Provident Financial Services, Inc. Announces Quarterly Earnings and
Declares Quarterly Cash Dividend
JERSEY CITY, NJ, October 26, 2006 - Provident Financial Services, Inc.
(NYSE:PFS) (the "Company") reported basic and diluted earnings per share of
$0.22 for the quarter ended September 30, 2006, a decrease of 4.7% compared to
basic and diluted earnings per share of $0.23 for the quarter ended September
30, 2005. Basic and diluted earnings per share were $0.65 for the nine months
ended September 30, 2006, essentially unchanged when compared to basic and
diluted earnings per share of $0.66 and $0.65, respectively, for the nine months
ended September 30, 2005. Net income for the three months ended September 30,
2006 totaled $13.0 million, a decrease of $2.0 million, or 13.1%, compared to
$14.9 million reported for the same period in 2005. Net income was $40.3 million
for the nine months ended September 30, 2006, a decrease of $3.4 million, or
7.8%, compared to $43.7 million for the same period in 2005. The earnings and
per share data for 2006 were impacted by a one-time executive severance payment
previously reported by the Company, which resulted in an after-tax charge of
$473,000, or $0.01 per share. The earnings and per share data for the nine
months ended September 30, 2005 were impacted by the acceptance of a Voluntary
Resignation Initiative ("VRI") by certain officers of the Company, which
resulted in an after-tax charge of $815,000, or $0.01 per share.
Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "Consistent
with the industry trend, our third quarter operating results reflect the impact
of the prolonged flat or inverted yield curve. In order to retain and grow
deposit relationships, we maintained competitive pricing on several deposit
products, which contributed to compression in our net interest margin as
compared to the previous quarter. We addressed this challenge to earnings growth
by continuing to incrementally reduce both our securities portfolio and
wholesale borrowings while managing non-interest expense and remaining an active
repurchaser of our stock."
Declaration of Quarterly Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.10 per
common share payable on November 30, 2006, to stockholders of record as of the
close of business on November 15, 2006.
Balance Sheet Summary
Total assets were $5.82 billion at September 30, 2006, compared to $6.05 billion
at December 31, 2005, as reductions in securities balances and proceeds from
deposit growth were used to fund repayments of borrowings, common stock
repurchases and loan growth.
Total investments decreased $267.8 million, or 17.4%, during the nine months
ended September 30, 2006. The decrease was primarily attributable to paydowns on
mortgage-backed securities and maturities of debt securities. In addition, the
Company sold $37.0 million of primarily mortgage-backed securities during the
second quarter as part of its ongoing interest rate risk management process.
During the third quarter, the Company also sold $4.4 million of equity
securities.
The Company's net loans increased $18.4 million, or 0.5%, to $3.73 billion at
September 30, 2006, from $3.71 billion at December 31, 2005, driven by loan
originations of $892.7 million and loan purchases of $53.7 million. Net
increases of $93.4 million in commercial and multi-family mortgage loans, $14.8
million in commercial loans and $31.7 million in consumer loans were partially
offset by decreases of $109.3 million in residential mortgage loans and $10.9
million in construction loans. Commercial real estate, construction and
commercial loans represented 39.9% of the loan portfolio at September 30, 2006,
compared to 37.5% at December 31, 2005.
At September 30, 2006, the Company's unfunded loan pipeline totaled $805.9
million, including $305.1 million in construction loan commitments, $203.0
million in commercial loan commitments and $102.1 million in commercial mortgage
commitments. This compared with an unfunded loan pipeline of $791.3 million at
June 30, 2006.
Borrowed funds decreased $186.4 million, or 19.2%, during the nine months ended
September 30, 2006, as a result of maturities, calls and paydowns on amortizing
obligations.
Total deposits increased $24.8 million, or 0.6%, during the nine months ended
September 30, 2006. Total deposits were $3.95 billion at September 30, 2006,
with core deposits, consisting of savings and demand deposit accounts,
representing 60.0% of total deposits.
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Common stock repurchases for the three and nine months ended September 30, 2006,
totaled 1.4 million shares at an average cost of $18.32 per share, and 5.1
million shares at an average cost of $18.20 per share, respectively. At
September 30, 2006, book value per share and tangible book value per share were
$15.94 and $9.16, respectively.
Results of Operations
Net Interest Margin
The net interest margin decreased 16 basis points to 3.17% for the quarter ended
September 30, 2006, from 3.33% for the quarter ended June 30, 2006. The net
interest margin for the quarter ended September 30, 2006 decreased 14 basis
points compared with the net interest margin of 3.31% for the quarter ended
September 30, 2005. The weighted average rate for interest-earning assets was
5.61% for the three months ended September 30, 2006, compared with 5.52% for the
trailing quarter and 5.11% for the three months ended September 30, 2005. The
weighted average rate for interest-bearing liabilities was 2.88% for the quarter
ended September 30, 2006, compared with 2.61% for the trailing quarter and 2.13%
for the third quarter of 2005.
For the nine months ended September 30, 2006, the net interest margin was 3.28%.
This was a decrease of seven basis points compared with the net interest margin
of 3.35% for the nine months ended September 30, 2005. The weighted average rate
for interest-earning assets was 5.51% for the nine months ended September 30,
2006, compared with 5.03% for the nine months ended September 30, 2005. The
weighted average rate for interest-bearing liabilities was 2.64% for the nine
months ended September 30, 2006, compared with 1.99% for the same period in
2005.
The higher rates on interest-earning assets and interest-bearing liabilities
reflect the increases in market interest rates experienced throughout the past
year. The compression in the net interest margin for both the three and nine
months ended September 30, 2006 is reflective of the prolonged flat or inverted
yield curve. Since January 1, 2005, the Board of Governors of the Federal
Reserve increased the Federal funds borrowing rate twelve times, for a total of
300 basis points. This had an unfavorable impact on the repricing of deposits,
which are priced off of the short end of the yield curve. The Company has
continued its near-term strategy of de-leveraging the balance sheet in the
current interest rate environment, but has nevertheless experienced net interest
margin compression in the third quarter of 2006 as competitive deposit pricing,
while less costly than comparable wholesale borrowings, has increased funding
costs faster than earning asset yields have grown.
Non-Interest Income
Non-interest income totaled $8.3 million for the quarter ended September 30,
2006, an increase of $515,000, or 6.6%, compared to the same period in 2005.
Increases in net gains on securities sales of $880,000 and other income of
$288,000 were partially offset by a $696,000 decrease in fee income for the
quarter ended September 30, 2006, compared with the same period in 2005. During
the third quarter of 2006, the Company sold $4.4 million in equity securities,
resulting in a gain of $1.1 million. The proceeds were used to repay borrowings
as the Company continued its efforts to de-leverage the balance sheet and
protect the net interest margin. The increase in other income was primarily
attributable to gains on loan sales of $23,000 recorded in the quarter ended
September 30, 2006, compared with losses on loan sales of $221,000 recorded for
the same period in 2005. In addition, the Company recognized gains on the call
of Federal Home Loan Bank advances resulting from the accelerated accretion of
related purchase accounting adjustments of $123,000 in the third quarter of
2006. The decrease in fee income was primarily attributable to a $593,000
reduction in commercial loan prepayment fee income for the quarter ended
September 30, 2006, compared with the same period in 2005.
For the nine months ended September 30, 2006, non-interest income totaled $23.0
million, an increase of $1.4 million, or 6.5%, compared to the same period in
2005. An increase in other income of $1.6 million was partially offset by a
reduction in securities gains of $198,000. The increase in other income was
primarily attributable to gains of $1.5 million recognized on the call of FHLB
advances for the nine months ended September 30, 2006. The decrease in gains on
securities sales was due to losses recorded on the sales of mortgage-backed
securities during the quarter ended June 30, 2006.
Non-Interest Expense
For the three months ended September 30, 2006, non-interest expense increased
$59,000, or 0.2%, to $30.1 million, compared to $30.0 million for the three
months ended September 30, 2005. Compensation and employee benefits expense
increased $1.5 million, primarily due to a one-time executive severance payment
of $800,000 previously reported by the Company. Other non-interest expense
decreased $689,000 for the quarter ended September 30, 2006, compared with the
same period in 2005, primarily due to reductions in ATM and debit card
maintenance costs, insurance and telephone expense. Net occupancy expense
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decreased $380,000 for the quarter ended September 30, 2006, compared with the
same period in 2005, primarily as a result of reductions in equipment
maintenance costs and depreciation expense. Amortization of intangibles
decreased $221,000 for the quarter ended September 30, 2006, compared with the
same period in 2005, as a result of scheduled reductions in core deposit
intangible amortization and a reduction in mortgage servicing rights
amortization resulting from slower principal repayments. Advertising expense
decreased $289,000 for the quarter ended September 30, 2006, compared with the
same period in 2005, due to the timing of marketing initiatives.
For the nine months ended September 30, 2006, non-interest expense decreased
$4.4 million, or 4.6%, to $90.2 million, compared to $94.6 million for the same
period in 2005. Compensation and employee benefits expense decreased $990,000
for the nine months ended September 30, 2006, compared with the same period in
2005, as a result of reductions in staff and the $1.4 million expense recorded
in the second quarter of 2005 in connection with the VRI, partially offset by
$800,000 in executive severance recorded in the third quarter of 2006. The
Company employed 874 full-time equivalent employees at September 30, 2006,
compared to 926 full-time equivalent employees at January 1, 2005. Amortization
of intangibles decreased $1.1 million for the nine months ended September 30,
2006, compared with the same period in 2005, as a result of scheduled reductions
in the amortization of core deposit intangibles. Other non-interest expense
decreased $941,000 for the nine months ended September 30, 2006, compared with
the same period in 2005, primarily due to reductions in ATM and debit card
maintenance costs, insurance, and telephone expense. Net occupancy expense
decreased $791,000 for the nine months ended September 30, 2006, compared with
the same period in 2005, primarily as a result of reductions in equipment
maintenance costs and depreciation expense. Data processing expense decreased
$380,000 for the nine months ended September 30, 2006, compared with the same
period in 2005, primarily due to the outsourcing of items processing in the
fourth quarter of 2005.
The Company's annualized non-interest expense as a percentage of average assets
was 2.06% for the quarter ended September 30, 2006, compared with 1.93% for the
same period in 2005. For the nine months ended September 30, 2006, non-interest
expense as a percentage of average assets was 2.05%, compared with 2.02% for the
same period in 2005. The efficiency ratio (non-interest expense divided by the
sum of net interest income and non-interest income) was 62.36% for the quarter
ended September 30, 2006, compared with 57.06% for the same period in 2005. For
the nine months ended September 30, 2006, the efficiency ratio was 60.58%,
compared with 59.34% for the same period in 2005. The Company's expense and
efficiency ratios have been adversely impacted by the reductions in asset size
and revenue resulting from the Company's de-leveraging of the balance sheet
given the current unfavorable interest rate environment.
Asset Quality
The Company continues to emphasize asset quality. Total non-performing loans at
September 30, 2006 were $6.8 million, or 0.18% of total loans, compared to $6.0
million, or 0.16% of total loans at December 31, 2005, and $6.5 million, or
0.18% of total loans at September 30, 2005. At September 30, 2006,
non-performing loans included $429,000 outstanding on two commercial mortgage
loans that were past maturity by more than ninety days and still accruing
interest. These loans were current as to interest and had estimated
loan-to-value ratios of 41% and 65% at September 30, 2006. The Company has
subsequently received $139,000 in full satisfaction of one of the loans and
anticipates full collection of the remaining loan. At September 30, 2006 and
December 31, 2005, the Company's allowance for loan losses was 0.86% of total
loans, compared with 0.89% of total loans at September 30, 2005. The Company
recorded provisions for loan losses of $100,000 and $1.2 million for the three
and nine months ended September 30, 2006, respectively, compared with provisions
of $100,000 and $500,000 for the three and nine months ended September 30, 2005,
respectively. For the three and nine months ended September 30, 2006, net
charge-offs totaled $158,000 and $1.0 million, respectively, compared with net
charge-offs of $832,000 and $1.6 million for the same periods in 2005. The
increase in the loan loss provision for the nine months ended September 30,
2006, compared with the same period in 2005, was attributable to loan growth, as
well as a shift in the composition of the loan portfolio from retail to
commercial loans.
Income Tax Expense
For the three and nine months ended September 30, 2006, the Company's effective
tax rates were 28.1% and 29.9%, respectively, compared with 33.6% and 32.1% for
the three and nine months ended September 30, 2005, respectively. The reductions
in the Company's effective tax rate are a result of a larger proportion of the
Company's income being derived from tax-exempt interest and Bank-owned life
insurance appreciation, as well as state tax benefits recorded on subsidiary
company net operating losses.
Acquisition of First Morris Bank & Trust
On October 15, 2006, the Company entered into an agreement under which First
Morris Bank & Trust ("First Morris") will merge with and into the Company's
subsidiary, The Provident Bank. Consideration will be paid to First Morris
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stockholders in a combination of stock and cash valued at approximately $124.1
million. The transaction is subject to regulatory approvals and First Morris'
stockholder approval. The merger will add nine branches to The Provident Bank
with deposits of $518 million as of June 30, 2006 in Morris County, New Jersey.
About the Company
Provident Financial Services, Inc. is the holding company for The Provident
Bank, a community-oriented bank offering a full range of retail and commercial
loan and deposit products. The Bank currently operates 76 full service branches
throughout northern and central New Jersey.
Post Earnings Conference Call
Representatives of the Company will hold a conference call for investors at
10:00 a.m. Eastern Time on October 26, 2006 regarding highlights of the
Company's third quarter 2006 financial results. The call may be accessed by
dialing 1-877-407-8035 (Domestic) or 1-201-689-8035 (International). Internet
access to the call is also available (listen only) at www.providentnj.com by
going to Investor Relations and clicking on Webcast.
4
Forward Looking Statements
Certain statements contained herein are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements may be
identified by reference to a future period or periods, or by the use of
forward-looking terminology, such as "may," "will," "believe," "expect,"
"estimate," "anticipate," "continue," or similar terms or variations on those
terms, or the negative of those terms. Forward-looking statements are subject to
numerous risks and uncertainties, including, but not limited to, those related
to the economic environment, particularly in the market areas in which the
Company operates, competitive products and pricing, fiscal and monetary policies
of the U.S. Government, changes in government regulations affecting financial
institutions, including regulatory fees and capital requirements, changes in
prevailing interest rates, acquisitions and the integration of acquired
businesses, in particular risks and uncertainties associated with the successful
merger with, and integration of the operations of First Morris Bank & Trust,
credit risk management, asset-liability management, the financial and securities
markets and the availability of and costs associated with sources of liquidity.
The Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company
wishes to advise readers that the factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with respect to future periods in any current statements. The Company does not
undertake and specifically declines any obligation to publicly release the
result of any revisions, which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
5
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Condition
September 30, 2006 (Unaudited) and December 31, 2005
(Dollars in Thousands)
Assets September 30, 2006 December 31, 2005
--------------------------------- ----------------------------
Cash and due from banks $ 129,873 $ 107,353
Short-term investments 2,450 9,915
--------------------------------- ----------------------------
Total cash and cash equivalents 132,323 117,268
--------------------------------- ----------------------------
Investment securities (market value of $398,428
at September 30, 2006 (unaudited) and $407,972
at December 31, 2005) 400,474 410,914
Securities available for sale, at fair value 836,592 1,082,957
Federal Home Loan Bank stock 32,824 43,794
Loans 3,757,736 3,739,122
Less allowance for loan losses 32,197 31,980
--------------------------------- ----------------------------
Net loans 3,725,539 3,707,142
--------------------------------- ----------------------------
Foreclosed assets, net 443 670
Banking premises and equipment, net 57,997 60,949
Accrued interest receivable 21,044 23,155
Intangible assets 431,021 435,838
Bank-owned life insurance 114,933 111,075
Other assets 70,807 58,612
--------------------------------- ----------------------------
Total assets $ 5,823,997 $ 6,052,374
================================= ============================
Liabilities and Stockholders' Equity
Deposits:
Demand deposits $ 1,024,365 $ 1,109,507
Savings deposits 1,343,036 1,363,997
Certificates of deposit of $100,000 or more 392,157 304,229
Other time deposits 1,186,675 1,143,725
--------------------------------- ----------------------------
Total deposits 3,946,233 3,921,458
Mortgage escrow deposits 17,355 18,121
Borrowed funds 783,755 970,108
Subordinated debentures 25,941 26,444
Other
liabilities 37,551 39,948
--------------------------------- ----------------------------
Total liabilities 4,810,835 4,976,079
--------------------------------- ----------------------------
Stockholders' Equity:
Preferred stock, $0.01 par value,
50,000,000 shares authorized, none issued -- --
Common stock, $0.01 par value, 200,000,000 shares authorized,
79,879,017 shares issued and 63,563,973 shares outstanding at
September 30, 2006, and 79,879,017 shares issued and
68,661,880 shares outstanding at December 31, 2005 799 799
Additional paid-in capital 967,258 964,555
Retained earnings 416,284 395,589
Accumulated other comprehensive loss (7,669) (8,906)
Treasury stock at cost (292,236) (167,113)
Unallocated common stock held by Employee Stock
Ownership Plan (71,274) (73,316)
Common Stock acquired by the Stock Award Plan -- (35,313)
Common Stock acquired by the Directors' Deferred Fee Plan (13,033) (13,224)
Deferred compensation - Directors' Deferred Fee Plan 13,033 13,224
-------------------------------- ----------------------------
6
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Total stockholders' equity 1,013,162 1,076,295
-------------------------------- ----------------------------
Total liabilities and stockholders'
equity $ 5,823,997 $ 6,052,374
================================ ============================
7
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Nine Months Ended September 30, 2006 and 2005 (Unaudited)
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ---------------------------------
2006 2005 2006 2005
-------------- --------------- -------------- ----------------
(Unaudited)
(Unaudited)
Interest income:
Real estate secured loans $ 40,188 $ 38,759 $ 119,917 $ 115,673
Commercial loans 7,382 5,691 20,318 15,927
Consumer loans 9,023 7,889 25,821 22,390
Investment securities 4,197 4,275 12,713 12,925
Securities available for sale 10,045 12,271 32,207 38,901
Other short-term investments 32 103 127 419
Federal funds -- 283 52 819
-------------- --------------- -------------- ----------------
Total interest income 70,867 69,271 211,155 207,054
-------------- --------------- -------------- ----------------
Interest expense:
Deposits 22,669 15,603 59,907 42,619
Borrowed funds 7,843 8,478 23,997 25,405
Subordinated debentures 436 379 1,255 1,083
-------------- --------------- -------------- ----------------
Total interest expense 30,948 24,460 85,159 69,107
-------------- --------------- -------------- ----------------
Net interest income 39,919 44,811 125,996 137,947
Provision for loan losses 100 100 1,220 500
-------------- --------------- -------------- ----------------
Net interest income after
provision for loan losses 39,819 44,711 124,776 137,447
-------------- --------------- -------------- ----------------
Non-interest income:
Fees 5,688 6,384 17,220 17,261
Bank-owned life insurance 1,329 1,286 3,858 3,838
Net gain (loss) on securities transactions 1,093 213 (47) 151
Other income (loss) 225 (63) 1,921 292
-------------- --------------- -------------- ----------------
Total non-interest income 8,335 7,820 22,952 21,542
-------------- --------------- -------------- ----------------
Non-interest expense:
Compensation and employee benefits 16,765 15,221 49,196 50,186
Net occupancy expense 4,462 4,842 13,732 14,523
Data processing expense 2,229 2,135 6,082 6,462
Amortization of intangibles 1,374 1,595 4,512 5,581
Advertising and promotion 797 1,086 3,063 3,290
Other operating expenses 4,462 5,151 13,652 14,593
-------------- --------------- -------------- ----------------
Total non-interest expense 30,089 30,030 90,237 94,635
-------------- --------------- -------------- ----------------
Income before income tax expense 18,065 22,501 57,491 64,354
Income tax expense 5,080 7,564 17,186 20,626
-------------- --------------- -------------- ----------------
Net income $ 12,985 $ 14,937 $ 40,305 $ 43,728
============== =============== ============== ================
Basic earnings per share $ 0.22 $ 0.23 $ 0.65 $ 0.66
Average basic shares outstanding 59,568,556 65,324,553 61,688,564 66,730,203
Diluted earnings per share $ 0.22 $ 0.23 $ 0.65 $ 0.65
Average diluted shares outstanding 60,296,944 66,081,331 62,424,568 67,487,825
8
PROVIDENT FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share data) (Unaudited)
At or for the Three At or for the Nine
Months Ended Months Ended
September 30, September 30,
-------------------------------------------------------------
2006 2005 2006 2005
---- ---- ---- ----
INCOME STATEMENT:
Net interest income $39,919 $44,811 $125,996 $137,947
Provision for loan losses 100 100 1,220 500
Non-interest income 8,335 7,820 22,952 21,542
Non-interest expense 30,089 30,030 90,237 94,635
Income before income tax expense 18,065 22,501 57,491 64,354
Net income 12,985 14,937 40,305 43,728
Basic earnings per share $0.22 $0.23 $0.65 $0.66
Diluted earnings per share $0.22 $0.23 $0.65 $0.65
Interest rate spread 2.73% 2.98% 2.87% 3.04%
Net interest margin 3.17% 3.31% 3.28% 3.35%
PROFITABILITY:
Annualized return on average assets 0.89% 0.96% 0.92% 0.93%
Annualized return on average equity 5.07% 5.42% 5.15% 5.28%
Annualized non-interest expense to average assets 2.06% 1.93% 2.05% 2.02%
Efficiency ratio (1) 62.36% 57.06% 60.58% 59.34%
ASSET QUALITY:
Non-accrual loans $6,373 $6,465
90+ and still accruing loans 429 --
Non-performing loans 6,802 6,465
Foreclosed assets 443 421
Non-performing loans to
total loans 0.18% 0.18%
Non-performing assets to
total assets 0.12% 0.11%
Allowance for loan losses $32,197 $32,621
Allowance for loan losses to
non-performing loans 473.35% 504.58%
Allowance for loan losses to
total loans 0.86% 0.89%
AVERAGE BALANCE SHEET DATA:
Assets $5,784,477 $6,188,773 $5,873,409 $6,266,827
Loans, net 3,715,945 3,659,764 3,708,593 3,658,180
Earning assets 5,030,293 5,402,747 5,120,163 5,481,589
Core deposits 2,327,983 2,566,915 2,365,358 2,581,520
Borrowings 837,252 1,103,611 893,110 1,131,788
Interest-bearing liabilities 4,258,833 4,565,435 4,313,041 4,635,726
Stockholders' equity 1,015,316 1,092,876 1,046,867 1,108,125
Average yield on interest-
earning assets 5.61% 5.11% 5.51% 5.03%
Average cost of interest-
bearing liabilities 2.88% 2.13% 2.64% 1.99%
9
Notes
(1) Efficiency Ratio Calculation
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2006 2005 2006 2005
---- ---- ---- ----
Net interest income $39,919 $44,811 $125,996 $137,947
Non-interest income 8,335 7,820 22,952 21,542
------ ------ ------- -------
Total income $48,254 $52,631 $148,948 $159,489
======= ======= ======== ========
Non-interest expense $30,089 $30,030 $90,237 $94,635
======= ======= ======= =======
Expense/Income: 62.36% 57.06% 60.58% 59.34%
====== ====== ====== ======
10
Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) September 30, 2006 June 30, 2006
Average Average Average Average
Balance Interest Yield Balance Interest Yield
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term Investments $ 2,412 $ 32 5.23% $ 3,123 $ 37 4.74%
Investment Securities (1) 405,461 4,197 4.14 408,362 4,218 4.13
Securities Available for Sale 872,400 9,533 4.37 959,237 10,310 4.30
Federal Home Loan Bank Stock 34,075 512 5.97 35,681 523 5.88
Net Loans (2)
Total Mortgage Loans 2,730,474 40,188 5.87 2,755,527 40,436 5.88
Total Commercial Loans 399,380 7,382 7.33 389,013 6,538 6.74
Total Consumer Loans 586,091 9,023 6.11 575,494 8,632 6.01
------------- ----------- --------------- ----------
Total Interest-Earning Assets 5,030,293 70,867 5.61 5,126,437 70,694 5.52
----------- --------- ---------- -----------
Non-Interest Earning Assets:
Cash and Due from Banks 78,993 79,196
Other Assets 675,191 674,776
------------- ---------------
Total Assets $ 5,784,477 $ 5,880,409
============= ===============
Interest-Bearing Liabilities:
Demand Deposits $ 564,279 2,147 1.51% $ 585,784 1,735 1.19%
Savings Deposits 1,307,747 4,997 1.52 1,318,684 4,212 1.28
Time Deposits 1,549,555 15,525 3.97 1,519,718 13,630 3.60
------------- ----------- --------------- ----------
Total Deposits 3,421,581 22,669 2.63 3,424,186 19,577 2.29
----------- ----------
Borrowed Funds:
Total Borrowings 837,252 8,279 3.92 883,387 8,423 3.82
------------- ----------- --------------- ----------
Total Interest-Bearing Liabilities 4,258,833 30,948 2.88 4,307,573 28,000 2.61
----------- --------- ---------- -----------
Non-Interest Bearing Liabilities 510,328 519,102
------------- ---------------
Total Liabilities 4,769,161 4,826,675
Stockholders' Equity 1,015,316 1,053,734
------------- ---------------
Total Liabilities & Stockholders' $ 5,784,477 $ 5,880,409
Equity
============= ===============
Net interest income $ 39,919 $ 42,694
=========== ==========
Net interest rate spread 2.73% 2.91%
==== ====
Net interest-earning assets $ 771,460 $ 818,864
============= ===============
Net interest margin (3) 3.17% 3.33%
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.18x 1.19X
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Average outstanding balance amounts shown are amortized cost.
(2) Average outstanding balances are net of the allowance for loan losses,
deferred loan fees and expenses, loan premiums and discounts and
include non-accrual loans.
(3) Annualized net interest income divided by average interest-earning assets.
11
The following table summarizes the net interest margin for the previous year,
inclusive.
9/30/06 6/30/2006 3/31/2006 12/31/2005 9/30/2005
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
-------- -------- -------- -------- --------
Interest-Earning Assets:
Securities 4.34% 4.29% 4.15% 4.02% 3.88%
Net Loans 6.06% 5.99% 5.84% 5.73% 5.69%
Total Interest-Earning Assets 5.61% 5.52% 5.35% 5.20% 5.11%
Interest-Bearing Liabilities
Total Deposits 2.63% 2.29% 2.10% 1.97% 1.79%
Total Borrowings 3.92% 3.82% 3.61% 3.37% 3.18%
Total Interest-Bearing Liabilities 2.88% 2.61% 2.43% 2.29% 2.13%
Interest Rate Spread 2.73% 2.91% 2.92% 2.91% 2.98%
Net Interest Margin 3.17% 3.33% 3.31% 3.27% 3.31%
Ratio of Interest-Earning Assets to
total Interest-Bearing Liabilities 1.18x 1.19x 1.19x 1.19x 1.18x
12
Average YTD Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) September 30, 2006 September 30, 2005
Average Average Average Average
Balance Interest Yield Balance Interest Yield
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term Investments $ 5,300 $ 179 4.51% $ 58,256 $ 1,238 2.84%
Investment Securities (1) 408,933 12,713 4.14 431,567 12,925 4.00
Securities Available for Sale 960,519 30,623 4.25 1,287,927 37,399 3.87
Federal Home Loan Bank Stock 36,818 1,584 5.75 45,659 1,502 4.40
Net Loans (2)
Total Mortgage Loans 2,748,999 119,917 5.82 2,768,364 115,673 5.57
Total Commercial Loans 386,464 20,318 7.03 358,960 15,927 5.85
Total Consumer Loans 573,130 25,821 6.02 530,856 22,390 5.64
------------- ------------ ---------------- ----------
Total Interest-Earning Assets 5,120,163 211,155 5.51 5,481,589 207,054 5.03
------------ --------- ---------- ------
Non-Interest Earning Assets:
Cash and Due from Banks 78,271 102,015
Other Assets 674,975 683,223
------------- ---------------
Total Assets $ 5,873,409 $ 6,266,827
============= ===============
Interest-Bearing Liabilities:
Demand Deposits $ 582,891 5,572 1.28% $ 611,943 4,139 0.90%
Savings Deposits 1,312,277 13,016 1.32 1,502,628 11,745 1.05
Time Deposits 1,515,763 41,319 3.64 1,389,367 26,735 2.57
------------- ------------ --------------- ----------
Total Deposits 3,419,931 59,907 2.34 3,503,938 42,619 1.63
------------ ----------
Borrowed Funds:
Total Borrowings 893,110 25,252 3.78 1,131,788 26,488 3.13
------------- ------------ --------------- ----------
Total Interest-Bearing Liabilities 4,313,041 85,159 2.64 4,635,726 69,107 1.99
------------ -------- ---------- -------
Non-Interest Bearing Liabilities 513,501 522,976
------------- ---------------
Total Liabilities 4,826,542 5,158,702
Stockholders' Equity 1,046,867 1,108,125
------------- ---------------
Total Liabilities & Stockholders'
Equity $ 5,873,409 $ 6,266,827
============= ===============
Net interest income $ 125,996 $ 137,947
============ ==========
Net interest rate spread 2.87% 3.04%
==== ====
Net interest-earning assets $ 807,122 $ 845,863
============= ===============
Net interest margin (3) 3.28% 3.35%
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.19x 1.18x
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Average outstanding balance amounts shown are amortized cost.
(2) Average outstanding balances are net of the allowance for loan losses,
deferred loan fees and expenses, loan premiums and discounts and include
non-accrual loans.
(3) Annualized net interest income divided by average interest-earning assets.
13
The following table summarizes the YTD net interest margin for the previous
three years, inclusive.
Nine Months Ended
----------------------------------------
9/30/06 9/30/05 9/30/04
------- ------- -------
Interest-Earning Assets:
Securities 4.26% 3.88% 3.51%
Net Loans 5.98% 5.60% 5.63%
Total Interest-Earning Assets 5.51% 5.03% 4.77%
Interest-Bearing Liabilities:
Total Deposits 2.34% 1.63% 1.32%
Total Borrowings 3.78% 3.13% 2.86%
Total Interest-Bearing Liabilities 2.64% 1.99% 1.69%
Interest Rate Spread 2.87% 3.04% 3.08%
Net Interest Margin 3.28% 3.35% 3.41%
Ratio of Interest-Earning Assets to
Total Interest-Bearing Liabilities 1.19x 1.18x 1.24x
14