Northwest Bancshares, Inc. Announces Second Quarter 2012 Earnings and Dividend Declaration

Jul 23, 2012, 10:00 ET from Northwest Bancshares, Inc.

WARREN, Pa., July 23, 2012 /PRNewswire/ -- Northwest Bancshares, Inc. (NasdaqGS: NWBI) announced net income for the quarter ended June 30, 2012 of $16.4 million, or $0.17 per diluted share.  This represents an increase of $1.4 million, or 9.1%, over the same quarter last year when net income was $15.0 million, or $0.15 per diluted share, and an increase of $1.2 million, or 7.8%, over the quarter ended March 31, 2012 when net income was $15.2 million, or $0.16 per diluted share.  The annualized returns on average shareholders' equity and average assets for the current quarter were 5.63% and 0.82% compared to 4.81% and 0.74% for the same quarter last year and 5.29% and 0.76% for the quarter ended March 31, 2012. 

The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.12 per share payable on August 16, 2012, to shareholders of record as of August 2, 2012.  This represents the 71st consecutive quarter in which the Company has paid a cash dividend. 

In making this announcement, William J. Wagner, President and CEO, noted, "In the most recent quarter we continued to see many positive trends in our operations. We were pleased with the stability of our margin despite the continued challenges of the interest rate environment and competitive pricing pressures.  During the quarter we experienced net loan growth of approximately $65 million, while asset quality continued to improve.  Delinquent and non-accrual loans at the end of the quarter were at the lowest levels since the second quarter of 2008.  Finally, through the hard work and dedication of our Board of Directors and employees in strengthening our compliance management system, we were pleased to announce the termination of the FDIC Consent Order on July 6, 2012." 

Net interest income decreased by $718,000, or 1.1%, to $66.0 million for the quarter ended June 30, 2012, from $66.7 million for the quarter ended June 30, 2011, which was primarily attributable to a decrease in interest income from loans of $2.6 million, or 3.2%, and from investment securities of $2.5 million, or 25.9%.  Partially offsetting this decrease was a $4.3 million, or 27.7% decrease in interest expense on deposit accounts. These changes from the previous year were primarily due to decreases in market interest rates.

The provision for loan losses decreased by $3.4 million, or 40.7%, to $5.0 million for the quarter ended June 30, 2012, from $8.4 million for the quarter ended June 30, 2011.  As of June 30, 2012, the allowance for loan losses was $70.1 million, or 1.24% of total loans, compared to $75.5 million, or 1.37% of total loans, as of June 30, 2011.  Loans 90 days or more delinquent decreased to $84.7 million as of June 30, 2012, compared to $90.2 million as of March 31, 2012 and $115.8 million as of June 30, 2011.  Net charge-offs for the quarter ended June 30, 2012 were $7.8 million, or 0.55% of average loans on an annualized basis, compared to $9.4 million, or 0.68% of average loans on an annualized basis, in the same quarter last year.

Noninterest income decreased by $425,000, or 2.8%, to $14.8 million for the quarter ended June 30, 2012, from $15.3 million for the quarter ended June 30, 2011, due primarily to a decrease in service charges and fees of $619,000.  This decrease is primarily attributable to changes in overdraft fees assessed on transactional deposit accounts.

Noninterest expense decreased by $524,000, or 1.0%, to $52.0 million for the quarter ended June 30, 2012, from $52.5 million for the quarter ended June 30, 2011, due primarily to a decrease in compensation and employee benefits of $2.3 million.  This decrease is primarily the result of a relatively high level of stock benefits being granted in the previous year. Partially offsetting this decrease was an increase in marketing expense of $1.7 million, which was due to the timing of several campaigns designed to increase lending activity and promote brand awareness.

Net income for the six-month period ended June 30, 2012 of $31.5 million, or $0.33 per diluted share, represents a decrease of $714,000, or 2.2% compared to net income of $32.3 million, or $0.31 per diluted share, for the six-month period ended June 30, 2011.  The annualized returns on average shareholders' equity and average assets were 5.44% and 0.79%, respectively, for the current six-month period compared to 5.07% and 0.79%, respectively, in the prior year.    

Headquartered in Warren, Pennsylvania, Northwest Bancshares, Inc. is the holding company of Northwest Savings Bank.  Founded in 1896, Northwest Savings Bank is a full-service financial institution offering a complete line of business and personal banking products as well as benefits and wealth management services. Northwest operates 167 community banking offices in Pennsylvania, New York, Ohio and Maryland and 52 consumer finance offices in Pennsylvania through its subsidiary, Northwest Consumer Discount Company.  Northwest Bancshares, Inc.'s common stock is listed on the NASDAQ Global Select Market.  Additional information regarding Northwest Bancshares, Inc. can be accessed on-line at www.northwestsavingsbank.com

Forward-Looking Statements - This press release may contain forward-looking statements with respect to the financial condition and results of operations of Northwest Bancshares, Inc. including, without limitations, statements relating to the earnings outlook of the Company. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, include among others, the following possibilities: (1) changes in the interest rate environment; (2) competitive pressure among financial services companies; (3) general economic conditions including an increase in non-performing loans that could result from an economic downturn; (4) changes in legislation or regulatory requirements; (5) difficulties in continuing to improve operating efficiencies; (6) difficulties in the integration of acquired businesses; and (7) increased risk associated with an increase in commercial real-estate and business loans and non-performing loans.  Management has no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this release.   

 

Northwest Bancshares, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(Dollars in thousands, except per share amounts)

 

(Unaudited)

June 30,

December 31,

Assets

2012

2011

Cash and cash equivalents

$         82,295

94,276

Interest-earning deposits in other financial institutions

638,940

593,388

Federal funds sold and other short-term investments

633

633

Marketable securities available-for-sale (amortized cost of $874,048 and $885,408)

900,643

908,349

Marketable securities held-to-maturity (fair value of $187,043 and $239,412)

180,134

231,389

Total cash, interest-earning deposits and marketable securities

1,802,645

1,828,035

Loans held for sale

12,800

967

Residental mortgage loans

2,418,756

2,396,399

Home equity loans 

1,102,936

1,084,786

Other consumer loans

240,992

245,689

Commercial real estate loans

1,494,781

1,435,767

Commercial loans

399,470

387,911

Total loans receivable

5,669,735

5,551,519

Allowance for loan losses

(70,110)

(71,138)

Loans receivable, net

5,599,625

5,480,381

Federal Home Loan Bank stock, at cost

46,834

48,935

Accrued interest receivable

23,871

24,599

Real estate owned, net

30,470

26,887

Premises and Equipment, net

135,004

132,152

Bank owned life insurance

135,722

133,524

Goodwill

171,882

171,882

Other intangible assets

1,549

2,123

Other assets

90,394

109,187

Total assets

$    8,037,996

7,957,705

Liabilities and Shareholders' equity

Liabilities

Noninterest-bearing demand deposits

$        732,200

658,560

Interest-bearing demand deposits

845,209

800,676

Savings deposits

2,195,095

2,036,272

Time deposits

2,033,366

2,284,817

Total deposits

5,805,870

5,780,325

Borrowed funds

853,114

827,925

Advances by borrowers for taxes and insurance

32,324

23,571

Accrued interest payable

1,242

1,104

Other liabilities

73,210

66,782

Junior subordinated debentures

103,094

103,094

Total liabilities

6,868,854

6,802,801

Shareholders' equity

Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued

-

-

Common stock, $0.01 par value: 500,000,000 shares authorized, 97,880,874 shares

and 97,493,046 shares issued, respectively

979

975

Paid-in-capital

662,183

659,523

Retained earnings

552,278

543,598

Unallocated common stock of Employee Stock Ownership Plan

(25,192)

(25,966)

Accumulated other comprehensive loss

(21,106)

(23,226)

Total shareholders' equity

1,169,142

1,154,904

Total liabilities and shareholders' equity

$     8,037,996

7,957,705

Equity to assets

14.54%

14.51%

Tangible common equity to assets

12.66%

12.60%

Book value per share

$            11.94

$       11.85

Tangible book value per share

$            10.17

$       10.06

Closing market price per share

$            11.71

$       12.44

Full time equivalent employees

2,018

1,950

Number of banking offices

167

168

 

Northwest Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income - Unaudited

(Dollars in thousands, except per share amounts)

Quarter months ended

June 30,

March 31,

2012

2011

2012

Interest income:

Loans receivable

$         77,422

79,993

78,159

Mortgage-backed securities

4,409

6,073

4,691

Taxable investment securities

435

594

573

Tax-free investment securities

2,318

2,992

2,446

Interest-earning deposits

473

489

380

Total interest income

85,057

90,141

86,249

Interest expense:

Deposits

11,184

15,473

12,944

Borrowed funds

7,912

7,989

7,899

Total interest expense

19,096

23,462

20,843

Net interest income

65,961

66,679

65,406

Provision for loan losses

4,963

8,367

6,287

Net interest income after provision

for loan losses

60,998

58,312

59,119

Noninterest income:

Impairment losses on securities

-

(577)

(545)

Noncredit related losses on securities not expected

to be sold (recognized in other comprehensive income)

-

70

307

Net impairment losses

-

(507)

(238)

Gain/ (loss) on sale of investments, net

(44)

45

44

Service charges and fees

8,702

9,321

8,425

Trust and other financial services income

2,018

2,185

2,116

Insurance commission income

1,603

1,790

1,718

Loss on real estate owned, net

(582)

(593)

(1,070)

Income from bank owned life insurance

1,107

1,716

1,117

Mortgage banking income

789

290

531

Other operating income

1,244

1,015

997

Total noninterest income

14,837

15,262

13,640

Noninterest expense:

Compensation and employee benefits

27,416

29,658

27,838

Premises and occupancy costs

5,483

5,650

5,748

Office operations

3,340

3,255

3,324

Processing expenses

6,059

5,687

6,142

Marketing expenses

3,829

2,108

2,036

Federal deposit insurance premiums

1,418

2,355

1,620

Professional services

1,500

1,289

1,697

Amortization of intangible assets

279

479

295

Real estate owned expense

571

249

740

Other expense

2,071

1,760

1,836

Total noninterest expense

51,966

52,490

51,276

Income before income taxes

23,869

21,084

21,483

Income tax expense

7,508

6,081

6,302

Net income

$         16,361

15,003

15,181

Basic earnings per share

$             0.17

0.15

0.16

Diluted earnings per share

$             0.17

0.15

0.16

Annualized return on average equity

5.63%

4.81%

5.29%

Annualized return on average assets

0.82%

0.74%

0.76%

Basic common shares outstanding

94,294,956

102,216,892

94,115,522

Diluted common shares outstanding

94,500,877

102,536,202

94,665,333

 

Northwest Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income - Unaudited

(Dollars in thousands, except per share amounts)

Six months ended

June 30,

2012

2011

Interest income:

Loans receivable

$         155,581

160,450

Mortgage-backed securities

9,100

12,829

Taxable investment securities

1,008

992

Tax-free investment securities

4,764

6,066

Interest-earning deposits

853

896

Total interest income

171,306

181,233

Interest expense:

Deposits

24,128

31,536

Borrowed funds

15,811

15,978

Total interest expense

39,939

47,514

Net interest income

131,367

133,719

Provision for loan losses

11,250

15,611

Net interest income after provision

for loan losses

120,117

118,108

Noninterest income:

Impairment losses on securities

(545)

(577)

Noncredit related losses on securities not expected

to be sold (recognized in other comprehensive income)

307

70

Net impairment losses

(238)

(507)

Gain on sale of investments, net

-

49

Service charges and fees

17,127

18,249

Trust and other financial services income

4,134

4,095

Insurance commission income

3,321

3,170

Loss on real estate owned, net

(1,652)

(620)

Income from bank owned life insurance

2,224

2,882

Mortgage banking income

1,320

487

Other operating income

2,241

1,783

Total noninterest income

28,477

29,588

Noninterest expense:

Compensation and employee benefits

55,254

55,157

Premises and occupancy costs

11,231

11,841

Office operations

6,664

6,355

Processing expenses

12,201

11,454

Marketing expenses

5,865

4,067

Federal deposit insurance premiums

3,038

4,782

Professional services

3,197

2,545

Amortization of intangible assets

574

970

Real estate owned expense

1,311

680

Other expense

3,907

4,017

Total noninterest expense

103,242

101,868

Income before income taxes

45,352

45,828

Income tax expense

13,810

13,572

Net income

$          31,542

32,256

Basic earnings per share

$              0.33

$                 0.31

Diluted earnings per share

$              0.33

$                 0.31

Annualized return on average equity

5.44%

5.07%

Annualized return on average assets

0.79%

0.79%

Basic common shares outstanding

94,205,239

104,381,955

Diluted common shares outstanding

94,583,105

104,884,123

 

Northwest Bancshares, Inc. and Subsidiaries

Asset quality

(Dollars in thousands)

June 30,

2012

March 31,

2012

June 30,

2011

December 31,

2011

Non-accrual loans current:

Residential mortgage loans

$                 -

-

-

-

Home equity loans

-

-

-

-

Other consumer loans

-

-

-

-

Commercial real estate loans

16,773

18,462

13,572

13,057

Commercial loans

10,168

4,232

26,542

13,480

Total non-accrual loans current

$        26,941

22,694

40,114

26,537

Non-accrual loans delinquent 30 days to 59 days:

Residential mortgage loans

$                  -

-

-

-

Home equity loans

-

-

-

-

Other consumer loans

-

-

-

-

Commercial real estate loans

3,230

3,068

2,809

3,274

Commercial loans

489

6,258

312

90

Total non-accrual loans delinquent 30 days to 59 days

$           3,719

9,326

3,121

3,364

Non-accrual loans delinquent 60 days to 89 days:

Residential mortgage loans

$                   -

-

-

-

Home equity loans

-

-

-

-

Other consumer loans

-

-

-

-

Commercial real estate loans

1,600

2,269

1,385

1,560

Commercial loans

344

534

693

3,808

Total non-accrual loans delinquent 60 days to 89 days

$           1,944

2,803

2,078

5,368

Non-accrual loans delinquent 90 days or more:

Residential mortgage loans

$         25,336

28,696

30,594

28,221

Home equity loans

9,770

9,100

9,069

9,560

Other consumer loans

1,580

1,983

1,825

2,667

Commercial real estate loans

33,956

34,601

55,512

44,603

Commercial loans

14,008

15,810

18,802

10,785

Total non- accrual loans delinquent 90 days or more

$         84,650

90,190

115,802

95,836

Total non-accrual loans

$       117,254

125,013

161,115

131,105

June 30,

March 31, 

June 30,

December 31,

2012

2012

2011

2011

Nonperforming loans

$      117,254

125,013

161,115

131,105

Real estate owned, net

30,470

28,895

21,389

26,887

Nonperforming assets

$      147,724

153,908

182,504

157,992

Non-accrual troubled debt restructuring *

$        28,342

29,606

39,962

29,575

Accruing troubled debt restructuring

50,129

37,697

19,984

39,854

Total troubled debt restructuring

$        78,471

67,303

59,946

69,429

Nonperforming loans to total loans

2.07%

2.23%

2.94%

2.36%

Nonperforming assets to total assets

1.84%

1.91%

2.26%

1.99%

Allowance for loan losses to total loans

1.24%

1.30%

1.37%

1.28%

Allowance for loan losses to nonperforming loans

59.79%

58.35%

46.83%

54.26%

* Amounts included in nonperforming loans above.

Northwest Bancshares, Inc. and Subsidiaries

Delinquency

(Dollars in thousands)

Loan delinquency schedule

(Number of loans and dollar amount of loans) 

June 30,

March 31,

June 30,

December 31,

2012

*

2012

*

2011

*

2011

*

Loans delinquent 30 days to 59 days:

Residential mortgage loans

70

$    4,470

0.2%

366

$  29,414

1.2%

84

4,627

0.2%

427

$33,671

1.4%

Home equity loans

153

5,842

0.5%

201

7,086

0.7%

174

5,763

0.5%

222

7,426

0.7%

Consumer loans

847

3,513

1.5%

647

2,854

1.2%

825

3,816

1.5%

903

4,854

2.0%

Commercial real estate loans

58

8,149

0.5%

77

9,275

0.6%

58

7,902

0.6%

104

10,680

0.7%

Commercial loans

33

1,839

0.5%

29

7,069

1.7%

40

2,264

0.5%

32

2,027

0.5%

Total loans delinquent 30 days to 59 days

1,161

$  23,813

0.4%

1,320

55,698

1.0%

1,181

24,372

0.4%

1,688

58,658

1.1%

Loans delinquent 60 days to 89 days:

Residential mortgage loans

83

$    6,932

0.3%

22

$   1,466

0.1%

84

8,044

0.3%

99

$  8,629

0.4%

Home equity loans

72

2,824

0.3%

50

2,313

0.2%

60

2,602

0.2%

47

1,953

0.2%

Consumer loans

319

1,273

0.5%

262

1,083

0.5%

349

1,195

0.5%

412

1,787

0.7%

Commercial real estate loans

23

3,081

0.2%

27

3,203

0.2%

23

3,348

0.2%

38

3,122

0.2%

Commercial loans

16

980

0.2%

16

1,376

0.3%

22

3,887

0.9%

25

4,958

1.3%

Total loans delinquent 60 days to 89 days

513

$  15,090

0.3%

377

9,441

0.2%

538

19,076

0.3%

621

20,449

0.4%

Loans delinquent 90 days or more:

Residential mortgage loans

265

$  25,336

1.0%

275

$  28,696

1.2%

268

30,594

1.3%

273

$28,221

1.2%

Home equity loans

180

9,770

0.9%

167

9,100

0.9%

173

9,069

0.8%

177

9,560

0.9%

Consumer loans

308

1,580

0.7%

348

1,983

0.8%

314

1,825

0.7%

456

2,667

1.1%

Commercial real estate loans

128

33,956

2.3%

120

34,601

2.3%

151

55,512

4.0%

131

44,603

3.1%

Commercial loans

57

14,008

3.5%

56

15,810

3.9%

55

18,802

4.3%

66

10,785

2.8%

Total loans delinquent 90 days or more

938

$84,650

1.5%

966

90,190

1.6%

961

115,802

2.1%

1,103

95,836

1.7%

Total loans delinquent

2,612

$123,553

2.2%

2,663

$155,329

2.8%

2,680

$159,250

2.8%

3,412

$174,943

3.2%

* - Represents delinquency, in dollars, divided by the respective total amount of that type of loan outstanding.  

 

Northwest Bancshares, Inc. and Subsidiaries

Criticized loans as of June 30, 2012 - unaudited:

(Dollars in thousands)

Recorded

investment

Special

in loans

Pass

mention

Substandard

 Doubtful 

 Loss 

receivable

Personal Banking:

Residential mortgage loans

$         2,412,020

-

18,477

22

1,037

2,431,556

Home equity loans

1,093,023

-

9,913

-

-

1,102,936

Other consumer loans

240,180

-

812

-

-

240,992

Total Personal Banking

3,745,223

-

29,202

22

1,037

3,775,484

Business Banking:

Commercial real estate loans

1,278,665

64,985

149,363

1,768

-

1,494,781

Commercial loans

313,741

14,685

70,540

504

-

399,470

Total Business Banking

1,592,406

79,670

219,903

2,272

-

1,894,251

$         5,337,629

79,670

249,105

2,294

1,037

5,669,735

 

Northwest Bancshares, Inc. and Subsidiaries

Allowance for loan losses

(Dollars in thousands)

Quarter months ended

Six months ended

June 30, 

June 30,

2012

2011

2012

2011

Allowance for loan losses 

Beginning balance

$             72,941

76,450

71,138

76,412

Provision

4,963

8,367

11,250

15,611

Charge-offs residential mortgage                                            

(1,219)

(829)

(2,262)

(2,034)

Charge-offs home equity

(589)

(893)

(1,481)

(3,148)

Charge-offs other consumer

(1,504)

(1,277)

(2,791)

(2,509)

Charge-offs commercial real estate

(2,959)

(2,269)

(4,432)

(4,545)

Charge-offs commercial

(2,719)

(4,874)

(3,368)

(5,915)

Recoveries

1,196

780

2,056

1,583

Ending balance

$             70,110

75,455

70,110

75,455

Net charge-offs to average loans, annualized

0.55%

0.68%

0.44%

0.60%

Northwest Bancshares, Inc. and Subsidiaries

Municipal Securities Portfolio

(Dollars in thousands)

Market

 Book 

Unrealized

As a %

 value 

 value 

gain/ (loss)

of book

6/30/2012

6/30/2012

6/30/2012

value

Municipal securities by state: 

     Pennsylvania

          School districts

$              105,282

100,796

4,486

47.6%

          General obligations

38,776

37,332

1,444

17.6%

          Revenue bonds

4,755

4,710

45

2.2%

     Total Pennsylvania

148,813

142,838

5,975

67.5%

     New York

28,907

27,786

1,121

13.1%

     Ohio

6,784

6,427

357

3.0%

     All other states

37,524

34,644

2,880

16.4%

$              222,028

211,695

10,333

 

Average Balance Sheet - unaudited

(Dollars in thousands)

The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on assets an average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are calculated using daily averages.

 Quarters ended June 30, 

2012

2011

 Average 

 Interest 

 Avg. 

 Average 

 Interest 

 Avg. 

 Balance 

 Yield/ 

 Balance 

 Yield/ 

Cost (h) 

 Cost (h) 

Assets:

Interest-earning assets:

   Loans receivable (a) (b) (d)

$  5,627,459

77,981

5.54%

5,484,194

80,389

5.86%

   Mortgage-backed securities (c) 

761,616

4,409

2.32%

917,748

6,073

2.65%

   Investment securities (c) (d)     

311,087

4,001

5.14%

392,963

5,196

5.29%

   FHLB stock

46,916

25

0.21%

55,100

-

-

   Other interest-earning deposits                    

679,217

473

0.28%

705,568

489

0.27%

Total interest-earning assets 

7,426,295

86,889

4.68%

7,555,573

92,147

4.87%

Noninterest earning assets (e)

592,004

556,085

Total assets

$  8,018,299

8,111,658

Liabilities and shareholders' equity:

Interest-bearing liabilities:

   Savings accounts

$  1,146,989

1,034

0.36%

1,093,539

1,275

0.47%

   Interest-bearing demand accounts

831,414

240

0.12%

813,179

246

0.12%

   Money market accounts

1,021,485

878

0.35%

933,288

1,059

0.46%

   Certificate accounts

2,088,538

9,032

1.74%

2,372,039

12,893

2.18%

   Borrowed funds (f)

846,244

6,490

3.08%

841,835

6,569

3.13%

   Junior subordinated debentures

103,094

1,422

5.46%

103,094

1,420

5.45%

Total interest-bearing liabilities

6,037,764

19,096

1.27%

6,156,974

23,462

1.53%

Noninterest bearing liabilities (g)

817,118

708,310

Total liabilities

6,854,882

6,865,284

Shareholders' equity

1,163,417

1,246,374

Total liabilities and shareholders' equity

$  8,018,299

8,111,658

Net interest income/ Interest rate spread

67,793

3.41%

68,685

3.34%

Net interest-earning assets/ Net interest margin

$  1,388,531

3.65%

1,398,599

3.64%

Ratio of interest-earning assets to

 interest-bearing liabilities

 1.23X 

 1.23X 

(a) Average gross loans receivable includes loans held as available-for-sale and loans placed on nonaccrual status.

(b) Interest income includes accretion/ amortization of deferred loan fees/ expenses, which was not material.

(c) Average balances do not include the effect of unrealized gains or losses on securities held as available-for-sale.

(d) Interest income on tax-free investment securities and tax-free loans are presented on a fully taxable equivalent basis.

(e) Average balances include the effect of unrealized gains or losses on securities held as available-for-sale.

(f) Average balances include FHLB borrowings, securities sold under agreements to repurchase and other borrowings.

(g) Average balances include non-interest bearing demand deposits (checking accounts).

(h) Shown on a FTE basis. GAAP basis yields for the periods indicated were: Loans - 5.50% and 5.83%, respectively, Investment securities - 3.54%  and 3.65%, respectively, Interest-earning assets - 4.58% and 4.80%, respectively. GAAP basis net interest rate spreads were 3.31% and  3.27%, respectively, and GAAP basis net interest margins were 3.55% and 3.53%, respectively.

Average Balance Sheet - unaudited

(Dollars in thousands)

The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are calculated using daily averages.

 Six months ended June 30, 

2012

2011

 Average 

 Interest 

 Avg. 

 Average 

 Interest 

 Avg. 

 Balance 

 Yield/ 

 Balance 

 Yield/