CAPX Elkhorn S&P 500 Capital Expenditures Portfolio

Capital Crossing Bank (NASDAQ:CAPX) (the "Bank") reported consolidated net income of $4.4 million, or $0.70 per diluted share, for the second quarter of 2006, compared to consolidated net income of $4.3 million, or $0.62 per diluted share, for the same period in 2005. The Bank also reported consolidated net income of $7.4 million, or $1.16 per diluted share, for the six months ended June 30, 2006, compared to consolidated net income of $8.9 million, or $1.26 per diluted share, for the same period in 2005. Nicholas W. Lazares, the Bank's Chairman and Co-Chief Executive Officer, stated, "We are pleased to report another solid 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 2006, the Bank recognized $14.4 million of transactional income, including $3.7 million of accelerated interest income associated with loan and lease payoffs, $8.2 million in net gains on sales of loans and $2.5 million in net gains on sales of other real estate owned and assets in possession. By contrast, 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 assets in possession. Total transactional income for the six months ended June 30, 2006 and 2005 amounted to $22.2 million and $19.8 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 2006, we purchased loans with outstanding principal balances of $92.9 million for a purchase price of $75.4 million, compared to the same period in 2005, when we purchased loans with outstanding principal balances of $48.7 million for a purchase price of $41.5 million. In the six months ended June 30, 2006, we purchased loans with outstanding principal balances of $127.7 million for a purchase price of $104.8 million, compared to the same period in 2005, when we purchased loans with outstanding principal balances of $99.6 million for a purchase price of $85.9 million." 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 increased $8.8 million from $42.5 million at December 31, 2005 to $51.3 million at June 30, 2006. 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, 2006, we held loans and leases with net investment balances of $11.7 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." A net provision for loan and lease losses of $1.1 million was recorded in the second quarter of 2006 compared to a net credit for loan and lease losses of $510,000 for the same period in 2005. In the second quarter of 2006, the Bank recorded an impairment provision of $793,000 and a provision for new loans acquired of $271,000. Similar provisions were not recorded in the second quarter of 2005. During the quarters ended June 30, 2006 and 2005, loan payoffs generated net credits for loan losses of $367,000 and $785,000, respectively, the purpose of which was to reverse unused reserves related to the paid off loans. A net provision for loan and lease losses of $573,000 was recorded for the six months ended June 30, 2006 compared to a net credit for loan and lease losses of $1.6 million for the same period in 2005. During the second quarter of 2006, the Bank's leasing subsidiary, Dolphin Capital Corp., originated leases with an aggregate investment balance of $20.0 million, compared to the same period in 2005 when it originated or acquired leases with an aggregate investment balance of $15.5 million. During the six months ended June 30, 2006, Dolphin Capital originated leases with an aggregate investment balance of $39.1 million compared to the same period in 2005 when it originated or acquired leases with an aggregate investment balance of $30.1 million. The increase is partially attributable to the initiation of a more aggressive marketing campaign. The Bank continued to repurchase shares of its common stock under its common stock repurchase program during the second quarter of 2006. On July 14, 2006, the Bank announced that it had increased the amount of the repurchase program by $10.0 million and extended the repurchase program until July 11, 2007. As of July 25, 2006 the Bank had repurchased 7,168,289 shares under its current repurchase program and previous repurchase programs at an average purchase price of $13.36 per share, and had an additional $11.2 million to invest under its current repurchase program. The Bank initiated its first repurchase program in August 2000. 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 Thursday, July 27th at 1:00 p.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 #3740536. A replay of the call will be available beginning at approximately 3:00 p.m. on July 27, 2006 through midnight on August 1, 2006. 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 "Item 1A. Risk Factors" in Part II of the Bank's Quarterly Report on Form 10-Q for the period ended March 31, 2006, 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 $1.1 billion in assets as of June 30, 2006. 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, 2006 2005 ------------ ------------- (dollars in thousands, except per share data) Total assets $ 1,055,947 $ 1,106,158 Loans and leases: 1,018,238 1,004,120 Non-accretable discount (59,572) (53,407) Accretable discount (79,896) (84,894) Allowance for loan and lease losses (13,586) (15,585) Net deferred loan and lease income (20,842) (18,396) ------------ ------------ Loans and leases, net 844,342 831,838 ------------ ------------ Short-term investments 44,939 120,807 Securities available for sale 97,156 84,645 Deposits 736,929 723,388 Borrowed funds 156,755 218,849 REIT preferred stock 64,758 64,758 Stockholders' equity 79,279 76,499 Non-performing assets: Other real estate owned, net 15,477 14,003 Other assets in possession, net 407 506 Non-performing loans and leases: Loans and leases acquired as non-performing 11,719 14,078 Loans and leases that became non-performing subsequent to acquisition 23,690 13,880 ------------ ------------ Total non-performing assets, net 51,293 42,467 ------------ ------------ Total non-performing assets, net as a percent to total assets 4.86% 3.84% Allowance for loan and lease losses as a percent of loans and leases, net of discount and deferred income 1.58 1.84 Allowance for loan and lease losses as a percent of net non-performing loans and leases 38.37 55.74 Book value per common share $ 15.47 $ 14.52 Tangible book value per common share 14.61 13.69 Shares outstanding, net 5,125,541 5,269,184 Capital Crossing Bank and Subsidiaries Consolidated Operating Results and Related Financial Data (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ----------------- ----------------- 2006 2005 2006 2005 -------- -------- -------- -------- (in thousands, except per share data) Interest income - regularly scheduled $18,606 $18,418 $37,651 $36,477 Interest income - accelerated 3,663 5,796 8,980 12,110 -------- -------- -------- -------- Total interest income 22,269 24,214 46,631 48,587 Interest expense (10,445) (8,910) (20,198) (17,110) -------- -------- -------- -------- Net interest income 11,824 15,304 26,433 31,477 (Provision) credit for loan and lease losses (1,122) 510 (573) 1,550 -------- -------- -------- -------- Net interest income, after (provision) credit for loan and lease losses 10,702 15,814 25,860 33,027 Gain on sales of loans, net 8,237 - 9,566 - Other income 420 421 880 823 Operating expenses: Other real estate owned and assets in possession income, net 1,869 3,929 2,671 7,343 Other operating expenses (11,273) (10,598) (21,894) (21,621) -------- -------- -------- -------- Total operating expenses (9,404) (6,669) (19,223) (14,278) -------- -------- -------- -------- Income before income taxes, minority interest and dividends on REIT preferred stock 9,955 9,566 17,083 19,572 Provision for income taxes (4,527) (4,331) (7,712) (8,722) Minority interest, net of taxes (91) (23) (146) (55) Dividends on REIT preferred stock, net of taxes (927) (927) (1,854) (1,854) -------- -------- -------- -------- Net income $ 4,410 $ 4,285 $ 7,371 $ 8,941 ======== ======== ======== ======== Weighted average shares outstanding: Basic 5,166 5,803 5,211 5,913 Diluted 6,267 6,964 6,335 7,085 Earnings per share: Basic $ 0.85 $ 0.74 $ 1.41 $ 1.51 Diluted 0.70 0.62 1.16 1.26 Financial ratios (annualized): Return on average assets 1.73% 1.68% 1.45% 1.74% Return on average stockholders' equity 22.85% 19.84% 19.18% 20.44% Transactional income: Interest and fee income on loan and lease pay-offs Non-accretable discount $ 1,275 $ 2,331 $ 1,959 $ 5,948 Accretable discount 1,762 2,012 4,688 4,216 Other interest income 626 1,453 2,333 1,946 -------- -------- -------- -------- Total interest and fee income on loan and lease pay-offs 3,663 5,796 8,980 12,110 Gain on sale of loans, net 8,237 - 9,566 - Gain on sale of other real estate owned and assets in possession, net 2,454 4,260 3,656 7,733 -------- -------- -------- -------- Total transactional income $14,354 $10,056 $22,202 $19,843 ======== ======== ======== ======== Capital Crossing Bank and Subsidiaries Interest Rate and Loan and Lease Volume Analysis (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- (dollars in thousands) Weighted average yield/rate (annualized): Short-term investments 4.86% 2.91% 4.58% 2.63% Securities available for sale 4.74 4.75 4.73 4.72 Loan and lease portfolio, net 10.29 11.05 10.88 11.16 Total interest- earning assets 9.41% 10.04% 9.88% 10.06% Interest bearing liabilities 4.89% 4.19% 4.76% 4.02% Interest rate spread 4.52% 5.85% 5.12% 6.04% Net interest margin 5.00% 6.34% 5.60% 6.52% Loan and lease volume: Loan originations $ 664 $ - $ 2,839 $ 508 Loan acquisitions Loan balances 92,865 48,717 127,661 99,625 (Discount) premium, net (17,432) (7,196) (22,862) (13,681) --------- --------- --------- --------- Loan acquisitions, net 75,433 41,521 104,799 85,944 --------- --------- --------- --------- Total loan volume 76,097 41,521 107,638 86,452 --------- --------- --------- --------- Lease originations 19,988 15,544 39,144 30,070 Lease acquisitions, net - - - - --------- --------- --------- --------- Total lease volume 19,988 15,544 39,144 30,070 --------- --------- --------- --------- Total loan and lease volume, net $ 96,085 $ 57,065 $146,782 $116,522 ========= ========= ========= ========= *T