CFX: Announce Third Quarter Earnings CFX: Announces Third Quarter Earnings Contact: Mark A. Gavin, EVP/Chief Operating Officer (603) 355-8604 Gregg R. Tewksbury, Chief Financial Officer (603) 355-8607 CFX CORPORATION ANNOUNCES THIRD QUARTER EARNINGS Keene, N.H., October 17, 1997 -- CFX CORPORATION (AMEX: CFX) today announced record earnings exclusive of merger-related charges of $8.2 million, charges, or $.34 per share, for the quarter ended September 30, 1997, compared to earnings of $6.9 million, or $.29 per share, for the corresponding period a year ago, an increase of $.05 per share, or 17%. On the same basis as described above, the Company's earnings for the nine months ended September 30, 1997, amounted to $23.4 million, or $.98 per share, compared to earnings of $19.8 million, or $.84 per share, for the corresponding period a year ago, an increase of $.14, or 17%. The Company's financial statements for all prior periods presented have been restated under the pooling-of-interests method of accounting for the acquisitions of Community Bankshares, Inc. (Community) and Portsmouth Bank Shares, Inc. (Portsmouth), completed as of August 29, 1997. After merger-related charges, the Company incurred a loss of $173 thousand, or $.01 per share, and earnings of $15.0 million, or $.63 per share, for the quarter and nine months ended September 30, 1997, respectively, compared to earnings of $3.2 million, or $.13 per share, and $16.0 million, or $.68 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 merger-related charges for the quarter and nine months ended September 30, 1997 and 1996 is summarized as follows: Earnings Reconciliation Three Months Ended Nine Months Ended September 30, 1997 (1) 1996 (2) 1997 (1) 1996 (2) (Dollars in thousands, except per share data) Net Income Available to Common Stock $ (173) $ 3,166 $14,990 $16,034 Add Back After-Tax Merger-Related Charges 8,372 3,722 8,372 3,722 ------- -------- ------- ------ Net Income Available to Common Stock Before Merger-Related Charges $ 8,199 $ 6,888 $23,362 $19,756 ======= ======= ======= ======= EARNINGS PER COMMON SHARE: Net Income Available to Common Stock $ (0.01) $ 0.13 $ 0.63 $ 0.68 ======= ======= ======= ======== Net Income Available to Common Stock Before Merger-Related Charges $ 0.34 $ 0.29 $ 0.98 $ 0.84 ======= ======= ======== ======== (1) Merger-related charges associated with the acquisitions of Community Bankshares, Inc. and Portsmouth Bank Shares, Inc. completed August 29, 1997. (2) Merger-related charges associated with the acquisitions of The Safety Fund Corporation and Milford Co/operative Bank completed on July 1, 1996. Company spokesman and Chief Operating Officer, Mark A. Gavin, said, "We are pleased to grow earnings by 17% over the year ago period. Net revenues (net interest and dividend income and other income) for the three months ended September 30, 1997, compared to corresponding period a year ago, grew by $3.5 million or 12.4%." Other financial highlights (excluding merger-related charges) for the third quarter of 1997 are as follows: * The Company's efficiency ratio improved significantly in the third quarter of 1997 compared to the third quarter of 1996, declining from 62.78% to 59.20%. Further efficiency improvements are expected as the cost savings from the Community and Portsmouth mergers are realized. * Total loans and leases increased by $319 million, or 20%, in 1997 and totaled $1.91 billion as of September 30, 1997. A breakdown of the loans and lease growth is as follows: (In millions) 9/30/97 12/31/96 Increase Residential Real Estate $1,094 $ 872 $ 222 Commercial 493 456 37 Consumer 326 266 60 ------ ------ ------- $1,913 $1,594 $ 319 ====== ====== ======= CFX Corporation is a multi-bank holding company with total assets of $2.8 billion as of September 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. The Company operates 57 full service offices, 3 loan production offices, and 103 automated teller and remote service banking locations in New Hampshire and central Massachusetts. In addition, the Company operates a mortgage division servicing approximately $951 million in mortgage loans for others and operates a trust division with $429 million in assets. SELECTED FINANCIAL HIGHLIGHTS At or for the Three Months Ended September 30, 1997 1996 1997 1996 As Excluding (Dollars in thousands, Reported Merger Charges except per share data) ---------------------------------------------------------------------------- Operating and Performance Ratios: Return on average assets (1) (.02)% .55% 1.15% 1.19% Return on average common equity (1) (.27) 5.33 12.82 11.61 Other income/average assets (1) .88 .97 .88 .97 Other expense/average assets (1) 4.19 3.73 2.64 2.95 Efficiency ratio 93.79 75.91 59.20 62.78 Tier 1 leverage capital 8.38 10.06 8.67 10.21 Asset Quality: Nonperforming assets/total assets .55% .60% Nonperforming loans as a percent of total loans and leases .62 .74 Allowance for loan and lease losses /nonperforming loans 179.69 180.29 Allowance for loan and lease losses/total loans and leases 1.12 1.34 Net charge offs/average loans and leases (1) .20 .13 Stock Performance Indicators: Common shares outstanding 23,977 23,456 23,977 23,456 Closing price $ 21.44 $ 14.17 $ 21.44 $ 14.17 Earnings (loss) per common share $ (.01) $ .13 $ .34 $ .29 Dividends declared per common share $ .22 $ .19 $ .22 $ .19 Dividend yield per common share(1) 4.10% 5.38% 4.10% 5.38% Book value per common share $ 10.25 $ 10.04 N/A N/A Tangible book value per common share $ 9.88 $ 9.64 N/A N/A Price/book value per common share 209.17% 141.14% N/A N/A Price/tangible book value per common share 217.00% 146.99% N/A N/A Price/earnings ratio (1) NM 27 16 12 Market capitalization $514,067 $322,372 $514,067 $322,372 (1) Annualized NM Not Meaningful 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, customers'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. CONSOLIDATED BALANCE SHEETS September 30, December 31, September 30, (Dollars in thousands) 1997 1996 1996 ---------------------------------------------------------------------------- Assets Cash and federal funds sold $118,837 $131,393 $143,726 Trading and investment securities 622,848 519,578 559,994 Mortgage loans held for sale 28,909 16,967 14,260 Nonperforming loans 11,914 10,783 11,206 Other loans and leases 1,901,463 1,583,616 1,494,740 Allowance for loan and lease losses (21,408) (20,332) (20,203) Premises and equipment 39,306 38,195 36,594 Mortgage servicing rights 8,152 7,523 7,447 Goodwill and deposit base intangibles 8,856 9,235 9,385 Foreclosed assets 3,614 3,349 2,931 Bank-owned life insurance 62,347 30,975 30,558 Other assets 36,344 37,975 47,417 ---------- ---------- ---------- Total Assets $2,821,182 $2,369,257 $2,338,055 ========== ========== ========== Liabilities and Shareholders' Equity Deposits $1,935,614 $1,751,141 $1,749,320 Borrowed funds 613,246 351,343 323,131 Other liabilities 26,631 26,937 30,027 ---------- ---------- ---------- Total Liabilities 2,575,491 2,129,421 2,102,478 ========== ========== ========== Shareholders' Equity Common stock 16,010 15,740 15,637 Paid-in capital 147,756 142,761 131,849 Retained earnings 80,494 81,265 89,448 Net unrealized (losses) gains on securities available for sale, after tax effects 2,022 489 (1,345) Cost of common stock in treasury (591) (419) (12) ---------- ---------- ---------- Total Shareholders' Equity 245,691 239,836 235,577 ---------- ---------- --------- Total Liabilities and Shareholders' Equity $2,821,182 $2,369,257 $2,338,055 ========== ========== ========== Common shares outstanding 23,977 23,581 23,456 ========== ========== ========== Common shareholders' equity per share $ 10.25 $ 10.17 $ 10.04 ========== ========== ========== CONSOLIDATED INCOME STATEMENTS Three Months Ended Nine Months Ended September 30, 1997 1996 1997 1996 (Dollars in thousands) ---------------------------------------------------------------------------- Interest and dividend income $53,034 $42,587 $146,496 $124,122 Interest expense 27,662 20,075 73,232 58,394 -------- ------- -------- -------- Net Interest and Dividend Income 25,372 22,512 73,264 65,728 Provision for loan and lease losses 1,423 980 3,385 3,210 -------- ------- -------- ------- Net Interest and Dividend Income After Provision for Loan and Lease Losses 23,949 21,532 69,879 62,518 -------- -------- -------- -------- Other income: Service charges on deposit accounts 1,245 1,302 3,807 3,797 Mortgage banking activities 1,381 947 4,660 3,326 Net gains on trading and investment securities 689 373 1,421 1,823 Leasing activities 276 459 1,443 1,820 Bank-owned life insurance 527 315 1,372 558 Trust fees 631 553 1,898 1,717 Other 1,504 1,671 2,942 3,062 -------- -------- ------- ------- 6,253 5,620 17,543 16,103 -------- -------- ------- ------- Other expense: Salaries and employee benefits 9,914 8,645 28,878 25,304 Occupancy and equipment expense 2,989 2,469 8,913 7,285 Advertising and marketing expense 677 491 1,768 1,792 Professional fees 800 387 1,902 1,571 Operation of foreclosed assets 179 150 427 437 Goodwill and deposit base intangible amortization 155 167 465 502 Merger expenses 11,031 4,522 11,031 4,522 Other 4,167 4,696 12,035 12,599 -------- -------- -------- -------- 29,912 21,527 65,419 54,012 -------- -------- -------- -------- Income Before Income Taxes 290 5,625 22,000 24,609 Income taxes 463 2,459 7,013 8,575 -------- -------- -------- -------- Net Income (Loss) Available to Common Stock $ (173) $ 3,166 $ 14,990 $ 16,034 ======== ======== ======== ======== Weighted average common shares outstanding 23,955 23,571 23,813 23,519 ======== ======== ======== ======== Earnings (loss) per common share $ (.01) $ .13 $ .63 $ .68 ======== ======== ======== ======== CONSOLIDATED AVERAGE BALANCE SHEETS Three Months Ended September 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 $1,899,776 $40,705 8.50% $1,486,181 $32,430 8.68% Tax-exempt loans and leases 12,139 318 10.39 9,111 250 10.92 Taxable securities 642,400 11,350 7.01 537,405 8,757 6.48 Tax-exempt securities 22,329 413 7.34 21,441 357 6.62 Other 60,867 516 3.36 74,216 1,020 5.47 ---------- ------- --------- ------ Total interest earning assets 2,637,511 53,302 8.02 2,128,354 42,814 8.00 ------- ------ Noninterest earning assets 194,157 165,574 ---------- ---------- Total $2,831,668 $2,293,928 ========== ========== Liabilities and Shareholders' Equity Interest bearing liabilities: Savings deposits $ 667,379 4,029 2.40 $ 891,291 7,018 3.13 Time deposits 1,033,192 14,701 5.65 641,232 8,874 5.51 Advances from Federal Home Loan Bank of Boston 439,857 6,442 5.81 233,100 3,214 5.49 Other borrowed funds 195,465 2,490 5.05 80,059 969 4.82 --------- ------ -------- ------ Total interest bearing liabilities 2,335,893 27,662 4.70 1,845,682 20,075 4.33 ------ ------ Noninterest bearing liabilities: Demand deposits 218,329 182,736 Other 23,806 29,387 Shareholders' equity 253,640 236,123 ---------- --------- Total $2,831,668 $2,293,928 ========== ========== Net interest and dividend income $ 25,640 $ 22,739 ======== ======== Interest rate spread 3.32% 3.67% Net interest margin 3.86% 4.25% (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 Nine Months Ended September 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 $1,751,578 $112,618 8.60% $1,423,507 $93,827 8.80% Tax-exempt loans and leases 10,188 788 10.34 8,816 762 11.55 Taxable securities 591,355 30,496 6.89 546,087 25,829 6.32 Tax-exempt securities 21,786 1,199 7.36 25,565 1,235 6.45 Other 62,970 2,126 4.51 75,354 3,184 5.64 --------- ------- --------- ------ Total interest earning assets 2,437,877 147,227 8.07 2,079,329 124,837 8.02 Noninterest earning assets 191,857 153,518 ---------- ---------- Total $2,629,734 $2,232,847 ========== ========== Liabilities and Shareholders' Equity Interest bearing liabilities: Savings deposits $ 666,701 11,760 2.36 $ 887,334 20,931 3.15 Time deposits 969,743 40,546 5.59 634,208 26,346 5.55 Advances from Federal Home Loan Bank of Boston 353,395 15,260 5.77 203,068 8,500 5.59 Other borrowed funds 150,385 5,666 5.04 72,562 2,617 4.82 --------- ------- -------- ------ Total interest bearing liabilities 2,140,224 73,232 4.57 1,797,172 58,394 4.34 ------- ------- Noninterest bearing liabilities: Demand deposits 207,710 174,985 Other 34,059 27,643 Shareholders' equity 247,741 233,047 ---------- ----------- Total $2,629,734 $ 2,232,847 ========== =========== Net interest and dividend income $73,995 $66,443 ======= ======= Interest rate spread 3.50% 3.68% Net interest margin 4.06% 4.27% (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. -END_