Provident Financial Services, Inc. Announces Quarterly Earnings,
Sixth Stock Repurchase Program and
Declares Increased Quarterly Cash Dividend
JERSEY CITY, NJ, July 26, 2007 - Provident Financial Services, Inc. (NYSE:PFS)
(the "Company") reported basic and diluted earnings per share of $0.22 for the
quarter ended June 30, 2007, compared to basic and diluted earnings per share of
$0.22, for the quarter ended June 30, 2006. Basic and diluted earnings per share
were $0.41 for the six months ended June 30, 2007, compared to basic and diluted
earnings per share of $0.44 and $0.43, respectively, for the six months ended
June 30, 2006. Net income for the three months ended June 30, 2007 totaled $13.6
million, an increase of $99,000, or 0.7%, compared to $13.5 million reported for
the same period in 2006. Net income was $24.4 million for the six months ended
June 30, 2007, a decrease of $2.9 million, or 10.6%, compared to $27.3 million
for the same period in 2006. Earnings and per share data for 2007 reflect the
impact of a settlement of an insurance claim resulting in a recovery of $3.5
million, net of tax, related to a fraud loss that occurred and was recognized in
2002, and the Company's acquisition of First Morris Bank and Trust ("First
Morris") from April 1, 2007, the date the acquisition was completed. Second
quarter 2007 earnings were impacted by one-time expenses of $246,000, net of
tax, related to the merger and integration of First Morris' operations.
Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "In the past
quarter we successfully integrated First Morris' operations, increased our loan
pipeline and maintained our net interest margin in line with the trailing
quarter. These results fit well with our strategic priorities of profitable
franchise expansion, commercial loan growth and prudent balance sheet
management." Pantozzi added, "In furtherance of our commitment to provide
long-term stockholder value, I am pleased to report the Board's declaration of a
ten percent increase in our quarterly cash dividend and authorization of our
sixth stock repurchase program."
Increase in Quarterly Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.11 per
common share, an increase of 10.0% from the prior quarter's cash dividend of
$0.10 per share. The dividend is payable on August 31, 2007 to stockholders of
record as of the close of business on August 15, 2007. Since declaring its first
cash dividend in the second quarter of 2003, the Company has increased the
quarterly cash dividend seven times for a total of 175%.
Authorization of Sixth Stock Repurchase Program
The Company's Board of Directors authorized the Company's sixth stock repurchase
program. Under the new authorization, the Company may repurchase 5% of the
amount of shares of common stock currently outstanding, or approximately 3.2
million shares. Repurchases will be made from time to time and will be
effectuated through open market purchases, unsolicited negotiated transactions,
or in such other manner deemed appropriate by management. Completion of the
repurchase program will not be limited to a specific time period. The Company's
repurchase activities will take into account SEC safe harbor rules and guidance
for issuer repurchases.
Balance Sheet Summary
Total assets increased to $6.15 billion at June 30, 2007, compared to $5.74
billion at December 31, 2006, due primarily to the acquisition of First Morris.
The fair value of assets acquired in the First Morris transaction totaled $554.7
million at April 1, 2007. The fair value of deposits and borrowings assumed
totaled $509.0 million and $12.8 million, respectively, at April 1, 2007.
Total investments decreased $41.7 million, or 3.4%, during the six months ended
June 30, 2007. The decrease was primarily attributable to paydowns on
mortgage-backed securities and maturities of debt securities. In addition, the
Company sold $40.8 million in mortgage-backed and debt securities acquired from
First Morris.
The Company's net loans increased $322.5 million, or 8.6%, to $4.07 billion at
June 30, 2007, from $3.75 billion at December 31, 2006, primarily due to the
acquisition of $335.7 million in loans from First Morris. For the six months
ended June 30, 2007, loan originations of $565.3 million and loan purchases of
$17.1 million were offset by repayments of $573.1 million. Net increases of
$127.1 million in commercial loans, $106.4 million in commercial mortgage and
multi-family loans, $54.9 million in consumer loans and $51.3 million in
residential mortgage loans were partially offset by a $12.3 million decrease in
construction loans. Commercial real estate, construction and commercial loans
represented 43.4% of the loan portfolio at June 30, 2007, compared to 41.3% at
December 31, 2006.
<Page>
At June 30, 2007, the Company's unfunded loan pipeline totaled $816.5 million,
including $257.4 million in construction loan commitments, $209.3 million in
commercial loan commitments and $102.5 million in commercial mortgage
commitments. The unfunded loan pipeline at March 31, 2007 was $705.5 million.
Intangible assets increased $93.4 million, to $523.1 million at June 30, 2007,
from $429.7 million at December 31, 2006, as a result of the goodwill and core
deposit intangible recorded in connection with the Company's acquisition of
First Morris.
Borrowed funds decreased $127.7 million, or 15.2%, during the six months ended
June 30, 2007, as a net result of maturities, calls and paydowns on amortizing
advances.
Total deposits increased $513.1 million, or 13.4%, during the six months ended
June 30, 2007 including $509.0 million in deposits assumed through the First
Morris acquisition. Total deposits were $4.34 billion at June 30, 2007, with
core deposits, consisting of savings and demand deposit accounts, representing
60.0% of total deposits.
Common stock repurchases for the three and six months ended June 30, 2007,
totaled 2.5 million shares at an average cost of $16.86 per share and 3.2
million shares at an average cost of $17.18 per share, respectively. At June 30,
2007, the Company's fifth stock repurchase plan was completed. At June 30, 2007,
book value per share and tangible book value per share were $16.41 and $8.16,
respectively, compared with $16.12 and $9.32, respectively, at December 31,
2006.
Results of Operations
Net Interest Margin
The net interest margin was 3.02% for the quarters ended June 30, 2007 and March
31, 2007. The net interest margin for the quarter ended June 30, 2007 decreased
31 basis points compared with the net interest margin of 3.33% for the quarter
ended June 30, 2006. The weighted average rate for interest-earning assets was
5.81% for the three months ended June 30, 2007, compared with 5.72% for the
trailing quarter and 5.52% for the three months ended June 30, 2006. The
weighted average rate for interest-bearing liabilities was 3.23% for the quarter
ended June 30, 2007, compared with 3.18% for the trailing quarter and 2.61% for
the second quarter of 2006.
For the six months ended June 30, 2007, the net interest margin was 3.02%. This
was a decrease of 31 basis points compared with the net interest margin of 3.33%
for the six months ended June 30, 2006. The weighted average rate for
interest-earning assets was 5.76% for the six months ended June 30, 2007,
compared with 5.45% for the six months ended June 30, 2006. The weighted average
rate for interest-bearing liabilities was 3.21% for the six months ended June
30, 2007, compared with 2.52% for the same period in 2006.
The increased rates on interest-earning assets and interest-bearing liabilities
reflect the repricing to higher market interest rates experienced throughout
2006 and the first half of 2007. The compression in the net interest margin for
the six months ended June 30, 2007 is reflective of the prolonged flat or
inverted yield curve. Since the Board of Governors of the Federal Reserve began
tightening interest rates in June 2004, the Federal funds borrowing rate has
been increased 17 times, for a total of 425 basis points. This has had an
unfavorable impact on the repricing of deposits, which are priced based on 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 pressure as competitive deposit
pricing has increased funding costs faster than earning asset yields have grown.
The average cost of deposits for the three months ended June 30, 2007 was 3.07%,
compared with 2.92% for the trailing quarter and 2.29% for the same period last
year. Wholesale borrowing costs decreased $373,000 for the three months ended
June 30, 2007, and increased $110,000 for the six months ended June 30, 2007,
compared with the same periods last year, as average borrowings decreased $134.0
million and $136.0 million, respectively. The average cost of borrowings for the
three months ended June 30, 2007 was 4.09%, compared with 4.26% for the trailing
quarter and 3.82% for the same period last year.
Non-Interest Income
Non-interest income totaled $14.2 million for the quarter ended June 30, 2007,
an increase of $6.9 million, or 95.0%, compared to the same period in 2006. The
Company recorded a one-time gain on an insurance settlement of $5.9 million,
before taxes, related to the resolution of previously disclosed litigation. Net
losses on securities transactions decreased $1.1 million. The Company sold $40.8
million in securities acquired from First Morris in the quarter ended June 30,
2007 and sold $35.3 million in lower-yielding mortgage-backed securities in the
second quarter of 2006. Other income decreased $1.2 million or 84.3% for the
quarter ended June 30, 2007, as a result of gains recognized in the quarter
ended June 30, 2006, on the call of FHLB advances resulting from the accelerated
accretion of purchase accounting adjustments.
2
<Page>
For the six months ended June 30, 2007, non-interest income totaled $21.9
million, an increase of $7.3 million or 50.0% compared to the same period in
2006. The Company recorded a one-time gain on an insurance settlement of $5.9
million, before taxes, related to the resolution of previously disclosed
litigation. Other income decreased $503,000 or 29.7% for the six months ended
June 30, 2007, compared to the same period in 2006, due primarily to gains
recorded on the call of FHLB advances in the same period in 2006.
Non-Interest Expense
For the three months ended June 30, 2007, non-interest expense increased $4.2
million, or 14.0% to $34.1 million, compared to $29.9 million for the three
months ended June 30, 2006. For the three months ended June 30, 2007,
compensation and benefits expense increased $1.7 million compared with the same
period in 2006, primarily as a result of the addition of branch and lending
staff from First Morris and the addition of small business and middle market
relationship managers to support the Company's business lending and deposit
gathering initiatives. Data processing expense increased $641,000 or 32.6%, due
primarily to $255,000 in expenses recorded in connection with the acquisition of
First Morris and the processing of customer accounts acquired as a result of the
merger. Amortization of intangibles increased $299,000 for the quarter ended
June 30, 2007 compared with the same period in 2006, primarily as a result of
the amortization of the core deposit intangible recorded in connection with the
First Morris acquisition. Additional increases in occupancy expense of $515,000
and advertising expense of $240,000 for the quarter ended June 30, 2007,
compared with the same period in 2006, are also due primarily to the acquisition
and integration of First Morris' operations. Other operating expenses increased
$799,000 or 17.2% due primarily to increases in printing, stationary and debit
card expenses related to the increase in customer accounts acquired from First
Morris and to an increase in miscellaneous losses.
For the six months ended June 30, 2007, non-interest expense increased $3.3
million or 5.5% to $63.5 million compared to $60.1 million for the six months
ended June 30, 2006. Compensation and benefits expense increased $1.5 million or
4.7% due primarily to additional branch and lending staff from First Morris and
the addition of small business and middle market relationship managers. Data
processing expense increased $811,000 or 21.0% due primarily to merger related
charges recorded in connection with the acquisition of First Morris. Occupancy
expense increased $243,000 for the six months ended June 30, 2007 compared with
the same period in 2006, primarily as a result of nine additional branch
locations obtained through the First Morris acquisition. Other operating
expenses increased $669,000 for the six months ended June 30, 2007 compared with
the same period in 2006, due primarily to an increase of $187,000 in check and
printing expense primarily related to customer communications associated with
the First Morris integration, $155,000 in charges related to miscellaneous
losses and an increase of $126,400 in loan collection expense.
Asset Quality
Total non-performing loans at June 30, 2007 were $11.1 million, or 0.27% of
total loans, compared with $7.5 million, or 0.20% of total loans at December 31,
2006, and $5.7 million, or 0.15% of total loans at June 30, 2006. At June 30,
2007 the Company's allowance for loan losses was 0.89% of total loans, compared
with 0.86% of total loans at December 31, 2006 and June 30, 2006. The Company
recorded provisions for loan losses of $1.2 million and $1.5 million for the
three and six months ended June 30, 2007, respectively, compared with provisions
of $565,000 and $1.1 million for the three and six months ended June 30, 2006.
For the three and six months ended June 30, 2007, the Company had net recoveries
of $60,500 and $5,400, respectively, compared with net charge-offs of $214,000
and $845,000 for the same periods in 2006. The allowance for loans losses
increased $4.3 million to $36.8 million at June 30, 2007, from $32.4 million at
December 31, 2006. The increase in the allowance is attributable to the addition
of First Morris' loan portfolio, the related $2.8 million of allowance for loan
losses and the current provision of $1.5 million. The increase in the loan loss
provision for the three months ended June 30, 2007, compared with the same
period in 2006, was primarily attributable to an increase in non-performing
loans, including $1.5 million in impaired loans acquired from First Morris,
which were recorded at fair value on the date of acquisition, an increase of
$1.4 million in residential non-performing loans and an increase in commercial
non-performing loans. Additional factors attributable to the increase included
growth in the commercial loan portfolio and the continued shift in the mix of
the portfolio to a greater percentage of commercial loans.
Income Tax Expense
For the three months ended June 30, 2007, the Company's income tax expense was
$5.3 million. This compares with $6.0 million for the same period in 2006. The
decrease in income tax expense was primarily attributable to reduced income
before income taxes. For the three months and six months ended June 30, 2007,
the Company's effective tax rate was 28.0% and 28.7%, compared with 30.6% and
30.7% for the three and six months ended June 30, 2006. The reduction in the
Company's effective tax rate was a result of a larger proportion of the
3
<Page>
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 April 1, 2007, First Morris was merged with and into the Company's
subsidiary, The Provident Bank. Consideration was paid to First Morris
stockholders in a combination of stock and cash. The merger added nine branches
to The Provident Bank 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. At June 30, 2007, the Bank operated 84 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 July 26, 2007 regarding highlights of the Company's
second quarter 2007 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
integration of the operations of First Morris, 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
June 30, 2007 (Unaudited) and December 31, 2006
(Dollars in Thousands)
Assets June 30, 2007 December 31, 2006
--------------------------------- ----------------------------
Cash and due from banks $ 103,916 $ 89,390
Short-term investments 2,820 2,667
--------------------------------- ----------------------------
Total cash and cash equivalents 106,736 92,057
--------------------------------- ----------------------------
Investment securities (market value of $364,228
at June 30, 2007 (unaudited) and $386,380
at December 31, 2006) 371,159 389,656
Securities available for sale, at fair value 776,871 790,894
Federal Home Loan Bank stock 26,180 35,335
Loans 4,110,468 3,783,664
Less allowance for loan losses 36,764 32,434
--------------------------------- ----------------------------
Net loans 4,073,704 3,751,230
--------------------------------- ----------------------------
Foreclosed assets, net 562 528
Banking premises and equipment, net 79,219 59,811
Accrued interest receivable 24,181 21,705
Intangible assets 523,084 429,718
Bank-owned life insurance 118,958 116,271
Other assets 53,611 55,759
--------------------------------- ----------------------------
Total assets $ 6,154,265 $ 5,742,964
================================= ============================
Liabilities and Stockholders' Equity
Deposits:
Demand deposits $ 1,427,366 $ 1,005,679
Savings deposits 1,175,075 1,261,282
Certificates of deposit of $100,000 or more 483,821 393,834
Other time deposits 1,253,330 1,165,668
--------------------------------- ----------------------------
Total deposits 4,339,592 3,826,463
Mortgage escrow deposits 19,535 17,616
Borrowed funds 713,316 840,990
Other
liabilities 40,907 38,739
--------------------------------- ----------------------------
Total liabilities 5,113,350 4,723,808
--------------------------------- ----------------------------
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,
83,209,293 shares issued and 63,449,449 shares outstanding at
June 30, 2007, and 79,879,017 shares issued and
63,233,548 shares outstanding at December 31, 2006 832 799
Additional paid-in capital 1,003,443 937,616
Retained earnings 436,485 424,958
Accumulated other comprehensive loss (9,261) (7,150)
Treasury stock at cost (321,469) (266,587)
Unallocated common stock held by Employee Stock
Ownership Plan (69,115) (70,480)
Common Stock acquired by the Directors' Deferred Fee Plan (12,867) (13,010)
Deferred compensation - Directors' Deferred Fee Plan 12,867 13,010
-------------------------------- ----------------------------
Total stockholders' equity 1,040,915 1,019,156
-------------------------------- ----------------------------
Total liabilities and stockholders'
Equity $ 6,154,265 $ 5,742,964
================================ ============================
5
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Six Months Ended June 30, 2007 and 2006 (Unaudited)
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ---------------------------------
---------------------------------
2007 2006 2007 2006
------------- --------------- -------------- ----------------
(Unaudited) (Unaudited)
Interest income:
Real estate secured loans $ 42,322 40,436 82,524 $79,729
Commercial loans 10,660 6,538 18,333 12,936
Consumer loans 9,922 8,632 18,834 16,798
Investment securities 3,877 4,218 7,862 8,516
Securities available for sale 9,988 10,833 19,196 22,162
Other short-term investments 35 26 78 95
Federal funds 101 11 105 52
------------- --------------- -------------- ----------------
Total interest income 76,905 70,694 146,932 140,288
------------- --------------- -------------- ----------------
Interest expense:
Deposits 29,229 19,577 53,356 37,238
Borrowed funds 7,638 8,011 16,264 16,154
Subordinated debentures -- 412 -- 819
------------- --------------- -------------- ----------------
Total interest expense 36,867 28,000 69,620 54,211
------------- --------------- -------------- ----------------
Net interest income 40,038 42,694 77,312 86,077
Provision for loan losses 1,200 565 1,500 1,120
------------- --------------- -------------- ----------------
Net interest income after
provision for loan losses 38,838 42,129 75,812 84,957
------------- --------------- -------------- ----------------
Non-interest income:
Fees 6,738 5,725 12,164 11,532
Gain on insurance settlement 5,947 -- 5,947 --
Bank-owned life insurance 1,355 1,270 2,687 2,529
Net loss on securities transactions (63) (1,145) (63) (1,140)
Other income 225 1,434 1,193 1,696
------------- --------------- -------------- ----------------
Total non-interest income 14,202 7,284 21,928 14,617
------------- --------------- -------------- ----------------
Non-interest expense:
Compensation and employee benefits 17,772 16,074 33,942 32,431
Net occupancy expense 4,970 4,455 9,513 9,270
Data processing expense 2,610 1,969 4,664 3,853
Amortization of intangibles 1,869 1,570 3,238 3,138
Advertising and promotion 1,465 1,225 2,252 2,266
Other operating expenses 5,450 4,651 9,859 9,190
------------- --------------- -------------- ----------------
Total non-interest expense 34,136 29,944 63,468 60,148
------------- --------------- -------------- ----------------
Income before income tax 18,904 19,469 34,272 39,426
expense
Income tax expense 5,287 5,951 9,847 12,106
------------- --------------- -------------- ----------------
-------------- ----------------
Net income $ 13,617 13,518 24,425 $27,320
============= =============== ============== ================
============= =============== ============== ================
Basic earnings per share $ 0.22 $ 0.22 0.41 $ 0.44
Average basic shares outstanding 61,339,380 62,099,369 60,202,164 62,766,137
Diluted earnings per share $ 0.22 $ 0.22 0.41 $ 0.43
Average diluted shares outstanding 61,339,380 62,838,312 60,202,164 63,505,949
6
PROVIDENT FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share data) (Unaudited)
At or for the Three At or for the Six
Months Ended Months Ended
June 30, June 30,
----------------------------------------------------------------
2007 2006 2007 2006
---- ---- ---- ----
INCOME STATEMENT:
Net interest income $40,038 $42,694 $77,312 $86,077
Provision for loan losses 1,200 565 1,500 1,120
Non-interest income 14,202 7,284 21,928 14,617
Non-interest expense 34,136 29,944 63,468 60,148
Income before income tax expense 18,904 19,469 34,272 39,426
Net income 13,617 13,518 24,425 27,320
Basic earnings per share $0.22 $0.22 $0.41 $0.44
Diluted earnings per share $0.22 $0.22 $0.41 $0.43
Interest rate spread 2.58% 2.91% 2.55% 2.93%
Net interest margin 3.02% 3.33% 3.02% 3.33%
PROFITABILITY:
Annualized return on average assets 0.88% 0.92% 0.83% 0.93%
Annualized return on average equity 5.14% 5.15% 4.74% 5.18%
Annualized non-interest expense to average assets 2.21% 2.04% 2.16% 2.05%
Efficiency ratio (1) 62.94% 59.91% 63.95% 59.73%
ASSET QUALITY:
Non-accrual loans
90+ and still accruing loans
Non-performing loans $11,060 $5,662
Foreclosed assets 562 484
Non-performing loans to
total loans 0.27% 0.15%
Non-performing assets to
total assets 0.19% 0.10%
Allowance for loan losses $36,764 $32,255
Allowance for loan losses to
non-performing loans 332.41% 569.68%
Allowance for loan losses to
total loans 0.89% 0.86%
AVERAGE BALANCE SHEET DATA:
Assets $6,181,643 $5,880,409 $5,931,470 $5,918,612
Loans, net 4,065,358 3,720,034 3,903,432 3,704,856
Earning assets 5,305,200 5,126,437 5,119,020 5,165,843
Core deposits 2,594,023 2,372,524 2,412,311 2,384,355
Borrowings 749,421 883,387 785,573 921,502
Interest-bearing liabilities 4,571,325 4,307,573 4,374,542 4,340,594
Stockholders' equity 1,063,526 1,053,734 1,039,485 1,062,904
Average yield on interest-earning assets 5.81% 5.52% 5.76% 5.45%
Average cost of interest-bearing liabilities 3.23% 2.61% 3.21% 2.52%
7
Notes
(1) Efficiency Ratio Calculation
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2007 2006 2007 2006
---- ---- ---- ----
Net interest income $40,038 $42,694 $77,312 $86,077
Non-interest income 14,202 7,284 21,928 14,617
------ ----- ------
Total income $54,240 $49,978 $99,240 $100,694
======= ======= ======= ========
Non-interest expense $34,136 $29,944 $63,468 $60,148
======= ======= ======= =======
Expense/Income: 62.94% 59.91% 63.95% 59.73%
====== ====== ====== ======
8
Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) June 30, 2007 March 31, 2007
============================================ ------------------------------------------ ----------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term Investments $ 10,096 $ 136 5.37 % $ 3,290 $ 47 5.92 %
Investment Securities (1) 377,024 3,877 4.11 386,209 3,985 4.13
Securities Available for Sale 824,530 9,364 4.54 767,911 8,616 4.49
Federal Home Loan Bank Stock 28,192 624 8.88 33,654 592 7.13
Net Loans (2)
Total Mortgage Loans 2,782,900 42,322 6.09 2,758,455 40,202 5.86
Total Commercial Loans 640,152 10,660 6.68 395,398 7,673 7.87
Total Consumer Loans 642,306 9,922 6.19 585,854 8,912 6.16
------------- ----------- -------------- ----------
Total Interest-Earning Assets 5,305,200 76,905 5.81 4,930,771 70,027 5.72
----------- ---------- ---------- --------
Non-Interest Earning Assets:
Cash and Due from Banks 97,505 78,251
Other Assets 778,938 669,495
------------- --------------
Total Assets $ 6,181,643 $ 5,678,517
============= ==============
Interest-Bearing Liabilities:
Demand Deposits $ 843,211 5,120 2.44 % $ 549,547 2,353 1.74 %
Savings Deposits 1,255,224 5,258 1.68 1,244,044 4,975 1.62
Time Deposits 1,723,469 18,851 4.39 1,559,855 16,799 4.37
------------- ----------- -------------- ----------
Total Deposits 3,821,904 29,229 3.07 3,353,446 24,127 2.92
----------- ----------
Total Borrowings 749,421 7,638 4.09 822,127 8,626 4.26
------------- ----------- -------------- ----------
Total Interest-Bearing Liabilities 4,571,325 36,867 3.23 4,175,573 32,753 3.18
----------- ------ --------- ----
Non-Interest Bearing Liabilities 546,792 487,767
------------- --------------
Total Liabilities 5,118,117 4,663,340
Stockholders' Equity 1,063,526 1,015,177
------------- --------------
Total Liabilities & stockholders'
Equity $ 6,181,643 $ 5,678,517
============= ==============
Net interest income $ 40,038 $ 37,274
=========== ==========
Net interest rate spread 2.58 % 2.54 %
==== ====
Net interest-earning assets $ 733,875 $ 755,198
============= ==============
Net interest margin (3) 3.02 % 3.02 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.16 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.
9
The following table summarizes the net interest margin for the previous year,
inclusive.
6/30/07 3/31/07 12/31/06 9/30/06 6/30/06
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
Interest-Earning Assets:
Securities 4.52% 4.45% 4.43% 4.34% 4.29%
Net Loans 6.20% 6.12% 6.08% 6.06% 5.99%
Total Interest-Earning Assets 5.81% 5.72% 5.66% 5.61% 5.52%
Interest-Bearing Liabilities
Total Deposits 3.07% 2.92% 2.81% 2.63% 2.29%
Total Borrowings 4.09% 4.26% 3.95% 3.92% 3.82%
Total Interest-Bearing Liabilities 3.23% 3.18% 3.03% 2.88% 2.61%
Interest Rate Spread 2.58% 2.54% 2.63% 2.73% 2.91%
Net Interest Margin 3.02% 3.02% 3.08% 3.17% 3.33%
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities 1.16x 1.18x 1.18x 1.18x 1.19x
10
Average YTD Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) June 30, 2007 June 30, 2006
------------------------------------------ ----------------------------------------
Average Average Average Average
Balance Interest Yield Balance Interest Yield
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term Investments $ 6,712 $ 183 5.50 % $ 6,768 $ 147 4.38 %
Investment Securities (1) 381,591 7,862 4.12 410,698 8,516 4.15
Securities Available for Sale 796,377 17,980 4.52 1,005,309 21,091 4.20
Federal Home Loan Bank Stock 30,908 1,216 7.94 38,212 1,071 5.65
Net Loans (2)
Total Mortgage Loans 2,770,745 82,524 5.98 2,758,415 79,729 5.80
Total Commercial Loans 518,451 18,333 7.13 379,899 12,936 6.87
Total Consumer Loans 614,236 18,834 6.18 566,542 16,798 5.98
--------------- ------------- ------------ --------------- -------
Total Interest-Earning Assets 5,119,020 146,932 5.76 5,165,843 140,288 5.45
------------- ------------ ---------- -----------
Non-Interest Earning Assets:
Cash and Due from Banks 87,931 77,904
Other Assets 724,519 674,865
------------- ---------------
Total Assets $ 5,931,470 $ 5,918,612
============= ===============
Interest-Bearing Liabilities:
Demand Deposits $ 697,190 7,473 2.16 % $ 592,351 3,425 1.17 %
Savings Deposits 1,249,665 10,233 1.65 1,328,154 8,019 1.22
Time Deposits 1,642,114 35,650 4.38 1,498,587 25,794 3.47
------------- ------------ --------------- ---------
Total Deposits 3,588,969 53,356 3.00 3,419,092 37,238 2.20
------------ ----------
Total Borrowings 785,573 16,264 4.17 921,502 16,973 3.71
------------- ------------ --------------- ----------
Total Interest-Bearing Liabilities 4,374,542 69,620 3.21 4,340,594 54,211 2.52
---------- ----------- ----------- ---------
Non-Interest Bearing Liabilities 517,443 515,114
------------- ---------------
Total Liabilities 4,891,985 4,855,708
Stockholders' Equity 1,039,485 1,062,904
------------- ---------------
Total Liabilities & Stockholders
Equity $ 5,931,470 $ 5,918,612
============= ===============
Net interest income $ 77,312 $ 86,077
============ ==========
Net interest rate spread 2.55 % 2.93 %
==== ====
Net interest-earning assets $ 744,478 $ 825,249
============= ===============
Net interest margin (3) 3.02 % 3.33 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.17 x 1.19 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.
11
The following table summarizes the YTD net interest margin for the previous
three years, inclusive.
Six Months Ended
----------------------------------------
6/30/07 6/30/06 6/30/05
Interest-Earning Assets:
Securities 4.48 4.22% 3.88%
Net Loans 6.16% 5.94% 5.56%
Total Interest-Earning Assets 5.76% 5.45% 4.99%
Interest-Bearing Liabilities:
Total Deposits 3.00% 2.20% 1.55%
Total Borrowings 4.17% 3.71% 3.10%
Total Interest-Bearing Liabilities 3.21% 2.52% 1.93%
Interest Rate Spread 2.55% 2.93% 3.06%
Net Interest Margin 3.02% 3.33% 3.36%
Ratio of Interest-Earning Assets to
Total Interest-Bearing Liabilities 1.17x 1.19x 1.18x
12