Provident Financial Services, Inc. Announces Quarterly Earnings, Fourth Stock Repurchase Program and Declares Increased Quarterly Cash Dividend28 April 2006
Provident Financial Services, Inc. (NYSE: PFS) (the "Company") reported basic and diluted earnings per share of $0.22 and net income of $13.8 million for the quarter ended March 31, 2006. This compares with basic and diluted earnings per share of $0.22 and net income of $15.0 million for the same period in 2005.
Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "In the face of the continued flat yield curve, we have maintained a short-term strategy of foregoing asset growth in favor of preserving net interest margin. We believe this strategy met with success in the first quarter as evidenced by a four basis point increase in our margin as compared to the trailing quarter. While both loan and deposit balances remained essentially unchanged, we pursued our practice of using cash flows from our securities portfolios to pay down wholesale borrowings. This, in conjunction with our ongoing share repurchase activity, resulted in a 1.7% decrease in total assets since year- end 2005." Pantozzi continued, "Asset growth for its own sake, particularly in an unfavorable interest rate climate, has remained an unattractive option for us and for long-term stockholder value. We have chosen to incrementally reposition our balance sheet to benefit from the eventual re-emergence of a more normalized yield curve. We continue to make progress in our efforts to increase non-interest income and to control non-interest expenses. Many of the initiatives we put in place in 2005 contributed to a 23.8% increase in fee income and a 3.7% decrease in total overhead costs this quarter as compared to the same period last year. I am also pleased to note that at quarter's end our asset quality remained excellent and our loan pipeline remained strong." Pantozzi concluded, "As a complement to all of these initiatives, we have continued to pursue our capital management strategy as witnessed by the Board of Directors' approval of our sixth quarterly cash dividend increase and our fourth stock repurchase program."
Authorization of Fourth Stock Repurchase Program
The Company's Board of Directors authorized the Company's fourth stock repurchase program. This program will commence upon completion of the Company's current repurchase program, under which 1.1 million shares remain to be purchased. Under the new authorization, the Company may repurchase 5% of the amount of shares of common stock currently outstanding, or approximately 3.4 million shares. Repurchases will be made from time to time and will be effectuated through open market purchases, unsolicited negotiated transactions, or in such other manner deemed appropriate by management. Completion of the repurchase program will not be limited to a specific time period. The Company's repurchase activities will take into account SEC safe harbor rules and guidance for issuer repurchases.
Increase in Quarterly Dividend
The Company's Board of Directors declared a quarterly cash dividend of $0.10 per common share, an increase of 11.1% from the prior quarter's cash dividend of $0.09 per share. The dividend is payable on May 31, 2006 to stockholders of record as of the close of business on May 15, 2006. Since declaring its first cash dividend in the second quarter of 2003, the Company has increased the quarterly cash dividend six times for a total of 150%.
Balance Sheet Summary
Total assets were $5.95 billion at March 31, 2006, compared to $6.05 billion at December 31, 2005, as reductions in securities balances were used to fund repayments of borrowings and common stock repurchases.
Total investments decreased $87.0 million, or 5.7%, during the quarter ended March 31, 2006. The decrease was primarily attributable to paydowns on mortgage-backed securities and scheduled maturities of debt securities.
The Company's net loans decreased $7.7 million, or 0.2%, to $3.70 billion during the three months ended March 31, 2006, as originations of $288.8 million were outpaced by principal repayments. Net decreases of $31.4 million in residential mortgage loans and $6.0 million in commercial loans were partially offset by increases of $14.1 million in commercial and multi-family mortgage loans, $9.6 million in construction loans and $6.2 million in consumer loans. Commercial real estate, construction and commercial loans represented 38.0% of the Company's total loan portfolio at March 31, 2006, compared with 37.5% at December 31, 2005. The decline in residential mortgages and shift in portfolio composition reflects the Company's continued focus on commercial lending.
At March 31, 2006, the Company's unfunded loan pipeline totaled $769.2 million, including $262.9 million in construction loan commitments, $167.8 million in commercial loan commitments and $119.0 million in commercial mortgage commitments. This compares with an unfunded loan pipeline of $696.2 million at December 31, 2005.
Borrowed funds decreased $94.8 million, or 9.8%, during the quarter ended March 31, 2006, as a result of maturities, calls and paydowns on amortizing obligations.
Total deposits increased $3.3 million, or 0.1%, during the quarter ended March 31, 2006, with a $53.6 million increase in time deposits partially offset by decreases in savings and demand accounts. Total deposits were $3.92 billion at March 31, 2006, with core deposits, consisting of savings and demand deposit accounts, representing 61.7% of total deposits.
Common stock repurchases for the three months ended March 31, 2006 totaled 893,000 shares at an average cost of $18.32 per share. At March 31, 2006, book value per share and tangible book value per share totaled $15.74 and $9.33, respectively.
Results of Operations
Net Interest Margin
The net interest margin improved four basis points to 3.31% for the quarter ended March 31, 2006, from 3.27% for the quarter ended December 31, 2005. This was a decrease of seven basis points compared with the net interest margin of 3.38% for the quarter ended March 31, 2005. The weighted average rate for interest-earning assets was 5.35% for the three months ended March 31, 2006, compared with 5.20% for the trailing quarter and 4.97% for the three months ended March 31, 2005. The weighted average rate for interest-bearing liabilities was 2.43% for the quarter ended March 31, 2006, compared with 2.29% for the trailing quarter and 1.88% for the first quarter of 2005. The increases in rates on interest-earning assets and interest-bearing liabilities reflect increases in market interest rates experienced throughout the past year.
Non-Interest Income
Non-interest income totaled $7.3 million for the quarter ended March 31, 2006, an increase of $1.2 million, or 18.8%, compared to the same period in 2005. The increase was primarily attributable to equity fund income, which increased $459,000 for the first quarter of 2006, compared with the same period in 2005, and deposit fees, which increased $452,000, or 18.1% for the first quarter of 2006, compared with the same period in 2005. The increase in deposit fees was related to the conclusion in the second quarter of 2005 of introductory fee waivers to customers obtained from an acquired institution. In addition, income related to the outsourcing of the official check function increased $190,000 for the first quarter of 2006, compared with the same period in 2005. The Company outsourced its official check processing in the second quarter of 2005.
Non-Interest Expense
For the three months ended March 31, 2006, non-interest expense decreased $1.2 million, or 3.7%, to $30.2 million, compared to $31.4 million for the three months ended March 31, 2005. Compensation and employee benefits expense decreased $687,000 for the quarter ended March 31, 2006, compared with the same period in 2005. The Company employed 898 full-time equivalent employees at March 31, 2006, compared with 915 full-time equivalent employees at March 31, 2005. Amortization of intangibles decreased $560,000 for the quarter ended March 31, 2006, compared with the same period in 2005, as a result of scheduled reductions in the amortization of core deposit intangibles. Data processing expense decreased $236,000 for the three months ended March 31, 2006, compared with the same period in 2005, as a result of service provider contract renewals on more favorable terms and cost saving initiatives implemented late in 2005.
Partially offsetting these decreases, advertising and promotions expense increased $311,000 for the quarter ended March 31, 2006, compared with the same period in 2005, as the Company continued its efforts to attract and retain profitable customer relationships. The Company's annualized non- interest expense as a percentage of average assets was 2.06% for the quarter ended March 31, 2006, compared with 2.01% for the same period in 2005. The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income) was 59.6% for the quarter ended March 31, 2006, compared with 58.8% for the same period in 2005.
Asset Quality
The Company continues to emphasize asset quality. Total non-performing loans as of March 31, 2006 were $5.8 million, or 0.16% of total loans, compared to $6.0 million, or 0.16% of total loans at December 31, 2005, and $5.6 million, or 0.15% of total loans at March 31, 2005. At March 31, 2006, the Company's allowance for loan losses was 0.86% of total loans, compared with 0.86% of total loans at December 31, 2005, and 0.92% of total loans at March 31, 2005. The Company recorded a $555,000 provision for loan losses for the three months ended March 31, 2006, primarily due to growth in commercial real estate and construction loans. The Company did not record a provision for loan losses for the three months ended March 31, 2005.
About the Company
Provident Financial Services, Inc. is the holding company for The Provident Bank, a community-oriented bank that offers a full range of retail and commercial loan and deposit products. The Bank currently operates 76 full service branches throughout northern and central New Jersey.
Post Earnings Conference Call
Representatives of the Company will hold a conference call for investors at 10:00 a.m. Eastern Time on April 27, 2006 regarding highlights of the Company's first quarter 2006 financial results. The call can be accessed by dialing 1-877-407-8035 (Domestic) or 1-201-689-8035 (International). Internet access to the call is also available (listen only) at http://www.providentnj.com by going to Investor Relations and clicking on Webcast.
Forward Looking Statements
Certain statements contained herein are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "estimate," "anticipate," "continue," or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.
The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not undertake and specifically declines any obligation to publicly release the result of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Condition
March 31, 2006 (Unaudited) and December 31, 2005
(Dollars in thousands)
March 31, December 31,
Assets 2006 2005
Cash and due from banks $105,456 $107,353
Federal funds sold 5,000 -
Short-term investments 2,152 9,915
Total cash and cash equivalents 112,608 117,268
Investment securities (market value of
$404,214 at March 31, 2006 (unaudited) and
$407,972 at December 31, 2005) 411,074 410,914
Securities available for sale, at fair
value 1,003,381 1,082,957
Federal Home Loan Bank stock 36,232 43,794
Loans 3,731,348 3,739,122
Less allowance for loan losses 31,904 31,980
Net loans 3,699,444 3,707,142
Foreclosed assets, net 305 670
Banking premises and equipment, net 59,859 60,949
Accrued interest receivable 21,008 23,155
Intangible assets 434,300 435,838
Bank-owned life insurance 112,334 111,075
Other assets 57,709 58,612
Total assets $5,948,254 $6,052,374
Liabilities and Stockholders' Equity
Deposits:
Demand deposits $1,093,606 $1,109,507
Savings deposits 1,329,543 1,363,997
Certificates of deposit of $100,000
or more 329,245 304,229
Other time deposits 1,172,341 1,143,725
Total deposits 3,924,735 3,921,458
Mortgage escrow deposits 19,363 18,121
Borrowed funds 875,284 970,108
Subordinated debentures 26,276 26,444
Other
liabilities 35,669 39,948
Total liabilities 4,881,327 4,976,079
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,
79,879,017 shares issued and 67,777,300
shares outstanding at March 31, 2006,
and 79,879,017 shares issued and
68,661,880 shares outstanding at
December 31, 2005 799 799
Additional paid-in capital 965,504 964,555
Retained earnings 403,159 395,589
Accumulated other comprehensive loss (12,325) (8,906)
Treasury stock at cost (183,468) (167,113)
Unallocated common stock held by
Employee Stock
Ownership Plan (72,635) (73,316)
Common Stock acquired by the Stock Award
Plan (34,107) (35,313)
Common Stock acquired by the Directors'
Deferred Fee Plan (13,079) (13,224)
Deferred compensation - Directors' Deferred
Fee Plan 13,079 13,224
Total stockholders' equity 1,066,927 1,076,295
Total liabilities and
stockholders' Equity $5,948,254 $6,052,374
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Three Months Ended March 31, 2006 and 2005
(Dollars in thousands, except per share data)
Three Months Ended
March 31
2006 2005
(Unaudited)
Interest income:
Real estate secured loans $39,293 $38,278
Commercial loans 6,398 4,953
Consumer loans 8,166 7,250
Investment securities 4,298 4,432
Securities available for sale 11,329 13,780
Other short-term investments 69 146
Federal funds 41 118
Total interest income 69,594 68,957
Interest expense:
Deposits 17,661 12,905
Borrowed funds 8,143 8,542
Subordinated debentures 407 345
Total interest
expense 26,211 21,792
Net interest income 43,383 47,165
Provision for loan losses 555 -
Net interest income
after provision for
loan losses 42,828 47,165
Non-interest income:
Fees 5,807 4,692
Bank-owned life insurance 1,259 1,296
Net gain (loss) on securities
transactions 5 (131)
Other income 262 313
Total non-interest
income 7,333 6,170
Non-interest expense:
Compensation and employee
benefits 16,357 17,044
Net occupancy expense 4,815 4,900
Data processing expense 1,884 2,120
Amortization of intangibles 1,568 2,128
Advertising and promotion
expense 1,041 730
Other operating expenses 4,539 4,455
Total non-interest
expense 30,204 31,377
Income before income
tax expense 19,957 21,958
Income tax expense 6,155 6,936
Net income $13,802 $15,022
Basic earnings per share $0.22 $0.22
63,440, 68,172,8
Average basic shares outstanding 313 85
Diluted earnings per share $0.22 $0.22
Average diluted shares
outstanding 64,180,995 68,934,081
PROVIDENT FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
(Unaudited)
At or for the Three
Months Ended
March 31
2006 2005
INCOME STATEMENT:
Net interest income $43,383 $47,165
Provision for loan losses 555 -
Non-interest income 7,333 6,170
Non-interest expense 30,204 31,377
Income before income tax expense 19,957 21,958
Net income 13,802 15,022
Basic earnings per share $0.22 $0.22
Diluted earnings per share $0.22 $0.22
Interest rate spread 2.92 % 3.09 %
Net interest margin 3.31 % 3.38 %
PROFITABILITY:
Annualized return on average assets 0.94 % 0.96 %
Annualized return on average equity 5.22 % 5.41 %
Annualized non-interest
expense to average assets 2.06 % 2.01 %
Efficiency ratio (1) 59.56 % 58.83 %
ASSET QUALITY:
Non-performing loans $5,790 $5,590
Foreclosed assets 305 140
Non-performing loans to total loans 0.16 % 0.15 %
Non-performing assets to total assets 0.10 % 0.09 %
Allowance for loan losses $31,904 $33,837
Allowance for loan losses to
non-performing loans 551.02 % 605.31 %
Allowance for loan losses to total loans 0.86 % 0.92 %
AVERAGE BALANCE SHEET DATA:
Assets $5,957,241 $6,339,184
Loans, net 3,689,510 3,654,614
Earning assets 5,205,688 5,554,271
Core deposits 2,396,316 2,597,502
Borrowings 960,041 1,168,448
Interest-bearing liabilities 4,373,982 4,698,182
Stockholders' equity 1,072,176 1,125,479
Average yield on interest-earning
assets 5.35 % 4.97 %
Average cost of interest-bearing
liabilities 2.43 % 1.88 %
Notes
(1) Efficiency Ratio Calculation
Three Months Ended
March 31
2006 2005
Net interest income $43,383 $47,165
Non-interest income 7,333 6,170
Total income $50,716 $53,335
Non-interest expense $30,204 $31,377
Expense/Income: 59.56 % 58.83 %
Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands)
March 31, 2006
Average Average
Balance Interest Yield
Interest-Earning
Assets:
Federal Funds Sold and
Other Short-Term
Investments $10,454 $110 4.27 %
Investment Securities (1) 413,060 4,298 4.16
Securities Available for Sale 1,051,893 10,781 4.10
Federal Home Loan Bank Stock 40,771 548 5.45
Net Loans (2)
Total Mortgage Loans 2,761,335 39,293 5.68
Total Commercial Loans 370,684 6,398 6.90
Total Consumer Loans 557,491 8,166 5.93
Total Interest-Earning Assets 5,205,688 69,594 5.35
Non-Interest Earning Assets:
Cash and Due from Banks 76,598
Other Assets 674,955
Total Assets $5,957,241
Interest-Bearing Liabilities:
Demand Deposits $598,991 1,689 1.14 %
Savings Deposits 1,337,729 3,807 1.15
Time Deposits 1,477,221 12,165 3.34
Total Deposits 3,413,941 17,661 2.10
Borrowed Funds:
Total Borrowings 960,041 8,550 3.61
Total Interest-Bearing
Liabilities 4,373,982 26,211 2.43
Non-Interest Bearing Liabilities 511,083
Total Liabilities 4,885,065
Stockholders' Equity 1,072,176
Total Liabilities &
Stockholders' Equity $5,957,241
Net interest income $43,383
Net interest rate spread 2.92 %
Net interest-earning assets $831,706
Net interest margin (3) 3.31 %
Ratio of interest-earning
assets to interest-bearing
liabilities 1.19 x
December 31, 2005
Average Average
Balance Interest Yield
Interest-Earning
Assets:
Federal Funds Sold and
Other Short-Term Investments $57,859 $563 3.86 %
Investment Securities (1) 419,244 4,260 4.06
Securities Available for Sale 1,135,151 11,208 3.95
Federal Home Loan Bank Stock 42,303 589 5.52
Net Loans (2)
Total Mortgage Loans 2,747,964 38,659 5.61
Total Commercial Loans 363,745 5,996 6.45
Total Consumer Loans 549,447 8,133 5.88
Total Interest-Earning
Assets 5,315,713 69,408 5.20
Non-Interest Earning
Assets:
Cash and Due from Banks 89,474
Other Assets 679,478
Total Assets $6,084,665
Interest-Bearing
Liabilities:
Demand Deposits $637,084 2,084 1.30 %
Savings Deposits 1,389,260 3,912 1.12
Time Deposits 1,428,608 11,159 3.10
Total Deposits 3,454,952 17,155 1.97
Borrowed Funds:
Total Borrowings 1,029,271 8,745 3.37
Total
Interest-Bearing Liabilities 4,484,223 25,900 2.29
Non-Interest Bearing Liabilities 525,179
Total Liabilities 5,009,402
Stockholders' Equity 1,075,263
Total Liabilities &
Stockholders' Equity $6,084,665
Net interest income $43,508
Net interest rate spread 2.91 %
Net interest-earning assets $831,490
Net interest margin (3) 3.27 %
Ratio of interest-earning
assets to interest-bearing
liabilities 1.19 x
(1) Average outstanding balance amounts shown are amortized cost.
(2) Average outstanding balances are net of the allowance for loan
losses, deferred loan fees and expenses, loan premiums and discounts
and include non-accrual loans.
(3) Annualized net interest income divided by average interest-earning
assets.
The following table summarizes the net interest margin for the previous
year, inclusive
3/31/ 12/31/ 9/30/ 6/30/ 3/31/
2006 2005 2005 2005 2005
1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Interest-Earning Assets:
Securities 4.15 % 4.02 % 3.88 % 3.86 % 3.90 %
Net Loans 5.84 % 5.73 % 5.69 % 5.58 % 5.53 %
Total Interest
Earning Assets 5.35 % 5.20 % 5.11 % 5.01 % 4.97 %
Interest-Bearing
Liabilities
Total Deposits 2.10 % 1.97 % 1.79 % 1.61 % 1.48 %
Total Borrowings 3.61 % 3.37 % 3.18 % 3.12 % 3.08 %
Total Interest Bearing
Liabilities 2.43 % 2.29 % 2.13 % 1.97 % 1.88 %
Interest Rate Spread 2.92 % 2.91 % 2.98 % 3.04 % 3.09 %
Net Interest Margin 3.31 % 3.27 % 3.31 % 3.34 % 3.38 %
Ratio of interest-earning
assets to total
interest-bearing
liabilities 1.19 % 1.19x 1.18x 1.18x 1.18x
Source: prnewswire
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