BELLINGHAM, Wash., Oct. 23, 2008 (GLOBE NEWSWIRE) -- Horizon Financial Corp. (Nasdaq:HRZB) today reported it remains well capitalized and set aside additional provisions for potential future loan losses in its fiscal second quarter ended September 30, 2008. In the quarter ended September 30, 2008, Horizon had a $12.0 million provision for loan losses, generating a net loss of $4.6 million, or $0.39 per share, compared to net income of $2.0 million, or $0.17 per diluted share, for the quarter ended June 30, 2008 and net income of $4.9 million, or $0.40 per diluted share, for the fiscal second quarter a year ago. In the first six months of fiscal 2009, Horizon incurred a $15.0 million provision for loan losses, generating a net loss of $2.6 million, or $0.22 per share, compared to earnings $9.9 million, or $0.81 per diluted share, in the first half of fiscal 2008.
"Undoubtedly the current economic turmoil is the most unsettling time we have seen in recent memory, and we are feeling the effects of the local and regional economic slowdown," said Rich Jacobson, Chief Executive Officer. "We have been in the construction lending field now for the better part of a century and have extensive experience in dealing with economic cycles in the Northwest. We also have very long term expertise in construction lending and have established structures and procedures to manage our construction lending programs. It is also worth noting that our exposure is limited to our Northwestern Washington market area.
"We continue to have exposure to commercial construction and land development projects, and these are the areas hardest hit in our region, particularly those in Pierce, King and Snohomish counties," Jacobson continued. "Consequently, as our construction and development borrowers complete their build-out phase and enter the marketing phase of their projects, we anticipate additional loans may move into nonaccrual status in future periods if the housing market does not improve and that our other real estate owned will also increase. To address these issues, we significantly increased the second quarter loan loss provision, bringing reserves to net loans up to 2.06% from 1.48% a year ago. This is consistent with our historical approach to provisioning for loan losses. We've worked through these cycles before and believe that this level of reserves is necessary given the current economic uncertainties."
Conference Call Information
Management will host a conference call this afternoon, October 23, 2008, at 1:30 p.m. PDT (4:30 pm EDT) to discuss the quarterly results. The live call can be accessed by dialing (303) 262-2130 or on the web at www.horizonbank.com. The replay, which will be available for a month beginning shortly after the call concludes, can be heard at (303) 590-3000 using access code 11120602#.
Capital Ratios, Liquidity and Credit Quality
Horizon Financial and Horizon Bank continue to be "well-capitalized" according to regulatory guidelines. On September 30, 2008 Horizon Financial reduced its quarterly cash dividend to $0.05 per share from $0.135 per share, acknowledging the importance of preserving capital in times of economic uncertainty. Liquidity remains strong with a solid mix of funding sources, including Federal Home Loan Bank and Federal Reserve credit facilities, strong core deposits and a solid investment portfolio. "The extension of FDIC insurance to all noninterest bearing deposits and the increased limit to $250,000 from $100,000 is restoring consumer confidence in the national banking system and should allow us to further build our core deposits," said Dennis Joines, President and Chief Operating Officer.
Total nonperforming assets were $80.2 million, or 5.53% of total assets at September 30, 2008, up from $38.6 million, or 2.67% of total assets at June 30, 2008, and $731,000, or 0.05% of total assets at September 30, 2007. Nonperforming loans increased to $78.4 million, or 6.19% of gross loans at September 30, 2008, from $35.8 million, or 2.83% of gross loans at June 30, 2008, and $6,000, at September 30, 2007. The increase in nonperforming loans at September 30, 2008, is primarily a result of slower sales of new single family homes and significantly lower demand for land and developable lots in King, Pierce and Snohomish Counties. Included in the commercial construction nonperforming assets are $29.4 million in condominium construction projects, with the remainder of this category in speculative single family home construction projects. "Most of our construction projects are complete or near completion, because in most cases, we limit the number of homes a builder can have in process," said Joines. It's important to note that a certain level of losses related to these credits has already been recognized, through loan charge-offs, as current appraised values are compared to loan balances. In the quarter ended September 30, 2008, Horizon recognized $5.6 million in losses, net of recoveries, compared to $3.0 million in the quarter ended June 30, 2008 and $39,000 in the quarter ended September 30, 2007.
The following tables break out the loan portfolio and nonperforming assets by category and geography:
Nonperforming Assets Nonperforming % of Nonperforming % of
by Category Assets NPAs Assets NPAs
(dollars in 000s) -------------------- -------------------
Sept. 30, 2008 June 30, 2008
1-4 Family residential $ 1,742 2% $ 1,829 5%
1-4 Family construction 1,417 2% 373 1%
------- ---- ------- ----
Subtotal 3,159 4% 2,202 6%
Commercial land development 19,479 24% 11,031 29%
Commercial construction 56,970 71% 25,163 65%
Multi family residential -- --
Commercial real estate -- --
Commercial loans 500 1% 82 0%
Home equity secured 116 0% 100 0%
Other consumer loans 5 0% 5 0%
------- ---- ------- ----
Subtotal 77,070 96% 36,381 94%
------- ---- ------- ----
Total nonperforming assets $80,229 100% $38,583 100%
======= ==== ======= ====
Nonperforming Assets Nonperforming % of Nonperforming % of
by Market Assets NPAs Assets NPAs
(dollars in 000s) -------------------- -------------------
Sept. 30, 2008 June 30, 2008
Whatcom County $ 8,993 11% $ 9,022 23%
Skagit County 563 1% 660 2%
Snohomish County 25,774 32% 20,717 54%
King County 22,896 29% -- 0%
Pierce County 22,003 27% 8,184 21%
------- ---- ------- ----
Total nonperforming assets $80,229 100% $38,583 100%
======= ==== ======= ====
Other real estate owned (OREO) decreased by 33% to $1.9 million at September 30, 2008, compared to $2.8 million from the previous quarter, and from $725,000 at September 30, 2007 with the successful sale of four properties previously held as OREO.
"We are working with our borrowers and builders to sell inventory and to mitigate losses, at the same time we are pursuing deeds in lieu of foreclosure or other repossession options on certain distressed properties," said Joines. "By taking possession of collateral we gain control and can be more successful disposing of the properties."
Balance Sheet Review
Total assets were $1.45 billion at September 30, 2008 and June 30, 2008 compared to $1.35 billion at September 30, 2007. Net loans were relatively unchanged at $1.24 billion as of September 30, 2008, compared to $1.25 billion at June 30, 2008 and $1.15 billion at September 30, 2007. The loan mix continues to reflect the business banking focus of the lending team, with commercial real estate loans representing 67% of net loans, commercial business loans representing 16%, residential loans representing 12%, and consumer loans representing 5% of net loans, respectively. "Our focus remains squarely on managing credit quality. We are continuing to service our existing customer base to maintain the solid relationships we have developed over the years, and we are not aggressively pursuing material increases in business from new customers at this time as a result of our focus on remaining well-capitalized," noted Jacobson.
As we've indicated previously, we have no preferred shares of either Freddie Mac or Fannie Mae in the investment portfolio. During the quarter ended September 30, 2008, the Bank elected to take a redemption in-kind distribution for its $5 million investment in the AMF family of mutual funds, due to the continuing decline in the net asset value precipitated by the unprecedented disruption in the mortgage backed securities markets. In conjunction with this distribution, the Bank realized a $777,000 loss during the quarter ended September 30, 2008 for the securities distributed. "Because of the short-term duration of these securities, we felt it was appropriate to dispose of our interests in the mutual fund and allow these individual securities to pay down while under our control instead of staying in this particular mutual fund," said Jacobson.
Total deposits increased to $1.14 billion at September 30, 2008, compared to $1.10 billion at June 30, 2008 and $997.6 million at September 30, 2007. Transaction accounts totaled $338.8 million and accounted for 30% of total deposits at September 30, 2008, compared to $352.9 million at June 30, 2008, or 32% of total deposits and $390.6 million, or 39% of total deposits at September 30, 2007. Time deposits increased to $808.4 million at September 30, 2008 compared to $743.8 million at June 30, 2008 and $607.0 million at September 30, 2007. Brokered certificates of deposit increased to $235.5 million, or 21% of total deposits at September 30, 2008 compared to $153.8 million, or 14% of total deposits at June 30, 2008 and $68.6 million, or 7% of total deposits at September 30, 2007. "The increase in brokered CD's directly replaced other borrowings, providing enhanced liquidity and flexibility with a call feature on many of these deposits. With these call options in our favor, we have the ability to return many of these deposits in the event we no longer need this additional liquidity," said Jacobson.
Shareholders' equity decreased 4% to $122.2 million at September 30, 2008 compared to $127.4 million at June 30, 2008 and decreased 5% from $128.1 million at September 30, 2007. At September 30, 2008, Horizon's book value was $10.21 per share, compared to $10.69 per share at June 30, 2008 and $10.56 per share a year earlier, and its tangible book value was $10.15 per share compared to $10.63 per share at June 30, 2008 and $10.50 per share a year ago. Horizon reduced its quarterly cash dividend to $0.05 per share from $0.135 per share, acknowledging the importance of preserving capital in these times of economic uncertainty. The cash dividend will be paid on November 7, 2008, to shareholders of record at the close of business October 17, 2008. This payment is the 84th consecutive quarterly cash dividend and represents an annualized dividend yield in the 2.5% to 3.0% range based on recent stock price activity.
Review of Operations
Net revenues (net interest income plus non-interest income) were $12.4 million for the three months ended September 30, 2008, compared to $15.6 million for the comparable quarter in fiscal 2008. Interest income declined 20% to $20.8 million in the current quarter compared to $25.9 million for the year ago quarter. Contributing to this decline was $1.6 million in non-accrual interest related to the increase in non-accrual loans during the second quarter of fiscal 2009. The increase in non-performing assets, along with reductions in the prime lending rate compared to the prior year, have adversely impacted the current period interest income figures. Interest expense declined 18% in the current quarter to $9.8 million, from $11.9 million for the second quarter a year ago. Year to date, net revenues were $25.9 million a decrease from $30.7 million in the first six months of fiscal 2008.
The provision for loan losses was $12.0 million in the second quarter of fiscal 2009, $3.0 million in the immediate prior quarter and $800,000 in the second quarter of fiscal 2008. Horizon recorded net charge offs of $5.6 million for the quarter ended September 30, 2008, compared to $3.0 million in the immediate prior quarter and $39,000 during the quarter ended September 30, 2007. The reserve for loan losses totaled $25.6 million, or 2.06% of net loans receivable at September 30, 2008, compared to $19.1 million, or 1.54% of net loans receivable at June 30, 2008 and $17.0 million, or 1.48% of net loans receivable at September 30, 2007.
Non-interest income was $1.5 million in the second quarter of fiscal 2009, compared to $1.6 million in the second quarter of fiscal 2008. The loss on the in-kind redemption of the AMF fund of $777,000 was partially offset by $767,000 in death benefits from a bank owned life insurance policy in the second quarter of fiscal 2009, included in other non-interest income. No additional securities held in the investment portfolio have been identified with similar exposure at this time. Year to date, non-interest income was $3.7 million compared to $3.3 million in the first six months of fiscal 2008.
Non-interest expense increased 9% to $8.1 million in the second quarter of fiscal 2009, from $7.5 million in the second quarter of fiscal 2008. The increase reflects a $335,000 loss on four OREO properties sold in the second quarter. Additional expenses relating to dealing with non-performing assets (including legal, appraisal and related fees) also contributed to this increase in non-interest expense. Management continues to work on reducing controllable expenses in the future.
The net interest margin was 3.26% in the second quarter of fiscal 2009, a decrease of 14 basis points from 3.40% in the immediate prior quarter and down 137 basis points from 4.63% in the same period a year ago. Year to date, the net interest margin was 3.33% down from 4.62% in the first half of fiscal 2008. The reversal of interest for non-accrual loans accounted for 51 basis points of the decline in the second quarter of fiscal 2009 and 38 basis points year to date.
The yield on earning assets was 6.20% in the second quarter of fiscal 2009, a decrease from 6.48% in the preceding quarter and 8.60% in the second quarter of fiscal 2008. In the second quarter of fiscal 2009, the cost of interest-bearing liabilities was 3.00%, compared to 3.18% in the preceding quarter and 4.10% for second quarter of fiscal 2008. In the first six months of fiscal 2009, the yield on earning assets was 6.34% down from 8.56% a year ago and the cost of interest bearing liabilities was 3.09% down from 4.08% a year ago.
Horizon Financial Corp. is a $1.45 billion, state-chartered bank holding company headquartered in Bellingham, Washington. Its primary subsidiary, Horizon Bank, is a state-chartered commercial bank that operates 19 full-service offices, four commercial loan centers and four real estate loan centers throughout Whatcom, Skagit, Snohomish and Pierce counties, Washington.
This press release contains statements that the Company believes are "forward-looking statements." These statements relate to the Company's financial condition, results of operations, plans, objectives, future performance or business. You should not place undue reliance on these statements, as they are subject to risks and uncertainties. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors which could cause actual results to differ materially include, but are not limited to, the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Board of Governors of the Federal Reserve System and our bank subsidiaries by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses or to write-down assets; our ability to control operating costs and expenses; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board; war or terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and other risks detailed in Horizon's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended March 31, 2008.
Sources for news release and conference call:
The Puget Sound Economic Forecaster September 2008;
www.nwrealestate.com/nwrpub/common/news.cfm;
Real Estats, September 2008
www.workforceexplorer.com/admin/uploadedPublications/9265_ESR_Oct21_08.pdf;
www.washingtonceo.com/home/story-display/article/307/skagit-consi.html;
blogs.thenewstribune.com/business/2008/10/15/milgard_will_close_marysville_plant
Bellingham Herald, 8-27-08:
Puget Sound Business Journal vol. 29, # 15, page 5;
Tacoma News Tribune, October 16, 2008, page B1
CONSOLIDATED STATEMENTS OF INCOME
(unaudited) Quarter Quarter Quarter
(in 000s, Ended Three Ended One Ended
except share Sept. 30, Month June 30, Year Sept. 30,
data) 2008 Change 2008 Change 2007
---------------------------------------------------------------------
Interest income:
Interest on
loans $ 19,808 -3% $ 20,446 -20% $ 24,881
Interest and
dividends on
securities 949 -1% 961 -6% 1,011
----------- ----------- -----------
Total
interest
income 20,757 -3% 21,407 -20% 25,892
Interest expense:
Interest on
deposits 8,500 -1% 8,587 -13% 9,818
Interest on
borrowings 1,334 -16% 1,593 -37% 2,131
----------- ----------- -----------
Total
interest
expense 9,834 -3% 10,180 -18% 11,949
----------- ----------- -----------
Net interest
income 10,923 -3% 11,227 -22% 13,943
Provision for
loan losses 12,000 300% 3,000 1400% 800
----------- ----------- -----------
Net interest
income
(loss) after
provision
for loan
losses (1,077) N/A 8,227 N/A 13,143
Non-interest
income:
Service fees 819 -15% 960 -11% 918
Net gain on
sales of
loans -
servicing
released 146 -28% 204 -16% 173
Net gain (loss)
on sales of
loans -
servicing
retained (2) N/A -- N/A 5
Net gain (loss)
on sales of
investment
securities (777) N/A 579 N/A --
Other 1,291 150% 516 150% 516
----------- ----------- -----------
Total
non-interest
income 1,477 -35% 2,259 -8% 1,612
Non-interest
expense:
Compensation
and employee
benefits 4,337 -4% 4,503 1% 4,296
Building
occupancy 1,175 4% 1,126 0% 1,177
Other expenses 2,142 43% 1,493 40% 1,532
Data processing 241 -1% 244 1% 238
Advertising 219 0% 219 5% 209
----------- ----------- -----------
Total
non-interest
expense 8,114 7% 7,585 9% 7,452
Income (loss)
before provision
for income
taxes (7,714) N/A 2,901 N/A 7,303
Provision
(Benefit) for
income taxes (3,109) N/A 881 N/A 2,390
----------- ----------- -----------
Net Income
(Loss) $ (4,605) N/A $ 2,020 N/A $ 4,913
=========== =========== ===========
Earnings per
share :
Basic earnings
(loss) per
share $ (0.39) N/A $ 0.17 N/A $ 0.40
Diluted
earnings
(loss) per
share N/A N/A $ 0.17 N/A $ 0.40
Weighted average
shares
outstanding:
Basic 11,940,064 0% 11,893,813 -2% 12,155,532
Common stock
equivalents 32,190 -55% 71,965 -68% 101,265
----------- ----------- -----------
Diluted 11,972,254 0% 11,965,778 -2% 12,256,797
=========== =========== ===========
CONSOLIDATED STATEMENTS OF INCOME
Six Months Six Months
Ended Ended
(unaudited) (in 000s, Sept. 30, Sept. 30,
except per share data) 2008 Change 2007
---------------------------------------------------------------------
Interest income:
Interest on loans $ 40,254 -17% $ 48,765
Interest and dividends on
securities 1,910 -6% 2,026
----------- -----------
Total interest income 42,164 -17% 50,791
Interest expense:
Interest on deposits 17,087 -11% 19,285
Interest on borrowings 2,927 -29% 4,122
----------- -----------
Total interest expense 20,014 -14% 23,407
----------- -----------
Net interest income 22,150 -19% 27,384
Provision for loan losses 15,000 1150% 1,200
----------- -----------
Net interest income (loss) after
provision for loan losses 7,150 -73% 26,184
Non-interest income:
Service fees 1,779 -1% 1,799
Net gain on sales of loans -
servicing released 350 -28% 487
Net gain (loss) on sales of loans -
servicing retained (2) N/A 17
Net gain (loss) on sales of
investment securities (198) N/A --
Other 1,807 79% 1,012
----------- -----------
Total non-interest income 3,736 13% 3,315
Non-interest expense:
Compensation and employee benefits 8,840 5% 8,427
Building occupancy 2,301 2% 2,262
Other expenses 3,635 16% 3,124
Data processing 485 1% 479
Advertising 438 6% 415
----------- -----------
Total non-interest expense 15,699 7% 14,707
Income (loss) before provision for
income taxes (4,813) N/A 14,792
Provision (Benefit) for income taxes (2,228) N/A 4,863
----------- -----------
Net Income (Loss) $ (2,585) N/A $ 9,929
=========== ===========
Earnings per share :
Basic earnings (loss) per share $ (0.22) N/A $ 0.81
Diluted earnings (loss) per share N/A N/A $ 0.81
Weighted average shares outstanding:
Basic 11,917,065 -2% 12,191,256
Common stock equivalents 56,119 -48% 108,149
----------- -----------
Diluted 11,973,184 -3% 12,299,405
=========== ===========
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
(in 000s, Three One
except share Sept. 30, Month June 30, Year Sept. 30,
data) 2008 Change 2008 Change 2007
---------------------------------------------------------------------
Assets:
Cash and due
from banks $ 22,117 -8% $ 24,095 20% $ 18,457
Interest-
bearing
deposits 18,816 565% 2,831 175% 6,836
Investment
securities -
available
for sale 32,183 -18% 39,050 -38% 51,652
Investment
securities -
held to
maturity -- N/A -- -100% 370
Mortgage-backed
securities -
available
for sale 39,503 4% 38,116 24% 31,865
Mortgage-backed
securities -
held to
maturity 10 -33% 15 -87% 78
Federal Home
Loan Bank
stock 8,580 -14% 10,015 18% 7,247
Loans held
for sale 1,496 -35% 2,314 -5% 1,571
Gross loans
receivable 1,265,275 0% 1,264,740 9% 1,163,436
Reserve for
loan losses (25,579) 34% (19,149) 50% (17,023)
----------- ----------- -----------
Net loans
receivable 1,239,696 0% 1,245,591 8% 1,146,413
Investment in
real estate
in a joint
venture 17,742 0% 17,704 2% 17,406
Accrued
interest and
dividends
receivable 6,942 -3% 7,179 -10% 7,691
Property and
equipment, net 27,142 -1% 27,351 -5% 28,551
Net deferred
income tax
assets 7,304 4% 7,012 98% 3,683
Income tax
receivable 4,111 N/A -- 418% 794
Other real
estate owned 1,859 -33% 2,764 156% 725
Other assets 23,798 1% 23,614 4% 22,792
----------- ----------- -----------
Total
assets $ 1,451,299 0% $ 1,447,651 8% $ 1,346,131
=========== =========== ===========
Liabilities:
Deposits $ 1,147,278 5% $ 1,096,754 15% $ 997,555
Other borrowed
funds 151,571 -21% 192,987 -20% 189,738
Borrowing
related to
investment
in real
estate in a
joint venture 23,404 2% 22,983 9% 21,419
Accounts
payable
and other
liabilities 4,618 -8% 5,020 -34% 6,955
Advances by
borrowers
for taxes
and insurance 372 100% 186 -11% 417
Deferred
compensation 1,905 -1% 1,917 -4% 1,982
Income tax
payable -- N/A 374 N/A --
----------- ----------- -----------
Total
liabili-
ties $ 1,329,148 1% $ 1,320,221 9% $ 1,218,066
Stockholders'
equity:
Serial
preferred
stock, $1.00
par value;
10,000,000
shares
authorized;
none issued
or outstanding -- -- --
Common stock,
$1.00 par
value;
30,000,000
shares
authorized;
11,960,371,
11,917,113, and
12,123,595
shares
outstanding $ 11,960 0% $ 11,917 -1% $ 12,124
Additional
paid-in
capital 51,086 1% 50,706 0% 51,199
Retained
earnings 59,115 -8% 64,318 -3% 61,207
Accumulated
other
comprehensive
income (loss) (10) N/A 489 N/A 3,535
----------- ----------- -----------
Total
stockholders'
equity 122,151 -4% 127,430 -5% 128,065
----------- ----------- -----------
Total
liabilities
and stock-
holders'
equity $ 1,451,299 0% $ 1,447,651 8% $ 1,346,131
=========== =========== ===========
Intangible
assets:
Goodwill $ 545 0% $ 545 0% $ 545
Mortgage
servicing
asset 235 -2% 240 1% 233
----------- ----------- -----------
Total
intangible
assets $ 780 -1% $ 785 0% $ 778
=========== =========== ===========
LOANS
(unaudited)
(in 000s) Sept. 30, 2008 June 30, 2008 Sept. 30, 2007
---------------------------------------------------------------------
1-4 Mortgage
1-4 Family
residential $ 157,502 $ 167,788 $ 159,824
1-4 Family
construction 37,877 37,719 34,032
Participations
sold (50,198) (51,330) (50,655)
---------- ----------- ----------
Subtotal 145,181 154,177 143,201
Commercial land
development 177,600 171,316 172,188
Commercial
construction 339,774 334,380 286,650
Multi family
residential 44,522 44,890 46,631
Commercial real
estate 286,728 296,682 296,453
Commercial loans 207,348 201,381 165,356
Home equity
secured 56,047 53,110 44,971
Other consumer
loans 8,075 8,804 7,986
---------- ----------- ----------
Subtotal 1,120,094 1,110,563 1,020,235
---------- ----------- ----------
Subtotal 1,265,275 1,264,740 1,163,436
Less:
Reserve for
loan losses (25,579) (19,149) (17,023)
---------- ----------- ----------
Net loans
receivable $1,239,696 $ 1,245,591 $1,146,413
========== =========== ==========
Net residential
loans $ 143,555 12% $ 152,880 12% $ 142,031 12%
Net commercial
loans 202,271 16% 197,676 16% 162,402 14%
Net commercial
real estate
loans 831,123 67% 834,142 67% 789,882 69%
Net consumer
loans 62,747 5% 60,893 5% 52,098 5%
--------------- ---------------- ---------------
$1,239,696 100% $ 1,245,591 100% $1,146,413 100%
=============== ================ ===============
DEPOSITS
(unaudited)
(in 000s) Sept. 30, 2008 June 30, 2008 Sept. 30, 2007
---------------------------------------------------------------------
Demand Deposits
Savings $ 18,135 2% $ 17,660 2% $ 19,183 2%
Checking 75,633 6% 71,382 6% 77,341 8%
Checking - non
interest
bearing 65,365 6% 78,981 7% 76,260 7%
Money market 179,714 16% 184,925 17% 217,790 22%
--------------- ---------------- ---------------
Subtotal 338,847 30% 352,948 32% 390,574 39%
Certificates of
Deposit
Under $100,000 289,945 25% 289,183 26% 277,848 28%
$100,000 and
above 283,015 24% 300,801 28% 260,534 26%
Brokered
Certificates
of Deposit 235,471 21% 153,822 14% 68,599 7%
--------------- ---------------- ---------------
Total
Certificates
of Deposit 808,431 70% 743,806 68% 606,981 61%
--------------- ---------------- ---------------
Total $1,147,278 100% $ 1,096,754 100% $ 997,555 100%
=============== ================ ===============
WEIGHTED AVERAGE INTEREST RATES:
Six Six
Quarter Quarter Quarter Months Months
Ended Ended Ended Ended Ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
(unaudited) 2008 2008 2007 2008 2007
------------------------------------------------ -----------------
Yield on loans 6.36% 6.64% 8.93% 6.50% 8.90%
Yield on investments 4.05% 4.32% 4.47% 4.18% 4.46%
---- ---- ---- ---- ----
Yield on interest-
earning assets 6.20% 6.48% 8.60% 6.34% 8.56%
Cost of deposits 3.04% 3.25% 3.96% 3.14% 3.93%
Cost of borrowings 2.80% 2.86% 4.93% 2.84% 4.94%
---- ---- ---- ---- ----
Cost of interest-
bearing
liabilities 3.00% 3.18% 4.10% 3.09% 4.08%
AVERAGE BALANCES
Six Six
Quarter Quarter Quarter Months Months
Ended Ended Ended Ended Ended
(unaudited) Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
(in 000s) 2008 2008 2007 2008 2007
---------------------------------------------------------------------
Loans $1,246,410 $1,231,792 $1,114,386 $1,239,101 $1,095,313
Investments 93,757 89,019 90,469 91,388 90,736
---------- ---------- ---------- ---------- ----------
Total
interest-
earning
assets 1,340,167 1,320,811 1,204,855 1,330,489 1,186,049
Deposits 1,118,799 1,056,157 992,531 1,087,478 981,618
Borrowings 190,443 222,470 172,738 206,457 166,779
---------- ---------- ---------- ---------- ----------
Total
interest-
bearing
liabili-
ties $1,309,242 $1,278,627 $1,165,269 1,293,935 1,148,397
Average
assets $1,449,475 $1,419,914 $1,324,836 $1,430,376 $1,306,667
Average
stockholders'
equity $ 124,790 $ 127,873 $ 126,850 $ 125,966 $ 125,852
CONSOLIDATED FINANCIAL RATIOS
Six Six
Quarter Quarter Quarter Months Months
Ended Ended Ended Ended Ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
(unaudited) 2008 2008 2007 2008 2007
---------------------------------------------------------------------
Return on
average
assets -1.27% 0.57% 1.48% -0.36% 1.52%
Return on
average
equity -14.76% 6.32% 15.49% -4.10% 15.78%
Efficiency
ratio 65.43% 56.25% 47.91% 60.65% 47.91%
Net interest
spread 3.19% 3.30% 4.49% 3.24% 4.49%
Net interest
margin 3.26% 3.40% 4.63% 3.33% 4.62%
Equity-to-
assets
ratio 8.42% 8.80% 9.51%
Book value
per share $ 10.21 $ 10.69 $ 10.56
Tangible
book value
per share $ 10.15 $ 10.63 $ 10.50
RESERVE FOR LOAN LOSSES
Six Six
Quarter Quarter Quarter Months Months
(unaudited) Ended Ended Ended Ended Ended
(dollars Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
in 000s) 2008 2008 2007 2008 2007
---------------------------------------------------------------------
Balance at
beginning
of period $ 19,149 $ 19,114 $ 16,262 $ 19,114 $ 15,889
Provision
for loan
losses 12,000 3,000 800 15,000 1,200
Charge offs -
net of
recoveries (5,570) (2,965) (39) (8,535) (66)
---------- ---------- ---------- ---------- ----------
Balance at
end of
period $ 25,579 $ 19,149 $ 17,023 $ 25,579 $ 17,023
Reserves/
Gross Loans
Receivable 2.02% 1.51% 1.46%
Reserves/
Net Loans
Receivable 2.06% 1.54% 1.48%
NON-PERFORMING ASSETS
(unaudited)
(dollars Sept. 30, June 30, Sept. 30,
in 000s) 2008 2008 2007
---------------------------------------------
Accruing
loans -
90 days
past due $ 589 $ -- $ --
Non-accrual
loans 77,781 35,819 6
---------- ---------- ----------
Total non-
performing
loans $ 78,370 $ 35,819 $ 6
Total non-
performing
loans/gross
loans 6.19% 2.83% 0.00%
Real estate
owned $ 1,859 $ 2,764 $ 725
---------- ---------- ----------
Total non-
performing
assets $ 80,229 $ 38,583 $ 731
Total non-
performing
assets/
total
assets 5.53% 2.67% 0.05%