CFX: Announces 40% Increase in Earnings Contact: Mark A. Gavin, Chief Financial Officer (603) 352-2502 CFX CORPORATION ANNOUNCES 40% INCREASE IN EARNINGS PER SHARE Keene, N.H., January 16, 1997 -- CFX CORPORATION (AMEX: CFX) today announced, exclusive of charges for mergers and other adjustments, record earnings of $4,489,000, or $.35 per share, for the quarter ended December 31, 1996, compared to earnings of $3,162,000, or $.25 per share, for the corresponding period a year ago, a per share increase of $.10, or 40%. On the same basis as described above, the Company's earnings for the year ended December 31, 1996, amounted to $16,248,000, or $1.27 per share, compared to earnings of $11,249,000 or $.89 per share, for the corresponding period a year ago, a per share increase of $.38, or 43%. The Company's financial statements for all prior periods presented have been restated under the poolingof-interests method of accounting for the acquisitions of The Safety Fund Corporation and the Milford Co/operative Bank, completed as of July 1, 1996. In addition, per share earnings for the prior periods have been restated to reflect the 1996 stock dividend of 5%. After charges for mergers and other adjustments,earnings were $4,622,000, or $.36 per share, and $12,641,000, or $.99 per share, for the quarter and year ended December 31,1996, respectively,compared to earnings of $3,162,000, or $.25 per share, and $11,249,000, or $.89 per share, for the corresponding periods a year ago, respectively. A reconciliation of net income available to common stock to net income available to common stock before charges for mergers and other adjustments for the quarter and the year ended December 31, 1996 is summarized as follows: EARNINGS RECONCILIATION December 31, 1996 Three Months Year (Dollars in thousands, Ended Ended except per share data) Net Income Available to Common Stock $4,622 $12,641 Add (Subtract) - After Tax: Merger Costs (1) - 3,722 FDIC-SAIF Settlement (2) (133) 424 Gain From Settlement of Pension Plans (3) - (539) (133) 3,607 Net Income Available to Common Stock Exclusive of Merger and Other Adjustments $4,489 $16,248 EARNINGS PER COMMON SHARE: Net Income Available to Common Stock $ .36 $ .99 Net Income Available to Common Stock Before Merger and Other Adjustment $ .35 $ 1.27 (1) Costs related to The Safety Fund Corporation and Milford Co/operative Bank mergers completed on July 1, 1996. (2) On September 30,1996, a law was passed to recapitalize the FDIC - Savings Association Insuranc Fund (SAIF through a special assessment of .657 percent of SAIF insured deposits (i.e., Milford Co/operative Bank deposits).The adjustment in the fourth quarter of 1996 reflects the difference between the third quarter of 1996 estimate and the payment remitted in the fourth quarter of 1996. (3) The Company terminated CFX Corporation's and Safety Fund's pension plans and transferred the assets and liabilities to a multi-employer pension plan. Company spokesman and Chief Financial Officer, Mark A. Gavin, said, "The Company achieved record earnings, exclusive of charges for mergers and other adjustments, for the seventh consecutive quarter. Leveraging the Company's franchise from loan growth, new revenue initiatives and continued improvements in efficiency, is the story behind the Company's 40% growth in earnings per share. The financial highlights for the fourth quarter of 1996 before merger costs and other adjustments are as follows: * Return on average assets and return on average shareholders' equity were 1.14% and 13.20%, respectively, for the fourth quarter of 1996, compared to .94% and 9.86%, respectively, for the fourth quarter of 1995. * Core earnings (net interest and dividend and other income) increased by $1.9 million, during the fourth quarter of 1996 over the year ago quarter. Average interest earning assets were $1.44 billion compared to $1.24 billion during the same period a year ago. * Total loans and leases grew by $192 million, or 21% in 1996, to $1.12 billion as of December 31, 1996. * The Company's efficiency ratio improved significantly in the fourth quarter of 1996 compared to the fourth quarter of 1995, declining from 67.21% to 61.82%. CFX Corporation is a multi-bank holding company with total assets of $1.6 billion as of December 31, 1996. The Company's three banking subsidiaries are CFX Bank, headquartered in Keene, New Hampshire, Orange Savings Bank, headquartered in Orange, Massachusetts, and The Safety Fund National Bank, headquartered in Fitchburg,Massachusetts. CFX Mortgage, Inc., CFX Bank's mortgage banking subsidiary,services approximately $765 million in mortgage loans for others. In addition, CFX Funding L.L.C., a 51% owned subsidiary of CFX Bank that engages in the facilitation of lease financing and rated securitizations, now services over $100 million in leases for others. The Company operates 42 full service offices, 2 loan production offices, and 68 automated teller and remote service banking locations in New Hampshire and central Massachusetts, and operates a trust division with $370 million in assets under management. SELECTED FINANCIAL HIGHLIGHTS At or for the Three Months Ended December 31, 1996 1995 1996 As Excluding (Dollars in thousands, Reported Adjustments(2) except per share data) Operating and Performance Ratios: Return on average assets (1) 1.17% .94% 1.14% Return on average common equity (1 13.59 9.86 13.20 Other income/average assets (1) 1.17 1.07 1.17 Other expense/average assets (1) 2.99 3.46 3.04 Efficiency ratio 61.13 67.21 61.82 Tier 1 leverage capital 7.99 8.77 8.20 Asset Quality: Nonperforming assets/total assets .68% .83% N/A Nonperforming loans as a percent of total loans and leases .74 1.08 N/A Allowance for loan and lease losses/nonperforming loans 189.66 153.97 N/A Allowance for loan and lease losses/total loans and leases 1.41 1.67 N/A Net charge offs/average loans and leases (1) .24 .41 N/A Stock Performance Indicators: Common shares outstanding 12,981 12,683 12,981 Closing price $15.50 $14.88 $15.50 Earnings per common share $.36 $.25 $.35 Book value per common share $10.24 $10.02 N/A Tangible book value per common shares $9.53 $9.24 N/A Price/book value per common share 151.37% 148.50% N/A Price/tangible book value per common share 162.64% 161.04% N/A Price/earnings ratio (1) 11 15 11 (1) Annualized (2) Excluding charges for mergers and other adjustments EARNINGS PER COMMON SHARE (1) 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Earnings Per Common Share: 1996 $ .28 $ .31 $ .33 $ .35 1995 .17 .22 .26 .25 (1) Excluding charges for mergers and other adjustments. CONSOLIDATED BALANCE SHEETS Year Ended December 31, (Dollars in thousands) 1996 1995 Assets Cash and federal funds sold $53,083 $60,368 Trading and investment securities 277,994 298,339 Mortgage loans held for sale 15,212 7,084 Nonperforming loans 8,299 10,075 Other loans and leases 1,111,463 917,356 Allowance for loan and lease losses (15,740) (15,449) Premises and equipment 27,386 25,253 Mortgage servicing rights 5,313 4,373 Goodwill and deposit base intangibl 9,235 9,884 Foreclosed real estate 2,223 1,186 Other assets 63,003 26,411 Total Assets $1,557,471 $1,344,880 Liabilities Deposits $1,157,541 $1,056,824 Borrowed funds 244,937 146,826 Other liabilities 22,091 14,198 Total Liabilities 1,424,569 1,217,848 Shareholders' Equity Common stock 8,672 8,052 Paid-in capital 97,406 85,902 Retained earnings 28,223 32,488 Net unrealized gains (losses) on securities available for sale, after tax effects (980) 590 Cost of common stock in treasury (419) - Total Shareholders' Equity 132,902 127,032 Total Liabilities and Shareholders' Equity $1,557,471 $1,344,880 Common shares outstanding 12,981 12,683 Common shareholders' equity per share $10.24 $10.02 CONSOLIDATED INCOME STATEMENTS Three Months Ended Year Ended December 31 (Dollars in thousands) 1996 1995 1996 1995 Interest and dividend income $28,377 $25,053 $108,425 $96,389 Interest expense 13,949 11,542 51,566 44,363 Net Interest and Dividend Income 14,428 13,511 56,859 52,026 Provision for loan and lease losses 600 754 2,935 3,037 Net Interest and Dividend Income After Provision for Loan and Lease Losses 13,828 12,757 53,924 48,989 Other income: Service charges on deposit accounts 1,005 960 4,001 3,756 Loan servicing fees 491 484 1,671 1,726 Net gains on trading and investment securities 368 323 711 1,296 Net gains on sales of loans 451 255 1,383 648 Leasing activities 667 400 2,487 1,967 Trust fees 634 608 2,351 2,246 Pension settlement gain - - 877 - Other 972 576 3,346 2,672 4,588 3,606 16,827 14,311 Other expense: Salaries and employee benefits 6,140 5,727 23,847 23,138 Occupancy expense and equipment expense 1,957 1,643 6,991 6,567 Professional fees 470 576 1,963 2,413 Advertising and marketing expense 329 414 1,711 1,598 FDIC deposit insurance 83 181 377 1,383 Goodwill and deposit base intangible amortization 151 182 653 714 Operation of foreclosed real estate 90 190 345 430 Merger expenses - - 4,522 - SAIF special assessment (217) - 691 - Other 2,753 2,762 10,270 9,959 11,756 11,675 51,370 46,202 Income Before Income Taxes 6,660 4,688 19,381 17,098 Income taxes 2,038 1,526 6,740 5,760 Net Income 4,622 3,162 12,641 11,338 Preferred stock dividends - - - 89 Net Income Available to Common Stock $4,622 3,162 $12,641 $11,249 Weighted average common shares outstanding 12,924 12,621 12,823 12,701 Earnings per common share $ .36 $ .25 $ .99 $ .89 CONSOLIDATED AVERAGE BALANCE SHEETS Three Months Ended December 31, 1996 1995 Interest Interest Average Income/ Yield Average Income/ Yield/ (Dollars in thousands) Balance Expense(1) Rate Balance Expense(1) Rate Assets Interest earning assets Loans and leases $1,094,966 $23,418 8.51% $887,066 $19,835 8.87% Tax-exempt loans and leases 9,249 257 11.05 8,461 309 14.49 Taxable securities 312,299 4,579 5.83 289,558 4,195 5.75 Tax-exempt securities 15,985 300 7.47 21,025 389 7.34 Other 2,802 26 3.69 34,358 580 6.70 Total interest earning assets 1,435,301 28,580 7.92 1,240,468 25,308 8.09 Noninterest earning assets 131,101 96,880 Total $1,566,402 $1,337,348 Liabilities and Shareholders' Equity Interest bearing liabilities: Savings deposits $444,102 2,576 2.31 $ 459,515 2,854 2.46 Time deposits 571,142 7,975 5.55 473,301 6,799 5.70 Advances from Federal Home Loan Bank of Boston 179,877 2,529 5.59 83,592 1,310 6.22 Other borrowed funds 74,237 869 4.66 49,425 579 4.65 Total interest bearing liabilities 1,269,358 13,949 4.37 1,065,833 11,542 4.30 Noninterest bearing liabilities: Demand deposits 141,111 127,600 Other 20,670 16,707 Shareholders'equity 135,263 127,208 Total $1,566,402 $1,337,348 Net interest and dividend income $ 14,631 $ 13,766 Interest rate spread 3.55% 3.79% Net interest margin 4.06% 4.40% (1) Income from tax-exempt securities and tax-exempt loans and leases has been restated to a tax equivalent basis using a 38.62% and 34.00% tax rate, respectively. CONSOLIDATED AVERAGE BALANCE SHEETS Year Ended December 31, 1996 1995 Interest Interest Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense(1) Rate Balance Expense(1) Rate Assets Interest earning assets Loans and leases $1,016,162 $87,743 8.63% $871,620 $ 76,176 8.74% Tax-exempt loans and leases 8,925 1,019 11.42 7,332 865 11.80 Taxable securities 303,306 18,548 6.12 278,583 17,020 6.11 Tax-exempt securities 18,054 1,337 7.40 22,605 1,632 7.22 Other 13,923 640 4.60 34,736 1,620 4.66 Total interest earning assets 1,360,370 109,287 8.03 1,214,876 97,313 8.01 Noninterest earning assets 115,516 96,579 Total $1,475,886 $1,311,455 Liabilities and Shareholders' Equity Interest bearing liabilities: Savings deposits $ 449,001 10,539 2.35 $ 465,849 11,745 2.52 Time deposits 541,945 30,201 5.57 466,025 25,534 5.48 Advances from Federal Home Loan Bank of Boston 131,913 7,476 5.67 75,508 4,740 6.28 Other borrowed funds 72,042 3,350 4.65 45,678 2,344 5.13 Total interest bearing liabilities 1,194,901 51,566 4.32 1,053,060 44,363 4.21 Noninterest bearing liabilities: Demand deposits 131,163 119,021 Other 17,851 15,496 Shareholders' equity 131,971 123,878 Total $1,475,886 $1,311,455 Net interest and dividend income $ 57,721 $ 52,950 Interest rate spread 3.71% 3.80% Net interest margin 4.24% 4.36% (1) Income from tax-exempt securities and tax-exempt loans and leases has been restated to a tax-equivalent basis using a 38.62% and 34.00% tax rate, respectively. Ends.