VCBI Virginia Commerce Bancorp (MM)

Virginia Commerce Bancorp, Inc. (Nasdaq:VCBI), parent company of Virginia Commerce Bank (the "Bank"), today reported its financial results for the third quarter and nine months ended September 30, 2005. Third Quarter 2005 Highlights: -- Net income of $5.3 million representing a 39.2% increase over third quarter 2004 -- Diluted earnings per share up 34.6% to $0.35 -- Assets, loans and deposits up 30.9%, 38.5% and 29.4% year-over-year -- Efficiency ratio improved further to 44.9% -- ROA and ROE increased to 1.48% and 20.35% Peter A. Converse, Chief Executive Officer, commented "We're delighted with our strong momentum and results. Considering the expenses associated with key new hires, added infrastructure and five branches opening since August of last year, we're particularly proud of our earnings and improved efficiency ratio. Obviously, strong loan growth of 38.5% and a 13 basis point increase in the net interest margin year-over-year contributed significantly to the 39% earnings increase. However, effective cost containment and rapid deposit growth in the new branches also contributed. These branches each achieved or exceeded $10 million in deposits within an average of six months of opening and three already are operating at break-even. With these recent branching successes, we are confidently pursuing other opportunities that could result in three to four more branch openings by the end of next year, focusing on Loudoun County and other new markets." Converse added, "Virginia Commerce is also progressing in other meaningful ways. Our new retail EVP, Steve Reeder, is advancing our retail cross-selling efforts to new levels. His initiatives are being enthusiastically embraced by branch personnel and are producing commendable results. Cross-selling and product sales are also benefiting from an increase from one full-time business development officer, a year ago, to six in the last few months. On the technology side, we are pursuing instant debit card issue capability as well as remote capture of deposits for our commercial customers. Both services should be available in the first quarter of next year. Overall, we are very excited about our continued prospects for success despite the heightened competition in our market." SUMMARY REVIEW OF FINANCIAL PERFORMANCE Net Income Third quarter earnings of $5.3 million increased $1.5 million, or 39.2%, over 2004 third quarter earnings of $3.8 million. On a diluted per share basis, third quarter earnings were $0.35 compared to $0.26 for the third quarter of 2004, an increase of 34.6%. For the nine months ended September 30, 2005, earnings of $14.1 million represent a 36.3% increase over the $10.3 million earned for the same period in 2004, with diluted earnings per share of $0.94 increasing 28.8%. The increases in net income for both the quarter and year-to-date were due to a 33.6% and 37.9% increase in net interest income, higher levels of non-interest income and continued strong expense control. Net Interest Income Net interest income for the third quarter of $14.5 million was up 33.6%, compared with $10.9 million for the same quarter last year due, to strong loan growth and an eight basis point increase in the net interest margin from 4.13% in the third quarter of 2004 to 4.21% for the current three-month period. Year-to-date net interest income of $40.8 million is up 37.9%, compared to $29.6 million in 2004, again due to strong loan growth and an increase in the net interest margin from 4.17% in 2004, to 4.30% for the current nine- month period. Compared to the second quarter of 2005, the net interest margin was down nine basis points from 4.30% to 4.21%, primarily due to a nineteen basis point increase in the average cost of interest-bearing deposits as a result of higher rates on new and maturing time deposits. Management believes the margin could remain relatively static or even improve slightly in the fourth quarter depending on further increases in the prime rate and the pricing influence of competitive market rates paid on interest-bearing deposits. Non-Interest Income and Non-Interest Expense Non-interest income for the third quarter of $1.9 million increased $380 thousand, or 25.0%, from $1.5 million for the same period in 2004, and increased by $331 thousand between the comparable nine-month period. Compared to the second quarter of 2005, non-interest income rose $355 thousand, or 23.0%. Increases occurred in all categories with deposit account service charges and fees and net gains on mortgage loans held-for-sale experiencing the most improvement. Management expects further improvement in deposit account service charges in the fourth quarter and possibly lower fees and net gains in its mortgage lending activities due to seasonal fluctuation and/or rising market rates. Non-interest expense increased $1.5 million, or 25.2%, from $5.9 million in the third quarter of 2004, to $7.4 million in the current period, and increased $4.9 million, or 30.5%, from $16.2 million for the nine months ended September 30, 2004, to $21.2 million year-to-date. Compared to the second quarter of 2005, non-interest expense is up only $124 thousand, or 1.7%. Increases since 2004 were due to the opening of five new branch locations, with the last one opening in June 2005, the hiring of additional loan officers, and other staffing and facilities expansion. However, earnings growth and containment of expenses associated with accelerated branching and overall expansion, resulted in the efficiency ratio improving from 47.5% in the third quarter of 2004 to 44.9% for the current three-month period. While management expects slightly higher expenses in the fourth quarter due to seasonal items and additional office space being leased, it is anticipated that this ratio will be maintained in the mid-to-high 40s for the foreseeable future. Loans Since September 30, 2004, loans, net of allowance for loan losses, have increased $330.0 million, or 38.5%, from $857 million to $1.2 billion. Growth occurred in all categories, with real estate construction loans and non-farm, non-residential real estate loans reflecting the largest increases. For the three months ended September 30, 2005, loans are up $84.3 million, or 7.6%, again with most of the growth concentrated in the Company's niche lending area of real estate construction and non-farm, non-residential real estate. Deposits and Repurchase Agreements Over the past twelve months, deposits have increased $280.0 million, or 29.4%, from $951.7 million to $1.2 billion, with demand deposits increasing $38.6 million, savings and interest-bearing demand deposits falling by $33.6 million, and time deposits growing by $274.9 million. Year-to-date deposits are up $260.7 million with demand deposits up $46.1 million, savings and interest-bearing demand deposits up $5.2 million, and time deposits increasing by $209.4 million. The growth in time deposits over the past year was highly concentrated in the first half of 2005 due to special certificate of deposit promotions to help fund strong loan demand. For the quarter, deposits rose $9.6 million as growth in interest-bearing demand deposits and time deposits was partially offset by a $19.7 million decline in non-interest bearing demand deposits due to lower title company account balances and transfers to repurchase agreements. In the third quarter of 2005, repurchase agreements increased $38.4 million, or 91.4%, as some new and existing demand deposit customers sought higher rates; however, the balances also include approximately $27 million in one account related to donations for Hurricane Katrina. The funds in that account are expected to decline significantly in the fourth quarter. Asset Quality Non-performing assets and past due loans increased from $226 thousand at September 30, 2004, to $2.9 million as of September 30, 2005, and decreased by $932 thousand from $3.8 million at June 30, 2005. The increase over the past year was due to three loans to two borrowers for a total of $2.8 million which have been classified as impaired. Of this $2.8 million, $2.3 million is well-secured by real estate. The provision for loan losses was $950 thousand for the third quarter of 2005 compared to $698 thousand in 2004, and as compared to $1.0 million in the second quarter of 2005. These provisions are consistent with the level of loan growth and the increase in non-performing assets from last year. The total allowance for loan losses as a percent of total loans is unchanged from June 30, 2005, at 1.09%. Stockholders' Equity Stockholders' equity is up $18.5 million, or 21.1%, from $87.8 million at September 30, 2004, to $106.3 million at September 30, 2005, due to earnings growth and $1.5 million in net proceeds and tax benefits from the exercise of options and warrants by company directors, officers and employees. On May 9, 2005, a five-for-four split in the form of a 25% stock dividend was paid, increasing the number of shares outstanding by 2,797,374. As a result of the stock dividend and exercise of options and warrants, total shares outstanding as of quarter end were 14,028,631. CONFERENCE CALL Virginia Commerce Bancorp will host a teleconference call for the financial community on October 12, 2005, at 11:00 a.m. Eastern Daylight Time to discuss the third quarter 2005 financial results. The public is invited to listen to this conference call by dialing 866-219-5631 at least 10 minutes prior to the call. A replay of the conference call will be available from 1:00 p.m. Eastern Daylight Time on October 12, 2005, until 11:59 p.m. Eastern Daylight Time on October 19, 2005. The public is invited to listen to this conference call replay by dialing 888-266-2081 and entering access code 781257. ABOUT VIRGINIA COMMERCE BANCORP, INC. Virginia Commerce Bancorp, Inc. is the parent bank holding company for Virginia Commerce Bank (the "Bank"), a Virginia state chartered bank that commenced operations in May 1988. The Bank pursues a traditional community banking strategy, offering a full range of business and consumer banking services through eighteen branch offices, two residential mortgage offices and one investment services office, principally to individuals and small to medium-size businesses in Northern Virginia and the Metropolitan Washington, D.C. area. NON-GAAP PRESENTATIONS This press release refers to the efficiency ratio, which is computed by dividing non-interest expense by the sum of net interest income on a tax equivalent basis and non-interest income. This is a non-GAAP financial measure that we believe provides investors with important information regarding our operational efficiency. Comparison of our efficiency ratio with those of other companies may not be possible because other companies may calculate the efficiency ratio differently. The Company, in referring to its net income, is referring to income under accounting principals generally accepted in the United States, or "GAAP". FORWARD LOOKING STATEMENTS This press release may contain forward-looking statements within the meaning of the Securities and Exchange Act of 1934, as amended, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies and regarding general economic conditions. In some cases, forward-looking statements can be identified by use of words such as "may," "will," "anticipates," "believes," "expects," "plans," "estimates," "potential," "continue," "should," and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Company's market, interest rates and interest rate policy, competitive factors, and other conditions which by their nature, are not susceptible to accurate forecast, and are subject to significant uncertainty. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results may differ materially from those indicated herein. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company's past results are not necessarily indicative of future performance. -0- *T Financial Highlights (Dollars in thousands, except per share data) (Unaudited) Three Months Ended September 30, 2005 2004 % Change -------------------------------- Summary Operating Results: Interest and dividend income $22,665 $15,152 49.6% Interest expense 8,119 4,262 90.5% Net interest and dividend income 14,546 10,890 33.6% Provision for loan losses 950 698 36.1% Non-interest income 1,898 1,518 25.0% Non-interest expense 7,395 5,907 25.2% Income before income taxes 8,099 5,803 39.6% Net income $5,303 $3,811 39.2% Performance Ratios: Return on average assets 1.48% 1.40% Return on average equity 20.35% 17.72% Net interest margin 4.21% 4.13% Efficiency ratio (1) 44.90% 47.47% Per Share Data: (2) Net income-basic $0.38 $0.27 40.7% Net income-diluted $0.35 $0.26 34.6% Average number of shares outstanding: Basic 14,026,690 13,795,920 Diluted 15,021,196 14,906,536 Nine months Ended September 30, 2005 2004 % Change -------------------------------- Summary Operating Results: Interest and dividend income $61,387 $41,258 48.8% Interest expense 20,562 11,649 76.5% Net interest and dividend income 40,825 29,609 37.9% Provision for loan losses 2,812 2,005 40.2% Non-interest income 4,660 4,329 7.6% Non-interest expense 21,180 16,233 30.5% Income before income taxes 21,493 15,700 36.9% Net income $14,088 $10,335 36.3% Performance Ratios: Return on average assets 1.44% 1.39% Return on average equity 19.11% 19.97% Net interest margin 4.30% 4.17% Efficiency ratio (1) 46.51% 47.67% Per Share Data: (2) Net income-basic $1.01 $0.79 27.8% Net income-diluted $0.94 $0.73 28.8% Average number of shares outstanding: Basic 14,002,116 13,015,430 Diluted 14,977,855 14,121,289 As of September 30, -------------------------------- 2005 2004 % Change -------------------------------- Selected Balance Sheet Data: Loans, net $1,187,297 $857,266 38.5% Investment securities 169,130 172,689 -2.1% Assets 1,449,058 1,107,114 30.9% Deposits 1,231,634 951,673 29.4% Stockholders' equity 106,331 87,799 21.1% Book value per share (2) $7.58 $6.36 19.2% Capital Ratios (% of risk weighted assets): Tier 1 capital: Company 9.75% 11.20% Bank 8.20% 9.19% Total qualifying capital: Company 10.78% 12.20% Bank 10.63% 12.10% Asset Quality Non-performing assets: Impaired loans $2,787 $197 Non-accrual loans 15 24 Loans 90+ days past due and still accruing 100 5 ----------- ----------- Total non-performing assets and past due loans $2,902 $226 to total loans: 0.24% 0.03% to total assets: 0.20% 0.02% Allowance for loan losses to total loans 1.09% 1.09% Net charge-offs (recoveries) $18 $(6) Net charge-offs to average loans outstanding 0.00% 0.00% As of September 30, -------------------------------- 2005 2004 % Change -------------------------------- Loan Portfolio: Commercial $114,300 $80,622 41.8% Real estate-one to four family residential 149,587 112,158 33.4% Real estate-multifamily residential 61,425 38,045 61.5% Real estate-nonfarm, nonresidential 528,294 408,538 29.3% Real estate-construction 344,487 225,483 52.8% Consumer 7,652 6,065 26.2% ----------- ----------- Total loans $1,205,745 $870,911 38.4% Less unearned income 5,252 4,177 25.7% Less allowance for loan losses 13,196 9,468 39.4% ----------- ----------- Loans, net $1,187,297 $857,266 38.5% Investment Securities (at book value): Available-for-sale: U.S. Government Agency obligations $113,453 $108,487 4.6% U.S. Treasuries -- 9,933 -100.0% Domestic corporate debt obligations 6,043 6,017 0.4% Obligations of states and political subdivisions 1,372 1,342 2.3% Restricted stock: Federal Reserve Bank 1,442 1,442 -- Federal Home Loan Bank 2,277 1,598 42.5% Community Bankers' Bank 55 55 -- ----------- ----------- $124,642 $128,874 -3.3% Held-to-maturity: U.S. Government Agency obligations $35,554 $34,891 1.9% Obligations of states and political subdivisions 8,437 8,432 0.1% Domestic corporate debt obligations 497 492 1.0% ----------- ----------- $44,488 $43,815 1.5% (1) Computed by dividing non-interest expense by the sum of net interest income on a tax-equivalent basis using a 35% rate and non-interest income. (2) Adjusted to give effect to a five-for-four stock split in the form of a 25% stock dividend in May 2005. Virginia Commerce Bancorp, Inc. Consolidated Balance Sheets (Dollars in thousands, except per share data) As of September 30, (Unaudited) 2005 2004 ----------- ----------- Assets Cash and due from banks $30,667 $17,966 Interest-bearing deposits with other banks 1,026 1,004 Securities (fair value: 2005, $168,860; 2004, $173,242) 169,130 172,689 Federal funds sold 21,917 28,655 Loans held-for-sale 12,127 7,618 Loans, net of allowance for loan losses of $13,196 in 2005 and $9,468 in 2004 1,187,297 857,266 Bank premises and equipment, net 7,537 6,425 Accrued interest receivable 5,544 3,893 Other assets 13,813 11,598 ----------- ----------- Total assets $1,449,058 $1,107,114 =========== =========== Liabilities and Stockholders' Equity Deposits Demand deposits $194,195 $155,550 Savings and interest-bearing demand deposits 337,555 371,145 Time deposits 699,884 424,978 ----------- ----------- Total deposits $1,231,634 $951,673 Securities sold under agreement to repurchase and federal funds purchased 86,385 45,136 Trust preferred capital notes 18,570 18,570 Accrued interest payable 2,920 1,543 Other liabilities 3,218 2,393 Commitments and contingent liabilities -- -- ----------- ----------- Total liabilities $1,342,727 $1,019,315 =========== =========== Stockholders' Equity Preferred stock, $1.00 par, 1,000,000 shares authorized and un-issued Common stock, $1.00 par, 20,000,000 shares authorized, issued and outstanding 2005, 14,028,631; 2004, 11,041,423 14,029 11,041 Surplus 35,603 37,116 Retained earnings 57,660 39,683 Accumulated other comprehensive income (loss), net (961) (41) ----------- ----------- Total stockholders' equity $106,331 $87,799 Total liabilities and stockholders' equity $1,449,058 $1,107,114 =========== =========== Virginia Commerce Bancorp, Inc. Consolidated Statements of Income (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine months Ended September 30, September 30, ----------------------------------- 2005 2004 2005 2004 ----------------------------------- Interest and dividend income: Interest and fees on loans $20,822 $13,430 $56,453 $36,650 Interest and dividends on investment securities: Taxable 1,472 1,527 4,168 4,074 Tax-exempt 60 59 178 191 Dividends 40 36 152 85 Interest on deposits with other banks 7 4 20 4 Interest on federal funds sold 264 96 416 254 ----------------------------------- Total interest and dividend income $22,665 $15,152 $61,387 $41,258 ----------------------------------- Interest expense: Deposits $7,386 $3,941 $18,357 $10,842 Securities sold under agreement to repurchase And federal funds purchased 413 85 961 152 Other borrowed funds -- -- 374 4 Trust preferred capital notes 320 236 870 651 ----------------------------------- Total interest expense $8,119 $4,262 $20,562 $11,649 ----------------------------------- Net interest income: $14,546 $10,890 $40,825 $29,609 Provision for loan losses 950 698 2,812 2,005 ----------------------------------- Net interest income after provision for loan losses $13,596 $10,192 $38,013 $27,604 ----------------------------------- Non-interest income: Service charges and other fees $617 $431 $1,540 $1,314 Non-deposit investment services commissions 137 133 332 323 Fees and net gains on loans held-for-sale 1,051 867 2,512 2,419 Other 93 87 276 273 ----------------------------------- Total non-interest income $1,898 $1,518 $4,660 $4,329 ----------------------------------- Non-interest expense: Salaries and employee benefits $4,284 $3,601 $12,423 $9,505 Occupancy expense 1,197 830 3,211 2,364 Data processing expense 397 336 1,121 974 Other operating expense 1,517 1,140 4,425 3,390 ----------------------------------- Total non-interest expense $7,395 $5,907 $21,180 $16,233 ----------------------------------- Income before taxes on income $8,099 $5,803 $21,493 $15,700 Provision for income taxes 2,796 1,992 7,405 5,365 ----------------------------------- Net Income $5,303 $3,811 $14,088 $10,335 ----------------------------------- Earnings per common share, basic (1) $0.38 $0.27 $1.01 $0.79 Earnings per common share, diluted (1) $0.35 $0.26 $0.94 $0.73 (1) Adjusted to give effect to a five-for-four stock split in the form of a 25% stock dividend in May 2005. Virginia Commerce Bancorp, Inc. Consolidated Average Balances, Yields, and Rates Three Months Ended September 30, (Unaudited) -------------------------------- 2005 -------------------------------- Interest Average Average Income- Yields (Dollars in thousands) Balance Expense /Rates -------------------------------- Assets Securities (1) $170,267 $1,572 3.75% Loans, net of unearned income (2) 1,171,406 20,822 6.96% Interest-bearing deposits in other banks 1,023 7 2.72% Federal funds sold 31,284 264 3.30% -------------------------------- Total interest-earning assets $1,373,980 $22,665 6.55% Other assets 45,196 ----------- Total Assets $1,419,176 =========== Liabilities and Stockholders' Equity Interest-bearing deposits: NOW accounts $208,031 $889 1.70% Money market accounts 111,724 539 1.91% Savings accounts 20,811 28 0.54% Time deposits 693,421 5,930 3.39% -------------------------------- Total interest-bearing deposits $1,033,987 $7,386 2.83% Securities sold under agreement to repurchase and federal funds purchased 59,612 413 2.75% Other borrowed funds -- -- -- Trust preferred capital notes 18,000 320 6.95% -------------------------------- Total interest-bearing liabilities $1,111,599 $8,119 2.90% Demand deposits and other liabilities 204,188 ----------- Total liabilities $1,315,787 Stockholders' equity 103,389 ----------- Total liabilities and stockholders' equity $1,419,176 =========== Interest rate spread 3.65% Net interest income and margin $14,546 4.21% -------------------------------- 2004 -------------------------------- Interest Average Average Income- Yields (Dollars in thousands) Balance Expense /Rates -------------------------------- Assets Securities (1) $180,510 $1,622 3.67% Loans, net of unearned income (2) 838,077 13,430 6.27% Interest-bearing deposits in other banks 751 4 2.08% Federal funds sold 28,655 96 1.30% -------------------------------- Total interest-earning assets $1,047,993 $15,152 5.75% Other assets 31,593 ----------- Total Assets $1,079,586 =========== Liabilities and Stockholders' Equity Interest-bearing deposits: NOW accounts $215,763 $740 1.36% Money market accounts 125,449 440 1.39% Savings accounts 20,869 29 0.56% Time deposits 410,498 2,732 2.64% -------------------------------- Total interest-bearing deposits $772,579 $3,941 2.02% Securities sold under agreement to repurchase and federal funds purchased 43,953 85 0.77% Other borrowed funds -- -- -- Trust preferred capital notes 18,000 236 5.13% -------------------------------- Total interest-bearing liabilities $834,532 $4,262 2.03% Demand deposits and other liabilities 159,715 ----------- Total liabilities $994,247 Stockholders' equity 85,339 ----------- Total liabilities and stockholders' equity $1,079,586 =========== Interest rate spread 3.72% Net interest income and margin $10,890 4.13% (1) Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which are reflected as a component of stockholders' equity. Average yields on securities are stated on a tax equivalent basis, using a 35% rate. (2) Loans placed on non-accrual status are included in the average balances. Net loan fees and late charges included in interest income on loans totaled $934 thousand and $674 thousand for the three months ended September 30, 2005, and 2004, respectively. Virginia Commerce Bancorp, Inc. Consolidated Average Balances, Yields, and Rates Nine months Ended September 30, (Unaudited) -------------------------------- 2005 -------------------------------- Interest Average Average Income- Yields (Dollars in thousands) Balance Expense /Rates -------------------------------- Assets Securities (1) $165,408 $4,498 3.62% Loans, net of unearned income (2) 1,088,057 56,453 6.84% Interest-bearing deposits in other banks 1,017 20 2.61% Federal funds sold 17,467 416 3.14% -------------------------------- Total interest-earning assets $1,271,949 $61,387 6.46% Other assets 37,838 ----------- Total Assets $1,309,787 =========== Liabilities and Stockholders' Equity Interest-bearing deposits: NOW accounts $207,538 $2,550 1.64% Money market accounts 106,802 1,354 1.69% Savings accounts 20,465 83 0.54% Time deposits 604,342 14,370 3.18% -------------------------------- Total interest-bearing deposits $939,147 $18,357 2.61% Securities sold under agreement to repurchase and federal funds purchased 54,611 961 2.35% Other borrowed funds 16,857 374 2.93% Trust preferred capital notes 18,000 870 6.37% -------------------------------- Total interest-bearing liabilities $1,028,615 $20,562 2.67% Demand deposits and other liabilities 182,582 ----------- Total liabilities $1,211,197 Stockholders' equity 98,590 ----------- Total liabilities and stockholders' equity $1,309,787 =========== Interest rate spread 3.79% Net interest income and margin $40,825 4.30% -------------------------------- 2004 -------------------------------- Interest Average Average Income- Yields (Dollars in thousands) Balance Expense /Rates -------------------------------- Assets Securities (1) $156,907 $4,350 3.79% Loans, net of unearned income (2) 762,055 36,650 6.32% Interest-bearing deposits in other banks 259 4 2.13% Federal funds sold 31,989 254 1.04% -------------------------------- Total interest-earning assets $951,210 $41,258 5.79% Other assets 39,061 ----------- Total Assets $990,271 =========== Liabilities and Stockholders' Equity Interest-bearing deposits: NOW accounts $210,915 $2,107 1.33% Money market accounts 118,471 1,229 1.38% Savings accounts 19,961 81 0.54% Time deposits 375,225 7,425 2.64% -------------------------------- Total interest-bearing deposits $724,572 $10,842 1.99% Securities sold under agreement to repurchase and federal funds purchased 36,590 152 0.55% Other borrowed funds 410 4 1.23% Trust preferred capital notes 18,000 651 4.76% -------------------------------- Total interest-bearing liabilities $779,572 $11,649 1.99% Demand deposits and other liabilities 141,767 ----------- Total liabilities $921,339 Stockholders' equity 68,932 ----------- Total liabilities and stockholders' equity $990,271 =========== Interest rate spread 3.80% Net interest income and margin $29,609 4.17% (1) Yields on securities available-for-sale have been calculated on the basis of historical cost and do not give effect to changes in the fair value of those securities, which are reflected as a component of stockholders' equity. Average yields on securities are stated on a tax equivalent basis, using a 35% rate. (2) Loans placed on non-accrual status are included in the average balances. Net loan fees and late charges included in interest income on loans totaled $2.9 million and $1.8 million for the nine months ended September 30, 2005, and 2004, respectively. *T