Investors Bancorp, Inc. Announces First Quarter Financial Results

SHORT HILLS, N.J., April 29 /PRNewswire-FirstCall/ -- Investors Bancorp, Inc. (Nasdaq: ISBC) ("Company"), the holding company for Investors Savings Bank ("Bank"), reported net income of $13.3 million for the three months ended March 31, 2010 compared to a net income of $7.1 million for the three months ended March 31, 2009. Basic and diluted earnings per share were $0.12 for the three months ended March 31, 2010 compared to basic earnings per share of $0.07 for the three months ended March 31, 2009.

Commenting on the Company's first quarter performance, Kevin Cummings, President and Chief Executive Officer, said, "Investors' net income of $13.3 million reflected a strong quarter marked by continued growth in earning assets and an increase in net interest margin to 3.06%. Investors continues to build its loan portfolio with high quality commercial real estate and residential mortgage loans.  This growth was primarily funded by lower cost core deposits."

Regarding credit quality Mr. Cummings commented, "While the economy shows signs of stabilization we remain cautious due to the high level of unemployment and its potential impact on our loan portfolio. We are encouraged as non-performing loans have remained flat with last quarter at 1.82% of total loans which compares favorably to our peers. Combined with our healthy tangible capital ratio of 9.6%, we believe we are uniquely positioned to take advantage of opportunities in this economic environment."

"During the quarter we announced the acquisition of $575 million in deposits and 17 branch locations from Millennium bcp Bank, which is expected to close during the quarter ending September 2010. We are excited to continue to expand our branch network into new markets with an acquisition which enhances shareholder value."  

The following represents other performance highlights and significant events that occurred during the three month period ended March 31, 2010:

• Net interest margin increased 72 basis points to 3.06% compared to prior year quarter and an increase of 25 basis points compared to linked quarter.

• Deposits increased $172.3 million, or 3.0%, to $6.01 billion at March 31, 2010 from $5.84 billion at December 31, 2009.

• Core deposits increased $123.3 million, or 4.8%, to $2.67 billion at March 31, 2010 from $2.55 billion at December 31, 2009.

• Net loans increased $185.0 million, or 2.8%, to $6.80 billion at March 31, 2010 from $6.62 billion at December 31, 2009.

• Non performing loans as a percentage of total loans were 1.82% at March 31, 2010, compared to 1.81% at December 31, 2009.

• The allowance for loan losses increased to $62.9 million or 0.92% of total loans at March 31, 2010 from $55.1 million or 0.83% at December 31, 2009.

• During the three months ended March 31, 2010 the Company charged-off $5.2 million in loans.

• The efficiency ratio improved to 46.2% for the quarter ended March 31, 2010 compared to 54.86% for quarter ended March 31, 2009

• The Company maintains a strong tangible capital ratio of 9.6%, and is considered well capitalized under regulatory guidelines.

• On March 30, 2010 the Company announced it will acquire approximately $575 million of deposits and seventeen (17) branch offices in New Jersey, New York and Massachusetts of Millennium bcp Bank for a deposit premium of 0.11%.

Comparison of Operating Results

Interest and Dividend Income

Total interest and dividend income increased by $10.3 million, or 11.1%, to $103.1 million for the three months ended March 31, 2010 from $92.7 million for the three months ended March 31, 2009. This increase is attributed to the average balance of interest-earning assets increasing $1.05 billion, or 14.9%, to $8.10 billion for the three months ended March 31, 2010 from $7.05 billion for the three months ended March 31, 2009.   This was partially offset by a 17 basis point decrease in the weighted average yield on interest-earning assets to 5.09% for the three months ended March 31, 2010 compared to 5.26% for the three months ended March 31, 2009.  

Interest income on loans increased by $14.3 million, or 18.6%, to $91.0 million for the three months ended March 31, 2010 from $76.7 million for the three months ended March 31, 2009, reflecting a $1.08 billion, or 19.2%, increase in the average balance of net loans to $6.72 billion for the three months ended March 31, 2010 from $5.63 billion for the three months ended March 31, 2009.  The increase is primarily attributed to an increase of $533.7 million and $378.9 million in the average balance of commercial real estate loans and multi-family loans, respectively, which is consistent with our strategic plan to diversify the loan portfolio. This was partially offset by a 3 basis point decrease in the average yield on loans to 5.42% for the three months ended March 31, 2010 from 5.45% for the three months ended March 31, 2009.  

Interest income on all other interest-earning assets, excluding loans, decreased by $4.0 million, or 24.9%, to $12.0 million for the three months ended March 31, 2010 from $16.0 million for the three months ended March 31, 2009. This decrease reflected a 105 basis point decrease in the average yield on all other interest-earning assets, excluding loans, to 3.47% for the three months ended March 31, 2010 from 4.52% for the three months ended March 31, 2009. The decrease in yield is primarily attributed to the repricing of our adjustable rate securities and the purchase of additional securities at lower yields.

Interest Expense

Total interest expense decreased by $10.5 million, or 20.3%, to $41.1 million for the three months ended March 31, 2010 from $51.6 million for the three months ended March 31, 2009.  This decrease is attributed to the weighted average cost of total interest-bearing liabilities decreasing 99 basis points to 2.22% for the three months ended March 31, 2010 compared to 3.21% for the three months ended March 31, 2009.  This was partially offset by the average balance of total interest-bearing liabilities increasing by $975.9 million, or 15.2%, to $7.40 billion for the three months ended March 31, 2010 from $6.42 billion for the three months ended March 31, 2009.  

Interest expense on interest-bearing deposits decreased $10.1 million, or 29.9% to $23.8 million for the three months ended March 31, 2010 from $33.9 million for the three months ended March 31, 2009.  This decrease is attributed to a 127 basis point decrease in the average cost of interest-bearing deposits to 1.69% for the three months ended March 31, 2010 from 2.96% for the three months ended March 31, 2009 as we were able to reduce the rates paid on deposits. This was partially offset by the average balance of total interest-bearing deposits increasing $1.03 billion, or 22.5% to $5.62 billion for the three months ended March 31, 2010 from $4.59 billion for the three months ended March 31, 2009. Core deposits growth represented 72.5%, or $747.4 million of the increase in the average balance of total interest-bearing deposits.

Interest expense on borrowed funds decreased by $313,000, or 1.8%, to $17.4 million for the three months ended March 31, 2010 from $17.7 million for the three months ended March 31, 2009. This decrease is attributed to the average balance of borrowed funds decreasing by $55.7 million or 3.0%, to $1.78 billion for the three months ended March 31, 2010 from $1.84 billion for the three months ended March 31, 2009. This was partially offset by the average cost of borrowed funds increasing 5 basis points to 3.90% for the three months ended March 31, 2010 from 3.85% for the three months ended March 31, 2009 as we extended some of our borrowings.  

Net Interest Income

Net interest income increased by $20.8 million, or 50.5%, to $61.9 million for the three months ended March 31, 2010 from $41.2 million for the three months ended March 31, 2009.  The increase was caused primarily by a 99 basis point decrease in our cost of interest-bearing liabilities to 2.22% for the three months ended March 31, 2010 from 3.21% for the three months ended March 31, 2009. This was partially offset by a 17 basis point decrease in our yield on interest-earning assets to 5.09% for the three months ended March 31, 2010 from 5.26% for the three months ended March 31, 2009. Short term interest rates remaining at historically low levels resulted in many of our deposits repricing downward. This had a positive impact on our net interest margin which improved by 72 basis points from 2.34% for the three months ended March 31, 2009 to 3.06% for the three months ended March 31, 2010.

Provision for Loan Losses

Our provision for loan losses was $13.1 million for the three month period ended March 31, 2010 compared to $8.0 million for the three month period ended March 31, 2009. For the three months ended March 31, 2010, net charge-offs totaled $5.2 million compared to net charge-offs of eight thousand dollars for the three months ended March 31, 2009. The increase in our provision is due to continued growth in the loan portfolio; the increased inherent credit risk in our overall portfolio, particularly the credit risk associated with commercial real estate lending; an increase in loan delinquency and non-performing loans; and the adverse economic conditions in our lending area.

The comparative table below details non-performing loans and allowance for loan loss coverage ratios over the last four quarters.

The allowance for loan losses increased by $7.9 million to $62.9 million at March 31, 2010 from $55.1 million at December 31, 2009.  Total non-performing loans, defined as non-accruing loans, were $124.7 million at March 31, 2010 compared to $120.2 million at December 31, 2009. Future increases in the allowance for loan losses may be necessary based on growth of the loan portfolio, change in composition of the loan portfolio, and the impact of the deterioration of the real estate and economic environments in our lending area.  

Non-Interest Income

Total non-interest income was $3.9 million for the three months ended March 31, 2010 compared to $3.4 million for the three months ended March 31, 2009.  The increase is primarily attributed to a $684,000 increase in fees and service charges to $1.6 million and a $265,000 increase in the cash surrender value of bank owned life insurance to $521,000 for the three months ended March 31, 2010. This was partially offset by a $416,000 decrease on gain on loan sales to $1.7 million for the three months ended March 31, 2010, attributed to less refinancing activity during the current quarter compared to the prior year quarter, resulting in fewer sales to the secondary market.

Non-Interest Expenses

Total non-interest expenses increased by $6.0 million, or 24.4%, to $30.4 million for the three months ended March 31, 2010 from $24.5 million for the three months ended March 31, 2009. Compensation and fringe benefits increased $1.5 million as a result of staff additions in our retail banking areas due to the acquisition of American Bancorp of New Jersey in May 2009 and the Banco Popular branch acquisition in October 2009, staff additions in our mortgage company and commercial real estate lending department, as well as normal merit increases.  The FDIC insurance premiums increased $1.4 million as a result of an increase in our deposits and an increase in the FDIC premium rate.  Occupancy expense increased $1.4 million as a result of the costs associated with expanding our branch network.

Income Taxes

Income tax expense was $9.1 million for the three months ended March 31, 2010, representing a 40.55% effective tax rate. For the three months ended March 31, 2009, there was an income tax expense of $5.0 million representing a 41.6% effective tax rate.

Balance Sheet Summary

Total assets increased by $390.9 million, or 4.7%, to $8.75 billion at March 31, 2010 from $8.36 billion at December 31, 2009.  This increase was largely the result of a $210.9 million increase in our cash and cash equivalents at March 31, 2010 and a $180.5 million increase in net loans, including loans held for sale.

Net loans, including loans held for sale, increased by $180.5 million, or 2.7%, to $6.82 billion at March 31, 2010 from $6.64 billion at December 31, 2009.  This increase in loans reflects our continued focus on loan originations and purchases, which was partially offset by paydowns and payoffs of loans. The loans we originate and purchase are on properties in New Jersey and states in close proximity to New Jersey. We do not originate or purchase, and our loan portfolio does not include, any sub-prime loans or option ARMs.  

We originate residential mortgage loans directly and through our mortgage subsidiary, ISB Mortgage Co. During the three month period ended March 31, 2010 we originated $144.9 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 month period ended March 31, 2010, we purchased loans totaling $231.1 million from these entities. We also purchase, on a "bulk purchase" basis, pools of mortgage loans that meet our underwriting criteria from several well-established financial institutions in the secondary market. During the three month period ended March 31, 2010, we purchased $14.8 million of residential mortgage loans on a "bulk purchase" basis.

Additionally, for the three month period ended March 31, 2010, we originated $40.4 million in multi-family loans, $86.9 million in commercial real estate loans, $27.0 million in construction loans, $14.5 in consumer and other loans, and $2.0 million in commercial and industrial loans. This activity is consistent with our strategy to diversify our loan portfolio by adding more multi-family and commercial real estate loans.

Securities, in the aggregate, decreased by $7.6 million, or 0.6%, to $1.18 billion at March 31, 2010, from $1.19 billion at December 31, 2009 as pay downs were partially offset by the purchase of $98.9 million of agency issued mortgage backed securities during the three months ended March 31, 2010.

The amount of stock we own in the Federal Home Loan Bank (FHLB) increased by $7.9 million from $66.2 million at December 31, 2009 to $74.1 million at March 31, 2010 as a result of an increase in our level of borrowings at March 31, 2010. Other assets decreased $3.6 million as prepaid FDIC insurance decreased in relation to our FDIC insurance expense.  

Deposits increased by $172.3 million, or 3.0%, to $6.01 billion at March 31, 2010 from $5.84 billion at December 31, 2009. Core deposits increased by $123.3 million, or 4.8% and certificate of deposits increased $49.0 million, or 1.5%. Our deposit gathering efforts continue to be successful in our markets.

Borrowed funds increased $175.0 million, or 10.9%, to $1.78 billion at March 31, 2010 from $1.60 billion at December 31, 2009.

Stockholders' equity increased $18.0 million to $868.2 million at March 31, 2010 from $850.2 million at December 31, 2009. The increase is primarily attributed to the $13.3 million net income for the period.

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 sixty five branch offices located in Essex, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Union and Warren Counties, New Jersey.  

Earnings Conference Call April 30, 2010 at 11:00 a.m. (ET)

The Company, as previously announced, indicated that it will host an earnings conference call Friday morning, April 30, 2010 at 11:00 a.m. (ET). The toll-free dial-in number is (800) 860-2442. A telephone replay will be available on April 30, 2010 from 1:00 p.m. (ET) through July 31, 2010, 9:00 a.m. (ET). The replay number is (877) 344-7529 password 437004. The conference call will also be simultaneously webcast on the Company's website www.isbnj.com and archived for one year.

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 our SEC filings, 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, 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.

SOURCE Investors Bancorp, Inc.