CAPX Elkhorn S&P 500 Capital Expenditures Portfolio

Capital Crossing Bank (NASDAQ:CAPX) (the "Bank") reported consolidated net income of $4.3 million, or $0.62 per diluted share, for the second quarter of 2005, compared to consolidated net income of $4.3 million, or $0.54 per diluted share, for the same period in 2004. The Bank also reported consolidated net income of $8.9 million, or $1.26 per diluted share, for the six months ended June 30, 2005, compared to consolidated net income of $9.5 million, or $1.20 per diluted share, for the same period in 2004. Nicholas W. Lazares, the Bank's Chairman and Co-Chief Executive Officer, stated, "We are pleased to report another strong quarter at Capital Crossing Bank." Mr. Lazares further stated, "A significant portion of the Bank's revenue arises from the recognition of "transactional" income. In the second quarter of 2005, the Bank recognized $10.1 million of transactional income, including $5.8 million of accelerated interest income associated with loan and lease payoffs and $4.3 million in net gains on sales of other real estate owned and property in possession. By contrast, in the second quarter of 2004, the Bank recognized approximately $8.7 million of transactional income, including $6.9 million of accelerated interest income associated with loan and lease payoffs, $960,000 in gains on sales of loans and $845,000 in net gains on sales of other real estate owned and property in possession. Total transactional income for the six months ended June 30, 2005 and 2004 amounted to $19.8 million and $17.0 million, respectively. Since the level of transactional income is unpredictable from quarter to quarter, the Bank's earnings may fluctuate significantly in the future." Richard Wayne, the Bank's President and Co-Chief Executive Officer, explained that, "The volume of our loan acquisitions varies from quarter-to-quarter depending upon market conditions. For example, in the second quarter of 2005, we purchased loans with outstanding principal balances of $48.7 million for a purchase price of $41.5 million, compared to the same period in 2004, when we purchased loans with outstanding principal balances of $164.5 million for a purchase price of $148.6 million. In the six months ended June 30, 2005, we purchased loans with outstanding principal balances of $99.6 million for a purchase price of $85.9 million, compared to the same period in 2004, when we purchased loans with outstanding principal balances of $183.4 million for a purchase price of $167.6 million." Included in our loan acquisitions for the second quarter of 2004, were $89.8 million of high quality residential loans that were acquired for a purchase price of $88.1 million. Although residential loan portfolios were available for purchase in the second quarter of 2005, management elected not to bid on or purchase such loans at the offered pricing levels. Mr. Wayne continued, "During the course of our review of available loan portfolios, we will, in some cases, decline to bid on a portfolio after analyzing the results of our due diligence review, or, in other instances, be outbid by other purchasers. We simply cannot predict how often we will successfully bid on a loan portfolio." Mr. Wayne further stated, "Our total non-performing assets decreased $10.2 million from $39.7 million at December 31, 2004 to $29.5 million at June 30, 2005. While a substantial majority of the loan and leases we have acquired in recent years have been performing, we have also acquired appropriately priced non-performing loans and leases. At June 30, 2005, we held loans and leases with net investment balances of $9.9 million which were acquired as non-performing. In the past, our pricing strategy and the level of discount we obtain on such loans and leases has enabled us to, over time, realize significant levels of transactional income from these assets." During the second quarter of 2005, the Bank's leasing subsidiary, Dolphin Capital Corp., originated leases with an aggregate investment balance of $15.5 million, compared to the same period in 2004 when it originated or acquired leases with an aggregate investment balance of $12.3 million. During the six months ended June 30, 2005, Dolphin Capital originated leases with an aggregate investment balance of $30.1 million compared to the same period in 2004 when it originated or acquired leases with an aggregate investment balance of $23.5 million. The increase is partially attributable to the initiation of a more aggressive marketing campaign. Dolphin Capital Corp.'s net income was $1.3 million for the six months ended June 30, 2005, compared to $1.2 million for the same period in 2004 and $425,000 for the second quarter in 2005, compared to $484,000 for the same period in 2004. The Bank continued to repurchase shares of its common stock under its common stock repurchase program during the second quarter of 2005. On June 27, 2005, the Bank announced that it had increased the amount of the repurchase program by $15.0 million. As of June 30, 2005, the Bank had repurchased 6,609,818 shares under its current repurchase program and previous repurchase programs at an average purchase price of $11.74 per share, and had an additional $14.4 million to invest under its current repurchase program. The Bank initiated its first repurchase program in August 2000. On July 22, 2004, the Bank announced that it had declared a 2-for-1 stock split effected in the form of a dividend, which was subsequently paid on August 9, 2004 to shareholders of record at the close of business on August 2, 2004. The effect of the stock split was that shareholders received one additional share of common stock for every share owned on the record date. The retroactive effect of this stock split has been applied to the number of shares and per share information contained in this press release. Investors and interested parties will have the opportunity to listen to management's discussion of the Bank's quarterly and six month results in a conference call to be held on Wednesday, July 20th at 11:00 a.m., Eastern Time. The conference call will be broadcast over the investor relations page of the Bank's website at www.capitalcrossing.com. For those who cannot listen to the live broadcast, an audio replay of the call will be available on the website or via telephone at 888-203-1112, access code #7889843. A replay of the call will be available beginning at approximately 2:00 p.m. on July 20, 2005 through midnight on July 26, 2005. This press release contains a number of forward-looking statements concerning the Bank's current expectations as to future growth and its results of operations. Any statements that are not statements of historical fact (including statements containing the words "believes," "plans," "anticipates," "expects," "estimates," "intends," "may," "projects," "will," "would," and similar expressions) should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the Bank's ability to successfully acquire loans at the same volume and the same yields as it has historically, changes in interest rates that adversely affect its business, the level of transactional income realized by the Bank as a result of loan and lease payoffs and the sale of real estate and loans, the Bank's ability to successfully diversify its asset base, the level of the Bank's non-performing assets, the Bank's ability to successfully conduct its leasing business, general economic conditions in the Bank's markets, as well as those other factors detailed under the caption "Certain Factors That May Affect Future Results" in the Bank's Quarterly Report on Form 10-Q for the period ended March 31, 2005, which important factors are incorporated herein by this reference. The Bank disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release. Capital Crossing Bank is a Massachusetts-chartered, FDIC-insured trust company with $1.0 billion in assets as of June 30, 2005. The Bank operates as a commercial bank, providing financial products and services to customers through its executive and main offices in Boston, its website at www.capitalcrossing.com, and through its leasing subsidiary Dolphin Capital Corp. located in Moberly, Missouri. The Bank is a value oriented investor in whole loans and loan portfolios generally secured by commercial, multi-family and one-to-four family residential real estate and other business assets. -0- *T Capital Crossing Bank and Subsidiaries Consolidated Financial Highlights (Unaudited) June 30, December 31, 2005 2004 ------------ ------------ (dollars in thousands, except per share data) Total assets $1,048,561 $1,082,224 Loans and leases: 997,375 1,005,665 Non-amortizing discount (43,462) (47,042) Amortizing discount (80,472) (80,399) Allowance for loan and lease losses (17,416) (21,037) Net deferred loan and lease income (17,500) (16,326) ----------- ----------- Loans and leases, net 838,525 840,861 ----------- ----------- Short-term investments 63,659 60,353 Securities available for sale 88,071 115,417 Deposits 713,379 727,874 Borrowed funds 171,623 176,079 REIT preferred stock 64,759 64,761 Stockholders' equity 81,742 91,355 Non-performing assets: Other real estate owned, net 5,723 7,567 Other assets in possession, net 250 1,163 Non-performing loans and leases: Loans and leases acquired as non- performing 9,936 21,213 Loans and leases that became non- performing subsequent to acquisition 13,598 9,761 ----------- ----------- Total non-performing assets, net 29,507 39,704 ----------- ----------- Total non-performing assets, net as a percent to total assets 2.81 % 3.67 % Allowance for loan and lease losses as a percent of loans and leases, net of discount and deferred income 2.03 2.44 Allowance for loan and lease losses as a percent of net non-performing loans and leases 74.00 67.92 Book value per common share $14.65 $14.96 Tangible book value per common share 13.86 14.24 Shares outstanding, net 5,581,481 6,108,114 Capital Crossing Bank and Subsidiaries Consolidated Operating Results and Related Financial Data (Unaudited) Three Months Six Months Ended Ended June 30, June 30, ----------------- ----------------- 2005 2004 2005 2004 -------- -------- -------- -------- (in thousands, except per share data) Interest income - regularly scheduled $18,418 $15,994 $36,477 $33,172 Interest income - accelerated 5,796 6,904 12,110 14,292 -------- -------- -------- -------- Total interest income 24,214 22,898 48,587 47,464 Interest expense (8,910) (7,521) (17,110) (14,687) -------- -------- -------- -------- Net interest income 15,304 15,377 31,477 32,777 Credit (provision) for loan and lease losses 510 732 1,550 2,040 -------- -------- -------- -------- Net interest income, after credit (provision) for loan and lease losses 15,814 16,109 33,027 34,817 Gain on sales of loans, net - 960 - 1,735 Other income 421 472 823 999 Operating expenses: Other real estate owned and assets in possession income, net 3,929 533 7,343 380 Other operating expenses (10,598) (9,280) (21,621) (18,991) -------- -------- -------- -------- Total operating expenses (6,669) (8,747) (14,278) (18,611) -------- -------- -------- -------- Income before income taxes, minority interest and dividends on REIT preferred stock 9,566 8,794 19,572 18,940 Provision for income taxes (4,331) (3,804) (8,722) (8,200) Minority interest, net of taxes (23) (11) (55) (88) Dividends on REIT preferred stock, net of taxes (927) (728) (1,854) (1,198) -------- -------- -------- -------- Net income $4,285 $4,251 $8,941 $9,454 ======== ======== ======== ======== Weighted average shares outstanding: Basic 5,803 6,676 5,913 6,666 Diluted 6,964 7,867 7,085 7,882 Earnings per share: Basic $0.74 $0.64 $1.51 $1.42 Diluted 0.62 0.54 1.26 1.20 Financial ratios (annualized): Return on average assets 1.68% 1.75% 1.74% 1.94% Return on average stockholders' equity 19.84% 17.83% 20.44% 20.33% Transactional income: Interest and fee income on loan and lease pay-offs Non-amortizing discount $2,331 $2,834 $5,948 $5,887 Amortizing discount 2,012 2,974 4,216 6,569 Other interest income 1,453 1,096 1,946 1,836 -------- -------- -------- -------- Total interest and fee income on loan and lease pay-offs 5,796 6,904 12,110 14,292 Gain on sale of loans, net - 960 - 1,735 Gain on sale of other real estate owned and assets in possession, net 4,260 845 7,733 980 -------- -------- -------- -------- Total transactional income $10,056 $8,709 $19,843 $17,007 ======== ======== ======== ======== Capital Crossing Bank and Subsidiaries Interest Rate and Loan and Lease Volume Analysis (Unaudited) Three Months Ended Six Months Ended June 30, June 30, --------------------------------------- 2005 2004 2005 2004 --------------------------------------- (dollars in thousands) Weighted average yield/rate (annualized): Short-term investments 2.91 % 1.08 % 2.63 % 1.09 % Securities available for sale 4.75 3.79 4.72 3.46 Loan and lease portfolio, net 11.05 12.11 11.16 12.36 Total interest-earning assets 10.04 % 9.87 % 10.06 % 10.13 % Interest bearing liabilities 4.19 % 3.73 % 4.02 % 3.58 % Interest rate spread 5.85 % 6.14 % 6.04 % 6.55 % Net interest margin 6.34 % 6.63 % 6.52 % 7.00 % Loan and lease volume: Loan originations $- $1,000 $508 $1,000 Loan acquisitions Loan balances 48,717 164,482 99,625 183,378 (Discount) premium, net (7,196) (15,858) (13,681) (15,781) -------- --------- --------- --------- Loan acquisitions, net 41,521 148,624 85,944 167,597 -------- --------- --------- --------- Total loan volume 41,521 149,624 86,452 168,597 -------- --------- --------- --------- Lease originations 15,544 11,229 30,070 22,440 Lease acquisitions, net - 1,023 - 1,023 -------- --------- --------- --------- Total lease volume 15,544 12,252 30,070 23,463 -------- --------- --------- --------- Total loan and lease volume, net $57,065 $161,876 $116,522 $192,060 ======== ========= ========= ========= *T