þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2006, | ||
or
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to . |
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
ITEM 1A. | RISK FACTORS |
| the number of mortgage loans originated; |
| the interest income earned on loans and securities; |
| the value of securities holdings; |
| gains from sales of loans and securities; and |
| deposits and borrowings. |
18
19
| the duration of the loan; |
| credit risks of a particular borrower; |
| changes in economic or industry conditions; and |
| in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral. |
20
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
21
ITEM 3. | LEGAL PROCEEDINGS |
22
ITEM 4. | SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS |
ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
23
(a) | (b) | (c) | ||||||||||
Number of Securities
|
||||||||||||
Remaining Available for
|
||||||||||||
Future Issuance Under
|
||||||||||||
Number of Securities to
|
Weighted-Average
|
Equity Compensation Plans
|
||||||||||
Be Issued Upon Exercise
|
Exercise Price of
|
(excluding those reflected
|
||||||||||
Plan Category
|
of Outstanding Options | Outstanding Options | in column (a)) | |||||||||
Equity compensation plans approved
by shareholders:
|
||||||||||||
1996 Plan
|
499,922 | $ | 19.15 | | ||||||||
1998 Plan
|
274,049 | 10.69 | 106,656 | |||||||||
2000 Plan
|
59,562 | 8.56 | | |||||||||
Total
|
833,533 | $ | 15.61 | 106,656 | ||||||||
Total Number of Shares
|
Approximate Dollar Value of
|
|||||||||||
Purchased as Part of
|
Shares that May
|
|||||||||||
Publicly Announced
|
Average Price Paid
|
Yet Be Purchased Under the
|
||||||||||
Month
|
Plans or Programs | per Share | Plans or Programs | |||||||||
October 2006
|
87,100 | $ | 11.93 | $ | 9,511,835 | |||||||
November 2006
|
400 | $ | 11.46 | $ | 8,473,130 | |||||||
December 2006
|
35,600 | $ | 11.68 | $ | 8,468,545 | |||||||
123,100 | $ | 11.88 | $ | 8,052,590 |
24
ITEM 6. | SELECTED FINANCIAL DATA |
Consolidated Ratios of Earnings to
|
Year Ended
|
Six-Month Period
|
||||||||||||||||||||||
Combined Fixed Charges and
|
December 31,
|
Ended December 31,
|
Fiscal Year Ended June 30, | |||||||||||||||||||||
Preferred Stock Dividends:
|
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||
Excluding Interest on Deposits
|
0.91x | 1.27x | 1.66x | 2.11x | 2.00x | 1.61x | ||||||||||||||||||
Including Interest on Deposits
|
0.93x | 1.20x | 1.48x | 1.72x | 1.60x | 1.38x |
ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
25
ITEM 9A. | CONTROLS AND PROCEDURES |
(a) | Disclosure Controls and Procedures |
(b) | Managements Report on Internal Control over Financial Reporting |
(c) | Changes in Internal Control over Financial Reporting |
ITEM 9B. | OTHER INFORMATION |
26
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
Exhibit
|
||||
No.:
|
Description of Document:
|
|||
3 | (i) | Amended and Restated Certificate of Incorporation.(1) | ||
3 | (ii) | By-Laws.(2) | ||
4 | .1 | Certificate of Designation creating the 7.125% Noncumulative Monthly Income Preferred Stock, Series A(3) | ||
4 | .2 | Certificate of Designation creating the 7.0% Noncumulative Monthly Income Preferred Stock, Series B (4) | ||
10 | .1 | 1996 Incentive Stock Option Plan.(5) | ||
10 | .2 | 1998 Incentive Stock Option Plan.(6) | ||
10 | .3 | 2000 Incentive Stock Option Plan.(7) | ||
10 | .4 | Form of Stock Option Grant.(8) | ||
10 | .5 | Lease Agreement Between Oriental Financial Group Inc. and Professional Office Park V, Inc.(9) | ||
10 | .6 | First Amendment to Lease Agreement Dated May 18, 2004, Between Oriental Financial Group Inc. and Professional Office Park V, Inc.(9) | ||
10 | .8 | Employment Agreement between Oriental Financial Group Inc. and Jose Rafael Fernández(9) | ||
10 | .11 | Change in Control Compensation Agreement between Oriental Financial Group Inc. and Jose E. Fernández Richards(9) | ||
10 | .12 | Change in Control Compensation Agreement between Oriental Financial Group Inc. and Jose R. Fernández(9) | ||
10 | .13 | Change in Control Compensation Agreement between Oriental Financial Group Inc. and Norberto González(9) | ||
10 | .14 | Change in Control Compensation Agreement between Oriental Financial Group Inc. and Ganesh Kumar(9) | ||
10 | .16 | Change in Control Compensation Agreement between Oriental Financial Group Inc. and Carlos J. Nieves(9) | ||
10 | .17 | Change in Control Compensation Agreement between Oriental Financial Group Inc. and Mari Evelyn Rodríguez(10) | ||
10 | .18 | Change in Control Compensation Agreement between Oriental Financial Group Inc. and José J. Gil de Lamadrid(11) | ||
10 | .19 | Agreement between Oriental Financial Group Inc. and José J. Gil de Lamadrid(12) |
27
Exhibit
|
||||
No.:
|
Description of Document:
|
|||
10 | .20 | Change in Control Compensation Agreement between Oriental Financial Group Inc. and Julio R. Micheo(13) | ||
10 | .21 | Investment Management Agreement between Oriental Financial Group Inc., et al., and Bear Stearns Asset Management Inc.(14) | ||
10 | .22 | Amendment to Investment Management Agreement between Oriental Financial Group Inc. and Bear Stearns Asset Management Inc. | ||
10 | .23 | Technology Outsourcing Agreement between Oriental Financial Group Inc. and Metavante Corporation(14) | ||
13 | .0 | Portions of the 2006 annual report to shareholders | ||
21 | .0 | List of subsidiaries | ||
23 | .1 | Consent of Deloitte & Touche LLP | ||
23 | .2 | Consent of KPMG LLP | ||
31 | .1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31 | .2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32 | .1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
32 | .2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
(1) | Incorporated herein by reference from Exhibit No. 3 of the Groups registration statement on Form S-3 filed with the SEC on April 2, 1999. | |
(2) | Incorporated herein by reference from Exhibit No. 3(ii) of the Groups current report on Form 8-K filed with the SEC on September 1, 2005. | |
(3) | Incorporated herein by reference from Exhibit No. 4.1 of the Groups registration statement on Form 8-A filed with the SEC on April 30, 1999. | |
(4) | Incorporated herein by reference from Exhibit No. 4.1 of the Groups registration statement on Form 8-A filed with the SEC on September 26, 2003. | |
(5) | Incorporated herein by reference from the Groups definitive proxy statement for the 1997 annual meeting of stockholders filed with the SEC on September 19, 1997. | |
(6) | Incorporated herein by reference from the Groups definitive proxy statement for the 1998 annual meeting of stockholders filed with the SEC on September 29, 1998. | |
(7) | Incorporated herein by reference from the Groups definitive proxy statement for the 2000 annual meeting of stockholders filed with the SEC on November 17, 2000. | |
(8) | Incorporated herein by reference from Exhibit No. 10.4 of the Groups annual report on Form 10-K filed with the SEC on September 13, 2004. | |
(9) | Incorporated herein by reference from Exhibit 10 of the Groups annual report on Form 10-K filed with the SEC on September 13, 2005. | |
(10) | Incorporated herein by reference from Exhibit 10.1 of the Groups quarterly report on Form 10-Q filed with the SEC on October 17, 2006. | |
(11) | Incorporated herein by reference from Exhibit 10.2 of the Groups current report on Form 8-K filed with the SEC on December 4, 2006. | |
(12) | Incorporated herein by reference from Exhibit 10.1 of the Groups current report on Form 8-K filed with the SEC on December 4, 2006. | |
(13) | Incorporated herein by reference from Exhibit 10 of the Groups current report on Form 10-K filed with the SEC on December 15, 2006. | |
(14) | Portions of this exhibit have been omitted pursuant to a request for confidential treatment. |
28
By:
President and Chief Executive Officer
Dated: March 27, 2007
By:
Executive Vice President and
Chief Financial Officer
Dated: March 27, 2007
By:
Chairman of the Board
Dated: March 27, 2007
By:
Director
Dated: March 27, 2007
By:
Director
Dated: March 27, 2007
By:
Director
Dated: March 27, 2007
By:
Director
Dated: March 27, 2007
By:
Director
Dated: March 27, 2007
By:
Director
Dated: March 27, 2007
By:
Director
Dated: March 27, 2007
29
Table of Contents
By:
Director
Dated: March 27, 2007
By:
Director
Dated: March 27, 2007
30
1
2
3
4
5
|
(a) To Client: | Oriental Financial Group Inc. | ||
|
Oriental Center | |||
|
Professional Offices Park | |||
|
997 San Roberto Street | |||
|
10 th Floor | |||
|
San Juan, Puerto Rico 00926 | |||
|
Attn: President and CEO | |||
|
||||
|
Oriental Bank & Trust | |||
|
Oriental Center | |||
|
Professional Offices Park | |||
|
997 San Roberto Street | |||
|
10 th Floor |
6
|
San Juan, Puerto Rico 00926 | |||
|
Attn: President and CEO | |||
|
||||
|
and | |||
|
||||
|
Oriental International Bank Inc. | |||
|
Oriental Center | |||
|
Professional Offices Park | |||
|
997 San Roberto Street | |||
|
10 th Floor | |||
|
San Juan, Puerto Rico 00926 | |||
|
Attn: President and CEO | |||
|
||||
|
(b) To the Custodian: | Mellon Bank, N.A. | ||
|
One Mellon Center | |||
|
500 Grant Street | |||
|
18 th Floor | |||
|
Pittsburgh, PA 15258-0000 | |||
|
Attn: Bill Johnson | |||
|
||||
|
(c) To the Investment Manager: | Bear Stearns Asset Management Inc . | ||
|
383 Madison Avenue | |||
|
New York, New York 10179 | |||
|
Attn: President, with a copy to | |||
|
Chief Operating Officer |
7
ORIENTAL FINANCIAL GROUP INC.
|
||||
By: | /s/ José R. Fernández | |||
Name: | José R. Fernández | |||
Title: President & CEO | ||||
ORIENTAL BANK & TRUST
|
||||
By: | /s/ José R. Fernández | |||
Name: | José R. Fernández | |||
Title: President & CEO | ||||
ORIENTAL INTERNATIONAL BANK INC.
|
||||
By: | /s/ José R. Fernández | |||
Name: | José R. Fernández | |||
Title: President & CEO | ||||
BEAR STEARNS ASSET MANAGEMENT INC.
|
||||
By: | /s/ Rajan Govindan | |||
Name: | Rajan Govindan | |||
Title: SMD | ||||
8
Banks
Broker Dealers
Lehman Brothers
Sandtandar Securities
Morgan Stanley
BBVA Capital Oppenheimer Capital
Credit Suisse First Boston
Doral Securities
Popular Securities
Samuel Ramirez
UBS (Paine Webber)
Gen Re Financial
Merrill Lynch
Cohen Bros
Wachovia (Prudential Securities)
Cantor Fitzgerald
Bear Stearns
HSBC
Citigroup
Washington Mutual
ABN-AMRO
RBS/Greenwich Capital
Goldman Sachs
Countrywide
JP Morgan Securities
Fannie Mae
Freddie Mac
FIMAT
Keef Bruyette & Woods
Sandler ONeil
1) | HELD TO MATURITY: An investment portfolio comprised of those securities purchased or originated to generate income by maintaining a positive spread over the cost of related funding source(s) were Oriental has the positive intent and ability to hold to maturity regardless of economic environment. | ||
2) | AVAILABLE FOR SALE: A portfolio of securities either intended for sale or for which a claim to be held to maturity cannot be sufficiently substantiated. | ||
3) | TRADING: A portfolio consisting of those securities purchased in order to maximize short-term gains. It also includes the mortgage banking activity to comply with FAS 115. However, Oriental is not precluded from classifying as trading a security it plans to hold for a longer period. |
Investment Types | Accounting 1 | |
|
||
Debt Securities
|
||
Held to Maturity
|
Amortized Cost | |
Available for Sale
|
Fair Value 2 | |
Trading
|
Market 3 | |
|
||
Mortgage-Backed Securities
|
||
Held to Maturity
|
Amortized Cost | |
Available for Sale
|
Fair Value 2 | |
Trading
|
Market 3 | |
|
||
Transfer of Securities
|
||
Between Trading and Held to
|
Investment Types | Accounting 1 | |
Maturity/Available for Sale
|
Market 3 | |
From Held to Maturity to
|
||
Available for Sale
|
Fair Value 2 | |
From Available for Sale to
|
||
Held to Maturity
|
Fair Value/Amortized Cost 4 |
1. | The accounting guidance in the table does not include accounting for investments with permanent impairment, which must always be considered under GAAP. Additionally, this guidance does not address the accounting for securities acquired for hedging purposes. The Treasurer or his designee will evaluate positions that have unrealized losses to determine if these are Other-than-temporarily impaired, and present such results to ALCO. | |
2. | Net unrealized gains and losses (excluding permanent impairment and adjusted for taxes) are recognized as an adjustment to capital until final deposition or recovery. There is no interim income statement impact. | |
3. | Unrealized gains and losses are recognized in the income statement. | |
4. | When securities are transferred to a held to maturity account from an available for sale account, unrealized gains/losses remain in contra equity account, which is amortized/accreted under interest method over the transferred securities remaining lives. |
1. | The put price must be negotiated the same day the security is purchased. | ||
2. | The security purchased must comply with the credit policy of these guidelines. | ||
3. | The put must be exercised the same day the security is purchased. | ||
4. | The broker/dealer granting the put must be in the approved list of broker/dealer. | ||
5. | The amount at risk in the put contract must be within the pre-approved limits of the counterparty. |
(1) | the extent to which exposure approaches Orientals internal limits; | ||
(2) | the volatility of the exposure; and | ||
(3) | the financial condition of the correspondent. |
Capitalization | Interday Limit | Intraday Limit | ||||||
Classification | % Capital | % Capital | ||||||
Well Capitalized
|
100 | % | 200 | % | ||||
Adequate
|
100 | % | 200 | % | ||||
Under
|
25 | % | 100 | % | ||||
Significantly Under
|
10 | %(l) | 20 | % | ||||
Critically Under
|
0 | %(2) | 0 | % |
(1) | Requires prior approval from Board of Directors on exception basis | |
(2) | May lend only on a secured basis; Prior approval required from Board of Directors |
|
BANCA
INVERSIONES HIPOTECAS |
Oficinas Ejecutivas
PO Box 195115 San Juan PR 00919-5115 |
|||
Tel 787-771-6800
Fax 787-771-6770 |
Very truly yours,
ORIENTAL FINANCIAL GROUP INC. |
||||
By: | /s/ José R. Fernández | |||
Name: | José R. Fernández | |||
Title : President & CEO | ||||
ORIENTAL BANK & TRUST
|
||||
By: | /s/ José R. Fernández | |||
Name: | José R. Fernández | |||
Title : President & CEO |
ORIENTAL INTERNATIONAL BANK INC.
|
||||
By: | /s/ José R. Fernández | |||
Name: | José R. Fernández | |||
Title: President & CEO | ||||
BEAR STEARNS ASSET MANAGEMENT INC.
|
|||||
By: | /s/ Andrew Headley | ||||
Name: | Andrew Headley | ||||
Title: Managing Director | |||||
METAVANTE CORPORATION | ORIENTAL FINANCIAL GROUP INC. | |||||||
4900 W. Brown Deer Road | 997 San Roberto Street | |||||||
Brown Deer, WI 53223 | Tenth Floor | |||||||
San Juan, PR 00926 | ||||||||
|
||||||||
By:
|
/s/ Paul T. Danola | By: | /s/ José Rafael Fernández | |||||
|
||||||||
Name:
|
Paul T. Danola | Name: | José Rafael Fernández | |||||
Title:
|
Senior Executive Vice President
Metavante Corporation |
Title: | President and Chief Executive Officer | |||||
|
||||||||
By:
|
/s/ James R. Geschke | |||||||
|
||||||||
Name:
|
James R. Geschke | |||||||
|
||||||||
Title:
|
Executive Vice President | |||||||
|
||||||||
|
Financial Technology Solutions |
2
1. | Metavante shall pay Customer $10,000.00 for each month or portion thereof that Metavante fails to have the Commencement Date occur on the Scheduled Conversion Date provided that such amount shall be prorated for any partial month. Metavante will establish a new Scheduled Conversion Date if the above date is missed, subject to Customers approval, which shall not be unreasonably withheld. | ||
2. | The recovery of the amounts set forth above by Customer from Metavante shall be Customers sole and exclusive monetary recovery from Metavante with respect to Metavantes failure to complete the Services necessary to have the Commencement Date occur on the Schedule Conversion Date. The parties acknowledge that the foregoing payments constitute reasonable and commercial liquidated damages. |
3
3. | If the Customers Conversion does not occur by June 30, 2008, either party may terminate this Agreement upon written notice provided to the other party on or before July 31, 2008. |
4
5
6
7
8
9
10
11
12
13
In the case of Customer:
|
ORIENTAL FINANCIAL GROUP INC. | |
|
997 San Roberto Street | |
|
Tenth Floor | |
|
San Juan, PR 00926 | |
|
Attn.: | |
For Billing Purposes:
|
SAME | |
In the case of Metavante:
|
METAVANTE CORPORATION | |
|
4900 West Brown Deer Road | |
|
Milwaukee WI 53223 | |
|
Attn: Senior Executive Vice President, Metavante | |
|
Corp. | |
Copy to:
|
||
|
Risk Management and Legal Division |
14
A. | ACH shall mean automated clearing house services. | ||
B. | Affiliate shall mean, with respect to Customer, those Entities listed in Exhibit A, attached hereto and any other Entity at any time Controlling, Controlled by, or under common Control of Customer to which Customer and Metavante shall agree in writing that it will receive Services under this Agreement. Metavantes Affiliates are those Entities at any time Controlling, Controlled by, or under common Control of Metavante. | ||
C. | Agreement shall mean this master agreement and all schedules and exhibits attached hereto, which are expressly incorporated, any future amendments thereto, and any future schedules and exhibits added hereto by mutual agreement. | ||
D. | Business Days shall be Mondays through Fridays except holidays recognized by the Federal Reserve Bank of New York. | ||
E. | Change in Control shall mean any event or series of events by which (i) any person or entity or group of persons or entities shall acquire Control of another person or entity or (ii) in the case of a corporation, during any period of twelve consecutive months commencing before or after the date hereof, individuals who, at the beginning of such twelve-month period, were directors of such corporation shall cease for any reason to constitute a majority of the board of directors of such corporation. | ||
F. | Commencement Date shall mean the date on which Metavante first provides the Initial Services to Customer. | ||
G. | Confidential Information shall have the meaning set forth in Section 13.3. | ||
H. | Consumer shall mean an individual who obtains a financial product or service from Customer to be used primarily for personal, family, or household purposes and who has a continuing relationship with Customer. | ||
I. | Contract Year shall mean successive periods of twelve months, the first of which (being slightly longer than twelve (12) months) shall commence on the Commencement Date and terminate on the last day of the month in which the first anniversary of the Commencement Date occurs. | ||
J. | Control shall mean the direct or indirect ownership of over fifty percent (50%) of the capital stock (or other ownership interest, if not a corporation) of any Entity or the possession, directly or indirectly, of the power to direct the management and policies of such Entity by ownership of voting securities, by contract or otherwise. Controlling shall mean having Control of any Entity, and Controlled shall mean being the subject of Control by another Entity. | ||
K. | Conversion shall mean (i) the transfer of Customers data processing and other information technology services to Metavantes systems; (ii) completion of upgrades, enhancements and software modifications as set forth in this Agreement; and (iii) completion of all interfaces set forth in this Agreement and full integration thereof such that Customer is able to receive the Initial Services in a live operating environment. |
15
L. | Conversion Date shall mean the date on which Conversion for Customer or a particular Affiliate has been completed. | ||
M. | Customer shall mean the Entity entering into this Agreement with Metavante and all Affiliates of such Entity for whom Metavante agrees to provide Services under this Agreement, as reflected on the first page of this Agreement or amendments executed after the Effective Date. | ||
N. | Customer Data means any and all data and information of any kind or nature submitted to Metavante by Customer, or received by Metavante on behalf of Customer, necessary for Metavante to provide the Services. | ||
O. | Damages shall mean actual and verifiable monetary obligations incurred, or costs paid (except overhead costs, attorneys fees, and court costs) which (i) would not have been incurred or paid but for a partys action or failure to act in breach of this Agreement, and (ii) are directly and solely attributable to such breach, but excluding any and all consequential, incidental, punitive and exemplary damages, and/or other damages expressly excluded by the terms of this Agreement. | ||
P. | Documentation shall mean Metavantes standard user instructions relating to the Services, including tutorials, on-screen help, and operating procedures, as provided to Customer in written or electronic form. | ||
Q. | Effective Date shall mean the date so defined on the signature page of this Agreement, or, if blank, the date executed by Metavante, as reflected in Metavantes records. | ||
R. | Effective Date of Termination shall mean the last day on which Metavante provides the Services to Customer (excluding any services relating to termination assistance). | ||
S. | Eligible Provider shall have the meaning as set forth in Section 16.9. | ||
T. | Employment Cost Index shall mean the Employment Cost IndexCivilian (not seasonally adjusted) as promulgated by the United States Department of Labors Bureau of Labor Statistics (or any successor index). | ||
U. | Entity means an individual or a corporation, partnership, sole proprietorship, limited liability company, joint venture, or other form of organization, and includes the parties hereto. | ||
V. | Estimated Remaining Value shall mean the number of calendar months remaining between the Effective Date of Termination and the last day of the contracted-for Term, multiplied by the average of the three (3) highest monthly fees (but in any event no less than the Monthly Base Fee or other monthly minimums) payable by Customer during the twelve (12) -month period prior to the event giving rise to termination rights under this Agreement. In the event the Effective Date of Termination occurs prior to expiration of the First Contract Year, the monthly fees used in calculating the Estimated Remaining Value shall be the greater of (i) the estimated monthly fees set forth in the Fee Schedule(s) and (ii) the average monthly fees described in the preceding sentence. | ||
W. | Expenses shall mean any and all reasonable and direct expenses paid by Metavante to Third Parties in connection with Services provided to or on behalf of Customer under this Agreement, including any postage, supplies, materials, travel and lodging, and telecommunication fees, but not payments by Metavante to Eligible Providers. | ||
X. | Federal Regulator shall mean the Chief Examiner of the Federal Home Loan Bank Board, the Office of Thrift Supervision, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or their successors, as applicable. | ||
Y. | Fee Schedule shall mean the portions of schedules containing fees and charges for services rendered to Customer under this Agreement. | ||
Z. | Initial Services shall mean all Services requested by Customer from Metavante under this Agreement prior to the Commencement Date, other than the Conversion services. The Initial Services requested as of the Effective Date are set forth in the schedules attached hereto, which shall be modified to include any additional services requested by Customer prior to the Commencement Date. | ||
AA. | Initial Term shall mean the period set forth on the first page of this Agreement. | ||
BB. | Legal Requirements shall mean the federal, Puerto Rico, and state laws, rules, and regulations pertaining to Customers business. | ||
CC. | Metavante Proprietary Materials and Information shall mean the Metavante Software and all source code, object code, documentation (whether electronic, printed, written, or otherwise), working papers, non-customer data, programs, diagrams, models, drawings, flow charts, and research (whether in tangible or intangible form or in written or machine-readable form), and all techniques, processes, inventions, knowledge, know-how, trade secrets (whether in tangible or intangible form or in written or machine-readable form), developed by Metavante prior to or during the Term of this Agreement, and such other information relating to Metavante or the Metavante Software that Metavante identifies to Customer as proprietary or confidential at the time of disclosure. | ||
DD. | Metavante Software shall mean the software owned by Metavante and used to provide the Services. |
16
EE. | Monthly Base Fee shall mean the minimum monthly fees payable by Customer to Metavante as specifically set forth in the Services and Charges Schedule. | ||
FF. | Network shall mean a shared system operating under a common name through which member financial institutions are able to authorize, route, process and settle transactions (e.g., MasterCard and Visa). | ||
GG. | New Services shall mean any services that are not included in the Initial Services but which, upon mutual agreement of the parties, are added to this Agreement. Upon such addition, New Services shall be included in the term Services. | ||
HH. | Performance Warranty shall have the meaning set forth in Section 6.1. | ||
II. | Plan shall have the meaning set forth in Section 15.1. | ||
JJ. | Privacy Regulations shall mean the regulations promulgated under Section 504 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, as such regulations may be amended from time to time. | ||
KK. | Professional Services shall mean services provided by Metavante for Conversion, training, and consulting, and services provided by Metavante to review or implement New Services or enhancements to existing Services. | ||
LL. | Sensitive Customer Information shall mean Customer Data with respect to a Consumer that is (a) such Consumers name, address or telephone number, in conjunction with such Consumers Social Security number, account number, credit or debit card number, or a personal identification number or password that would permit access to such Consumers account or (b) any combination of components of information relating to such Consumer that would allow a person to log onto or access such Consumers account, such as user name and password or password and account number. | ||
MM. | Services shall mean the services, functions, and responsibilities described in this Agreement to be performed by Metavante during the Term and shall include New Services that are agreed to by the parties in writing. | ||
NN. | Service Levels shall mean those service levels set forth in the Service Level Schedule. | ||
OO. | Taxes shall mean any manufacturers, sales, use, gross receipts, excise, personal property, or similar tax or duty assessed by any governmental or quasi-governmental authority upon or as a result of the execution or performance of any service pursuant to this Agreement or materials furnished with respect to this Agreement, except any income, franchise, privilege, or similar tax on or measured by Metavantes net income, capital stock, net worth or municipal license tax imposed on Metavantes volume of business. | ||
PP. | Term shall mean the Initial Term and any extension thereof, unless this Agreement is earlier terminated in accordance with its provisions. | ||
QQ. | Termination Fee shall have the meaning set forth on the Termination Fee Schedule. | ||
RR. | Third Party shall mean any Entity other than the parties or any Affiliates of the parties. | ||
SS. | Tier 1 Support shall mean the provision of customer service and technical support to end users. The Metavante customer care agents provide assistance with the following, but not limited to payment verification, payee set up, opening service requests for payment research, user education on how to use the Metavante products, technical support with using and accessing the products, and technical support for some browser issues. | ||
TT. | Tier 2 Support shall mean the provision of support to end users for consumer initiated payment issues such as payment not posted, stop payment, late fees, and payment posted for incorrect amount. The Metavante payment research team acts as an advocate to the payee on behalf of the end-user to research and resolve the payment issue in a timely manner. | ||
UU. | User Manuals shall mean the documentation provided by Metavante to Customer which describes the features and functionalities of the Services, as modified and updated by the customer bulletins distributed by Metavante from time to time. | ||
VV. | Visa shall mean VISA U.S.A., Inc. |
17
18
19
Weeks Prior | ||
To Conversion | Event | |
37 Weeks
|
Project Organization and Administration | |
|
Specific individuals to support this Conversion will be assigned at the Customer and at Metavante. Internal project initiation documents will be completed, and a detailed project plan will be developed at Metavante. | |
|
||
36 Weeks
|
Project Kickoff Meeting | |
|
A kickoff meeting is held at the bank to introduce Metavante Conversion Project Management to the Customers project team. The overall Conversion process will be reviewed. Specific details will be discussed regarding project scope, roles and responsibilities, Conversion major events, and critical success factors. | |
|
||
|
Equipment/Network Assessment | |
|
Each office will be visited to record the layout of each location from a network perspective and to inventory existing equipment, including terminals, printers, ATM machines, controllers, and modems. This information will be evaluated to determine requirements for the future. | |
|
||
|
High-Level Application and Operations Review | |
|
A discussion of each application will be conducted at a high level to better understand services provided to existing customers. Current operational processes supported, such as item capture, statement rendering, and exception items, will be reviewed as well as interfaces to the current processor to clarify service requirements and special needs. | |
|
||
|
Conversion Tapes Ordered | |
|
Conversion tapes will be ordered from the appropriate service providers. | |
|
||
30 Weeks
|
Equipment/Network Plan Development | |
|
Based on the Equipment/Network Assessment, an Equipment/Network Plan with a network design and hardware/software requirements will be developed. | |
|
||
|
Staff Training at Metavante | |
|
Key individuals from the Bank will attend application training at Metavante to help with Conversion analysis and to prepare to train others at the Bank. | |
|
||
20 Weeks
|
MIFIL Reports Created | |
|
Metavante reports will be produced using the Conversion test tapes to list each field, all values found in each field, and the number of occurrences of each value. | |
|
||
18 Weeks
|
Product Mapping | |
|
Meetings will be conducted with Metavante product support representatives to review the business processes supported by the Bank based on the product knowledge of Bank personnel, current application documentation, and Conversion file record layouts. Each field will be discussed for clarification and determination of the corresponding use on the Metavante System. All backroom support will be reviewed, a general training plan will be developed, and enhancements will be identified. | |
|
||
16 Weeks
|
Training Bank and Training Network Established | |
|
A training Bank will be set up on the Metavante system to facilitate training of Bank staff and testing of the Conversion. The appropriate network and equipment will be installed at designated training locations. | |
|
||
10 Weeks
|
Test Report Review | |
|
Conversion Test Reports will be reviewed by the product support representative with key contacts at the Bank to verify accuracy of the Conversion process. Issues will be identified and addressed. | |
|
||
|
Operational Analysis | |
|
Business processes, as planned, will be reviewed to confirm that system parameters and processes are aligned with operational procedures. Issues will be identified and addressed. |
20
Weeks Prior | ||
To Conversion | Event | |
6 Weeks
|
Bank Network Installed | |
|
The network to support all Bank locations will be installed. As a general rule, one terminal will be installed at each location in preparation for Readiness Review. The remainder of the equipment will be installed during the last few days before the Conversion. | |
|
||
4 Weeks
|
Readiness Review | |
|
This is a three-day test of our preparedness for the live Conversion with Metavante project staff on-site for support. Test scripts will be distributed to Bank personnel at each location for data entry on the training Bank. Nightly posting will be run with item capture test files as input, reports will be produced, and the test Bank will be balanced each day. Bank personnel will be asked to support all functions of this test using operational procedures from data entry to balancing. This will give Bank staff a chance to practice using the system and gain confidence before dealing with their customers in a production environment. It also will serve to validate network configuration, interface processes, staff training, and operational procedures. Issues will be identified and addressed. | |
|
||
2 Weeks
|
Final Preparation for Conversion | |
|
Technical setup for the Conversion will be reviewed for accuracy, and follow-up calls will be made to external firms supporting the Bank to confirm previously made arrangements (Federal Reserve, current software vendors, ATM support, etc.). A detailed Conversion Weekend Plan will be developed and distributed to all key contacts. | |
|
||
0 Weeks
|
Files Converted, Live on Metavante | |
|
Files will be converted to Metavante over Conversion weekend, after posting on the old processor for Friday night. | |
|
||
|
Conversion Support On-Site | |
|
The Metavante project manager and product support representatives will be on-site the week following Conversion to support Bank personnel. |
21
| Overall Implementation Management | |
| Manage Conversion Milestones | |
| Issue Escalation and Resolution | |
| Administer Project Plan | |
| Facilitate Periodic Meetings | |
| Coordinate Receipt of Data Files | |
| Development of Conversion Cut-over Plan |
| Onsite Scope Definition (products and conversion methods) | |
| Onsite Conversion Kickoff | |
| Detailed definition of Interfaces and Enhancements | |
| Provide Samples of Customer, Internal and Vendor Communication | |
| Finalize Project Timeline | |
| Understand Elements of Success | |
| Define Team Structure/Responsibilities | |
| Technical Review to Include Network, Equipment and Training Site |
Automated Product Conversion of Existing Data |
| Deposits Including Demand, Money Market, NOW, Savings, CDs, IRAs, Passbooks | |
| Combined Statements | |
| Customer Information System (Tape to Tape) Including Deposits, Loans, Cardbase, Safe Deposit, Internet Banking | |
| Integrated Funds Management (Transfers) | |
| Safe Box | |
| Account Analysis | |
| Loans Including Commercial, Consumer, Mortgage/Investor, Revolving Credit, Floor Plans | |
| On-Line Collections | |
| Overdraft Protection (Loan System) | |
| Notepad (existing system only) | |
| Collateral | |
| Tickler | |
| Financial Control/General Ledger | |
| Internet Banking | |
| Bill Payment | |
| Account Reconciliation | |
| ATM/Debit Cards | |
| Credit Cards/Merchant Services | |
| ATM Devices |
| On-line Collections | |
| Letter Writer | |
| Remote Capture to Include Item Processing Transmission | |
| Printback to Include Configuration and Setup of BARR System | |
| IRS Government Reporting | |
| Currency Transaction Reporting | |
| Cash Management | |
| ACH | |
| Exception Desktop Standard Features | |
| Metavante Insight | |
| Enterprise Contact Management | |
| Credit Revue | |
| Shared VRU | |
| Information Desktop | |
| TellerInsight | |
| BankerInsight | |
| Star View and PC STAR | |
| CIS Householding with base plan for Clean CIS (Post Conversion) | |
| Relationship Profitability (Post Conversion) | |
| Relationship Packaging (Post Conversion) | |
| Marketing Suite (Post Conversion) | |
| Financial Control/GL Application Interfaces | |
| Holding Company Chart and Control File | |
| Chart of Accounts | |
| Internet Banking | |
| Bill Payment | |
| Custom Statement Format | |
| Bank Control Setups-System Parameters | |
| System Generated Reports | |
| ATM Management System | |
| Print setup for ATM Receipts and Deposit Envelopes (Parameters dependent on device type) | |
| Settlement Manager | |
| Debit Dispute System | |
| Predictive Risk Management | |
| Card Activation | |
| Card Personalization with no re-issue | |
| GHR Lending |
| Wholesale Website | ||
| Consumer Lending | ||
| Mortgage Lending |
| Image Solutions |
| Vision Content (Reports, Deposits, Lending, COLD) | ||
| Metavante Long Term Archive (7 years) |
| Review of Current Processor Files and Customer Disclosure Information | |
| Onsite Product Review and Mapping of Some Applications | |
| Creation of Data Extracts from Current Processor Files | |
| Branch Software Customization Requirement Definition | |
| Automated Data Mapping Tools | |
| Assist with MICR Document Definition | |
| Assist with Output Form Definition |
| Duplicate Account Checks and Renumbering of Duplicates | |
| One-time Creation of File to Order New Documents for Duplicate Accounts | |
| Conversion Program Coding |
22
| Branch Software Testing | |
| System to System Reconciliation | |
| Reconcile Converted Applications to Converted GL | |
| Internal Verification of Converted Data | |
| Test End of Day Processing | |
| Testing the Item Processing Transmissions to Include POD, Bulk File and Inclearings | |
| Testing of Report Transmission and Print |
| Provide Test Report and Mapping Specifications for Verification | |
| One Set of Pre and Post Verification Reports Provided | |
| Provide Guidance For: |
| Converted Data Verification By Customer | ||
| System Parameter Review | ||
| Review and Testing of All Software Customization |
| Test Report Provided on CD ROM or Transmission to Optical |
| Retirement Transactions | |
| No Book Transactions for Passbooks | |
| Year-to-Date Interest for Both Loans and Deposits | |
| Year-to-Date Withholding (back-up and retirement distribution) | |
| Year-to-Date Penalty (forfeiture) | |
| Retirement Contributions | |
| Retirement Distributions | |
| Investor Loan History Since Last Cut-off | |
| History for Current Year and 2 Prior Years on General Ledger-Balances Only | |
| General Ledger Current Year Budget | |
| Outstanding Billing Amounts |
| Installation of Network Circuits and Communication Equipment | |
| Setup Training Site | |
| Setup Branch Training Workstations |
| Provide Needs Analysis to Assist in Determining Training Requirements | |
| Provide Tools to Assist in Developing a Training Plan | |
| Establish a Production Bank in the Conversion Process to Facilitate Training | |
| Train-the-Trainer Classes at a Metavante Location for Core Applications | |
| On-site Branch Software Training |
| Joint Review of Workflow/Business Processes | |
| Process Documented by Job Function |
| A Coordinated Three Day Event Testing Daily Activities/Workflow | |
| Processing in a Production Environment: |
| POD Capture and Posting of Test Data | ||
| EOD Processing | ||
| ATM Loads and Communications |
| Onsite Support and Management | |
| Customized Application Checklists and Sample Scripts Provided | |
| Management Report Identifying Areas of Risk and Follow-up | |
| Introduction to Client Relationship Manager |
| All Conversion Programs and Software Customization is Frozen to Ensure Stable Environment | |
| Managed Process For Changes Required During This Period |
| Implement Conversion Cut-over Plan | |
| Convert Production Files From Current Processor After Friday Night Posting | |
| Data Conversion Verification | |
| Convert ATM Devices |
| 1-50-converted conversion week | ||
| >50-converted 2-4 weeks prior to conversion week |
| System to System Reconciliation | |
| Conversion Reports on CD ROM | |
| Assistance in Coordinating: |
| Equipment Installation | ||
| Deployment and Certification of Final Branch Automation Software |
| Centralized Onsite Management and Application Support | |
| Conduct Daily Management Meetings | |
| Document and Monitor Issues | |
| Reconcile Converted Applications to General Ledger and Support Daily Balancing Activity Related to Converted Applications | |
| Monitor Daily Proof Process |
| Support for first Account Analysis Statement | |
| Support for first Investor Cutoff | |
| Year-end Testing | |
| Transition to Ongoing Support Area Two Weeks After Conversion Date | |
| Transition to Client Relationship Manager |
23
1. | Customer shall develop the MS Access based IRA companion application required to accommodate the following: |
a. | YTD and Life-to-date taxable vs. non-taxable interest & principal on contributions and distributions (must allow for update of this information based upon transactions passed from Metavante) | ||
b. | Records of early payment of taxes which also reduces total taxable base | ||
c. | Must accept a file from BIC of all automated transactions daily (interest, ACH, automated distributions, etc) and update totals buckets | ||
d. | Indicator must be held of accounts which need to do reporting at end of year of 1st year contributions as 480.7 | ||
e. | Any other information not stored by the Metavante Deposit system required for Puerto Rican processing of IRAs |
2. | Customer will be responsible to input account information in the above application to prepare it for live processing post conversion. This information may need to be gathered from a variety of sources including Excel spreadsheets, and historical documents. The information entered must be balanced against the information converted to the Metavante Deposit system. | ||
3. | Customer will be responsible to scan all documents to Vision Content (Treev) associated with IRAs, and Loans that the bank wishes to have available to support operations post conversion. | ||
4. | Customer will be responsible to build and input all scripts in Spanish into Enterprise Contact Management used for service, sales, and call requests. Metavante will train Customer in the manner to accomplish this authoring. | ||
5. | Customer will be responsible to create all forms for deposit new account origination using Liquid Office in both Spanish and English. Metavante will provide consulting assistance to train Customer personnel in this task. | ||
6. | Customer is responsible to create all custom forms required for their lending programs. Should Customer wish to license any VMP forms in addition to the standard documents provided by GHR, a contract directly with VMP will be required. | ||
7. | Customer must also create the 480.x form in Word (for data merge) that will be fed from Metavante per items a, b, and c below |
a. | daily extract of new IRAs for generation of form 480.x fed to Word for notice print | ||
b. | daily extract of closed IRAs for generation of form 480.x fed to Word for notice print | ||
c. | end of year extract of new IRAs fed by ACH for generation of form 480.x fed to Word for notice print |
8. | Customer will be responsible to create the Word template to receive the file for data merge and notice production of new Investor CDs and IRAs on a specific day of the month. | ||
9. | Customer will be responsible to work with Bankware to accept Metavantes standard Asset/Liability feed in order to produce the required reporting. | ||
10. | Customer will be responsible to work with Easy Call to accept Metavantes standard Call Report feed in order to produce the required reporting. | ||
11. | Customer will be responsible to create the extract from the BIC that will be passed to CRA Wiz. Metavante will provide consulting to assist in the bank understanding how to accomplish this. | ||
12. | Customer will be responsible to establish the Excel spreadsheet to accept data from Metavante used in calculating incentive compensation for deposits and loans. | ||
13. | Customer will be responsible to work with USBA to accept Metavantes standard Baker Hill One Point feed in order to produce the required reporting. If modifications are required assumes bank will accomplish this through a 3rd party provider and an ETL tool or by creating a special extract using the BIC. | ||
14. | Customer to provide resources to identify language requirements for: |
a. | bilingual versions of all deposit/loan statements, bills, collection letter, and notices | ||
b. | bilingual retirement statements | ||
c. | bilingual safebox notices | ||
d. | bilingual retirement notices |
15. | Customer will be responsible to assist in testing, and provide required Symposium resources to assist with Metavante questions to develop a CTI interface for the following: |
a. |
real-time TAPI interface for screen pop to ECM
|
||
b. | ECM scripting to Symposium soft-phone for outbound calling |
16. | Customer will fund S1 development for integration and setup as follows: |
a. | S1 setup required to utilize Metavante EII for presentation of e-statements and calling of check images | ||
b. | S1 setup required to change over and test integration to Metavante through Connectware V6 | ||
c. | S1 setup required to receive batch BAI2 files from Metavante Deposits and Loans for prior day balances and activity (consulting with Metavante and version upgrade) |
17. | Customer will be responsible to contract with Peoplesoft to accommodate any changes necessary to accept Metavantes standard daily general ledger interface file. | ||
18. | Customer will be responsible to either 1) certify their existing receipt printers for tellers meet Metavante specifications or 2) acquire printers that meet Metavante specifications. | ||
19. | Customer will be responsible to provide data files in an acceptable format (flat files with associated copy books, each record containing appropriate key fields, e.g. account number) of all applications to be converted to Metavante from the appropriate source applications, e.g. Bankway, Onbase, CRM, and any others. If field data required for Metavante conversions is not available in the |
24
files provided by Customer, and appropriate default values cannot be determined, Customer will be responsible to enter the required data, or provide complementary data files of the missing information. | |||
20. | File transmissions to/from 3 rd party entities will come by way of the PC Barr located at Customers location, and will traverse the backbone between Metavante and Customer. Typically files sent from Metavante to a 3 rd party, or from a 3 rd party to Metavante will contain JCL that will be recognized by the PC Barr for automatic routing. However, if the 3 rd party requires the use of special software for the transmission of the files, e.g. NDM, additional costs may be incurred by Customer f or Metavante to setup, test, certify, and perform the transmission(s) in a different fashion. |
25
26
27
28
A. | ACH Services shall mean Services whereby Metavante: initiates and/or receives automated clearing house debit and credit entries, and adjustments to debit entries and credit entries to accounts of End Users; and § credits and/or debits the same to such accounts. | ||
B. | Availability shall mean that the Service associated with the applicable Service Level is available to Customer and End Users, as applicable, as contemplated by this Agreement and is functioning normally in all other material respects as defined in each description of each Service Level set forth in this Service Level Schedule. | ||
C. | Business Case Assessment shall have the meaning set forth in Section 2 of Attachment A to this Service Level Schedule. | ||
D. | Business Day shall mean each Monday through Friday except holidays recognized by the Federal Reserve Bank of New York. | ||
E. | Business Intelligence Center or BIC shall mean the information support system implemented by Metavante to access key business information contained in the Data Warehouse. The tools included in the BIC offering are designed to support both casual and power Customer users. The Software for the so-called client portion of the BIC offering (which includes Data Warehouse-related Software and report writing Software) will reside on equipment located at Customer facilities; all other elements of the Software for the BIC offering will reside at Metavante facilities. BIC may be operated by Customers or Metavantes personnel. | ||
F. | Card Management System or CMS is a tool accessible by Customer that provides online inquiry and maintenance, card issuance, transaction authorization and customer account management for debit, prepaid debit and ATM card programs. | ||
G. | CIS means Customer Information System. | ||
H. | Core System shall mean the following elements of the Metavante System: the so-called Deposit System, the so-called Loan System and CIS. | ||
I. | Critical Operations Reports shall mean each of the following reports: Loan System (R6000-R7530) and Deposit System (R1000-2640 and R2669-R4998), and all enhancements and replacements therefor. | ||
J. | Demarcation shall mean the measure from the router into the host, the round trip into the host, then back into the router. | ||
K. | Data Warehouse shall mean Metavantes data warehouse commonly known as Business Intelligence Center (which includes the tool commonly known as Business Objects), and any permitted successors and replacements therefor. | ||
L. | Lending Solutions shall mean the following elements of the Metavante System: the so-called GHR Wholesale Web Site, the so-called GHR Consumer Lending Solution and the so-called GHR Mortgage Lending Solution. | ||
M. | EFD shall mean electronic funds delivery. | ||
N. | Operations Center shall mean the data center from which Metavante provides the Services. | ||
O. | Processing Day shall mean any Monday through Saturday except holidays recognized by the Federal Reserve Bank of New York, other than the following holidays which shall each be deemed to be a Processing Day: Martin Luther King Day, Presidents Day, Columbus Day and Veterans Day. |
29
P. | Scheduled Downtime shall mean any period of non-Availability due to scheduled maintenance as set forth in each description of each Service Level set forth in this Service Level Schedule and other maintenance periods agreed to in writing in advance by the parties. | ||
Q. | Scheduled Hours of Availability shall mean the period of time during which Availability is measured for a given Service Level as set forth in each applicable description of each Service Level set forth in this Service Level Schedule. | ||
R. | Service Level Change shall have the meaning set forth in Section 2 of Attachment A to this Service Level Schedule. | ||
S. | Service Level Credit shall have the meaning set forth in Section 1.4 A of this Service Level Schedule. | ||
T. | Service Level Credit Event shall have the meaning set forth in Section 1.5 of this Service Level Schedule. | ||
U. | Service Level Failure shall have the meaning set forth in Section 1.4D of this Service Level Schedule. | ||
V. | Service Level Monthly Cap shall have the meaning set forth in Section 1.4B of this Service Level Schedule. | ||
W. | SLA Team shall have the meaning set forth in Section 3A of Attachment A to this Service Level Schedule. | ||
X. | Tandem/BASE24 shall mean the application responsible for receiving transaction authorization data from POS, ATM devices and EFT associations. The transaction authorization data is then delivered to host applications for authorization decisions via external associations or directly to the Card Management System. |
A. | Except as otherwise expressly provided in this Service Level Schedule, all Service Levels shall be measured consistently on a calendar month basis. No later than thirty (30) days following the end of each month, Metavante shall provide Customer with a monthly performance report for the Services, which report shall include its performance with respect to each of the Service Levels, including: a. Metavantes performance against, and calculations with respect to, each Service Level during the preceding month and prior months; and b. Service Level Failures occurring during the preceding month. Such measurement, monitoring and reporting shall permit Customer to verify compliance with the Service Levels. | ||
B. | Metavante shall promptly investigate, assemble and preserve pertinent information with respect to, report on the causes of and correct all performance related failures associated with, Service Levels, including performing and taking appropriate preventive measures to prevent recurrence. In addition, Metavante shall provide Customer with communications as soon as reasonably practicable with respect to issues that impact or could reasonably be expected to impact Customer. Metavante shall use commercially reasonable efforts to minimize recurrences of such failures for which it is responsible. Customer shall use reasonable efforts to correct and minimize the recurrence of problems for which Customer is responsible and that prevent Metavante from meeting the Service Levels. Metavante shall use commercially reasonable efforts to resolve all problems and requests within the scope of Services notwithstanding whether any Service Level has or has not been met, and shall notify Customer promptly of any such unresolved issues known to it. | ||
C. | Metavante shall maintain reasonable supporting information for each monthly performance report for at least fifteen (15) months and shall, at Customers request, make such information available to Customer. | ||
D. | Metavante shall notify Customer promptly in such form and format as the parties mutually agree if Customer becomes entitled to a Service Level Credit. The notice shall specify each Service Level Credit Event and each associated Service Level Failure and the amount of the Service Level Credit that Customer is entitled to receive. |
A. | A Service Level Credit shall mean a percentage credit based on the invoice to be submitted by Metavante to Customer with respect to the Services provided in the month in which a Service Level Failure occurs based on Metavantes performance relative to the Service Levels. A Service Level Credit is a reduction in price to reflect the reduced value of the Services and is not liquidated damages for Metavantes failure to meet any Service Level. However, a Service Level Credit shall be an exclusive remedy with respect to a Service Level Failure and shall be in lieu of other contractual remedies except as provided for in Section 8 of this Agreement. Metavante shall apply Service Level Credits to Customers invoice in the month following the event giving rise to the Service Level Credit. If no additional invoices are to |
30
be issued by Metavante, Metavante shall pay Customer the amount of the Service Level Credit in immediately available funds. | |||
B. | Service Level Credits applied during any month shall not exceed twenty percent (20%) of the applicable monthly invoice prior to the application of any credits (the Service Level Monthly Cap). | ||
C. | Service Level Credits payable by Metavante to Customer during any calendar year shall not exceed one hundred percent (100%) of the average monthly fees payable by Customer to Metavante during the previous calendar year prior to the application of any credits. | ||
D. | Service Level Failure . A Service Level Failure occurs whenever Metavante fails to meet a Service Level. Metavante shall be excused for a Service Level Failure to the extent the Service Level Failure is attributable to: |
(i) | an event to the extent excused under Section 17.11 of the Agreement, or | ||
(ii) | acts or omissions of Customer. |
A. | Periodic Review . Upon either partys request from time to time, the parties may periodically review the performance categories, metrics and Service Levels and modify, add or delete them in accordance with the change process set forth in Attachment A to this Service Level Schedule. | ||
B. | Service Level Review . From time to time, the parties shall meet to discuss performance with respect to, and matters relating to, the Service Levels. |
A. | The Core System Service Level means that each of the Core Systems shall have ninety-nine percent (99%) Availability. Availability means the ability of Customer to access each of the Core Systems and perform transactions necessary to complete the function within each of such Core Systems with up to date information during the Scheduled Hours of Availability. The Scheduled Hours of Availability for the Core System Service Level shall be 7:00 a.m. to 10:00 p.m. each Processing Day. No Schedule Downtime shall exist unless otherwise agreed in writing between the parties. Metavantes obligation under this Service Level is subject to Customer meeting its 11:00 p.m. input data commitment. However, up to 1:00 a.m., Metavante commits to the 7:00 a.m. online availability from the time Metavante receives Customer input data. | ||
B. | A Service Level Credit Event for the Core System Service Level shall occur if Availability is ninety six and one-half percent (96.5%) or less three times in any consecutive six month period. The Service Level Credit shall be six percent (6%). |
31
A. | The Operations Center Availability Service Level means that communications between Customers network and the Operations Center shall have ninety-nine and nine-tenths percent (99.9%) Availability. Availability means that there are communications between Customers network and the Operations Center during Scheduled Hours of Availability. The Scheduled Hours of Availability for the Operations Center Availability Service Level shall be twenty four hours a day, seven days per week. Scheduled Downtime for the Operations Center Availability Service Level is: a. Sundays between 2:00 a.m. and 6:00 a.m.; b. other planned outages of up to one (1) hour per month in the aggregate, provided that Metavante shall notify Customer of any such planned outages using Metavantes InfoSource notification system at least twenty four (24) hours prior to the planned outage specifying the duration of the planned outage, it being understood that if such outage exceeds the duration of the planned outage, such outage shall not be deemed to be Scheduled Downtime; c. downtime if Customer elects not to have SNS back-up capabilities; and d. equipment maintenance periods that are mutually agreed upon in writing in advance. | ||
B. | A Service Level Credit Event for the Operations Center Availability Service Level shall occur if Availability for a month is ninety six and one-half percent (96.5%) or less three times in any consecutive six month period. The Service Level Credit shall be eight percent (8%). | ||
C. | For the avoidance of doubt, the Operations Center Availability Service Level measures network transport and not necessarily Customers experience. For example, a Customer user may assume the network is the cause of an issue when in fact the actual issue is something other than the wide area network (WAN). |
A. | The Business Intelligence Center Service Level means that the BIC shall have ninety-eight percent (98%) Availability. Availability means that the BIC is accessible for use by Customer to access the Data Warehouse and that the same is functioning normally in all material respects during Scheduled Hours of Availability. The Scheduled Hours of Availability for the Business Intelligence Center Service Level shall be 7:00 a.m. to 6:00 p.m. each Processing Day. Scheduled Downtime for the Business Intelligence Center Service Level is Sundays. | ||
B. | A Service Level Credit Event for the Business Intelligence Center Service Level shall occur if Availability for a month is ninety five percent (95%) or less for the Business Intelligence Center Service Level occurs three times in any consecutive six month period. The Service Level Credit shall be four percent (4%). |
A. | The Business Intelligence Center Prior Day Data Updates Service Level means that each Processing Day, Metavante shall initiate and complete associated processing with respect to the BIC no later than 7:00 a.m. the following Business Day after Metavante has received all required posting input data, provided that such data is received no later than 11:00 p.m. on the Processing Day. |
32
B. | A Service Level Credit Event for the Business Intelligence Center Processing Service Level shall occur if three or more Service Level Failures occur in any month with respect to the Business Intelligence Center Processing Service Level. The Service Level Credit shall be four percent (4%). |
A. | The Batch Report Service Level means that each Processing Day, Metavante shall initiate batch processing with respect to all batch reports and have such processing completed and all Critical Operations Reports available for Customer to obtain from Metavantes systems within four (4) hours after Customers submission to Metavante of a so-called end of day command, provided that Metavante has received from Customer all required posting input data no later than 11:00 p.m. on the Processing Day. However, up to 1:00 a.m., Metavante commits to a rolling four (4) hours from the time Metavante receives Customer input data. | ||
B. | A Service Level Credit Event for the Daily Batch Report Service Level shall occur if a Service Level Failure occurs with respect to the Daily Batch Report Service such that associated processing is not completed and such reports are not available for Customer to obtain by 10:00 a.m. the following day three or more times in any month with respect to the Daily Batch Report Service Level. In each case, the Service Level Credit shall be four percent (4%). |
A. | The Year-End Batch Report Service Level means that Metavante shall initiate batch processing with respect to all year-end batch reports and have such processing completed and all such reports available for Customer to obtain from Metavantes systems within fifteen (15) hours after Customers submission to Metavante of a so-called end of year command, provided that such end of year command is issued no later than 1:00 a.m. the day following the last Processing Day of the applicable year. | ||
B. | A Service Level Credit Event for the Year-End Batch Report Service Level shall occur if Metavante commits a Service Level Failure with respect to the Year-End Batch Report Service Level such that associated processing is not completed and such reports are not available for Customer to obtain by 6:00 a.m. the first Business Day following the submission to Metavante of a so-called end of year command. The Service Level Credit shall be four percent (4%). |
A. | The Tandem Electronic Funds Delivery Service Level means that Tandem/Base 24 shall have ninety-nine and seven tenths percent (99.7%) Availability. Availability means Tandem/Base 24 is available and operational and is functioning normally in all material respects with respect to all functions during Scheduled Hours of Availability. The Scheduled Hours of Availability for the Tandem Electronic Funds Delivery Service Level shall be twenty four hours a day, seven days per week. Scheduled Downtime for the Tandem Electronic Funds Delivery Service Level is Sundays between 2:00 a.m. and 6:00 a.m. | ||
B. | A Service Level Credit Event for the Tandem Electronic Funds Delivery Service Level shall occur if Availability for a month is ninety eight percent (98%) or less three times in any consecutive six month period. The Service Level Credit shall be six percent (6%). |
A. | The CMS Electronic Funds Delivery Service Level means that CMS shall have ninety-nine and five tenths percent (99.5%) Availability. Availability means CMS is available and operational and is functioning normally in all material respects with respect to all functions during Scheduled Hours of Availability. The Scheduled Hours of Availability for the CMS Electronic Funds Delivery Service Level shall be twenty four hours a day, seven days per week. Scheduled Downtime for the CMS Electronic Funds Delivery Service Level is Sundays between 2:00 a.m. and 6:00 a.m. | ||
B. | A Service Level Credit Event for the CMS Electronic Funds Delivery Service Level shall occur if Availability for a month is ninety eight percent (98%) or less three times in any consecutive six month period. The Service Level Credit shall be six percent (6%). |
33
A. | The EFD Reports Service Level means that each day, Metavante shall initiate processing with respect to all daily EFD reports and have all such processing completed and all such reports available for Customer to obtain from Metavantes systems by 3:00 a.m. the following day. | ||
B. | A Service Level Credit Event for the EFD Reports Monthly Service Level shall occur if a Service Level Failure occurs with respect to the EFD Reports Service Level such that such reports are not available for Customer to obtain by 3:00 p.m. the following day three times in a month. The Service Level Credit for each such Service Level Failure shall be six percent (6%). |
A. | The Teller Transactions Response Time Service Level means that Metavante shall process so-called teller transactions in an average of 1.5 seconds or less from the time that the transaction is sent by Customers point of demarcation to the time the processed data is returned to Customers point of demarcation. The Scheduled Hours of Availability for the Teller Transactions Response Time Service Level shall be 7:00 a.m. to 10:00 p.m. each Processing Day. | ||
B. | A Service Level Credit Event for the Teller Transactions Response Time Service Level shall occur if Metavante processes so-called teller transactions in a month in an average of 5 seconds or more from the time that the transaction is sent by Customers point of demarcation to the time the processed data is returned to Customers point of demarcation three times in any consecutive six month period. The Service Level Credit shall be six percent (6%). |
A. | The CRT Transactions Response Time Service Level means that Metavante shall process so-called CRT transactions in an average of 2.5 seconds or less from the time that the transaction is sent by Customers point of demarcation to the time the processed data is returned to Customers point of demarcation. The Scheduled Hours of Availability for the CRT Transactions Response Time Service Level shall be 7:00 a.m. to 10:00 p.m. each Processing Day. | ||
B. | A Service Level Credit Event for the CRT Transactions Response Time Service Level shall occur if Metavante processes so-called CRT transactions in a month in an average of 6 seconds or more from the time that the transaction is sent by Customers point of demarcation to the time the processed data is returned to Customers point of demarcation three times in any consecutive six month period. The Service Level Credit shall be six percent (6%). |
34
A. | Details of the Service Level Change ( e.g. , measuring tool and methodology, Service Level calculation, exclusions, associated Service Level Credit, projected implementation/effective date); | ||
B. | Objective or expected benefit; | ||
C. | Implementation difficulty, effort and cost, if any, and responsibility therefor; | ||
D. | Cost, if any, and any possibility of mitigation; | ||
E. | Risk factors (e.g., operational, regulatory, controls); | ||
F. | Degree of change; | ||
G. | Nature and extent of impact upon the parties; | ||
H. | Combinational impacts ( i.e. , how one Service Level affects another); | ||
I. | System implications; and | ||
J. | Issues relating to Applicable Law. |
A. | A joint Metavante-Customer team (the SLA Team ) shall review, evaluate and potentially modify the Service Level Changes and associated Business Case Assessments. | ||
B. | At a minimum, the SLA Team shall consist of personnel designated by the parties as necessary for an effective review of the Business Case Assessments. The SLA Team shall operate and make decisions by consensus among the parties representatives, but approval of proposed Service Level Changes shall not be unreasonably withheld or delayed. With respect to each Service Level Change, the SLA Team shall elect one of three results: |
I. | terminate consideration of the Service Level Change without further review; | ||
II. | remand the associated Business Case Assessment to the parties for reconsideration based upon SLA Teams comments; or | ||
III. | approve the Service Level Change for submission for signoff. |
35
A. | a project schedule; | ||
B. | required updates to this schedule and other affected policies, procedures and standards; | ||
C. | a communication plan; and | ||
D. | required changes to systems, reporting schedules, training and processes. |
36
Number of Months Following Termination | Rebate | |
1 | 100% | |
2 | 5/6 | |
3 | 4/6 | |
4 | 3/6 | |
5 | 2/6 | |
6 | 1/6 |
37
1. | Customer authorizes and directs Metavante to enroll Customer in the SecureCode Program as an Issuer. As Customers third party processor for MasterCard transactions, Metavante will provide services as described in Exhibit A for Customer in support of its participation in the SecureCode Program in accordance with the terms and subject to all terms, limitations, and conditions of the Services Agreement, but Metavante has no responsibility or obligation for the SecureCode Program itself. Customer acknowledges and agrees that this is Metavantes sole responsibility in connection with the SecureCode Program and that Metavante will have no other obligation or liability to Customer related to the Program . | ||
2. | Customer will pay the additional fees to Metavante as described in Exhibit A hereto and any and all fees assessed by MasterCard in connection with the SecureCode Program. | ||
3. | Customer will be responsible for all obligations imposed by MasterCard upon Issuers participating in the SecureCode Service. In particular, and without limitation, Customer will be responsible for fraudulent transactions when the cardholders identity is authenticated through a password that the cardholder provides when making an online purchase under the SecureCode Program. Customer will be responsible for contracting with its cardholders to provide the service to them, and for establishing terms of its cardholders use of the service in accordance with MasterCards operating regulations. Metavante may provide Customer with samples of cardholder terms for the program that have been provided to Metavante by MasterCard or other third parties, but Customer acknowledges and agrees that these forms are provided by Metavante AS IS and without warranty or representation of any kind. | ||
4. | Customer agrees to indemnify, defend, and hold Metavante harmless from any and all loss, liability, claims, costs, and expenses relating to Customers participation in the SecureCode Program as an Issuer. |
By:
|
||||
|
||||
|
||||
Date:
|
||||
|
38
39
F-1
F-3
F-4
F-5
F-6
F-7 to F-8
F-9
F-11 to F-61
F-62 to F-63
F-64 to F-97
F-97 to F-100
F-101 to F-108
F-1
F-2
José Rafael
Fernández
President and Chief Executive Officer
Date: March 27, 2007
Norberto González
Executive Vice President and Chief Financial Officer
Date: March 27, 2007
F-3
F-10
F-4
DECEMBER 31, 2006 AND 2005 AND JUNE 30, 2005
F-5
FOR THE YEAR ENDED DECEMBER 31, 2006, THE SIX-MONTH PERIOD
ENDED
DECEMBER 31, 2005 AND THE FISCAL YEARS ENDED JUNE 30,
2005 AND 2004
F-6
FOR THE YEAR ENDED DECEMBER 31, 2006,
THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2005
AND THE FISCAL YEARS ENDED JUNE 30, 2005 AND 2004
F-7
FOR THE YEARS ENDED DECEMBER 31, 2006,
THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2005
AND THE FISCAL YEARS ENDED JUNE 30, 2005 AND 2004
F-8
FOR THE YEAR ENDED DECEMBER 31, 2006,
SIX-MONTH PERIOD ENDED DECEMBER 31, 2005
AND THE FISCAL YEARS ENDED JUNE 30, 2005 AND 2004
F-9
F-24
F-25
F-56
F-63
AS OF DECEMBER 31, 2006 AND 2005 AND JUNE 30, 2005,
AND FOR THE YEAR ENDED DECEMBER 31, 2006,
THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2005
AND THE FISCAL YEARS ENDED JUNE 30, 2005 AND 2004
1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
F-11
F-12
F-13
F-14
F-15
F-16
F-17
Fiscal Year Ended June 30,
2005
2004
(In thousands, except for per share data)
$
59,669
$
59,717
(3,057
)
3,932
(1,459
)
(1,394
)
55,153
62,255
(4,802
)
(4,198
)
$
50,351
$
58,057
$
2.23
$
2.48
$
2.05
$
2.59
$
2.14
$
2.32
$
1.96
$
2.43
24,571
22,394
1,104
1,486
25,675
23,880
F-18
Six-Month
Year Ended
Period Ended
Fiscal Year Ended
December 31,
December 31,
June 30,
2006
2005
2005
2004
3.97
%
2.75
%
2.75
%
2.25
%
34
%
44
%
35
%
33
%
4.24
%
4.03
%
4.06
%
3.77
%
8.5
8.5
7
7
Permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise
would require bifurcation;
Clarifies which interest-only strips and principal-only strips
are not subject to the requirements of Statement 133;
Establishes a requirement to evaluate interests in securitized
financial assets to identify interests that are freestanding
derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation;
Clarifies that concentrations of credit risk in the form of
subordination are not embedded derivatives;
Amends SFAS No. 140 to eliminate the prohibition on a
qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest
other than another derivative financial instrument.
F-19
Income tax benefits should be recognized when, based on the
technical merits of a tax position, the entity believes that if
a dispute arose with the taxing authority and were taken to a
court of last resort, it is more likely than not (i.e., a
probability of greater than 50 percent) that the tax
position would be sustained as filed; and
If a position is determined to be more likely than not of being
sustained, the reporting enterprise should recognize the largest
amount of tax benefit that is greater than 50 percent
likely of being realized upon ultimate settlement with the
taxing authority.
F-20
F-21
2.
INVESTMENTS
F-22
December 31, 2006
Gross
Gross
Weighted
Amortized
Unrealized
Unrealized
Fair
Average
Cost
Gains
Losses
Value
Yield
(In thousands)
$
20,254
$
64
$
872
$
19,446
5.68
%
50,598
520
2,347
48,770
6.11
%
70,852
584
3,219
68,217
150,099
1,506
148,593
5.45
%
40,690
408
235
40,863
5.61
%
722,419
7
5,139
717,287
5.48
%
913,208
415
6,880
906,743
984,060
999
10,099
974,960
5.52
%
15,022
127
14,895
2.71
%
848,400
7
17,529
830,878
3.85
%
55,262
3,961
51,301
5.29
%
918,684
7
21,617
897,074
713,171
628
11,529
702,270
5.04
%
182,874
215
2,176
180,913
5.35
%
152,748
18
1,303
151,463
5.13
%
1,048,793
861
15,008
1,034,646
1,967,477
868
36,625
1,931,720
4.55
%
$
2,951,537
$
1,867
$
46,724
$
2,906,680
4.87
%
F-23
December 31, 2005
Gross
Gross
Weighted
Amortized
Unrealized
Unrealized
Fair
Average
Cost
Gains
Losses
Value
Yield
(In thousands)
$
174,836
$
$
5,599
$
169,237
3.45
%
28,356
183
340
28,199
5.29
%
92,005
1,468
90,537
4.75
%
295,197
183
7,407
287,973
488,356
12,193
476,163
5.17
%
36,799
630
129
37,300
5.83
%
249,297
552
4,401
245,448
5.47
%
774,452
1,182
16,723
758,911
1,069,649
1,365
24,130
1,046,884
4.95
%
60,168
818
59,350
2.84
%
1,021,634
77
19,661
1,002,050
4.09
%
62,084
2,987
59,097
5.32
%
1,143,886
77
23,466
1,120,497
822,870
1,238
10,389
813,719
5.05
%
216,237
1,371
1,196
216,412
5.52
%
163,262
129
1,187
162,204
5.42
%
1,202,369
2,738
12,772
1,192,335
2,346,255
2,815
36,238
2,312,832
4.65
%
$
3,415,904
$
4,180
$
60,368
$
3,359,716
4.75
%
June 30, 2005
Gross
Gross
Weighted
Amortized
Unrealized
Unrealized
Fair
Average
Cost
Gains
Losses
Value
Yield
(In thousands)
$
174,823
$
$
1,807
$
173,016
3.47
%
45,744
1,138
152
46,730
5.78
%
69,028
4
3,098
65,934
4.45
%
289,595
1,142
5,057
285,680
549,936
477
1,880
548,533
4.48
%
13,959
306
36
14,229
5.65
%
182,663
410
1,795
181,278
4.61
%
746,558
1,193
3,711
744,040
1,036,153
2,335
8,768
1,029,720
4.40
%
856,964
968
7,250
850,682
3.76
%
62,094
10
1,664
60,440
5.33
%
919,058
978
8,914
911,122
914,174
14,226
2,184
926,216
5.11
%
250,189
4,520
473
254,236
5.33
%
51,325
181
372
51,134
4.49
%
1,215,688
18,927
3,029
1,231,586
2,134,746
19,905
11,943
2,142,708
4.59
%
$
3,170,899
$
22,240
$
20,711
$
3,172,428
4.53
%
December 31, 2006
Available-for-sale
Held-to-maturity
Amortized
Amortized
Cost
Fair Value
Cost
Fair Value
(In thousands)
$
26,962
$
24,676
$
169,927
$
168,378
312,392
306,271
467
415
281,255
273,831
43,423
43,126
155,110
148,593
70,852
68,217
918,684
897,073
1,241
1,294
911,967
905,449
1,048,793
1,034,647
913,208
906,743
1,048,793
1,034,647
$
984,060
$
974,960
$
1,967,477
$
1,931,720
Available-for-sale
Less Than 12 Months
Amortized
Unrealized
Fair
Cost
Loss
Value
(In thousands)
$
1,996
$
172
$
1,824
880,687
6,641
874,046
87
57
30
882,770
6,870
875,900
12 Months or More
Amortized
Unrealized
Fair
Cost
Loss
Value
14,086
700
13,386
9,101
239
8,862
24,962
2,290
22,672
48,149
3,229
44,920
Total
Amortized
Unrealized
Fair
Cost
Loss
Value
16,082
872
15,210
889,788
6,880
882,908
25,049
2,347
22,702
$
930,919
$
10,099
$
920,820
F-26
Less Than 12 Months
Amortized
Unrealized
Fair
Cost
Loss
Value
(In thousands)
$
393,983
$
1,262
$
392,721
393,983
1,262
392,721
12 Months or More
Amortized
Unrealized
Fair
Cost
Loss
Value
15,022
128
14,894
841,900
17,529
824,371
55,262
3,961
51,301
484,083
13,745
470,338
1,396,267
35,363
1,360,904
Total
Amortized
Unrealized
Fair
Cost
Loss
Value
15,022
127
14,895
841,900
17,529
824,371
55,262
3,961
51,301
878,066
15,008
863,058
$
1,790,250
$
36,625
$
1,753,625
F-27
Available-for-sale
Less Than 12 Months
Amortized
Unrealized
Fair
Cost
Loss
Value
(In thousands)
$
74,705
$
2,060
$
72,645
13,482
199
13,283
428,977
9,497
419,480
67,005
1,468
65,537
584,169
13,224
570,945
12 Months or More
Amortized
Unrealized
Fair
Cost
Loss
Value
100,131
3,539
96,592
2,690
141
2,549
218,674
7,226
211,448
321,495
10,906
310,589
Total
Amortized
Unrealized
Fair
Cost
Loss
Value
174,836
5,599
169,237
16,172
340
15,832
647,651
16,723
630,928
67,005
1,468
65,537
$
905,664
$
24,130
$
881,534
F-28
Less Than 12 Months
Amortized
Unrealized
Fair
Cost
Loss
Value
(In thousands)
$
486,520
$
9,559
$
476,961
9,965
65
9,900
435,973
4,902
431,071
932,458
14,526
917,932
12 Months or More
Amortized
Unrealized
Fair
Cost
Loss
Value
60,168
818
59,350
510,113
10,102
500,011
52,119
2,922
49,197
269,134
7,870
261,264
891,534
21,712
869,822
Total
Amortized
Unrealized
Fair
Cost
Loss
Value
60,168
818
59,350
996,633
19,661
976,972
62,084
2,987
59,097
705,107
12,772
692,335
$
1,823,992
$
36,238
$
1,787,754
F-29
Available-for-sale
Less Than 12 Months
Amortized
Unrealized
Fair
Cost
Loss
Value
(In thousands)
$
174,823
$
1,807
$
173,016
14,381
152
14,229
426,657
1,626
425,031
66,993
3,098
63,895
682,854
6,683
676,171
12 Months or More
Amortized
Unrealized
Fair
Cost
Loss
Value
139,387
2,085
137,302
139,387
2,085
137,302
Total
Amortized
Unrealized
Fair
Cost
Loss
Value
174,823
1,807
173,016
14,381
152
14,229
566,044
3,711
562,333
66,993
3,098
63,895
$
822,241
$
8,768
$
813,473
F-30
Less Than 12 Months
Amortized
Unrealized
Fair
Cost
Loss
Value
(In thousands)
$
702,535
$
7,250
$
695,285
183,997
1,209
182,788
886,532
8,459
878,073
12 Months or More
Amortized
Unrealized
Fair
Cost
Loss
Value
52,130
1,664
50,466
121,351
1,820
119,531
173,481
3,484
169,997
Total
Amortized
Unrealized
Fair
Cost
Loss
Value
702,535
7,250
695,285
52,130
1,664
50,466
305,348
3,029
302,319
$
1,060,013
$
11,943
$
1,048,070
3.
PLEDGED
ASSETS
F-31
4.
LOANS
RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES
December 31,
June 30,
2006
2005
2005
(In thousands)
$
898,809
$
599,163
$
576,335
353
4,188
4,185
36,270
40,178
47,891
223,563
210,101
223,685
(3,147
)
(2,864
)
(2,930
)
1,155,848
850,766
849,166
18,139
14,730
12,983
35,772
35,482
30,027
24
14
(40
)
53,935
50,226
42,970
1,209,783
900,992
892,136
(8,016
)
(6,630
)
(6,495
)
1,201,767
894,362
885,641
10,603
8,946
17,963
$
1,212,370
$
903,308
$
903,604
F-32
Six-Month
Year Ended
Period Ended
Fiscal Year Ended
December 31,
December 31,
June 30,
2006
2005
2005
2004
(In thousands)
$
6,630
$
6,495
$
7,553
$
5,031
4,387
1,902
3,315
4,587
(3,678
)
(2,081
)
(5,094
)
(3,207
)
677
314
721
1,142
$
8,016
$
6,630
$
6,495
$
7,553
5.
PREMISES
AND EQUIPMENT
Useful Life
December 31,
June 30,
(Years)
2006
2005
2005
(In thousands)
$
1,014
$
1,014
$
1,014
40
2,777
3,507
3,224
5 10
12,948
7,704
7,255
3 7
6,801
5,387
5,276
3 7
12,368
13,162
12,555
35,908
30,774
29,324
(15,755
)
(15,946
)
(14,055
)
$
20,153
$
14,828
$
15,269
F-33
6.
ACCRUED
INTEREST RECEIVABLE AND OTHER ASSETS
December 31,
June 30,
2006
2005
2005
(In thousands)
$
34,216
$
22,054
$
18,999
11,913
11,085
10,247
1,037
3,213
3,536
2,152
2,681
3,764
7,547
4,932
3,590
1,086
2,169
2,171
2,006
2,006
2,006
1,507
13
17
2,061
$
61,477
$
48,157
$
46,374
F-34
7.
DEPOSITS
AND RELATED INTEREST
Six-Month
Year Ended
Period Ended
Fiscal Year Ended
December 31,
December 31,
June 30,
2006
2005
2005
2004
(In thousands)
$
857
$
445
$
900
$
818
5,366
440
941
1,081
40,479
19,396
27,903
28,113
$
46,701
$
20,281
$
29,744
$
30,012
8.
BORROWINGS
F-35
Fair Value of
Borrowing
Underlying
Balance
Collateral
(In thousands)
$
263,908
$
267,929
10,427
10,779
385,677
390,589
99,650
99,499
900,428
938,824
875,833
893,939
$
2,535,923
$
2,601,559
F-36
December 31,
June 30,
2006
2005
2005
Fair Value of
Fair Value of
Fair Value of
Borrowing
Underlying
Borrowing
Underlying
Borrowing
Underlying
Balance
Collateral
Balance
Collateral
Balance
Collateral
(In thousands)
$
96,498
$
99,235
$
83,242
$
87,120
$
104,161
$
105,652
26,985
27,316
46,069
47,527
50,401
51,122
13,440
13,633
123,483
126,551
129,311
134,647
168,002
170,407
287,403
291,871
400,807
408,425
484,861
495,330
137,371
139,280
310,316
317,992
234,610
239,676
62,563
63,914
117,039
127,625
541,813
558,776
711,123
726,417
782,034
798,920
158,002
164,610
260,383
267,310
603,021
608,794
90,518
91,426
173,643
178,956
291,784
294,578
77,809
78,554
248,520
256,036
434,026
446,266
972,614
981,926
147,886
152,149
23,176
23,506
24,828
25,972
683,341
713,141
831,227
865,290
48,004
49,478
404,338
408,687
342,322
343,129
281,308
279,487
621,004
630,096
100,048
98,058
785,694
786,232
963,326
973,225
5,186
8,674
72,893
73,156
166,846
167,195
69,197
70,545
80,732
80,901
21,528
21,574
5,186
8,674
142,090
143,701
269,106
269,670
$
2,535,923
$
2,601,559
$
2,427,880
$
2,473,734
$
2,191,756
$
2,220,923
F-37
December 31,
June 30,
2006
2005
2005
(In thousands)
$
2,627,323
$
2,270,145
$
2,174,312
$
2,923,796
$
2,427,880
$
2,398,861
5.09
%
3.78
%
2.78
%
4.94
%
4.29
%
3.07
%
December 31,
June 30,
Fixed Interest Rate
2006
2005
2005
(In thousands)
1.57
%
$
$
$
50,000
3.82
%
50,000
4.17
%
10,000
4.30
%
3,300
2.48
%
25,000
25,000
2.01
%
50,000
50,000
2.13
%
50,000
50,000
2.96
%
50,000
50,000
5.33
%
6,900
5.41
%
30,000
5.44
%
30,000
5.45
%
40,000
3.09
%
25,000
25,000
25,000
4.07
%
50,000
50,000
50,000
$
181,900
$
313,300
$
300,000
F-38
9.
DERIVATIVE
ACTIVITIES
F-39
December 31,
June 30,
2005
2005
(Dollars in thousands)
$
1,275,000
$
885,000
3.90
%
3.44
%
4.39
%
3.27
%
1 to 60
4 to 64
100
%
100
%
F-40
Year Ending
Equity Indexed
Equity Indexed
Options Purchased
Options Written
Total
(In thousands)
$
43,285
$
38,511
$
81,796
35,700
34,072
69,772
22,085
21,055
43,140
9,045
8,706
17,751
21,415
20,580
41,995
$
131,530
$
122,924
$
254,454
10.
EMPLOYEE
BENEFIT PLAN
F-41
11.
RELATED
PARTY TRANSACTIONS
December 31,
June 30,
2006
2005
2005
(In thousands)
$
4,467
$
5,603
$
3,559
736
550
2,233
(1,170
)
(1,686
)
(189
)
$
4,033
$
4,467
$
5,603
12.
INCOME
TAX
Six-Month
Year Ended
Period Ended
Fiscal Year Ended
December 31,
December 31,
June 30,
2006
2005
2005
2004
(In thousands)
$
1,817
$
4,659
$
(2,631
)
$
5,180
(3,448
)
(4,532
)
982
397
$
(1,631
)
$
127
$
(1,649
)
$
5,577
F-42
Six-Month
Period Ended
Year Ended December 31,
December 31,
Year Ended June 30,
2006
2005
2005
2004
Amount
Rate
Amount
Rate
Amount
Rate
Amount
Rate
(Dollars in thousands)
$
(2,931
)
43.5
%
$
7,074
41.5
%
$
22,628
39.0
%
$
25,465
39.0
%
(3,527
)
−52.3
%
(9,625
)
−56.5
%
(23,090
)
−39.8
%
(23,991
)
−36.7
%
37
0.5
%
28
0.2
%
746
1.3
%
1,378
2.1
%
1,928
28.6
%
1,991
11.7
%
0.0
%
0.0
%
(465
)
−6.9
%
4,300
25.2
%
(2,800
)
−4.8
%
0.0
%
589
8.7
%
2,738
40.6
%
(3,641
)
−21.4
%
867
1.5
%
2,725
4.8
%
$
(1,631
)
−24.2
%
$
127
0.8
%
$
(1,649
)
−2.8
%
$
5,577
8.5
%
F-43
December 31,
June 30,
2006
2005
2005
(In thousands)
$
3,142
$
2,601
$
2,533
1,745
2,377
2,119
312
268
130
3,043
3,327
3,044
290
1,810
112
66
58
46
4,331
4,300
6,911
1,991
518
152
180
20,358
16,884
8,164
(3,919
)
(1,991
)
16,439
14,893
8,164
(15
)
(86
)
(2,289
)
(2,656
)
(1,887
)
(2,289
)
(2,671
)
(1,973
)
$
14,150
$
12,222
$
6,191
F-44
13.
STOCKHOLDERS
EQUITY
F-45
Six-Month
Fiscal Year Ended
Period Ended
Fiscal Year Ended
December 31,
December 31,
June 30,
2006
2005
2005
2004
Dollar
Dollar
Dollar
Dollar
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
(In thousands)
770
$
10,332
228
$
3,368
246
$
4,578
2,025
$
35,888
233
2,817
545
7,003
200
3,014
20
499
(14
)
(193
)
(3
)
(39
)
24
249
(242
)
(4,473
)
(1,799
)
(31,809
)
989
$
12,956
770
$
10,332
228
$
3,368
246
$
4,578
F-46
Fiscal Year
Six-Month Period
Fiscal Year
Ended December 31,
Ended December 31,
Ended June 30,
2006
2005
2005
2004
Weighted
Weighted
Weighted
Weighted
Number
Average
Number
Average
Number
Average
Number
Average
of
Exercise
of
Exercise
of
Exercise
of
Exercise
Options
Price
Options
Price
Options
Price
Options
Price
946,855
$
15.51
1,219,333
$
13.23
1,674,351
$
12.36
2,270,014
$
11.44
30,000
12.20
56,000
15.02
566,525
24.36
224,722
23.92
(72,486
)
8.04
(246,489
)
3.44
(871,162
)
8.15
(713,198
)
8.89
(70,836
)
19.60
(81,989
)
17.12
(150,381
)
11.95
(107,187
)
12.93
833,533
$
15.61
946,855
$
15.51
1,219,333
$
13.23
1,674,351
$
12.55
Outstanding
Exercisable
Weighted
Weighted Average
Weighted
Number of
Average
Contract Life
Number of
Average
Options
Exercise Price
(Years)
Options
Exercise Price
148,316
$
7.13
7.1
148,316
$
7.13
62,083
10.71
5.8
62,083
10.71
254,277
12.70
2.7
218,277
12.70
81,622
15.51
3.8
41,622
15.51
88,935
19.90
3.4
88,935
19.90
125,700
24.08
2.3
125,700
24.08
72,600
27.53
2.1
72,600
27.53
833,533
$
15.61
3.6
757,533
$
15.79
$
13,013,000
$
11,964,000
F-47
Year Ended
Six-Month Period
Fiscal Year
December 31,
Ended December 31,
Ended June 30,
2006
2005
2005
2004
(In thousands, except per share data)
$
(5,106
)
$
16,919
$
59,669
$
59,717
(4,802
)
(2,401
)
(4,802
)
(4,198
)
$
(9,908
)
$
14,518
$
54,867
$
55,519
24,562
24,777
24,571
22,394
110
340
1,104
1,486
24,672
25,117
25,675
23,880
$
(0.40
)
$
0.59
$
2.23
$
2.48
$
(0.40
)
$
0.58
$
2.14
$
2.32
F-48
December 31,
June 30,
2006
2005
2005
(In thousands)
$
8,998
$
$
3,938
(8,768
)
(18,721
)
(21,585
)
(24,211
)
(6,376
)
(20,237
)
(5,404
)
$
(16,099
)
$
(37,884
)
$
(38,383
)
F-49
Actual
Minimum Capital Requirement
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
$
380,574
22.04%
$
135,677
8.00%
$
372,558
21.57%
$
67,830
4.00%
$
372,558
8.42%
$
176,987
4.00%
$
454,299
35.22%
$
103,204
8.00%
$
447,669
34.70%
$
51,602
4.00%
$
447,669
10.13%
$
176,790
4.00%
$
451,626
37.51%
$
96,327
8.00%
$
445,131
36.97%
$
48,163
4.00%
$
445,131
10.59%
$
168,080
4.00%
Minimum to be Well
Minimum Capital
Capitalized Under Prompt Corrective
Actual
Requirement
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
$
293,339
17.49%
$
134,174
8.00%
$
167,651
10.00%
$
285,323
17.01%
$
67,095
4.00%
$
100,543
6.00%
$
285,323
6.43%
$
177,495
4.00%
$
222,098
5.00%
$
312,617
24.37%
$
102,607
8.00%
$
128,259
10.00%
$
305,987
23.86%
$
51,304
4.00%
$
76,956
6.00%
$
305,987
6.90%
$
177,272
4.00%
$
221,591
5.00%
$
292,784
25.71%
$
91,112
8.00%
$
113,890
10.00%
$
286,289
25.14%
$
45,556
4.00%
$
68,334
6.00%
$
286,289
6.87%
$
166,789
4.00%
$
208,487
5.00%
14.
COMMITMENTS
F-50
Minimum Rent
(In thousands)
$
3,091
2,949
2,942
2,801
2,731
9,060
$
23,574
15.
LITIGATION
F-51
16.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
F-52
December 31,
June 30,
2006
2005
2005
Fair
Carrying
Fair
Carrying
Fair
Carrying
Value
Value
Value
Value
Value
Value
(In thousands)
$
34,070
$
34,070
$
17,269
$
17,269
$
24,683
$
24,683
5,000
5,000
60,000
60,000
30,000
30,000
243
243
146
146
265
265
974,960
974,960
1,046,884
1,046,884
1,029,720
1,029,720
1,931,720
1,967,477
2,312,832
2,346,255
2,142,708
2,134,746
13,607
13,607
20,002
20,002
27,058
27,058
6,430
6,430
44,009
44,009
1,034
1,034
1,209,177
1,212,370
911,477
903,308
917,721
903,604
34,216
34,216
22,054
22,054
18,999
18,999
27,940
27,940
29,067
29,067
23,735
23,735
2,509
2,509
1,220,601
1,232,988
1,288,254
1,298,568
1,247,805
1,252,897
2,523,152
2,535,923
2,470,463
2,427,880
2,191,507
2,191,756
180,876
181,900
309,942
313,300
297,123
300,000
36,083
36,083
72,166
72,166
72,166
72,166
15,000
15,000
15,000
15,000
15,000
15,000
13,568
13,568
4,455
4,455
12,310
12,310
43,354
43,354
22,772
22,772
21,321
21,321
30,435
30,435
41,209
41,209
11,581
11,581
December 31,
June 30,
2006
2005
2005
Contract or
Contract or
Contract or
Notional
Fair
Notional
Fair
Notional
Fair
Amount
Value
Amount
Value
Amount
Value
(In thousands)
$
13,137
$
(263
)
$
16,386
$
(328
)
$
18,191
$
(364
)
F-53
Cash and cash equivalents, money market investments, time
deposits with other banks, securities sold but not yet
delivered, accrued interest receivable and payable, securities
and loans purchased but not yet received, federal funds
purchased, accrued expenses, other liabilities, term notes and
subordinated capital notes have been valued at the carrying
amounts reflected in the consolidated statements of financial
condition as these are reasonable estimates of fair value given
the short-term nature of the instruments.
The fair value of trading securities and investment securities
available for sale and held to maturity is estimated based on
bid quotations from securities dealers. If a quoted market price
is not available, fair value is estimated using quoted market
prices for similar securities. Investments in FHLB stock are
valued at their redemption value.
The estimated fair value of loans
held-for-sale
is based on secondary market prices. The fair value of the loan
portfolio has been estimated for loan portfolios with similar
financial characteristics. Loans are segregated by type, such as
mortgage, commercial and consumer. Each loan category is further
segmented into fixed and adjustable interest rates and by
performing and non-performing categories. The fair value of
performing loans is calculated by discounting contractual cash
flows, adjusted for prepayment estimates, if any, using
estimated current market discount rates that reflect the credit
and interest rate risk inherent in the loan. The fair value for
significant non-performing loans is based on specific
evaluations of discounted expected future cash flows from the
loans or its collateral using current appraisals and market
rates.
The fair value of demand deposits and savings accounts is the
amount payable on demand at the reporting date. The fair value
of fixed-maturity certificates of deposit is based on the
discounted value of the contractual cash flows, using estimated
current market discount rates for deposits of similar remaining
maturities.
For short-term borrowings, the carrying amount is considered a
reasonable estimate of fair value. The fair value of long-term
borrowings is based on the discounted value of the contractual
cash flows, using current estimated market discount rates for
borrowings with similar terms and remaining maturities.
The fair value of interest rate swaps and equity index option
contracts were estimated by management based on the present
value of expected future cash flows using discount rates of the
swap yield curve. These fair values represent the estimated
amount the Group would receive or pay to terminate the contracts
taking into account the current interest rates and the current
creditworthiness of the counterparties.
The fair value of commitments to extend credit and unused lines
of credit is based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of
the agreements and the counterparties credit standings.
17.
SEGMENT
REPORTING
F-54
Year Ended December 31,
Financial
Total Major
Consolidated
Banking
Treasury
Services
Segments
Eliminations
Total
(In thousands)
$
79,267
$
152,830
$
214
$
232,311
$
$
232,311
(25,683
)
(161,529
)
(973
)
(188,185
)
(188,185
)
53,584
(8,699
)
(759
)
44,126
44,126
9,452
(8,430
)
16,216
17,238
17,238
(50,177
)
(2,573
)
(10,963
)
(63,713
)
(63,713
)
3,952
3,952
(3,952
)
(806
)
(3,146
)
(3,952
)
3,952
(4,388
)
(4,388
)
(4,388
)
$
12,423
$
(20,508
)
$
1,348
$
(6,737
)
$
$
(6,737
)
December 31, 2006
$
1,679,150
$
2,995,634
$
12,014
$
4,686,798
$
(313,108
)
$
4,373,690
F-55
Six Month Period Ended December 31,
Financial
Total Major
Banking
Treasury
Services
Segments
Eliminations
Total
(In thousands)
$
46,754
$
58,267
$
65
$
105,086
$
$
105,086
(31,304
)
(39,402
)
(70,706
)
(70,706
)
15,450
18,865
65
34,380
34,380
5,158
3,737
7,487
16,382
16,382
(24,904
)
(1,571
)
(5,339
)
(31,814
)
(31,814
)
1,699
1,699
(1,699
)
(6
)
(1,693
)
(1,699
)
1,699
(1,902
)
(1,902
)
(1,902
)
$
(4,499
)
$
21,025
$
520
$
17,046
$
$
17,046
$
969,186
$
3,963,013
$
8,513
$
4,940,712
$
(393,763
)
$
4,546,949
Fiscal Year Ended June 30,
Financial
Total Major
Banking
Treasury
Services
Segments
Eliminations
Total
(In thousands)
$
79,220
$
110,033
$
59
$
189,312
$
$
189,312
(44,676
)
(58,223
)
(102,899
)
(102,899
)
34,544
51,810
59
86,413
86,413
14,234
6,480
14,171
34,885
34,885
(48,267
)
(1,524
)
(10,172
)
(59,963
)
(59,963
)
3,684
3,684
(3,684
)
(593
)
(3,091
)
(3,684
)
3,684
(3,315
)
(3,315
)
(3,315
)
$
880
$
56,173
$
967
$
58,020
$
$
58,020
June 30, 2005
$
973,296
$
3,655,649
$
9,582
$
4,638,527
$
(391,662
)
$
4,246,865
$
52,126
$
112,174
$
85
$
164,385
$
$
164,385
(17,109
)
(60,065
)
(77,174
)
(77,174
)
35,017
52,109
85
87,211
87,211
14,748
13,914
17,372
46,034
46,034
(42,524
)
(7,653
)
(13,187
)
(63,364
)
(63,364
)
2,964
1,028
3,992
(3,992
)
(392
)
(3,600
)
(3,992
)
3,992
(4,587
)
(4,587
)
(4,587
)
$
5,618
$
57,978
$
1,698
$
65,294
$
$
65,294
June 30, 2004
$
771,483
$
3,096,459
$
12,332
$
3,880,274
$
(154,579
)
$
3,725,695
18.
ORIENTAL
FINANCIAL GROUP INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
F-57
(Parent Company Only)
Six-Month
Year Ended
Period Ended
Fiscal Year
December 31,
December 31,
Ended June 30,
2006
2005
2005
2004
(In thousands)
$
10,000
$
$
5,000
$
23,000
77
121
143
2,468
648
1,287
1,744
(1,127
)
802
1,952
11,341
1,527
6,408
26,839
5,337
2,474
4,325
3,005
5,408
551
(401
)
5,442
10,745
3,025
3,924
8,447
596
(1,498
)
2,484
18,392
(5
)
4
591
(1,494
)
2,484
18,392
(6,631
)
19,846
59,679
40,255
934
(1,433
)
(2,494
)
1,070
(5,106
)
16,919
59,669
59,717
21,785
499
6,979
(45,053
)
$
16,679
$
17,418
$
66,648
$
14,664
F-58
(Parent Company Only)
Six-Month
Year Ended
Period Ended
Fiscal Year Ended
December 31,
December 31,
June 30,
2006
2005
2005
2004
(In thousands)
$
(5,106
)
$
16,919
$
59,669
$
59,717
6,631
(19,846
)
(59,679
)
(40,300
)
(934
)
1,433
2,494
(1,026
)
(8
)
26
9
61
1,515
(228
)
(1,952
)
1
(4
)
737
(694
)
62
(74
)
(2,341
)
(722
)
(2,267
)
4,445
495
(3,116
)
288
20,871
(2,844
)
275
9,507
507
26,676
(6,500
)
(11,100
)
6,745
4
4
(30,982
)
100,804
19,150
20,648
(140,602
)
(909
)
(1,083
)
66,589
17,557
21,159
(115,005
)
(7,599
)
855
1,896
4,507
5,896
(200
)
25
49
65
4,184
(2,005
)
33,057
(10
)
51,560
(36,998
)
35,043
(2,819
)
(6,964
)
(3,512
)
(499
)
(18,555
)
(9,356
)
(17,918
)
(15,014
)
(53,533
)
(14,399
)
(16,884
)
100,504
13,551
42
4,563
6,370
15,531
15,489
10,926
4,556
$
29,082
$
15,531
$
15,489
$
10,926
19.
CHANGE IN
THE FISCAL YEAR END
F-59
Year Ended
Six Months Ended
December 31,
December 31,
2006
2005
2005
2004
(Unaudited)
(Unaudited)
$
232,311
$
201,534
$
105,086
$
92,864
188,185
127,456
70,706
46,149
44,126
74,078
34,380
46,715
4,388
3,412
1,902
1,805
17,238
28,920
16,382
22,347
63,713
57,856
31,814
33,921
(6,737
)
41,730
17,046
33,336
(1,631
)
(2,168
)
127
645
(5,106
)
43,898
16,919
32,691
(4,802
)
(4,802
)
(2,401
)
(2,401
)
(9,908
)
39,096
14,518
30,290
$
(0.40
)
$
1.58
$
0.59
$
1.24
$
(0.40
)
$
1.56
$
0.58
$
1.17
24,562
24,750
24,777
24,407
24,672
25,083
25,117
25,953
$
0.56
$
0.56
$
0.28
$
0.27
20.
RESTATEMENT
OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
F-60
June 30, 2005
As Previously
Reported
As Restated
$
907,391
$
903,604
4,250,652
4,246,865
42,584
41,209
3,909,485
3,908,110
187,301
206,804
68,620
46,705
341,167
338,755
Fiscal Year Ended June 30,
2005
2004
As Previously
As Previously
Reported
As Restated
Reported
As Restated
$
26,663
$
23,606
$
24,579
$
28,511
63,020
59,963
59,432
63,364
54,963
58,020
69,226
65,294
56,612
59,669
63,649
59,717
$
2.11
$
2.23
$
2.65
$
2.48
$
2.05
$
2.14
$
2.49
$
2.32
F-61
SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31, 2006 AND 2005, SIX-MONTH PERIODS
ENDED
DECEMBER 31, 2005 AND 2004
AND EACH OF THE FISCAL YEARS IN THE THREE YEAR PERIOD ENDED
JUNE 30, 2005
F-62
(1)
Per share related information has been retroactively adjusted to
reflect stock splits and stock dividends, when applicable.
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
Year ended December 31, 2006 compared to year ended
December 31, 2005 (unaudited);
Six-month period ended December 31, 2005 compared to
six-month period ended December 31, 2004 (unaudited); and
Fiscal year ended June 30, 2005 compared to fiscal year
ended June 30, 2004.
F-64
F-65
F-66
F-67
F-68
Interest
Average Rate
Average Balance
December 31,
December 31,
December 31,
December 31,
December 31,
December 31,
2006
2005
2006
2005
2006
2005
(Dollars in thousands)
$
232,311
$
201,534
5.18
%
4.83
%
$
4,480,729
$
4,175,143
57,657
45,156
1.27
%
1.08
%
289,968
246,690
6.47
%
5.91
%
4,480,729
4,175,143
188,185
127,456
4.48
%
3.30
%
4,198,401
3,857,666
$
101,783
$
119,234
1.99
%
2.61
%
$
282,328
$
317,477
2.27
%
2.86
%
$
154,942
$
142,211
4.57
%
4.38
%
$
3,386,999
$
3,245,440
(1,522
)
(1,764
)
−0.04
%
−0.05
%
153,420
140,447
4.53
%
4.33
%
3,386,999
3,245,440
19
9
5.01
%
3.08
%
379
292
2,057
1,820
5.36
%
4.10
%
38,360
44,341
155,496
142,276
4.54
%
4.32
%
3,425,738
3,290,073
55,278
43,482
6.86
%
5.95
%
805,285
730,614
17,417
12,790
8.20
%
10.20
%
212,294
125,395
4,120
2,986
11.01
%
10.27
%
37,412
29,061
76,815
59,258
7.28
%
6.70
%
1,054,991
885,070
232,311
201,534
5.18
%
4.83
%
4,480,729
4,175,143
39,177
42,508
857
908
1.09
%
1.05
%
78,826
86,703
5,366
909
3.25
%
1.01
%
165,249
89,948
40,478
34,784
4.26
%
3.54
%
950,695
983,582
46,701
36,601
3.78
%
3.04
%
1,233,947
1,202,741
133,646
74,696
5.09
%
3.31
%
2,627,484
2,255,199
(8,494
)
1,486
−0.32
%
0.07
%
562
695
0.02
%
0.03
%
125,714
76,877
4.78
%
3.41
%
2,627,484
2,255,199
8,968
8,553
3.74
%
2.79
%
239,590
306,398
5,331
4,743
7.54
%
6.57
%
70,732
72,166
846
456
5.64
%
3.04
%
15,000
15,000
625
226
5.37
%
3.67
%
11,648
6,162
141,484
90,855
4.77
%
3.42
%
2,964,454
2,654,925
188,185
127,456
4.48
%
3.30
%
4,198,401
3,857,666
$
44,126
$
74,078
0.70
%
1.53
%
0.98
%
1.78
%
$
282,328
$
317,477
106.72
%
108.23
%
F-69
C.
CHANGES
IN NET INTEREST INCOME DUE TO:
December 31, 2006 versus
December 31, 2005
Volume
Rate
Total
$
4,351
$
8,868
$
13,219
13,206
4,352
17,558
17,557
13,220
30,777
922
9,178
10,100
9,146
39,692
48,838
(2,387
)
4,178
1,791
7,681
53,048
60,729
$
9,876
$
(39,828
)
$
(29,952
)
F-70
Interest
Average Rate
Average Balance
Six-Month Period
Six-Month Period
Six-Month Period
Ended
Ended
Ended
December 31,
December 31,
December 31,
2005
2004
2005
2004
2005
2004
(Dollars in thousands)
$
105,086
$
92,864
4.91
%
4.89
%
$
4,276,515
$
3,795,805
23,912
21,167
1.12
%
1.12
%
128,998
114,031
6.03
%
6.01
%
4,276,515
3,795,805
70,706
46,149
3.58
%
2.62
%
3,953,452
3,526,701
$
58,292
$
67,882
2.45
%
3.39
%
$
323,063
$
269,104
2.72
%
3.58
%
$
73,540
$
67,039
4.46
%
4.53
%
$
3,300,864
$
2,962,126
(824
)
(958
)
−0.05
%
−0.06
%
72,716
66,081
4.41
%
4.47
%
3,300,864
2,962,126
4
2
3.31
%
0.41
%
242
975
1,465
171
5.17
%
1.65
%
56,691
20,788
74,185
66,254
4.42
%
4.44
%
3,357,797
2,983,889
24,617
22,558
6.50
%
6.50
%
757,207
694,529
4,602
3,002
7.11
%
6.24
%
129,506
96,264
1,682
1,050
10.51
%
9.94
%
32,005
21,123
30,901
26,610
6.73
%
6.55
%
918,718
811,916
105,086
92,864
4.91
%
4.89
%
4,276,515
3,795,805
60,334
50,728
445
438
1.05
%
1.06
%
84,809
82,931
440
472
1.02
%
1.02
%
86,135
92,623
19,396
12,513
3.70
%
3.16
%
1,049,495
793,112
20,281
13,423
3.17
%
2.63
%
1,280,773
1,019,394
43,807
18,856
3.86
%
1.79
%
2,270,145
2,109,690
(1,255
)
7,388
−0.11
%
0.70
%
357
311
0.03
%
0.03
%
42,909
26,555
3.78
%
2.52
%
2,270,145
2,109,690
4,595
4,002
3.01
%
2.58
%
305,430
310,451
2,470
2,046
6.85
%
5.67
%
72,166
72,166
261
123
3.48
%
1.64
%
15,000
15,000
190
3.82
%
9,938
50,425
32,726
3.77
%
2.61
%
2,672,679
2,507,307
70,706
46,149
3.58
%
2.62
%
3,953,452
2,526,701
$
34,380
$
46,715
1.33
%
2.27
%
1.61
%
2.46
%
$
323,063
$
269,104
108.17
%
107.63
%
F-71
C.
CHANGES
IN NET INTEREST INCOME DUE TO:
December 31, 2005 versus December 31, 2004
Volume
Rate
Total
$
3,615
$
676
$
4,291
8,262
(331
)
7,931
11,877
345
12,222
6,762
96
6,858
1,838
14,515
16,354
75
1,271
1,345
8,675
15,882
24,557
$
3,202
$
(15,537
)
$
(12,335
)
F-72
Interest
Average rate
Average balance
June 30,
June 30,
June 30,
June 30,
June 30,
June 30,
2005
2004
2005
2004
2005
2004
(Dollars in thousands)
$
189,312
$
164,385
4.81
%
5.19
%
$
3,932,822
$
3,168,832
42,411
35,223
1.08
%
1.11
%
231,723
199,608
5.89
%
6.30
%
3,932,822
3,168,832
102,899
77,174
2.81
%
2.55
%
3,659,858
3,026,876
$
128,824
$
122,434
3.08
%
3.75
%
$
272,964
$
141,956
3.27
%
3.86
%
$
135,710
$
113,732
4.41
%
4.70
%
$
3,074,679
$
2,419,264
(1,898
)
(1,685
)
−0.06
%
−0.07
%
133,812
112,047
4.35
%
4.63
%
3,074,679
2,419,264
8
44
1.21
%
3.26
%
662
1,350
526
164
2.00
%
1.53
%
26,242
10,714
134,346
112,255
4.33
%
4.62
%
3,101,583
2,431,328
45,943
46,467
6.57
%
7.01
%
699,027
662,590
6,674
3,336
6.14
%
5.85
%
108,636
57,047
2,349
2,327
9.96
%
13.02
%
23,576
17,867
54,966
52,130
6.61
%
7.07
%
831,239
737,504
189,312
164,385
4.81
%
5.19
%
3,932,822
3,168,832
54,986
51,906
900
818
1.05
%
1.08
%
85,756
75,495
941
1,079
1.01
%
1.22
%
93,218
88,568
27,903
28,115
3.27
%
3.38
%
854,337
831,167
29,744
30,012
2.73
%
2.87
%
1,088,297
1,047,136
49,746
17,805
2.29
%
1.12
%
2,174,312
1,595,717
10,131
17,744
0.47
%
1.11
%
647
469
0.03
%
0.03
%
60,524
36,018
2.78
%
2.26
%
2,174,312
1,595,717
7,962
8,011
2.58
%
2.63
%
308,930
304,547
4,318
2,986
5.98
%
4.63
%
72,166
64,476
317
147
2.11
%
0.98
%
15,000
15,000
34
2.95
%
1,153
73,155
47,162
2.84
%
2.38
%
2,571,561
1,979,740
102,899
77,174
2.81
%
2.55
%
3,659,858
3,026,876
$
86,413
$
87,211
2.00
%
2.64
%
2.19
%
2.75
%
$
272,964
$
141,956
107.46
%
104.69
%
F-73
C.
CHANGES
IN NET INTEREST INCOME DUE TO:
Fiscal 2005
Fiscal 2004
versus 2004
versus 2003
Volume
Rate
Volume
Rate
$
6,342
$
(3,506
)
$
5,089
$
(4,445
)
29,383
(7,292
)
29,710
(17,715
)
35,725
(10,798
)
34,799
(22,160
)
1,154
(1,422
)
883
(4,528
)
21,598
2,908
14,581
(12,397
)
363
1,124
4,250
(2,950
)
23,115
2,610
19,714
(19,875
)
$
12,610
$
(13,408
)
$
15,085
$
(2,285
)
F-74
F-75
F-76
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005,
FOR THE SIX-MONTH PERIODS ENDED DECEMBER 31, 2005 AND
2004
AND FISCAL YEARS ENDED JUNE 30, 2005, 2004 AND
2003
Fiscal Year Ended
Six-Month Period Ended
Fiscal Year Ended
December 31,
December 31,
June 30,
2006
2005
Variance %
2005
2004
2005
2004
2003
(Unaudited)
(Unaudited)
(Dollars in thousands)
$
3,368
$
3,944
−14.6
%
$
1,702
$
5,532
$
7,774
$
7,719
$
8,026
16,029
14,029
14.3
%
7,432
7,435
14,032
17,617
14,472
2,701
236
1044.5
%
74
177
339
22,098
18,209
23.9
%
9,208
13,144
22,145
25,336
22,498
5,382
5,417
−0.6
%
3,025
2,466
4,858
4,887
4,075
2,438
2,253
8.2
%
1,324
1,150
2,079
2,037
1,625
1,186
645
83.9
%
146
105
604
241
268
9,006
8,315
8.3
%
4,495
3,721
7,541
7,165
5,968
(17,637
)
3,173
−655.8
%
650
5,642
8,165
13,414
14,223
3,218
(2,060
)
−256.2
%
1,077
(393
)
(3,530
)
11
(4,061
)
28
(48
)
−158.3
%
5
38
(15
)
21
571
(915
)
−100.0
%
(15,306
)
1,065
−1537.2
%
1,732
5,287
4,620
13,446
10,733
828
1,083
−23.5
%
838
246
612
248
146.8
%
109
195
333
87
(160
)
1,440
1,331
8.2
%
947
195
579
87
(160
)
$
17,238
$
28,920
−40.4
%
$
16,382
$
22,347
$
34,885
$
46,034
$
39,039
F-77
F-78
FOR THE SIX-MONTH PERIODS ENDED DECEMBER 31, 2005 AND
2004
Year Ended December 31,
Six-Month Period Ended December 31,
Fiscal Year Ended June 30,
2006
2005
Variance %
2005
2004
2005
2004
2003
(Dollars in thousands)
$
24,630
$
20,410
20.7
%
$
12,714
$
15,910
$
23,606
$
28,511
$
24,312
11,573
11,331
2.1
%
5,798
5,050
10,583
9,639
9,079
6,821
7,385
−7.6
%
3,771
3,380
6,994
5,631
6,467
4,466
5,276
−15.4
%
2,862
3,306
5,720
6,850
6,654
2,405
2,129
13.0
%
1,195
902
1,836
1,754
1,556
2,323
918
153.6
%
374
339
883
677
447
2,017
1,742
15.8
%
911
896
1,727
1,853
1,775
1,914
1,914
0.0
%
854
1,015
2,075
1,679
1,244
1,598
1,624
−1.5
%
837
843
1,630
1,849
1,671
995
945
5.4
%
528
474
891
1,121
1,038
861
749
15.0
%
374
392
767
791
736
4,110
3,433
19.7
%
1,596
1,414
3,251
3,009
2,426
$
63,713
$
57,856
10.1
%
$
31,814
$
33,921
$
59,963
$
63,364
$
57,405
28.35
%
49.99
%
51.49
%
65.88
%
58.18
%
72.65
%
68.01
%
86.33
%
57.51
%
66.17
%
53.24
%
51.39
%
52.92
%
55.77
%
0.73
%
0.75
%
0.85
%
0.89
%
0.75
%
0.97
%
1.13
%
38.7
%
35.3
%
40.0
%
46.9
%
39.4
%
45.0
%
42.4
%
0.56
%
0.45
%
0.56
%
0.76
%
0.56
%
0.77
%
0.80
%
$
46.4
$
38.7
$
48.8
$
60.6
$
44.6
$
52.3
$
48.0
530
527
521
525
529
545
506
$
8,552
$
8,624
$
8,723
$
7,932
$
8,028
$
6,836
$
6,009
535
520
520
554
520
526
513
F-79
F-80
F-81
F-82
F-83
December 31,
December 31,
Variance
June 30,
2006
2005
%
2005
(Dollars in thousands)
$
1,955,566
$
1,961,285
−0.3
%
$
1,959,760
863,019
1,251,058
−31.0
%
1,029,980
100,729
90,333
11.5
%
108,968
23,366
90,609
−74.2
%
66,023
5,000
60,000
−91.7
%
30,000
13,607
20,002
−32.0
%
27,058
30,949
100.0
%
2,992,236
3,473,287
−13.9
%
3,221,789
1,209,783
900,992
34.3
%
892,136
(8,016
)
(6,630
)
20.9
%
(6,495
)
1,201,767
894,362
34.4
%
885,641
10,603
8,946
18.5
%
17,963
1,212,370
903,308
34.2
%
903,604
6,430
44,009
−85.4
%
1,034
4,211,036
4,420,604
−4.7
%
4,126,427
15,341
13,789
11.3
%
14,892
18,729
3,480
438.2
%
9,791
27,940
29,067
−3.9
%
23,735
20,153
14,828
35.9
%
15,269
14,150
12,222
15.8
%
6,191
4,864
4,802
1.3
%
4,186
61,477
48,157
27.7
%
46,374
162,909
126,345
28.9
%
120,438
$
4,373,690
$
4,546,949
−3.8
%
$
4,246,865
65.4
%
56.5
%
60.8
%
28.8
%
36.0
%
32.0
%
3.4
%
2.6
%
3.4
%
2.4
%
4.9
%
3.8
%
100.0
%
100.0
%
100.0
%
F-84
Maturities
After One Year to
Five Years
After Five Years
Balance
Fixed
Variable
Fixed
Variable
Outstanding at
One Year
Interest
Interest
Interest
Interest
December 31, 2006
or Less
Rates
Rates
Rates
Rates
(In thousands)
$
1,020,094
$
3,093
$
6,963
$
$
1,010,038
$
164,157
37,894
74,853
42,330
6,158
2,922
36,565
8,861
20,163
7,541
$
1,220,816
$
49,848
$
101,979
$
42,330
$
1,023,737
$
2,922
F-85
As of December 31, 2006 and 2005 and June 30, 2005
December 31,
June 30,
2006
2005
2005
(Dollars in thousands)
$
932,285
$
637,318
$
625,481
241,433
227,846
236,373
36,065
35,828
30,282
1,209,783
900,992
892,136
(8,016
)
(6,630
)
(6,495
)
1,201,767
894,362
885,641
10,603
8,946
17,963
$
1,212,370
$
903,308
$
903,604
77.1
%
71.0
%
70.7
%
19.9
%
25.0
%
26.0
%
3.0
%
4.0
%
3.3
%
100.0
%
100.0
%
100.0
%
F-86
AS OF DECEMBER 31, 2006 AND 2005 AND JUNE 30,
2005
December 31,
December 31,
Variance
June 30,
2006
2005
%
2005
(Dollars in thousands)
$
59,603
$
61,473
−3.0
%
$
62,205
72,810
85,119
−14.5
%
89,930
266,181
82,640
222.1
%
93,920
829,867
1,061,401
−21.8
%
1,002,908
1,228,461
1,290,633
−4.8
%
1,248,963
4,527
7,935
−42.9
%
3,934
1,232,988
1,298,568
−5.1
%
1,252,897
1,340
1,930
100.0
%
2,535,923
2,427,880
4.5
%
2,197,926
181,900
313,300
−41.9
%
300,000
36,083
72,166
−50.0
%
72,166
15,000
15,000
0.0
%
15,000
12,228
2,525
384.3
%
12,310
2,782,474
2,832,801
−1.8
%
2,597,402
43,354
−100.0
%
22,772
4,015,462
4,174,723
−3.8
%
3,873,071
21,802
30,435
−28.4
%
35,039
$
4,037,264
$
4,205,158
−4.0
%
$
3,908,110
4.9
%
4.8
%
5.0
%
5.9
%
6.6
%
7.2
%
21.7
%
6.4
%
7.5
%
67.6
%
82.2
%
80.3
%
100.0
%
100.0
%
100.0
%
0.0
%
0.1
%
91.1
%
85.7
%
84.6
%
6.5
%
11.1
%
11.6
%
1.3
%
2.5
%
2.8
%
0.5
%
0.5
%
0.6
%
0.4
%
0.1
%
0.4
%
100.0
%
100.0
%
100.0
%
$
2,535,923
$
2,427,880
$
2,197,926
$
2,627,323
$
2,270,145
$
2,174,312
$
2,923,796
$
2,427,880
$
2,398,861
5.09
%
3.41
%
2.78
%
4.94
%
4.01
%
3.07
%
F-87
(In thousands)
$
253,919
104,091
38,944
42,506
$
439,460
F-88
AS OF DECEMBER 31, 2006 AND 2005 AND JUNE 30,
2005
December 31,
December 31,
Variance
June 30,
2006
2005
%
2005
(In thousands, except for per share data)
$
336,426
$
341,791
−1.6
%
$
338,755
8.42
%
10.13
%
−16.4
%
10.59
%
4.00
%
4.00
%
4.00
%
$
372,558
$
447,669
−16.3
%
$
445,131
$
176,987
$
176,790
0.1
%
$
168,080
21.57
%
34.70
%
−37.4
%
36.97
%
4.00
%
4.00
%
4.00
%
$
372,558
$
447,669
−16.3
%
$
445,131
$
67,830
$
51,602
33.8
%
$
48,163
22.04
%
35.22
%
−37.0
%
37.51
%
8.00
%
8.00
%
8.00
%
$
380,574
$
454,299
−15.7
%
$
451,626
$
135,677
$
103,204
33.8
%
$
96,327
24,453
24,580
−0.5
%
24,876
$
10.98
$
11.13
−0.9
%
$
10.88
$
12.95
$
12.36
4.8
%
$
15.26
$
316,671
$
303,809
4.2
%
$
379,608
$
13,753
$
6,913
98.9
%
$
13,522
$
0.56
$
0.56
0.0
%
$
0.55
−140.12
%
47.61
%
−394.3
%
24.65
%
4.39
%
4.34
%
1.2
%
2.46
%
F-89
Cash
Price
Dividend
High
Low
Per share
$
13.57
$
11.47
$
0.14
$
12.86
$
11.82
$
0.14
$
13.99
$
11.96
$
0.14
$
14.46
$
12.41
$
0.14
$
13.12
$
10.16
$
0.14
$
15.98
$
11.91
$
0.14
$
23.47
$
13.66
$
0.14
$
28.94
$
22.97
$
0.14
$
28.41
$
24.37
$
0.14
$
26.64
$
22.76
$
0.13
(1)
Adjusted to give retroactive effect to the 10% stock dividends
declared on the Groups common stock on November 30,
2004.
F-90
F-91
Year Ended
Six-Month Period
December 31,
Ended December 31,
Fiscal Year Ended June 30,
2006
2005
2005
2004
2005
2004
2003
(Dollars in thousands)
$
6,630
$
7,565
$
6,495
$
7,553
$
7,553
$
5,031
$
3,039
4,387
3,412
1,902
1,805
3,315
4,587
4,190
(3,001
)
(4,347
)
(1,767
)
(1,793
)
(4,373
)
(2,065
)
(2,198
)
$
8,016
$
6,630
$
6,630
$
7,565
$
6,495
$
7,553
$
5,031
Year Ended December 31,
Fiscal Year Ended June 30,
2006
2005
2005
2004
2003
(Dollars in thousands)
$
3,721
$
3,185
$
3,167
$
3,861
$
1,749
1,831
1,723
1,714
1,317
433
1,944
1,417
1,335
1,462
1,299
520
305
279
913
1,550
$
8,016
$
6,630
$
6,495
$
7,553
$
5,031
46.4
%
48.0
%
48.8
%
51.1
%
34.8
%
22.8
%
26.0
%
26.4
%
17.4
%
8.6
%
24.3
%
21.4
%
20.6
%
19.4
%
25.8
%
6.5
%
4.6
%
4.3
%
12.1
%
30.8
%
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
0.39
%
0.50
%
0.51
%
0.60
%
0.26
%
0.76
%
0.76
%
0.73
%
1.61
%
0.99
%
5.36
%
3.96
%
4.41
%
7.84
%
30.31
%
0.04
%
0.03
%
0.03
%
0.12
%
0.21
%
0.66
%
0.73
%
0.71
%
1.01
%
0.69
%
18.4
%
15.1
%
15.1
%
19.6
%
14.2
%
20.9
%
23.3
%
23.3
%
25.1
%
21.1
%
205.9
%
135.4
%
135.4
%
184.7
%
139.0
%
F-92
Six-Month Period Ended
Year Ended December 31,
December 31,
Fiscal Year Ended June 30,
2006
2005
2005
2004
2005
2004
2003
$
(896
)
$
(2,437
)
$
(774
)
$
(1,198
)
$
(2,861
)
$
(378
)
$
(5
)
41
145
145
(855
)
(2,292
)
(629
)
(1,198
)
(2,861
)
(378
)
(5
)
(277
)
(665
)
(180
)
(129
)
(614
)
(249
)
(24
)
116
19
16
105
119
139
63
(161
)
(646
)
(164
)
(24
)
(495
)
(110
)
39
(2,505
)
(1,842
)
(1,127
)
(904
)
(1,619
)
(2,580
)
(3,066
)
520
433
153
333
602
1,003
834
(1,985
)
(1,409
)
(974
)
(571
)
(1,017
)
(1,577
)
(2,232
)
(3,678
)
(4,944
)
(2,081
)
(2,231
)
(5,094
)
(3,207
)
(3,095
)
677
597
314
438
721
1,142
897
$
(3,001
)
$
(4,347
)
$
(1,767
)
$
(1,793
)
$
(4,373
)
$
(2,065
)
$
(2,198
)
0.11
%
0.31
%
0.17
%
0.34
%
0.41
%
0.06
%
0.00
%
0.08
%
0.52
%
0.25
%
0.05
%
0.46
%
0.19
%
−0.10
%
5.31
%
4.85
%
6.08
%
5.41
%
4.31
%
8.83
%
11.40
%
0.28
%
0.49
%
0.38
%
0.44
%
0.53
%
0.28
%
0.33
%
$
805,285
$
730,614
$
757,207
$
694,529
$
699,027
$
662,590
$
608,189
212,294
125,395
129,506
96,264
108,636
57,047
40,477
37,412
29,061
32,005
21,123
23,576
17,867
19,581
$
1,054,991
$
885,070
$
918,718
$
811,916
$
831,239
$
737,504
$
668,247
F-93
December 31,
June 30,
2006
2005
2005
2004
2003
(Dollars in thousands)
$
17,845
$
18,986
$
21,859
$
23,714
$
10,350
20,453
9,447
8,997
7,224
18,532
38,298
28,433
30,856
30,938
28,882
4,864
4,802
4,186
888
536
$
43,162
$
33,235
$
35,042
$
31,826
$
29,418
0.99
%
0.73
%
0.83
%
0.85
%
0.97
%
Six-Month
Year Ended
Period Ended
December 31,
December 31,
Fiscal Year Ended June 30,
2006
2005
2005
2004
2003
(Dollars in thousands)
$
3,433
$
1,403
$
2,164
$
843
$
648
December 31,
June 30,
2006
2005
2005
(Dollars in thousands)
$
34,404
$
23,535
$
26,184
3,167
4,600
4,549
727
298
123
$
38,298
$
28,433
$
30,856
89.8
%
82.8
%
84.9
%
8.3
%
16.2
%
14.7
%
1.9
%
1.0
%
0.4
%
100.0
%
100.0
%
100.0
%
3.14
%
3.12
%
3.39
%
0.88
%
0.63
%
0.73
%
11.38
%
8.32
%
9.11
%
F-94
Mortgage loans
well collateralized
residential mortgage loans are placed in non-accrual status when
they become 365 days or more past due, or earlier if other
factors indicate that the collection of principal an interest is
doubtful, and are written down, if necessary, based on the
specific evaluation of the collateral underlying the loan. At
December 31, 2006, the Groups non-performing mortgage
loans totaled $34.4 million or 89.8% of the Groups
non-performing loans, compared to $23.5 million or 82.8% at
December 31, 2005, and to $26.2 million or 84.9% at
June 30, 2005. Non-performing loans in this category are
primarily residential mortgage loans. Based
F-95
on the value of the underlying collateral and the
loan-to-value
ratios, management considers that no significant losses will be
incurred on this portfolio.
Commercial business loans
are placed in
non-accrual status when they become 90 days or more past
due and are charged-off based on the specific evaluation of the
underlying collateral. At December 31, 2006, the
Groups non-performing commercial business loans amounted
to $3.2 million or 8.3% of the Groups non-performing
loans, compared to $4.6 million or 16.2% at
December 31, 2005, and $4.5 million or 14.7% at
June 30, 2005. Most of this portfolio is also
collateralized by real estate and no significant losses are
expected.
Consumer loans
are placed in non-accrual
status when they become 90 days past due and charged-off
when payments are delinquent 120 days. At December 31,
2006, the Groups non-performing consumer loans amounted to
$727,000 or 1.9% of the Groups total non-performing loans,
compared to $298,000 or 1.0% at December 31, 2005, and
$123,000 or 0.4% at June 30, 2005.
Foreclosed real
estate
is initially recorded at the lower of the related loan
balance or fair value at the date of foreclosure. Any excess of
the loan balance over the fair value of the property is charged
against the allowance for loan losses. Subsequently, any excess
of the carrying value over the estimated fair value less selling
costs is charged to operations. Management is actively seeking
prospective buyers for these foreclosed properties. Foreclosed
real estate amounted to $4.9 million at December 31,
2006, $4.8 million at December 31, 2005 and
$4.2 million at June 30, 2005.
Payments Due by Period
Total
Less than 1 Year
1 - 3 Years
3 - 5 Years
After 5 Years
(Dollars in thousands)
$
13,568
$
13,568
$
$
$
2,535,923
1,635,495
900,428
181,900
131,900
50,000
15,000
15,000
36,083
36,083
23,574
3,091
5,891
5,532
9,060
$
2,806,048
$
1,799,054
$
55,891
$
905,960
$
45,143
$
13,137
$
13,137
$
$
$
F-96
F-97
December 31,
June 30,
2005
2005
2004
(Dollars in thousands)
$
1,275,000
$
885,000
$
900,000
3.90
%
3.44
%
3.47
%
4.39
%
3.27
%
1.25
%
1 to 60
4 to 64
3 to 76
100
%
100
%
100
%
Equity Indexed
Options Sold
Equity Indexed
(Embedded in
Options Purchased
Deposits)
Total
(In thousands)
$
43,285
$
38,511
$
81,796
35,700
34,072
69,772
22,085
21,055
43,140
9,045
8,706
17,751
21,415
20,580
41,995
$
131,530
$
122,924
$
254,454
F-98
Expected
Amount
Percent
NII
Change
Change
(Dollars in thousands)
$
47,352
$
0.00
%
$
30,999
$
(16,354
)
−34.54
%
$
66,541
$
19,189
40.52
%
$
56,798
$
0.00
%
$
38,043
$
(18,755
)
−33.02
%
$
65,168
$
8,370
14.74
%
F-99
F-100
Quarter
Quarter
Quarter
Quarter
Ended
Ended
Ended
Ended
March 31,
June 30,
September 30,
December 31,
2006
2006
2006
2006
(In thousands, except for per share data)
$
55,992
$
56,894
$
60,865
$
58,560
40,780
46,186
51,912
49,307
15,212
10,708
8,953
9,253
(1,101
)
(947
)
(870
)
(1,470
)
14,111
9,761
8,083
7,783
8,953
7,521
9,885
(9,121
)
14,883
14,784
15,145
18,901
8,181
2,498
2,823
(20,239
)
131
(21
)
446
(2,187
)
8,050
2,519
2,377
(18,052
)
(1,200
)
(1,201
)
(1,200
)
(1,201
)
$
6,850
$
1,318
$
1,177
$
(19,253
)
$
0.28
$
0.05
$
0.05
$
(0.78
)
$
0.28
$
0.05
$
0.05
$
(0.78
)
$
8,050
$
2,519
$
2,377
$
(18,052
)
(11,543
)
(9,788
)
25,039
(635
)
(19
)
(19
)
(2,174
)
17,384
9,916
8,106
(18,454
)
(288
)
10,455
(1)
(1,457
)
(749
)
1,571
(4,040
)
578
992
(2,067
)
(1,023
)
(1,817
)
(709
)
14,370
9,941
$
6,233
$
1,810
$
16,747
(1)
$
(8,111
)
(1)
This quarterly comprehensive income financial table is being
filed to correct a clerical error in the Groups previously
filed Form 10-Q for the quarterly period ended
September 30, 2006 on page 4,Unaudited
Consolidated Statements of Comprehensive Income for the Quarters
and nine-month periods Ended
F-101
September 30, 2006 and 2005, as a result of which the
Group understated by approximately $10.5 million the amount
of comprehensive income for that quarter. However, the amount of
comprehensive income for the nine-month period presented therein
was correctly stated. There are no other changes to our
Form 10-Q,
as filed on November 14, 2006.
As disclosed in the Groups current report on
Form 8-K
filed on September 28, 2006, we unwound several interest
rate swaps with an aggregate notional amount of
$640 million, which resulted in a net gain for us of
approximately $10.5 million. Pursuant to Statement of
Financial Accounting Standards No. 133 (Accounting for
Derivative Instruments and Hedging), we concluded that such net
gain would be deferred in other comprehensive income and that it
would be reclassified into earnings over the originally
remaining terms of the swaps, starting in the September 30,
2006 quarter and ending in the December 31, 2010 quarter.
Due to a clerical error, we did not include a new line item for
presenting the aforementioned net gain in the unaudited
consolidated statements of comprehensive income that was filed
with the
Form 10-Q.
As a result and even though the transaction was correctly
accounted by the Group, the total amount of comprehensive income
for the quarter ended September 30, 2006, was incorrectly
presented as $6.292 million. However, the correct amount is
$16.747 million as presented in Table 13A included herein.
F-102
Quarter Ended
Quarter Ended
September 30,
December 31,
2005
2005
(In thousands, except for
per share data)
$
50,813
$
54,273
33,485
37,221
17,328
17,052
951
951
16,377
16,101
7,825
8,557
15,390
16,424
8,812
8,234
(391
)
264
8,421
8,498
(1,200
)
(1,201
)
$
7,221
$
7,297
$
0.29
$
0.30
$
0.29
$
0.29
$
8,421
$
8,498
(8,978
)
(4,078
)
(341
)
(309
)
11,006
2,956
50
(1,306
)
744
755
2,481
(1,982
)
$
10,902
$
6,516
F-103
Quarter Ended
Quarter Ended
Quarter Ended
Quarter Ended
September 30,
December 31,
March 31,
June 30,
2004
2004
2005
2005
(In thousands, except for per share data)
$
44,947
$
47,917
$
47,572
$
48,876
21,294
24,855
27,162
29,588
23,653
23,062
20,410
19,288
700
1,105
660
850
22,953
21,957
19,750
18,438
10,404
11,943
6,101
6,437
15,461
18,460
12,148
13,894
17,896
15,440
13,703
10,981
(768
)
123
2,671
(377
)
17,128
15,563
16,374
10,604
(1,200
)
(1,201
)
(1,200
)
(1,201
)
$
15,928
$
14,362
$
15,174
$
9,403
$
0.66
$
0.59
$
0.62
$
0.38
$
0.61
$
0.55
$
0.58
$
0.37
$
17,128
$
15,563
$
16,374
$
10,604
20,773
(952
)
(15,708
)
6,717
(3,244
)
(2,398
)
(2,636
)
832
(16,886
)
3,496
13,583
(6,565
)
4,401
2,987
1,923
820
(197
)
359
79
(405
)
4,847
3,492
(2,759
)
1,399
$
21,975
$
19,055
$
13,615
$
12,003
F-104
F-105
Permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise
would require bifurcation;
Clarifies which interest-only strips and principal-only strips
are not subject to the requirements of Statement 133;
Establishes a requirement to evaluate interests in securitized
financial assets to identify interests that are freestanding
derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation;
Clarifies that concentrations of credit risk in the form of
subordination are not embedded derivatives;
Amends SFAS No. 140 to eliminate the prohibition on a
qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest
other than another derivative financial instrument.
F-106
Income tax benefits should be recognized when, based on the
technical merits of a tax position, the entity believes that if
a dispute arose with the taxing authority and were taken to a
court of last resort, it is more likely than not (i.e., a
probability of greater than 50 percent) that the tax
position would be sustained as filed; and
If a position is determined to be more likely than not of being
sustained, the reporting enterprise should recognize the largest
amount of tax benefit that is greater than 50 percent
likely of being realized upon ultimate settlement with the
taxing authority.
F-107
F-108
A) | ORIENTAL BANK AND TRUST an insured non-member commercial bank organized and existing under the laws of the Commonwealth of Puerto Rico. |
1. | Oriental International Bank Inc. an international banking entity organized and existing under the laws of the Commonwealth of Puerto Rico. | |
2. | Oriental Mortgage Corporation a mortgage bank organized and existing under the laws of the Commonwealth of Puerto Rico. This corporation is currently not in operation. |
B) | ORIENTAL FINANCIAL SERVICES CORP. a registered securities broker-dealer organized and existing under the laws of the Commonwealth of Puerto Rico. |
C) | ORIENTAL INSURANCE, INC. a registered insurance agency organized and existing under the laws of the Commonwealth of Puerto Rico. |
D) | CARIBBEAN PENSION CONSULTANTS, INC a corporation organized and existing under the laws of the State of Florida that offers third party pension plan administration in the continental U.S., Puerto Rico and the Caribbean. |
E) | ORIENTAL FINANCIAL (PR) STATUTORY TRUST I a special purpose statutory trust organized under the laws of the State of Connecticut. |
F) | ORIENTAL FINANCIAL (PR) STATUTORY TRUST II a special purpose statutory trust organized under the laws of the State of Connecticut. |
By: |
/s/ José
Rafael Fernández
|
By: |
/s/ Norberto
González
|
By: |
/s/ José
Rafael Fernández
|
By: |
/s/ Norberto
González
|