Provident Financial Services, Inc. Announces Increased Fourth Quarter and Full Year Earnings for 2012 and Declares Quarterly Cash Dividend
JERSEY CITY, NJ, February 1, 2013 - Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $16.7 million, or $0.29 per basic and diluted share for the quarter ended December 31, 2012, compared to net income of $14.9 million, or $0.26 per basic and diluted share for the quarter ended December 31, 2011.
For the year ended December 31, 2012, the Company reported net income of $67.3 million, or $1.18 per basic and diluted share, compared to net income of $57.3 million, or $1.01 per basic and diluted share for the same period last year.
The increase in earnings for the fourth quarter and year ended December 31, 2012, was largely attributable to continued improvements in asset quality and related reductions in the provision for loan losses, inclusive of consideration for possible loan losses related to Superstorm Sandy, while growth in both average loans outstanding and average lower-costing core deposits more than offset the impact of compression in asset yields.
Christopher Martin, Chairman, President and Chief Executive Officer, commented, “Our quarterly results were strong as loan growth eclipsed 7% annualized, while earnings per share of 29 cents continued our consistent trend of producing solid results. We achieved record earnings in 2012, despite the challenging rate environment and a struggling, but improving regional economy. The growth in our commercial lending and wealth management divisions produced excellent results, augmented by quality client relationships.” Martin continued: “We conservatively provided for the potential financial impact of Superstorm Sandy on customers with businesses and residences in parts of our market. To help those communities that were the hardest hit, The Provident Bank Foundation has earmarked $250,000 to assist in their rebuilding efforts.”
Declaration of Quarterly Dividend
The Company’s Board of Directors declared a quarterly cash dividend of $0.13 per common share payable on February 28, 2013, to stockholders of record as of the close of business on February 15, 2013.
Balance Sheet Summary
Total assets increased $186.3 million to $7.28 billion at December 31, 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 $34.2 million to $103.8 million at December 31, 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 loans increased $251.2 million, or 5.4%, at December 31, 2012 to $4.90 billion from $4.65 billion at December 31, 2011. Loan originations totaled $1.7 billion and loan purchases totaled $73.7 million for the year ended December 31, 2012. The loan portfolio had net increases of $256.2 million in commercial and multi-family mortgage loans, $18.2 million in consumer loans, $17.4 million in commercial loans and $5.3 million in construction loans, which were partially offset by a decrease in residential mortgage loans of $43.6 million. Commercial real estate, commercial and construction loans represented 62.4% of the loan portfolio at December 31, 2012, compared to 59.8% at December 31, 2011.
At December 31, 2012, the Company’s unfunded loan commitments totaled $869.0 million, including $334.9 million in commercial loan commitments, $149.8 million in construction loan commitments and $97.2 million in commercial mortgage commitments. Unfunded loan commitments at December 31, 2011 were $770.4 million.
Total investments decreased $102.4 million, or 5.8%, to $1.66 billion at December 31, 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 $271.7 million, or 5.3%, during the year ended December 31, 2012 to $5.43 billion from $5.16 billion at December 31, 2011. Core deposits, consisting of savings and demand deposit accounts, increased $442.9 million, or 11.0%, to $4.47 billion at December 31, 2012. Partially offsetting this increase, time deposits decreased $171.3 million, or 15.2%, to $957.5 million at December 31, 2012, with the majority of the decrease occurring in the 24-month and shorter maturity categories. The Company continued to develop core deposit relationships, while strategically permitting the run-off of higher-costing time deposits. Core deposits represented 82.4% of total deposits at December 31, 2012, compared to 78.1% at December 31, 2011.
Borrowed funds were reduced $116.9 million, or 12.7% during the year ended December 31, 2012, to $803.3 million, as core deposit growth continued to replace wholesale funding. Borrowed funds represented 11.0% of total assets at December 31, 2012, a reduction from 13.0% at December 31, 2011.
Stockholders’ equity increased $28.8 million, or 3.0% during the year ended December 31, 2012, to $981.2 million, primarily due to net income earned for the period, partially offset by dividends paid to stockholders and common stock repurchases. Common stock repurchases for the three months and year ended December 31, 2012, totaled 271,045 shares at an average cost of $14.00 per share and 678,750 shares at an average cost of $13.89 per share, respectively. As of December 31, 2012, 4.1 million shares remained eligible for repurchase. At December 31, 2012, book value per share and tangible book value per share were $16.37 and $10.40, 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 December 31, 2012, net interest income increased $296,000 from the same period in 2011, to $54.2 million. Net interest income for the year ended December 31, 2012, increased $1.3 million compared to 2011, to $217.3 million. The improvements in net interest income for the three months and year ended December 31, 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 December 31, 2012 was 3.29%, a decrease of 2 basis points from 3.31% for the quarter ended September 30, 2012, and 10 basis points from 3.39% for the quarter ended December 31, 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 3.92% for the three months ended December 31, 2012, compared with 3.99% for the trailing quarter, and 4.24% for the three months ended December 31, 2011. The weighted average cost of interest-bearing liabilities was 0.77% for the quarter ended December 31, 2012, compared with 0.82% for the trailing quarter, and 0.99% for the fourth quarter of 2011. The average cost of interest bearing deposits for the three months ended December 31, 2012 was 0.50%, compared with 0.54% for the trailing quarter, and 0.72% 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 $840.1 million for the quarter ended December 31, 2012, compared with $771.4 million for the trailing quarter, and $680.1 million for the quarter ended December 31, 2011. The average cost of borrowings for the three months ended December 31, 2012 was 2.29%, compared with 2.32% for the trailing quarter, and 2.34% for the same period last year.
For the year ended December 31, 2012, the net interest margin decreased 11 basis points to 3.38%, compared with 3.49% for the year ended December 31, 2011. The weighted average yield on interest-earning assets declined 38 basis points to 4.08% for the year ended December 31, 2012, compared with 4.46% for the year ended December 31, 2011, while the weighted average cost of interest-bearing liabilities declined 30 basis points to 0.83% for the year ended December 31, 2012, compared with 1.13% for the same period in 2011. The average cost of interest bearing deposits for the year ended December 31, 2012 was 0.56%, compared with 0.83% for the same period last year. Average non-interest bearing demand deposits totaled $743.1 million for the year ended December 31, 2012, compared with $605.8 million for the year ended December 31, 2011. The average cost of borrowings for the year ended December 31, 2012 was 2.26%, compared with 2.55% for the same period last year.
Non-Interest Income
Non-interest income totaled $11.8 million for the quarter ended December 31, 2012, an increase of $3.1 million, or 35.4%, compared to the same period in 2011. The improvement in non-interest income was largely due to increases in both net gains from securities transactions and other income. Net gains on securities transactions for the quarter ended December 31, 2012, increased $2.0 million. 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. Other income increased $993,000 for the quarter December 31, 2012, compared to the same period in 2011, due to a $525,000 net gain recognized on the sale of a vacant parcel of land in the current period and losses previously recorded in 2011 related to the sale of the Company’s former administrative facilities. Also contributing to the improvement in other income was an increase in net gains on the sale of foreclosed real estate and an increase in gains related to loan sales.
For the year ended December 31, 2012, non-interest income totaled $43.6 million, an increase of $11.1 million, or 34.0%, compared to the same period in 2011. Fee income totaled $30.3 million for the year ended December 31, 2012, an increase of $4.9 million compared with the same period in 2011, largely due to an increase in wealth management fees attributable to the August 2011 acquisition of Beacon Trust Company (“Beacon”) and increased prepayment fees on commercial loans, which were partially offset by lower overdraft fee income. Net gains on securities transactions totaled $4.5 million for the year ended December 31, 2012, compared to $708,000 for the same period in 2011. During the year, 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 $2.0 million for the year ended December 31, 2012, compared with the same period in 2011, primarily due to a $525,000 net gain recognized on the sale of a vacant parcel of land, $568,000 in income associated with the termination of the Company’s debit card rewards program, losses previously recorded in 2011 related to the sale of the Company’s former administrative facilities, and an increase in gains resulting from a larger number of loan sales. Other-than-temporary impairment charges on investment securities declined $302,000 for the year ended December 31, 2012, compared to 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 December 31, 2012, non-interest expense increased $1.2 million, or 3.2%, to $37.4 million, compared to the three months ended December 31, 2011. Compensation and benefits increased $1.4 million for the quarter ended December 31, 2012, to $19.8 million, compared to the quarter ended December 31, 2011. This increase was due to higher salary expense associated with annual merit increases, increased severance costs and increased employee medical and retirement benefit costs, partially offset by a reduction in the incentive compensation accrual. Other operating expenses increased $403,000, to $6.9 million for the quarter ended December 31, 2012, from the same period in 2011, mainly due to $545,000 of net expenses related to damages sustained at one of the Company’s branches in Superstorm Sandy, partially offset by a reduction in other operating expenses attributable to prior year costs of $227,000 associated with Hurricane Irene incurred in the quarter ended December 31, 2011. Partially offsetting these increases, amortization of intangibles decreased $218,000 for the three months ended December 31, 2012, compared with the same period in 2011, as a result of scheduled reductions in core deposit intangible amortization. FDIC insurance expense decreased $202,000 to $1.2 million for the three months ended December 31, 2012, compared with the same period in 2011, primarily due to a lower assessment rate. Net occupancy expense decreased $163,000, to $5.2 million for the three months ended December 31, 2012, compared to the same period in 2011, primarily due to reduced property taxes and lower utilities and maintenance expense.
The Company’s annualized non-interest expense as a percentage of average assets was 2.05% for the quarter ended December 31, 2012, compared to 2.04% 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 56.68% for the quarter ended December 31, 2012, compared with 57.85% for the same period in 2011.
Non-interest expense for the year ended December 31, 2012 was $148.8 million, an increase of $6.4 million, or 4.5%, from the year ended December 31, 2011. Compensation and benefits expense increased $6.0 million, to $80.9 million for the year ended December 31, 2012 compared to the year ended December 31, 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 medical and retirement benefit costs. In addition, other operating expense increased $2.2 million for the year ended December 31, 2012, compared to the same period in 2011, due primarily to increased non-performing asset related expenses, net expenses incurred due to damages sustained in Super- storm Sandy, 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 $818,000 for the year ended December 31, 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 year ended December 31, 2012, compared to 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 $788,000 to $5.1 million for the year ended December 31, 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 $644,000 to $20.5 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. Additionally, amortization of intangibles decreased $564,000 for the year ended December 31, 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.
Asset Quality
The Company’s total non-performing loans at December 31, 2012, improved to $99.0 million, or 2.02% of total loans, compared with $105.7 million, or 2.19% of total loans at September 30, 2012, and $122.5 million, or 2.63% of total loans at December 31, 2011. The $6.7 million decrease in non-performing loans at December 31, 2012, compared with the trailing quarter, was largely due to a $2.4 million decrease in non-performing residential loans, a $1.8 million decrease in non-performing commercial mortgage loans, a $1.7 million decrease in non-performing construction loans and a $1.2 million decrease in non-performing commercial loans. At December 31, 2012, impaired loans totaled $109.6 million with related specific reserves of $7.2 million, compared with impaired loans totaling $114.4 million with related specific reserves of $8.4 million at September 30, 2012. At December 31, 2011, impaired loans totaled $103.2 million with related specific reserves of $9.3 million.
At December 31, 2012, the Company’s allowance for loan losses was 1.43% of total loans, compared with 1.46% of total loans at September 30, 2012, and 1.60% of total loans at December 31, 2011. The Company recorded provisions for loan losses of $4.0 million and $16.0 million for the three months and year ended December 31, 2012, respectively, compared with provisions of $6.0 million and $28.9 million for the three months and year ended December 31, 2011, respectively. The provision for loan losses,for the three months and year ended December 31, 2012, included $1.5 million for possible loan losses related to Superstorm Sandy. The Company had net charge-offs of $3.9 million and $20.0 million for the three months and year ended December 31, 2012, respectively, compared with net charge-offs of $5.3 million and $23.3 million, respectively, for the same periods in 2011. The allowance for loan losses decreased $4.0 million to $70.3 million at December 31, 2012, from $74.4 million at December 31, 2011, as the weighted average risk rating of the loan portfolio improved and net non-performing asset disposition increased.
At December 31, 2012, the Company held $12.5 million of foreclosed assets, compared with $12.8 million at December 31, 2011. Foreclosed assets at December 31, 2012 consisted primarily of $6.5 million of commercial real estate, $5.0 million of residential real estate and $583,000 of marine vessels.
Income Tax Expense
For the three months ended December 31, 2012, the Company’s income tax expense was $7.9 million, compared with $5.5 million for the same period in 2011. For the year ended December 31, 2012, the Company’s income tax expense was $28.9 million, compared with $19.8 million for the same period in 2011. The Company’s effective tax rates were 32.1% and 30.0%, respectively, for the three months and year ended December 31, 2012, compared with 27.0% and 25.7% for the three months and year ended December 31, 2011, respectively. The increase in effective tax rates and income tax expense was primarily a function of growth in pre-tax income from taxable sources.
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, February 1, 2013 regarding highlights of the Company’s quarter and year ended December 31, 2012 financial results. The call may be accessed by dialing 1-877-317-6789 (Domestic) or 1-412-317-6789 (International). 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 |
| December 31, 2012 (Unaudited) and December 31, 2011 |
| (Dollars in Thousands) |
| | | | | | | | | |
| Assets | | | December 31, 2012 | December 31, 2011 |
| | | | | | | | | |
| Cash and due from banks | | $ | 101,850 | $ | 68,553 |
| Short-term investments | | | 1,973 | | 1,079 |
| | | | Total cash and cash equivalents | | | 103,823 | | 69,632 |
| | | | | | | | | |
| Securities available for sale, at fair value | | | 1,264,002 | | 1,376,119 |
| Investment securities held to maturity (fair value of $374,916 at | | | | | |
| | December 31, 2012 and $366,296 at December 31, 2011) | | | 359,464 | | 348,318 |
| Federal Home Loan Bank of New York ("FHLB-NY") stock | | | 37,543 | | 38,927 |
| | | | | | | | | |
| Loans | | | | | 4,904,699 | | 4,653,509 |
| | Less allowance for loan losses | | | 70,348 | | 74,351 |
| | | | Net loans | | | 4,834,351 | | 4,579,158 |
| | | | | | | | | |
| Foreclosed assets, net | | | 12,473 | | 12,802 |
| Banking premises and equipment, net | | | 66,120 | | 66,260 |
| Accrued interest receivable | | | 24,002 | | 24,653 |
| Intangible assets | | | | 357,907 | | 360,714 |
| Bank-owned life insurance | | | 147,286 | | 142,010 |
| Other assets | | | | | 76,724 | | 78,810 |
| | | | Total assets | | $ | 7,283,695 | $ | 7,097,403 |
| | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | |
| | | | | | | | | |
| Deposits: | | | | | | | |
| | Demand deposits | | $ | 3,556,011 | $ | 3,136,129 |
| | Savings deposits | | | 914,787 | | 891,742 |
| | Certificates of deposit of $100,000 or more | | | 324,901 | | 383,174 |
| | Other time deposits | | | 632,572 | | 745,552 |
| | | | Total deposits | | | 5,428,271 | | 5,156,597 |
| | | | | | | | | |
| Mortgage escrow deposits | | | 21,238 | | 20,955 |
| Borrowed funds | | | 803,264 | | 920,180 |
| Other liabilities | | | 49,676 | | 47,194 |
| | | | Total liabilities | | | 6,302,449 | | 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 59,937,955 outstanding at December 31, 2012, and 59,968,195 | | | | | |
| | outstanding at December 31, 2011 | | | 832 | | 832 |
| Additional paid-in capital | | | 1,021,507 | | 1,019,253 |
| Retained earnings | | | 389,549 | | 363,011 |
| Accumulated other comprehensive income | | | 7,716 | | 9,571 |
| Treasury stock | | | | | (386,270) | | (384,725) |
| Unallocated common stock held by the Employee Stock Ownership Plan ("ESOP") | | | (52,088) | | (55,465) |
| Common Stock acquired by the Directors' Deferred Fee Plan ("DDFP") | | | (7,298) | | (7,390) |
| Deferred Compensation - DDFP | | | 7,298 | | 7,390 |
| | | | Total stockholders' equity | | | 981,246 | | 952,477 |
| | | | Total liabilities and stockholders' equity | | $ | 7,283,695 | $ | 7,097,403 |
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| Consolidated Statements of Income |
| Three Months and Year Ended December 31, 2012 (Unaudited) and 2011 |
| (Dollars in Thousands, except per share data) |
| | | | | | | | | | | | |
| | | | | | Three Months Ended | | Year Ended |
| | | | | | December 31, | | December 31, |
| | | | | | 2012 | | 2011 | | 2012 | | 2011 |
| Interest income: | | | | | | | | | |
| | Real estate secured loans | $ | 38,903 | $ | 39,306 | $ | 155,078 | $ | 158,731 |
| | Commercial loans | | 10,125 | | 10,892 | | 40,942 | | 42,759 |
| | Consumer loans | | 6,241 | | 6,348 | | 25,208 | | 25,793 |
| | Securities available for sale and FHLB-NY stock | | 6,398 | | 7,689 | | 29,141 | | 36,157 |
| | Investment securities | | 2,912 | | 2,991 | | 11,808 | | 12,160 |
| | Deposits, Federal funds sold and other short-term investments | | 24 | | 38 | | 82 | | 119 |
| | | Total interest income | | 64,603 | | 67,264 | | 262,259 | | 275,719 |
| | | | | | | | | | | | |
| Interest expense: | | | | | | | | | |
| | Deposits | | | | 5,688 | | 8,113 | | 25,348 | | 36,552 |
| | Borrowed funds | | 4,708 | | 5,240 | | 19,574 | | 23,177 |
| | | Total interest expense | | 10,396 | | 13,353 | | 44,922 | | 59,729 |
| | | Net interest income | | 54,207 | | 53,911 | | 217,337 | | 215,990 |
| | | | | | | | | | | | |
| Provision for loan losses | | 4,000 | | 6,000 | | 16,000 | | 28,900 |
| | | Net interest income after provision for loan losses | | 50,207 | | 47,911 | | 201,337 | | 187,090 |
| | | | | | | | | | | | |
| Non-interest income: | | | | | | | | |
| | Fees | | | | 7,318 | | 7,366 | | 30,336 | | 25,418 |
| | Bank owned life insurance | | 1,381 | | 1,244 | | 5,276 | | 5,242 |
| | 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 | | 2,015 | | 22 | | 4,497 | | 708 |
| | Other income | | 1,038 | | 45 | | 3,504 | | 1,476 |
| | | Total non-interest income | | 11,752 | | 8,677 | | 43,613 | | 32,542 |
| | | | | | | | | | | | |
| Non-interest expense: | | | | | | | | |
| | Compensation and employee benefits | | 19,790 | | 18,428 | | 80,874 | | 74,904 |
| | Net occupancy expense | | 5,157 | | 5,320 | | 20,487 | | 21,131 |
| | Data processing expense | | 2,556 | | 2,506 | | 10,318 | | 9,500 |
| | FDIC Insurance | | 1,198 | | 1,400 | | 5,095 | | 5,883 |
| | Amortization of intangibles | | 498 | | 716 | | 2,466 | | 3,030 |
| | Impairment of premises and equipment | | — | | — | | — | | 807 |
| | Advertising and promotion expense | | 1,290 | | 1,346 | | 4,139 | | 3,951 |
| | Other operating expenses | | 6,896 | | 6,493 | | 25,449 | | 23,240 |
| | | Total non-interest expenses | | 37,385 | | 36,209 | | 148,828 | | 142,446 |
| | | Income before income tax expense | | 24,574 | | 20,379 | | 96,122 | | 77,186 |
| Income tax expense | | 7,892 | | 5,509 | | 28,855 | | 19,842 |
| | | Net income | $ | 16,682 | $ | 14,870 | $ | 67,267 | $ | 57,344 |
| | | | | | | | | | | | |
| Basic earnings per share | $ | 0.29 | $ | 0.26 | $ | 1.18 | $ | 1.01 |
| Average basic shares outstanding | | 57,183,704 | | 56,898,336 | | 57,145,868 | | 56,856,083 |
| | | | | | | | | | | | |
| Diluted earnings per share | $ | 0.29 | $ | 0.26 | $ | 1.18 | $ | 1.01 |
| Average diluted shares outstanding | | 57,235,473 | | 56,910,915 | | 57,199,804 | | 56,868,524 |
| 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 | | Year Ended |
| | | | | | December 31, | | | December 31, |
| | | | | | 2012 | | | 2011 | | | 2012 | | | 2011 |
| STATEMENTS OF INCOME: | | | | | | | | | | | |
| Net interest income | | $ | 54,207 | | $ | 53,911 | | $ | 217,337 | | $ | 215,990 |
| Provision for loan losses | | | 4,000 | | | 6,000 | | | 16,000 | | | 28,900 |
| Non-interest income | | | 11,752 | | | 8,677 | | | 43,613 | | | 32,542 |
| Non-interest expense | | | 37,385 | | | 36,209 | | | 148,828 | | | 142,446 |
| Income before income tax expense | | 24,574 | | | 20,379 | | | 96,122 | | | 77,186 |
| Net income | | | | 16,682 | | | 14,870 | | | 67,267 | | | 57,344 |
| Diluted earnings per share | | | $0.29 | | | $0.26 | | | $1.18 | | | $1.01 |
| Interest rate spread | | | 3.15% | | | 3.25% | | | 3.25% | | | 3.33% |
| Net interest margin | | | 3.29% | | | 3.39% | | | 3.38% | | | 3.49% |
| | | | | | | | | | | | | | | |
| PROFITABILITY: | | | | | | | | | | | | |
| Annualized return on average assets | | 0.91% | | | 0.84% | | | 0.94% | | | 0.83% |
| Annualized return on average equity | | 6.69% | | | 6.18% | | | 6.88% | | | 6.09% |
| Annualized non-interest expense to average assets | | 2.05% | | | 2.04% | | | 2.08% | | | 2.07% |
| Efficiency ratio (1) | | | 56.68% | | | 57.85% | | | 57.03% | | | 57.31% |
| | | | | | | | | | | | | | | |
| ASSET QUALITY: | | | | | | | | | | | | |
| Non-accrual loans | | | | | | | | $ | 98,990 | | $ | 122,549 |
| 90+ and still accruing | | | | | | | | | — | | | — |
| Non-performing loans | | | | | | | | | 98,990 | | | 122,549 |
| Foreclosed assets | | | | | | | | | 12,473 | | | 12,802 |
| Non-performing assets | | | | | | | | | 111,463 | | | 135,351 |
| Non-performing loans to total loans | | | | | | | | 2.02% | | | 2.63% |
| Non-performing assets to total assets | | | | | | | | 1.53% | | | 1.91% |
| Allowance for loan losses | | | | | | | | $ | 70,348 | | $ | 74,351 |
| Allowance for loan losses to total non-performing loans | | | | | | | | 71.07% | | | 60.67% |
| Allowance for loan losses to total loans | | | | | | | | 1.43% | | | 1.60% |
| | | | | | | | | | | | | | | |
| AVERAGE BALANCE SHEET DATA: | | | | | | | | | | | |
| Assets | | | $ | 7,269,482 | | $ | 7,041,992 | | $ | 7,170,941 | | $ | 6,893,107 |
| Loans, net | | | | 4,772,099 | | | 4,528,380 | | | 4,658,422 | | | 4,423,125 |
| Earning assets | | 6,525,784 | | | 6,289,331 | | | 6,431,555 | | | 6,158,329 |
| Core deposits | | 4,419,871 | | | 3,992,536 | | | 4,226,283 | | | 3,777,647 |
| Borrowings | | | | 818,122 | | | 888,027 | | | 864,728 | | | 909,531 |
| Interest-bearing liabilities | | | 5,378,558 | | | 5,352,132 | | | 5,389,461 | | | 5,294,623 |
| Stockholders' equity | | | 992,375 | | | 954,563 | | | 977,758 | | | 941,428 |
| Average yield on interest-earning assets | | 3.92% | | | 4.24% | | | 4.08% | | | 4.46% |
| Average cost of interest-bearing liabilities | | 0.77% | | | 0.99% | | | 0.83% | | | 1.13% |
| | | | | | | | | | | | | | | |
| LOAN DATA: | | | | | | | | | | | |
| Mortgage loans: | | | | | | | | | | | | |
| | Residential | | | | | | | $ | 1,265,015 | | $ | 1,308,635 |
| | Commercial | | | | | | | | 1,349,950 | | | 1,253,542 |
| | Multi-family | | | | | | | | | 723,958 | | | 564,147 |
| | Construction | | | | | | | | | 120,133 | | | 114,817 |
| Total mortgage loans | | | | | | | | | 3,459,056 | | | 3,241,141 |
| | Commercial loans | | | | | | | | | 866,395 | | | 849,009 |
| | Consumer loans | | | | | | | | | 579,166 | | | 560,970 |
| Total gross loans | | | | | | | | | 4,904,617 | | | 4,651,120 |
| | Premium on purchased loans | | | | | | | | 4,964 | | | 5,823 |
| | Unearned discounts | | | | | | | | | (78) | | | (100) |
| | Net deferred | | | | | | | | | (4,804) | | | (3,334) |
| Total loans | | | | | | | | | $ | 4,904,699 | | $ | 4,653,509 |
| Notes | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
(1) Efficiency Ratio Calculation | | | | | | | | | | | |
| | | | | | Three Months Ended | | | Year Ended |
| | | | | | December 31, | | | December 31, |
| | | | | | 2012 | | | 2011 | | | 2012 | | | 2011 |
| | Net interest income | | $ | 54,207 | | $ | 53,911 | | $ | 217,337 | | $ | 215,990 |
| | Non-interest income | | | 11,752 | | | 8,677 | | | 43,613 | | | 32,542 |
| | Total income: | | $ | 65,959 | | $ | 62,588 | | $ | 260,950 | | $ | 248,532 |
| | | | | | | | | | | | | | | |
| | Non-interest expense: | | $ | 37,385 | | $ | 36,209 | | $ | 148,828 | | $ | 142,446 |
| | | | | | | | | | | | | | | |
| | Expense/income: | | | 56.68% | | | 57.85% | | | 57.03% | | | 57.31% |
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| Net Interest Margin Analysis |
| Quarterly Average Balances |
| (Unaudited) (Dollars in Thousands) |
| |
| | December 31, 2012 | | | | September 30, 2012 | | | |
| | Average | | | | Average | | | | Average | | | | Average | | |
| | Balance | | Interest | | Yield | | | | Balance | | Interest | | Yield | | |
| Interest-Earning Assets: | | | | | | | | | | | | | | | |
| Deposits | $ | 37,442 | $ | 24 | | 0.25% | | | $ | 66,040 | $ | 42 | | 0.25% | | |
| Federal funds sold and | | | | | | | | | | | | | | | |
| other short-term investments | 1,738 | | — | | 0.14% | | | | 1,461 | | — | | 0.02% | | |
| Investment securities (1) | 350,890 | | 2,912 | | 3.32% | | | | 356,052 | | 2,987 | | 3.36% | | |
| Securities available for sale | 1,325,804 | | 5,963 | | 1.80% | | | | 1,315,366 | | 6,138 | | 1.87% | | |
| Federal Home Loan Bank stock | 37,811 | | 435 | | 4.58% | | | | 38,489 | | 461 | | 4.77% | | |
| Net loans: (2) | | | | | | | | | | | | | | | |
| Total mortgage loans | 3,380,309 | | 38,903 | | 4.55% | | | | 3,260,435 | | 38,544 | | 4.68% | | |
| Total commercial loans | 812,727 | | 10,125 | | 4.91% | | | | 822,093 | | 10,242 | | 4.94% | | |
| Total consumer loans | 579,063 | | 6,241 | | 4.29% | | | | 575,680 | | 6,343 | | 4.38% | | |
| Total net loans | 4,772,099 | | 55,269 | | 4.58% | | | | 4,658,208 | | 55,129 | | 4.68% | | |
| Total Interest-Earning Assets | $ | 6,525,784 | $ | 64,603 | | 3.92% | | | $ | 6,435,616 | $ | 64,757 | | 3.99% | | |
| | | | | | | | | | | | | | | | |
| Non-Interest Earning Assets: | | | | | | | | | | | | | | | |
| Cash and due from banks | 80,974 | | | | | | | | 82,849 | | | | | | |
| Other assets | 662,724 | | | | | | | | 660,647 | | | | | | |
| Total Assets | $ | 7,269,482 | | | | | | | $ | 7,179,112 | | | | | | |
| | | | | | | | | | | | | | | | |
| Interest-Bearing Liabilities: | | | | | | | | | | | | | | | |
| Demand deposits | $ | 2,675,980 | $ | 2,293 | | 0.34% | | | $ | 2,601,626 | $ | 2,543 | | 0.39% | | |
| Savings deposits | 903,774 | | 339 | | 0.15% | | | | 902,458 | | 365 | | 0.16% | | |
| Time deposits | 980,682 | | 3,056 | | 1.24% | | | | 1,018,517 | | 3,247 | | 1.27% | | |
| Total Deposits | 4,560,436 | | 5,688 | | 0.50% | | | | 4,522,601 | | 6,155 | | 0.54% | | |
| Borrowed funds | 818,122 | | 4,708 | | 2.29% | | | | 837,728 | | 4,887 | | 2.32% | | |
| Total Interest-Bearing Liabilities | 5,378,558 | | 10,396 | | 0.77% | | | | 5,360,329 | | 11,042 | | 0.82% | | |
| | | | | | | | | | | | | | | | |
| Non-Interest Bearing Liabilities | 898,549 | | | | | | | | 835,051 | | | | | | |
| Total Liabilities | 6,277,107 | | | | | | | | 6,195,380 | | | | | | |
| Stockholders' equity | 992,375 | | | | | | | | 983,732 | | | | | | |
| Total Liabilities and Stockholders' Equity | 7,269,482 | | | | | | | $ | 7,179,112 | | | | | | |
| | | | | | | | | | | | | | | | |
| Net interest income | | $ | 54,207 | | | | | | | $ | 53,715 | | | | |
| | | | | | | | | | | | | | | | |
| Net interest rate spread | | | | | 3.15% | | | | | | | | 3.17% | |
| Net interest-earning assets | $ | 1,147,226 | | | | | | | $ | 1,075,287 | | | | | |
| | | | | | | | | | | | | | | |
| Net interest margin (3) | | | | | 3.29% | | | | | | | | 3.31% | |
| Ratio of interest-earning assets to | | | | | | | | | | | | | | |
| total interest-bearing liabilities | 1.21 | x | | | | | | | 1.20 | 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. |
| | | | | | | | | | | | |
| | | | 12/31/12 | | 9/30/12 | | 6/30/12 | | 3/31/12 | | 12/31/11 |
| | | | 4th Qtr. | | 3rd Qtr. | | 2nd Qtr. | | 1st Qtr. | | 4th Qtr. |
| Interest-Earning Assets: | | | | | | | | | | | |
| Securities | | | 2.13% | | 2.17% | | 2.42% | | 2.54% | | 2.44% |
| Net loans | | | 4.58% | | 4.68% | | 4.76% | | 4.83% | | 4.94% |
| Total interest-earning assets | | | 3.92% | | 3.99% | | 4.11% | | 4.19% | | 4.24% |
| | | | | | | | | | | | |
| Interest-Bearing Liabilities: | | | | | | | | | | | |
| Total deposits | | | 0.50% | | 0.54% | | 0.58% | | 0.62% | | 0.72% |
| Total borrowings | | | 2.29% | | 2.32% | | 2.20% | | 2.25% | | 2.34% |
| Total interest-bearing liabilities | | | 0.77% | | 0.82% | | 0.85% | | 0.90% | | 0.99% |
| | | | | | | | | | | | |
| Interest rate spread | | | 3.15% | | 3.17% | | 3.26% | | 3.29% | | 3.25% |
| Net interest margin | | | 3.29% | | 3.31% | | 3.39% | | 3.42% | | 3.39% |
| | | | | | | | | | | | |
| Ratio of interest-earning assets to interest-bearing liabilities | | | 1.21x | | 1.20x | | 1.18x | | 1.18x | | 1.18x |
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| Net Interest Margin Analysis |
| Average Year to Date Balances |
| (Unaudited) (Dollars in Thousands) |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | December 31, 2012 | | | | December 31, 2011 |
| | | | | Average | | | Average | | | | Average | | | Average |
| | | | | Balance | | Interest | Yield | | | | Balance | | Interest | Yield |
| Interest-Earning Assets: | | | | | | | | | | | | |
| | Deposits | $ | 32,200 | $ | 81 | 0.25% | | | $ | 47,727 | $ | 119 | 0.25% |
| | Federal funds sold and | | | | | | | | | | | | |
| | other short-term investments | | 1,439 | | 1 | 0.09% | | | | 1,457 | | — | 0.01% |
| | Investment securities (1) | | 351,981 | | 11,808 | 3.35% | | | | 345,528 | | 12,160 | 3.52% |
| | Securities available for sale | | 1,348,376 | | 27,327 | 2.03% | | | | 1,302,233 | | 34,393 | 2.64% |
| | Federal Home Loan Bank stock | | 39,137 | | 1,814 | 4.63% | | | | 38,259 | | 1,764 | 4.61% |
| | Net loans: (2) | | | | | | | | | . | | | |
| | Total mortgage loans | | 3,273,458 | | 155,078 | 4.74% | | | | 3,102,662 | | 158,731 | 5.08% |
| | Total commercial loans | | 812,575 | | 40,942 | 5.04% | | | | 765,228 | | 42,759 | 5.56% |
| | Total consumer loans | | 572,389 | | 25,208 | 4.40% | | | | 555,235 | | 25,793 | 4.64% |
| | Total net loans | | 4,658,422 | | 221,228 | 4.75% | | | | 4,423,125 | | 227,283 | 5.11% |
| | Total Interest-Earning Assets | $ | 6,431,555 | $ | 262,259 | 4.08% | | | $ | 6,158,329 | $ | 275,719 | 4.46% |
| | | | | | | | | | | | | | | |
| Non-Interest Earning Assets: | | | | | | | | | | | | |
| | Cash and due from banks | | 77,489 | | | | | | | 77,823 | | | |
| | Other assets | | 661,897 | | | | | | | 656,955 | | | |
| | Total Assets | $ | 7,170,941 | | | | | | $ | 6,893,107 | | | |
| | | | | | | | | | | | | | | |
| Interest-Bearing Liabilities: | | | | | | | | | | | | |
| | Demand deposits | $ | 2,581,802 | $ | 10,292 | 0.40% | | | $ | 2,272,780 | $ | 15,168 | 0.67% |
| | Savings deposits | | 901,398 | | 1,449 | 0.16% | | | | 899,020 | | 2,971 | 0.33% |
| | Time deposits | | 1,041,533 | | 13,607 | 1.31% | | | | 1,213,292 | | 18,413 | 1.52% |
| | Total Deposits | | 4,524,733 | | 25,348 | 0.56% | | | | 4,385,092 | | 36,552 | 0.83% |
| | | | | | | | | | | | | | | |
| | Borrowed funds | | 864,728 | | 19,574 | 2.26% | | | | 909,531 | | 23,177 | 2.55% |
| | Total Interest-Bearing Liabilities | | 5,389,461 | | 44,922 | 0.83% | | | | 5,294,623 | | 59,729 | 1.13% |
| | | | | | | | | | | | | | | |
| Non-Interest Bearing Liabilities | | 803,722 | | | | | | | 657,056 | | | |
| | Total Liabilities | | 6,193,183 | | | | | | | 5,951,679 | | | |
| | Stockholders' equity | | 977,758 | | | | | | | 941,428 | | | |
| | Total Liabilities and Stockholders' Equity | 7,170,941 | | | | | | $ | 6,893,107 | | | |
| | | | | | | | | | | | | | | |
| Net interest income | | | $ | 217,337 | | | | | | $ | 215,990 | |
| | | | | | | | | | | | | | | |
| Net interest rate spread | | | | | 3.25% | | | | | | | 3.33% |
| Net interest-earning assets | $ | 1,042,094 | | | | | | $ | 863,706 | | | |
| | | | | | | | | | | | | | | |
| Net interest margin (3) | | | | | 3.38% | | | | | | | 3.49% |
| 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. | |
| | | | | | | | | | | | | |
| | | | | Year Ended | | | | |
| | | | | 12/31/12 | | 12/31/11 | | 12/31/10 | | | | |
| | Interest-Earning Assets: | | | | | | | | | | | |
| | Securities | | | 2.32% | | 2.79% | | 3.15% | | | | |
| | Net loans | | | 4.75% | | 5.11% | | 5.39% | | | | |
| | Total interest-earning assets | | | 4.08% | | 4.46% | | 4.73% | | | | |
| | | | | | | | | | | | | |
| | Interest-Bearing Liabilities: | | | | | | | | | | | |
| | Total deposits | | | 0.56% | | 0.83% | | 1.09% | | | | |
| | Total borrowings | | | 2.26% | | 2.55% | | 3.18% | | | | |
| | Total interest-bearing liabilities | | | 0.83% | | 1.13% | | 1.46% | | | | |
| | | | | | | | | | | | | |
| | Interest rate spread | | | 3.25% | | 3.33% | | 3.27% | | | | |
| | Net interest margin | | | 3.38% | | 3.49% | | 3.45% | | | | |
| | | | | | | | | | | | | |
| | Ratio of interest-earning assets to interest-bearing liabilities | 1.19x | | 1.16x | | 1.14x | | | | |
| | | | | | | | | | | | | |
14
