NEXITY FINANCIAL CORPORATION 
By Nexity Financial Corporation (NASDAQ: NXTY):
Third Quarter 2006 Highlights:
- Record net income of $1.61 million, up 48.9% from last year
- Diluted net income per share of $0.18, up 27.7% from last year
- Total assets of $853.2 million, up 16.1% from last year's $734.7 million
- Total loans of $557.7 million, up 16.6% from last year's $478.2 million
- Total deposits of $635.2 million, up 15.9% from last year's $547.9 million
- Strong credit quality with QTD annualized net charge-offs of 0.06% and nonperforming loans of 0.00% of total loans
Nexity Financial Corporation (NASDAQ: NXTY) today reported third quarter net income of $1.61 million, or $0.18 per diluted share. Net income was up 48.9% from the same period in 2005. The improved earnings were primarily related to rapid growth in net interest income, improved noninterest income, and a lower provision for loan losses. Net interest income was up 23.2% from the same period in 2005 due to a 16.4% increase in average interest-earning assets and strong improvement in the net interest margin from 3.15% in 2005 to 3.32% in 2006.
?I am very pleased with our third quarter financial performance as earnings continue to grow at an outstanding pace. Loan growth picked up during the period and credit quality continues to be very sound,? said Greg Lee, Chairman and CEO of Nexity Financial Corporation. ?We are seeing some solid growth in Texas and North Carolina which are newer markets for us. We will continue to develop our lending, marketing, and investment sales personnel to increase production and provide superior correspondent banking services to community banks.?
Return on average assets and return on average equity were 0.79% and 10.50%, respectively, for the third quarter of 2006 compared with 0.78% and 10.26% during the second quarter in 2006 and 0.61% and 10.70% for the third quarter of 2005.
For the nine months ended September 30, 2006, operating income was $4.32 million or $0.48 per diluted share compared to $3.07 million or $0.40 per diluted share during the same period in 2005. For the nine months ended September 30, 2006, Nexity's net income was $4.48 million or $0.49 per diluted share compared with $3.37 million, or $0.44 per diluted share for the same period in 2005. Operating income is net income less after tax non-recurring items and is more indicative of financial performance because it focuses on core earnings. The non-recurring items in each period presented are net gains realized on the sale of investment securities.
Return on average assets and return on average equity were 0.75% and 9.66%, respectively, for the nine months ended September 30, 2006 compared with 0.68% and 12.16% for the same period in 2005. Return on equity is lower than the same period last year primarily due to the additional equity raised at the end of the third quarter of 2005.
Total assets grew to $853.2 million at September 30, 2006, up $118.4 million or 16.1% from the $734.7 million reported at September 30, 2005. Total loans were $557.7 million at September 30, 2006, up $79.5 million or 16.6% from the $478.2 million reported at September 30, 2005. Total deposits were $635.2 million at September 30, 2006, up $87.4 million or 15.9% from the $547.9 million reported at September 30, 2005.
Net interest income, the major component of Nexity's income statement was $6.7 million for the third quarter of 2006 versus $5.5 million for the same period in 2005, an increase of 23.2%. This increase was due to strong balance sheet growth and an improved net interest margin. Average interest-earning assets were up 16.4% and the net interest margin improved from 3.15% in 2005 to 3.32% in 2006. Our target level for the net interest margin is 3.00% and we anticipate that it will approach this level over the next 3 to 6 months primarily due to the rising cost of interest bearing liabilities.
Average earning assets were higher because of strong growth in loans and deposits. Average loans were up $74.8 million or 15.9%. The net interest margin benefited from the increasing interest rate environment, a high level of loan fees from improved loan production, and an increase in noninterest bearing funds related to the increase in stockholders' equity. Average loans as a percentage of average earning assets was 68.0% during the third quarter of 2006 versus 68.2% for the same period in 2005.
The provision for loan losses during the third quarter of 2006 was down $125,000 or 22.9% versus the same period in 2005. The provision for loan losses was lower primarily because of slower loan growth in 2006. Net charge-offs for the third quarter of 2006 were $86,496 or 0.06% of average loans for the third quarter of 2006 on an annualized basis versus $128,644 or 0.11% for the same period in 2005.
Noninterest income for the third quarter of 2006 was $377,931 which was down $80,067 or 17.5% from the $457,998 reported for the second quarter of 2006 and up $18,375 or 5.1% from the $359,556 reported for the same period in 2005. Noninterest income was down from last quarter primarily because of lower income from our brokerage and investment services division. Noninterest income was up from the same period in 2005 primarily because of growth in our clearing and cash management business with correspondent banks.
Noninterest expense for the third quarter of 2006 was $4.16 million which was down slightly from the $4.18 million reported for the second quarter of 2006 and up $619,228 or 17.5% from the $3.54 million reported for the same period in 2005. Noninterest expense was higher than last year primarily due to increases related to the continued expansion of our correspondent banking markets and services, higher internet advertising costs, and costs related to technology investments made during the second half of 2005.
The efficiency ratio was 58.60% for the third quarter of 2006 which was improved from the 62.42% reported for the second quarter of 2006 and the 60.88% reported for the same period in 2005. The efficiency ratio was lower in the third quarter of 2006 primarily because strong growth in net interest income and a slower pace of growth in overhead.
Credit quality continues to be strong. There were no nonperforming loans at September 30, 2006 compared with $64,570 or 0.01% of total loans at September 30, 2005. Nonperforming assets were $1.5 million or 0.18% of total assets at September 30, 2006 compared with $1.7 million or 0.24% of total assets at September 30, 2005. Annualized net charge-offs were 0.15% of average loans during the nine months of 2006 compared with 0.07% for the same period in 2005. The allowance for loan losses was 1.26% of total loans at September 30, 2006 and 1.25% of total loans at September 30, 2005.
Nexity's total risk-based capital, tier 1 risk-based capital, and leverage ratios at September 30, 2006 were 11.79%, 10.79%, and 9.35%, respectively, compared with 13.73%, 12.72%, and 10.81%, respectively, at September 30, 2005. On March 3, 2006, Nexity announced a stock repurchase program to acquire up to 400,000 shares, or approximately 4.6% of the total common shares outstanding at that time. Nexity has repurchased 365,950 shares or approximately 4.2% of total common shares outstanding at that time.
Conference Call / Webcast Information
Nexity Financial Corporation will host a conference call on Tuesday, October 31 at 10:00 AM Eastern Daylight Time (EDT) to discuss the third quarter 2006 results. Additional material information, including forward-looking statements such as trends and projections, may be discussed during the presentation. To participate in the conference call or webcast, please follow the instructions listed below.
Webcast: Live via the Internet and Windows Media Player
http://www.nexitybank.com/ then to the Investor Relations
section, to conference in via the web
Then click on "Third Quarter 2006 Earnings Release
Conference Call." The Webcast access will be "listen only".
Webcast URL: http://www.vcall.com/IC/CEPage.asp?ID=109892
Live via telephone to conference in via telephone
1-877-407-8033 (U.S. and Canada)
(201) 689-8033 (International)About Nexity Financial Corporation
Nexity Financial Corporation is an $853 million commercial bank offering deposit products nationwide consisting of money markets, checking accounts and online access. Nexity generates the majority of its income through wholesale correspondent banking activities. Nexity is headquartered in Birmingham, Alabama. Customer Service Representatives can be reached at 1-877-738-6391. To learn more about Nexity Bank please visit www.nexitybank.com.
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Nexity Financial Corporation notes that any statements in this press release and elsewhere that are not historical facts are ?forward-looking statements.? The words ?expect?, ?anticipate?, ?intend?, ?consider?, ?plan?, ?believe?, ?seek?, ?should?, ?estimate? and similar expressions are intended to identify such forward-looking statements, but other statements may constitute forward-looking statements. The forward-looking statements involve risks and uncertainties that may cause Nexity's actual results of operations to differ materially from expected results. For a discussion of such risks and uncertainties, see Nexity's Annual Report on Form 10-K for the fiscal year ended December 31, 2005, as well as its other filings with the U.S. Securities and Exchange Commission. Nexity assumes no obligation to update any forward-looking statements contained in this document as a result of new information or future events or developments.
| Nexity Financial Corporation | |||||||||||
| Financial Summary (Unaudited) | |||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||
| September 30, | Percent | September 30, | Percent | ||||||||
| Income Statement Data | 2006 | 2005 | Change | 2006 | 2005 | Change | |||||
| Interest income | $15,268,060 | $10,935,126 | 39.6% | $42,493,589 | $28,776,223 | 47.7% | |||||
| Interest expense | 8,548,482 | 5,479,716 | 56.0 | 23,374,618 | 13,995,348 | 67.0 | |||||
| Net interest income | 6,719,578 | 5,455,410 | 23.2 | 19,118,971 | 14,780,875 | 29.3 | |||||
| Provision for loan losses | 420,000 | 545,000 | (22.9) | 1,175,000 | 1,290,000 | (8.9) | |||||
Net interest income after provision for loan losses | 6,299,578 | 4,910,410 | 28.3 | 17,943,971 | 13,490,875 | 33.0 | |||||
| Net gains on sales of securities | 0 | 0 | 0.0 | 250,665 | 468,351 | (46.5) | |||||
| Noninterest income | 377,931 | 359,556 | 5.1 | 1,224,461 | 1,055,268 | 16.0 | |||||
| Noninterest expense | 4,159,487 | 3,540,259 | 17.5 | 12,318,658 | 10,080,834 | 22.2 | |||||
| Income before income taxes | 2,518,022 | 1,729,707 | 45.6 | 7,100,439 | 4,933,660 | 43.9 | |||||
| Applicable income tax expense | 908,984 | 649,234 | 40.0 | 2,620,260 | 1,568,056 | 67.1 | |||||
| Net income | $1,609,038 | $1,080,473 | 48.9% | $4,480,179 | $3,365,604 | 33.1% | |||||
| Reconciliation of Non-GAAP measures to GAAP: | |||||||||||
| Net income | $1,609,038 | $1,080,473 | 48.9% | $4,480,179 | $3,365,604 | 33.1% | |||||
| Non-recurring (income) expense (after-tax) (1) | 0 | 0 | 0.0 | (155,728) | (293,952) | 47.0 | |||||
| Operating income | $1,609,038 | $1,080,473 | 48.9% | $4,324,451 | $3,071,652 | 40.8% | |||||
| Net income per share - basic | $0.19 | $0.15 | 25.0 | $0.52 | $0.48 | 8.8 | |||||
| Net income per share - diluted | $0.18 | $0.14 | 27.7 | $0.49 | $0.44 | 11.0 | |||||
| Operating income per share - basic | $0.19 | $0.15 | 25.0 | $0.51 | $0.44 | 15.0 | |||||
| Operating income per share - diluted | $0.18 | $0.14 | 27.7 | $0.48 | $0.40 | 17.4 | |||||
| Weighted average shares outstanding - basic | 8,383,025 | 7,037,434 | 19.1 | 8,541,260 | 6,979,039 | 22.4 | |||||
| Weighted average shares outstanding - diluted | 8,922,780 | 7,649,393 | 16.6 | 9,096,873 | 7,585,590 | 19.9 | |||||
| Performance Ratios | |||||||||||
(Annualized (a)) | |||||||||||
Return on average assets (a) | 0.79% | 0.61% | 28.9% | 0.75% | 0.68% | 9.7% | |||||
Return on average stockholders' equity (a) | 10.50 | 10.70 | (1.8) | 9.66 | 12.16 | (20.6) | |||||
Net yield on average interest-earning assets (tax equivalent) (a) | 3.32 | 3.15 | 5.5 | 3.25 | 3.06 | 6.2 | |||||
| Efficiency ratio | 58.60 | 60.88 | (3.7) | 60.55 | 63.66 | (4.9) | |||||
| Selected Average Balances | |||||||||||
| (In thousands) | |||||||||||
| Total assets | $811,847 | $702,437 | 15.6% | $797,567 | $657,423 | 21.3% | |||||
| Interest-earning assets | 801,888 | 688,857 | 16.4 | 786,925 | 646,096 | 21.8 | |||||
| Loans-net of unearned income | 544,885 | 470,106 | 15.9 | 533,890 | 423,985 | 25.9 | |||||
| Investment securities | 235,748 | 203,222 | 16.0 | 225,842 | 202,666 | 11.4 | |||||
| Deposits | 625,493 | 533,926 | 17.1 | 608,840 | 498,202 | 22.2 | |||||
| Noninterest-bearing deposits | 6,114 | 4,347 | 40.6 | 4,954 | 4,196 | 18.1 | |||||
| Interest-bearing deposits | 619,379 | 529,579 | 17.0 | 603,886 | 494,006 | 22.2 | |||||
| Interest-bearing liabilities | 734,856 | 650,817 | 12.9 | 722,149 | 610,819 | 18.2 | |||||
| Stockholders' equity | 60,805 | 40,081 | 51.7 | 61,981 | 36,991 | 67.6 | |||||
| (1) Non-recurring income is gains on sales of investment securities. | |||||||||||
| Nexity Financial Corporation | |||||||||||||||||||||||||||||||||||||
| Financial Summary (Unaudited) | |||||||||||||||||||||||||||||||||||||
| Selected Financial Data | |||||||||||||||||||||||||||||||||||||
| at Period-End | |||||||||||||||||||||||||||||||||||||
| (In thousands) | September 30, | Percent | |||||||||||||||||||||||||||||||||||
| 2006 | 2005 | Change | |||||||||||||||||||||||||||||||||||
| Total assets | $853,167 | $734,731 | 16.1% | ||||||||||||||||||||||||||||||||||
| Interest-earning assets | 836,921 | Share
© Business Wire - 2006
Nexity Financial Corporation is bank holding company and financial holding company The Company operates a wholly owned subsidiary bank, Nexity Bank, which is headquartered in Birmingham, Alabama, with additional correspondent banking offices in Atlanta, Georgia; Myrtle Beach and Columbia, South Carolina; Dallas, Texas; Orlando, Florida; Milwaukee, Wisconsin, and Charlotte and Raleigh, North Carolina. Nexity Bank is an Alabama state chartered bank. The Company conducts deposit business in all 50 states in the United States and conduct loan business primarily in the southeastern United States and Texas. As of December 31, 2007, The Company had total loans of $644.9 million and total deposits of $709.2 million.
Sector
Banks
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