Provident Financial Services, Inc. Announces Third Quarter Earnings and Declares Quarterly Cash Dividend
ISELIN, NJ, October 29, 2014 - Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $19.0 million, or $0.30 per basic and diluted share for the three months ended September 30, 2014, compared to net income of $16.1 million, or $0.28 per basic and diluted share for the three months ended September 30, 2013. For the nine months ended September 30, 2014, the Company reported net income of $52.4 million, or $0.88 per basic and diluted share, compared to net income of $53.1 million, or $0.93 per basic and diluted share for the same period last year.
On May 30, 2014, the Company completed its acquisition of Team Capital Bank ("Team Capital"), which added at fair value $964.0 million to total assets, $631.4 million to loans, and $769.9 million to deposits. The results of operations for the three and nine months ended September 30, 2014 included net non-recurring items related to the acquisition of Team Capital that reduced earnings by $2.2 million and $3.5 million, net of tax, respectively.
Earnings for the nine months ended September 30, 2014 were further impacted by a $790,000, net of tax, non-cash charge resulting from the recognition of a pro rata portion of unrealized losses related to lump sum distributions from the Company's frozen pension plan, in order to lower and reduce the volatility of future pension costs.
Excluding these items, core earnings(1) for the three and nine months ended September 30, 2014 were $21.2 million, or $0.34 per diluted share, and $56.7 million, or $0.95 per diluted share, respectively.
Christopher Martin, Chairman, President and Chief Executive Officer, commented, “We are pleased with our core operating results, as we maintained our pricing and credit discipline in an increasingly competitive market. The Team Capital systems conversion was seamlessly completed during the quarter, and I applaud our employees’ efforts in achieving that success.” Martin continued: “We remain focused on growth opportunities in our market, as evidenced by the addition of a team of experienced asset-based lenders and the acquisition of their $25 million loan portfolio during the quarter. Provident is well positioned to further augment our performance in tandem with an improving economy and an eventual rise in interest rates.”
Declaration of Quarterly Dividend
The Company’s Board of Directors declared a quarterly cash dividend of $0.15 per common share payable on November 28, 2014, to stockholders of record as of the close of business on November 14, 2014.
Balance Sheet Summary
Total assets increased $931.2 million to $8.42 billion at September 30, 2014, from $7.49 billion at December 31, 2013, primarily due to the addition of $964.0 million of total assets from the Team Capital acquisition, partially offset by a decrease in cash and cash equivalents.
The Company’s loan portfolio increased $771.4 million, or 14.8%, to $5.97 billion at September 30, 2014, from $5.19 billion at December 31, 2013, which included $631.4 million of loans acquired from Team Capital. Loan originations totaled $1.2 billion and loan purchases totaled $94.5 million for the nine months ended September 30, 2014. The loan portfolio had net increases of $318.7 million in commercial loans, $286.9 million in commercial mortgage loans, $63.6 million in residential mortgage loans, $53.2 million in construction loans, $35.1 million in consumer loans and $13.8 million in multi-family mortgage loans. Commercial real estate, commercial and construction loans represented 69.0% of the loan portfolio at September 30, 2014, compared to 66.3% at December 31, 2013.
At September 30, 2014, the Company’s unfunded loan commitments totaled $1.26 billion, including commitments of $479.2 million in commercial loans, $301.4 million in construction loans and $119.4 million in commercial mortgage loans. Unfunded loan commitments at December 31, 2013 were $910.1 million.
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Total investments increased $65.9 million, or 4.2%, to $1.64 billion at September 30, 2014, from $1.57 billion at December 31, 2013, largely due to investment securities acquired in the Team Capital transaction, along with purchases of mortgage-backed and municipal securities, partially offset by principal repayments on mortgage-backed securities, maturities of municipal and agency bonds and sales of certain mortgage-backed securities.
Banking premises and equipment increased $30.1 million for the nine months ended September 30, 2014, to $96.6 million, primarily due to assets acquired from Team Capital at a fair value of $24.8 million.
For the nine months ended September 30, 2014, Bank-owned life insurance ("BOLI") increased $25.8 million primarily due to BOLI acquired from Team Capital at a fair value of $22.3 million.
Total deposits increased $525.5 million during the nine months ended September 30, 2014 to $5.73 billion. The increase in total deposits was primarily due to $769.9 million acquired from Team Capital, partially offset by the cyclical outflow of municipal deposits and a decrease in time deposits. At September 30, 2014, core deposits, which consist of savings and demand deposit accounts, totaled $4.91 billion, compared to $4.40 billion at December 31, 2013. Within the core deposit category, non-interest bearing demand deposits increased $152.6 million to $1.02 billion at September 30, 2014. Core deposits represented 85.8% of total deposits at September 30, 2014, compared to 84.5% at December 31, 2013.
Borrowed funds increased $287.1 million, or 23.8% during the nine months ended September 30, 2014, to $1.49 billion, as longer-term wholesale funding was added to mitigate interest rate risk. Borrowed funds represented 17.7% of total assets at September 30, 2014, an increase from 16.1% at December 31, 2013.
Stockholders’ equity increased $118.3 million, or 11.7% for the nine months ended September 30, 2014, to $1.13 billion, due to common stock issued for the purchase of Team Capital, net income earned for the period and an increase in unrealized gains on securities available for sale, partially offset by dividends paid to stockholders. The Company issued 4,933,064 shares of common stock in the Team Capital acquisition. Common stock repurchases for the nine months ended September 30, 2014 totaled 263,075 shares at an average cost of $16.72 per share. At September 30, 2014, 3.5 million shares remained eligible for repurchase under the current authorization. Book value per share and tangible book value per share(1) at September 30, 2014 were $17.40 and $11.16, respectively, compared with $16.87 and $10.92, respectively, at December 31, 2013.
Results of Operations
Net Interest Income and Net Interest Margin
For the three months ended September 30, 2014, net interest income increased $9.0 million to $63.0 million, from $54.0 million for the same period in 2013. Net interest income for the nine months ended September 30, 2014, increased $14.3 million, to $175.6 million, from $161.3 million for the same period in 2013. Both comparative periods were favorably impacted by the net assets acquired from Team Capital.
The Company’s net interest margin increased 6 basis points to 3.30% for the quarter ended September 30, 2014, from 3.24% for the trailing quarter. The weighted average yield on interest-earning assets increased 5 basis points to 3.86% for the quarter ended September 30, 2014, compared with 3.81% for the quarter ended June 30, 2014. The weighted average cost of interest-bearing liabilities for the quarter ended September 30, 2014 decreased one basis point to 0.68%, versus the trailing quarter at 0.69%. The average cost of interest bearing deposits for the quarter ended September 30, 2014 was 0.34%, compared with 0.33% for the trailing quarter. Average non-interest bearing demand deposits totaled $1.03 billion for the quarter ended September 30, 2014, compared with $913.9 million for the quarter ended June 30, 2014. The average cost of borrowed funds for the quarter ended September 30, 2014 was 1.87%, compared with 1.97% for the trailing quarter.
The net interest margin increased 2 basis points to 3.30% for the quarter ended September 30, 2014, compared with 3.28% for the quarter ended September 30, 2013. The weighted average yield on interest-earning assets
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increased 3 basis points to 3.86% for the quarter ended September 30, 2014, compared with 3.83% for the quarter ended September 30, 2013, while the weighted average cost of interest bearing liabilities increased one basis point to 0.68% for the quarter ended September 30, 2014, compared with 0.67% for the third quarter of 2013. The average cost of interest bearing deposits for the quarter ended September 30, 2014 was 0.34%, compared with 0.39% for the same period last year. Average non-interest bearing demand deposits totaled $1.03 billion for the quarter ended September 30, 2014, compared with $844.2 million for the quarter ended September 30, 2013. The average cost of borrowed funds for the quarter ended September 30, 2014 was 1.87%, compared with 2.00% for the same period last year.
For the nine months ended September 30, 2014, the net interest margin decreased 3 basis points to 3.27%, compared with 3.30% for the nine months ended September 30, 2013. The weighted average yield on interest earning assets declined 2 basis points to 3.84% for the nine months ended September 30, 2014, compared with 3.86% for the nine months ended September 30, 2013, while the weighted average cost of interest bearing liabilities increased 1 basis point to 0.69% for the nine months ended September 30, 2014, compared with 0.68% for the nine months ended September 30, 2013. The average cost of interest bearing deposits for the nine months ended September 30, 2014 was 0.34%, compared with 0.41% for the same period last year. Average non-interest bearing demand deposits totaled $934.4 million for the nine months ended September 30, 2014, compared with $823.7 million for the nine months ended September 30, 2013. The average cost of borrowings for the nine months ended September 30, 2014 was 1.90%, compared with 2.08% for the same period last year.
Non-Interest Income
Non-interest income totaled $11.3 million for the quarter ended September 30, 2014, a decrease of $421,000, or 3.6%, compared to the same period in 2013. Fee income decreased $1.3 million, or 13.1%, to $8.5 million, from $9.8 million for the three months ended September 30, 2013, primarily due to a $1.6 million decrease in commercial loan prepayment fee income, partially offset by a $353,000 increase in wealth management fees. Net gains on securities transactions increased $447,000 for the three months ended September 30, 2014, compared to the same period in 2013. Other income increased $264,000 for the three months ended September 30, 2014, compared to the same period in 2013, primarily due to a $409,000 net fee recognized on a loan level interest rate swap transaction executed during the current quarter and an increase in net gains on loan sales, partially offset by a reduction in net gains on sales of foreclosed and other real estate. In addition, income related to BOLI increased $148,000 for the three months ended September 30, 2014, compared to the same period in 2013, principally due to income recognized on BOLI assets acquired from Team Capital.
For the nine months ended September 30, 2014, non-interest income totaled $29.8 million, a decrease of $4.6 million, or 13.3%, compared to the same period in 2013. Fee income decreased $3.1 million, to $23.0 million for the nine months ended September 30, 2014, compared with the same period in 2013, largely due to a $3.7 million decrease in prepayment fees on commercial loans, partially offset by a $1.1 million increase in wealth management fees. BOLI income decreased $1.1 million for the nine months ended September 30, 2014, principally due to lower death benefit claims recognized in the nine months ended September 30, 2014, compared to the same period in 2013. Also contributing to the decline in non-interest income, net gains on securities transactions for the nine months ended September 30, 2014 declined $727,000 compared to the same period in 2013. These decreases were partially offset by a $378,000 increase in other income for the nine months ended September 30, 2014, compared with the same period in 2013, primarily due to a $486,000 gain recognized on the prepayment of FHLB borrowings acquired from Team Capital and the fee recognized on a loan level interest rate swap, partially offset by a reduction in gains on loan sales.
Non-Interest Expense
For the three months ended September 30, 2014, non-interest expense increased $9.4 million to $45.8 million, compared to the three months ended September 30, 2013. Non-interest expense for the three months ended September 30, 2014 included $3.7 million of non-recurring costs related to the acquisition of Team Capital and the first full quarter of operating expenses associated with the operation of the former Team Capital franchise. Compensation and benefits expense increased $3.8 million to $24.9 million for the three months ended September
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30, 2014, compared to the three months ended September 30, 2013, largely due to a $2.2 million increase in salary expense associated with the addition of former Team Capital employees, $922,000 of severance and retention expense associated with the Team Capital acquisition and increased stock-based compensation. Data processing expense increased $2.4 million to $5.0 million for the three months ended September 30, 2014, compared to $2.6 million for the same period in 2013, principally due to $2.1 million of non-recurring core system contract termination costs related to the Team Capital acquisition and increased software maintenance costs. Other operating expenses increased $976,000 to $6.5 million for the three months ended September 30, 2014, compared to $5.5 million for the same period in 2013, largely due to $524,000 of non-recurring professional services and customer communication costs related to the Team Capital acquisition. In addition, net occupancy costs increased $878,000, to $6.0 million for the quarter ended September 30, 2014, compared to same quarter in 2013, due to additional facilities costs related to Team Capital and increased equipment maintenance costs.
The Company’s annualized core non-interest expense as a percentage of average assets(1) was 1.99% for the quarter ended September 30, 2014, compared with 2.00% for the same period in 2013. The efficiency ratio (core non-interest expense divided by the sum of net interest income and core non-interest income)(1) was 56.70% for the quarter ended September 30, 2014, compared with 55.48% for the same period in 2013.
Non-interest expense for the nine months ended September 30, 2014 was $127.7 million, an increase of $16.5 million from the nine months ended September 30, 2013. Non-interest expense for the nine months ended September 30, 2014 includes $6.0 million of non-recurring costs related to the acquisition of Team Capital. Compensation and benefits expense increased $7.8 million to $69.9 million for the nine months ended September 30, 2014, compared to the nine months ended September 30, 2013, due to increased salary, severance and retention expense associated with Team Capital, increased pension costs associated with lump-sum pension distributions made to vested terminated employees and increased stock-based compensation. Data processing expense increased $2.7 million to $10.6 million for the nine months ended September 30, 2014, compared to $7.9 million for the same period in 2013, principally due to $2.1 million of non-recurring core system contract termination costs related to the Team Capital acquisition and increased software maintenance. Other operating expenses increased $2.6 million to $20.9 million for the nine months ended September 30, 2014, compared to $18.3 million for the same period in 2013, primarily due to non-recurring professional services and customer communication costs related to the Team Capital acquisition. In addition, net occupancy costs increased $2.3 million, to $17.7 million for the nine months ended September 30, 2014, compared to same period in 2013, principally due to additional facilities costs related to Team Capital, increased seasonal expense in the first quarter of 2014 related to the harsh winter conditions and increased depreciation expense. The amortization of intangibles increased $433,000 for the nine months ended September 30, 2014, compared with the same period in 2013, primarily due to increases in the core deposit intangible amortization related to the Team Capital acquisition, while FDIC insurance costs declined $126,000 as a result of a lower assessment rate.
Asset Quality
The Company’s total non-performing loans at September 30, 2014 were $64.1 million, or 1.07% of total loans, compared with $65.4 million, or 1.11% of total loans at June 30, 2014, and $81.6 million, or 1.61% of total loans at September 30, 2013. The $1.3 million decrease in non-performing loans at September 30, 2014, compared with the trailing quarter, was due to a $1.3 million decrease in non-performing residential mortgages, a $747,000 decrease in non-performing commercial loans and a $68,000 decrease in non-performing commercial mortgage loans, partially offset by an $803,000 increase in non-performing consumer loans. At September 30, 2014, impaired loans totaled $93.5 million with related specific reserves of $8.3 million, compared with impaired loans totaling $93.8 million with related specific reserves of $8.5 million at June 30, 2014. At September 30, 2013, impaired loans totaled $113.0 million with related specific reserves of $10.7 million. Non-performing loans do not include purchased credit impaired ("PCI") loans acquired from Team Capital. At September 30, 2014, PCI loans totaled $4.5 million, compared to $5.2 million at June 30, 2014.
At September 30, 2014, the Company’s allowance for loan losses was 1.06% of total loans, a decrease from 1.08% at June 30, 2014, and a decrease from 1.30% of total loans at September 30, 2013. The decline in the loan coverage ratio from the quarter ended September 30, 2013, was largely the result of Team Capital loans recorded at fair
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value at the date of acquisition, with no corresponding allowance. The Company recorded provisions for loan losses of $1.5 million and $3.4 million for the three and nine months ended September 30, 2014, respectively, compared with provisions of $1.2 million and $3.7 million for the three and nine months ended September 30, 2013, respectively. For the three and nine months ended September 30, 2014, the Company had net charge-offs of $2.0 million and $4.7 million, respectively, compared with net charge-offs of $2.2 million and $8.0 million, respectively, for the same periods in 2013. The allowance for loan losses decreased $1.3 million to $63.3 million at September 30, 2014, from $64.7 million at December 31, 2013.
At September 30, 2014, the Company held $6.3 million of foreclosed assets, compared with $5.5 million at December 31, 2013. Foreclosed assets at September 30, 2014 consisted of $4.0 million of commercial real estate, $2.2 million of residential real estate and $129,000 of marine vessels. Total non-performing assets at September 30, 2014 declined $11.8 million, or 14.3%, to $70.4 million, or 0.84% of total assets, from $82.2 million, or 1.10% of total assets at December 31, 2013.
Income Tax Expense
For the three and nine months ended September 30, 2014, the Company’s income tax expense was $7.9 million and $21.8 million, respectively, compared with $12.0 million and $27.6 million, for the three and nine months ended September 30, 2013, respectively. The decrease in income tax expense was primarily attributable to a $3.2 million charge recognized in the three and nine months ended September 30, 2013 associated with the write-off of a deferred tax asset related to expired non-qualified stock options and lower proportional pre-tax income from taxable sources, as tax exempt municipal securities and BOLI were added through the Team Capital acquisition. The Company’s effective tax rate was 29.4% for both the three and nine months ended September 30, 2014, compared with 42.7% and 34.2% for the three and nine months ended September 30, 2013, respectively.
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About the Company
Provident Financial Services, Inc. is the holding company for The Provident Bank, a community-oriented bank offering "commitment you can count on" since 1839. The Provident Bank provides a comprehensive array of financial products and services through its network of branches throughout northern and central New Jersey, as well as Bucks, Lehigh and Northampton counties in Pennsylvania. The Bank also provides fiduciary and wealth management services through its wholly owned subsidiary, Beacon Trust Company.
Post Earnings Conference Call
Representatives of the Company will hold a conference call for investors at 10:00 a.m. Eastern Time on Wednesday, October 29, 2014 regarding highlights of the Company’s third quarter financial results. The call may be accessed by dialing 1-888-336-7149 (Domestic), 1-412-902-4175 (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 have any obligation to update any forward-looking statements to reflect events or circumstances after the date of this statement.
(1) Core earnings, tangible book value per share, return on average tangible equity, annualized core non-interest expense as a percentage of average assets and the efficiency ratio are non-GAAP financial measures. Please refer to the Notes on pages 10 and 11 which contain the reconciliation of GAAP to non-GAAP financial measures and the associated calculations.
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| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||
| Consolidated Statements of Financial Condition | |||||||
| September 30, 2014 (Unaudited) and December 31, 2013 | |||||||
| (Dollars in Thousands) | |||||||
| Assets | September 30, 2014 | December 31, 2013 | |||||
| Cash and due from banks | $ | 87,439 | $ | 100,053 | |||
| Short-term investments | 1,366 | 1,171 | |||||
| Total cash and cash equivalents | 88,805 | 101,224 | |||||
| Securities available for sale, at fair value | 1,110,323 | 1,157,594 | |||||
Investment securities held to maturity (fair value of $471,473 at September 30, 2014 (unaudited) and $355,913 at December 31, 2013) | 460,014 | 357,500 | |||||
| Federal Home Loan Bank Stock | 68,725 | 58,070 | |||||
| Loans | 5,966,198 | 5,194,813 | |||||
| Less allowance for loan losses | 63,330 | 64,664 | |||||
| Net loans | 5,902,868 | 5,130,149 | |||||
| Foreclosed assets, net | 6,334 | 5,486 | |||||
| Banking premises and equipment, net | 96,558 | 66,448 | |||||
| Accrued interest receivable | 24,189 | 22,956 | |||||
| Intangible assets | 404,948 | 356,432 | |||||
| Bank-owned life insurance | 176,307 | 150,511 | |||||
| Other assets | 79,487 | 80,958 | |||||
| Total assets | $ | 8,418,558 | $ | 7,487,328 | |||
| Liabilities and Stockholders' Equity | |||||||
| Deposits: | |||||||
| Demand deposits | $ | 3,928,254 | $ | 3,473,724 | |||
| Savings deposits | 983,831 | 921,993 | |||||
| Certificates of deposit of $100,000 or more | 314,027 | 270,631 | |||||
| Other time deposits | 501,841 | 536,123 | |||||
| Total deposits | 5,727,953 | 5,202,471 | |||||
| Mortgage escrow deposits | 21,544 | 20,376 | |||||
| Borrowed funds | 1,490,983 | 1,203,879 | |||||
| Other liabilities | 49,036 | 49,849 | |||||
| Total liabilities | 7,289,516 | 6,476,575 | |||||
| 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, 83,209,285 shares issued and 64,887,339 outstanding at September 30, 2014 and 59,917,649 outstanding at December 31, 2013 | 832 | 832 | |||||
| Additional paid-in capital | 1,026,479 | 1,026,144 | |||||
| Retained earnings | 452,152 | 427,763 | |||||
| Accumulated other comprehensive income (loss) | 1,054 | (4,851 | ) | ||||
| Treasury stock | (304,864 | ) | (390,380 | ) | |||
| Unallocated common stock held by the Employee Stock Ownership Plan | (46,611 | ) | (48,755 | ) | |||
| Common Stock acquired by the Directors' Deferred Fee Plan | (7,136 | ) | (7,205 | ) | |||
| Deferred Compensation - Directors' Deferred Fee Plan | 7,136 | 7,205 | |||||
| Total stockholders' equity | 1,129,042 | 1,010,753 | |||||
| Total liabilities and stockholders' equity | $ | 8,418,558 | $ | 7,487,328 | |||
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| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||||||||||
| Consolidated Statements of Income | |||||||||||||||
| Three and Nine Months Ended September 30, 2014 and 2013 (Unaudited) | |||||||||||||||
| (Dollars in Thousands, except per share data) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||
| Interest income: | |||||||||||||||
| Real estate secured loans | $ | 43,837 | $ | 38,238 | $ | 122,770 | $ | 114,158 | |||||||
| Commercial loans | 13,961 | 10,092 | 36,056 | 30,118 | |||||||||||
| Consumer loans | 6,106 | 5,918 | 17,637 | 17,750 | |||||||||||
| Securities available for sale and Federal Home Loan Bank stock | 6,410 | 6,033 | 20,155 | 18,345 | |||||||||||
| Investment securities held to maturity | 3,323 | 2,694 | 8,899 | 8,300 | |||||||||||
| Deposits, federal funds sold and other short-term investments | 15 | 9 | 44 | 30 | |||||||||||
| Total interest income | 73,652 | 62,984 | 205,561 | 188,701 | |||||||||||
| Interest expense: | |||||||||||||||
| Deposits | 4,054 | 4,354 | 11,479 | 13,917 | |||||||||||
| Borrowed funds | 6,629 | 4,633 | 18,511 | 13,481 | |||||||||||
| Total interest expense | 10,683 | 8,987 | 29,990 | 27,398 | |||||||||||
| Net interest income | 62,969 | 53,997 | 175,571 | 161,303 | |||||||||||
| Provision for loan losses | 1,500 | 1,200 | 3,400 | 3,700 | |||||||||||
| Net interest income after provision for loan losses | 61,469 | 52,797 | 172,171 | 157,603 | |||||||||||
| Non-interest income: | |||||||||||||||
| Fees | 8,512 | 9,792 | 22,986 | 26,070 | |||||||||||
| Bank-owned life insurance | 1,349 | 1,201 | 4,228 | 5,355 | |||||||||||
| Net gain on securities transactions | 487 | 40 | 247 | 974 | |||||||||||
| Other income | 961 | 697 | 2,291 | 1,913 | |||||||||||
| Total non-interest income | 11,309 | 11,730 | 29,752 | 34,312 | |||||||||||
| Non-interest expense: | |||||||||||||||
| Compensation and employee benefits | 24,947 | 21,106 | 69,921 | 62,103 | |||||||||||
| Net occupancy expense | 5,950 | 5,072 | 17,662 | 15,322 | |||||||||||
| Data processing expense | 5,029 | 2,644 | 10,587 | 7,913 | |||||||||||
| FDIC Insurance | 1,141 | 1,073 | 3,421 | 3,547 | |||||||||||
| Amortization of intangibles | 976 | 318 | 1,778 | 1,345 | |||||||||||
| Advertising and promotion expense | 1,281 | 718 | 3,427 | 2,741 | |||||||||||
| Other operating expenses | 6,509 | 5,533 | 20,898 | 18,252 | |||||||||||
| Total non-interest expense | 45,833 | 36,464 | 127,694 | 111,223 | |||||||||||
| Income before income tax expense | 26,945 | 28,063 | 74,229 | 80,692 | |||||||||||
| Income tax expense | 7,913 | 11,987 | 21,817 | 27,560 | |||||||||||
| Net income | $ | 19,032 | $ | 16,076 | $ | 52,412 | $ | 53,132 | |||||||
| Basic earnings per share | $ | 0.30 | $ | 0.28 | $ | 0.88 | $ | 0.93 | |||||||
| Average basic shares outstanding | 62,440,310 | 57,241,270 | 59,670,773 | 57,205,175 | |||||||||||
| Diluted earnings per share | $ | 0.30 | $ | 0.28 | $ | 0.88 | $ | 0.93 | |||||||
| Average diluted shares outstanding | 62,559,207 | 57,357,344 | 59,804,205 | 57,279,935 | |||||||||||
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| 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, | ||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||
| STATEMENTS OF INCOME: | |||||||||||||||
| Net interest income | $ | 62,969 | $ | 53,997 | $ | 175,571 | $ | 161,303 | |||||||
| Provision for loan losses | 1,500 | 1,200 | 3,400 | 3,700 | |||||||||||
| Non-interest income | 11,309 | 11,730 | 29,752 | 34,312 | |||||||||||
| Non-interest expense | 45,833 | 36,464 | 127,694 | 111,223 | |||||||||||
| Income before income tax expense | 26,945 | 28,063 | 74,228 | 80,692 | |||||||||||
| Net income | 19,032 | 16,076 | 52,412 | 53,132 | |||||||||||
| Diluted earnings per share | $0.30 | $0.28 | $0.88 | $0.93 | |||||||||||
| Interest rate spread | 3.18 | % | 3.16 | % | 3.15 | % | 3.18 | % | |||||||
| Net interest margin | 3.30 | % | 3.28 | % | 3.27 | % | 3.30 | % | |||||||
| PROFITABILITY: | |||||||||||||||
| Annualized return on average assets | 0.90 | % | 0.88 | % | 0.89 | % | 0.98 | % | |||||||
| Annualized return on average equity | 6.68 | % | 6.43 | % | 6.53 | % | 7.16 | % | |||||||
Annualized return on average tangible equity (3) | 10.42 | % | 10.04 | % | 10.08 | % | 11.19 | % | |||||||
Annualized core non-interest expense to average assets (4) | 1.99 | % | 2.00 | % | 2.03 | % | 2.06 | % | |||||||
Efficiency ratio (5) | 56.70 | % | 55.48 | % | 58.76 | % | 56.86 | % | |||||||
| ASSET QUALITY: | |||||||||||||||
| Non-accrual loans | $ | 64,072 | $ | 81,583 | |||||||||||
| 90+ and still accruing | — | — | |||||||||||||
| Non-performing loans | 64,072 | 81,583 | |||||||||||||
| Foreclosed assets | 6,334 | 7,282 | |||||||||||||
| Non-performing assets | 70,406 | 88,865 | |||||||||||||
| Non-performing loans to total loans | 1.07 | % | 1.60 | % | |||||||||||
| Non-performing assets to total assets | 0.84 | % | 1.21 | % | |||||||||||
| Allowance for loan losses | $ | 63,330 | $ | 66,008 | |||||||||||
| Allowance for loan losses to total non-performing loans | 98.84 | % | 80.91 | % | |||||||||||
| Allowance for loan losses to total loans | 1.06 | % | 1.30 | % | |||||||||||
| AVERAGE BALANCE SHEET DATA: | |||||||||||||||
| Assets | $ | 8,409,821 | $ | 7,249,273 | $ | 7,907,902 | $ | 7,228,735 | |||||||
| Loans, net | 5,872,538 | 4,954,204 | 5,483,627 | 4,881,172 | |||||||||||
| Earning assets | 7,555,954 | 6,507,968 | 7,117,805 | 6,487,678 | |||||||||||
| Core deposits | 4,960,764 | 4,410,427 | 4,658,496 | 4,413,095 | |||||||||||
| Borrowings | 1,402,791 | 918,840 | 1,300,310 | 865,144 | |||||||||||
| Interest-bearing liabilities | 6,191,876 | 5,349,098 | 5,840,237 | 5,351,551 | |||||||||||
| Stockholders' equity | 1,130,232 | 992,163 | 1,073,487 | 991,974 | |||||||||||
| Average yield on interest-earning assets | 3.86 | % | 3.83 | % | 3.84 | % | 3.86 | % | |||||||
| Average cost of interest-bearing liabilities | 0.68 | % | 0.67 | % | 0.69 | % | 0.68 | % | |||||||
| LOAN DATA: | |||||||||||||||
| Mortgage loans: | |||||||||||||||
| Residential | $ | 1,237,629 | $ | 1,192,762 | |||||||||||
| Commercial | 1,687,520 | 1,375,372 | |||||||||||||
| Multi-family | 942,666 | 859,908 | |||||||||||||
| Construction | 236,533 | 190,526 | |||||||||||||
| Total mortgage loans | 4,104,348 | 3,618,568 | |||||||||||||
| Commercial loans | 1,250,921 | 891,510 | |||||||||||||
| Consumer loans | 612,748 | 574,678 | |||||||||||||
| Total gross loans | 5,968,017 | 5,084,756 | |||||||||||||
| Premium on purchased loans | 4,895 | 4,220 | |||||||||||||
| Unearned discounts | (54 | ) | (63 | ) | |||||||||||
| Net deferred | (6,660 | ) | (5,813 | ) | |||||||||||
| Total loans | $ | 5,966,198 | $ | 5,083,100 | |||||||||||
9
Notes - Reconciliation of GAAP to Non-GAAP Financial Measures - (Dollars in Thousands, except share data) | ||||||||||||||||
| (1) Core Earnings | ||||||||||||||||
| Three Months Ended September 30, 2014 | Nine Months Ended September 30, 2014 | |||||||||||||||
| Net interest income | $ | 62,969 | $ | 175,571 | ||||||||||||
| Provision for loan losses | 1,500 | 3,400 | ||||||||||||||
| Net interest income after provision for loan losses | 61,469 | 172,171 | ||||||||||||||
| Non-interest income | 11,309 | 29,752 | ||||||||||||||
| Less: Gain on prepayment of borrowings acquired from Team Capital | — | 486 | ||||||||||||||
Core non-interest income (a) | 11,309 | 29,266 | ||||||||||||||
| Non-interest expense | 45,833 | 127,694 | ||||||||||||||
| Less: Team Capital acquisition expense | 3,714 | 5,996 | ||||||||||||||
| Less: Lump sum pension distribution costs | — | 1,336 | ||||||||||||||
Core non-interest expense (b) | 42,119 | 120,362 | ||||||||||||||
| Income taxes | 7,913 | 21,816 | ||||||||||||||
| Income tax effect of non core items | 1,517 | 2,553 | ||||||||||||||
| Core earnings | $ | 21,229 | $ | 56,706 | ||||||||||||
| Core diluted earnings per share | $ | 0.34 | $ | 0.95 | ||||||||||||
| (2) Book and Tangible Book Value per Share | ||||||||||||||||
| At September 30, | ||||||||||||||||
| 2014 | 2013 | |||||||||||||||
| Total stockholders' equity | $ | 1,129,042 | $ | 996,692 | ||||||||||||
| Less: total intangible assets | 404,948 | 356,708 | ||||||||||||||
| Total tangible stockholders' equity | $ | 724,094 | $ | 639,984 | ||||||||||||
| Shares outstanding | 64,887,339 | 59,887,025 | ||||||||||||||
| Book value per share (total stockholders' equity/shares outstanding) | $17.40 | $16.64 | ||||||||||||||
| Tangible book value per share (total tangible stockholders' equity/shares outstanding) | $11.16 | $10.69 | ||||||||||||||
| (3) Return on Average Tangible Equity | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Total average stockholders' equity | $ | 1,130,232 | $ | 992,163 | $ | 1,073,487 | $ | 991,974 | ||||||||
| Less: total average intangible assets | 405,345 | 356,894 | 378,621 | 357,318 | ||||||||||||
| Total average tangible stockholders' equity | $ | 724,887 | $ | 635,269 | $ | 694,866 | $ | 634,656 | ||||||||
| Net income | $ | 19,032 | $ | 16,076 | $ | 52,412 | $ | 53,132 | ||||||||
| Annualized return on average tangible equity (net income/total average stockholders' equity) | 10.42 | % | 10.04 | % | 10.08 | % | 11.19 | % | ||||||||
10
Notes - Reconciliation of GAAP to Non-GAAP Financial Measures - Continued (Dollars in Thousands, except share data) | ||||||||||||||||
| (4) Annualized Core Non-Interest Expense/Average Assets Calculation | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Annualized core non-interest expense | $ | 167,103 | $ | 144,667 | 150,757 | $ | 160,924 | $ | 148,705 | |||||||
| Average assets | 8,409,821 | 7,249,273 | 7,218,296 | 7,907,902 | 7,228,735 | |||||||||||
| Core non-interest expense/average assets | 1.99 | % | 2.00 | % | 2.03 | % | 2.06 | % | ||||||||
| (5) Efficiency Ratio Calculation | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net interest income | $ | 62,969 | $ | 53,997 | $ | 175,571 | $ | 161,303 | ||||||||
Core non-interest income (a) | 11,309 | 11,730 | 29,266 | 34,312 | ||||||||||||
| Total core income | 74,278 | 65,727 | 204,837 | 195,615 | ||||||||||||
Core non-interest expense (b) | 42,119 | 36,464 | 120,362 | 111,223 | ||||||||||||
| Core expense/core income | 56.70 | % | 55.48 | % | 58.76 | % | 56.86 | % | ||||||||
11
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||||||||||||||
| Net Interest Margin Analysis | |||||||||||||||||||
| Quarterly Average Balances | |||||||||||||||||||
| (Unaudited) (Dollars in Thousands) | |||||||||||||||||||
| September 30, 2014 | June 30, 2014 | ||||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||||
| Balance | Interest | Yield | Balance | Interest | Yield | ||||||||||||||
Interest-Earning Assets: | |||||||||||||||||||
| Deposits | $ | 22,236 | $ | 15 | 0.25% | $ | 31,044 | $ | 19 | 0.25% | |||||||||
| Federal funds sold and other short-term investments | 1,504 | — | 0.02% | 1,449 | — | 0.02% | |||||||||||||
| Investment securities (1) | 458,303 | 3,323 | 2.90% | 396,409 | 2,906 | 2.93% | |||||||||||||
| Securities available for sale | 1,135,121 | 5,779 | 2.04% | 1,139,994 | 6,097 | 2.14% | |||||||||||||
| Federal Home Loan Bank stock | 66,252 | 631 | 3.78% | 62,755 | 566 | 3.62% | |||||||||||||
| Net loans: (2) | |||||||||||||||||||
| Total mortgage loans | 4,068,283 | 43,837 | 4.26% | 3,814,789 | 40,381 | 4.21% | |||||||||||||
| Total commercial loans | 1,190,661 | 13,961 | 4.62% | 1,014,610 | 11,548 | 4.53% | |||||||||||||
| Total consumer loans | 613,594 | 6,106 | 3.95% | 587,361 | 5,869 | 4.01% | |||||||||||||
| Total net loans | 5,872,538 | 63,904 | 4.30% | 5,416,760 | 57,798 | 4.25% | |||||||||||||
| Total Interest-Earning Assets | $ | 7,555,954 | $ | 73,652 | 3.86% | $ | 7,048,411 | $ | 67,386 | 3.81% | |||||||||
| Non-Interest Earning Assets: | |||||||||||||||||||
| Cash and due from banks | 75,935 | 70,849 | |||||||||||||||||
| Other assets | 777,932 | 710,385 | |||||||||||||||||
| Total Assets | $ | 8,409,821 | $ | 7,829,645 | |||||||||||||||
| Interest-Bearing Liabilities: | |||||||||||||||||||
| Demand deposits | $ | 2,939,231 | $ | 2,137 | 0.29% | $ | 2,751,265 | $ | 1,866 | 0.27% | |||||||||
| Savings deposits | 995,891 | 238 | 0.09% | 953,132 | 228 | 0.10% | |||||||||||||
| Time deposits | 853,963 | 1,679 | 0.78% | 805,322 | 1,593 | 0.79% | |||||||||||||
| Total Deposits | 4,789,085 | 4,054 | 0.34% | 4,509,719 | 3,687 | 0.33% | |||||||||||||
| Borrowed funds | 1,402,791 | 6,629 | 1.87% | 1,283,433 | 6,298 | 1.97% | |||||||||||||
| Total Interest-Bearing Liabilities | 6,191,876 | 10,683 | 0.68% | 5,793,152 | 9,985 | 0.69% | |||||||||||||
| Non-Interest Bearing Liabilities | 1,087,713 | 971,527 | |||||||||||||||||
| Total Liabilities | 7,279,589 | 6,764,679 | |||||||||||||||||
| Stockholders' equity | 1,130,232 | 1,064,966 | |||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 8,409,821 | $ | 7,829,645 | |||||||||||||||
| Net interest income | $ | 62,969 | $ | 57,401 | |||||||||||||||
| Net interest rate spread | 3.18% | 3.12% | |||||||||||||||||
| Net interest-earning assets | $ | 1,364,078 | $ | 1,255,259 | |||||||||||||||
| Net interest margin (3) | 3.30% | 3.24% | |||||||||||||||||
| Ratio of interest-earning assets to | |||||||||||||||||||
| total interest-bearing liabilities | 1.22x | 1.22x | |||||||||||||||||
| (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. |
12
| The following table summarizes the quarterly net interest margin for the previous five quarters. | ||||||||||||||
| 9/30/14 | 6/30/14 | 3/31/14 | 12/31/13 | 9/30/13 | ||||||||||
| 3rd Qtr. | 2nd Qtr. | 1st Qtr. | 4th Qtr. | 3rd Qtr. | ||||||||||
| Interest-Earning Assets: | ||||||||||||||
| Securities | 2.32 | % | 2.35 | % | 2.46 | % | 2.41 | % | 2.25 | % | ||||
| Net loans | 4.30 | % | 4.25 | % | 4.26 | % | 4.27 | % | 4.33 | % | ||||
| Total interest-earning assets | 3.86 | % | 3.81 | % | 3.84 | % | 3.82 | % | 3.83 | % | ||||
| Interest-Bearing Liabilities: | ||||||||||||||
| Total deposits | 0.34 | % | 0.33 | % | 0.35 | % | 0.37 | % | 0.39 | % | ||||
| Total borrowings | 1.87 | % | 1.97 | % | 1.87 | % | 2.01 | % | 2.00 | % | ||||
| Total interest-bearing liabilities | 0.68 | % | 0.69 | % | 0.68 | % | 0.69 | % | 0.67 | % | ||||
| Interest rate spread | 3.18 | % | 3.12 | % | 3.16 | % | 3.13 | % | 3.16 | % | ||||
| Net interest margin | 3.30 | % | 3.24 | % | 3.28 | % | 3.26 | % | 3.28 | % | ||||
| Ratio of interest-earning assets to interest-bearing liabilities | 1.22x | 1.22x | 1.22x | 1.23x | 1.22x | |||||||||
13
| PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||||||||||||||
| Net Interest Margin Analysis | |||||||||||||||||||
| Average Year to Date Balances | |||||||||||||||||||
| (Unaudited) (Dollars in Thousands) | |||||||||||||||||||
| September 30, 2014 | September 30, 2013 | ||||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||||
| Balance | Interest | Yield | Balance | Interest | Yield | ||||||||||||||
| Interest-Earning Assets: | |||||||||||||||||||
| Deposits | $ | 23,310 | $ | 44 | 0.25% | $ | 14,256 | $ | 30 | 0.28% | |||||||||
| Federal funds sold and other short term investments | 1,382 | — | 0.02% | 1,561 | — | 0.04% | |||||||||||||
| Investment securities (1) | 404,556 | 8,899 | 2.93% | 351,561 | 8,300 | 3.15% | |||||||||||||
| Securities available for sale | 1,142,296 | 18,353 | 2.14% | 1,197,160 | 17,116 | 1.91% | |||||||||||||
| Federal Home Loan Bank stock | 62,634 | 1,802 | 3.85% | 41,968 | 1,229 | 3.91% | |||||||||||||
| Net loans: (2) | |||||||||||||||||||
| Total mortgage loans | 3,850,929 | 122,770 | 4.23% | 3,468,538 | 114,158 | 4.36% | |||||||||||||
| Total commercial loans | 1,041,135 | 36,056 | 4.60% | 842,045 | 30,118 | 4.75% | |||||||||||||
| Total consumer loans | 591,563 | 17,637 | 3.99% | 570,589 | 17,750 | 4.16% | |||||||||||||
| Total net loans | 5,483,627 | 176,463 | 4.27% | 4,881,172 | 162,026 | 4.41% | |||||||||||||
| Total Interest-Earning Assets | $ | 7,117,805 | $ | 205,561 | 3.84% | $ | 6,487,678 | $ | 188,701 | 3.86% | |||||||||
Non-Interest Earning Assets: | |||||||||||||||||||
| Cash and due from banks | 70,031 | 71,177 | |||||||||||||||||
| Other assets | 720,066 | 669,880 | |||||||||||||||||
| Total Assets | $ | 7,907,902 | $ | 7,228,735 | |||||||||||||||
Interest-Bearing Liabilities: | |||||||||||||||||||
| Demand deposits | $ | 2,767,987 | $ | 5,717 | 0.28% | $ | 2,660,025 | $ | 5,656 | 0.28% | |||||||||
| Savings deposits | 956,109 | 677 | 0.09% | 929,361 | 713 | 0.10% | |||||||||||||
| Time deposits | 815,831 | 5,085 | 0.83% | 897,021 | 7,548 | 1.13% | |||||||||||||
| Total Deposits | 4,539,927 | 11,479 | 0.34% | 4,486,407 | 13,917 | 0.41% | |||||||||||||
| Borrowed funds | 1,300,310 | 18,511 | 1.90% | 865,144 | 13,481 | 2.08% | |||||||||||||
| Total Interest-Bearing Liabilities | $ | 5,840,237 | $ | 29,990 | 0.69% | $ | 5,351,551 | $ | 27,398 | 0.68% | |||||||||
| Non-Interest Bearing Liabilities | 994,178 | 885,210 | |||||||||||||||||
| Total Liabilities | 6,834,415 | 6,236,761 | |||||||||||||||||
| Stockholders' equity | 1,073,487 | 991,974 | |||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 7,907,902 | $ | 7,228,735 | |||||||||||||||
| Net interest income | $ | 175,571 | $ | 161,303 | |||||||||||||||
| Net interest rate spread | 3.15% | 3.18% | |||||||||||||||||
| Net interest-earning assets | $ | 1,277,568 | $ | 1,136,127 | |||||||||||||||
| Net interest margin (3) | 3.27% | 3.30% | |||||||||||||||||
| Ratio of interest-earning assets to | |||||||||||||||||||
| total interest-bearing liabilities | 1.22x | 1.21x | |||||||||||||||||
| (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. | |||||||||||||||||||
14
| The following table summarizes the year-to-date net interest margin for the previous three years. | ||||||||
| Nine Months Ended | ||||||||
| 9/30/14 | 9/30/13 | 9/30/12 | ||||||
| Interest-Earning Assets: | ||||||||
| Securities | 2.37 | % | 2.22 | % | 2.37 | % | ||
| Net loans | 4.27 | % | 4.41 | % | 4.76 | % | ||
| Total interest-earning assets | 3.84 | % | 3.86 | % | 4.10 | % | ||
| Interest-Bearing Liabilities: | ||||||||
| Total deposits | 0.34 | % | 0.41 | % | 0.58 | % | ||
| Total borrowings | 1.90 | % | 2.08 | % | 2.26 | % | ||
| Total interest-bearing liabilities | 0.69 | % | 0.68 | % | 0.86 | % | ||
| Interest rate spread | 3.15 | % | 3.18 | % | 3.24 | % | ||
| Net interest margin | 3.27 | % | 3.30 | % | 3.38 | % | ||
| Ratio of interest-earning assets to interest-bearing liabilities | 1.21x | 1.21x | 1.19x | |||||
15