Attached files
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| 8-K - 8-K - Investors Bancorp, Inc. | a8kq22018earningsrelease.htm |
Exhibit 99.1
101 JFK Parkway, Short Hills, NJ 07078
news release
Contact: Marianne Wade
(973) 924-5100
investorrelations@investorsbank.com
Investors Bancorp, Inc. Announces Second Quarter Financial Results and Cash Dividend
Short Hills, N.J. - (PR NEWSWIRE) - July 26, 2018 - Investors Bancorp, Inc. (NASDAQ:ISBC) (“Company”), the holding company for Investors Bank (“Bank”), reported net income of $57.1 million, or $0.20 per diluted share, for the three months ended June 30, 2018 compared to $57.9 million, or $0.20 per diluted share, for the three months ended March 31, 2018 and $39.6 million, or $0.14 per diluted share, for the three months ended June 30, 2017.
For the six months ended June 30, 2018, net income totaled $115.0 million, or $0.40 per diluted share, compared to $85.7 million, or $0.29 per diluted share, for the six months ended June 30, 2017.
The Company also announced today that its Board of Directors declared a cash dividend of $0.09 per share to be paid on August 24, 2018 for stockholders of record as of August 10, 2018.
Kevin Cummings, Chairman and CEO, commented, “We delivered another strong quarter at the Bank as year over year earnings per share grew 43% to $0.20 per share. We and our shareholders continue to benefit from our loan diversification and expense control efforts, as well as a lower federal tax rate.”
Mr. Cummings also commented, “We have achieved solid net income despite higher funding costs. We remain committed to our efficient management of capital, evidenced by our repurchase of 3.1 million shares this quarter.”
Performance Highlights
• | Total assets increased $139.2 million, or 0.6%, to $25.36 billion at June 30, 2018 from $25.23 billion at March 31, 2018. |
• | Net loans increased $185.9 million, or 0.9%, to $20.54 billion at June 30, 2018 from $20.35 billion at March 31, 2018. |
• | Total deposits increased $371.1 million, or 2.2%, to $16.92 billion at June 30, 2018 from $16.55 billion at March 31, 2018. |
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• | Net interest income for the three months ended June 30, 2018 was $171.3 million, a 2.5% increase compared to the three months ended June 30, 2017. |
• | Non-interest income for the three months ended June 30, 2018 was $11.5 million, a 23.2% increase compared to the three months ended June 30, 2017. |
• | Efficiency ratio improved to 56.12% for the three months ended June 30, 2018 compared to 60.25% for the three months ended June 30, 2017. |
• | During the three months ended June 30, 2018, the Company repurchased 3.1 million shares of its outstanding common stock for approximately $41.2 million. |
Financial Performance Overview
Second Quarter 2018 compared to First Quarter 2018
For the second quarter of 2018, net income totaled $57.1 million, a decrease of $828,000 as compared to $57.9 million in the first quarter of 2018. The changes in net income on a sequential quarter basis are highlighted below.
Net interest income decreased by $1.2 million, or 0.7%, as compared to the first quarter of 2018. Changes within interest income and expense categories are as follows:
• | Interest expense increased $8.0 million, primarily attributable to the weighted average cost of interest-bearing liabilities which increased 15 basis points to 1.37% for the three months ended June 30, 2018. Additionally, the average balance of total interest-bearing liabilities increased $268.6 million, or 1.4%, to $19.57 billion. |
• | An increase in interest and dividend income of $6.8 million, or 3.0%, to $238.4 million as compared to the first quarter of 2018 primarily attributed to a $337.6 million increase in the average balance of net loans from organic loan growth, offset by paydowns and payoffs, and a 7 basis point increase in the weighted average loan yield to 4.16%, predominately driven by higher average yields on new loan originations. |
• | Prepayment penalties, which are included in interest income, totaled $5.6 million for the three months ended June 30, 2018 as compared to $5.2 million for the three months ended March 31, 2018. |
Net interest margin decreased 5 basis points to 2.80% for the three months ended June 30, 2018 compared to the three months ended March 31, 2018, primarily driven by the higher costs of interest-bearing liabilities.
Total non-interest income was $11.5 million for the three months ended June 30, 2018, an increase of $2.4 million, or 26.0%, as compared to the three months ended March 31, 2018, primarily driven by an increase in gain on securities of $1.2 million and an increase in other income attributed to non-depository investment products of $709,000.
Total non-interest expenses were $102.6 million for the three months ended June 30, 2018, an increase of $1.5 million, or 1.5%, as compared to the first quarter of 2018. For the three months ended June 30, 2018, compensation and fringe benefits increased $1.7 million and advertising and promotional expense increased $1.7 million. These increases were partially offset by office occupancy and equipment expense which decreased $1.9 million.
Income tax expense was $19.1 million for the three months ended June 30, 2018 and $20.1 million for the three months ended March 31, 2018. The effective tax rate was 25.1% for the three months ended June 30,
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2018 and 25.7% for the three months ended March 31, 2018. Additionally, income tax expense includes the excess tax benefits related to the Company’s stock plans of $503,000 for the three months ended June 30, 2018 compared to $811,000 for the three months ended March 31, 2018. On July 1, 2018, the State of New Jersey enacted new legislation that created a temporary surtax effective for tax years 2018 through 2021 and requires companies to file combined tax returns beginning in 2019. The Company is currently evaluating the effect of this new legislation on its net deferred tax asset and future tax expense.
Second Quarter 2018 compared to Second Quarter 2017
For the second quarter of 2018, net income totaled $57.1 million, an increase of $17.5 million as compared to $39.6 million in the second quarter of 2017. The changes in net income on a year over year quarter basis are highlighted below.
On a year over year basis, second quarter of 2018 net interest income increased by $4.2 million, or 2.5%, as compared to the second quarter of 2017 due to:
• | An increase in interest and dividend income of $22.9 million, or 10.6%, to $238.4 million primarily as a result of a $941.0 million increase in the average balance of net loans from organic loan growth and the acquired equipment finance portfolio, offset by paydowns and payoffs. The weighted average yield on net loans increased 18 basis points to 4.16% primarily driven by higher average yields on new loan origination volume and an increase in prepayment penalties. |
• | Prepayment penalties, which are included in interest income, totaled $5.6 million for the three months ended June 30, 2018 as compared to $3.1 million for the three months ended June 30, 2017. |
• | Interest expense increased $18.6 million, or 38.5%, primarily attributed to an increase in the weighted average cost of interest-bearing liabilities of 32 basis points to 1.37% for the three months ended June 30, 2018. Additionally, the average balance of interest-bearing deposits increased $1.06 billion, or 7.9%, to $14.51 billion for the three months ended June 30, 2018 and the average balance of total borrowed funds increased $80.1 million, or 1.6%, to $5.06 billion. |
Net interest margin decreased 7 basis points year over year to 2.80% for the three months ended June 30, 2018 from 2.87% for the three months ended June 30, 2017, primarily driven by the higher costs of interest-bearing liabilities.
Total non-interest income was $11.5 million for the three months ended June 30, 2018, an increase of $2.2 million, or 23.2%, as compared to the three months ended June 30, 2017, primarily driven by an increase in gain on securities of $1.1 million and an increase in other income attributed to non-depository investment products of $1.0 million.
Total non-interest expenses decreased $3.7 million, or 3.5%, year over year. For the three months ended June 30, 2018, professional fees decreased $10.8 million largely attributable to lower consulting fees associated with risk management and compliance efforts. Partially offsetting this decrease, compensation and fringe benefits increased $6.9 million as a result of additions to our staff to support the growth and build out of our risk management and operating infrastructure, as well as normal merit and benefit increases.
Income tax expense was $19.1 million for the three months ended June 30, 2018 and $24.5 million for the three months ended June 30, 2017. The effective tax rate was 25.1% for the three months ended June 30, 2018 and 38.2% for the three months ended June 30, 2017. The decrease in the effective tax rate is primarily driven by the enactment of the Tax Cuts and Jobs Act (“Tax Act”) in December 2017. Additionally, income tax expense includes the excess tax benefits related to the Company’s stock plans of $503,000 for the three months ended June 30, 2018 and $173,000 for the three months ended June 30, 2017.
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Six Months Ended June 30, 2018 compared to Six Months Ended June 30, 2017
Net income increased by $29.4 million year over year to $115.0 million for the six months ended June 30, 2018. The change in net income year over year is the result of the following:
Net interest income increased by $9.6 million, or 2.9%, as compared to the six months ended June 30, 2017 due to:
• | Total interest and dividend income increased by $44.4 million, or 10.4%, to $470.0 million for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017, primarily attributed to a $1.06 billion increase in the average balance of net loans from organic loan growth and the acquired equipment finance portfolio, offset by paydowns and payoffs. The weighted average yield on net loans increased 17 basis points to 4.13% primarily driven by higher average yields on new loan origination volume and an increase in prepayment penalties. |
• | Prepayment penalties, which are included in interest income, totaled $10.9 million for the six months ended June 30, 2018, as compared to $6.2 million for the six months ended June 30, 2017. |
• | Total interest expense increased by $34.8 million, or 38.0%, to $126.2 million for the six months ended June 30, 2018, as compared to the six months ended June 30, 2017, primarily attributed to an increase in the weighted average cost of interest-bearing liabilities of 29 basis points to 1.30% for the six months ended June 30, 2018. In addition, the average balance of total interest-bearing liabilities increased $1.27 billion, or 7.0%, to $19.44 billion for the six months ended June 30, 2018. |
Net interest margin decreased 9 basis points to 2.82% for the six months ended June 30, 2018 from 2.91% for the six months ended June 30, 2017, primarily driven by the higher costs of interest-bearing liabilities.
Total non-interest income was $20.6 million for the six months ended June 30, 2018, an increase of $1.6 million, or 8.2%, as compared to the six months ended June 30, 2017. The increase was driven by a $1.4 million increase in other income attributed to non-depository investment products, an increase of $938,000 in income on bank owned life insurance and an increase of $798,000 in fees and service charges. These increases were partially offset by a $1.3 million decrease in gain on loans, net.
Total non-interest expenses were $203.7 million for the six months ended June 30, 2018, a decrease of $2.2 million, or 1.0%, as compared to the six months of 2017. Professional fees decreased $13.8 million for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017, largely attributable to lower consulting fees associated with risk management and compliance efforts. Partially offsetting this decrease, compensation and fringe benefits increased $8.7 million as a result of additions to our staff to support the growth and build out of our risk management and operating infrastructure, as well as normal merit increases. Office occupancy and equipment expense increased $2.1 million.
Income tax expense was $39.2 million for the six months ended June 30, 2018 compared to $51.7 million for the six months ended June 30, 2017. The effective tax rate was 25.4% for the six months ended June 30, 2018 and 37.6% for the six months ended June 30, 2017. The decrease in the effective tax rate is primarily driven by the enactment of the Tax Act. Additionally, income tax expense includes the excess tax benefits related to the Company’s stock plans of $1.3 million for the six months ended June 30, 2018 and $1.5 million for the six months ended June 30, 2017.
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Asset Quality
Our provision for loan losses is primarily a result of the inherent credit risk in our overall portfolio, the growth and composition of the loan portfolio, and the level of non-accrual loans and charge-offs. For the three months ended June 30, 2018, our provision for loan losses was $4.0 million, compared to $2.5 million for the three months ended March 31, 2018 and $6.0 million for the three months ended June 30, 2017. For the three months ended June 30, 2018, net charge-offs were $4.3 million compared to net charge-offs of $2.3 million for the three months ended March 31, 2018 and net charge-offs of $6.9 million for the three months ended June 30, 2017. Our provision for loan losses was $6.5 million for the six months ended June 30, 2018 compared with $10.0 million for the six months ended June 30, 2017. For the six months ended June 30, 2018, net charge-offs were $6.6 million compared to $8.3 million for the six months ended June 30, 2017.
Our accruing past due loans and non-accrual loans discussed below exclude certain purchased credit impaired (“PCI”) loans, primarily consisting of loans recorded in the Company’s acquisitions. Under U.S. GAAP, the PCI loans (acquired at a discount that is due, in part, to credit quality) are not subject to delinquency classification in the same manner as loans originated by the Bank.
Total non-accrual loans were $134.6 million, or 0.65% of total loans, at June 30, 2018 compared to $136.0 million, or 0.66% of total loans, at March 31, 2018 and $135.7 million, or 0.68% of total loans, at December 31, 2017. We continue to proactively and diligently work to resolve our troubled loans.
At June 30, 2018, there were $40.2 million of loans deemed as troubled debt restructured loans (“TDRs”), of which $27.3 million were residential and consumer loans, $11.3 million were commercial and industrial loans, $904,000 were multi-family loans and $634,000 were commercial real estate loans. TDRs of $12.8 million were classified as accruing and $27.4 million were classified as non-accrual at June 30, 2018.
The following table sets forth non-accrual loans and accruing past due loans (excluding PCI loans and loans held for sale) on the dates indicated as well as certain asset quality ratios.
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June 30, 2018 | March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||||||||||||||||||||||||||||||
# of loans | amount | # of loans | amount | # of loans | amount | # of loans | amount | # of loans | amount | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||
Accruing past due loans: | ||||||||||||||||||||||||||||||||||
30 to 59 days past due: | ||||||||||||||||||||||||||||||||||
Residential and consumer | 101 | $ | 20.6 | 97 | $ | 16.9 | 126 | $ | 20.0 | 108 | $ | 21.5 | 86 | $ | 14.2 | |||||||||||||||||||
Construction | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Multi-family | 6 | 27.4 | 3 | 5.0 | 5 | 6.3 | 10 | 15.8 | 4 | 10.4 | ||||||||||||||||||||||||
Commercial real estate | 9 | 8.7 | 5 | 5.7 | 5 | 4.6 | 6 | 32.3 | 2 | 1.9 | ||||||||||||||||||||||||
Commercial and industrial | 7 | 2.9 | 6 | 3.4 | 11 | 4.3 | 8 | 0.6 | 6 | 0.6 | ||||||||||||||||||||||||
Total 30 to 59 days past due | 123 | 59.6 | 111 | 31.0 | 147 | 35.2 | 132 | 70.2 | 98 | 27.1 | ||||||||||||||||||||||||
60 to 89 days past due: | ||||||||||||||||||||||||||||||||||
Residential and consumer | 37 | 9.5 | 46 | 7.7 | 50 | 8.2 | 47 | 7.7 | 35 | 5.8 | ||||||||||||||||||||||||
Construction | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Multi-family | — | — | — | — | 2 | 7.7 | — | — | — | — | ||||||||||||||||||||||||
Commercial real estate | — | — | 1 | 0.3 | 2 | 0.8 | 2 | 1.0 | — | — | ||||||||||||||||||||||||
Commercial and industrial | 1 | 2.1 | 1 | 0.1 | — | — | 2 | 1.4 | 1 | 0.3 | ||||||||||||||||||||||||
Total 60 to 89 days past due | 38 | 11.6 | 48 | 8.1 | 54 | 16.7 | 51 | 10.1 | 36 | 6.1 | ||||||||||||||||||||||||
Total accruing past due loans | 161 | $ | 71.2 | 159 | $ | 39.1 | 201 | $ | 51.9 | 183 | $ | 80.3 | 134 | $ | 33.2 | |||||||||||||||||||
Non-accrual: | ||||||||||||||||||||||||||||||||||
Residential and consumer | 375 | $ | 69.2 | 390 | $ | 72.5 | 427 | $ | 76.4 | 417 | $ | 74.3 | 447 | $ | 81.0 | |||||||||||||||||||
Construction | 1 | 0.3 | 1 | 0.3 | 1 | 0.3 | — | — | — | — | ||||||||||||||||||||||||
Multi-family | 9 | 19.5 | 8 | 20.2 | 5 | 15.0 | 4 | 14.2 | 6 | 19.0 | ||||||||||||||||||||||||
Commercial real estate | 36 | 16.7 | 38 | 19.7 | 37 | 34.0 | 31 | 35.3 | 36 | 75.6 | ||||||||||||||||||||||||
Commercial and industrial | 13 | 28.9 | 19 | 23.3 | 11 | 10.0 | 6 | 1.9 | 5 | 1.8 | ||||||||||||||||||||||||
Total non-accrual loans | 434 | $ | 134.6 | 456 | $ | 136.0 | 481 | $ | 135.7 | 458 | $ | 125.7 | 494 | $ | 177.4 | |||||||||||||||||||
Accruing troubled debt restructured loans | 56 | $ | 12.8 | 54 | $ | 12.4 | 49 | $ | 11.0 | 58 | $ | 13.4 | 45 | $ | 11.7 | |||||||||||||||||||
Non-accrual loans to total loans | 0.65 | % | 0.66 | % | 0.68 | % | 0.63 | % | 0.89 | % | ||||||||||||||||||||||||
Allowance for loan losses as a percent of non-accrual loans | 171.46 | % | 169.97 | % | 170.17 | % | 183.09 | % | 129.68 | % | ||||||||||||||||||||||||
Allowance for loan losses as a percent of total loans | 1.11 | % | 1.12 | % | 1.15 | % | 1.15 | % | 1.16 | % | ||||||||||||||||||||||||
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Balance Sheet Summary
Total assets increased $235.6 million, or 0.9%, to $25.36 billion at June 30, 2018 from December 31, 2017. Net loans increased $685.0 million, or 3.5%, to $20.54 billion at June 30, 2018, securities decreased $202.4 million, or 5.3%, to $3.58 billion at June 30, 2018, and cash decreased $422.4 million to $196.0 million at June 30, 2018 from December 31, 2017.
The detail of the loan portfolio (including PCI loans) is below:
June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||
(In thousands) | |||||||||
Commercial Loans: | |||||||||
Multi-family loans | $ | 7,903,469 | 7,844,123 | 7,802,835 | |||||
Commercial real estate loans | 4,654,592 | 4,593,577 | 4,548,101 | ||||||
Commercial and industrial loans | 2,147,430 | 2,024,903 | 1,625,375 | ||||||
Construction loans | 270,892 | 390,853 | 416,883 | ||||||
Total commercial loans | 14,976,383 | 14,853,456 | 14,393,194 | ||||||
Residential mortgage loans | 5,140,556 | 5,083,779 | 5,026,517 | ||||||
Consumer and other | 668,127 | 665,647 | 671,137 | ||||||
Total Loans | 20,785,066 | 20,602,882 | 20,090,848 | ||||||
Deferred fees and premiums on purchased loans, net | (17,141 | ) | (20,506 | ) | (7,778 | ) | |||
Allowance for loan losses | (230,838 | ) | (231,144 | ) | (230,969 | ) | |||
Net loans | $ | 20,537,087 | 20,351,232 | 19,852,101 | |||||
During the six months ended June 30, 2018, we originated $745.0 million in multi-family loans, $440.3 million in commercial and industrial loans, $308.1 million in commercial real estate loans, $288.8 million in residential loans, $67.3 million in construction loans and $41.9 million in consumer and other loans. This increase in loans reflects our continued focus on generating multi-family loans, commercial real estate loans and commercial and industrial loans, which was partially offset by pay downs and payoffs of loans. During February 2018, we completed the acquisition of a $345.8 million equipment finance portfolio, comprised of both loans and leases, which is classified within our commercial and industrial portfolio. Our loans are primarily on properties and businesses located in New Jersey and New York.
We also purchased mortgage loans from correspondent entities including other banks and mortgage bankers. Our agreements with these correspondent entities require them to originate loans that adhere to our underwriting standards. During the six months ended June 30, 2018, we purchased loans totaling $170.9 million from these entities. In addition to the loans originated for our portfolio, our mortgage subsidiary, Investors Home Mortgage Co., originated residential mortgage loans for sale to third parties totaling $19.3 million during the six months ended June 30, 2018.
The allowance for loan losses decreased by $131,000 to $230.8 million at June 30, 2018 from $231.0 million at December 31, 2017. Our allowance for loan losses is impacted by the inherent credit risk in our overall portfolio, the growth and composition of the loan portfolio, and the level of non-accrual loans and charge-offs. Future increases in the allowance for loan losses may be necessary based on the growth and composition of the loan portfolio, the level of loan delinquency and the economic conditions in our lending area. At June 30, 2018, our allowance for loan losses as a percent of total loans was 1.11%.
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Securities decreased by $202.4 million, or 5.3%, to $3.58 billion at June 30, 2018 from $3.78 billion at December 31, 2017. This decrease was a result of paydowns, partially offset by purchases. Bank owned life insurance increased $53.2 million to $208.8 million at June 30, 2018. During the six months ended June 30, 2018, we purchased $125.0 million of bank owned life insurance and surrendered $71.1 million of an older policy. The proceeds from the surrendered policy are included as a receivable in other assets and are expected to be received in the third quarter. Goodwill and intangible assets increased $3.0 million to $100.6 million at June 30, 2018 primarily due to the acquisition of the equipment finance portfolio.
Deposits decreased by $440.3 million, or 2.5%, from $17.36 billion at December 31, 2017 to $16.92 billion at June 30, 2018 primarily driven by decreases in interest-bearing checking and money market accounts, partially offset by an increase in time deposits. Checking accounts decreased $678.9 million to $6.65 billion at June 30, 2018 from $7.33 billion at December 31, 2017. Core deposits (savings, checking and money market) represented approximately 75% of our total deposit portfolio at June 30, 2018 compared to 80% at December 31, 2017.
Borrowed funds increased by $683.5 million, or 15.3%, to $5.14 billion at June 30, 2018 from $4.46 billion at December 31, 2017 to fund the growth of the loan portfolio as deposits declined.
Stockholders’ equity decreased by $34.5 million to $3.09 billion at June 30, 2018 from $3.13 billion at December 31, 2017, primarily attributed to the repurchase of 7.6 million shares of common stock for $103.0 million and cash dividends of $0.18 per share totaling $54.5 million during the six months ended June 30, 2018. These decreases were partially offset by net income of $115.0 million and share-based plan activity of $17.6 million for the six months ended June 30, 2018. The Bank remains significantly above FDIC “well capitalized” standards, with a Tier 1 Leverage Ratio of 10.91% at June 30, 2018.
About the Company
Investors Bancorp, Inc. is the holding company for Investors Bank, which as of June 30, 2018 operated from its corporate headquarters in Short Hills, New Jersey and 151 branches located throughout New Jersey and New York.
Earnings Conference Call July 27, 2018 at 11:00 a.m. (ET)
The Company, as previously announced, will host an earnings conference call on Friday, July 27, 2018 at 11:00 a.m. (ET). The toll-free dial-in number is: (866) 218-2404. Callers who pre-register will bypass the live operator and may avoid any delays in joining the conference call. Participants will immediately receive an online confirmation, an email and a calendar invitation for the event.
Conference Call Pre-registration link: http://dpregister.com/10121999
A telephone replay will be available beginning on July 27, 2018 from 1:00 p.m. (ET) through 9:00 a.m. (ET) on October 26, 2018. The replay number is (877) 344-7529, password 10121999. The conference call will also be simultaneously webcast on the Company’s website www.investorsbank.com and archived for one year.
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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, as described in the “Risk Factors” disclosures included in our Annual Report on Form 10-K, as supplemented in quarterly reports on Form 10-Q, including, but not limited to, those related to the real estate and economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.
The Company wishes to caution readers not to place undue reliance on any such forward looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions that 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.
Non-GAAP Financial Measures
We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. We utilize these measures for internal planning and forecasting purposes. We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.
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INVESTORS BANCORP, INC. AND SUBSIDIARY | |||||||||
Consolidated Balance Sheets | |||||||||
June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||
(unaudited) | (unaudited) | (audited) | |||||||
Assets | (Dollars in thousands) | ||||||||
Cash and cash equivalents | $ | 195,995 | 153,439 | 618,394 | |||||
Equity securities | 5,753 | 5,677 | 5,701 | ||||||
Debt securities available-for-sale, at estimated fair value | 1,915,265 | 1,940,588 | 1,982,026 | ||||||
Debt securities held-to-maturity, net (estimated fair value of $1,659,095, $1,717,381 and $1,820,125 at June 30, 2018, March 31, 2018 and December 31, 2017, respectively) | 1,660,967 | 1,715,531 | 1,796,621 | ||||||
Loans receivable, net | 20,537,087 | 20,351,232 | 19,852,101 | ||||||
Loans held-for-sale | 5,949 | 1,011 | 5,185 | ||||||
Federal Home Loan Bank stock | 247,410 | 264,919 | 231,544 | ||||||
Accrued interest receivable | 73,944 | 74,200 | 72,855 | ||||||
Other real estate owned | 5,190 | 4,873 | 5,830 | ||||||
Office properties and equipment, net | 176,546 | 177,368 | 180,231 | ||||||
Net deferred tax asset | 131,761 | 130,250 | 121,663 | ||||||
Bank owned life insurance | 208,818 | 207,274 | 155,635 | ||||||
Goodwill and intangible assets | 100,621 | 101,609 | 97,665 | ||||||
Other assets | 99,586 | 97,706 | 3,793 | ||||||
Total assets | $ | 25,364,892 | 25,225,677 | 25,129,244 | |||||
Liabilities and Stockholders’ Equity | |||||||||
Liabilities: | |||||||||
Deposits | $ | 16,917,405 | 16,546,325 | 17,357,697 | |||||
Borrowed funds | 5,144,987 | 5,361,260 | 4,461,533 | ||||||
Advance payments by borrowers for taxes and insurance | 116,482 | 128,745 | 104,308 | ||||||
Other liabilities | 95,035 | 97,266 | 80,255 | ||||||
Total liabilities | 22,273,909 | 22,133,596 | 22,003,793 | ||||||
Stockholders’ equity | 3,090,983 | 3,092,081 | 3,125,451 | ||||||
Total liabilities and stockholders’ equity | $ | 25,364,892 | 25,225,677 | 25,129,244 | |||||
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INVESTORS BANCORP, INC. AND SUBSIDIARY | ||||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||
June 30, 2018 | March 31, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | ||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Interest and dividend income: | ||||||||||||||||||||
Loans receivable and loans held-for-sale | $ | 211,791 | 204,722 | 192,891 | 416,513 | 378,852 | ||||||||||||||
Securities: | ||||||||||||||||||||
GSE obligations | 273 | 274 | 28 | 547 | 36 | |||||||||||||||
Mortgage-backed securities | 19,633 | 20,022 | 17,274 | 39,655 | 33,983 | |||||||||||||||
Equity | 33 | 35 | 30 | 68 | 78 | |||||||||||||||
Municipal bonds and other debt | 2,432 | 2,258 | 2,136 | 4,690 | 6,204 | |||||||||||||||
Interest-bearing deposits | 409 | 455 | 177 | 864 | 284 | |||||||||||||||
Federal Home Loan Bank stock | 3,831 | 3,801 | 2,972 | 7,632 | 6,165 | |||||||||||||||
Total interest and dividend income | 238,402 | 231,567 | 215,508 | 469,969 | 425,602 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
Deposits | 42,067 | 36,376 | 25,336 | 78,443 | 47,520 | |||||||||||||||
Borrowed funds | 25,034 | 22,707 | 23,116 | 47,741 | 43,907 | |||||||||||||||
Total interest expense | 67,101 | 59,083 | 48,452 | 126,184 | 91,427 | |||||||||||||||
Net interest income | 171,301 | 172,484 | 167,056 | 343,785 | 334,175 | |||||||||||||||
Provision for loan losses | 4,000 | 2,500 | 6,000 | 6,500 | 10,000 | |||||||||||||||
Net interest income after provision for loan losses | 167,301 | 169,984 | 161,056 | 337,285 | 324,175 | |||||||||||||||
Non-interest income: | ||||||||||||||||||||
Fees and service charges | 5,230 | 5,458 | 4,962 | 10,688 | 9,890 | |||||||||||||||
Income on bank owned life insurance | 1,543 | 1,286 | 1,166 | 2,829 | 1,891 | |||||||||||||||
Gain on loans, net | 663 | 257 | 1,206 | 920 | 2,198 | |||||||||||||||
Gain (loss) on securities, net | 1,147 | (46 | ) | 48 | 1,101 | 1,275 | ||||||||||||||
Gain on sales of other real estate owned, net | 184 | 153 | 251 | 337 | 425 | |||||||||||||||
Other income | 2,711 | 2,002 | 1,687 | 4,713 | 3,344 | |||||||||||||||
Total non-interest income | 11,478 | 9,110 | 9,320 | 20,588 | 19,023 | |||||||||||||||
Non-interest expense: | ||||||||||||||||||||
Compensation and fringe benefits | 60,799 | 59,061 | 53,881 | 119,860 | 111,155 | |||||||||||||||
Advertising and promotional expense | 3,807 | 2,087 | 4,516 | 5,894 | 6,601 | |||||||||||||||
Office occupancy and equipment expense | 14,717 | 16,578 | 14,333 | 31,295 | 29,180 | |||||||||||||||
Federal insurance premiums | 4,525 | 4,500 | 3,900 | 9,025 | 7,610 | |||||||||||||||
General and administrative | 693 | 500 | 842 | 1,193 | 1,576 | |||||||||||||||
Professional fees | 3,801 | 4,402 | 14,580 | 8,203 | 22,001 | |||||||||||||||
Data processing and communication | 7,106 | 6,123 | 5,914 | 13,229 | 11,774 | |||||||||||||||
Other operating expenses | 7,136 | 7,834 | 8,302 | 14,970 | 15,929 | |||||||||||||||
Total non-interest expenses | 102,584 | 101,085 | 106,268 | 203,669 | 205,826 | |||||||||||||||
Income before income tax expense | 76,195 | 78,009 | 64,108 | 154,204 | 137,372 | |||||||||||||||
Income tax expense | 19,098 | 20,084 | 24,475 | 39,182 | 51,719 | |||||||||||||||
Net income | $ | 57,097 | 57,925 | 39,633 | 115,022 | 85,653 | ||||||||||||||
Basic earnings per share | $0.20 | 0.20 | 0.14 | 0.40 | 0.29 | |||||||||||||||
Diluted earnings per share | $0.20 | 0.20 | 0.14 | 0.40 | 0.29 | |||||||||||||||
Basic weighted average shares outstanding | 284,502,818 | 287,685,531 | 291,127,119 | 286,085,380 | 291,156,097 | |||||||||||||||
Diluted weighted average shares outstanding | 285,733,542 | 289,131,916 | 293,130,285 | 287,413,166 | 293,264,007 | |||||||||||||||
11
INVESTORS BANCORP, INC. AND SUBSIDIARY | ||||||||||||||||||||||||||||
Average Balance Sheet and Yield/Rate Information | ||||||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||||||
June 30, 2018 | March 31, 2018 | June 30, 2017 | ||||||||||||||||||||||||||
Average Outstanding Balance | Interest Earned/Paid | Weighted Average Yield/Rate | Average Outstanding Balance | Interest Earned/Paid | Weighted Average Yield/Rate | Average Outstanding Balance | Interest Earned/Paid | Weighted Average Yield/Rate | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||
Interest-earning cash accounts | $ | 178,293 | 409 | 0.92 | % | $ | 199,283 | 455 | 0.91 | % | $ | 162,787 | 177 | 0.43 | % | |||||||||||||
Equity securities | 5,714 | 33 | 2.31 | % | 5,702 | 35 | 2.46 | % | 5,509 | 30 | 2.18 | % | ||||||||||||||||
Debt securities available-for-sale | 1,990,306 | 10,829 | 2.18 | % | 2,020,833 | 10,852 | 2.15 | % | 1,793,254 | 8,959 | 2.00 | % | ||||||||||||||||
Debt securities held-to-maturity | 1,693,025 | 11,509 | 2.72 | % | 1,759,737 | 11,702 | 2.66 | % | 1,672,517 | 10,479 | 2.51 | % | ||||||||||||||||
Net loans | 20,348,913 | 211,791 | 4.16 | % | 20,011,353 | 204,722 | 4.09 | % | 19,407,939 | 192,891 | 3.98 | % | ||||||||||||||||
Federal Home Loan Bank stock | 255,362 | 3,831 | 6.00 | % | 239,100 | 3,801 | 6.36 | % | 259,497 | 2,972 | 4.58 | % | ||||||||||||||||
Total interest-earning assets | 24,471,613 | 238,402 | 3.90 | % | 24,236,008 | 231,567 | 3.82 | % | 23,301,503 | 215,508 | 3.70 | % | ||||||||||||||||
Non-interest earning assets | 741,974 | 697,486 | 761,432 | |||||||||||||||||||||||||
Total assets | $ | 25,213,587 | $ | 24,933,494 | $ | 24,062,935 | ||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||
Savings | $ | 2,146,880 | 2,953 | 0.55 | % | $ | 2,331,475 | 3,290 | 0.56 | % | $ | 2,120,219 | 2,045 | 0.39 | % | |||||||||||||
Interest-bearing checking | 4,487,247 | 14,057 | 1.25 | % | 4,812,897 | 13,579 | 1.13 | % | 4,266,755 | 8,346 | 0.78 | % | ||||||||||||||||
Money market accounts | 3,858,022 | 10,497 | 1.09 | % | 4,091,149 | 9,292 | 0.91 | % | 4,175,137 | 8,104 | 0.78 | % | ||||||||||||||||
Certificates of deposit | 4,017,105 | 14,560 | 1.45 | % | 3,398,732 | 10,215 | 1.20 | % | 2,887,454 | 6,841 | 0.95 | % | ||||||||||||||||
Total interest-bearing deposits | 14,509,254 | 42,067 | 1.16 | % | 14,634,253 | 36,376 | 0.99 | % | 13,449,565 | 25,336 | 0.75 | % | ||||||||||||||||
Borrowed funds | 5,060,767 | 25,034 | 1.98 | % | 4,667,160 | 22,707 | 1.95 | % | 4,980,705 | 23,116 | 1.86 | % | ||||||||||||||||
Total interest-bearing liabilities | 19,570,021 | 67,101 | 1.37 | % | 19,301,413 | 59,083 | 1.22 | % | 18,430,270 | 48,452 | 1.05 | % | ||||||||||||||||
Non-interest-bearing liabilities | 2,535,093 | 2,508,888 | 2,458,208 | |||||||||||||||||||||||||
Total liabilities | 22,105,114 | 21,810,301 | 20,888,478 | |||||||||||||||||||||||||
Stockholders’ equity | 3,108,473 | 3,123,193 | 3,174,457 | |||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 25,213,587 | $ | 24,933,494 | $ | 24,062,935 | ||||||||||||||||||||||
Net interest income | $ | 171,301 | $ | 172,484 | $ | 167,056 | ||||||||||||||||||||||
Net interest rate spread | 2.53 | % | 2.60 | % | 2.65 | % | ||||||||||||||||||||||
Net interest earning assets | $ | 4,901,592 | $ | 4,934,595 | $ | 4,871,233 | ||||||||||||||||||||||
Net interest margin | 2.80 | % | 2.85 | % | 2.87 | % | ||||||||||||||||||||||
Ratio of interest-earning assets to total interest-bearing liabilities | 1.25 | X | 1.26 | X | 1.26 | X | ||||||||||||||||||||||
12
INVESTORS BANCORP, INC. AND SUBSIDIARY | |||||||||||||||||||
Average Balance Sheet and Yield/Rate Information | |||||||||||||||||||
For the Six Months Ended | |||||||||||||||||||
June 30, 2018 | June 30, 2017 | ||||||||||||||||||
Average Outstanding Balance | Interest Earned/Paid | Weighted Average Yield/Rate | Average Outstanding Balance | Interest Earned/Paid | Weighted Average Yield/Rate | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||
Interest-earning cash accounts | $ | 188,730 | 864 | 0.92 | % | $ | 153,516 | 284 | 0.37 | % | |||||||||
Equity securities | 5,708 | 68 | 2.38 | % | 5,768 | 78 | 2.70 | % | |||||||||||
Debt securities available-for-sale | 2,005,485 | 21,681 | 2.16 | % | 1,754,586 | 17,207 | 1.96 | % | |||||||||||
Debt securities held-to-maturity | 1,726,197 | 23,211 | 2.69 | % | 1,698,489 | 23,016 | 2.71 | % | |||||||||||
Net loans | 20,181,066 | 416,513 | 4.13 | % | 19,118,385 | 378,852 | 3.96 | % | |||||||||||
Federal Home Loan Bank stock | 247,276 | 7,632 | 6.17 | % | 250,377 | 6,165 | 4.92 | % | |||||||||||
Total interest-earning assets | 24,354,462 | 469,969 | 3.86 | % | 22,981,121 | 425,602 | 3.70 | % | |||||||||||
Non-interest earning assets | 719,852 | 758,317 | |||||||||||||||||
Total assets | $ | 25,074,314 | $ | 23,739,438 | |||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||
Savings | $ | 2,238,667 | 6,243 | 0.56 | % | $ | 2,113,192 | 3,879 | 0.37 | % | |||||||||
Interest-bearing checking | 4,649,173 | 27,636 | 1.19 | % | 4,185,870 | 14,829 | 0.71 | % | |||||||||||
Money market accounts | 3,973,942 | 19,789 | 1.00 | % | 4,177,217 | 15,294 | 0.73 | % | |||||||||||
Certificates of deposit | 3,709,627 | 24,775 | 1.34 | % | 2,886,273 | 13,518 | 0.94 | % | |||||||||||
Total interest bearing deposits | 14,571,409 | 78,443 | 1.08 | % | 13,362,552 | 47,520 | 0.71 | % | |||||||||||
Borrowed funds | 4,865,051 | 47,741 | 1.96 | % | 4,801,159 | 43,907 | 1.83 | % | |||||||||||
Total interest-bearing liabilities | 19,436,460 | 126,184 | 1.30 | % | 18,163,711 | 91,427 | 1.00 | % | |||||||||||
Non-interest-bearing liabilities | 2,522,062 | 2,412,101 | |||||||||||||||||
Total liabilities | 21,958,522 | 20,575,812 | |||||||||||||||||
Stockholders’ equity | 3,115,792 | 3,163,626 | |||||||||||||||||
Total liabilities and stockholders’ equity | $ | 25,074,314 | $ | 23,739,438 | |||||||||||||||
Net interest income | $ | 343,785 | $ | 334,175 | |||||||||||||||
Net interest rate spread | 2.56 | % | 2.70 | % | |||||||||||||||
Net interest earning assets | $ | 4,918,002 | $ | 4,817,410 | |||||||||||||||
Net interest margin | 2.82 | % | 2.91 | % | |||||||||||||||
Ratio of interest-earning assets to total interest-bearing liabilities | 1.25 | X | 1.27 | X | |||||||||||||||
13
INVESTORS BANCORP, INC. AND SUBSIDIARY | |||||||||||||||||
Selected Performance Ratios | |||||||||||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||||||||||
June 30, 2018 | March 31, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
Return on average assets | 0.91 | % | 0.93 | % | 0.66 | % | 0.92 | % | 0.72 | % | |||||||
Return on average equity | 7.35 | % | 7.42 | % | 4.99 | % | 7.38 | % | 5.41 | % | |||||||
Return on average tangible equity | 7.59 | % | 7.67 | % | 5.16 | % | 7.63 | % | 5.59 | % | |||||||
Interest rate spread | 2.53 | % | 2.60 | % | 2.65 | % | 2.56 | % | 2.70 | % | |||||||
Net interest margin | 2.80 | % | 2.85 | % | 2.87 | % | 2.82 | % | 2.91 | % | |||||||
Efficiency ratio | 56.12 | % | 55.67 | % | 60.25 | % | 55.90 | % | 58.27 | % | |||||||
Non-interest expense to average total assets | 1.63 | % | 1.62 | % | 1.77 | % | 1.62 | % | 1.73 | % | |||||||
Average interest-earning assets to average interest-bearing liabilities | 1.25 | 1.26 | 1.26 | 1.25 | 1.27 | ||||||||||||
INVESTORS BANCORP, INC. AND SUBSIDIARY | |||||||||||||||||
Selected Financial Ratios and Other Data | |||||||||||||||||
June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||||||||||
Asset Quality Ratios: | |||||||||||||||||
Non-performing assets as a percent of total assets | 0.60 | % | 0.61 | % | 0.61 | % | |||||||||||
Non-performing loans as a percent of total loans | 0.71 | % | 0.72 | % | 0.73 | % | |||||||||||
Allowance for loan losses as a percent of non-accrual loans | 171.46 | % | 169.97 | % | 170.17 | % | |||||||||||
Allowance for loan losses as a percent of total loans | 1.11 | % | 1.12 | % | 1.15 | % | |||||||||||
Capital Ratios: | |||||||||||||||||
Tier 1 Leverage Ratio (1) | 10.91 | % | 11.09 | % | 11.00 | % | |||||||||||
Common equity tier 1 risk-based (1) | 13.27 | % | 13.58 | % | 13.94 | % | |||||||||||
Tier 1 Risk-Based Capital (1) | 13.27 | % | 13.58 | % | 13.94 | % | |||||||||||
Total Risk-Based Capital (1) | 14.39 | % | 14.73 | % | 15.13 | % | |||||||||||
Equity to total assets (period end) | 12.19 | % | 12.26 | % | 12.44 | % | |||||||||||
Average equity to average assets | 12.33 | % | 12.53 | % | 12.74 | % | |||||||||||
Tangible capital to tangible assets (2) | 11.84 | % | 11.90 | % | 12.10 | % | |||||||||||
Book value per common share (2) | $ | 10.77 | $ | 10.68 | $ | 10.64 | |||||||||||
Tangible book value per common share (2) | $ | 10.42 | $ | 10.33 | $ | 10.31 | |||||||||||
Other Data: | |||||||||||||||||
Number of full service offices | 151 | 150 | 156 | ||||||||||||||
Full time equivalent employees | 1,964 | 1,901 | 1,931 | ||||||||||||||
(1) Ratios are for Investors Bank and do not include capital retained at the holding company level. | |||||||||||||||||
(2) See Non-GAAP Reconciliation. | |||||||||||||||||
14
Investors Bancorp, Inc. | |||||||||||
Non-GAAP Reconciliation | |||||||||||
(Dollars in thousands, except share data) | |||||||||||
Book Value and Tangible Book Value per Share Computation | |||||||||||
June 30, 2018 | March 31, 2018 | December 31, 2017 | |||||||||
Total stockholders’ equity | $ | 3,090,983 | 3,092,081 | 3,125,451 | |||||||
Goodwill and intangible assets | 100,621 | 101,609 | 97,665 | ||||||||
Tangible stockholders’ equity | $ | 2,990,362 | 2,990,472 | 3,027,786 | |||||||
Book Value per Share Computation | |||||||||||
Common stock issued | 359,070,852 | 359,070,852 | 359,070,852 | ||||||||
Treasury shares | (60,029,302 | ) | (57,274,414 | ) | (52,944,765 | ) | |||||
Shares outstanding | 299,041,550 | 301,796,438 | 306,126,087 | ||||||||
Unallocated ESOP shares | (12,079,298 | ) | (12,197,723 | ) | (12,316,149 | ) | |||||
Book value shares | 286,962,252 | 289,598,715 | 293,809,938 | ||||||||
Book Value per Share | $ | 10.77 | $ | 10.68 | $ | 10.64 | |||||
Tangible Book Value per Share | $ | 10.42 | $ | 10.33 | $ | 10.31 | |||||
Total assets | $ | 25,364,892 | 25,225,677 | 25,129,244 | |||||||
Goodwill and intangible assets | 100,621 | 101,609 | 97,665 | ||||||||
Tangible assets | $ | 25,264,271 | 25,124,068 | 25,031,579 | |||||||
Tangible capital to tangible assets | 11.84 | % | 11.90 | % | 12.10 | % | |||||
15