Sales of residential construction projects continued to be slow and continued declines in real estate values and in addition to an increase in non-performing loans resulted in a provision for loan losses of $1.5 million.
- Net charge-offs were $1.2 million.
- Total non-performing assets consisting of non-performing loans and foreclosed assets totaled $42.6 million or 0.67% of total assets compared to 30.6 million or 0.48% of total assets at March 31st.
- At June 30, a $16 million loan was 90 days plus past due and still accruing.
Total non-performing loans were $36.7 million, or 0.86% of total loans, compared with $11.1 million, or 0.27% of total loans in the prior year.
- This included the $16 million loan secured by a 64-unit condominium project whereby the borrower closed on the sale of the first unit, brought the loan current and reduced the outstanding principal balance.
- The loan is now performing in accordance with its original contractual terms.
Total deposits decreased $60.4 million or 1.4% from 4,224 million in the previous quarter to 4.174 million second quarter
- Increases of $54.2 million in demand deposit balances were offset by decreases in savings balances of $45.5 million and higher cost time deposit balances of $69.1 million.
- Core deposits as a percentage of total deposits were 63.3% compared to 62.2% at the end of the first quarter.
- Non-interest income decreased $2.1 million or 24% to $6.7 million from 8.8 million in the first quarter.
Fee income declined $1.2 million or 20% as a result of a $1.3 million decrease in equity fund income compared to the trailing quarter.
- Other income decreased $1.1 million to $118,000, primarily as a result of non-recurring gain on the sale of a branch and the gain associated with the Visa initial public offering that was recorded in the first quarter.
- Non-interest expense increased $1.3 million or 4.2% to $33.3 million during the quarter compared to $32 million in the trailing quarter.
- The increase in non-interest expense was due primarily to a $795,000 increase in advertising and promotion, a $751,000 increase in compensation and benefits, and a $215,000 increase in other operating expense, partially offset by decreases in intangible amortization, data processing and net occupancy expense.
Non-interest income totaled $6.7 million, showing a decrease of $7.5 million compared to the same period in 2007.
- In 2007, the Company recorded a one-time gain on an insurance settlement of $5.9 million, before taxes, related to the resolution of previously disclosed litigation.
- Fee income decreased $1.8 million, or 27.4%, compared to the same period in 2007, primarily as a result of decreases in the value of equity fund holdings and lower loan prepayment income.
- Partially offsetting these decreases, net gains on securities transactions totaled $305,000, compared with losses of $63,000 for the same quarter in 2007.
- All of the firm''s capital ratios at both the holding company and bank levels exceeded the regulatory threshold to be considered well capitalized.
- In order to conserve that capital while still maintaining a quarterly cash dividend, Provident Financial Services'' share repurchase activity in the second quarter was negligible.
Key questions and answers from the second quarter fiscal year 2008 earnings call as presented by Provident Financial Services, Inc. (PFS) on July 24, 2008
Mark Fitzgibbon (Sandler O’Neill):
What is your deposit strategy?
Linda Niro: It is a combination of both on the deposit side and our preferred method of funding loan growth to expand our deposit base and our market share.
We have a strategic business plan to expand core account relationships, not only on the retail side, but on the commercial and small business side by offering new products, by enhancing our Web site and internet banking capabilities.
While de novo branching will be in the mix, where it makes sense, from a geographic location and market share, primarily it is going to be through expanding relationships with our customers and improving our core deposit mix.
Paul Pantozzi: We have several locations, de novo locations in the pipeline, they are not going to be coming online until much later this year and really into the first and second quarters of 2009, but again, very selective locations hopefully to assist in the process.
Mark Fitzgibbon (Sandler O’Neill):
Comment on that $16 million credit that you have that you secured at the end of the quarter?
Chris Martin: That building had just been finished. We had some delays and the process that takes and now that everything is completed, there were some sales just waiting to get the COs to close the unit.
Definitely, in a decent market and also there is more affordability index in this building. So, things are slow, but they have progressed and we''re closing contracts as we speak.
Mark Fitzgibbon (Sandler O’Neill):
Can you hold the margin here given what you see going on with liability pricing and the yield curve?
