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8-K - FORM 8-K (EARNINGS RELEASE) - PROVIDENT FINANCIAL SERVICES INCform8k_020113.htm

 


Provident Financial Services, Inc. Announces Increased Fourth Quarter and Full Year Earnings for 2012 and Declares Quarterly Cash Dividend


JERSEY CITY, NJ, February 1, 2013 - Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $16.7 million, or $0.29 per basic and diluted share for the quarter ended December 31, 2012, compared to net income of $14.9 million, or $0.26 per basic and diluted share for the quarter ended December 31, 2011.

For the year ended December 31, 2012, the Company reported net income of $67.3 million, or $1.18 per basic and diluted share, compared to net income of $57.3 million, or $1.01 per basic and diluted share for the same period last year.

The increase in earnings for the fourth quarter and year ended December 31, 2012, was largely attributable to continued improvements in asset quality and related reductions in the provision for loan losses, inclusive of consideration for possible loan losses related to Superstorm Sandy, while growth in both average loans outstanding and average lower-costing core deposits more than offset the impact of compression in asset yields.

Christopher Martin, Chairman, President and Chief Executive Officer, commented, “Our quarterly results were strong as loan growth eclipsed 7% annualized, while earnings per share of 29 cents continued our consistent trend of producing solid results.  We achieved record earnings in 2012, despite the challenging rate environment and a struggling, but improving regional economy.  The growth in our commercial lending and wealth management divisions produced excellent results, augmented by quality client relationships.”  Martin continued:   “We conservatively provided for the potential financial impact of Superstorm Sandy on customers with businesses and residences in parts of our market.  To help those communities that were the hardest hit, The Provident Bank Foundation has earmarked $250,000 to assist in their rebuilding efforts.”

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.13 per common share payable on February 28, 2013, to stockholders of record as of the close of business on February 15, 2013.

Balance Sheet Summary

Total assets increased $186.3 million to $7.28 billion at December 31, 2012, from $7.10 billion at December 31, 2011.  The increase was primarily due to increases in net loans and cash and cash equivalents, partially offset by a decline in total securities.

Cash and cash equivalents increased $34.2 million to $103.8 million at December 31, 2012, from $69.6 million at December 31, 2011.  These cash balances are expected to be deployed to fund loan originations, the repayment of borrowings and investment purchases.

The Company’s loans increased $251.2 million, or 5.4%, at December 31, 2012 to $4.90 billion from $4.65 billion at December 31, 2011.  Loan originations totaled $1.7 billion and loan purchases totaled $73.7 million for the year ended December 31, 2012.  The loan portfolio had net increases of $256.2 million in commercial and multi-family mortgage loans, $18.2 million in consumer loans, $17.4 million in commercial loans and $5.3 million in construction loans, which were partially offset by a decrease in residential mortgage loans of $43.6 million.  Commercial real estate, commercial and construction loans represented 62.4% of the loan portfolio at December 31, 2012, compared to 59.8% at December 31, 2011.


 
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At December 31, 2012, the Company’s unfunded loan commitments totaled $869.0 million, including $334.9 million in commercial loan commitments, $149.8 million in construction loan commitments and $97.2 million in commercial mortgage commitments.  Unfunded loan commitments at December 31, 2011 were $770.4 million.

Total investments decreased $102.4 million, or 5.8%, to $1.66 billion at December 31, 2012, from $1.76 billion at December 31, 2011.  The decrease was primarily due to principal repayments on mortgage-backed securities, maturities of municipal and agency bonds, and the sale of certain mortgage-backed securities which had a high risk of prepayment, partially offset by purchases of mortgage-backed and municipal securities.

Total deposits increased $271.7 million, or 5.3%, during the year ended December 31, 2012 to $5.43 billion from $5.16 billion at December 31, 2011.  Core deposits, consisting of savings and demand deposit accounts, increased $442.9 million, or 11.0%, to $4.47 billion at December 31, 2012.  Partially offsetting this increase, time deposits decreased $171.3 million, or 15.2%, to $957.5 million at December 31, 2012, with the majority of the decrease occurring in the 24-month and shorter maturity categories.  The Company continued to develop core deposit relationships, while strategically permitting the run-off of higher-costing time deposits.  Core deposits represented 82.4% of total deposits at December 31, 2012, compared to 78.1% at December 31, 2011.

Borrowed funds were reduced $116.9 million, or 12.7% during the year ended December 31, 2012, to $803.3 million, as core deposit growth continued to replace wholesale funding.  Borrowed funds represented 11.0% of total assets at December 31, 2012, a reduction from 13.0% at December 31, 2011.

Stockholders’ equity increased $28.8 million, or 3.0% during the year ended December 31, 2012, to $981.2 million, primarily due to net income earned for the period, partially offset by dividends paid to stockholders and common stock repurchases.  Common stock repurchases for the three months and year ended December 31, 2012, totaled 271,045 shares at an average cost of $14.00 per share and 678,750 shares at an average cost of $13.89 per share, respectively.  As of December 31, 2012, 4.1 million shares remained eligible for repurchase.  At December 31, 2012, book value per share and tangible book value per share were $16.37 and $10.40, respectively, compared with $15.88 and $9.87, respectively, at December 31, 2011.

Results of Operations

Net Interest Income and Net Interest Margin

For the three months ended December 31, 2012, net interest income increased $296,000 from the same period in 2011, to $54.2 million.  Net interest income for the year ended December 31, 2012, increased $1.3 million compared to 2011, to $217.3 million.  The improvements in net interest income for the three months and year ended December 31, 2012, resulted from an increase in average interest-earning assets, primarily average loans outstanding, funded with growth in lower-costing core deposits.  This improvement in earning asset volume and funding mix was partially offset by compression in the net interest margin.


 
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The Company’s net interest margin for the quarter ended December 31, 2012 was 3.29%, a decrease of 2 basis points from 3.31% for the quarter ended September 30, 2012, and 10 basis points from 3.39% for the quarter ended December 31, 2011.  The decrease in the net interest margin was primarily attributable to the decline in yields on interest-earning assets, which outpaced the downward re-pricing of the Company’s interest-bearing liabilities as longer-term market interest rates have declined and the yield curve has flattened.  The weighted average yield on interest-earning assets was 3.92% for the three months ended December 31, 2012, compared with 3.99% for the trailing quarter, and 4.24% for the three months ended December 31, 2011.  The weighted average cost of interest-bearing liabilities was 0.77% for the quarter ended December 31, 2012, compared with 0.82% for the trailing quarter, and 0.99% for the fourth quarter of 2011.  The average cost of interest bearing deposits for the three months ended December 31, 2012 was 0.50%, compared with 0.54% for the trailing quarter, and 0.72% for the same period last year.  Partially offsetting the effects of interest rate spread compression on the margin, average non-interest bearing demand deposits totaled $840.1 million for the quarter ended December 31, 2012, compared with $771.4 million for the trailing quarter, and $680.1 million for the quarter ended December 31, 2011.  The average cost of borrowings for the three months ended December 31, 2012 was 2.29%, compared with 2.32% for the trailing quarter, and 2.34% for the same period last year.

For the year ended December 31, 2012, the net interest margin decreased 11 basis points to 3.38%, compared with 3.49% for the year ended December 31, 2011.  The weighted average yield on interest-earning assets declined 38 basis points to 4.08% for the year ended December 31, 2012, compared with 4.46% for the year ended December 31, 2011, while the weighted average cost of interest-bearing liabilities declined 30 basis points to 0.83% for the year ended December 31, 2012, compared with 1.13% for the same period in 2011.  The average cost of interest bearing deposits for the year ended December 31, 2012 was 0.56%, compared with 0.83% for the same period last year.  Average non-interest bearing demand deposits totaled $743.1 million for the year ended December 31, 2012, compared with $605.8 million for the year ended December 31, 2011.  The average cost of borrowings for the year ended December 31, 2012 was 2.26%, compared with 2.55% for the same period last year.

Non-Interest Income

Non-interest income totaled $11.8 million for the quarter ended December 31, 2012, an increase of $3.1 million, or 35.4%, compared to the same period in 2011.  The improvement in non-interest income was largely due to increases in both net gains from securities transactions and other income.   Net gains on securities transactions for the quarter ended December 31, 2012, increased $2.0 million.  During the period, the Company identified and sold certain mortgage-backed securities which had a high risk of accelerated prepayment.  The proceeds from the sales were reinvested in similar securities with more stable projected cash flows.  Other income increased $993,000 for the quarter December 31, 2012, compared to the same period in 2011, due to a $525,000 net gain recognized on the sale of a vacant parcel of land in the current period and losses previously recorded in 2011 related to the sale of the Company’s former administrative facilities.  Also contributing to the improvement in other income was an increase in net gains on the sale of foreclosed real estate and an increase in gains related to loan sales.


 
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For the year ended December 31, 2012, non-interest income totaled $43.6 million, an increase of $11.1 million, or 34.0%, compared to the same period in 2011.  Fee income totaled $30.3 million for the year ended December 31, 2012, an increase of $4.9 million compared with the same period in 2011, largely due to an increase in wealth management fees attributable to the August 2011 acquisition of Beacon Trust Company (“Beacon”) and increased prepayment fees on commercial loans, which were partially offset by lower overdraft fee income.  Net gains on securities transactions totaled $4.5 million for the year ended December 31, 2012, compared to $708,000 for the same period in 2011.  During the year, the Company identified and sold certain mortgage-backed securities which had a high risk of accelerated prepayment.  The proceeds from the sales were reinvested in similar securities with more stable projected cash flows.  Also contributing to the increase in non-interest income, other income increased $2.0 million for the year ended December 31, 2012, compared with the same period in 2011, primarily due to a $525,000 net gain recognized on the sale of a vacant parcel of land, $568,000 in income associated with the termination of the Company’s debit card rewards program, losses previously recorded in 2011 related to the sale of the Company’s former administrative facilities, and an increase in gains resulting from a larger number of loan sales.  Other-than-temporary impairment charges on investment securities declined $302,000 for the year ended December 31, 2012, compared to last year, as the Company did not experience any other-than-temporary impairment on its securities portfolio in 2012.

Non-Interest Expense

For the three months ended December 31, 2012, non-interest expense increased $1.2 million, or 3.2%, to $37.4 million, compared to the three months ended December 31, 2011.  Compensation and benefits increased $1.4 million for the quarter ended December 31, 2012, to $19.8 million, compared to the quarter ended December 31, 2011.  This increase was due to higher salary expense associated with annual merit increases, increased severance costs and increased employee medical and retirement benefit costs, partially offset by a reduction in the incentive compensation accrual.  Other operating expenses increased $403,000, to $6.9 million for the quarter ended December 31, 2012, from the same period in 2011, mainly due to $545,000 of net expenses related to damages sustained at one of the Company’s branches in Superstorm Sandy, partially offset by a reduction in other operating expenses attributable to prior year costs of $227,000 associated with Hurricane Irene incurred in the quarter ended December 31, 2011.  Partially offsetting these increases, amortization of intangibles decreased $218,000 for the three months ended December 31, 2012, compared with the same period in 2011, as a result of scheduled reductions in core deposit intangible amortization.  FDIC insurance expense decreased $202,000 to $1.2 million for the three months ended December 31, 2012, compared with the same period in 2011, primarily due to a lower assessment rate.  Net occupancy expense decreased $163,000, to $5.2 million for the three months ended December 31, 2012, compared to the same period in 2011, primarily due to reduced property taxes and lower utilities and maintenance expense.

The Company’s annualized non-interest expense as a percentage of average assets was 2.05% for the quarter ended December 31, 2012, compared to 2.04% for the same period in 2011.  The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income) was 56.68% for the quarter ended December 31, 2012, compared with 57.85% for the same period in 2011.


 
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Non-interest expense for the year ended December 31, 2012 was $148.8 million, an increase of $6.4 million, or 4.5%, from the year ended December 31, 2011.  Compensation and benefits expense increased $6.0 million, to $80.9 million for the year ended December 31, 2012 compared to the year ended December 31, 2011, due to higher salary expense associated with annual merit increases, personnel added as a result of the Beacon acquisition, an increased incentive compensation accrual and increased employee medical and retirement benefit costs.  In addition, other operating expense increased $2.2 million for the year ended December 31, 2012, compared to the same period in 2011, due primarily to increased non-performing asset related expenses, net expenses incurred due to damages sustained in Super- storm Sandy, a $213,000 charge related to the termination of a software contract in connection with the Beacon integration and $222,000 in charges related to the consolidation of underperforming branches.  Data processing expense increased $818,000 for the year ended December 31, 2012, compared to the same period in 2011, due to an increase in software maintenance expense, primarily associated with technology enhancements at Beacon, and increased core processing fees.  Partially offsetting these increases, impairment of premises and equipment declined $807,000 for the year ended December 31, 2012, compared to last year, due to an impairment charge incurred in the first quarter of 2011 related to the then planned sale and relocation of the Company’s former loan center.  FDIC insurance expense decreased $788,000 to $5.1 million for the year ended December 31, 2012, compared with the same period in 2011.  The decrease was primarily due to a lower assessment rate and a change in assessment methodology from a deposit-based to an asset-based assessment, effective in the second quarter of 2011.  Net occupancy expense decreased $644,000 to $20.5 million, compared to the same period last year, due to the consolidation and relocation of the Company’s administrative offices in April 2011 and the elimination of prior year carrying costs on previously occupied facilities owned by the Company that were sold in November 2011.  Additionally, amortization of intangibles decreased $564,000 for the year ended December 31, 2012, compared with the same period of 2011, as a result of scheduled reductions in core deposit intangible amortization, partially offset by the amortization of the customer relationship intangible arising from the Beacon acquisition.

Asset Quality

The Company’s total non-performing loans at December 31, 2012, improved to $99.0 million, or 2.02% of total loans, compared with $105.7 million, or 2.19% of total loans at September 30, 2012, and $122.5 million, or 2.63% of total loans at December 31, 2011.  The $6.7 million decrease in non-performing loans at December 31, 2012, compared with the trailing quarter, was largely due to a $2.4 million decrease in non-performing residential loans, a $1.8 million decrease in non-performing commercial mortgage loans, a $1.7 million decrease in non-performing construction loans and a $1.2 million decrease in non-performing commercial loans.  At December 31, 2012, impaired loans totaled $109.6 million with related specific reserves of $7.2 million, compared with impaired loans totaling $114.4 million with related specific reserves of $8.4 million at September 30, 2012.  At December 31, 2011, impaired loans totaled $103.2 million with related specific reserves of $9.3 million.

At December 31, 2012, the Company’s allowance for loan losses was 1.43% of total loans, compared with 1.46% of total loans at September 30, 2012, and 1.60% of total loans at December 31, 2011.  The Company recorded provisions for loan losses of $4.0 million and $16.0 million for the three months and year ended December 31, 2012, respectively, compared with provisions of $6.0 million and $28.9 million for the three months and year ended December 31, 2011, respectively.  The provision for loan losses,for the three months and year ended December 31, 2012, included $1.5 million for possible loan losses related to Superstorm Sandy.  The Company had net charge-offs of $3.9 million and $20.0 million for the three months and year ended December 31, 2012, respectively, compared with net charge-offs of $5.3 million and $23.3 million, respectively, for the same periods in 2011.  The allowance for loan losses decreased $4.0 million to $70.3 million at December 31, 2012, from $74.4 million at December 31, 2011, as the weighted average risk rating of the loan portfolio improved and net non-performing asset disposition increased.

 
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At December 31, 2012, the Company held $12.5 million of foreclosed assets, compared with $12.8 million at December 31, 2011.  Foreclosed assets at December 31, 2012 consisted primarily of $6.5 million of commercial real estate, $5.0 million of residential real estate and $583,000 of marine vessels.

Income Tax Expense

For the three months ended December 31, 2012, the Company’s income tax expense was $7.9 million, compared with $5.5 million for the same period in 2011.  For the year ended December 31, 2012, the Company’s income tax expense was $28.9 million, compared with $19.8 million for the same period in 2011.  The Company’s effective tax rates were 32.1% and 30.0%, respectively, for the three months and year ended December 31, 2012, compared with 27.0% and 25.7% for the three months and year ended December 31, 2011, respectively.  The increase in effective tax rates and income tax expense was primarily a function of growth in pre-tax income from taxable sources.

About the Company

Provident Financial Services, Inc. is the holding company for The Provident Bank, a community-oriented bank offering a full range of retail and commercial loan and deposit products.  The Bank currently operates a network of full service branches throughout 11 counties in northern and central New Jersey.

Post Earnings Conference Call

Representatives of the Company will hold a conference call for investors at 10:00 a.m. Eastern Time on Friday, February 1, 2013 regarding highlights of the Company’s quarter and year ended December 31, 2012 financial results.  The call may be accessed by dialing 1-877-317-6789 (Domestic) or 1-412-317-6789 (International).  Internet access to the call is also available (listen only) at www.providentnj.com by going to Investor Relations and clicking on Webcast.

Forward Looking Statements

Certain statements contained herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made. The Company advises readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

 
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PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
December 31, 2012 (Unaudited) and December 31, 2011
(Dollars in Thousands)
                 
Assets
   
December 31, 2012
December 31, 2011
                 
Cash and due from banks
 
$
101,850  
$
68,553  
Short-term investments
   
1,973  
 
1,079  
     
Total cash and cash equivalents
   
103,823  
 
69,632  
                 
Securities available for sale, at fair value
   
1,264,002  
 
1,376,119  
Investment securities held to maturity (fair value of $374,916 at
         
 
December 31, 2012 and $366,296 at December 31, 2011)
   
359,464  
 
348,318  
Federal Home Loan Bank of New York ("FHLB-NY") stock
   
37,543  
 
38,927  
                 
Loans
       
4,904,699  
 
4,653,509  
 
Less allowance for loan losses
   
70,348  
 
74,351  
     
Net loans
   
4,834,351  
 
4,579,158  
                 
Foreclosed assets, net
   
12,473  
 
12,802  
Banking premises and equipment, net
   
66,120  
 
66,260  
Accrued interest receivable
   
24,002  
 
24,653  
Intangible assets
     
357,907  
 
360,714  
Bank-owned life insurance
   
147,286  
 
142,010  
Other assets
       
76,724  
 
78,810  
     
Total assets
 
$
7,283,695  
$
7,097,403  
                 
Liabilities and Stockholders' Equity
         
                 
Deposits:
             
 
Demand deposits
 
$
3,556,011  
$
3,136,129  
 
Savings deposits
   
914,787  
 
891,742  
 
Certificates of deposit of $100,000 or more
   
324,901  
 
383,174  
 
Other time deposits
   
632,572  
 
745,552  
     
Total deposits
   
5,428,271  
 
5,156,597  
                 
Mortgage escrow deposits
   
21,238  
 
20,955  
Borrowed funds
   
803,264  
 
920,180  
Other liabilities
   
49,676  
 
47,194  
     
Total liabilities
   
6,302,449  
 
6,144,926  
                 
Stockholders' Equity:
         
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued
   
—    
 
—    
Common stock, $0.01 par value, 200,000,000 shares authorized, 83,209,293 shares
         
 
 issued and 59,937,955 outstanding at December 31, 2012, and 59,968,195
         
 
outstanding at December 31, 2011
   
832  
 
832  
Additional paid-in capital
   
1,021,507  
 
1,019,253  
Retained earnings
   
389,549  
 
363,011  
Accumulated other comprehensive income
   
7,716  
 
9,571  
Treasury stock
       
(386,270)
 
(384,725)
Unallocated common stock held by the Employee Stock Ownership Plan ("ESOP")
   
(52,088)
 
(55,465)
Common Stock acquired by the Directors' Deferred Fee Plan ("DDFP")
   
(7,298)
 
(7,390)
Deferred Compensation - DDFP
   
7,298  
 
7,390  
     
Total stockholders' equity
   
981,246  
 
952,477  
     
Total liabilities and stockholders' equity
 
$
7,283,695  
$
7,097,403  

 
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PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three Months and Year Ended December 31, 2012 (Unaudited) and 2011
(Dollars in Thousands, except per share data)
                       
         
Three Months Ended
 
Year Ended
         
December 31,
 
December 31,
         
2012
 
2011
 
2012
 
2011
Interest income:
                 
 
Real estate secured loans
$
38,903  
$
39,306  
$
155,078  
$
158,731  
 
Commercial loans
 
10,125  
 
10,892  
 
40,942  
 
42,759  
 
Consumer loans
 
6,241  
 
6,348  
 
25,208  
 
25,793  
 
Securities available for sale and FHLB-NY stock
 
6,398  
 
7,689  
 
29,141  
 
36,157  
 
Investment securities
 
2,912  
 
2,991  
 
11,808  
 
12,160  
 
Deposits, Federal funds sold and other short-term investments
 
24  
 
38  
 
82  
 
119  
   
Total interest income
 
64,603  
 
67,264  
 
262,259  
 
275,719  
                       
Interest expense:
                 
 
Deposits
     
5,688  
 
8,113  
 
25,348  
 
36,552  
 
Borrowed funds
 
4,708  
 
5,240  
 
19,574  
 
23,177  
   
Total interest expense
 
10,396  
 
13,353  
 
44,922  
 
59,729  
   
Net interest income
 
54,207  
 
53,911  
 
217,337  
 
215,990  
                       
Provision for loan losses
 
4,000  
 
6,000  
 
16,000  
 
28,900  
   
Net interest income after provision for loan losses
 
50,207  
 
47,911  
 
201,337  
 
187,090  
                       
Non-interest income:
               
 
Fees
     
7,318  
 
7,366  
 
30,336  
 
25,418  
 
Bank owned life insurance
 
1,381  
 
1,244  
 
5,276  
 
5,242  
 
Other-than-temporary impairment losses on securities
 
—    
 
—    
 
—    
 
(1,661)
 
Portion of loss recognized in OCI (before taxes)
 
—    
 
—    
 
—    
 
1,359  
 
Net impairment losses recognized in earnings
 
—    
 
—    
 
—    
 
(302)
 
Net gain on securities transactions
 
2,015  
 
22  
 
4,497  
 
708  
 
Other income
 
1,038  
 
45  
 
3,504  
 
1,476  
   
Total non-interest income
 
11,752  
 
8,677  
 
43,613  
 
32,542  
                       
Non-interest expense:
               
 
Compensation and employee benefits
 
19,790  
 
18,428  
 
80,874  
 
74,904  
 
Net occupancy expense
 
5,157  
 
5,320  
 
20,487  
 
21,131  
 
Data processing expense
 
2,556  
 
2,506  
 
10,318  
 
9,500  
 
FDIC Insurance
 
1,198  
 
1,400  
 
5,095  
 
5,883  
 
Amortization of intangibles
 
498  
 
716  
 
2,466  
 
3,030  
 
Impairment of premises and equipment
 
—    
 
—    
 
—    
 
807  
 
Advertising and promotion expense
 
1,290  
 
1,346  
 
4,139  
 
3,951  
 
Other operating expenses
 
6,896  
 
6,493  
 
25,449  
 
23,240  
   
Total non-interest expenses
 
37,385  
 
36,209  
 
148,828  
 
142,446  
   
Income before income tax expense
 
24,574  
 
20,379  
 
96,122  
 
77,186  
Income tax expense
 
7,892  
 
5,509  
 
28,855  
 
19,842  
   
Net income
$
16,682  
$
14,870  
$
67,267  
$
57,344  
                       
Basic earnings per share
$
0.29
$
0.26
$
1.18
$
1.01
Average basic shares outstanding
 
57,183,704
 
56,898,336
 
57,145,868
 
56,856,083
                       
Diluted earnings per share
$
0.29
$
0.26
$
1.18
$
1.01
Average diluted shares outstanding
 
57,235,473
 
56,910,915
 
57,199,804
 
56,868,524

 
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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
 
Year Ended
         
December 31,
   
December 31,
         
2012
   
2011
   
2012
   
2011
STATEMENTS OF INCOME:
                     
Net interest income
 
$
54,207
 
$
53,911
 
$
217,337
 
$
215,990
Provision for loan losses
   
4,000
   
6,000
   
16,000
   
28,900
Non-interest income
   
11,752
   
8,677
   
43,613
   
32,542
Non-interest expense
   
37,385
   
36,209
   
148,828
   
142,446
Income before income tax expense
 
24,574
   
20,379
   
96,122
   
77,186
Net income
     
16,682
   
14,870
   
67,267
   
57,344
Diluted earnings per share
   
$0.29
   
$0.26
   
$1.18
   
$1.01
Interest rate spread
   
3.15%
   
3.25%
   
3.25%
   
3.33%
Net interest margin
   
3.29%
   
3.39%
   
3.38%
   
3.49%
                             
PROFITABILITY:
                       
Annualized return on average assets
 
0.91%
   
0.84%
   
0.94%
   
0.83%
Annualized return on average equity
 
6.69%
   
6.18%
   
6.88%
   
6.09%
Annualized non-interest expense to average assets
 
2.05%
   
2.04%
   
2.08%
   
2.07%
Efficiency ratio (1)
   
56.68%
   
57.85%
   
57.03%
   
57.31%
                             
ASSET QUALITY:
                       
Non-accrual loans
             
$
98,990
 
$
122,549
90+ and still accruing
               
—    
   
—    
Non-performing loans
               
98,990
   
122,549
Foreclosed assets
               
12,473
   
12,802
Non-performing assets
               
111,463
   
135,351
Non-performing loans to total loans
             
2.02%
   
2.63%
Non-performing assets to total assets
             
1.53%
   
1.91%
Allowance for loan losses
             
$
70,348
 
$
74,351
Allowance for loan losses to total non-performing loans
             
71.07%
   
60.67%
Allowance for loan losses to total loans
             
1.43%
   
1.60%
                             
AVERAGE BALANCE SHEET DATA:
                     
Assets
   
$
7,269,482
 
$
7,041,992
 
$
7,170,941
 
$
6,893,107
Loans, net
     
4,772,099
   
4,528,380
   
4,658,422
   
4,423,125
Earning assets
 
6,525,784
   
6,289,331
   
6,431,555
   
6,158,329
Core deposits
 
4,419,871
   
3,992,536
   
4,226,283
   
3,777,647
Borrowings
     
818,122
   
888,027
   
864,728
   
909,531
Interest-bearing liabilities
   
5,378,558
   
5,352,132
   
5,389,461
   
5,294,623
Stockholders' equity
   
992,375
   
954,563
   
977,758
   
941,428
Average yield on interest-earning assets
 
3.92%
   
4.24%
   
4.08%
   
4.46%
Average cost of interest-bearing liabilities
 
0.77%
   
0.99%
   
0.83%
   
1.13%
                             
LOAN DATA:
                     
Mortgage loans:
                       
 
Residential
           
$
1,265,015
 
$
1,308,635
 
Commercial
             
1,349,950
   
1,253,542
 
Multi-family
               
   723,958
   
   564,147
 
Construction
               
   120,133
   
   114,817
Total mortgage loans
               
3,459,056
   
3,241,141
 
Commercial loans
               
   866,395
   
  849,009
 
Consumer loans
               
  579,166
   
  560,970
Total gross loans
               
4,904,617
   
4,651,120
 
Premium on purchased loans
             
       4,964
   
       5,823
 
Unearned discounts
               
        (78)
   
      (100)
 
Net deferred
               
    (4,804)
   
   (3,334)
Total loans
               
$
4,904,699
 
$
4,653,509

 
9

 




Notes
                         
                             
(1) Efficiency Ratio Calculation
                     
         
Three Months Ended
   
Year Ended
         
December 31,
   
December 31,
         
2012
   
2011
   
2012
   
2011
 
Net interest income
 
$
     54,207
 
$
     53,911
 
$
   217,337
 
$
   215,990
 
Non-interest income
   
     11,752
   
       8,677
   
     43,613
   
     32,542
 
Total income:
 
$
     65,959
 
$
     62,588
 
$
   260,950
 
$
   248,532
                             
 
Non-interest expense:
 
$
     37,385
 
$
     36,209
 
$
   148,828
 
$
   142,446
                             
 
Expense/income:
   
56.68%
   
57.85%
   
57.03%
   
57.31%


 
10

 
 
 
 

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Quarterly Average Balances
(Unaudited) (Dollars in Thousands)
 
 
December 31, 2012
     
September 30, 2012
     
 
Average
     
Average
     
Average
     
Average
   
 
Balance
 
Interest
 
Yield
     
Balance
 
Interest
 
Yield
   
Interest-Earning Assets:
                             
Deposits
$
37,442
$
24
 
0.25%
   
$
66,040
$
42
 
0.25%
   
Federal funds sold and
                             
     other short-term investments
1,738
 
—    
 
0.14%
     
1,461
 
—    
 
0.02%
   
Investment securities  (1)
350,890
 
2,912
 
3.32%
     
356,052
 
2,987
 
3.36%
   
Securities available for sale
1,325,804
 
5,963
 
1.80%
     
1,315,366
 
6,138
 
1.87%
   
Federal Home Loan Bank stock
37,811
 
435
 
4.58%
     
38,489
 
461
 
4.77%
   
Net loans:   (2)
                             
     Total mortgage loans
3,380,309
 
38,903
 
4.55%
     
3,260,435
 
38,544
 
4.68%
   
     Total commercial loans
812,727
 
10,125
 
4.91%
     
822,093
 
10,242
 
4.94%
   
     Total consumer loans
579,063
 
6,241
 
4.29%
     
575,680
 
6,343
 
4.38%
   
  Total net loans
4,772,099
 
55,269
 
4.58%
     
4,658,208
 
55,129
 
4.68%
   
  Total Interest-Earning Assets
$
6,525,784
$
64,603
 
3.92%
   
$
6,435,616
$
64,757
 
3.99%
   
                               
Non-Interest Earning Assets:
                             
Cash and due from banks
80,974
             
82,849
           
Other assets
662,724
             
660,647
           
Total Assets
$
7,269,482
           
$
7,179,112
           
                               
Interest-Bearing Liabilities:
                             
Demand deposits
$
2,675,980
$
2,293
 
0.34%
   
$
2,601,626
$
2,543
 
0.39%
   
Savings deposits
903,774
 
339
 
0.15%
     
902,458
 
365
 
0.16%
   
Time deposits
980,682
 
3,056
 
1.24%
     
1,018,517
 
3,247
 
1.27%
   
Total Deposits
4,560,436
 
5,688
 
0.50%
     
4,522,601
 
6,155
 
0.54%
   
Borrowed funds
818,122
 
4,708
 
2.29%
     
837,728
 
4,887
 
2.32%
   
  Total Interest-Bearing Liabilities
5,378,558
 
10,396
 
0.77%
     
5,360,329
 
11,042
 
0.82%
   
                               
Non-Interest Bearing Liabilities
898,549
             
835,051
           
Total Liabilities
6,277,107
             
6,195,380
           
Stockholders' equity
992,375
             
983,732
           
Total Liabilities and Stockholders' Equity
7,269,482
           
$
7,179,112
           
                               
Net interest income
 
$
54,207
           
$
53,715
       
                               
Net interest rate spread
       
3.15%
             
3.17%
 
Net interest-earning assets
$
1,147,226
           
$
1,075,287
         
                             
Net interest margin    (3)
       
3.29%
             
3.31%
 
Ratio of interest-earning assets to
                           
      total interest-bearing liabilities
1.21
x
           
1.20
x
       

 
(1) Average outstanding balance amounts shown are amortized cost.
 
(2) Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans.
 
(3) Annualized net interest income divided by average interest-earning assets.


 
11

 



The following table summarizes the quarterly net interest margin for the previous five quarters.
                       
     
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
     
4th Qtr.
 
3rd Qtr.
 
2nd Qtr.
 
1st Qtr.
 
4th Qtr.
Interest-Earning Assets:
                     
Securities
   
2.13%
 
2.17%
 
2.42%
 
2.54%
 
2.44%
Net loans
   
4.58%
 
4.68%
 
4.76%
 
4.83%
 
4.94%
    Total interest-earning assets
   
3.92%
 
3.99%
 
4.11%
 
4.19%
 
4.24%
                       
Interest-Bearing Liabilities:
                     
Total deposits
   
0.50%
 
0.54%
 
0.58%
 
0.62%
 
0.72%
Total borrowings
   
2.29%
 
2.32%
 
2.20%
 
2.25%
 
2.34%
    Total interest-bearing liabilities
   
0.77%
 
0.82%
 
0.85%
 
0.90%
 
0.99%
                       
Interest rate spread
   
3.15%
 
3.17%
 
3.26%
 
3.29%
 
3.25%
Net interest margin
   
3.29%
 
3.31%
 
3.39%
 
3.42%
 
3.39%
                       
Ratio of interest-earning assets to interest-bearing liabilities
   
1.21x
 
1.20x
 
1.18x
 
1.18x
 
1.18x


 
12

 


 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Average Year to Date Balances
(Unaudited) (Dollars in Thousands)
                             
                             
       
December 31, 2012
     
December 31, 2011
       
Average
   
Average
     
Average
   
Average
       
Balance
 
Interest
Yield
     
Balance
 
Interest
Yield
Interest-Earning Assets:
                       
 
Deposits
$
32,200
$
81
0.25%
   
$
47,727
$
119
0.25%
 
Federal funds sold and
                       
 
     other short-term investments
 
1,439
 
1
0.09%
     
1,457
 
—    
0.01%
 
Investment securities  (1)
 
351,981
 
11,808
3.35%
     
345,528
 
12,160
3.52%
 
Securities available for sale
 
1,348,376
 
27,327
2.03%
     
1,302,233
 
34,393
2.64%
 
Federal Home Loan Bank stock
 
39,137
 
1,814
4.63%
     
38,259
 
1,764
4.61%
 
Net loans:  (2)
               
.
     
 
Total mortgage loans
 
3,273,458
 
155,078
4.74%
     
3,102,662
 
158,731
5.08%
 
Total commercial loans
 
812,575
 
40,942
5.04%
     
765,228
 
42,759
5.56%
 
Total consumer loans
 
572,389
 
25,208
4.40%
     
555,235
 
25,793
4.64%
 
Total net loans
 
4,658,422
 
221,228
4.75%
     
4,423,125
 
227,283
5.11%
 
Total Interest-Earning Assets
$
6,431,555
$
262,259
4.08%
   
$
6,158,329
$
275,719
4.46%
                             
Non-Interest Earning Assets:
                       
 
Cash and due from banks
 
77,489
           
77,823
     
 
Other assets
 
661,897
           
656,955
     
 
Total Assets
$
7,170,941
         
$
6,893,107
     
                             
Interest-Bearing Liabilities:
                       
 
Demand deposits
$
2,581,802
$
10,292
0.40%
   
$
2,272,780
$
15,168
0.67%
 
Savings deposits
 
901,398
 
1,449
0.16%
     
899,020
 
2,971
0.33%
 
Time deposits
 
1,041,533
 
13,607
1.31%
     
1,213,292
 
18,413
1.52%
 
Total Deposits
 
4,524,733
 
25,348
0.56%
     
4,385,092
 
36,552
0.83%
                             
 
Borrowed funds
 
864,728
 
19,574
2.26%
     
909,531
 
23,177
2.55%
 
Total Interest-Bearing Liabilities
 
5,389,461
 
44,922
0.83%
     
5,294,623
 
59,729
1.13%
                             
Non-Interest Bearing Liabilities
 
803,722
           
657,056
     
 
Total Liabilities
 
6,193,183
           
5,951,679
     
 
Stockholders' equity
 
977,758
           
941,428
     
 
Total Liabilities and Stockholders' Equity
7,170,941
         
$
6,893,107
     
                             
Net interest income
   
$
217,337
         
$
215,990
 
                             
Net interest rate spread
       
3.25%
           
3.33%
Net interest-earning assets
$
1,042,094
         
$
863,706
     
                             
Net interest margin  (3)
       
3.38%
           
3.49%
Ratio of interest-earning assets to
                       
total interest-bearing liabilities
 
1.19
x
         
1.16
x
   

 
(1) Average outstanding balance amounts shown are amortized cost.
 
(2) Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans.
 
(3) Annualized net interest income divided by average interest-earning assets.

 
13

 



 
The following table summarizes the year-to-date net interest margin for the previous three years.
 
                         
       
Year Ended
       
       
12/31/12
 
12/31/11
 
12/31/10
       
 
Interest-Earning Assets:
                     
 
Securities
   
2.32%
 
2.79%
 
3.15%
       
 
Net loans
   
4.75%
 
5.11%
 
5.39%
       
 
    Total interest-earning assets
   
4.08%
 
4.46%
 
4.73%
       
                         
 
Interest-Bearing Liabilities:
                     
 
Total deposits
   
0.56%
 
0.83%
 
1.09%
       
 
Total borrowings
   
2.26%
 
2.55%
 
3.18%
       
 
    Total interest-bearing liabilities
   
0.83%
 
1.13%
 
1.46%
       
                         
 
Interest rate spread
   
3.25%
 
3.33%
 
3.27%
       
 
Net interest margin
   
3.38%
 
3.49%
 
3.45%
       
                         
 
Ratio of interest-earning assets to interest-bearing liabilities
1.19x
 
1.16x
 
1.14x
       
                         

14