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 23, 2008
Provident Financial Services, Inc. Announces Quarterly Earnings and Declares
Quarterly Cash Dividend
JERSEY CITY, NJ, April 23, 2008 ---/ PRNewswire-First Call/- Provident Financial
Services, Inc. (NYSE:PFS) (the "Company") reported basic and diluted earnings
per share of $0.19 and net income of $10.7 million for the quarter ended March
31, 2008. This compares with basic and diluted earnings per share of $0.18 and
net income of $10.8 million for the same period in 2007. Compared with the first
quarter of 2007, results for the quarter ended March 31, 2008 benefited from the
April 1, 2007 acquisition of First Morris Bank & Trust ("First Morris"), which
added nine branch locations and assets with a fair value of $554.2 million as of
the acquisition date.
First quarter 2008 results were also favorably impacted by a $180,000 net
after-tax gain recorded in connection with the ownership and mandatory
redemption of a portion of the Company's Class B Visa, Inc. shares as part of
Visa's recent initial public offering, and a $175,000 net after-tax gain
resulting from the sale of a branch office. Results for the quarter ended March
31, 2007 were favorably impacted by interest of $531,000, net of tax, earned on
Federal income taxes refunded in connection with a previous acquisition.
Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "In the past
quarter our net interest margin expanded as reductions in short-term interest
rates began to favorably impact our funding costs. We also experienced deposit
growth, particularly in our core deposit categories, and we continued to manage
our balance sheet and cost structure in a tough economic environment. This
quarter's operating results reflect the positive contribution of the First
Morris acquisition and our on-going focus on achieving operating efficiencies."
Pantozzi added, "An integral part of our response to an unsettled economy has
been to maintain a solid capital position, and our stock repurchase activity for
the quarter was curtailed accordingly. We will continue to monitor and manage
our capital in order to preserve and enhance long-term stockholder value."
Declaration of Quarterly Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.11 per
common share payable on May 30, 2008, to stockholders of record as of the close
of business on May 15, 2008.
Balance Sheet Summary
Total assets were $6.40 billion at March 31, 2008, compared to $6.36 billion at
December 31, 2007, primarily as a result of increases in securities available
for sale and securities purchases pending settlement that were included in other
assets at March 31, 2008, partially offset by a decrease in loans.
Total investments increased $91.0 million, or 7.8%, during the three months
ended March 31, 2008. The increase included $55.2 million of residential
mortgage loan pools that were securitized by the Company and are now held as
securities available for sale.
The Company's net loans decreased $40.7 million, or 1.0%, to $4.21 billion at
March 31, 2008, from $4.26 billion at December 31, 2007, largely as a result of
the securitization of $55.2 million of conforming one- to four-family 30-year
fixed-rate residential mortgage loans. Loan originations totaled $335.5 million
and loan purchases totaled $23.2 million for the three months ended March 31,
2008. Net increases of $53.9 million in commercial and multi-family mortgage
loans and $2.3 million in commercial loans were more than offset by decreases of
$64.1 million in residential mortgage loans, $22.4 million in construction loans
and $9.6 million in consumer loans. Commercial real estate, construction and
commercial loans represented 46.4% of the loan portfolio at March 31, 2008,
compared to 45.2% at December 31, 2007.
At March 31, 2008, the Company's unfunded loan pipeline totaled $671.9 million,
including $173.3 million in construction loan commitments, $154.5 million in
commercial loan commitments and $68.2 million in commercial mortgage
commitments. The unfunded loan pipeline at December 31, 2007 was $767.5 million.
1
Other assets increased $25.1 million and other liabilities increased $24.8
million during the three months ended March 31, 2008, primarily as a result of
securities trades which were pending settlement at March 31, 2008.
Total deposits increased $10.1 million, or 0.2%, during the three months ended
March 31, 2008. Total deposits were $4.23 billion at March 31, 2008, with core
deposits, consisting of savings and demand deposit accounts, representing 62.2%
of total deposits.
Common stock repurchases for the three months ended March 31, 2008, totaled
35,000 shares at an average cost of $13.81 per share. At March 31, 2008, 2.2
million shares remained eligible for repurchase under the current authorization.
At March 31, 2008, book value per share and tangible book value per share were
$16.94 and $8.25, respectively, compared with $16.78 and $8.05, respectively, at
December 31, 2007.
Results of Operations
Net Interest Margin
The net interest margin increased 3 basis points to 2.87% for the quarter ended
March 31, 2008, from 2.84% for the quarter ended December 31, 2007. The net
interest margin for the quarter ended March 31, 2008 decreased 15 basis points
compared with the net interest margin of 3.02% for the quarter ended March 31,
2007. The weighted average rate for interest-earning assets was 5.63% for the
three months ended March 31, 2008, compared with 5.76% for the trailing quarter
and 5.72% for the three months ended March 31, 2007. The weighted average rate
for interest-bearing liabilities was 3.14% for the quarter ended March 31, 2008,
compared with 3.33% for the trailing quarter and 3.18% for the first quarter of
2007.
The average cost of deposits for the three months ended March 31, 2008 was
2.87%, compared with 3.11% for the trailing quarter and 2.92% for the same
period last year. The average cost of borrowed funds for the three months ended
March 31, 2008 was 4.06%, compared with 4.19% for the trailing quarter and 4.26%
for the same period last year.
Non-Interest Income
Non-interest income totaled $8.8 million for the quarter ended March 31, 2008,
an increase of $1.1 million, or 13.7%, compared to the same period in 2007. The
increase was primarily attributable to a $688,000 increase in fee income and a
$299,000 increase in other income for the quarter ended March 31, 2008, compared
with the same period in 2007. The increase in fee income was primarily
attributable to increases in deposit fees and trust income, largely due to the
First Morris acquisition. Significant components of other income for the first
quarter of 2008 included $660,000 in pre-tax gains associated with the ownership
and mandatory redemption of a portion of the Company's Class B Visa, Inc. shares
as part of Visa's recent initial public offering and $400,000 in pre-tax gains
on the sale of deposits associated with the sale of an under-performing branch.
In the first quarter of 2007, other income included $897,000 of pre-tax interest
earned on Federal income taxes refunded in connection with a previous
acquisition.
Non-Interest Expense
For the three months ended March 31, 2008, non-interest expense increased $2.6
million, or 8.9%, to $32.0 million, compared to $29.3 million for the three
months ended March 31, 2007. Increases of $714,000 in net occupancy expense,
$407,000 in the amortization of intangibles, and $309,000 in data processing
expense for the quarter ended March 31, 2008, compared with the same period in
2007, were all primarily attributable to the April 1, 2007 acquisition of First
Morris. The increase in the amortization of intangibles for the quarter ended
March 31, 2008, compared with the same period in 2007, was also partially
attributable to the $104,000 pre-tax accelerated amortization of a core deposit
intangible recognized upon the sale of an under-performing branch. A $543,000
increase in compensation and benefits expense for the quarter ended March 31,
2008, compared with the same period last year, reflected normal annual merit
increases, the addition of branch and lending staff from First Morris and the
addition of small business and middle market relationship managers to support
the Company's business lending and deposit gathering initiatives. A $917,000
increase in other operating expenses for the quarter ended March 31, 2008,
compared with the same period last year, included $356,000 in expense associated
with Company's proportionate share of a litigation reserve established by Visa.
The Company's annualized non-interest expense as a percentage of average assets
was 2.03% for the quarter ended March 31, 2008, compared with 2.09% for the same
period in 2007. The efficiency ratio (non-interest expense divided by the sum of
net interest income and non-interest income) was 66.60% for the quarter ended
March 31, 2008, compared with 65.18% for the same period in 2007.
2
Asset Quality
Total non-performing loans at March 31, 2008 were $27.4 million, or 0.64% of
total loans, compared with $34.6 million, or 0.81% of total loans at December
31, 2007, and $7.6 million, or 0.20% of total loans at March 31, 2007. At March
31, 2008, the Company's allowance for loan losses was 0.96% of total loans,
compared with 0.95% of total loans at December 31, 2007, and 0.87% of total
loans at March 31, 2007. The Company recorded a provision for loan losses of
$1.3 million for the quarter ended March 31, 2008, compared with a provision of
$300,000 for the quarter ended March 31, 2007. For the three months ended March
31, 2008, the Company had net charge-offs of $1.2 million, compared with net
charge-offs of $56,000 for the same period in 2007. The increase in the loan
loss provision for the three months ended March 31, 2008, compared with the same
period in 2007, was attributable to an increase in non-performing loans,
downgrades in risk ratings, growth in the loan portfolio and an increase in
commercial loans as a percentage of the loan portfolio to 46.4% at March 31,
2008, from 41.5% at March 31, 2007. At March 31, 2008, the Company held $3.2
million of foreclosed assets, compared with $1.0 million at December 31, 2007.
Income Tax Expense
For the three months ended March 31, 2008, the Company's income tax expense was
$4.0 million. This compares with $4.6 million for the same period in 2007. For
the three months ended March 31, 2008, the Company's effective tax rate was
27.4%, compared with 29.7% for the three months ended March 31, 2007. 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 sources.
About the Company
Provident Financial Services, Inc. is the holding company for The Provident
Bank, a community-oriented bank offering a full range of retail and commercial
loan and deposit products. At March 31, 2008, the Bank operated 84 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 24, 2008 regarding highlights of the Company's
first quarter 2008 financial results. The call may be accessed by dialing
1-800-860-2442 (Domestic) or 1-412-858-4600 (International). Internet access to
the call is also available (listen only) at www.providentnj.com by going to
Investor Relations and clicking on Webcast.
Forward Looking Statements
Certain statements contained herein are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements may be
identified by reference to a future period or periods, or by the use of
forward-looking terminology, such as "may," "will," "believe," "expect,"
"estimate," "anticipate," "continue," or similar terms or variations on those
terms, or the negative of those terms. Forward-looking statements are subject to
numerous risks and uncertainties, including, but not limited to, those related
to the economic environment, particularly in the market areas in which the
Company operates, competitive products and pricing, fiscal and monetary policies
of the U.S. Government, changes in government regulations affecting financial
institutions, including regulatory fees and capital requirements, changes in
prevailing interest rates, acquisitions and the integration of acquired
businesses, credit risk management, asset-liability management, the financial
and securities markets and the availability of and costs associated with sources
of liquidity.
The Company 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.
3
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Condition
March 31, 2008 (Unaudited) and December 31, 2007
(Dollars in Thousands)
Assets March 31, 2008 December 31, 2007
--------------------------------- ----------------------------
Cash and due from banks $ 93,323 $ 83,737
Federal funds sold -- 18,000
Short-term investments 10,334 38,892
--------------------------------- ----------------------------
Total cash and cash equivalents 103,657 140,629
--------------------------------- ----------------------------
Investment securities held to maturity (market value of $359,508 at March 31,
2008 (unaudited) and $359,699
at December 31, 2007) 353,941 358,491
Securities available for sale, at fair value 867,592 769,615
Federal Home Loan Bank stock 37,359 39,764
Loans 4,255,667 4,296,291
Less allowance for loan losses 40,857 40,782
--------------------------------- ----------------------------
Net loans 4,214,810 4,255,509
--------------------------------- ----------------------------
Foreclosed assets, net 3,160 1,041
Banking premises and equipment, net 78,082 79,138
Accrued interest receivable 23,188 24,665
Intangible assets 518,865 520,722
Bank-owned life insurance 122,981 121,674
Other assets 73,209 48,143
--------------------------------- ----------------------------
Total assets $ 6,396,844 $ 6,359,391
================================= ============================
Liabilities and Stockholders' Equity
Deposits:
Demand deposits $ 1,642,005 $ 1,553,625
Savings deposits 991,472 1,031,725
Certificates of deposit of $100,000 or more 471,418 480,362
Other time deposits 1,130,033 1,159,108
--------------------------------- ----------------------------
Total deposits 4,234,928 4,224,820
Mortgage escrow deposits 18,896 18,075
Borrowed funds 1,066,707 1,075,104
Other
liabilities 65,433 40,598
--------------------------------- ----------------------------
Total liabilities 5,385,964 5,358,597
--------------------------------- ----------------------------
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 59,673,683 shares outstanding at
March 31, 2008, and 59,646,936 shares outstanding at
December 31, 2007 832 832
Additional paid-in capital 1,010,653 1,009,120
Retained earnings 441,583 437,503
Accumulated other comprehensive income 8,586 4,335
Treasury stock at cost (383,870) (383,407)
Unallocated common stock held by Employee Stock
Ownership Plan (66,904) (67,589)
Common Stock acquired by the Directors' Deferred Fee Plan (7,736) (7,759)
Deferred compensation - Directors' Deferred Fee Plan 7,736 7,759
-------------------------------- ----------------------------
4
Total stockholders' equity 1,010,880 1,000,794
-------------------------------- ----------------------------
Total liabilities and stockholders'
equity $ 6,396,844 $ 6,359,391
================================ ============================
5
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three Months Ended March 31, 2008 and 2007
(Dollars in thousands, except per share data)
Three Months Ended
March 31
------------------------------
2008 2007
------------- ----------------
(Unaudited)
Interest income:
Real estate secured loans $ 41,387 40,202
Commercial loans 11,282 7,673
Consumer loans 9,679 8,912
Investment securities 3,653 3,985
Securities available for sale 10,287 9,208
Other short-term investments 226 43
Federal funds 148 4
------------- ----------------
Total interest income 76,662 70,027
------------- ----------------
Interest expense:
Deposits 26,590 24,127
Borrowed funds 10,883 8,626
------------- ----------------
Total interest expense 37,473 32,753
------------- ----------------
Net interest income 39,189 37,274
Provision for loan losses 1,300 300
------------- ----------------
Net interest income after
provision for loan losses 37,889 36,974
------------- ----------------
Non-interest income:
Fees 6,114 5,426
Bank-owned life insurance 1,308 1,332
Net gain on securities transactions 96 --
Other income 1,267 968
------------- ----------------
Total non-interest income 8,785 7,726
------------- ----------------
Non-interest expense:
Compensation and employee benefits 16,713 16,170
Net occupancy expense 5,257 4,543
Data processing expense 2,363 2,054
Amortization of intangibles 1,776 1,369
Advertising and promotion expense 517 787
Other operating expenses 5,326 4,409
------------- ----------------
Total non-interest expense 31,952 29,332
------------- ----------------
Income before income tax 14,722 15,368
expense
Income tax expense 4,029 4,560
------------- ----------------
Net income $ 10,693 10,808
============= ================
Basic earnings per share $0.19 $0.18
Average basic shares outstanding 55,924,581 59,052,312
Diluted earnings per share $0.19 $0.18
Average diluted shares outstanding 55,924,581 59,052,312
6
PROVIDENT FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share data) (Unaudited)
At or for the Three
Months Ended
March 31,
--------------------------------
2008 2007
---- ----
INCOME STATEMENT:
Net interest income $39,189 $37,274
Provision for loan losses 1,300 300
Non-interest income 8,785 7,726
Non-interest expense 31,952 29,332
Income before income tax expense 14,722 15,368
Net income 10,693 10,808
Basic earnings per share $0.19 $0.18
Diluted earnings per share $0.19 $0.18
Interest rate spread 2.49% 2.54%
Net interest margin 2.87% 3.02%
PROFITABILITY:
Annualized return on average assets 0.68% 0.77%
Annualized return on average equity 4.28% 4.32%
Annualized non-interest expense to average assets 2.03% 2.09%
Efficiency ratio (1) 66.60% 65.18%
ASSET QUALITY:
Non-accrual loans 27,401 7,321
90+ and still accruing loans -- 274
Non-performing loans 27,401 7,595
Foreclosed assets 3,160 757
Non-performing loans to
total loans 0.64% 0.20%
Non-performing assets to
total assets 0.48% 0.15%
Allowance for loan losses $40,857 $32,678
Allowance for loan losses to
non-performing loans 149.11% 430.26%
Allowance for loan losses to
total loans 0.96% 0.87%
AVERAGE BALANCE SHEET DATA:
Assets $6,324,774 $5,678,517
Loans, net 4,237,200 3,739,707
Interest-Earning assets 5,463,739 4,930,771
Core deposits 2,578,987 2,228,580
Borrowed funds 1,078,838 822,127
Interest-bearing liabilities 4,805,002 4,175,573
Stockholders' equity 1,005,833 1,015,177
Average yield on interest-
earning assets 5.63% 5.72%
Average cost of interest-
bearing liabilities 3.14% 3.18%
7
Notes
(1) Efficiency Ratio Calculation
Three Months Ended
March 31,
---------
2008 2007
---- ----
Net interest income $39,189 $37,274
Non-interest income 8,785 7,726
----- -----
Total income $47,974 $45,000
======= =======
Non-interest expense $31,952 $29,332
======= =======
Expense/Income: 66.60% 65.18%
====== ======
8
Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands) March 31, 2008 December 31, 2007
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------------------------------------------ ---------------------------------------
Interest-Earning Assets:
Federal Funds Sold and
Other Short-Term
Investments $ 43,839 $ 374 3.44 % $ 4,129 $ 50 4.80 %
Investment Securities (1) 355,354 3,653 4.11 362,549 3,742 4.13
Securities Available for Sale 788,221 9,531 4.84 765,551 8,918 4.66
Federal Home Loan Bank Stock 39,125 756 7.78 35,746 575 6.38
Net Loans (2)
Total Mortgage Loans 2,897,029 41,387 5.73 2,894,182 42,191 5.81
Total Commercial Loans 701,802 11,282 6.47 677,108 12,271 7.19
Total Consumer Loans 638,369 9,679 6.08 645,045 10,071 6.20
------------- ----------- ----------- ---------
Total Interest-Earning Assets 5,463,739 76,662 5.63 5,384,310 77,818 5.76
----------- -------------- ---------- -------------
Non-Interest Earning Assets:
Cash and Due from Banks 81,323 85,076
Other Assets 779,712 786,302
------------- --------------
Total Assets $ 6,324,774 $ 6,255,688
============= ==============
Interest-Bearing Liabilities:
Demand Deposits $ 1,115,920 6,480 2.34 % $ 1,032,160 7,117 2.74 %
Savings Deposits 997,689 3,111 1.25 1,054,116 3,918 1.47
Time Deposits 1,612,555 16,999 4.24 1,645,956 18,225 4.39
------------- ----------- -------------- ----------
Total Deposits 3,726,164 26,590 2.87 3,732,232 29,260 3.11
----------- ----------
Borrowed Funds 1,078,838 10,883 4.06 973,393 10,275 4.19
------------- ----------- -------------- ----------
Total Interest-Bearing Liabilities 4,805,002 37,473 3.14 4,705,625 39,535 3.33
----------- -------------- ---------- -------------
Non-Interest Bearing Liabilities 513,939 543,273
------------- --------------
Total Liabilities 5,318,941 5,248,898
Stockholders' Equity 1,005,833 1,006,790
------------- --------------
Total Liabilities & Stockholders'
Equity $ 6,324,774 $ 6,255,688
============= ==============
Net interest income $ 39,189 $ 38,283
=========== ==========
Net interest rate spread 2.49 % 2.43 %
==== ====
Net interest-earning assets $ 658,737 $ 678,685
============= ==============
Net interest margin (3) 2.87 % 2.84 %
==== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.14 x 1.14 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.
9
The following table summarizes the net interest margin for the previous year,
inclusive.
3/31/08 12/31/07 9/30/07 6/30/07 3/31/07
1stQtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
------- -------- ------- -------- -------
Interest-Earning Assets:
Securities 4.67% 4.55% 4.55% 4.52% 4.45%
Net Loans 5.90% 6.09% 6.24% 6.20% 6.12%
Total Interest-Earning Assets 5.63% 5.76% 5.87% 5.81% 5.72%
Interest-Bearing Liabilities
Total Deposits 2.87% 3.11% 3.17% 3.07% 2.92%
Borrowed Funds 4.06% 4.19% 4.16% 4.09% 4.26%
Total Interest-Bearing Liabilities 3.14% 3.33% 3.34% 3.23% 3.18%
Interest Rate Spread 2.49% 2.43% 2.53% 2.58% 2.54%
Net Interest Margin 2.87% 2.84% 2.97% 3.02% 3.02%
Ratio of Interest-Earning Assets to
Interest-Bearing Liabilities 1.14x 1.14x 1.15x 1.16x 1.18x
10