CFX: Announces 19% Gain in EPS Contact: Mark A. Gavin, EVP/Chief Operating Officer (603) 355-8604 Gregg R. Tewksbury, Chief Financial Officer (603) 355-8607 CFX CORPORATION ANNOUNCES 19% GAIN IN EARNINGS PER SHARE Keene, N.H., July 10, 1997 -- CFX CORPORATION (AMEX: CFX) today announced record earnings of $4.81 million, or $.37 per share, for the quarter ended June 30, 1997, compared to earnings of $4.01 million, or $.31 per share, for the corresponding period a year ago, a per share increase of $.06, or 19%. The Company's earnings for the six months ended June 30, 1997, amounted to $9.55 million, or $.73 per share, compared to earnings of $7.57 million, or $.59 per share, for the corresponding period a year ago, a per share increase of $.14, or 24%. Company spokesman and Chief Operating Officer, Mark A. Gavin, said, "We are very pleased to report strong growth in both earnings per share and net revenues (net interest and dividend income and other income) for the second quarter of 1997. Earnings per share and net revenues grew by 19% and 9%, respectively, for the three months ended June 30, 1997 over the same period a year ago. Growth in both investment securities and loans and leases along with increased mortgage banking activities, tax-exempt income, and tax credits from low income housing tax credit investments, were the primary reasons behind the strong growth in earnings per share and net revenues." Other financial highlights for the second quarter of 1997 are as follows: * Return on average assets and return on average shareholders' equity were 1.10% and 13.99%,respectively,for the second quarter of 1997,compared to 1.10% and 12.37%, respectively, for the second quarter of 1996. * Net revenues increased by $1.68 million, or 9% during the second quarter of 1997 over the year ago quarter. Average earning assets were $1.60 billion compared to $1.34 billion during the same period a year ago. * Total loans and leases grew by $281 million, or 28%, over the last twelve months, to $1.29 billion, as of June 30, 1997. A breakdown of the loans and lease growth is as follows: (In millions) 6/30/97 6/30/96 Increase Residential Real Estate $ 847 $ 648 $ 199 Commercial 303 270 33 Consumer 137 88 49 ------ ------ ----- $1,287 $1,006 $ 281 ====== ====== ===== CFX Corporation is a multi-bank holding company with total assets of $1.86 billion as of June 30, 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 $895 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 $117 million in leases for others. The Company operates 43 full service offices, 3 loan production offices, and 68 automated teller and remote service banking locations in New Hampshire and central Massachusetts, and operates a trust division with $405 million in assets. Upon completion of the Company's pending acquisitions of Portsmouth Bank Shares, Inc. and Community Bankshares, Inc. (both expected in the third quarter of 1997) and planned increases in the balance sheet leverage associated with the Portsmouth transaction, it is anticipated that the Company will have $2.7 billion in assets. Additionally, the Company will have 58 full-service banking offices, 3 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, has 3 full-service branches, and $263 million in total assets as of March 31, 1997. Community Bankshares, Inc., a bank holding company, headquartered in Concord, New Hampshire, has 12 fullservice branches and total assets of $581 million as of March 31, 1997. SELECTED FINANCIAL HIGHLIGHTS ----------------------------- At or for the Three Months Ended June 30, 1997 1996 Operating and Performance Ratios: Return on average assets (1) 1.10% 1.10% Return on average common equity (1) 3.99 2.37 Other income/average assets (1) .96 1.10 Other expense/average assets (1) 2.93 3.15 Efficiency ratio 63.42 61.73 Tier 1 leverage capital 7.49 8.49 Asset Quality: Nonperforming assets/total assets .72% .81% Nonperforming loans as a percent of total loans and leases .60 1.02 Allowance for loan and lease losses/ nonperforming loans 207.53 150.43 Allowance for loan and lease losses/ total loans and leases 1.25 1.53 Net charge offs/average loans and leases(1) .11 .67 Stock Performance Indicators: Common shares outstanding 13,144 12,831 Closing price $21.00 $12.38 Earnings per common share $.37 $.31 Dividends declared per common share $.22 - (2) Dividend yield per common share 4.19% - (2) Book value per common share $10.52 $10.21 Tangible book value per common share $9.85 $9.47 Price/book value per common share 199.62% 121.23% Price/tangible book value per common share 213.20% 130.76% Price/earnings ratio (1) 14 10 (1)Annualized (2)The dividend for the second quarter of 1996 was omitted in order for the Company to account for the acquisitions of The Safety Fund Corporation and Milford Co/operative Bank as pooling-of-interests transactions. The Company has made, and may continue to make, various forward-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 of changes 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 pressure on loans and deposit products,actions of competitors, changes in economic conditions, the extent and timing of actions of the Federal Reserve, customer's acceptance of the Company's products and services and the extent and timing of legislative and regulatory actions and reforms. The Company's forward-looking statements speak only as of the 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 (1) ------------------------- 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Earnings Per Common Share: 1997 $ .36 $ .37 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 $.28 in the third quarter and an increase of $.01 in the fourth quarter. CONSOLIDATED BALANCE SHEETS June 30, December 31, June 30, (In thousands, except per share data) 1997 1996 1996 ------------------------------------------------------------------------- Assets Cash and federal funds sold $69,057 $50,601 $76,345 Trading and investment securities 394,607 277,994 319,171 Mortgage loans held for sale 14,089 15,212 13,032 Nonperforming loans 7,730 8,299 10,258 Other loans and leases 1,278,939 1,109,865 995,741 Allowance for loan and lease losses (16,042) (15,740) (15,431) Premises and equipment 28,553 27,386 25,410 Mortgage servicing rights 5,937 5,313 4,446 Goodwill and deposit base intangibles 8,925 9,235 9,553 Foreclosed assets 5,631 2,223 1,889 Bank owned life insurance 32,120 30,975 20,243 Other assets 29,484 25,729 37,100 ---------- ---------- ---------- Total Assets $1,859,030 $1,547,092 $1,497,757 ========== ========== ========== Liabilities and Shareholders' Equity Deposits $1,258,360 $1,157,207 $1,122,885 Borrowed funds 444,673 242,455 224,966 Other liabilities 17,672 14,477 18,864 ---------- ---------- --------- Total Liabilities 1,720,705 1,414,139 1,366,715 ========== ========== ========== Shareholders' Equity Common stock 8,788 8,672 8,147 Paid-in capital 99,269 97,406 86,649 Retained earnings 32,023 28,223 38,208 Net unrealized losses on securities available for sale, after tax effects (1,164) (929) (1,962) Cost of common stock in treasury (591) (419) - ---------- ---------- --------- Total Shareholders' Equity 138,325 132,953 131,042 ---------- ---------- --------- Total Liabilities and Shareholders' Equity $1,859,030 $1,547,092 $1,497,757 ========== ========== ========== Common shares outstanding 13,144 12,981 12,831 ========== ========== ========== Common shareholders' equity per share $ 10.52 $ 10.24 $ 10.21 ========== ========== ========== CONSOLIDATED INCOME STATEMENTS Three Months Ended Six Months Ended June 30,(In thousands, except per share data) 1997 1996 1997 1996 ---------------------------------------------------------------------------- Interest and dividend income $32,263 $26,892 $61,766 $52,632 Interest expense 16,483 12,573 30,982 24,612 -------- -------- -------- -------- Net Interest and Dividend Income 15,780 14,319 30,784 28,020 Provision for loan and lease losses 702 750 1,404 1,655 ------- -------- -------- -------- Net Interest and Dividend Income After Provision for Loan and Lease Losses 15,078 13,569 29,380 26,365 ------- -------- ------- -------- Other income: Service charges on deposit accounts 952 1,007 1,932 1,976 Mortgage banking activities 1,231 680 2,186 1,518 Net gains on trading and investment securities 133 146 127 356 Leasing activities 392 659 1,167 1,361 Trust fees 650 606 1,267 1,165 Other 848 894 1,899 1,448 ------- ------- -------- ------- 4,206 3,992 8,578 7,824 ------- ------- -------- ------- Other expense: Salaries and employee benefits 6,858 5,897 13,419 11,650 Occupancy and equipment expense 2,151 1,600 4,086 3,349 Professional fees 346 489 722 1,108 Advertising and marketing expense 460 471 775 988 Goodwill and deposit base intangible amortization 155 168 310 335 Operation of foreclosed assets 86 62 131 153 Other 2,741 2,763 5,328 5,444 ------- -------- -------- -------- 12,797 11,450 24,771 23,027 ------- -------- -------- -------- Income Before Income Taxes 6,487 6,111 13,187 11,162 Income Taxes 1,680 2,098 3,638 3,594 ------- -------- -------- -------- Net Income Available to Common Stock $ 4,807 $ 4,013 $ 9,549 $ 7,568 ======= ======= ======= ======= Weighted average common shares outstanding 13,102 12,805 13,058 12,726 ======= ======= ======= ======= Earnings per common share $ .37 $ .31 $ .73 $ .59 ======= ======= ======= ======= CONSOLIDATED AVERAGE BALANCE SHEETS Three Months Ended June 30, 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 $1,208,681 $25,430 8.44% $ 989,182 $ 21,468 8.73% Tax-exempt loans and leases 9,163 248 10.86 9,150 278 12.22 Taxable securities 361,823 6,361 7.05 304,686 4,742 6.26 Tax-exempt securities 14,793 279 7.56 20,291 372 7.37 Other 8,799 138 6.29 21,588 270 5.03 ---------- ------ -------- ------- Total interest earning assets 1,603,259 32,456 8.12 1,344,897 27,130 8.11 ------ ------- Non interest earning assets 146,852 116,201 ---------- ---------- Total $1,750,111 $1,461,098 ========== ========== Liabilities and Shareholders' Equity Interest bearing liabilities: Savings deposits $ 431,713 2,410 2.24 $ 451,093 2,622 2.34 Time deposits 654,882 9,173 5.62 529,160 7,307 5.55 Advances from Federal Home Loan Bank of Boston 255,000 3,756 5.91 118,593 1,650 5.60 Other borrowed funds 88,672 1,145 5.18 83,302 994 4.80 ---------- ------ --------- ------ Total interest bearing liabilities 1,430,267 16,484 4.62 1,182,148 12,573 4.28 Noninterest bearing liabilities: Demand deposits 148,440 131,035 Other 33,633 17,463 Shareholders' equity 137,771 130,452 ---------- ---------- Total $1,750,111 $1,461,098 ========== ========== Net interest and dividend income $15,972 $14,557 ======= ======= Interest rate spread 3.50% 3.83% Net interest margin 4.00% 4.35% (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. Six Months Ended June 30, 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 $1,182,789 $49,682 8.47% $964,293 $42,089 8.78% Tax-exempt loans and leases 9,197 470 10.31 8,654 512 11.90 Taxable securities 330,106 11,216 6.85 306,992 9,249 6.06 Tax-exempt securities 14,422 537 7.51 20,049 731 7.33 Other 6,081 229 7.59 21,308 508 4.79 --------- ------ -------- ------ Total interest earning assets 1,542,595 62,134 8.12 1,321,296 53,089 8.08 ------- ------ Noninterest earning assets 139,835 106,358 ---------- ---------- Total $1,682,430 $1,427,654 ========== ========== Liabilities and Shareholders' Equity Interest bearing liabilities: Savings deposits $ 432,125 4,823 2.25 $ 450,641 5,275 2.35 Time deposits 624,100 17,337 5.60 528,825 14,733 5.60 Advances from Federal Home Loan Bank of Boston 226,875 6,501 5.78 105,900 3,032 5.76 Other borrowed funds 91,962 2,322 5.09 67,143 1,572 4.71 ---------- ------ --------- ------- Total interest bearing liabilities 1,375,062 30,983 4.54 1,152,509 24,612 4.29 ------ ------- Noninterest bearing liabilities: Demand deposits 142,565 126,489 Other 27,933 16,127 Shareholders' equity 136,870 132,529 ---------- ---------- Total $1,682,430 $1,427,654 ========== ========== Net interest and dividend income $ 31,151 $ 28,477 ======== ======== Interest rate spread 3.58% 3.79% Net interest margin 4.07% 4.33% (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.