IFCJ Interchange Financial Services

Interchange Financial Services Corporation (Nasdaq:IFCJ): 2005 Highlights: -- Record earnings of $19.7 million for full year 2005 -- Commercial loans grew $170 million or 28% -- Expands franchise into Essex County with acquisition of Franklin Bank in October -- 4th quarter net income and diluted earnings per share increase 17% and 11%, respectively Interchange Financial Services Corporation (the "Company") (NASDAQ:IFCJ), holding company of Interchange Bank (the "Bank"), today reported diluted earnings per share ("EPS") of $0.99, on net income of $19.7 million for the year ended December 31, 2005. Net income and diluted earnings per share increased 8.2% and 5.3%, respectively, for 2005 as compared to 2004. Fourth quarter net income totaled $6.1 million, or $0.30 per diluted share. The results reflect an increase in net income and diluted earnings per share of 16.9% and 11.1%, respectively, for the fourth quarter of 2005 as compared to the same period in 2004. "I am pleased to report another year of record earnings. We have been challenged with a difficult interest rate environment over the last few years; however, we continue to produce shareholder value by remaining disciplined on executing our business plan. During this difficult operating environment, we focused intensely on preserving shareholder equity by not stretching for profits through strategies that are bets on interest rates, which later are unwound at a great cost of capital," Anthony Abbate, President and CEO stated. "A key strategy we outlined and concentrated on is business banking, and for the second year in a row we increased our commercial loan portfolio by over 20%, a great accomplishment," Abbate continued. "Another key strategy is focusing on expense management. As part of this strategy we curtailed our defined benefit pension plans for both employees and directors which will continue to benefit the Company in the future. As a result of the curtailment we recognized a $1.2 million gain which reduced our non-interest expense for the fourth quarter and the year. We also enhanced our defined contribution plan for 2006 by increasing the Bank's fixed contribution to employees. Our on-going net expense savings as a result of the curtailment and enhancement of the plans is currently estimated to be approximately $360,000 annually." Commenting further on the Company's activities Mr. Abbate stated, "Extending our branch presence into Essex County with the completion of our acquisition of Franklin Bank along with enhancing our products and offerings will allow us to continue to grow thoughtfully. We have identified additional locations in adjacent counties and are continuing our branch expansion program looking to add one to two branches a year. As part of our branch expansion program we have created the position of and hired a new Senior Vice President of Retail Banking." The Company increased its quarterly cash dividend over 11% from the prior year and it represents the 12th consecutive year of regular dividend increases. For the first quarter of 2006 the Company declared a quarterly cash dividend of $0.10 per common share, payable February 7, 2006 to shareholders of record on January 30, 2006. The dividend represents $0.40 per share on an annualized basis. The results of operations include those of Franklin Bank from October 13, 2005, the date of acquisition. Return on Average Assets and Equity For the fourth quarter of 2005 return on average stockholders' equity and return on average assets were 13.79% and 1.49% versus 14.00% and 1.42%, respectively, for the same period in 2004. 2005's full year return on average stockholders' equity and return on average assets were 12.38% and 1.28% versus 12.54% and 1.29%, respectively, for 2004. Tangible return on equity was 20.37% for the year ended December 31, 2005 as compared to 21.26% for 2004. Net Interest Income Net interest income for the fourth quarter 2005, on a taxable equivalent basis, increased $1.1 million, or 7.9%, from the same period in 2004. For the year ended December 31, 2005 net interest income, on a taxable equivalent basis, increased $3.1 million, or 5.9%, from the same period in 2004. The growth for the quarter and full year as compared to 2004 was primarily attributed to an increase in the average balances of commercial loans and leases of $182.6 million, or 29.1%, and $139.6 million, or 24.0%, respectively. The benefit in net interest income obtained from the increase in average loans was partially offset by a decline in the net interest margin ("margin") of 11 basis points for both the quarter and the full year. The margin was 3.99% for the quarter and 4.05% for the year ended December 31, 2005. The margin was primarily affected by an increase in the cost of interest bearing deposits and both the rate paid on and the volume of borrowings increased. The increase in the borrowing costs was primarily a result of an increase in Federal Home Loan Bank advances. In addition, $20 million of trust preferred securities were issued by the Company's subsidiaries at an average rate of 6.10% in June of 2005. The trust preferred securities were issued as part of our overall liquidity and capital management plans and in support of our continued loan growth. Non-Interest Income Non-interest income was $3.0 million for the fourth quarter of 2005 as compared to $3.4 million in 2004. Non-interest income was $10.4 million for the year ended December 31, 2005 as compared to $11.5 million in 2004. Gains on sales of securities declined in 2005 for both the quarter and full year by $462 thousand and $1.1 million, respectively, as compared to the same periods in 2004. Service charges on deposits were $905 thousand for the quarter ended December 31, 2005, a decline of $70 thousand as compared to the same period in 2004. Service charges on deposits were $3.6 million for the year ended December 31, 2005, a decline of $166 thousand as compared to the same period in 2004. The decline in service charges was primarily a result of a decline in checking account service charges, as a result of a shift to free checking, and overdraft fees. Gains on sales of loans and leases were $417 thousand and $1.3 million for the fourth quarter and full year of 2005, respectively. The gain on the sale of the guaranteed portion of Small Business Administration loans increased $206 thousand, or 27%, and were $960 thousand for the year ended December 31, 2005. Non-Interest Expense Non-interest expense for the fourth quarter was $8.1 million, a decrease of $907 thousand, as compared to the same period in 2004. Non-interest expense for year ended December 31, 2005 amounted to $35.7 million, a decline of $308 thousand, as compared to the full year 2004. During the fourth quarter the Company recognized a pre-tax gain on the curtailment of its defined benefit pension plans of $1.2 million. The gain on curtailment was a result of the Company's actions to freeze future service benefits accruals. Excluding the gain on the curtailment of the defined benefit pension plan, non-interest expense increased approximately $912 thousand, or 2.5% for the year ended December 31, 2005. Total Loans At December 31, 2005, total gross loans were approximately $1.1 billion, an increase of $171.8 million, or 18.4% as compared to December 31, 2004. The increase in loans was principally a result of growth in commercial loans. Growth occurred in each segment of our commercial loan portfolio as commercial mortgages, construction, and commercial and financial loans expanded $103.1 million, $41.2 million and $26.0 million, respectively. Non-performing loans decreased 61% to $3.6 million at December 31, 2005 as compared to $9.1 million at December 31, 2004. Non-performing assets represented 0.33% versus 0.99%, of the total loans and foreclosed and repossessed assets outstanding at the end of the respective periods. Net charge-offs to average loans and leases for the year ended December 31, 2005 declined to 0.11% versus 0.12% as compared to the same period in the prior year. The Allowance for Loan and Lease Losses ("ALLL") totaled $10.6 million at December 31, 2005, of which approximately $1.0 million was a result of the acquisition of Franklin Bank during the quarter. The ALLL at December 31, 2005 represented 299.2% of non-performing loans and leases and 0.96% of total loans and leases. Post-Earnings Conference Call The Company will hold a conference call on Thursday, January 26, 2005, at 2:00 p.m. (Eastern Time) to discuss the financial results for the year ended December 31, 2005. This Web-cast can be accessed through the Company's Web site, www.interchangebank.com or on the investor relations page, as well as the Web address www.companyboardroom.com. The replay will begin shortly after the completion of the live call and will be available for approximately two weeks. About Interchange Financial Services Corporation Headquartered in Saddle Brook, NJ, Interchange Financial Services Corporation (NASDAQ: IFCJ) wholly-owns Interchange Bank, one of Bergen County's largest independent commercial banks. A thought leader in the industry, the Bank was among the first to implement a broad range of innovative services, including 24-hour, 7-day-a-week online banking and bill paying services, online stock trading, and the ability to apply for a loan online with an instant credit decision. Mutual funds and annuities are offered through the Bank's investment services. With $1.6 billion in assets and 30 branches, the Bank focuses its efforts on the local communities from which it derives deposits and generates loans. Through Interchange Bank's subsidiary, Interchange Capital Company, L.L.C., cost effective equipment leasing solutions are available to small- and middle-market companies. For additional information, please visit the Company's Web site at www.interchangebank.com. In addition to discussing historical information, certain statements included in or incorporated into this report relate to the financial condition, results of operations and business of the Company which are not historical facts, but which are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used herein, the words "anticipate," "believe," "estimate," "expect," "will" and other similar expressions are generally intended to identify such forward-looking statements. Such statements are intended to be covered by the safe harbor provisions for forward-looking statements contained in such Act, and we are including this statement for purposes of invoking these safe harbor provisions. These forward-looking statements include, but are not limited to, statements about the operations of the Company, the adequacy of the Company's allowance for losses associated with the loan portfolio, the prospects of continued loan and deposit growth, and improved credit quality and other risks as discussed in reports we have filed with the SEC. The forward-looking statements in this report involve certain estimates or assumptions, known and unknown risks and uncertainties, many of which are beyond the control of the Company, and reflect what we currently anticipate will happen in each case. What actually happens could differ materially. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake - and specifically disclaims any obligation - to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. -0- *T INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS CONSOLIDATED BALANCE SHEETS (dollars in thousands) December 31, December 31, 2005 2004 Change ------------ ------------ ------ (unaudited) (unaudited) Assets Cash and due from banks $42,620 $33,108 28.7 % Interest earning deposits 4 2 100.0 Securities 356,466 388,729 (8.3) Loans and leases Commercial 783,902 613,533 27.8 Commercial Lease Financing 24,584 23,535 4.5 Consumer 297,483 297,113 0.1 ------------ ------------ ------ 1,105,969 934,181 18.4 Allowance for loan and lease losses (10,646) (9,797) 8.7 ------------ ------------ ------ Net loans 1,095,323 924,384 18.5 Premises and equipment, net 17,509 17,713 (1.2) Foreclosed real estate and other repossesed assets 122 156 (21.8) Bank Owned Life Insurance 26,941 25,847 4.2 Goodwill and other intangible assets 74,379 59,612 24.8 Accrued interest receivable and other assets 18,022 14,590 23.5 ------------ ------------ ------ Total assets $1,631,386 $1,464,141 11.4 ============ ============ ====== Liabilities Deposits $1,260,108 $1,246,138 1.1 Borrowings 160,422 59,001 171.9 Subordinated debentures 20,620 - - Accrued interest payable and other liabilities 11,234 8,847 27.0 ------------ ------------ ------ Total liabilities 1,452,384 1,313,986 10.5 ------------ ------------ ------ Total stockholders' equity 179,002 150,155 19.2 ------------ ------------ ------ Total liabilities and stockholders' equity $1,631,386 $1,464,141 11.4 ============ ============ ====== INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS CONSOLIDATED INCOME STATEMENTS (dollars in thousands, except per share data) Three Months Ended December 31, -------------------------------- 2005 2004 Change ----------- ----------- ------- (unaudited) (unaudited) Interest income: Interest and fees on loans $18,526 $14,464 28.1 % Interest on federal funds sold 93 81 14.8 Interest on interest earning deposits 3 - - Interest and dividends on securities: Taxable interest income 2,159 2,763 (21.9) Interest income exempt from federal income taxes 694 229 202.7 Dividends 103 18 472.2 ----------- ----------- ------- Total interest income 21,578 17,555 22.9 ----------- ----------- ------- Interest expense: Interest on deposits 5,844 3,718 57.2 Interest on borrowings 1,354 321 321.8 ----------- ----------- ------- Total interest expense 7,198 4,039 78.2 ----------- ----------- ------- Net interest income 14,380 13,516 6.4 Provision for loan and lease losses 225 225 - ----------- ----------- ------- Net interest income after provision for loan & lease losses 14,155 13,291 6.5 ----------- ----------- ------- Non-interest income: Service fees on deposit accounts 905 975 (7.2) Net gain on sale of securities - 462 (100.0) Other 2,129 1,936 10.0 ----------- ----------- ------- Total non-interest income 3,034 3,373 (10.1) ----------- ----------- ------- Non-interest expense: Salaries and benefits 4,180 4,922 (15.1) Net occupancy 1,395 1,306 6.8 Furniture and equipment 327 322 1.6 Advertising and promotion 287 247 16.2 Other 1,930 2,229 (13.4) ----------- ----------- ------- Total non-interest expense 8,119 9,026 (10.0) ----------- ----------- ------- Income before income taxes 9,070 7,638 18.7 Income taxes 2,976 2,426 22.7 ----------- ----------- ------- Net income $6,094 $5,212 16.9 =========== =========== ======= Basic earnings per common share $0.30 $0.27 11.1 Diluted earnings per common share $0.30 $0.27 11.1 CONSOLIDATED INCOME STATEMENTS (dollars in thousands, except per share data) Year Ended December 31, ------------------------------- 2005 2004 Change ----------- ----------- ------ (unaudited) (unaudited) Interest income: Interest and fees on loans $66,433 $54,173 22.6 % Interest on federal funds sold 111 151 (26.5) Interest on interest earning deposits 3 - - Interest and dividends on securities: Taxable interest income 9,623 10,520 (8.5) Interest income exempt from federal income taxes 2,026 1,164 74.1 Dividends 299 92 225.0 ----------- ----------- ------ Total interest income 78,495 66,100 18.8 ----------- ----------- ------ Interest expense: Interest on deposits 19,626 12,390 58.4 Interest on borrowings 3,736 1,264 195.6 ----------- ----------- ------ Total interest expense 23,362 13,654 71.1 ----------- ----------- ------ Net interest income 55,133 52,446 5.1 Provision for loan and lease losses 925 1,200 (22.9) ----------- ----------- ------ Net interest income after provision for loan & lease losses 54,208 51,246 5.8 ----------- ----------- ------ Non-interest income: Service fees on deposit accounts 3,587 3,753 (4.4) Net gain on sale of securities 394 1,444 (72.7) Other 6,400 6,260 2.2 ----------- ----------- ------ Total non-interest income 10,381 11,457 (9.4) ----------- ----------- ------ Non-interest expense: Salaries and benefits 19,325 19,463 (0.7) Net occupancy 5,583 5,283 5.7 Furniture and equipment 1,267 1,309 (3.2) Advertising and promotion 1,347 1,456 (7.5) Other 8,178 8,497 (3.8) ----------- ----------- ------ Total non-interest expense 35,700 36,008 (0.9) ----------- ----------- ------ Income before income taxes 28,889 26,695 8.2 Income taxes 9,184 8,481 8.3 ----------- ----------- ------ Net income $19,705 $18,214 8.2 =========== =========== ====== Basic earnings per common share $1.01 $0.95 6.3 Diluted earnings per common share $0.99 $0.94 5.3 INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS ---------------------------------------------------------------------- Analysis of Net Interest Income ---------------------------------------------------------------------- for the quarter ended December 31, (dollars in thousands) 2005 (unaudited) ----------------------------- Average Average Balance Interest Rate ----------- -------- ------- Assets Interest earning assets: Loans (1) $1,106,539 $18,548 6.70 % Taxable securities (4) 293,200 2,346 3.20 Tax-exempt securities (2) (4) 67,820 949 5.60 Federal funds sold and interest earning deposits 9,409 96 4.08 ----------- -------- ------- Total interest-earning assets 1,476,968 21,939 5.94 -------- Non-interest earning assets: Cash and due from banks 37,445 Allowance for loan and lease losses (11,208) Other assets 130,315 ----------- Total assets $1,633,520 =========== Liabilities and stockholders' equity Interest-bearing liabilities Interest bearing deposits $1,049,270 5,844 2.23 Borrowings and subordinated debentures 132,178 1,354 4.10 ----------- -------- ------- Total interest-bearing liabilities 1,181,448 7,198 2.44 -------- Non-interest bearing liabilities Demand deposits 261,200 Other liabilities 14,048 ----------- Total liabilities (3) 1,456,696 Stockholders' equity 176,824 ----------- Total liabilities and stockholders' equity $1,633,520 =========== Net interest income (tax-equivalent basis) 14,741 3.50 Tax-equivalent basis adjustment (361) -------- Net interest income $14,380 ======== Net interest income as a percent of interest-earning assets (tax-equivalent basis) 3.99 % ---------------------------------------------------------------------- Analysis of Net Interest Income ---------------------------------------------------------------------- for the quarter ended December 31, (dollars in thousands) 2004 (unaudited) ----------------------------- Average Average Balance Interest Rate ----------- -------- ------- Assets Interest earning assets: Loans (1) $933,037 $14,493 6.21 % Taxable securities (4) 345,308 2,781 3.22 Tax-exempt securities (2) (4) 36,875 344 3.73 Federal funds sold and interest earning deposits 16,991 81 1.91 ----------- -------- ------- Total interest-earning assets 1,332,211 17,699 5.31 -------- Non-interest earning assets: Cash and due from banks 36,008 Allowance for loan and lease losses (9,878) Other assets 113,412 ----------- Total assets $1,471,753 =========== Liabilities and stockholders' equity Interest-bearing liabilities Interest bearing deposits $1,024,589 3,718 1.45 Borrowings and subordinated debentures 50,553 321 2.54 ----------- -------- ------- Total interest-bearing liabilities 1,075,142 4,039 1.50 -------- Non-interest bearing liabilities Demand deposits 237,258 Other liabilities 10,457 ----------- Total liabilities (3) 1,322,857 Stockholders' equity 148,896 ----------- Total liabilities and stockholders' equity $1,471,753 =========== Net interest income (tax-equivalent basis) 13,660 3.81 Tax-equivalent basis adjustment (144) -------- Net interest income $13,516 ======== Net interest income as a percent of interest-earning assets (tax-equivalent basis) 4.10 % (1) Nonaccrual loans and any related interest recorded have been included in computing the average rate earned on the loan portfolio. When applicable, tax exempt loans are computed on a fully taxable equivalent basis using the corporate federal tax rate (2) Computed on a fully taxable equivalent basis using the corporate federal tax rate of 34%. (3) All deposits are in domestic bank offices. (4) The average balances are based on historical cost and do not reflect unrealized gains or losses. INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS ---------------------------------------------------------------------- Analysis of Net Interest Income ---------------------------------------------------------------------- for the year ended December 31, 2005 (dollars in thousands) 2005 (unaudited) ----------------------------- Average Average Balance Interest Rate ----------- -------- ------- Assets Interest earning assets Loans (1) $1,018,245 $66,530 6.53 % Taxable securities (4) 312,368 $9,922 3.18 Tax-exempt securities (2) (4) 55,633 $2,996 5.39 Federal funds sold and interest earning deposits 2,908 $114 3.92 ----------- -------- ------- Total interest-earning assets 1,389,154 $79,562 5.73 -------- Non-interest earning assets Cash and due from banks 36,473 Allowance for loan and lease losses (10,300) Other assets 119,280 ----------- Total assets $1,534,607 =========== Liabilities and stockholders' equity Interest-bearing liabilities Interest bearing deposits $1,013,222 $19,626 1.94 Borrowings and subordinated debentures 102,928 $3,736 3.63 ----------- -------- ------- Total interest-bearing liabilities 1,116,150 $23,362 2.09 -------- Non-interest bearing liabilities Demand deposits 248,017 Other liabilities 11,210 ----------- Total liabilities (3) 1,375,377 Stockholders' equity 159,230 ----------- Total liabilities and stockholders' equity $1,534,607 =========== Net interest income (tax-equivalent basis) $56,200 3.64 Tax-equivalent basis adjustment ($1,067) -------- Net interest income $55,133 ======== Net interest income as a percent of interest-earning assets (tax-equivalent basis) 4.05 % ---------------------------------------------------------------------- Analysis of Net Interest Income ---------------------------------------------------------------------- for the year ended December 31, 2005 (dollars in thousands) 2004 (unaudited) ----------------------------- Average Average Balance Interest Rate ----------- -------- -------- Assets Interest earning assets Loans (1) $872,322 $54,314 6.23 % Taxable securities (4) 357,641 10,612 2.97 Tax-exempt securities (2) (4) 35,438 1,666 4.70 Federal funds sold and interest earning deposits 10,333 151 1.46 ----------- -------- ------- Total interest-earning assets 1,275,734 66,743 5.23 -------- Non-interest earning assets Cash and due from banks 36,181 Allowance for loan and lease losses (9,829) Other assets 114,525 ----------- Total assets $1,416,611 =========== Liabilities and stockholders' equity Interest-bearing liabilities Interest bearing deposits $968,549 12,390 1.28 Borrowings and subordinated debentures 57,943 1,264 2.18 ----------- -------- ------- Total interest-bearing liabilities $1,026,492 13,654 1.33 -------- Non-interest bearing liabilities Demand deposits 232,513 Other liabilities 12,393 ----------- Total liabilities (3) 1,271,398 Stockholders' equity 145,213 ----------- Total liabilities and stockholders' equity $1,416,611 =========== Net interest income (tax-equivalent basis) 53,089 3.90 Tax-equivalent basis adjustment (643) -------- Net interest income $52,446 ======== Net interest income as a percent of interest-earning assets (tax-equivalent basis) 4.16 % (1) Nonaccrual loans and any related interest recorded have been included in computing the average rate earned on the loan portfolio. When applicable, tax exempt loans are computed on a fully taxable equivalent basis using the corporate federal tax rate (2) Computed on a fully taxable equivalent basis using the corporate federal tax rate of 34%. (3) All deposits are in domestic bank offices. (4) The average balances are based on historical cost and do not reflect unrealized gains or losses. INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS STATEMENT OF CONDITION - SELECTED DATA (Period Ending) 3 12 December 31, September 30, month December 31, month 2005 2005 Change 2004 Change ------------ ------------- ------ ------------ ------ (unaudited) (unaudited) (unaudited) Loans $1,105,969 $1,049,332 5.4 % $934,181 18.4 % Securities 356,466 357,559 (0.3) 388,729 (8.3) Earning assets 1,462,439 1,406,895 3.9 1,322,912 10.5 Total Assets 1,631,386 1,551,940 5.1 1,464,141 11.4 Deposits 1,260,108 1,266,128 (0.5) 1,246,138 1.1 Borrowings 160,422 97,455 64.6 59,001 171.9 Subordinated debentures 20,620 20,620 - - n/a Shareholders' equity 179,002 157,477 13.7 150,155 19.2 Leverage ratio 8.20 %(a) 8.21 % 6.49 % Risk weighted ratios: Tier 1 10.99 (a) 11.01 9.36 Total 11.90 (a) 11.93 10.35 (a) Estimates subject to change. Asset quality Quarter ended ------------------------------------------- Net charge offs $756 $87 769.0 % $225 236.0 % Loan loss allowance (10,646) (10,159) 4.8 (9,797) 8.7 Nonperforming loans $3,558 $5,917 (39.9) $9,133 (61.0) Foreclosed real estate & other repossessed assets 122 156 (21.8) 156 (21.8) --------- --------- ------ ------- ------ Total Nonperforming assets ("NPA") $3,680 $6,073 (39.4) $9,289 (60.4) ========= ========= ====== ======= ====== Ratio's --------------------------- Net charge offs as % of average loans (annualized) 0.27 % 0.03 % 0.10 % Loan loss allowance as % of period-end loans 0.96 0.97 1.05 Loan loss allowance as % of nonperforming loans 299.2 171.7 107.3 NPA's as a percent of loans + foreclosed assets 0.33 0.58 0.99 Year Ended ---------------------------------------- December 31, December 31, 12 month 2005 2004 Change ------------ ------------ --------- Net charge offs $1,094 $1,044 $50 Net charge offs as % of average loans (annualized) 0.11 % 0.12 % (0.01)% INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS PROFITABILITY (dollars in thousands, except per share data) Quarter ended ----------------------------------------------------- December September 3 month December 12 month 31, 2005 30, 2005 Change 31, 2004 Change ----------- ----------- ------- ----------- -------- (unaudited) (unaudited) (unaudited) Net interest income (taxable equivalent) $14,741 $13,991 5.4 % $13,660 7.9 % Provision for loan and lease losses 225 300 (25.0) 225 - Net gain on sale of securities - 77 (100.0) 462 (100.0) Non-interest income, excluding net gain on sale of securities 3,034 2,600 16.7 2,911 4.2 Non-interest expense 8,119 9,247 (12.2) 9,026 (10.0) Net income $6,094 $4,676 30.3 $5,212 16.9 Return on average assets 1.49 % 1.22 % 1.42 % Return on average equity 13.79 11.98 14.00 Return on average tangible equity 23.16 19.32 23.40 Net interest margin 3.99 4.02 4.10 Basic earnings per common share (1) $0.30 $0.24 25.0 % $0.27 11.1 % Diluted earnings per common share (1) 0.30 0.24 25.0 0.27 11.1 Dividends declared per common share (1) 0.090 0.090 - 0.083 8.4 Book value per common share - end of period (1) $8.89 $8.22 8.2 $7.85 13.2 Shares outstanding - end of period (1) 20,139 19,162 5.1 19,121 5.3 Weighted average shares outstanding (1) Basic (1) 20,214 19,160 5.5 19,118 5.7 Diluted (1) 20,614 19,607 5.1 19,490 5.8 (1) Adjusted for 3 for 2 stock split declared on January 18, 2005 payable on February 18, 2005 INTERCHANGE FINANCIAL SERVICES CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS Year Ended ----------------------------------- December 31, December 31, 12 month 2005 2004 Change ------------ ------------ -------- (unaudited) (unaudited) Net interest income (taxable equivalent) $56,200 $53,089 5.9 % Provision for loan and lease losses 925 1,200 (22.9) Net gain on sale of securities 394 1,444 (72.7) Non-interest income, excluding net gain on sale of securities 9,987 10,013 (0.3) Non-interest expenses 35,700 36,008 (0.9) Net income $19,705 $18,214 8.2 Return on average assets 1.28 % 1.29 % Return on average equity 12.38 12.54 Return on average tangible equity 20.37 21.26 Net interest margin 4.05 4.16 Basic earnings per common share (1) $1.01 $0.95 6.3 % Diluted earnings per common share (1) 0.99 0.94 5.3 Dividends declared per common share (1) 0.36 0.33 9.1 Book value per common share - end of period (1) $8.89 $7.85 13.2 Shares outstanding - end of period (1) 20,139 19,121 5.3 Weighted average shares outstanding (1) Basic (1) 19,417 19,124 1.5 Diluted (1) 19,835 19,476 1.8 (1) Adjusted for 3 for 2 stock split declared on January 18, 2005 payable on February 18, 2005 *T