Provident Financial Services, Inc. Announces Record Third Quarter Earnings and Declares Quarterly Cash Dividend


ISELIN, N.J., Oct. 27, 2017 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $26.6 million, or $0.41 per basic and diluted share, for the three months ended September 30, 2017, compared to net income of $22.9 million, or $0.36 per basic and diluted share, for the three months ended September 30, 2016.  For the nine months ended September 30, 2017, the Company reported net income of $74.5 million, or $1.16 per basic share and $1.15 per diluted share, compared to net income of $65.2 million, or $1.03 per basic share and $1.02 per diluted share, for the same period last year. 

The increases in the Company’s earnings for the three and nine months ended September 30, 2017 were driven by the period-over-period growth in average loans outstanding, growth in both average non-interest bearing and interest bearing core deposits, expansion of the net interest margin and an increase in non-interest income.  The improvement in the net interest margin was largely the result of an increase in the yield on earning assets, combined with a relatively stable cost of funds.

Christopher Martin, Chairman, President and Chief Executive Officer commented: “Our record quarterly earnings were driven by expansion of our net interest margin, improved asset quality and prudent expense management.  While loan production was strong for the quarter, net portfolio growth was constrained by elevated levels of loan payoffs.  Our loan pipeline remains very strong however, and as a result, we expect our total loans will increase in the upcoming quarters.”  Martin added: “I would like to congratulate all members of the Provident team for their efforts which led to Provident Bank being recently named the Best Bank in New Jersey by Money Magazine.”

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.20 per common share payable on November 30, 2017, to stockholders of record as of the close of business on November 15, 2017.

Balance Sheet Summary

Total assets at September 30, 2017 totaled $9.50 billion, a $5.3 million decrease from December 31, 2016.  The decline in total assets was primarily due to a $23.2 million decrease in total investments, a $5.5 million decrease in premises and equipment and a $2.3 million decrease in foreclosed assets, partially offset by a $24.6 million increase in total loans.

The Company’s loan portfolio increased $24.6 million, or 0.4%, to $7.03 billion at September 30, 2017, from $7.00 billion at December 31, 2016.  For the nine months ended September 30, 2017, loan originations, including advances on lines of credit, totaled $2.56 billion.  During the nine months ended September 30, 2017, the loan portfolio had net increases of $78.1 million in commercial loans, $59.9 million in construction loans and $44.0 million in commercial mortgage loans, partially offset by net decreases of $67.1 million in multi-family mortgage loans, $54.4 million in residential mortgage loans and $35.5 million in consumer loans.  Commercial real estate, commercial and construction loans represented 76.7% of the loan portfolio at September 30, 2017, compared to 75.3% at December 31, 2016. 

At September 30, 2017, the Company’s unfunded loan commitments totaled $2.11 billion, including commitments of $1.16 billion in commercial loans, $444.8 million in construction loans and $221.1 million in commercial mortgage loans.  Unfunded loan commitments at December 31, 2016 and September 30, 2016 were $1.83 billion and $1.38 billion, respectively.

Total investments decreased $23.2 million, or 1.4%, to $1.58 billion at September 30, 2017, from $1.60 billion at December 31, 2016, largely due to principal repayments on mortgage-backed securities, and maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities, along with an increase in unrealized gains on securities available for sale.

Total deposits increased $37.6 million, or 0.6%, during the nine months ended September 30, 2017, to $6.59 billion from $6.55 billion at December 31, 2016.  Total core deposits, which consist of savings and demand deposit accounts, increased $60.9 million to $5.96 billion at September 30, 2017, from $5.90 billion at December 31, 2016, while time deposits decreased $23.3 million to $627.9 million at September 30, 2017, from $651.2 million at December 31, 2016.  The increase in core deposits was largely attributable to a $100.9 million increase in interest bearing demand deposits and a $19.5 million increase in non-interest bearing demand deposits, partially offset by a $43.7 million decrease in money market deposits and a $15.8 million decrease in savings deposits.  Core deposits represented 90.5% of total deposits at September 30, 2017, compared to 90.1% at December 31, 2016.

Borrowed funds decreased $87.2 million, or 5.4%, during the nine months ended September 30, 2017, to $1.53 billion, as wholesale funding was replaced by net inflows of deposits and capital formation for the period.  Borrowed funds represented 16.1% of total assets at September 30, 2017, a decrease from 17.0% at December 31, 2016.

Stockholders’ equity increased $48.4 million, or 3.9%, for the nine months ended September 30, 2017, to $1.30 billion, primarily due to net income earned for the period and an increase in unrealized gains on securities available for sale, partially offset by dividends paid to stockholders.  Common stock repurchases made in connection with withholding to cover income taxes on the vesting of stock-based compensation for the nine months ended September 30, 2017 totaled 43,090 shares at an average cost of $27.13.  At September 30, 2017, 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 September 30, 2017 were $19.56 and $13.23, respectively, compared with $18.94 and $12.54, respectively, at December 31, 2016.

Results of Operations

Net Interest Income and Net Interest Margin

For the three months ended September 30, 2017, net interest income increased $5.2 million to $70.2 million, from $65.0 million for the same period in 2016.  Net interest income for the nine months ended September 30, 2017 increased $14.4 million, to $206.3 million, from $192.0 million for the same period in 2016.  The improvement in net interest income for the comparative periods was due to growth in average loans outstanding resulting from organic originations and increases in both average interest bearing core deposits and average non-interest bearing demand deposits, combined with 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 and a relatively stable cost of funds, as growth in average core deposits mitigated the Company's need to utilize higher-cost sources to fund average loans outstanding.

The Company’s net interest margin increased five basis points to 3.22% for the quarter ended September 30, 2017, from 3.17% for the trailing quarter.  The weighted average yield on interest-earning assets increased five basis points to 3.75% for the quarter ended September 30, 2017, compared to 3.70% for the quarter ended June 30, 2017.  The weighted average cost of interest-bearing liabilities for the quarter ended September 30, 2017 increased one basis point to 0.68%, compared to 0.67% for the trailing quarter.  The average cost of interest bearing deposits for the quarter ended September 30, 2017 increased two basis points to 0.38%, from 0.36% for the quarter ended June 30, 2017.  Average non-interest bearing demand deposits totaled $1.36 billion for the quarter ended September 30, 2017, compared to $1.33 billion for the trailing quarter ended June 30, 2017.  The average cost of borrowed funds for the quarter ended September 30, 2017 was 1.71%, compared to 1.66% for the trailing quarter.

The net interest margin increased 17 basis points to 3.22% for the quarter ended September 30, 2017, compared to 3.05% for the quarter ended September 30, 2016.  The weighted average yield on interest-earning assets increased 18 basis points to 3.75% for the quarter ended September 30, 2017, compared to 3.57% for the quarter ended September 30, 2016, while the weighted average cost of interest bearing liabilities increased three basis points for the quarter ended September 30, 2017 to 0.68%, compared to the third quarter of 2016.  The average cost of interest bearing deposits for the quarter ended September 30, 2017 was 0.38%, compared to 0.34% for the same period last year.  Average non-interest bearing demand deposits totaled $1.36 billion for the quarter ended September 30, 2017, compared to $1.25 billion for the quarter ended September 30, 2016.  The average cost of borrowed funds for the quarter ended September 30, 2017 was 1.71%, compared to 1.70% for the same period last year.  

For the nine months ended September 30, 2017, the net interest margin increased nine basis points to 3.19%, compared to 3.10% for the nine months ended September 30, 2016.  The weighted average yield on interest earning assets increased nine basis points to 3.72% for the nine months ended September 30, 2017, compared to 3.63% for the nine months ended September 30, 2016, while the weighted average cost of interest bearing liabilities increased one basis point to 0.67% for the nine months ended September 30, 2017, compared to 0.66% the same period last year.  The average cost of interest bearing deposits for the nine months ended September 30, 2017 was 0.36%, compared to 0.33% for the same period last year.  Average non-interest bearing demand deposits totaled $1.34 billion for the nine months ended September 30, 2017, compared to $1.22 billion for the nine months ended September 30, 2016.  The average cost of borrowings for the nine months ended September 30, 2017 was 1.67%, compared to 1.71% for the same period last year.

Non-Interest Income

Non-interest income totaled $15.1 million for the quarter ended September 30, 2017, an increase of $1.0 million, or 7.4%, compared to the same period in 2016.  Fee income increased $1.5 million to $7.7 million for the three months ended September 30, 2017, compared to the same period in 2016, largely due to a $1.3 million increase in commercial loan prepayment fee income and a $218,000 increase in debit card revenue, partially offset by a $56,000 decrease in income from non-deposit investment products.  Also contributing to the increase in non-interest income, wealth management income increased $330,000 to $4.6 million for the three months ended September 30, 2017, compared to the same period in 2016, due to stronger market conditions which positively impacted fees earned from assets under management and an increase in tax preparation fees.  Net gains on securities transactions increased $79,000 for the three months ended September 30, 2017, compared to the same period in 2016.  Partially offsetting these increases in non-interest income, other income decreased $877,000 to $1.5 million for the three months ended September 30, 2017, compared to the quarter ended September 30, 2016, primarily due to an $853,000 decrease in net gains on the sale of loans and a $143,000 decrease in net gains on the sale of foreclosed real estate, partially offset by a $116,000 increase in net fees on loan-level interest rate swap transactions. 

For the nine months ended September 30, 2017, non-interest income totaled $42.4 million, an increase of $1.5 million, or 3.6%, compared to the same period in 2016.  Fee income increased $1.6 million for the nine months ended September 30, 2017, compared to the same period in 2016, primarily due to a $1.3 million increase in commercial loan prepayment fee income, a $259,000 increase in deposit related fee income and a $139,000 increase in merchant fee income, partially offset by a $168,000 decrease in income from non-deposit investment products and an $86,000 decrease in debit card revenue.  Income from Bank-owned life insurance increased $1.2 million to $5.3 million for the nine months ended September 30, 2017, compared to the same period in 2016, primarily due to the recognition of death benefit claims.  Wealth management income increased $230,000 to $13.3 million for the nine months ended September 30, 2017, due to stronger market conditions which positively impacted fees earned from assets under management and an increase in tax preparation fees.  Partially offsetting these increases in non-interest income, other income decreased $1.6 million to $2.8 million for the nine months ended September 30, 2017, compared to $4.4 million for the same period in 2016, principally due to a $1.2 million decrease in net gains on loan sales and a $335,000 gain recognized on the sale of deposits resulting from a strategic branch divestiture in the prior year.

Non-Interest Expense

For the three months ended September 30, 2017, non-interest expense totaled $46.3 million, an increase of $430,000, or 0.9%, compared to the three months ended September 30, 2016.  Compensation and benefits expense increased $603,000 to $27.3 million for the three months ended September 30, 2017, compared to $26.7 million for the same period in 2016.  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 retirement benefit costs.  Other operating expenses increased $128,000 to $7.0 million for the three months ended September 30, 2017, compared to the same period in 2016, largely due to an increase in consulting costs, partially offset by decreases in loan collection expense and debit card maintenance expense.  Advertising and promotion expenses increased $120,000 to $907,000 for the three months ended September 30, 2017, compared to the same period in 2016, largely due to the timing of the Company's advertising campaigns.  Partially offsetting these increases in non-interest expense, amortization of intangibles decreased $135,000 for the three months ended September 30, 2017, compared with the same period in 2016, as a result of scheduled reductions in amortization.  Additionally, net occupancy costs decreased $122,000, to $6.1 million for the three months ended September 30, 2017, compared to the same period in 2016, largely due to a decrease in depreciation expense.  

The Company’s annualized non-interest expense as a percentage of average assets(1) was 1.93% for the quarter ended September 30, 2017, compared to 1.96% for the same period in 2016.  The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income)(1) was 54.24% for the quarter ended September 30, 2017, compared to 58.01% for the same period in 2016. 

Non-interest expense totaled $139.7 million for the nine months ended September 30, 2017, an increase of $3.1 million, or 2.3%, compared to $136.6 million for the nine months ended September 30, 2016.  Compensation and benefits expense increased $2.6 million to $81.1 million for the nine months ended September 30, 2017, compared to $78.5 million for the nine months ended September 30, 2016, 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, partially offset by a decrease in retirement benefit costs.  Net occupancy costs increased $526,000 to $19.3 million for the nine months ended September 30, 2017, compared to the same period in 2016, principally due to an increase in snow removal costs incurred earlier in the year, combined with an increase in facilities maintenance costs.  Data processing expense increased $457,000 to $10.3 million for the nine months ended September 30, 2017, compared to $9.8 million for the same period in 2016, primarily due to increases in telecommunication costs and software maintenance expense.  In addition, other operating expenses increased $620,000 to $21.2 million for the nine months ended September 30, 2017, compared to the same period in 2016, largely due to increases in legal, consulting and debit card maintenance expenses, partially offset by a decrease in loan collection expense.  Partially offsetting these increases in non-interest expense, FDIC insurance expense decreased $667,000 to $3.1 million for the nine months ended September 30, 2017, compared to $3.7 million for the same period in 2016.  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, 2016.  Additionally, amortization of intangibles decreased $549,000 for the nine months ended September 30, 2017, compared with the same period in 2016, as a result of scheduled reductions in amortization. 

Asset Quality

The Company’s total non-performing loans at September 30, 2017 were $36.4 million, or 0.52% of total loans, compared to $38.9 million, or 0.55% of total loans at June 30, 2017, and $42.4 million, or 0.61% of total loans at December 31, 2016.  The $2.5 million decrease in non-performing loans at September 30, 2017, compared to the trailing quarter, was due to a $2.5 million decrease in non-performing construction loans, a $657,000 decrease in non-performing commercial mortgage loans, a $413,000 decrease in non-performing consumer loans and a $306,000 decrease in non-performing residential loans, partially offset by a $1.4 million increase in non-performing commercial loans.  At September 30, 2017, impaired loans totaled $50.2 million with related specific reserves of $2.9 million, compared with impaired loans totaling $52.7 million with related specific reserves of $4.1 million at June 30, 2017.  At December 31, 2016, impaired loans totaled $52.0 million with related specific reserves of $2.3 million.

At September 30, 2017, the Company’s allowance for loan losses decreased three basis points to 0.86% of total loans, compared to 0.89% at June 30, 2017 and 0.88% at December 31, 2016.  The decline in this loan coverage ratio from December 31, 2016, was largely the result of an overall improvement in asset quality.  The Company recorded provisions for loan losses of $500,000 and $3.7 million for the three and nine months ended September 30, 2017, respectively, compared with provisions of $1.0 million and $4.2 million for the three and nine months ended September 30, 2016, respectively.  For the three and nine months ended September 30, 2017, the Company had net charge-offs of $3.1 million and $5.3 million, respectively, compared to net charge-offs of $845,000 and $4.5 million, respectively, for the same periods in 2016.  The allowance for loan losses decreased $1.6 million to $60.3 million at September 30, 2017 from $61.9 million at December 31, 2016.

At September 30, 2017 and December 31, 2016, the Company held $5.7 million and $8.0 million of foreclosed assets, respectively.  During the nine months ended September 30, 2017, there were 12 additions to foreclosed assets with a carrying value of $2.2 million, and 23 properties sold with a carrying value of $3.8 million.  Foreclosed assets at September 30, 2017 consisted of $3.4 million of commercial real estate and $2.3 million of residential real estate.  Total non-performing assets at September 30, 2017 decreased $8.2 million, or 16.4%, to $42.2 million, or 0.44% of total assets, from $50.4 million, or 0.53% of total assets at December 31, 2016.

Income Tax Expense

For the three and nine months ended September 30, 2017, the Company’s income tax expense was $12.0 million and $30.8 million, respectively, compared with $9.3 million and $26.8 million, for the three and nine months ended September 30, 2016, respectively.  The Company’s effective tax rates were 31.1% and 29.3% for the three and nine months ended September 30, 2017, respectively, compared to 28.8% and 29.1% for the three and nine months ended September 30, 2016, respectively, as a greater proportion of income in the current year periods was derived from taxable sources.  The Company adopted Accounting Standards Update ("ASU”) No. 2016-09, "Compensation - Stock Compensation (Topic 718)" in the third quarter of 2016.  Under this guidance, all excess tax benefits and tax deficiencies associated with share-based compensation are recognized as income tax expense or benefit in the income statement.  For the nine months ended September 30, 2017 and 2016, the application of this guidance resulted in decreases in income tax expense of $1.2 million and $158,000, respectively.

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, October 27, 2017 at 10:00 a.m. Eastern Time to discuss highlights of the Company’s financial results for the quarter ended September 30, 2017.  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 set forth in Item 1A of the Company's 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
September 30, 2017 (Unaudited) and December 31, 2016
(Dollars in Thousands)
    
AssetsSeptember 30, 2017 December 31, 2016
    
Cash and due from banks$97,298  $92,508 
Short-term investments51,485  51,789 
Total cash and cash equivalents148,783  144,297 
    
Securities available for sale, at fair value1,028,305  1,040,386 
Investment securities held to maturity (fair value of $490,425 at September 30,      
2017 (unaudited) and $489,287 at December 31, 2016)481,845  488,183 
Federal Home Loan Bank Stock70,896  75,726 
Loans7,028,052  7,003,486 
Less allowance for loan losses60,276  61,883 
Net loans6,967,776  6,941,603 
Foreclosed assets, net5,703  7,991 
Banking premises and equipment, net78,567  84,092 
Accrued interest receivable27,398  27,082 
Intangible assets420,877  422,937 
Bank-owned life insurance188,123  188,527 
Other assets76,873  79,641 
Total assets$9,495,146  $9,500,465 
    
Liabilities and Stockholders' Equity   
    
Deposits:   
Demand deposits$4,880,133  $4,803,426 
Savings deposits1,083,215  1,099,020 
Certificates of deposit of $100,000 or more296,172  290,295 
Other time deposits331,696  360,888 
Total deposits6,591,216  6,553,629 
Mortgage escrow deposits25,186  24,452 
Borrowed funds1,525,560  1,612,745 
Other liabilities53,012  57,858 
Total liabilities8,194,974  8,248,684 
    
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 66,467,819 shares outstanding at September 30, 2017 and      
 66,082,283 outstanding at December 31, 2016832  832 
Additional paid-in capital1,010,247  1,005,777 
Retained earnings586,575  550,768 
Accumulated other comprehensive loss(708) (3,397)
Treasury stock(260,910) (264,221)
Unallocated common stock held by the Employee Stock Ownership Plan(35,864) (37,978)
Common Stock acquired by the Directors' Deferred Fee Plan(5,343) (5,846)
Deferred Compensation - Directors' Deferred Fee Plan5,343  5,846 
Total stockholders' equity1,300,172  1,251,781 
Total liabilities and stockholders' equity$9,495,146    $9,500,465 


 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Nine Months Ended September 30, 2017 and 2016 (Unaudited)
(Dollars in Thousands, except per share data)
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Interest income:       
Real estate secured loans$47,692  $45,262  $140,712  $134,411 
Commercial loans18,964  16,093  53,884  46,419 
Consumer loans5,083  5,627  15,293  16,657 
Securities available for sale and Federal Home Loan Bank stock6,540  5,576  19,651  17,074 
Investment securities held to maturity3,272  3,349  9,812  10,011 
Deposits, federal funds sold and other short-term investments343  138  898  252 
Total interest income81,894  76,045  240,250  224,824 
        
Interest expense:       
Deposits4,988  4,441  14,093  12,397 
Borrowed funds6,694  6,633  19,855  20,477 
Total interest expense11,682  11,074  33,948  32,874 
Net interest income70,212  64,971  206,302  191,950 
Provision for loan losses500  1,000  3,700  4,200 
Net interest income after provision for loan losses69,712  63,971  202,602  187,750 
        
Non-interest income:       
Fees7,680  6,137  20,940  19,309 
Wealth management income4,592  4,262  13,314  13,084 
Bank-owned life insurance1,353  1,382  5,291  4,083 
Net gain (loss) on securities transactions36  (43) 47  54 
Other income1,451  2,328  2,804  4,378 
Total non-interest income15,112  14,066  42,396  40,908 
        
Non-interest expense:       
Compensation and employee benefits27,328  26,725  81,086  78,496 
Net occupancy expense6,105  6,227  19,255  18,729 
Data processing expense3,314  3,328  10,302  9,845 
FDIC Insurance967  1,117  3,065  3,732 
Amortization of intangibles632  767  2,079  2,628 
Advertising and promotion expense907  787  2,709  2,567 
Other operating expenses7,027  6,899  21,248  20,628 
Total non-interest expense46,280  45,850  139,744  136,625 
Income before income tax expense38,544  32,187  105,254  92,033 
Income tax expense11,969  9,281  30,788  26,798 
Net income$26,575  $22,906  $74,466  $65,235 
        
Basic earnings per share$0.41  $0.36  $1.16  $1.03 
Average basic shares outstanding 64,454,684   63,728,393   64,327,640   63,545,065 
        
Diluted earnings per share$0.41  $0.36  $1.15  $1.02 
Average diluted shares outstanding 64,645,278     63,934,886     64,519,710     63,727,723 


 
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
September 30,
 Nine months ended
September 30,
  2017  2016  2017  2016
STATEMENTS OF INCOME:       
Net interest income$70,212  $64,971  $206,302  $191,950 
Provision for loan losses 500   1,000   3,700   4,200 
Non-interest income 15,112   14,066   42,396   40,908 
Non-interest expense 46,280   45,850   139,744   136,625 
Income before income tax expense 38,544   32,187   105,254   92,033 
Net income 26,575   22,906   74,466   65,235 
Diluted earnings per share$0.41  $0.36  $1.15  $1.02 
Interest rate spread 3.07%  2.92%  3.05%  2.97%
Net interest margin 3.22%  3.05%  3.19%  3.10%
        
PROFITABILITY:       
Annualized return on average assets 1.11%  0.98%  1.05%  0.95%
Annualized return on average equity 8.11%  7.33%  7.76%  7.11%
Annualized return on average tangible equity (2) 12.00%  11.13%  11.56%  10.88%
Annualized non-interest expense to average assets (3) 1.93%  1.96%  1.97%  2.00%
Efficiency ratio (4) 54.24%  58.01%  56.19%  58.67%
        
ASSET QUALITY:       
Non-accrual loans    $36,448  $40,016 
90+ and still accruing         
Non-performing loans     36,448   40,016 
Foreclosed assets     5,703   10,087 
Non-performing assets     42,151   50,103 
Non-performing loans to total loans     0.52%  0.58%
Non-performing assets to total assets     0.44%  0.53%
Allowance for loan losses    $60,276  $61,088 
Allowance for loan losses to total non-performing loans     165.38%  152.66%
Allowance for loan losses to total loans     0.86%  0.89%
        
AVERAGE BALANCE SHEET DATA:       
Assets$9,496,733  $9,328,946  $9,506,682  $9,133,000 
Loans, net 6,937,467   6,730,854   6,936,512   6,607,963 
Earning assets 8,617,728   8,420,908   8,620,994   8,224,380 
Core deposits 5,933,299   5,746,057   5,902,127   5,480,122 
Borrowings 1,553,365   1,550,148   1,594,197   1,600,023 
Interest-bearing liabilities 6,766,182   6,748,118   6,815,077   6,610,432 
Stockholders' equity 1,299,810   1,242,710   1,283,158   1,226,011 
Average yield on interest-earning assets 3.75%  3.57%  3.72%  3.63%
Average cost of interest-bearing liabilities 0.68%  0.65%  0.67%  0.66%
        
LOAN DATA:       
Mortgage loans:       
Residential    $1,157,888  $1,214,095 
Commercial     2,022,698   1,884,699 
Multi-family     1,335,103   1,384,541 
Construction     324,692   316,803 
Total mortgage loans     4,840,381   4,800,138 
Commercial loans     1,709,015   1,554,052 
Consumer loans     481,262   538,061 
Total gross loans     7,030,658   6,892,251 
Premium on purchased loans     4,229   5,330 
Unearned discounts     (36)  (39)
Net deferred     (6,799)  (6,956)
Total loans    $7,028,052  $6,890,586 


  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 September 30, At December 31, 
    2017  2016  2016 
Total stockholders' equity  $1,300,172  $1,244,280  $1,251,781  
Less: total intangible assets   420,877   423,678   422,937  
Total tangible stockholders' equity  $879,295  $820,602  $828,844  
         
Shares outstanding   66,467,819   66,028,442   66,082,283  
         
Book value per share (total stockholders' equity/shares outstanding)  $19.56  $18.84  $18.94  
Tangible book value per share (total tangible stockholders' equity/shares outstanding)  $13.23  $12.43  $12.54  
         
(2) Annualized Return on Average Tangible Equity        
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
 2017  2016  2017  2016 
Total average stockholders' equity$1,299,810  $1,242,710  $1,283,158  $1,226,011  
Less: total average intangible assets421,272   424,151   421,952   424,993  
Total average tangible stockholders' equity$878,538  $818,559  $861,206  $801,018  
         
Net income$26,575  $22,906  $74,466  $65,235  
         
Annualized return on average tangible equity (net income/total average stockholders' equity)12.00%  11.13%  11.56%  10.88% 
         
(3) Annualized Non-Interest Expense to Average Assets        
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
 2017  2016  2017  2016 
Total annualized non-interest expense183,611   182,403   186,837   182,499  
Average assets$9,496,733  $9,328,946  $9,506,682  $9,133,000  
         
Annualized non-interest expense/average assets1.93%  1.96%  1.97%  2.00% 
         
(4) Efficiency Ratio Calculation        
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
 2017  2016  2017  2016 
Net interest income$70,212  $64,971  $206,302  $191,950  
Non-interest income15,112   14,066   42,396   40,908  
Total income$85,324  $79,037  $248,698  $232,858  
         
Non-interest expense$46,280  $45,850  $139,744  $136,625  
         
Efficiency ratio (non-interest expense/income)54.24%  58.01%  56.19%  58.67% 


 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Quarterly Average Balances
(Unaudited) (Dollars in Thousands)
            
 September 30, 2017 June 30, 2017
 Average   Average Average   Average
 Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:           
Deposits$22,383 $54 0.95% $16,376 $39 0.95%
Federal funds sold and other short-term investments52,102 289 2.22% 52,047 259 1.99%
Investment securities  (1)490,121 3,272 2.67% 493,632 3,292 2.67%
Securities available for sale1,043,123 5,488 2.10% 1,052,134 5,631 2.14%
Federal Home Loan Bank stock72,532 1052 5.76% 76,870 917 4.79%
Net loans:  (2)           
Total mortgage loans4,805,991 47,692 3.92% 4,815,931 47,009 3.88%
Total commercial loans1,644,437 18,964 4.54% 1,636,916 18,100 4.40%
Total consumer loans487,039 5,083 4.14% 498,850 5,196 4.18%
Total net loans6,937,467 71,739 4.08% 6,951,697 70,305 4.02%
Total Interest-Earning Assets$8,617,728 $81,894 3.75% $8,642,756 $80,443 3.70%
            
Non-Interest Earning Assets:           
Cash and due from banks89,304     96,131    
Other assets789,701     796,889    
Total Assets$9,496,733     $9,535,776    
            
Interest-Bearing Liabilities:           
Demand deposits$3,476,330 $3,124 0.36% $3,440,044 $2,852 0.33%
Savings deposits1,096,626 534 0.19% 1,114,333 523 0.19%
Time deposits639,861 1,330 0.82% 670,566 1,278 0.76%
Total Deposits5,212,817 4,988 0.38% 5,224,943 4,653 0.36%
            
Borrowed funds1,553,365 6,694 1.71% 1,628,155 6,735 1.66%
Total Interest-Bearing Liabilities6,766,182 11,682 0.68% 6,853,098 11,388 0.67%
            
Non-Interest Bearing Liabilities:           
Non-interest bearing deposits1,360,343     1,331,143    
Other non-interest bearing liabilities70,398     66,740    
Total non-interest bearing liabilities1,430,741     1,397,883    
Total Liabilities8,196,923     8,250,981    
Stockholders' equity1,299,810     1,284,795    
Total Liabilities and Stockholders' Equity$9,496,733     $9,535,776    
            
Net interest income  $70,212     $69,055  
            
Net interest rate spread    3.07%     3.03%
Net interest-earning assets$1,851,546     $1,789,658    
            
Net interest margin   (3)    3.22%     3.17%
Ratio of interest-earning assets to           
total interest-bearing liabilities1.27x     1.26x    


(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.  
          
 9/30/17 6/30/17 3/31/17 12/31/16 09/30/16
 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
Interest-Earning Assets:         
Securities2.41%   2.40%   2.40%   2.18%   2.14%
Net loans4.08% 4.02% 3.93% 3.93% 3.93%
Total interest-earning assets3.75% 3.70% 3.63% 3.58% 3.57%
          
Interest-Bearing Liabilities:         
Total deposits0.38% 0.36% 0.35% 0.34% 0.34%
Total borrowings1.71% 1.66% 1.63% 1.67% 1.70%
Total interest-bearing liabilities0.68% 0.67% 0.65% 0.64% 0.65%
          
Interest rate spread3.07% 3.03% 2.98% 2.94% 2.92%
Net interest margin3.22% 3.17% 3.11% 3.07% 3.05%
          
Ratio of interest-earning assets to interest-bearing liabilities 1.27x 1.26x 1.26x 1.26x 1.25x


 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Average Year to Date Balances
(Unaudited) (Dollars in Thousands)
            
 September 30, 2017 September 30, 2016
 Average   Average Average   Average
 Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:           
Deposits$20,166  $124  0.82% $66,671  $248  0.50%
Federal funds sold and other short term investments51,993  774  1.99% 1,619  4  0.20%
Investment securities  (1)490,008  9,812  2.67% 477,564  10,011  2.79%
Securities available for sale1,047,521  16,681  2.13% 996,790  14,464  1.94%
Federal Home Loan Bank stock74,794  2,970  8.01% 73,773  2,610  5.31%
Net loans:  (2)           
Total mortgage loans4,811,312  140,712  3.87% 4,617,611  134,411  3.85%
Total commercial loans1,626,939  53,884  4.39% 1,437,716  46,419  4.27%
Total consumer loans498,261  15,293  4.10% 552,636  16,657  4.02%
Total net loans6,936,512  209,889  4.01% 6,607,963  197,487  3.96%
Total Interest-Earning Assets$8,620,994  $240,250  3.72% $8,224,380  $224,824  3.63%
            
Non-Interest Earning Assets:           
Cash and due from banks91,161      100,833     
Other assets794,527      807,787     
Total Assets$9,506,682      $9,133,000     
            
Interest-Bearing Liabilities:           
Demand deposits$3,455,533  $8,724  0.34% $3,231,073  $7,284  0.30%
Savings deposits1,107,143  1,584  0.19% 1,033,281  1,184  0.15%
Time deposits658,204  3,785  0.77% 746,055  3,929  0.70%
Total Deposits5,220,880  14,093  0.36% 5,010,409  12,397  0.33%
Borrowed funds1,594,197  19,855  1.67% 1,600,023  20,477  1.71%
Total Interest-Bearing Liabilities$6,815,077  $33,948  0.67% $6,610,432  $32,874  0.66%
            
Non-Interest Bearing Liabilities:           
Non-interest bearing deposits1,339,451      1,215,768     
Other non-interest bearing liabilities68,996      80,789     
Total non-interest bearing liabilities1,408,447      1,296,557     
Total Liabilities8,223,524      7,906,989     
Stockholders' equity1,283,158      1,226,011     
Total Liabilities and Stockholders' Equity$9,506,682      $9,133,000     
            
Net interest income  $206,302      $191,950   
            
Net interest rate spread    3.05%     2.97%
Net interest-earning assets$1,805,917      $1,613,948     
            
Net interest margin   (3)    3.19%     3.10%
Ratio of interest-earning assets to           
total interest-bearing liabilities1.26x     1.24x    
            
(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.
       
 Nine Months Ended 
 9/30/2017   9/30/2016   9/30/2015 
Interest-Earning Assets:      
Securities2.53% 2.28% 2.33% 
Net loans4.01% 3.96% 4.09% 
Total interest-earning assets3.72% 3.63% 3.72% 
       
Interest-Bearing Liabilities:      
Total deposits0.36% 0.33% 0.31% 
Total borrowings1.67% 1.71% 1.73% 
Total interest-bearing liabilities0.67% 0.66% 0.66% 
       
Interest rate spread3.05% 2.97% 3.06% 
Net interest margin3.19% 3.10% 3.18% 
       
Ratio of interest-earning assets to interest-bearing liabilities1.26x 1.24x 1.23x 

CONTACT: Investor Relations, 1-732-590-9300
Web Site: http://www.Provident.Bank