Provident Financial Services (
Q3 2010 Earnings Call
October 29, 2010 10:00 a.m. ET
Christopher Martin – Chairman, President and CEO
Tom Lyons – SVP and CFO
Rick Weiss – Janney Montgomery Scott
Steve Moss – Janney Montgomery Scott
Damon DelMonte - KBW
Matthew Kelley – Sterne, Agee and Leach
Collyn Gilbert – Stifel Nicolaus
Jake Seville – RBC Capital Markets
Mark Fitzgibbon – Sandler O’Neill & Partners
Previous Statements by PFS
» Provident Financial Services, Inc. Q2 2010 Earnings Call Transcript
» Provident Financial Services, Inc. Q1 2010 Earnings Call Transcript
» Provident Financial Services, Inc. Q1 2009 Earnings Call Transcript
» Provident Financial Services Inc. Q4 2008 Earnings Call Transcript
Good morning and welcome to the Provident Financial Services Third Quarter 2010 Earnings Conference Call. All participants will be in a listen-only mode. (Operator instructions) Please note that this event is being recorded.
I would now like to turn the conference over to Mr. Leonard Gleason, Investor Relations Officer. Sir, please go ahead.
Thank you, BJ, and good morning, everyone. Welcome to the Provident Financial Services Inc. Third Quarter Earnings Call. All our presenters this morning are Chris Martin, Chairman, President, and CEO, and Tom Lyons, our Senior Vice President, and CFO.
Before turning the program over them to discuss our third quarter results, I would ask that you please take note of our standard caution as to any forward-looking statements that may be made during the course of today’s review of our financial performance.
Our full disclosure and disclaimer can be found in the text of today’s earnings release. A copy of that notice, and all of our SEC filings may be obtained by accessing the investor relation page on our web site www.providentnj.com or by calling our Investor Relations Department at 201-915-5344.
With that, it’s my pleasure to introduce our Chief Executive Officer Chris Martin, who will provide the highlights of our third quarter financial results, Chris.
Thank you, Len, good morning, everyone. Our third quarter operating results continue the steady trend of improved earnings in this difficult environment. Against the backdrop of high unemployment and under employment, increased regulation and a struggling New Jersey economy, our earnings totaled 13.5 million or $0.24 per share, which represented a 55.2% increase in our quarterly earnings from the same period last year.
Margin expansion increased modestly in the third quarter by 2 basis points to 3.50% with the main driver being reduced funding cost. During the quarter we increased our quarter deposits as a percent of total deposit to approximately 73% representing an increase of 183.2 million or 5.4% from December 31, 2009.
Time deposits declined by $177.8 million for 11.8% from the end of ‘09. However, to expand relationship for CD customers will continue, but we remain focused on building out our community banking model of increased core funding.
The average cost of deposits for the third quarter declined to 1.05% from 1.13% for the trailing quarter. Borrowings decreased 51.7 million or 5.4% to 904 million during the quarter, as access to liquidity was used to pay down some borrowing.
We have during the quarter continued to match on large CRE and multifamily loans to lock in spread, thereby extending duration in borrowings to offset deposits that may be subject to repricing, if and when rates rise.
Loans increased 17.5 million during the quarter but decreased 47.6 year to date or 1.1%, despite in-house organic originations totally 960 million for the 9 months ended September 30, 2010. We do not use brokers to originate loans, we cultivate relationships by using our centers of influence, our advisory council, and our relationship mangers to generate lead.
The loan mix continues to trend toward commercial loans but we will continue to meet the needs of our communities in terms of retail origination in consumer and mortgage lending. The company continues to sell the majority of its 30 year originations to the agency, to minimize interest rate risk.
Opportunities, although improving slightly, are challenging in our market due to conditions that disqualifies potential borrowers due to cash flow issues asset valuation and equity shortfalls.
We continue to seek out potential customers that need prudent credit underwriting standards. As evident, our pipeline continues to grow and our unfunded commitments total 824 million at September 30.
Asset quality still struggles, and was non-performing loans totally 103.5 million at September 30, 2010. Residential mortgage delinquencies remain an area of concern as the New Jersey foreclosure process is one of the most difficult in the country. Avoiding the foreclosure processing issues reported in the media, we maintained all of our loan files and we directly managed all of our foreclosure work.
Whenever possible, we attempt to assist our borrowers to minimize the cost to them, as well as to the bank. And until the employment picture and/or the real estate values improve in New Jersey and surrounding areas, this will be an issue we have to deal with for the foreseeable future.
Our provision of 8.6 million during the quarter was likewise reflective of the current economy and the increase of nonperformers. Net charges were 1.3 million in the quarter and the allowance now stands at 1.58% of total loans.
Our operating expense decreased 1.9 million or 5.3% for the quarter, and our efficiency ratio improved to 56.02% for the 3 month ended September 30, 2010 from 66.4% for the same period in 2009.
We will continue to work at further streamlining our operations by utilizing our new technologies and systems to enhance our automated processes. Tom Lyons, will provide you with some additional details on our financial results, Tom.