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Provident Financial Services, Inc. Announces Increased Second Quarter Earnings and Declares Quarterly Cash Dividend

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ISELIN, N.J., July 31, 2015 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE: PFS) (the "Company") reported net income of $21.8 million, or $0.35 per basic and diluted share for the three months ended June 30, 2015, compared to net income of $16.4 million, or $0.28 per basic and diluted share for the three months ended June 30, 2014. For the six months ended June 30, 2015, the Company reported net income of $41.6 million, or $0.66 per basic and diluted share, compared to net income of $33.4 million, or $0.57 per basic and diluted share for the same period last year. 

Earnings for the three and six months ended June 30, 2015 were driven by year-over-year growth in both average loans outstanding and average non-interest bearing deposits, growth in non-interest income and further improvement in asset quality. These factors helped mitigate the impact of compression in the net interest margin.

During the three and six months ended June 30, 2015 and 2014, the Company incurred non-recurring items associated with the April 1, 2015 acquisition of The MDE Group and the equity interests of Acertus Capital Management, LLC (collectively "MDE"), and the May 30, 2014 acquisition of Team Capital Bank ("Team Capital"). The prior year periods were further impacted by a non-cash charge resulting from the recognition of a pro rata portion of unrealized losses related to lump sum distributions from the Company's frozen pension plan. Excluding these non-recurring items, core earnings (1) for the three and six months ended June 30, 2015 were $22.0 million, or $0.35 per diluted share, and $41.8 million, or $0.67 per diluted share, respectively, compared to $18.3 million, or $0.31 per diluted share, and $35.4 million, or $0.61 per diluted share for the three and six months ended June 30, 2014, respectively.

Christopher Martin, Chairman, President and Chief Executive Officer, commented: "Our strong second quarter performance was bolstered by solid loan growth, as well as an increase in wealth management revenues from our recently completed acquisition of MDE. Further increases in fee income drove record revenues for the quarter, and asset quality metrics also continued to improve." Martin continued: "Notwithstanding an increase in our level of non-interest bearing deposits, margin pressure continued as we contend with the current low level of market rates and position our balance sheet for an eventual rising rate environment."

Declaration of Quarterly Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.16 per common share payable on August 28, 2015, to stockholders of record as of the close of business on August 14, 2015.

Balance Sheet Summary

Total assets increased $228.0 million to $8.75 billion at June 30, 2015, from $8.52 billion at December 31, 2014, primarily due to a $222.8 million increase in total loans and a $28.5 million increase in intangible assets, partially offset by a $32.5 million decrease in total investments.

The Company's loan portfolio increased $222.8 million, or 3.7%, to $6.31 billion at June 30, 2015, from $6.09 billion at December 31, 2014. Loan originations totaled $1.27 billion and loan purchases totaled $49.8 million for the six months ended June 30, 2015. The loan portfolio had net increases of $128.7 million in multi-family mortgage loans, $80.2 million in construction loans and $44.6 million in commercial mortgage loans, partially offset by net decreases of $21.6 million in consumer loans, $7.6 million in commercial loans and $1.5 million in residential mortgage loans. Commercial real estate, commercial and construction loans represented 70.8% of the loan portfolio at June 30, 2015, compared to 69.4% at December 31, 2014. 

At June 30, 2015, the Company's unfunded loan commitments totaled $1.22 billion, including commitments of $528.7 million in commercial loans, $256.3 million in construction loans and $123.3 million in commercial mortgage loans. Unfunded loan commitments at December 31, 2014 and June 30, 2014 were $1.21 billion and $1.13 billion, respectively.

Total investments decreased $32.5 million, or 2.0%, to $1.58 billion at June 30, 2015, from $1.61 billion at December 31, 2014, largely due to principal repayments on mortgage-backed securities, maturities of municipal and agency bonds and sales of certain mortgage-backed securities, partially offset by purchases of mortgage-backed and municipal securities.

For the six months ended June 30, 2015, intangible assets increased $28.5 million, primarily related to the acquisition of MDE, partially offset by scheduled amortization.

Total deposits increased $21.7 million during the six months ended June 30, 2015, to $5.81 billion. Total core deposits, which consist of savings and demand deposit accounts, increased $51.4 million to $5.02 billion at June 30, 2015, while time deposits decreased $29.8 million to $795.9 million at June 30, 2015. The increase in core deposits was largely attributable to growth in non-interest bearing demand deposits, which increased $92.4 million to $1.14 billion at June 30, 2015. The increase in non-interest bearing demand deposits was partially offset by a $23.4 million decrease in interest bearing demand deposits, a $10.3 million decrease in money market deposits and a $7.2 million decrease in savings deposits. Core deposits represented 86.3% of total deposits at June 30, 2015, compared to 85.7% at December 31, 2014.

Borrowed funds increased $174.7 million, or 11.6% during the six months ended June 30, 2015, to $1.68 billion. Borrowed funds represented 19.2% of total assets at June 30, 2015, an increase from 17.7% at December 31, 2014.

Stockholders' equity increased $23.0 million, or 2.0% for the six months ended June 30, 2015, to $1.17 billion, due to net income earned for the period, partially offset by dividends paid to stockholders and a decrease in unrealized gains on securities available for sale. Common stock repurchases made in connection with withholding to cover income taxes on stock-based compensation for the six months ended June 30, 2015 totaled 105,735 shares at an average cost of $18.27 per share. At June 30, 2015, 3.3 million shares remained eligible for repurchase under the current authorization. Book value per share and tangible book value per share(1) at June 30, 2015 were $17.88 and $11.25, respectively, compared with $17.63 and $11.40, respectively, at December 31, 2014. The decrease in  tangible book value per share at June 30, 2015, compared to December 31, 2014, was due to an increase in goodwill and other intangibles related to the acquisition of MDE.

Results of Operations

Net Interest Income and Net Interest Margin

For the three months ended June 30, 2015, net interest income increased $4.3 million to $61.7 million, from $57.4 million for the same period in 2014. Net interest income for the six months ended June 30, 2015, increased $11.0 million, to $123.6 million, from $112.6 million for the same period in 2014. The improvement in net interest income for the comparative periods was due to growth in average loans outstanding resulting from loans acquired from Team Capital and organic originations and increases in average non-interest bearing demand deposits, partially offset by period-over-period compression in the net interest margin. 

The Company's net interest margin decreased 7 basis points to 3.17% for the quarter ended June 30, 2015, from 3.24% for the trailing quarter. The weighted average yield on interest-earning assets decreased 7 basis points to 3.71% for the quarter ended June 30, 2015, compared with 3.78% for the quarter ended March 31, 2015. The weighted average cost of interest-bearing liabilities for the quarter ended June 30, 2015 was 0.67%, unchanged from the trailing quarter. The average cost of interest bearing deposits for the quarter ended June 30, 2015 was 0.31%, unchanged from the quarter ended March 31, 2015. Average non-interest bearing demand deposits totaled $1.10 billion for the quarter ended June 30, 2015, compared with $1.05 billion for the quarter ended March 31, 2015. The average cost of borrowed funds for the quarter ended June 30, 2015 was 1.77%, compared with 1.82% for the trailing quarter.

The net interest margin decreased 7 basis points to 3.17% for the quarter ended June 30, 2015, compared with 3.24% for the quarter ended June 30, 2014. The weighted average yield on interest-earning assets decreased 10 basis points to 3.71% for the quarter ended June 30, 2015, compared with 3.81% for the quarter ended June 30, 2014, while the weighted average cost of interest bearing liabilities decreased 2 basis points to 0.67% for the quarter ended June 30, 2015, compared with 0.69% for the second quarter of 2014. The average cost of interest bearing deposits for the quarter ended June 30, 2015 was 0.31%, compared with 0.33% for the same period last year. Average non-interest bearing demand deposits totaled $1.10 billion for the quarter ended June 30, 2015, compared with $913.9 million for the quarter ended June 30, 2014. The average cost of borrowed funds for the quarter ended June 30, 2015 was 1.77%, compared with 1.97% for the same period last year.  

For the six months ended June 30, 2015, the net interest margin decreased 5 basis points to 3.20%, compared with 3.25% for the six months ended June 30, 2014. The weighted average yield on interest earning assets declined 8 basis points to 3.74% for the six months ended June 30, 2015, compared with 3.82% for the six months ended June 30, 2014, while the weighted average cost of interest bearing liabilities decreased 2 basis points to 0.67% for the six months ended June 30, 2015, compared with 0.69% for the six months ended June 30, 2014. The average cost of interest bearing deposits for the six months ended June 30, 2015 was 0.31%, compared with 0.34% for the same period last year. Average non-interest bearing demand deposits totaled $1.08 billion for the six months ended June 30, 2015, compared with $888.0 million for the six months ended June 30, 2014. The average cost of borrowings for the six months ended June 30, 2015 was 1.80%, compared with 1.92% for the same period last year. 

Non-Interest Income

Non-interest income totaled $16.9 million for the quarter ended June 30, 2015, an increase of $6.6 million, or 64.1%, compared to the same period in 2014.  Wealth management income increased $2.6 million, to $5.1 million  for the three months ended June 30, 2015, compared to $2.5 million for the same period in 2014. The increase in wealth management income was primarily attributable to fees earned from assets under management acquired in the MDE transaction. Fee income increased $2.1 million to $7.2 million, from $5.1 million for the three months ended June 30, 2014, largely due to a $1.1 million increase in commercial loan prepayment fee income, a $428,000 increase in ATM and debit card revenue and a $405,000 increase in overdraft fees. Other income increased $1.7 million for the three months ended June 30, 2015, compared to the same period in 2014, primarily due to $2.1 million of net fees from loan level interest rate swap transactions executed during the current quarter, partially offset by a non-recurring $486,000 net gain on the prepayment of FHLB borrowings acquired from Team Capital which was recognized in the quarter ended June 30, 2014. In addition, net gains on securities transactions increased $533,000 for the three months ended June 30, 2015, compared to the same period in 2014.

For the six months ended June 30, 2015, non-interest income totaled $27.2 million, an increase of $8.8 million, or 47.7%, compared to the same period in 2014. Fee income increased $3.4 million to $13.2 million for the six months ended June 30, 2015, compared with the same period in 2014, largely due to a $2.1 million increase in prepayment fees on commercial loans, a $583,000 increase in ATM and debit card revenue and a $482,000 increase in overdraft fees. Wealth management income increased $3.1 million to $7.7 million for the six months ended June 30, 2015, largely due to $2.4 million of fees resulting from the MDE acquisition, combined with $660,000 of increased fee income from the Company's existing wealth business. Also contributing to the increase in non-interest income, other income increased $1.7 million for the six months ended June 30, 2015, compared with the same period in 2014, primarily due to $2.3 million of fees recognized on loan level interest rate swaps, partially offset by a non-recurring $486,000 net gain recognized on the prepayment of FHLB borrowings acquired from Team Capital in the prior year period. Net gains on securities transactions for the six months ended June 30, 2015 increased $885,000 compared to the same period in 2014.

Non-Interest Expense

For the three months ended June 30, 2015, non-interest expense increased $2.4 million to $46.1 million, compared to the three months ended June 30, 2014. Net occupancy costs increased $954,000, to $6.6 million for the quarter ended June 30, 2015, compared to same quarter in 2014, due to additional costs related to facilities acquired  from Team Capital and increased depreciation expense. Compensation and benefits expense increased $833,000 to $24.4 million for the three months ended June 30, 2015, compared to the three months ended June 30, 2014, largely due to a $2.1 million increase in salary expense primarily associated with the addition of former MDE and Team Capital employees for the full quarter of 2015, along with higher salary expense resulting from annual merit increases. The increase in salary expense was partially offset by a decrease in severance and retention expense related to the Team Capital acquisition in the prior year quarter, a decrease in stock-based compensation and a reduction in pension expense resulting from the $1.3 million lump-sum pension distribution made to vested terminated employees in the second quarter of 2014. In addition, amortization of intangibles increased $605,000 to $1.1 million for quarter ended June 30, 2015, compared to $519,000 for the same period in 2014, principally due to an increase in the core deposit intangible amortization related to the Team Capital acquisition and an increase in the customer relationship intangible amortization related to the acquisition of MDE. Data processing expense increased $398,000 to $3.2 million for the three months ended June 30, 2015, compared to $2.8 million for the same period in 2014, principally due to increases in software maintenance costs and telecommunication expenses. Partially offsetting these increases in non-interest expense, other operating expenses decreased $770,000 to $8.2 million for the three months ended June 30, 2015, compared to $9.0 million for the same period in 2014. This decrease was largely due to $1.7 million of non-recurring professional services and customer communication costs related to the Team Capital acquisition incurred in the second quarter of 2014, partially offset by $413,000 of non-recurring professional services costs associated with the MDE transaction in the quarter ended June 30, 2015, and an increase in non-performing asset related expenses.

The Company's annualized core non-interest expense as a percentage of average assets (1) was 2.12% for the quarter ended June 30, 2015, compared with 2.06% for the same period in 2014. The efficiency ratio (core non-interest expense divided by the sum of net interest income and core non-interest income)(1) was 58.14% for the quarter ended June 30, 2015, compared with 59.84% for the same period in 2014. 

Non-interest expense for the six months ended June 30, 2015 was $89.6 million, an increase of $7.7 million from the six months ended June 30, 2014. Compensation and benefits expense increased $3.6 million to $48.6 million for the six months ended June 30, 2015, compared to the six months ended June 30, 2014, due to increased salary expense associated with new employees from both Team Capital and MDE and additional salary expense associated with annual merit increases, partially offset by lower stock based compensation, severance and pension costs. Net occupancy costs increased $2.0 million, to $13.7 million for the six months ended June 30, 2015, compared to same period in 2014, principally due to additional facilities costs related to Team Capital and increased depreciation expense. The amortization of intangibles increased $1.2 million for the six months ended June 30, 2015, compared with the same period in 2014, primarily due to increases in both the core deposit intangible and customer relationship intangible amortization related to the Team Capital and MDE acquisitions, respectively. In addition, data processing expense increased $628,000 to $6.2 million for the six months ended June 30, 2015, compared to $5.6 million for the same period in 2014, principally due to increased software maintenance costs and telecommunication expenses.

Asset Quality

The Company's total non-performing loans at June 30, 2015 were $46.1 million, or 0.73% of total loans, compared with $50.9 million, or 0.83% of total loans at March 31, 2015, and $65.4 million, or 1.11% of total loans at June 30, 2014. The $4.8 million decrease in non-performing loans at June 30, 2015, compared with the trailing quarter, was due to a $5.0 million decrease in non-performing residential mortgages, a $763,000 decrease in non-performing commercial mortgage loans and a $230,000 decrease in non-performing commercial loans, partially offset by a $607,000 increase in non-performing consumer loans and a $526,000 increase in non-performing multi-family loans. At June 30, 2015, impaired loans totaled $83.0 million with related specific reserves of $2.7 million, compared with impaired loans totaling $90.8 million with related specific reserves of $6.7 million at March 31, 2015. At June 30, 2014, impaired loans totaled $93.8 million with related specific reserves of $8.5 million. Non-performing loans do not include purchased credit impaired ("PCI") loans acquired from Team Capital. At June 30, 2015, PCI loans totaled $3.8 million, compared to $4.3 million at March 31, 2015.

At June 30, 2015, the Company's allowance for loan losses was 0.95% of total loans, a decrease from 1.00% at March 31, 2015, and a decrease from 1.08% of total loans at June 30, 2014. The decline in this loan coverage ratio from the quarter ended June 30, 2014, was largely the result of an overall improvement in asset quality, including continued declines in non-performing and delinquent loans. The Company recorded provisions for loan losses of $1.1 million and $1.7 million for the three and six months ended June 30, 2015, respectively, compared with provisions of $1.5 million and $1.9 million for the three and six months ended June 30, 2014, respectively. For the three and six months ended June 30, 2015, the Company had net charge-offs of $2.6 million and $3.8 million, respectively, compared with net charge-offs of $1.0 million and $2.7 million, respectively, for the same periods in 2014. The allowance for loan losses decreased $2.1 million to $59.6 million at June 30, 2015, from $61.7 million at December 31, 2014.

At June 30, 2015, the Company held $8.1 million of foreclosed assets, compared with $5.1 million at December 31, 2014. Foreclosed assets at June 30, 2015 consisted of $5.4 million of residential real estate and $2.7 million of commercial real estate. Total non-performing assets at June 30, 2015 declined $4.8 million, or 8.1%, to $54.2 million, or 0.62% of total assets, from $59.0 million, or 0.69% of total assets at December 31, 2014.

Income Tax Expense

For the three and six months ended June 30, 2015, the Company's income tax expense was $9.6 million and $18.0 million, respectively, compared with $6.2 million and $13.9 million, for the three and six months ended June 30, 2014, respectively. The increase in income tax expense was a function of growth in pre-tax income for the three and six months ended June 30, 2015. The Company's effective tax rates were 30.6% and 30.2% for the three and six months ended June 30, 2015, respectively, compared with 27.5% and 29.4% for the three and six months ended June 30, 2014, respectively, as a greater proportion of income was derived from taxable sources in the current year periods. 

About the Company

Provident Financial Services, Inc. is the holding company for The Provident Bank, a community-oriented bank offering "commitment you can count on" since 1839. The Provident Bank provides a comprehensive array of financial products and services through its network of branches throughout northern and central New Jersey, as well as Bucks, Lehigh and Northampton counties in Pennsylvania. The Bank also provides fiduciary and wealth management services through its wholly owned subsidiary, Beacon Trust Company.

Post Earnings Conference Call

Representatives of the Company will hold a conference call for investors at 10:00 a.m. Eastern Time on Friday, July 31, 2015 regarding highlights of the Company's second quarter financial results. The call may be accessed by dialing 1-888-336-7149 (Domestic), 1-412-902-4175 (International) or 1-855-669-9657 (Canada). Internet access to the call is also available (listen only) at www.providentnj.com by going to Investor Relations and clicking on Webcast.

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, including, but not limited to, those set forth in Item 1A of the Company's Annual Report on Form 10-K, or supplemented by its quarterly reports on Form 10-Q, and those related to the 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 cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made. The Company advises 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 have any obligation to update any forward-looking statements to reflect events or circumstances after the date of this statement.

Footnotes

(1) Core earnings, tangible book value per share, return on average tangible equity, annualized core non-interest expense as a percentage of average assets and the efficiency ratio are non-GAAP financial measures. Please refer to the Notes on pages  9 and 10 which contain the reconciliation of GAAP to non-GAAP financial measures and the associated calculations.



    
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
June 30, 2015 (Unaudited) and December 31, 2014
(Dollars in Thousands)
    
AssetsJune 30, 2015 December 31, 2014
    
Cash and due from banks$102,346  $102,484 
Short-term investments2,386  1,278 
Total cash and cash equivalents104,732  103,762 
    
Securities available for sale, at fair value1,031,325  1,074,395 
Investment securities held to maturity (fair value of $476,792 at June 30, 2015 (unaudited) and $482,473 at December 31, 2014)471,984  469,528 
Federal Home Loan Bank Stock77,892  69,789 
Loans6,308,353  6,085,505 
Less allowance for loan losses59,624  61,734 
Net loans6,248,729  6,023,771 
Foreclosed assets, net8,088  5,098 
Banking premises and equipment, net91,380  92,990 
Accrued interest receivable25,628  25,228 
Intangible assets432,879  404,422 
Bank-owned life insurance180,377  177,712 
Other assets78,400  76,682 
Total assets$8,751,414  $8,523,377 
    
Liabilities and Stockholders' Equity   
    
Deposits:   
Demand deposits$4,030,152  $3,971,487 
Savings deposits988,131  995,347 
Certificates of deposit of $100,000 or more350,004  342,072 
Other time deposits445,934  483,617 
Total deposits5,814,221  5,792,523 
Mortgage escrow deposits25,970  21,649 
Borrowed funds1,684,574  1,509,851 
Other liabilities59,525  55,255 
Total liabilities7,584,290  7,379,278 
    
Stockholders' equity:   
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued   
Common stock, $0.01 par value, 200,000,000 shares authorized, 83,209,293 shares issued and 65,287,831 outstanding at June 30, 2015 and 64,905,905 outstanding at December 31, 2014832  832 
Additional paid-in capital998,096  995,053 
Retained earnings485,577  465,276 
Accumulated other comprehensive (loss) income(1,463) 29 
Treasury stock(271,904) (271,779)
Unallocated common stock held by the Employee Stock Ownership Plan(44,014) (45,312)
Common Stock acquired by the Directors' Deferred Fee Plan(6,899) (7,113)
Deferred Compensation - Directors' Deferred Fee Plan6,899  7,113 
Total stockholders' equity1,167,124  1,144,099 
Total liabilities and stockholders' equity$8,751,414  $8,523,377 



 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Six Months Ended June 30, 2015 and 2014 (Unaudited)
(Dollars in Thousands, except per share data)
        
 Three Months Ended Six Months Ended
 June 30, June 30,
 2015 2014 2015 2014
Interest income:       
Real estate secured loans$43,594  $40,381  $86,883  $78,933 
Commercial loans13,669  11,548  27,108  22,095 
Consumer loans5,794  5,869  11,588  11,531 
Securities available for sale and Federal Home Loan Bank stock5,735  6,663  12,036  13,745 
Investment securities held to maturity3,386  2,906  6,782  5,576 
Deposits, federal funds sold and other short-term investments10  19  22  29 
Total interest income72,188  67,386  144,419  131,909 
        
Interest expense:       
Deposits3,624  3,687  7,212  7,425 
Borrowed funds6,890  6,298  13,605  11,882 
Total interest expense10,514  9,985  20,817  19,307 
Net interest income61,674  57,401  123,602  112,602 
Provision for loan losses1,100  1,500  1,700  1,900 
Net interest income after provision for loan losses60,574  55,901  121,902  110,702 
        
Non-interest income:       
Fees7,181  5,074  13,235  9,876 
Wealth management income5,097  2,545  7,655  4,598 
Bank-owned life insurance1,317  1,577  2,665  2,879 
Net gain (loss) on securities transactions643  110  645  (240)
Other income2,704  1,021  3,045  1,330 
Total non-interest income16,942  10,327  27,245  18,443 
        
Non-interest expense:       
Compensation and employee benefits24,414  23,581  48,615  44,974 
Net occupancy expense6,577  5,623  13,749  11,712 
Data processing expense3,159  2,761  6,186  5,558 
FDIC Insurance1,272  1,144  2,490  2,280 
Amortization of intangibles1,124  519  2,051  802 
Advertising and promotion expense1,381  1,081  2,142  2,146 
Other operating expenses8,192  8,962  14,323  14,389 
Total non-interest expense46,119  43,671  89,556  81,861 
Income before income tax expense31,397  22,557  59,591  47,284 
Income tax expense9,601  6,206  17,993  13,904 
Net income$21,796  $16,351  $41,598  $33,380 
        
Basic earnings per share$0.35  $0.28  $0.66  $0.57 
Average basic shares outstanding 62,894,213   59,147,241   62,784,655   58,263,052 
        
Diluted earnings per share$0.35  $0.28  $0.66  $0.57 
Average diluted shares outstanding 63,044,965   59,269,262   62,943,563   58,403,753 



 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Financial Highlights
(Dollars in Thousands, except share data) (Unaudited)
    
 At or for the At or for the
 Three Months Ended Six Months Ended
 June 30, June 30,
 2015 2014 2015 2014
STATEMENTS OF INCOME:       
Net interest income$61,674  $57,401  $123,602  $112,602 
Provision for loan losses 1,100   1,500   1,700   1,900 
Non-interest income 16,942   10,327   27,245   18,443 
Non-interest expense 46,119   43,671   89,556   81,861 
Income before income tax expense 31,397   22,557   59,591   47,284 
Net income 21,796   16,351   41,598   33,380 
Diluted earnings per share$0.35  $0.28  $0.66  $0.57 
Interest rate spread 3.04%  3.12%  3.07%  3.13%
Net interest margin 3.17%  3.24%  3.20%  3.25%
        
PROFITABILITY:       
Annualized return on average assets 1.01%  0.84%  0.98%  0.88%
Annualized return on average equity 7.47%  6.16%  7.21%  6.44%
Annualized return on average tangible equity (3) 11.78%  9.49%  11.22%  9.90%
Annualized core non-interest expense to average assets (4) 2.12%  2.06%  2.10%  2.06%
Efficiency ratio (5) 58.14%  59.84%  59.09%  60.00%
        
ASSET QUALITY:       
Non-accrual loans    $46,075  $65,363 
90+ and still accruing       
Non-performing loans     46,075   65,363 
Foreclosed assets     8,088   6,983 
Non-performing assets     54,163   72,346 
Non-performing loans to total loans     0.73%  1.11%
Non-performing assets to total assets     0.62%  0.86%
Allowance for loan losses    $59,624  $63,875 
Allowance for loan losses to total non-performing loans     129.41%  97.72%
Allowance for loan losses to total loans     0.95%  1.08%
        
AVERAGE BALANCE SHEET DATA:       
Assets$8,630,079  $7,829,645  $8,570,533  $7,652,783 
Loans, net 6,149,613   5,416,760   6,089,275   5,285,948 
Earning assets 7,752,727   7,048,411   7,707,908   6,895,100 
Core deposits 5,038,090   4,618,256   5,010,010   4,504,857 
Borrowings 1,560,757   1,283,433   1,526,923   1,248,220 
Interest-bearing liabilities 6,297,067   5,793,152   6,263,485   5,661,502 
Stockholders'  equity 1,169,641   1,064,966   1,163,394   1,044,646 
Average yield on interest-earning assets 3.71%  3.81%  3.74%  3.82%
Average cost of interest-bearing liabilities 0.67%  0.69%  0.67%  0.69%
        
LOAN DATA:       
Mortgage loans:       
Residential    $1,250,988  $1,224,192 
Commercial     1,740,388   1,672,319 
Multi-family     1,170,917   968,242 
Construction     301,328   227,433 
Total mortgage loans     4,463,621   4,092,186 
Commercial loans     1,256,006   1,203,199 
Consumer loans     589,987   617,489 
Total gross loans     6,309,614   5,912,874 
Premium on purchased loans     5,543   4,380 
Unearned discounts     (47)  (55)
Net deferred     (6,757)  (7,130)
Total loans    $6,308,353  $5,910,069 



        
Notes - Reconciliation of GAAP to Non-GAAP Financial Measures - (Dollars in Thousands, except share data)       
        
(1) Core Earnings       
 Three Months Ended Six Months Ended
 June 30, June 30,
 2015 2014 2015 2014
        
Net interest income$61,674  $57,401  $123,602  $112,602 
Provision for loan losses1,100  1,500   1,700   1,900 
Net interest income after provision for loan losses60,574  55,901   121,902   110,702 
        
Non-interest income16,942  10,327   27,245   18,443 
Less: Gain on prepayment of acquired borrowings  486     486 
Core non-interest income16,942  9,841   27,245   17,957 
        
Non-interest expense46,119  43,671   89,556   81,861 
Less: Acquisition expense413  2,097   413   2,195 
Less: Lump sum pension distribution costs  1,336     1,336 
Core non-interest expense45,706  40,238   89,143   78,330 
        
Income taxes9,601  6,206   17,993   13,904 
Income tax effect of non-core items166  959   166   999 
Core earnings$22,043  $18,339  $41,845  $35,426 
Core diluted earnings per share$0.35  $0.31  $0.67  $0.61 
        
(2) Book and Tangible Book Value per Share       
     At June 30,
     2015 2014
Total stockholders' equity    $1,167,124  $1,121,391 
Less: total intangible assets     432,879   405,685 
Total tangible stockholders' equity    $734,245  $715,706 
        
Shares outstanding     65,287,831   64,888,489 
        
Book value per share (total stockholders' equity/shares outstanding)    $17.88  $17.28 
Tangible book value per share (total tangible stockholders' equity/shares outstanding)    $11.25  $11.03 
        
(3) Return on Average Tangible Equity       
 Three Months Ended Six Months Ended
 June 30, June 30,
 2015 2014 2015 2014
Total average stockholders' equity$1,169,641  $1,064,966  $1,163,394  $1,044,646 
Less: total average intangible assets427,378  373,644   415,799   365,036 
Total average tangible stockholders' equity$742,263  $691,322  $747,595  $679,610 
        
Net income$21,796  $16,351  $41,598  $33,380 
Annualized return on average tangible equity (net income/total average stockholders' equity)11.78% 9.49%  11.22%  9.90%
        



        
Notes - Reconciliation of GAAP to Non-GAAP Financial Measures - Continued  (Dollars in Thousands, except share data)       
        
(4) Annualized Core Non-Interest Expense/Average Assets Calculation       
 Three Months Ended Six Months Ended
 June 30, June 30,
 2015 2014 2015 2014
        
Annualized core non-interest expense$183,326  $161,394   $179,764  $157,958 
Average assets 8,630,079   7,829,645    8,570,533   7,652,783 
Core non-interest expense/average assets2.12% 2.06% 2.10% 2.06%
        
(5) Efficiency Ratio Calculation       
 Three Months Ended Six Months Ended
 June 30, June 30,
 2015 2014 2015 2014
Net interest income$61,674  $57,401  $123,602  $112,602 
Core non-interest income16,942  9,841  27,245  17,957 
Total core income78,616  67,242  150,847  130,559 
        
Core non-interest expense45,706  40,238  89,143  78,330 
Core expense/core income58.14% 59.84% 59.09% 60.00%
        
        



 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Quarterly Average Balances
(Unaudited) (Dollars in Thousands)
            
 June 30, 2015 March 31, 2015
 Average   Average Average   Average
 Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:           
Deposits$17,374 $10  0.25% $18,842 $12  0.25%
Federal funds sold and other short-term investments1,512   0.03% 1,149   0.03%
Investment securities  (1)473,954 3,386  2.86% 473,374 3,396  2.87%
Securities available for sale1,037,516 5,036  1.94% 1,071,853 5,437  2.03%
Federal Home Loan Bank stock72,758 699  3.85% 69,109 864  5.07%
Net loans:  (2)           
Total mortgage loans4,326,843 43,594  4.01% 4,210,152 43,289  4.11%
Total commercial loans1,228,062 13,669  4.44% 1,212,557 13,439  4.46%
Total consumer loans594,708 5,794  3.90% 605,556 5,794  3.88%
Total net loans6,149,613 63,057  4.08% 6,028,265 62,522  4.16%
Total Interest-Earning Assets$7,752,727 $72,188  3.71% $7,662,592 $72,231  3.78%
            
Non-Interest Earning Assets:           
Cash and due from banks78,868     76,024    
Other assets798,484     771,710    
Total Assets$8,630,079     $8,510,326    
            
Interest-Bearing Liabilities:           
Demand deposits$2,953,559 $1,993  0.27% $2,944,909 $1,912  0.26%
Savings deposits988,415 259  0.11% 982,592 245  0.10%
Time deposits794,336 1,372  0.69% 809,314 1,431  0.72%
Total Deposits4,736,310 3,624  0.31% 4,736,815 3,588  0.31%
            
Borrowed funds1,560,757 6,890  1.77% 1,492,714 6,715  1.82%
Total Interest-Bearing Liabilities6,297,067 10,514  0.67% 6,229,529 10,303  0.67%
            
Non-Interest Bearing Liabilities1,163,371     1,123,719    
Total Liabilities7,460,438     7,353,248    
Stockholders' equity1,169,641     1,157,078    
Total Liabilities and Stockholders' Equity$8,630,079     $8,510,326    
            
Net interest income  $61,674     $61,928  
            
Net interest rate spread     3.04%      3.11%
Net interest-earning assets$1,455,660     $1,433,063    
            
Net interest margin   (3)     3.17%      3.24%
Ratio of interest-earning assets to           
total interest-bearing liabilities1.23x     1.23x    
            
(1) Average outstanding balance amounts shown are amortized cost.
(2) Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans.
(3) Annualized net interest income divided by average interest-earning assets.



   
The following table summarizes the quarterly net interest margin for the previous five quarters.  
          
 6/30/15 3/31/15 12/31/14 09/30/14 6/30/14
 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
Interest-Earning Assets:         
Securities2.28% 2.38% 2.35% 2.32% 2.35%
Net loans4.08% 4.16% 4.27% 4.30% 4.25%
Total interest-earning assets3.71% 3.78% 3.85% 3.86% 3.81%
          
Interest-Bearing Liabilities:         
Total deposits0.31% 0.31% 0.32% 0.34% 0.33%
Total borrowings1.77% 1.82% 1.81% 1.87% 1.97%
Total interest-bearing liabilities0.67% 0.67% 0.67% 0.68% 0.69%
          
Interest rate spread3.04% 3.11% 3.18% 3.18% 3.12%
Net interest margin3.17% 3.24% 3.30% 3.30% 3.24%
          
Ratio of interest-earning assets to interest-bearing liabilities1.23x 1.23x 1.22x 1.22x 1.22x



 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Average Year to Date Balances
(Unaudited) (Dollars in Thousands)
            
 June 30, 2015 June 30, 2014
 Average   Average Average   Average
 Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:           
Deposits$18,103  $22   0.25% $23,857  $29   0.25%
Federal funds sold and other short term investments1,331     0.03% 1,320     0.02%
Investment securities  (1)473,665  6,782   2.86% 377,237  5,576   2.96%
Securities available for sale1,054,590  10,474   1.99% 1,145,943  12,576   2.20%
Federal Home Loan Bank stock70,944  1,562   4.44% 60,795  1,169   3.88%
Net loans:  (2)           
Total mortgage loans4,268,820  86,883   4.06% 3,740,450  78,933   4.21%
Total commercial loans1,220,353  27,108   4.45% 965,132  22,095   4.58%
Total consumer loans600,102  11,588   3.89% 580,366  11,531   4.01%
Total net loans6,089,275  125,579   4.12% 5,285,948  112,559   4.25%
Total Interest-Earning Assets$7,707,908  $144,419   3.74% $6,895,100  $131,909   3.82%
            
Non-Interest Earning Assets:           
Cash and due from banks77,454      67,029     
Other assets785,171      690,654     
Total Assets$8,570,533      $7,652,783     
            
Interest-Bearing Liabilities:           
Demand deposits$2,949,258  $3,904   0.27% $2,680,946  $3,581   0.27%
Savings deposits985,520  504   0.10% 935,888  439   0.09%
Time deposits801,784  2,804   0.70% 796,448  3,405   0.86%
Total Deposits4,736,562  7,212   0.31% 4,413,282  7,425   0.34%
Borrowed funds1,526,923  13,605   1.80% 1,248,220  11,882   1.92%
Total Interest-Bearing Liabilities$6,263,485  $20,817   0.67% $5,661,502  $19,307   0.69%
            
Non-Interest Bearing Liabilities1,143,654      946,635     
Total Liabilities7,407,139      6,608,137     
Stockholders' equity1,163,394      1,044,646     
Total Liabilities and Stockholders' Equity$8,570,533      $7,652,783     
            
Net interest income  $123,602      $112,602   
            
Net interest rate spread     3.07%      3.13%
Net interest-earning assets$1,444,423      $1,233,598     
            
Net interest margin   (3)     3.20%      3.25%
Ratio of interest-earning assets to           
total interest-bearing liabilities1.23x     1.22x    
            
(1)  Average outstanding balance amounts shown are amortized cost.
(2)  Average outstanding balance are net of the allowance for loan losses, deferred loan fees and expenses, loan premium and discounts and include non-accrual loans.
(3)  Annualized net interest income divided by average interest-earning assets.



 
The following table summarizes the year-to-date net interest margin for the previous three years.
      
 Six Months Ended
 6/30/15 6/30/14 6/30/13
Interest-Earning Assets:     
Securities2.33% 2.41% 2.20%
Net loans4.12% 4.25% 4.45%
Total interest-earning assets3.74% 3.82% 3.89%
      
Interest-Bearing Liabilities:     
Total deposits0.31% 0.34% 0.43%
Total borrowings1.80% 1.92% 2.13%
Total interest-bearing liabilities0.67% 0.69% 0.69%
      
Interest rate spread3.07% 3.13% 3.20%
Net interest margin3.20% 3.25% 3.32%
      
Ratio of interest-earning assets to interest-bearing liabilities1.23x 1.22x 1.21x

 

Investor Relations, 1-732-590-9300 Web Site: http://www.providentnj.com

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