Attached files
| file | filename |
|---|---|
| 8-K - 8-K - PROVIDENT FINANCIAL SERVICES INC | a8-k093017.htm |
Provident Financial Services, Inc. Announces Record Third Quarter Earnings and Declares Quarterly Cash Dividend
ISELIN, NJ, October 27, 2017 - Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $26.6 million, or $0.41 per basic and diluted share, for the three months ended September 30, 2017, compared to net income of $22.9 million, or $0.36 per basic and diluted share, for the three months ended September 30, 2016. For the nine months ended September 30, 2017, the Company reported net income of $74.5 million, or $1.16 per basic share and $1.15 per diluted share, compared to net income of $65.2 million, or $1.03 per basic share and $1.02 per diluted share, for the same period last year.
The increases in the Company’s earnings for the three and nine months ended September 30, 2017 were driven by the period-over-period growth in average loans outstanding, growth in both average non-interest bearing and interest bearing core deposits, expansion of the net interest margin and an increase in non-interest income. The improvement in the net interest margin was largely the result of an increase in the yield on earning assets, combined with a relatively stable cost of funds.
Christopher Martin, Chairman, President and Chief Executive Officer commented: “Our record quarterly earnings were driven by expansion of our net interest margin, improved asset quality and prudent expense management. While loan production was strong for the quarter, net portfolio growth was constrained by elevated levels of loan payoffs. Our loan pipeline remains very strong however, and as a result, we expect our total loans will increase in the upcoming quarters.” Martin added: “I would like to congratulate all members of the Provident team for their efforts which led to Provident Bank being recently named the Best Bank in New Jersey by Money Magazine.”
Declaration of Quarterly Dividend
The Company’s Board of Directors declared a quarterly cash dividend of $0.20 per common share payable on November 30, 2017, to stockholders of record as of the close of business on November 15, 2017.
Balance Sheet Summary
Total assets at September 30, 2017 totaled $9.50 billion, a $5.3 million decrease from December 31, 2016. The decline in total assets was primarily due to a $23.2 million decrease in total investments, a $5.5 million decrease in premises and equipment and a $2.3 million decrease in foreclosed assets, partially offset by a $24.6 million increase in total loans.
The Company’s loan portfolio increased $24.6 million, or 0.4%, to $7.03 billion at September 30, 2017, from $7.00 billion at December 31, 2016. For the nine months ended September 30, 2017, loan originations, including advances on lines of credit, totaled $2.56 billion. During the nine months ended September 30, 2017, the loan portfolio had net increases of $78.1 million in commercial loans, $59.9 million in construction loans and $44.0 million in commercial mortgage loans, partially offset by net decreases of $67.1 million in multi-family mortgage loans, $54.4 million in residential mortgage loans and $35.5 million in consumer loans. Commercial real estate, commercial and construction loans represented 76.7% of the loan portfolio at September 30, 2017, compared to 75.3% at December 31, 2016.
At September 30, 2017, the Company’s unfunded loan commitments totaled $2.11 billion, including commitments of $1.16 billion in commercial loans, $444.8 million in construction loans and $221.1 million in commercial mortgage loans. Unfunded loan commitments at December 31, 2016 and September 30, 2016 were $1.83 billion and $1.38 billion, respectively.
Total investments decreased $23.2 million, or 1.4%, to $1.58 billion at September 30, 2017, from $1.60 billion at December 31, 2016, largely due to principal repayments on mortgage-backed securities, and maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities, along with an increase in unrealized gains on securities available for sale.
Total deposits increased $37.6 million, or 0.6%, during the nine months ended September 30, 2017, to $6.59 billion from $6.55 billion at December 31, 2016. Total core deposits, which consist of savings and demand deposit
1
accounts, increased $60.9 million to $5.96 billion at September 30, 2017, from $5.90 billion at December 31, 2016, while time deposits decreased $23.3 million to $627.9 million at September 30, 2017, from $651.2 million at December 31, 2016. The increase in core deposits was largely attributable to a $100.9 million increase in interest bearing demand deposits and a $19.5 million increase in non-interest bearing demand deposits, partially offset by a $43.7 million decrease in money market deposits and a $15.8 million decrease in savings deposits. Core deposits represented 90.5% of total deposits at September 30, 2017, compared to 90.1% at December 31, 2016.
Borrowed funds decreased $87.2 million, or 5.4%, during the nine months ended September 30, 2017, to $1.53 billion, as wholesale funding was replaced by net inflows of deposits and capital formation for the period. Borrowed funds represented 16.1% of total assets at September 30, 2017, a decrease from 17.0% at December 31, 2016.
Stockholders’ equity increased $48.4 million, or 3.9%, for the nine months ended September 30, 2017, to $1.30 billion, primarily due to net income earned for the period and an increase in unrealized gains on securities available for sale, partially offset by dividends paid to stockholders. Common stock repurchases made in connection with withholding to cover income taxes on the vesting of stock-based compensation for the nine months ended September 30, 2017 totaled 43,090 shares at an average cost of $27.13. At September 30, 2017, 3.1 million shares remained eligible for repurchase under the current stock repurchase authorization. Book value per share and tangible book value per share(1) at September 30, 2017 were $19.56 and $13.23, respectively, compared with $18.94 and $12.54, respectively, at December 31, 2016.
Results of Operations
Net Interest Income and Net Interest Margin
For the three months ended September 30, 2017, net interest income increased $5.2 million to $70.2 million, from $65.0 million for the same period in 2016. Net interest income for the nine months ended September 30, 2017 increased $14.4 million, to $206.3 million, from $192.0 million for the same period in 2016. The improvement in net interest income for the comparative periods was due to growth in average loans outstanding resulting from organic originations and increases in both average interest bearing core deposits and average non-interest bearing demand deposits, combined with period-over-period expansion of the net interest margin. The improvement in the net interest margin was a function of an increase in the yield on earning assets and a relatively stable cost of funds, as growth in average core deposits mitigated the Company's need to utilize higher-cost sources to fund average loans outstanding.
The Company’s net interest margin increased five basis points to 3.22% for the quarter ended September 30, 2017, from 3.17% for the trailing quarter. The weighted average yield on interest-earning assets increased five basis points to 3.75% for the quarter ended September 30, 2017, compared to 3.70% for the quarter ended June 30, 2017. The weighted average cost of interest-bearing liabilities for the quarter ended September 30, 2017 increased one basis point to 0.68%, compared to 0.67% for the trailing quarter. The average cost of interest bearing deposits for the quarter ended September 30, 2017 increased two basis points to 0.38%, from 0.36% for the quarter ended June 30, 2017. Average non-interest bearing demand deposits totaled $1.36 billion for the quarter ended September 30, 2017, compared to $1.33 billion for the trailing quarter ended June 30, 2017. The average cost of borrowed funds for the quarter ended September 30, 2017 was 1.71%, compared to 1.66% for the trailing quarter.
The net interest margin increased 17 basis points to 3.22% for the quarter ended September 30, 2017, compared to 3.05% for the quarter ended September 30, 2016. The weighted average yield on interest-earning assets increased 18 basis points to 3.75% for the quarter ended September 30, 2017, compared to 3.57% for the quarter ended September 30, 2016, while the weighted average cost of interest bearing liabilities increased three basis points for the quarter ended September 30, 2017 to 0.68%, compared to the third quarter of 2016. The average cost of interest bearing deposits for the quarter ended September 30, 2017 was 0.38%, compared to 0.34% for the same period last year. Average non-interest bearing demand deposits totaled $1.36 billion for the quarter ended September 30, 2017, compared to $1.25 billion for the quarter ended September 30, 2016. The average cost of borrowed funds for the quarter ended September 30, 2017 was 1.71%, compared to 1.70% for the same period last year.
For the nine months ended September 30, 2017, the net interest margin increased nine basis points to 3.19%, compared to 3.10% for the nine months ended September 30, 2016. The weighted average yield on interest earning assets increased nine basis points to 3.72% for the nine months ended September 30, 2017, compared to 3.63%
2
for the nine months ended September 30, 2016, while the weighted average cost of interest bearing liabilities increased one basis point to 0.67% for the nine months ended September 30, 2017, compared to 0.66% the same period last year. The average cost of interest bearing deposits for the nine months ended September 30, 2017 was 0.36%, compared to 0.33% for the same period last year. Average non-interest bearing demand deposits totaled $1.34 billion for the nine months ended September 30, 2017, compared to $1.22 billion for the nine months ended September 30, 2016. The average cost of borrowings for the nine months ended September 30, 2017 was 1.67%, compared to 1.71% for the same period last year.
Non-Interest Income
Non-interest income totaled $15.1 million for the quarter ended September 30, 2017, an increase of $1.0 million, or 7.4%, compared to the same period in 2016. Fee income increased $1.5 million to $7.7 million for the three months ended September 30, 2017, compared to the same period in 2016, largely due to a $1.3 million increase in commercial loan prepayment fee income and a $218,000 increase in debit card revenue, partially offset by a $56,000 decrease in income from non-deposit investment products. Also contributing to the increase in non-interest income, wealth management income increased $330,000 to $4.6 million for the three months ended September 30, 2017, compared to the same period in 2016, due to stronger market conditions which positively impacted fees earned from assets under management and an increase in tax preparation fees. Net gains on securities transactions increased $79,000 for the three months ended September 30, 2017, compared to the same period in 2016. Partially offsetting these increases in non-interest income, other income decreased $877,000 to $1.5 million for the three months ended September 30, 2017, compared to the quarter ended September 30, 2016, primarily due to an $853,000 decrease in net gains on the sale of loans and a $143,000 decrease in net gains on the sale of foreclosed real estate, partially offset by a $116,000 increase in net fees on loan-level interest rate swap transactions.
For the nine months ended September 30, 2017, non-interest income totaled $42.4 million, an increase of $1.5 million, or 3.6%, compared to the same period in 2016. Fee income increased $1.6 million for the nine months ended September 30, 2017, compared to the same period in 2016, primarily due to a $1.3 million increase in commercial loan prepayment fee income, a $259,000 increase in deposit related fee income and a $139,000 increase in merchant fee income, partially offset by a $168,000 decrease in income from non-deposit investment products and an $86,000 decrease in debit card revenue. Income from Bank-owned life insurance increased $1.2 million to $5.3 million for the nine months ended September 30, 2017, compared to the same period in 2016, primarily due to the recognition of death benefit claims. Wealth management income increased $230,000 to $13.3 million for the nine months ended September 30, 2017, due to stronger market conditions which positively impacted fees earned from assets under management and an increase in tax preparation fees. Partially offsetting these increases in non-interest income, other income decreased $1.6 million to $2.8 million for the nine months ended September 30, 2017, compared to $4.4 million for the same period in 2016, principally due to a $1.2 million decrease in net gains on loan sales and a $335,000 gain recognized on the sale of deposits resulting from a strategic branch divestiture in the prior year.
Non-Interest Expense
For the three months ended September 30, 2017, non-interest expense totaled $46.3 million, an increase of $430,000, or 0.9%, compared to the three months ended September 30, 2016. Compensation and benefits expense increased $603,000 to $27.3 million for the three months ended September 30, 2017, compared to $26.7 million for the same period in 2016. This increase was principally due to additional salary expense related to annual merit increases, an increase in the accrual for incentive compensation and an increase in stock-based compensation, partially offset by a decrease in retirement benefit costs. Other operating expenses increased $128,000 to $7.0 million for the three months ended September 30, 2017, compared to the same period in 2016, largely due to an increase in consulting costs, partially offset by decreases in loan collection expense and debit card maintenance expense. Advertising and promotion expenses increased $120,000 to $907,000 for the three months ended September 30, 2017, compared to the same period in 2016, largely due to the timing of the Company's advertising campaigns. Partially offsetting these increases in non-interest expense, amortization of intangibles decreased $135,000 for the three months ended September 30, 2017, compared with the same period in 2016, as a result of scheduled reductions in amortization. Additionally, net occupancy costs decreased $122,000, to $6.1 million for the three months ended September 30, 2017, compared to the same period in 2016, largely due to a decrease in depreciation expense.
3
The Company’s annualized non-interest expense as a percentage of average assets(1) was 1.93% for the quarter ended September 30, 2017, compared to 1.96% for the same period in 2016. The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income)(1) was 54.24% for the quarter ended September 30, 2017, compared to 58.01% for the same period in 2016.
Non-interest expense totaled $139.7 million for the nine months ended September 30, 2017, an increase of $3.1 million, or 2.3%, compared to $136.6 million for the nine months ended September 30, 2016. Compensation and benefits expense increased $2.6 million to $81.1 million for the nine months ended September 30, 2017, compared to $78.5 million for the nine months ended September 30, 2016, primarily due to additional salary expense related to annual merit increases, an increase in the accrual for incentive compensation and an increase in stock-based compensation, partially offset by a decrease in retirement benefit costs. Net occupancy costs increased $526,000 to $19.3 million for the nine months ended September 30, 2017, compared to the same period in 2016, principally due to an increase in snow removal costs incurred earlier in the year, combined with an increase in facilities maintenance costs. Data processing expense increased $457,000 to $10.3 million for the nine months ended September 30, 2017, compared to $9.8 million for the same period in 2016, primarily due to increases in telecommunication costs and software maintenance expense. In addition, other operating expenses increased $620,000 to $21.2 million for the nine months ended September 30, 2017, compared to the same period in 2016, largely due to increases in legal, consulting and debit card maintenance expenses, partially offset by a decrease in loan collection expense. Partially offsetting these increases in non-interest expense, FDIC insurance expense decreased $667,000 to $3.1 million for the nine months ended September 30, 2017, compared to $3.7 million for the same period in 2016. This decrease was due to the FDIC's reduction of assessment rates for depository institutions with less than $10.0 billion in total assets that became effective for the quarter ended September 30, 2016. Additionally, amortization of intangibles decreased $549,000 for the nine months ended September 30, 2017, compared with the same period in 2016, as a result of scheduled reductions in amortization.
Asset Quality
The Company’s total non-performing loans at September 30, 2017 were $36.4 million, or 0.52% of total loans, compared to $38.9 million, or 0.55% of total loans at June 30, 2017, and $42.4 million, or 0.61% of total loans at December 31, 2016. The $2.5 million decrease in non-performing loans at September 30, 2017, compared to the trailing quarter, was due to a $2.5 million decrease in non-performing construction loans, a $657,000 decrease in non-performing commercial mortgage loans, a $413,000 decrease in non-performing consumer loans and a $306,000 decrease in non-performing residential loans, partially offset by a $1.4 million increase in non-performing commercial loans. At September 30, 2017, impaired loans totaled $50.2 million with related specific reserves of $2.9 million, compared with impaired loans totaling $52.7 million with related specific reserves of $4.1 million at June 30, 2017. At December 31, 2016, impaired loans totaled $52.0 million with related specific reserves of $2.3 million.
At September 30, 2017, the Company’s allowance for loan losses decreased three basis points to 0.86% of total loans, compared to 0.89% at June 30, 2017 and 0.88% at December 31, 2016. The decline in this loan coverage ratio from December 31, 2016, was largely the result of an overall improvement in asset quality. The Company recorded provisions for loan losses of $500,000 and $3.7 million for the three and nine months ended September 30, 2017, respectively, compared with provisions of $1.0 million and $4.2 million for the three and nine months ended September 30, 2016, respectively. For the three and nine months ended September 30, 2017, the Company had net charge-offs of $3.1 million and $5.3 million, respectively, compared to net charge-offs of $845,000 and $4.5 million, respectively, for the same periods in 2016. The allowance for loan losses decreased $1.6 million to $60.3 million at September 30, 2017 from $61.9 million at December 31, 2016.
At September 30, 2017 and December 31, 2016, the Company held $5.7 million and $8.0 million of foreclosed assets, respectively. During the nine months ended September 30, 2017, there were 12 additions to foreclosed assets with a carrying value of $2.2 million, and 23 properties sold with a carrying value of $3.8 million. Foreclosed assets at September 30, 2017 consisted of $3.4 million of commercial real estate and $2.3 million of residential real estate. Total non-performing assets at September 30, 2017 decreased $8.2 million, or 16.4%, to $42.2 million, or 0.44% of total assets, from $50.4 million, or 0.53% of total assets at December 31, 2016.
4
Income Tax Expense
For the three and nine months ended September 30, 2017, the Company’s income tax expense was $12.0 million and $30.8 million, respectively, compared with $9.3 million and $26.8 million, for the three and nine months ended September 30, 2016, respectively. The Company’s effective tax rates were 31.1% and 29.3% for the three and nine months ended September 30, 2017, respectively, compared to 28.8% and 29.1% for the three and nine months ended September 30, 2016, respectively, as a greater proportion of income in the current year periods was derived from taxable sources. The Company adopted Accounting Standards Update ("ASU”) No. 2016-09, "Compensation - Stock Compensation (Topic 718)" in the third quarter of 2016. Under this guidance, all excess tax benefits and tax deficiencies associated with share-based compensation are recognized as income tax expense or benefit in the income statement. For the nine months ended September 30, 2017 and 2016, the application of this guidance resulted in decreases in income tax expense of $1.2 million and $158,000, respectively.
About the Company
Provident Financial Services, Inc. is the holding company for Provident Bank, a community-oriented bank offering "commitment you can count on" since 1839. 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 on Friday, October 27, 2017 at 10:00 a.m. Eastern Time to discuss highlights of the Company’s financial results for the quarter ended September 30, 2017. 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 provident.bank 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,” "project," "intend," “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 set forth in Item 1A of the Company's Annual Report on Form 10-K, as supplemented by its Quarterly Reports on Form 10-Q, and 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.
Footnotes
(1) Tangible book value per share, annualized return on average tangible equity, annualized non-interest expense as a percentage of average assets and the efficiency ratio are non-GAAP financial measures. Please refer to the Notes following the Consolidated Financial Highlights which contain the reconciliation of GAAP to non-GAAP financial measures and the associated calculations.
5
6
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||
Consolidated Statements of Financial Condition | |||||||
September 30, 2017 (Unaudited) and December 31, 2016 | |||||||
(Dollars in Thousands) | |||||||
Assets | September 30, 2017 | December 31, 2016 | |||||
Cash and due from banks | $ | 97,298 | $ | 92,508 | |||
Short-term investments | 51,485 | 51,789 | |||||
Total cash and cash equivalents | 148,783 | 144,297 | |||||
Securities available for sale, at fair value | 1,028,305 | 1,040,386 | |||||
Investment securities held to maturity (fair value of $490,425 at September 30, 2017 (unaudited) and $489,287 at December 31, 2016) | 481,845 | 488,183 | |||||
Federal Home Loan Bank Stock | 70,896 | 75,726 | |||||
Loans | 7,028,052 | 7,003,486 | |||||
Less allowance for loan losses | 60,276 | 61,883 | |||||
Net loans | 6,967,776 | 6,941,603 | |||||
Foreclosed assets, net | 5,703 | 7,991 | |||||
Banking premises and equipment, net | 78,567 | 84,092 | |||||
Accrued interest receivable | 27,398 | 27,082 | |||||
Intangible assets | 420,877 | 422,937 | |||||
Bank-owned life insurance | 188,123 | 188,527 | |||||
Other assets | 76,873 | 79,641 | |||||
Total assets | $ | 9,495,146 | $ | 9,500,465 | |||
Liabilities and Stockholders' Equity | |||||||
Deposits: | |||||||
Demand deposits | $ | 4,880,133 | $ | 4,803,426 | |||
Savings deposits | 1,083,215 | 1,099,020 | |||||
Certificates of deposit of $100,000 or more | 296,172 | 290,295 | |||||
Other time deposits | 331,696 | 360,888 | |||||
Total deposits | 6,591,216 | 6,553,629 | |||||
Mortgage escrow deposits | 25,186 | 24,452 | |||||
Borrowed funds | 1,525,560 | 1,612,745 | |||||
Other liabilities | 53,012 | 57,858 | |||||
Total liabilities | 8,194,974 | 8,248,684 | |||||
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 66,467,819 shares outstanding at September 30, 2017 and 66,082,283 outstanding at December 31, 2016 | 832 | 832 | |||||
Additional paid-in capital | 1,010,247 | 1,005,777 | |||||
Retained earnings | 586,575 | 550,768 | |||||
Accumulated other comprehensive loss | (708 | ) | (3,397 | ) | |||
Treasury stock | (260,910 | ) | (264,221 | ) | |||
Unallocated common stock held by the Employee Stock Ownership Plan | (35,864 | ) | (37,978 | ) | |||
Common Stock acquired by the Directors' Deferred Fee Plan | (5,343 | ) | (5,846 | ) | |||
Deferred Compensation - Directors' Deferred Fee Plan | 5,343 | 5,846 | |||||
Total stockholders' equity | 1,300,172 | 1,251,781 | |||||
Total liabilities and stockholders' equity | $ | 9,495,146 | $ | 9,500,465 | |||
7
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||||||||||
Consolidated Statements of Income | |||||||||||||||
Three and Nine Months Ended September 30, 2017 and 2016 (Unaudited) | |||||||||||||||
(Dollars in Thousands, except per share data) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest income: | |||||||||||||||
Real estate secured loans | $ | 47,692 | $ | 45,262 | $ | 140,712 | $ | 134,411 | |||||||
Commercial loans | 18,964 | 16,093 | 53,884 | 46,419 | |||||||||||
Consumer loans | 5,083 | 5,627 | 15,293 | 16,657 | |||||||||||
Securities available for sale and Federal Home Loan Bank stock | 6,540 | 5,576 | 19,651 | 17,074 | |||||||||||
Investment securities held to maturity | 3,272 | 3,349 | 9,812 | 10,011 | |||||||||||
Deposits, federal funds sold and other short-term investments | 343 | 138 | 898 | 252 | |||||||||||
Total interest income | 81,894 | 76,045 | 240,250 | 224,824 | |||||||||||
Interest expense: | |||||||||||||||
Deposits | 4,988 | 4,441 | 14,093 | 12,397 | |||||||||||
Borrowed funds | 6,694 | 6,633 | 19,855 | 20,477 | |||||||||||
Total interest expense | 11,682 | 11,074 | 33,948 | 32,874 | |||||||||||
Net interest income | 70,212 | 64,971 | 206,302 | 191,950 | |||||||||||
Provision for loan losses | 500 | 1,000 | 3,700 | 4,200 | |||||||||||
Net interest income after provision for loan losses | 69,712 | 63,971 | 202,602 | 187,750 | |||||||||||
Non-interest income: | |||||||||||||||
Fees | 7,680 | 6,137 | 20,940 | 19,309 | |||||||||||
Wealth management income | 4,592 | 4,262 | 13,314 | 13,084 | |||||||||||
Bank-owned life insurance | 1,353 | 1,382 | 5,291 | 4,083 | |||||||||||
Net gain (loss) on securities transactions | 36 | (43 | ) | 47 | 54 | ||||||||||
Other income | 1,451 | 2,328 | 2,804 | 4,378 | |||||||||||
Total non-interest income | 15,112 | 14,066 | 42,396 | 40,908 | |||||||||||
Non-interest expense: | |||||||||||||||
Compensation and employee benefits | 27,328 | 26,725 | 81,086 | 78,496 | |||||||||||
Net occupancy expense | 6,105 | 6,227 | 19,255 | 18,729 | |||||||||||
Data processing expense | 3,314 | 3,328 | 10,302 | 9,845 | |||||||||||
FDIC Insurance | 967 | 1,117 | 3,065 | 3,732 | |||||||||||
Amortization of intangibles | 632 | 767 | 2,079 | 2,628 | |||||||||||
Advertising and promotion expense | 907 | 787 | 2,709 | 2,567 | |||||||||||
Other operating expenses | 7,027 | 6,899 | 21,248 | 20,628 | |||||||||||
Total non-interest expense | 46,280 | 45,850 | 139,744 | 136,625 | |||||||||||
Income before income tax expense | 38,544 | 32,187 | 105,254 | 92,033 | |||||||||||
Income tax expense | 11,969 | 9,281 | 30,788 | 26,798 | |||||||||||
Net income | $ | 26,575 | $ | 22,906 | $ | 74,466 | $ | 65,235 | |||||||
Basic earnings per share | $ | 0.41 | $ | 0.36 | $ | 1.16 | $ | 1.03 | |||||||
Average basic shares outstanding | 64,454,684 | 63,728,393 | 64,327,640 | 63,545,065 | |||||||||||
Diluted earnings per share | $ | 0.41 | $ | 0.36 | $ | 1.15 | $ | 1.02 | |||||||
Average diluted shares outstanding | 64,645,278 | 63,934,886 | 64,519,710 | 63,727,723 | |||||||||||
8
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 September 30, | Nine months ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
STATEMENTS OF INCOME: | |||||||||||||||
Net interest income | $ | 70,212 | $ | 64,971 | $ | 206,302 | $ | 191,950 | |||||||
Provision for loan losses | 500 | 1,000 | 3,700 | 4,200 | |||||||||||
Non-interest income | 15,112 | 14,066 | 42,396 | 40,908 | |||||||||||
Non-interest expense | 46,280 | 45,850 | 139,744 | 136,625 | |||||||||||
Income before income tax expense | 38,544 | 32,187 | 105,254 | 92,033 | |||||||||||
Net income | 26,575 | 22,906 | 74,466 | 65,235 | |||||||||||
Diluted earnings per share | $0.41 | $0.36 | $1.15 | $1.02 | |||||||||||
Interest rate spread | 3.07 | % | 2.92 | % | 3.05 | % | 2.97 | % | |||||||
Net interest margin | 3.22 | % | 3.05 | % | 3.19 | % | 3.10 | % | |||||||
PROFITABILITY: | |||||||||||||||
Annualized return on average assets | 1.11 | % | 0.98 | % | 1.05 | % | 0.95 | % | |||||||
Annualized return on average equity | 8.11 | % | 7.33 | % | 7.76 | % | 7.11 | % | |||||||
Annualized return on average tangible equity (2) | 12.00 | % | 11.13 | % | 11.56 | % | 10.88 | % | |||||||
Annualized non-interest expense to average assets (3) | 1.93 | % | 1.96 | % | 1.97 | % | 2.00 | % | |||||||
Efficiency ratio (4) | 54.24 | % | 58.01 | % | 56.19 | % | 58.67 | % | |||||||
ASSET QUALITY: | |||||||||||||||
Non-accrual loans | $ | 36,448 | $ | 40,016 | |||||||||||
90+ and still accruing | — | — | |||||||||||||
Non-performing loans | 36,448 | 40,016 | |||||||||||||
Foreclosed assets | 5,703 | 10,087 | |||||||||||||
Non-performing assets | 42,151 | 50,103 | |||||||||||||
Non-performing loans to total loans | 0.52 | % | 0.58 | % | |||||||||||
Non-performing assets to total assets | 0.44 | % | 0.53 | % | |||||||||||
Allowance for loan losses | $ | 60,276 | $ | 61,088 | |||||||||||
Allowance for loan losses to total non-performing loans | 165.38 | % | 152.66 | % | |||||||||||
Allowance for loan losses to total loans | 0.86 | % | 0.89 | % | |||||||||||
AVERAGE BALANCE SHEET DATA: | |||||||||||||||
Assets | $ | 9,496,733 | $ | 9,328,946 | $ | 9,506,682 | $ | 9,133,000 | |||||||
Loans, net | 6,937,467 | 6,730,854 | 6,936,512 | 6,607,963 | |||||||||||
Earning assets | 8,617,728 | 8,420,908 | 8,620,994 | 8,224,380 | |||||||||||
Core deposits | 5,933,299 | 5,746,057 | 5,902,127 | 5,480,122 | |||||||||||
Borrowings | 1,553,365 | 1,550,148 | 1,594,197 | 1,600,023 | |||||||||||
Interest-bearing liabilities | 6,766,182 | 6,748,118 | 6,815,077 | 6,610,432 | |||||||||||
Stockholders' equity | 1,299,810 | 1,242,710 | 1,283,158 | 1,226,011 | |||||||||||
Average yield on interest-earning assets | 3.75 | % | 3.57 | % | 3.72 | % | 3.63 | % | |||||||
Average cost of interest-bearing liabilities | 0.68 | % | 0.65 | % | 0.67 | % | 0.66 | % | |||||||
LOAN DATA: | |||||||||||||||
Mortgage loans: | |||||||||||||||
Residential | $ | 1,157,888 | $ | 1,214,095 | |||||||||||
Commercial | 2,022,698 | 1,884,699 | |||||||||||||
Multi-family | 1,335,103 | 1,384,541 | |||||||||||||
Construction | 324,692 | 316,803 | |||||||||||||
Total mortgage loans | 4,840,381 | 4,800,138 | |||||||||||||
Commercial loans | 1,709,015 | 1,554,052 | |||||||||||||
Consumer loans | 481,262 | 538,061 | |||||||||||||
Total gross loans | 7,030,658 | 6,892,251 | |||||||||||||
Premium on purchased loans | 4,229 | 5,330 | |||||||||||||
Unearned discounts | (36 | ) | (39 | ) | |||||||||||
Net deferred | (6,799 | ) | (6,956 | ) | |||||||||||
Total loans | $ | 7,028,052 | $ | 6,890,586 | |||||||||||
9
Notes and Reconciliation of GAAP to Non-GAAP Financial Measures - (Dollars in Thousands, except share data) | ||||||||||||||||
(1) Book and Tangible Book Value per Share | ||||||||||||||||
At September 30, | At December 31, | |||||||||||||||
2017 | 2016 | 2016 | ||||||||||||||
Total stockholders' equity | $ | 1,300,172 | $ | 1,244,280 | $ | 1,251,781 | ||||||||||
Less: total intangible assets | 420,877 | 423,678 | 422,937 | |||||||||||||
Total tangible stockholders' equity | $ | 879,295 | $ | 820,602 | $ | 828,844 | ||||||||||
Shares outstanding | 66,467,819 | 66,028,442 | 66,082,283 | |||||||||||||
Book value per share (total stockholders' equity/shares outstanding) | $19.56 | $18.84 | $18.94 | |||||||||||||
Tangible book value per share (total tangible stockholders' equity/shares outstanding) | $13.23 | $12.43 | $12.54 | |||||||||||||
(2) Annualized Return on Average Tangible Equity | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Total average stockholders' equity | $ | 1,299,810 | $ | 1,242,710 | $ | 1,283,158 | $ | 1,226,011 | ||||||||
Less: total average intangible assets | 421,272 | 424,151 | 421,952 | 424,993 | ||||||||||||
Total average tangible stockholders' equity | $ | 878,538 | $ | 818,559 | $ | 861,206 | $ | 801,018 | ||||||||
Net income | $ | 26,575 | $ | 22,906 | $ | 74,466 | $ | 65,235 | ||||||||
Annualized return on average tangible equity (net income/total average stockholders' equity) | 12.00 | % | 11.13 | % | 11.56 | % | 10.88 | % | ||||||||
(3) Annualized Non-Interest Expense to Average Assets | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Total annualized non-interest expense | 183,611 | 182,403 | 186,837 | 182,499 | ||||||||||||
Average assets | $ | 9,496,733 | $ | 9,328,946 | $ | 9,506,682 | $ | 9,133,000 | ||||||||
Annualized non-interest expense/average assets | 1.93 | % | 1.96 | % | 1.97 | % | 2.00 | % | ||||||||
(4) Efficiency Ratio Calculation | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net interest income | $ | 70,212 | $ | 64,971 | $ | 206,302 | $ | 191,950 | ||||||||
Non-interest income | 15,112 | 14,066 | 42,396 | 40,908 | ||||||||||||
Total income | $ | 85,324 | $ | 79,037 | $ | 248,698 | $ | 232,858 | ||||||||
Non-interest expense | $ | 46,280 | $ | 45,850 | $ | 139,744 | $ | 136,625 | ||||||||
Efficiency ratio (non-interest expense/income) | 54.24 | % | 58.01 | % | 56.19 | % | 58.67 | % | ||||||||
10
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||||||||||||||
Net Interest Margin Analysis | |||||||||||||||||||
Quarterly Average Balances | |||||||||||||||||||
(Unaudited) (Dollars in Thousands) | |||||||||||||||||||
September 30, 2017 | June 30, 2017 | ||||||||||||||||||
Average | Average | Average | Average | ||||||||||||||||
Balance | Interest | Yield/Cost | Balance | Interest | Yield/Cost | ||||||||||||||
Interest-Earning Assets: | |||||||||||||||||||
Deposits | $ | 22,383 | $ | 54 | 0.95% | $ | 16,376 | $ | 39 | 0.95% | |||||||||
Federal funds sold and other short-term investments | 52,102 | 289 | 2.22% | 52,047 | 259 | 1.99% | |||||||||||||
Investment securities (1) | 490,121 | 3,272 | 2.67% | 493,632 | 3,292 | 2.67% | |||||||||||||
Securities available for sale | 1,043,123 | 5,488 | 2.10% | 1,052,134 | 5,631 | 2.14% | |||||||||||||
Federal Home Loan Bank stock | 72,532 | 1052 | 5.76% | 76,870 | 917 | 4.79% | |||||||||||||
Net loans: (2) | |||||||||||||||||||
Total mortgage loans | 4,805,991 | 47,692 | 3.92% | 4,815,931 | 47,009 | 3.88% | |||||||||||||
Total commercial loans | 1,644,437 | 18,964 | 4.54% | 1,636,916 | 18,100 | 4.40% | |||||||||||||
Total consumer loans | 487,039 | 5,083 | 4.14% | 498,850 | 5,196 | 4.18% | |||||||||||||
Total net loans | 6,937,467 | 71,739 | 4.08% | 6,951,697 | 70,305 | 4.02% | |||||||||||||
Total Interest-Earning Assets | $ | 8,617,728 | $ | 81,894 | 3.75% | $ | 8,642,756 | $ | 80,443 | 3.70% | |||||||||
Non-Interest Earning Assets: | |||||||||||||||||||
Cash and due from banks | 89,304 | 96,131 | |||||||||||||||||
Other assets | 789,701 | 796,889 | |||||||||||||||||
Total Assets | $ | 9,496,733 | $ | 9,535,776 | |||||||||||||||
Interest-Bearing Liabilities: | |||||||||||||||||||
Demand deposits | $ | 3,476,330 | $ | 3,124 | 0.36% | $ | 3,440,044 | $ | 2,852 | 0.33% | |||||||||
Savings deposits | 1,096,626 | 534 | 0.19% | 1,114,333 | 523 | 0.19% | |||||||||||||
Time deposits | 639,861 | 1,330 | 0.82% | 670,566 | 1,278 | 0.76% | |||||||||||||
Total Deposits | 5,212,817 | 4,988 | 0.38% | 5,224,943 | 4,653 | 0.36% | |||||||||||||
Borrowed funds | 1,553,365 | 6,694 | 1.71% | 1,628,155 | 6,735 | 1.66% | |||||||||||||
Total Interest-Bearing Liabilities | 6,766,182 | 11,682 | 0.68% | 6,853,098 | 11,388 | 0.67% | |||||||||||||
Non-Interest Bearing Liabilities: | |||||||||||||||||||
Non-interest bearing deposits | 1,360,343 | 1,331,143 | |||||||||||||||||
Other non-interest bearing liabilities | 70,398 | 66,740 | |||||||||||||||||
Total non-interest bearing liabilities | 1,430,741 | 1,397,883 | |||||||||||||||||
Total Liabilities | 8,196,923 | 8,250,981 | |||||||||||||||||
Stockholders' equity | 1,299,810 | 1,284,795 | |||||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 9,496,733 | $ | 9,535,776 | |||||||||||||||
Net interest income | $ | 70,212 | $ | 69,055 | |||||||||||||||
Net interest rate spread | 3.07% | 3.03% | |||||||||||||||||
Net interest-earning assets | $ | 1,851,546 | $ | 1,789,658 | |||||||||||||||
Net interest margin (3) | 3.22% | 3.17% | |||||||||||||||||
Ratio of interest-earning assets to | |||||||||||||||||||
total interest-bearing liabilities | 1.27x | 1.26x | |||||||||||||||||
(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. | ||||||||||||||
9/30/17 | 6/30/17 | 3/31/17 | 12/31/16 | 09/30/16 | ||||||||||
3rd Qtr. | 2nd Qtr. | 1st Qtr. | 4th Qtr. | 3rd Qtr. | ||||||||||
Interest-Earning Assets: | ||||||||||||||
Securities | 2.41 | % | 2.40 | % | 2.40 | % | 2.18 | % | 2.14 | % | ||||
Net loans | 4.08 | % | 4.02 | % | 3.93 | % | 3.93 | % | 3.93 | % | ||||
Total interest-earning assets | 3.75 | % | 3.70 | % | 3.63 | % | 3.58 | % | 3.57 | % | ||||
Interest-Bearing Liabilities: | ||||||||||||||
Total deposits | 0.38 | % | 0.36 | % | 0.35 | % | 0.34 | % | 0.34 | % | ||||
Total borrowings | 1.71 | % | 1.66 | % | 1.63 | % | 1.67 | % | 1.70 | % | ||||
Total interest-bearing liabilities | 0.68 | % | 0.67 | % | 0.65 | % | 0.64 | % | 0.65 | % | ||||
Interest rate spread | 3.07 | % | 3.03 | % | 2.98 | % | 2.94 | % | 2.92 | % | ||||
Net interest margin | 3.22 | % | 3.17 | % | 3.11 | % | 3.07 | % | 3.05 | % | ||||
Ratio of interest-earning assets to interest-bearing liabilities | 1.27x | 1.26x | 1.26x | 1.26x | 1.25x | |||||||||
12
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||||||||||||||
Net Interest Margin Analysis | |||||||||||||||||||
Average Year to Date Balances | |||||||||||||||||||
(Unaudited) (Dollars in Thousands) | |||||||||||||||||||
September 30, 2017 | September 30, 2016 | ||||||||||||||||||
Average | Average | Average | Average | ||||||||||||||||
Balance | Interest | Yield/Cost | Balance | Interest | Yield/Cost | ||||||||||||||
Interest-Earning Assets: | |||||||||||||||||||
Deposits | $ | 20,166 | $ | 124 | 0.82% | $ | 66,671 | $ | 248 | 0.50% | |||||||||
Federal funds sold and other short term investments | 51,993 | 774 | 1.99% | 1,619 | 4 | 0.20% | |||||||||||||
Investment securities (1) | 490,008 | 9,812 | 2.67% | 477,564 | 10,011 | 2.79% | |||||||||||||
Securities available for sale | 1,047,521 | 16,681 | 2.13% | 996,790 | 14,464 | 1.94% | |||||||||||||
Federal Home Loan Bank stock | 74,794 | 2,970 | 8.01% | 73,773 | 2,610 | 5.31% | |||||||||||||
Net loans: (2) | |||||||||||||||||||
Total mortgage loans | 4,811,312 | 140,712 | 3.87% | 4,617,611 | 134,411 | 3.85% | |||||||||||||
Total commercial loans | 1,626,939 | 53,884 | 4.39% | 1,437,716 | 46,419 | 4.27% | |||||||||||||
Total consumer loans | 498,261 | 15,293 | 4.10% | 552,636 | 16,657 | 4.02% | |||||||||||||
Total net loans | 6,936,512 | 209,889 | 4.01% | 6,607,963 | 197,487 | 3.96% | |||||||||||||
Total Interest-Earning Assets | $ | 8,620,994 | $ | 240,250 | 3.72% | $ | 8,224,380 | $ | 224,824 | 3.63% | |||||||||
Non-Interest Earning Assets: | |||||||||||||||||||
Cash and due from banks | 91,161 | 100,833 | |||||||||||||||||
Other assets | 794,527 | 807,787 | |||||||||||||||||
Total Assets | $ | 9,506,682 | $ | 9,133,000 | |||||||||||||||
Interest-Bearing Liabilities: | |||||||||||||||||||
Demand deposits | $ | 3,455,533 | $ | 8,724 | 0.34% | $ | 3,231,073 | $ | 7,284 | 0.30% | |||||||||
Savings deposits | 1,107,143 | 1,584 | 0.19% | 1,033,281 | 1,184 | 0.15% | |||||||||||||
Time deposits | 658,204 | 3,785 | 0.77% | 746,055 | 3,929 | 0.70% | |||||||||||||
Total Deposits | 5,220,880 | 14,093 | 0.36% | 5,010,409 | 12,397 | 0.33% | |||||||||||||
Borrowed funds | 1,594,197 | 19,855 | 1.67% | 1,600,023 | 20,477 | 1.71% | |||||||||||||
Total Interest-Bearing Liabilities | $ | 6,815,077 | $ | 33,948 | 0.67% | $ | 6,610,432 | $ | 32,874 | 0.66% | |||||||||
Non-Interest Bearing Liabilities: | |||||||||||||||||||
Non-interest bearing deposits | 1,339,451 | 1,215,768 | |||||||||||||||||
Other non-interest bearing liabilities | 68,996 | 80,789 | |||||||||||||||||
Total non-interest bearing liabilities | 1,408,447 | 1,296,557 | |||||||||||||||||
Total Liabilities | 8,223,524 | 7,906,989 | |||||||||||||||||
Stockholders' equity | 1,283,158 | 1,226,011 | |||||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 9,506,682 | $ | 9,133,000 | |||||||||||||||
Net interest income | $ | 206,302 | $ | 191,950 | |||||||||||||||
Net interest rate spread | 3.05% | 2.97% | |||||||||||||||||
Net interest-earning assets | $ | 1,805,917 | $ | 1,613,948 | |||||||||||||||
Net interest margin (3) | 3.19% | 3.10% | |||||||||||||||||
Ratio of interest-earning assets to | |||||||||||||||||||
total interest-bearing liabilities | 1.26x | 1.24x | |||||||||||||||||
(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. | |||||||||||||||||||
13
The following table summarizes the year-to-date net interest margin for the previous three years. | |||||||||
Nine Months Ended | |||||||||
9/30/2017 | 9/30/2016 | 9/30/2015 | |||||||
Interest-Earning Assets: | |||||||||
Securities | 2.53 | % | 2.28 | % | 2.33 | % | |||
Net loans | 4.01 | % | 3.96 | % | 4.09 | % | |||
Total interest-earning assets | 3.72 | % | 3.63 | % | 3.72 | % | |||
Interest-Bearing Liabilities: | |||||||||
Total deposits | 0.36 | % | 0.33 | % | 0.31 | % | |||
Total borrowings | 1.67 | % | 1.71 | % | 1.73 | % | |||
Total interest-bearing liabilities | 0.67 | % | 0.66 | % | 0.66 | % | |||
Interest rate spread | 3.05 | % | 2.97 | % | 3.06 | % | |||
Net interest margin | 3.19 | % | 3.10 | % | 3.18 | % | |||
Ratio of interest-earning assets to interest-bearing liabilities | 1.26x | 1.24x | 1.23x | ||||||
14