Large-Cap & Mid-Cap Bank Valuation Update
Valuation and Performance Spreadsheets for Large Caps: BAC, BK, BBT, C,
FITB, JPM, KEY, MEL, MI, NCC, NFB, PNC, RF, STI, UBS, USB, WB, WFC
And Mid-Cap Bank Stocks: ASO, ASBC, BXS, CBCF, CBSS, CMA, CNB,
CYN, FNB, FHN, FMER, FULT, HBAN, ONB, SKYF, SNV, SUSQ, TCB, UB, WL, VLY

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Large Cap Banks for 7-31-06
Large Cap Bank News
Citigroup Investment Research Named Most Widely Used Provider     Business Wire 7-13
    Citigroup Investment Research is the most widely used research provider with 79% of respondents utilizing it regularly, which is 11 percent more than Merrill Lynch and UBS, according to a study from the TABB Group, a firm respected for its focus on Financial Markets thought leadership. TABB interviewed 78 firms on all sides of the industry in its survey, from primary consumers (asset and investment management firms) to research producers (independent research providers and brokers/dealers with and without investment banking.) Of those surveyed, approximately 33% of the firms interviewed were based in the U.K. In addition to the TABB results, in the most recent StarMine results, which viewed by some to be the most objective source in tracking the performance of equity analyst recommendations, has recognized Citigroup Investment Research as a global leader for its analysts' recommendations in the U.S., Europe, Emerging Markets and Hong Kong. Citigroup Investment Research is a highly respected research unit and is comprised of more than 300 research analysts in more than 20 locations around the world. Citigroup Investment Research covers approximately 2,800 companies, representing an estimated 90% of the market capitalization of the major global indices.

Bank of America Reports $1.19 Per Share     PRNewswire 7-19
    Bank of America reported that net income in Q2-06 rose 18% to $5.48 billion from $4.66 billion a year earlier. Per-share earnings (diluted) were $1.19, up 4% from $1.14 a year earlier, the previous record quarter on a split-adjusted basis. [Analysts surveyed by Thomson First Call forecast earnings of $1.10] For the first six months of 2006, Bank of America earned $10.46 billion, or $2.25 per share, compared to $9.05 billion, or $2.21 per share on a split-adjusted basis, a year earlier. Return on average common shareholders' equity for Q2 was 17.26% compared to 18.93% in Q2-05. Return on average assets was 1.51% in Q2-06 compared to 1.46% in Q2-05.
    Net interest income on a fully taxable-equivalent basis was $8.93 billion, compared to $7.83 billion the previous year. Besides the addition of MBNA, the increase was driven by loan growth and increases in asset-liability management activity, partially offset by lower core deposit levels and spread compression. The net interest yield increased 5 basis points to 2.85%. Noninterest income was up 38% to $9.60 billion from $6.96 billion. Besides the addition of MBNA, which helped boost card income, these results were driven by continued strength in service fee income and increases in trading account profits, investment banking income and equity investment gains.
    Net charge-offs were $1.02 billion, or 0.65% of average loans and leases. Net charge-offs were $822 million, or 0.54%, in Q1-06 and $880 million, or 0.68%, in Q2-05. Nonperforming assets were $1.64 billion, or 0.25% of total loans, leases and foreclosed properties, as of 6-30-06. This compared to $1.68 billion, or 0.27%, at 3-31-06 and $1.90 billion, or 0.36%, on 6-30*05.

Bank of New York Reports Net Income of $0.59 Per Share     PRNewswire 7-19
    The Bank of New York reported Q2-06 net income of $448 million and diluted earnings per share of 59 cents, compared with net income of $398 million and diluted earnings per share of 52 cents in Q2-05, up 13%, and net income of $422 million and diluted earnings per share of 55 cents in Q1-06. A survey of analysts by Thomson First Call produced a consensus estimate of 56 cents for the quarter. Year-to-date net income was $870 million, or $1.13 of diluted earnings per share, compared to $777 million, or $1.00 of diluted earnings per share in 2005.
    The Company repurchased 10.3 million shares in the second quarter of 2006. Return on average common equity for Q2-06 was 18.17%, compared with 17.12% in Q2-05 and 17.31% in Q1-06. Return on average assets for Q2-06 was 1.63%, compared with 1.59% in Q2-05 and 1.61% in Q1-06.

Citi Q2 Profits Up 8%     Business Wire 7-17
    Citigroup reported net income for Q2-06 of $5.27 billion, or $1.05/share vs. $.97/share in Q2-05. [Aanalysts had expected $1.06.] EPS from Continuing Operations was $1.05 in Q2-06 vs. $0.91 in Q2-05, up 15%. Return on common equity was 18.6%. "In the second quarter, we achieved our second highest income from continuing operations while making significant progress on our strategic initiatives. We added a record number of new consumer branches during the quarter. We also opened corporate and investment banking offices in Kuwait and Dubai. The results from our newly launched Citibank e-savings business have been exceptional, with $4.2 billion of deposits since its launch 3 months ago - approximately two-thirds representing new money to Citibank," said Charles Prince, Chairman and CEO.
    For Citi's U.S. Cards, net income increased 19%. U.S. Consumer Lending, revenues declined, as 21% growth in average loans was offset by net interest margin compression across the loan portfolios. International Cards, revenue growth of 28% was driven by higher purchase sales and average loans, but net income declined due to higher credit costs.

JPMorgan Chase Reports Net Income of $0.99 Per Share     Business Wire 7-19
    JPMorgan Chase reported Q2-06 net income of $3.5 billion [$0.99/share] compared with $1.0 billion [$0.28/share] for Q2-05. The comparison with the prior year benefited from the absence of a litigation reserve charge of $1.2 billion after-tax, or $0.33 per share. Analysts surveyed by Thomson Financial had forecast earnings of 87 cents a share on revenue of $15.3 billion.
    Net revenue was $4.2 billion, up by $1.4 billion, or 52%, from the prior year, and down 11% from the record results in the prior quarter. Investment banking fees of $1.4 billion were a record, up 42% from the prior year, driven by record fees in both equity and debt underwriting. Advisory fees of $352 million were flat compared with strong performance in the prior year. Debt underwriting fees of $652 million were up 30% driven by record bond underwriting fees, partially offset by lower loan syndication fees. Equity underwriting fees of $364 million were up by $260 million, reflecting strong performance across all regions. Fixed Income Markets revenue of $2.0 billion was up 43% due to stronger performance across essentially all products. Equity Markets revenue of $528 million improved from a weak prior-year quarter, reflecting strength in equity commissions. Credit Portfolio revenue of $251 million was down 15%, primarily reflecting lower gains from loan workouts and loan sales.

KeyCorp Reports     Business Wire 7-18
    KeyCorp today announced Q2-06 net income of $308 million, or $0.75 per diluted common share, compared to $291 million, or $0.70 per share, for Q2-05. For Q1-06, net income was $289 million, or $0.70 per diluted common share. Return on average equity was 16.11% for Q2-06, compared to 16.15% for the same period last year and 15.48% for Q1-06. For the first six months of 2006, net income was $597 million, or $1.45 per diluted common share, compared to $555 million, or $1.34 per share, for the first six months of 2005. Return on average equity was 15.80%, compared to 15.63% for the first half of 2005.
    Taxable-equivalent net interest income increased to $752 million for the second quarter of 2006 from $723 million for the same period last year. The positive effect of a 4% increase in average earning assets, due primarily to commercial loan growth, more than offset the effect of a 2 basis point decline in the net interest margin to 3.69%. During the second quarter of 2005, the net interest margin benefited from a principal investing distribution of $15 million received in the form of dividends and interest. This distribution added approximately 8 basis points to the net interest margin for the year-ago quarter. Compared to Q1-06, taxable-equivalent net interest income decreased by $4 million. This reduction was attributable to an 8 basis point decline in the net interest margin, offset in part by a slight increase in average earning assets.
    Key's noninterest income was $547 million for Q2-06, compared to $486 million for Q2-05. The increase reflected net gains of $23 million from principal investing in the current year, compared to net losses of $1 million one year ago, and a $9 million gain recorded in miscellaneous income that resulted from the share redemption by MasterCard Incorporated as part of its initial public offering in May 2006.
    Net loan charge-offs for the quarter totaled $34 million, or 0.21% of average loans, compared to $48 million, or 0.30%, for the same period last year and $39 million, or 0.23%, for the previous quarter. At June 30, 2006, Key's nonperforming loans totaled $279 million and represented 0.41% of period-end loans, compared to 0.45% at June 30, 2005, and 0.44% at March 31, 2006.
    Key repurchased 4,000,000 of its common shares. At June 30, 2006, there were 12,461,248 shares remaining for repurchase under the current authorization.
    During their conference call, Key was asked if their loans in the '30-80 day past due' [the number of which was falling] are moving towards longer periods of deliquency. Key said no. Asked about real estate loans, Key expects growth in mid single didgets. There was 3.6% growth in Q1 and 2% in Q2 - which is its slowest growth in 8 quarters. And some of the slowing is due to actions on Key's part - they are 'tapping breaks in some markets' - like Florida. Residential construction loans were only 15.5% of Key's construction portfolio. Mike Mayo with Prudential noted that Key had increased its guidance for the year [to $2.85-$ 2.95] while at the same time it was sayihng that margins will be lower. What is driving this difference? Key said look at the stats from Q1 and Q2, which show rising EPS while margins shrink. Key also noted that service charges at banks going up. Letter of credit fees are up. Asked about a potential 'merger of equalls' in Key's future, Key replied 'never say never'. There are too many banks. Pricing is more competitive in mid-west than in Key's other markets. Consolidation will happen.

Marshall & Ilsley Second Quarter Profits Up 10.9%     Business Wire 7-17
    Marshall & Ilsley reported Q2-06 net income of $203.7 million, or $0.79 per share, compared to $183.7 million, or $0.79 per share in Q2-05. Q2 net income increased 10.9% over Q2-05. Net income for the six months ended June 30th was $390.5 million, or $1.57 per share, compared to $349.1 million, or $1.50 per share, in the first half of 2005. The results include the effect of the acquisitions of Gold Banc Corporation and Trustcorp Financial, which were both completed on April 1, 2006. As of April 1, 2006, Gold Banc Corporation and Trustcorp Financial had assets of $4.9 billion.
    Earnings for the quarter and the six months ended June 30, 2005, include a $16.2 million after-tax gain, or $0.07 per diluted share, resulting from the sale of a venture capital investment, net of related expenses. Return on average assets based on net income for Q2 was 1.53%, as compared to 1.73% for Q2-05. Return on average equity based on net income was 14.36% this quarter as compared to 17.52% for Q2-05. Without the gain on the sale of the venture capital investment, net of expenses, the return on average assets for Q2-05 would have been 1.58%, and the return on average equity for the same period would have been 15.97%.
    Net charge-offs for the period were $9.9 million, or 0.10% of total average loans and leases outstanding this quarter, and $11.9 million a year ago or 0.15% of total average loans and leases. At June 30, 2006, the allowance for loan and lease losses was 1.03% of total loans and leases, compared to 1.12% a year earlier. Nonperforming loans and leases were 0.49% of total loans and leases at June 30, 2006, and 0.41% at June 30, 2005.
    Interest Spread (net interest margin?) was 2.65% in Q2-06 vs. 2.97% in Q2-05, Net Interest Income was $381.8 million in Q2-06 vs. $321.4 million in Q2-05, up 18.8%. Non-Interest Revenues were $484.4 million in Q2-06 vs. $434.3 million in Q2-05, up 11.5%.

Mellon Reports Second Quarter Continuing EPS Increase of 12% to $.55     PRNewswire 7-19
    Mellon Financial Corporation reported income from continuing operations of $228 million, or 55 cents per share, in Q2-06. This compares to income from continuing operations of $203 million, or 49 cents per share, in Q2-05, and $202 million, or 49 cents per share, in Q1-06. Net income, including discontinued operations, totaled $231 million, or 56 cents per share, in Q2-06, compared with $125 million, or 30 cents per share, in Q2-05, and $207 million, or 50 cents per share, in Q1-06. The second quarter of 2005 included a loss from discontinued operations of $78 million, or 19 cents per share.
    Total fee and other revenue increased $178 million, or 18%, to $1,176 million and represented 91% of total revenue. Excluding the impact of acquisitions, total fee and other revenue increased by 15%. Net interest revenue totaled $122 million, a decrease of $11 million. Net interest margin was 1.73% in Q2-06 compared to 1.95% in Q1-06 and 2.07% in Q2-05.

NCC Reports     PRNweswire Wire 7-18
    National City Corporation reported net income of $473 million, or $.77 per diluted share, for the second quarter of 2006, compared to $459 million, or $.74 per diluted share, for the immediately preceding quarter, and $625 million, or $.97 per diluted share, for the prior year period. For the six months ended June 30, 2006 and 2005, net income was $932 million, or $1.51 per diluted share, and $1.1 billion, or $1.71 per diluted share, respectively. Return on average equity for Q2-05 was 15.08%, 14.91% in Q1-06 and 19.65% in Q2-05. Return on average total equity was 15.10% in Q2-06, 14.92% in Q1-06 and 12.59% in Q2-05.
    Tax-equivalent net interest income was $1.2 billion for Q2-06, down slightly compared with Q1-06, and about equal to Q2-05. Growth in average earning assets was offset by a decline in net interest margin reflecting tighter lending spreads. The net interest margin was 3.73% for Q2-06, compared with 3.81% in the preceding quarter and 3.76% in Q2-05.
    Fees and other income for Q2-06 were $783 million, up $139 million from Q1-06 and down $193 million from Q2-05. Deposit and other banking fees grew to $240 million, a 9% increase compared to the preceding quarter and a 15% increase over the second quarter of last year.
    Second quarter 2006 net charge-offs were $76 million, compared to $121 million in the preceding quarter and $72 million in the second quarter a year ago. Nonperforming assets were $667 million at June 30, 2006, compared to $647 million at March 31, 2006 and $596 million at December 31, 2005.

PNC Reports Net Income of $1.28     PRNewswire 7-18
    The PNC Financial reported net income of $381 million [$1.28/share] for Q2-06, compared with $282 million [.98/share] in Q2-05 and $354 million [$1.19/share] in Q1-06. For the first six months of 2006, PNC earned net income of $735 million [$2.47/share] compared with $636 million [$2.22/share] for the first six months of 2005, an increase of 16% and 11% respectively. Return on average common shareholders' equity was 17.49% for the quarter, compared with 14.34% in Q2-05 and 16.67% in Q1-06.
    Retail Banking earned $185 million for Q2-06, compared with $162 million for Q2-05 and $190 million for Q1-06. Compared with Q2-05, revenue increased 10%, while noninterest expense increased only 4%, driving a 14% increase in earnings. Corporate & Institutional Banking earned $116 million in Q2-06, compared with $144 million in Q2-05 and $105 million in Q1-06. BlackRock earned $63 million in Q2-06, an increase of $10 million, or 19%, compared with Q2-05 and a decrease of $8 million, or 11%, compared with Q1-06. PFPC earned $26 million for the quarter, compared with $24 million in the year-earlier period and $27 million in the linked quarter.
    Taxable-equivalent net interest income totaled $562 million for Q2-06, an increase of 4% compared with $541 million in Q2-05 and essentially unchanged compared with $563 million in Q1-. The net interest margin in Q2-06 was 2.90%, compared with 3.00% in Q2-05 and 2.95% in Q1-06. The increase in net interest income over Q2-05 was largely the result of higher income associated with increased interest-earning assets, partially offset by the higher cost of deposits and borrowings.
    Noninterest income totaled $1.230 billion for Q2-06, a 32% increase compared with $929 million for the same quarter in the prior year, and a 4 percent increase compared with $1.185 billion in the first quarter of 2006. The increase compared with the second quarter of 2005 was due to increases in asset management, equity management, corporate services, trading and consumer services.
    Net charge-offs were $30 million, or .24% of average loans, for the quarter, compared with net recoveries of $38 million in Q2-05 and net charge-offs of $18 million in Q1-06. PNC repurchased 1.8 million common shares during Q2-06.

Regions Reports Record Second Quarter Profits     Business Wire 7-14
    Regions Financial announced that Q2-06 net income was $345 million, or 75 cents per diluted share compared to Q1-06's 64 cents per diluted share and Q2-05's 53 cents per diluted share, including 6 cents of merger-related charges. Thus, per share quarterly earnings rose 17% linked quarter and 27% year-over-year, excluding merger charges. For the first six months of 2006, net income totaled $640 million, or $1.39/share compared to $1.04/share, including 12 cents of merger and other charges, reported in the first six months of 2005. The 20% annual increase, excluding merger and other charges, reflected solid revenue growth and merger-related cost save benefits.
    Taxable equivalent net interest income rose $25 million, or an annualized 13% linked quarter, reflecting a higher net interest margin (4.24%) and an additional business day in the second quarter. The year-over-year quarterly increase was 10%, driven by 39 basis point margin expansion and modest balance sheet growth.
    Credit quality was excellent in the second quarter. Non-performing assets declined 22 percent linked quarter, or $89 million, to $320 million at June 30, 2006 - 0.54% of loans and foreclosed real estate. This compares to $456 million (0.78% of loans and foreclosed real estate) at June 30, 2005. Loans greater than 90 days past due also improved, dropping $15 million, or 16%, first-to-second quarter.
    During Q2, Regions repurchased 3.6 million shares at an average cost of $35.08/share. Year-to-date June 30, buybacks totaled 7.3 million shares, leaving up to an additional 20.3 million common shares that can be repurchased under the company's current authorization. Regions remained well capitalized. Tangible stockholders' equity-to-tangible assets was 6.69% at June 30, 2006 - down slightly from March 31's 6.77%.

SunTrust Reports     PRNewswire 7-19
    SunTrust Banks reported record net income for Q2-06 of $544.0 million, up 17% from $465.7 million in the second quarter of 2005. Net income per diluted share was also a record $1.49, up 16% from $1.28 in Q2-05. Excluding merger expense incurred in Q2-05, net income and net income per diluted share were both up 9%.
    Fully taxable-equivalent net interest income was $1,190.0 million in Q2-06, up 4% from Q2-05. The primary factor driving income growth year- over-year was strong loan growth. Loans grew 12% on average from Q2-05. Net interest income decreased 3% from Q1-06 as a result of a decrease in loans held for sale and the associated spread as well as the continued shift in deposit mix away from lower cost deposit products to certificates of deposit. The net interest margin of 3.00% for Q2-06 was down 12 basis points from Q1-06, attributable to the continued shift in deposit mix towards higher cost products and the negative impact the flatter yield curve has had on the spread between incremental earning asset growth and the cost of funding the growth.
    Total noninterest income was $875.4 million for Q2-06, up 14% from Q2-05. A significant portion of the increase resulted from growth in mortgage-related income. On a sequential annualized basis, noninterest income increased 11% in Q2-06 from Q1-06.
    Annualized net charge-offs in Q2-06 were 0.10% of average loans, up from the cyclical low of 0.08% reached in Q1-06 and down from 0.13% in Q2-05. Net charge-offs were $29.1 million in Q2-06 compared to $22.3 million in Q1-06 and $35.4 million in Q2-05. Nonperforming assets were up $35.5 million, or 11%, in Q2-06 compared to Q1-06, but were down $10.5 million, or 3%, from Q2-05. The increase from Q1-06 was mainly driven by increases in commercial and residential real estate nonperforming loans. Nonperforming assets were $369.8 million, or 0.31% of loans, other real estate owned and other repossessed assets as of 6-30-06 compared to $334.3 million, or 0.28% of loans, other real estate owned and other repossessed assets as of 3-31-06.

U.S. Bancorp Reports     Business Wire 7-18
    U.S. Bancorp reported net income of $1,201 million for Q2-06, compared with $1,121 million for Q2-05. Net income of $.66 per diluted common share in Q2-06 was higher than the same period of 2005 by 10.0%, or $.06 per diluted common share. Return on average assets and return on average common equity were 2.27% and 24.3%, respectively, for Q2-06, compared with returns of 2.23% and 22.7%, respectively, for Q2-05. We achieved industry-leading performance metrics of return on assets of 2.27% and return on average common equity of 24.3%. We recorded exceptional growth in fee revenue, and that growth, coupled with controlled expenses, led to a tangible efficiency ratio for the quarter of 41.8%.
    Second quarter net interest income on a taxable-equivalent basis was $1,697 million, compared with $1,761 million recorded in Q2-05. Average earning assets for the period increased over Q2-05 by $8.2 billion (4.6%), primarily driven by a $3.7 billion (21.3%) increase in residential mortgages, a $2.6 billion (6.0%) increase in total commercial loans, a $2.2 billion (4.9%) increase in total retail loans and a $1.2 billion (4.4%) increase in total commercial real estate loans. This was partially offset by a $2.3 billion (5.3%) decrease in investment securities. The positive impact to net interest income from the growth in earning assets was more than offset by a lower net interest margin. The net interest margin in Q2-06 was 3.68%, compared with 3.99% in Q2-05. The decline in the net interest margin reflected the competitive lending environment during 2005, asset/liability management decisions and the impact of changes in the yield curve from a year ago. Since Q2-05, credit spreads have tightened by approximately 23 basis points across most lending products due to competitive pricing and a change in mix due to growth in lower-spread, fixed-rate credit products.
    Second quarter noninterest income was $1,755 million, an increase of $214 million (13.9%) from the same quarter of 2005 and $141 million (8.7%) higher than Q1-06. The increase in noninterest income over Q2-05 was driven by favorable variances in the majority of fee income categories and the impact of the MasterCard IPO gain included in other income.

Wells Fargo Reports     Business Wire 7-18
    Wells Fargo for q2-06 reported net income of $2.09 billion, up 9% from prior year's $1.91 billion, up 14% (annualized) from Q1-06 and record diluted earnings per share of $1.23, up 10% from Q2-05's $1.12, up 13% (annualized) from Q1-06. For the first half of 2006, diluted earnings per share were a record $2.42 and net income was a record $4.11 billion, up 10% and 9%, respectively, from the first half of 2005.
    Net interest income increased 10% from a year ago and 9% (annualized) on a linked-quarter basis. Solid growth in net interest income again was driven by continued growth in high-quality earning assets and solid core deposit growth. WFC sold $26 billion of ARMs this quarter. "In addition, taking advantage of market volatility during the quarter, we sold our lowest-yielding debt securities and, for the first time, significantly added to our portfolio of long-term debt securities at yields of approximately 6.25% -- nearly 200 basis points higher than the cyclical low in yields. While the ARM sales program and continued solid growth in core deposits -- particularly double-digit growth in low-cost checking accounts -- positively impacted the net interest margin in the second quarter, our even higher growth in earning assets -- including the securities purchased in the quarter -- accounted for all of the 9 basis point linked-quarter decline in our net interest margin. Our second quarter net interest margin of 4.76% remained one of the highest in banking" said Senior EVP and Chief Financial Officer Howard Atkins.
    Noninterest income increased 14% from Q2-05 and 13% (annualized) on a linked-quarter basis. This double-digit growth reflected strong year-over-year growth in deposit service charges (up 6%); trust and investment fees (up 13%); debit and credit card fees (up 16 percent); and other fees, largely loan-related (up 7%).
    Net charge-offs for Q2-06 were $432 million (.58% of average loans outstanding, annualized), compared with $433 million (.56%) in Q1-06 and $454 million (.62%) in Q2-05. Total nonperforming assets were $1.92 billion (.64% of total loans) at June 30, 2006, compared with $1.85 billion (.60%) at March 31, 2006 and $1.39 billion (.46%) at June 30, 2005.

June-July Ratings Changes      On 7-28 AG Edwards Downgraded PNC from Buy to Hold. On 6-16 Brean Murray Initiated coverage of WFC at Strong Buy, Brean Murray Initiated coverage of WB at Strong Buy, and Brean Murray Initiated coverage of BAC at Strong Buy.

High-Yield Mid-Cap Banks 7-31-06
Mid-Cap Bank News
City National to Buy Back More Stock     BusinessWire 7-06
    City National's board authorized the company to repurchase an additional 1.5 million shares, subject to market conditions. The company has nearly completed the 1.5-million-share buyback program announced on April 26. "Over the past 11 years, City National has repurchased more than 12 million shares of its stock," said President and Chief Executive Officer Russell Goldsmith. "This longstanding share repurchase commitment, coupled with a cash dividend that has increased 530 percent since 1995, reflects the company's strong commitment to effective capital management and growing shareholder value."

As Customers Chase Better Yields, Firms Expect a Profit Squeeze     Robin Sidel & Clint Riley, WSJ 7-10
    A growing number of Americans are transferring their money into high-yielding bank accounts, a trend that is taking its toll on the nation's regional banks. As financial institutions gear up for quarterly earnings reports this month, a number of them have warned investors that results will be hurt by rising rates. And part of the blame is being placed on consumers and businesses who are moving funds from traditional low-interest-bearing accounts to savings accounts, certificates of deposit and other bank products that are sporting annual rates of more than 5%. This is putting the banks in a pickle because they must either raise rates to stay competitive or watch their customers flee to rivals.
    That is the case at California's City National bank which last month lowered its forecast for 2006 earnings growth to between 1% and 4% from its previous expectation of 8% to 10%. "Responding to a steady rise in short-term interest rates over the past two years, some of City National's business clients have shifted funds from core deposit accounts into higher-yielding accounts and instruments," the bank said in a SEC filing. The company's stock tumbled 11% on the news and pressured shares of other California banks.
    The trend is contributing to a tricky time for regional banks, which often don't have a steady stream of fee-based products that can help offset the impact of rising rates. The recent deposit trends are adding more pressure to net interest margins. Net-interest margins have been squeezed for much of the year by the flat yield curve. "With the curve remaining flat, we expect managements' tone to be cautious as the rate cycle could extend past most expectations," wrote John McDonald, an analyst at Banc of America Securities, in a June 30 report.
    In recent weeks, other regional banks also have warned that the financial results are being squeezed. Among them: National City Corp. of Cleveland; Fifth Third Bancorp, which is based in Cincinnati; and New Jersey's Commerce Bancorp. The warnings have prompted analysts to reduce their expectations for other regional banks that haven't yet sounded the alarm.
    "As we get closer to second-quarter earnings season, it seems clear that the current operating environment is continuing to take a toll on bank earnings," wrote Robert Hughes, an analyst at Keefe, Bruyette & Woods, in an earnings outlook issued late last month.

Associated [ASO] Earns $0.53/Share     BusinessWire 7-20
    AmSouth Bancorporation reported earnings for the second quarter ended June 30, 2006, of $.53 per diluted share, compared to $.52 per diluted share reported for the second quarter of 2005. Return on average assets was 1.39% in Q2-06 compared to 1.39% in Q1-06 and 1.40% in Q4-05. Return on average shareholders' equity was 20.59% in Q2-06 compared to 20.52% in Q1-06 and 20.36% in Q4-05.
    Net interest income in Q2 grew to $402.8 million, or an annual rate of 6.4% compared with the second quarter of 2005, and the net interest margin was 3.39% compared to 3.42% in Q1-06 and 3.37% in Q4-05. Contributing to the higher level of net interest income, loan growth continued at a healthy 10.9 percent pace compared to the second quarter of 2005 and was led by growth in Commercial Real Estate, small business lending, and equity lending. Total deposits grew $2.2 billion during the same period.
    Noninterest revenue, which includes earnings from service charges, trust, investment services, interchange, and other sources of fee income, was $231.4 million for the quarter, increasing at an annual rate of 21.3% compared with the prior quarter. Noninterest expenses in the second quarter were $339.6 million, which includes $7.2 million in stock based compensation expense not recorded in prior quarters.
    Total nonperforming assets at June 30, 2006, were $109.4 million, or 0.29% of loans net of unearned income, foreclosed properties and repossessions, compared to $100.3 million, or 0.27%, in the previous quarter. Credit quality remained strong, with net charge-offs of $17.2 million or 0.19% of average net loans in the second quarter, a decrease of 2 basis points compared with the second quarter of 2005.

Associated [ASBC] Earns $0.63/Share, Up 11%     BusinessWire 7-20
    Associated Banc-Corp earned $.63/share in Q2-06, up 11% from $.57/share for Q2-05. For the six months that ended June 30, 2006, diluted earnings per share were $1.23, up 6% from $1.16 per diluted share for the comparable period in 2005. Net income for Q2-06 was $83.5 million, up 13% compared to $74.0 million in Q2-05. For the year to date, net income was $165.3 million for 2006, up 9% over $151.5 million for the comparable six months of 2005. Book value per share rose to $17.20 as of June 30, 2006, up 9% compared to a year earlier. Return on average assets was 1.58%, up from 1.44% for Q2-05. Return on average equity grew to 14.86% for Q2-05, versus 14.62% for Q2-05.
    Net Interest Income in Q2-06 was $168,399 million compared to $166,674 million in Q2-05, an increase of 1.0%. Total interest income rose 21.3%, while interest expense rose 55.6%. Associated's net interest margin for Q2-06 was 3.59%, compared to 3.48% for Q1-06 and 3.63% for Q2-05.
    Core fee-based revenues including trust service fees, service charges on deposits, card-based and other non-deposit fees, and retail commissions totaled $59.7 million for Q2-06, up 8% over both Q1-06 and Q2-05. Net mortgage banking income was $5.8 million for Q2-06, up from $4.4 million in Q1-06, and $2.4 million for Q2-05. All other noninterest income sources combined totaled $11.7 million for Q2-06, an increase of $.5 million [5%] over the previous quarter, and up $7.7 million over Q2-05.
    Net charge-offs represented 0.11% of average loans, compared to 0.08% for the comparable first half of 2005. Nonperforming loans declined to $103 million, representing 0.67%t of total loans, compared to $110 million (or 0.71% of loans) at March 31, 2006, and $113 million (or 0.80%) at June 30, 2005.
    Average return on Assets: [1] Commercial $9,605.422 million at an average yiled of 7.35% [2] Residential mortgage 2,811.824 million at an average yiled of 5.79% [3] Retail 3,098.543 million at an average yiled of 7.76% [4] Total loans 15,515.789 million at an average yiled of 7.15% [5] Investments and other 3,826.839 million at an average yiled of 5.08% -- Total earning assets 19,342.628 million at an average yiled of 6.74%

BancorpSouth [BXS] Reports Net Income of $0.45     PRNewsWire 7-20
    BancorpSouth's net income increased 37.6% for Q2-06 to $35.5 million from $25.8 million for Q2-05. Net income per diluted share for Q2-06 increased 36.4% to $0.45 from $0.33 for Q2-05. Return on average assets was 1.21% in Q2-06 compared to 0.96% in Q2-05. Return on common equity was 14.32% in Q2-06 compared to 11.19% in Q2-05. Book value per share at the end of Q2-06 was $12.76 compared to $11.96 at the end of Q2-05.
    Interest revenue for Q2-06 increased 23.0%, or $31.3 million, to $167.4 million from $136.0 million for Q2-05 and 4.7% from $159.9 million for Q1-06. Interest expense increased 45.2%, or $21.8 million, to $70.2 million for Q2-06 from $48.3 million for Q2-05 and 9.7% from $64.0 million for Q1-06. The average taxable equivalent yield on earning assets increased to 6.39% for Q2-06 from 5.63% for Q2-05 and 6.16% for Q1-06. The average rate paid on interest bearing liabilities was 3.17% for Q2-06, compared with 2.34% for Q2-05 and 2.91% for Q1-06. Net interest revenue increased 10.8% to $97.2 million for Q2-06 from $87.7 million for Q2-05 and 1.3% from $95.9 million for Q1-06. Net interest margin was 3.75% for Q2-06 compared with 3.66% for Q2-05 and 3.73% for Q1-06.
    Noninterest revenue increased 24.6% to $53.6 million for Q2-06 from $43.0 million for Q2-05. These results include the impact of a $6.5 million net increase in mortgage revenue related to changes in the value of BancorpSouth's mortgage servicing asset for Q2-06 compared with Q2-05. Excluding this increase, noninterest revenue expanded 8.2% for the second quarter, primarily attributable to the 13.8% growth in insurance commissions.
    Annualized net charge-offs were 0.18 percent of average loans and leases for the second quarter of 2006 compared with 0.26% for Q2-05 and 0.09% for Q1-06. Non-performing loans and leases increased 2.7% to $24.4 million, or 0.32% of loans and leases, at June 30, 2006, from $23.7 million, or 0.34% of loans and leases, at June 30, 2005, and declined 6.2% from $26.0 million, or 0.35% of loans and leases, at March 31, 2006.
    Average return on Assets: [1] Loans, loans held for sale, and leases net of unearned income $7,034.782 million with an average yield of 6.33% [2] Held-to-maturity securities: Taxable $1,072.562 million with an average yield of 3.53% [3] Tax-exempt $137.503 million with an average yield of 6.99% [4] Available-for-sale securities: Taxable $1,444.327 million with an average yield of 3.54% [5] Tax-exempt $131.287 million with an average yield of 7.01% [6] Short-term investments $38.216 million with an average yield of 3.54% - Total interest earning assets and revenue %9,858.677 million with an average yield of 5.63%

Citizens [CBCF] Reports Net Income of $49. Per Share    PRNewswire 7-20
    Citizens Banking Corporation announced net income of $20.9 million for the three months ended June 30, 2006. This represents an increase of $0.1 million or 0.7% over the first quarter of 2006 net income of $20.8 million and represents an increase of $0.3 million or 1.7% over the second quarter of 2005 net income of $20.6 million. Diluted net income per share was $0.49, an increase of 2.1% compared with $0.48 for Q1-06, and an increase of 4.3% over the $0.47 for Q2-05. Annualized returns on average assets and average equity during Q2-06 were 1.09% and 12.96%, respectively, compared with 1.10% and 12.86% for Q1-06 and 1.06% and 12.62% for Q2-05.
    Net interest income was $66.0 million in the second quarter of 2006 compared with $67.5 million in the first quarter of 2006 and $68.8 million in the second quarter of 2005. The decrease in net interest income compared with the first quarter of 2006 was driven by the decline in net interest margin, partially offset by an increase in average earning assets of $31.9 million. Net interest margin was 3.84% for Q2-06 compared with 3.97% for Q1-06 and 3.92% for Q2-05. The decreases from both prior periods were due to funds migrating within the deposit portfolio from lower cost savings and transaction accounts to higher cost savings and time deposits, the repricing of $120.0 million of low-cost wholesale funding in the second quarter of 2006, and continued pricing pressure on loans.
    Noninterest income for the second quarter of 2006 was $23.7 million, a decrease of $1.8 million or 7.1% from the first quarter of 2006 and an increase of $0.6 million or 2.6% from the second quarter of 2005. Noninterest expense for the second quarter of 2006 was $60.1 million, a decrease of $1.5 million or 2.5% from Q1-06 and a decrease of $0.9 million or 1.5% from Q2-05.
    Nonperforming assets totaled $34.8 million at June 30, 2006, a decrease of $1.7 million or 4.7% compared with March 31, 2006 and a decrease of $14.3 million or 29.1% compared with June 30, 2005. Nonperforming assets at June 30, 2006 represented 0.61% of total loans plus other repossessed assets acquired compared with 0.65% at March 31, 2006 and 0.89% at June 30, 2005.

Compass Bancshares [CBSS] Reports Record Second Quarter EPS of $0.88     BusinessWire 7-18
    Compass Bancshares reported record earnings of $223.3 million for the first six months of 2006, a 12% increase over the $199 million earned during the first six months of 2005. Earnings for Q2-06 increased 9% to $115.4 million compared to $106 million earned during Q2-05. Earnings per share for Q2-06 increased 6% to $0.88 from $0.83 in Q2-05. Return on average assets and return on average shareholders' equity for Q2-06 were 1.40% and 17.75%, respectively. Book value/share was $20.15 at the end of Q2-06 compared to $17.61 at the end of Q2-05.
    Net interest income was $287.682 million in Q2-06 compared to $236.470 million in Q2-05. It increased 22% from year ago levels driven by solid loan growth and continued low-cost deposit generation. Net interest margin increased to 3.80% in Q2-06 from 3.55% in Q2-05, 3.58% in Q3-05, 3.59% in Q4-05, 3.70% in Q1-06. Non-interest income was $181.417 million in Q2-06 compared to $169.654 million in Q2-06, up 7%.
    Net charge-offs as a percentage of average loans decreased to 0.28% compared to 0.40% in Q2-05. Nonperforming assets as a percentage of loans and other real estate decreased to 0.28% compared to 0.34% at the end of the second quarter of 2005.
    Average return on Assets: [1] Loans $23,825.717 million with an average yield of 7.30% [2] Investment securities held to maturity 2,186.628 million with an average yield of 4.88% [3] Investment securities available for sale 4,392.836 million with an average yield of 4.71% [4] Other earning assets 82.395 million with an average yield of 5.10% -- Total earning assets (a) 30,487.576 million with an average yield of 6.75%
    Average cost on Funds: [1] Interest bearing transaction accounts $ 8,974.393 million with an average yield of 2.07% [2] Time deposits 3,421.489 million with an average yield of 4.44% [3] Certificates of deposit 3,740.929 million with an average yield of 4.53% [4] Federal funds purchased and securities sold under agreement to repurchase 2,917.273 million with an average yield of 4.89% [5] Other short-term borrowings 878.471 million with an average yield of 4.91% [6] FHLB and other borrowings 3,883.337 million with an average yield of 5.27% -- Total interest bearing liabilities (a) 23,815.892 million with an average yield of 3.77%

Comerica [CMA] Reports EPS of $1.22     PRNewsWire 7-20
    CMA reported Q2-06 earnings of $200 million [$1.22/share], compared to $194 million [$1.18/share] for Q1-06 and $217 million [$1.28/share] for the Q2-05. Total revenue increased $33 million [5%] over Q1-06, and $25 million [4%] over Q2-05. Return on average common shareholders' equity was 15.50% in Q2 compared to 15.33% in Q1 and 16.99% in Q2-05.
    Net interest income was $502 million for Q2-06, compared to $479 million for Q1-06 and $483 million for Q2-05. The $23 million increase in net interest income from Q1-06 level resulted principally from earning asset growth and the impact of one more day ($5 million) in Q2-06. Average earning assets of $52.4 billion for Q2-06 increased $1.4 billion from Q1-06, primarily the result of a $1.3 billion increase in average loans to $47.8 billion for Q2-06. Average Financial Services Division loans (primarily low-rate) declined $352 million. Average deposits of $42.0 billion for Q2-06 increased $823 million from Q1-06. Total average noninterest-bearing deposits of $13.6 billion remained consistent with Q1-06 levels. Average Financial Services Division noninterest-bearing deposits increased $110 million to $4.8 billion in Q2-06, compared to Q1-06.
    The net interest margin was 3.83% in Q2-06, compared to 3.80% in Q1-06 and 4.09% in Q2-05. When compared to Q1-06, Q2-06 net interest margin was positively impacted by lower average Financial Services Division loans (primarily low-rate) and a higher benefit from noninterest-bearing sources of funds, partially offset by competitive loan pricing and the margin impact of loan growth in excess of deposit growth.
    Noninterest income was $225 million for Q2-06, compared to $215 million for Q1-06 and $219 million for Q2-05. Most categories of noninterest income were stable in Q2-06, with increases generated from investment advisory revenue and card fees.
    Net loan charge-offs were at 15 basis points for the first six months of 2006, down from 31 basis points in the same period in 2005. Nonperforming assets were down 29% to $174 million at June 30, 2006, compared to $246 million at June 30, 2005.

Colonial BancGroup's [CNB] Q2-06 Earnings Grow To $0.43/Share     BusinessWire 7-19
    Colonial BancGroup announced today that CNB had record earnings for Q2-06 of $0.43 per diluted share, a 5% increase over the $0.41/share forQ2-05r. Net income for the quarter was a record $67 million, a 7% increase over the $62 million reported in Q2-05. Book value/ share was $12.69 in Q2-06 compared to $12.39 in Q2-05.
    Colonial's net interest income for Q2-05 was $192,087 million in Q2-05 compared to $174,435, an increase of 10%. "The increase in net interest income is the result of strong growth in loans and in assets of the mortgage warehouse lending division which were funded by outstanding deposit growth," said CNB's CEO and President, Robert Lowder. Net interest margin was 3.81% in Q2-06 compared to 3.72% in Q2-05. Total noninterest income for Q2-06 was $44.873 million compared to $60.597 million in Q2-05, a decrease of -26%. During Q2-05, CNB had atypical gains on $8 miolion on derivitives and $9 million on the sale of some branches.

City National's [CYN] Q2-06 Earnings Grow To $1.16/Share     BusinessWire 7-19
    City National reported Q2-06 net income of $58.7 million [$1.16/share] up from $57.7 million [$1.13/share] for Q2-05. Year to date, City National has earned $116 million [$2.28/share] on revenue of $419.9 million. In the first half of 2005, CYN earned net income of $113.2 million [$2.22/share] on revenue of $397.8 million. Year to date, City National has earned $116 million, or $2.28 per share, on revenue of $419.9 million. In the first half of 2005, the company earned net income of $113.2 million, or $2.22 per share, on revenue of $397.8 million. Return on average assets was 1.59% in Q2-06 compared to 1.65% in Q2-05. Return on average shareholders' equity was 16.20% in Q2-06 compared to 17.03% in Q2-05 and year to date it is 15.94% compared to 16.83% in 2005. Book value/share was $29.26 at the end of Q2-06 compared to $28.51 at the end of Q2-05.
    Fully taxable-equivalent net interest income reached $157.5 million in Q2-06, up 3%t from $152.7 million for Q2-05. Fully taxable-equivalent net interest income in the first quarter of 2006 was $155.5 million. City National's yield on earning assets reached 6.19%, up from 5.50% in the Q2-05. At June 30, 2006, the bank's prime rate was 8.25 percent, 200 basis points higher than it was at the same time last year. Average noninterest-bearing deposits fell 3% from Q2-05 but increased 1% from Q1-06. Time deposits, including certificates of deposit, were significantly higher. Total interest expense grew 112% from Q2-05 and 14% from Q1-06. CYN's Q2 net interest margin was 4.65%, compared with 4.73% during Q2-05 and 4.62% in Q1-06. Q2-06 noninterest income was $58.6 million, 14% higher than Q2-05, due primarily to the continuing growth of City National's wealth management and international services fee revenue.
    Average return on Assets: [1]Commercial loans $3,968 million at an average yiled of 6.84% [2] real estate mortgages 1,909 million at an average yiled of 7.60% [3] Residential mortgages 2,737 million at an average yiled of 5.31% [4] Real estate construction 743 million at an average yiled of 9.14% [5] Equity lines of credit 352 million at an average yiled of 7.63% [6] Installment 195 million at an average yiled of 7.72% - Total loans 9,903 million at an average yield of 6.79

FNB Reports Q2 Net Income Falls to $0.28/Share     PRNewswire 7-18
    FNB reported Q2-06 net income of $16.6 million, or $.28/share. These results compare to $15.8 million, or $.27/share, for Q1-06 and $17.5 million, or $.31/share, for Q2-05. FNB's return on equity for the second quarter of 2006 was 13.4%, its return on tangible equity was 26.6% and its return on assets was 1.15%.
    Fully tax equivalent net interest income for the Q2-06 was up 1.9% on a sequential quarter basis but 1.3% below the same period last year. Average loans were up 4.9% on a linked quarter basis. In spite of a flat yield curve, the yield on earning assets was up 18 basis points compared to the previous quarter. Offsetting the increase in interest income was a 29 basis-point increase in the cost of funds reflecting competitive pricing pressures and a change in the mix of deposits due to customer preferences. The net interest margin for the second quarter was 3.73%, a decrease of 9 basis points from the first quarter of 2006.
    Non-interest income for Q2-06 totaled $20.8 million, representing an increase of 3.4% compared to the prior quarter and 10.6% versus the same period last year. Service charges on loans and deposits were up $464 thousand, or 4.6%, on a linked quarter basis reflecting cyclical trends. Insurance commissions were down $861 thousand from the previous quarter due to a reduction in contingent fees, which are primarily earned in the first quarter of each year. Retail securities commissions and fees grew $361 thousand, or 38.1%, in the second quarter of 2006 versus the first quarter of 2006 as alternative investments became more attractive to our customers. In addition, the Corporation realized an $894 thousand gain on the settlement of an impaired loan acquired in a previous merger.
    Annualized net charge-offs for the second quarter of 2006 improved to 27 basis points of average loans, compared to 56 basis points for the second quarter of 2005 and 37 basis points in the first quarter of 2006. Non-performing loans to total loans were 74 basis points for the second quarter of 2006, representing improvements from 81 basis points in both the second quarter last year and on a sequential quarter basis.

First Horizon National [FHN] Reports $0.82     PrimeZone 7-19
     First Horizon National Corporation announced Q2-06 earnings of $104.3 million [$.82/share]. In Q2-05 earnings were $100.1 million [$.77/share]. Return on average shareholders' equity and return on average assets were 17.4% and 1.09%, respectively, for Q2-06 and 18.8% and 1.11% for Q2-05.
    Net interest income increased 9% to $230.7 million in Q2-06 from $211.4 million in Q2-05 as earning assets grew 11%, or $2.1 billion. Loans grew 19% or $3.4 billion while loans held for sale decreased 72% or $1.3 billion and deposits increased 11% or $1.2 billion over Q2-05. The Retail/Commercial Banking net interest margin was 4.27% in Q2-06 compared to 4.25% in Q1-06 and 4.34% in Q2-05. The consolidated net interest margin was 3.00% for Q2-06 compared to 3.06% for Q2-05. This compression in the margin occurred as the net interest spread decreased to 2.34 percent in 2006 from 2.66 percent in 2005 while the benefit from free funding increased to 66 basis points from 40 basis points. The decline in margin is attributable to a flatter yield curve which decreased spread on the warehouse by 122 basis points to 1.44%, creating a negative impact of 13 basis points on the overall corporate margin this quarter as compared to a year ago.
    Noninterest income increased 12% to $111.8 million in Q2-06 from $99.8 million in Q2-05. In Q2-05, noninterest income was reduced by $5.2 million resulting from a write-off of the net capitalized expenses on HELOC. Fees from deposit transactions and cash management increased 8% or $3.3 million compared to Q2-05 due to deposit growth and pricing initiatives. Revenue from loan sales and securitizations increased 18% or $2.0 million in Q2-06 compared to Q2-05.
    The net charge-off ratio increased to 26 basis points in Q2-06 from 23 basis points in 2005 as net charge-offs grew to $13.8 million from $10.3 million during a period of strong loan growth. Nonperforming assets ratio only increased to 45 basis points in second quarter 2006 from 36 basis points last year.

FirstMerit [FMER] Reports Q2-06 Net Income Falls to $0.35/Share     PRNewswire 7-20
     FirstMerit Corporation announced Q2-06 net income of $27.7 million, or $0.35/share, compared with $36.1 million [$0.43/share] for Q2-05. For the first six months of 2006, the Company reported net income of $57.6 million, or $0.72 per diluted share, compared with $66.2 million, or $0.79 per diluted share, for the first six months of 2005. Returns on average common equity and average assets were 12.75% and 1.10% in Q2-06, compared with 15.07% and 1.40% for Q2-05. Book value/common share was $10.88 in Q2-06 compared to $10.91 in Q1-06 and $11.39 in Q4-05.
    Total revenue, defined as net interest income on a fully tax-equivalent ("FTE") basis plus noninterest income net of securities transactions, totaled $138.5 million for the second quarter 2006, compared with $138.6 million reported in the second quarter 2005. FTE net interest income was $86.4 million for Q2-06, a decline of $2.1 million, or 2.32%, compared with the year-ago quarter. During the quarter the net interest margin expanded 4 basis points to 3.78%, compared with Q2-05.
    FMER expanded its net interest margin by taking advantage of opportunities within its flexibly structured investment portfolio. For Q2-06, average investment securities accounted for 23.80% of average assets, compared with 27.44% for Q2-05. The $441.6 million, or 15.58%, reduction in the securities portfolio supported a $300.0 million, or 15.92%, reduction of average borrowed funds, along with $129.3 million, or 1.96%, growth in the average loan portfolio.
    Noninterest income excluding securities transactions totaled $52.1 million for Q2-06, compared with $50.1 million for Q2-05, an increase of $2.0 million [3.90%]. Credit card fees increased $1.0 million [9.08%] and service charges increased $0.2 million [1.18%]. Compared with Q1-06, credit card fees increased $0.8 million [7.56%], and deposit service charges rose $1.9 million [12.10%].
    Net charge-offs totaled $13.0 million in Q2-06, compared with $10.3 million for Q2-05, or 0.78% and 0.62% of average loans, respectively. FMER's longer term trend of improving charge-off levels was interrupted by costs related to a credit relationship that accounted for $6.6 million of the quarter's total net charge-offs. FMER expects to return to its trend of lower charge-off levels for the balance of 2006. As of 6-30-06, nonperforming assets were $58.8 million, or 0.86%, of period-end loans plus other real estate, compared with $54.0 million, or 0.82%, at 6-30-05. Nonperforming assets declined $14.2 million, or 19.41%, from 3-31-06.

Fulton [FULT] Reports Q2-06 Earnings Rises to $0.27/Share     PRNewswire 7-20
     Fulton Financial Corporation earned $46.7 million for Q2-06, a 12.3% increase over Q2-05. Diluted net income per share for the quarter increased to 27 cents, an 8.0% increase over the 25 cents reported in Q2-05. Diluted net income per share for the first six months of 2006 increased to 52 cents, a 4.0% increase over the 50 cents reported in 2005. Book value was $8.31 in Q2-06 compared to $7.45 in q2-05, a rise of 11.5%. Return on average assets was 1.32% in Q2-05 compared to 1.46% in Q2-05. Return on average equity was 13.01% in Q2-06 compared to 13.90% in Q2-05.
    Net interest income for Q2-06 increased $22.9 million, or 22.9%, compared to Q2-05, with approximately $18.4 million attributable to the Columbia and Somerset acquisitions. The increase from Q1-06 was $7.8 million, or 6.8%, with approximately $5.4 million resulting from Columbia. Fulton's net interest margin was 3.90% for Q2-06, 3.88% for Q1-06 and 3.92% for Q2-05.
    Other income, excluding investment securities gains, decreased $2.3 million, or 6.2%, in Q2-06 compared to Q2-05. Columbia and Somerset contributed $1.7 million to other income. The remaining $4.0 million net decrease resulted from $2.2 million in non-recurring gains on the sale of deposits in 2005 and decreases in fee income and gains on mortgage loan sales. Compared to Q1-06, other income increased $651,000, or 1.9%, mainly due to $580,000 of income added by Columbia.
    Nonperforming assets were 0.29% of total assets at 6-30-06, compared to 0.35% at 3-31-06 and 0.27% at 6-30-05. Annualized net charge-offs for Q2-06 were 0.02% of average total loans, compared to 0.03% for Q1-06 and 0.02% for Q2-05.

Huntington Bancshares [HBAN] Reports EPS of $0.46     PRNewswire 7-21
    Huntington Bancshares reported 2006 second quarter earnings of $111.6 million, or $0.46 per common share, up 5% and 2%, respectively, from $106.4 million, or $0.45 per common share, in the year-ago quarter. Return on average assets was 1.25% in Q2-06 compared to 1.26% in Q1-06 and 1.31% in Q2-05. Return on average shareholders' equity was 14.9% in Q2-06 compared to 15.5% in Q1-06 and 16.3% in Q2-05.
    Fully taxable equivalent net interest income [$262 million] increased $21.3 million, or 9% ($3.6 million, or 1% merger-adjusted), from the year-ago quarter, reflecting the favorable impact of a $2.7 billion, or 9%, increase in average earning assets, as the fully taxable equivalent net interest margin was 3.34% compared to 3.32% in Q1-06 and 3.36% in Q2-05. "Over the last 10 quarters, our net interest margin has remained within a narrow range of 3.29%-3.38%. This reflected our focus on disciplined loan and deposit pricing, as well as effective interest rate risk management," said Thomas Hoaglin, CEO. Non-interest income [$163 million] increased $6.8 million, or 4%, from the year-ago quarter, despite a $23.2 million decline in operating lease income.
    At June 30, 2006, the tangible equity to assets ratio was 6.46%, down from 7.36% a year ago and from 6.97% at March 31, 2006. During the quarter, 8.1 million shares of common stock were repurchased in the open market, leaving 6.9 million shares available for purchase under the 15 million share repurchase authorization announced April 20, 2006.

Old National [ONB] Reports Earnings of $.30/Share    Primewone 7-27
    Old National Bancorp reported earnings of $20.2 million, or $.30 per share, for the second quarter of 2006, down $.01 from the $.31 per share earned in the first quarter of the year. Both earnings from continuing operations and net income for the first six months of 2006 were $40.9 million, or $.61 per share. These results compare favorably to the $40.3 million, or $.59 per share, from continuing operations and net income of $39.8 million, or $.58 per share, for the first half of 2005. Return on Average Assets was .97% compared to 1.16% in Q2-05. Return on Average Equity was 12.82% compared to 14.56% in Q2-05. Net Interest Income (FTE) was $59.620 million in Q2-06, down from $60.223 million in Q2-05. The net interest margin for the second quarter was 3.18%, unchanged from the margin for the first quarter of the year.

SKYF Reports Second Quarter EPS of $0.41     PRNewswire 7-18
    Sky reported net income for the second quarter of 2006 was $45.1 million, or $.41 per diluted share, compared to $47.8 million, or $.45 per diluted share, for the second quarter of 2005. Annualized return on assets and return on equity for the second quarter were 1.15% and 11.42%, respectively, compared with 1.27% and 13.32%, respectively, for the same period in 2005. The second quarter of 2006 was impacted by the change in accounting for certain derivative hedging relationships, that reduced net income by $6.5 million or $.06 per diluted share.
    Net interest income for the second quarter was $133.2 million, up 4.1% from $128.0 million in the second quarter of 2005. The net interest margin for the second quarter was 3.75%, up 2 basis points from the second quarter of 2005, but down 3 basis points from the first quarter of 2006. Non-interest revenues on a core-operating basis, excluding the derivative losses recorded during the quarter, were $55.9 million, up 8.5% from $51.5 million in the second quarter of 2005.
    The second quarter of 2005 charge-offs were lower than our historical trend. Net credit losses for the quarter were $8.3 million, or .30% annualized to average total loans, compared to $5.8 million, or .22%, for the second quarter of 2005. At June 30, 2006, non-performing loans to total loans was 1.11% versus 1.16% at March 31, 2006 and 1.17% at June 30, 2005. SKY maintaining their projection of 2006 diluted earnings per share on a core operating basis, of $1.90 to $1.95 per diluted share.

Synovus [SNV] Reports Q2 EPS of $0.47 - Up 15%     Businesswire 7-19
    Synovus' Q2-06 earnings grew 18.9% over Q2-05 to $152.8 million, which represented earnings per share growth of 15.0% to $.47 per share. Return on assets was 2.07% and return on equity was 18.45% for Q2-06, compared to 1.98% and 18.70%, respectively, in the same period last year. Book value per share was $10.43 in Q2-06; $9.43 in Q4-05; and $8.97 in Q2-05. Synovus' Chief Executive Officer Richard said, "As a result of the second quarter performance, we are confident in our expectation to be at the higher end of 12 - 14% earnings per share growth for 2006.
    Net Interest Income (FTE) was $288.681 million in Q2-06 compared to $263.920 million in Q1-06 and $238.653 million in Q2-05, up 21.0% for the year. Net interest margin expanded to 4.39% from last quarter's excellent 4.32% level. The reported net interest margin is primarily due to increased yields on the variable rate portion of the loan portfolio, which is approximately 58% of total loans. Total core deposit growth (excludes brokered time deposits) was 14.3% over last year. Fundamental core deposit growth (excluding acquisitions) was 9.9% over 2005. Total loans grew 15.5% over last year, while fundamental loan growth was 11.5% year over year.
    Total Non-Interest Income was $517.753 million in Q2-06 compared to $491.875 million inQ1-06 and $486,292 million in Q2-05, up 6.5% for the year. Bankcard fees increased 16.2% and brokerage and investment banking revenue increased 13.0%. Mortgage banking revenue was up 9.1%, service charges on deposit accounts were up 5.0%, and fiduciary and asset management fees were up 3.5%, compared to the second quarter last year.
    The net charge-off ratio was 0.17% compared to 0.27% in Q1-06 and 0.37% in Q2-05. The ratio of nonperforming assets to loans and other real estate was 0.48%, compared to 0.45% last quarter and 0.51% in Q2-05.
    Average return on Assets: [1] Taxable Investment Securities $3,008.122 million with an average yield of 4.21% compared to a yield of 3.78% in Q2-05. [2] Tax-Exempt Investment Securities $202,676 million with an average yield of 6.73% compared to a yield of 6.87% in Q2-05. [3] Trading Account Assets $ 47.398 million with an average yield of 5.72% with no amounts in Q2-05. [4] Commercial Loans $9,746.392 million with an average yield of 7.98% compared to a yield of 6.47% in Q2-05. [5] Consumer Loans $875.171 million with an average yield of 8.09% compared to a yield of 7.37% in Q2-05. [6] Mortgage Loans $1,071.477 million with an average yield of 6.82% compared to a yield of 6.47% in Q2-05. [7] Credit Card Loans $ 260.010 million with an average yield of 10.81% compared to a yield of 10.03% in Q2-05. [8] Home Equity Loans $ 1,231.592 million with an average yield of 7.69% compared to a yield of 5.92% in Q2-05.

Susquehanna [SUSQ] Reports Earnings of $.38/Share    PRNewswire 7-21
    Susquehanna Bancshares announced net income for Q2-06 was $19.3 million, or $0.38 per diluted share, compared to $18.7 million, or $0.40 per diluted share, for the second quarter of 2005. Net income for the first six months of 2006 was $37.0 million, or $0.76 per share, compared to $34.1 million, or $0.73 for the first half of 2005. Return on average assets and average tangible equity for Q2-06 finished at 0.97% and 14.43%, respectively. This compared to Q2-05 with 1.03% and 15.39%, for the same measurements, respectively. Return on average assets and average tangible equity for the first six months of 2006 were 0.97% and 14.14%, respectively. This compared to 0.93% and 14.13% for the first six months of 2005.
    Total interest income in Q2-06 was $115.293 million compared to $93.524 million in Q2-05. Net interest margin increased 8 basis points to 3.89% compared to 3.81% in the second quarter of 2005. Total noninterest income in Q2-06 was $32.078 compared to $30.223 million in Q2-05.

TCF Financial [TCB] Reports Second Quarter EPS of $0.52     PRNewswire 7-18
    TCF Financial reported diluted earnings per share of 52 cents for Q2-06, compared with 53 cents for Q2-05. Net income for Q2-06 was $67.1 million, compared with $70.6 million for Q2-05. Q2-05 included $4.9 million in pre-tax gains on asset sales for an after-tax impact of two cents per diluted share. For Q2-06, return on average assets was 1.92% and return on average common equity was 27.75%, compared with 2.22% and 30.23%, respectively, for Q2-05. Diluted earnings per share for the first six months of 2006 was 96 cents, compared with $1.00 for the same 2005 period.
    TCF's net interest income in Q2-06 was $135.4 million, up $4.2 million, or 3.2%, from Q2-05 and up $4.3 million, or 3.3%, from Q1-06. Net interest margin in Q2-06 was 4.22%, compared with 4.53% for Q2-05 and 4.25% for Q1-06. The increase in net interest income from Q2-05 was primarily due to a $1.3 billion, or 10.9%, increase in average interest-earning assets, partially offset by the 31 basis point reduction in net interest margin. This decrease in net interest margin was primarily due to the continued customer preference for lower-yielding fixed-rate loans due to the flat yield curve and higher deposit and borrowing costs.
    Total non-interest income was $123.6 million for Q2-06, up $6 million, or 5.1%, from Q2-05. Banking fees and service charges were $71.1 million for Q2-06, up $4.3 million, or 6.5%, from Q2-05, primarily due to the growth in checking accounts. Card revenues totaled $23 million for Q2-06, up 16.6% over Q2-05. The increase in card revenues was primarily attributable to an increase in active accounts and customer transaction volumes. For Q2-06, ATM revenue was $9.8 million, compared with $10.8 million for Q2-05. The decline in ATM revenue was primarily attributable to continued declines in fees charged to TCF customers for use of non-TCF ATM machines due to expansion of TCF's ATM network and modifications of checking products, partially offset by the increased number of TCF customers with cards.
    Net loan and lease charge-offs in Q2-06 were $3.2 million, or .12% (annualized) of average loans and leases, compared with net charge-offs of $1.9 million, or .08% (annualized) for Q2-05. Total non-performing assets were $51.1 million, or .36% of total assets, at June 30, 2006, up from $47.4 million, or .35%, at December 31, 2005.
    Average return on Assets: [1]Investments $101.305 million with an average yield of 4.33% [2]Securities available for sale 1,646,986 million with an average yield of 5.18% [3] Education loans held for sale 213,279 million with an average yield of 4.83% [4] Consumer home equity: Fixed-rate 2,048,035 million with an average yield of 6.72% [5] Variable-rate 2,594,538 million with an average yield of 6.77% [6] Consumer - other 34,012 million with an average yield of 9.19% [7] Commercial real estate: Fixed- and adjustable-rate 1,365,132 million with an average yield of 6.14% [8] Variable-rate 834,876 million with an average yield of 5.72% [9] Commercial business: Fixed- and adjustable-rate 73,654 million with an average yield of 5.75% [10] Variable-rate 359,269 million with an average yield of 5.56% [11] Leasing and equipment finance 1,412,520 million with an average yield of 6.83% and [12] Residential real estate 919,379 million with an average yield of 5.71 %

UnionBanCal Corporation [UB] Reports EPS of $1.26    Businesswire 7-20
    UnionBanCal Corporation reported Q2-06 net income of $182.9 million, or $1.26 per diluted common share, compared with $1.27 per diluted common share a year earlier. Income from continuing operations was $182.6 million, or $1.26 per diluted common share, compared with $1.27 per diluted common share a year earlier. First half 2006 net income was $355.9 million, or $2.44 per diluted common share, compared with $2.49 per diluted common share for first half 2005. Income from continuing operations was $364.1 million, or $2.50 per diluted common share, compared with $2.47 per diluted common share for first half 2005.
    Net interest income was $469 million in Q2-06, up $9 million, or 2.0%, from the same quarter a year ago, primarily due to strong growth in loans. Average earning assets increased $1.7 billion, or 4.0%, primarily due to a $4.5 billion, or 14.8%, increase in average loans, while average securities declined $2.6 billion, or 23.7%. Average commercial loans increased $2.4 billion, or 22.4%, and average residential mortgages increased $1.4 billion, or 14.0%. Compared to second quarter 2005, average total deposits increased $0.3 billion, or 0.8%. Average interest bearing deposits increased $1.6 billion, or 7.6%. Average noninterest bearing deposits decreased $1.3 billion, or 6.7%, primarily due to a $733 million, or 22.5%, decrease in average title and escrow deposits, and a $442 million, or 3.6%, decrease in average other commercial noninterest bearing deposits. Average noninterest bearing deposits represented 44.2% of average total deposits in Q2-06. The annualized average all-in cost of funds was 1.76%, reflecting the Company's strong average deposit-to-loan ratio of 113% and the high proportion of noninterest bearing deposits to total deposits. The net interest margin in Q2-06 was 4.23%, compared with 4.32% in Q2-05.
    In second quarter 2006, noninterest income was $219 million, up $16 million, or 7.7%, from the same quarter a year ago. Noninterest expense for second quarter 2006 was $413 million, an increase of $25 million, or 6.3 percent, over second quarter 2005. Nonperforming assets at June 30, 2006, were $36 million, or 0.07 percent of total assets. This compares with $42 million, or 0.09 percent of total assets, at March 31, 2006, and $69 million, or 0.13 percent of total assets, at June 30, 2005. Nonperforming assets declined 48 percent between June 30, 2005 and June 30, 2006.

Valley National [VLY] Reports Q2 EPS of $0.35/Share     PRNewswire 7-18
    Valley National Bancorp announced net income for the six months ended June 30, 2006 was $81.7 million compared to $77.3 million for the same period in 2005, an increase of 5.7%. Adjusting for a five percent stock dividend issued on 5-22-06, fully diluted earnings per common share were $0.70 for the six months ended June 30, 2006, compared to $0.69 per common share for the six months ended June 30, 2005. Net income for Q2-06 was $40.8 million compared to $39.0 million for Q2-05, an increase of 4.6%. Fully diluted earnings per common share were $0.35 for Q2-06, compared to $0.34 per common share in Q2-05.
    Net interest income on a tax equivalent basis was $100.0 million for Q2-06, a $1.6 million decrease from the same quarter of 2005 and a decrease of $263 thousand from Q1-06. The decrease during the quarter was mainly a result of an increase in funding costs of $6.1 million, or 26 basis points from Q1-06. The net interest margin on a tax equivalent basis was 3.48% for Q2-06, a decline of two basis points from Q1-06. However, the yield on average total loans continue to improve as the Q2-06 equaled 6.49%, an increase of 54 basis points from Q2-05 and a 23 basis point increase from Q1-06. Valley's cost of total deposits remained relatively low by industry standards at 2.11% for Q2-06 compared to 1.85 percent for Q1-06.
    Non-interest income was unchanged from Q1-06, totaling approximately $19.4 million for the three months ended June 30, 2006. However, service charges on deposit accounts increased $348 thousand. While, trust and investment services also increased $249 thousand to $1.9 million from the prior quarter mainly due to an increase in managed account fees. Partially offsetting the increases, net gains on securities transactions decreased $401 thousand as compared to the first quarter of 2006.
    Net loan charge-offs for the second quarter of 2006 were $3.3 million compared to $936 thousand for the second quarter of 2005, and $584 thousand for the first quarter of 2006. Total non-performing assets, consisting of non-accrual loans and other real estate owned, totaled $30.7 million, or 0.37 percent of loans and other real estate owned at June 30, 2006 down from $35.1 million or 0.43 percent at March 31, 2006.

Wilmington [WL] Reports EPS of $.67/Share     Businesswire 7-21
    Wilmington Trust Corporation announced net income for Q2-06 was $46.9 million. This was 22% higher than for the year-ago second quarter. Earnings per share (on a diluted basis) for Q2-06 were $0.67. This was 20% higher than for the year-ago second quarter. On an annualized basis, second quarter 2006 results produced a return on average assets of 1.81% and a return on average equity of 17.75%. The corresponding returns for the second quarter of 2005 were 1.60% and 16.55%, respectively.
    Net interest income for Q2-06 was $90.4 million compared to $80.1 in Q2-05, an increase of 12.9%. Net interest margin for Q2-06 was 3.80% compared to 3.66% in Q2-05. Noninterest income for Q2-06 was $86.3 million compared to $76.4 in Q2-05, an increase of 13.0%.

July Ratings Changes     On 7-05 Lehman Brothers Downgraded UB from Overweight to Equal-weight. On 7-21 Oppenheimer Upgraded ASBC from Sell to Neutral. On 7-21 Sanders Morris Harris Downgraded UB from Strong Buy to Buy.

June Ratings Changes     On 6-16 Brean Murray Initiated coverage of FULT at Accumulate. On 6-12 KeyBanc Capital Mkts / McDonald Upgraded ONB from Hold to Buy. On 6-20 Ferris Baker Watts Upgraded SUSQ from Neutral to Buy. On 6-23 Merrill Lynch on cut CMA to "sell" from "neutral" and said it expects downward revisions in the company's estimates over the next several quarters. The brokerage said, based on announcements from the bank's peers, it expects the company's margin to be under more pressure than investors expect. It also expects credit to put pressure on Comerica's earnings from the second half of 2006. On 6-29 Keefe Bruyette Upgraded CBCF from Market Perform to Outperform.

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