NEWS RELEASE
CONTACT: Kenneth J. Wagner, SVP Investor Relations
Provident Financial Services, Inc.
(201) 915-5344
FOR RELEASE: 7:43 A.M. Eastern Time: October 23, 2008
Provident Financial Services, Inc. Announces Quarterly Earnings
and Declares Quarterly Cash Dividend
JERSEY CITY, NJ, October 23, 2008 ---/PRNewswire/First Call/ - Provident
Financial Services, Inc. (NYSE:PFS) (the "Company") reported basic and diluted
earnings per share of $0.23 for the quarter ended September 30, 2008, compared
to basic and diluted earnings per share of $0.14 for the quarter ended September
30, 2007. Basic and diluted earnings per share were $0.61 for the nine months
ended September 30, 2008, compared to basic and diluted earnings per share of
$0.55 for the nine months ended September 30, 2007. Net income for the three
months ended September 30, 2008 totaled $13.2 million, compared to $8.3 million
reported for the same period in 2007. Net income was $34.2 million for the nine
months ended September 30, 2008, compared to $32.7 million for the same period
in 2007.
Earnings and per share data for the nine months ended September 30, 2008 reflect
severance costs totaling $503,000, net of tax, recognized during the second
quarter of 2008. In addition, the Company recorded other-than-temporary
impairment charges on investments in a debt security issued by Lehman Brothers
Holdings, Inc. and the common stock of two publicly-traded financial
institutions totaling $869,000, net of tax, during the quarter ended September
30, 2008. Results for the nine months ended September 30, 2008, were also
impacted by a $180,000 net after-tax gain recorded in connection with the
ownership and mandatory redemption of a portion of the Company's Class B Visa,
Inc. shares as part of Visa's initial public offering in the first quarter of
2008, and a $175,000 net after-tax gain resulting from the sale of a branch
office in the first quarter of 2008.
Earnings and per share data for the three and nine months ended September 30,
2007 were impacted by severance charges totaling $1.9 million, net of tax.
Earnings and per share data for the nine months ended September 30, 2007 were
further impacted by the settlement of an insurance claim which resulted in a
recovery of $3.5 million, net of tax, related to a fraud loss that occurred and
was recognized in 2002, and one-time expenses of $246,000, net of tax, related
to the April 1, 2007 acquisition of First Morris Bank & Trust ("First Morris").
Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "Our third
quarter operating results reflect the basic strategies of our business:
expanding net interest margin, managing overhead expenses, adhering to
conservative lending standards and maintaining our well-capitalized status, as
defined by our regulators. We neither originate nor hold any sub-prime
mortgages, trust preferred securities, or common or preferred stock issued by
Fannie Mae or Freddie Mac. In comparison to the trailing quarter, our results
also reflect growth in total loans outstanding, growth in total core deposits
and improvement in our efficiency ratio. We remain mindful of the unsettled
economic environment, and, in response, have made prudent and appropriate
additions to our loan loss allowance. At the same time, we have maintained our
ability and willingness to lend to quality borrowers, as well as our commitment
to enhancing core customer relationships. We believe these are the appropriate
strategies for achieving earnings momentum and returning long-term stockholder
value."
Declaration of Quarterly Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.11 per
common share payable on November 28, 2008, to stockholders of record as of the
close of business on November 14, 2008.
Balance Sheet Summary
Total assets increased to $6.45 billion at September 30, 2008, compared to $6.36
billion at December 31, 2007, due primarily to increases in loans and securities
available for sale.
Total investments increased $62.1 million, or 5.3%, during the nine months ended
September 30, 2008. The increase included $55.2 million of residential mortgage
loan pools that were securitized by the Company in the first quarter of 2008 and
are held as securities available for sale.
The Company's net loans increased $79.3 million, or 1.9%, to $4.33 billion at
September 30, 2008, from $4.26 billion at December 31, 2007, as year-to-date
loan originations and purchases more than offset the securitization of $55.2
million of conforming one- to four-family 30-year fixed-rate residential
mortgage loans during the first quarter of 2008. Loan originations totaled
$952.6 million and loan purchases totaled $228.4 million for the nine months
ended September 30, 2008. Compared with December 31, 2007, commercial mortgage
and multi-family loans increased $136.9 million, and residential mortgage loans
increased $81.9 million, while construction loans decreased $80.1 million,
commercial loans decreased $40.4 million, and consumer loans decreased $17.5
million. Commercial real estate, construction and commercial loans represented
44.7% of the loan portfolio at September 30, 2008, compared to 45.2% at December
31, 2007.
At September 30, 2008, the Company's unfunded loan pipeline totaled $728.9
million, including $238.0 million in commercial loan commitments, $119.6 million
in construction loan commitments and $93.2 million in commercial mortgage
commitments. The unfunded loan pipeline at June 30, 2008 was $763.4 million.
Total deposits decreased $88.9 million, or 2.1%, during the nine months ended
September 30, 2008, however core deposits increased $51.8 million, or 2.0%, to
$2.64 billion at September 30, 2008. Total deposits were $4.14 billion at
September 30, 2008, with core deposits, consisting of savings and demand deposit
accounts, representing 63.8% of total deposits. Borrowed funds increased $169.7
million, or 15.8%, during the nine months ended September 30, 2008.
Common stock repurchases for the nine months ended September 30, 2008 totaled
101,000 shares at an average cost of $14.30 per share. At September 30, 2008,
book value per share and tangible book value per share were $17.04 and $8.38,
respectively, compared with $16.78 and $8.05, respectively, at December 31,
2007.
Results of Operations
Net Interest Margin
The net interest margin increased 17 basis points to 3.27% for the quarter ended
September 30, 2008, from 3.10% for the quarter ended June 30, 2008. The net
interest margin for the quarter ended September 30, 2008 increased 30 basis
points compared with the net interest margin of 2.97% for the quarter ended
September 30, 2007. The weighted average yield on interest-earning assets was
5.51% for the three months ended September 30, 2008, compared with 5.50% for the
trailing quarter and 5.87% for the three months ended September 30, 2007. The
weighted average cost of interest-bearing liabilities was 2.55% for the quarter
ended September 30, 2008, compared with 2.74% for the trailing quarter and 3.34%
for the third quarter of 2007.
For the nine months ended September 30, 2008, the net interest margin was 3.08%.
This was an increase of 8 basis points compared with the net interest margin of
3.00% for the nine months ended September 30, 2007. The weighted average yield
on interest-earning assets was 5.54% for the nine months ended September 30,
2008, compared with 5.80% for the nine months ended September 30, 2007. The
weighted average cost of interest-bearing liabilities was 2.80% for the nine
months ended September 30, 2008, compared with 3.25% for the same period in
2007.
The average cost of interest-bearing deposits for the three months ended
September 30, 2008 was 2.19%, compared with 2.41% for the trailing quarter and
3.17% for the same period last year. The average cost of borrowings for the
three months ended September 30, 2008 was 3.62%, compared with 3.84% for the
trailing quarter and 4.16% for the same period last year.
The average cost of interest-bearing deposits for the nine months ended
September 30, 2008 was 2.49%, compared with 3.06% for the same period last year.
The average cost of borrowings for the nine months ended September 30, 2008 was
3.83%, compared with 4.17% for the same period last year.
Non-Interest Income
Non-interest income totaled $7.8 million for the quarter ended September 30,
2008, a decrease of $298,000 compared to the same period in 2007. Net losses on
securities transactions totaled $966,000 for the quarter ended September 30,
2008, compared with net gains of $2,000 for the same period last year. The net
securities losses for the current quarter included $1.4 million of
other-than-temporary impairment charges recognized on investments in a debt
security issued by Lehman Brothers Holdings, Inc. and the common stock of two
publicly-traded financial institutions. Partially offsetting the net securities
losses, fee income for the quarter ended September 30, 2008 increased $846,000,
or 13.1%, compared to the same period in 2007, primarily as a result of
increases in the value of equity fund holdings. In addition, other income
declined $157,000 for the quarter ended September 30, 2008, compared with the
same period in 2007, as a result of a non-recurring gain on the sale of real
estate recognized in 2007.
2
For the nine months ended September 30, 2008, non-interest income totaled $23.2
million, a decrease of $6.8 million, or 22.6%, compared to the same period in
2007. In 2007, 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. In addition, net losses on securities transactions totaled $565,000
for the nine months ended September 30, 2008, compared with net losses of
$61,000 for the same period in 2007.
Non-Interest Expense
For the three months ended September 30, 2008, non-interest expense decreased
$3.7 million, or 10.5%, to $32.0 million, compared to $35.7 million for the
three months ended September 30, 2007. For the three months ended September 30,
2008, compensation and benefits expense decreased $4.3 million, compared with
the same period in 2007. Compensation and benefits expense decreased as a result
of previous staff reductions and lower stock-based compensation costs. The
Company recorded $3.2 million in severance charges during the quarter ended
September 30, 2007. Amortization of intangibles decreased $304,000 for the three
months ended September 30, 2008, compared with the same period in 2007, as a
result of scheduled reductions in the amortization of core deposit intangibles.
Partially offsetting these decreases, other operating expenses increased
$427,000 for the quarter ended September 30, 2008, compared with the same period
in 2007, due primarily to expenses related to foreclosed assets.
For the nine months ended September 30, 2008, non-interest expense decreased
$2.0 million, or 2.0%, to $97.2 million, compared to $99.2 million for the nine
months ended September 30, 2007. Compensation and benefits expense decreased
$4.0 million, as a result of previous staff reductions and lower stock-based
compensation costs. The Company incurred $773,000 in pre-tax severance costs
during the second quarter of 2008, compared with $3.2 million in severance
charges recognized during the quarter ended September 30, 2007. Advertising
costs decreased $352,000 for the nine months ended September 30, 2008, compared
with the same period in 2007, as prior year costs included charges related to
the First Morris acquisition. Amortization of intangibles decreased $209,000 for
the nine months ended September 30, 2008, compared with the same period in 2007,
as a result of scheduled reductions in the amortization of core deposit
intangibles. Partially offsetting these decreases, other operating expenses
increased $1.4 million for the nine months ended September 30, 2008, compared
with the same period in 2007, due to increases in several categories, including
an expense of $356,000 associated with the Company's proportionate share of a
litigation reserve established by Visa, as well as increases in attorney fees
and costs associated with foreclosed assets. Net occupancy expense increased
$1.2 million for the nine months ended September 30, 2008, compared with the
same period in 2007, due primarily to the addition of nine branch locations in
connection with the acquisition of First Morris.
The Company's annualized non-interest expense as a percentage of average assets
improved to 1.98% for the quarter ended September 30, 2008, compared with 2.30%
for the same period in 2007. For the nine months ended September 30, 2008,
non-interest expense as a percentage of average assets was 2.04%, compared with
2.21% for the same period in 2007. The efficiency ratio (non-interest expense
divided by the sum of net interest income and non-interest income) improved to
60.16% for the quarter ended September 30, 2008, compared with 75.41% for the
same period in 2007. For the nine months ended September 30, 2008, the
efficiency ratio was 64.66%, compared with 67.65% for the same period in 2007.
Asset Quality
Total non-performing loans at September 30, 2008 were $35.3 million, or 0.81% of
total loans, compared with $34.6 million, or 0.81% of total loans at December
31, 2007, and $11.0 million, or 0.26% of total loans at September 30, 2007. At
September 30, 2008, the Company's allowance for loan losses was 0.99% of total
loans, compared with 0.95% of total loans at December 31, 2007, and 0.89% of
total loans at September 30, 2007. The Company recorded provisions for loan
losses of $3.8 million and $6.6 million for the three and nine months ended
September 30, 2008, respectively, compared with provisions of $1.3 million and
$2.8 million for the three and nine months ended September 30, 2007,
respectively. For the three and nine months ended September 30, 2008, the
Company had net charge-offs of $1.6 million and $4.1 million, respectively,
compared with net charge-offs of $473,000 and $468,000 for the same periods in
2007. The allowance for loan losses increased $2.5 million, to $43.3 million at
September 30, 2008, from $40.8 million at December 31, 2007. The increase in the
loan loss provision for the three and nine months ended September 30, 2008,
compared with the same periods in 2007, was attributable to an increase in
non-performing loans, growth in the loan portfolio, and an increase in
commercial loans as a percentage of the loan portfolio to 44.7% at September 30,
2008, from 44.0% at September 30, 2007, as well as ongoing uncertainty with
respect to general economic conditions. At September 30, 2008, the Company held
$3.6 million of foreclosed assets, compared with $1.0 million at December 31,
2007, and $5.9 million at June 30, 2008. The increase in foreclosed assets at
September 30, 2008, compared with December 31, 2007, was primarily attributable
to one commercial real estate line of credit secured by a number of properties
that was previously classified as impaired.
3
Income Tax Expense
For the three months ended September 30, 2008, the Company's income tax expense
was $4.2 million, compared with $2.1 million for the same period in 2007. For
the nine months ended September 30, 2008, the Company's income tax expense was
$12.3 million, compared with $11.9 million for the same period in 2007. The
increase in income tax expense was primarily attributable to increased income
before income taxes. For the three and nine months ended September 30, 2008, the
Company's effective tax rates were 24.2% and 26.5%, respectively, compared with
20.2% and 26.7% for the three and nine months ended September 30, 2007,
respectively. The effective tax rates for the three and nine months ended
September 30, 2008 were favorably impacted by the utilization of capital losses
on securities transactions. The effective tax rates for the three and nine
months ended September 30, 2007 reflected a larger proportion of the Company's
income being derived from tax-exempt sources, primarily as a result of lower
pre-tax income in 2007 due to $3.2 million in severance charges recorded during
the quarter ended September 30, 2007.
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 83 full service branches
throughout northern and central New Jersey.
Post Earnings Conference Call
Representatives of the Company will hold a conference call for investors at
10:00 a.m. Eastern Time on October 23, 2008 regarding highlights of the
Company's third quarter 2008 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.
4
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Condition
September 30, 2008 (Unaudited) and December 31, 2007
(Dollars in Thousands)
Assets September 30, 2008 December 31, 2007
--------------------------------- ----------------------------
Cash and due from banks $ 84,970 $ 83,737
Federal funds sold -- 18,000
Short-term investments 3,664 38,892
--------------------------------- ----------------------------
Total cash and cash equivalents 88,634 140,629
--------------------------------- ----------------------------
Investment securities held to maturity (market value of
$347,193 at September 30, 2008 (unaudited) and
$359,666 at December 31, 2007) 354,112 358,491
Securities available for sale, at fair value 832,659 769,615
Federal Home Loan Bank stock 43,149 39,764
Loans 4,378,148 4,296,291
Less allowance for loan losses 43,329 40,782
--------------------------------- ----------------------------
Net loans 4,334,819 4,255,509
--------------------------------- ----------------------------
Foreclosed assets, net 3,556 1,041
Banking premises and equipment, net 77,078 79,138
Accrued interest receivable 23,587 24,665
Intangible assets 516,031 520,722
Bank-owned life insurance 125,654 121,674
Other assets 51,826 48,143
--------------------------------- ----------------------------
Total assets $ 6,451,105 $ 6,359,391
================================= ============================
Liabilities and Stockholders' Equity
Deposits:
Demand deposits $ 1,732,534 $ 1,553,625
Savings deposits 904,596 1,031,725
Certificates of deposit of $100,000 or more 431,744 480,362
Other time deposits 1,067,003 1,159,108
--------------------------------- ----------------------------
Total deposits 4,135,877 4,224,820
Mortgage escrow deposits 19,648 18,075
Borrowed funds 1,244,794 1,075,104
Other
liabilities 35,218 40,598
--------------------------------- ----------------------------
Total liabilities 5,435,537 5,358,597
--------------------------------- ----------------------------
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 59,609,837 shares outstanding at
September 30, 2008, and 59,646,936 shares outstanding at
December 31, 2007 832 832
Additional paid-in capital 1,013,080 1,009,120
Retained earnings 451,856 437,503
Accumulated other comprehensive income 186 4,335
Treasury stock at cost (384,852) (383,407)
Unallocated common stock held by Employee Stock
Ownership Plan (65,534) (67,589)
Common Stock acquired by the Directors' Deferred Fee Plan (7,690) (7,759)
Deferred compensation - Directors' Deferred Fee Plan 7,690 7,759
-------------------------------- ----------------------------
Total stockholders' equity 1,015,568 1,000,794
-------------------------------- ----------------------------
Total liabilities and stockholders'
equity $ 6,451,105 $ 6,359,391
================================ ============================
5
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Nine Months Ended September 30, 2008 and 2007 (Unaudited)
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ---------------------------------
2008 2007 2008 2007
------------- --------------- -------------- ----------------
(Unaudited) (Unaudited)
Interest income:
Real estate secured loans $ 42,465 42,791 124,406 125,315
Commercial loans 10,665 11,547 32,568 29,880
Consumer loans 9,106 10,227 27,932 29,061
Investment securities 3,606 3,802 10,860 11,664
Securities available for sale 10,770 9,418 32,372 28,614
Other short-term investments 26 37 329 115
Federal funds -- 5 164 110
------------- --------------- -------------- ----------------
Total interest income 76,638 77,827 228,631 224,759
------------- --------------- -------------- ----------------
Interest expense:
Deposits 20,133 30,307 68,945 83,663
Borrowed funds 11,154 8,237 32,577 24,501
------------- --------------- -------------- ----------------
Total interest expense 31,287 38,544 101,522 108,164
------------- --------------- -------------- ----------------
Net interest income 45,351 39,283 127,109 116,595
Provision for loan losses 3,800 1,300 6,600 2,800
------------- --------------- -------------- ----------------
Net interest income after
provision for loan losses 41,551 37,983 120,509 113,795
------------- --------------- -------------- ----------------
Non-interest income:
Fees 7,281 6,435 18,287 18,599
Gain on insurance settlement -- -- -- 5,947
Bank-owned life insurance 1,320 1,339 3,980 4,026
Net (loss) gain on securities transactions (966) 2 (565) (61)
Other income 140 297 1,525 1,490
------------- --------------- -------------- ----------------
Total non-interest income 7,775 8,073 23,227 30,001
------------- --------------- -------------- ----------------
Non-interest expense:
Compensation and employee benefits 16,591 20,842 50,768 54,784
Net occupancy expense 5,195 4,938 15,626 14,451
Data processing expense 2,296 2,249 6,903 6,913
Amortization of intangibles 1,373 1,677 4,706 4,915
Advertising and promotion 1,160 1,089 2,989 3,341
Other operating expenses 5,343 4,916 16,210 14,775
------------- --------------- -------------- ----------------
Total non-interest expense 31,958 35,711 97,202 99,179
------------- --------------- -------------- ----------------
Income before income tax 17,368 10,345 46,534 44,617
expense
Income tax expense 4,205 2,085 12,325 11,932
------------- --------------- -------------- ----------------
Net income $ 13,163 $8,260 34,209 $32,685
============= =============== ============== ================
Basic earnings per share $ 0.23 $ 0.14 0.61 $ 0.55
Average basic shares outstanding 56,078,691 58,968,076 56,006,174 59,787,076
Diluted earnings per share $ 0.23 $ 0.14 0.61 $ 0.55
Average diluted shares outstanding 56,078,870 58,968,076 56,006,234 59,787,076
6
PROVIDENT FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share data) (Unaudited)
At or for the Three At or for the Nine
Months Ended Months Ended
September 30, September 30,
----------------------------------------------------------------
2008 2007 2008 2007
---- ---- ---- ----
INCOME STATEMENT:
Net interest income $45,351 $39,283 $127,109 $116,595
Provision for loan losses 3,800 1,300 6,600 2,800
Non-interest income 7,775 8,073 23,227 30,001
Non-interest expense 31,958 35,711 97,202 99,179
Income before income tax expense 17,368 10,345 46,534 44,617
Net income 13,163 8,260 34,209 32,685
Basic earnings per share $0.23 $0.14 $0.61 $0.55
Diluted earnings per share $0.23 $0.14 $0.61 $0.55
Interest rate spread 2.96% 2.53% 2.74% 2.55%
Net interest margin 3.27% 2.97% 3.08% 3.00%
PROFITABILITY:
Annualized return on average assets 0.82% 0.53% 0.72% 0.73%
Annualized return on average equity 5.17% 3.18% 4.53% 4.22%
Annualized non-interest expense to average assets 1.98% 2.30% 2.04% 2.21%
Efficiency ratio (1) 60.16% 75.41% 64.66% 67.65%
ASSET QUALITY:
Non-accrual loans $35,281 $11,023
Non-performing loans 35,281 11,023
Foreclosed assets 3,556 600
Non-performing loans to
total loans 0.81% 0.26%
Non-performing assets to
total assets 0.60% 0.19%
Allowance for loan losses $43,329 $37,591
Allowance for loan losses to
non-performing loans 122.81% 341.02%
Allowance for loan losses to
total loans 0.99% 0.89%
AVERAGE BALANCE SHEET DATA:
Assets $6,419,753 $6,159,799 $6,365,479 $6,008,416
Loans, net 4,293,132 4,117,244 4,244,900 3,975,486
Earning assets 5,548,275 5,283,844 5,501,514 5,174,565
Core deposits 2,636,521 2,580,743 2,611,346 2,469,072
Borrowings 1,227,084 785,760 1,136,553 785,636
Interest-bearing liabilities 4,889,180 4,580,544 4,837,484 4,443,964
Stockholders' equity 1,012,422 1,029,610 1,009,190 1,036,157
Average yield on interest-earning assets 5.51% 5.87% 5.54% 5.80%
Average cost of interest-bearing liabilities 2.55% 3.34% 2.80% 3.25%
7
Notes
(1) Efficiency Ratio Calculation
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2008 2007 2008 2007
---- ---- ---- ----
Net interest income $45,351 $39,283 $127,109 $116,595
Non-interest income 7,775 8,073 23,227 30,001
----- ----- ------ ------
Total income $53,126 $47,356 $150,336 $146,596
======= ======= ======== ========
Non-interest expense $31,958 $35,711 $97,202 $99,179
======= ======= ======= =======
Expense/Income: 60.16% 75.41% 64.66% 67.65%
====== ====== ====== ======
8
Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) September 30, 2008 June 30, 2008
------------------------------------------ ----------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term Investments $ 4,651 $ 26 2.28 % $ 12,227 $ 93 3.05 %
Investment Securities (1) 354,603 3,606 4.07 354,012 3,601 4.07
Securities Available for Sale 854,981 10,212 4.78 887,401 10,557 4.76
Federal Home Loan Bank Stock 40,908 558 5.43 34,537 758 8.83
Net Loans (2)
Total Mortgage Loans 3,001,010 42,465 5.65 2,901,165 40,554 5.60
Total Commercial Loans 670,535 10,665 6.33 679,636 10,621 6.29
Total Consumer Loans 621,587 9,106 5.83 623,037 9,147 5.90
------------- ----------- ------------- -----------
Total Interest-Earning Assets 5,548,275 76,638 5.51 5,492,015 75,331 5.50
----------- -------------- ---------- --------------
Non-Interest Earning Assets:
Cash and Due from Banks 84,333 74,823
Other Assets 787,145 784,470
------------- --------------
Total Assets $ 6,419,753 $ 6,351,308
============= ==============
Interest-Bearing Liabilities:
Demand Deposits $ 1,249,566 5,725 1.82 % $ 1,178,700 5,110 1.74 %
Savings Deposits 920,365 2,273 0.98 965,877 2,446 1.02
Time Deposits 1,492,165 12,135 3.24 1,570,383 14,666 3.76
------------- ----------- -------------- ----------
Total Deposits 3,662,096 20,133 2.19 3,714,960 22,222 2.41
Total Borrowings 1,227,084 11,154 3.62 1,102,742 10,540 3.84
------------- ----------- -------------- ----------
Total Interest-Bearing Liabilities 4,889,180 31,287 2.55 4,817,702 32,762 2.74
----------- -------------- ---------- --------------
Non-Interest Bearing Liabilities 518,151 524,333
------------- --------------
Total Liabilities 5,407,330 5,342,035
Stockholders' Equity 1,012,422 1,009,273
------------- --------------
Total Liabilities & Stockholders'
Equity $ 6,419,753 $ 6,351,308
============= ==============
Net interest income $ 45,351 $ 42,569
=========== ==========
Net interest rate spread 2.96 % 2.76 %
==== ====
Net interest-earning assets $ 659,095 $ 674,313
============= ==============
Net interest margin (3) 3.27 % 3.10 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.13 x 1.14 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.
9/30/08 6/30/08 3/31/08 12/31/07 9/30/07
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
-------- -------- -------- -------- --------
Interest-Earning Assets:
Securities 4.59% 4.66% 4.67% 4.55% 4.55%
Net Loans 5.78% 5.76% 5.90% 6.09% 6.24%
Total Interest-Earning Assets 5.51% 5.50% 5.63% 5.76% 5.87%
Interest-Bearing Liabilities
Total Deposits 2.19% 2.41% 2.87% 3.11% 3.17%
Total Borrowings 3.62% 3.84% 4.06% 4.19% 4.16%
Total Interest-Bearing Liabilities 2.55% 2.74% 3.14% 3.33% 3.34%
Interest Rate Spread 2.96% 2.76% 2.49% 2.43% 2.53%
Net Interest Margin 3.27% 3.10% 2.87% 2.84% 2.97%
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities 1.13x 1.14x 1.14x 1.14x 1.15x
10
Average YTD Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) September 30, 2008 September 30, 2007
------------------------------------------ ----------------------------------------
Average Average Average Average
Balance Interest Yield Balance Interest Yield
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term Investments $ 20,182 $ 493 3.27 % $ 5,561 $ 225 5.40 %
Investment Securities (1) 354,656 10,860 4.08 377,502 11,664 4.12
Securities Available for Sale 843,576 30,300 4.79 785,987 26,876 4.56
Federal Home Loan Bank Stock 38,200 2,072 7.25 30,029 1,738 7.74
Net Loans (2)
Total Mortgage Loans 2,933,316 124,406 5.66 2,795,469 125,315 5.98
Total Commercial Loans 683,942 32,568 6.36 554,718 29,880 7.20
Total Consumer Loans 627,642 27,932 5.93 625,299 29,061 6.21
------------- --------------- ----------
Total Interest-Earning Assets 5,501,514 228,631 5.54 5,174,565 224,759 5.80
------------ -------------- ---------- -----------
Non-Interest Earning Assets:
Cash and Due from Banks 80,175 89,151
Other Assets 783,790 774,700
------------- ---------------
Total Assets $ 6,365,479 $ 6,008,416
============= ===============
Interest-Bearing Liabilities:
Demand Deposits $ 1,181,644 17,315 1.96 % $ 787,590 14,152 2.40 %
Savings Deposits 961,161 7,830 1.09 1,207,087 14,757 1.63
Time Deposits 1,558,126 43,800 3.75 1,663,651 54,754 4.40
------------- ------------ --------------- ----------
Total Deposits 3,700,931 68,945 2.49 3,658,328 83,663 3.06
Total Borrowings 1,136,553 32,577 3.83 785,636 24,501 4.17
------------- ------------ --------------- ----------
Total Interest-Bearing Liabilities 4,837,484 101,522 2.80 4,443,964 108,164 3.25
------------ ------------- ---------- -----------
Non-Interest Bearing Liabilities 518,805 528,295
------------- ---------------
Total Liabilities 5,356,289 4,972,259
Stockholders' Equity 1,009,190 1,036,157
------------- ---------------
Total Liabilities & Stockholders'
Equity $ 6,365,479 $ 6,008,416
============= ===============
Net interest income $ 127,109 $ 116,595
============ ==========
Net interest rate spread 2.74 % 2.55 %
==== ====
Net interest-earning assets $ 664,030 $ 730,601
============= ===============
Net interest margin (3) 3.08 % 3.00 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.14 X 1.16 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.
Nine Months Ended
----------------------------------------
9/30/08 9/30/07 9/30/06
Interest-Earning Assets:
Securities 4.64% 4.50% 4.26%
Net Loans 5.81% 6.19% 5.98%
Total Interest-Earning Assets 5.54% 5.80% 5.51%
Interest-Bearing Liabilities:
Total Deposits 2.49% 3.06% 2.34%
Total Borrowings 3.83% 4.17% 3.78%
Total Interest-Bearing Liabilities 2.80% 3.25% 2.64%
Interest Rate Spread 2.74% 2.55% 2.87%
Net Interest Margin 3.08% 3.00% 3.28%
Ratio of Interest-Earning Assets to
Total Interest-Bearing Liabilities 1.14x 1.16x 1.19x
12