Attached files
| file | filename |
|---|---|
| 8-K - 8-K - PROVIDENT FINANCIAL SERVICES INC | a8-k123117.htm |
Provident Financial Services, Inc. Announces Fourth Quarter and Full Year Earnings,
Declares Quarterly Cash Dividend
and Sets Annual Meeting Date
ISELIN, NJ, January 26, 2018 - Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $19.5 million, or $0.30 per basic and diluted share for the quarter ended December 31, 2017, compared to net income of $22.6 million, or $0.35 per basic and diluted share for the quarter ended December 31, 2016. For the year ended December 31, 2017, the Company reported net income of $93.9 million, or $1.46 per basic share and $1.45 per diluted share, compared to net income of $87.8 million, or $1.38 per basic and diluted share for the same period last year.
As a result of the enactment of the Tax Cuts and Jobs Act (the "Tax Act") on December 22, 2017, the Company recognized additional tax expense of $4.0 million for the quarter and year ended December 31, 2017. Excluding the impact of the Tax Act, for the quarter and year ended December 31, 2017, net income was $23.4 million, or $0.36 per diluted share and $97.9 million, or $1.52 per diluted share, respectively.
Partially offsetting the effect of the Tax Act, earnings for the quarter and year ended December 31, 2017 were favorably impacted by year-over-year growth in average loans outstanding, growth in both average non-interest bearing and interest bearing core deposits, and expansion of the net interest margin. The improvement in the net interest margin was driven by the upward repricing of adjustable rate assets and a relatively stable cost of funds.
Chairman, President and Chief Executive Officer Christopher Martin commented: “Provident’s fourth quarter financial results were marked by impressive loan and core deposit growth, stable funding costs and strong asset quality. Our net interest margin expanded three basis points, contributing to another quarterly record in net interest income for the Company. Our core business remains strong and our balance sheet and loan pipeline are well-positioned as we enter the new year.” Martin added: “We continue our preparations for meeting the current regulatory requirements associated with crossing the $10 billion asset threshold, while working with our trade groups to effect regulatory relief for community banks like Provident.”
Declaration of Quarterly Dividend
The Company’s Board of Directors declared a quarterly cash dividend of $0.20 per common share payable on February 28, 2018, to stockholders of record as of the close of business on February 15, 2018.
Annual Meeting Date Set
The Annual Meeting of Stockholders will be held on April 26, 2018 at the Renaissance Woodbridge Hotel, Iselin, New Jersey at 10:00 a.m. March 1, 2018 has been established as the record date for the determination of stockholders entitled to vote at the Annual Meeting.
Balance Sheet Summary
Total assets increased $344.8 million, or 3.6%, to $9.85 billion at December 31, 2017, from $9.50 billion at December 31, 2016. The increase in total assets was primarily due to a $322.2 million increase in total loans and a $46.5 million increase in total cash and cash equivalents, partially offset by a $20.9 million decrease in premises and equipment and a $7.6 million decrease in total investments.
The Company’s loan portfolio increased $322.2 million, or 4.6%, to $7.33 billion at December 31, 2017, from $7.00 billion at December 31, 2016. For the year ended December 31, 2017, loan originations, including advances on lines of credit, totaled $3.70 billion, compared with $3.09 billion for 2016. The loan portfolio had net increases of $192.5 million in commercial mortgage loans, $127.8 million in construction loans, $114.4 million in commercial loans and $1.8 million in multi-family mortgage loans, partially offset by net decreases of $69.3 million in residential mortgage loans and $42.8 million in consumer loans. Commercial real estate, commercial and construction loans represented 77.9% of the total loan portfolio at December 31, 2017, compared to 75.3% at December 31, 2016.
1
At December 31, 2017, the Company’s unfunded loan commitments totaled $1.98 billion, including commitments of $1.05 billion in commercial loans, $440.9 million in construction loans and $208.0 million in commercial mortgage loans. Unfunded loan commitments at September 30, 2017 and December 31, 2016 were $2.11 billion and $1.83 billion, respectively.
Total investments decreased $7.6 million, or 0.5%, to $1.60 billion at December 31, 2017, largely due to principal repayments on mortgage-backed securities, maturities of municipal and agency bonds, and sales of certain mortgage-backed securities, partially offset by purchases of mortgage-backed and municipal securities.
The Company’s premises and equipment decreased $20.9 million, or 24.9%, to $63.2 million at December 31, 2017, from $84.1 million at December 31, 2016. The decrease was primarily the result of the Company’s December 13, 2017 sale and leaseback of 12 of its New Jersey banking offices.
Total deposits increased $160.5 million, or 2.4%, during the year ended December 31, 2017 to $6.71 billion. Total core deposits, which consist of savings and demand deposit accounts, increased $176.9 million, or 3.0%, to $6.08 billion at December 31, 2017, while time deposits decreased $16.4 million to $634.8 million at December 31, 2017. The increase in core deposits for the year ended December 31, 2017 was largely attributable to a $140.0 million increase in interest bearing demand deposits and a $103.6 million increase in non-interest bearing demand deposits, partially offset by a $50.7 million decrease in money market deposits and a $16.0 million decrease in savings deposits. Core deposits represented 90.5% of total deposits at December 31, 2017, compared to 90.1% at December 31, 2016.
Borrowed funds increased $129.8 million, or 8.0%, during the year ended December 31, 2017, to $1.74 billion, as wholesale funds, combined with net deposit inflows, were used to fund the Company's asset growth. Borrowed funds represented 17.7% of total assets at December 31, 2017, an increase from 17.0% at December 31, 2016.
Stockholders’ equity increased $46.9 million, or 3.7%, during the year ended December 31, 2017, to $1.30 billion, primarily due to net income earned during the year, partially offset by cash dividends paid to stockholders and an increase in unrealized losses on securities available for sale. Common stock repurchases for the year ended December 31, 2017, which were made in connection with withholding to cover income taxes on stock-based compensation, totaled 45,123 shares at an average cost of $27.08 per share. At December 31, 2017, 3.1 million shares remained eligible for repurchase under the current authorization. Book value per share and tangible book value per share(1) at December 31, 2017 were $19.52 and $13.20, 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 quarter ended December 31, 2017, net interest income increased $5.3 million to $71.9 million, from $66.6 million for the same period in 2016. Net interest income for the year ended December 31, 2017 increased $19.6 million, to $278.2 million, from $258.6 million for the same period in 2016. The improvement in net interest income for the comparative periods was largely 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 Company’s net interest margin for the quarter ended December 31, 2017 increased three basis points to 3.25%, compared with 3.22% for the trailing quarter ended September 30, 2017. The weighted average yield on interest-earning assets increased three basis points to 3.78% for the quarter ended December 31, 2017, compared with 3.75% for the trailing quarter. The weighted average cost of interest-bearing liabilities for the quarter ended December 31, 2017 remained unchanged at 0.68%, compared to the trailing quarter. The average cost of interest-bearing deposits for the quarter ended December 31, 2017 increased two basis points to 0.40%, compared with 0.38% for the trailing quarter. Average non-interest bearing demand deposits totaled $1.45 billion for the quarter ended December 31, 2017, compared with $1.36 billion for the trailing quarter. The average cost of borrowed funds for the quarter ended December 31, 2017 was 1.63%, compared with 1.71% for the quarter ended September 30, 2017.
2
The net interest margin increased 18 basis points to 3.25% for the quarter ended December 31, 2017, compared with 3.07% for the quarter ended December 31, 2016. The weighted average yield on interest-earning assets increased 20 basis points to 3.78% for the quarter ended December 31, 2017, compared with 3.58% for the quarter ended December 31, 2016, while the weighted average cost of interest-bearing liabilities increased four basis points to 0.68% for the quarter ended December 31, 2017, compared with 0.64% for the fourth quarter of 2016. The average cost of interest-bearing deposits for the quarter ended December 31, 2017 was 0.40%, compared with 0.34% for the same period last year. Average non-interest bearing demand deposits totaled $1.45 billion for the quarter ended December 31, 2017, compared with $1.32 billion for the quarter ended December 31, 2016. The average cost of borrowed funds for the quarter ended December 31, 2017 was 1.63%, compared with 1.67% for the same period last year.
For the year ended December 31, 2017, the net interest margin increased ten basis points to 3.21%, compared with 3.11% for the year ended December 31, 2016. The weighted average yield on interest-earning assets increased ten basis points to 3.74% for the year ended December 31, 2017, compared with 3.64% for the year ended December 31, 2016, while the weighted average cost of interest-bearing liabilities increased one basis point to 0.67% for the year ended December 31, 2017, compared with 0.66% for the same period in 2016. The average cost of interest-bearing deposits for the year ended December 31, 2017 was 0.37%, compared with 0.33% for the same period last year. Average non-interest bearing demand deposits totaled $1.37 billion for the year ended December 31, 2017, compared with $1.24 billion for the year ended December 31, 2016. The average cost of borrowings for the year ended December 31, 2017 was 1.66%, compared with 1.70% for the same period last year.
Non-Interest Income
Non-interest income totaled $13.3 million for the quarter ended December 31, 2017, a decrease of $1.2 million, or 8.2%, compared to the quarter ended December 31, 2016. Other income decreased $557,000 for the quarter ended December 31, 2017, compared to the same period in 2016, primarily due to a $1.2 million decrease in net fees on loan-level interest rate swap transactions, partially offset by increases in net gains recognized on loan sales and net gains recognized on the sale of foreclosed real estate of $629,000 and $111,000, respectively. Also contributing to the decrease in non-interest income, fee income decreased $460,000 to $6.3 million for the quarter ended December 31, 2017, from $6.7 million for the quarter ended December 31, 2016, largely due to a $603,000 decrease in prepayment fees on commercial loans, partially offset by increases in deposit related fee income and merchant fee income of $137,000 and $90,000, respectively.
For the year ended December 31, 2017, non-interest income totaled $55.7 million, an increase of $304,000, compared to the same period in 2016. Income from Bank-owned life insurance increased $1.2 million to $6.7 million for the year ended December 31, 2017, compared to the same period in 2016, primarily due to the recognition of death benefit claims. Fee income also increased $1.2 million to $27.2 million, compared to the same period in 2016, largely due to a $657,000 increase in commercial loan prepayment fee income, a $397,000 increase in deposit related fee income and a $229,000 increase in merchant fee income, partially offset by a $218,000 decrease in income from non-deposit investment products and a $43,000 decrease in debit card revenue. Partially offsetting these increases in non-interest income, other income decreased $2.1 million for the year ended December 31, 2017, compared with the same period in 2016, mainly due to a $910,000 decrease in net fees on loan-level interest rate swap transactions, a $583,000 decrease in net gains recognized on loan sales and a $335,000 non-recurring 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 December 31, 2017, non-interest expense increased $926,000 to $48.1 million, compared to $47.2 million for the quarter ended December 31, 2016. Compensation and benefits expense increased $622,000 to $28.3 million for the three months ended December 31, 2017, compared to $27.6 million for the three months ended December 31, 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 $584,000 to $7.5 million for the three months ended December 31, 2017, compared to $7.0 million for the same period in 2016. This increase was largely due to an increase in consulting fees, partially offset by decreases in legal fees and non-performing asset related expenses. Additionally, data processing expense increased $237,000 to $3.6 million for
3
the three months ended December 31, 2017, compared to $3.4 million for the same period in 2016, principally due to an increase in software maintenance expense and telecommunication costs. Partially offsetting these increases in non-interest expense, FDIC insurance expense decreased $333,000 to $822,000 for three months ended December 31, 2017, compared to $1.2 million for the same period in 2016, due to a reduction in the insurance assessment rate. Amortization of intangibles decreased $172,000 for the three months ended December 31, 2017, compared with the same period in 2016, as a result of scheduled reductions in amortization.
The Company’s annualized non-interest expense as a percentage of average assets (1) was 1.98% for the quarter ended December 31, 2017, compared with 1.99% 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 56.43% for the quarter ended December 31, 2017, compared with 58.14% for the same period in 2016.
Non-interest expense for the year ended December 31, 2017 was $187.8 million, an increase of $4.0 million from the year ended December 31, 2016. Compensation and benefits expense increased $3.2 million to $109.4 million for the year ended December 31, 2017, compared to $106.1 million for the year ended December 31, 2016. This increase was 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. Other operating expenses increased $1.2 million to $28.8 million for the year ended December 31, 2017, compared to $27.6 million for the same period in 2016, largely due to increases in consulting and debit card maintenance expenses, partially offset by a decrease in loan collection expense. Data processing costs increased $694,000 to $13.9 million for the year ended December 31, 2017, compared with the same period in 2016, due to increased software maintenance and telecommunication costs. Net occupancy costs increased $437,000, to $25.3 million for the year ended December 31, 2017, compared to the same period in 2016, resulting from an increase in snow removal costs, combined with an increase in facilities maintenance costs. Partially offsetting these increases in non-interest expense, FDIC insurance expense decreased $1.0 million to $3.9 million for year ended December 31, 2017, compared to $4.9 million for the same period in 2016. This decrease was primarily due to the FDIC's reduction of assessment rates for depository institutions with less than $10.0 billion in assets, which became effective in the quarter ended September 30, 2016. Additionally, amortization of intangibles decreased $721,000 for the year ended December 31, 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 December 31, 2017 were $34.9 million, or 0.48% of total loans, compared with $36.4 million, or 0.52% of total loans at September 30, 2017, and $42.4 million, or 0.61% of total loans at December 31, 2016. The $1.5 million decrease in non-performing loans at December 31, 2017, compared with the trailing quarter, was due to a $980,000 decrease in non-performing commercial mortgage loans, a $715,000 decrease in non-performing residential mortgage loans and a $280,000 decrease in non-performing commercial loans, partially offset by a $456,000 increase in non-performing consumer loans. At December 31, 2017, impaired loans totaled $52.0 million with related specific reserves of $2.7 million, compared with impaired loans totaling $50.2 million with related specific reserves of $2.9 million at September 30, 2017. At December 31, 2016, impaired loans totaled $52.0 million with related specific reserves of $2.3 million.
At December 31, 2017, the Company’s allowance for loan losses was 0.82% of total loans, compared to 0.86% at September 30, 2017, and 0.88% of total loans at December 31, 2016. The decline in the loan coverage ratio from December 31, 2016 resulted from an overall improvement in asset quality. The allowance for loan losses decreased $1.7 million to $60.2 million at December 31, 2017, from $61.9 million at December 31, 2016. The Company recorded provisions for loan losses of $1.9 million and $5.6 million for the quarter and year ended December 31, 2017, respectively, compared with provisions of $1.2 million and $5.4 million for the quarter and year ended December 31, 2016, respectively. For the quarter and year ended December 31, 2017, the Company had net charge-offs of $2.0 million and $7.3 million, respectively, compared with net charge-offs of $405,000 and $4.9 million, respectively, for the same periods in 2016.
At December 31, 2017, the Company held $6.9 million of foreclosed assets, compared with $8.0 million at December 31, 2016. During the year ended December 31, 2017, there were 16 additions to foreclosed assets with an aggregate carrying value of $3.8 million and 26 properties sold with an aggregate carrying value of $4.3 million.
4
Foreclosed assets at December 31, 2017 consisted of $3.9 million of commercial real estate and $3.0 million of residential real estate. Total non-performing assets at December 31, 2017 declined $8.6 million, or 17.1%, to $41.8 million, or 0.42% of total assets, from $50.4 million, or 0.53% of total assets at December 31, 2016.
Income Tax Expense
For the quarter and year ended December 31, 2017, the Company’s income tax expense was $15.7 million and $46.5 million, respectively, compared with $10.2 million and $37.0 million, for the quarter and year ended December 31, 2016, respectively. The Company’s effective tax rates were 44.7% and 33.1% for the quarter and year ended December 31, 2017, respectively, compared with 31.1% and 29.6% for the quarter and year ended December 31, 2016, respectively. Tax expense and the effective tax rate for the quarter and year ended December 31, 2017, were impacted by an additional tax expense of $4.0 million related to the recently enacted Tax Act.
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, January 26, 2018 at 10:00 a.m. Eastern Time to discuss highlights of the Company’s financial results for the quarter and year ended December 31, 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 www.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
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||
Consolidated Statements of Financial Condition | |||||||
December 31, 2017 (Unaudited) and December 31, 2016 | |||||||
(Dollars in Thousands) | |||||||
Assets | December 31, 2017 | December 31, 2016 | |||||
Cash and due from banks | $ | 139,557 | $ | 92,508 | |||
Short-term investments | 51,277 | 51,789 | |||||
Total cash and cash equivalents | 190,834 | 144,297 | |||||
Securities available for sale, at fair value | 1,037,812 | 1,040,386 | |||||
Investment securities held to maturity (fair value of $485,039 and $489,287 at December 31, 2017 and December 31, 2016, respectively) | 477,652 | 488,183 | |||||
Federal Home Loan Bank Stock | 81,184 | 75,726 | |||||
Loans | 7,325,718 | 7,003,486 | |||||
Less allowance for loan losses | 60,195 | 61,883 | |||||
Net loans | 7,265,523 | 6,941,603 | |||||
Foreclosed assets, net | 6,864 | 7,991 | |||||
Banking premises and equipment, net | 63,185 | 84,092 | |||||
Accrued interest receivable | 29,646 | 27,082 | |||||
Intangible assets | 420,290 | 422,937 | |||||
Bank-owned life insurance | 189,525 | 188,527 | |||||
Other assets | 82,759 | 79,641 | |||||
Total assets | $ | 9,845,274 | $ | 9,500,465 | |||
Liabilities and Stockholders' Equity | |||||||
Deposits: | |||||||
Demand deposits | $ | 4,996,345 | $ | 4,803,426 | |||
Savings deposits | 1,083,012 | 1,099,020 | |||||
Certificates of deposit of $100,000 or more | 316,074 | 290,295 | |||||
Other time deposits | 318,735 | 360,888 | |||||
Total deposits | 6,714,166 | 6,553,629 | |||||
Mortgage escrow deposits | 25,933 | 24,452 | |||||
Borrowed funds | 1,742,514 | 1,612,745 | |||||
Other liabilities | 64,000 | 57,858 | |||||
Total liabilities | 8,546,613 | 8,248,684 | |||||
Total stockholders' equity | 1,298,661 | 1,251,781 | |||||
Total liabilities and stockholders' equity | $ | 9,845,274 | $ | 9,500,465 | |||
6
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||||||||||
Consolidated Statements of Income | |||||||||||||||
Three Months (Unaudited) and Year Ended December 31, 2017 (Unaudited) and 2016 | |||||||||||||||
(Dollars in Thousands, except per share data) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest income: | |||||||||||||||
Real estate secured loans | $ | 49,184 | $ | 46,457 | $ | 189,896 | $ | 180,868 | |||||||
Commercial loans | 19,023 | 16,603 | 72,907 | 63,022 | |||||||||||
Consumer loans | 5,008 | 5,171 | 20,301 | 21,829 | |||||||||||
Securities available for sale and Federal Home Loan Bank stock | 6,794 | 5,817 | 26,445 | 22,890 | |||||||||||
Investment securities held to maturity | 3,215 | 3,198 | 13,027 | 13,208 | |||||||||||
Deposits, Federal funds sold and other short-term investments | 372 | 245 | 1,270 | 498 | |||||||||||
Total interest income | 83,596 | 77,491 | 323,846 | 302,315 | |||||||||||
Interest expense: | |||||||||||||||
Deposits | 5,348 | 4,551 | 19,441 | 16,947 | |||||||||||
Borrowed funds | 6,348 | 6,323 | 26,203 | 26,801 | |||||||||||
Total interest expense | 11,696 | 10,874 | 45,644 | 43,748 | |||||||||||
Net interest income | 71,900 | 66,617 | 278,202 | 258,567 | |||||||||||
Provision for loan losses | 1,900 | 1,200 | 5,600 | 5,400 | |||||||||||
Net interest income after provision for loan losses | 70,000 | 65,417 | 272,602 | 253,167 | |||||||||||
Non-interest income: | |||||||||||||||
Fees | 6,278 | 6,738 | 27,218 | 26,047 | |||||||||||
Bank-owned life insurance | 1,402 | 1,387 | 6,693 | 5,470 | |||||||||||
Wealth management income | 4,290 | 4,472 | 17,604 | 17,556 | |||||||||||
Net gain on securities transactions | 10 | 10 | 57 | 64 | |||||||||||
Other income | 1,321 | 1,878 | 4,125 | 6,256 | |||||||||||
Total non-interest income | 13,301 | 14,485 | 55,697 | 55,393 | |||||||||||
Non-interest expense: | |||||||||||||||
Compensation and employee benefits | 28,267 | 27,645 | 109,353 | 106,141 | |||||||||||
Net occupancy expense | 6,035 | 6,123 | 25,290 | 24,853 | |||||||||||
Data processing expense | 3,620 | 3,383 | 13,922 | 13,228 | |||||||||||
FDIC Insurance | 822 | 1,155 | 3,887 | 4,887 | |||||||||||
Amortization of intangibles | 591 | 763 | 2,670 | 3,391 | |||||||||||
Advertising and promotion expense | 1,195 | 1,119 | 3,904 | 3,685 | |||||||||||
Other operating expenses | 7,548 | 6,964 | 28,796 | 27,593 | |||||||||||
Total non-interest expense | 48,078 | 47,152 | 187,822 | 183,778 | |||||||||||
Income before income tax expense | 35,223 | 32,750 | 140,477 | 124,782 | |||||||||||
Income tax expense | 15,740 | 10,182 | 46,528 | 36,980 | |||||||||||
Net income | $ | 19,483 | $ | 22,568 | $ | 93,949 | $ | 87,802 | |||||||
Basic earnings per share | $ | 0.30 | $ | 0.35 | $ | 1.46 | $ | 1.38 | |||||||
Average basic shares outstanding | 64,554,617 | 63,937,151 | 64,384,851 | 63,643,622 | |||||||||||
Diluted earnings per share | $ | 0.30 | $ | 0.35 | $ | 1.45 | $ | 1.38 | |||||||
Average diluted shares outstanding | 64,749,297 | 64,222,633 | 64,579,222 | 63,851,986 | |||||||||||
7
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, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
STATEMENTS OF INCOME: | |||||||||||||||
Net interest income | $ | 71,900 | $ | 66,617 | $ | 278,202 | $ | 258,567 | |||||||
Provision for loan losses | 1,900 | 1,200 | 5,600 | 5,400 | |||||||||||
Non-interest income | 13,301 | 14,485 | 55,697 | 55,393 | |||||||||||
Non-interest expense | 48,078 | 47,152 | 187,822 | 183,778 | |||||||||||
Income before income tax expense | 35,223 | 32,750 | 140,477 | 124,782 | |||||||||||
Net income | 19,483 | 22,568 | 93,949 | 87,802 | |||||||||||
Diluted earnings per share | $0.30 | $0.35 | $1.45 | $1.38 | |||||||||||
Interest rate spread | 3.10 | % | 2.94 | % | 3.07 | % | 2.98 | % | |||||||
Net interest margin | 3.25 | % | 3.07 | % | 3.21 | % | 3.11 | % | |||||||
PROFITABILITY: | |||||||||||||||
Annualized return on average assets | 0.80 | % | 0.95 | % | 0.99 | % | 0.95 | % | |||||||
Annualized return on average equity | 5.90 | % | 7.16 | % | 7.28 | % | 7.12 | % | |||||||
Annualized return on average tangible equity (1) | 8.69 | % | 10.82 | % | 10.82 | % | 10.86 | % | |||||||
Annualized core non-interest expense to average assets (1) | 1.98 | % | 1.99 | % | 1.97 | % | 1.99 | % | |||||||
Efficiency ratio (1) | 56.43 | % | 58.14 | % | 56.25 | % | 58.54 | % | |||||||
ASSET QUALITY: | |||||||||||||||
Non-accrual loans | $ | 34,929 | $ | 42,401 | |||||||||||
90+ and still accruing | — | — | |||||||||||||
Non-performing loans | 34,929 | 42,401 | |||||||||||||
Foreclosed assets | 6,864 | 7,991 | |||||||||||||
Non-performing assets | 41,793 | 50,392 | |||||||||||||
Non-performing loans to total loans | 0.48 | % | 0.61 | % | |||||||||||
Non-performing assets to total assets | 0.42 | % | 0.53 | % | |||||||||||
Allowance for loan losses | $ | 60,195 | $ | 61,883 | |||||||||||
Allowance for loan losses to total non-performing loans | 172.34 | % | 145.95 | % | |||||||||||
Allowance for loan losses to total loans | 0.82 | % | 0.88 | % | |||||||||||
AVERAGE BALANCE SHEET DATA: | |||||||||||||||
Assets | $ | 9,618,177 | $ | 9,449,483 | $ | 9,534,785 | $ | 9,212,553 | |||||||
Loans, net | 7,075,373 | 6,853,878 | 6,971,512 | 6,669,778 | |||||||||||
Earning assets | 8,739,182 | 8,549,966 | 8,649,286 | 8,306,221 | |||||||||||
Core deposits | 6,071,705 | 5,939,340 | 5,944,870 | 5,595,554 | |||||||||||
Borrowings | 1,545,665 | 1,509,654 | 1,581,964 | 1,577,307 | |||||||||||
Interest-bearing liabilities | 6,793,648 | 6,789,480 | 6,809,675 | 6,655,439 | |||||||||||
Stockholders' equity | 1,310,193 | 1,253,202 | 1,289,973 | 1,232,846 | |||||||||||
Average yield on interest-earning assets | 3.78 | % | 3.58 | % | 3.74 | % | 3.64 | % | |||||||
Average cost of interest-bearing liabilities | 0.68 | % | 0.64 | % | 0.67 | % | 0.66 | % | |||||||
LOAN DATA: | |||||||||||||||
Mortgage loans: | |||||||||||||||
Residential | $ | 1,142,914 | $ | 1,212,255 | |||||||||||
Commercial | 2,171,174 | 1,978,700 | |||||||||||||
Multi-family | 1,404,005 | 1,402,169 | |||||||||||||
Construction | 392,580 | 264,814 | |||||||||||||
Total mortgage loans | 5,110,673 | 4,857,938 | |||||||||||||
Commercial loans | 1,745,301 | 1,630,887 | |||||||||||||
Consumer loans | 473,958 | 516,755 | |||||||||||||
Total gross loans | 7,329,932 | 7,005,580 | |||||||||||||
Premium on purchased loans | 4,029 | 4,968 | |||||||||||||
Unearned discounts | (36 | ) | (38 | ) | |||||||||||
Net deferred | (8,207 | ) | (7,024 | ) | |||||||||||
Total loans | $ | 7,325,718 | $ | 7,003,486 | |||||||||||
(1) Refer to: Notes - Reconciliation of GAAP to Non-GAAP Measures.
8
Notes - Reconciliation of GAAP to Non-GAAP Financial Measures - (Dollars in Thousands, except share data) | |||||||||||||||
(1) Book and Tangible Book Value per Share | |||||||||||||||
At December 31, | |||||||||||||||
2017 | 2016 | ||||||||||||||
Total stockholders' equity | $ | 1,298,661 | $ | 1,251,781 | |||||||||||
Less: total intangible assets | 420,290 | 422,937 | |||||||||||||
Total tangible stockholders' equity | $ | 878,371 | $ | 828,844 | |||||||||||
Shares outstanding | 66,535,017 | 66,082,283 | |||||||||||||
Book value per share (total stockholders' equity/shares outstanding) | $19.52 | $18.94 | |||||||||||||
Tangible book value per share (total tangible stockholders' equity/shares outstanding) | $13.20 | $12.54 | |||||||||||||
(2) Annualized Return on Average Tangible Equity | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Total average stockholders' equity | $ | 1,310,193 | $ | 1,253,202 | $ | 1,289,973 | $ | 1,232,846 | |||||||
Less: total average intangible assets | 420,667 | 423,413 | 421,628 | 424,595 | |||||||||||
Total average tangible stockholders' equity | $ | 889,526 | $ | 829,789 | $ | 868,345 | $ | 808,251 | |||||||
Net income | $ | 19,483 | $ | 22,568 | $ | 93,949 | $ | 87,802 | |||||||
Annualized return on average tangible equity (net income/total average stockholders' equity) | 8.69 | % | 10.82 | % | 10.82 | % | 10.86 | % | |||||||
(3) Annualized Non-Interest Expense to Average Assets | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Total annualized non-interest expense | $ | 190,744 | $ | 187,583 | $ | 187,822 | $ | 183,778 | |||||||
Average assets | 9,618,177 | 9,449,483 | 9,534,785 | 9,212,553 | |||||||||||
Annualized non-interest expense/average assets | 1.98 | % | 1.99 | % | 1.97 | % | 1.99 | % | |||||||
(4) Efficiency Ratio | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net interest income | $ | 71,900 | $ | 66,617 | $ | 278,202 | $ | 258,567 | |||||||
Non-interest income | 13,301 | 14,485 | 55,697 | 55,393 | |||||||||||
Total income | $ | 85,201 | $ | 81,102 | $ | 333,899 | $ | 313,960 | |||||||
Non-interest expense | 48,078 | 47,152 | 187,822 | 183,778 | |||||||||||
Efficiency ratio (non-interest expense/total income) | 56.43 | % | 58.14 | % | 56.25 | % | 58.54 | % | |||||||
9
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||||||||||||||
Net Interest Margin Analysis | |||||||||||||||||||
Quarterly Average Balances | |||||||||||||||||||
December 31, 2017 | September 30, 2017 | ||||||||||||||||||
Average | Average | Average | Average | ||||||||||||||||
Balance | Interest | Yield/Cost | Balance | Interest | Yield/Cost | ||||||||||||||
Interest-Earning Assets: | |||||||||||||||||||
Deposits | $ | 24,142 | $ | 73 | 1.20% | $ | 22,383 | $ | 54 | 0.95% | |||||||||
Federal funds sold and other short-term investments | 51,186 | 299 | 2.32% | 52,102 | 289 | 2.22% | |||||||||||||
Investment securities (1) | 480,518 | 3,215 | 2.68% | 490,121 | 3,272 | 2.67% | |||||||||||||
Securities available for sale | 1,036,341 | 5,703 | 2.20% | 1,043,123 | 5,488 | 2.10% | |||||||||||||
Federal Home Loan Bank stock | 71,622 | 1,091 | 6.04% | 72,532 | 1,052 | 5.76% | |||||||||||||
Net loans: (2) | |||||||||||||||||||
Total mortgage loans | 4,918,552 | 49,184 | 3.95% | 4,805,991 | 47,692 | 3.92% | |||||||||||||
Total commercial loans | 1,679,544 | 19,023 | 4.45% | 1,644,437 | 18,964 | 4.54% | |||||||||||||
Total consumer loans | 477,277 | 5,008 | 4.16% | 487,039 | 5,083 | 4.14% | |||||||||||||
Total net loans | 7,075,373 | 73,215 | 4.08% | 6,937,467 | 71,739 | 4.08% | |||||||||||||
Total Interest Earning Assets | $ | 8,739,182 | $ | 83,596 | 3.78% | $ | 8,617,728 | $ | 81,894 | 3.75% | |||||||||
Non-Interest Earning Assets: | |||||||||||||||||||
Cash and due from banks | 96,062 | 89,304 | |||||||||||||||||
Other assets | 782,933 | 789,701 | |||||||||||||||||
Total Assets | $ | 9,618,177 | $ | 9,496,733 | |||||||||||||||
Interest-Bearing Liabilities: | |||||||||||||||||||
Demand deposits | $ | 3,542,341 | $ | 3,481 | 0.39% | $ | 3,476,330 | $ | 3,124 | 0.36% | |||||||||
Savings deposits | 1,083,179 | 508 | 0.19% | 1,096,626 | 534 | 0.19% | |||||||||||||
Time deposits | 622,463 | 1,359 | 0.87% | 639,861 | 1,330 | 0.82% | |||||||||||||
Total Deposits | 5,247,983 | 5,348 | 0.40% | 5,212,817 | 4,988 | 0.38% | |||||||||||||
Borrowed funds | 1,545,665 | 6,348 | 1.63% | 1,553,365 | 6,694 | 1.71% | |||||||||||||
Total Interest Bearing Liabilities | 6,793,648 | 11,696 | 0.68% | 6,766,182 | 11,682 | 0.68% | |||||||||||||
Non-Interest Bearing Liabilities: | |||||||||||||||||||
Non-interest bearing deposits | 1,446,185 | 1,360,343 | |||||||||||||||||
Other non-interest bearing liabilities | 68,151 | 70,398 | |||||||||||||||||
Total Non-interest Bearing Liabilities | 1,514,336 | 1,430,741 | |||||||||||||||||
Total Liabilities | 8,307,984 | 8,196,923 | |||||||||||||||||
Stockholders' equity | 1,310,193 | 1,299,810 | |||||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 9,618,177 | $ | 9,496,733 | |||||||||||||||
Net interest income | $ | 71,900 | $ | 70,212 | |||||||||||||||
Net interest rate spread | 3.10% | 3.07% | |||||||||||||||||
Net interest-earning assets | $ | 1,945,534 | $ | 1,851,546 | |||||||||||||||
Net interest margin (3) | 3.25% | 3.22% | |||||||||||||||||
Ratio of interest-earning assets to | |||||||||||||||||||
total interest-bearing liabilities | 1.29x | 1.27x | |||||||||||||||||
(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. | |||||||||||||||||||
10
The following table summarizes the quarterly net interest margin for the previous five quarters. | ||||||||||||||
12/31/17 | 9/30/17 | 6/30/17 | 03/31/17 | 12/31/16 | ||||||||||
4th Qtr. | 3rd Qtr. | 2nd Qtr. | 1st Qtr. | 4th Qtr. | ||||||||||
Interest-Earning Assets: | ||||||||||||||
Securities | 2.49 | % | 2.41 | % | 2.40 | % | 2.40 | % | 2.18 | % | ||||
Net loans | 4.08 | % | 4.08 | % | 4.02 | % | 3.93 | % | 3.93 | % | ||||
Total interest-earning assets | 3.78 | % | 3.75 | % | 3.70 | % | 3.63 | % | 3.58 | % | ||||
Interest-Bearing Liabilities: | ||||||||||||||
Total deposits | 0.40 | % | 0.38 | % | 0.36 | % | 0.35 | % | 0.34 | % | ||||
Total borrowings | 1.63 | % | 1.71 | % | 1.66 | % | 1.63 | % | 1.67 | % | ||||
Total interest-bearing liabilities | 0.68 | % | 0.68 | % | 0.67 | % | 0.65 | % | 0.64 | % | ||||
Interest rate spread | 3.10 | % | 3.07 | % | 3.03 | % | 2.98 | % | 2.94 | % | ||||
Net interest margin | 3.25 | % | 3.22 | % | 3.17 | % | 3.11 | % | 3.07 | % | ||||
Ratio of interest-earning assets to interest-bearing liabilities | 1.29x | 1.27x | 1.26x | 1.26x | 1.26x | |||||||||
11
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY | |||||||||||||||||||
Net Interest Margin Analysis | |||||||||||||||||||
Average Year to Date Balances | |||||||||||||||||||
(Unaudited) (Dollars in Thousands) | |||||||||||||||||||
December 31, 2017 | December 31, 2016 | ||||||||||||||||||
Average | Average | Average | Average | ||||||||||||||||
Balance | Interest | Yield/Cost | Balance | Interest | Yield/Cost | ||||||||||||||
Interest-Earning Assets: | |||||||||||||||||||
Deposits | $ | 19,670 | $ | 199 | 1.00% | $ | 62,704 | $ | 314 | 0.50% | |||||||||
Federal funds sold and other short term investments | 51,790 | 1,071 | 2.07% | 13,010 | 184 | 1.42% | |||||||||||||
Investment securities (1) | 487,616 | 13,027 | 2.67% | 478,901 | 13,208 | 2.76% | |||||||||||||
Securities available for sale | 1,044,703 | 22,384 | 2.14% | 1,008,900 | 19,377 | 1.92% | |||||||||||||
Federal Home Loan Bank stock | 73,995 | 4,061 | 5.49% | 72,928 | 3,513 | 4.82% | |||||||||||||
Net loans: (2) | |||||||||||||||||||
Total mortgage loans | 4,838,342 | 189,896 | 3.92% | 4,661,378 | 180,868 | 3.88% | |||||||||||||
Total commercial loans | 1,640,198 | 72,907 | 4.44% | 1,461,997 | 63,022 | 4.31% | |||||||||||||
Total consumer loans | 492,972 | 20,301 | 4.12% | 546,403 | 21,829 | 3.99% | |||||||||||||
Total net loans | 6,971,512 | 283,104 | 4.06% | 6,669,778 | 265,719 | 3.98% | |||||||||||||
Total Interest Earning Assets | $ | 8,649,286 | $ | 323,846 | 3.74% | $ | 8,306,221 | $ | 302,315 | 3.64% | |||||||||
Non-Interest Earning Assets: | |||||||||||||||||||
Cash and due from banks | 93,894 | 99,441 | |||||||||||||||||
Other assets | 791,605 | 806,891 | |||||||||||||||||
Total Assets | $ | 9,534,785 | $ | 9,212,553 | |||||||||||||||
Interest-Bearing Liabilities: | |||||||||||||||||||
Demand deposits | $ | 3,477,413 | $ | 12,205 | 0.35% | $ | 3,305,269 | $ | 10,106 | 0.31% | |||||||||
Savings deposits | 1,101,103 | 2,092 | 0.19% | 1,047,061 | 1,709 | 0.16% | |||||||||||||
Time deposits | 649,195 | 5,144 | 0.79% | 725,802 | 5,132 | 0.71% | |||||||||||||
Total Deposits | 5,227,711 | 19,441 | 0.37% | 5,078,132 | 16,947 | 0.33% | |||||||||||||
Borrowed funds | 1,581,964 | 26,203 | 1.66% | 1,577,307 | 26,801 | 1.70% | |||||||||||||
Total Interest Bearing Liabilities | $ | 6,809,675 | $ | 45,644 | 0.67% | $ | 6,655,439 | $ | 43,748 | 0.66% | |||||||||
Non-Interest Bearing Liabilities: | |||||||||||||||||||
Non-interest bearing deposits | 1,366,354 | 1,243,224 | |||||||||||||||||
Other non-interest bearing liabilities | 68,783 | 81,044 | |||||||||||||||||
Total Non-interest Bearing Liabilities | 1,435,137 | 1,324,268 | |||||||||||||||||
Total Liabilities | 8,244,812 | 7,979,707 | |||||||||||||||||
Stockholders' equity | 1,289,973 | 1,232,846 | |||||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 9,534,785 | $ | 9,212,553 | |||||||||||||||
Net interest income | 278,202 | 258,567 | |||||||||||||||||
Net interest rate spread | 3.07% | 2.98% | |||||||||||||||||
Net interest-earning assets | $ | 1,839,611 | $ | 1,650,782 | |||||||||||||||
Net interest margin (3) | 3.21% | 3.11% | |||||||||||||||||
Ratio of interest-earning assets to | |||||||||||||||||||
total interest-bearing liabilities | 1.27 x | 1.25 x | |||||||||||||||||
(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. | |||||||||||||||||||
12
The following table summarizes the year-to-date net interest margin for the previous three years. | ||||||||
Years Ended | ||||||||
12/31/17 | 12/31/16 | 12/31/15 | ||||||
Interest-Earning Assets: | ||||||||
Securities | 2.43 | % | 2.24 | % | 2.31 | % | ||
Net loans | 4.06 | % | 3.98 | % | 4.10 | % | ||
Total interest-earning assets | 3.74 | % | 3.64 | % | 3.73 | % | ||
Interest-Bearing Liabilities: | ||||||||
Total deposits | 0.37 | % | 0.33 | % | 0.31 | % | ||
Total borrowings | 1.66 | % | 1.70 | % | 1.71 | % | ||
Total interest-bearing liabilities | 0.67 | % | 0.66 | % | 0.66 | % | ||
Interest rate spread | 3.07 | % | 2.98 | % | 3.07 | % | ||
Net interest margin | 3.21 | % | 3.11 | % | 3.20 | % | ||
Ratio of interest-earning assets to interest-bearing liabilities | 1.27x | 1.25x | 1.24x | |||||
13