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

ISELIN, N.J., July 29, 2016 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $21.4 million, or $0.34 per basic and diluted share for the three months ended June 30, 2016, compared to net income of $21.8 million, or $0.35 per basic and diluted share for the three months ended June 30, 2015. For the six months ended June 30, 2016, the Company reported net income of $42.3 million, or $0.67 per basic and diluted share, compared to net income of $41.6 million, or $0.66 per basic and diluted share for the same period last year.

Earnings for the three and six months ended June 30, 2016 were favorably impacted by growth in average loans outstanding, along with growth in both average non-interest bearing deposits and average interest bearing core deposits. These factors helped mitigate the impact of compression in the net interest margin.

Earnings for the three and six months ended June 30, 2015, were impacted by $413,000 of non-recurring transaction costs associated with the April 1, 2015 acquisition of The MDE Group and the equity interests of Acertus Capital Management, LLC (collectively “MDE”).

Christopher Martin, Chairman, President and Chief Executive Officer commented: “Commercial loan growth exceeded our expectations, which contributed nicely to record quarterly net interest income for the Company. We continue to grow the loan portfolio while preserving our conservative credit standards. Core deposit growth was strong during the quarter, improving our liquidity measures and serving as a better funding source for loan growth. Asset quality metrics continued to improve and now stand at levels existing prior to the Great Recession. All in, this was a solid quarter marked by consistent performance.” Martin continued: “In pursuing further expansion of our eastern Pennsylvania franchise, we recently opened a loan production office in Montgomery County and the early reports are encouraging.”

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.18 per common share payable on August 31, 2016, to stockholders of record as of the close of business on August 15, 2016.

Balance Sheet Summary

Total assets increased $315.1 million to $9.23 billion at June 30, 2016, from $8.91 billion at December 31, 2015, primarily due to a $243.3 million increase in total loans and a $52.3 million increase in total investments.

The Company’s loan portfolio increased $243.3 million, or 3.7%, to $6.78 billion at June 30, 2016, from $6.54 billion at December 31, 2015. Loan originations totaled $1.5 billion and loan purchases totaled $28.6 million for the six months ended June 30, 2016. The loan portfolio had net increases of $147.9 million in multi-family mortgage loans, $81.2 million in commercial mortgage loans and $75.2 million in commercial loans, partially offset by net decreases of $32.7 million in construction loans, $16.0 million in consumer loans and $11.1 million in residential mortgage loans. Commercial real estate, commercial and construction loans represented 73.5% of the loan portfolio at June 30, 2016, compared to 72.1% at December 31, 2015.

At June 30, 2016, the Company’s unfunded loan commitments totaled $1.23 billion, including commitments of $536.1 million in commercial loans, $291.0 million in construction loans and $114.5 million in commercial mortgage loans. Unfunded loan commitments at December 31, 2015 and June 30, 2015 were $1.15 billion and $1.22 billion, respectively.

Total investments increased $52.3 million, or 3.4%, to $1.57 billion at June 30, 2016, from $1.52 billion at December 31, 2015, largely due to purchases of mortgage-backed and municipal securities and an increase in unrealized gains on securities available for sale, partially offset by principal repayments on mortgage-backed securities, maturities of municipal and agency bonds and sales of certain mortgage-backed securities.

Total deposits increased $305.9 million, or 5.2%, during the six months ended June 30, 2016, to $6.23 billion, from $5.92 billion at December 31, 2015. Total core deposits, which consist of savings and demand deposit accounts, increased $311.2 million to $5.50 billion at June 30, 2016, from $5.18 billion at December 31, 2015, while time deposits decreased $5.3 million to $734.4 million at June 30, 2016, from $739.7 million at December 31, 2015. The increase in core deposits was largely attributable to a $111.1 million increase in interest bearing demand deposits, a $79.5 million increase in money market deposits, a $70.0 million increase in savings deposits and a $50.6 million increase in non-interest bearing demand deposits. Core deposits represented 88.2% of total deposits at June 30, 2016, compared to 87.5% at December 31, 2015.

Borrowed funds decreased $42.4 million, or 2.5% during the six months ended June 30, 2016, to $1.67 billion, as shorter-term wholesale funding was replaced by net inflows of deposits for the period. Borrowed funds represented 18.0% of total assets at June 30, 2016, a decrease from 19.2% at December 31, 2015.

Stockholders’ equity increased $33.5 million, or 2.8% for the six months ended June 30, 2016, to $1.23 billion, 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 six months ended June 30, 2016 totaled 146,469 shares at an average cost of $18.45. At June 30, 2016, 3.2 million shares remained eligible for repurchase under the current authorization. Book value per share and tangible book value per share(1) at June 30, 2016 were $18.68 and $12.23, respectively, compared with $18.26 and $11.75, respectively, at December 31, 2015.

Results of Operations

Net Interest Income and Net Interest Margin

For the three months ended June 30, 2016, net interest income increased $2.2 million to $63.9 million, from $61.7 million for the same period in 2015. Net interest income for the six months ended June 30, 2016 increased $3.4 million, to $127.0 million, from $123.6 million for the same period in 2015. 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 non-interest bearing demand deposits and average interest bearing core deposits, partially offset by period-over-period compression in the net interest margin. The growth in average core deposits mitigated the Company's need to utilize higher-cost sources to fund loan growth.

The Company’s net interest margin remained unchanged at 3.11% for the quarter ended June 30, 2016, compared to the trailing quarter. The weighted average yield on interest-earning assets decreased 2 basis points to 3.64% for the quarter ended June 30, 2016, compared with 3.66% for the quarter ended March 31, 2016. The weighted average cost of interest-bearing liabilities for the quarter ended June 30, 2016 decreased 2 basis points to 0.66%, compared with 0.68% for the trailing quarter. The average cost of interest bearing deposits for the quarter ended June 30, 2016 increased 1 basis point to 0.33%, from 0.32% at the quarter ended March 31, 2016. Average non-interest bearing demand deposits totaled $1.21 billion for the quarter ended June 30, 2016, compared with $1.19 billion for the quarter ended March 31, 2016. The average cost of borrowed funds for the quarter ended June 30, 2016 was 1.72%, compared with 1.71% for the trailing quarter.

The net interest margin decreased 6 basis points to 3.11% for the quarter ended June 30, 2016, compared with 3.17% for the quarter ended June 30, 2015. The weighted average yield on interest-earning assets decreased 7 basis points to 3.64% for the quarter ended June 30, 2016, compared with 3.71% for the quarter ended June 30, 2015, while the weighted average cost of interest bearing liabilities decreased 1 basis point to 0.66% for the quarter ended June 30, 2016, compared with 0.67% for the second quarter of 2015. The average cost of interest bearing deposits for the quarter ended June 30, 2016 was 0.33%, compared with 0.31% for the same period last year. Average non-interest bearing demand deposits totaled $1.21 billion for the quarter ended June 30, 2016, compared with $1.10 billion for the quarter ended June 30, 2015. The average cost of borrowed funds for the quarter ended June 30, 2016 was 1.72%, compared with 1.77% for the same period last year.

For the six months ended June 30, 2016, the net interest margin decreased 9 basis points to 3.11%, compared with 3.20% for the six months ended June 30, 2015. The weighted average yield on interest earning assets declined 9 basis points to 3.65% for the six months ended June 30, 2016, compared with 3.74% for the six months ended June 30, 2015, while the weighted average cost of interest bearing liabilities remained unchanged at 0.67% for the six months ended June 30, 2016, compared to the six months ended June 30, 2015. The average cost of interest bearing deposits for the six months ended June 30, 2016 was 0.33%, compared with 0.31% for the same period last year. Average non-interest bearing demand deposits totaled $1.20 billion for the six months ended June 30, 2016, compared with $1.08 billion for the six months ended June 30, 2015. The average cost of borrowings for the six months ended June 30, 2016 was 1.71%, compared with 1.80% for the same period last year.

Non-Interest Income

Non-interest income totaled $13.8 million for the quarter ended June 30, 2016, a decrease of $3.1 million, or 18.4%, compared to the same period in 2015. Other income decreased $1.5 million for the three months ended June 30, 2016, compared to the same period in 2015, largely due to a $1.9 million decrease in net fees on loan-level interest rate swap transactions, partially offset by an additional $131,000 gain recognized on the sale of deposits resulting from a strategic branch divestiture in the first quarter of 2016. Wealth management income decreased $586,000 to $4.5 million for the three months ended June 30, 2016, compared to $5.1 million for the same period in 2015. The decrease in wealth management income was primarily attributable to weakened market conditions which negatively impacted fees earned from assets under management, along with a reduction in income associated with the licensing of indices to ETF providers. Also contributing to the decrease in non-interest income, fee income decreased $470,000 to $6.7 million for the three months ended June 30, 2016, compared to $7.2 million for the same period in 2015. This decrease was largely due to a $325,000 decrease in commercial loan prepayment fee income and a $227,000 decrease in debit card revenue, partially offset by a $140,000 increase in loan related fee income. Net gains on securities transactions decreased $642,000 for the three months ended June 30, 2016, compared to the same period in 2015.

For the six months ended June 30, 2016, non-interest income totaled $26.8 million, a decrease of $403,000, or 1.5%, compared to the same period in 2015. Other income decreased $1.0 million to $2.1 million for the six months ended June 30, 2016, compared with the same period in 2015, largely due to a $2.3 million decrease in net fees on loan-level interest rate swap transactions, partially offset by a $335,000 gain recognized on the sale of deposits resulting from a strategic branch divestiture and a $206,000 increase in net gains recognized on loan sales. Also contributing to the decrease in non-interest income, net gains on securities transactions for the six months ended June 30, 2016 decreased $548,000 compared to the same period in 2015. Partially offsetting these decreases, wealth management income increased $1.2 million to $8.8 million for the six months ended June 30, 2016, largely due to fees from assets under management acquired in the MDE acquisition, which closed April 1, 2015, partially offset by the negative impact of a reduction in income associated with the licensing of indices to ETF providers.

Non-Interest Expense

For the three months ended June 30, 2016, non-interest expense decreased $222,000 to $45.9 million, compared to the three months ended June 30, 2015. Net occupancy expense decreased $509,000 to $6.1 million for the three months ended June 30, 2016, compared to $6.6 million for the same period in 2015. This decrease was primarily due to decreases in facilities and equipment maintenance expenses, as well as a decrease in net rent expense. Advertising and promotion expenses decreased $480,000 to $901,000 for the three months ended June 30, 2016, compared to the same period in 2015, largely due to the timing of the Company's advertising campaigns. Other operating expenses decreased $426,000 to $7.8 million for the three months ended June 30, 2016, compared to the same period in 2015, largely due to $413,000 of non-recurring professional services costs related to the MDE transaction in the quarter ended June 30, 2015, partially offset by an increase in non-performing asset related expenses. Additionally, the amortization of intangibles decreased $268,000 for the the three months ended June 30, 2016, compared with the same period in 2015, as a result of scheduled reductions in amortization. Partially offsetting these decreases in non-interest expense, compensation and benefits expense increased $1.3 million to $25.7 million for the three months ended June 30, 2016, compared to $24.4 million for the same period in 2015. 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 employee medical and retirement benefit costs. Also, data processing expense increased $113,000 to $3.3 million for the three months ended June 30, 2016, compared to $3.2 million for the same period in 2015, primarily due to an increase in software maintenance costs.

The Company’s annualized non-interest expense as a percentage of average assets was 2.03% for the quarter ended June 30, 2016, compared with 2.14%, or 2.12% annualized core non-interest expense as a percentage of average assets(1), for the same period in 2015. The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income) was 59.04% for the quarter ended June 30, 2016, compared with 58.66%, or a 58.14% core efficiency ratio(1), for the same period in 2015.

Non-interest expense for the six months ended June 30, 2016 was $90.8 million, an increase of $1.2 million from $89.6 million for the six months ended June 30, 2015. Compensation and benefits expense increased $3.2 million to $51.8 million for the six months ended June 30, 2016, compared to $48.6 million for the six months ended June 30, 2015, due to increased salary expense associated with new employees from MDE, additional salary expense associated with annual merit increases and an increase in employee medical and retirement benefit costs. In addition, data processing expense increased $331,000 to $6.5 million for the six months ended June 30, 2016, compared to $6.2 million for the same period in 2015, principally due to an increase in software maintenance costs. Net occupancy costs decreased $1.2 million, to $12.5 million for the six months ended June 30, 2016, compared to same period in 2015, principally due to a decrease in seasonal expenses resulting from a milder winter, combined with decreases in facilities and equipment maintenance expenses. Other operating expenses decreased $594,000 to $13.7 million for the six months ended June 30, 2016, compared to the same period in 2015, largely due to $413,000 of non-recurring professional services costs associated with the MDE transaction for the six months ended June 30, 2015, partially offset by an increase in non-performing asset related expenses. In addition, advertising and promotion expenses decreased $362,000 to $1.8 million for the six months ended June 30, 2016, compared to the same period in 2015, largely due to the timing of the Company's advertising campaigns, while the amortization of intangibles decreased $190,000 for the six months ended June 30, 2016, compared with the same period in 2015, as a result of scheduled reductions in amortization.

Asset Quality

The Company’s total non-performing loans at June 30, 2016 were $43.0 million, or 0.63% of total loans, compared with $50.6 million, or 0.76% of total loans at March 31, 2016 and $46.1 million, or 0.73% of total loans at June 30, 2015. The $7.6 million decrease in non-performing loans at June 30, 2016, compared with the trailing quarter, was due to a $10.5 million decrease in non-performing commercial loans and a $917,000 decrease in non-performing residential mortgage loans, partially offset by a $3.0 million increase in non-performing commercial mortgage loans, a $649,000 increase in non-performing multi-family loans and a $206,000 increase in non-performing consumer loans. At June 30, 2016, impaired loans totaled $45.3 million with related specific reserves of $2.3 million, compared with impaired loans totaling $54.2 million with related specific reserves of $5.1 million at March 31, 2016. At June 30, 2015, impaired loans totaled $83.0 million with related specific reserves of $2.7 million.

At June 30, 2016, the Company’s allowance for loan losses was 0.90% of total loans, a decrease from 0.94% at March 31, 2016, and a decrease from 0.95% of total loans at June 30, 2015. The decline in this loan coverage ratio from the quarter ended June 30, 2015, 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 $1.7 million and $3.2 million for the three and six months ended June 30, 2016, respectively, compared with provisions of $1.1 million and $1.7 million for the three and six months ended June 30, 2015, respectively. For the three and six months ended June 30, 2016, the Company had net charge-offs of $3.0 million and $3.7 million, respectively, compared with net charge-offs of $2.6 million and $3.8 million, respectively, for the same periods in 2015. The allowance for loan losses decreased $491,000 to $60.9 million at June 30, 2016, from $61.4 million at December 31, 2015.

At June 30, 2016 and December 31, 2015, the Company held $10.5 million of foreclosed assets. During the six months ended June 30, 2016, there were 14 additions to foreclosed assets with a carrying value of $2.5 million and 15 properties sold with a carrying value of $2.1 million. Foreclosed assets at June 30, 2016 consisted of $5.5 million of residential real estate, $4.8 million of commercial real estate and $135,000 of marine vessels. Total non-performing assets at June 30, 2016 decreased $1.6 million, or 2.8%, to $53.5 million, or 0.58% of total assets, from $55.1 million, or 0.62% of total assets at December 31, 2015.

Income Tax Expense

For the three and six months ended June 30, 2016, the Company’s income tax expense was $8.8 million and $17.5 million, respectively, compared with $9.6 million and $18.0 million, for the three and six months ended June 30, 2015, respectively. The Company’s effective tax rates were 29.1% and 29.3% for the three and six months ended June 30, 2016, respectively, compared with 30.6% and 30.2% for the three and six months ended June 30, 2015, respectively, as a greater proportion of income was derived from non-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 on Friday, July 29, 2016 at 10:00 a.m. Eastern Time to discuss highlights of the Company’s financial results for the quarter ended June 30, 2016. 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,” “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, return on average tangible equity, annualized core non-interest expense as a percentage of average assets and the core efficiency ratio are non-GAAP financial measures. Please refer to the Notes on page 9 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, 2016 (Unaudited) and December 31, 2015
(Dollars in Thousands)
AssetsJune 30, 2016 December 31, 2015
Cash and due from banks$116,319 $100,899
Short-term investments1,208 1,327
Total cash and cash equivalents117,527 102,226
Securities available for sale, at fair value1,013,539 964,534
Investment securities held to maturity (fair value of $501,435 at
June 30, 2016 (unaudited) and $488,331 at December 31, 2015)
478,846 473,684
Federal Home Loan Bank Stock76,310 78,181
Loans6,780,966 6,537,674
Less allowance for loan losses60,933 61,424
Net loans6,720,033 6,476,250
Foreclosed assets, net10,508 10,546
Banking premises and equipment, net86,574 88,987
Accrued interest receivable26,055 25,766
Intangible assets424,413 426,277
Bank-owned life insurance185,758 183,057
Other assets87,191 82,149
Total assets$9,226,754 $8,911,657
Liabilities and Stockholders' Equity
Deposits:
Demand deposits$4,439,943 $4,198,788
Savings deposits1,055,503 985,478
Certificates of deposit of $100,000 or more344,291 324,215
Other time deposits390,149 415,506
Total deposits6,229,886 5,923,987
Mortgage escrow deposits28,238 23,345
Borrowed funds1,665,277 1,707,632
Other liabilities73,790 60,628
Total liabilities7,997,191 7,715,592
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 65,813,618 outstanding at June 30, 2016 and 65,489,354
outstanding at December 31, 2015
832 832
Additional paid-in capital1,003,646 1,000,810
Retained earnings526,820 507,713
Accumulated other comprehensive income (loss)7,118 (2,546)
Treasury stock(268,467) (269,014)
Unallocated common stock held by the Employee Stock Ownership Plan(40,386) (41,730)
Common Stock acquired by the Directors' Deferred Fee Plan(6,182) (6,517)
Deferred Compensation - Directors' Deferred Fee Plan6,182 6,517
Total stockholders' equity1,229,563 1,196,065
Total liabilities and stockholders' equity$9,226,754 $8,911,657


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Six Months Ended June 30, 2016 and 2015 (Unaudited)
(Dollars in Thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Interest income:
Real estate secured loans$44,916 $43,594 $89,149 $86,883
Commercial loans15,374 13,669 30,326 27,108
Consumer loans5,394 5,794 11,030 11,588
Securities available for sale and Federal Home Loan Bank stock 5,718 5,735 11,498 12,036
Investment securities held to maturity3,331 3,386 6,662 6,782
Deposits, federal funds sold and other short-term investments72 10 114 22
Total interest income74,805 72,188 148,779 144,419
Interest expense:
Deposits4,135 3,624 7,956 7,212
Borrowed funds6,760 6,890 13,844 13,605
Total interest expense10,895 10,514 21,800 20,817
Net interest income63,910 61,674 126,979 123,602
Provision for loan losses1,700 1,100 3,200 1,700
Net interest income after provision for loan losses62,210 60,574 123,779 121,902
Non-interest income:
Fees6,711 7,181 13,172 13,235
Wealth management income4,511 5,097 8,822 7,655
Bank-owned life insurance1,369 1,317 2,701 2,665
Net gain on securities transactions1 643 97 645
Other income1,232 2,704 2,050 3,045
Total non-interest income13,824 16,942 26,842 27,245
Non-interest expense:
Compensation and employee benefits25,741 24,414 51,771 48,615
Net occupancy expense6,068 6,577 12,502 13,749
Data processing expense3,272 3,159 6,517 6,186
FDIC Insurance1,293 1,272 2,615 2,490
Amortization of intangibles856 1,124 1,861 2,051
Advertising and promotion expense901 1,381 1,780 2,142
Other operating expenses7,766 8,192 13,729 14,323
Total non-interest expense45,897 46,119 90,775 89,556
Income before income tax expense30,137 31,397 59,846 59,591
Income tax expense8,781 9,601 17,517 17,993
Net income$21,356 $21,796 $42,329 $41,598
Basic earnings per share$0.34 $0.35 $0.67 $0.66
Average basic shares outstanding 63,553,694 62,894,213 63,452,393 62,784,655
Diluted earnings per share$0.34 $0.35 $0.67 $0.66
Average diluted shares outstanding 63,726,513 63,044,965 63,623,134 62,943,563


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,
2016 2015 2016 2015
STATEMENTS OF INCOME:
Net interest income$ 63,910 $ 61,674 $ 126,979 $ 123,602
Provision for loan losses 1,700 1,100 3,200 1,700
Non-interest income 13,824 16,942 26,842 27,245
Non-interest expense 45,897 46,119 90,775 89,556
Income before income tax expense 30,137 31,397 59,846 59,591
Net income 21,356 21,796 42,329 41,598
Diluted earnings per share$0.34 $0.35 $0.67 $0.66
Interest rate spread 2.98% 3.04% 2.98% 3.07%
Net interest margin 3.11% 3.17% 3.11% 3.20%
PROFITABILITY:
Annualized return on average assets 0.94% 1.01% 0.94% 0.98%
Annualized return on average equity 7.01% 7.47% 6.99% 7.21%
Annualized return on average tangible equity (2) 10.74% 11.78% 10.75% 11.22%
Annualized non-interest expense to average assets (3) 2.03% 2.14% 2.02% 2.11%
Annualized core non-interest expense to average assets (3) 2.03% 2.12% 2.02% 2.10%
Efficiency ratio (4) 59.04% 58.66% 59.01% 59.37%
Core efficiency ratio (4) 59.04% 58.14% 59.01% 59.09%
ASSET QUALITY:
Non-accrual loans $ 43,008 $ 43,008
90+ and still accruing
Non-performing loans 43,008 46,075
Foreclosed assets 10,508 10,508
Non-performing assets 53,516 54,163
Non-performing loans to total loans 0.63% 0.73%
Non-performing assets to total assets 0.58% 0.62%
Allowance for loan losses $ 60,933 $ 59,624
Allowance for loan losses to total non-performing loans 141.68% 129.41%
Allowance for loan losses to total loans 0.90% 0.95%
AVERAGE BALANCE SHEET DATA:
Assets$ 9,107,296 $ 8,630,079 $ 9,033,951 $ 8,570,533
Loans, net 6,588,407 6,149,613 6,545,841 6,089,275
Earning assets 8,195,959 7,752,727 8,125,033 7,707,908
Core deposits 5,461,044 5,038,088 5,345,694 5,010,010
Borrowings 1,581,576 1,560,757 1,625,234 1,526,923
Interest-bearing liabilities 6,595,890 6,297,067 6,540,833 6,263,485
Stockholders' equity 1,224,928 1,169,641 1,217,569 1,163,394
Average yield on interest-earning assets 3.64% 3.71% 3.65% 3.74%
Average cost of interest-bearing liabilities 0.66% 0.67% 0.67% 0.67%
LOAN DATA:
Mortgage loans:
Residential $ 1,244,083 $ 1,255,159
Commercial 1,797,325 1,716,117
Multi-family 1,381,925 1,234,066
Construction 298,974 331,649
Total mortgage loans 4,722,307 4,536,991
Commercial loans 1,509,498 1,434,291
Consumer loans 550,171 566,175
Total gross loans 6,781,976 6,537,457
Premium on purchased loans 5,729 5,740
Unearned discounts (39) (41)
Net deferred (6,700) (5,482)
Total loans $ 6,780,966 $ 6,537,674


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,
2016 2015
Total stockholders' equity $ 1,229,563 $ 1,167,124
Less: total intangible assets 424,413 432,879
Total tangible stockholders' equity $ 805,150 $ 734,245
Shares outstanding 65,813,618 65,287,831
Book value per share (total stockholders' equity/shares outstanding) $18.68 $17.88
Tangible book value per share (total tangible stockholders' equity/shares outstanding) $12.23 $11.25
(2) Annualized Return on Average Tangible Equity
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Total average stockholders' equity$1,224,928 $1,169,641 $ 1,217,569 $ 1,163,394
Less: total average intangible assets424,938 427,378 425,418 415,799
Total average tangible stockholders' equity$799,990 $742,263 $ 792,151 $ 747,595
Net income$21,356 $21,796 $ 42,329 $ 41,598
Annualized return on average tangible equity (net income/total average stockholders' equity) 10.74% 11.78% 10.75% 11.22%
(3) Annualized Non-Interest Expense/Average Assets Calculation
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Annualized non-interest expense184,597 184,983 182,548 180,596
Less: annualized non-recurring MDE acquisition expense 1,657 833
Annualized core non-interest expense$184,597 $183,326 $ 182,548 $ 179,763
Average assets$9,107,296 $8,630,079 $ 9,033,951 $ 8,570,533
Annualized non-interest expense/average assets2.03% 2.14% 2.02% 2.11%
Annualized core non-interest expense/average assets2.03% 2.12% 2.02% 2.10%
(4) Efficiency Ratio Calculation
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
Net interest income$63,910 $61,674 $ 126,979 $ 123,602
Non-interest income13,824 16,942 26,842 27,245
Total income$77,734 $78,616 $ 153,821 $ 150,847
Non-interest expense45,897 46,119 90,775 89,556
Less: non-recurring MDE acquisition expense 413 413
Core non-interest expense$45,897 $45,706 $ 90,775 $ 89,143
Efficiency ratio (non-interest expense/income)59.04% 58.66% 59.01% 59.37%
Core efficiency ratio (core non-interest expense/income)59.04% 58.14% 59.01% 59.09%




PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Quarterly Average Balances
(Unaudited) (Dollars in Thousands)
June 30, 2016 March 31, 2016
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:
Deposits$57,045 $72 0.51% $33,239 $42 0.50%
Federal funds sold and other short-term investments 1,582 0.06% 1,437 0.06%
Investment securities (1)476,492 3,331 2.80% 474,130 3,331 2.81%
Securities available for sale999,750 4,861 1.95% 965,490 4,886 2.02%
Federal Home Loan Bank stock72,683 857 4.73% 76,536 894 4.70%
Net loans: (2)
Total mortgage loans4,596,722 44,916 3.89% 4,543,468 44,233 3.87%
Total commercial loans1,437,994 15,374 4.25% 1,399,478 14,952 4.25%
Total consumer loans553,691 5,394 3.92% 560,329 5,636 4.04%
Total net loans6,588,407 65,684 3.97% 6,503,275 64,821 3.97%
Total Interest-Earning Assets$8,195,959 $74,805 3.64% $8,054,107 $73,974 3.66%
Non-Interest Earning Assets:
Cash and due from banks104,823 98,510
Other assets806,514 807,988
Total Assets$9,107,296 $8,960,605
Interest-Bearing Liabilities:
Demand deposits$3,219,568 $2,404 0.30% $3,051,598 $2,191 0.29%
Savings deposits1,033,385 390 0.15% 991,038 285 0.12%
Time deposits761,361 1,341 0.71% 774,249 1,345 0.70%
Total Deposits5,014,314 4,135 0.33% 4,816,885 3,821 0.32%
Borrowed funds1,581,576 6,760 1.72% 1,668,892 7,084 1.71%
Total Interest-Bearing Liabilities6,595,890 10,895 0.66% 6,485,777 10,905 0.68%
Non-Interest Bearing Liabilities:
Non-interest bearing deposits1,208,091 1,187,709
Other non-interest bearing liabilities78,387 76,909
Total non-interest bearing liabilities1,286,478 1,264,618
Total Liabilities7,882,368 7,750,395
Stockholders' equity1,224,928 1,210,210
Total Liabilities and Stockholders' Equity$9,107,296 $8,960,605
Net interest income $63,910 $63,069
Net interest rate spread 2.98% 2.98%
Net interest-earning assets$1,600,069 $1,568,330
Net interest margin (3) 3.11% 3.11%
Ratio of interest-earning assets to
total interest-bearing liabilities1.24x 1.24x


(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.
6/30/16 3/31/16 12/31/15 09/30/15 6/30/15
2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
Interest-Earning Assets:
Securities2.27% 2.36% 2.33% 2.26% 2.28%
Net loans3.97% 3.97% 4.03% 4.02% 4.08%
Total interest-earning assets3.64% 3.66% 3.70% 3.66% 3.71%
Interest-Bearing Liabilities:
Total deposits0.33% 0.32% 0.31% 0.31% 0.31%
Total borrowings1.72% 1.71% 1.65% 1.61% 1.77%
Total interest-bearing liabilities0.66% 0.68% 0.66% 0.65% 0.67%
Interest rate spread2.98% 2.98% 3.04% 3.01% 3.04%
Net interest margin 3.11% 3.11% 3.17% 3.13% 3.17%
Ratio of interest-earning assets to interest-bearing liabilities 1.24x 1.24x 1.24x 1.24x 1.23x


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Average Year to Date Balances
(Unaudited) (Dollars in Thousands)
June 30, 2016 June 30, 2015
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:
Deposits$45,142 $114 0.50% $18,103 $22 0.25%
Federal funds sold and other short term investments1,509 0.06% 1,331 0.03%
Investment securities (1)475,311 6,662 2.80% 473,665 6,782 2.86%
Securities available for sale982,620 9,747 1.99% 1,054,590 10,474 1.99%
Federal Home Loan Bank stock74,610 1,751 4.72% 70,944 1,562 4.44%
Net loans: (2)
Total mortgage loans4,570,095 89,149 3.88% 4,268,820 86,883 4.06%
Total commercial loans1,418,736 30,326 4.25% 1,220,353 27,108 4.45%
Total consumer loans557,010 11,030 3.98% 600,102 11,588 3.89%
Total net loans6,545,841 130,505 3.97% 6,089,275 125,579 4.12%
Total Interest-Earning Assets$8,125,033 $148,779 3.65% $7,707,908 $144,419 3.74%
Non-Interest Earning Assets:
Cash and due from banks101,666 77,454
Other assets807,252 785,171
Total Assets$9,033,951 $8,570,533
Interest-Bearing Liabilities:
Demand deposits$3,135,583 $4,593 0.29% $2,949,258 $3,904 0.27%
Savings deposits1,012,211 676 0.13% 985,520 504 0.10%
Time deposits767,805 2,687 0.70% 801,784 2,804 0.70%
Total Deposits4,915,599 7,956 0.33% 4,736,562 7,212 0.31%
Borrowed funds1,625,234 13,844 1.71% 1,526,923 13,605 1.80%
Total Interest-Bearing Liabilities$6,540,833 $21,800 0.67% $6,263,485 $20,817 0.67%
Non-Interest Bearing Liabilities:
Non-interest bearing deposits1,197,900 1,075,232
Other non-interest bearing liabilities77,649 68,422
Total non-interest bearing liabilities1,275,549 1,143,654
Total Liabilities7,816,382 7,407,139
Stockholders' equity1,217,569 1,163,394
Total Liabilities and Stockholders' Equity$9,033,951 $8,570,533
Net interest income $126,979 $123,602
Net interest rate spread 2.98% 3.07%
Net interest-earning assets$1,584,200 $1,444,423
Net interest margin (3) 3.11% 3.20%
Ratio of interest-earning assets to
total interest-bearing liabilities1.24x 1.23x
(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
6/30/2016 6/30/2015 6/30/2014
Interest-Earning Assets:
Securities 2.32% 2.33% 2.41%
Net loans3.97% 4.12% 4.25%
Total interest-earning assets3.65% 3.74% 3.82%
Interest-Bearing Liabilities:
Total deposits0.33% 0.31% 0.34%
Total borrowings1.71% 1.80% 1.92%
Total interest-bearing liabilities0.67% 0.67% 0.69%
Interest rate spread2.98% 3.07% 3.13%
Net interest margin3.11% 3.20% 3.25%
Ratio of interest-earning assets to interest-bearing liabilities1.24x 1.23x 1.22x


CONTACT: Investor Relations 1-732-590-9300 Web Site: provident.bank

Source:Provident Financial Services, Inc.