits | | | 9,573,663 | | | | 9,083,148 | | | 5.4 | | | | 9,341,301 | | | | 8,946,699 | | | 4.4 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total deposits | | | 11,229,578 | | | | 10,762,319 | | | 4.3 | | | | 10,999,788 | | | | 10,568,779 | | | 4.1 | |
Repos and federal funds purchased | | | 869,381 | | | | 794,554 | | | 9.4 | | | | 934,044 | | | | 867,071 | | | 7.7 | |
Debt and FHLB advances | | | 1,920,271 | | | | 1,980,981 | | | (3.1 | ) | | | 2,024,517 | | | | 2,024,209 | | | 0.0 | |
Other liabilities | | | 178,081 | | | | 146,767 | | | 21.3 | | | | 175,035 | | | | 142,098 | | | 23.2 | |
Shareholders’ equity | | | 1,605,492 | | | | 1,512,883 | | | 6.1 | | | | 1,586,632 | | | | 1,471,917 | | | 7.8 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 15,802,803 | | | $ | 15,197,504 | | | 4.0 | | | $ | 15,720,016 | | | $ | 15,074,074 | | | 4.3 | |
| | | | | | | | | | | | | | | | | | | | | | |
ASSET QUALITY DATA:
| | | | | | | | |
| | | September 30 | |
| | | 2006 | | | 2005 | |
Non-accrual loans | | $ | 127,279 | | | $ | 126,131 | |
Restructured loans | | | 43 | | | | 495 | |
| | | | | | | | |
Total non-performing loans | | | 127,322 | | | | 126,626 | |
Investment securities | | | — | | | | 10,299 | |
Other real estate owned | | | 13,992 | | | | 14,700 | |
| | | | | | | | |
Total non-performing assets | | $ | 141,314 | | | $ | 151,625 | |
| | | | | | | | |
Loans 90 days or more past due & still accruing | | $ | 17,207 | | | $ | 24,424 | |
Allowance for credit losses | | | 144,310 | | | | 153,351 | |
ASSET QUALITY RATIOS: | | | | | | | | |
Non-accrual loans to total loans | | | 1.13 | % | | | 1.16 | % |
Non-performing loans to total loans | | | 1.13 | | | | 1.16 | |
Non-performing assets to total assets | | | 0.89 | | | | 0.99 | |
Loans 90 days or more past due and still accruing to total loans | | | 0.15 | | | | 0.22 | |
Allowance for credit losses to non-performing loans | | | 113.34 | | | | 121.11 | |
Allowance for credit losses to non-performing assets | | | 102.12 | | | | 101.14 | |
Allowance for credit losses to total loans | | | 1.28 | | | | 1.41 | |
NET CHARGE-OFFS
| | | | | | |
| | | Three Months Ended
September 30 |
| | | 2006 | | 2005 |
Net charge-offs | | $ | 9,890 | | $ | 7,997 |
Net charge-offs to average loans | | | 0.35 | | | 0.29 |
| |
| | | Nine Months Ended
September 30 |
| | | 2006 | | 2005 |
Net charge-offs | | $ | 26,191 | | $ | 45,562 |
Net charge-offs to average loans | | | 0.31 | | | 0.57 |
8
Summary Financials-Third Quarter 2006
SKY FINANCIAL GROUP, INC.
*NON-GAAP DISCLOSURE RECONCILIATIONS
(Dollars in thousands)
Core operating earnings reflect net income adjusted to exclude the after-tax effect of discontinued operations, merger, integration and restructuring expenses and derivative gains (losses) on swaps that are not reflective of on going operations or are not expected to recur.
Cash operating earnings are core operating earnings adjusted to exclude the after-tax effect of amortizing core deposits and other intangibles.
Management believes that both core operating earnings and cash operating earnings assist the investor in understanding the impact of merger, integration and restructuring expenses, derivative gains and losses on swaps and amortization of intangibles on reported results.
Core operating earnings
The following reconciles GAAP income from continuing operations to core operating earnings for the three and nine months ended September 30, 2006 and 2005:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | | Nine Months Ended
September 30 | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Net income | | $ | 54,569 | | | $ | 50,345 | | | $ | 150,282 | | | $ | 128,850 | |
| | | | | | | | | | | | | | | | |
Add: Merger, integration and restructuring expense | | | 941 | | | | 122 | | | | 1,485 | | | | 1,153 | |
Derivative (gains) losses on swaps | | | (3,570 | ) | | | — | | | | 6,360 | | | | — | |
Tax effect | | | 920 | | | | (43 | ) | | | (2,746 | ) | | | (404 | ) |
| | | | | | | | | | | | | | | | |
After-tax non-operating items | | | (1,709 | ) | | | 79 | | | | 5,099 | | | | 749 | |
| | | | | | | | | | | | | | | | |
Core operating earnings | | $ | 52,860 | | | $ | 50,424 | | | $ | 155,381 | | | $ | 129,599 | |
| | | | | | | | | | | | | | | | |
Merger, integration and restructuring expenses in 2006 reflect charges associated with the pending acquisition of Union Federal in the first, second and third quarters and additional costs from the Falls Bank acquisition incurred in the first quarter.
Merger, integration and restructuring expenses in 2005 reflect charges associated with the acquisition of Belmont Bancorp in the second quarter and the cost associated with the acquisition of Falls Bank recorded in the third quarter.
Core operating earnings is used as the numerator to calculate core operating return on average assets, core operating return on average equity and core operating earnings per share. Additionally, merger, integration and restructuring expenses are deducted from non-interest expense in the numerator of the core operating efficiency ratio disclosed in the tables. The derivative gains (losses) on swaps are deducted from non-interest income in the denominator of the ratio. The comparable information on a GAAP basis is also provided in the tables.
Cash operating earnings
The following table reconciles core operating earnings to cash operating earnings for the three and nine months ended September 30, 2006 and 2005:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | | Nine Months Ended
September 30 | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Core operating earnings | | $ | 52,860 | | | $ | 50,424 | | | $ | 155,381 | | | $ | 129,599 | |
| | | | | | | | | | | | | | | | |
Add: Amortization of core deposits and other intangible assets | | | 3,728 | | | | 3,813 | | | | 11,413 | | | | 10,978 | |
Tax effect | | | (1,305 | ) | | | (1,335 | ) | | | (3,995 | ) | | | (3,842 | ) |
| | | | | | | | | | | | | | | | |
After-tax non-operating items | | | 2,423 | | | | 2,478 | | | | 7,418 | | | | 7,136 | |
| | | | | | | | | | | | | | | | |
Cash operating earnings | | $ | 55,283 | | | $ | 52,902 | | | $ | 162,799 | | | $ | 136,735 | |
| | | | | | | | | | | | | | | | |
Cash operating earnings is used as the numerator to calculate the cash operating return on average tangible equity and the cash operating return on average tangible assets. The denominator of each ratio is adjusted to deduct the average balance of intangible assets during the period. Additionally, amortization of core deposits and other intangible assets and merger, integration and restructuring expenses are deducted from non-interest expense in the numerator of the cash operating efficiency ratio disclosed in the tables. The derivative gains (losses) on swaps are deducted from non-interest income in the denominator of the ratio. The comparable GAAP information is also included in the tables.
9
Summary Financials-Third Quarter 2006
The following table reconciles average GAAP equity to average tangible equity for the three and nine months ended September 30, 2006 and 2005.
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | | Nine Months Ended
September 30 | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Average GAAP equity | | $ | 1,605,492 | | | $ | 1,512,883 | | | $ | 1,586,632 | | | $ | 1,471,917 | |
| | | | | | | | | | | | | | | | |
Goodwill | | | 524,329 | | | | 507,944 | | | | 523,636 | | | | 486,889 | |
Core deposits and other intangibles | | | 57,906 | | | | 69,687 | | | | 61,642 | | | | 69,463 | |
Deferred taxes | | | (20,267 | ) | | | (24,390 | ) | | | (21,575 | ) | | | (24,312 | ) |
| | | | | | | | | | | | | | | | |
| | | 561,968 | | | | 553,241 | | | | 563,703 | | | | 532,040 | |
| | | | | | | | | | | | | | | | |
Average tangible equity | | $ | 1,043,524 | | | $ | 959,642 | | | $ | 1,022,929 | | | $ | 939,877 | |
| | | | | | | | | | | | | | | | |
The following table reconciles average GAAP assets to average tangible assets for the three and nine months ended September 30, 2006 and 2005:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | | Nine Months Ended
September 30 | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Average GAAP assets | | $ | 15,802,803 | | | $ | 15,197,504 | | | $ | 15,720,016 | | | $ | 15,074,074 | |
| | | | | | | | | | | | | | | | |
Goodwill | | | 524,329 | | | | 507,944 | | | | 523,636 | | | | 486,889 | |
Core deposits and other intangibles | | | 57,906 | | | | 69,687 | | | | 61,642 | | | | 69,463 | |
Deferred taxes | | | (20,267 | ) | | | (24,390 | ) | | | (21,575 | ) | | | (24,312 | ) |
| | | | | | | | | | | | | | | | |
| | | 561,968 | | | | 553,241 | | | | 563,703 | | | | 532,040 | |
| | | | | | | | | | | | | | | | |
Average tangible assets | | $ | 15,240,835 | | | $ | 14,644,263 | | | $ | 15,156,313 | | | $ | 14,542,034 | |
| | | | | | | | | | | | | | | | |
The following table reconciles GAAP earnings per share to operating earnings per share, core operating earnings per share and cash operating earnings per share (certain information does not add due to rounding):
Basic EPS
| | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | Nine Months Ended
September 30 |
| | | 2006 | | | 2005 | | 2006 | | 2005 |
Net income | | $ | 0.50 | | | $ | 0.47 | | $ | 1.39 | | $ | 1.21 |
After-tax merger, integration and restructuring and derivative gains (losses) on swaps | | | (0.02 | ) | | | 0.00 | | | 0.05 | | | 0.01 |
| | | | | | | | | | | | | |
Core operating earnings | | | 0.49 | | | | 0.47 | | | 1.43 | | | 1.22 |
After-tax amortization of core deposits and other intangible assets | | | 0.02 | | | | 0.02 | | | 0.07 | | | 0.07 |
| | | | | | | | | | | | | |
Cash operating earnings | | $ | 0.51 | | | $ | 0.49 | | $ | 1.50 | | $ | 1.28 |
| | | | | | | | | | | | | |
Diluted EPS
| | | | | | | | | | | | | |
| | | Three Months Ended
September 30 | | Nine Months Ended
September 30 |
| | | 2006 | | | 2005 | | 2006 | | 2005 |
Net income | | $ | 0.50 | | | $ | 0.46 | | $ | 1.37 | | $ | 1.20 |
After-tax merger, integration and restructuring and derivative gains (losses) on swaps | | | (0.02 | ) | | | 0.00 | | | 0.05 | | | 0.01 |
| | | | | | | | | | | | | |
Core operating earnings | | | 0.48 | | | | 0.47 | | | 1.42 | | | 1.20 |
After-tax amortization of core deposits and other intangible assets | | | 0.02 | | | | 0.02 | | | 0.07 | | | 0.07 |
| | | | | | | | | | | | | |
Cash operating earnings | | $ | 0.51 | | | $ | 0.49 | | $ | 1.49 | | $ | 1.27 |
| | | | | | | | | | | | | |
— end —
10
Third Quarter 2006
Supplemental Financial Information
October 18, 2006
Supplemental Financial Information - Third Quarter 2006
SKY FINANCIAL GROUP, INC.
FIVE QUARTER STATEMENTS OF INCOME (unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 |
| | | 3rd qtr | | 2nd qtr | | | 1st qtr | | | 4th qtr | | 3rd qtr |
Fully taxable equivalent interest income | | $ | 254,900 | | $ | 243,898 | | | $ | 234,812 | | | $ | 224,108 | | $ | 213,223 |
| | | | | | | | | | | | | | | | | |
Interest income | | $ | 254,134 | | $ | 243,146 | | | $ | 234,044 | | | $ | 223,243 | | $ | 212,358 |
Interest expense | | | 122,155 | | | 109,926 | | | | 101,208 | | | | 91,017 | | | 81,939 |
| | | | | | | | | | | | | | | | | |
Net interest income | | | 131,979 | | | 133,220 | | | | 132,836 | | | | 132,226 | | | 130,419 |
Provision for credit losses | | | 9,445 | | | 9,476 | | | | 7,154 | | | | 6,807 | | | 8,725 |
| | | | | | | | | | | | | | | | | |
Net interest income after provision for credit losses | | | 122,534 | | | 123,744 | | | | 125,682 | | | | 125,419 | | | 121,694 |
| | | | | | | | | | | | | | | | | |
Non-interest income | | | | | | | | | | | | | | | | | |
Trust services income | | | 5,835 | | | 6,012 | | | | 5,881 | | | | 5,511 | | | 5,598 |
Service charges and fees on deposit accounts | | | 16,701 | | | 15,026 | | | | 13,499 | | | | 14,578 | | | 14,786 |
Mortgage banking income | | | 6,240 | | | 6,518 | | | | 5,563 | | | | 5,632 | | | 7,681 |
Brokerage and insurance commissions | | | 15,156 | | | 15,880 | | | | 19,792 | | | | 14,519 | | | 13,896 |
Net securities gains (losses) | | | 18 | | | (80 | ) | | | (5 | ) | | | 1,553 | | | 147 |
Derivative gains (losses) on swaps | | | 3,570 | | | (9,930 | ) | | | — | | | | — | | | — |
Net cash settlement on swaps | | | 159 | | | (199 | ) | | | — | | | | — | | | — |
Other income | | | 13,254 | | | 12,728 | | | | 11,929 | | | | 14,412 | | | 10,082 |
| | | | | | | | | | | | | | | | | |
Total non-interest income | | | 60,933 | | | 45,955 | | | | 56,659 | | | | 56,205 | | | 52,190 |
| | | | | | | | | | | | | | | | | |
Non-interest expenses | | | | | | | | | | | | | | | | | |
Salaries and employee benefits | | | 57,593 | | | 55,805 | | | | 59,814 | | | | 53,251 | | | 53,120 |
Occupancy and equipment expense | | | 17,364 | | | 17,134 | | | | 17,643 | | | | 17,209 | | | 16,754 |
Merger, integration and restructuring expense | | | 941 | | | 364 | | | | 180 | | | | 618 | | | 122 |
Other operating expenses | | | 25,966 | | | 28,618 | | | | 28,541 | | | | 30,037 | | | 27,444 |
| | | | | | | | | | | | | | | | | |
Total non-interest expense | | | 101,864 | | | 101,921 | | | | 106,178 | | | | 101,115 | | | 97,440 |
| | | | | | | | | | | | | | | | | |
Income from continuing operations before income taxes | | | 81,603 | | | 67,778 | | | | 76,163 | | | | 80,509 | | | 76,444 |
Income taxes from continuing operations | | | 27,034 | | | 22,705 | | | | 25,523 | | | | 27,168 | | | 26,099 |
| | | | | | | | | | | | | | | | | |
Income from continuing operations | | | 54,569 | | | 45,073 | | | | 50,640 | | | | 53,341 | | | 50,345 |
| | | | | | | | | | | | | | | | | |
Income from discontinued operations, net of tax | | | — | | | — | | | | — | | | | 372 | | | — |
| | | | | | | | | | | | | | | | | |
Net income | | $ | 54,569 | | $ | 45,073 | | | $ | 50,640 | | | $ | 53,713 | | $ | 50,345 |
| | | | | | | | | | | | | | | | | |
Core operating earnings | | $ | 52,860 | | $ | 51,764 | | | $ | 50,757 | | | $ | 53,743 | | $ | 50,424 |
| | | | | | | | | | | | | | | | | |
Note: During the fourth quarter of 2005, Sky Financial adopted Financial Accounting Standards No. 123(R),Share Based Payment (FAS 123(R)). Sky Financial adopted FAS 123(R) using the modified retrospective method and restated the first three interim quarters of 2005. The first three quarters presented above have been restated from the amounts originally reported to included expense related to stock options. The additional salary and employee benefits expense was recorded as follows: (1) first quarter - $1.2 million ($0.8 million after tax); (2) second quarter - $1.1 million ($0.7 million after tax); and (3) third quarter - $1.0 million ($0.7 million after tax).
1
Supplemental Financial Information - Third Quarter 2006
SKY FINANCIAL GROUP, INC.
FIVE QUARTER PERFORMANCE RATIOS AND SHARE DATA (Unaudited)
PERFORMANCE RATIOS
| | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Return on average equity | | 13.48 | % | | 11.42 | % | | 13.07 | % | | 13.89 | % | | 13.20 | % |
Return on average assets | | 1.37 | | | 1.15 | | | 1.31 | | | 1.39 | | | 1.31 | |
| | | | | |
| CONTINUING OPERATIONS | | | | | | | | | | | | | | | |
| | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Return on average equity | | 13.48 | % | | 11.42 | % | | 13.07 | % | | 13.79 | % | | 13.20 | % |
Return on average assets | | 1.37 | | | 1.15 | | | 1.31 | | | 1.38 | | | 1.31 | |
Net interest rate spread (FTE) | | 3.08 | | | 3.23 | | | 3.30 | | | 3.32 | | | 3.35 | |
Net interest rate margin (FTE) | | 3.65 | | | 3.75 | | | 3.78 | | | 3.76 | | | 3.75 | |
Efficiency ratio | | 52.59 | | | 56.65 | | | 55.81 | | | 53.42 | | | 53.11 | |
| | | | | |
| CORE OPERATING * | | | | | | | | | | | | | | | |
| | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Return on average equity | | 13.06 | % | | 13.11 | % | | 13.10 | % | | 13.90 | % | | 13.22 | % |
Return on average assets | | 1.33 | | | 1.32 | | | 1.31 | | | 1.39 | | | 1.32 | |
Efficiency ratio | | 53.09 | | | 53.49 | | | 55.71 | | | 53.09 | | | 53.04 | |
| | | | | |
| CASH OPERATING* | | | | | | | | | | | | | | | |
| | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Return on average tangible equity | | 21.02 | % | | 21.34 | % | | 21.49 | % | | 23.08 | % | | 21.87 | % |
Return on average assets | | 1.44 | | | 1.44 | | | 1.43 | | | 1.51 | | | 1.43 | |
Efficiency ratio | | 51.13 | | | 51.49 | | | 53.67 | | | 51.02 | | | 50.96 | |
2
Supplemental Financial Information - Third Quarter 2006
SKY FINANCIAL GROUP, INC.
FIVE QUARTER SHARE DATA (Unaudited)
| | | | | | | | | | | | | | | |
| | | 2006 | | 2005 |
| | | 3rd qtr | | 2nd qtr | | 1st qtr | | 4th qtr | | 3rd qtr |
Earnings per share from continuing operations | | | | | | | | | | | | | | | |
Basic | | $ | 0.50 | | $ | 0.42 | | $ | 0.47 | | $ | 0.49 | | $ | 0.47 |
Diluted | | | 0.50 | | | 0.41 | | | 0.46 | | | 0.49 | | | 0.46 |
Earnings per share from discontinued operations | | | | | | | | | | | | | | | |
Basic | | | — | | | — | | | — | | | 0.00 | | | — |
Diluted | | | — | | | — | | | — | | | 0.00 | | | — |
Earnings per share | | | | | | | | | | | | | | | |
Basic | | | 0.50 | | | 0.42 | | | 0.47 | | | 0.50 | | | 0.47 |
Diluted | | | 0.50 | | | 0.41 | �� | | 0.46 | | | 0.49 | | | 0.46 |
Core operating earnings per share* | | | | | | | | | | | | | | | |
Basic | | | 0.49 | | | 0.48 | | | 0.47 | | | 0.50 | | | 0.47 |
Diluted | | | 0.48 | | | 0.47 | | | 0.46 | | | 0.49 | | | 0.47 |
Cash operating earnings per share* | | | | | | | | | | | | | | | |
Basic | | | 0.51 | | | 0.50 | | | 0.49 | | | 0.52 | | | 0.49 |
Diluted | | | 0.51 | | | 0.50 | | | 0.49 | | | 0.52 | | | 0.49 |
Cash dividend declared per common share | | | 0.23 | | | 0.23 | | | 0.23 | | | 0.23 | | | 0.22 |
Book value per share | | | 15.10 | | | 14.47 | | | 14.41 | | | 14.35 | | | 14.12 |
Average shares outstanding | | | | | | | | | | | | | | | |
Basic | | | 108,564,000 | | | 108,463,000 | | | 108,337,000 | | | 107,844,000 | | | 107,236,000 |
Diluted | | | 109,345,000 | | | 109,266,000 | | | 109,287,000 | | | 109,008,000 | | | 108,431,000 |
Book value calculation shares outstanding | | | 108,947,993 | | | 108,782,409 | | | 108,704,939 | | | 108,307,601 | | | 107,469,752 |
3
Supplemental Financial Information - Third Quarter 2006
SKY FINANCIAL GROUP, INC.
FIVE QUARTER AVERAGE BALANCE SHEETS (Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Cash and due from banks | | $ | 243,811 | | | $ | 240,562 | | | $ | 246,033 | | | $ | 249,407 | | | $ | 266,045 | |
Interest-earning deposits with banks | | | 12,951 | | | | 15,041 | | | | 12,546 | | | | 16,690 | | | | 30,680 | |
Federal funds sold | | | 533 | | | | 3,115 | | | | 2,644 | | | | 930 | | | | 1,033 | |
Loans held for sale | | | 16,110 | | | | 17,656 | | | | 11,727 | | | | 18,048 | | | | 27,661 | |
Securities available for sale | | | 3,152,411 | | | | 3,139,803 | | | | 3,115,505 | | | | 3,049,214 | | | | 3,042,872 | |
Total loans | | | 11,265,283 | | | | 11,165,552 | | | | 11,176,494 | | | | 10,946,325 | | | | 10,791,361 | |
Allowance for loan losses | | | (144,362 | ) | | | (143,169 | ) | | | (144,415 | ) | | | (149,914 | ) | | | (152,901 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net loans | | | 11,120,921 | | | | 11,022,383 | | | | 11,032,079 | | | | 10,796,411 | | | | 10,638,460 | |
Premises and equipment | | | 166,983 | | | | 165,470 | | | | 167,180 | | | | 165,570 | | | | 167,698 | |
Goodwill and other intangibles | | | 582,235 | | | | 585,291 | | | | 588,376 | | | | 589,410 | | | | 577,631 | |
Other assets | | | 506,848 | | | | 507,024 | | | | 483,232 | | | | 472,562 | | | | 445,424 | |
| | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 15,802,803 | | | $ | 15,696,345 | | | $ | 15,659,322 | | | $ | 15,358,242 | | | $ | 15,197,504 | |
| | | | | | | | | | | | | | | | | | | | |
Total interest-earning assets | | $ | 14,447,288 | | | $ | 14,341,167 | | | $ | 14,318,916 | | | $ | 14,031,207 | | | $ | 13,893,607 | |
| | | | | | | | | | | | | | | | | | | | |
Non-interest-bearing deposits | | $ | 1,655,915 | | | $ | 1,674,377 | | | $ | 1,645,047 | | | $ | 1,698,192 | | | $ | 1,679,171 | |
Interest-bearing deposits | | | 9,573,663 | | | | 9,330,457 | | | | 9,114,741 | | | | 9,098,470 | | | | 9,083,148 | |
| | | | | | | | | | | | | | | | | | | | |
Total deposits | | | 11,229,578 | | | | 11,004,834 | | | | 10,759,788 | | | | 10,796,662 | | | | 10,762,319 | |
Repos and federal funds purchased | | | 869,381 | | | | 913,764 | | | | 1,020,649 | | | | 828,989 | | | | 794,554 | |
Debt and FHLB advances | | | 1,920,271 | | | | 2,023,530 | | | | 2,132,077 | | | | 2,027,218 | | | | 1,980,981 | |
Other liabilities | | | 178,081 | | | | 170,984 | | | | 176,019 | | | | 171,142 | | | | 146,767 | |
Shareholders’ equity | | | 1,605,492 | | | | 1,583,233 | | | | 1,570,789 | | | | 1,534,231 | | | | 1,512,883 | |
| | | | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 15,802,803 | | | $ | 15,696,345 | | | $ | 15,659,322 | | | $ | 15,358,242 | | | $ | 15,197,504 | |
| | | | | | | | | | | | | | | | | | | | |
4
Supplemental Financial Information - Third Quarter 2006
SKY FINANCIAL GROUP, INC.
FIVE QUARTER PERIOD END BALANCE SHEETS (Unaudited)
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Cash and due from banks | | $ | 272,903 | | | $ | 293,266 | | | $ | 260,304 | | | $ | 318,114 | | | $ | 289,089 | |
Interest-earning deposits with banks | | | 12,980 | | | | 13,226 | | | | 9,652 | | | | 15,037 | | | | 14,196 | |
Federal funds sold | | | — | | | | — | | | | 23,000 | | | | — | | | | — | |
Loans held for sale | | | 16,515 | | | | 22,296 | | | | 23,395 | | | | 24,184 | | | | 20,685 | |
Securities available for sale | | | 3,221,525 | | | | 3,084,312 | | | | 3,144,045 | | | | 3,097,472 | | | | 3,052,117 | |
Total loans | | | 11,305,636 | | | | 11,218,034 | | | | 11,093,918 | | | | 11,149,222 | | | | 10,914,530 | |
Allowance for loan losses | | | (144,310 | ) | | | (144,601 | ) | | | (143,383 | ) | | | (144,461 | ) | | | (153,351 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net loans | | | 11,161,326 | | | | 11,073,433 | | | | 10,950,535 | | | | 11,004,761 | | | | 10,761,179 | |
Premises and equipment | | | 166,865 | | | | 166,551 | | | | 165,598 | | | | 166,797 | | | | 165,517 | |
Goodwill and other intangibles | | | 580,306 | | | | 583,948 | | | | 587,231 | | | | 588,939 | | | | 582,798 | |
Other assets | | | 488,211 | | | | 513,970 | | | | 494,791 | | | | 467,987 | | | | 451,384 | |
| | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 15,920,631 | | | $ | 15,751,002 | | | $ | 15,658,551 | | | $ | 15,683,291 | | | $ | 15,336,965 | |
| | | | | | | | | | | | | | | | | | | | |
Total interest-earning assets | | $ | 14,556,656 | | | $ | 14,337,868 | | | $ | 14,294,010 | | | $ | 14,285,915 | | | $ | 14,001,528 | |
| | | | | | | | | | | | | | | | | | | | |
Non-interest-bearing deposits | | $ | 1,665,760 | | | $ | 1,698,585 | | | $ | 1,663,459 | | | $ | 1,734,113 | | | $ | 1,722,735 | |
Interest-bearing deposits | | | 9,730,664 | | | | 9,393,136 | | | | 9,339,539 | | | | 9,021,563 | | | | 9,132,059 | |
| | | | | | | | | | | | | | | | | | | | |
Total deposits | | | 11,396,424 | | | | 11,091,721 | | | | 11,002,998 | | | | 10,755,676 | | | | 10,854,794 | |
Repos and federal funds purchased | | | 904,827 | | | | 883,403 | | | | 915,821 | | | | 1,053,244 | | | | 780,585 | |
Debt and FHLB advances | | | 1,781,640 | | | | 2,010,758 | | | | 1,982,984 | | | | 2,125,788 | | | | 1,963,594 | |
Other liabilities | | | 192,785 | | | | 190,607 | | | | 190,177 | | | | 194,706 | | | | 220,937 | |
Shareholders’ equity | | | 1,644,955 | | | | 1,574,513 | | | | 1,566,571 | | | | 1,553,877 | | | | 1,517,055 | |
| | | | | | | | | | | | | | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 15,920,631 | | | $ | 15,751,002 | | | $ | 15,658,551 | | | $ | 15,683,291 | | | $ | 15,336,965 | |
| | | | | | | | | | | | | | | | | | | | |
5
Supplemental Financial Information - Third Quarter 2006
SKY FINANCIAL GROUP, INC.
FIVE QUARTER LOAN TABLE (Unaudited)
(Dollars in thousands)
PERIOD END
| | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Residential Mortgage | | $ | 1,069,992 | | | $ | 1,069,897 | | | $ | 1,125,633 | | | $ | 1,134,698 | | | $ | 1,096,703 | |
Home Equity | | | 1,707,425 | | | | 1,712,030 | | | | 1,696,999 | | | | 1,730,752 | | | | 1,737,937 | |
Consumer | | | 689,380 | | | | 691,270 | | | | 695,392 | | | | 711,197 | | | | 736,363 | |
Commercial Real Estate | | | 4,704,738 | | | | 4,666,045 | | | | 4,539,276 | | | | 4,552,226 | | | | 4,447,272 | |
Commercial & Industrial | | | 3,134,101 | | | | 3,078,792 | | | | 3,036,618 | | | | 3,020,349 | | | | 2,896,255 | |
| | | | | | | | | | | | | | | | | | | | |
Total Loans | | $ | 11,305,636 | | | $ | 11,218,034 | | | $ | 11,093,918 | | | $ | 11,149,222 | | | $ | 10,914,530 | |
| | | | | | | | | | | | | | | | | | | | |
Residential Mortgage | | | 9 | % | | | 10 | % | | | 10 | % | | | 10 | % | | | 10 | % |
Home Equity | | | 15 | % | | | 15 | % | | | 15 | % | | | 16 | % | | | 16 | % |
Consumer | | | 6 | % | | | 6 | % | | | 6 | % | | | 6 | % | | | 7 | % |
Commercial Real Estate | | | 42 | % | | | 42 | % | | | 41 | % | | | 41 | % | | | 41 | % |
Commercial & Industrial | | | 28 | % | | | 27 | % | | | 28 | % | | | 27 | % | | | 26 | % |
| | | | | | | | | | | | | | | | | | | | |
Total Loans | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| AVERAGES | | | | | | | | | | | | | | | | | | | | |
| | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
| | | | | | | | | | | | | | | | | | | | |
Residential Mortgage | | $ | 1,070,254 | | | $ | 1,107,658 | | | $ | 1,132,588 | | | $ | 1,106,292 | | | $ | 1,102,936 | |
Home Equity | | | 1,704,231 | | | | 1,706,839 | | | | 1,711,076 | | | | 1,732,682 | | | | 1,745,278 | |
Consumer | | | 691,634 | | | | 695,951 | | | | 701,714 | | | | 724,727 | | | | 755,634 | |
Commercial Real Estate | | | 4,711,243 | | | | 4,609,588 | | | | 4,524,839 | | | | 4,536,494 | | | | 4,419,506 | |
Commercial & Industrial | | | 3,087,921 | | | | 3,045,569 | | | | 3,106,277 | | | | 2,846,130 | | | | 2,768,007 | |
| | | | | | | | | | | | | | | | | | | | |
Total Loans | | $ | 11,265,283 | | | $ | 11,165,605 | | | $ | 11,176,494 | | | $ | 10,946,325 | | | $ | 10,791,361 | |
| | | | | | | | | | | | | | | | | | | | |
Residential Mortgage | | | 10 | % | | | 10 | % | | | 10 | % | | | 10 | % | | | 10 | % |
Home Equity | | | 15 | % | | | 15 | % | | | 15 | % | | | 16 | % | | | 16 | % |
Consumer | | | 6 | % | | | 6 | % | | | 6 | % | | | 7 | % | | | 7 | % |
Commercial Real Estate | | | 42 | % | | | 41 | % | | | 41 | % | | | 41 | % | | | 41 | % |
Commercial & Industrial | | | 27 | % | | | 28 | % | | | 28 | % | | | 26 | % | | | 26 | % |
| | | | | | | | | | | | | | | | | | | | |
Total Loans | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | |
6
Supplemental Financial Information - Third Quarter 2006
SKY FINANCIAL GROUP, INC.
FIVE QUARTER FUNDING TABLE (Unaudited)
(Dollars in thousands)
PERIOD END
| | | | | | | | | | | | | | | |
| | | 2006 | | 2005 |
| | | 3rd qtr | | 2nd qtr | | 1st qtr | | 4th qtr | | 3rd qtr |
Non-interest-bearing demand deposits | | $ | 1,665,760 | | $ | 1,698,585 | | $ | 1,663,459 | | $ | 1,734,113 | | $ | 1,722,735 |
Interest-bearing demand deposits | | | 415,232 | | | 354,253 | | | 385,747 | | | 333,491 | | | 410,783 |
Savings deposits | | | 3,364,869 | | | 3,283,701 | | | 3,426,386 | | | 3,416,583 | | | 3,585,227 |
Time deposits | | | 5,950,563 | | | 5,755,182 | | | 5,527,406 | | | 5,271,489 | | | 5,136,049 |
| | | | | | | | | | | | | | | |
Total deposits | | | 11,396,424 | | | 11,091,721 | | | 11,002,998 | | | 10,755,676 | | | 10,854,794 |
| | | | | | | | | | | | | | | |
Short-term borrowings | | | 904,827 | | | 883,403 | | | 915,821 | | | 1,053,244 | | | 780,585 |
Trust preferred securities | | | 337,040 | | | 337,156 | | | 182,288 | | | 184,799 | | | 187,790 |
Debt and FHLB advances | | | 1,444,600 | | | 1,673,602 | | | 1,800,696 | | | 1,940,989 | | | 1,775,804 |
| | | | | | | | | | | | | | | |
Total funding sources | | $ | 14,082,891 | | $ | 13,985,882 | | $ | 13,901,803 | | $ | 13,934,708 | | $ | 13,598,973 |
| | | | | | | | | | | | | | | |
| | | | | |
| AVERAGE | | | | | | | | | | | | | | | |
| | |
| | | 2006 | | 2005 |
| | | 3rd qtr | | 2nd qtr | | 1st qtr | | 4th qtr | | 3rd qtr |
Non-interest-bearing demand deposits | | $ | 1,655,915 | | $ | 1,674,377 | | $ | 1,645,047 | | $ | 1,698,192 | | $ | 1,679,171 |
Interest-bearing demand deposits | | | 387,738 | | | 363,567 | | | 345,545 | | | 368,885 | | | 400,426 |
Savings deposits | | | 3,327,147 | | | 3,327,009 | | | 3,396,816 | | | 3,524,370 | | | 3,651,598 |
Time deposits | | | 5,858,778 | | | 5,639,881 | | | 5,372,380 | | | 5,205,215 | | | 5,031,124 |
| | | | | | | | | | | | | | | |
Total deposits | | | 11,229,578 | | | 11,004,834 | | | 10,759,788 | | | 10,796,662 | | | 10,762,319 |
| | | | | | | | | | | | | | | |
Short-term borrowings | | | 869,381 | | | 913,766 | | | 1,020,649 | | | 829,152 | | | 794,554 |
Trust preferred securities | | | 338,275 | | | 254,433 | | | 184,440 | | | 185,934 | | | 189,509 |
Debt and FHLB advances | | | 1,581,996 | | | 1,769,095 | | | 1,947,637 | | | 1,841,121 | | | 1,791,472 |
| | | | | | | | | | | | | | | |
Total funding sources | | $ | 14,019,230 | | $ | 13,942,128 | | $ | 13,912,514 | | $ | 13,652,869 | | $ | 13,537,854 |
| | | | | | | | | | | | | | | |
7
Supplemental Financial Information - Third Quarter 2006
ASSET QUALITY DATA:
| | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Non-accrual loans | | $ | 127,279 | | | $ | 124,839 | | | $ | 128,402 | | | $ | 119,030 | | | $ | 126,131 | |
Restructured loans | | | 43 | | | | 45 | | | | 463 | | | | 479 | | | | 495 | |
| | | | | | | | | | | | | | | | | | | | |
Total non-performing loans | | | 127,322 | | | | 124,884 | | | | 128,865 | | | | 119,509 | | | | 126,626 | |
Investment securities | | | — | | | | — | | | | — | | | | — | | | | 10,299 | |
Other real estate owned | | | 13,992 | | | | 14,471 | | | | 18,319 | | | | 17,476 | | | | 14,700 | |
| | | | | | | | | | | | | | | | | | | | |
Total non-performing assets | | $ | 141,314 | | | $ | 139,355 | | | $ | 147,184 | | | $ | 136,985 | | | $ | 151,625 | |
| | | | | | | | | | | | | | | | | | | | |
Loans 90 days or more past due & still accruing | | $ | 17,207 | | | $ | 11,858 | | | $ | 20,408 | | | $ | 27,987 | | | $ | 24,424 | |
Net charge-offs | | | 9,890 | | | | 8,270 | | | | 8,030 | | | | 16,223 | | | | 7,997 | |
Allowance for loan losses | | | 144,310 | | | | 144,601 | | | | 143,383 | | | | 144,461 | | | | 153,351 | |
| | | | | |
| ASSET QUALITY RATIOS: | | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Non-accrual loans to total loans | | | 1.13 | % | | | 1.11 | % | | | 1.16 | % | | | 1.07 | % | | | 1.16 | % |
Non-performing loans to total loans | | | 1.13 | | | | 1.11 | | | | 1.16 | | | | 1.07 | | | | 1.16 | |
Non-performing assets to total assets | | | 0.89 | | | | 0.88 | | | | 0.94 | | | | 0.87 | | | | 0.99 | |
Loans 90 days or more past due and still accruing to total loans | | | 0.15 | | | | 0.11 | | | | 0.18 | | | | 0.25 | | | | 0.22 | |
Net charge-offs to average loans | | | 0.35 | | | | 0.30 | | | | 0.29 | | | | 0.59 | | | | 0.29 | |
Allowance for loan losses to non-performing loans | | | 113.34 | | | | 115.79 | | | | 111.27 | | | | 120.88 | | | | 121.11 | |
Allowance for loan losses to non-performing assets | | | 102.12 | | | | 103.76 | | | | 97.42 | | | | 105.46 | | | | 101.14 | |
Allowance for loan losses to total loans | | | 1.28 | | | | 1.29 | | | | 1.29 | | | | 1.30 | | | | 1.41 | |
8
Supplemental Financial Information - Third Quarter 2006
SKY FINANCIAL GROUP, INC.
*NON-GAAP DISCLOSURE RECONCILIATIONS
(Dollars in thousands)
Core operating earnings reflect net income adjusted to exclude the after-tax effect of discontinued operations, merger, integration and restructuring expenses and derivative gains (losses) on swaps that are not reflective of on-going operations or are not expected to recur.
Cash operating earnings are core operating earnings adjusted to exclude the after-tax effect of amortizing core deposits and other intangibles.
Management believes that both core operating earnings and cash operating earnings assist the investor in understanding the impact of merger, integration and restructuring expenses, derivative losses on swaps and amortization of intangibles on reported results.
Core operating earnings
The following reconciles GAAP income from continuing operations to core operating earnings for the nine months ended September 30, 2006 and 2005 for each of the five quarters presented in the tables:
| | | | | | | | |
| | | Nine Months Ended
September 30 | |
| | | 2006 | | | 2005 | |
Income from continuing operations | | $ | 150,282 | | | $ | 128,850 | |
Add: Merger, integration and restructuring expense | | | 1,485 | | | | 1,153 | |
Derivative losses on swaps | | | 6,360 | | | | — | |
Tax effect | | | (2,746 | ) | | | (404 | ) |
| | | | | | | | |
After-tax non-operating items | | | 5,099 | | | | 749 | |
| | | | | | | | |
Core operating earnings | | $ | 155,381 | | | $ | 129,599 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Income from continuing operations | | $ | 54,569 | | | $ | 45,073 | | | $ | 50,640 | | | $ | 53,341 | | | $ | 50,345 | |
| | | | | | | | | | | | | | | | | | | | |
Add: Merger, integration and restructuring expense | | | 941 | | | | 364 | | | | 180 | | | | 618 | | | | 122 | |
Derivative (gains) losses on swaps | | | (3,570 | ) | | | 9,930 | | | | — | | | | — | | | | — | |
Tax effect | | | 920 | | | | (3,603 | ) | | | (63 | ) | | | (216 | ) | | | (43 | ) |
| | | | | | | | | | | | | | | | | | | | |
After-tax non-operating items | | | (1,709 | ) | | | 6,691 | | | | 117 | | | | 402 | | | | 79 | |
| | | | | | | | | | | | | | | | | | | | |
Core operating earnings | | $ | 52,860 | | | $ | 51,764 | | | $ | 50,757 | | | $ | 53,743 | | | $ | 50,424 | |
| | | | | | | | | | | | | | | | | | | | |
Merger, integration and restructuring expenses in 2006 reflect charges associated with the pending acquisition of Union Federal incurred in the first, second and third quarters and additional costs from the Falls Bank acquisition incurred in the first quarter.
Merger, integration and restructuring expenses in 2005 reflect charges associated with the acquisition of Belmont Bancorp in the second quarter, the cost associated with the acquisition of Falls Bank recorded in the third and fourth quarters and the cost associated with the pending acquisition of Union Federal recorded in the fourth quarter.
Core operating earnings is used as the numerator to calculate core operating return on average assets, core operating return on average equity and core operating earnings per share. Additionally, merger, integration and restructuring expenses are deducted from non-interest expense in the numerator of the core operating efficiency ratio disclosed in the tables. The derivative gains (losses) on swaps are deducted from non-interest income in the denominator of the ratio. The comparable information on a GAAP basis is also provided in the tables.
9
Supplemental Financial Information - Third Quarter 2006
Cash operating earnings
The following reconciles core operating earnings to cash operating earnings for the nine months ended September 30, 2006 and 2005 as well as for each of the five quarters presented in these tables:
| | | | | | | | |
| | | Nine Months Ended
September 30 | |
| | | 2006 | | | 2005 | |
Core operating earnings | | $ | 155,381 | | | $ | 129,599 | |
| | | | | | | | |
Amortization of core deposits and other intangible assets | | | 11,413 | | | | 10,978 | |
Tax effect | | | (3,995 | ) | | | (3,842 | ) |
| | | | | | | | |
After-tax non-operating items | | | 7,418 | | | | 7,136 | |
| | | | | | | | |
Cash operating earnings | | $ | 162,799 | | | $ | 136,735 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Core operating earnings | | $ | 52,860 | | | $ | 51,764 | | | $ | 50,757 | | | $ | 53,743 | | | $ | 50,424 | |
| | | | | | | | | | | | | | | | | | | | |
Amortization of core deposits and other intangible assets | | | 3,728 | | | | 3,807 | | | | 3,877 | | | | 3,909 | | | | 3,813 | |
Tax effect | | | (1,305 | ) | | | (1,332 | ) | | | (1,357 | ) | | | (1,368 | ) | | | (1,335 | ) |
| | | | | | | | | | | | | | | | | | | | |
After-tax non-operating items | | | 2,423 | | | | 2,475 | | | | 2,520 | | | | 2,541 | | | | 2,478 | |
| | | | | | | | | | | | | | | | | | | | |
Cash operating earnings | | $ | 55,283 | | | $ | 54,239 | | | $ | 53,277 | | | $ | 56,284 | | | $ | 52,902 | |
| | | | | | | | | | | | | | | | | | | | |
Cash operating earnings is used as the numerator to calculate the cash operating return on average tangible equity and the cash operating return on average tangible assets. The denominator of each ratio is adjusted to deduct the average balance of intangible assets during the period. Additionally, amortization of core deposits and other intangible assets and merger, integration and restructuring expenses are deducted from non-interest expense in the numerator of the cash operating efficiency ratio disclosed in the tables. The derivative gains (losses) on swaps are deducted from non-interest income in the denominator of the ratio. The comparable GAAP information is also included in the tables.
10
Supplemental Financial Information - Third Quarter 2006
The following table reconciles average GAAP equity to average tangible equity for the three and nine months ended September 30, 2006 and 2005, as well as each of the period ends presented in the tables.
| | | | | | | | |
| | | Nine Months Ended
September 30 | |
| | | 2006 | | | 2005 | |
Average GAAP equity | | $ | 1,586,632 | | | $ | 1,471,917 | |
| | | | | | | | |
Goodwill | | | 523,636 | | | | 486,889 | |
Core deposits and other intangibles | | | 61,642 | | | | 69,463 | |
Deferred taxes | | | (21,575 | ) | | | (24,312 | ) |
| | | | | | | | |
| | | 563,703 | | | | 532,040 | |
| | | | | | | | |
Average tangible equity | | $ | 1,022,929 | | | $ | 939,877 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Average GAAP equity | | $ | 1,605,492 | | | $ | 1,583,233 | | | $ | 1,570,789 | | | $ | 1,534,231 | | | $ | 1,512,883 | |
| | | | | | | | | | | | | | | | | | | | |
Goodwill | | | 524,329 | | | | 523,582 | | | | 522,981 | | | | 524,217 | | | | 507,944 | |
Core deposits and other intangibles | | | 57,906 | | | | 61,709 | | | | 65,395 | | | | 65,193 | | | | 69,687 | |
Deferred taxes | | | (20,267 | ) | | | (21,598 | ) | | | (22,888 | ) | | | (22,818 | ) | | | (24,390 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | 561,968 | | | | 563,693 | | | | 565,488 | | | | 566,592 | | | | 553,241 | |
| | | | | | | | | | | | | | | | | | | | |
Average tangible equity | | $ | 1,043,524 | | | $ | 1,019,540 | | | $ | 1,005,301 | | | $ | 967,639 | | | $ | 959,642 | |
| | | | | | | | | | | | | | | | | | | | |
The following table reconciles average GAAP assets to average tangible assets for the nine months ended September 30, 2006 and 2005, as well as each of the period ends presented in the tables.
| | | | | | | | |
| | | Nine Months Ended
September 30 | |
| | | 2006 | | | 2005 | |
Average GAAP assets | | $ | 15,720,016 | | | $ | 15,074,074 | |
| | | | | | | | |
Goodwill | | | 523,636 | | | | 486,889 | |
Core deposits and other intangibles | | | 61,642 | | | | 69,463 | |
Deferred taxes | | | (21,575 | ) | | | (24,312 | ) |
| | | | | | | | |
| | | 563,703 | | | | 532,040 | |
| | | | | | | | |
Average tangible assets | | $ | 15,156,313 | | | $ | 14,542,034 | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | | 2005 | |
| | | 3rd qtr | | | 2nd qtr | | | 1st qtr | | | 4th qtr | | | 3rd qtr | |
Average GAAP assets | | $ | 15,802,803 | | | $ | 15,696,345 | | | $ | 15,659,322 | | | $ | 15,358,242 | | | $ | 15,197,504 | |
| | | | | | | | | | | | | | | | | | | | |
Goodwill | | | 524,329 | | | | 523,582 | | | | 522,981 | | | | 524,217 | | | | 507,944 | |
Core deposits and other intangibles | | | 57,906 | | | | 61,709 | | | | 65,395 | | | | 65,193 | | | | 69,687 | |
Deferred taxes | | | (20,267 | ) | | | (21,598 | ) | | | (22,888 | ) | | | (22,818 | ) | | | (24,390 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | 561,968 | | | | 563,693 | | | | 565,488 | | | | 566,592 | | | | 553,241 | |
| | | | | | | | | | | | | | | | | | | | |
Average tangible assets | | $ | 15,240,835 | | | $ | 15,132,652 | | | $ | 15,093,834 | | | $ | 14,791,650 | | | $ | 14,644,263 | |
| | | | | | | | | | | | | | | | | | | | |
11
Supplemental Financial Information - Third Quarter 2006
The following table reconciles GAAP earnings per share to core operating earnings per share and cash operating earnings per share (certain information does not add due to rounding):
Basic EPS
| | | | | | |
| | | Nine Months Ended
September 30 |
| | | 2006 | | 2005 |
Net income | | $ | 1.39 | | $ | 1.21 |
After-tax earnings from discontinued operations | | | — | | | — |
After-tax merger, integration and restructuring and derivative gains (losses) on swaps | | | 0.05 | | | 0.01 |
| | | | | | |
Core operating earnings | | | 1.43 | | | 1.22 |
After-tax amortization of core deposits and other intangible assets | | | 0.07 | | | 0.07 |
| | | | | | |
Cash operating earnings | | $ | 1.50 | | $ | 1.28 |
| | | | | | |
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2005 |
| | | 3rd qtr | | | 2nd qtr | | 1st qtr | | 4th qtr | | | 3rd qtr |
Net income | | $ | 0.50 | | | $ | 0.42 | | $ | 0.47 | | $ | 0.50 | | | $ | 0.47 |
After-tax earnings from discontinued operations | | | — | | | | — | | | — | | | (0.00 | ) | | | — |
After-tax merger, integration and restructuring and derivative gains (losses) on swaps | | | (0.02 | ) | | | 0.06 | | | 0.00 | | | 0.00 | | | | 0.00 |
| | | | | | | | | | | | | | | | | |
Core operating earnings | | | 0.49 | | | | 0.48 | | | 0.47 | | | 0.50 | | | | 0.47 |
After-tax amortization of core deposits and other intangible assets | | | 0.02 | | | | 0.02 | | | 0.02 | | | 0.02 | | | | 0.02 |
| | | | | | | | | | | | | | | | | |
Cash operating earnings | | $ | 0.51 | | | $ | 0.50 | | $ | 0.49 | | $ | 0.52 | | | $ | 0.49 |
| | | | | | | | | | | | | | | | | |
Diluted EPS
| | | | | | |
| | | Nine Months Ended
September 30 |
| | | 2006 | | 2005 |
Net income | | $ | 1.37 | | $ | 1.20 |
After-tax earnings from discontinued operations | | | — | | | — |
After-tax merger, integration and restructuring and derivative gains (losses) on swaps | | | 0.05 | | | 0.01 |
| | | | | | |
Core operating earnings | | | 1.42 | | | 1.20 |
After-tax amortization of core deposits and other intangible assets | | | 0.07 | | | 0.07 |
| | | | | | |
Cash operating earnings | | $ | 1.49 | | $ | 1.27 |
| | | | | | |
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2005 |
| | | 3rd qtr | | | 2nd qtr | | 1st qtr | | 4th qtr | | | 3rd qtr |
Net income | | $ | 0.50 | | | $ | 0.41 | | $ | 0.46 | | $ | 0.49 | | | $ | 0.46 |
After-tax earnings from discontinued operations | | | — | | | | — | | | — | | | (0.00 | ) | | | — |
After-tax merger, integration and restructuring and derivative gains (losses) on swaps | | | (0.02 | ) | | | 0.06 | | | 0.00 | | | 0.00 | | | | 0.00 |
| | | | | | | | | | | | | | | | | |
Core operating earnings | | | 0.48 | | | | 0.47 | | | 0.46 | | | 0.49 | | | | 0.47 |
After-tax amortization of core deposits and other intangible assets | | | 0.02 | | | | 0.02 | | | 0.02 | | | 0.02 | | | | 0.02 |
| | | | | | | | | | | | | | | | | |
Cash operating earnings | | $ | 0.51 | | | $ | 0.50 | | $ | 0.49 | | $ | 0.52 | | | $ | 0.49 |
| | | | | | | | | | | | | | | | | |
— end —
12
