SHORT HILLS, N.J., Oct. 26 /PRNewswire-FirstCall/ -- Investors Bancorp, Inc. ("Company"), the holding company for Investors Savings Bank ("Bank"), reported net income of $4.4 million for the three months ended September 30, 2006 compared to $6.0 million for the three months ended September 30, 2005.
The Company reported basic and diluted earnings of $0.04 per share for the three months ended September 30, 2006. Since the Company completed its initial public stock offering on October 11, 2005, earnings per share are not applicable for the three months ended September 30, 2005.
"The interest rate environment remains stubbornly challenging and costly for most financial institutions," said Robert M. Cashill, the Company's President and CEO. "During these difficult times we remain committed to increasing our retail franchise value by increasing both our loan and deposit portfolios. We have recently redesigned several of our retail oriented checking products and added a suite of commercial and business deposit products. These initiatives, if successful, will help reduce the liability sensitive nature of our balance sheet."
Mr. Cashill also commented on the recently announced share repurchase program. "We are pleased by our Board's recent decision to authorize the repurchase of up to 10% of our publicly-held outstanding shares of common stock, or 5,317,590 shares and believe this is a prudent and efficient way to manage our capital position."
Comparison of Operating Results
Interest and Dividend Income
Interest and dividend income increased by $11.8 million, or 20.7%, to $69.0 million for the three months ended September 30, 2006 from $57.2 million for the three months ended September 30, 2005. This increase was due to a 57.9% increase in interest income on loans, partially offset by an 11.5% decrease in interest income on securities and other interest-earning assets.
Interest income on loans increased by $15.4 million, or 57.9%, to $41.9 million for the three months ended September 30, 2006 from $26.6 million for the three months ended September 30, 2005. This increase resulted from a $988.0 million, or 47.2%, increase in the average balance of net loans to $3.08 billion for the three months ended September 30, 2006 from $2.09 billion for the three months ended September 30, 2005. This increase also reflects a 37 basis point increase in the average yield on net loans to 5.44% for the three months ended September 30, 2006 from 5.07% for the three months ended September 30, 2005.
Interest income on all other interest-earning assets, excluding loans, decreased by $3.5 million, or 11.5%, to $27.1 million for the three months ended September 30, 2006 from $30.7 million for the three months ended September 30, 2005. This decrease resulted from a $553.1 million decrease in the average balance of securities and other interest-earning assets, partially offset by a 40 basis point increase in the average yield on securities and other interest-earning assets to 4.65% for the three months ended September 30, 2006 from 4.25% for the three months ended September 30, 2005.
Interest Expense
Interest expense increased by $13.9 million, or 42.7%, to $46.6 million for the three months ended September 30, 2006 from $32.6 million for the three months ended September 30, 2005.
Interest expense on interest-bearing deposits increased $9.0 million, or 41.6% to $30.8 million for the three months ended September 30, 2006 from $21.7 million for the three months ended September 30, 2005. This increase was due to a 123 basis point increase in the average cost of interest-bearing deposits partially offset by a $174.7 million decrease in the average balance of interest bearing deposits.
Interest expense on borrowed funds increased by $4.9 million or 44.8%, to $15.8 million for the three months ended September 30, 2006 from $10.9 million for the three months ended September 30, 2005. The average balance of borrowed funds increased by $99.2 million or 8.4% to $1.28 billion for the three months ended September 30, 2006 from $1.18 billion for the three months ended September 30, 2005. In addition, the cost of borrowed funds increased by 124 basis points to 4.93% for the three months ended September 30, 2006 from 3.69% for the three months ended September 30, 2005.
Net Interest Income
Net interest income decreased by $2.1 million or 8.5%, to $22.5 million for the three months ended September 30, 2006 from $24.6 million for the three months ended September 30, 2005. The decrease was caused primarily by a 76 basis point decrease in our net interest rate spread to 1.03% for the three months ended September 30, 2006 from 1.79% for the three months ended September 30, 2005 as a result of the cost of average interest-bearing liabilities more than offsetting the increase in the yield on average interest-earning assets. Our net interest margin also decreased by 31 basis points from 1.97% for the three months ended September 30, 2005 to 1.66% for the three months ended September 30, 2006.
Provision for Loan Losses. Our provision for loan losses was $225,000 and $100,000 for the three months ended September 30, 2006 and 2005, respectively. There were net charge-offs of $1,600 for three months ended September 30, 2006 and net recoveries of $20,600 for the three months ended September 30, 2005. The allowance for loan losses increased by $223,000 to $6.6 million at September 30, 2006 from $6.3 million at June 30, 2006. This increase in the allowance for loan losses reflects the overall growth of our loan portfolio, the level of our non-performing loans and the low level of charge-offs.
Non-performing loans, defined as non-accruing loans, increased by $420,000 to $3.7 million at September 30, 2006 from $3.3 million at June 30, 2006. The ratio of non-performing loans to total loans was 0.12% at September 30, 2006 compared with 0.11% at June 30, 2006. The ratio of the allowance for loan losses to non-performing loans was 176.52% at September 30, 2006 compared with 192.18% at June 30, 2006. The ratio of the allowance for loan losses to total loans was 0.21% at September 30, 2006 compared to 0.22% at June 30, 2006. We believe our allowance for loan losses is adequate based on the overall growth in our loan portfolio, the current level of loan charge-offs, the stability of the New Jersey real estate market in general, and the performance and stability of our loan portfolio.
Although we believe we have established and maintained an adequate level of allowance for loan losses, additions may be necessary if future economic conditions differ substantially from the current operating environment. Although we use the best information available, the level of allowance for loan losses remains an estimate that is subject to significant judgment and short-term change.
Other Income
Other income increased by $1.0 million to $1.6 million for the three months ended September 30, 2006 from $589,000 for the three months ended September 30, 2005. This increase was largely the result of a $922,000 increase in reported income on bank owned life insurance. On July 1, 2006, the Company adopted a new accounting principle that was recently approved by the FASB Emerging Issues Task Force ("EITF"). The adoption of this accounting principle changed the manner in which we recognize income related to our bank owned life insurance contract.
Operating Expenses
Operating expenses increased by $1.5 million or 9.5%, to $17.1 million for the three months ended September 30, 2006 from $15.6 million for the three months ended September 30, 2005. The increase was primarily due to compensation and fringe benefits increasing by $803,000 or 8.3% to $10.4 million for the three months ended September 30, 2006. This increase is primarily due to $533,000 in ESOP related expenses recorded during the three months ended September 30, 2006. There were no ESOP expenses during the three months ended September 30, 2005. The increase also reflects staff additions in our commercial real estate and retail banking areas, normal merit increases and increases in employee benefits costs. In addition, professional fees increased $426,000 or 122.1% to $775,000 for the three months ended September 30, 2006. This can be attributed to the increased professional fees associated with being a public company.
Income Taxes
Income tax expense was $2.4 million for the three months ended September 30, 2006; a decrease of $1.1 million, or 32.4%, from income tax expense of $3.5 million for the three months ended September 30, 2005. Our effective tax rate was 35.2% for the three months ended September 30, 2006, compared to 37.0% for the three months ended September 30, 2005, due primarily to the higher level of tax-exempt income we earned in the three months ended September 30, 2006 from on our bank owned life insurance contract.
Balance Sheet Summary
Total assets increased by $129.5 million, or 2.4%, to $5.63 billion at September 30, 2006 from $5.50 billion at June 30, 2006. This increase was largely the result of an increase in the loan portfolio partially offset by the decrease in our securities portfolio.
Securities, in aggregate, decreased by $100.4 million, or 4.4%, to $2.19 billion at September 30, 2006, from $2.29 billion at June 30, 2006. This decrease was a result of utilizing the cash flow from investments to fund the loan growth, which is consistent with our strategic plan.
Net loans, including loans held for sale, increased by $232.4 million, or 7.8%, to $3.19 billion at September 30, 2006 from $2.96 billion at June 30, 2006. This increase in loans reflects our continued focus on loan originations and purchases. The loans we originate and purchase are made primarily on properties in New Jersey. To a lesser degree we originate and purchase loans in states contiguous to New Jersey as a way to geographically diversify our residential loan portfolio.
We originate residential mortgage loans directly and through our mortgage subsidiary, ISB Mortgage Co. During the three months ended September 30, 2006 we originated $39.1 million in residential mortgage loans. In addition, we purchase 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 three months ended September 30, 2006 we purchased loans totaling $193.8 million from these entities. We also purchase pools of mortgage loans in the secondary market on a "bulk purchase" basis from several well- established financial institutions. During the three months ended September 30, 2006, we purchased loans totaling $43.9 million on a "bulk purchase" basis.
Additionally, for the three months ended September 30, 2006, we originated $3.7 million in multi-family and commercial real estate loans and $16.7 million in construction loans. This is consistent with our strategy of originating multi-family, commercial real estate and construction loans to diversify our loan portfolio.
Bank owned life insurance increased by $6.4 million from $78.9 million at June 30, 2006 to $85.3 million at September 30, 2006. This increase was primarily due to adoption of the new accounting principle related to bank owned life insurance. In addition, the amount of stock we own in the Federal Home Loan Bank (FHLB) increased by $2.8 million from $46.1 million at June 30, 2006 to $48.9 million at September 30, 2006 as a result of an increase in our level of borrowings. There was also an increase in accrued interest receivable of $2.7 million resulting from an increase in interest-earning assets and the timing of certain cash flows resulting from the change in the mix of our assets.
Deposits increased by $54.6 million, or 1.7%, to $3.36 billion at September 30, 2006 from $3.30 billion at June 30, 2006. The increase was due primarily to an increase in certificates of deposits.
Borrowed funds increased $61.5 million, or 4.9%, to $1.31 billion at September 30, 2006 from $1.25 billion at June 30, 2006. This increase in borrowed funds is the result of strong loan growth that exceeded the available cash flows from the investment and deposit portfolios.
Stockholders' equity increased $14.9 million, or 1.7%, to $915.1 million at September 30, 2006 from $900.2 million at June 30, 2006. The majority of this increase is attributed to a $5.6 million increase in retained earnings due to adoption of the new accounting principle related to bank owned life insurance, a decrease of $4.5 million in the accumulated other comprehensive loss and net income of $4.4 million for the three months ended September 30, 2006.
About the Company
Investors Bancorp, Inc. is the holding company for Investors Savings Bank, which operates from its corporate headquarters in Short Hills, New Jersey, and forty-six branch offices located in Essex, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Somerset and Union Counties, New Jersey. For more information, please visit http://www.isbnj.com/
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, as described in our SEC filings, and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operated, 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, 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.
INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
September 30, 2006 (Unaudited) and June 30, 2006
September 30, June 30,
Assets 2006 2006
(In thousands)
Cash and cash equivalents $28,075 39,824
Securities available-for-sale, at
estimated fair value 508,137 528,876
Securities held-to-maturity, net
(estimated fair value of
$1,643,786 and $1,695,975 at
September 30, 2006
and June 30, 2006, respectively) 1,683,418 1,763,032
Loans receivable, net 3,191,520 2,960,583
Loans held-for-sale 2,414 974
Stock in the Federal Home Loan Bank 48,893 46,125
Accrued interest receivable 23,790 21,053
Office properties and equipment, net 27,446 27,911
Net deferred tax asset 26,052 28,176
Bank owned life insurance contract 85,262 78,903
Other assets 1,700 1,789
Total assets $5,626,707 5,497,246
Liabilities and Stockholders' Equity
Liabilities:
Deposits $3,356,658 3,302,043
Borrowed funds 1,307,232 1,245,740
Advance payments by borrowers for
taxes and insurance 16,050 15,337
Other liabilities 31,677 33,939
Total liabilities 4,711,617 4,597,059
Stockholders' equity:
Preferred stock, $0.01 par value,
500,000 authorized shares;
none issued - -
Common stock, $0.01 par value,
200,000,000 shares authorized;
116,275,688 issued and outstanding
at September 30, 2006
and June 30, 2006, 532 532
Additional paid-in capital 525,105 524,962
Unallocated common stock held by the
employee stock ownership plan (40,059) (40,414)
Retained earnings 436,148 426,233
Accumulated other comprehensive loss:
Net unrealized loss on securities
available for sale, net of tax (6,268) (10,758)
Minimum pension liability, net of tax (368) (368)
(6,636) (11,126)
Total stockholders' equity 915,090 900,187
Total liabilities and
stockholders' equity $5,626,707 5,497,246
INVESTORS BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the Three Months
Ended September 30,
2006 2005
(Dollars in thousands,
except per share data)
Interest and dividend income:
Loans receivable and loans held-for-sale $41,912 26,550
Securities:
Government-sponsored enterprise obligations 1,339 1,674
Mortgage-backed securities 22,053 25,984
Equity securities available-for-sale 455 455
Municipal bonds and other debt 2,406 714
Interest-bearing deposits 169 833
Repurchase agreements - 262
Federal Home Loan Bank stock 697 728
Total interest and dividend income 69,031 57,200
Interest expense:
Deposits 30,750 21,716
Secured borrowings 15,814 10,918
Total interest expense 46,564 32,634
Net interest income 22,467 24,566
Provision for loan losses 225 100
Net interest income after
provision for loan losses 22,242 24,466
Other income:
Fees and service charges 660 619
Increase (decrease) in and death
benefits on bank owned
life insurance contract 795 (127)
Gain on sales of mortgage loans, net 83 77
Other income 21 20
Total other income 1,559 589
Operating expenses:
Compensation and fringe benefits 10,443 9,640
Advertising and promotional expense 900 603
Office occupancy and equipment expense 2,423 2,644
Federal insurance premiums 110 109
Stationery, printing, supplies and telephone 393 492
Legal, audit, accounting, and
supervisory examination fees 775 349
Data processing service fees 936 887
Other operating expenses 1,107 875
Total operating expenses 17,087 15,599
Income before income tax expense 6,714 9,456
Income tax expense 2,363 3,495
Net income $4,351 5,961
Earnings per share - basic and diluted $0.04 n/a
Weighted average shares outstanding
- basic and diluted 112,246,699 n/a
INVESTORS BANCORP, INC. AND SUBSIDIARY
Average Balance Sheet and Yield/Rate Information
For Three Months Ended
September 30, 2006
Average
Outstanding Interest Average
Balance Earned/Paid Yield/Rate
(Dollars in thousands)
Interest-earning assets:
Due from banks $20,078 $169 3.37%
Repurchase agreements - - -
Securities available-for-sale 534,833 5,722 4.28%
Securities held-to-maturity 1,729,172 20,531 4.75%
Net loans 3,081,486 41,912 5.44%
Stock in FHLB 47,782 697 5.83%
Total interest-earning assets 5,413,351 69,031 5.10%
Non-interest earning assets 149,168
Total assets $5,562,519
Interest-bearing Liabilities:
Savings $223,182 526 0.94%
Interest-bearing checking 307,730 1,845 2.40%
Money market accounts 207,345 873 1.68%
Certificates of deposit 2,555,204 27,506 4.31%
Borrowed funds 1,282,547 15,814 4.93%
Total interest-bearing
liabilities 4,576,008 46,564 4.07%
Non-interest bearing liabilities 83,243
Total liabilities 4,659,251
Stockholders' equity 903,268
Total liabilities and
stockholders' equity $5,562,519
Net interest income $22,467
Net interest rate spread 1.03%
Net interest earning assets $837,343
Net interest margin 1.66%
Ratio of interest-earning assets to
total interest-bearing liabilities 1.18 X
INVESTORS BANCORP, INC. AND SUBSIDIARY
Average Balance Sheet and Yield/Rate Information
For Three Months Ended
September 30, 2005
(Dollars in thousands)
Average
Outstanding Interest Average
Balance Earned/Paid Yield/Rate
Interest-earning assets:
Due from banks $110,533 $833 3.01%
Repurchase agreements 30,435 262 3.44%
Securities available-for-sale 661,818 6,945 4.20%
Securities held-to-maturity 2,024,383 21,882 4.32%
Net loans 2,093,532 26,550 5.07%
Stock in FHLB 57,751 728 5.04%
Total interest-earning assets 4,978,452 57,200 4.60%
Non-interest earning assets 136,441
Total assets $5,114,893
Interest-bearing Liabilities:
Savings $470,523 1,005 0.85%
Interest-bearing checking 282,479 1,160 1.64%
Money market accounts 306,974 1,030 1.34%
Certificates of deposit 2,408,212 18,521 3.08%
Borrowed funds 1,183,390 10,918 3.69%
Total interest-bearing
liabilities 4,651,578 32,634 2.81%
Non-interest bearing liabilities 59,917
Total liabilities 4,711,495
Stockholders' equity 403,398
Total liabilities and
stockholders' equity $5,114,893
Net interest income $24,566
Net interest rate spread 1.79%
Net interest earning assets $326,874
Net interest margin 1.97%
Ratio of interest-earning assets to
total interest-bearing liabilities 1.07 X
INVESTORS BANCORP, INC. AND SUBSIDIARY
Selected Performance Ratios
For the Three Months Ended
September 30,
2006 2005
Return on average assets 0.31% 0.47%
Return on average equity 1.93% 5.91%
Interest rate spread 1.03% 1.79%
Net interest margin 1.66% 1.97%
Efficiency ratio 71.12% 62.01%
Non-interest expense to average total assets 1.23% 1.22%
Average interest-earning assets to average
interest-bearing liabilities 1.18 1.07
INVESTORS BANCORP, INC. AND SUBSIDIARY
Selected Financial Ratios and Other Data
At or For the Period Ended
September 30, June 30,
2006 2006
Asset Quality Ratios:
Non-performing assets as a percent of
total assets 0.07% 0.06%
Non-performing loans as a percent of
total loans 0.12% 0.11%
Allowance for loan losses as a
percent of total loans 0.21% 0.22%
Allowance for loan losses as a
percent of non-performing loans 176.52% 192.18%
Capital Ratios:
Total risk-based capital (to risk
weighted assets) (1) 25.67% 26.48%
Tier 1 risk-based capital (to risk
weighted assets) (1) 25.42% 26.23%
Tier 1 leverage (core) capital (to
adjusted tangible assets) (1) 11.91% 12.25%
Equity to total assets (period end) 16.26% 16.38%
Tangible capital (to tangible assets) 16.25% 16.36%
Book value per common share $8.15 $8.02
Other Data:
Number of full service offices 46 46
Full time equivalent employees 474 473
(1) Ratios are for Investors Savings Bank and do not include capital
retained at the holding company level.
