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 fourth quarter and year ended December 31, 2005. Fourth Quarter 2005 Highlights: -- Net income of $5.6 million representing a 43.3% increase over fourth quarter 2004 -- Diluted earnings per share up 42.3% to $0.37 -- Loans increased $82.9 million during the quarter, a 27.9% annualized rate -- Net interest margin increased 13 basis points over the prior quarter to 4.34% -- $25 million in Trust Preferred Securities issued -- Assets surpassed $1.5 billion Year 2005 Highlights: -- Net income of $19.7 million representing a 38.2% increase over 2004 -- Diluted earnings per share up 32.3% to $1.31 -- Assets, loans and deposits up 33.3%, 37.2%, and 28.1% -- Efficiency ratio improved to 46.5% -- ROA and ROE increased to 1.45% and 19.44% -- Three new branches opened Peter A. Converse, Chief Executive Officer, commented, "Obviously, we're delighted to finish another year of record earnings and strong balance sheet growth with an equally solid fourth quarter. Considering that we surpassed $1.5 billion in assets by the end of 2005 just after going over $1 billion for the first time in 2004, is very satisfying and a real credit to our team of dedicated employees. We're particularly pleased to have improved our returns, net interest margin and efficiency ratio year-over-year, while accelerating our branching, adding talent and infrastructure, and growing deposits in an increasingly competitive market." Converse continued, "For 2006, we anticipate we will be able to maintain strong growth and performance by sticking to our core strengths and further refining products and processes. Recent initiatives in cross-selling, instant debit card issue and remote capture of commercial deposits should bear meaningful fruit in 2006. And our growth certainly should be enhanced with the expected opening of five more branches during the year, focusing on Loudoun, Prince William and Fairfax Counties. The first of those branches is opening this week in Newington (Fairfax County near Springfield), taking us to a current total of nineteen. I'd say we're already 'off and running' for 2006." SUMMARY REVIEW OF FINANCIAL PERFORMANCE Net Income Fourth quarter earnings of $5.6 million increased $1.7 million, or 43.3%, over 2004 fourth quarter earnings of $3.9 million. On a diluted per share basis, fourth quarter earnings were $0.37 compared to $0.26 for the fourth quarter of 2004, an increase of 42.3%. For the year ended December 31, 2005, earnings of $19.7 million represent a 38.2% increase over the $14.2 million earned for the same period in 2004, with diluted earnings per share of $1.31 increasing 32.3%. The increases in net income for both the quarter and year-end, were due to a 31.4% and 36.0% increase in net interest income, a 41.0% and 15.9% increase in non-interest income and continued strong expense control. Net Interest Income Net interest income for the fourth quarter of $15.8 million was up 31.4%, compared with $12.1 million for the same quarter last year, due to strong loan growth and a four basis point increase in the net interest margin from 4.30% in the fourth quarter of 2004, to 4.34% for the current three-month period. For the year, net interest income of $56.7 million is up 36.0%, compared to $41.7 million in 2004, again due to strong loan growth and an increase in the net interest margin from 4.23% in 2004, to 4.30%. Management expects some margin compression in 2006 assuming no further increases in the prime rate after the first quarter, a generally flat yield curve, and further competitive pressure on interest-bearing deposit rates. Nonetheless, the margin should remain comfortably above 4.00%. Non-Interest Income Non-interest income for the fourth quarter of $2.0 million increased $586 thousand, or 41.0%, from $1.4 million for the same period in 2004, and increased by $917 thousand, or 26.2%, from $5.8 million in 2004, to $6.7 million in 2005. Fees from lockbox operations and overdrafts contributed to significant increases in service charge revenue for both periods, while fees and net gains on mortgage loans held-for-sale remained steady. It is expected that non-interest income will be lower in the first quarter of 2006 with reduced levels of fees from lockbox operations and somewhat lower fees and net gains from mortgage lending activities due to seasonal fluctuation. However, overall in 2006, non-interest income should improve marginally over 2005 levels. Non-Interest Expense Non-interest expense increased $1.7 million, or 26.0%, from $6.6 million in the fourth quarter of 2004, to $8.3 million in the current period, and increased $6.7 million, or 29.2%, from $22.8 million in 2004, to $29.5 million for the year ended December 31, 2005. Increases since 2004 were due to the opening of five new branch locations, the hiring of additional loan officers, higher levels of incentive compensation associated with loan growth and other staffing and facilities expansion. However, earnings growth as well as containment of the expenses associated with accelerated branching and facilities expansion, resulted in the efficiency ratio improving from 48.8% in 2004, to 46.5% in 2005. On a linked quarter basis, non-interest expense for the fourth quarter increased $890 thousand, or 12.0%, due mostly to higher incentive compensation and a one-time charge of $161 thousand associated with the acceleration of all unvested stock option grants to Company officers and directors. Loans Since December 31, 2004, loans, net of allowance for loan losses, have increased $344.5 million, or 37.2 %, from $925.8 million to $1.3 billion. Growth occurred in all categories, with real estate construction loans and non-farm, non-residential real estate loans reflecting the largest dollar increases, while commercial loans increased 37.8% year-over-year. For the three months ended December 31, 2005, loans were up $82.9 million, or 7.0%, 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. The Company expects loan growth will continue to be strong in 2006. Deposits Over the past twelve months, deposits have increased $272.5 million, or 28.1%, from $971.0 million to $1.2 billion, with demand deposits increasing $40.4 million, savings and interest-bearing demand deposits increasing $17.2 million, and time deposits growing by $214.9 million. For the three months ended December 31, 2005, deposits were up $11.9 million with a slight decline in demand deposits, a $12.0 million increase in savings and interest-bearing demand deposits, and a $5.5 million increase in time deposits. The growth in both demand and time deposits in 2005 was highly concentrated in the first half of the year with many new title company demand accounts opened and several certificate of deposit promotions implemented to help fund strong loan demand. In the second half of the year, demand balances declined as title company accounts experienced lower levels of activity while time deposit growth slowed, as fewer promotions were run and several large CDs closed due to reasons unrelated to interest rates or service issues. Repurchase Agreements and Federal Funds Purchased With loan growth outpacing deposit growth for both the year and the fourth quarter, the resulting funding gap was bridged with increases in repurchase agreements and Fed funds of $58.6 million and $25.4 million, respectively, or 110.1% and 29.4%. Trust Preferred Securities On December 20, 2005, the Company completed the private placement of an aggregate of $25 million of trust preferred securities through VCBI Capital Trust III, a newly formed trust subsidiary organized under Delaware law. The securities mature on February 23, 2036, and are redeemable at par, at the Company's option, at any time on or after February 23, 2011, subject to regulatory approval. The securities are redeemable prior to February 23, 2011, at a premium ranging up to 104% of the principal amount thereof, upon the occurrence of certain regulatory or legal events. The securities bear interest on a quarterly basis, at a 6.19% fixed rate until February 23, 2011, at which time the interest rate becomes a variable rate, adjusted quarterly, equal to 142 basis points over three-month LIBOR. The proceeds from this issuance were used to supplement the Company's capital for continued growth and other general corporate purposes. Asset Quality Non-performing assets and past due loans increased from $1.2 million at December 31, 2004, to $2.0 million as of December 31, 2005, and decreased by $901 thousand from $2.9 million at September 30, 2005. This total of $2.0 million in non-performing assets includes one loan for $1.8 million which is well-secured by real estate. The provision for loan losses was $960 thousand for the fourth quarter of 2005 compared to $984 thousand in 2004, and as compared to $950 thousand in the third quarter of 2005. For the year, provisions were $3.8 million versus $3.0 million in 2004. These provisions are consistent with the level of loan growth, changes in the level of non-performing assets, and $352 thousand in net charge-offs in 2005, of which $334 thousand occurred in the fourth quarter. Stockholders' Equity Stockholders' equity increased $20.5 million, or 22.4%, from $91.3 million at December 31, 2004, to $111.8 million at December 31, 2005, due to earnings growth and $1.7 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 year-end were 14,049,602. On December 29, 2005, the Company approved the acceleration of the vesting of all unvested stock options awarded through December 15, 2005, including options held by executive officers and directors. As a result of this action, options to purchase 372,520 shares of common stock became exercisable effective December 30, 2005. This acceleration will allow the Company to eliminate the recognition of a total of approximately $2.3 million in after-tax compensation expense from January 2006 through December 2009, upon the adoption of FASB Statement No. 123R in January 2006. Further, the Company recorded a one-time after-tax charge in the fourth quarter of 2005 of $161 thousand due to this event. The Company believes reducing the impact of FASB 123R on earnings over the remaining vesting period of the stock options is in the best interests of the Company's stockholders. All other terms of each stock option award remain unchanged. The Company will continue to grant options in 2006 and as a result anticipates recognizing approximately $350 thousand in after-tax compensation expense. CONFERENCE CALL Virginia Commerce Bancorp will host a teleconference call for the financial community on January 19, 2006, at 11:00 a.m. Eastern Standard Time to discuss the fourth quarter and year-end 2005 financial results. The public is invited to listen to this conference call by dialing 866-847-7863 at least 10 minutes prior to the call. A replay of the conference call will be available from 2:00 p.m. Eastern Standard Time on January 19, 2006, until 11:59 p.m. Eastern Standard Time on January 26, 2005. The public is invited to listen to this conference call replay by dialing 888-266-2081 and entering access code 836278. 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 nineteen 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 Virginia Commerce Bancorp, Inc. Financial Highlights (Dollars in thousands, except per share data) (Unaudited) Three Months Ended December 31, 2005 2004 % Change ------------------------------------ Summary Operating Results: Interest and dividend income $ 25,091 $ 16,740 49.9% Interest expense 9,249 4,682 97.5% Net interest and dividend income 15,842 12,058 31.4% Provision for loan losses 960 984 (2.4)% Non-interest income 2,016 1,430 41.0% Non-interest expense 8,286 6,574 26.0% Income before income taxes 8,612 5,930 45.2% Net income $ 5,579 $ 3,894 43.3% Performance Ratios: Return on average assets 1.49% 1.37% Return on average equity 20.35% 17.26% Net interest margin 4.34% 4.30% Efficiency ratio (1) 46.39% 48.67% Per Share Data: (2) Net income-basic $ 0.40 $ 0.28 42.9% Net income-diluted $ 0.37 $ 0.26 42.3% Average number of shares outstanding: Basic 14,036,405 13,804,194 Diluted 15,038,804 14,956,809 Year Ended December 31, 2005 2004 % Change ------------------------------------ Summary Operating Results: Interest and dividend income $ 86,478 $ 57,998 49.1% Interest expense 29,811 16,331 82.5% Net interest and dividend income 56,667 41,667 36.0% Provision for loan losses 3,772 2,989 26.2% Non-interest income 6,676 5,759 15.9% Non-interest expense 29,466 22,807 29.2% Income before income taxes 30,105 21,630 39.2% Net income $ 19,667 $ 14,229 38.2% Performance Ratios: Return on average assets 1.45% 1.39% Return on average equity 19.44% 19.28% Net interest margin 4.30% 4.23% Efficiency ratio (1) 46.52% 48.01% Per Share Data: (2) Net income-basic $ 1.40 $ 1.08 29.6% Net income-diluted $ 1.31 $ 0.99 32.3% Average number of shares outstanding: Basic 14,010,688 13,212,621 Diluted 14,989,143 14,330,169 As of December 31, ------------------------------------ 2005 2004 % Change ------------------------------------ Selected Balance Sheet Data: Loans, net $ 1,270,255 $ 925,782 37.2% Investment securities 173,053 163,232 6.0% Assets 1,518,425 1,139,353 33.3% Deposits 1,243,506 970,968 28.1% Stockholders' equity 111,818 91,324 22.4% Book value per share (2) $ 7.96 $ 6.62 20.2% Capital Ratios (% of risk weighted assets): Tier 1 capital: Company 10.97% 10.89% Bank 8.12% 9.01% Total qualifying capital: Company 12.42% 11.92% Bank 12.27% 11.82% Asset Quality Non-performing assets: Impaired loans $ 1,980 $ 1,192 Non-accrual loans 14 18 Loans 90+ days past due and still accruing 7 -- Troubled debt restructurings -- -- ------------ ------------ Total non-performing assets, $ 2,001 $ 1,210 past due loans and troubled debt restructurings to total loans: 0.15% 0.13% to total assets: 0.13% 0.11% Allowance for loan losses to total loans 1.07% 1.11% Net charge-offs (recoveries) $ 352 $ 44 Net charge-offs to average loans outstanding 0.03% 0.01% As of December 31, ------------------------------------ 2005 2004 % Change ------------------------------------ Loan Portfolio: Commercial $ 122,243 $ 88,725 37.8% Real estate-one-to-four family residential 160,355 125,089 28.2% Real estate-multi-family residential 58,567 43,798 33.7% Real estate-nonfarm, nonresidential 559,866 436,533 28.3% Real estate-construction 380,997 240,469 58.4% Consumer 7,386 5,879 25.6% ------------ ------------ Total loans $ 1,289,414 $ 940,493 37.1% Less unearned income 5,338 4,309 23.9% Less allowance for loan losses 13,821 10,402 32.9% ------------ ------------ Loans, net $ 1,270,255 $ 925,782 37.2% Investment Securities (at book value): Available-for-sale: U.S. Government Agency obligations $ 116,624 $ 100,093 16.5% U.S. Treasuries -- 9,930 n/a Domestic corporate debt obligations 6,043 6,020 0.4% Obligations of states and political subdivisions 1,352 1,338 1.0% Restricted stock: Federal Reserve Bank 1,442 1,442 -- Federal Home Loan Bank 2,277 1,761 29.3% Community Bankers' Bank 55 55 -- ------------ ------------ ---------- $ 127,793 $ 120,639 5.9% Held-to-maturity: U.S. Government Agency obligations $ 35,798 $ 33,667 6.3% Obligations of states and political subdivisions 8,963 8,433 6.3% Domestic corporate debt obligations 499 493 1.2% ------------ ------------ $ 45,260 $ 42,593 6.3% (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 December 31, (Unaudited) 2005 2004 ------------ ------------ Assets Cash and due from banks $ 32,607 $ 16,783 Interest-bearing deposits with other banks 1,035 1,009 Securities (fair value: 2005, $172,102; 2004, $163,477) 173,053 163,232 Federal funds sold -- -- Loans held-for-sale 12,548 9,662 Loans, net of allowance for loan losses of $13,821 in 2005 and $10,402 in 2004 1,270,255 925,782 Bank premises and equipment, net 7,534 6,692 Accrued interest receivable 6,550 4,105 Other assets 14,843 12,088 ------------ ------------ Total assets $ 1,518,425 $ 1,139,353 ------------ ------------ Liabilities and Stockholders' Equity Deposits Demand deposits $ 188,554 $ 148,063 Savings and interest-bearing demand deposits 349,566 332,385 Time deposits 705,386 490,520 ------------ ------------ Total deposits $ 1,243,506 $ 970,968 Securities sold under agreement to repurchase and federal funds purchased 111,794 53,207 Trust preferred capital notes 44,344 18,570 Accrued interest payable 3,003 1,555 Other liabilities 3,960 3,729 Commitments and contingent liabilities -- -- ------------ ------------ Total liabilities $ 1,406,607 $ 1,048,029 ------------ ------------ 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, 14,049,602; 2004, 11,046,422 14,050 11,046 Surplus 36,066 37,219 Retained earnings 63,239 43,578 Accumulated other comprehensive loss, net (1,537) (519) ------------ ------------ Total stockholders' equity $ 111,818 $ 91,324 Total liabilities and stockholders' equity $ 1,518,425 $ 1,139,353 ------------ ------------ Virginia Commerce Bancorp, Inc. Consolidated Statements of Income (Dollars in thousands, except per share data) (Unaudited) Three Months Year Ended Ended December 31, December 31, ----------------------------------- 2005 2004 2005 2004 ----------------------------------- Interest and dividend income: Interest and fees on loans $23,161 $15,164 $79,614 $51,814 Interest and dividends on investment securities: Taxable 1,558 1,405 5,726 5,479 Tax-exempt 60 59 238 250 Dividends 51 39 203 124 Interest on deposits with other banks 10 6 30 10 Interest on federal funds sold 251 67 667 321 -------- -------- -------- -------- Total interest and dividend income $25,091 $16,740 $86,478 $57,998 Interest expense: Deposits $ 8,075 $ 4,258 $26,432 $15,100 Securities sold under agreement to repurchase and federal funds purchased 749 173 1,710 325 Other borrowed funds 49 11 423 15 Trust preferred capital notes 376 240 1,246 891 -------- -------- -------- -------- Total interest expense $ 9,249 $ 4,682 $29,811 $16,331 Net interest income: $15,842 $12,058 $56,667 $41,667 Provision for loan losses 960 984 3,772 2,989 -------- -------- -------- -------- Net interest income after provision for loan losses $14,882 $11,074 $52,895 $38,678 Non-interest income: Service charges and other fees $ 1,013 $ 435 $ 2,553 $ 1,749 Non-deposit investment services commissions 124 104 456 427 Fees and net gains on loans held-for-sale 794 810 3,306 3,229 Other 85 81 361 354 -------- -------- -------- -------- Total non-interest income $ 2,016 $ 1,430 $ 6,676 $ 5,759 Non-interest expense: Salaries and employee benefits $ 4,898 $ 3,973 $17,321 $13,478 Occupancy expense 1,268 876 4,479 3,240 Data processing expense 432 340 1,553 1,314 Other operating expense 1,688 1,385 6,113 4,775 -------- -------- -------- -------- Total non-interest expense $ 8,286 $ 6,574 $29,466 $22,807 Income before taxes on income $ 8,612 $ 5,930 $30,105 $21,630 Provision for income taxes 3,033 2,036 10,438 7,401 -------- -------- -------- -------- Net Income $ 5,579 $ 3,894 $19,667 $14,229 Earnings per common share, basic (1) $ 0.40 $ 0.28 $ 1.40 $ 1.08 Earnings per common share, diluted (1) $ 0.37 $ 0.26 $ 1.31 $ 0.99 (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 December 31, (Unaudited) 2005 ---------------------------------- Interest Average Average Income- Yields (Dollars in thousands) Balance Expense /Rates ---------------------------------- Assets Securities (1) $ 174,631 $ 1,669 3.86% Loans, net of unearned income (2) 1,249,704 23,161 7.25% Interest-bearing deposits in other banks 1,030 10 3.99% Federal funds sold 25,925 251 3.79% ---------------------------------- Total interest-earning assets $1,451,290 $ 25,091 6.86% Other assets 38,289 ----------- Total Assets $1,489,579 ----------- Liabilities and Stockholders' Equity Interest-bearing deposits: NOW accounts $ 205,615 $ 872 1.68% Money market accounts 121,961 635 2.06% Savings accounts 20,591 28 0.54% Time deposits 720,308 6,540 3.60% ---------------------------------- Total interest-bearing deposits $1,068,475 $ 8,075 3.00% Securities sold under agreement to repurchase and federal funds purchased 89,250 749 3.33% Other borrowed funds 4,565 49 4.24% Trust preferred capital notes 21,261 376 6.91% ---------------------------------- Total interest-bearing liabilities $1,183,551 $ 9,249 3.10% Demand deposits and other liabilities 197,252 ----------- Total liabilities $1,380,803 Stockholders' equity 108,776 ----------- Total liabilities and stockholders' equity $1,489,579 ----------- Interest rate spread 3.76% Net interest income and margin $ 15,842 4.34% 2004 ---------------------------------- Interest Average Average Income- Yields (Dollars in thousands) Balance Expense /Rates ---------------------------------- Assets Securities (1) $ 168,048 $ 1,503 3.62% Loans, net of unearned income (2) 908,752 15,164 6.53% Interest-bearing deposits in other banks 1,006 6 2.31% Federal funds sold 17,458 67 1.52% ---------------------------------- Total interest-earning assets $1,095,264 $ 16,740 6.00% Other assets 29,400 ----------- Total Assets $1,124,664 ----------- Liabilities and Stockholders' Equity Interest-bearing deposits: NOW accounts $ 206,597 $ 682 1.31% Money market accounts 122,652 439 1.42% Savings accounts 21,118 29 0.55% Time deposits 458,348 3,108 2.69% ---------------------------------- Total interest-bearing deposits $ 808,715 $ 4,258 2.09% Securities sold under agreement to repurchase and federal funds purchased 47,351 173 1.45% Other borrowed funds 1,718 11 2.51% Trust preferred capital notes 18,000 240 5.22% ---------------------------------- Total interest-bearing liabilities $ 875,784 $ 4,682 2.12% Demand deposits and other liabilities 159,366 ----------- Total liabilities $1,035,150 Stockholders' equity 89,514 ----------- Total liabilities and stockholders' equity $1,124,664 ----------- Interest rate spread 3.88% Net interest income and margin $ 12,058 4.30% (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 $1.1 million and $982 thousand for the three months ended December 31, 2005, and 2004, respectively. Virginia Commerce Bancorp, Inc. Consolidated Average Balances, Yields, and Rates Year Ended December 31, (Unaudited) 2005 ---------------------------------- Interest Average Average Income- Yields (Dollars in thousands) Balance Expense /Rates ---------------------------------- Assets Securities (1) $ 168,733 $ 6,167 3.70% Loans, net of unearned income (2) 1,128,801 79,614 7.05% Interest-bearing deposits in other banks 1,020 30 2.95% Federal funds sold 19,599 667 3.40% ---------------------------------- Total interest-earning assets $1,318,153 $ 86,478 6.57% Other assets 35,800 ----------- Total Assets $1,353,953 ----------- Liabilities and Stockholders' Equity Interest-bearing deposits: NOW accounts $ 207,053 $ 3,422 1.65% Money market accounts 110,623 1,988 1.80% Savings accounts 20,497 112 0.55% Time deposits 633,572 20,910 3.30% ---------------------------------- Total interest-bearing deposits $ 971,745 $ 26,432 2.72% Securities sold under agreement to repurchase and federal funds purchased 63,342 1,710 2.70% Other borrowed funds 13,759 423 3.07% Trust preferred capital notes 18,822 1,246 6.62% ---------------------------------- Total interest-bearing liabilities $1,067,668 $ 29,811 2.79% Demand deposits and other liabilities 185,134 ----------- Total liabilities $1,252,802 Stockholders' equity 101,151 ----------- Total liabilities and stockholders' equity $1,353,953 ----------- Interest rate spread 3.78% Net interest income and margin $ 56,667 4.30% 2004 ---------------------------------- Interest Average Average Income- Yields (Dollars in thousands) Balance Expense /Rates ---------------------------------- Assets Securities (1) $ 159,833 $ 5,853 3.71% Loans, net of unearned income (2) 798,195 51,814 6.49% Interest-bearing deposits in other banks 447 10 2.23% Federal funds sold 27,748 321 1.16% ---------------------------------- Total interest-earning assets $ 986,223 $ 57,998 5.89% Other assets 36,455 ----------- Total Assets $1,022,678 ----------- Liabilities and Stockholders' Equity Interest-bearing deposits: NOW accounts $ 209,617 $ 2,789 1.33% Money market accounts 119,963 1,667 1.39% Savings accounts 20,255 111 0.55% Time deposits 395,718 10,533 2.66% ---------------------------------- Total interest-bearing deposits $ 745,553 $ 15,100 2.03% Securities sold under agreement to repurchase and federal funds purchased 39,962 325 0.81% Other borrowed funds 733 15 2.00% Trust preferred capital notes 18,000 891 4.95% ---------------------------------- Total interest-bearing liabilities $ 804,248 $ 16,331 2.03% Demand deposits and other liabilities 144,617 ----------- Total liabilities $ 948,865 Stockholders' equity 73,813 ----------- Total liabilities and stockholders' equity $1,022,678 ----------- Interest rate spread 3.86% Net interest income and margin $ 41,667 4.23% (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 $4.0 million and $2.8 million for the year ended December 31, 2005, and 2004, respectively. *T