NEXITY FINANCIAL CORPORATION 
By Nexity Financial Corporation (NASDAQ: NXTY):
Second Quarter 2007 Highlights:
- Net income per share of $0.13, down from $0.17 last year primarily due to start-up expenses related to new business lines
- Total assets of $923.3 million, up 10.7% from last year's $834.0 million
- Total loans of $629.0 million, up 17.3% from last year and 30.1% annualized from the 1st Quarter
- Total deposits of $693.1 million, up 10.3% from last year's $628.6 million
- Strong credit quality with YTD annualized net charge-offs of 0.03% and nonperforming assets of 0.53% of total assets
Nexity Financial Corporation (NASDAQ: NXTY) today reported second quarter operating income of $1.14 million, or $0.13 per diluted share compared with $1.41 million, or $0.16 per diluted share for the same period in 2006. The decrease in earnings was primarily related to the costs associated with expansion of the investment division and start-up of our wealth management business. The after-tax cost of these initiatives was approximately $325,000, or $0.037 per diluted share which was right in line with our expectation. Operating income, a non-GAAP financial measure, 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. Net income for the second quarter was $1.14 million, or $0.13 per diluted share compared with $1.56 million, or $0.17 per diluted share for the same period in 2006.
?Loan production and growth in loans outstanding was very strong during the second quarter and was sufficient to overcome a high level of construction and commercial real estate loan payoffs,? said Greg Lee, Chairman and CEO of Nexity Financial Corporation. ?Our expansion in the investment division developed nicely during the second quarter and we expect continued progress and increasing revenues during the second half of 2007. We are committed to continuing to invest in people, new markets, and new products and services to provide superior correspondent banking services to community banks.?
Return on average assets and return on average equity were 0.51% and 6.91%, respectively, for the second quarter of 2007 compared with 0.75% and 9.62% during the first quarter in 2007 and 0.78% and 10.26% for the second quarter of 2006.
For the six months ended June 30, 2007, operating income was $2.71 million or $0.31 per diluted share compared to $2.72 million or $0.30 per diluted share during the same period in 2006. For the six months ended June 30, 2007, Nexity's net income was $2.71 million or $0.31 per diluted share compared with $2.87 million, or $0.31 per diluted share for the same period in 2006.
Return on average assets and return on average equity were 0.63% and 8.25%, respectively, for the six months ended June 30, 2007 compared with 0.73% and 9.25% for the same period in 2006.
Total assets grew to $923.3 million at June 30, 2007, up $89.3 million or 10.7% from the $834.0 million reported at June 30, 2006. Total loans were $629.0 million at June 30, 2007, up $92.9 million or 17.3% from the $536.1 million reported at June 30, 2006. Total deposits were $693.1 million at June 30, 2007, up $64.5 million or 10.3% from the $628.6 million reported at June 30, 2006.
Net interest income, the major component of Nexity's income statement was $6.3 million for the second quarter of 2007 up 1.6% from the same period in 2006 and up 15.2% annualized from the first quarter of 2007. The increases were due to growth in average earning assets. Average interest-earning assets increased 8.1% from last year and 13.3% annualized from the first quarter of 2007. The net interest margin was 2.95% compared with 2.97% in the first quarter of 2007 and 3.14% for the same period in 2006. The net interest margin was lower in 2007 primarily due to the increased cost of interest-bearing liabilities and a lower level of noninterest bearing sources of funds. Our target level for the net interest margin is 3.00%. Average earning assets were higher because of strong growth in loans outstanding. Average loans were up $68.4 million or 12.9%. Average loans as a percentage of average earning assets improved from 66.9% during the second quarter of 2006 to 69.8% for the same period in 2007.
The provision for loan losses during the second quarter of 2007 was up $155,000 or 54.4% versus the same period in 2006. The provision for loan losses was higher primarily because of improved loan growth in 2007. Net charge-offs for the second quarter of 2007 were $23,231 or 0.02% of average loans on an annualized basis versus $53,917 or 0.04% for the first quarter of 2007 and $471,170 or 0.36% for the same period in 2006.
Noninterest income for the second quarter of 2007 was $588,697, up $130,699 or 28.5% from the $457,998 reported for the same period in 2006. Noninterest income was up primarily because of an increase in income from cash value life insurance, service charges on deposit accounts and other fee income associated with our clearing and cash management business with correspondent banks. Income from the brokerage and investment services division was flat during the second quarter of 2007 compared with the same period last year. We expect strong improvement for the second half of 2007.
Nexity realized $250,665 in net gains from the sale of investment securities during the second quarter of 2006 versus $0 during the same period in 2007. During the second quarter of 2006, the Corporation had the opportunity to sell its equity position in an illiquid common stock and recorded a gain of $722,505. The Corporation also sold $11.0 million in fixed income debt securities with an average yield of 3.84% at a loss of $471,840. As part of this transaction, the Corporation purchased $12.0 million in fixed income debt securities with an average yield of 5.86%.
Noninterest expense for the second quarter of 2007 was $4.93 million which was up $517,865 or 11.7% from the $4.41 million reported for the first quarter of 2007 and up $750,563 or 18.0% from the $4.18 million reported for the same period in 2006. Noninterest expense was higher primarily due to increases related to the start-up costs of the Midwest and Florida offices and the Wealth Management business. Expenses related to these new initiatives in the second quarter of 2007 were approximately $650,000. We also had a write-down of other real estate totaling approximately $200,000 during the second quarter of 2007.
The efficiency ratio was 71.21% for the second quarter of 2007 which was up from the 65.62% reported for the first quarter of 2007 and the 62.42% reported for the same period in 2006. The efficiency ratio was adversely affected by the incremental overhead growth associated with the Midwest and Florida expansion and the start-up costs related to the Wealth Management business. We expect much improved revenues in the Midwest and Florida offices in the third and fourth quarters and to begin to generate revenue in the Wealth Management business in the fourth quarter. These efforts will have a negative impact on the efficiency ratio in 2007 and we expect this ratio to be between 65% and 68% for the year.
Credit quality continues to be strong as nonperforming loans were $0 or 0.00% of total loans at June 30, 2007 compared with $49,000 or 0.01% of total loans at June 30, 2006. Nonperforming assets were $4.9 million or 0.53% of total assets at June 30, 2007 compared with $1.5 million or 0.19% of total assets at June 30, 2006. Annualized net charge-offs were 0.03% of average loans during the first half of 2007 compared with 0.19% for the same period in 2006. The allowance for loan losses was 1.24% of total loans at June 30, 2007 and 1.25% at June 20, 2006.
Nexity's total risk-based capital, tier 1 risk-based capital, and leverage ratios at June 30, 2007 were 10.93%, 9.94%, and 8.72%, respectively, compared with 12.10%, 11.12%, and 9.44%, respectively, at June 30, 2006. On July 23, 2007, Nexity announced a stock repurchase program to acquire up to 800,000 shares, or approximately 9.9% of the total common shares currently outstanding. Nexity has repurchased 620,000 shares or approximately 7.1% of total common shares outstanding since the beginning of last year under similar programs.
Conference Call / Webcast Information
Nexity Financial Corporation will host a conference call on Tuesday, July 31 at 10:00 AM Eastern Daylight Time (EDT) to discuss the second quarter 2007 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 "Second Quarter 2007 Earnings Release
Conference Call." The Webcast access will be "listen
only".
Webcast URL: http://www.vcall.com/IC/CEPage.asp?ID=118183
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 a $923 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, 2006, 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.
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| Financial Summary (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
| June 30, |
| June 30, |
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| Income Statement Data | 2007 | 2006 | Percent Change | 2007 | 2006 | Percent Change | ||||||||||||||||||||||||||||||||||||||||
| Interest income | $16,265,929 | $14,169,852 | 14.8 | % | $31,637,722 | $27,225,529 | 16.2 | % | ||||||||||||||||||||||||||||||||||||||
| Interest expense | 9,934,285 | 7,935,443 | 25.2 | 19,205,631 | 14,826,136 | 29.5 | ||||||||||||||||||||||||||||||||||||||||
| Net interest income | 6,331,644 | 6,234,409 | 1.6 | 12,432,091 | 12,399,393 | 0.3 | ||||||||||||||||||||||||||||||||||||||||
| Provision for loan losses | 440,000 | 285,000 | 54.4 | 440,000 | 755,000 | (41.7 | ) | |||||||||||||||||||||||||||||||||||||||
Net interest income after provision for loan losses | 5,891,644 | 5,949,409 | (1.0 | ) | 11,992,091 | 11,644,393 | 3.0 | |||||||||||||||||||||||||||||||||||||||
| Net gains on sales of securities | 0 | 250,665 | (100.0 | ) | 0 | 250,665 | (100.0 | ) | ||||||||||||||||||||||||||||||||||||||
| Noninterest income | 588,697 | 457,998 | 28.5 | 1,209,574 | 846,530 | 42.9 | ||||||||||||||||||||||||||||||||||||||||
| Noninterest expense | 4,928,169 | 4,177,607 | 18.0 | 9,338,474 | 8,159,171 | 14.5 | ||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | 1,552,172 | 2,480,465 | (37.4 | ) | 3,863,191 | 4,582,417 | (15.7 | ) | ||||||||||||||||||||||||||||||||||||||
| Applicable income tax expense | 408,566 | 916,276 | (55.4 | ) | 1,153,265 | 1,711,276 | (32.6 | ) | ||||||||||||||||||||||||||||||||||||||
| Net income | $1,143,606 | $1,564,189 | (26.9 | )% | $2,709,926 | $2,871,141 | (5.6 | )% | ||||||||||||||||||||||||||||||||||||||
| Reconciliation of Non-GAAP measures to GAAP: | ||||||||||||||||||||||||||||||||||||||||||||||
| Net income | $1,143,606 | $1,564,189 | (26.9 | )% | $2,709,926 | $2,871,141 | (5.6 | )% | ||||||||||||||||||||||||||||||||||||||
| Non-recurring (income) expense (after-tax) (1) | 0 | (155,728 | ) | (100.0 | ) | 0 | (155,728 | ) | (100.0 | ) | ||||||||||||||||||||||||||||||||||||
| Operating income | $1,143,606 | $1,408,461 | (18.8 | )% | $2,709,926 | $2,715,413 | (0.2 | )% | ||||||||||||||||||||||||||||||||||||||
| Net income per share - basic | $0.14 | $0.18 | (24.9 | )% | $0.32 | $0.33 | (2.4 | )% | ||||||||||||||||||||||||||||||||||||||
| Net income per share - diluted | $0.13 | $0.17 | (24.5 | ) | $0.31 | $0.31 | (2.0 | ) | ||||||||||||||||||||||||||||||||||||||
| Operating income per share - basic | $0.14 | $0.17 | (16.6 | ) | $0.32 | $0.31 | 3.2 | |||||||||||||||||||||||||||||||||||||||
| Operating income per share - diluted | $0.13 | $0.16 | (16.2 | ) | $0.31 | $0.30 | 3.7 | |||||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding - basic | 8,307,779 | 8,529,986 | (2.6 | ) | 8,340,693 | 8,621,688 | (3.3 | ) | ||||||||||||||||||||||||||||||||||||||
| Weighted average shares outstanding - diluted | 8,799,494 | 9,085,301 | (3.1 | ) | 8,843,442 | 9,185,362 | (3.7 | ) | ||||||||||||||||||||||||||||||||||||||
| Performance Ratios | ||||||||||||||||||||||||||||||||||||||||||||||
(Annualized (a)) | ||||||||||||||||||||||||||||||||||||||||||||||
Return on average assets (a) | 0.51 | % | 0.78 | % |
| (34.0 | )% | 0.63 | % | 0.73 | % |
| (14.2 | )% | ||||||||||||||||||||||||||||||||
Return on average stockholders' equity (a) | 6.91 | 10.26 | (32.7 | ) | 8.25 | 9.25 | Share
© Business Wire - 2007
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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