Provident Financial Services, Inc. Announces Fourth Quarter
and Full-Year Earnings for 2006
JERSEY CITY, NJ, January 25, 2007 - Provident Financial Services, Inc.
(NYSE:PFS) (the "Company") reported basic and diluted earnings per share of
$0.23 and $0.22, respectively, for the quarter ended December 31, 2006, compared
to basic and diluted earnings per share of $0.23 for the quarter ended December
31, 2005. Basic and diluted earnings per share were $0.88 and $0.87,
respectively, for the year ended December 31, 2006, compared to basic and
diluted earnings per share of $0.89 and $0.88, respectively, for the year ended
December 31, 2005. Net income for the three months ended December 31, 2006
totaled $13.4 million, a decrease of $1.4 million, or 9.4%, compared to $14.8
million reported for the same period in 2005. Net income was $53.7 million for
the year ended December 31, 2006, a decrease of $4.8 million, or 8.2%, compared
to $58.5 million for the same period in 2005. The earnings and per share data
for the year ended December 31, 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 three months and year ended December 31, 2006 were further impacted
by a loss on the early extinguishment of debt, which resulted in an after-tax
charge of $403,000, or $0.01 per share. The earnings and per share data for the
year ended December 31, 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, "In the
fourth quarter, as throughout 2006, we continued to emphasize balance sheet and
expense management in response to a challenging interest rate environment. Our
ability to generate higher-yielding commercial business and commercial real
estate loans has worked in conjunction with our plan to reduce low-yielding
securities and high-cost borrowings." Pantozzi added, "Although our
determination to retain customer relationships by means of some competitive
deposit pricing put pressure on our net interest margin, we lessened the impact
of this through ongoing management of our overhead cost structure. Each major
category of non-interest expense was reduced in 2006 compared to 2005. We
believe these steps will position us well for future earnings growth."
Declaration of Quarterly Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.10 per
common share payable on February 28, 2007, to stockholders of record as of the
close of business on February 15, 2007.
Balance Sheet Summary
Total assets were $5.74 billion at December 31, 2006, compared to $6.05 billion
at December 31, 2005, as reductions in securities balances were used to fund
repayments of borrowings, common stock repurchases, deposit outflows and loan
growth.
Total investments decreased $321.8 million, or 20.9%, during the year ended
December 31, 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 and $8.9
million of equity securities as part of its ongoing interest rate risk
management process.
The Company's net loans increased $44.1 million, or 1.2%, to $3.75 billion at
December 31, 2006, from $3.71 billion at December 31, 2005, driven by loan
originations of $1.18 billion and loan purchases of $57.2 million. Net increases
of $135.4 million in commercial and multi-family mortgage loans, $31.1 million
in commercial loans and $36.3 million in consumer loans were partially offset by
decreases of $149.9 million in residential mortgage loans and $6.6 million in
construction loans. Commercial real estate, construction and commercial loans
represented 41.3% of the loan portfolio at December 31, 2006, compared to 37.5%
at December 31, 2005.
At December 31, 2006, the Company's unfunded loan pipeline totaled $772.6
million, including $274.0 million in construction loan commitments, $195.0
million in commercial loan commitments and $110.6 million in commercial mortgage
commitments. This compared with an unfunded loan pipeline of $805.9 million at
September 30, 2006.
Borrowed funds decreased $129.1 million, or 13.3%, during the year ended
December 31, 2006, as a result of maturities, calls and paydowns on amortizing
obligations. In addition, subordinated debentures that had an outstanding
balance of $26.4 million at December 31, 2005 were redeemed in December 2006.
1
Total deposits decreased $95.0 million, or 2.4%, during the year ended December
31, 2006. Total deposits were $3.83 billion at December 31, 2006, with core
deposits, consisting of savings and demand deposit accounts, representing 59.2%
of total deposits.
Common stock repurchases for the three months and year ended December 31, 2006,
totaled 338,000 shares at an average cost of $18.15 per share, and 5.5 million
shares at an average cost of $18.20 per share, respectively. At December 31,
2006, book value per share and tangible book value per share were $16.12 and
$9.32, respectively.
Results of Operations
Net Interest Margin
The net interest margin decreased 9 basis points to 3.08% for the quarter ended
December 31, 2006, from 3.17% for the quarter ended September 30, 2006. The net
interest margin for the quarter ended December 31, 2006 decreased 19 basis
points compared with the net interest margin of 3.27% for the quarter ended
December 31, 2005. The weighted average rate for interest-earning assets was
5.66% for the three months ended December 31, 2006, compared with 5.61% for the
trailing quarter and 5.20% for the three months ended December 31, 2005. The
weighted average rate for interest-bearing liabilities was 3.03% for the quarter
ended December 31, 2006, compared with 2.88% for the trailing quarter and 2.29%
for the fourth quarter of 2005.
For the year ended December 31, 2006, the net interest margin was 3.23%. This
was a decrease of 11 basis points compared with the net interest margin of 3.34%
for the year ended December 31, 2005. The weighted average rate for
interest-earning assets was 5.54% for the year ended December 31, 2006, compared
with 5.08% for the year ended December 31, 2005. The weighted average rate for
interest-bearing liabilities was 2.74% for the year ended December 31, 2006,
compared with 2.07% 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 months and
year ended December 31, 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 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 $9.0 million for the quarter ended December 31,
2006, an increase of $1.3 million, or 17.2%, compared to the same period in
2005. Increases in net gains on securities sales of $1.1 million and fee income
of $378,000 were partially offset by a $151,000 decrease in other income for the
quarter ended December 31, 2006, compared with the same period in 2005. During
the fourth quarter of 2006, the Company sold $4.5 million in equity securities,
resulting in a gain of $1.2 million. The proceeds were used to repay borrowings
as the Company continued to de-leverage the balance sheet and protect the net
interest margin. The increase in fee income was primarily attributable to an
increase in commercial loan prepayment fees. The decrease in other income was
primarily attributable to a decrease in gains on the call of Federal Home Loan
Bank advances.
For the year ended December 31, 2006, non-interest income totaled $32.0 million,
an increase of $2.7 million, or 9.3%, compared to 2005. Other income increased
$1.5 million for the year ended December 31, 2006, compared with 2005, primarily
due to gains recognized on the call of FHLB advances. In addition, gains on
securities sales increased $862,000 and fee income increased $337,000 for the
year ended December 31, 2006, compared with 2005, primarily due to increased
deposit fee income.
Non-Interest Expense
For the three months ended December 31, 2006, non-interest expense decreased
$1.5 million, or 5.1%, to $28.0 million, compared to $29.5 million for the three
months ended December 31, 2005. Net occupancy expense decreased $611,000 for the
quarter ended December 31, 2006, compared with the same period in 2005,
primarily as a result of reductions in equipment maintenance costs and
depreciation expense. Compensation and employee benefits expense decreased
$515,000, primarily due to decreases in medical benefit costs as a result of
changes in plan design, benefits and participant contributions. Advertising
expense decreased $231,000 for the quarter ended December 31, 2006, compared
with the same period in 2005. Amortization of intangibles decreased $203,000 for
the quarter ended December 31, 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. Other operating expenses increased $112,000 for the
quarter ended December 31, 2006, compared with the same period in 2005, as
2
reductions in a number of expense categories were more than offset by a $682,000
loss on the early extinguishment of subordinated debentures recognized in the
fourth quarter of 2006. The subordinated debentures were called at par with the
loss resulting from the recognition of unamortized bond issuance costs. The
debentures were scheduled to reprice to above market rates.
For the year ended December 31, 2006, non-interest expense decreased $5.9
million, or 4.8%, to $118.3 million, compared to $124.2 million for the same
period in 2005. Compensation and employee benefits expense decreased $1.5
million for the year ended December 31, 2006, compared with 2005, as a result of
reductions in medical benefit costs due to changes in plan design, benefits and
participant contributions, as well as 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 877 full-time equivalent employees at
December 31, 2006, compared to 926 full-time equivalent employees at January 1,
2005. Net occupancy expense decreased $1.4 million for the year ended December
31, 2006, compared with 2005, primarily as a result of reductions in equipment
maintenance costs and depreciation expense. Amortization of intangibles
decreased $1.3 million for the year ended December 31, 2006, compared with 2005,
as a result of scheduled reductions in the amortization of core deposit
intangibles. Other non-interest expense decreased $829,000 for the year ended
December 31, 2006, compared with 2005, despite a $682,000 loss on the early
extinguishment of subordinated debentures, due to reductions in a variety of
expense categories including ATM and debit card maintenance costs, insurance,
litigation and telephone expense. Advertising and promotions expense decreased
$458,000 for the year ended December 31, 2006, compared with 2005. Data
processing expense decreased $439,000 for the year ended December 31, 2006,
compared with 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 1.93% for the quarters ended December 31, 2006 and 2005. For the year ended
December 31, 2006, non-interest expense as a percentage of average assets was
2.02%, compared with 2.00% for 2005. The efficiency ratio (non-interest expense
divided by the sum of net interest income and non-interest income) was 58.98%
for the quarter ended December 31, 2006, compared with 57.72% for the same
period in 2005. For the year ended December 31, 2006, the efficiency ratio was
60.20%, compared with 58.94% for 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
December 31, 2006 were $7.5 million, or 0.20% of total loans, compared to $6.0
million, or 0.16% of total loans at December 31, 2005. At December 31, 2006 and
2005, the Company's allowance for loan losses was 0.86% of total loans. The
Company recorded provisions for loan losses of $100,000 and $1.3 million for the
three months and year ended December 31, 2006, respectively, compared with
provisions of $100,000 and $600,000 for the three months and year ended December
31, 2005, respectively. For the three months and year ended December 31, 2006,
the Company had net recoveries of $137,000 and net charge-offs of $866,000,
respectively, compared with net charge-offs of $741,000 and $2.4 million for the
same periods in 2005. The increase in the loan loss provision for the year ended
December 31, 2006, compared with 2005, was primarily attributable to growth in
the loan portfolio and a shift in composition from retail to commercial credits.
Income Tax Expense
For the three months and year ended December 31, 2006, the Company's income tax
expense was $6.0 million and $23.2 million, respectively. This compares with
$6.8 million and $27.4 million for the same periods in 2005. The decreases in
income tax expense are primarily attributable to reduced income before income
taxes. For the three months and year ended December 31, 2006, the Company's
effective tax rates were 31.0% and 30.2%, respectively, compared with 31.4% and
31.9% for the three and twelve months ended December 31, 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
stockholders in a combination of stock and cash. The transaction is subject to
3
regulatory approvals and First Morris' stockholder approval. The merger will add
nine branches to The Provident Bank, with deposits of $528.5 million as of
September 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 75 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 January 25, 2007 regarding highlights of the
Company's fourth quarter and full year 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.
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.
4
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Condition
December 31, 2006 (Unaudited) and December 31, 2005
(Dollars in Thousands)
Assets December 31, 2006 December 31, 2005
--------------------------------- ----------------------------
Cash and due from banks $ 89,390 $ 107,353
Short-term investments 2,667 9,915
--------------------------------- ----------------------------
Total cash and cash equivalents 92,057 117,268
--------------------------------- ----------------------------
Investment securities (market value of $388,380
at December 31, 2006 (unaudited) and $407,972
at December 31, 2005) 389,656 410,914
Securities available for sale, at fair value 790,894 1,082,957
Federal Home Loan Bank stock 35,335 43,794
Loans 3,783,664 3,739,122
Less allowance for loan losses 32,434 31,980
--------------------------------- ----------------------------
Net loans 3,751,230 3,707,142
--------------------------------- ----------------------------
Foreclosed assets, net 528 670
Banking premises and equipment, net 59,811 60,949
Accrued interest receivable 21,705 23,155
Intangible assets 429,718 435,838
Bank-owned life insurance 116,271 111,075
Other assets 55,742 58,612
--------------------------------- ----------------------------
Total assets $ 5,742,947 $ 6,052,374
================================= ============================
Liabilities and Stockholders' Equity
Deposits:
Demand deposits $ 1,005,679 $ 1,109,507
Savings deposits 1,261,282 1,363,997
Certificates of deposit of $100,000 or more 393,834 304,229
Other time deposits 1,165,668 1,143,725
--------------------------------- ----------------------------
Total deposits 3,826,463 3,921,458
Mortgage escrow deposits 17,616 18,121
Borrowed funds 840,990 970,108
Subordinated debentures -- 26,444
Other
liabilities 38,698 39,948
--------------------------------- ----------------------------
Total liabilities 4,723,767 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 63,233,548 shares outstanding at
December 31, 2006, and 79,879,017 shares issued and
68,661,880 shares outstanding at December 31, 2005 799 799
Additional paid-in capital 968,064 964,555
Retained earnings 424,958 395,589
Accumulated other comprehensive loss (7,125) (8,906)
Treasury stock at cost (297,036) (167,113)
Unallocated common stock held by Employee Stock
Ownership Plan (70,480) (73,316)
Common Stock acquired by the Stock Award Plan -- (35,313)
Common Stock acquired by the Directors' Deferred Fee Plan (13,010) (13,224)
Deferred compensation - Directors' Deferred Fee Plan 13,010 13,224
-------------------------------- ----------------------------
5
Total stockholders' equity 1,019,180 1,076,295
-------------------------------- ----------------------------
Total liabilities and stockholders'
equity $ 5,742,947 $ 6,052,374
================================ ============================
6
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three Months and Year Ended December 31, 2006 (Unaudited) and 2005
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Year Ended
December 31, December 31,
------------------------------ ---------------------------------
2006 2005 2006 2005
-------------- --------------- -------------- ----------------
(Unaudited) (Unaudited)
Interest income:
Real estate secured loans $ 40,275 38,659 160,192 154,332
Commercial loans 7,522 5,996 27,840 21,923
Consumer loans 9,178 8,133 34,999 30,523
Investment securities 4,115 4,260 16,828 17,185
Securities available for sale 9,669 11,797 41,876 50,698
Other short-term investments 34 94 161 513
Federal funds 191 469 243 1,288
-------------- --------------- -------------- ----------------
-------------- ----------------
Total interest income 70,984 69,408 282,139 276,462
-------------- --------------- -------------- ----------------
Interest expense:
Deposits 24,284 17,155 84,191 59,774
Borrowed funds 7,887 8,354 31,884 33,759
Subordinated debentures 281 391 1,536 1,474
-------------- --------------- -------------- ----------------
-------------- ----------------
Total interest expense 32,452 25,900 117,611 95,007
-------------- --------------- -------------- ----------------
-------------- ----------------
Net interest income 38,532 43,508 164,528 181,455
Provision for loan losses 100 100 1,320 600
-------------- --------------- -------------- ----------------
Net interest income after
provision for loan losses 38,432 43,408 163,208 180,855
-------------- --------------- -------------- ----------------
-------------- ----------------
Non-interest income:
Fees 6,085 5,707 23,305 22,968
Bank-owned life insurance 1,338 1,305 5,196 5,143
Net gain on securities transactions 1,217 157 1,170 308
Other income 359 510 2,280 802
-------------- --------------- -------------- ----------------
-------------- ----------------
Total non-interest income 8,999 7,679 31,951 29,221
-------------- --------------- -------------- ----------------
Non-interest expense:
Compensation and employee benefits 14,099 14,614 63,295 64,800
Net occupancy expense 4,322 4,933 18,054 19,456
Data processing expense 2,243 2,302 8,325 8,764
Amortization of intangibles 1,376 1,579 5,888 7,160
Advertising and promotion 756 987 3,819 4,277
Other operating expenses 5,240 5,128 18,892 19,721
-------------- --------------- -------------- ----------------
Total non-interest expense 28,036 29,543 118,273 124,178
-------------- --------------- -------------- ----------------
-------------- ----------------
Income before income tax expense 19,395 21,544 76,886 85,898
Income tax expense 6,015 6,773 23,201 27,399
-------------- --------------- -------------- ----------------
-------------- ----------------
Net income $ 13,380 14,771 53,685 $58,499
============== =============== ============== ================
Basic earnings per share $ 0.23 $0.23 0.88 $ 0.89
Average basic shares outstanding 58,831,921 64,282,046 60,968,533 66,083,173
Diluted earnings per share $ 0.22 $0.23 0.87 $ 0.88
Average diluted shares outstanding 59,565,397 65,022,636 61,703,906 66,836,536
7
PROVIDENT FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share data) (Unaudited)
At or for the Three At or for the Year
Months Ended Ended
December 31, December 31,
-------------------------------------------------------------
2006 2005 2006 2005
---- ---- ---- ----
INCOME STATEMENT:
Net interest income $38,532 $43,508 $164,528 $181,455
Provision for loan losses 100 100 1,320 600
Non-interest income 8,999 7,679 31,951 29,221
Non-interest expense 28,036 29,543 118,273 124,178
Income before income tax expense 19,395 21,544 76,886 85,898
Net income 13,380 14,771 53,685 58,499
Basic earnings per share $0.23 $0.23 $0.88 $0.89
Diluted earnings per share $0.22 $0.23 $0.87 $0.88
Interest rate spread 2.63% 2.91% 2.80% 3.01%
Net interest margin 3.08% 3.27% 3.23% 3.34%
PROFITABILITY:
Annualized return on average assets 0.92% 0.96% 0.92% 0.94%
Annualized return on average equity 5.23% 5.45% 5.17% 5.32%
Annualized non-interest expense to average assets 1.93% 1.93% 2.02% 2.00%
Efficiency ratio (1) 58.98% 57.72% 60.20% 58.94%
ASSET QUALITY:
Non-accrual loans 7,275 6,005
90+ and still accruing loans 274 --
Non-performing loans 7,549 6,005
Foreclosed assets 528 670
Non-performing loans to
total loans 0.20% 0.16%
Non-performing assets to
total assets 0.14% 0.11%
Allowance for loan losses $32,434 $31,980
Allowance for loan losses to
non-performing loans 429.65% 532.56%
Allowance for loan losses to
total loans 0.86% 0.86%
AVERAGE BALANCE SHEET DATA:
Assets $5,754,978 $6,084,665 $5,843,558 $6,220,912
Loans, net 3,731,584 3,661,156 3,714,388 3,658,930
Earning assets 4,995,610 5,315,713 5,088,769 5,439,779
Core deposits 2,304,899 2,498,879 2,350,118 2,560,690
Borrowings 821,304 1,029,271 875,011 1,105,948
Interest-bearing liabilities 4,245,809 4,484,223 4,296,095 4,597,539
Stockholders' equity 1,014,160 1,075,263 1,038,623 1,099,842
Average yield on interest-
earning assets 5.66% 5.20% 5.54% 5.08%
Average cost of interest-
bearing liabilities 3.03% 2.29% 2.74% 2.07%
8
Notes
- -----
(1) Efficiency Ratio Calculation
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2006 2005 2006 2005
---- ---- ---- ----
Net interest income $38,532 $43,508 $164,528 $181,455
Non-interest income 8,999 7,679 31,951 29,221
----- ----- ------ ------
Total income $47,531 $51,187 $196,479 $210,676
======= ======= ======== ========
Non-interest expense $28,036 $29,543 $118,273 $124,178
======= ======= ======== ========
Expense/Income: 58.98% 57.72% 60.20% 58.94%
====== ====== ====== ======
9
Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) December 31, 2006 September 30, 2006
Average Average Average Average
Balance Interest Yield Balance Interest Yield
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term Investments $ 14,643 $ 225 6.10 % $ 2,412 $ 32 5.23 %
Investment Securities (1) 396,110 4,115 4.16 405,461 4,197 4.14
Securities Available for Sale 819,641 9,135 4.46 872,400 9,533 4.37
Federal Home Loan Bank Stock 33,632 534 6.30 34,075 512 5.97
Net Loans (2)
Total Mortgage Loans 2,737,212 40,275 5.87 2,730,474 40,188 5.87
Total Commercial Loans 403,591 7,522 7.39 399,380 7,382 7.33
Total Consumer Loans 590,781 9,178 6.17 586,091 9,023 6.11
------------- ---------------
Total Interest-Earning Assets 4,995,610 70,984 5.66 5,030,293 70,867 5.61
----------- -------------- ---------- -----------
Non-Interest Earning Assets:
Cash and Due from Banks 81,024 78,993
Other Assets 678,344 675,191
------------- ---------------
Total Assets $ 5,754,978 $ 5,784,477
============= ===============
============= ===============
Interest-Bearing Liabilities:
Demand Deposits $ 568,906 2,448 1.71 % $ 564,279 2,147 1.51 %
Savings Deposits 1,292,394 5,182 1.59 1,307,747 4,997 1.52
Time Deposits 1,563,205 16,654 4.23 1,549,555 15,525 3.97
------------- ----------- --------------- ----------
Total Deposits 3,424,505 24,284 2.81 3,421,581 22,669 2.63
----------- ----------
Borrowed Funds:
Total Borrowings 821,304 8,168 3.95 837,252 8,279 3.92
------------- ----------- --------------- ----------
Total Interest-Bearing Liabilities 4,245,809 32,452 3.03 4,258,833 30,948 2.88
----------- -------------- ---------- -----------
Non-Interest Bearing Liabilities 495,009 510,328
------------- ---------------
Total Liabilities 4,740,818 4,769,161
Stockholders' Equity 1,014,160 1,015,316
------------- ---------------
Total Liabilities & $ 5,754,978 $ 5,784,477
Stockholders' Equity
============= ===============
Net interest income $ 38,532 $ 39,919
=========== ==========
Net interest rate spread 2.63 % 2.73 %
==== ====
Net interest-earning assets $ 749,801 $ 771,460
============= ===============
Net interest margin (3) 3.08 % 3.17 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.18 x 1.18 x
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Average outstanding balance amounts shown are amortized cost.
(2) Average outstanding balances are net of the allowance for loan losses,
deferred loan fees and expenses, loan premiums and discounts and include
non-accrual loans.
(3) Annualized net interest income divided by average interest-earning assets.
10
The following table summarizes the net interest margin for the previous year,
inclusive.
12/31/06 9/30/06 6/30/2006 3/31/2006 12/31/2005
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr.
-------- -------- -------- -------- --------
Interest-Earning Assets:
Securities 4.43% 4.34% 4.29% 4.15% 4.02%
Net Loans 6.08% 6.06% 5.99% 5.84% 5.73%
Total Interest-Earning Assets 5.66% 5.61% 5.52% 5.35% 5.20%
Interest-Bearing Liabilities
Total Deposits 2.81% 2.63% 2.29% 2.10% 1.97%
Total Borrowings 3.95% 3.92% 3.82% 3.61% 3.37%
Total Interest-Bearing Liabilities 3.03% 2.88% 2.61% 2.43% 2.29%
Interest Rate Spread 2.63% 2.73% 2.91% 2.92% 2.91%
Net Interest Margin 3.08% 3.17% 3.33% 3.31% 3.27%
Ratio of Interest-Earning Assets to
total Interest-Bearing Liabilities 1.18x 1.18x 1.19x 1.19x 1.19x
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Average YTD Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) December 31, 2006 December 31, 2005
Average Average Average Average
Balance Interest Yield Balance Interest Yield
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term Investments $ 7,655 $ 404 5.27 % $ 58,156 $ 1,801 3.10 %
Investment Securities (1) 405,701 16,828 4.15 428,461 17,185 4.01
Securities Available for Sale 925,010 39,758 4.30 1,249,419 48,607 3.89
Federal Home Loan Bank Stock 36,015 2,118 5.88 44,813 2,091 4.67
Net Loans (2)
Total Mortgage Loans 2,746,028 160,192 5.83 2,763,222 154,332 5.59
Total Commercial Loans 390,781 27,840 7.12 360,166 21,923 6.09
Total Consumer Loans 577,579 34,999 6.06 535,542 30,523 5.70
------------- ------------ --------------- ----------
Total Interest-Earning Assets 5,088,769 282,139 5.54 5,439,779 276,462 5.08
------------ ----------- ----------- ------
Non-Interest Earning Assets:
Cash and Due from Banks 78,965 98,854
Other Assets 675,824 682,279
------------- ---------------
Total Assets $ 5,843,558 $ 6,220,912
============= ===============
Interest-Bearing Liabilities:
Demand Deposits $ 579,366 8,020 1.38 % $ 618,280 6,223 1.01 %
Savings Deposits 1,313,997 18,198 1.38 1,474,053 15,657 1.06
Time Deposits 1,527,721 57,973 3.79 1,399,258 37,894 2.71
------------- ------------ --------------- ----------
Total Deposits 3,421,084 84,191 2.46 3,491,591 59,774 1.71
------------ ----------
Borrowed Funds:
Total Borrowings 875,011 33,420 3.82 1,105,948 35,233 3.19
------------- ------------ --------------- ----------
Total Interest-Bearing Liabilities 4,296,095 117,611 2.74 4,597,539 95,007 2.07
------------ ------------ ---------- -----------
Non-Interest Bearing Liabilities 508,840 523,531
------------- ---------------
Total Liabilities 4,804,935 5,121,070
Stockholders' Equity 1,038,623 1,099,842
------------- ---------------
Total Liabilities & $ 5,843,558 $ 6,220,912
Stockholders' Equity
============= ===============
Net interest income $ 164,528 $ 181,455
============ ==========
Net interest rate spread 2.80 % 3.01 %
==== ====
Net interest-earning assets $ 792,674 $ 842,240
============= ===============
Net interest margin (3) 3.23 % 3.34 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.18 x 1.18 x
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Average outstanding balance amounts shown are amortized cost.
(2) Average outstanding balances are net of the allowance for loan losses,
deferred loan fees and expenses, loan premiums and discounts and include
non-accrual loans.
(3) Annualized net interest income divided by average interest-earning assets.
12
The following table summarizes the YTD net interest margin for the previous
three years, inclusive.
Year Ended
----------------------------------------
12/31/06 12/31/05 12/31/04
-------- -------- --------
Interest-Earning Assets:
Securities 4.30% 3.91% 3.58%
Net Loans 6.00% 5.65% 5.60%
Total Interest-Earning Assets 5.54% 5.08% 4.81%
Interest-Bearing Liabilities:
Total Deposits 2.46% 1.71% 1.34%
Total Borrowings 3.82% 3.19% 2.89%
Total Interest-Bearing Liabilities 2.74% 2.07% 1.72%
Interest Rate Spread 2.80% 3.01% 3.09%
Net Interest Margin 3.23% 3.34% 3.40%
Ratio of Interest-Earning Assets to
Total Interest-Bearing Liabilities 1.18x 1.18x 1.22x
13