Nexity Financial Corporation (NASDAQ: NXTY)

Second Quarter 2006 Highlights:

-- Record operating income of $1.41 million, up 33.6% from last year

-- Diluted operating income per share of $0.16, up 11.1% from last year

-- Total assets of $834.0 million, up 22.9% from last year's $678.4 million

-- Total loans of $536.1 million, up 20.1% from last year's $446.5 million

-- Total deposits of $628.6 million, up 22.7% from last year's $512.1 million

-- Strong credit quality with YTD annualized net charge-offs of 0.19% and nonperforming loans of 0.01% of total loans

Nexity Financial Corporation (NASDAQ: NXTY) today reported second quarter operating income of $1.41 million, or $0.16 per diluted share. Operating income was up 33.6% from the same period in 2005. The improved earnings were primarily related to rapid growth in net interest income and improved noninterest income. Net interest income was up 27.1% from the same period in 2005 due to a 22.6% increase in average interest-earning assets and strong improvement in the net interest margin from 3.03% in 2005 to 3.14% in 2006. Operating income is net income less after tax non-recurring items and is more indicative of financial performance because it focuses on core earnings. The non-recurring items in each period presented are net gains realized on the sale of investment securities. Net income for the second quarter was $1.56 million, or $0.17 per diluted share compared with $1.35 million, or $0.18 per diluted share for the same period in 2005.

"The outstanding growth in net interest income and noninterest income continue to fuel our core earnings ability. Loan production has been very strong in 2006 although outstanding loan growth has lagged our expectations primarily due to construction and commercial real estate loan payoffs," said Greg Lee, Chairman and CEO of Nexity Financial Corporation. "We continue to develop our lending, marketing, and investment sales personnel to provide superior correspondent banking services to community banks."

Return on average assets and return on average equity were 0.78% and 10.26%, respectively, for the second quarter of 2006 compared with 0.68% and 8.28% during the first quarter in 2006 and 0.82% and 15.49% for the second quarter of 2005. Return on equity is lower than the same period last year primarily due to the additional equity raised at the end of the third quarter of 2005.

For the six months ended June 30, 2006, operating income was $2.72 million or $0.30 per diluted share compared to $1.99 million or $0.26 per diluted share during the same period in 2005. For the six months ended June 30, 2006, Nexity's net income was $2.87 million or $0.31 per diluted share compared with $2.29 million, or $0.30 per diluted share for the same period in 2005..

Return on average assets and return on average equity were 0.73% and 9.25%, respectively, for the six months ended June 30, 2006 compared with 0.73% and 13.01% for the same period in 2005. Return on equity is lower than the same period last year primarily due to the additional equity raised at the end of the third quarter of 2005.

Total assets grew to $834.0 million at June 30, 2006, up $155.6 million or 22.9% from the $678.4 million reported at June 30, 2005. Total loans were $536.1 million at June 30, 2006, up $89.6 million or 20.1% from the $446.5 million reported at June 30, 2005. Total deposits were $628.6 million at June 30, 2006, up $116.5 million or 22.7% from the $512.1 million reported at June 30, 2005.

Net interest income, the major component of Nexity's income statement was $6.2 million for the second quarter of 2006 versus $4.9 million for the same period in 2005, an increase of 27.1%. This increase was due to strong balance sheet growth and an improved net interest margin. Average interest-earning assets were up 22.6% and the net interest margin improved from 3.03% in 2005 to 3.14% in 2006. Our target level for the net interest margin is 3.00% and we anticipate that it will approach this level over the next 6 to 9 months due to the rising cost of interest bearing liabilities.

Average earning assets were higher because of strong growth in loans and deposits. Average loans were up $112.0 million or 26.7%. The net interest margin benefited from the increasing interest rate environment, an improved mix of earning assets, and an increase in noninterest bearing funds related to the increase in stockholders' equity. Average loans as a percentage of average earning assets improved from 64.7% during the second quarter of 2005 to 66.9% for the same period in 2006.

The provision for loan losses during the second quarter of 2006 was down $375,000 or 56.8% versus the same period in 2005. The provision for loan losses was lower primarily because of slower loan growth in 2006. Net charge-offs were elevated in the second quarter due to one loan charged-off that was previously on nonaccrual status. Net charge-offs for the second quarter of 2006 were $471,170 or 0.36% of average loans for the second quarter of 2006 on an annualized basis versus $32,158 or 0.03% for the same period in 2005.

Noninterest income for the second quarter of 2006 was $457,998, up $105,991 or 30.1% from the $352,007 reported for the same period in 2005. Noninterest income was up primarily because of an increase in income from the brokerage and investment services division and growth in our clearing and cash management business with correspondent banks. Income from the brokerage and investment services division was up $75,629 or 39.5% during the second quarter of 2006 compared with the same period last year. Income from our clearing and cash management business with correspondent banks was up $13,897 or 71.6% during the second quarter of 2006 compared with the same period last year.

Nexity realized $250,665 in net gains from the sale of investment securities during the second quarter of 2006 versus $468,351 during the same period in 2005. During the second quarter of 2006, the Corporation had the opportunity to sell its equity position in an illiquid common stock and recorded a gain of $722,505. The Corporation also sold $11.0 million in fixed income debt securities with an average yield of 3.84% at a loss of $471,840. As part of this transaction, the Corporation purchased $12.0 million in fixed income debt securities with an average yield of 5.86%. The transactions will improve monthly interest income by approximately $23,000.

Noninterest expense for the second quarter of 2006 was $4.18 million which was up $196,043 or 4.9% from the $3.98 million reported for the first quarter of 2006 and up $818,562 or 24.4% from the $3.36 million reported for the same period in 2005. Noninterest expense was higher than last year primarily due to increases related to the continued expansion of our correspondent banking markets and services, higher internet advertising costs, and costs related to technology investments made during the second half of 2005.

The efficiency ratio was 62.42% for the second quarter of 2006 which was improved from the 63.89% reported for the same period in 2005 but higher than the 60.75% reported for the first quarter of 2006. The efficiency ratio was higher in the second quarter of 2006 versus the first quarter of 2006 primarily because of slower quarter-to-quarter growth in net interest income and higher overhead.

Credit quality continues to be strong as nonperforming loans were only $49,000 or 0.01% of total loans at June 30, 2006 compared with $23,206 or 0.01% of total loans at June 30, 2005. Nonperforming assets were $1.5 million or 0.19% of total assets at June 30, 2006 compared with $1.7 million or 0.25% of total assets at June 30, 2005. Annualized net charge-offs were 0.19% of average loans during the first half of 2006 compared with 0.05% for the same period in 2005. The allowance for loan losses was 1.25% of total loans at June 30, 2006 and 2005.

Nexity's total risk-based capital, tier 1 risk-based capital, and leverage ratios at June 30, 2006 were 12.10%, 11.12%, and 9.44%, respectively, compared with 10.29%, 9.23%, and 7.36%, respectively, at June 30, 2005. On March 3, 2006, Nexity announced a stock repurchase program to acquire up to 400,000 shares, or approximately 4.6% of the total common shares currently outstanding. Nexity has repurchased 225,500 shares or approximately 2.6% of total common shares outstanding at that time.

Conference Call / Webcast Information

Nexity Financial Corporation will host a conference call on Tuesday, July 25 at 10:00 AM Eastern Daylight Time (EDT) to discuss the second quarter 2006 results. Additional material information, including forward-looking statements such as trends and projections, may be discussed during the presentation. To participate in the conference call or webcast, please follow the instructions listed below. -0- *T Webcast: Live via the Internet and Windows Media Player http://www.nexitybank.com/ then to the Investor Relations section, to conference in via the web Then click on "Second Quarter 2006 Earnings Release Conference Call." The Webcast access will be "listen only". Webcast URL: http://www.vcall.com/IC/CEPage.asp?ID=106622 Live via telephone to conference in via telephone 1-877-407-8033 (U.S. and Canada) (201) 689-8033 (International) *T

About Nexity Financial Corporation

Nexity Financial Corporation is an $834 million commercial bank offering deposit products nationwide consisting of money markets, checking accounts and online access. Nexity generates the majority of its income through wholesale correspondent banking activities. Nexity is headquartered in Birmingham, Alabama. Customer Service Representatives can be reached at 1-877-738-6391. To learn more about Nexity Bank please visit www.nexitybank.com.

CAUTION ABOUT FORWARD-LOOKING STATEMENTS

In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Nexity Financial Corporation notes that any statements in this press release and elsewhere that are not historical facts are "forward-looking statements." The words "expect", "anticipate", "intend", "consider", "plan", "believe", "seek", "should", "estimate" and similar expressions are intended to identify such forward-looking statements, but other statements may constitute forward-looking statements. The forward-looking statements involve risks and uncertainties that may cause Nexity's actual results of operations to differ materially from expected results. For a discussion of such risks and uncertainties, see Nexity's Annual Report on Form 10-K for the fiscal year ended December 31, 2005, as well as its other filings with the U.S. Securities and Exchange Commission. Nexity assumes no obligation to update any forward-looking statements contained in this document as a result of new information or future events or developments. -0- *T Nexity Financial Corporation Financial Summary (Unaudited) ---------------------------------------------------------------------- Three Months Ended June 30, Percent Income Statement Data 2006 2005 Change ---------------------------------------------------------------------- Interest income $14,169,852 $9,639,799 47.0 % Interest expense 7,935,443 4,733,971 67.6 ------------ ------------ Net interest income 6,234,409 4,905,828 27.1 Provision for loan losses 285,000 660,000 (56.8) ------------ ------------ Net interest income after provision for loan losses 5,949,409 4,245,828 40.1 Net gains on sales of securities 250,665 468,351 (46.5) Noninterest income 457,998 352,007 30.1 Noninterest expense 4,177,607 3,359,045 24.4 ------------ ------------ Income before income taxes 2,480,465 1,707,141 45.3 Applicable income tax expense 916,276 358,822 155.4 ------------ ------------ Net income $1,564,189 $1,348,319 16.0 % ============ ============ Reconciliation of Non-GAAP measures to GAAP: Net income $1,564,189 $1,348,319 16.0 % Non-recurring (income) expense (after-tax) (1) (155,728) (293,952) 47.0 ------------ ------------ Operating income $1,408,461 $1,054,367 33.6 % ============ ============ Net income per share - basic $0.18 $0.19 (5.4) Net income per share - diluted $0.17 $0.18 (3.5) Operating income per share - basic $0.17 $0.15 8.9 Operating income per share - diluted $0.16 $0.14 11.1 Weighted average shares outstanding - basic 8,529,986 6,952,284 22.7 Weighted average shares outstanding - diluted 9,085,301 7,554,331 20.3 ---------------------------------------------------------------------- Performance Ratios (Annualized (a)) Return on average assets (a) 0.78 % 0.82 % (5.1)% Return on average stockholders' equity (a) 10.26 15.49 (33.8) Net yield on average interest-earning assets (tax equivalent) (a) 3.14 3.03 3.7 Efficiency ratio 62.42 63.89 (2.3) ---------------------------------------------------------------------- Selected Average Balances (In thousands) Total assets $806,084 $659,219 22.3 % Interest-earning assets 795,841 649,248 22.6 Loans-net of unearned income 532,036 420,040 26.7 Investment securities 228,671 202,789 12.8 Deposits 617,385 505,228 22.2 Noninterest-bearing deposits 4,929 4,160 18.5 Interest-bearing deposits 612,456 501,068 22.2 Interest-bearing liabilities 732,185 615,207 19.0 Stockholders' equity 61,150 34,915 75.1 ---------------------------------------------------------------------- Six Months Ended June 30, Percent Income Statement Data 2006 2005 Change ---------------------------------------------------------------------- Interest income $27,225,529 $17,841,097 52.6 % Interest expense 14,826,136 8,515,632 74.1 ------------ ------------ Net interest income 12,399,393 9,325,465 33.0 Provision for loan losses 755,000 745,000 1.3 ------------ ------------ Net interest income after provision for loan losses 11,644,393 8,580,465 35.7 Net gains on sales of securities 250,665 468,351 (46.5) Noninterest income 846,530 695,712 21.7 Noninterest expense 8,159,171 6,540,575 24.7 ------------ ------------ Income before income taxes 4,582,417 3,203,953 43.0 Applicable income tax expense 1,711,276 918,822 86.2 ------------ ------------ Net income $2,871,141 $2,285,131 25.6 % ============ ============ Reconciliation of Non-GAAP measures to GAAP: Net income $2,871,141 $2,285,131 25.6 % Non-recurring (income) expense (after-tax) (1) (155,728) (293,952) 47.0 ------------ ------------ Operating income $2,715,413 $1,991,179 36.4 % ============ ============ Net income per share - basic $0.33 $0.33 1.3 Net income per share - diluted $0.31 $0.30 3.3 Operating income per share - basic $0.31 $0.29 9.9 Operating income per share - diluted $0.30 $0.26 12.1 Weighted average shares outstanding - basic 8,621,688 6,949,357 24.1 Weighted average shares outstanding - diluted 9,185,362 7,553,033 21.6 --------------------------------------------------------------------- Performance Ratios (Annualized (a)) Return on average assets (a) 0.73 % 0.73 % 0.9 % Return on average stockholders' equity (a) 9.25 13.01 (28.9) Net yield on average interest-earning assets (tax equivalent) (a) 3.20 3.02 6.0 Efficiency ratio 61.60 65.27 (5.6) ---------------------------------------------------------------------- Selected Average Balances (In thousands) Total assets $790,308 $634,543 24.5 % Interest-earning assets 779,319 623,470 25.0 Loans-net of unearned income 528,301 400,543 31.9 Investment securities 220,806 201,493 9.6 Deposits 600,375 480,044 25.1 Noninterest-bearing deposits 4,363 4,119 5.9 Interest-bearing deposits 596,012 475,925 25.2 Interest-bearing liabilities 715,691 590,488 21.2 Stockholders' equity 62,579 35,421 76.7 ---------------------------------------------------------------------- (1) Non-recurring income is gains on sales of investment securities. Nexity Financial Corporation Financial Summary (Unaudited) ---------------------------------------------------------------------- Selected Financial Data at Period-End (In thousands) June 30, Percent 2006 2005 Change ----------- ----------- ------ Total assets $833,984 $678,398 22.9 % Interest-earning assets 816,252 666,272 22.5 Loans-net of unearned income 536,096 446,496 20.1 Allowance for loan losses 6,716 5,563 20.7 Investment securities 223,850 203,211 10.2 Deposits 628,556 512,089 22.7 Stockholders' equity 59,396 38,232 55.4 Average loans to average deposits 88.00 % 83.44 % 5.5 % Total loans to interest-earning 65.68 67.01 (2.0) assets Average stockholders' equity to average assets 7.92 5.58 41.9 Tier 1 capital to average assets (Leverage ratio) 9.44 7.36 28.3 Risk-based capital ratios: Tier 1 capital 11.12 9.23 20.5 Total capital 12.10 10.29 17.6 Book value per common share $6.99 $5.50 27.1 Tangible book value per common share $6.88 $5.37 28.2 Total common shares outstanding 8,499,055 6,952,358 22.2 Credit Quality Data Nonperforming assets $1,549,000 $1,692,539 (8.5)% Nonperforming loans 49,000 23,206 111.2 Net charge-offs 505,792 93,527 440.8 Nonperforming assets to total assets 0.19 % 0.25 % (25.6) Annualized net charge-offs to average total loans (YTD) 0.19 0.05 310.0 Allowance for loan losses to total loans 1.25 1.25 0.5 Allowance for loan losses to nonperforming loans 13,705.96 23,973.51 (42.8) Nexity Financial Corporation Financial Summary (Unaudited) ---------------------------------------------------------------------- Consolidated Balance Sheets (In thousands) 6/30/06 3/31/06 12/31/05 9/30/05 6/30/05 ---------------------------------------------------------------------- ASSETS Cash and due from banks $ 3,496 $ 3,501 $ 2,222 $ 3,019 $ 2,480 Interest-bearing deposits in other banks 1,223 2,271 2,593 3,330 11,261 Federal funds sold 55,083 40,554 43,509 38,447 5,304 Investment securities available-for-sale, at fair value 223,850 217,362 209,018 202,154 203,211 Loans, net of unearned income 536,096 527,861 515,573 478,222 446,496 Allowance for loan losses (6,716) (6,902) (6,467) (5,980) (5,563) ------------------------ -------- -------- --------- -------- -------- Net loans 529,380 520,959 509,106 472,242 440,933 ------------------------ -------- -------- --------- -------- -------- Premises and equipment, net 1,113 1,146 1,207 1,120 739 Deferred tax asset 6,134 4,589 3,775 2,306 2,241 Intangible assets 911 911 911 911 911 Other assets 12,794 12,574 12,338 11,202 11,318 ------------------------ -------- -------- --------- -------- -------- Total assets $833,984 $803,867 $ 784,679 $734,731 $678,398 ======================== ======== ======== ========= ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Demand Deposits $ 8,251 $ 4,503 $ 4,301 $ 3,433 $ 2,776 NOW and money market accounts 246,495 233,081 249,906 240,999 230,834 Time deposits $100,000 and over 120,030 120,676 111,814 94,237 80,154 Other time and savings deposits 253,780 250,529 230,649 209,190 198,325 --------------------------------- -------- --------- -------- -------- Total deposits 628,556 608,789 596,670 547,859 512,089 Federal funds purchased and securities sold under agreements to repurchase 25,000 1,903 560 555 6,119 Long-term borrowings 100,000 110,000 105,000 105,000 103,000 Subordinated debentures 12,372 12,372 12,372 12,372 12,372 Accrued expenses and other liabilities 8,661 7,534 6,805 5,461 6,586 --------------------------------- -------- --------- -------- -------- Total liabilities 774,589 740,598 721,407 671,247 640,166 ------------------------ -------- -------- --------- -------- -------- Stockholders' Equity: Preferred stock 0 0 0 0 0 Common stock 87 87 87 87 70 Surplus 62,042 62,021 61,905 62,379 36,413 Retained earnings 6,215 4,651 3,344 2,168 1,088 Accumulated other comprehensive (loss) income (6,111) (3,394) (2,064) (1,150) 661 Less: Treasury stock (2,838) (96) 0 0 0 ------------------------ -------- -------- --------- -------- -------- Total stockholders' equity 59,395 63,269 63,272 63,484 38,232 ------------------------ -------- -------- --------- -------- -------- Total liabilities and stockholders' equity $833,984 $803,867 $ 784,679 $734,731 $678,398 ======================== ======== ======== ========= ======== ======== Nexity Financial Corporation Financial Summary (Unaudited) ---------------------------------------------------------------------- Income Statement Data 6/30/06 3/31/06 12/31/05 ---------------------------------------------------------------------- Interest income $14,169,852 $13,055,677 $12,362,413 Interest expense 7,935,443 6,890,693 6,268,728 ----------- ----------- ----------- Net interest income 6,234,409 6,164,984 6,093,685 Provision for loan losses 285,000 470,000 580,000 ----------- ----------- ----------- Net interest income after provision for loan losses 5,949,409 5,694,984 5,513,685 Net gains on sales of securities 250,665 0 0 Noninterest income 457,998 388,532 381,175 Noninterest expense 4,177,607 3,981,564 4,042,129 ----------- ----------- ----------- Income before income taxes 2,480,465 2,101,952 1,852,731 Applicable income tax expense 916,276 795,000 677,024 ----------- ----------- ----------- Net income $ 1,564,189 $ 1,306,952 $ 1,175,707 =========== =========== =========== Reconciliation of Non-GAAP measures to GAAP: Net income $ 1,564,189 $ 1,306,952 $ 1,175,707 Non-recurring (income) expense (after-tax) (1) (155,728) 0 0 ----------- ----------- ----------- Operating income $ 1,408,461 $ 1,306,952 $ 1,175,707 =========== =========== =========== Net income per share - basic $ 0.18 $ 0.15 $ 0.13 Net income per share - diluted $ 0.17 $ 0.14 $ 0.13 Operating income per share - basic $ 0.17 $ 0.15 $ 0.13 Operating income per share - diluted $ 0.16 $ 0.14 $ 0.13 Weighted average shares outstanding - basic 8,529,986 8,714,408 8,709,626 Weighted average shares outstanding - diluted 9,085,301 9,286,534 9,300,260 ---------------------------------------------------------------------- Performance Ratios (Annualized (a)) Return on average assets (a) 0.78 0.68 % 0.63% Return on average stockholders' equity (a) 10.26 8.28 7.31 Net yield on average interest- earning assets (tax equivalent) (a) 3.14 3.28 3.30 Efficiency ratio 62.42 60.75 62.43 ---------------------------------------------------------------------- Income Statement Data 9/30/05 6/30/05 ---------------------------------------------------------------------- Interest income $10,935,126 $9,639,799 Interest expense 5,479,716 4,733,971 ----------- ---------- Net interest income 5,455,410 4,905,828 Provision for loan losses 545,000 660,000 ----------- ---------- Net interest income after provision for loan losses 4,910,410 4,245,828 Net gains on sales of securities 0 468,351 Noninterest income 359,556 352,007 Noninterest expense 3,540,259 3,359,045 ----------- ---------- Income before income taxes 1,729,707 1,707,141 Applicable income tax expense 649,234 358,822 ----------- ---------- Net income $ 1,080,473 $1,348,319 =========== ========== Reconciliation of Non-GAAP measures to GAAP: Net income $ 1,080,473 $1,348,319 Non-recurring (income) expense (after-tax)(1) 0 (293,952) ----------- ---------- Operating income $ 1,080,473 $1,054,367 =========== ========== Net income per share - basic $ 0.15 $ 0.19 Net income per share - diluted $ 0.14 $ 0.18 Operating income per share - basic $ 0.15 $ 0.15 Operating income per share - diluted $ 0.14 $ 0.14 Weighted average shares outstanding - basic 7,037,434 6,952,284 Weighted average shares outstanding - diluted 7,650,291 7,554,331 ---------------------------------------------------------------------- Performance Ratios (Annualized (a)) Return on average assets (a) 0.61 % 0.82 % Return on average stockholders' equity (a) 10.69 15.49 Net yield on average interest-earning assets (tax equivalent) (a) 3.15 3.03 Efficiency ratio 60.88 63.89 ---------------------------------------------------------------------- (1) Non-recurring income is gains on sales of investment securities. Nexity Financial Corporation Financial Summary (Unaudited) ---------------------------------------------------------------------- Summary of Capital and Capital Ratios 6/30/06 3/31/06 12/31/05 9/30/05 6/30/05 ---------------------------------------------------------------------- Regulatory Capital (In thousands) Tier 1 Capital $ 76,596 $ 77,753 $ 76,425 $ 75,723 $ 48,660 Tier 2 Capital 6,716 6,902 6,467 5,980 5,563 ---------- ---------- ---------- ---------- ---------- Total risk- based capital 83,312 84,655 82,892 81,703 54,223 ---------- ---------- ---------- ---------- ---------- Total risk- weighted assets 688,716 680,314 649,436 595,253 527,184 Capital Ratios Total risk- based capital 12.10 12.44 % 12.76 % 13.73 % 10.29% Tier 1 risk- based capital 11.12 11.43 11.77 12.72 9.23 Leverage ratio 9.44 10.01 10.24 10.81 7.36 Book value per common share $ 6.99 $ 7.26 $ 7.26 $ 7.29 $ 5.50 Tangible book value per common share $ 6.88 $ 7.15 $ 7.16 $ 7.18 $ 5.37 Total common shares outstanding 8,499,055 8,716,425 8,711,175 8,709,091 6,952,358 Credit Quality Data Nonperforming assets $1,549,000 $4,150,356 $4,151,025 $1,726,660 $1,692,539 Nonperforming loans 49,000 2,650,356 2,651,025 64,570 23,206 Net charge-offs 471,170 34,622 92,934 128,644 32,158 Nonperforming loans to total loans 0.01 0.50 % 0.51 % 0.01 % 0.01% Nonperforming assets to total assets 0.19 0.52 0.53 0.24 0.25 Annualized net charge-offs to average total loans (QTD) 0.36 0.03 0.07 0.11 0.03 Allowance for loan losses to total loans 1.25 1.31 1.25 1.25 1.25 Allowance for loan losses to nonperforming loans 13,705.96 260.42 243.93 9,261.27 23,973.51 Nexity Financial Corporation Financial Summary (Unaudited) ---------------------------------------------------------------------- Comparative Average Balance Sheets - Yields and Costs Three Months Ended --------------------------------- 6/30/06 --------------------------------- Average Revenue/ Yield/ Balance Expense Rate --------------------------------- Interest-earning assets: Loans (1) $532,035,576 $11,016,654 8.31 % Investment securities, taxable (2) 228,670,316 2,694,469 4.71 Interest-bearing balances due from banks 2,435,088 53,457 8.81 Trading securities 697,522 13,177 7.58 Federal funds sold and securities purchased under agreements to resell 32,002,269 392,095 4.91 ---------------------------------------------------------------------- Total interest-earning assets 795,840,771 14,169,852 7.14 % ---------------------------------------------------------------------- Noninterest-earning assets: Cash and due from banks 3,877,515 Premises and equipment 1,156,918 Other, less allowance for loan losses 5,208,378 -------------------------------------------------- Total noninterest-earning assets 10,242,811 -------------------------------------------------- TOTAL ASSETS $806,083,582 ============= Interest-bearing liabilities: Interest-bearing deposits: Interest checking $ 4,337,981 13,045 1.21 % Savings 430,475 1,283 1.20 Money market 233,878,765 2,448,636 4.20 Time deposits 373,808,461 4,202,737 4.51 ---------------------------------------------------------------------- Total interest-bearing deposits 612,455,682 6,665,701 4.37 Federal funds purchased and securities sold under agreements to repurchase 1,862,791 22,646 4.88 Long-term debt 105,494,506 1,001,121 3.80 Subordinated debentures 12,372,000 245,975 7.97 ---------------------------------------------------------------------- Total interest-bearing liabilities 732,184,979 7,935,443 4.35 % ---------------------------------------------------------------------- Noninterest-bearing liabilities: Demand deposits 4,929,362 Other liabilities 7,819,484 -------------------------------------------------- Total noninterest-bearing liabilities 12,748,846 -------------------------------------------------- Stockholders' equity 61,149,757 -------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $806,083,582 ============= Net interest income $ 6,234,409 ============ Interest income/earning assets 7.14 % Interest expense/earning assets 4.00 ------ Net interest income/earning assets 3.14 % ====== Three Months Ended --------------------------------- 3/31/06 --------------------------------- Average Revenue/ Yield/ Balance Expense Rate --------------------------------- Interest-earning assets: Loans (1) $524,524,074 $10,283,980 7.95 % Investment securities, taxable (2) 212,855,033 2,475,540 4.65 Interest-bearing balances due from banks 2,534,098 38,023 6.09 Trading securities 200,944 2,089 4.22 Federal funds sold and securities purchased under agreements to resell 22,499,440 256,045 4.62 ---------------------------------------------------------------------- Total interest-earning assets 762,613,589 13,055,677 6.94 % ---------------------------------------------------------------------- Noninterest-earning assets: Cash and due from banks 3,858,425 Premises and equipment 1,184,559 Other, less allowance for loan losses 6,701,360 -------------------------------------------------- Total noninterest-earning assets 11,744,344 -------------------------------------------------- TOTAL ASSETS $774,357,933 ============= Interest-bearing liabilities: Interest-bearing deposits: Interest checking $ 4,293,168 12,866 1.22 % Savings 365,865 1,108 1.23 Money market 225,043,672 2,118,464 3.82 Time deposits 349,682,553 3,549,494 4.12 ---------------------------------------------------------------------- Total interest-bearing deposits 579,385,258 5,681,932 3.98 Federal funds purchased and securities sold under agreements to repurchase 1,810,345 20,182 4.52 Long-term debt 105,444,444 959,490 3.64 Subordinated debentures 12,372,000 229,089 7.51 ---------------------------------------------------------------------- Total interest-bearing liabilities 699,012,047 6,890,693 4.00 % ---------------------------------------------------------------------- Noninterest-bearing liabilities: Demand deposits 3,791,347 Other liabilities 7,530,697 -------------------------------------------------- Total noninterest-bearing liabilities 11,322,044 -------------------------------------------------- Stockholders' equity 64,023,842 -------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $774,357,933 ============= Net interest income $ 6,164,984 ============ Interest income/earning assets 6.94 % Interest expense/earning assets 3.66 ------ Net interest income/earning assets 3.28 % ====== Three Months Ended --------------------------------- 12/31/05 --------------------------------- Average Revenue/ Yield/ Balance Expense Rate --------------------------------- Interest-earning assets: Loans (1) $503,939,978 $ 9,727,025 7.66 % Investment securities, taxable (2) 202,489,492 2,329,066 4.56 Interest-bearing balances due from banks 3,024,472 47,817 6.27 Trading securities 0 0 0.00 Federal funds sold and securities purchased under agreements to resell 24,109,466 258,505 4.25 ---------------------------------------------------------------------- Total interest-earning assets 733,563,408 12,362,413 6.69 % ---------------------------------------------------------------------- Noninterest-earning assets: Cash and due from banks 4,056,607 Premises and equipment 1,127,966 Other, less allowance for loan losses 6,941,755 -------------------------------------------------- Total noninterest-earning assets 12,126,328 -------------------------------------------------- TOTAL ASSETS $745,689,736 ============= Interest-bearing liabilities: Interest-bearing deposits: Interest checking $ 4,563,776 12,811 1.11 % Savings 401,216 1,250 1.24 Money market 236,604,659 2,134,191 3.58 Time deposits 310,536,210 2,960,234 3.78 -------------------------------------------------- ------------ ------ Total interest-bearing deposits 552,105,861 5,108,486 3.67 Federal funds purchased and securities sold under agreements to repurchase 1,986,809 19,816 3.96 Long-term debt 105,000,000 920,577 3.48 Subordinated debentures 12,372,000 219,849 7.05 ---------------------------------------------------------------------- Total interest-bearing liabilities 671,464,670 6,268,728 3.70 % ---------------------------------------------------------------------- Noninterest-bearing liabilities: Demand deposits 4,360,172 Other liabilities 6,017,108 -------------------------------------------------- Total noninterest-bearing liabilities 10,377,280 -------------------------------------------------- Stockholders' equity 63,847,786 -------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $745,689,736 ============= Net interest income $ 6,093,685 ============ Interest income/earning assets 6.69 % Interest expense/earning assets 3.39 ------ Net interest income/earning assets 3.30 % ====== (1) Average loan balances are stated net of unearned income and include nonaccrual loans. (2) The weighted average yields on securities are calculated on the basis of the yield to maturity based on the book value of each security. Nexity Financial Corporation Financial Summary (Unaudited) ---------------------------------------------------------------------- Comparative Average Balance Sheets - Yields and Costs Three Months Ended -------------------------------- 9/30/05 -------------------------------- Average Revenue/ Yield/ Balance Expense Rate -------------------------------- Interest-earning assets: Loans (1) $470,106,189 $ 8,460,765 7.14 % Investment securities, taxable (2) 203,222,301 2,325,952 4.58 Interest-bearing balances due from banks 3,176,961 34,811 4.35 Trading securities 0 0 0.00 Federal funds sold and securities purchased under agreements to resell 12,351,544 113,598 3.65 ---------------------------------------------------------------------- Total interest-earning assets 688,856,995 10,935,126 6.31 % ---------------------------------------------------------------------- Noninterest-earning assets: Cash and due from banks 2,929,460 Premises and equipment 1,118,125 Other, less allowance for loan losses 9,531,931 --------------------------------------------------- Total noninterest-earning assets 13,579,516 --------------------------------------------------- TOTAL ASSETS $702,436,511 ============= Interest-bearing liabilities: Interest-bearing deposits: Interest checking $ 3,800,191 8,253 0.86 % Savings 459,942 1,433 1.24 Money market 238,046,932 1,909,614 3.18 Time deposits 287,271,827 2,433,214 3.36 ---------------------------------------------------------------------- Total interest-bearing deposits 529,578,892 4,352,514 3.26 Federal funds purchased and securities sold under agreements to repurchase 4,202,609 35,706 3.37 Long-term debt 104,663,043 888,578 3.40 Subordinated debentures 12,372,000 202,918 6.51 ---------------------------------------------------------------------- Total interest-bearing liabilities 650,816,544 5,479,716 3.34 % ---------------------------------------------------------------------- Noninterest-bearing liabilities: Demand deposits 4,347,057 Other liabilities 7,192,277 --------------------------------------------------- Total noninterest-bearing liabilities 11,539,334 --------------------------------------------------- Stockholders' equity 40,080,633 --------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $702,436,511 ============= Net interest income $ 5,455,410 ============ Interest income/earning assets 6.31 % Interest expense/earning assets 3.16 ------- Net interest income/earning assets 3.15 % ======= Three Months Ended -------------------------------- 6/30/05 -------------------------------- Average Revenue/ Yield/ Balance Expense Rate -------------------------------- Interest-earning assets: Loans (1) $420,039,884 $ 7,133,086 6.81 % Investment securities, taxable (2) 202,789,003 2,295,994 4.53 Interest-bearing balances due from banks 3,590,413 39,296 4.39 Trading securities 0 0 0.00 Federal funds sold and securities purchased under agreements to resell 22,829,096 171,423 3.01 ---------------------------------------------------------------------- Total interest-earning assets 649,248,396 9,639,799 5.96 % ---------------------------------------------------------------------- Noninterest-earning assets: Cash and due from banks 3,039,466 Premises and equipment 795,092 Other, less allowance for loan losses 6,135,776 -------------------------------------------------- Total noninterest-earning assets 9,970,334 -------------------------------------------------- TOTAL ASSETS $659,218,730 ============ Interest-bearing liabilities: Interest-bearing deposits: Interest checking $ 4,258,555 9,326 0.88 % Savings 533,295 1,645 1.24 Money market 219,415,269 1,545,747 2.83 Time deposits 276,861,499 2,177,082 3.15 ---------------------------------------------------------------------- Total interest-bearing deposits 501,068,618 3,733,800 2.99 Federal funds purchased and securities sold under agreements to repurchase 3,491,289 25,505 2.93 Long-term debt 98,274,725 789,126 3.21 Subordinated debentures 12,372,000 185,540 6.02 ---------------------------------------------------------------------- Total interest-bearing liabilities 615,206,632 4,733,971 3.09 % ---------------------------------------------------------------------- Noninterest-bearing liabilities: Demand deposits 4,159,808 Other liabilities 4,937,662 -------------------------------------------------- Total noninterest-bearing liabilities 9,097,470 -------------------------------------------------- Stockholders' equity 34,914,628 -------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $659,218,730 ============ Net interest income $ 4,905,828 =========== Interest income/earning assets 5.96 % Interest expense/earning assets 2.93 ------ Net interest income/earning assets 3.03 % ====== (1) Average loan balances are stated net of unearned income and include nonaccrual loans. (2) The weighted average yields on securities are calculated on the basis of the yield to maturity based on the book value of each security. *T