Mortgage banking efforts were enhanced during the year to improve the Company’s ability to generate fees from originating and selling fixed rate mortgage products to permanent investors. Colonial hired over fifty mortgage banking personnel in Florida to capture more of the market opportunity. As a result, fees from mortgage banking origination activities increased over 45% from 2004 companywide.
We expect to improve deposit service charges and income from financial planning services. In 2006, Colonial began offering variable annuities and mutual funds to our customers as an alternative to certificates of deposits and fixed annuities. To counteract the trend seen in 2005 for deposit service charges, the Company began 2006 with advertising and sales campaigns to increase checking account growth which, in turn, should equate to more fee income from deposit accounts. Operating expenses were held in check compared to the Company’s growth in revenues. The Company’s efficiency ratio,1 which measures how much of a dollar it takes in expense to produce a dollar of revenue, improved from 59.32% in 2004 to 57.06% in 2005. We expect to continue to improve the Company’s operating leverage in 2006 through efficiencies and expense savings initiatives.
The largest component of noninterest expense is salaries and benefits. We believe in investing in our people as we believe that banking is still a people business. Five years ago, we set out to forge a proactive sales and service culture and to reward our people for their efforts. In 2005, over 82% of our branches received incentive compensation through our branch incentive program which pays for deposit and noninterest income growth. Furthermore, 57% of our employees received some form of incentive compensation in 2005.
In summary, we believe that the best things really do come out of the blue - that is, Colonial BancGroup.