Maryland
|
52-1532952
|
(State
of incorporation)
|
(I.R.S.
Employer Identification Number)
|
17801
Georgia Avenue, Olney, Maryland 20832
|
301-774-6400
|
(Address
of principal office) (Zip Code)
|
(Telephone
Number)
|
Large accelerated filer ¨
|
Accelerated filer x
|
Non-accelerated filer ¨
|
Smaller reporting company ¨
|
Page
|
||
PART
I - FINANCIAL INFORMATION
|
||
ITEM
1. FINANCIAL STATEMENTS
|
1 | |
Consolidated
Balance Sheets at
|
||
September
30, 2008 (Unaudited) and December 31, 2007
|
1
|
|
Consolidated
Statements of Income for the Three Month and Nine Month
|
||
Periods
Ended September 30, 2008 and 2007 (Unaudited)
|
2
|
|
Consolidated
Statements of Cash Flows for the Nine
|
||
Month
Periods Ended September 30, 2008 and 2007 (Unaudited)
|
4
|
|
Consolidated
Statements of Changes in Stockholders’ Equity for the
|
||
Nine
Month Periods Ended September 30, 2008 and 2007
(Unaudited)
|
6
|
|
Notes
to Consolidated Financial Statements
|
7
|
|
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
|
||
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
20
|
|
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
|
||
ABOUT
MARKET RISK
|
33
|
|
ITEM
4. CONTROLS AND PROCEDURES
|
33
|
|
PART
II - OTHER INFORMATION
|
||
ITEM
1A. RISK FACTORS
|
33
|
|
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
33
|
|
ITEM
6. EXHIBITS
|
34
|
|
SIGNATURES
|
34
|
(Dollars
in thousands)
|
(Unaudited)
September 30,
2008
|
December 31,
2007
|
|||||
ASSETS
|
|||||||
Cash
and due from banks
|
$
|
55,321
|
$
|
63,432
|
|||
Federal
funds sold
|
19,712
|
22,055
|
|||||
Interest-bearing
deposits with banks
|
483
|
365
|
|||||
Cash
and cash equivalents
|
75,516
|
85,852
|
|||||
|
|||||||
Residential
mortgage loans held for sale (at fair value)
|
4,541
|
7,089
|
|||||
Investments
available-for-sale (at fair value)
|
206,898
|
186,801
|
|||||
Investments
held-to-maturity — fair value of $181,734 (2008) and $240,995
(2007)
|
178,690
|
234,706
|
|||||
Other
equity securities
|
32,347
|
23,766
|
|||||
Total
loans and leases
|
2,482,418
|
2,277,031
|
|||||
Less:
allowance for loan and lease losses
|
(38,266
|
)
|
(25,092
|
)
|
|||
Net
loans and leases
|
2,444,152
|
2,251,939
|
|||||
Premises
and equipment, net
|
52,441
|
54,457
|
|||||
Accrued
interest receivable
|
12,491
|
14,955
|
|||||
Goodwill
|
75,701
|
76,585
|
|||||
Other
intangible assets, net
|
13,286
|
16,630
|
|||||
Other
real estate owned
|
1,698
|
461
|
|||||
Other
assets
|
97,356
|
90,712
|
|||||
Total
assets
|
$
|
3,195,117
|
$
|
3,043,953
|
|||
LIABILITIES
|
|||||||
Noninterest-bearing
deposits
|
$
|
468,101
|
$
|
434,053
|
|||
Interest-bearing
deposits
|
1,780,711
|
1,839,815
|
|||||
Total
deposits
|
2,248,812
|
2,273,868
|
|||||
Short-term
borrowings
|
484,595
|
373,972
|
|||||
Long-term
borrowings
|
76,828
|
17,553
|
|||||
Subordinated
debentures
|
35,000
|
35,000
|
|||||
Accrued
interest payable and other liabilities
|
30,182
|
27,920
|
|||||
Total
liabilities
|
2,875,417
|
2,728,313
|
|||||
STOCKHOLDERS'
EQUITY
|
|||||||
Common
stock — par value $1.00; shares authorized 50,000,000; shares issued and
outstanding 16,383,671 (2008) and 16,349,317 (2007)
|
16,384
|
16,349
|
|||||
Additional
paid in capital
|
85,065
|
83,970
|
|||||
Retained
earnings
|
222,126
|
216,376
|
|||||
Accumulated
other comprehensive loss
|
(3,875
|
)
|
(1,055
|
)
|
|||
Total
stockholders' equity
|
319,700
|
315,640
|
|||||
Total
liabilities and stockholders' equity
|
$
|
3,195,117
|
$
|
3,043,953
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||||||||||||
(Dollars
in thousands, except per share data)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Interest
Income:
|
|||||||||||||
Interest
and fees on loans and leases
|
$
|
37,263
|
$
|
39,789
|
$
|
112,428
|
$
|
112,756
|
|||||
Interest
on loans held for sale
|
100
|
234
|
318
|
701
|
|||||||||
Interest
on deposits with banks
|
6
|
590
|
79
|
1,081
|
|||||||||
Interest
and dividends on securities:
|
|||||||||||||
Taxable
|
3,171
|
3,211
|
7,749
|
10,832
|
|||||||||
Exempt
from federal income taxes
|
1,409
|
2,468
|
6,712
|
7,776
|
|||||||||
Interest
on federal funds sold
|
99
|
666
|
529
|
1,720
|
|||||||||
TOTAL
INTEREST INCOME
|
42,048
|
46,958
|
127,815
|
134,866
|
|||||||||
Interest
Expense:
|
|||||||||||||
Interest
on deposits
|
9,325
|
15,898
|
32,930
|
45,263
|
|||||||||
Interest
on short-term borrowings
|
3,544
|
3,198
|
9,886
|
10,265
|
|||||||||
Interest
on long-term borrowings
|
1,092
|
650
|
3,214
|
1,912
|
|||||||||
TOTAL
INTEREST EXPENSE
|
13,961
|
19,746
|
46,030
|
57,440
|
|||||||||
NET
INTEREST INCOME
|
28,087
|
27,212
|
81,785
|
77,426
|
|||||||||
Provision
for loan and lease losses
|
6,545
|
750
|
15,401
|
2,369
|
|||||||||
NET
INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES
|
21,542
|
26,462
|
66,384
|
75,057
|
|||||||||
Noninterest
Income:
|
|||||||||||||
Securities
gains
|
9
|
22
|
662
|
28
|
|||||||||
Service
charges on deposit accounts
|
3,249
|
2,999
|
9,481
|
7,937
|
|||||||||
Gains
on sales of mortgage loans
|
397
|
738
|
1,772
|
2,149
|
|||||||||
Fees
on sales of investment products
|
820
|
765
|
2,547
|
2,471
|
|||||||||
Trust
and investment management fees
|
2,380
|
2,365
|
7,282
|
7,007
|
|||||||||
Insurance
agency commissions
|
1,282
|
1,294
|
4,725
|
5,422
|
|||||||||
Income
from bank owned life insurance
|
742
|
720
|
2,183
|
2,097
|
|||||||||
Visa
check fees
|
727
|
730
|
2,184
|
2,037
|
|||||||||
Other
income
|
1,273
|
1,497
|
4,434
|
3,761
|
|||||||||
TOTAL
NONINTEREST INCOME
|
10,879
|
11,130
|
35,270
|
32,909
|
|||||||||
Noninterest
Expenses:
|
|||||||||||||
Salaries
and employee benefits
|
11,949
|
14,654
|
39,574
|
41,864
|
|||||||||
Occupancy
expense of premises
|
2,732
|
2,946
|
8,150
|
8,072
|
|||||||||
Equipment
expenses
|
1,515
|
1,631
|
4,514
|
4,734
|
|||||||||
Marketing
|
526
|
359
|
1,511
|
1,563
|
|||||||||
Outside
data services
|
1,116
|
870
|
3,319
|
2,873
|
|||||||||
Amortization
of intangible assets
|
1,103
|
1,123
|
3,344
|
2,956
|
|||||||||
Goodwill
impairment charge
|
2,250
|
0
|
2,250
|
0
|
|||||||||
Other
expenses
|
4,076
|
4,316
|
12,194
|
12,410
|
|||||||||
TOTAL
NONINTEREST EXPENSES
|
25,267
|
25,899
|
74,856
|
74,472
|
|||||||||
Income
Before Income Taxes
|
7,154
|
11,693
|
26,798
|
33,494
|
|||||||||
Income
Tax Expense
|
1,795
|
3,512
|
7,583
|
9,599
|
|||||||||
NET
INCOME
|
$
|
5,359
|
$
|
8,181
|
$
|
19,215
|
$
|
23,895
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||||||||||||
(Dollars
in thousands, except per share data)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Basic
Net Income Per Share
|
$
|
0.33
|
$
|
0.50
|
$
|
1.18
|
$
|
1.50
|
|||||
Diluted
Net Income Per Share
|
0.33
|
0.50
|
1.17
|
1.50
|
|||||||||
Dividends
Declared Per Share
|
0.24
|
0.23
|
0.72
|
0.69
|
Nine Months Ended
September 30,
|
|||||||
(Dollars
in thousands)
|
2008
|
2007
|
|||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
19,215
|
$
|
23,895
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
10,420
|
7,805
|
|||||
Provision
for loan and lease losses
|
15,401
|
2,369
|
|||||
Stock
compensation expense
|
551
|
848
|
|||||
Deferred
income tax benefits
|
(5,401
|
)
|
(2,564
|
)
|
|||
Origination
of loans held for sale
|
(136,330
|
)
|
(234,298
|
)
|
|||
Proceeds
from sales of loans held for sale
|
140,614
|
240,944
|
|||||
Gains
on sales of loans held for sale
|
(1,772
|
)
|
(2,149
|
)
|
|||
Securities
gains
|
(662
|
)
|
(28
|
)
|
|||
Gains
on sales of premises and equipment
|
(66
|
)
|
0
|
||||
Net
decrease in accrued interest receivable
|
2,464
|
967
|
|||||
Net
increase in other assets
|
(344
|
)
|
(3,535
|
)
|
|||
Net
decrease in accrued expenses and other liabilities
|
2,262
|
3,561
|
|||||
Other
– net
|
(4,566
|
)
|
(2,063
|
)
|
|||
Net
cash provided by operating activities
|
41,786
|
35,752
|
|||||
Cash
flows from investing activities:
|
|||||||
Proceeds
(purchases) of other equity securities
|
(8,581
|
)
|
392
|
||||
Purchases
of investments available-for-sale
|
(176,327
|
)
|
(19,045
|
)
|
|||
Proceeds
from the sales of other real estate owned
|
240
|
(149
|
)
|
||||
Proceeds
from maturities, calls and principal payments of investments
held-to-maturity
|
56,065
|
33,547
|
|||||
Proceeds
from maturities, calls and principal payments of investments
available-for-sale
|
152,748
|
133,981
|
|||||
Net
increase in loans and leases
|
(206,858
|
)
|
(101,448
|
)
|
|||
Proceeds
from redemption of VISA stock
|
429
|
0
|
|||||
Contingent
consideration payout
|
(1,620
|
)
|
0
|
||||
Acquisition
of business activity, net
|
0
|
(15,769
|
)
|
||||
Expenditures
for premises and equipment
|
(1,821
|
)
|
(3,757
|
)
|
|||
Net
cash (used) provided in investing activities
|
(185,725
|
)
|
27,752
|
||||
Cash
flows from financing activities:
|
|||||||
Net
decrease in deposits
|
(25,056
|
)
|
(50,797
|
)
|
|||
Net
increase (decrease) in short-term borrowings
|
109,898
|
(35,717
|
)
|
||||
Proceeds
from issuance of long-term borrowings
|
60,000
|
0
|
|||||
Retirement
of long-term borrowings
|
0
|
(64
|
)
|
||||
Common
stock purchased and retired
|
0
|
(1,494
|
)
|
||||
Proceeds
from issuance of common stock
|
579
|
1,437
|
|||||
Dividends
paid
|
(11,818
|
)
|
(11,210
|
)
|
|||
Net
cash (used) provided by financing activities
|
133,603
|
(97,845
|
)
|
||||
Net
decrease in cash and cash equivalents
|
(10,336
|
)
|
(34,341
|
)
|
|||
Cash
and cash equivalents at beginning of period
|
85,852
|
106,897
|
|||||
Cash
and cash equivalents at end of period
|
$
|
75,516
|
$
|
72,556
|
Nine Months Ended
September 30,
|
|||||||
(Dollars
in thousands)
|
2008
|
2007
|
|||||
Supplemental
Disclosures:
|
|||||||
Interest
payments
|
$
|
45,597
|
$
|
57,437
|
|||
Income
tax payments
|
13,715
|
3,974
|
|||||
Transfers
from loans to other real estate owned
|
1,471
|
90
|
|||||
Reclassification
of borrowings from long-term to short-term
|
725
|
568
|
|||||
Details
of acquisition:
|
|||||||
Fair
value of assets acquired
|
0
|
$
|
417,434
|
||||
Fair
value of liabilities assumed
|
0
|
(365,709
|
)
|
||||
Stock
issued for acquisition
|
0
|
(58,916
|
)
|
||||
Purchase
price in excess of net assets acquired
|
0
|
62,640
|
|||||
Cash
paid for acquisition
|
0
|
55,449
|
|||||
Cash
and cash equivalents acquired with acquisition
|
0
|
(39,680
|
)
|
||||
Acquisition
of business activity, net
|
$
|
0
|
$
|
15,769
|
(Dollars in thousands, except per share data)
|
Common
Stock
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (loss)
|
|
Total
Stockholders’
Equity
|
||||||||
Balances
at December 31, 2007
|
$
|
16,349
|
$
|
83,970
|
$
|
216,376
|
$
|
(1,055
|
)
|
$
|
315,640
|
|||||
Adjustment
to reflect adoption of EITF Issue 06-04 effective January 1,
2008
|
(1,647
|
)
|
(1,647
|
)
|
||||||||||||
Balance
as of January 1, 2008 following adoption of EITF Issue
06-04
|
16,349
|
83,970
|
214,729
|
$
|
(1,055
|
)
|
313,993
|
|||||||||
Comprehensive
income:
|
||||||||||||||||
Net
income
|
19,215
|
19,215
|
||||||||||||||
Other
comprehensive income, net of tax effects and reclassification
adjustment
|
(2,820
|
)
|
(2,820
|
)
|
||||||||||||
Total
comprehensive income
|
16,395
|
|||||||||||||||
Cash
dividends - $0.72 per share
|
(11,818
|
)
|
(11,818
|
)
|
||||||||||||
Stock
compensation expense
|
551
|
551
|
||||||||||||||
Common
stock issued pursuant to:
|
||||||||||||||||
Director
stock purchase plan – 1,479 shares
|
2
|
38
|
40
|
|||||||||||||
Stock
option plan – 9,127 shares (16,837 shares issued less 7,710 shares
retired)
|
9
|
53
|
62
|
|||||||||||||
Employee
stock purchase plan – 23,748 shares
|
24
|
453
|
477
|
|||||||||||||
Balances
at September 30, 2008
|
$
|
16,384
|
$
|
85,065
|
$
|
222,126
|
$
|
(3,875
|
)
|
$
|
319,700
|
|||||
Balances
at December 31, 2006
|
$
|
14,827
|
$
|
27,869
|
$
|
199,102
|
$
|
(4,021
|
)
|
$
|
237,777
|
|||||
Comprehensive
income:
|
||||||||||||||||
|
|
|||||||||||||||
Net
income
|
23,895
|
23,895
|
||||||||||||||
Other
comprehensive loss, net of tax effects
|
455
|
455
|
||||||||||||||
Total
comprehensive income
|
|
24,350
|
||||||||||||||
Cash
dividends - $0.69 per share
|
(11,210
|
)
|
(11,210
|
)
|
||||||||||||
Stock
Compensation Expense
|
848
|
848
|
||||||||||||||
Common
stock issuance pursuant to:
|
||||||||||||||||
Acquisition
of Potomac Bank - 886,989 shares
|
887
|
32,190
|
33,077
|
|||||||||||||
Acquisition
of County National Bank - 690,047 shares
|
690
|
25,149
|
25,839
|
|||||||||||||
Director
stock purchase plan – 2,402 shares
|
2
|
75
|
77
|
|||||||||||||
Stock
option plan – 51,797 shares (55,205 shares issued less 3,408 shares
retired)
|
52
|
810
|
|
|
862
|
|||||||||||
Stock
repurchases- 54,838 shares
|
(55
|
)
|
(1,439
|
)
|
(1,494
|
)
|
||||||||||
Employee
stock purchase plan – 17,709 shares
|
18
|
480
|
498
|
|||||||||||||
Balances
at September 30, 2007
|
$
|
16,421
|
$
|
85,982
|
$
|
211,787
|
$
|
(3,566
|
)
|
$
|
310,624
|
Weighted
|
|||||||||||||
Weighted
|
Average
|
||||||||||||
Number
|
Average
|
Remaining
|
Aggregate
|
||||||||||
of
|
Exercised
|
Contractual
|
Intrinsic
|
||||||||||
(Dollars in thousands, except per share data):
|
Shares
|
Share Price
|
Life(Years)
|
Value
|
|||||||||
Balance
at January 1, 2008
|
996,365
|
$
|
33.72
|
5.3
|
$
|
1,588
|
|||||||
Granted
|
116,360
|
27.96
|
6.5
|
||||||||||
Exercised
|
(16,837
|
)
|
16.55
|
4.3
|
|||||||||
Forfeited
or expired
|
(76,937
|
)
|
32.68
|
5.0
|
|||||||||
Balance
at September 30, 2008
|
1,018,951
|
$
|
33.41
|
4.7
|
$
|
654
|
|||||||
Exercisable
at September 30, 2008
|
839,796
|
$
|
33.86
|
$
|
654
|
Weighted
|
|||||||
Average
|
|||||||
Number
|
Grant-Date
|
||||||
Of Shares
|
Fair Value
|
||||||
Nonvested at January 1, 2008
|
72,221
|
$
|
8.11
|
||||
Granted
|
116,360
|
4.47
|
|||||
Vested
|
0
|
0
|
|||||
Forfeited
|
(9,426
|
)
|
6.71
|
||||
Nonvested
at September 30, 2008
|
179,155
|
$
|
5.82
|
Weighted
|
|||||||
Average
|
|||||||
Number
|
Grant-Date
|
||||||
Of Shares
|
Fair Value
|
||||||
Restricted stock at
January 1, 2008
|
24,746
|
$
|
37.14
|
||||
Granted
|
28,675
|
27.96
|
|||||
Vested
|
0
|
0
|
|||||
Exercised
|
(167
|
)
|
16.34
|
||||
Forfeited
|
(2,520
|
)
|
34.21
|
||||
Restricted
stock at September 30, 2008
|
50,734
|
$
|
32.11
|
(Dollars and amounts in thousands, except
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||
per share data)
|
September 30,
|
September 30,
|
|||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Basic:
|
|||||||||||||
Net
income available to common stockholders
|
$
|
5,359
|
$
|
8,181
|
$
|
19,215
|
$
|
23,895
|
|||||
Average
common shares outstanding
|
16,380
|
16,435
|
16,367
|
15,897
|
|||||||||
Basic
net income per share
|
$
|
0.33
|
$
|
0.50
|
$
|
1.18
|
$
|
1.50
|
|||||
Diluted:
|
|||||||||||||
Net
income available to common stockholders
|
$
|
5,359
|
$
|
8,181
|
$
|
19,215
|
$
|
23,895
|
|||||
Average
common shares outstanding
|
16,380
|
16,435
|
16,367
|
15,897
|
|||||||||
Stock
option and restricted stock adjustment
|
39
|
74
|
52
|
83
|
|||||||||
Average
common shares outstanding–diluted
|
16,419
|
16,509
|
16,419
|
15,980
|
|||||||||
Diluted
net income per share
|
$
|
0.33
|
$
|
0.50
|
$
|
1.17
|
$
|
1.50
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||||||||||||
(In thousands)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Service cost
for benefits earned
|
$
|
0
|
$
|
320
|
$
|
0
|
$
|
960
|
|||||
Interest
cost on projected benefit obligation
|
356
|
341
|
1,066
|
1,023
|
|||||||||
Expected
return on plan assets
|
(326
|
)
|
(379
|
)
|
(978
|
)
|
(1,137
|
)
|
|||||
Amortization
of prior service cost
|
(1,501
|
)
|
(44
|
)
|
(1,589
|
)
|
(132
|
)
|
|||||
Recognized
net actuarial loss
|
97
|
136
|
295
|
408
|
|||||||||
Net
periodic benefit cost
|
$
|
(1,374
|
)
|
$
|
374
|
$
|
(1,206
|
)
|
$
|
1,122
|
(In thousands)
|
Continuous unrealized losses
existing for:
|
||||||||||||
Available for sale as of September 30,
2008
|
Fair Value
|
Less than 12
months
|
More than 12
months
|
Total Unrealized
Losses
|
|||||||||
U.S.
Agencies and Corporations
|
$
|
64,675
|
$
|
300
|
$
|
0
|
$
|
300
|
|||||
Mortgage-backed
|
73,080
|
665
|
6
|
671
|
|||||||||
CMO
|
648
|
1
|
0
|
1
|
|||||||||
Trust
preferred
|
5,327
|
1,256
|
0
|
1,256
|
|||||||||
State
and municipal
|
1,129
|
43
|
0
|
43
|
|||||||||
$
|
144,859
|
$
|
2,265
|
$
|
6
|
$
|
2,271
|
(In thousands)
|
Continuous unrealized losses
existing for:
|
||||||||||||
Available for sale as of
December 31, 2007
|
Fair Value
|
Less than 12
months
|
More than 12
months
|
Total Unrealized
Losses
|
|||||||||
U.S.
Agencies and Corporations
|
$
|
20,925
|
$
|
0
|
$
|
99
|
$
|
99
|
|||||
Mortgage-backed
|
12,554
|
43
|
4
|
47
|
|||||||||
$
|
33,479
|
$
|
43
|
$
|
103
|
$
|
146
|
(In thousands)
|
Continuous unrealized losses
existing for:
|
||||||||||||
Held to Maturity as of
September 30,
2008
|
Fair
Value
|
|
|
Less
than 12
months
|
|
|
More
than 12
months
|
|
|
Total
Unrealized
Losses
|
|||
State
and municipal
|
26,062
|
903
|
0
|
903
|
|||||||||
$
|
26,062
|
$
|
903
|
$
|
0
|
$
|
903
|
(In
thousands)
|
|
|
|
Continuous unrealized losses
existing for:
|
|
|
|
||||||
Held to Maturity as of December 31,
2007
|
|
|
Fair Value
|
|
|
Less than 12
months
|
|
|
More than 12
months
|
|
|
Total Unrealized
Losses
|
|
State
and municipal
|
$
|
3,340
|
$
|
1
|
$
|
31
|
$
|
32
|
|||||
$
|
3,340
|
$
|
1
|
$
|
31
|
$
|
32
|
(In thousands)
|
Community
Banking
|
Insurance
|
Leasing
|
Investment
Mgmt.
|
Inter-Segment
Elimination
|
Total
|
|||||||||||||
Quarter ended September 30, 2008
|
|||||||||||||||||||
Interest
income
|
$
|
41,618
|
$
|
8
|
$
|
730
|
$
|
6
|
$
|
(314
|
)
|
$
|
42,048
|
||||||
Interest
expense
|
13,975
|
0
|
300
|
0
|
(314
|
)
|
13,961
|
||||||||||||
Provision
for loan and lease losses
|
6,545
|
0
|
0
|
0
|
0
|
6,545
|
|||||||||||||
Noninterest
income
|
8,292
|
1,474
|
128
|
1,137
|
(152
|
)
|
10,879
|
||||||||||||
Noninterest
expenses
|
21,033
|
1,273
|
2,301
|
812
|
(152
|
)
|
25,267
|
||||||||||||
Income
before income taxes
|
8,357
|
209
|
(1,743
|
)
|
331
|
0
|
7,154
|
||||||||||||
Income
tax expense
|
2,355
|
88
|
(778
|
)
|
130
|
0
|
1,795
|
||||||||||||
Net
income
|
$
|
6,002
|
$
|
121
|
$
|
(965
|
)
|
$
|
201
|
$
|
0
|
$
|
5,359
|
||||||
Assets
|
$
|
3,201,243
|
$
|
12,296
|
$
|
36,421
|
$
|
11,432
|
$
|
(66,275
|
)
|
$
|
3,195,117
|
Quarter
ended September
30, 2007
|
|||||||||||||||||||
Interest
income
|
$
|
46,564
|
$
|
31
|
$
|
676
|
$
|
20
|
$
|
(333
|
)
|
$
|
46,958
|
||||||
Interest
expense
|
19,795
|
0
|
284
|
0
|
(333
|
)
|
19,746
|
||||||||||||
Provision
for loan and lease losses
|
750
|
0
|
0
|
0
|
0
|
750
|
|||||||||||||
Noninterest
income
|
8,351
|
1,398
|
353
|
1,173
|
(145
|
)
|
11,130
|
||||||||||||
Noninterest
expenses
|
23,308
|
1,503
|
326
|
907
|
(145
|
)
|
25,899
|
||||||||||||
Income
before income taxes
|
11,062
|
(74
|
)
|
419
|
286
|
0
|
11,693
|
||||||||||||
Income
tax expense
|
3,264
|
(29
|
)
|
166
|
111
|
0
|
3,512
|
||||||||||||
Net
income
|
$
|
7,798
|
$
|
(45
|
)
|
$
|
253
|
$
|
175
|
$
|
0
|
$
|
8,181
|
||||||
Assets
|
$
|
2,966,737
|
$
|
11,635
|
$
|
35,090
|
$
|
9,327
|
$
|
(57,297
|
)
|
$
|
2,965,492
|
(In thousands)
|
Community
Banking
|
Insurance
|
Leasing
|
Investment
Mgmt.
|
Inter-Segment
Elimination
|
Total
|
|||||||||||||
Year to Date September 30, 2008
|
|||||||||||||||||||
Interest
income
|
$
|
126,515
|
$
|
40
|
$
|
2,186
|
$
|
26
|
$
|
(952
|
)
|
$
|
127,815
|
||||||
Interest
expense
|
46,095
|
0
|
887
|
0
|
(952
|
)
|
46,030
|
||||||||||||
Provision
for loan and lease losses
|
15,221
|
0
|
180
|
0
|
0
|
15,401
|
|||||||||||||
Noninterest
income
|
26,692
|
5,203
|
386
|
3,446
|
(457
|
)
|
35,270
|
||||||||||||
Noninterest
expenses
|
65,608
|
4,052
|
2,988
|
2,665
|
(457
|
)
|
74,856
|
||||||||||||
Income
before income taxes
|
26,283
|
1,191
|
(1,483
|
)
|
807
|
0
|
26,798
|
||||||||||||
Income
tax expense
|
7,383
|
485
|
(600
|
)
|
315
|
0
|
7,583
|
||||||||||||
Net
income
|
$
|
18,900
|
$
|
706
|
$
|
(883
|
)
|
$
|
492
|
$
|
0
|
$
|
19,215
|
||||||
Assets
|
$
|
3,201,243
|
$
|
12,296
|
$
|
36,421
|
$
|
11,432
|
$
|
(66,275
|
)
|
$
|
3,195,117
|
||||||
Year
to Date September
30, 2007
|
|||||||||||||||||||
Interest
income
|
$
|
133,690
|
$
|
77
|
$
|
1,992
|
$
|
52
|
$
|
(945
|
)
|
$
|
134,866
|
||||||
Interest
expense
|
57,565
|
0
|
820
|
0
|
(945
|
)
|
57,440
|
||||||||||||
Provision
for loan and lease losses
|
2,369
|
0
|
0
|
0
|
0
|
2,369
|
|||||||||||||
Noninterest
income
|
23,440
|
5,849
|
697
|
3,380
|
(457
|
)
|
32,909
|
||||||||||||
Noninterest
expenses
|
67,159
|
4,126
|
838
|
2,806
|
(457
|
)
|
74,472
|
||||||||||||
Income
before income taxes
|
30,037
|
1,800
|
1,031
|
626
|
0
|
33,494
|
|||||||||||||
Income
tax expense
|
8,233
|
713
|
408
|
245
|
0
|
9,599
|
|||||||||||||
Net
income
|
$
|
21,804
|
$
|
1,087
|
$
|
623
|
$
|
381
|
$
|
0
|
$
|
23,895
|
|||||||
Assets
|
$
|
2,966,737
|
$
|
11,635
|
$
|
35,090
|
$
|
9,327
|
$
|
(57,297
|
)
|
$
|
2,965,492
|
For
the three months ended September 30,
|
|||||||||||||||||||
2008
|
2007
|
||||||||||||||||||
Tax
|
Tax
|
||||||||||||||||||
Pretax
|
Benefit/
|
Net
|
Pretax
|
Benefit/
|
Net
|
||||||||||||||
(In
thousands)
|
Amount
|
(Expense)
|
Amount
|
Amount
|
(Expense)
|
Amount
|
|||||||||||||
Net
Income
|
$
|
5,359
|
$
|
8,181
|
|||||||||||||||
Other
comprehensive income:
|
|||||||||||||||||||
Unrealized
holding (losses) gains arising during the period
|
$
|
(2,325
|
)
|
926
|
(1,399)
$
|
1,221
|
(478
|
)
|
743
|
||||||||||
Reclassification
adjustment for (gains) losses included in net income
|
(9
|
)
|
4
|
(5
|
)
|
(22
|
)
|
9
|
(13
|
)
|
|||||||||
Adjustment
for pensions (FAS 158)
|
(1,404
|
)
|
560
|
(844
|
)
|
0
|
0
|
0
|
|||||||||||
Total
change in other comprehensive income
|
$
|
(3,738
|
)
|
1,490
|
(2,248)
|
$ |
1,199
|
(469
|
)
|
730
|
|||||||||
Total
comprehensive income
|
$
|
3,111
|
$
|
8,911
|
For
the nine months ended September 30,
|
|||||||||||||||||||
2008
|
2007
|
||||||||||||||||||
Tax
|
Tax
|
||||||||||||||||||
Pretax |
Benefit/
|
Net
|
Pretax
|
Benefit/
|
Net
|
||||||||||||||
(In
thousands)
|
Amount |
(Expense)
|
Amount
|
Amount
|
(Expense)
|
Amount
|
|||||||||||||
Net
Income
|
$
|
19,215
|
$
|
23,895
|
|||||||||||||||
Other
comprehensive income:
|
|||||||||||||||||||
Unrealized
holding (losses) gains arising during the period
|
$
|
(2,733
|
)
|
1,088
|
(1,645
|
)
|
$
|
1,421
|
(558
|
)
|
863
|
||||||||
Reclassification
adjustment for (gains) losses included in net income
|
(662 | ) |
265
|
(397
|
)
|
(28
|
)
|
11
|
(17
|
)
|
|||||||||
Adjustment
for pensions (FAS 158)
|
(1,294 | ) |
516
|
(778
|
)
|
(643
|
)
|
252
|
(391
|
)
|
|||||||||
Total
change in other comprehensive income
|
$
|
(4,689
|
)
|
1,869
|
(2,820
|
)
|
$
|
750
|
(295
|
)
|
455
|
||||||||
Total
comprehensive income
|
$
|
16,395
|
$
|
24,350
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant Other
Observable
Inputs (Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Balance as of
September 30,
2008
|
||||||||||
Assets
|
|||||||||||||
Residential
Mortgage loans held for sale
|
$
|
-
|
$
|
4,541
|
$
|
-
|
$
|
4,541
|
|||||
Investment
securities, available for sale
|
-
|
206,898
|
-
|
206,898
|
|||||||||
Investment
securities, held to maturity
|
-
|
181,734
|
-
|
181,734
|
|||||||||
Interest
swap agreements
|
-
|
4,428
|
-
|
4,428
|
|||||||||
Liabilities
|
|||||||||||||
Interest
swap agreements
|
$
|
-
|
$
|
(4,428
|
)
|
$
|
-
|
$
|
(4,428
|
)
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant Other
Observable
Inputs (Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Balance as of
September 30,
2008
|
||||||||||
Assets
|
|||||||||||||
Impaired
Loans
|
$
|
-
|
$
|
-
|
$
|
45,113
|
$
|
45,113
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
(Dollars
in thousands)
|
2008
|
2007
|
2008
|
2007
|
|||||||||
GAAP
Efficiency ratio:
|
|||||||||||||
Noninterest
expenses
|
$
|
25,267
|
$
|
25,899
|
$
|
74,856
|
$
|
74,472
|
|||||
Net
interest income plus noninterest income-
|
|||||||||||||
GAAP
|
38,966
|
38,342
|
117,055
|
110,335
|
|||||||||
Efficiency
ratio–GAAP
|
64.84
|
%
|
67.55
|
%
|
63.95
|
%
|
67.50
|
%
|
|||||
Non-GAAP
Adjustments:
|
|||||||||||||
Noninterest
expenses
|
$
|
25,267
|
$
|
25,899
|
$
|
74,856
|
$
|
74,472
|
|||||
Goodwill
impairment charge
|
(2,250
|
)
|
0
|
(2,250
|
)
|
0
|
|||||||
Amortization
of intangible assets
|
(1,103
|
)
|
(1,123
|
)
|
(3,344
|
)
|
(2,956
|
)
|
|||||
Pension
prior service credit
|
1,473
|
0
|
1,473
|
0
|
|||||||||
Noninterest
expenses–as adjusted
|
23,387
|
24,776
|
70,735
|
71,516
|
|||||||||
Net
interest income plus noninterest income
|
38,966
|
38,342
|
117,055
|
110,335
|
|||||||||
Tax-equivalency
|
1,180
|
1,447
|
3,381
|
4,096
|
|||||||||
Securities
gains
|
(9
|
)
|
(22
|
)
|
(662
|
)
|
(28
|
)
|
|||||
Net
interest income plus noninterest income – as adjusted
|
40,137
|
39,767
|
119,774
|
114,403
|
|||||||||
Efficiency
ratio – Non-GAAP
|
58.27
|
%
|
62.30
|
%
|
59.06
|
%
|
62.51
|
%
|
(In thousands)
|
September 30, 2008
|
%
|
December 31, 2007
|
%
|
|||||||||
Residential
real estate
|
$
|
674,445
|
27
|
%
|
$
|
623,286
|
27
|
%
|
|||||
Commercial
loans and leases
|
1,410,755
|
57
|
1,277,450
|
56
|
|||||||||
Consumer
|
397,218
|
16
|
376,295
|
17
|
|||||||||
Total
Loans and Leases
|
2,482,418
|
100
|
%
|
2,277,031
|
100
|
%
|
|||||||
Less:
Allowance for credit losses
|
(38,266
|
)
|
(25,092
|
)
|
|||||||||
Net
loans and leases
|
$
|
2,444,152
|
$
|
2,251,939
|
(In thousands)
|
September 30, 2008
|
%
|
December 31, 2007
|
%
|
|||||||||
Noninterest-bearing
deposits
|
$
|
468,101
|
21
|
%
|
$
|
434,053
|
19
|
%
|
|||||
Interest-bearing
deposits:
|
|||||||||||||
Demand
|
231,016
|
10
|
254,878
|
11
|
|||||||||
Money
market savings
|
619,533
|
28
|
726,647
|
32
|
|||||||||
Regular
savings
|
143,990
|
6
|
153,964
|
7
|
|||||||||
Time
deposits less than $100,000
|
455,291
|
20
|
416,601
|
18
|
|||||||||
Time
deposits $100,000 or more
|
330,881
|
15
|
287,725
|
13
|
|||||||||
Total
interest-bearing
|
1,780,711
|
79
|
1,839,815
|
81
|
|||||||||
Total
deposits
|
$
|
2,248,812
|
100
|
%
|
$
|
2,273,868
|
100
|
%
|
CHANGE IN INTEREST RATES:
|
+ 400 bp
|
|
+ 300 bp
|
|
+ 200 bp
|
|
+ 100 bp
|
|
- 100 bp
|
|
- 200 bp
|
|
-300 bp
|
|
-400 bp
|
|
|||||||||
POLICY
LIMIT
|
-25
|
%
|
-20
|
%
|
-17.5
|
%
|
-12.5
|
%
|
-12.5
|
%
|
-17.5
|
%
|
-20
|
%
|
-25
|
%
|
|||||||||
September
2008
|
3.64
|
4.21
|
4.38
|
4.65
|
-3.11
|
N/A
|
N/A
|
N/A
|
|||||||||||||||||
December
2007
|
-14.82
|
-10.47
|
-6.12
|
-1.91
|
-0.68
|
-1.01
|
-2.84
|
N/A
|
CHANGE IN INTEREST RATES:
|
|
+ 400 bp
|
|
+ 300 bp
|
|
+ 200 bp
|
|
+ 100 bp
|
|
- 100 bp
|
|
-200 bp
|
|
-300 bp
|
|
-400 bp
|
|
||||||||
POLICY
LIMIT
|
-40
|
%
|
-30
|
%
|
-
22.5
|
%
|
-10.0
|
%
|
-12.5
|
%
|
-22.5
|
%
|
-30
|
%
|
-40
|
%
|
|||||||||
September
2008
|
-18.31
|
-12.90
|
-6.03
|
-0.79
|
-8.72
|
N/A
|
N/A
|
N/A
|
|||||||||||||||||
December
2007
|
-15.40
|
-9.09
|
-1.44
|
3.14
|
-3.57
|
-9.01
|
-13.26
|
N/A
|
(In
thousands)
|
||||
Commitments
to extend credit:
|
||||
Unused
lines of credit (home equity and business)
|
$
|
404,333
|
||
Other
commitments to extend credit
|
194,078
|
|||
67,846
|
||||
$
|
666,257
|
(Dollars in thousands and tax equivalent)
|
For the nine months ended September 30,
|
||||||||||||||||||
2008
|
2007
|
||||||||||||||||||
Average
Balance
|
Interest
(1)
|
Annualized
Average
Yield/Rate
|
Average
Balance
|
Interest
(1)
|
Annualized
Average
Yield/Rate
|
||||||||||||||
Assets
|
|||||||||||||||||||
Total
loans and leases (2)
|
$
|
2,393,470
|
$
|
112,746
|
6.29
|
%
|
$
|
2,073,002
|
$
|
113,457
|
7.31
|
%
|
|||||||
Total
securities
|
427,345
|
17,842
|
5.59
|
511,013
|
22,704
|
5.95
|
|||||||||||||
Other
earning assets
|
31,500
|
608
|
2.58
|
71,617
|
2,801
|
5.23
|
|||||||||||||
TOTAL
EARNING ASSETS
|
2,852,315
|
131,196
|
6.14
|
%
|
2,655,632
|
138,962
|
7.00
|
%
|
|||||||||||
Nonearning
assets
|
272,413
|
258,816
|
|||||||||||||||||
Total
assets
|
$
|
3,124,728
|
$
|
2,914,448
|
|||||||||||||||
Liabilities
and Stockholders' Equity
|
|||||||||||||||||||
Interest-bearing
demand deposits
|
$
|
244,943
|
528
|
0.29
|
%
|
$
|
237,173
|
626
|
0.35
|
%
|
|||||||||
Money
market savings deposits
|
680,189
|
9,760
|
1.92
|
611,881
|
17,349
|
3.79
|
|||||||||||||
Regular
savings deposits
|
156,093
|
365
|
0.31
|
168,957
|
421
|
0.33
|
|||||||||||||
Time
deposits
|
760,569
|
22,277
|
3.91
|
784,995
|
26,867
|
4.58
|
|||||||||||||
Total
interest-bearing deposits
|
1,841,794
|
32,930
|
2.39
|
1,803,006
|
45,263
|
3.36
|
|||||||||||||
Short-term
borrowings
|
397,432
|
9,886
|
3.32
|
313,681
|
10,265
|
4.38
|
|||||||||||||
Long-term
borrowings
|
100,591
|
3,214
|
4.26
|
42,358
|
1,912
|
6.02
|
|||||||||||||
Total
interest-bearing liabilities
|
2,339,817
|
46,030
|
2.63
|
2,159,045
|
57,440
|
3.56
|
|||||||||||||
Noninterest-bearing
demand deposits
|
435,725
|
441,151
|
|||||||||||||||||
Other
noninterest-bearing liabilities
|
30,115
|
30,916
|
|||||||||||||||||
Stockholders'
equity
|
319,071
|
283,336
|
|||||||||||||||||
Total
liabilities and stockholders' equity
|
$
|
3,124,728
|
$
|
2,914,448
|
|||||||||||||||
Net
interest income and spread
|
$
|
85,166
|
3.51
|
%
|
$
|
81,522
|
3.44
|
%
|
|||||||||||
Less:
tax equivalent adjustment
|
3,381
|
4,096
|
|||||||||||||||||
Net
interest income
|
$
|
81,785
|
$
|
77,426
|
|||||||||||||||
Net
interest margin (3)
|
3.99
|
%
|
4.10
|
%
|
|||||||||||||||
Ratio
of average earning assets to
|
|||||||||||||||||||
Average
interest-bearing liabilities
|
121.90
|
%
|
123.00
|
%
|
2008 vs. 2007
|
2007 vs. 2006
|
||||||||||||||||||
Increase
|
Due to Change
|
Increase
|
Due to Change
|
||||||||||||||||
Or
|
In Average:*
|
Or
|
In Average:*
|
||||||||||||||||
(In thousands and tax equivalent)
|
(Decrease)
|
Volume
|
Rate
|
(Decrease)
|
Volume
|
Rate
|
|||||||||||||
Interest
income from earning assets:
|
|||||||||||||||||||
Loans
and leases
|
$
|
(711
|
)
|
$
|
16,205
|
$
|
(16,916
|
)
|
$
|
20,112
|
$
|
15,687
|
$
|
4,425
|
|||||
Securities
|
(4,862
|
)
|
(3,550
|
)
|
(1,312
|
)
|
(1,187
|
)
|
(2,335
|
)
|
1,148
|
||||||||
Other
earning assets
|
(2,193
|
)
|
(1,151
|
)
|
(1,042
|
)
|
2,351
|
2,307
|
44
|
||||||||||
Total
interest income
|
(7,766
|
)
|
11,504
|
(19,270
|
)
|
21,276
|
15,659
|
5,617
|
|||||||||||
Interest
expense on funding of earning assets:
|
|||||||||||||||||||
Interest-bearing
demand deposits
|
(98
|
)
|
18
|
(116
|
)
|
129
|
17
|
112
|
|||||||||||
Regular
savings deposits
|
(56
|
)
|
(31
|
)
|
(25
|
)
|
(135
|
)
|
(55
|
)
|
(80
|
)
|
|||||||
Money
market savings deposits
|
(7,589
|
)
|
1,749
|
(9,338
|
)
|
9,247
|
6,177
|
3,070
|
|||||||||||
Time
deposits
|
(4,590
|
)
|
(805
|
)
|
(3,785
|
)
|
9,176
|
5,508
|
3,668
|
||||||||||
Total
borrowings
|
923
|
4,143
|
(3,220
|
)
|
(2,894
|
)
|
(4,063
|
)
|
1,169
|
||||||||||
Total
interest expense
|
(11,410
|
)
|
5,074
|
(16,484
|
)
|
15,523
|
7,584
|
7,939
|
|||||||||||
Net
interest income
|
$
|
3,644
|
$
|
6,430
|
$
|
(2,786
|
)
|
$
|
5,753
|
$
|
8,075
|
$
|
(2,322
|
)
|
Nine Months Ended
September 30, 2008
|
Twelve Months Ended
December 31, 2007
|
||||||
Balance, January
1
|
$
|
25,092
|
$
|
19,492
|
|||
Allowance
acquired from acquisition
|
0
|
2,798
|
|||||
Provision
for loan and lease losses
|
15,401
|
4,094
|
|||||
Loan
charge-offs:
|
|||||||
Residential
real estate
|
(149
|
)
|
0
|
||||
Commercial
loans and leases
|
(2,096
|
)
|
(1,103
|
)
|
|||
Consumer
|
(609
|
)
|
(341
|
)
|
|||
Total
charge-offs
|
(2,854
|
)
|
(1,444
|
)
|
|||
Loan
recoveries:
|
|||||||
Residential
real estate
|
4
|
12
|
|||||
Commercial
loans and leases
|
459
|
110
|
|||||
Consumer
|
164
|
30
|
|||||
Total
recoveries
|
627
|
152
|
|||||
Net
recoveries (charge-offs)
|
(2,227
|
)
|
(1,292
|
)
|
|||
Balance,
period end
|
$
|
38,266
|
$
|
25,092
|
|||
Net
charge-offs (recoveries) to average loans and leases (annual
basis)
|
0.12
|
%
|
0.06
|
%
|
|||
Allowance
to total loans and leases
|
1.54
|
%
|
1.10
|
%
|
September 30, 2008
|
December 31, 2007
|
||||||
Non-accrual
loans and leases
|
$
|
64,246
|
$
|
23,040
|
|||
Loans
and leases 90 days past due
|
2,074
|
11,362
|
|||||
Restructured
loans and leases
|
395
|
0
|
|||||
Total
nonperforming loans and leases*
|
66,715
|
34,402
|
|||||
Other
real estate owned, net
|
1,698
|
461
|
|||||
Total
nonperforming assets
|
$
|
68,413
|
$
|
34,863
|
|||
Nonperforming
assets to total assets
|
2.14
|
%
|
1.15
|
%
|
Period
|
(a) Total Number of
Shares Purchased |
(b) Average Price
Paid per Share |
(c) Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs |
(d) Maximum
Number that May Yet Be Purchased Under the Plans or Programs (2)(3) |
|||||||||
July
2008
|
0
|
NA
|
0
|
629,996
|
|||||||||
August
2008
|
0
|
NA
|
0
|
629,996
|
|||||||||
September
2008
|
0
|
NA
|
0
|
629,996
|
Exhibit
31(a)
|
Certification
of Chief Executive Officer
|
|
Exhibit
31(b)
|
Certification
of Chief Financial Officer
|
|
Exhibit
32 (a)
|
Certification
of Chief Executive Officer pursuant to 18 U.S. Section
1350
|
|
Exhibit
32 (b)
|
Certification
of Chief Financial Officer pursuant to 18 U.S. Section
1350
|
By:
|
/S/
HUNTER R. HOLLAR
|
Hunter
R. Hollar
|
|
Chief
Executive Officer
|
By:
|
/S/
PHILIP J. MANTUA
|
Philip
J. Mantua
|
|
Executive
Vice President and Chief Financial
Officer
|