Investors Bancorp, Inc. Announces First Quarter Financial Results and Cash Dividend

SHORT HILLS, N.J., April 27, 2017 /PRNewswire/ -- Investors Bancorp, Inc. (NASDAQ: ISBC) ("Company"), the holding company for Investors Bank ("Bank"), reported net income of $46.0 million, or  $0.16 per diluted share, for the three months ended March 31, 2017, compared to $52.5 million, or $0.18  per diluted share, for the three months ended December 31, 2016, and $44.7 million, or $0.14 per diluted share, for the three months ended March 31, 2016.

Kevin Cummings, President and CEO commented, "This was a solid quarter for the Bank as year over year earnings per share grew 14%. We continue to invest in our risk management infrastructure as well as BSA remediation initiatives."

Mr. Cummings continued, "Our non-accrual loan metrics continued to improve as compared with the prior
quarters."

The Company also announced today that its Board of Directors declared a cash dividend of $0.08 per share to be paid on May 25, 2017 for stockholders of record as of May 10, 2017.

Performance Highlights

• Total assets increased $714.0 million, or 3.1%, to $23.89 billion at March 31, 2017 from $23.17 billion at December 31, 2016.
• Net loans increased $691.4 million, or 3.7%, to $19.26 billion at March 31, 2017 from $18.57 billion at December 31, 2016. During the three months ended March 31, 2017 we originated $1.16 billion in new loans.
• Core deposits (savings, checking and money market) increased $218.8 million from $12.33 billion at December 31, 2016 to $12.55 billion at March 31, 2017 and represent approximately 82% of total deposits as of March 31, 2017 compared to 76% at March 31, 2016.
• Net interest income for the three months ended March 31, 2017 was $167.1 million, an 8.1% increase compared to the three months ended March 31, 2016.
• Non-accrual loans to total loans declined to 0.45% at March 31, 2017 compared to 0.61% at March 31, 2016. Our provision for loan losses was $4.0 million for the three months ended March 31, 2017, compared to net charge-offs of $1.5 million.
• Earnings per share increased 14% from $0.14 per share for the three months ended March 31, 2016 to $0.16 per share for the three months ended March 31, 2017.

Financial Performance Overview

For the first quarter of 2017, net income totaled $46.0 million, a decrease of $6.4 million as compared to the fourth quarter of 2016 and an increase of $1.4 million as compared to the first quarter of 2016.  The changes in net income on both a sequential and year over year quarter basis are the result of the following:

Net interest income decreased by $1.6 million, or 0.9%, as compared to the fourth quarter of 2016 due to:

• An increase in total interest expense of $3.6 million primarily attributable to rising deposit and borrowing costs, as well as an increase in the weighted average balance of total interest-bearing liabilities of $678.6 million, or 3.9%, to $17.89 billion. The weighted average cost of interest-bearing liabilities for the three months ended March 31, 2017 increased 5 basis points to 0.96%.
• An increase in interest and dividend income of $2.0 million, or 1.0%, to $210.1 million as compared to the fourth quarter of 2016.
• Interest income on loans decreased by $2.0 million, or 1.0%, to $186.0 million which is attributed to a 17 basis point reduction in the weighted average loan yield to 3.95%, primarily driven by lower prepayment penalties and lower average yields on new loan origination volume. The decrease is partially offset by a $567.2 million increase in the average balance of net loans to $18.83 billion primarily attributed to growth in the commercial loan portfolio.
• Prepayment penalties, which are included in interest income, totaled $3.2 million for the three months ended March 31, 2017, as compared to $7.4 million for the three months ended December 31, 2016.
• Interest income on interest-earning assets, excluding loans, increased by $4.0 million, or 19.7%, to $24.1 million for the three months ended March 31, 2017. The increase is attributed to the weighted average yield on interest-earning assets, excluding loans, which increased 36 basis points to 2.52% for the three months ended March 31, 2017.

The net interest margin decreased 12 basis points to 2.95% for the three months ended March 31, 2017 from 3.07% for the three months ended December 31, 2016 with approximately 8 basis points of the decrease being driven by lower prepayment penalties.

On a year over year basis, net interest income increased by $12.6 million, or 8.1%, in the first quarter of 2017, as compared to the first quarter of 2016 due to:

• An increase in interest and dividend income of $18.0 million, or 9.4%, to $210.1 million as a result of a $2.06 billion increase in the average balance of net loans from continued loan origination growth, partially offset by the weighted average loan yield decreasing 17 basis points to 3.95%, with new originations yields and prepayment penalty declines.
• Prepayment penalties, which are included in interest income, totaled $3.2 million for the three months ended March 31, 2017, as compared to $4.7 million for the three months ended March 31, 2016.
• An increase in total interest expense of $5.4 million was primarily attributed to an increase in the average balance of total borrowed funds of $1.31 billion, or 39.4%, to $4.62 billion for the three months ended March 31, 2017 and an increase in the average balance of interest-bearing deposits of $935.4 million, or 7.6%, to $13.27 billion. The weighted average cost of interest-bearing liabilities remained flat at 0.96% for the three months ended March 31, 2017.

The net interest margin decreased 10 basis points year over year to 2.95% for the three months ended March 31, 2017 from 3.05% for the three months ended March 31, 2016 with approximately 3 basis points of the decrease being driven by lower prepayment penalties.

Total non-interest income increased by $1.2 million to $9.7 million for the three months ended March 31, 2017 compared to the three months ended December 31, 2016, primarily due to a $1.2 million gain on security transactions as a result of the sale of available for sale securities totaling $46.1 million for the three months ended March 31, 2017.  Compared to the first quarter of 2016, total non-interest income increased $1.0 million.

Total non-interest expenses were $99.6 million for the three months ended March 31, 2017, an increase of $10.5 million, or 11.9%, as compared to the fourth quarter of 2016.  Compensation and fringe benefits increased $9.1 million due to additions to our staff to support continued growth and infrastructure, especially in our risk management area, as well as normal merit increases.  These increases were coupled with the decrease of our incentive compensation and freezing of defined benefit retirement plans during the fourth quarter of 2016 which reduced total non-interest expenses for the three months ended December 31, 2016 by approximately $5.0 million. For the three months ended March 31, 2017 professional fees increased $1.8 million, largely attributable to continuing risk management and compliance efforts, including the enhancement of the Company's bank secrecy act and anti-money laundering compliance program ("BSA").  Excluding the impact of BSA related professional fees, total non-interest expenses totaled $95.1 million for the three months ended March 31, 2017.

Compared to the first quarter of 2016, total non-interest expenses increased $12.4 million, or 14.2%, year over year due to the contributing factors:

• Compensation and fringe benefits increased $5.5 million as a result of additions to our staff to support continued growth and continued build out of our risk management and operating infrastructure, as well as normal merit increases.
• Professional fees increased $3.4 million as we continue to enhance risk management and operational infrastructure.
• Federal insurance premiums and office occupancy and equipment expense increased $1.3 million and $1.0 million, respectively, for the three months ended March 31, 2017.

Income tax expense was $27.2 million for the three months ended March 31, 2017, $31.0 million for the three months ended December 31, 2016 and $26.5 million for the three months ended March 31, 2016.

Asset Quality

Our provision for loan losses was $4.0 million for the three months ended March 31, 2017, compared to $4.8 million for the three months ended December 31, 2016 and $5.0 million for the three months ended March 31, 2016.  For the three months ended March 31, 2017, net charge-offs were $1.5 million compared to net recoveries of $73,000 for the three months ended December 31, 2016 and net charge-offs of $6.9 million for the three months ended March 31, 2016.

Our provision for the three months ended March 31, 2017 is primarily a result of continued organic growth in the loan portfolio, specifically the multi-family, commercial real estate and commercial and industrial portfolios; the inherent credit risk in our overall portfolio, particularly the credit risk associated with commercial real estate lending and commercial and industrial lending; offset by the improvement in the level of non-accrual loans and charge-offs.

Our accruing past due loans and non-accrual loans discussed below exclude certain purchased credit impaired (PCI) loans, primarily consisting of loans recorded in the Company's acquisitions.  Under U.S. GAAP, the PCI loans (acquired at a discount that is due, in part, to credit quality) are not subject to delinquency classification in the same manner as loans originated by the Bank.

Total non-accrual loans decreased to $87.1 million, or 0.45% of total loans, at March 31, 2017 compared to $94.3 million, or 0.50% of total loans, at December 31, 2016.  Classified loans as a percent of total loans increased to 1.58% at March 31, 2017 from 1.00% at December 31, 2016. 

We continue to diligently resolve our troubled loans, however it takes a long period of time to resolve residential credits in our lending area.  At March 31, 2017, there were $33.0 million of loans deemed as troubled debt restructurings, of which $27.4 million were residential and consumer loans, $3.7 million were commercial real estate loans, $1.7 million were commercial and industrial loans and $246,000 were multi-family loans.  Troubled debt restructured loans of $12.2 million were classified as accruing and $20.8 million were classified as non-accrual at March 31, 2017.

The following table sets forth non-accrual loans and accruing past due loans (excluding PCI loans and loans held for sale) on the dates indicated as well as certain asset quality ratios.

Balance Sheet Summary

Total assets increased by $714.0 million, or 3.1%, to $23.89 billion at March 31, 2017 from December 31, 2016.  Net loans increased $691.4 million, or 3.7%, to $19.26 billion at March 31, 2017, and securities increased by $55.7 million, or 1.6%, to $3.47 billion at March 31, 2017 from December 31, 2016.

The detail of the loan portfolio (including PCI loans) is below:           

During the three months ended March 31, 2017, we originated $498.4 million in multi-family loans, $234.7 million in commercial real estate loans, $176.0 million in commercial and industrial loans, $121.6 million in residential loans, $95.7 million in construction loans and $32.5 million in consumer and other loans.  This increase in loans reflects our continued focus on generating multi-family loans, commercial real estate loans and commercial and industrial loans, which was partially offset by pay downs and payoffs of loans.  Our loans are primarily on properties and businesses located in New Jersey and New York.

In addition to the loans originated for our portfolio, our mortgage subsidiary, Investors Home Mortgage Co., originated residential mortgage loans for sale to third parties totaling $41.2 million during the three months ended March 31, 2017.

The allowance for loan losses increased by $2.5 million to $230.9 million at March 31, 2017 from $228.4 million at December 31, 2016.  The increase in our allowance for loan losses is due to the growth of the loan portfolio and the credit risk in our overall portfolio, particularly the inherent credit risk associated with commercial real estate lending as well as commercial and industrial loans, offset by the improvement in the level of non-accrual loans and charge-offs.  Future increases in the allowance for loan losses may be necessary based on the growth and composition of the loan portfolio, the level of loan delinquency and the economic conditions in our lending area.  At March 31, 2017, our allowance for loan loss as a percent of total loans was 1.18%.

Securities, in the aggregate, increased by $55.7 million, or 1.6%, to $3.47 billion at March 31, 2017 from $3.42 billion at December 31, 2016.  This increase was a result of purchases partially offset by paydowns and sales.

Deposits increased by $95.2 million, or 0.6%, from $15.28 billion at December 31, 2016 to $15.38 billion at March 31, 2017.  Checking accounts increased $100.0 million to $6.19 billion at March 31, 2017 from $6.09 billion at December 31, 2016.  Core deposits (savings, checking and money market) represented approximately 82% of our total deposit portfolio at March 31, 2017.

Borrowed funds increased by $547.5 million, or 12.0%, to $5.09 billion at March 31, 2017 from $4.55 billion at December 31, 2016 to help fund the continued growth of the loan portfolio.

Stockholders' equity increased by $35.2 million to $3.16 billion at March 31, 2017 from $3.12 billion at December 31, 2016.  The increase is primarily attributed to net income of $46.0 million and $10.2 million of costs related to share-based plans for the three months ended March 31, 2017.  These increases are partially offset by cash dividends of $0.08 per share totaling $24.8 million during the three months ended March 31, 2017.

About the Company

Investors Bancorp, Inc. is the holding company for Investors Bank, which as of March 31, 2017 operates from its corporate headquarters in Short Hills, New Jersey and 152 branches located throughout New Jersey and New York.

Earnings Conference Call April 28, 2017 at 11:00 a.m. (ET)

The Company, as previously announced, will host an earnings conference call on Friday, April 28, 2017 at 11:00 a.m. (ET).  The toll-free dial-in number is: (866) 218-2404.  Callers who pre-register will bypass the live operator and may avoid any delays in joining the conference call.  Participants will immediately receive an online confirmation, an email and a calendar invitation for the event.

Conference Call Pre-registration link: http://dpregister.com/10104229

A telephone replay will be available beginning on April 28, 2017 from 1:00 p.m. (ET) through 9:00 a.m. (ET) on July 28, 2017.  The replay number is (877) 344-7529 password 10104229.  The conference call will also be simultaneously webcast on the Company's website www.myinvestorsbank.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 the " Risk Factors" disclosures included in our Annual Report on Form 10-K, as supplemented in quarterly reports on Form 10-Q, 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 that 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.

Non-GAAP Financial Measures

We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position.  We utilize these measures for internal planning and forecasting purposes.  We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management.  These non-GAAP measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure.  Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

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SOURCE Investors Bancorp, Inc.