Investors Bancorp, Inc. Announces Fourth Quarter and Year End Financial Results and Second Cash Dividend

SHORT HILLS, N.J., Jan. 31, 2013 /PRNewswire/ -- Investors Bancorp, Inc. (NASDAQ: ISBC) ("Company"), the holding company for Investors Bank ("Bank"), reported net income of $21.4 million for the three months ended December 31, 2012 compared to net income of $21.1 million for the three months ended December 31, 2011.  Basic and diluted earnings per share were $0.20 for the three months ended December 31, 2012 compared to $0.20 for the three months ended December 31, 2011.  During the quarter ended December 31, 2012, the Company completed the acquisition of Marathon National Bank of New York ("Marathon Bank").  The results for the quarter ended December 31, 2012 include one-time expenses related to the acquisitions of $4.4 million net of tax.  Excluding these expenses, basic and diluted earnings per share would have been $0.24 for the three months ended  December 31, 2012 and return on average tangible equity would have been 10.69%.

Net income for the year ended December 31, 2012 was $88.8 million compared to net income of $78.9 million for the year ended December 31, 2011.  Basic and diluted earnings per share were $0.83 and $0.82  respectively, for the year ended December 31, 2012 compared to basic and diluted of $0.73 for the year ended December 31, 2011. The results for the year ended December 31, 2012 include one-time expenses related to the acquisitions of Brooklyn Federal Savings Bank ("Brooklyn Federal") and Marathon Bank of $8.1 million, net of tax.  Excluding these expenses, basic and diluted earnings per share would have been $0.90 for the twelve months ended  December 31, 2012.

The Company announced today that the Board of Directors has declared a cash dividend of $0.05 per share to stockholders of record as of February 11, 2013, payable on February 25, 2013. This is the Company's second dividend since completing its initial public stock offering in October 2005. The majority of the outstanding stock of the Company is owned by Investors Bancorp MHC, a mutual holding company, which will receive the dividend payment along with the public shareholders.

Commenting on the results of the quarter, Kevin Cummings, President and CEO stated "This has been a very busy quarter for the Company. From an earnings perspective, excluding acquisition related charges, Investors recorded a strong quarter with earnings per share of $0.24 compared to $0.20 for the prior year quarter. In addition, we experienced good loan growth during the quarter and our credit quality continued to improve with non-performing loans to total loans decreasing to 1.31% compared to 1.44% at September 30, 2012."

Mr. Cummings also commented on the Company's exposure to superstorm Sandy, "We continue to work with borrowers and those severely impacted as a result of the storm. It is still too soon to know the exact extent of the financial impact from the storm, however, due to the amount of loans we have in the affected areas along the coastline, we felt it prudent to provide credit reserves of $5.5 million for storm-related losses. We will continue to monitor our exposure to these loans."

Regarding the Company's acquisition strategy, Mr. Cummings added, "The integration of Marathon Bank into Investors is progressing well and we are excited about our recently announced acquisition of Roma Financial Corporation which will expand our retail bank footprint into new markets in New Jersey." 

The following represents performance highlights and significant events that occurred during the period:

  • The Company completed the acquisition of Marathon Bank on October 15, 2012 which added $777.5 million in deposits and $558.5 million in net loans and resulted in $38.4 million of goodwill. 

     
  • Net loans increased $1.51 billion, or 17.2%, to $10.31 billion at December 31, 2012 from $8.79 billion at December 31, 2011. During the year ended December 31, 2012, we originated $1.29 billion in multi-family loans and $458.9 million in commercial real estate loans.  The acquisitions of Marathon Bank and Brooklyn Federal added approximately $558.5 million and  $71.3 million, respectively of net loans.  As of December 31, 2012, the commercial loan portfolio exceeds 51% of total loans. 

     
  • Deposits increased by $1.41 billion, or 19.1% to $8.77 billion at December 31, 2012 from $7.36 billion at December 31, 2011. Core deposits increased $1.78 billion or 44.3% from the prior year end.   The acquisitions of  Marathon Bank and Brooklyn Federal contributed $777.5 million  and $385.9 million, respectively of deposits in total.  As of December 31, 2012, core deposits exceeds 66% of total deposits. 

     
  • Efficiency ratio was 53.1% for the three months ended December 31, 2012 and 42.7% for the three months ended December 31, 2011.  Excluding one-time expenses related to the acquisitions the efficiency ratio was 46.6% for the three months ended  December 31, 2012

     
  • Net interest margin for the three months ended December 31, 2012 was 3.51%. This represents an increase of 15 basis points compared to prior year end and an increase of 16 basis point from the September 30, 2012 linked quarter. 

Comparison of Operating Results

Interest and Dividend Income

Total interest and dividend income increased by $9.5 million, or 7.9%, to $130.2 million  for the three months ended December 31, 2012 from $120.7 million for the three months ended December 31, 2011.  This increase is attributed to the average balance of interest-earning assets increasing $1.49 billion or 14.7%, to $11.57 billion for the three months ended December 31, 2012 from $10.09 billion for the three months ended December 31, 2011 due to organic growth and acquisitions. This was partially offset by the weighted average yield on interest-earning assets decreasing 28 basis points to 4.50% for the three months ended December 31, 2012 compared to 4.78% for the three months ended December 31, 2011. 

Interest income on loans increased by $9.7 million, or 8.7%, to $120.8 million for the three months ended December 31, 2012 from $111.1 million for the three months ended December 31, 2011, reflecting a $1.06 billion or 12.1%, increase in the average balance of net loans to $9.85 billion for the three months ended December 31, 2012 from $8.79 billion for the three months ended December 31, 2011. The increase is primarily attributed to the average balance of multi-family loans and commercial real estate loans increasing $842.6 million and $447.8 million, respectively  as we continue to focus on diversifying our loan portfolio by adding more multi-family loans and commercial real estate loans. This was partially offset by the decrease in the average balance of residential loans and construction loans of $201.6 million and $62.0 million, respectively for the three months ended December 31, 2012. In addition, we recorded $3.4 million  in loan prepayment fees in interest income for the three months ended December 31, 2012 compared to $923,000  for the three months ended December 31, 2011. This was partially offset by a 15 basis point decrease in the average yield on net loans to 4.90% for the three months ended December 31, 2012 from 5.05% for the three months ended December 31, 2011, as lower rates on new and refinanced loans reflect the current interest rate environment.

Interest income on all other interest-earning assets, excluding loans, decreased by $165,000, or 1.7%, to $9.4 million for the three months ended December 31, 2012 from $9.5 million for the three months ended December 31, 2011.  The decrease is attributed to the weighted average yield on interest-earning assets, excluding loans, decreasing by 77 basis points to 2.18% for the three months ended December 31, 2012 compared to 2.95% for the three months ended December 31, 2011 reflecting the lower interest rate environment.  This was partially offset by a $426.7 million increase in the average balance of all other interest-earning assets, excluding loans, to $1.72 billion for the three months ended December 31, 2012 from $1.29 billion for the three months ended December 31, 2011.

Total interest and dividend income increased by $22.6 million or 4.8%, to $496.2 million million for the year ended December 31, 2012 from $473.6 million for the year ended December 31, 2011.  This increase is attributed to the average balance of interest-earning assets increasing $1.27 billion, or 13.1%, to $10.96 billion for the year ended December 31, 2012 from $9.70 billion for the year ended December 31, 2011.  This was partially offset by the weighted average yield on interest-earning assets decreasing 35 basis points to 4.53% for the year ended December 31, 2012 compared to 4.88% for the year ended December 31, 2011. 

Interest income on loans increased by $20.8 million, or 4.8% to $455.2 million for the year ended December 31, 2012 from $434.4 million for the year ended December 31, 2011, reflecting a $810.5 million, or 9.6%, increase in the average balance of net loans to $9.27 billion for the year ended December 31, 2012 from $8.46 billion for the year ended December 31, 2011. The increase is primarily attributed to the average balance of multi-family loans and commercial real estate loans increasing $693.3 million and $236.7 million, respectively as we continue to focus on diversifying our loan portfolio by adding more multi-family loans and commercial real estate loans.  In addition, we recorded $8.8 million  in loan prepayment fees in interest income for the year ended December 31, 2012 compared to $2.6 million  for the year ended December 31, 2011.  This was offset by the decrease in the average balance of construction and residential loans of $72.2 million and $63.1 million  respectively, for the year ended December 31, 2012 and a 22 basis point decrease in the average yield on net loans to 4.91% for the year ended December 31, 2012 from 5.13% for the year ended December 31, 2011, as lower rates on new and refinanced loans reflect the current interest rate environment. 

Interest income on all other interest-earning assets, excluding loans, increased by $1.8 million, or 4.5%, to $41.0 million for the year ended December 31, 2012 from $39.2 million for the year ended December 31, 2011.  This increase reflected a $459.1 million increase in the average balance of all other interest-earning assets, excluding loans, to $1.69 billion for the year ended December 31, 2012 from $1.23 billion for the year ended December 31, 2011. This was offset by the weighted average yield on interest-earning assets, excluding loans, decreasing by 76 basis points to 2.42% for the year ended December 31, 2012 compared to 3.18% for the year ended December 31, 2011 reflecting the current interest rate environment.

Interest Expense

Total interest expense decreased by $7.3 million, or 20.2%, to $28.6 million for the three months ended December 31, 2012 from $35.9 million for the three months ended December 31, 2011. This decrease is attributed to the weighted average cost of total interest-bearing liabilities decreasing 46 basis points to 1.13% for the three months ended December 31, 2012 compared to 1.59% for the three months ended December 31, 2011. This was partially offset by the average balance of total interest-bearing liabilities increasing by $1.06 billion, or 11.7%, to $10.11 billion for the three months ended December 31, 2012 from $9.05 billion for the three months ended December 31, 2011. 

Interest expense on interest-bearing deposits decreased $6.0 million, or 30.0% to $14.0 million for the three months ended December 31, 2012 from $20.0 million for the three months ended December 31, 2011.  This decrease is attributed to a 44 basis point decrease in the average cost of interest-bearing deposits to 0.71% for the three months ended December 31, 2012 from 1.15% for the three months ended December 31, 2011 as deposit rates reflect the lower interest rate environment.  This was partially offset by the average balance of total interest-bearing deposits increasing $905.9 million, or 13.0% to $7.87 billion for the three months ended December 31, 2012 from $6.96 billion for the three months ended December 31, 2011. Core deposit accounts- savings, checking and money market outpaced average total interest-bearing deposit growth as average core deposits increased $1.28 billion over the past year.

Interest expense on borrowed funds decreased by $1.2 million or 7.8%, to $14.7 million for the three months ended December 31, 2012 from $15.9 million for the three months ended December 31, 2011.  This decrease is attributed to the average cost of borrowed funds decreasing 44 basis points to 2.62% for the three months ended December 31, 2012 from 3.06% for the three months ended December 31, 2011 as maturing borrowings repriced to lower interest rates.  This was partially offset by the average balance of borrowed funds increasing by $153.8 million or 7.4%, to $2.24 billion for the three months ended December 31, 2012 from $2.08 billion for the three months ended December 31, 2011.

Total interest expense decreased by $21.0 million or 14.5%, to $123.4 million for the year ended December 31, 2012 from $144.5 million for the year ended December 31, 2011.  This decrease is attributed to the weighted average cost of total interest-bearing liabilities decreasing 39 basis points to 1.27% for the year ended December 31, 2012 compared to 1.66% for the year ended December 31, 2011.  This was partially offset by the average balance of total interest-bearing liabilities increasing by $1.02 billion, or 11.7%, to $9.72 billion for the year ended December 31, 2012 from $8.70 billion for the year ended December 31, 2011. 

Interest expense on interest-bearing deposits decreased $16.3 million or 20.4% to $63.6 million for the year ended December 31, 2012 from $79.9 million for the year ended December 31, 2011.  This decrease is attributed to a 36 basis point decrease in the average cost of interest-bearing deposits to 0.85% for the year ended December 31, 2012 from 1.21% for the year ended December 31, 2011 as deposit rates reflect the lower interest rate environment.  This was partially offset by the average balance of total interest-bearing deposits increasing $872.4 million, or 13.2% to $7.50 billion for the year ended December 31, 2012 from $6.63 billion for the year ended December 31, 2011.  Core deposit accounts- savings, checking and money market outpaced average total interest-bearing deposit growth as average core deposits increased $1.11 billion.

Interest expense on borrowed funds decreased by $4.7 million, or 7.3% to $59.9 million for the year ended December 31, 2012 from $64.6 million for the year ended December 31, 2011. This decrease is attributed to the average cost of borrowed funds decreasing 42 basis points to 2.69% for the year ended December 31, 2012 from 3.11% for the year ended December 31, 2011 as maturing borrowings repriced to lower interest rates.  This was partially offset by the average balance of borrowed funds increasing by $148.5 million or 7.2%, to $2.22 billion for the year ended December 31, 2012 from $2.08 billion for the year ended December 31, 2011.

Net Interest Income

Net interest income increased by $16.8 million, or 19.8%, to $101.5 million for the three months ended December 31, 2012 from $84.8 million for the three months ended December 31, 2011.  The increase was primarily due to the average balance of interest earning assets increasing $1.49 billion to $11.57 billion at December 31, 2012 compared to $10.09 billion at December 31, 2011, as well as a 46 basis point decrease in our cost of interest-bearing liabilities to 1.13% for the three months ended December 31, 2012 from 1.59% for the three months ended December 31, 2011. These were partially offset by the average balance of our interest earning liabilities increasing $1.06 billion to $10.11 billion at December 31, 2012 compared to $9.05 billion at December 31, 2011, as well as the yield on our interest-earning assets decreasing 28 basis points to 4.50% for the three months ended December 31, 2012 from 4.78% for the three months ended December 31, 2011. While the yield on our interest earning assets declined due to the lower interest rate environment, our cost of funds also continued to fall resulting in our net interest margin increasing by 15 basis points from 3.36% for the three months ended December 31, 2011 to 3.51% for the three months ended December 31, 2012.

Net interest income increased by $43.7 million, or 13.3%, to $372.7 million for the year ended December 31, 2012 from $329.1 million for the year ended December 31, 2011.  The increase was primarily due to the average balance of interest earning assets increasing $1.27 billion to $10.96 billion at December 31, 2012 compared to $9.70 billion at December 31, 2011, as well as a 39 basis point decrease in our cost of interest-bearing liabilities to 1.27% for the year ended December 31, 2012 from 1.66% for the year ended December 31, 2011. These were partially offset by the average balance of our interest earning liabilities increasing $1.02 billion to $9.72 billion at December 31, 2012 compared to $8.70 billion at December 31, 2011, as well as the yield on our interest-earning assets decreasing  35 basis points to 4.53% for the year ended December 31, 2012 from 4.88% for the year ended December 31, 2011. While the yield on our interest earning assets declined due to the lower interest rate environment, our cost of funds also continued to fall resulting in our net interest margin increasing by one basis point from 3.39% for the year ended December 31, 2011 to 3.40% for the year ended December 31, 2012.

Provision for Loan Losses

Our provision for loan losses was $17.0 million for the three months ended December 31, 2012 compared to $20.0 million for the three months ended December 31, 2011. For the three months ended December 31, 2012, net charge-offs were $6.1 million compared to $19.2 million for the three months ended December 31, 2011.  The three months ended December 31, 2011 included the sale of approximately $19.8 million non performing loans resulting in charge-offs of $10.6 million.  The charge-offs for the three months ended December 31, 2012 included approximately $5.4 million of residential charge-offs.  For the year ended December 31, 2012, our provision for loan losses was $65.0 million compared to $75.5 million for the year ended December 31, 2011. For the year ended December 31, 2012, net charge-offs were $40.1 million compared to $49.2 million for the year ended December 31, 2011.  Our provision for the quarter and year ended December 31, 2012 is a result of continued growth in the loan portfolio, specifically the multi-family and commercial real estate portfolios; the inherent credit risk in our overall portfolio, particularly the credit risk associated with commercial real estate lending; the level of non-performing loans and delinquent loans caused by the adverse economic and real estate conditions in our lending area; and the impact of superstorm Sandy. 

Our past due loans and non-accrual loans discussed below exclude certain purchased credit impaired (PCI) loans, primarily consisting of loans recorded in the acquisition of Marathon. 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 Investors.  The following table sets forth non-accrual loans and accruing past due loans (excluding PCI loans) on the dates indicated as well as certain asset quality ratios.  

 


 

December 31,

September 30,

June 30,

March 31,

December 30,


 

2012

2012

2012

2012

2011


 

# of loans

Amount

# of loans

Amount

# of loans

Amount

# of loans

Amount

# of loans

Amount


 

(Dollars in millions)

Accruing past

due loans:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 to 59 days past

due:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Residential

     and consumer

114

$

34.3

71

$

23.6

65

$

16.3

65

$

14.9

80

$

19.1

     Construction


 

1


 

0.4


 


 

1


 

0.7

     Multi-family

1


 

0.2

2


 

3.1

4


 

4.6

2


 

16.0

2


 

0.8

     Commercial

     real estate

6


 

16.5

1


 

0.3

1


 

0.2

2


 

1.8

2


 

1.5

     Commercial

     and industrial

3


 

0.6


 


 


 


 

          Total 30

          to 59

          days past

          due

124

$

51.6

75

$

27.4

70

$

21.1

69

$

32.7

85

$

22.1

60 to 89 days past

due:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Residential

     and consumer

45

$

11.9

43

$

11.9

40

$

8.4

25

$

4.4

33

$

10.0

     Construction


 


 

1


 

0.2


 


 

     Multi-family

3


 

4.0

1


 

1.2


 


 

4


 

6.2

     Commercial

     real estate

4


 

3.0


 


 


 


 

     Commercial

     and industrial

2


 

2.6

1


 

0.10

3


 

3.3

1


 

0.7


 

          Total 60

          to 89

          days past

          due

54


 

21.5

45


 

13.2

44


 

11.9

26


 

5.1

37


 

16.2

     Total accruing

     past due loans

178

$

73.1

120

$

40.6

114

$

33.0

95

$

37.8

122

$

38.3

Non-accrual:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Residential

     and consumer

354

$

82.5

335

$

81.2

328

$

81.7

328

$

86.1

321

$

85.0

     Construction

9


 

25.8

9


 

26.6

15


 

51.4

16


 

57.2

15


 

57.1

     Multi-family

5


 

11.1

6


 

12.0

6


 

13.3

4


 

6.2


 

     Commercial

     real estate

4


 

0.8

1


 

0.8

1


 

1.2

2


 

0.4

1


 

0.1

     Commercial

     and industrial

2


 

0.4

1


 

0.1

2


 

0.8


 


 

Total Non-accrual

Loans

374

$

120.6

352

$

120.7

352

$

148.4

350

$

149.9

337

$

142.2

Accruing troubled

debt restructured

loans

22

$

15.8

18

$

14.8

17

$

8.9

15

$

8.4

15

$

10.5

     Non-accrual

     loans to total

     loans


 

 

1.16%


 

 

1.28%


 

 

1.60%


 

 

1.64%


 

 

1.60 %

     Allowance for

     loan loss as a

     percent of

     non-accrual

     loans


 

 

117.92%


 

 

108.79%


 

 

86.58%


 

 

82.53%


 

 

82.44%

     Allowance for

     loan losses as

     a percent of

     total loans


 

 

1.36%


 

 

1.39%


 

 

1.38%


 

 

1.35%


 

 

1.32 %

Total non-accrual loans decreased $21.6 million to $120.6 million at December 31, 2012 compared to $142.2 million at December 31, 2011 as we continue to diligently resolve our troubled loans.   Excluding the loans acquired from Marathon Bank, our allowance for loan loss as a percent of total loans is 1.44%.  At December 31, 2012, there were $27.7 million of loans deemed trouble debt restructuring, of which $15.8 million were accruing and $11.9 million were on non-accrual.

In late October 2012, the Company's primary market area was adversely impacted by superstorm Sandy. The storm disrupted operations for many businesses in the area and caused substantial property damage in our lending area. In response to the storm, the Company waived late fees and provided payment deferrals to borrowers impacted by the storm.

As of today, the Company has received requests from 45 residential loan borrowers for a payment deferment. The total outstanding principal balance of this pool of loans is $20.7 million with an average loan size of $460,000 and a weighted average loan-to-value ratio of 53% based on appraised values at the time of origination or a more recent valuation, if available. The properties were primarily in a flood zone and the Bank requires borrowers maintain flood insurance. The Bank continues to stay in contact with these residential borrowers to monitor their ability to continue to remit their monthly payments.

The Bank has also contacted most of its commercial loan borrowers in the affected area. At this time, eight commercial real estate borrowers with a combined total outstanding loan balance of $17.8 million have reported losses from the storm. At December 31, 2012, two of these loans totaling $1.7 million were current; four of these loans totaling $13.8 million were 30 days delinquent and two loans totaling $2.3 million were 60 days delinquent.

Although the number of borrowers that have reached out to the Company for financial assistance has been limited, the highest impacted areas along the coastline include 493 residential mortgage loans totaling approximately $275 million in principal outstanding with a loan-to-value of 62%. This represents approximately 6% of our residential mortgage portfolio.

The Company has evaluated the impact of the storm relative to the adequacy of the allowance for loan losses. Based on the Company's evaluation, there were no loan charge-offs or specific losses identified to date. However, the ultimate amount of loan losses relating to the storm is uncertain and difficult to predict as information continues to be gathered. Due to the heightened risk associated with the population of loans identified above, the Company provided credit reserves of $5.5 million for possible credit losses related to the storm as of December 31, 2012.

The allowance for loan losses increased by $24.9 million to $142.2 million at December 31, 2012 from $117.2 million at December 31, 2011.  The increase in our allowance for loan losses is due to the increased inherent credit risk in our overall portfolio, particularly the credit risk associated with commercial real estate lending; and delinquent loans caused by the adverse economic conditions in our lending area and the continued growth in the multi-family and commercial real estate loan portfolios. 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 impact of the deterioration of the real estate and economic environments in our lending area. 

Non-Interest Income

Total non-interest income increased by $1.6 million, or 17.8% to $10.5 million for the three months ended December 31, 2012 from $8.9 million for the three months ended December 31, 2011.  The increase is primarily attributed to the gain on the sale of loans increasing $1.6 million to $5.0 million for the three months ended December 31, 2012.

Total non-interest income increased by $14.9 million, or 51.1% to $44.1 million for the year ended December 31, 2012 from $29.2 million for the year ended December 31, 2011.  The increase is primarily attributed to the gain on the sale of loans increasing $11.1 million to $20.9 million.  In addition,  fees and service charges relating primarily to the servicing of third party loan portfolios as well as fees from commercial deposit and loan accounts increased $2.1 million to $16.6 million for the year ended December 31, 2012, offset by a $977,000 impairment charge of mortgage servicing rights.  Other non- interest income increased by $1.6 million primarily from the fees associated with the sale of non-deposit investment products.

Non-Interest Expenses

Total non-interest expenses increased by $19.4 million, or 48.6%, to $59.5 million for the three months ended December 31, 2012 from $40.0 million for the three months ended December 31, 2011.  This increase included $7.3 million of acquisition related expenses.  Compensation and fringe benefits increased $11.6 million primarily as a result of the staff additions to support our continued growth as well as including employees from the acquisitions of Marathon Bank and Brooklyn Federal, normal merit increases and $5.0 million in acquisition related expenses.  Occupancy expense increased $1.8 million due to costs associated with expanding our branch network and our new operations center. Data processing expenses increased $3.2 million primarily due to the growth in the number of branches and customer accounts and $2.4 million of acquisition related expenses.  In addition, our FDIC insurance premium increased $1.5 million as the FDIC reclassified Investors Bank as a large institution from a small institution which increased our assessment rate.

Total non-interest expenses increased by $49.4 million, or 31.4%, to $207.0 million for the year ended December 31, 2012 from $157.6 million for the year ended December 31, 2011.  This increase included $13.3 million acquisition related expenses.  Compensation and fringe benefits increased $23.5 million primarily as a result of the staff additions to support our continued growth, including employees from the acquisitions of Marathon Bank and Brooklyn Federal, as well as normal merit increases and $6.4 million in acquisition related expenses.  Occupancy expense increased $6.8 million  due to our increased branch network and operations center as well as a one-time charge of $3.0 million for the early termination of certain leased facilities and the costs associated with expanding our branch network. Data processing expenses increased $7.6 million primarily due to increased volume of accounts and $4.0 million in acquisition related expenses.

Income Taxes

Income tax expense was $14.2 million for the three months ended December 31, 2012, representing a 39.85% effective tax rate compared to income tax expense of $12.6 million for the three months ended December 31, 2011 representing a 37.32% effective tax rate.  The increase in the effective tax rate is partially attributed to the non-deductible acquisition related expenses. 

Income tax expense was $56.1 million for the year ended December 31, 2012, representing a 38.72% effective tax rate compared to income tax expense of $46.3 million for the year ended December 31, 2011 representing a 36.98% effective tax rate.  The increase in the effective tax rate is partially attributed to the non-deductible acquisition related expenses. 

Balance Sheet Summary

Total assets increased by $2.02 billion, or 18.9%, to $12.72 billion at December 31, 2012 from $10.70 billion at December 31, 2011.  This increase was largely the result of net loans, including loans held for sale, increasing $1.52 billion to $10.34 billion at December 31, 2012 from $8.81 billion at December 31, 2011 and a $401.6 million increase in available for sale securities to $1.39 billion at December 31, 2012 from $983.7 million at December 31, 2011.

Net loans, including loans held for sale, increased by $1.52 billion, or 17.3%, to $10.34 billion at December 31, 2012 from $8.81 billion at December 31, 2011.  For the year ended December 31, 2012, we originated $1.29 billion in multi-family loans, $458.8 million in commercial real estate loans, $139.8 million in commercial and industrial loans, $69.8 million in consumer and other loans and $32.2 million in construction loans.  This increase in loans reflects our continued focus on generating multi-family and commercial real estate loans, which was partially offset by pay downs and payoffs of loans. The loans we originate and purchase are on properties located primarily in New Jersey and New York.  The net loans acquired from Marathon Bank and Brooklyn Federal were approximately $558.5 million and $71.3 million, respectively.

We originate residential mortgage loans through our mortgage subsidiary, Investors Home Mortgage Co. For the year ended December 31, 2012, Investors Home Mortgage Co. originated $1.51 billion in residential mortgage loans of which $811.2 million were for sale to third party investors and $694.0 million were added to our portfolio. We also purchased 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 year ended December 31, 2012, we purchased loans totaling $638.8 million from these entities. In addition, we acquired $177.5 million in loans from Brooklyn Federal and subsequently sold $49.4 million of commercial real estate loans and an additional $37.9 million of commercial real estate loans on a pass through basis to a third party. 

At December 31, 2012, total loans were $10.44 billion and included $4.84 billion in residential loans, $3.00 billion in multi-family loans, $1.97 billion in commercial real estate loans, $224.8 million in construction loans, $238.9 million in consumer and other loans and $169.3 million in commercial and industrial loans.

Securities, in the aggregate, increased by $293.9 million, or 23.1%, to $1.57 billion at December 31, 2012, from $1.27 billion at December 31, 2011. The increase in the portfolio was primarily due to the purchase of $760.7 million of agency issued mortgage backed securities partially offset by sales, normal pay downs or maturities during the year ended December 31, 2012. 

Intangible assets increased $60.0 million  for the year ended December 31, 2012.  The majority of the increase is attributed to $38.4 million in goodwill and $5.0 million of core deposit intangible asset recorded in conjunction with the Marathon Bank acquisition and $16.5 million in goodwill recorded in conjunction with the Brooklyn Federal acquisition.  The amount of stock we own in the Federal Home Loan Bank (FHLB) increased by $33.7 million from $116.8 million at December 31, 2011 to $150.5 million at December 31, 2012 as a result of an increase in our level of borrowings.

Deposits increased by $1.41 billion, or 19.1%, to $8.77 billion at December 31, 2012 from $7.36 billion at December 31, 2011. This was attributed to an increase in core deposits of $1.78 billion or 44.3%, partially offset by a $375.9 million decrease in certificates of deposit.  The majority of the increase is related to acquisitions during the year in which Marathon Bank contributed $777.5 million while Brooklyn Federal contributed $385.9 million of deposits in total. 

Borrowed funds increased $450.2 million, or 20.0%, to $2.71 billion at December 31, 2012 from $2.26 billion at December 31, 2011 due to the funding of our asset growth.

Stockholders' equity increased $99.4 million to $1.07 billion at December 31, 2012 from $967.4 million at December 31, 2011. The increase is primarily attributed to the $88.8 million of net income for the year ended December 31, 2012 and $7.6 million as a result of the acquisition of Brooklyn Federal. In addition, stockholder's equity was positively impacted by other comprehensive income of $3.5 million and $1.4 million in ESOP and stock based compensation expenses. This was partially offset by the declaration of a cash dividend of $0.05 per common share that resulted in a decrease of $5.6 million in stockholders' equity.

About the Company

Investors Bancorp, Inc. is the holding company for Investors Bank, which as of  December 31, 2012 operates from its corporate headquarters in Short Hills, New Jersey and 101 offices located throughout northern and central New Jersey and New York.

Earnings Conference Call February 1, 2013 at 11:00 a.m. (ET)

The Company, as previously announced, will host an earnings conference call Friday, February 1, 2013 at 11:00 a.m. (ET). The toll-free dial-in number is: (888) 317-6016. A telephone replay will be available on February 1, 2013 from 1:00 p.m. (ET) through May 2, 2013 9:00 a.m. (ET). The replay number is (877) 344-7529 password 10023420. 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 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.

 

INVESTORS BANCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2012 and 2011


 

 

 

 

 

 

 

 

December 31,


 

December 31,

Assets


 

2012


 

2011


 

 

 

 

 

 

 

 

(In thousands)

Cash and cash equivalents

$

155,153


 

90,139

Securities available-for-sale, at estimated fair value


 

1,385,328


 

983,715

Securities held-to-maturity, net (estimated fair value of


 

 

 

 

 

$198,893 and $311,860 at December 31, 2012 and 11


 

 

 

 

 

 respectively)


 

179,922


 

287,671

Loans receivable, net


 

10,306,786


 

8,794,211

Loans held-for-sale


 

28,233


 

18,847

Federal Home Loan Bank stock


 

150,501


 

116,813

Accrued interest receivable 


 

45,144


 

40,063

Other real estate owned


 

8,093


 

3,081

Office properties and equipment, net


 

91,408


 

60,555

Net deferred tax asset 


 

150,006


 

133,526

Bank owned life insurance  


 

113,941


 

112,990

Intangible assets


 

99,222


 

39,225

Other assets


 

 

 

8,837


 

20,749


 

 

 

 

 

Total assets

$

12,722,574


 

10,701,585

Liabilities and Stockholders' Equity


 

 

 

 

Liabilities:


 

 

 

 

 

 

 

 

Deposits


 

 

$

8,768,857


 

7,362,003


 

Borrowed funds


 

2,705,652


 

2,255,486


 

Advance payments by borrowers for taxes and insurance


 

52,707


 

43,434


 

Other liabilities


 

128,541


 

73,222


 

 

 

 

 

Total liabilities


 

11,655,757


 

9,734,145

Stockholders' equity:


 

 

 

 

 

Preferred stock, $0.01 par value, 50,000,000 authorized shares;  


 

 

 

 

 

 

none issued


 


 


 

Common stock, $0.01 par value, 200,000,000 shares authorized;


 

 

 

 

 

 

118,020,280 issued;  111,915,882 and 110,937,672 outstanding


 

 

 

 

 

 

at December 31, 2012 and 2011, respectively


 

532


 

532


 

Additional paid-in capital


 

533,858


 

536,408


 

Retained earnings


 

644,923


 

561,596


 

Treasury stock, at cost; 6,104,398 and 7,082,608 shares at


 

 

 

 

 

 

December 31, 2012 and 2011, respectively


 

(73,692)


 

(87,375)


 

Unallocated common stock held by the employee stock


 

 

 

 

 

 

ownership plan


 

(31,197)


 

(32,615)


 

Accumulated other comprehensive loss


 

(7,607)


 

(11,106)


 

 

 

 

Total stockholders' equity


 

1,066,817


 

967,440


 

 

 

 

Total liabilities and stockholders' equity

$

12,722,574


 

10,701,585

 

INVESTORS BANCORP, INC. AND SUBSIDIARIES


 

 

 

Consolidated Statements of Operations


 

 

 

(Unaudited)


 

 

 

 

 

 

 

 

 

 

 

For the Three Months


 

For the Year 


 

 

 

 

 

 

 

 

Ended December 31,


 

Ended December 31,


 

 

 

 

 

 

 

 

2012


 

2011


 

2012


 

2011


 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

Interest and dividend income:


 

 

 

 

 

 

 

 

 

Loans receivable and loans held-for-sale

$

120,783


 

111,126


 

455,221


 

434,377


 

Securities: 


 

 

 

 

 

 

 

 

 

 

 

Government-sponsored enterprise obligations


 

1


 

1


 

15


 

268


 

 

Mortgage-backed securities


 

6,637


 

7,031


 

30,167


 

29,341


 

 

Equity securities available-for-sale


 

7


 


 

17


 


 

 

Municipal bonds and other debt


 

1,235


 

1,322


 

5,174


 

5,269


 

Interest-bearing deposits


 

10


 

7


 

40


 

37


 

Federal Home Loan Bank stock


 

1,486


 

1,180


 

5,555


 

4,280


 

 

 

Total interest and dividend income


 

130,159


 

120,667


 

496,189


 

473,572

Interest expense:


 

 

 

 

 

 

 

 

 

Deposits 


 

 

 

13,961


 

19,986


 

63,582


 

79,889


 

Secured borrowings 


 

14,683


 

15,925


 

59,862


 

64,599


 

 

 

Total interest expense


 

28,644


 

35,911


 

123,444


 

144,488


 

 

 

Net interest income


 

101,515


 

84,756


 

372,745


 

329,084

Provision for loan losses 


 

17,000


 

20,000


 

65,000


 

75,500


 

 

 

Net interest income after provision


 

 

 

 

 

 

 

 

 

 

 

 

for loan losses


 

84,515


 

64,756


 

307,745


 

253,584

Non-interest income 


 

 

 

 

 

 

 

 

 

Fees and service charges


 

3,795


 

3,952


 

16,564


 

14,496


 

Income on bank owned life insurance   


 

886


 

707


 

2,778


 

3,139


 

Gain on loan transactions, net


 

4,992


 

3,350


 

20,866


 

9,736


 

Gain (loss) on securities transactions


 

(11)


 

37


 

274


 

(257)


 

Loss on sale of other real estate owned, net


 

(58)


 

(35)


 

(180)


 

(140)


 

Other income


 

869


 

883


 

3,810


 

2,196


 

 

 

Total non-interest income 


 

10,473


 

8,894


 

44,112


 

29,170

Non-interest expense


 

 

 

 

 

 

 

 

 

Compensation and fringe benefits


 

32,956


 

21,312


 

109,197


 

85,688


 

Advertising and promotional expense


 

1,560


 

1,761


 

6,854


 

6,352


 

Office occupancy and equipment expense 


 

8,413


 

6,646


 

33,619


 

26,786


 

Federal insurance premiums


 

3,400


 

1,950


 

10,770


 

9,300


 

Stationery, printing, supplies and telephone


 

1,246


 

1,120


 

4,295


 

3,444


 

Professional fees


 

1,896


 

1,697


 

9,487


 

5,329


 

Data processing service fees


 

5,297


 

2,093


 

15,901


 

8,252


 

Other operating expenses


 

4,690


 

3,441


 

16,884


 

12,436


 

 

 

Total non-interest expenses


 

59,458


 

40,020


 

207,007


 

157,587


 

 

 

Income before income tax expense 


 

35,530


 

33,630


 

144,850


 

125,167

Income tax expense 


 

14,159


 

12,551


 

56,083


 

46,281


 

 

 

Net income 

$

21,371


 

21,079


 

88,767


 

78,886

Basic earnings per share

$

0.20


 

0.20


 

0.83


 

0.73

Diluted earnings per share


 

0.20


 

0.20


 

0.82


 

0.73

Weighted average shares outstanding:


 

 

 

 

 

 

 

 

 

Basic


 

 

 

 

107,443,387


 

106,731,854


 

107,371,685


 

107,839,000


 

Diluted


 

 

 

 

108,508,350


 

107,011,699


 

108,091,522


 

108,044,786

 

INVESTORS BANCORP, INC. AND SUBSIDIARIES

Average Balance Sheet and Yield/Rate Information


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For Three Months Ended 


 

 

 

 

 

December 31, 2012


 

December 31, 2011


 

 

 

 

 

Average

Outstanding

Balance

Interest

Earned/Paid

Average

Yield/Rate


 

Average

Outstanding

Balance

Interest

Earned/Paid

Average

Yield/Rate


 

 

 

 

 

 

(Dollars in thousands)

Interest-earning assets:


 

 

 

 

 

 

 

 

 

Interest-earning cash accounts


 

$            118,755

$                   10

0.03%


 

$              72,595

$                   7

0.04%


 

Securities available-for-sale


 

1,292,606

5,163

1.60%


 

808,225

4,218

2.09%


 

Securities held-to-maturity


 

180,694

2,717

6.01%


 

303,686

4,136

5.45%


 

Net loans


 

9,854,541

120,783

4.90%


 

8,794,223

111,126

5.05%


 

Federal Home Loan Bank stock


 

127,986

1,486

4.64%


 

108,809

1,180

4.34%


 

 

Total interest-earning assets


 

11,574,582

130,159

4.50%


 

10,087,538

120,667

4.78%

Non-interest earning assets


 

545,752


 

 

 

415,109


 

 

 

 

Total assets


 

$       12,120,334


 

 

 

$       10,502,647


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:


 

 

 

 

 

 

 

 

 

Savings


 

 

$         1,653,466

$              1,848

0.45%


 

$         1,260,764

$            2,262

0.72%


 

Interest-bearing checking


 

1,674,235

1,621

0.39%


 

1,232,006

1,656

0.54%


 

Money market accounts


 

1,527,031

1,838

0.48%


 

1,077,989

2,076

0.77%


 

Certificates of deposit


 

3,013,228

8,654

1.15%


 

3,391,320

13,992

1.65%


 

Borrowed funds


 

2,238,159

14,683

2.62%


 

2,084,379

15,925

3.06%


 

 

Total interest-bearing liabilities


 

10,106,119

28,644

1.13%


 

9,046,458

35,911

1.59%

Non-interest bearing liabilities


 

957,833


 

 

 

499,308


 

 

 

 

Total liabilities


 

11,063,952


 

 

 

9,545,766


 

 

Stockholders' equity


 

1,056,382


 

 

 

956,881


 

 

 

 

Total liabilities and stockholders' equity


 

$       12,120,334


 

 

 

$       10,502,647


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income


 

 

$          101,515


 

 

 

$          84,756


 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest rate spread


 

 

 

3.36%


 

 

 

3.20%


 

 

 

 

 

 

 

 

 

 

 

 

Net interest earning assets


 

$         1,468,463


 

 

 

$         1,041,080


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin


 

 

 

3.51%


 

 

 

3.36%


 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to total interest-


 

 

 

 

 

 

 

 

 

bearing liabilities


 

1.15

X


 

 

1.12

X


 

 

INVESTORS BANCORP, INC. AND SUBSIDIARIES

Average Balance Sheet and Yield/Rate Information


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For Twelve Months Ended 


 

 

 

 

 

December 31, 2012


 

December 31, 2011


 

 

 

 

 

Average

Outstanding

Balance

Interest

Earned/Paid

Average

Yield/Rate


 

Average

Outstanding

Balance

Interest

Earned/Paid

Average

Yield/Rate


 

 

 

 

 

 

(Dollars in thousands)

Interest-earning assets:


 

 

 

 

 

 

 

 

 

Interest-earning cash accounts


 

$            96,945

$              40

0.04%


 

$          70,089

$              35

0.05%


 

Securities available-for-sale


 

1,250,391

22,521

1.80%


 

692,664

15,431

2.23%


 

Securities held-to-maturity


 

221,524

12,852

5.80%


 

369,593

19,449

5.26%


 

Net loans


 

9,271,550

455,221

4.91%


 

8,461,030

434,377

5.13%


 

Federal Home Loan Bank stock


 

124,385

5,555

4.47%


 

101,764

4,280

4.21%


 

 

Total interest-earning assets


 

10,964,795

496,189

4.53%


 

9,695,140

473,572

4.88%

Non-interest earning assets


 

493,278


 

 

 

411,009


 

 

 

 

Total assets


 

$     11,458,073


 

 

 

$   10,106,149


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:


 

 

 

 

 

 

 

 

 

Savings


 

 

$       1,535,636

$         7,859

0.51%


 

$     1,230,093

$         9,713

0.79%


 

Interest-bearing checking


 

1,467,583

6,586

0.45%


 

1,075,694

5,999

0.56%


 

Money market accounts


 

1,342,366

7,937

0.59%


 

929,291

7,276

0.78%


 

Certificates of deposit


 

3,155,041

41,200

1.31%


 

3,393,106

56,901

1.68%


 

Borrowed funds


 

2,224,126

59,862

2.69%


 

2,075,597

64,599

3.11%


 

 

Total interest-bearing liabilities


 

9,724,752

123,444

1.27%


 

8,703,781

144,488

1.66%

Non-interest bearing liabilities


 

710,894


 

 

 

466,875


 

 

 

 

Total liabilities


 

10,435,646


 

 

 

9,170,656


 

 

Stockholders' equity


 

1,022,427


 

 

 

935,493


 

 

 

 

Total liabilities and stockholders' equity


 

$     11,458,073


 

 

 

$   10,106,149


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income


 

 

$     372,745


 

 

 

$     329,084


 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest rate spread


 

 

 

3.26%


 

 

 

3.22%


 

 

 

 

 

 

 

 

 

 

 

 

Net interest earning assets


 

$       1,240,043


 

 

 

$        991,359


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin


 

 

 

3.40%


 

 

 

3.39%


 

 

 

 

 

 

 

 

 

 

 

 

Ratio of interest-earning assets to total interest-


 

 

 

 

 

 

 

 

 

bearing liabilities


 

1.13

X


 

 

1.11

X


 

 

INVESTORS BANCORP, INC. AND SUBSIDIARIES

Selected Performance Ratios


 

 

 

 

 

 

For the Three Months Ended


 

 

December 31, 


 

 

2012


 

2011


 

 

 

 

 

 

Return on average assets 

0.71%


 

0.80%


 

Return on average equity 

8.09%


 

8.81%


 

Return on average equity (1) 

9.75%


 

8.81%


 

Return on average tangible equity

8.87%


 

9.19%


 

Return on average tangible equity (1) 

10.69%


 

9.19%


 

Interest rate spread

3.36%


 

3.20%


 

Net interest margin

3.51%


 

3.36%


 

Efficiency ratio 

53.09%


 

42.73%


 

Efficiency ratio (2)

46.59%


 

42.73%


 

Non-interest expense to average total assets  

1.96%


 

1.52%


 

Average interest-earning assets to average


 

 

 

 

   interest-bearing liabilities

1.15


 

1.12


 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended


 

 

December 31, 


 

 

2012


 

2011


 

 

 

 

 

 

Return on average assets 

0.77%


 

0.78%


 

Return on average equity 

8.68%


 

8.43%


 

Return on average equity (1) 

9.48%


 

8.43%


 

Return on average tangible equity

9.27%


 

8.80%


 

Return on average tangible equity (1) 

10.12%


 

8.80%


 

Interest rate spread

3.26%


 

3.22%


 

Net interest margin

3.40%


 

3.39%


 

Efficiency ratio 

49.66%


 

43.99%


 

Efficiency ratio (2)

46.47%


 

43.99%


 

Non-interest expense to average total assets  

1.81%


 

1.56%


 

Average interest-earning assets to average


 

 

 

 

   interest-bearing liabilities

1.13


 

1.11


 

 

 

 

 

 

(1) Excluding impact of Marathon Bank and Brooklyn Federal one time acquisition charges 


 

 

totaling $4.4 million and $8.1 million net of tax for the three months and year ended December 31, 2012.  


 

(2) Excluding impact of Marathon Bank and Brooklyn Federal one time acquisition charges 


 

 

totaling $7.3 million and $13.3 million for the three months and year ended December 31, 2012.  


 

 

 

 

 

 

INVESTORS BANCORP, INC. AND SUBSIDIARIES

Selected Financial Ratios and Other Data


 

 

 

 

 

 

December 31, 


 

December 31,


 

 

2012


 

2011


 

 

 

 

 

 

Asset Quality Ratios:


 

 

 

 

Non-performing assets as a percent of total assets

1.14%


 

1.46%


 

Non-performing loans as a percent of total loans

1.31%


 

1.72%


 

Allowance for loan losses as a percent of non-accrual loans

117.92%


 

82.44%


 

Allowance for loan losses as a percent of total loans

1.36%


 

1.32%


 

 

 

 

 

 

 

 

 

 

 

Capital Ratios:


 

 

 

 

Total risk-based capital (to risk weighted assets)   (2)

11.24%


 

13.07%


 

Tier 1 risk-based capital (to risk weighted assets)   (2)

9.98%


 

11.81%


 

Tier 1 leverage (core) capital (to adjusted tangible assets)   (2)

7.59%


 

8.21%


 

Equity to total assets (period end)

8.39%


 

9.04%


 

Average equity to average assets

8.92%


 

9.26%


 

Tangible capital (to tangible assets)

7.67%


 

8.71%


 

Book value per common share

$                   9.81


 

$                   8.98


 

 

 

 

 

 

Other Data:


 

 

 

 

Number of full service offices

101


 

81


 

Full time equivalent employees

1,193


 

959


 

 

 

 

 

 

(2) Ratios are for Investors Bank and do not include capital retained at the holding company level.


 

 

 

SOURCE Investors Bancorp, Inc.



RELATED LINKS
http://www.myinvestorsbank.com

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