Provident Financial Services, Inc. Announces Increased Quarterly Earnings and Declares Quarterly Cash Dividend
ISELIN, NJ, July 26, 2013 - Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $19.2 million, or $0.34 per basic and diluted share for the three months ended June 30, 2013, compared to net income of $16.0 million, or $0.28 per basic and diluted share for the three months ended June 30, 2012.
For the six months ended June 30, 2013, the Company reported net income of $37.1 million, or $0.65 per basic and diluted share, compared to net income of $34.4 million, or $0.60 per basic and diluted share for the same period last year.
Earnings for the three and six months ended June 30, 2013 were aided by a continued improvement in asset quality and a related reduction in the provision for loan losses compared with the same periods last year. Year-over-year growth in both average loans outstanding and average non-interest bearing demand deposits has mitigated compression in the net interest margin and the related adverse impact on net interest income.
Christopher Martin, Chairman, President and Chief Executive Officer, commented, “Consistent earnings performance has become a standard for Provident, and this quarter was no exception. Our growth in average loans and non-interest bearing deposits helped to partially offset the nominal net interest margin compression we experienced during the quarter.” Martin continued: “Improvement in asset quality accelerated further this quarter as problem loan formation subsided and previously troubled assets were resolved. With our return on average assets at 1.07% and the loan pipeline at its highest level in over five years, our team’s commitment to improved performance is evident in our results.”
Declaration of Quarterly Dividend
The Company’s Board of Directors declared a quarterly cash dividend of $0.14 per common share payable on August 30, 2013, to stockholders of record as of the close of business on August 15, 2013.
Balance Sheet Summary
Total assets decreased $9.6 million to $7.27 billion at June 30, 2013, from $7.28 billion at December 31, 2012, primarily due to decreases in total investments and cash and cash equivalents, partially offset by an increase in total loans.
Total investments decreased $87.3 million, or 5.3%, to $1.57 billion at June 30, 2013, from $1.66 billion at December 31, 2012, largely 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 heightened risk of prepayment, partially offset by purchases of mortgage-backed and municipal securities.
Cash and cash equivalents decreased $23.3 million to $80.5 million at June 30, 2013, from $103.8 million at December 31, 2012. The decline in cash was attributable to a decrease in total deposits and an increase in total loans, partially offset by an increase in borrowings and a decrease in total investments.
The Company’s loan portfolio increased $93.6 million, or 1.9%, to $5.00 billion at June 30, 2013, from $4.90 billion at December 31, 2012. Loan growth was tempered by the repayment of $17.3 million on two shared national credits during the six months ended June 30, 2013. Loan originations totaled $813.7 million and loan purchases totaled $4.6 million for the six months ended June 30, 2013. The loan portfolio had net increases of $75.9 million in multi-family mortgage loans, $42.2 million in construction loans, $36.7 million in commercial mortgage loans, and $10.4 million in commercial loans, which were partially offset by net decreases of $58.6 million and $11.0 million in residential mortgage and consumer loans, respectively. Commercial real estate, commercial and construction loans represented 64.5% of the loan portfolio at June 30, 2013, compared to 62.4% at December 31, 2012.
At June 30, 2013, the Company’s unfunded loan commitments totaled $1.00 billion, including $402.2 million in commercial loan commitments, $247.1 million in construction loan commitments and $65.5 million in commercial mortgage commitments. Unfunded loan commitments at March 31, 2013 were $940.1 million.
Total deposits decreased $179.4 million, or 3.3%, during the six months ended June 30, 2013 to $5.25 billion. Core deposits, which consist of savings and demand deposit accounts, decreased $104.9 million, or 2.3%, to $4.37 billion at June 30, 2013. The majority of the core deposit decrease was in demand and money market deposits, largely related to the cyclical outflow of municipal deposits. It also included certain expected outflows resulting from client tax planning considerations earlier in the year. Time deposits decreased $74.5 million, or 7.8%, to $883.0 million at June 30, 2013, with the majority of the decrease occurring in the 9-, 12- and 60-month maturity categories. Core deposits represented 83.2% of total deposits at June 30, 2013, compared to 82.4% at December 31, 2012.
Borrowed funds increased $165.9 million, or 20.6% during the six months ended June 30, 2013, to $969.1 million, as longer-term wholesale funding was added to mitigate interest rate risk, and shorter-term wholesale funding was used to manage the cyclical outflow of municipal deposits. Borrowed funds represented 13.3% of total assets at June 30, 2013, an increase from 11.0% at December 31, 2012.
Stockholders’ equity increased $5.3 million, or 0.5% during the six months ended June 30, 2013, to $986.6 million, due to net income earned for the period, partially offset by dividends paid to stockholders, common stock repurchases and a decline in unrealized gains on securities available for sale. Common stock repurchases for the six months ended June 30, 2013 totaled 397,483 shares at an average cost of $14.80 per share. At June 30, 2013, 3.7 million shares remained eligible for repurchase under the current authorization. At June 30, 2013, book value per share and tangible book value per share were $16.48 and $10.52, respectively, compared with $16.37 and $10.40, respectively, at December 31, 2012.
Results of Operations
Net Interest Income and Net Interest Margin
For the three months ended June 30, 2013, net interest income decreased $1.2 million, to $53.4 million, from $54.6 million for the same period in 2012. Net interest income for the six months ended June 30, 2013, decreased $2.1 million, to $107.3 million, from $109.4 million for the same period in 2012. For both periods, the decline in net interest income resulted from compression in the net interest margin, which was mitigated by an increase in average interest earning assets, primarily average loans outstanding, partially funded with growth in non-interest bearing demand deposits.
The Company’s net interest margin decreased 4 basis points to 3.29% for the quarter ended June 30, 2013, from 3.33% for the trailing quarter ended March 31, 2013. The decrease in the net interest margin versus the trailing quarter was primarily attributable to reductions in the weighted average yield on interest-earning assets, which declined 8 basis points to 3.84% for the quarter ended June 30, 2013, compared with 3.92% for the quarter ended March 31, 2013. The weighted average cost of interest-bearing liabilities was 0.67% for the quarter ended June 30, 2013, compared with 0.71% for the trailing quarter, a decrease of 4 basis points. The average cost of interest bearing deposits for the quarter ended June 30, 2013 was 0.41%, compared with 0.44% for the trailing quarter. The average cost of borrowed funds for the quarter ended June 30, 2013 was 2.03%, compared with 2.24% for the quarter ended March 31, 2013.
The net interest margin for the quarter ended June 30, 2013 decreased 10 basis points to 3.29%, compared with 3.39% for the quarter ended June 30, 2012. The decrease in the net interest margin for the quarter ended June 30, 2013, compared with the same period last year, was primarily attributable to reductions in the weighted average yield on interest-earning assets, which declined 27 basis points to 3.84% for the quarter ended June 30, 2013, compared with 4.11% for the quarter ended June 30, 2012. The weighted average cost of interest bearing liabilities declined 18 basis points to 0.67% for the quarter ended June 30, 2013, compared with 0.85% for the second quarter of 2012. The average cost of interest bearing deposits for the quarter ended June 30, 2013 was 0.41%, compared with 0.58% for the same period last year. Average non-interest bearing demand deposits totaled $807.2 million for the quarter ended June 30, 2013, compared with $689.3 million for the quarter ended June 30, 2012. The average cost of borrowed funds for the quarter ended June 30, 2013 was 2.03%, compared with 2.20% for the same period last year.
For the six months ended June 30, 2013, the net interest margin decreased 9 basis points to 3.32%, compared with 3.41% for the six months ended June 30, 2012. The weighted average yield on interest earning assets declined 26 basis points to 3.89% for the six months ended June 30, 2013, compared with 4.15% for the six months ended June 30, 2012, while the weighted average cost of interest bearing liabilities declined 18 basis points to 0.69% for the six months ended June 30, 2013, compared with 0.87% for the same period in 2012. The average cost of interest bearing deposits for the six months ended June 30, 2013 was 0.43%, compared with 0.60% for the same period last year. Average non-interest bearing demand deposits totaled $813.3 million for the six months ended June 30, 2013, compared with $679.7 million for the six months ended June 30, 2012. The average cost of borrowings for the six months ended June 30, 2013 was 2.13%, compared with 2.22% for the same period last year.
Non-Interest Income
Non-interest income totaled $12.6 million for the quarter ended June 30, 2013, an increase of $3.3 million, or 35.3%, compared to the same period in 2012. Income related to Bank-owned life insurance (“BOLI”) increased $1.7 million for the three months ended June 30, 2013, compared to the same period in 2012, primarily due to the recognition of a $1.5 million policy claim. For the quarter ended June 30, 2013, fee income increased $907,000 to $8.3 million, from $7.4 million for the three months ended June 30, 2012, largely due to an increase in commercial loan prepayment fee income. Additionally, net gains on securities transactions increased $422,000 for the three months ended June 30, 2013, compared to the same period in 2012, as the Company sold certain mortgage-backed securities which had a heightened risk of accelerated prepayment. The proceeds from these sales were reinvested in similar securities with more stable projected cash flows. Furthermore, other income increased $281,000 for the three months ended June 30, 2013, compared to the same period in 2012, principally due to a recovery of medical plan administrative costs and a reduction in net losses on the sale of foreclosed real estate, partially offset by a decrease in gains on loan sales.
For the six months ended June 30, 2013, non-interest income totaled $22.6 million, an increase of $511,000, or 2.3%, compared to the same period in 2012. BOLI income increased $1.5 million for the six months ended June 30, 2013, compared to the same period in the prior year, principally due to the recognition of a policy claim. Also contributing to the increase in non-interest income, fee income increased $792,000, to $16.3 million for the six months ended June 30, 2013, compared with the same period in 2012, largely due to an increase in prepayment fees on commercial loans. Net gains on securities transactions for the six months ended June 30, 2013, declined $1.3 million, compared to the same period in 2012. In addition, other income decreased $563,000 for the six months ended June 30, 2013, compared with the same period in 2012, primarily due to a decrease in gains on loan sales.
Non-Interest Expense
For the three months ended June 30, 2013, non-interest expense increased $57,000, to $37.8 million, compared to the three months ended June 30, 2012. Data processing expense increased $185,000 for the three months ended June 30, 2013, compared with the same period in 2012, because of increased software maintenance expense, partially offset by lower core processing fees. In addition, advertising expenses increased $149,000, or 13.2%, to $1.3 million and other operating expenses increased $94,000, or 1.4%, to $7.0 million for the quarter ended June 30, 2013, from $6.9 million for the same period in 2012. Partially offsetting these increases in non-interest expense, the amortization of intangibles decreased $202,000 for the three months ended June 30, 2013, compared with the same period in 2012, as a result of scheduled reductions in core deposit intangible amortization. Net occupancy expense decreased $118,000 for the three months ended June 30, 2013, compared with the same period in 2012, primarily due to lower equipment maintenance expense. In addition, compensation and benefits expense decreased $45,000 for the quarter ended June 30, 2013, compared to the quarter ended June 30, 2012, due to reduced employee medical and retirement benefit costs, partially offset by an increased incentive compensation accrual.
The Company’s annualized non-interest expense as a percentage of average assets was 2.10% for the quarter ended June 30, 2013, compared with 2.13% for the same period in 2012. The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income) was 57.25% for the quarter ended June 30, 2013, compared with 59.07% for the same period in 2012.
Non-interest expense for the six months ended June 30, 2013 was $74.8 million, an increase of $212,000 from the six months ended June 30, 2012. Compensation and benefits expense increased $518,000 to $41.0 million for the six months ended June 30, 2013, compared to the six months ended June 30, 2012, due to higher salary expense associated with annual merit increases, an increased incentive compensation accrual, increased severance expense and increased payroll taxes, partially offset by reduced employee medical and retirement benefit costs. Data processing expense increased $219,000 for the six months ended June 30, 2013, compared to the same period in 2012, because of increased software maintenance expense, partially offset by lower core processing fees. Advertising expense increased $210,000 to $2.0 million, compared to the same period last year. In addition, net occupancy expense increased $62,000 to $10.3 million, compared to the same period last year, due to higher snow removal costs and increased depreciation expense related to branch renovations, partially offset by reduced equipment maintenance expense and lower rent expense, a portion of which was due to branch consolidations in 2012. Partially offsetting these increases in non-interest expense, amortization of intangibles decreased $430,000 for the six months ended June 30, 2013, compared to the same period last year, primarily a result of scheduled reductions in core deposit intangible amortization. Other operating expense decreased $221,000 for the six months ended June 30, 2013, compared to the same period in 2012, due largely to lower loan collection and loan administration expenses, a reduction in debit card maintenance expenses, combined with two non-recurring charges of $213,000 and $162,000 incurred in the prior year period related to the termination of a software contract in connection with the Beacon Trust Company integration and the consolidation of underperforming branches, respectively. Additionally, FDIC insurance expense decreased $146,000 to $1.2 million for the six months ended June 30, 2013, compared with the same period in 2012, primarily due to a lower assessment rate.
Asset Quality
The Company’s total non-performing loans at June 30, 2013 were $88.8 million, or 1.78% of total loans, compared with $99.1 million, or 2.02% of total loans at March 31, 2013, and $115.2 million, or 2.43% of total loans at June 30, 2012. The $10.2 million decrease in non-performing loans at June 30, 2013, compared with the trailing quarter, was due to a $7.0 million decrease in non-performing residential loans, a $1.4 million decrease in non-performing commercial mortgage loans, a $1.3 million decrease in non-performing consumer loans and a $474,000 decrease in non-performing commercial loans. At June 30, 2013, impaired loans totaled $115.8 million with related specific reserves of $6.8 million, compared with impaired loans totaling $112.0 million with related specific reserves of $6.6 million at March 31, 2013. At June 30, 2012, impaired loans totaled $115.5 million with related specific reserves of $8.6 million.
At June 30, 2013, the Company’s allowance for loan losses was 1.34% of total loans, a decrease from 1.43% at March 31, 2013, and a decrease from 1.53% of total loans at June 30, 2012. The Company recorded provisions for loan losses of $1.0 million and $2.5 million for the three and six months ended June 30, 2013, respectively, compared with provisions of $3.5 million and $8.5 million for the three and six months ended June 30, 2012, respectively. For the three and six months ended June 30, 2013, the Company had net charge-offs of $4.0 million and $5.8 million, respectively, compared with net charge-offs of $5.1 million and $10.5 million, respectively, for the same periods in 2012. The allowance for loan losses decreased $3.3 million to $67.0 million at June 30, 2013, from $70.3 million at December 31, 2012 as the weighted average risk rating of the loan portfolio improved, early stage delinquencies declined, certain non-performing asset resolutions were completed and the reduced pace of new non-performing asset formation resulted in net outflows.
At June 30, 2013, the Company held $13.7 million of foreclosed assets, compared with $12.5 million at December 31, 2012. Foreclosed assets at June 30, 2013 consisted of $4.7 million of residential real estate, $8.0 million of commercial real estate and $368,000 of marine vessels.
Income Tax Expense
For the three and six months ended June 30, 2013, the Company’s income tax expense was $8.0 million and $15.6 million, respectively, compared with $6.7 million and $14.0 million, for the three and six months ended June 30, 2012, 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 rate was 29.4% and 29.6% for the three and six months ended June 30, 2013, respectively, compared with 29.4% and 28.9% for the three and six months ended June 30, 2012, 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, through its network of full service branches throughout 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, July 26, 2013 regarding highlights of the Company’s second quarter 2013 financial results. The call may be accessed by dialing 1-888-317-6016 (Domestic), 1-412-317-6016 (International) or 1-855-669-9657 (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 |
| June 30, 2013 (Unaudited) and December 31, 2012 |
| (Dollars in Thousands) |
| | | | | | | | | |
| Assets | | | June 30, 2013 | | December 31, 2012 |
| | | | | | | | | |
| Cash and due from banks | | $ | 79,035 | $ | 101,850 |
| Short-term investments | | | 1,470 | | 1,973 |
| | | | Total cash and cash equivalents | | | 80,505 | | 103,823 |
| | | | | | | | | |
| Securities available for sale, at fair value | | | 1,174,778 | | 1,264,002 |
| Investment securities held to maturity (fair value of $353,494 at | | | | | |
| | June 30, 2013 (unaudited) and $374,916 at December 31, 2012) | | | 351,836 | | 359,464 |
| Federal Home Loan Bank Stock | | | 47,052 | | 37,543 |
| | | | | | | | | |
| Loans | | | | | 4,998,347 | | 4,904,699 |
| | Less allowance for loan losses | | | 67,005 | | 70,348 |
| | | | Net loans | | | 4,931,342 | | 4,834,351 |
| Foreclosed assets, net | | | 13,740 | | 12,473 |
| Banking premises and equipment, net | | | 67,732 | | 66,120 |
| Accrued interest receivable | | | 22,999 | | 24,002 |
| Intangible assets | | | | 357,015 | | 357,907 |
| Bank-owned life insurance | | | 148,069 | | 147,286 |
| Other assets | | | | | 79,011 | | 76,724 |
| | | | Total assets | | $ | 7,274,079 | $ | 7,283,695 |
| | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | |
| | | | | | | | | |
| Deposits: | | | | | | | |
| | Demand deposits | | $ | 3,420,610 | $ | 3,556,011 |
| | Savings deposits | | | 945,328 | | 914,787 |
| | Certificates of deposit of $100,000 or more | | | 295,971 | | 324,901 |
| | Other time deposits | | | 587,003 | | 632,572 |
| | | | Total deposits | | | 5,248,912 | | 5,428,271 |
| | | | | | | | | |
| Mortgage escrow deposits | | | 23,077 | | 21,238 |
| Borrowed funds | | | 969,123 | | 803,264 |
| Other liabilities | | | 46,373 | | 49,676 |
| | | | Total liabilities | | | 6,287,485 | | 6,302,449 |
| | | | | | | | | |
| 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 59,863,653 outstanding at June 30, 2013, and 59,937,955 | | | | | |
| | outstanding at December 31, 2012 | | | 832 | | 832 |
| Additional paid-in capital | | | 1,024,181 | | 1,021,507 |
| Retained earnings | | | 410,078 | | 389,549 |
| Accumulated other comprehensive (loss) income | | | (6,557) | | 7,716 |
| Treasury stock | | | | | (391,268) | | (386,270) |
| Unallocated common stock held by the Employee Stock Ownership Plan | | | (50,672) | | (52,088) |
| Common Stock acquired by the Directors' Deferred Fee Plan | | | (7,251) | | (7,298) |
| Deferred Compensation - Directors' Deferred Fee Plan | | | 7,251 | | 7,298 |
| | | | Total stockholders' equity | | | 986,594 | | 981,246 |
| | | | Total liabilities and stockholders' equity | | $ | 7,274,079 | $ | 7,283,695 |
| | | | | | | | | |
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| Consolidated Statements of Income |
| Three and Six Months Ended June 30, 2013 and 2012 (Unaudited) |
| (Dollars in Thousands, except per share data) |
| | | | | | | | | | | | |
| | | | | | Three Months Ended | | Six Months Ended |
| | | | | | June 30, | | June 30, |
| | | | | | 2013 | | 2012 | | 2013 | | 2012 |
| Interest income: | | | | | | | | | |
| | Real estate secured loans | $ | 37,585 | $ | 38,672 | $ | 75,920 | $ | 77,631 |
| | Commercial loans | | 10,055 | | 10,205 | | 20,026 | | 20,575 |
| | Consumer loans | | 5,875 | | 6,335 | | 11,832 | | 12,624 |
| | Securities available for sale and Federal Home Loan Bank stock | | 6,120 | | 7,812 | | 12,312 | | 16,144 |
| | Investment securities held to maturity | | 2,767 | | 2,991 | | 5,606 | | 5,909 |
| | Deposits, Federal funds sold and other short-term investments | | 11 | | 4 | | 21 | | 16 |
| | | Total interest income | | 62,413 | | 66,019 | | 125,717 | | 132,899 |
| | | | | | | | | | | | |
| Interest expense: | | | | | | | | | |
| | Deposits | | | | 4,607 | | 6,503 | | 9,563 | | 13,505 |
| | Borrowed funds | | 4,395 | | 4,938 | | 8,848 | | 9,979 |
| | | Total interest expense | | 9,002 | | 11,441 | | 18,411 | | 23,484 |
| | | Net interest income | | 53,411 | | 54,578 | | 107,306 | | 109,415 |
| Provision for loan losses | | 1,000 | | 3,500 | | 2,500 | | 8,500 |
| | | Net interest income after provision for loan losses | | 52,411 | | 51,078 | | 104,806 | | 100,915 |
| | | | | | | | | | | | |
| Non-interest income: | | | | | | | | |
| | Fees | | | | 8,318 | | 7,411 | | 16,278 | | 15,486 |
| | Bank-owned life insurance | | 2,944 | | 1,260 | | 4,154 | | 2,622 |
| | Net gain on securities transactions | | 423 | | 1 | | 934 | | 2,184 |
| | Other income | | 952 | | 671 | | 1,216 | | 1,779 |
| | | Total non-interest income | | 12,637 | | 9,343 | | 22,582 | | 22,071 |
| | | | | | | | | | | | |
| Non-interest expense: | | | | | | | | |
| | Compensation and employee benefits | | 20,154 | | 20,199 | | 40,997 | | 40,479 |
| | Net occupancy expense | | 5,044 | | 5,162 | | 10,250 | | 10,188 |
| | Data processing expense | | 2,647 | | 2,462 | | 5,269 | | 5,050 |
| | FDIC Insurance | | 1,224 | | 1,230 | | 2,474 | | 2,620 |
| | Amortization of intangibles | | 516 | | 718 | | 1,027 | | 1,457 |
| | Advertising and promotion expense | | 1,277 | | 1,128 | | 2,023 | | 1,813 |
| | Other operating expenses | | 6,951 | | 6,857 | | 12,719 | | 12,940 |
| | | Total non-interest expenses | | 37,813 | | 37,756 | | 74,759 | | 74,547 |
| | | Income before income tax expense | | 27,235 | | 22,665 | | 52,629 | | 48,439 |
| Income tax expense | | 8,007 | | 6,662 | | 15,573 | | 14,008 |
| | | Net income | $ | 19,228 | $ | 16,003 | $ | 37,056 | $ | 34,431 |
| | | | | | | | | | | | |
| Basic earnings per share | $ | 0.34 | $ | 0.28 | $ | 0.65 | $ | 0.60 |
| Average basic shares outstanding | | 57,206,242 | | 57,152,952 | | 57,186,828 | | 57,102,389 |
| | | | | | | | | | | | |
| Diluted earnings per share | $ | 0.34 | $ | 0.28 | $ | 0.65 | $ | 0.60 |
| Average diluted shares outstanding | | 57,283,646 | | 57,187,413 | | 57,240,932 | | 57,135,022 |
| | | | | | | | | | | | |
| 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 | | Six Months Ended |
| | | | | | June 30, | | | June 30, |
| | | | | | 2013 | | | 2012 | | | 2013 | | | 2012 |
| STATEMENTS OF INCOME: | | | | | | | | | | | |
| Net interest income | | $ | 53,411 | | $ | 54,578 | | $ | 107,306 | | $ | 109,415 |
| Provision for loan losses | | | 1,000 | | | 3,500 | | | 2,500 | | | 8,500 |
| Non-interest income | | | 12,637 | | | 9,343 | | | 22,582 | | | 22,071 |
| Non-interest expense | | | 37,813 | | | 37,756 | | | 74,759 | | | 74,547 |
| Income before income tax expense | | 27,235 | | | 22,665 | | | 52,629 | | | 48,439 |
| Net income | | | | 19,228 | | | 16,003 | | | 37,056 | | | 34,431 |
| Diluted earnings per share | | | $0.34 | | | $0.28 | | | $0.65 | | | $0.60 |
| Interest rate spread | | | 3.17% | | | 3.26% | | | 3.20% | | | 3.28% |
| Net interest margin | | | 3.29% | | | 3.39% | | | 3.32% | | | 3.41% |
| | | | | | | | | | | | | | | |
| PROFITABILITY: | | | | | | | | | | | | |
| Annualized return on average assets | | 1.07% | | | 0.90% | | | 1.04% | | | 0.97% |
| Annualized return on average equity | | 7.75% | | | 6.61% | | | 7.53% | | | 7.16% |
| Annualized return on average tangible equity | | 12.08% | | | 10.48% | | | 11.78% | | | 11.40% |
| Annualized non-interest expense to average assets | | 2.10% | | | 2.13% | | | 2.09% | | | 2.11% |
| Efficiency ratio (1) | | | 57.25% | | | 59.07% | | | 57.56% | | | 56.70% |
| | | | | | | | | | | | | | | |
| ASSET QUALITY: | | | | | | | | | | | | |
| Non-accrual loans | | | | | | | | $ | 88,835 | | $ | 115,216 |
| 90+ and still accruing | | | | | | | | | — | | | — |
| Non-performing loans | | | | | | | | | 88,835 | | | 115,216 |
| Foreclosed assets | | | | | | | | | 13,740 | | | 13,925 |
| Non-performing assets | | | | | | | | | 102,575 | | | 129,141 |
| Non-performing loans to total loans | | | | | | | | 1.78% | | | 2.43% |
| Non-performing assets to total assets | | | | | | | | 1.41% | | | 1.81% |
| Allowance for loan losses | | | | | | | | $ | 67,005 | | $ | 72,352 |
| Allowance for loan losses to total non-performing loans | | | | | | | | 75.43% | | | 62.80% |
| Allowance for loan losses to total loans | | | | | | | | 1.34% | | | 1.53% |
| | | | | | | | | | | | | | | |
| AVERAGE BALANCE SHEET DATA: | | | | | | | | | | | |
| Assets | | | $ | 7,216,401 | | $ | 7,132,142 | | $ | 7,218,296 | | $ | 7,116,998 |
| Loans, net | | | | 4,858,148 | | | 4,617,622 | | | 4,844,051 | | | 4,601,067 |
| Earning assets | | | | 6,474,853 | | | 6,404,882 | | | 6,477,364 | | | 6,381,872 |
| Core deposits | | | | 4,394,745 | | | 4,138,914 | | | 4,414,452 | | | 4,103,550 |
| Borrowings | | | | 870,421 | | | 903,084 | | | 837,851 | | | 901,935 |
| Interest-bearing liabilities | | | 5,354,783 | | | 5,410,410 | | | 5,352,799 | | | 5,409,697 |
| Stockholders' equity | | | 995,729 | | | 973,562 | | | 991,878 | | | 967,349 |
| Average yield on interest-earning assets | | 3.84% | | | 4.11% | | | 3.89% | | | 4.15% |
| Average cost of interest-bearing liabilities | | 0.67% | | | 0.85% | | | 0.69% | | | 0.87% |
| | | | | | | | | | | | | | | |
| LOAN DATA: | | | | | | | | | | | |
| Mortgage loans: | | | | | | | | | | | |
| Residential | | | | | | | $ | 1,206,368 | | $ | 1,307,578 |
| Commercial | | | | | | | | 1,386,606 | | | 1,277,342 |
| Multi-family | | | | | | | | 799,840 | | | 598,476 |
| Construction | | | | | | | | 162,332 | | | 119,678 |
| Total mortgage loans | | | | | | | | 3,555,146 | | | 3,303,074 |
| Commercial loans | | | | | | | | 876,782 | | | 854,257 |
| Consumer loans | | | | | | | | 568,139 | | | 576,291 |
| Total gross loans | | | | | | | | 5,000,067 | | | 4,733,622 |
| Premium on purchased loans | | | | | | | | 4,269 | | | 5,571 |
| Unearned discounts | | | | | | | | (66) | | | (77) |
| Net deferred | | | | | | | | (5,923) | | | (3,986) |
| Total loans | | | | | | | $ | 4,998,347 | | $ | 4,735,130 |
| Notes: | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
(1) Efficiency Ratio Calculation | | | | | | | | | | | |
| | | | | | Three Months Ended | | | Six Months Ended |
| | | | | | June 30, | | | June 30, |
| | | | | | 2013 | | | 2012 | | | 2013 | | | 2012 |
| | Net interest income | | $ | 53,411 | | $ | 54,578 | | $ | 107,306 | | $ | 109,415 |
| | Non-interest income | | | 12,637 | | | 9,343 | | | 22,582 | | | 22,071 |
| | Total income: | | $ | 66,048 | | $ | 63,921 | | $ | 129,888 | | $ | 131,486 |
| | | | | | | | | | | | | | | |
| | Non-interest expense: | | $ | 37,813 | | $ | 37,756 | | $ | 74,759 | | $ | 74,547 |
| | | | | | | | | | | | | | | |
| | Expense/income: | | | 57.25% | | | 59.07% | | | 57.56% | | | 56.70% |
| | | | | | | | | | | | | | | |
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| Net Interest Margin Analysis |
| Quarterly Average Balances |
| (Unaudited) (Dollars in Thousands) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | June 30, 2013 | | | | March 31, 2013 | |
| | | | | | | Average | | | | Average | | | | Average | | | | Average | |
| | | | | | | Balance | | Interest | | Yield | | | | Balance | | Interest | | Yield | |
| | Interest-Earning Assets: | | | | | | | | | | | | | | | | |
| | | Deposits | | | $ | 14,314 | $ | 11 | | 0.25% | | | $ | 16,639 | $ | 10 | | 0.25% | |
| | | Federal funds sold and | | | | | | | | | | | | | | | | |
| | | other short-term investments | | 1,392 | | — | | 0.08% | | | | 1,424 | | — | | 0.01% | |
| | | Investment securities (1) | | | 351,690 | | 2,767 | | 3.15% | | | | 350,326 | | 2,839 | | 3.24% | |
| | | Securities available for sale | | | 1,206,625 | | 5,745 | | 1.90% | | | | 1,243,647 | | 5,764 | | 1.85% | |
| | | Federal Home Loan Bank stock | | | 42,684 | | 375 | | 3.53% | | | | 38,070 | | 428 | | 4.56% | |
| | | Net loans: (2) | | | | | | | | | | | | | | | | |
| | | Total mortgage loans | | | 3,447,241 | | 37,585 | | 4.34% | | | | 3,418,532 | | 38,335 | | 4.49% | |
| | | Total commercial loans | | | 840,827 | | 10,055 | | 4.76% | | | | 839,389 | | 9,971 | | 4.78% | |
| | | Total consumer loans | | | 570,080 | | 5,875 | | 4.13% | | | | 571,875 | | 5,957 | | 4.22% | |
| | | Total net loans | | | 4,858,148 | | 53,515 | | 4.39% | | | | 4,829,796 | | 54,263 | | 4.51% | |
| | | Total Interest-Earning Assets | | $ | 6,474,853 | $ | 62,413 | | 3.84% | | | $ | 6,479,902 | $ | 63,304 | | 3.92% | |
| | | | | | | | | | | | | | | | | | | | |
| | Non-Interest Earning Assets: | | | | | | | | | | | | | | | | |
| | | Cash and due from banks | | | 67,732 | | | | | | | | 75,239 | | | | | |
| | | Other assets | | | 673,816 | | | | | | | | 665,070 | | | | | |
| | | Total Assets | | $ | 7,216,401 | | | | | | | $ | 7,220,211 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Interest-Bearing Liabilities: | | | | | | | | | | | | | | | | |
| | | Demand deposits | | $ | 2,649,414 | $ | 1,866 | | 0.28% | | | $ | 2,696,385 | $ | 1,954 | | 0.29% | |
| | | Savings deposits | | | 938,110 | | 218 | | 0.09% | | | | 918,535 | | 267 | | 0.12% | |
| | | Time deposits | | | 896,838 | | 2,523 | | 1.13% | | | | 930,953 | | 2,735 | | 1.19% | |
| | | Total Deposits | | | 4,484,362 | | 4,607 | | 0.41% | | | | 4,545,873 | | 4,956 | | 0.44% | |
| | | | | | | | | | | | | | | | | | | | |
| | | Borrowed funds | | | 870,421 | | 4,395 | | 2.03% | | | | 804,919 | | 4,453 | | 2.24% | |
| | | Total Interest-Bearing Liabilities | | 5,354,783 | | 9,002 | | 0.67% | | | | 5,350,792 | | 9,409 | | 0.71% | |
| | | | | | | | | | | | | | | | | | | | |
| | Non-Interest Bearing Liabilities | | | 865,889 | | | | | | | | 881,435 | | | | | |
| | | Total Liabilities | | | 6,220,672 | | | | | | | | 6,232,227 | | | | | |
| | | Stockholders' equity | | | 995,729 | | | | | | | | 987,984 | | | | | |
| | | Total Liabilities and Stockholders' Equity | $ | 7,216,401 | | | | | | | $ | 7,220,211 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Net interest income | | | | $ | 53,411 | | | | | | | $ | 53,895 | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Net interest rate spread | | | | | | | 3.17% | | | | | | | | 3.21% | |
| | Net interest-earning assets | | $ | 1,120,070 | | | | | | | $ | 1,129,110 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Net interest margin (3) | | | | | | | 3.29% | | | | | | | | 3.33% | |
| | Ratio of interest-earning assets to | | | | | | | | | | | | | | | | |
| | total interest-bearing liabilities | | | 1.21 | x | | | | | | | 1.21 | 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. | | |
| | | | | | | | | | | | |
| | | | 6/30/13 | | 3/31/13 | | 12/31/12 | | 9/30/12 | | 6/30/12 |
| | | | 2nd Qtr. | | 1st Qtr. | | 4th Qtr. | | 3rd Qtr. | | 2nd Qtr. |
| Interest-Earning Assets: | | | | | | | | | | | |
| Securities | | | 2.20% | | 2.19% | | 2.13% | | 2.17% | | 2.42% |
| Net loans | | | 4.39% | | 4.51% | | 4.58% | | 4.68% | | 4.76% |
| Total interest-earning assets | | | 3.84% | | 3.92% | | 3.92% | | 3.99% | | 4.11% |
| | | | | | | | | | | | |
| Interest-Bearing Liabilities: | | | | | | | | | | | |
| Total deposits | | | 0.41% | | 0.44% | | 0.50% | | 0.54% | | 0.58% |
| Total borrowings | | | 2.03% | | 2.24% | | 2.29% | | 2.32% | | 2.20% |
| Total interest-bearing liabilities | | | 0.67% | | 0.71% | | 0.77% | | 0.82% | | 0.85% |
| | | | | | | | | | | | |
| Interest rate spread | | | 3.17% | | 3.21% | | 3.15% | | 3.17% | | 3.26% |
| Net interest margin | | | 3.29% | | 3.33% | | 3.29% | | 3.31% | | 3.39% |
| | | | | | | | | | | | |
| Ratio of interest-earning assets to interest-bearing liabilities | 1.21x | | 1.21x | | 1.21x | | 1.20x | | 1.18x |
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY |
| Net Interest Margin Analysis |
| Average Year to Date Balances |
| (Unaudited) (Dollars in Thousands) |
| | | | | | | | | | | | | | | |
| | | | | June 30, 2013 | | | June 30, 2012 | |
| | | | | Average | | | Average | | | Average | | | Average | |
| | | | | Balance | | Interest | Yield | | | Balance | | Interest | Yield | |
| Interest-Earning Assets: | | | | | | | | | | | | |
| | Deposits | | $ | 15,470 | $ | 21 | 0.28% | | $ | 12,445 | $ | 15 | 0.25% | |
| | Federal funds sold and | | | | | | | | | | | | |
| | other short-term investments | | 1,408 | | — | 0.04% | | | 1,277 | | 1 | 0.10% | |
| | Investment securities (1) | | 351,012 | | 5,606 | 3.19% | | | 350,476 | | 5,909 | 3.37% | |
| | Securities available for sale | | 1,225,034 | | 11,508 | 1.88% | | | 1,376,473 | | 15,227 | 2.21% | |
| | Federal Home Loan Bank stock | | 40,389 | | 804 | 4.01% | | | 40,134 | | 917 | 4.59% | |
| | Net loans: (2) | | | | | | | | | | | | |
| | Total mortgage loans | | 3,432,966 | | 75,920 | 4.41% | | | 3,226,028 | | 77,631 | 4.79% | |
| | Total commercial loans | | 840,112 | | 20,026 | 4.77% | | | 807,687 | | 20,575 | 5.08% | |
| | Total consumer loans | | 570,973 | | 11,832 | 4.18% | | | 567,352 | | 12,624 | 4.47% | |
| | Total net loans | | 4,844,051 | | 107,778 | 4.45% | | | 4,601,067 | | 110,830 | 4.80% | |
| | Total Interest-Earning Assets | $ | 6,477,364 | $ | 125,717 | 3.89% | | $ | 6,381,872 | $ | 132,899 | 4.15% | |
| | | | | | | | | | | | | | | |
Non-Interest Earning Assets: | | | | | | | | | | | | |
| | Cash and due from banks | | 71,465 | | | | | | 73,018 | | | | |
| | Other assets | | 669,467 | | | | | | 662,108 | | | | |
| | Total Assets | $ | 7,218,296 | | | | | $ | 7,116,998 | | | | |
| | | | | | | | | | | | | | | |
Interest-Bearing Liabilities: | | | | | | | | | | | | |
| | Demand deposits | $ | 2,672,770 | $ | 3,819 | 0.29% | | $ | 2,524,175 | $ | 5,456 | 0.43% | |
| | Savings deposits | | 928,377 | | 485 | 0.11% | | | 899,661 | | 746 | 0.17% | |
| | Time deposits | | 913,801 | | 5,259 | 1.16% | | | 1,083,926 | | 7,303 | 1.35% | |
| | Total Deposits | | 4,514,948 | | 9,563 | 0.43% | | | 4,507,762 | | 13,505 | 0.60% | |
| | Borrowed funds | | 837,851 | | 8,848 | 2.13% | | | 901,935 | | 9,979 | 2.22% | |
| | Total Interest-Bearing Liabilities | | 5,352,799 | | 18,411 | 0.69% | | | 5,409,697 | $ | 23,484 | 0.87% | |
| | | | | | | | | | | | | | | |
| Non-Interest Bearing Liabilities | | 873,619 | | | | | | 739,952 | | | | |
| | Total Liabilities | | 6,226,418 | | | | | | 6,149,649 | | | | |
| | Stockholders' equity | | 991,878 | | | | | | 967,349 | | | | |
| | Total Liabilities and Stockholders' Equity | $ | 7,218,296 | | | | | $ | 7,116,998 | | | | |
| | | | | | | | | | | | | | | |
| Net interest income | | | $ | 107,306 | | | | | $ | 109,415 | | |
| | | | | | | | | | | | | | | |
| Net interest rate spread | | | | | 3.20% | | | | | | 3.28% | |
| Net interest-earning assets | $ | 1,124,565 | | | | | $ | 972,175 | | | | |
| | | | | | | | | | | | | | | |
| Net interest margin (3) | | | | | 3.32% | | | | | | 3.41% | |
| Ratio of interest-earning assets to | | | | | | | | | | | | |
| total interest-bearing liabilities | | 1.21 | x | | | | | 1.18 | x | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | (1) Average outstanding balance amounts shown are amortized cost. | | | | | | |
| | | | | | | | | | | | | | | |
| | (2) Average outstanding balance are net of the allowance for loan losses, deferred loan fees and expenses, loan premium 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. | |
| | | | | | | | | | | | |
| | | | Six Months Ended | | | | |
| | | | 6/30/13 | | 6/30/12 | | 6/30/11 | | | | |
| Interest-Earning Assets: | | | | | | | | | | | |
| Securities | | | 2.20% | | 2.48% | | 2.96% | | | | |
| Net loans | | | 4.45% | | 4.80% | | 5.20% | | | | |
| Total interest-earning assets | | | 3.89% | | 4.15% | | 4.57% | | | | |
| | | | | | | | | | | | |
| Interest-Bearing Liabilities: | | | | | | | | | | | |
| Total deposits | | | 0.43% | | 0.60% | | 0.90% | | | | |
| Total borrowings | | | 2.13% | | 2.22% | | 2.67% | | | | |
| Total interest-bearing liabilities | | | 0.69% | | 0.87% | | 1.21% | | | | |
| | | | | | | | | | | | |
| Interest rate spread | | | 3.20% | | 3.28% | | 3.36% | | | | |
| Net interest margin | | | 3.32% | | 3.41% | | 3.52% | | | | |
| | | | | | | | | | | | |
| Ratio of interest-earning assets to interest-bearing liabilities | 1.21x | | 1.18x | | 1.16x | | | | |
13
