NEWS RELEASE
CONTACT: Kenneth J. Wagner, SVP Investor Relations
Provident Financial Services, Inc.
(201) 915-5344
FOR RELEASE: 7:43 A.M. Eastern Time: January 24, 2008
Provident Financial Services, Inc. Announces Fourth Quarter and
Full-Year Earnings
for 2007 and Declares Quarterly Cash Dividend
JERSEY CITY, NJ, January 24, 2008 ---/ PRNewswire-First Call/- Provident
Financial Services, Inc. (NYSE:PFS) (the "Company") reported basic and diluted
earnings per share of $0.08 for the quarter ended December 31, 2007, compared to
basic and diluted earnings per share of $0.23 and $0.22, respectively, for the
quarter ended December 31, 2006. Basic and diluted earnings per share were $0.63
for the year ended December 31, 2007, compared to basic and diluted earnings per
share of $0.88 and $0.87, respectively, for the year ended December 31, 2006.
Net income for the three months ended December 31, 2007 totaled $4.7 million,
compared to $13.4 million reported for the same period in 2006. Net income was
$37.4 million for the year ended December 31, 2007, compared to $53.7 million
for the same period in 2006. The primary reasons for the decreases in quarterly
and annual net income for 2007 compared with the same periods in 2006 were the
continued compression of the net interest margin, an increase in the provision
for loan losses as a result of increased non-performing loans and increased
non-interest expense, primarily compensation and benefits expense, resulting
from the acquisition of First Morris Bank & Trust ("First Morris") as of April
1, 2007.
Earnings and per share data for the three months and year ended December 31,
2007 reflect the impact of a previously announced executive separation agreement
which resulted in a one-time charge of $655,000, net of tax, or $0.01 per share.
Earnings and per share data for the three months and year ended December 31,
2007 also reflect the impact of a securities impairment charge of $1.0 million,
net of tax, or $0.02 per share, and losses recognized on sales of securities in
connection with portfolio repositioning totaling $632,000, net of tax, or $0.01
per share. Earnings and per share data for the year ended December 31, 2007
further reflect the impact of a previously announced voluntary resignation
program which resulted in a one-time charge of $2.1 million, net of tax, or
$0.04 per share. In addition, earnings and per share data for the year ended
December 31, 2007 reflect the impact of a settlement of an insurance claim
resulting in a recovery of $3.5 million, net of tax, or $.06 per share, related
to a fraud loss that occurred and was recognized in 2002, the Company's
acquisition of First Morris from April 1, 2007, the date the acquisition was
completed, and one-time expenses of $246,000, net of tax, related to the merger
and integration of First Morris' operations. Earnings and per share data for the
year ended December 31, 2006 were impacted by a one-time executive severance
payment which resulted in an after-tax charge of $473,000, or $0.01 per share.
Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "While we
have no direct exposure to subprime loans or collateralized debt obligations,
the resulting downturn in the general economy that continued during the past
quarter impacted certain of our commercial credits, and we reassessed our risk
ratings and increased reserves accordingly. A further outgrowth of this adverse
environment was impairment to the value of an investment in our securities
portfolio, and the appropriate charge was recognized. Also, our net interest
margin remained under pressure, as recent reductions in the level of short-term
interest rates had an immediate impact on asset yields, while their effect on
liability costs has yet to be fully realized due to competitive deposit
pricing." Pantozzi added, "Despite these headwinds, we believe that our business
fundamentals remain solid. Our capital position is strong, our commitment to
asset quality remains a priority, and we continue to operate in an economically
resilient though competitive market place."
Declaration of Quarterly Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.11 per
common share payable on February 28, 2008, to stockholders of record as of the
close of business on February 15, 2008.
Balance Sheet Summary
Total assets increased to $6.36 billion at December 31, 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 $554.2
million at April 1, 2007. The fair value of deposits and borrowings assumed from
First Morris totaled $509.0 million and $12.8 million, respectively, at April 1,
2007.
Total investments decreased $48.0 million, or 3.9%, during the year ended
December 31, 2007. The decrease was primarily attributable to paydowns on
mortgage-backed securities and maturities of debt securities, as well as sales
of $40.8 million in mortgage-backed and debt securities acquired from First
Morris. In the fourth quarter of 2007, the Company repositioned a portion of its
securities portfolio, selling an additional $81.2 million of mortgage-backed
securities with a weighted average life of 1.4 years and a weighted average
yield of 4.10%, and recognizing a loss on sale of $972,000. Proceeds from the
fourth quarter 2007 securities sales were reinvested in government agency and
AAA rated mortgage-backed securities, with a weighted average life of 4.7 years
and a weighted average yield of 5.26%.
The Company's net loans increased $504.3 million, or 13.4%, to $4.26 billion at
December 31, 2007, from $3.75 billion at December 31, 2006, including the
acquisition of $335.3 million in loans from First Morris. For the year ended
December 31, 2007, loans originated and acquired from First Morris of $1.61
billion and loan purchases of $79.1 million were partially offset by repayments
of $1.17 billion. Compared with December 31, 2006, and including loans acquired
from First Morris, commercial loans increased $208.3 million, commercial
mortgage and multi-family loans increased $144.6 million, residential mortgage
loans increased $82.4 million, consumer loans increased $51.2 million, and
construction loans increased $26.7 million. Commercial real estate, construction
and commercial loans represented 45.2% of the loan portfolio at December 31,
2007, compared to 41.3% at December 31, 2006.
At December 31, 2007, the Company's unfunded loan pipeline totaled $767.5
million, including $233.4 million in construction loan commitments, $201.8
million in commercial loan commitments and $98.4 million in commercial mortgage
commitments. The unfunded loan pipeline at September 30, 2007 was $817.3
million.
Intangible assets increased $91.0 million, to $520.7 million at December 31,
2007, from $429.7 million at December 31, 2006, as a result of $89.1 million of
goodwill and an $8.4 million core deposit intangible recorded in connection with
the acquisition of First Morris.
Total deposits increased $398.4 million, or 10.4%, during the year ended
December 31, 2007, including $509.0 million in deposits assumed from First
Morris. Total deposits were $4.22 billion at December 31, 2007, with core
deposits, consisting of savings and demand deposit accounts, representing 61.2%
of total deposits. In addition, borrowed funds increased $234.1 million, or
27.8%, during the year ended December 31, 2007.
Common stock repurchases for the three months and year ended December 31, 2007
totaled 2.4 million shares at an average cost of $15.08 per share, and 7.3
million shares at an average cost of $16.09 per share, respectively. At December
31, 2007, book value per share and tangible book value per share were $16.78 and
$8.05, respectively, compared with $16.12 and $9.32, respectively, at December
31, 2006.
Results of Operations
Net Interest Margin
The net interest margin decreased 13 basis points to 2.84% for the quarter ended
December 31, 2007, compared with 2.97% for the quarter ended September 30, 2007.
The net interest margin for the quarter ended December 31, 2007 decreased 24
basis points compared with the net interest margin of 3.08% for the quarter
ended December 31, 2006. The weighted average yield on interest-earning assets
was 5.76% for the three months ended December 31, 2007, compared with 5.87% for
the trailing quarter and 5.66% for the three months ended December 31, 2006. The
weighted average cost of interest-bearing liabilities was 3.33% for the quarter
ended December 31, 2007, compared with 3.34% for the trailing quarter and 3.03%
for the fourth quarter of 2006.
For the year ended December 31, 2007, the net interest margin was 2.96%. This
was a decrease of 27 basis points compared with the net interest margin of 3.23%
for the year ended December 31, 2006. The weighted average yield on
interest-earning assets was 5.79% for the year ended December 31, 2007, compared
with 5.54% for the year ended December 31, 2006. The weighted average cost of
interest-bearing liabilities was 3.27% for the year ended December 31, 2007,
compared with 2.74% for the same period in 2006.
The year-over-year increase in rates on interest-earning assets and
interest-bearing liabilities reflect the repricing to higher market interest
rates experienced throughout 2006 and the first nine months of 2007. The
compression in the net interest margin for the year ended December 31, 2007 is
reflective of the prolonged flat or inverted yield curve that existed throughout
2006 and much of the first nine months of 2007. Since the Federal Reserve began
tightening interest rates in June 2004, the Federal funds borrowing rate was
increased 17 times, for a total of 425 basis points, before the Federal funds
borrowing rate was decreased 50 basis points on September 18, 2007. The Federal
funds borrowing rate was subsequently reduced an additional 25 basis points at
each of the October 31, 2007 and December 11, 2007 Federal Open Market Committee
meetings. The Federal Reserve's actions throughout 2006 and 2007 had an overall
unfavorable impact on the repricing of deposits in 2007 when compared with 2006.
The September 18, 2007 and fourth quarter 2007 rate reductions began to have
some favorable effect on deposit pricing in the fourth quarter of 2007, as the
average cost of deposits for the three months ended December 31, 2007 was 3.11%,
compared with 3.17% for the trailing quarter, and compared with 2.81% for the
same period last year. The average cost of borrowings for the three months ended
December 31, 2007 was 4.19%, compared with 4.16% for the trailing quarter and
3.95% for the same period last year. In addition to the impact of market
interest rate movements, the net interest margin and earning asset yield for the
fourth quarter and year ended December 31, 2007, were adversely impacted by
reduced loan yields resulting from increases in non-accrual loans and the
related reversal of $355,000 of interest income.
Non-Interest Income
Non-interest income totaled $5.5 million for the quarter ended December 31,
2007, a decrease of $3.5 million, or 38.5%, compared to the same period in 2006.
The Company recorded an other-than-temporary impairment charge totaling $1.0
million in the fourth quarter of 2007, related to a reduction in the market
value of an investment in the common stock of a publicly traded financial
institution. Prior to the charge, the impairment was recorded as an unrealized
loss on securities available for sale and reflected as a reduction of equity
through accumulated other comprehensive income. In addition, net losses on
securities transactions totaled $923,000 for the quarter ended December 31,
2007, compared with net gains of $1.2 million for the same quarter in 2006. Fee
income decreased $146,000 for the quarter ended December 31, 2007, compared with
the same period in 2006, as a result of equity fund losses, despite a $647,000,
or 13.4% increase in retail fees. Other income decreased $213,000 for the
quarter ended December 31, 2007 compared with the same period in 2006, primarily
as a result of a non-recurring gain recognized on the sale of deposits in 2006.
For the year ended December 31, 2007, non-interest income totaled $35.5 million,
an increase of $3.6 million, or 11.2%, 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. The
Company recorded an other-than-temporary impairment charge on an investment
totaling $1.0 million in the fourth quarter of 2007. In addition, net losses on
securities transactions totaled $984,000 for the year ended December 31, 2007,
compared with net gains of $1.2 million for 2006. Fee income increased $1.2
million, or 5.3%, for the year ended December 31, 2007, compared to the same
period in 2006, as a result of increases in retail fees and trust income
attributable to the First Morris acquisition. Other income decreased $644,000,
or 28.3%, for the year ended December 31, 2007, compared to the same period in
2006, due primarily to non-recurring gains recorded on the call of FHLB advances
and the sale of deposits during 2006.
Non-Interest Expense
For the three months ended December 31, 2007, non-interest expense increased
$5.8 million, or 20.7%, to $33.8 million, compared to $28.0 million for the
three months ended December 31, 2006. For the three months ended December 31,
2007, compensation and benefits expense increased $3.3 million compared with the
same period in 2006, primarily as a result of a $1.0 million one-time charge
related to a previously announced executive separation agreement, 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. Amortization of intangibles increased
$295,000 for the quarter ended December 31, 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 $658,000 and advertising expense of $845,000
for the quarter ended December 31, 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 $750,000 due to increases in
several categories, including examination fees, consulting fees, printing and
supplies costs, debit card expense, and miscellaneous losses.
For the year ended December 31, 2007, non-interest expense increased $14.7
million, or 12.5%, to $133.0 million, compared to $118.3 million for the year
ended December 31, 2006. Compensation and benefits expense increased $8.9
million, primarily as a result of one-time severance costs totaling $4.2 million
in connection with a previously announced voluntary resignation program and an
executive separation agreement, as well as the addition of branch and lending
staff from First Morris and the addition of small business and middle market
relationship managers. Data processing expense increased $781,000 due primarily
to merger-related charges recorded in connection with the acquisition of First
Morris. Amortization of intangibles increased $698,000 for the year ended
December 31, 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 $1.4
million and advertising expense of $1.1 million for the year ended December 31,
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 $1.9 million for the year ended December 31, 2007, compared
with the same period in 2006, due to increases in several categories, including
Community Reinvestment Act related grants for the origination of mortgages to
low- and moderate-income borrowers, printing and supplies costs, examination
fees, debit card expense, loan collection expense and miscellaneous losses.
Asset Quality
Total non-performing loans at December 31, 2007 were $34.6 million, or 0.81% of
total loans, compared with $7.5 million, or 0.20% of total loans at December 31,
2006. The increase in non-performing loans was primarily due to the movement in
the fourth quarter of 2007 of four commercial and commercial mortgage loans with
total outstanding balances of $23.1 million to non-accrual status. All four of
these loans have been evaluated under Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," and were
recognized as impaired. One loan in the amount of $3.6 million is secured by
real estate with a current estimated loan to value ratio of 48.0%, and therefore
there is no specific reserve associated with this loan at this time. Based on an
assessment of current collateral values and/or estimates of future cash flows,
the remaining three loans have estimated potential losses of $2.9 million, and a
specific reserve for that amount has been established.
At December 31, 2007 the Company's allowance for loan losses was 0.95% of total
loans, compared with 0.86% of total loans at December 31, 2006. The Company
recorded provisions for loan losses of $3.7 million and $6.5 million for the
three months and year ended December 31, 2007, respectively, compared with
provisions of $100,000 and $1.3 million for the three months and year ended
December 31, 2006, respectively. For the three months and year ended December
31, 2007, the Company had net charge-offs of $539,000 and $1.0 million,
respectively, compared with net recoveries of $137,000 and net charge-offs of
$866,000 for the same periods in 2006. The allowance for loan losses increased
$8.3 million to $40.8 million at December 31, 2007, from $32.4 million at
December 31, 2006. The increase in the allowance was attributable to the
addition of First Morris' loan portfolio and the related $2.8 million of
allowance for loan losses, as well as the current provision of $6.5 million. The
increase in the loan loss provision for the three months and year ended December
31, 2007, compared with the same periods in 2006, was attributable to an
increase in non-performing loans, downgrades in risk ratings, growth in the loan
portfolio and an increase in commercial loans as a percentage of the loan
portfolio to 45.2% at December 31, 2007, compared to 41.3% at December 31, 2006.
Income Tax Expense
For the three months ended December 31, 2007, the Company's income tax expense
was $1.6 million. This compared with $6.0 million for the same period in 2006.
For the year ended December 31, 2007, the Company's income tax expense was $13.5
million, compared with $23.2 million for the same period in 2006. The decrease
in income tax expense was attributable to reduced income before income taxes and
a lower effective tax rate. For the three months and year ended December 31,
2007, the Company's effective tax rates were 24.9% and 26.5%, compared with
31.0% and 30.2% for the three months and year ended December 31, 2006. The
reduction in the Company's effective tax rate was primarily a result of a larger
proportion of the Company's income being derived from tax-exempt interest and
Bank-owned life insurance appreciation.
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 Company common 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 December 31, 2007, the Bank operated 85 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 24, 2008 regarding highlights of the
Company's fourth quarter 2007 financial results. The call may be accessed by
dialing 1-800-860-2442 (Domestic) or 1-412-858-4600 (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, 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.
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Condition
December 31, 2007 (Unaudited) and December 31, 2006
(Dollars in Thousands)
Assets December 31, 2007 December 31, 2006
-------------------------------- ---------------------------
Cash and due from banks $ 83,737 $ 89,390
Federal funds sold 18,000 --
Short-term investments 38,892 2,667
-------------------------------- ---------------------------
Total cash and cash equivalents 140,629 92,057
-------------------------------- ---------------------------
Investment securities (market value of $359,699
at December 31, 2007 (unaudited) and $386,380
at December 31, 2006) 358,491 389,656
Securities available for sale, at fair value 769,615 790,894
Federal Home Loan Bank stock 39,764 35,335
Loans 4,296,291 3,783,664
Less allowance for loan losses 40,782 32,434
-------------------------------- ---------------------------
Net loans 4,255,509 3,751,230
-------------------------------- ---------------------------
Foreclosed assets, net 1,041 528
Banking premises and equipment, net 79,138 59,811
Accrued interest receivable 24,665 21,705
Intangible assets 520,722 429,718
Bank-owned life insurance 121,674 116,271
Other assets 48,143 55,759
-------------------------------- ---------------------------
Total assets $ 6,359,391 $ 5,742,964
-------------------------------- ---------------------------
Liabilities and Stockholders' Equity
Deposits:
Demand deposits $ 1,553,625 $ 1,005,679
Savings deposits 1,031,725 1,261,282
Certificates of deposit of $100,000 or more 480,362 393,834
Other time deposits 1,159,108 1,165,668
-------------------------------- ---------------------------
Total deposits 4,224,820 3,826,463
Mortgage escrow deposits 18,075 17,616
Borrowed funds 1,075,104 840,990
Other
liabilities 40,598 38,739
-------------------------------- ---------------------------
Total liabilities 5,358,597 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 59,646,936 shares outstanding at
December 31, 2007, and 79,879,017 shares issued and
63,233,548 shares outstanding at December 31, 2006 832 799
Additional paid-in capital 1,009,120 937,616
Retained earnings 437,503 424,958
Accumulated other comprehensive income (loss) 4,335 (7,150)
Treasury stock at cost (383,407) (266,587)
Unallocated common stock held by Employee Stock
Ownership Plan (67,589) (70,480)
Common Stock acquired by the Directors' Deferred Fee Plan (7,759) (13,010)
Deferred compensation - Directors' Deferred Fee Plan 7,759 13,010
------------------------------- ---------------------------
Total stockholders' equity 1,000,794 1,019,156
Total liabilities and stockholders' equity $ 6,359,391 $ 5,742,964
------------------------------- ---------------------------
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three Months and Year Ended December 31, 2007 and 2006 (Unaudited)
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Year Ended
December 31, December 31,
----------------------------- --------------------------------
--------------------------------
2007 2006 2007 2006
------------ -------------- ------------- ---------------
(Unaudited) (Unaudited)
Interest income:
Real estate secured loans $ 42,191 40,275 167,506 160,192
Commercial loans 12,271 7,522 42,151 27,840
Consumer loans 10,071 9,178 39,132 34,999
Investment securities 3,742 4,115 15,406 16,828
Securities available for sale 9,493 9,669 38,107 41,876
Other short-term investments 38 34 153 161
Federal funds 12 191 122 243
------------ -------------- ------------- ---------------
Total interest income 77,818 70,984 302,577 282,139
------------ -------------- ------------- ---------------
Interest expense:
Deposits 29,260 24,284 112,923 84,191
Borrowed funds 10,275 7,887 34,776 31,884
Subordinated debentures -- 281 -- 1,536
------------ -------------- ------------- ---------------
Total interest expense 39,535 32,452 147,699 117,611
------------ -------------- ------------- ---------------
Net interest income 38,283 38,532 154,878 164,528
Provision for loan losses 3,730 100 6,530 1,320
------------ -------------- ------------- ---------------
Net interest income after
provision for loan losses 34,553 38,432 148,348 163,208
------------ -------------- ------------- ---------------
Non-interest income:
Fees 5,939 6,085 24,538 23,305
Gain on insurance settlement -- -- 5,947 --
Bank-owned life insurance 1,377 1,338 5,403 5,196
Impairment charge on securities (1,003) -- (1,003) --
Net (loss) gain on securities transactions (923) 1,217 (984) 1,170
Other income 146 359 1,636 2,280
------------ -------------- ------------- ---------------
Total non-interest income 5,536 8,999 35,537 31,951
------------ -------------- ------------- ---------------
Non-interest expense:
Compensation and employee benefits 17,399 14,099 72,183 63,295
Net occupancy expense 4,980 4,322 19,431 18,054
Data processing expense 2,193 2,243 9,106 8,325
Amortization of intangibles 1,671 1,376 6,586 5,888
Advertising and promotion 1,601 756 4,942 3,819
Other operating expenses 5,990 5,240 20,765 18,892
------------ -------------- ------------- ---------------
Total non-interest expense 33,834 28,036 133,013 118,273
------------ -------------- ------------- ---------------
Income before income tax 6,255 19,395 50,872 76,886
expense
Income tax expense 1,560 6,015 13,492 23,201
------------ -------------- ------------- ---------------
Net income $ 4,695 13,380 37,380 $53,685
------------ -------------- ------------- ---------------
Basic earnings per share $ 0.08 $ 0.23 0.63 $ 0.88
Average basic shares outstanding 56,931,990 58,831,921 59,067,438 60,968,533
Diluted earnings per share $ 0.08 $ 0.22 0.63 $ 0.87
Average diluted shares outstanding 56,931,990 59,565,397 59,067,438 61,703,906
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share data) (Unaudited)
2007 2006 2007 2006
---- ---- ---- ----
INCOME STATEMENT:
Net interest income $38,283 $38,532 $154,878 $164,528
Provision for loan losses 3,730 100 6,530 1,320
Non-interest income 5,536 8,999 35,537 31,951
Non-interest expense 33,834 28,036 133,013 118,273
Income before income tax expense 6,255 19,395 50,872 76,886
Net income 4,695 13,380 37,380 53,685
Basic earnings per share $0.08 $0.23 $0.63 $0.88
Diluted earnings per share $0.08 $0.22 $0.63 $0.87
Interest rate spread 2.43% 2.63% 2.52% 2.80%
Net interest margin 2.84% 3.08% 2.96% 3.23%
PROFITABILITY:
Annualized return on average assets 0.30% 0.92% 0.62% 0.92%
Annualized return on average equity 1.85% 5.23% 3.63% 5.17%
Annualized non-interest expense to average assets 2.15% 1.93% 2.19% 2.02%
Efficiency ratio (1) 77.21% 58.98% 69.85% 60.20%
ASSET QUALITY:
Non-accrual loans $34,644 $7,275
90+ and still accruing loans -- 274
Non-performing loans 34,644 7,549
Foreclosed assets 1,041 528
Non-performing loans to
total loans 0.81% 0.20%
Non-performing assets to
total assets 0.56% 0.14%
Allowance for loan losses $40,782 $32,434
Allowance for loan losses to
non-performing loans 117.72% 429.65%
Allowance for loan losses to
total loans 0.95% 0.86%
AVERAGE BALANCE SHEET DATA:
Assets $6,255,688 $5,754,978 $6,070,742 $5,843,558
Loans, net 4,216,335 3,731,584 4,036,193 3,714,388
Earning assets 5,384,310 4,995,610 5,227,432 5,088,769
Core deposits 2,572,351 2,304,899 2,495,104 2,350,118
Borrowings 973,393 821,304 832,961 875,011
Interest-bearing liabilities 4,705,625 4,245,809 4,509,917 4,296,095
Stockholders' equity 1,006,790 1,014,160 1,028,755 1,038,623
Average yield on interest-earning assets 5.76% 5.66% 5.79% 5.54%
Average cost of interest-bearing liabilities 3.33% 3.03% 3.27% 2.74%
Notes
(1) Efficiency Ratio Calculation
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2007 2006 2007 2006
---- ---- ---- ----
Net interest income $38,283 $38,532 $154,878 $164,528
Non-interest income 5,536 8,999 35,537 31,951
----- ----- ------ ------
Total income $43,819 $47,531 $190,415 $196,479
======= ======= ======== ========
Non-interest expense $33,834 $28,036 $133,013 $118,273
======= ======= ======== ========
Expense/Income: 77.21% 58.98% 69.85% 60.20%
====== ====== ====== ======
Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) December 31, 2007 September 30, 2007
----------------------------------------- ---------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
----------------------------------------- ---------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term Investments $ 4,129 $ 50 4.80 % $ 3,297 $ 42 4.97 %
Investment Securities (1) 362,549 3,742 4.13 369,457 3,802 4.12
Securities Available for Sale 765,551 8,918 4.66 765,546 8,897 4.65
Federal Home Loan Bank Stock 35,746 575 6.38 28,300 521 7.31
Net Loans (2)
Total Mortgage Loans 2,894,182 42,191 5.81 2,844,111 42,791 6.00
Total Commercial Loans 677,108 12,271 7.19 626,069 11,547 7.32
Total Consumer Loans 645,045 10,071 6.20 647,064 10,227 6.27
------------ ---------- ------------- ---------
Total Interest-Earning Assets 5,384,310 77,818 5.76 5,283,844 77,827 5.87
---------- --------- --------- ---------
Non-Interest Earning Assets:
Cash and Due from Banks 85,076 91,551
Other Assets 786,302 784,404
------------ -------------
Total Assets $ 6,255,688 $ 6,159,799
------------ -------------
Interest-Bearing Liabilities:
Demand Deposits $ 1,032,160 7,117 2.74 % $ 965,442 6,679 2.74 %
Savings Deposits 1,054,116 3,918 1.47 1,123,319 4,523 1.60
Time Deposits 1,645,956 18,225 4.39 1,706,023 19,105 4.44
------------ ---------- ------------- ---------
Total Deposits 3,732,232 29,260 3.11 3,794,784 30,307 3.17
Total Borrowings 973,393 10,275 4.19 785,760 8,237 4.16
------------ ---------- ------------- ---------
Total Interest-Bearing Liabilities 4,705,625 39,535 3.33 4,580,544 38,544 3.34
------------ ---------- ---------- --------- ----------
Non-Interest Bearing Liabilities 543,273 549,645
------------ -------------
Total Liabilities 5,248,898 5,130,189
Stockholders' Equity 1,006,790 1,029,610
------------ -------------
Total Liabilities & Stockholders
Equity $ 6,255,688 $ 6,159,799
------------ -------------
Net interest income $ 38,283 $ 39,283
---------- ---------
Net interest rate spread 2.43 % 2.53 %
==== ====
Net interest-earning assets $ 678,685 $ 703,300
------------ -------------
Net interest margin (3) 2.84 % 2.97 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.14 x 1.15 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.
The following table summarizes the net interest margin for the previous year, inclusive.
12/31/07 9/30/07 6/30/07 3/31/07 12/31/06
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr.
Interest-Earning Assets:
Securities 4.55% 4.55% 4.52% 4.45% 4.43%
Net Loans 6.09% 6.24% 6.20% 6.12% 6.08%
Total Interest-Earning Assets 5.76% 5.87% 5.81% 5.72% 5.66%
Interest-Bearing Liabilities
Total Deposits 3.11% 3.17% 3.07% 2.92% 2.81%
Total Borrowings 4.19% 4.16% 4.09% 4.26% 3.95%
Total Interest-Bearing Liabilities 3.33% 3.34% 3.23% 3.18% 3.03%
Interest Rate Spread 2.43% 2.53% 2.58% 2.54% 2.63%
Net Interest Margin 2.84% 2.97% 3.02% 3.02% 3.08%
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities 1.14x 1.15x 1.16x 1.18x 1.18x
Average YTD Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) December 31, 2007 December 31, 2006
----------------------------------------- ---------------------------------------
Average Average Average Average
Balance Interest Yield Balance Interest Yield
----------------------------------------- ---------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term Investments $ 5,200 $ 275 5.28 % $ 7,655 $ 404 5.27%
Investment Securities (1) 373,733 15,406 4.12 405,701 16,828 4.15
Securities Available for Sale 780,836 35,794 4.58 925,010 39,758 4.30
Federal Home Loan Bank Stock 31,470 2,313 7.35 36,015 2,118 5.88
Net Loans (2)
Total Mortgage Loans 2,820,350 167,506 5.94 2,746,028 160,192 5.83
Total Commercial Loans 585,567 42,151 7.20 390,781 27,840 7.12
Total Consumer Loans 630,276 39,132 6.21 577,579 34,999 6.06
------------ ----------- -------------- ---------
Total Interest-Earning Assets 5,227,432 302,577 5.79 5,088,769 282,139 5.54
----------- ------------- --------- ----------
Non-Interest Earning Assets:
Cash and Due from Banks 88,124 78,965
Other Assets 755,186 675,824
------------ --------------
Total Assets $ 6,070,742 $ 5,843,558
------------ --------------
Interest-Bearing Liabilities:
Demand Deposits $ 849,235 21,269 2.50 % $ 579,366 8,020 1.38 %
Savings Deposits 1,168,530 18,674 1.60 1,313,997 18,198 1.38
Time Deposits 1,659,191 72,980 4.40 1,527,721 57,973 3.79
------------ ----------- -------------- ---------
Total Deposits 3,676,956 112,923 3.07 3,421,084 84,191 2.46
Total Borrowings 832,961 34,776 4.17 875,011 33,420 3.82
------------ ----------- -------------- ---------
Total Interest-Bearing Liabilities 4,509,917 147,699 3.27 4,296,095 117,611 2.74
----------- ------------- --------- ----------
Non-Interest Bearing Liabilities 532,070 508,840
------------ --------------
Total Liabilities 5,041,987 4,804,935
Stockholders' Equity 1,028,755 1,038,623
------------ --------------
Total Liabilities & Stockholders'
Equity $ 6,070,742 $ 5,843,558
------------ --------------
Net interest income $ 154,878 $ 164,528
----------- ---------
Net interest rate spread 2.52 % 2.80 %
==== ====
Net interest-earning assets $ 717,515 $ 792,674
------------ --------------
Net interest margin (3) 2.96 % 3.23 %
==== ====
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.
The following table summarizes the YTD net interest margin for the previous
three years, inclusive.
Year Ended
----------------------------------------
12/31/07 12/31/06 12/31/05
Interest-Earning Assets: -------- -------- --------
Securities 4.52% 4.30% 3.91%
Net Loans 6.16% 6.00% 5.65%
Total Interest-Earning Assets 5.79% 5.54% 5.08%
Interest-Bearing Liabilities:
Total Deposits 3.07% 2.46% 1.71%
Total Borrowings 4.17% 3.82% 3.19%
Total Interest-Bearing Liabilities 3.27% 2.74% 2.07%
Interest Rate Spread 2.52% 2.80% 3.01%
Net Interest Margin 2.96% 3.23% 3.34%
Ratio of Interest-Earning Assets to
Total Interest-Bearing Liabilities 1.16x 1.18x 1.18x