CFX: Announces 29% Increase in EPS Contact: Mark A. Gavin, Chief Operating Officer (603) 355-8604 Gregg R. Tewksbury, Chief Financial Officer (603) 355-8607 CFX CORPORATION ANNOUNCES 29% INCREASE IN EARNINGS PER SHARE Keene, N.H., April 10, 1997 -- CFX CORPORATION (AMEX: CFX) today announced record earnings of $4.74 million, or $.36 per share, for the quarter ended March 31, 1997, compared to earnings of $3.56 million, or $.28 per share, for the corresponding period a year ago, a per share increase of $.08, or 29%. Company spokesman and Chief Operating Officer, Mark A. Gavin, said, "We are pleased to report the eighth consecutive quarter of record earnings before charges for mergers and other adjustments. The strong financial results are directly related to consistent growth in earning assets, strong asset quality, new revenue and other initiatives, and continued improvement in operating efficiency." Mr. Gavin added, "We are also proud to report that over the last two years, the Company's return on equity (ROE) has improved by approximately 33% from 10.62% in the first quarter of 1996 to 14.14% in the first quarter of 1997. The Company's solid progress in accomplishing a higher ROE has moved us closer toward our ROE goal of 15%." Other financial highlights for the first quarter of 1997 are as follows: * Return on average assets was 1.19%, for the first quarter of 1997, compared to 1.03% for the first quarter of 1996. * Core earnings (net interest and dividend income and other income) increased by $1.84 million, or 11% during the first quarter of 1997 over the year ago quarter. Average interest earning assets were $1.48 billion compared to $1.30 billion during the same period a year ago. * Total loans and leases grew by $32 million, or 3%, to $1.15 billion as of March 31, 1997. * The Company's efficiency ratio improved significantly in the first quarter of 1997 compared to the first quarter of 1996, declining from 65.22% to 61.24%. CFX Corporation is a multi-bank holding company with total assets of $1.74 billion as of March 31, 1997. 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 $886 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 $108 million in leases for others. The Company operates 43 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 assets of approximately $371 million. Upon completion of CFX's pending acquisitions of Portsmouth Bank Shares, Inc. and Community Bankshares, Inc. (expected in the third quarter of 1997) and planned increases in the balance sheet leverage associated with the Portsmouth transaction, it is anticipated that CFX will have approximately $2.7 billion in assets, 57 full-service banking offices,2 loan production offices and 88 automated teller and remote service locations in New Hampshire and central Massachusetts. Portsmouth Bank Shares, Inc., a bank holding company headquartered in Portsmouth, New Hampshire, had 3 full-service branches, and $271 million in total assets as of December 31,1996. Community Bankshares, Inc., a bank holding company, headquartered in Concord, New Hampshire, had 11 full-service branches and total assets of $550 million as of December 31, 1996. SELECTED FINANCIAL HIGHLIGHTS At or for the Three Months Ended March 31, (Dollars in thousands, except per share data) 1997 1996 Operating and Performance Ratios: Return on average assets (1) 1.19% 1.03% Return on average common equity (1) 14.14 10.62 Other income/average assets (1) 1.10 1.11 Other expense/average assets (1) 3.00 3.34 Efficiency ratio 61.24 65.22 Tier 1 leverage capital 7.91 8.60 Asset Quality: Nonperforming assets/total assets .61% .89% Nonperforming loans as a percent of total loans and leases .77 1.19 Allowance for loan and lease losses/nonperforming loans 177.91 135.79 Allowance for loan and lease losses/ total loans and leases 1.36 1.62 Net charge offs/average loans and leases (1) .27 .44 Stock Performance Indicators: Common shares outstanding 13,050 12,778 Closing price $ 16.88 $14.05 Earnings per common share $ .36 $ .28 Dividends declared per common share $ .22 $ .17 Dividend yield per common share 5.21% 4.84% Book value per common share $ 10.25 $10.01 Tangible book value per common share $ 9.56 $ 9.25 Price/book value per common share 164.68% 140.36% Price/tangible book value per common share 176.57% 151.89% Price/earnings ratio (1) 12 13 (1) Annualized The Company has made, and may continue to make, various forwar-looking statements with respect to earnings per share, cost savings related to acquisitions, credit quality and other financial business matters for 1997 and, in certain instances, subsequent periods. The Company cautions that these forward- looking statements are subject to numerous assumptions,risks, and uncertainties, and that statements for periods subsequent to 1997 are subject to greater uncertainty because of the increased likelihood ofchanges in underlying factors and assumptions. Actual results could differ materially from forward-looking statements. In addition to those factors previously disclosed by the Company and those factors identified elsewhere herein, the following factors could cause actual results to differ materially from such forward-looking statements: continued pricing pressures on loan and deposit products, actions of competitors, changes in economic conditions,the extent and timing of actions of the Federal Reserve, customers' acceptance of the Company's products and services and the extent and timing oflegislative and regulatory actions and reforms. The Company's forward-looking statements speak only as ofthe date on which such statements are made. By making any forward-looking statements, the Company assumes no duty to update them to reflect new, changing or unanticipated events or circumstances. EARNINGS PER COMMON SHARE 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Earnings Per Common Share: 1997 $ .36 1996 .28 $ .31 $ .04 (1) $ .36 (1) 1995 .17 .21 .26 25 (1) For the quarter ended September 30,1996, the Company recorded pre-tax costs related to the mergers of The Safety Fund Corporation and Milford Co/operative Bank totaling $4,522,000, and pre-tax costs associated with a SAIF special assessment of $908,000. The Company also recorded a pre-tax gain from the settlement of the Company's pension plan of $877,000 during the quarter ended September 30, 1996. These adjustments amounted to a reduction of earnings per common share of $.30 in the third quarter and an increase of $.01 in the fourth quarter. CONSOLIDATED BALANCE SHEETS March 31, December 31, March 31, (Dollars in thousands) 1997 1996 1996 Assets Cash and federal funds sold $ 66,708 $ 50,601 $ 65,124 Trading and investment securities 410,374 277,994 335,551 Mortgage loans held for sale 21,101 15,212 7,794 Nonperforming loans 8,803 8,299 11,284 Other loans and leases 1,141,855 1,109,865 936,049 Allowance for loan and lease losses (15,661) (15,740) (15,322) Premises and equipment 28,227 27,386 24,921 Mortgage servicing rights 6,555 5,313 4,473 Goodwill and deposit base intangibles 9,080 9,235 9,720 Foreclosed real estate 1,806 2,223 1,364 Bank-owned life insurance 31,376 30,975 - Other assets 34,225 25,729 34,549 ----------- ---------- --------- Total Assets $1,744,449 $1,547,092 $1,415,507 =========== ========== ========== Liabilities Deposits $1,223,530 $1,157,207 $1,119,270 Borrowed funds 343,216 242,455 149,130 Other liabilities 43,884 14,477 19,159 --------- ---------- --------- Total Liabilities 1,610,630 1,414,139 1,287,559 --------- ---------- --------- Shareholders' Equity Common stock 8,718 8,672 8,113 Paid-in capital 98,234 97,406 86,438 Retained earnings 30,094 28,223 34,352 Net unrealized losses on securities available for sale, after tax effects (2,757) (929) (955) Cost of common stock in treasury (470) (419) - ---------- ---------- ---------- Total Shareholders' Equity 133,819 132,953 127,948 ---------- ---------- ---------- Total Liabilities and Shareholders' Equity $1,744,449 $1,547,092 $1,415,507 ========== ========== ========= Common shares outstanding 13,050 12,981 12,778 Common shareholders' equity ========== ========== ========= per share $ 10.25 $ 10.24 $ 10.01 ========== ========== ========= CONSOLIDATED INCOME STATEMENTS Three Months Ended March 31, (Dollars in thousands) 1997 1996 Interest and dividend income $ 29,503 $ 25,740 Interest expense 14,499 12,039 -------- -------- Net Interest and Dividend Income 15,004 13,701 Provision for loan and lease losses 702 905 -------- -------- Net Interest and Dividend Income After Provision for Loan and Lease Losses 14,302 12,796 -------- -------- Other income: Service charges on deposit accounts 980 969 Loan servicing fees 407 400 Net gains (losses) on trading and investment securities (6) 210 Net gains on sales of loans 548 438 Leasing activities 775 702 Trust fees 617 559 Other 1,051 554 -------- -------- 4,372 3,832 Other expense: Salaries and employee benefits 6,561 5,753 Occupancy expense and equipment expense 1,935 1,749 Professional fees 376 619 Advertising and marketing expense 315 517 Goodwill and deposit base intangible amortization 155 167 Operation of foreclosed real estate 45 91 Other 2,587 2,681 -------- -------- 11,974 11,577 -------- -------- Income Before Income Taxes 6,700 5,051 Income taxes 1,958 1,496 -------- -------- Net Income Available to Common Stock $ 4,742 $ 3,555 ======== ======== Weighted average common shares outstanding 13,014 12,714 ======== ======== Earnings per common share $ .36 $ .28 ======== ======== CONSOLIDATED AVERAGE BALANCE SHEETS Three Months Ended March 31, 1997 1996 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 $1,156,557 $24,252 8.50% $939,378 $ 20,621 8.83% Tax-exempt loans and leases 9,231 222 9.75 8,184 234 11.50 Taxable securities 297,922 4,855 6.61 309,298 4,507 5.86 Tax-exempt securities 14,047 258 7.45 19,808 359 7.29 Other 6,187 91 5.97 21,027 238 4.55 --------- ------ ---- -------- ------- ----- Total interest earning assets 1,483,944 29,678 8.11 1,297,695 25,959 8.05 Noninterest earning assets 134,153 96,516 ---------- ---------- Total $1,618,097 $1,394,211 ========== ========== Liabilities and Shareholders' Equity Interest bearing liabilities: Savings deposits $ 432,542 2,413 2.26 $ 450,187 2,653 2.37 Time deposits 592,975 8,164 5.58 528,492 7,426 5.65 Advances from Federal Home Loan Bank of Boston 198,438 2,745 5.61 93,207 1,382 5.96 Other borrowed funds 98,140 1,177 4.86 50,984 578 4.56 ---------- ----- ---- --------- ------- ----- Total interest bearing liabilities 1,322,095 14,499 4.45 1,122,870 12,039 4.31 ------ ------- Noninterest bearing liabilities: Demand deposits 136,624 121,942 Other 23,418 14,793 Shareholders' equity 135,960 134,606 ---------- ---------- Total $1,618,097 $1,394,211 ========== ========== Net interest and dividend income $15,179 $13,920 ======= ======= Interest rate spread 3.66% 3.74% Net interest margin 4.15% 4.31% (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. 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