Provident Financial Services, Inc. Announces Increased Quarterly Earnings and Declares Quarterly Cash Dividend
JERSEY CITY, NJ, October 26, 2012 - Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $16.2 million, or $0.28 per basic and diluted share for the three months ended September 30, 2012, compared to net income of $15.6 million, or $0.27 per basic and diluted share for the three months ended September 30, 2011.
For the nine months ended September 30, 2012, the Company reported net income of $50.6 million, or $0.89 per basic share and $0.88 per diluted share, compared to net income of $42.5 million, or $0.75 per basic and diluted share for the same period last year.
The improvement in earnings for the third quarter and year-to-date period ended September 30, 2012, was largely attributable to the continued improvement in asset quality and related reductions in the provision for loan losses, while growth in both average loans outstanding and average lower-costing core deposits have mitigated compression in the net interest margin.
Christopher Martin, Chairman, President and Chief Executive Officer, commented, “The strong organic loan growth we experienced during the third quarter helped offset the margin compression currently affecting much of our industry. Our margin was impacted by accelerated repayments of mortgage-backed securities, as well as rate modifications and refinancing by existing customers who continued to take advantage of the prolonged low interest rate environment.” Martin continued: “Helping preserve the margin, we achieved substantial core deposit growth during the quarter. Asset quality continued to improve despite the lingering challenges within the New Jersey economy. We look forward to 2013 and hopefully, a clearer economic outlook. Our capital levels remain strong and our staff remains committed to building and expanding client relationships through personal attention.”
Declaration of Quarterly Dividend
The Company’s Board of Directors declared a quarterly cash dividend of $0.13 per common share payable on November 30, 2012, to stockholders of record as of the close of business on November 15, 2012.
Balance Sheet Summary
Total assets increased $167.6 million to $7.26 billion at September 30, 2012, from $7.10 billion at December 31, 2011. The increase was primarily due to increases in net loans and cash and cash equivalents, partially offset by a decline in total securities.
Cash and cash equivalents increased $37.9 million to $107.6 million at September 30, 2012, from $69.6 million at December 31, 2011. These cash balances are expected to be deployed to fund loan originations, the repayment of borrowings and investment purchases.
The Company’s net loans increased $169.4 million, or 3.7%, during the nine months ended September 30, 2012 to $4.75 billion. Loan originations totaled $1.2 billion and loan purchases totaled $115.4 million for the nine months ended September 30, 2012. The loan portfolio had net increases of $162.9 million in commercial and multi-family mortgage loans, $22.6 million in consumer loans and $10.6 million in construction loans, which were partially offset by decreases in residential mortgage loans and commercial loans of $19.3 million and $9.8 million, respectively. Commercial real estate, commercial and construction loans represented 61.1% of the loan portfolio at September 30, 2012, compared to 59.8% at December 31, 2011.
At September 30, 2012, the Company’s unfunded loan commitments totaled $850.9 million, including $345.4 million in commercial loan commitments, $138.7 million in construction loan commitments and $96.7 million in commercial mortgage commitments. Unfunded loan commitments at December 31, 2011 were $770.4 million.
Total investments decreased $35.9 million, or 2.0%, to $1.73 billion at September 30, 2012, from $1.76 billion at December 31, 2011. The decrease was primarily due to principal repayments on mortgage-backed securities, maturities of municipal and agency bonds and the sale of certain mortgage-backed securities which had a high risk of prepayment, partially offset by purchases of mortgage-backed and municipal securities.
Total deposits increased $217.1 million, or 4.2%, during the nine months ended September 30, 2012 to $5.37 billion. Core deposits, consisting of savings and demand deposit accounts, increased $338.3 million, or 8.4%, to $4.37 billion at September 30, 2012. Partially offsetting this increase, time deposits decreased $121.2 million, or 10.7%, to $1.01 billion at September 30, 2012, with the majority of the decrease occurring in the 24-month and shorter maturity categories. The Company remains focused on developing core deposit relationships, while strategically permitting the run-off of time deposits. Core deposits represented 81.3% of total deposits at September 30, 2012, compared to 78.1% at December 31, 2011.
Borrowed funds were reduced $85.8 million, or 9.3% during the nine months ended September 30, 2012, to $834.4 million, as core deposit growth continued to replace wholesale funding. Borrowed funds represented 11.5% of total assets at September 30, 2012, a reduction from 13.0% at December 31, 2011.
Common stock repurchases for the nine months ended September 30, 2012, totaled 408,000 shares at an average cost of $13.81 per share. No shares were repurchased during the quarter ended September 30, 2012. As of September 30, 2012, 1.4 million shares remained eligible for repurchase under the current authorization. At September 30, 2012, book value per share and tangible book value per share were $16.43 and $10.47, respectively, compared with $15.88 and $9.87, respectively, at December 31, 2011.
Results of Operations
Net Interest Income and Net Interest Margin
For the three months ended September 30, 2012, net interest income decreased $741,000 from the same period in 2011, to $53.7 million. The decline in net interest income for the three months ended September 30, 2012, was primarily due to compression in the net interest margin, partially mitigated by growth in average interest-earning assets. Net interest income for the nine months ended September 30, 2012, increased $1.1 million compared to the same period in 2011, to $163.1 million. The improvement in net interest income for the nine months ended September 30, 2012 resulted from an increase in average interest-earning assets, primarily average loans outstanding, funded with growth in lower-costing core deposits. This improvement in earning asset volume and funding mix was partially offset by compression in the net interest margin.
The Company’s net interest margin for the quarter ended September 30, 2012 was 3.31%, a decrease of 8 basis points from 3.39% for the quarter ended June 30, 2012, and 19 basis points from 3.50% for the quarter ended September 30, 2011. The decrease in the net interest margin was primarily attributable to the decline in yields on interest-earning assets, which outpaced the downward re-pricing of the Company’s interest-bearing liabilities as longer-term market interest rates have declined and the yield curve has flattened. The weighted average yield on interest-earning assets was 3.99% for the three months ended September 30, 2012, compared with 4.11% for the trailing quarter, and 4.45% for the three months ended September 30, 2011. The weighted average cost of interest-bearing liabilities was 0.82% for the quarter ended September 30, 2012, compared with 0.85% for the trailing quarter and 1.10% for the third quarter of 2011. The average cost of interest bearing deposits for the three months ended September 30, 2012 was 0.54%, compared with 0.58% for the trailing quarter and 0.81% for the same period last year. Partially offsetting the effects of interest rate spread compression on the margin, average non-interest bearing demand deposits totaled $771.4 million for the quarter ended September 30, 2012, compared with $689.3 million for the trailing quarter and $605.8 million for the quarter ended September 30, 2011. The average cost of borrowings for the three months ended September 30, 2012 was 2.32%, compared with 2.20% for the trailing quarter, and 2.50% for the same period last year. The increase in the cost of borrowing from the trailing quarter was due to a reduction in lower-costing overnight funds.
For the nine months ended September 30, 2012, the net interest margin decreased 13 basis points to 3.38%, compared with 3.51% for the nine months ended September 30, 2011. The weighted average yield on interest-earning assets declined 43 basis points to 4.10% for the nine months ended September 30, 2012, compared with 4.53% for the nine months ended September 30, 2011, while the weighted average cost of interest-bearing liabilities declined 32 basis points to 0.86% for the nine months ended September 30, 2012, compared with 1.18% for the same period in 2011. The average cost of interest bearing deposits for the nine months ended September 30, 2012 was 0.58%, compared with 0.87% for the same period last year. Average non-interest bearing demand deposits totaled $710.5 million for the nine months ended September 30, 2012, compared with $580.8 million for the nine months ended September 30, 2011. The average cost of borrowings for the nine months ended September 30, 2012 was 2.26%, compared with 2.62% for the same period last year.
Non-Interest Income
Non-interest income totaled $9.8 million for the quarter ended September 30, 2012, an increase of $1.1 million, or 13.2%, compared to the same period in 2011. Fee income increased $901,000 to $7.5 million for the three months ended September 30, 2012, compared with the three months ended September 30, 2011, due primarily to an increase in commercial loan prepayment fees and increased wealth management fees attributable to Beacon Trust Company (“Beacon”), acquired in August 2011. These increases were partially offset by lower deposit-based fee revenue. Additionally, other income increased $600,000 for the three months ended September 30, 2012, compared to the same period in 2011, resulting from an increase in gains related to loan sales, partially offset by increased net losses on the sale of foreclosed real estate. Net gains on securities transactions for the quarter ended September 30, 2012 totaled $298,000, a decrease of $360,000 compared to the same period in 2011.
For the nine months ended September 30, 2012, non-interest income totaled $31.9 million, an increase of $8.0 million, or 33.5%, compared to the same period in 2011. Fee income totaled $23.0 million for the nine months ended September 30, 2012, an increase of $5.0 million compared with the same period in 2011, largely due to an increase in wealth management fees related to the Beacon acquisition and increased prepayment fees on commercial loans, which were partially offset by lower deposit-based fee income, primarily consisting of overdraft fees. Net gains on securities transactions totaled $2.5 million for the nine months ended September 30, 2012, compared to $686,000 for the same period in 2011. During the period, the Company identified and sold certain mortgage-backed securities which had a high risk of accelerated prepayment. The proceeds from the sales were reinvested in similar securities with more stable projected cash flows. Also contributing to the increase in non-interest income, other income increased $1.0 million for the nine months ended September 30, 2012, compared with the same period in 2011, primarily due to income associated with the termination of the Company’s debit card rewards program and an increase in gains related to loan sales, partially offset by increased net losses on the sale of foreclosed real estate. Other-than-temporary impairment charges on investment securities declined $302,000 for the nine months ended September 30, 2012, compared to the same period last year, as the Company did not experience any other-than-temporary impairment on its securities portfolio in 2012.
Non-Interest Expense
For the three months ended September 30, 2012, non-interest expense increased $1.9 million, or 5.6%, to $36.9 million, compared to the three months ended September 30, 2011. Compensation and benefits increased $905,000 for the quarter ended September 30, 2012, to $20.1 million, compared to the quarter ended September 30, 2011. This increase was due to higher salary expense associated with annual merit increases, personnel added as a result of the Beacon acquisition, an increased incentive compensation accrual, and increased employee health and medical costs and retirement benefit costs. Other operating expenses increased $877,000, to $6.1 million for the quarter ended September 30, 2012, from the same period in 2011, due mainly to an increase in non-performing asset related expenses and costs associated with branch consolidations. In addition, data processing expense increased $331,000 for the three months ended September 30, 2012, compared to same period in 2011, primarily due to increased software maintenance expense associated with technology enhancements at Beacon. Partially offsetting these increases, amortization of intangibles decreased $197,000 for the three months ended September 30, 2012, compared with the same period in 2011, as a result of scheduled reductions in core deposit intangible amortization. Net occupancy expense decreased $144,000, to $5.1 million for the three months ended September 30, 2012, compared to the same period in 2011, as the prior year period included approximately $125,000 in expense due to property damage sustained in Hurricane Irene.
The Company’s annualized non-interest expense as a percentage of average assets was 2.04% for the quarter ended September 30, 2012, compared to 2.01% for the same period in 2011. The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income) was 58.10% for the quarter ended September 30, 2012, compared with 55.39% for the same period in 2011.
Non-interest expense for the nine months ended September 30, 2012 was $111.4 million, an increase of $5.2 million, or 4.9%, from the nine months ended September 30, 2011. Compensation and benefits expense increased $4.6 million, to $61.1 million for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, due to higher salary expense associated with annual merit increases, personnel added as a result of the Beacon acquisition, an increased incentive compensation accrual and increased employee health and medical costs and retirement benefit costs. In addition, other operating expense increased $1.8 million for the nine months ended September 30, 2012, compared to the same period in 2011, due primarily to increased non-performing asset related expenses, a $213,000 charge related to the termination of a software contract in connection with the Beacon integration, and $222,000 in charges related to the consolidation of underperforming branches. Data processing expense increased $768,000 for the nine months ended September 30, 2012, compared to the same period in 2011, due to an increase in software maintenance expense, primarily associated with technology enhancements at Beacon, and increased core processing fees. Partially offsetting these increases, impairment of premises and equipment declined $807,000 for the nine months ended September 30, 2012, compared to the same period last year, due to an impairment charge incurred in the first quarter of 2011 related to the then planned sale and relocation of the Company’s former loan center. FDIC insurance expense decreased $586,000 to $3.9 million for the nine months ended September 30, 2012, compared with the same period in 2011. The decrease was primarily due to a lower assessment rate and a change in assessment methodology from a deposit-based to an asset-based assessment, effective in the second quarter of 2011. Net occupancy expense decreased $481,000 to $15.3 million, compared to the same period last year, due to the consolidation and relocation of the Company’s administrative offices in April 2011 and the elimination of prior year carrying costs on previously occupied facilities owned by the Company that were sold in November 2011. Approximately $125,000 in expense due to property damage sustained in Hurricane Irene were also included in occupancy expense for the nine months ended September 30, 2011. Additionally, amortization of intangibles decreased $346,000 for the nine months ended September 30, 2012, compared with the same period of 2011, as a result of scheduled reductions in core deposit intangible amortization, partially offset by the amortization of the customer relationship intangible arising from the Beacon acquisition and increased amortization of mortgage servicing rights.
Asset Quality
The Company’s total non-performing loans at September 30, 2012 improved to $105.7 million, or 2.19% of total loans, compared with $115.2 million, or 2.43% of total loans at June 30, 2012, $122.5 million, or 2.63% of total loans at December 31, 2011, and $125.3 million, or 2.74% of total loans at September 30, 2011. The decrease in non-performing loans at September 30, 2012, compared with the trailing quarter, was largely due to a $4.9 million decrease in non-performing commercial loans, a $2.6 million decrease in non-performing residential loans, a $1.3 million decrease in non-performing consumer loans and a $1.0 million decrease in non-performing commercial mortgage loans. At September 30, 2012, impaired loans totaled $114.4 million with related specific reserves of $8.4 million, compared with impaired loans totaling $115.5 million with related specific reserves of $8.6 million at June 30, 2012.
At September 30, 2012, the Company’s allowance for loan losses was 1.46% of total loans, compared with 1.53% of total loans at June 30, 2012, 1.60% of total loans at December 31, 2011 and 1.61% of total loans at September 30, 2011. The Company recorded provisions for loan losses of $3.5 million and $12.0 million for the three and nine months ended September 30, 2012, respectively, compared with provisions of $7.5 million and $22.9 million for the three and nine months ended September 30, 2011, respectively. For the three and nine months ended September 30, 2012, the Company had net charge-offs of $5.6 million and $16.1 million, respectively, compared with net charge-offs of $6.1 million and $18.0 million, respectively, for the same periods in 2011. The allowance for loan losses decreased $4.1 million to $70.3 million at September 30, 2012, from $74.4 million at December 31, 2011 as the weighted average risk rating of the loan portfolio improved and non-performing asset formation decreased.
At September 30, 2012, the Company held $13.9 million of foreclosed assets, compared with $12.8 million at December 31, 2011. Foreclosed assets at September 30, 2012 consisted of $6.5 million of commercial real estate, $5.9 million of residential real estate, $498,000 of marine vessels and $339,000 of commercial loans.
Income Tax Expense
For the three and nine months ended September 30, 2012, the Company’s income tax expense was $7.0 million and $21.0 million, respectively, compared with $5.1 million and $14.3 million, for the three and nine months ended September 30, 2011, respectively. The increase in income tax expense was primarily a function of growth in pre-tax income from taxable sources. The Company’s effective tax rates were 30.1% and 29.3% for the three and nine months ended September 30, 2012, respectively, compared with 24.6% and 25.2% for both the three and nine months ended September 30, 2011, respectively.
About the Company
Provident Financial Services, Inc. is the holding company for The Provident Bank, a community-oriented bank offering a full range of retail and commercial loan and deposit products. The Bank currently operates a network of full service branches throughout 11 counties in northern and central New Jersey.
Post Earnings Conference Call
Representatives of the Company will hold a conference call for investors at 10:00 a.m. Eastern Time on Friday, October 26, 2012 regarding highlights of the Company’s third quarter 2012 financial results. The call may be accessed by dialing 1-877-317-6789 (Domestic), 1-412-317-6789 (International) or 1-866-605-3852 (Canada). Internet access to the call is also available (listen only) at www.providentnj.com by going to Investor Relations and clicking on Webcast.
Forward Looking Statements
Certain statements contained herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.
The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made. The Company advises readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| Consolidated Statements of Financial Condition |
| September 30, 2012 (Unaudited) and December 31, 2011 |
| (Dollars in Thousands) |
| | | | | | | | | |
| Assets | | | September 30, 2012 | December 31, 2011 |
| | | | | | | | | |
| Cash and due from banks | | $ | 105,601 | $ | 68,553 |
| Short-term investments | | | 1,952 | | 1,079 |
| | | | Total cash and cash equivalents | | | 107,553 | | 69,632 |
| | | | | | | | | |
| Securities available for sale, at fair value | | | 1,337,212 | | 1,376,119 |
| Investment securities held to maturity (fair value of $370,353 at | | | | | |
| | September 30, 2012 (unaudited) and $366,296 at December 31, 2011) | | | 352,307 | | 348,318 |
| Federal Home Loan Bank of New York ("FHLB-NY") stock | | | 37,971 | | 38,927 |
| | | | | | | | | |
| Loans | | | | | 4,818,857 | | 4,653,509 |
| | Less allowance for loan losses | | | 70,280 | | 74,351 |
| | | | Net loans | | | 4,748,577 | | 4,579,158 |
| | | | | | | | | |
| Foreclosed assets, net | | | 13,900 | | 12,802 |
| Banking premises and equipment, net | | | 67,315 | | 66,260 |
| Accrued interest receivable | | | 22,590 | | 24,653 |
| Intangible assets | | | | 358,365 | | 360,714 |
| Bank-owned life insurance | | | 145,905 | | 142,010 |
| Other assets | | | | | 73,285 | | 78,810 |
| | | | Total assets | | $ | 7,264,980 | $ | 7,097,403 |
| | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | |
| | | | | | | | | |
| Deposits: | | | | | | | |
| | Demand deposits | | $ | 3,468,321 | $ | 3,136,129 |
| | Savings deposits | | | 897,854 | | 891,742 |
| | Certificates of deposit of $100,000 or more | | | 342,807 | | 383,174 |
| | Other time deposits | | | 664,695 | | 745,552 |
| | | | Total deposits | | | 5,373,677 | | 5,156,597 |
| | | | | | | | | |
| Mortgage escrow deposits | | | 21,340 | | 20,955 |
| Borrowed funds | | | 834,421 | | 920,180 |
| Other liabilities | | | 46,999 | | 47,194 |
| | | | Total liabilities | | | 6,276,437 | | 6,144,926 |
| | | | | | | | | |
| Stockholders' Equity: | | | | | |
| Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued | | | — | | — |
| Common stock, $0.01 par value, 200,000,000 shares authorized, 83,209,293 shares | | | | | |
| | issued and 60,156,795 outstanding at September 30, 2012, and 59,968,195 | | | | | |
| | outstanding at December 31, 2011 | | | 832 | | 832 |
| Additional paid-in capital | | | 1,020,778 | | 1,019,253 |
| Retained earnings | | | 390,515 | | 363,011 |
| Accumulated other comprehensive income | | | 13,038 | | 9,571 |
| Treasury stock | | | | | (383,256) | | (384,725) |
| Unallocated common stock held by the Employee Stock Ownership Plan ("ESOP") | | | (53,364) | | (55,465) |
| Common Stock acquired by the Directors' Deferred Fee Plan ("DDFP") | | | (7,321) | | (7,390) |
| Deferred Compensation - DDFP | | | 7,321 | | 7,390 |
| | | | Total stockholders' equity | | | 988,543 | | 952,477 |
| | | | Total liabilities and stockholders' equity | | $ | 7,264,980 | $ | 7,097,403 |
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| Consolidated Statements of Income |
| Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited) |
| (Dollars in Thousands, except per share data) |
| | | | | | | | | | | | |
| | | | | | Three months ended | | Nine months ended |
| | | | | | September 30, | | September 30, |
| | | | | | 2012 | | 2011 | | 2012 | | 2011 |
| Interest income: | | | | | | | | | |
| | Real estate secured loans | $ | 38,544 | $ | 39,466 | $ | 116,175 | $ | 119,425 |
| | Commercial loans | | 10,242 | | 11,010 | | 30,817 | | 31,867 |
| | Consumer loans | | 6,343 | | 6,436 | | 18,967 | | 19,445 |
| | Securities available for sale and FHLB-NY stock | | 6,599 | | 9,174 | | 22,743 | | 28,468 |
| | Investment securities | | 2,987 | | 3,045 | | 8,896 | | 9,169 |
| | Deposits, Federal funds sold and other short-term investments | | 42 | | 26 | | 58 | | 81 |
| | | Total interest income | | 64,757 | | 69,157 | | 197,656 | | 208,455 |
| | | | | | | | | | | | |
| Interest expense: | | | | | | | | | |
| | Deposits | | | | 6,155 | | 8,984 | | 19,660 | | 28,439 |
| | Borrowed funds | | 4,887 | | 5,717 | | 14,866 | | 17,937 |
| | | Total interest expense | | 11,042 | | 14,701 | | 34,526 | | 46,376 |
| | | Net interest income | | 53,715 | | 54,456 | | 163,130 | | 162,079 |
| Provision for loan losses | | 3,500 | | 7,500 | | 12,000 | | 22,900 |
| | | Net interest income after provision for loan losses | | 50,215 | | 46,956 | | 151,130 | | 139,179 |
| | | | | | | | | | | | |
| Non-interest income: | | | | | | | | |
| | Fees | | | | 7,532 | | 6,631 | | 23,018 | | 18,052 |
| | Bank owned life insurance | | 1,273 | | 1,274 | | 3,895 | | 3,998 |
| | Other-than-temporary impairment losses on securities | | — | | — | | — | | (1,661) |
| | Portion of loss recognized in OCI (before taxes) | | — | | — | | — | | 1,359 |
| | Net impairment losses recognized in earnings | | — | | — | | — | | (302) |
| | Net gain on securities transactions | | 298 | | 658 | | 2,482 | | 686 |
| | Other income | | 687 | | 87 | | 2,466 | | 1,431 |
| | | Total non-interest income | | 9,790 | | 8,650 | | 31,861 | | 23,865 |
| | | | | | | | | | | | |
| Non-interest expense: | | | | | | | | |
| | Compensation and employee benefits | | 20,131 | | 19,226 | | 61,084 | | 56,476 |
| | Net occupancy expense | | 5,142 | | 5,286 | | 15,330 | | 15,811 |
| | Data processing expense | | 2,712 | | 2,381 | | 7,762 | | 6,994 |
| | FDIC Insurance | | 1,277 | | 1,319 | | 3,897 | | 4,483 |
| | Amortization of intangibles | | 511 | | 708 | | 1,968 | | 2,314 |
| | Impairment of premises and equipment | | — | | — | | — | | 807 |
| | Advertising and promotion expense | | 1,036 | | 823 | | 2,849 | | 2,605 |
| | Other operating expenses | | 6,087 | | 5,210 | | 18,553 | | 16,747 |
| | | Total non-interest expenses | | 36,896 | | 34,953 | | 111,443 | | 106,237 �� |
| | | Income before income tax expense | | 23,109 | | 20,653 | | 71,548 | | 56,807 |
| Income tax expense | | 6,955 | | 5,087 | | 20,963 | | 14,333 |
| | | Net income | $ | 16,154 | $ | 15,566 | $ | 50,585 | $ | 42,474 |
| | | | | | | | | | | | |
| Basic earnings per share | $ | 0.28 | $ | 0.27 | $ | 0.89 | $ | 0.75 |
| Average basic shares outstanding | | 57,194,046 | | 56,926,131 | | 57,133,164 | | 56,847,975 |
| | | | | | | | | | | | |
| Diluted earnings per share | $ | 0.28 | $ | 0.27 | $ | 0.88 | $ | 0.75 |
| Average diluted shares outstanding | | 57,238,819 | | 56,941,715 | | 57,169,844 | | 56,860,371 |
| | | | | | | | | | | | |
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| Consolidated Financial Highlights |
| (Dollars in Thousands, except share data) (Unaudited) |
| | | | | | | | | | | | | | | |
| | | | | | At or for the | | | At or for the |
| | | | | | Three Months Ended | Nine Months Ended |
| | | | | | September 30, | | | September 30, |
| | | | | | 2012 | | | 2011 | | | 2012 | | | 2011 |
STATEMENTS OF INCOME: | | | | | | | | | | | |
| Net interest income | | $ | 53,715 | | $ | 54,456 | | $ | 163,130 | | $ | 162,079 |
| Provision for loan losses | | | 3,500 | | | 7,500 | | | 12,000 | | | 22,900 |
| Non-interest income | | | 9,790 | | | 8,650 | | | 31,861 | | | 23,865 |
| Non-interest expense | | | 36,896 | | | 34,953 | | | 111,443 | | | 106,237 |
| Income before income tax expense | | 23,109 | | | 20,653 | | | 71,548 | | | 56,807 |
| Net income | | | | 16,154 | | | 15,566 | | | 50,585 | | | 42,474 |
| Diluted earnings per share | | | $0.28 | | | $0.27 | | | $0.88 | | | $0.75 |
| Interest rate spread | | | 3.17% | | | 3.35% | | | 3.24% | | | 3.35% |
| Net interest margin | | | 3.31% | | | 3.50% | | | 3.38% | | | 3.51% |
| |
| PROFITABILITY: | | | | | | | | | | | | |
| Annualized return on average assets | | 0.90% | | | 0.90% | | | 0.95% | | | 0.83% |
| Annualized return on average equity | | 6.53% | | | 6.52% | | | 6.95% | | | 6.06% |
| Annualized non-interest expense to average assets | | 2.04% | | | 2.01% | | | 2.09% | | | 2.08% |
| Efficiency ratio (1) | | | 58.10% | | | 55.39% | | | 57.15% | | | 57.13% |
| |
| ASSET QUALITY: | | | | | | | | | | | | |
| Non-accrual loans | | | | | | | | $ | 105,686 | | $ | 125,333 |
| 90+ and still accruing | | | | | | | | | — | | | — |
| Non-performing loans | | | | | | | | | 105,686 | | | 125,333 |
| Foreclosed assets | | | | | | | | | 13,900 | | | 6,889 |
| Non-performing assets | | | | | | | | | 119,586 | | | 132,222 |
| Non-performing loans to total loans | | | | | | | | 2.19% | | | 2.74% |
| Non-performing assets to total assets | | | | | | | | 1.65% | | | 1.89% |
| Allowance for loan losses | | | | | | | | $ | 70,280 | | $ | 73,655 |
| Allowance for loan losses to total non-performing loans | | | | | | | | 66.50% | | | 58.77% |
| Allowance for loan losses to total loans | | | | | | | | 1.46% | | | 1.61% |
| |
| AVERAGE BALANCE SHEET DATA: | | | | | | | | | | | |
| Assets | | | $ | 7,179,112 | | $ | 6,896,530 | | $ | 7,137,854 | | $ | 6,842,934 |
| Loans, net | | | | 4,658,208 | | | 4,414,332 | | | 4,620,253 | | | 4,387,655 |
| Earning assets | | 6,435,616 | | | 6,151,259 | | | 6,399,917 | | | 6,114,182 |
| Core deposits | | 4,275,493 | | | 3,789,544 | | | 4,161,283 | | | 3,705,231 |
| Borrowings | | | | 837,728 | | | 907,055 | | | 880,376 | | | 916,777 |
| Interest-bearing liabilities | | | 5,360,329 | | | 5,289,910 | | | 5,393,121 | | | 5,275,243 |
| Stockholders' equity | | | 983,732 | | | 947,394 | | | 972,850 | | | 937,002 |
| Average yield on interest-earning assets | | 3.99% | | | 4.45% | | | 4.10% | | | 4.53% |
| Average cost of interest-bearing liabilities | | 0.82% | | | 1.10% | | | 0.86% | | | 1.18% |
| |
| LOAN DATA: | | | | | | | | | | | |
| Mortgage loans: | | | | | | | | | | | | |
| | Residential | | | | | | | $ | 1,289,316 | | $ | 1,347,973 |
| | Commercial | | | | | | | | 1,293,143 | | | 1,236,370 |
| | Multi-family | | | | | | | | 687,485 | | | 497,025 |
| | Construction | | | | | | | | 125,408 | | | 115,251 |
| Total mortgage loans | | | | | | | | | 3,395,352 | | | 3,196,619 |
| | Commercial loans | | | | | | | | | 839,253 | | | 814,112 |
| | Consumer loans | | | | | | | | | 583,554 | | | 553,670 |
| Total gross loans | | | | | | | | | 4,818,159 | | | 4,564,401 |
| | Premium on purchased loans | | | | | | | | 5,327 | | | 6,320 |
| | Unearned discounts | | | | | | | | | (83) | | | (107) |
| | Net deferred | | | | | | | | | (4,546) | | | (2,394) |
| Total loans | | | | | | | | | $ | 4,818,857 | | $ | 4,568,220 |
| Notes | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
(1) Efficiency Ratio Calculation | | | | | | | | | | | |
| | | | | | Three Months Ended | | | Nine Months Ended |
| | | | | | September 30, | | | September 30, |
| | | | | | 2012 | | | 2011 | | | 2012 | | | 2011 |
| | Net interest income | | $ | 53,715 | | $ | 54,456 | | $ | 163,130 | | $ | 162,079 |
| | Non-interest income | | | 9,790 | | | 8,650 | | | 31,861 | | | 23,865 |
| | Total income: | | $ | 63,505 | | $ | 63,106 | | $ | 194,991 | | $ | 185,944 |
| | | | | | | | | | | | | | | |
| | Non-interest expense: | | $ | 36,896 | | $ | 34,953 | | $ | 111,443 | | $ | 106,237 |
| | | | | | | | | | | | | | | |
| | Expense/income: | | | 58.10% | | | 55.39% | | | 57.15% | | | 57.13% |
| | | | | | | | | | | | | | | |
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| Net Interest Margin Analysis |
| Quarterly Average Balances |
| (Unaudited) (Dollars in Thousands) |
| | | | | | | | | | | | | | | | | | |
| | | | | | September 30, 2012 | | | | June 30, 2012 |
| | | | | | Average | | | | Average | | | | Average | | | | Average |
| | | | | | Balance | | Interest | | Yield | | | | Balance | | Interest | | Yield |
| | Interest-Earning Assets: | | | | | | | | | | | | | | |
| | | Deposits | | $ | 66,040 | $ | 42 | | 0.25% | | | $ | 5,477 | $ | 3 | | 0.25% |
| | | Federal funds sold and | | | | | | | | | | | | | | |
| | | other short-term investments | 1,461 | | — | | 0.02% | | | | 1,290 | | 1 | | 0.16% |
| | | Investment securities (1) | | 356,052 | | 2,987 | | 3.36% | | | | 357,248 | | 2,991 | | 3.35% |
| | | Securities available for sale | | 1,315,366 | | 6,138 | | 1.87% | | | | 1,381,968 | | 7,376 | | 2.13% |
| | | Federal Home Loan Bank stock | | 38,489 | | 461 | | 4.77% | | | | 41,277 | | 436 | | 4.25% |
| | | Net loans (2) | | | | | | | | | | | | | | |
| | | Total mortgage loans | | 3,260,435 | | 38,544 | | 4.68% | | | | 3,250,352 | | 38,672 | | 4.73% |
| | | Total commercial loans | | 822,093 | | 10,242 | | 4.94% | | | | 797,182 | | 10,205 | | 5.10% |
| | | Total consumer loans | | 575,680 | | 6,343 | | 4.38% | | | | 570,088 | | 6,335 | | 4.47% |
| | | Total Net loans | | 4,658,208 | | 55,129 | | 4.68% | | | | 4,617,622 | | 55,212 | | 4.76% |
| | | Total Interest-Earning Assets | $ | 6,435,616 | $ | 64,757 | | 3.99% | | | $ | 6,404,882 | $ | 66,019 | | 4.11% |
| | | | | | | | | | | | | | | | | | |
| | Non-Interest Earning Assets: | | | | | | | | | | | | | | |
| | | Cash and due from banks | | 82,849 | | | | | | | | 66,450 | | | | |
| | | Other assets | | 660,647 | | | | | | | | 660,810 | | | | |
| | | Total Assets | $ | 7,179,112 | | | | | | | $ | 7,132,142 | | | | |
| | | | | | | | | | | | | | | | | | |
| | Interest-Bearing Liabilities: | | | | | | | | | | | | | | |
| | | Demand deposits | $ | 2,601,626 | $ | 2,543 | | 0.39% | | | $ | 2,540,421 | $ | 2,674 | | 0.42% |
| | | Savings deposits | | 902,458 | | 365 | | 0.16% | | | | 909,157 | | 372 | | 0.16% |
| | | Time deposits | | 1,018,517 | | 3,247 | | 1.27% | | | | 1,057,748 | | 3,457 | | 1.31% |
| | | Total Deposits | | 4,522,601 | | 6,155 | | 0.54% | | | | 4,507,326 | | 6,503 | | 0.58% |
| | | Borrowed funds | | 837,728 | | 4,887 | | 2.32% | | | | 903,084 | | 4,938 | | 2.20% |
| | | Total Interest-Bearing Liabilities | $ | 5,360,329 | $ | 11,042 | | 0.82% | | | $ | 5,410,410 | $ | 11,441 | | 0.85% |
| | Non-Interest Bearing Liabilities | | 835,051 | | | | | | | | 748,172 | | | | |
| | | Total Liabilities | | 6,195,380 | | | | | | | | 6,158,582 | | | | |
| | | Stockholders' equity | | 983,732 | | | | | | | | 973,562 | | | | |
| | | Total Liabilities and Stockholders' Equity | | 7,179,112 | | | | | | | $ | 7,132,144 | | | | |
| | | | | | | | | | | | | | | | | | |
| | Net interest income | | | $ | 53,715 | | | | | | | $ | 54,578 | | |
| | | | | | | | | | | | | | | | | | |
| | Net interest rate spread | | | | | | 3.17% | | | | | | | | 3.26% |
| | Net interest-earning assets | $ | 1,075,287 | | | | | | | $ | 994,472 | | | | |
| | | | | | | | | | | | | | | | | | |
| | Net interest margin (3) | | | | | | 3.31% | | | | | | | | 3.39% |
| | Ratio of interest-earning assets to | | | | | | | | | | | | | | |
| | total interest-bearing liabilities | | 1.20 | x | | | | | | | 1.18 | x | | | |
| |
(1) Average outstanding balance amounts shown are amortized cost. |
(2) Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans. |
(3) Annualized net interest income divided by average interest-earning assets. |
| The following table summarizes the quarterly net interest margin for the previous five quarters. | | |
| | | | | | | | | | | | |
| | | | 9/30/12 | | 6/30/12 | | 3/31/12 | | 12/31/11 | | 9/30/11 |
| | | | 3rd Qtr. | | 2nd Qtr. | | 1st Qtr. | | 4th Qtr. | | 3rd Qtr. |
| Interest-Earning Assets: | | | | | | | | | | | |
| Securities | | | 2.17% | | 2.42% | | 2.54% | | 2.44% | | 2.81% |
| Net loans | | | 4.68% | | 4.76% | | 4.83% | | 4.94% | | 5.10% |
| Total interest-earning assets | | | 3.99% | | 4.11% | | 4.19% | | 4.24% | | 4.45% |
| | | | | | | | | | | | |
| Interest-Bearing Liabilities: | | | | | | | | | | | |
| Total deposits | | | 0.54% | | 0.58% | | 0.62% | | 0.72% | | 0.81% |
| Total borrowings | | | 2.32% | | 2.20% | | 2.25% | | 2.34% | | 2.50% |
| Total interest-bearing liabilities | | | 0.82% | | 0.85% | | 0.90% | | 0.99% | | 1.10% |
| | | | | | | | | | | | |
| Interest rate spread | | | 3.17% | | 3.26% | | 3.29% | | 3.25% | | 3.35% |
| Net interest margin | | | 3.31% | | 3.39% | | 3.42% | | 3.39% | | 3.50% |
| | | | | | | | | | | | |
| Ratio of interest-earning assets to interest-bearing liabilities | 1.20x | | 1.18x | | 1.18x | | 1.18x | | 1.16x |
| | | | | | | | | | | | |
| | PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| | Net Interest Margin Analysis |
| | Average Year to Date Balances |
| | (Unaudited) (Dollars in Thousands) |
| | | | | | | | | | | | | | | | |
| | | | | | September 30, 2012 | | | | September 30, 2011 |
| | | | | | Average | | | Average | | | | Average | | | Average |
| | | | | | Balance | | Interest | Yield | | | | Balance | | Interest | Yield |
| | Interest-Earning Assets: | | | | | | | | | | | | |
| | | Deposits | $ | 30,440 | $ | 57 | 0.25% | | | $ | 43,573 | $ | 81 | 0.25% |
| | | Federal funds sold and | | | | | | | | | | | | |
| | | other short-term investments | | 1,339 | | 1 | 0.07% | | | | 1,468 | | — | 0.01% |
| | | Investment securities (1) | | 352,348 | | 8,896 | 3.37% | | | | 344,651 | | 9,169 | 3.55% |
| | | Securities available for sale | | 1,355,955 | | 21,365 | 2.10% | | | | 1,298,521 | | 27,098 | 2.78% |
| | | Federal Home Loan Bank stock | | 39,582 | | 1,378 | 4.65% | | | | 38,314 | | 1,370 | 4.78% |
| | | Net loans (2) | | | | | | | | | . | | | |
| | | Total mortgage loans | | 3,237,581 | | 116,175 | 4.75% | | | | 3,078,068 | | 119,425 | 5.15% |
| | | Total commercial loans | | 812,524 | | 30,817 | 5.02% | | | | 753,854 | | 31,867 | 5.61% |
| | | Total consumer loans | | 570,148 | | 18,967 | 4.44% | | | | 555,733 | | 19,445 | 4.68% |
| | | Total Net loans | | 4,620,253 | | 165,959 | 4.76% | | | | 4,387,655 | | 170,737 | 5.17% |
| | | Total Interest-Earning Assets | $ | 6,399,917 | $ | 197,656 | 4.10% | | | $ | 6,114,182 | $ | 208,455 | 4.53% |
| | | | | | | | | | | | | | | | |
| | Non-Interest Earning Assets: | | | | | | | | | | | | |
| | | Cash and due from banks | | 76,319 | | | | | | | 73,775 | | | |
| | | Other assets | | 661,618 | | | | | | | 654,977 | | | |
| | | Total Assets | $ | 7,137,854 | | | | | | $ | 6,842,934 | | | |
| | | | | | | | | | | | | | | | |
| | Interest-Bearing Liabilities: | | | | | | | | | | | | |
| | | Demand deposits | $ | 2,550,181 | $ | 7,998 | 0.42% | | | $ | 2,219,689 | $ | 11,827 | 0.71% |
| | | Savings deposits | | 900,600 | | 1,111 | 0.16% | | | | 904,731 | | 2,423 | 0.36% |
| | | Time deposits | | 1,061,964 | | 10,551 | 1.33% | | | | 1,234,046 | | 14,189 | 1.54% |
| | | Total Deposits | | 4,512,745 | | 19,660 | 0.58% | | | | 4,358,466 | | 28,439 | 0.87% |
| | | Borrowed funds | | 880,376 | | 14,866 | 2.26% | | | | 916,777 | | 17,937 | 2.62% |
| | | Total Interest-Bearing Liabilities | $ | 5,393,121 | $ | 34,526 | 0.86% | | | $ | 5,275,243 | $ | 46,376 | 1.18% |
| | Non-Interest Bearing Liabilities | | 771,883 | | | | | | | 630,689 | | | |
| | | Total Liabilities | | 6,165,004 | | | | | | | 5,905,932 | | | |
| | | Stockholders' equity | | 972,850 | | | | | | | 937,002 | | | |
| | | Total Liabilities and Stockholders' Equity | 7,137,854 | | | | | | $ | 6,842,934 | | | |
| | | | | | | | | | | | | | | | |
| | Net interest income | | | $ | 163,130 | | | | | | $ | 162,079 | |
| | | | | | | | | | | | | | | | |
| | Net interest rate spread | | | | | 3.24% | | | | | | | 3.35% |
| | Net interest-earning assets | $ | 1,006,796 | | | | | | $ | 838,939 | | | |
| | | | | | | | | | | | | | | | |
| | Net interest margin (3) | | | | | 3.38% | | | | | | | 3.51% |
| | Ratio of interest-earning assets to | | | | | | | | | | | | |
| | total interest-bearing liabilities | | 1.19 | x | | | | | | 1.16 | x | | |
| | | | | | | | | | | | | | | | |
| |
(1) Average outstanding balance amounts shown are amortized cost. |
(2) Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans. |
(3) Annualized net interest income divided by average interest-earning assets. |
| The following table summarizes the year-to-date net interest margin for the previous three years. | |
| | | | | | | | | | | | |
| | | | Nine Months Ended | | | | |
| | | | 9/30/12 | | 9/30/11 | | 9/30/10 | | | | |
| Interest-Earning Assets: | | | | | | | | | | | |
| Securities | | | 2.37% | | 2.91% | | 3.27% | | | | |
| Net loans | | | 4.76% | | 5.17% | | 5.41% | | | | |
| Total interest-earning assets | | | 4.10% | | 4.53% | | 4.78% | | | | |
| | | | | | | | | | | | |
| Interest-Bearing Liabilities: | | | | | | | | | | | |
| Total deposits | | | 0.58% | | 0.87% | | 1.15% | | | | |
| Total borrowings | | | 2.26% | | 2.62% | | 3.26% | | | | |
| Total interest-bearing liabilities | | | 0.86% | | 1.18% | | 1.52% | | | | |
| | | | | | | | | | | | |
| Interest rate spread | | | 3.24% | | 3.35% | | 3.26% | | | | |
| Net interest margin | | | 3.38% | | 3.51% | | 3.45% | | | | |
| | | | | | | | | | | | |
| Ratio of interest-earning assets to interest-bearing liabilities | 1.19x | | 1.16x | | 1.14x | | | | |
| | | | | | | | | | | | |
13
