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

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ISELIN, N.J., July 27, 2018 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE:PFS) (the "Company") reported net income of $19.2 million, or $0.30 per basic and diluted share, for the three months ended June 30, 2018, compared to net income of $24.4 million, or $0.38 per basic and diluted share, for the three months ended June 30, 2017.  For the six months ended June 30, 2018, the Company reported net income of $47.2 million, or $0.73 per basic and diluted share, compared to net income of $47.9 million, or $0.75 per basic share and $0.74 per diluted share, for the same period last year.

As previously reported in a Current Report on Form 8-K filed on July 5, 2018, the Company's earnings for the three and six months ended June 30, 2018 were adversely impacted by an increase in the provision for loan losses arising from a credit loss associated with a $15.4 million credit to a commercial borrower that filed a Chapter 7 petition in bankruptcy on March 27, 2018 for a liquidation of assets.  That credit resulted in a net charge-off of $14.9 million in the quarter.  In addition, the Company had a net charge-off of $4.0 million relating to two loans to another commercial borrower that became impaired during the quarter.  As a result, net income for the quarter and year to date was reduced by $11.8 million, after tax or $0.18 per diluted share, and $13.6 million, after tax or $0.21 per diluted share, respectively.

For the three and six months ended June 30, 2018, the Company achieved record net interest income resulting from period over period growth in average loans outstanding and growth in both average non-interest and interest bearing deposits, along with an expansion of the net interest margin.  The improvement in net interest margin was driven by an increase in the yield on earning assets and a lagging cost of funds.

Christopher Martin, Chairman, President and Chief Executive Officer commented:  "This quarter's results reflect record revenue for the Company and continued expansion of our net interest margin, as our funding costs continue to be well-managed and the yield on our loan portfolio increased.  The credit losses incurred this quarter were primarily driven by two commercial relationships which we believe involved borrower fraud in each instance.  We do not believe these credits are indicative of any deterioration in our overall credit quality.  We will continue to pursue all available avenues for recovery of these loan losses, although there can be no assurance as to how successful we will be in this regard."  Martin added:  "I am pleased to report that our board of directors declared an increase in the quarterly cash dividend to $0.21 per share.  We remain positive about our strong capital position, increased core revenue, and the prospect of expansion of both our core banking and wealth management businesses."

Declaration of Quarterly Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.21 per common share payable on August 31, 2018, to stockholders of record as of the close of business on August 15, 2018.  The dividend is an increase of 5.0% from the prior quarter's cash dividend of $0.20 per common share.

Balance Sheet Summary

Total assets at June 30, 2018 totaled $9.73 billion, a $112.4 million decrease from December 31, 2017.  The decline in total assets was primarily due to a $72.5 million decrease in total loans, a $48.9 million decrease in cash and cash equivalents and a $2.8 million decrease in premises and equipment, partially offset by a $7.1 million increase in total investments.

The Company's loan portfolio decreased $72.5 million to $7.25 billion at June 30, 2018, from $7.33 billion at December 31, 2017.  For the six months ended June 30, 2018, loan originations, including advances on lines of credit, totaled $1.60 billion, compared with $1.62 billion for the same period in 2017.  During the six months ended June 30, 2018, the loan portfolio had net decreases of $56.7 million in commercial loans, $24.2 million in residential mortgage loans and $22.0 million in consumer loans, partially offset by net increases of $14.3 million in construction loans, $14.3 million in commercial mortgage loans and $1.9 million in multi-family mortgage loans.  Commercial real estate, commercial and construction loans represented 78.4% of the loan portfolio at June 30, 2018, compared to 77.9% at December 31, 2017.

At June 30, 2018, the Company's unfunded loan commitments totaled $1.66 billion, including commitments of $718.4 million in commercial loans, $426.4 million in construction loans and $250.0 million in commercial mortgage loans.  Unfunded loan commitments at December 31, 2017 and June 30, 2017 were $1.98 billion and $1.95 billion, respectively.

The loan pipeline, consisting of work-in-process and loans approved pending closing, totaled $1.10 billion at June 30, 2018, compared to $1.12 billion and $1.31 billion at December 31, 2017 and June 30, 2017, respectively.

Total investments were $1.60 billion at June 30, 2018, which increased $7.1 million, compared to the balance at December 31, 2017, largely due to purchases of mortgage-backed and municipal securities, partially offset by principal repayments on mortgage-backed securities, maturities and calls of certain municipal and agency bonds and an increase in unrealized losses on available for sale debt securities.

Total deposits decreased $40.2 million during the six months ended June 30, 2018, to $6.67 billion from $6.71 billion at December 31, 2017.  Total core deposits, which consist of savings and demand deposit accounts, decreased $55.0 million to $6.02 billion at June 30, 2018, from $6.08 billion at December 31, 2017, while time deposits increased $14.7 million to $649.6 million at June 30, 2018, from $634.8 million at December 31, 2017.  The increase in time deposits was primarily the result of a 13-month certificate of deposit promotional campaign which provided the Company a lower-cost funding alternative to wholesale borrowings. The decrease in core deposits was largely attributable to a $60.3 million decrease in money market deposits, a $28.1 million decrease in interest bearing demand deposits and a $12.6 million decrease in savings deposits, partially offset by a $46.1 million increase in non-interest bearing demand deposits.  Core deposits represented 90.3% of total deposits at June 30, 2018, compared to 90.5% at December 31, 2017.

Borrowed funds decreased $101.0 million during the six months ended June 30, 2018, to $1.64 billion.  The decrease in borrowings for the period was primarily a function of lower asset funding requirements.  Borrowed funds represented 16.9% of total assets at June 30, 2018, a decrease from 17.7% at December 31, 2017.

Stockholders' equity increased $12.6 million during the six months ended June 30, 2018, to $1.31 billion, primarily due to net income earned for the period, partially offset by dividends paid to stockholders and an increase in unrealized losses on securities available for sale.  Common stock repurchases made in connection with withholding to cover income taxes on the vesting of stock-based compensation for the six months ended June 30, 2018 totaled 70,588 shares at an average cost of $26.16.  At June 30, 2018, 3.1 million shares remained eligible for repurchase under the current stock repurchase authorization.  Book value per share and tangible book value per share(1) at June 30, 2018 were $19.64 and $13.36, respectively, compared with $19.52 and $13.20, respectively, at December 31, 2017.

Results of Operations

Net Interest Income and Net Interest Margin

For the three months ended June 30, 2018, net interest income increased $5.2 million to $74.3 million, from $69.1 million for the same period in 2017.  Net interest income for the six months ended June 30, 2018 increased $11.5 million to $147.6 million, from $136.1 million for the same period in 2017.  The improvement in net interest income for the comparative periods was largely due to growth in average loans outstanding resulting from organic originations and period-over-period expansion of the net interest margin.  The improvement in the net interest margin was a function of an increase in the yield on earning assets, which outpaced the rise in the Company's cost of funds.  Also contributing to the improvement, the growth in average core deposits including non-interest bearing demand deposits mitigated the Company's need to utilize higher-cost sources to fund average loans outstanding.

The Company's net interest margin increased three basis points to 3.33% for the quarter ended June 30, 2018, from 3.30% for the trailing quarter.  The weighted average yield on interest-earning assets increased eight basis points to 3.97% for the quarter ended June 30, 2018, compared to 3.89% for the quarter ended March 31, 2018.  The weighted average cost of interest-bearing liabilities for the quarter ended June 30, 2018 increased six basis points to 0.82%, compared to 0.76% for the trailing quarter.  The average cost of interest bearing deposits for the quarter ended June 30, 2018 increased six basis points to 0.53%, from 0.47% for the quarter ended March 31, 2018.  Average non-interest bearing demand deposits totaled $1.46 billion for the quarter ended June 30, 2018, compared to $1.42 billion for the trailing quarter ended March 31, 2018.  The average cost of borrowed funds for the quarter ended June 30, 2018 was 1.82%, compared to 1.70% for the trailing quarter.

The net interest margin increased 16 basis points to 3.33% for the quarter ended June 30, 2018, compared to 3.17% for the quarter ended June 30, 2017.  The weighted average yield on interest-earning assets increased 27 basis points to 3.97% for the quarter ended June 30, 2018, compared to 3.70% for the quarter ended June 30, 2017, while the weighted average cost of interest bearing liabilities increased 15 basis points for the quarter ended June 30, 2018 to 0.82%, compared to the second quarter of 2017.  The average cost of interest bearing deposits for the quarter ended June 30, 2018 was 0.53%, compared to 0.36% for the same period last year.  Average non-interest bearing demand deposits totaled $1.46 billion for the quarter ended June 30, 2018, compared to $1.33 billion for the quarter ended June 30, 2017.  The average cost of borrowed funds for the quarter ended June 30, 2018 was 1.82%, compared to 1.66% for the same period last year.

For the six months ended June 30, 2018, the net interest margin increased 16 basis points to 3.31%, compared to 3.15% for the six months ended June 30, 2017.  The weighted average yield on interest earning assets increased 26 basis points to 3.93% for the six months ended June 30, 2018, compared to 3.67% for the six months ended June 30, 2017, while the weighted average cost of interest bearing liabilities increased 13 basis points to 0.79% for the six months ended June 30, 2018, compared to 0.66% the same period last year.  The average cost of interest bearing deposits for the six months ended June 30, 2018 was 0.50%, compared to 0.35% for the same period last year.  Average non-interest bearing demand deposits totaled $1.44 billion for the six months ended June 30, 2018, compared to $1.33 billion for the six months ended June 30, 2017.  The average cost of borrowings for the six months ended June 30, 2018 was 1.76%, compared to 1.64% for the same period last year.

Non-Interest Income

Non-interest income totaled $13.8 million for the quarter ended June 30, 2018, a decrease of $1.0 million, compared to the same period in 2017.  Income from Bank-owned life insurance ("BOLI") decreased $1.3 million to $1.3 million for the three months ended June 30, 2018, compared to the same period in 2017, primarily due to the recognition of death benefit claims in the second quarter of last year.  Fee income decreased $643,000 to $6.6 million for the three months ended June 30, 2018, compared to the same period in 2017, largely due to a $1.0 million decrease in commercial loan prepayment fee income, partially offset by a $124,000 increase in income from the sale of non-deposit investment products and a $121,000 increase in loan related fee income.  Partially offsetting these decreases in non-interest income, other income increased $835,000 to $1.3 million for the three months ended June 30, 2018, compared to the quarter ended June 30, 2017, primarily due to a $556,000 increase in net fees on loan-level interest rate swap transactions and a $226,000 increase in net gains on the sale of foreclosed real estate, partially offset by a $109,000 decrease in net gains on the sale of loans.

For the six months ended June 30, 2018, non-interest income totaled $27.1 million, a decrease of $140,000, compared to the same period in 2017.  BOLI income decreased $1.4 million to $2.6 million for the six months ended June 30, 2018, compared to the same period in 2017, primarily due to the recognition of death benefit claims in the prior year.  Partially offsetting this decrease, other income increased $980,000 to $2.3 million for the six months ended June 30, 2018, compared to $1.4 million for the same period in 2017, due to a $662,000 increase in net fees on loan-level interest rate swap transactions, a $214,000 increase in net gains on the sale of loans and a $115,000 increase in net gains on the sale of foreclosed real estate.  Also, wealth management income increased $280,000 to $9.0 million for the six months ended June 30, 2018, resulting from growth in assets under management, higher incremental fees on new asset management relationships and increased revenue from mutual fund offerings.

Non-Interest Expense

For the three months ended June 30, 2018, non-interest expense totaled $48.8 million, an increase of $1.5 million, compared to the three months ended June 30, 2017.  Compensation and benefits expense increased $1.1 million to $28.0 million for the three months ended June 30, 2018, compared to $26.9 million for the same period in 2017.  This increase was principally due to additional salary expense related to annual merit increases, an increase in the accrual for incentive compensation and an increase in stock-based compensation, partially offset by a decrease in employee medical benefit costs.  Other operating expenses increased $456,000 to $8.5 million for the three months ended June 30, 2018, compared to the same period in 2017, largely due to an $813,000 increase in consulting costs, partially offset by a $368,000 valuation charge related to foreclosed real estate recognized in the prior year.  Net occupancy costs increased $188,000 to $6.4 million for the three months ended June 30, 2018, compared to the same period in 2017, principally due to increases in facilities maintenance costs and rent expense, partially offset by a decrease in real estate taxes.  A portion of these variances are associated with the Company's sale and leaseback of certain facilities in December 2017.  Data processing expense increased $95,000 to $3.6 million for the three months ended June 30, 2018, principally due to increases in software maintenance and on-line banking expenses, partially offset by lower telecommunication expense.  Partially offsetting these increases, amortization of intangibles decreased $149,000 for the three months ended June 30, 2018, compared with the same period in 2017, as a result of scheduled reductions in amortization.  Additionally, advertising and promotion expenses decreased $98,000 to $847,000 for the three months ended June 30, 2018, compared to the same period in 2017, largely due to the timing of the Company's advertising campaigns.

The Company's annualized non-interest expense as a percentage of average assets(1) was 2.01% for the quarter ended June 30, 2018, compared to 1.99% for the same period in 2017.  The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income)(1) was 55.39% for the quarter ended June 30, 2018, compared to 56.44% for the same period in 2017.

Non-interest expense totaled $95.7 million for the six months ended June 30, 2018, an increase of $2.3 million, compared to $93.5 million for the six months ended June 30, 2017.  Compensation and benefits expense increased $2.1 million to $55.9 million for the six months ended June 30, 2018, compared to $53.8 million for the six months ended June 30, 2017, primarily due to additional salary expense related to annual merit increases, an increase in the accrual for incentive compensation and an increase in stock-based compensation.  Other operating expenses increased $400,000 to $14.6 million for the six months ended June 30, 2018, compared to the same period in 2017, largely due to an increase in consulting expenses, partially offset by a valuation charge related to foreclosed real estate recognized in the prior year, along with decreases in attorney fees and loan collection expense.  In addition, data processing expense increased $244,000 to $7.2 million for the six months ended June 30, 2018, compared to $7.0 million for the same period in 2017, principally due to increases in software maintenance expense, partially offset by lower telecommunication expense.  Partially offsetting these increases in non-interest expense, amortization of intangibles decreased $331,000 for the six months ended June 30, 2018, compared with the same period in 2017, as a result of scheduled reductions in amortization, and FDIC insurance expense decreased $145,000 to $2.0 million for the six months ended June 30, 2018, compared to $2.1 million for the same period in 2017.  This decrease was due to the FDIC's reduction of assessment rates for depository institutions with less than $10.0 billion in total assets that became effective for the quarter ended September 30, 2017.

Asset Quality

The Company's total non-performing loans at June 30, 2018 were $32.6 million, or 0.45% of total loans, compared to $45.9 million, or 0.63% of total loans at March 31, 2018, and $34.9 million, or 0.48% of total loans at December 31, 2017.  The $13.3 million decrease in non-performing loans at June 30, 2018, compared to the trailing quarter, was due to a $13.8 million decrease in non-performing commercial loans, a $116,000 decrease in non-performing commercial mortgage loans and a $10,000 decrease in non-performing consumer loans, partially offset by a $641,000 increase in non-performing residential loans.  At June 30, 2018, impaired loans totaled $55.5 million with related specific reserves of $2.1 million, compared with impaired loans totaling $68.3 million with related specific reserves of $4.5 million at March 31, 2018.  At December 31, 2017, impaired loans totaled $52.0 million with related specific reserves of $2.7 million.

At June 30, 2018, the Company's allowance for loan losses was 0.81% of total loans, a decrease from 0.86% at March 31, 2018 and 0.82% at December 31, 2017.  The Company recorded provisions for loan losses of $15.5 million and $20.9 million for the three and six months ended June 30, 2018, respectively, compared with provisions of $1.7 million and $3.2 million for the three and six months ended June 30, 2017, respectively.  For the three and six months ended June 30, 2018, the Company had net charge-offs of $19.2 million and $22.3 million, respectively, compared to net charge-offs of $1.0 million and $2.2 million, respectively, for the same periods in 2017.  The allowance for loan losses decreased $1.4 million to $58.8 million at June 30, 2018 from $60.2 million at December 31, 2017.  The increase in the provision for loan losses and loan charge-offs for the second quarter of 2018 was primarily due to deterioration in selected commercial credits, including a $15.4 million credit to a commercial borrower that on March 27, 2018 filed a Chapter 7 petition in bankruptcy for a liquidation of assets and two credits totaling $4.0 million to another commercial borrower that became impaired during the quarter.  For the three and six months ended June 30, 2018, the Company recorded charge-offs of $18.9 million on these commercial credits.

At June 30, 2018 and December 31, 2017, the Company held $6.5 million and $6.9 million of foreclosed assets, respectively.  During the six months ended June 30, 2018, there were four additions to foreclosed assets with a carrying value of $1.2 million, and eight properties sold with a carrying value of $1.4 million.  Foreclosed assets at June 30, 2018 consisted of $3.7 million of commercial real estate and $2.8 million of residential real estate.  Total non-performing assets at June 30, 2018 decreased $2.6 million, or 6.3%, to $39.1 million, or 0.40% of total assets, from $41.8 million, or 0.42% of total assets at December 31, 2017.

Income Tax Expense

For the three and six months ended June 30, 2018, the Company's income tax expense was $4.6 million and $10.9 million, respectively, compared with $10.5 million and $18.8 million, for the three and six months ended June 30, 2017, respectively.  The Company's effective tax rates were 19.2% and 18.8% for the three and six months ended June 30, 2018, respectively, compared to 30.0% and 28.2% for the three and six months ended June 30, 2017, respectively.  The decreases in tax expense and the effective tax rate were the result of the enactment of the Tax Cuts and Jobs Act on December 22, 2017, along with a decrease in pre-tax income derived from taxable sources.

About the Company

Provident Financial Services, Inc. is the holding company for Provident Bank, a community-oriented bank offering "commitment you can count on" since 1839.  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 on Friday, July 27, 2018 at 10:00 a.m. Eastern Time to discuss the Company's financial results for the quarter ended June 30, 2018.  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 provident.bank 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," "project," "intend," "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 described in the "Risk Factors" section of our Annual Report on Form 10-K, as 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) Tangible book value per share, annualized return on average tangible equity, annualized non-interest expense as a percentage of average assets and the efficiency ratio are non-GAAP financial measures.  Please refer to the Notes following the Consolidated Financial Highlights 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, 2018 (Unaudited) and December 31, 2017
(Dollars in Thousands)
       
Assets June 30, 2018   December 31, 2017
       
Cash and due from banks $ 91,192     $ 139,557  
Short-term investments 50,761     51,277  
Total cash and cash equivalents 141,953     190,834  
       
Available for sale debt securities, at fair value 1,052,534     1,037,154  
Held to maturity debt securities (fair value of $472,185 at June 30, 2018
(unaudited) and $485,039 at December 31, 2017)

473,825     477,652  
Equity securities, at fair value 687     658  
Federal Home Loan Bank Stock 76,772     81,184  
Loans 7,253,242     7,325,718  
Less allowance for loan losses 58,819     60,195  
Net loans 7,194,423     7,265,523  
Foreclosed assets, net 6,537     6,864  
Banking premises and equipment, net 60,348     63,185  
Accrued interest receivable 29,735     29,646  
Intangible assets 419,180     420,290  
Bank-owned life insurance 192,082     189,525  
Other assets 84,836     82,759  
Total assets $ 9,732,912     $ 9,845,274  
       
Liabilities and Stockholders' Equity      
       
Deposits:      
Demand deposits $ 4,953,994     $ 4,996,345  
Savings deposits 1,070,397     1,083,012  
Certificates of deposit of $100,000 or more 325,653     316,074  
Other time deposits 323,905     318,735  
Total deposits 6,673,949     6,714,166  
Mortgage escrow deposits 30,106     25,933  
Borrowed funds 1,641,539     1,742,514  
Other liabilities 76,056     64,000  
Total liabilities 8,421,650     8,546,613  
       
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 66,780,853 shares outstanding at June 30, 2018 and
66,535,017 outstanding at December 31, 2017
832     832  
Additional paid-in capital 1,017,256     1,012,908  
Retained earnings 606,423     586,132  
Accumulated other comprehensive loss (19,912 )   (7,465 )
Treasury stock (260,908 )   (259,907 )
Unallocated common stock held by the Employee Stock Ownership Plan (32,429 )   (33,839 )
Common Stock acquired by the Directors' Deferred Fee Plan (4,840 )   (5,175 )
Deferred Compensation - Directors' Deferred Fee Plan 4,840     5,175  
Total stockholders' equity 1,311,262     1,298,661  
Total liabilities and stockholders' equity $ 9,732,912     $ 9,845,274  
               


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Six Months Ended June 30, 2018 and 2017 (Unaudited)
(Dollars in Thousands, except per share data)
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2018   2017   2018   2017
Interest income:              
Real estate secured loans $ 52,756     $ 47,009     $ 104,266     $ 93,020  
Commercial loans 19,350     18,100     38,476     34,920  
Consumer loans 4,945     5,196     9,850     10,210  
Available for sale debt securities, equity securities and Federal Home Loan Bank stock 7,682     6,548     14,933     13,111  
Investment securities held to maturity 3,154     3,292     6,298     6,540  
Deposits, federal funds sold and other short-term investments 428     298     823     555  
Total interest income 88,315     80,443     174,646     158,356  
               
Interest expense:              
Deposits 6,996     4,653     13,231     9,105  
Borrowed funds 7,039     6,735     13,858     13,161  
Total interest expense 14,035     11,388     27,089     22,266  
Net interest income 74,280     69,055     147,557     136,090  
Provision for loan losses 15,500     1,700     20,900     3,200  
Net interest income after provision for loan losses 58,780     67,355     126,657     132,890  
               
Non-interest income:              
Fees 6,612     7,255     13,251     13,260  
Wealth management income 4,602     4,509     9,002     8,722  
Bank-owned life insurance 1,293     2,549     2,557     3,938  
Net gain on securities transactions     11     1     11  
Other income 1,330     495     2,333     1,353  
Total non-interest income 13,837     14,819     27,144     27,284  
               
Non-interest expense:              
Compensation and employee benefits 27,983     26,910     55,852     53,758  
Net occupancy expense 6,383     6,195     13,128     13,150  
Data processing expense 3,626     3,531     7,232     6,988  
FDIC Insurance 900     999     1,953     2,098  
Amortization of intangibles 546     695     1,116     1,447  
Advertising and promotion expense 847     945     1,814     1,802  
Other operating expenses 8,521     8,065     14,621     14,221  
Total non-interest expense 48,806     47,340     95,716     93,464  
Income before income tax expense 23,811     34,834     58,085     66,710  
Income tax expense 4,568     10,451     10,929     18,819  
Net income $ 19,243     $ 24,383     $ 47,156     $ 47,891  
               
Basic earnings per share $ 0.30     $ 0.38     $ 0.73     $ 0.75  
Average basic shares outstanding   64,911,919       64,357,684       64,840,843       64,263,065   
               
Diluted earnings per share $ 0.30     $ 0.38     $ 0.73     $ 0.74  
Average diluted shares outstanding   65,099,603       64,541,071       65,024,917       64,455,873  
                               


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 June 30,   Six months ended June 30,
    2018     2017     2018     2017
STATEMENTS OF INCOME:              
Net interest income $ 74,280     $ 69,055     $ 147,557     $ 136,090  
Provision for loan losses   15,500       1,700       20,900       3,200  
Non-interest income   13,837       14,819       27,144       27,284  
Non-interest expense   48,806       47,340       95,716       93,464  
Income before income tax expense   23,811       34,834       58,085       66,710  
Net income   19,243       24,383       47,156       47,891  
Diluted earnings per share $ 0.30     $ 0.38     $ 0.73     $ 0.74  
Interest rate spread   3.15 %     3.03 %     3.14 %     3.01 %
Net interest margin   3.33 %     3.17 %     3.31 %     3.15 %
               
PROFITABILITY:              
Annualized return on average assets   0.79 %     1.03 %     0.98 %     1.02 %
Annualized return on average equity   5.87 %     7.61 %     7.25 %     7.58 %
Annualized return on average tangible equity (2)   8.62 %     11.33 %     10.66 %     11.33 %
Annualized non-interest expense to average assets (3)   2.01 %     1.99 %     1.98 %     1.98 %
Efficiency ratio (4)   55.39 %     56.44 %     54.79 %     57.21 %
               
ASSET QUALITY:              
Non-accrual loans         $ 32,610     $ 38,907  
90+ and still accruing                  
Non-performing loans           32,610       38,907  
Foreclosed assets           6,537       6,603  
Non-performing assets           39,147       45,510  
Non-performing loans to total loans           0.45 %     0.55 %
Non-performing assets to total assets           0.40 %     0.48 %
Allowance for loan losses         $ 58,819     $ 62,862  
Allowance for loan losses to total non-performing loans           180.37 %     161.57 %
Allowance for loan losses to total loans           0.81 %     0.89 %
               
AVERAGE BALANCE SHEET DATA:              
Assets $ 9,726,387     $ 9,535,776     $ 9,744,728     $ 9,511,739  
Loans, net   7,190,972       6,951,697       7,217,202       6,936,026  
Earning assets   8,849,250       8,642,756       8,871,953       8,620,849  
Core deposits   6,118,327       5,885,520       6,117,067       5,886,283  
Borrowings   1,554,013       1,628,155       1,591,142       1,614,951  
Interest-bearing liabilities   6,860,586       6,853,098       6,908,917       6,839,929  
Stockholders' equity   1,315,104       1,284,795       1,312,223       1,274,695  
Average yield on interest-earning assets   3.97 %     3.70 %     3.93 %     3.67 %
Average cost of interest-bearing liabilities   0.82 %     0.67 %     0.79 %     0.66 %
               
LOAN DATA:              
Mortgage loans:              
Residential         $ 1,118,696     $ 1,169,144  
Commercial           2,185,444       1,992,574  
Multi-family           1,405,927       1,384,708  
Construction           406,893       305,860  
Total mortgage loans           5,116,960       4,852,286  
Commercial loans           1,688,623       1,688,381  
Consumer loans           451,919       492,837  
Total gross loans           7,257,502       7,033,504  
Premium on purchased loans           3,668       4,492  
Unearned discounts           (35 )     (37 )
Net deferred           (7,893 )     (6,911 )
Total loans         $ 7,253,242     $ 7,031,048  


  Notes and Reconciliation of GAAP to Non-GAAP Financial Measures - (Dollars in Thousands, except share data)  
                 
(1) Book and Tangible Book Value per Share                
      At June 30,   At December 31,  
        2018     2017     2017  
Total stockholders' equity     $ 1,311,262     $ 1,283,601     $ 1,298,661    
Less: total intangible assets       419,180       421,499       420,290    
Total tangible stockholders' equity     $ 892,082     $ 862,102     $ 878,371    
                 
Shares outstanding       66,780,853       66,441,753       66,535,017    
                 
Book value per share (total stockholders' equity/shares outstanding)     $ 19.64     $ 19.32     $ 19.52    
Tangible book value per share (total tangible stockholders' equity/shares outstanding)     $ 13.36     $ 12.98     $ 13.20    
                 
(2) Annualized Return on Average Tangible Equity                
  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
  2018     2017     2018     2017  
Total average stockholders' equity $ 1,315,104     $ 1,284,795     $ 1,312,223     $ 1,274,695    
Less: total average intangible assets 419,519       421,930       419,801       422,298    
Total average tangible stockholders' equity $ 895,585     $ 862,865     $ 892,422     $ 852,397    
                 
Net income $ 19,243     $ 24,383     $ 47,156     $ 47,891    
                 
Annualized return on average tangible equity (net income/total average stockholders' equity) 8.62 %     11.33 %     10.66 %     11.33 %  
                 
(3) Annualized Non-Interest Expense to Average Assets                
  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
  2018     2017     2018     2017  
Total annualized non-interest expense 195,760       189,880       193,018       188,477    
Average assets $ 9,726,387     $ 9,535,776     $ 9,744,728     $ 9,511,739    
                 
Annualized non-interest expense/average assets 2.01 %     1.99 %     1.98 %     1.98 %  
                 
(4) Efficiency Ratio Calculation                
  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
  2018     2017     2018     2017  
Net interest income $ 74,280     $ 69,055     $ 147,557     $ 136,090    
Non-interest income 13,837       14,819       27,144       27,284    
Total income $ 88,117     $ 83,874     $ 174,701     $ 163,374    
                 
Non-interest expense $ 48,806     $ 47,340     $ 95,716     $ 93,464    
                 
Efficiency ratio (non-interest expense/income) 55.39 %     56.44 %     54.79 %     57.21 %  




 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Quarterly Average Balances
(Unaudited) (Dollars in Thousands)
                       
  June 30, 2018   March 31, 2018
  Average       Average   Average       Average
  Balance   Interest   Yield/Cost   Balance   Interest   Yield/Cost
Interest-Earning Assets:                      
Deposits $ 11,083   $ 50   1.80 %   $ 16,696   $ 63     1.53 %
Federal funds sold and other short-term investments 51,006   378   2.98 %   51,032   332     2.64 %
Investment securities  (1) 471,807   3,154   2.67 %   469,774   3,144   2.68 %
Securities available for sale 1,050,806   6,461   2.46 %   1,036,236   6,071   2.35 %
Equity Securities, at fair value 667     0.00 %   658   5     3.31 %
Federal Home Loan Bank stock 72,909   1,221   6.72 %   77,186   1,175   6.17 %
Net loans:  (2)                      
Total mortgage loans 5,077,790   52,756   4.13 %   5,096,047   51,510   4.04 %
Total commercial loans 1,657,283   19,350   4.64 %   1,680,143   19,126   4.57 %
Total consumer loans 455,899   4,945   4.35 %   467,534   4,905   4.26 %
Total net loans 7,190,972   77,051   4.26 %   7,243,724   75,541   4.18 %
Total Interest-Earning Assets $ 8,849,250   $ 88,315   3.97 %   $ 8,895,306   $ 86,331   3.89 %
                       
Non-Interest Earning Assets:                      
Cash and due from banks 98,477           90,710        
Other assets 778,660           777,797        
Total Assets $ 9,726,387           $ 9,763,813        
                       
Interest-Bearing Liabilities:                      
Demand deposits $ 3,568,420   $ 4,665   0.52 %   $ 3,609,361   $ 4,204   0.47 %
Savings deposits 1,088,052   497   0.18 %   1,088,783   493   0.18 %
Time deposits 650,101   1,834   1.13 %   630,957   1,538   0.99 %
Total Deposits 5,306,573   6,996   0.53 %   5,329,101   6,235   0.47 %
                       
Borrowed funds 1,554,013   7,039   1.82 %   1,628,684   6,819   1.70 %
Total Interest-Bearing Liabilities 6,860,586   14,035   0.82 %   6,957,785   13,054   0.76 %
                       
Non-Interest Bearing Liabilities:                      
Non-interest bearing deposits 1,461,855           1,417,649        
Other non-interest bearing liabilities 88,842           79,069        
Total non-interest bearing liabilities 1,550,697           1,496,718        
Total Liabilities 8,411,283           8,454,503        
Stockholders' equity 1,315,104           1,309,310        
Total Liabilities and Stockholders' Equity $ 9,726,387           $ 9,763,813        
                       
Net interest income     $ 74,280           $ 73,277    
                       
Net interest rate spread         3.15 %           3.13 %
Net interest-earning assets $ 1,988,664           $ 1,937,521        
                       
Net interest margin   (3)         3.33 %           3.30 %
                       
Ratio of interest-earning assets to total interest-bearing liabilities 1.29x           1.28x        


   
(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.    
                   
  6/30/18   3/31/18   12/31/17   9/30/17   6/30/17
  2nd Qtr.   1st Qtr.   4th Qtr   3rd Qtr.   2nd Qtr.
Interest-Earning Assets:                  
Securities 2.72%   2.62%   2.49%   2.41%   2.40%
Net loans 4.26%   4.18%   4.08%   4.08%   4.02%
Total interest-earning assets 3.97%   3.89%   3.78%   3.75%   3.70%
                   
Interest-Bearing Liabilities:                  
Total deposits 0.53%   0.47%   0.40%   0.38%   0.36%
Total borrowings 1.82%   1.70%   1.63%   1.71%   1.66%
Total interest-bearing liabilities 0.82%   0.76%   0.68%   0.68%   0.67%
                   
Interest rate spread 3.15%   3.13%   3.10%   3.07%   3.03%
Net interest margin 3.33%   3.30%   3.25%   3.22%   3.17%
                   
Ratio of interest-earning assets to interest-bearing liabilities 1.29x   1.28x   1.29x   1.27x   1.26x
                   


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Average Year to Date Balances
(Unaudited) (Dollars in Thousands)
                       
  June 30, 2018   June 30, 2017
  Average       Average   Average       Average
  Balance   Interest   Yield/Cost   Balance   Interest   Yield/Cost
Interest-Earning Assets:                      
Deposits $ 13,677     $ 113     1.67 %   $ 17,235     $ 71     0.82 %
Federal funds sold and other short term investments 51,019     710     2.81 %   51,938     484     1.88 %
Investment securities  (1) 470,796     6,298     2.68 %   489,950     6,540     2.67 %
Securities available for sale 1,043,561     12,535     2.40 %   1,049,192     11,186     2.13 %
Equity securities, at fair value 662         0.00 %   564     8     2.91 %
Federal Home Loan Bank stock 75,036     2,398     6.39 %   75,944     1,917     5.09 %
Net loans:  (2)                      
Total mortgage loans 5,086,901     104,266     4.09 %   4,814,016     93,020     3.85 %
Total commercial loans 1,668,617     38,476     4.61 %   1,618,045     34,920     4.31 %
Total consumer loans 461,684     9,850     4.30 %   503,965     10,210     4.08 %
Total net loans 7,217,202     152,592     4.22 %   6,936,026     138,150     3.98 %
Total Interest-Earning Assets $ 8,871,953     $ 174,646     3.93 %   $ 8,620,849     $ 158,356     3.67 %
                       
Non-Interest Earning Assets:                      
Cash and due from banks 94,812             93,908          
Other assets 777,963             796,982          
Total Assets $ 9,744,728             $ 9,511,739          
                       
Interest-Bearing Liabilities:                      
Demand deposits $ 3,588,778     $ 8,869     0.50 %   $ 3,444,962     $ 5,599     0.33 %
Savings deposits 1,088,415     990     0.18 %   1,112,489     1,051     0.19 %
Time deposits 640,582     3,372     1.06 %   667,527     2,455     0.74 %
Total Deposits 5,317,775     13,231     0.50 %   5,224,978     9,105     0.35 %
Borrowed funds 1,591,142     13,858     1.76 %   1,614,951     13,161     1.64 %
Total Interest-Bearing Liabilities $ 6,908,917     $ 27,089     0.79 %   $ 6,839,929     $ 22,266     0.66 %
                       
Non-Interest Bearing Liabilities:                      
Non-interest bearing deposits 1,439,874             1,328,832          
Other non-interest bearing liabilities 83,714             68,283          
Total non-interest bearing liabilities 1,523,588             1,397,115          
Total Liabilities 8,432,505             8,237,044          
Stockholders' equity 1,312,223             1,274,695          
Total Liabilities and Stockholders' Equity $ 9,744,728             $ 9,511,739          
                       
Net interest income     $ 147,557             $ 136,090      
                       
Net interest rate spread         3.14 %           3.01 %
Net interest-earning assets $ 1,963,036             $ 1,780,920          
                       
Net interest margin   (3)         3.31 %           3.15 %
                       
Ratio of interest-earning assets to total interest-bearing liabilities 1.28x           1.26x        
                       
(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  
  6/30/2018   6/30/2017   6/30/2016  
Interest-Earning Assets:            
Securities 2.67%     2.40%     2.32%    
Net loans 4.22%     3.98%     3.97%    
Total interest-earning assets 3.93%     3.67%     3.65%    
             
Interest-Bearing Liabilities:            
Total deposits 0.50%     0.35%     0.33%    
Total borrowings 1.76%     1.64%     1.71%    
Total interest-bearing liabilities 0.79%     0.66%     0.67%    
             
Interest rate spread 3.14%     3.01%     2.98%    
Net interest margin 3.31%     3.15%     3.11%    
             
Ratio of interest-earning assets to interest-bearing liabilities 1.28x     1.26x     1.24x    
                   

CONTACT:  Investor Relations, 1-732-590-9300

Web Site:  http://www.Provident.Bank



 

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