NEWS RELEASE
CONTACT: Kenneth J. Wagner, SVP Investor Relations
Provident Financial Services, Inc.
(201) 915-5344
FOR RELEASE: 7:43 A.M. Eastern Time: April 25, 2007
Provident Financial Services, Inc. Announces Quarterly Earnings
JERSEY CITY, NJ, April 25, 2007 -/ PRNewswire-First Call/ Provident Financial
Services, Inc. (NYSE:PFS) (the "Company") reported basic and diluted earnings
per share of $0.18, and net income of $10.8 million for the quarter ended March
31, 2007. This compares with basic and diluted earnings per share of $0.22 and
net income of $13.8 million for the same period in 2006. Net income and earnings
per share for the three months ended March 31, 2007 were favorably impacted by
the receipt of $531,000, net of tax, attributable to interest earned on Federal
income taxes refunded in connection with a previous acquisition.
Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "The
unfavorable interest rate environment that prevailed in 2006 continued in the
first quarter of 2007. In response to this challenge, we continued to reposition
our earning assets and minimize wholesale borrowings to control long-term
interest rate risk. We also continued to manage our overhead expenses to
preserve profitability, while remaining focused on asset quality." Pantozzi
added, "Our acquisition of First Morris Bank & Trust was completed April 1, and,
therefore, the impact of that transaction is not reflected in our first quarter
financials. As with our balance sheet, credit risk, expense and capital
management strategies, we believe the addition of the First Morris franchise
will assist in positioning us for delivery of long-term stockholder value."
Declaration of Quarterly Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.10 per
common share payable on May 31, 2007, to stockholders of record as of the close
of business on May 15, 2007.
Balance Sheet Summary
Total assets were $5.70 billion at March 31, 2007, compared to $5.74 billion at
December 31, 2006, as cash flows from reductions in securities balances and
repayments on loans were used to fund repayments of borrowings, deposit outflows
and common stock repurchases.
Total investments decreased $69.2 million, or 5.7%, during the three months
ended March 31, 2007. The decrease was primarily attributable to paydowns on
mortgage-backed securities and maturities of debt securities.
The Company's net loans decreased $18.7 million, or 0.5%, to $3.73 billion at
March 31, 2007, from $3.75 billion at December 31, 2006, as repayments outpaced
loan originations of $265.3 million and loan purchases of $6.7 million. Net
increases of $44.9 million in commercial and multi-family mortgage loans were
more than offset by decreases of $25.2 million in commercial loans, $18.7
million in construction loans, $12.4 million in residential mortgage loans and
$6.9 million in consumer loans. Commercial real estate, construction and
commercial loans represented 41.5% of the loan portfolio at March 31, 2007,
compared to 41.3% at December 31, 2006.
At March 31, 2007, the Company's unfunded loan pipeline totaled $705.5 million,
including $244.3 million in construction loan commitments, $181.6 million in
commercial loan commitments and $87.0 million in commercial mortgage
commitments. The unfunded loan pipeline at December 31, 2006 was $772.6 million.
Other assets increased $52.5 million, to $108.3 million at March 31, 2007, from
$55.8 million at December 31, 2006, due primarily to the pre-funding of the cash
consideration payable in connection with the Company's acquisition of First
Morris Bank & Trust that was consummated effective April 1, 2007.
Borrowed funds decreased $25.9 million, or 3.1%, during the three months ended
March 31, 2007, as a result of maturities, calls and paydowns on amortizing
advances.
Total deposits decreased $15.9 million, or 0.4%, during the three months ended
March 31, 2007. Total deposits were $3.81 billion at March 31, 2007, with core
deposits, consisting of savings and demand deposit accounts, representing 59.0%
of total deposits.
Common stock repurchases for the three months ended March 31, 2007, totaled
682,000 shares at an average cost of $18.34 per share. At March 31, 2007, 2.5
million shares remained eligible for repurchase under the current authorization.
At March 31, 2007, book value per share and tangible book value per share were
$16.22 and $9.37, respectively, compared with $16.12 and $9.32, respectively, at
December 31, 2006.
Results of Operations
Net Interest Margin
The net interest margin decreased 6 basis points to 3.02% for the quarter ended
March 31, 2007, from 3.08% for the quarter ended December 31, 2006. The net
interest margin for the quarter ended March 31, 2007 decreased 29 basis points
compared with the net interest margin of 3.31% for the quarter ended March 31,
2006. The weighted average rate for interest-earning assets was 5.72% for the
three months ended March 31, 2007, compared with 5.66% for the trailing quarter
and 5.35% for the three months ended March 31, 2006. The weighted average rate
for interest-bearing liabilities was 3.18% for the quarter ended March 31, 2007,
compared with 3.03% for the trailing quarter and 2.43% for the first quarter of
2006.
The increased rates on interest-earning assets and interest-bearing liabilities
reflect the repricing to higher market interest rates experienced throughout
2006. The compression in the net interest margin for the three months ended
March 31, 2007 is reflective of the prolonged flat or inverted yield curve.
Since the Board of Governors of the Federal Reserve began its interest rate
tightening campaign in June 2004, the Federal funds borrowing rate has been
increased 17 times, for a total of 425 basis points. This has had an unfavorable
impact on the repricing of deposits, which are priced off of the short end of
the yield curve. The Company has continued its near-term strategy of
de-leveraging the balance sheet in the current interest rate environment, but
has nevertheless experienced net interest margin compression as competitive
deposit pricing, while less costly than comparable wholesale borrowings, has
increased funding costs faster than earning asset yields have grown. Interest
expense on deposits increased $6.5 million for the three months ended March 31,
2007, compared with the same period last year, despite a $60.5 decrease in
average deposits for the three months ended March 31, 2007, compared with the
same period last year. The average cost of deposits for the three months ended
March 31, 2007 was 2.92%, compared with 2.81% for the trailing quarter and 2.10%
for the same period last year. Wholesale borrowing costs also increased $458,000
in the current quarter, compared with the same period last year, despite a
$137.9 million decrease in average borrowings for the three months ended March
31, 2007, compared with the same period last year. The average cost of
borrowings for the three months ended March 31, 2007 was 4.26%, compared with
3.95% for the trailing quarter and 3.61% for the same period last year.
Non-Interest Income
Non-interest income totaled $7.7 million for the quarter ended March 31, 2007,
an increase of $393,000, or 5.4%, compared to the same period in 2006. A
$381,000 decrease in fee income was more than offset by a $706,000 increase in
other income for the quarter ended March 31, 2007, compared with the same period
in 2006. The decrease in fee income was primarily attributable to a decrease in
income from equity fund holdings. The increase in other income was primarily
attributable to interest earned on Federal income taxes refunded in connection
with a previous acquisition.
Non-Interest Expense
For the three months ended March 31, 2007, non-interest expense decreased
$872,000, or 2.9%, to $29.3 million, compared to $30.2 million for the three
months ended March 31, 2006. Net occupancy expense decreased $272,000 for the
quarter ended March 31, 2007, compared with the same period in 2006, primarily
as a result of reductions in equipment maintenance costs and depreciation
expense. Advertising expense decreased $254,000 for the quarter ended March 31,
2007, compared with the same period in 2006. Amortization of intangibles
decreased $199,000 for the quarter ended March 31, 2007, compared with the same
period in 2006, as a result of scheduled reductions in core deposit intangible
amortization. Compensation and employee benefits expense decreased $187,000 for
the quarter ended March 31, 2007, compared with the same period in 2006,
primarily due to decreases in medical benefit costs as a result of changes in
plan design, benefits and participant contributions implemented in the second
half of 2006.
The Company's annualized non-interest expense as a percentage of average assets
was 2.09% for the quarter ended March 31, 2007, compared with 2.06% for the same
period in 2006. The efficiency ratio (non-interest expense divided by the sum of
net interest income and non-interest income) was 65.18% for the quarter ended
March 31, 2007, compared with 59.56% for the same period in 2006. The Company's
expense and efficiency ratios have been
adversely impacted by reductions in assets and revenue resulting from the
Company's de-leveraging of the balance sheet given the current unfavorable
interest rate environment.
Asset Quality
The Company continues to emphasize asset quality. Total non-performing loans at
March 31, 2007 were $7.6 million, or 0.20% of total loans, compared with $7.5
million, or 0.20% of total loans at December 31, 2006, and $5.8 million, or
0.16% of total loans at March 31, 2006. At March 31, 2007 the Company's
allowance for loan losses was 0.87% of total loans, compared with 0.86% of total
loans at December 31, 2006 and March 31, 2006. The Company recorded a provision
for loan losses of $300,000 for the quarter ended March 31, 2007, compared with
a provision of $555,000 for the quarter ended March 31, 2006. For the three
months ended March 31, 2007, the Company had net charge-offs of $56,000,
compared with net charge-offs of $631,000 for the same period in 2006. The
decrease in the loan loss provision for the three months ended March 31, 2007,
compared with the same period in 2006, was primarily attributable to a $33.9
million decrease in the loan portfolio balance at March 31, 2007, compared to
March 31, 2006.
Income Tax Expense
For the three months ended March 31, 2007, the Company's income tax expense was
$4.6 million. This compares with $6.2 million for the same period in 2006. The
decrease in income tax expense was primarily attributable to reduced income
before income taxes. For the three months ended March 31, 2007, the Company's
effective tax rate was 29.7%, compared with 30.8% for the three months ended
March 31, 2006. The reduction in the Company's effective tax rate was a result
of a larger proportion of the Company's income being derived from tax-exempt
interest and Bank-owned life insurance appreciation, as well as state tax
benefits recorded on subsidiary company net operating losses.
Acquisition of First Morris Bank & Trust
On April 1, 2007, First Morris Bank & Trust ("First Morris"), was merged with
and into the Company's subsidiary, The Provident Bank. Consideration was paid to
First Morris stockholders in a combination of stock and cash. The merger added
nine branches to The Provident Bank, with deposits of $508.6 million as of March
31, 2007 in Morris County, New Jersey. The Company's financial condition and
results of operations at and for the quarter ended March 31, 2007 do not include
First Morris.
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. At March 31, 2007, the Bank operated 75 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 April 26, 2007 regarding highlights of the Company's
first quarter 2007 financial results. The call may be accessed by dialing
1-877-407-8035 (Domestic) or 1-201-689-8035 (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, in particular risks and uncertainties associated with the successful
integration of the operations of First Morris Bank & Trust, credit risk
management, asset-liability management, the financial and securities markets and
the availability of and costs associated with sources of liquidity.
The Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company
wishes to advise 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 Condition
March 31, 2007 (Unaudited) and December 31, 2006
(Dollars in Thousands)
Assets March 31, 2007 December 31, 2006
-------------------- --------------------
Cash and due from banks $ 79,769 $ 89,390
Short-term investments 2,655 2,667
-------------------- --------------------
Total cash and cash equivalents 82,424 92,057
-------------------- --------------------
Investment securities (market value
of $377,755 at March 31, 2007
(unaudited) and $386,380 at
December 31, 2006) 380,084 389,656
Securities available for sale, at fair value 735,385 790,894
Federal Home Loan Bank stock 31,248 35,335
Loans 3,765,204 3,783,664
Less allowance for loan losses 32,678 32,434
-------------------- --------------------
Net loans 3,732,526 3,751,230
-------------------- --------------------
Foreclosed assets, net 757 528
Banking premises and equipment, net 59,126 59,811
Accrued interest receivable 20,241 21,705
Intangible assets 428,381 429,718
Bank-owned life insurance 117,603 116,271
Other assets 108,258 55,759
-------------------- --------------------
Total assets $ 5,696,033 $ 5,742,964
==================== ====================
Liabilities and Stockholders' Equity
Deposits:
Demand deposits $ 989,866 $ 1,005,679
Savings deposits 1,257,575 1,261,282
Certificates of deposit of
$100,000 or more 404,089 393,834
Other time deposits 1,159,035 1,165,668
-------------------- --------------------
Total deposits 3,810,565 3,826,463
Mortgage escrow deposits 18,898 17,616
Borrowed funds 815,083 840,990
Other liabilities 36,038 38,739
-------------------- --------------------
Total liabilities 4,680,584 4,723,808
-------------------- --------------------
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,
79,879,017 shares issued and
62,621,748 shares outstanding at
March 31, 2007, and 79,879,017
shares issued and 63,233,548
shares outstanding at
December 31, 2006 799 799
Additional paid-in capital 939,670 937,616
Retained earnings 429,429 424,958
Accumulated other comprehensive loss (5,557) (7,150)
Treasury stock at cost (279,094) (266,587)
Unallocated common stock held by
Employee Stock Ownership Plan (69,798) (70,480)
Common Stock acquired by the Directors'
Deferred Fee Plan (12,890) (13,010)
Deferred compensation - Directors'
Deferred Fee Plan 12,890 13,010
-------------------- --------------------
Total stockholders' equity 1,015,449 1,019,156
-------------------- --------------------
Total liabilities and
stockholders' equity $ 5,696,033 $ 5,742,964
==================== ====================
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three Months Ended March 31, 2007 and 2006
(Dollars in thousands, except per share data)
Three Months Ended
March 31
------------------------------
2007 2006
------------- ----------------
(Unaudited)
Interest income:
Real estate secured loans $ 40,202 39,293
Commercial loans 7,673 6,398
Consumer loans 8,912 8,166
Investment securities 3,985 4,298
Securities available for sale 9,208 11,329
Other short-term investments 43 69
Federal funds 4 41
------------- ----------------
Total interest income 70,027 69,594
------------- ----------------
Interest expense:
Deposits 24,127 17,661
Borrowed funds 8,626 8,143
Subordinated debentures -- 407
------------- ----------------
Total interest expense 32,753 26,211
------------- ----------------
Net interest income 37,274 43,383
Provision for loan losses 300 555
------------- ----------------
Net interest income after
provision for loan losses 36,974 42,828
------------- ----------------
Non-interest income:
Fees 5,426 5,807
Bank-owned life insurance 1,332 1,259
Net gain on securities transactions -- 5
Other income 968 262
------------- ----------------
Total non-interest income 7,726 7,333
------------- ----------------
Non-interest expense:
Compensation and employee benefits 16,170 16,357
Net occupancy expense 4,543 4,815
Data processing expense 2,054 1,884
Amortization of intangibles 1,369 1,568
Advertising and promotion expense 787 1,041
Other operating expenses 4,409 4,539
------------- ----------------
Total non-interest expense 29,332 30,204
------------- ----------------
Income before income tax
expense 15,368 19,957
Income tax expense 4,560 6,155
------------- ----------------
Net income $ 10,808 13,802
============= ================
Basic earnings per share $0.18 $0.22
Average basic shares outstanding 59,052,312 63,440,313
Diluted earnings per share $0.18 $0.22
Average diluted shares outstanding 59,052,312 64,180,995
PROVIDENT FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share data) (Unaudited)
At or for the Three
Months Ended
March 31,
------------------------------
2007 2006
---- ----
INCOME STATEMENT:
Net interest income $37,274 $43,383
Provision for loan losses 300 555
Non-interest income 7,726 7,333
Non-interest expense 29,332 30,204
Income before income tax expense 15,368 19,957
Net income 10,808 13,802
Basic earnings per share $0.18 $0.22
Diluted earnings per share $0.18 $0.22
Interest rate spread 2.54% 2.92%
Net interest margin 3.02% 3.31%
PROFITABILITY:
Annualized return on average assets 0.77% 0.94%
Annualized return on average equity 4.32% 5.22%
Annualized non-interest expense to average assets 2.09% 2.06%
Efficiency ratio (1) 65.18% 59.56%
ASSET QUALITY:
Non-accrual loans 7,321 5,790
90+ and still accruing loans 274 --
Non-performing loans 7,595 5,790
Foreclosed assets 757 305
Non-performing loans to
total loans 0.20% 0.16%
Non-performing assets to
total assets 0.15% 0.10%
Allowance for loan losses $32,678 $31,904
Allowance for loan losses to
non-performing loans 430.26% 551.02%
Allowance for loan losses to
total loans 0.87% 0.86%
AVERAGE BALANCE SHEET DATA:
Assets $5,678,517 $5,957,241
Loans, net 3,739,707 3,689,510
Earning assets 4,930,771 5,205,688
Core deposits 2,228,580 2,396,316
Borrowings 822,127 960,041
Interest-bearing liabilities 4,175,573 4,373,982
Stockholders' equity 1,015,177 1,072,176
Average yield on interest-
earning assets 5.72% 5.35%
Average cost of interest-
bearing liabilities 3.18% 2.43%
Notes
- -----
(1) Efficiency Ratio Calculation
Three Months Ended
March 31,
---------
2007 2006
---- ----
Net interest income $37,274 $43,383
Non-interest income 7,726 7,333
----- -----
Total income $45,000 $50,716
======= =======
Non-interest expense $29,332 $30,204
======= =======
Expense/Income: 65.18% 59.56%
====== ======
Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands)
March 31, 2007 December 31, 2006
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------------------------------------ ----------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term
Investments $ 3,290 $ 47 5.92 % $ 14,643 $ 225 6.10 %
Investment Securities (1) 386,209 3,985 4.13 396,110 4,115 4.16
Securities Available for Sale 767,911 8,616 4.49 819,641 9,135 4.46
Federal Home Loan Bank Stock 33,654 592 7.13 33,632 534 6.30
Net Loans (2)
Total Mortgage Loans 2,758,455 40,202 5.86 2,737,212 40,275 5.87
Total Commercial Loans 395,398 7,673 7.87 403,591 7,522 7.39
Total Consumer Loans 585,854 8,912 6.16 590,781 9,178 6.17
------------ -------- ----------- -------
Total Interest-Earning Assets 4,930,771 70,027 5.72 4,995,610 70,984 5.66
-------- ------- ------- ---------
Non-Interest Earning Assets:
Cash and Due from Banks 78,251 81,024
Other Assets 669,495 678,344
------------ -----------
Total Assets $ 5,678,517 $ 5,754,978
============ ===========
Interest-Bearing Liabilities:
Demand Deposits $ 549,547 2,353 1.74 % $ 568,906 2,448 1.71 %
Savings Deposits 1,244,044 4,975 1.62 1,292,394 5,182 1.59
Time Deposits 1,559,855 16,799 4.37 1,563,205 16,654 4.23
------------ -------- ----------- -------
Total Deposits 3,353,446 24,127 2.92 3,424,505 24,284 2.81
-------- -------
Borrowed Funds:
Total Borrowings 822,127 8,626 4.26 821,304 8,168 3.95
------------- -------- ----------- -------
Total Interest-Bearing Liabilities 4,175,573 32,753 3.18 4,245,809 32,452 3.03
-------- ------- ------- ---------
Non-Interest Bearing Liabilities 487,767 495,009
------------- -----------
Total Liabilities 4,663,340 4,740,818
Stockholders' Equity 1,015,177 1,014,160
------------- -----------
Total Liabilities & Stockholders'
Equity $ 5,678,517 $ 5,754,978
============= ===========
Net interest income $ 37,274 $ 38,532
======== =======
Net interest rate spread 2.54 % 2.63 %
==== ====
Net interest-earning assets $ 755,198 $ 749,801
============= ===========
Net interest margin (3) 3.02 % 3.08 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.18 x 1.18 x
- --------------------------------------------------------------------------------
(1) Average outstanding balance amounts shown are amortized cost.
(2) Average outstanding balances are net of the allowance for loan losses,
deferred loan fees and expenses, loan premiums and discounts and
include non-accrual loans.
(3) Annualized net interest income divided by average interest-earning assets.
The following table summarizes the net interest margin for the previous year,
inclusive.
3/31/07 12/31/06 9/30/06 6/30/06 3/31/06
1stQtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
------- --------- -------- -------- --------
Interest-Earning Assets:
Securities 4.45% 4.43% 4.34% 4.29% 4.15%
Net Loans 6.12% 6.08% 6.06% 5.99% 5.84%
Total Interest-Earning Assets 5.72% 5.66% 5.61% 5.52% 5.35%
Interest-Bearing Liabilities
Total Deposits 2.92% 2.81% 2.63% 2.29% 2.10%
Total Borrowings 4.26% 3.95% 3.92% 3.82% 3.61%
Total Interest-Bearing Liabilities 3.18% 3.03% 2.88% 2.61% 2.43%
Interest Rate Spread 2.54% 2.63% 2.73% 2.91% 2.92%
Net Interest Margin 3.02% 3.08% 3.17% 3.33% 3.31%
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities 1.18x 1.18x 1.18x 1.19x 1.19x