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Bank of the Hills, National Association

Kerrville, TX · Cert 34636

FDIC

Q2 2006

$320.1MAssets
$147.6MLoans
$294.3MDeposits
$24.6MEquity
Deposit mix
85%Interest-bearing $248.9M15%Noninterest $45.5MQ2 2005Q2 2006

NIM

4.61%Q2 ’044.89%Q2 ’055.47%Q2 ’06-4%-5%

Non-interest income vs. expense

2.20%Q2 ’041.99%Q2 ’051.80%Q2 ’06-5%-17%

Executive Summary

  • Earnings: ROA of 1.69%, up 14 bps year over year; NIM at 3.20%.
  • Asset quality: problem loans at 0.00% of loans (0 bps YoY), with net charge-offs at 0.04%.
  • Funding: loans stand at 50.14% of deposits as of Q2 2006.

Financial Results

Return on Assets (quarter, annualized)

1.69%+14 bps YoY

Net Interest Margin (quarter, annualized)

3.20%-18 bps YoY

Efficiency Ratio (quarter, annualized)

45.54%-276 bps YoY

Tier 1 Leverage Ratio

n/a

Discrete quarter, annualized.

MetricQ2 2005Q3 2005Q4 2005Q1 2006Q2 2006YoY ΔTrend
Earnings
Return on Assets1.54%1.57%1.69%1.54%1.69%+14 bps
Return on Equity21.51%21.74%23.71%21.28%22.31%+80 bps
Net Interest Margin3.39%3.34%3.17%3.16%3.20%-18 bps
Efficiency Ratio48.30%48.64%47.52%47.44%45.54%-276 bps
Non-Interest Burden1.26%1.24%1.14%1.12%1.05%-21 bps
Growth
Asset Growth (YoY)17.46%19.51%22.52%18.39%15.83%-163 bps
Loan Growth (YoY)14.31%9.85%6.87%8.46%4.22%-1,009 bps
Deposit Growth (YoY)15.48%19.35%22.51%17.96%16.85%+137 bps
Asset Quality
Nonperforming Loans / Loans0.00%0.00%0.00%0.00%0.00%0 bps
Net Charge-Offs / Loans0.02%0.01%0.04%0.01%0.04%+2 bps
Allowance / Loans1.43%1.45%1.48%1.46%1.46%+3 bps
Allowance Coverage of NPLsn/an/an/an/an/an/an/a
Capital
Tier 1 Leverage Ration/an/an/an/an/an/an/a
Total Risk-Based Capital13.62%13.84%14.28%14.30%15.18%+156 bps
Equity / Assets7.21%7.22%7.06%7.42%7.69%+47 bps
Liquidity & Funding
Loans / Deposits56.22%53.65%49.24%50.83%50.14%-608 bps
Liquid Assets / Assets41.18%40.26%40.78%43.36%45.18%+400 bps
CRE / Total Capitaln/an/an/an/an/an/an/a