NEWS RELEASE
CONTACT: Kenneth J. Wagner, SVP Investor Relations
Provident Financial Services, Inc.
(201) 915-5344
FOR RELEASE: 7:43 A.M. Eastern Time: July 23, 2009
Provident Financial Services, Inc. Announces Quarterly Earnings and Declares
Quarterly Cash Dividend
JERSEY CITY, NJ, July 23, 2009---/PRNewswwire/First Call/ - Provident Financial
Services, Inc. (NYSE:PFS) (the "Company") reported net income of $6.3 million,
or $0.11 per basic and diluted share for the quarter ended June 30, 2009,
compared to net income of $10.4 million, or $0.18 per basic and diluted share
for the quarter ended June 30, 2008. The Company reported operating income,
excluding a non-cash goodwill impairment charge recorded in the first quarter of
2009, of $15.2 million, or $0.27 per basic and diluted share for the six months
ended June 30, 2009, compared to net income of $21.0 million, or $0.38 per basic
and diluted share for the six months ended June 30, 2008.
The Company previously recognized a $152.5 million, or $2.71 per share goodwill
impairment charge during the quarter ended March 31, 2009. This accounting
charge resulted in a net loss of $137.3 million, or $2.44 per basic and diluted
share for the six months ended June 30, 2009. The goodwill impairment charge was
a non-cash accounting adjustment to the Company's financial statements which did
not affect cash flows, liquidity, or tangible capital. As goodwill is excluded
from regulatory capital, the impairment charge did not impact the regulatory
capital ratios of the Company or its wholly owned subsidiary, The Provident
Bank, both of which remain "well-capitalized" under regulatory requirements.
Compared with the three and six months ended June 30, 2008, earnings and per
share data for the three and six months ended June 30, 2009 also reflect an
increase in the provision for loan losses due to the following: an increase in
non-performing loans; downgrades in risk ratings; year-over-year growth in the
loan portfolio; an increase in commercial loans as a percentage of the loan
portfolio; and the impact of current macroeconomic conditions. The provision for
loan losses was $5.8 million and $11.6 million for the three and six months
ended June 30, 2009, respectively, compared with $1.5 million and $2.8 million,
respectively, for the same periods in 2008. In addition, earnings and per share
data for the three and six months ended June 30, 2009 were impacted by a special
assessment imposed on the banking industry by the FDIC as part of a plan to
restore the deposit insurance fund. The cost of this special assessment to the
Company was $1.9 million, or $0.03 per basic and diluted share, net of tax.
Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "During the
second quarter, we continued to address the challenges posed by the recessionary
economy by making requisite loan charge-offs and appropriate additions to the
allowance for potential loan losses. As a result, our ratio of non-performing
loans to total loans remained essentially unchanged from the level reported at
the end of the prior quarter, and our ratio of loan loss allowance to total
loans remained stable. Our deposits increased during the second quarter as
consumers and businesses continued to seek a secure and reputable repository for
their funds. We remained cautious in deploying this excess liquidity, however,
as we sought to meet loan demand from quality borrowers and to select
investments that would return a meaningful longer-term revenue stream while
managing our interest rate risk. This posture resulted in a decrease in our net
interest margin as compared to both the matched and trailing quarters." Pantozzi
continued, "These factors, coupled with the special FDIC assessment, had an
impact on net earnings for the quarter, but our long-term focus on balance sheet
management, expense control, asset quality maintenance and a solid capital
position have helped ensure that our core operating capabilities remain strong."
Declaration of Quarterly Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.11 per
common share payable on August 31, 2009, to stockholders of record as of the
close of business on August 17, 2009.
Balance Sheet Summary
Total assets increased $120.1 million, or 1.8%, to $6.67 billion at June 30,
2009, from $6.55 billion at December 31, 2008, due primarily to increases in
securities available for sale and cash and cash equivalents, partially offset by
decreases in loans and intangible assets.
1
Cash and cash equivalents increased $135.8 million to $204.3 million at June 30,
2009, from $68.5 million at December 31, 2008, as a result of deposit inflows
and proceeds from repayments and sales of loans. The Company will continue to
deploy these balances to fund loan originations, investment purchases and the
repayment of maturing borrowings.
Total investments increased $299.2 million, or 24.7%, during the six months
ended June 30, 2009. The increase included $84.9 million of residential mortgage
loan pools that were securitized by the Company in the first quarter of 2009 and
are held as securities available for sale. The loan securitization was
undertaken to enhance the liquidity and risk-based capital treatment of the
underlying loans.
The Company's net loans decreased $173.4 million, or 3.9%, to $4.31 billion at
June 30, 2009, from $4.48 billion at December 31, 2008. This decrease was
partially attributable to the securitization of $84.9 million of residential
mortgage loans during the first quarter of 2009. Loan originations totaled
$572.5 million and loan purchases totaled $28.6 million for the six months ended
June 30, 2009. Compared with December 31, 2008, residential mortgage loans
decreased $189.1 million, consumer loans decreased $26.0 million, construction
loans decreased $5.0 million, and commercial loans decreased $797,000, while
commercial mortgage and multi-family loans increased $53.5 million. In addition
to the securitization of $84.9 million of loans, total residential mortgage
loans decreased as a result of the sale of newly originated 30-year fixed-rate
loans as part of the Company's interest rate risk management process. Commercial
real estate, construction and commercial loans represented 49.4% of the loan
portfolio at June 30, 2009, compared to 46.5% at December 31, 2008.
At June 30, 2009, the Company's unfunded loan commitments totaled $730.2
million, including $241.3 million in commercial loan commitments, $100.9 million
in construction loan commitments and $97.2 million in commercial mortgage
commitments. Unfunded loan commitments at March 31, 2009 were $708.7 million.
Intangible assets decreased $154.9 million to $359.8 million at June 30, 2009,
from $514.7 million at December 31, 2008, primarily due to a $152.5 million
goodwill impairment charge previously recognized in the first quarter of 2009.
Total deposits increased $483.0 million, or 11.4%, during the six months ended
June 30, 2009, to $4.71 billion. Core deposits, consisting of savings and demand
deposit accounts, increased $321.0 million, or 11.9%, to $3.01 billion at June
30, 2009. The majority of the core deposit increase was in municipal money
market and retail checking deposits. Time deposits increased $162.0 million, or
10.6%, to $1.69 billion at June 30, 2009, with the majority of the increase
occurring in the 18- and 15-month maturity categories. Core deposits represented
64.0% of total deposits at June 30, 2009, compared to 63.7% at December 31,
2008.
Borrowed funds were reduced by $219.9 million, or 17.6%, during the six months
ended June 30, 2009, to $1.03 billion, as the Company deployed excess liquidity
arising from the increase in core deposit funding. Borrowed funds represented
15.4% of total assets at June 30, 2009, a reduction from 19.1% at December 31,
2008.
Common stock repurchases for the six months ended June 30, 2009 totaled 6,000
shares at an average cost of $11.31 per share. At June 30, 2009, 2.1 million
shares remained eligible for repurchase under the current authorization. At June
30, 2009, book value per share and tangible book value per share were $14.59 and
$8.57, respectively, compared with $17.09 and $8.45, respectively, at December
31, 2008.
Results of Operations
Net Interest Margin
The net interest margin decreased 14 basis points to 2.96% for the quarter ended
June 30, 2009, from 3.10% for each of the quarters ended March 31, 2009 and June
30, 2008. The decrease in the net interest margin for the three months ended
June 30, 2009 versus the trailing quarter and the quarter ended June 30, 2008
was attributable to reductions in earning asset yields, an increase in the
average balance of lower-yielding interest-bearing deposits and short-term
investments and an increase in the average balance of non-performing loans. The
weighted average yield on interest-earning assets was 4.96% for the three months
ended June 30, 2009, compared with 5.21% for the trailing quarter and 5.50% for
the three months ended June 30, 2008. The weighted average cost of
interest-bearing liabilities was 2.27% for the quarter ended June 30, 2009,
compared with 2.39% for the trailing quarter and 2.74% for the second quarter of
2008. The average cost of deposits for the three months ended June 30, 2009 was
1.93%, compared with 2.06% for the trailing quarter and 2.41% for the same
period last year. The average cost of borrowings for the three months ended June
30, 2009 was 3.60%, compared with 3.47% for the trailing quarter and 3.84% for
the same period last year. The increase in the average cost of borrowings for
the quarter ended June 30, 2009 versus the trailing quarter was attributable to
a reduction in lower-cost overnight borrowings resulting from increased deposit
levels.
2
For the six months ended June 30, 2009, the net interest margin increased 5
basis points to 3.03%, compared with 2.98% for the six months ended June 30,
2008. The weighted average yield on interest-earning assets declined 48 basis
points to 5.08% for the six months ended June 30, 2009, compared with 5.56% for
the six months ended June 30, 2008, however the weighted average cost of
interest-bearing liabilities declined 61 basis points to 2.33% for the six
months ended June 30, 2009, compared with 2.94% for the same period in 2008. The
average cost of deposits for the six months ended June 30, 2009 was 1.99%,
compared with 2.64% for the same period last year. The average cost of
borrowings for the six months ended June 30, 2009 was 3.53%, compared with 3.95%
for the same period last year.
Non-Interest Income
Non-interest income totaled $8.9 million for the quarter ended June 30, 2009, an
increase of $2.2 million compared to the same period in 2008. Fee income for the
quarter ended June 30, 2009 increased $1.6 million, or 32.2%, compared to the
same period in 2008, primarily as a result of increases in the value of equity
fund holdings. In addition, net gains on securities transactions totaled
$992,000 for the quarter ended June 30, 2009, compared with net gains of
$305,000 for the same quarter in 2008. Other income increased $740,000 for the
quarter ended June 30, 2009, compared with the same period in 2008, primarily
due to an increase in gains on loan sales. The Company experienced an increase
in the origination and sale of 30-year fixed-rate residential mortgage loans
during the first half of 2009 as a result of lower prevailing market interest
rates that promoted increased refinancing activity. Partially offsetting these
increases, the Company recognized net other-than-temporary impairment charges of
$801,000 in the second quarter of 2009 related to investments in a non-Agency
mortgage-backed security and the common stock of two publicly traded financial
institutions.
For the six months ended June 30, 2009, non-interest income totaled $15.8
million, an increase of $379,000, or 2.5%, compared to the same period in 2008.
Fee income increased $689,000, or 6.3%, for the six months ended June 30, 2009,
compared to the same period in 2008, primarily as a result of increases in the
value of equity fund holdings. In addition, net gains on securities transactions
totaled $1.2 million for the six months ended June 30, 2009, compared with net
gains of $401,000 for the same period in 2008. Partially offsetting these
increases, the Company recognized net other-than-temporary impairment charges of
$801,000 in the second quarter of 2009 related to investments in a non-Agency
mortgage-backed security and the common stock of two publicly traded financial
institutions. Other income also declined for the six months ended June 30, 2009,
compared with the same period in 2008, primarily as a result of $660,000 of
non-recurring income realized last year in connection with Visa's initial public
offering.
Non-Interest Expense
For the three months ended June 30, 2009, non-interest expense increased $4.9
million, or 14.6%, to $38.2 million, compared to $33.3 million for the three
months ended June 30, 2008. FDIC insurance expense increased $4.8 million for
the three months ended June 30, 2009, compared with the same period in 2008, as
a result of deposit growth, changes in premium rates and a special assessment
imposed on the industry as part of a plan to restore the deposit insurance fund.
The cost of the FDIC special assessment was $3.1 million, accrued during the
quarter ended June 30, 2009 and payable September 30, 2009. In addition, other
operating expenses increased $964,000 for the quarter ended June 30, 2009,
compared with the same period last year, primarily as a result of costs
associated with the dissolution of a real estate development joint venture.
Partially offsetting these increases, compensation and benefits expense
decreased $680,000 for the three months ended June 30, 2009, compared with the
same period in 2008, primarily due to the recognition of $773,000 in severance
costs during the second quarter of 2008.
Excluding the $152.5 million non-cash goodwill impairment charge recorded in the
first quarter of 2009, non-interest expense increased $6.2 million, or 9.5%, to
$71.4 million for the six months ended June 30, 2009, compared to $65.2 million
for the six months ended June 30, 2008. FDIC insurance expense increased $5.1
million for the six months ended June 30, 2009, compared with the same period in
2008, as a result of deposit growth, changes in premium rates and the $3.1
million FDIC special assessment discussed previously. Other operating expenses
increased $1.0 million for the six months ended June 30, 2009, compared with the
same period in 2008, due primarily to costs associated with the dissolution of a
real estate development joint venture.
Asset Quality
Total non-performing loans at June 30, 2009 were $63.9 million, or 1.47% of
total loans, compared with $63.8 million, or 1.46% of total loans at March 31,
2009, $59.1 million, or 1.31% of total loans at December 31, 2008, and $36.7
million, or 0.86% of total loans at June 30, 2008. At June 30, 2009, impaired
loans totaled $37.0 million with related specific reserves of $4.7 million. At
June 30, 2009, the Company's allowance for loan losses was 1.19% of total loans,
compared with 1.05% of total loans at December 31, 2008 and 0.96% of total loans
at June 30, 2008. The Company recorded provisions for loan losses of $5.8
3
million and $11.6 million for the three and six months ended June 30, 2009,
respectively, compared with provisions of $1.5 million and $2.8 million for the
three and six months ended June 30, 2008, respectively. For the three and six
months ended June 30, 2009, the Company had net charge-offs of $6.2 million and
$7.3 million, respectively, compared with net charge-offs of $1.2 and $2.5
million, respectively, for the same periods in 2008. Net charge-offs for the
three and six months ended June 30, 2009 included $3.0 million related to an
equipment lease financing company. The allowance for loan losses increased $4.3
million to $52.0 million at June 30, 2009, from $47.7 million at December 31,
2008. The increase in the loan loss provision for the three and six months ended
June 30, 2009, compared with the same periods in 2008, was attributable to an
increase in non-performing loans, downgrades in risk ratings, year-over-year
growth in the loan portfolio and an increase in commercial loans as a percentage
of the loan portfolio to 49.4% at June 30, 2009, from 45.1% at June 30, 2008. At
June 30, 2009, the Company held $5.5 million of foreclosed assets, compared with
$3.4 million at December 31, 2008.
Income Tax Expense
For the three months ended June 30, 2009, the Company's income tax expense was
$1.7 million, compared with $4.1 million for the same period in 2008. For the
six months ended June 30, 2009, the Company's income tax expense was $4.7
million, compared with $8.1 million for the same period in 2008. The decrease in
income tax expense was attributable to lower pre-tax income and a lower
effective tax rate. Excluding the impact of the goodwill impairment charge
recognized in the first quarter of 2009, which is not tax deductible, the
Company's effective tax rates were 21.5% and 23.4%, respectively, for the three
and six months ended June 30, 2009, compared with 28.3% and 27.8% for the three
and six months ended June 30, 2008, respectively. The reduction in the effective
tax rate is attributable to reduced projections of taxable income and a larger
proportion of the Company's income being derived from tax-exempt sources.
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 81 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 23, 2009 regarding highlights of the Company's
second quarter 2009 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
June 30, 2009 (Unaudited) and December 31, 2008
(Dollars in Thousands)
Assets June 30, 2009 December 31, 2008
--------------------------------- ----------------------------
Cash and due from banks $ 195,754 $ 66,315
Short-term investments 8,570 2,231
--------------------------------- ----------------------------
Total cash and cash equivalents 204,324 68,546
--------------------------------- ----------------------------
Investment securities held to maturity (market value of $344,743 at June 30,
2009 (unaudited) and $351,623
at December 31, 2008) 339,307 347,484
Securities available for sale, at fair value 1,134,818 820,329
Federal Home Loan Bank stock 35,732 42,833
Loans 4,357,657 4,526,748
Less allowance for loan losses 51,994 47,712
--------------------------------- ----------------------------
Net loans 4,305,663 4,479,036
--------------------------------- ----------------------------
Foreclosed assets, net 5,459 3,439
Banking premises and equipment, net 76,429 75,750
Accrued interest receivable 25,004 23,866
Intangible assets 359,790 514,684
Bank-owned life insurance 129,475 126,956
Other assets 52,843 45,825
--------------------------------- ----------------------------
Total assets $ 6,668,844 $ 6,548,748
================================= ============================
Liabilities and Stockholders' Equity
Deposits:
Demand deposits $ 2,137,915 $ 1,821,437
Savings deposits 876,935 872,388
Certificates of deposit of $100,000 or more 541,951 445,466
Other time deposits 1,152,579 1,087,045
--------------------------------- ----------------------------
Total deposits 4,709,380 4,226,336
Mortgage escrow deposits 19,795 20,074
Borrowed funds 1,027,762 1,247,681
Other liabilities 39,334 36,067
--------------------------------- ----------------------------
Total liabilities 5,796,271 5,530,158
--------------------------------- ----------------------------
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 59,836,673 shares outstanding at
June 30, 2009, and 59,610,623 shares outstanding at
December 31, 2008 832 832
Additional paid-in capital 1,014,162 1,013,293
Retained earnings 303,892 454,444
Accumulated other comprehensive income 1,875 (485)
Treasury stock at cost (384,924) (384,854)
Unallocated common stock held by Employee Stock
Ownership Plan (63,264) (64,640)
Common Stock acquired by the Directors' Deferred Fee Plan (7,621) (7,667)
Deferred compensation - Directors' Deferred Fee Plan 7,621 7,667
-------------------------------- ----------------------------
Total stockholders' equity 872,573 1,018,590
-------------------------------- ----------------------------
Total liabilities and stockholders'
equity $ 6,668,844 $ 6,548,748
================================ ============================
5
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2009 and 2008 (Unaudited)
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ---------------------------------
2009 2008 2009 2008
------------- --------------- -------------- ----------------
(Unaudited) (Unaudited)
(Unaudited)
Interest income:
Real estate secured loans $ 39,675 40,554 80,280 $81,941
Commercial loans 10,570 10,621 21,068 21,903
Consumer loans 7,923 9,147 16,097 18,826
Investment securities 3,343 3,601 6,792 7,254
Securities available for sale 10,668 11,315 21,379 21,602
Other short-term investments 5 77 12 303
Deposits 117 -- 117 --
Federal funds 11 16 24 164
------------- --------------- -------------- ----------------
Total interest income 72,312 75,331 145,769 151,993
------------- --------------- -------------- ----------------
Interest expense:
Deposits 19,759 22,222 39,329 48,812
Borrowed funds 9,388 10,540 19,344 21,423
------------- --------------- -------------- ----------------
Total interest expense 29,147 32,762 58,673 70,235
------------- --------------- -------------- ----------------
Net interest income 43,165 42,569 87,096 81,758
Provision for loan losses 5,800 1,500 11,600 2,800
------------- --------------- -------------- ----------------
Net interest income after
provision for loan losses 37,365 41,069 75,496 78,958
------------- --------------- -------------- ----------------
Non-interest income:
Fees 6,466 4,892 11,695 11,006
Bank-owned life insurance 1,350 1,352 2,519 2,660
Net gain on securities transactions 992 305 1,179 401
Other-than-temporary impairment losses on
securities (5,466) -- (5,466) --
Portion of loss recognized in other
comprehensive income (before taxes) 4,665 -- 4,665 --
------------- --------------- -------------- ----------------
Net impairment losses on securities recognized (801) -- (801) --
in earnings
Other income 858 118 1,239 1,385
------------- --------------- -------------- ----------------
Total non-interest income 8,865 6,667 15,831 15,452
------------- --------------- -------------- ----------------
Non-interest expense:
Goodwill impairment -- -- 152,502 --
Compensation and employee benefits 16,784 17,464 34,261 34,177
FDIC Insurance 4,934 141 5,360 285
Net occupancy expense 4,912 5,174 10,304 10,431
Data processing expense 2,300 2,244 4,656 4,607
Advertising and promotion 1,356 1,312 2,030 1,829
Amortization of intangibles 1,311 1,557 2,905 3,333
Insurance 559 456 1,104 938
Printing and supplies 545 457 1,048 890
Other operating expenses 5,451 4,487 9,779 8,754
------------- --------------- -------------- ----------------
Total non-interest expense 38,152 33,292 223,949 65,244
------------- --------------- -------------- ----------------
6
Income (loss) before income 8,078 14,444 (132,622) 29,166
tax expense
Income tax expense 1,733 4,091 4,652 8,120
------------- --------------- -------------- ----------------
Net income (loss) $ 6,345 10,353 (137,274) $21,046
============= =============== ============== ================
Basic earnings (loss) per share $ 0.11 $ 0.18 (2.44) $ 0.38
Average basic shares outstanding 56,240,798 56,014,455 56,205,182 55,969,517
Diluted earnings (loss) per share $ 0.11 $ 0.18 (2.44) $ 0.38
Average diluted shares outstanding 56,240,798 56,014,455 56,205,182 55,969,517
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,
----------------------------------------------------------------
2009 2008 2009 2008
---- ---- ---- ----
STATEMENTS OF OPERATIONS:
Net interest income $43,165 $42,569 $87,096 $81,758
Provision for loan losses 5,800 1,500 11,600 2,800
Non-interest income 8,865 6,667 15,831 15,452
Non-interest expense (1) 38,152 33,292 71,447 65,244
Operating income before income tax expense (2) 8,078 14,444 19,880 29,166
Operating income (2) 6,345 10,353 15,228 21,046
Goodwill impairment charge -- -- 152,502 --
Net income (loss) 6,345 10,353 (137,274) 21,046
Operating basic and diluted earnings per share (1) $0.11 $0.18 $0.27 $0.38
Per share impact of goodwill impairment charge -- -- $(2.71) --
Basic and diluted earnings (loss) per share $0.11 $0.18 $(2.44) $0.38
Interest rate spread 2.69% 2.76% 2.75% 2.62%
Net interest margin 2.96% 3.10% 3.03% 2.98%
PROFITABILITY:
Annualized return on average assets (1) 0.39% 0.66% 0.47% 0.67%
Annualized return on average equity (1) 2.91% 4.13% 3.24% 4.20%
Annualized non-interest expense to average assets (1) 2.34% 2.11% 2.20% 2.07%
Efficiency ratio (1), (3) 73.33% 67.62% 69.42% 67.12%
ASSET QUALITY:
Non-accrual loans $63,880 $20,726
90+ and still accruing loans -- 15,990
Non-performing loans 63,880 36,716
Foreclosed assets 5,459 5,883
Non-performing loans to
total loans 1.47% 0.86%
Non-performing assets to
total assets 1.04% 0.67%
Allowance for loan losses $51,994 $41,118
Allowance for loan losses to
non-performing loans 81.39% 111.99%
Allowance for loan losses to
total loans 1.19% 0.96%
7
AVERAGE BALANCE SHEET DATA:
Assets $6,548,904 $6,351,308 $6,543,363 $6,338,041
Loans, net 4,280,311 4,203,838 4,321,162 4,220,519
Earning assets 5,834,063 5,492,015 5,756,561 5,477,877
Core deposits 2,885,324 2,618,253 2,800,537 2,598,620
Borrowings 1,044,909 1,102,742 1,103,698 1,090,790
Interest-bearing liabilities 5,153,373 4,817,702 5,083,899 4,811,352
Stockholders' equity 874,519 1,009,273 946,475 1,007,553
Average yield on interest-earning assets 4.96% 5.50% 5.08% 5.56%
Average cost of interest-bearing liabilities 2.27% 2.74% 2.33% 2.94%
Notes
(1) Excluding a $152.2 million non-cash goodwill impairment charge
(2) Operating Income Reconciliation
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Net income (loss) $6,345 $10,353 $(137,274) $21,046
Goodwill impairment -- -- 152,502 --
------- ------- ------- -------
Operating income $6,345 $10,353 $15,228 $21,046
====== ======= ======= =======
(3) Efficiency Ratio Calculation
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Net interest income $43,165 $42,569 $87,096 $81,758
Non-interest income 8,865 6,667 15,831 15,452
----- ----- ------ ------
Total income $52,030 $49,236 $102,927 $97,210
======= ======= ======== =======
Non-interest expense (1) $38,152 $33,292 $71,447 $65,244
======= ======= ======= =======
Expense/Income: 73.33% 67.62% 69.42% 67.12%
====== ====== ====== ======
8
Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) June 30, 2009 March 31, 2009
------------------------------------------ ----------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Deposits $ 187,257 $ 117 0.25 % $ -- $ -- -- %
Federal Funds Sold and
Other Short-Term Investments 52,783 16 0.12 40,640 20 0.20
Investment Securities (1) 338,409 3,343 3.95 343,360 3,449 4.02
Securities Available for Sale 939,576 10,135 4.31 893,274 10,386 4.65
Federal Home Loan Bank Stock 35,727 533 5.98 38,456 325 3.42
Net Loans (2)
Total Mortgage Loans 2,959,822 39,675 5.37 3,022,253 40,605 5.40
Total Commercial Loans 716,468 10,570 5.92 724,545 10,498 5.88
Total Consumer Loans 604,021 7,923 5.26 615,669 8,174 5.38
------------- ----------- -------------- ----------
Total Interest-Earning Assets 5,834,063 72,312 4.96 5,678,197 73,457 5.21
----------- -------------- ---------- --------------
Non-Interest-Earning Assets:
Cash and Due from Banks 90,947 82,195
Other Assets 623,894 777,368
------------- --------------
Total Assets $ 6,548,904 $ 6,537,760
============= ==============
Interest-Bearing Liabilities:
Demand Deposits $ 1,532,855 5,612 1.47 % $ 1,387,566 5,518 1.61 %
Savings Deposits 877,220 1,681 0.77 867,822 1,880 0.88
Time Deposits 1,698,389 12,466 2.94 1,595,124 12,172 3.09
------------- ----------- -------------- ----------
Total Deposits 4,108,464 19,759 1.93 3,850,512 19,570 2.06
----------- ----------
Total Borrowings 1,044,909 9,388 3.60 1,163,140 9,956 3.47
------------- ----------- -------------- ----------
Total Interest-Bearing Liabilities 5,153,373 29,147 2.27 5,013,652 29,526 2.39
----------- -------------- ---------- --------------
Non-Interest-Bearing Liabilities 521,012 504,877
------------- --------------
Total Liabilities 5,674,385 5,518,529
Stockholders' Equity 874,519 1,019,231
------------- --------------
Total Liabilities & Stockholders
Equity $ 6,548,904 $ 6,537,760
============= ==============
Net interest income $ 43,165 $ 43,931
=========== ==========
Net interest rate spread 2.69 % 2.82 %
==== ====
Net interest-earning assets $ 680,690 $ 664,545
============= ==============
Net interest margin (3) 2.96 % 3.10 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.13 x 1.13 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.
6/30/09 3/31/09 12/31/08 9/30/08 6/30/08
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
-------- -------- -------- -------- --------
Interest-Earning Assets:
Securities 3.64% 4.31% 4.50% 4.59% 4.66%
Net Loans 5.44% 5.48% 5.63% 5.78% 5.76%
Total Interest-Earning Assets 4.96% 5.21% 5.38% 5.51% 5.50%
Interest-Bearing Liabilities
Total Deposits 1.93% 2.06% 2.14% 2.19% 2.41%
Total Borrowings 3.60% 3.47% 3.45% 3.62% 3.84%
Total Interest-Bearing Liabilities 2.27% 2.39% 2.47% 2.55% 2.74%
Interest Rate Spread 2.69% 2.82% 2.91% 2.96% 2.76%
Net Interest Margin 2.96% 3.10% 3.20% 3.27% 3.10%
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities 1.13x 1.13x 1.13x 1.13x 1.14x
10
Average YTD Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) June 30, 2009 June 30, 2008
------------------------------------------ ----------------------------------------
Average Average Average Average
Balance Interest Yield Balance Interest Yield
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Deposits $ 94,146 $ 117 0.25 % $ -- $ -- -- %
Federal Funds Sold and
Other Short-Term Investments 46,745 36 0.15 28,033 467 3.35
Investment Securities (1) 340,871 6,792 3.99 354,683 7,254 4.09
Securities Available for Sale 916,553 20,522 4.48 837,811 20,088 4.80
Federal Home Loan Bank Stock 37,084 857 4.66 36,831 1,514 8.27
Net Loans (2)
Total Mortgage Loans 2,990,865 80,280 5.39 2,899,097 81,941 5.67
Total Commercial Loans 720,484 21,068 5.90 690,719 21,903 6.38
Total Consumer Loans 609,813 16,097 5.32 630,703 18,826 5.99
------------- ------------ ------------- ------------
Total Interest-Earning Assets 5,756,561 145,769 5.08 5,477,877 151,993 5.56
------------- ------------- ------------ ---------
Non-Interest-Earning Assets:
Cash and Due from Banks 86,595 78,073
Other Assets 700,207 782,091
------------- ---------------
Total Assets $ 6,543,363 $ 6,338,041
============= ===============
Interest-Bearing Liabilities:
Demand Deposits $ 1,458,679 11,130 1.54 % $ 1,147,310 11,590 2.03 %
Savings Deposits 874,480 3,562 0.82 981,783 5,557 1.14
Time Deposits 1,647,042 24,637 3.02 1,591,469 31,665 4.00
------------- ------------ --------------- ----------
Total Deposits 3,980,201 39,329 1.99 3,720,562 48,812 2.64
------------ ----------
Total Borrowings 1,103,698 19,344 3.53 1,090,790 21,423 3.95
------------- ------------ --------------- ----------
Total Interest-Bearing Liabilities 5,083,899 58,673 2.33 4,811,352 70,235 2.94
------------ ------------ ---------- -----------
Non-Interest-Bearing Liabilities 512,989 519,136
------------- ---------------
Total Liabilities 5,596,888 5,330,488
Stockholders' Equity 946,475 1,007,553
------------- ---------------
Total Liabilities & Stockholders' $ 6,543,363 $ 6,338,041
Equity ============= ===============
Net interest income $ 87,096 $ 81,758
============ ==========
Net interest rate spread 2.75 % 2.62 %
==== ====
Net interest-earning assets $ 672,663 $ 666,525
============= ===============
Net interest margin (3) 3.03 % 2.98 %
==== ====
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.
11
The following table summarizes the YTD net interest margin for the previous
three years, inclusive.
Six Months Ended
----------------------------------------
6/30/09 6/30/08 6/30/07
------- ------- -------
Interest-Earning Assets:
Securities 3.95% 4.67% 4.48%
Net Loans 5.46% 5.83% 6.16%
Total Interest-Earning Assets 5.08% 5.56% 5.76%
Interest-Bearing Liabilities:
Total Deposits 1.99% 2.64% 3.00%
Total Borrowings 3.53% 3.95% 4.17%
Total Interest-Bearing Liabilities 2.33% 2.94% 3.21%
Interest Rate Spread 2.75% 2.62% 2.55%
Net Interest Margin 3.03% 2.98% 3.02%
Ratio of Interest-Earning Assets to
Total Interest-Bearing Liabilities 1.13x 1.14x 1.17x
12