FSLA First Sentinel Bancorp (MM)

First Sentinel Reports First Quarter 2004 Earnings and Declares Quarterly Cash Dividend WOODBRIDGE, N.J., April 23 /PRNewswire-FirstCall/ -- First Sentinel Bancorp, Inc. , ("First Sentinel" or the "Company"), parent company of First Savings Bank (the "Bank"), reported basic and diluted earnings per share of $0.23 and $0.22, respectively, for the first quarter of 2004, compared with first quarter 2003 basic and diluted earnings per share of $0.26 and $0.24, respectively. The Company reported net income of $6.0 million for the current quarter, compared with $6.8 million for the same period in 2003. Annualized return on average equity was 10.41% for the three months ended March 31, 2004, compared with 12.80% for the same period in 2003. Annualized return on average assets was 1.10% for the first quarter of 2004, compared to 1.21% for the same period in 2003. Results of Operations Net interest income totaled $14.9 million for the quarter ended March 31, 2004 compared with $15.0 million for the same period in 2003. Interest income decreased $2.2 million, or 7.7%, to $26.6 million for the three months ended March 31, 2004, from $28.8 million for the comparable 2003 period. The average balance of loans increased $1.2 million, or 0.1%, to $1.2 billion for the first quarter of 2004, compared with the first three months of 2003. Interest income on loans, however, decreased $1.4 million, or 7.1%, reflecting the decline in market interest rates, as the average yield on loans declined 45 basis points to 5.79%. Average investment and mortgage-backed securities, including Fed funds sold and investments in Federal Home Loan Bank stock, decreased $57.4 million, or 6.1%, to $879.9 million for the quarter ended March 31, 2004, compared with the same period last year. Income on such investments declined $852,000 due to both the decline in the average balance and the decline in average yield of 12 basis points to 3.97% for the first quarter of 2004. Interest expense decreased $2.1 million, or 15.2%, to $11.7 million for the three months ended March 31, 2004, from $13.8 million for the comparable 2003 period. Interest expense on deposits declined $1.8 million, or 29.4%, to $4.4 million for the first quarter of 2004, compared with the same period in 2003, as a result of lower market interest rates and a shift in deposit composition, from higher-costing certificates of deposit into lower-priced core deposit accounts. Interest expense on certificates of deposit decreased $1.3 million, or 30.9%, during the first quarter of 2004 compared with 2003. The average balance of certificates of deposit declined $83.5 million, or 14.0%, for the quarter ended March 31, 2004, compared with the same period in 2003, while the average rate paid on certificates decreased 55 basis points to 2.26%. Interest expense on core deposits, consisting of checking, savings and money market accounts, decreased $539,000, or 26.2%, to $1.5 million for the quarter ended March 31, 2004, compared with the same period in 2003. Average core deposits increased $36.7 million, or 4.6%, to $826.5 million for the three months ended March 31, 2004, compared with the same period of 2003. Within these core accounts, average non-interest bearing deposits grew $6.0 million, or 8.2%, to $79.0 million for the first quarter of 2004 compared with 2003. The ratio of average core deposits to total deposits improved to 62% for the three months ended March 31, 2004, from 57% for the same period in 2003. The average rate paid on all core deposits declined to 0.74% for the quarter ended March 31, 2004, from 1.04% for the same period of 2003. Average deposits for the first quarter of 2004 were impacted by the sale of $38.9 million in deposits along with the Company's Lawrenceville, New Jersey branch in December 2003. Interest expense on borrowed funds declined $736,000, or 9.8%, to $6.8 million for the first quarter of 2004, compared with the same period in 2003. Average borrowings decreased $16.5 million, or 2.7%, while the average cost of borrowed funds declined 36 basis points to 4.65% for the quarter ended March 31, 2004. The decline in interest expense on borrowed funds was partially offset by the reclassification to interest expense from non-interest expense of $477,000 in costs associated with the Company's subordinated debentures. Such reclassification was a result of the Company's adoption of revised FASB Interpretation No. 46, "Consolidation of Variable Interest Entities," on December 31, 2003, which required deconsolidation of the subsidiary trusts formed in connection with the Company's issuance of preferred capital securities. The Company's net interest margin increased five basis points to 2.82% for the first quarter of 2004, from 2.77% for the first quarter of 2003. Net interest margin increased ten basis points from 2.72% for the fourth quarter of 2003. Interest rate spread was 2.53% for the first quarter of 2004, compared with 2.43% for the first quarter of 2003 and 2.42% for the fourth quarter of 2003. First Sentinel did not record a provision for loan losses during the quarters ended March 31, 2004 and 2003, as a result of stable loan portfolio size and asset quality. The reserve balance of $12.8 million at March 31, 2004 represented 1.03% of total loans and more than nine times non-performing loans. Total non-performing assets decreased to $1.3 million at March 31, 2004, from $1.4 million for the comparable 2003 period. The ratio of non-performing assets to total assets was 0.06% at March 31, 2004 and 2003. Non-interest income decreased $537,000 to $1.9 million for the quarter ended March 31, 2004, from $2.4 million for the same period in 2003. The first quarter of 2004 included net gains on sales of loans and securities totaling $363,000, compared with $893,000 for the first quarter of 2003. During the quarter ended March 31, 2003, the Company recognized gains on the sale of higher coupon mortgage-backed securities that demonstrated a significant propensity to prepay, as well as several corporate debt obligations. Non-interest expense increased $408,000, or 5.8%, to $7.5 million for the quarter ended March 31, 2004, compared with 2003, primarily as a result of increased compensation costs and merger-related charges, partially offset by the reclassification of expense associated with the Company's subordinated debentures to interest expense. Financial Condition Total assets decreased $28.2 million from December 31, 2003, to $2.2 billion at March 31, 2004. Loans receivable, net increased $12.1 million from December 31, 2003, to $1.2 billion at March 31, 2004. Originations during the first quarter of 2004 were $101.1 million, compared with $157.0 million for the fourth quarter of 2003 and $182.2 million during the first quarter of 2003. The loan pipeline, consisting of loan applications in the process of approval, amounted to $102.1 million at March 31, 2004. Of the total loan portfolio at March 31, 2004, 1-4 family mortgage loans comprised 59.8%, home equity loans comprised 9.3% and commercial real estate, multi-family and construction loans comprised 30.1%. Investment and mortgage-backed securities available for sale decreased $34.7 million, or 4.2%, during the quarter ended March 31, 2004, to $794.5 million. Proceeds from sales, calls and prepayments of securities during the quarter were used to repay borrowed funds, which decreased $41.0 million, or 6.9%, to $550.5 million at March 31, 2004. Total deposits increased $6.4 million, or 0.5%, during the 2004 quarter to $1.3 billion. Core deposit growth of $16.5 million was partially offset by managed certificate of deposit run-off of $10.1 million. Stockholders' equity increased $7.8 million, or 3.4%, to $235.3 million during the first three months of 2004. Stated and tangible book value per share at March 31, 2004, were $8.62 and $8.49, respectively. Declaration of Quarterly Dividend The Board of Directors also announced that it has approved a regular quarterly cash dividend of $0.105 per common share. The dividend will be paid on May 28, 2004 to stockholders of record as of the close of business on May 14, 2004. First Savings Bank operates through 22 branch offices in Middlesex, Monmouth, Somerset and Union Counties, New Jersey. Statements contained in this news release that are not historical fact are forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a large number of factors. Factors that may cause a difference include, but are not limited to, changes in interest rates, economic conditions, deposit and loan growth, real estate values, loan loss provisions, competition, customer retention, changes in legislation and regulation, or the inability to complete the merger with Provident Financial Services, Inc., as and when expected. First Sentinel Bancorp assumes no obligation for updating any such forward-looking statements at any time. FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Financial Condition (In thousands, except share data) March 31, December 31, 2004 2003 (unaudited) Assets Cash and due from banks $32,169 $16,007 Federal funds sold 41,500 59,800 Total cash and cash equivalents 73,669 75,807 Federal Home Loan Bank of New York (FHLB-NY) stock, at cost 19,523 21,075 Investment securities available for sale 101,859 106,459 Mortgage-backed securities available for sale 692,652 722,794 Loans receivable, net 1,222,862 1,210,721 Interest and dividends receivable 9,159 9,282 Premises and equipment, net 14,847 15,160 Core deposit intangibles 3,520 3,730 Other assets 38,359 39,642 Total assets $2,176,450 $2,204,670 Liabilities and Stockholders' Equity Liabilities Deposits $1,346,240 $1,339,858 Borrowed funds 550,457 591,500 Subordinated debentures 25,774 25,774 Advances by borrowers for taxes and insurance 9,780 9,519 Other liabilities 8,857 10,445 Total liabilities 1,941,108 1,977,096 Stockholders' Equity Preferred Stock; authorized 10,000,000 shares; issued and outstanding - none - - Common Stock, $.01 par value, 85,000,000 shares authorized; 43,106,742 and 27,290,078 shares issued and outstanding at 3/31/04 and 43,106,742 and 27,251,064 shares issued and outstanding at 12/31/03 430 430 Paid-in capital 209,530 208,523 Retained earnings 169,893 166,902 Accumulated other comprehensive income 7,327 4,059 Treasury stock (150,115) (150,571) Common Stock acquired by the Employee Stock Ownership Plan (ESOP) (8,257) (8,486) Common Stock acquired by the Recognition and Retention Plan (RRP) (209) (280) Common Stock acquired by the Directors' Deferred Fee Plan (DDFP) (2,858) (2,768) DDFP Transition differential (7,674) (7,674) Deferred Compensation DDFP 17,275 17,439 Total stockholders' equity 235,342 227,574 Total liabilities and stockholders' equity $2,176,450 $2,204,670 FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollars in thousands, except share data) (Unaudited) Quarter Ended March 31, 2004 2003 Interest income: Loans $17,827 $19,193 Investment and mortgage-backed securities available for sale 8,736 9,588 Total interest income 26,563 28,781 Interest expense: Deposits: NOW and money market demand 1,061 1,336 Savings 458 722 Certificates of deposit 2,888 4,180 Total interest expense - deposits 4,407 6,238 Borrowed funds 6,796 7,532 Subordinated debentures 477 -- Total interest expense 11,680 13,770 Net interest income 14,883 15,011 Provision for loan losses -- -- Net interest income after provision for loan losses 14,883 15,011 Non-interest income: Fees and service charges 1,030 888 Net gain on sales of loans and securities 363 893 Income on Bank Owned Life Insurance 394 398 Other income 99 244 Total non-interest income 1,886 2,423 Non-interest expense: Compensation and benefits 4,385 3,852 Occupancy 642 646 Equipment 538 428 Advertising 129 255 Federal deposit insurance 54 58 Amortization of core deposit intangibles 210 210 Distributions on preferred capital securities -- 472 General and administrative 1,278 1,171 Merger-related 264 -- Total non-interest expense 7,500 7,092 Income before income tax expense 9,269 10,342 Income tax expense 3,238 3,494 Net income $6,031 $6,848 Basic earnings per share $0.23 $0.26 Weighted average shares outstanding - Basic 26,334,868 25,961,314 Diluted earnings per share $0.22 $0.24 Weighted average shares outstanding - Diluted 27,881,458 27,652,037 FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES Consolidated Average Statements of Financial Condition (Dollars in thousands) Quarter Ended March 31, 2004 2003 Average Average Average Average Balance Interest Yield Balance Interest Yield /Cost /Cost Assets Interest-earning assets: Federal funds sold $24,857 $58 0.93% $34,354 $101 1.18% Investment securities available for sale (1) 127,297 1,249 3.92 131,618 1,644 5.00 Mortgage-backed securities availa- ble for sale 727,786 7,429 4.08 771,408 7,843 4.07 Total investments 879,940 8,736 3.97 937,380 9,588 4.09 Mortgage loans 1,108,135 16,206 5.85 1,103,789 17,353 6.29 Home equity loans 61,407 942 6.14 62,892 1,074 6.83 Home equity lines of credit 51,995 526 4.05 48,278 562 4.66 Other loans 9,632 153 6.35 15,057 204 5.42 Total loans 1,231,169 17,827 5.79 1,230,016 19,193 6.24 Total interest- earning assets 2,111,109 26,563 5.03 2,167,396 28,781 5.31 Non-interest earning assets 86,968 95,069 Total assets $2,198,077 $2,262,465 Liabilities and Stockholders' Equity Interest-bearing liabilities: NOW and money market accounts $526,594 $1,061 0.81% $491,108 $1,336 1.09% Savings accounts 220,824 458 0.83 225,574 722 1.28 Certificates of deposit 511,739 2,888 2.26 595,202 4,180 2.81 Total interest- bearing deposits 1,259,157 4,407 1.40 1,311,884 6,238 1.90 Borrowed funds 585,217 6,796 4.65 601,673 7,532 5.01 Subordinated debentures 25,774 477 7.40 -- -- -- Total interest- bearing liabilities 1,870,148 11,680 2.50 1,913,557 13,770 2.88 Non-interest bearing deposits 79,049 73,082 Other liabilities 17,190 61,766 Total liabil- ities 1,966,387 2,048,405 Stockholders' equity 231,690 214,060 Total liabil- ities and stockholders' equity $2,198,077 $2,262,465 Net interest income/interest rate spread $14,883 2.53% $15,011 2.43% Net interest- earning assets/net interest margin $240,961 2.82% $253,839 2.77% Ratio of interest- earning assets to interest-bearing liabilities 1.13X 1.13X (1) Includes FHLB-NY stock. FINANCIAL SUMMARY (Dollars in thousands, except share data) (unaudited) Three Months Ended March 31, 2004 2003 Income Statement Net Interest Income $14,883 $15,011 Provision for Loan Losses -- -- Non-interest Income 1,886 2,423 Non-interest Expense 7,500 7,092 Pre-tax Income 9,269 10,342 Income Tax Expense 3,238 3,494 Net Income 6,031 6,848 Basic Earnings Per Share $0.23 $0.26 Diluted Earnings Per Share $0.22 $0.24 Dividends Declared Per Share $0.105 $0.105 Dividend Payout Ratio 49.21% 42.07% Interest Rate Spread 2.53% 2.43% Net Interest Margin 2.82% 2.77% Profitability Annualized Return on Average Assets 1.10% 1.21% Annualized Return on Average Equity 10.41% 12.80% FINANCIAL SUMMARY (continued) (Dollars in thousands, except share data) (unaudited) Three Months Ended March 31, 2004 2003 Asset Quality Net Charge-Offs (Recoveries) ("NCO") $2 $2 REO Expenses -- 10 Non Accrual Loans 944 1,125 Loans 90+ and Still Accruing 367 294 Non Performing Loans 1,311 1,419 Non Performing Assets $1,311 $1,419 Credit Quality Non Performing Loans/Loans 0.11% 0.12% Non Performing Assets/Assets 0.06 0.06 Allowance/Non Performing Loans 973.76 904.02 Allowance/Loans 1.03 1.04 Allowance/Non Performing Assets 973.76% 904.02% Balance Sheet (Period End Balances) Investment Securities and FHLB stock $121,382 $135,324 Mortgage-backed Securities 692,652 805,386 Loans, net of unearned and deferred fees 1,235,628 1,227,957 Allowance for Loan Losses 12,766 12,828 Assets 2,176,450 2,295,515 Deposits 1,346,240 1,406,077 Borrowings 550,457 621,623 Stockholders' Equity $235,342 $204,959 Total Shares Outstanding 27,290,078 26,599,906 Stated Book Value $8.62 $7.71 Tangible Book Value $8.49 $7.54 DATASOURCE: First Sentinel Bancorp, Inc. CONTACT: Thomas M. Lyons, Executive Vice President and Chief Financial Officer of First Sentinel Bancorp, Inc., +1-732-726-9700, ext. 5542; or Investor Relations - Ann C. Clancy for First Sentinel Bancorp, Inc., +1-732-726-9700, ext. 5514 Web site: http://www.firstsentinelbancorp.com/

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