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

ISELIN, N.J., Oct. 28, 2016 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $22.9 million, or $0.36 per basic and diluted share, for the three months ended September 30, 2016, compared to net income of $20.6 million, or $0.33 per basic and diluted share, for the three months ended September 30, 2015. For the nine months ended September 30, 2016, the Company reported net income of $65.2 million, or $1.03 per basic share and $1.02 per diluted share, compared to net income of $62.2 million, or $0.99 per basic and diluted share for the same period last year.

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

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

Christopher Martin, Chairman, President and Chief Executive Officer commented: "Our positive third quarter financial results, including record net interest income, were marked by strong commercial loan and core deposit growth. This reflects an increase in overall customer confidence within our markets. Asset quality further improved from already sound levels, and we remain focused on expense management with annualized non-interest expense to average assets held below 2% as we continue to battle margin compression."

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.18 per common share payable on November 30, 2016, to stockholders of record as of the close of business on November 15, 2016.

Balance Sheet Summary

Total assets increased $478.3 million to $9.39 billion at September 30, 2016, from $8.91 billion at December 31, 2015, primarily due to a $352.9 million increase in total loans and a $63.2 million increase in total investments.

The Company’s loan portfolio increased $352.9 million, or 5.4%, to $6.89 billion at September 30, 2016, from $6.54 billion at December 31, 2015. Loan originations totaled $2.3 billion and loan purchases totaled $28.6 million for the nine months ended September 30, 2016. The loan portfolio had net increases of $168.6 million in commercial mortgage loans, $150.5 million in multi-family mortgage loans and $119.8 million in commercial loans, partially offset by net decreases of $41.1 million in residential mortgage loans, $28.1 million in consumer loans and $14.8 million in construction loans. Commercial real estate, commercial and construction loans represented 74.6% of the loan portfolio at September 30, 2016, compared to 72.1% at December 31, 2015.

At September 30, 2016, the Company’s unfunded loan commitments totaled $1.38 billion, including commitments of $630.3 million in commercial loans, $346.5 million in construction loans and $100.8 million in commercial mortgage loans. Unfunded loan commitments at December 31, 2015 and September 30, 2015 were $1.15 billion and $1.20 billion, respectively.

Total investments increased $63.2 million, or 4.2%, to $1.58 billion at September 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 $603.5 million, or 10.2%, during the nine months ended September 30, 2016, to $6.53 billion, from $5.92 billion at December 31, 2015. Total core deposits, which consist of savings and demand deposit accounts, increased $674.8 million to $5.86 billion at September 30, 2016, from $5.18 billion at December 31, 2015, while time deposits decreased $71.3 million to $668.4 million at September 30, 2016, from $739.7 million at December 31, 2015. The increase in core deposits was largely attributable to a $367.4 million increase in interest bearing demand deposits, a $118.0 million increase in money market deposits, a $100.2 million increase in non-interest bearing demand deposits and an $89.2 million increase in savings deposits. Core deposits represented 89.8% of total deposits at September 30, 2016, compared to 87.5% at December 31, 2015.

Borrowed funds decreased $185.3 million, or 10.8% during the nine months ended September 30, 2016, to $1.52 billion, as wholesale funding was replaced by net inflows of deposits for the period. Borrowed funds represented 16.2% of total assets at September 30, 2016, a decrease from 19.2% at December 31, 2015.

Stockholders’ equity increased $48.2 million, or 4.0% for the nine months ended September 30, 2016, to $1.24 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, 2016 totaled 147,237 shares at an average cost of $18.46. At September 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 September 30, 2016 were $18.84 and $12.43, 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 September 30, 2016, net interest income increased $2.4 million to $65.0 million, from $62.5 million for the same period in 2015. Net interest income for the nine months ended September 30, 2016 increased $5.8 million, to $192.0 million, from $186.1 million for the same period in 2015. The improvement in net interest income 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, 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 decreased six basis points to 3.05% for the quarter ended September 30, 2016, from 3.11% for the trailing quarter. The weighted average yield on interest-earning assets decreased seven basis points to 3.57% for the quarter ended September 30, 2016, compared with 3.64% for the quarter ended June 30, 2016. The weighted average cost of interest-bearing liabilities for the quarter ended September 30, 2016 decreased one basis point to 0.65%, compared with 0.66% for the trailing quarter. The average cost of interest bearing deposits for the quarter ended September 30, 2016 increased one basis point to 0.34%, from 0.33% for the quarter ended June 30, 2016. Average non-interest bearing demand deposits totaled $1.25 billion for the quarter ended September 30, 2016, compared with $1.21 billion for the quarter ended June 30, 2016. The average cost of borrowed funds for the quarter ended September 30, 2016 was 1.70%, compared with 1.72% for the trailing quarter.

The net interest margin decreased eight basis points to 3.05% for the quarter ended September 30, 2016, compared with 3.13% for the quarter ended September 30, 2015. The weighted average yield on interest-earning assets decreased nine basis points to 3.57% for the quarter ended September 30, 2016, compared with 3.66% for the quarter ended September 30, 2015, while the weighted average cost of interest bearing liabilities remained unchanged at 0.65% for the quarter ended September 30, 2016, compared to the third quarter of 2015. The average cost of interest bearing deposits for the quarter ended September 30, 2016 was 0.34%, compared with 0.31% for the same period last year. Average non-interest bearing demand deposits totaled $1.25 billion for the quarter ended September 30, 2016, compared with $1.15 billion for the quarter ended September 30, 2015. The average cost of borrowed funds for the quarter ended September 30, 2016 was 1.70%, compared with 1.61% for the same period last year.

For the nine months ended September 30, 2016, the net interest margin decreased eight basis points to 3.10%, compared with 3.18% for the nine months ended September 30, 2015. The weighted average yield on interest earning assets declined nine basis points to 3.63% for the nine months ended September 30, 2016, compared with 3.72% for the nine months ended September 30, 2015, while the weighted average cost of interest bearing liabilities remained unchanged at 0.66% for the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015. The average cost of interest bearing deposits for the nine months ended September 30, 2016 was 0.33%, compared with 0.31% for the same period last year. Average non-interest bearing demand deposits totaled $1.22 billion for the nine months ended September 30, 2016, compared with $1.10 billion for the nine months ended September 30, 2015. The average cost of borrowings for the nine months ended September 30, 2016 was 1.71%, compared with 1.73% for the same period last year.

Non-Interest Income

Non-interest income totaled $14.1 million for the quarter ended September 30, 2016, an increase of $2.0 million, or 16.2%, compared to the same period in 2015. Other income increased $2.5 million for the three months ended September 30, 2016, compared to the same period in 2015, largely due to a $1.2 million increase in net gains on loan sales, an $876,000 increase in net fees on loan-level interest rate swap transactions and a $354,000 increase in net gains on the sale of foreclosed real estate. Wealth management income decreased $488,000 to $4.3 million for the three months ended September 30, 2016, compared to $4.8 million for the same period in 2015. The decrease in wealth management income was primarily due to a shift in the mix of assets under management which negatively impacted fees earned, along with a reduction in income associated with the licensing of indices to exchange traded fund ("ETF") providers. Fee income decreased $93,000 to $6.1 million for the three months ended September 30, 2016, compared to $6.2 million for the same period in 2015, largely due to a $191,000 decrease in commercial loan prepayment fee income, partially offset by a $96,000 increase in deposit related fee income. Net gains on securities transactions decreased $48,000 for the three months ended September 30, 2016, compared to the same period in 2015.

For the nine months ended September 30, 2016, non-interest income totaled $40.9 million, an increase of $1.6 million, or 3.9%, compared to the same period in 2015. Other income increased $1.5 million to $4.4 million for the nine months ended September 30, 2016, compared with the same period in 2015, largely due to a $1.4 million increase in net gains on loan sales, a $432,000 increase in net gains on the sale of foreclosed real estate, and a $335,000 gain recognized on the sale of deposits resulting from a strategic branch divestiture, partially offset by a $1.4 million decrease in net fees on loan-level interest rate swap transactions. Also contributing to the increase in non-interest income, wealth management income increased $679,000 to $13.1 million for the nine months ended September 30, 2016, largely due to fees from assets under management acquired in the MDE acquisition, which closed April 1, 2015. This increase in wealth management income was offset in part by a reduction in income associated with the licensing of indices to ETF providers. Partially offsetting these increases in non-interest income, net gains on securities transactions and fee income decreased $596,000 and $156,000, respectively, for the nine months ended September 30, 2016, compared to the same period in 2015. The decrease in fee income was largely due to a $1.1 million decrease in commercial loan prepayment fee income, partially offset by increases in both deposit and loan-related fee income.

Non-Interest Expense

For the three months ended September 30, 2016, non-interest expense increased $2.2 million to $45.9 million, compared to the three months ended September 30, 2015. Compensation and benefits expense increased $1.9 million to $26.7 million for the three months ended September 30, 2016, compared to $24.8 million for the same period in 2015. This increase was principally due to additional salary expense related to annual merit increases, and an increase in the accrual for incentive compensation, partially offset by a decrease in stock-based compensation. Other operating expenses increased $377,000 to $6.9 million for the three months ended September 30, 2016, compared to the same period in 2015, largely due to an increase in legal expense and an increase in debit card expense related to the Company's issuance of chip-enabled debit cards. In addition, advertising and promotion expenses increased $189,000 to $787,000 for the three months ended September 30, 2016, compared to the same period in 2015, largely due to the timing of the Company's advertising campaigns. Partially offsetting these increases in non-interest expense, the amortization of intangibles decreased $245,000 for the three months ended September 30, 2016, compared with the same period in 2015, as a result of scheduled reductions in amortization. Additionally, FDIC insurance expense decreased $156,000 to $1.1 million for three months ended September 30, 2016, compared to $1.3 million for the same period in 2015. This decrease was due to the FDIC's reduction of assessment rates for depository institutions with less than $10.0 billion in assets, effective for the quarter ended September 30, 2016. The decrease in the FDIC assessment rate was partially offset by an increase in the Company's total assets subject to assessment.

The Company’s annualized non-interest expense as a percentage of average assets(1) was 1.96% for the quarter ended September 30, 2016, compared with 1.97% for the same period in 2015. The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income)(1) was 58.01% for the quarter ended September 30, 2016, compared with 58.42% for the same period in 2015.

Non-interest expense for the nine months ended September 30, 2016 was $136.6 million, an increase of $3.5 million from $133.2 million for the nine months ended September 30, 2015. Compensation and benefits expense increased $5.1 million to $78.5 million for the nine months ended September 30, 2016, compared to $73.4 million for the nine months ended September 30, 2015, due to increased salary expense associated with new employees from MDE, additional salary expense associated with annual merit increases, an increase in the accrual for incentive compensation and an increase in employee medical and retirement benefit costs. In addition, data processing expense increased $420,000 to $9.8 million for the nine months ended September 30, 2016, compared to $9.4 million for the same period in 2015, principally due to an increase in software maintenance costs. Net occupancy costs decreased $1.2 million, to $18.7 million for the nine months ended September 30, 2016, compared to the 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. The amortization of intangibles decreased $435,000 for the nine months ended September 30, 2016, compared with the same period in 2015, as a result of scheduled reductions in amortization. In addition, other operating expenses decreased $217,000 to $20.6 million for the nine months ended September 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 nine months ended September 30, 2015, partially offset by increases in debit card maintenance costs, foreclosed real estate expense and non-performing asset-related expenses. Advertising and promotion expenses decreased $173,000 to $2.6 million for the nine months ended September 30, 2016, compared to the same period in 2015, largely due to the timing of the Company's advertising campaigns.

Asset Quality

The Company’s total non-performing loans at September 30, 2016 were $40.0 million, or 0.58% of total loans, compared with $43.0 million, or 0.63% of total loans at June 30, 2016 and $39.6 million, or 0.62% of total loans at September 30, 2015. The $3.0 million decrease in non-performing loans at September 30, 2016, compared with the trailing quarter, was due to a $1.8 million decrease in non-performing residential mortgage loans, a $1.5 million decrease in non-performing commercial loans, a $777,000 decrease in non-performing multi-family loans and a $423,000 decrease in non-performing consumer loans, partially offset by a $1.4 million increase in non-performing commercial mortgage loans and a $175,000 increase in non-performing construction loans. At September 30, 2016, impaired loans totaled $44.4 million with related specific reserves of $2.1 million, compared with impaired loans totaling $45.3 million with related specific reserves of $2.3 million at June 30, 2016. At September 30, 2015, impaired loans totaled $67.9 million with related specific reserves of $2.4 million.

At September 30, 2016, the Company’s allowance for loan losses was 0.89% of total loans, a decrease from 0.90% at June 30, 2016, and a decrease from 0.94% of total loans at September 30, 2015. The decline in this loan coverage ratio from the quarter ended September 30, 2015, was largely the result of an overall improvement in asset quality. The Company recorded provisions for loan losses of $1.0 million and $4.2 million for the three and nine months ended September 30, 2016, respectively, compared with provisions of $1.4 million and $3.1 million for the three and nine months ended September 30, 2015, respectively. For the three and nine months ended September 30, 2016, the Company had net charge-offs of $845,000 and $4.5 million, respectively, compared with net charge-offs of $560,000 and $4.4 million, respectively, for the same periods in 2015. The allowance for loan losses decreased $336,000 to $61.1 million at September 30, 2016, from $61.4 million at December 31, 2015.

At September 30, 2016 and December 31, 2015, the Company held $10.1 million and $10.5 million of foreclosed assets, respectively. During the nine months ended September 30, 2016, there were 19 additions to foreclosed assets with a carrying value of $3.1 million and 21 properties sold with a carrying value of $2.9 million. Foreclosed assets at September 30, 2016 consisted of $5.5 million of residential real estate, $4.4 million of commercial real estate and $139,000 of marine vessels. Total non-performing assets at September 30, 2016 decreased $5.0 million, or 9.0%, to $50.1 million, or 0.53% of total assets, from $55.1 million, or 0.62% of total assets at December 31, 2015.

Income Tax Expense

For the three and nine months ended September 30, 2016, the Company’s income tax expense was $9.3 million and $26.8 million, respectively, compared with $9.0 million and $27.0 million, for the three and nine months ended September 30, 2015, respectively. The Company’s effective tax rates were 28.8% and 29.1% for the three and nine months ended September 30, 2016, respectively, compared with 30.5% and 30.3% for the three and nine months ended September 30, 2015, respectively, as a greater proportion of income was derived from non-taxable sources in the current year periods. Also, in the third quarter of 2016, the Company adopted Accounting Standards Update ("ASU”) No. 2016-09, "Compensation - Stock Compensation (Topic 718)." The adoption of this ASU resulted in a $252,000 decrease in income tax expense for the three and nine months ended September 30, 2016, and reduced the effective tax rates for the three and nine months ended September 30, 2016, by 79 basis points and 27 basis points, 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 28, 2016 at 10:00 a.m. Eastern Time to discuss highlights of the Company’s financial results for the quarter ended September 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
September 30, 2016 (Unaudited) and December 31, 2015
(Dollars in Thousands)
Assets September 30, 2016
December 31, 2015
Cash and due from banks $117,348 $100,899
Short-term investments 42,326 1,327
Total cash and cash equivalents 159,674 102,226
Securities available for sale, at fair value 1,032,235 964,534
Investment securities held to maturity (fair value of $495,516 at September 30, 2016 (unaudited) and $488,331 at December 31, 2015) 476,359 473,684
Federal Home Loan Bank Stock 71,019 78,181
Loans 6,890,586 6,537,674
Less allowance for loan losses 61,088 61,424
Net loans 6,829,498 6,476,250
Foreclosed assets, net 10,087 10,546
Banking premises and equipment, net 85,207 88,987
Accrued interest receivable 25,305 25,766
Intangible assets 423,678 426,277
Bank-owned life insurance 187,140 183,057
Other assets 89,799 82,149
Total assets $9,390,001 $8,911,657
Liabilities and Stockholders' Equity
Deposits:
Demand deposits $4,784,360 $4,198,788
Savings deposits 1,074,708 985,478
Certificates of deposit of $100,000 or more 293,085 324,215
Other time deposits 375,345 415,506
Total deposits 6,527,498 5,923,987
Mortgage escrow deposits 24,285 23,345
Borrowed funds 1,522,368 1,707,632
Other liabilities 71,570 60,628
Total liabilities 8,145,721 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 66,028,442 outstanding at September 30, 2016 and 65,489,354 outstanding at December 31, 2015 832 832
Additional paid-in capital 1,003,837 1,000,810
Retained earnings 538,429 507,713
Accumulated other comprehensive income (loss) 5,974 (2,546)
Treasury stock (265,078) (269,014)
Unallocated common stock held by the Employee Stock Ownership Plan (39,714) (41,730)
Common Stock acquired by the Directors' Deferred Fee Plan (6,014) (6,517)
Deferred Compensation - Directors' Deferred Fee Plan 6,014 6,517
Total stockholders' equity 1,244,280 1,196,065
Total liabilities and stockholders' equity $ 9,390,001 $ 8,911,657


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Nine Months Ended September 30, 2016 and 2015 (Unaudited)
(Dollars in Thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Interest income:
Real estate secured loans$45,262 $44,541 $134,411 $131,424
Commercial loans16,093 13,767 46,419 40,875
Consumer loans5,627 5,646 16,657 17,234
Securities available for sale and Federal Home Loan Bank stock5,576 5,672 17,074 17,708
Investment securities held to maturity3,349 3,368 10,011 10,150
Deposits, federal funds sold and other short-term investments138 19 252 41
Total interest income76,045 73,013 224,824 217,432
Interest expense:
Deposits4,441 3,639 12,397 10,851
Borrowed funds6,633 6,827 20,477 20,432
Total interest expense11,074 10,466 32,874 31,283
Net interest income64,971 62,547 191,950 186,149
Provision for loan losses1,000 1,400 4,200 3,100
Net interest income after provision for loan losses63,971 61,147 187,750 183,049
Non-interest income:
Fees6,137 6,230 19,309 19,465
Wealth management income4,262 4,750 13,084 12,405
Bank-owned life insurance1,382 1,248 4,083 3,913
Net (loss) gain on securities transactions(43) 5 54 650
Other income (expense)2,328 (123) 4,378 2,922
Total non-interest income14,066 12,110 40,908 39,355
Non-interest expense:
Compensation and employee benefits26,725 24,784 78,496 73,399
Net occupancy expense6,227 6,186 18,729 19,935
Data processing expense3,328 3,239 9,845 9,425
FDIC Insurance1,117 1,273 3,732 3,763
Amortization of intangibles767 1,012 2,628 3,063
Advertising and promotion expense787 598 2,567 2,740
Other operating expenses6,899 6,522 20,628 20,845
Total non-interest expense45,850 43,614 136,625 133,170
Income before income tax expense32,187 29,643 92,033 89,234
Income tax expense9,281 9,034 26,798 27,027
Net income$22,906 $20,609 $65,235 $62,207
Basic earnings per share$0.36 $0.33 $1.03 $0.99
Average basic shares outstanding 63,728,393 63,034,185 63,545,065 62,868,745
Diluted earnings per share$0.36 $0.33 $1.02 $0.99
Average diluted shares outstanding 63,934,886 63,198,299 63,727,723 63,029,389


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,
2016 2015 2016 2015
STATEMENTS OF INCOME:
Net interest income$64,971 $62,547 $191,950 $186,149
Provision for loan losses 1,000
1,400
4,200
3,100
Non-interest income 14,066
12,110
40,908
39,355
Non-interest expense 45,850
43,614
136,625
133,170
Income before income tax expense 32,187
29,643
92,033
89,234
Net income 22,906
20,609
65,235
62,207
Diluted earnings per share$0.36
$0.33
$1.02
$0.99
Interest rate spread 2.92
% 3.01
% 2.97
% 3.06
%
Net interest margin 3.05
% 3.13
% 3.10
% 3.18
%
PROFITABILITY:
Annualized return on average assets 0.98% 0.93% 0.95% 0.96%
Annualized return on average equity 7.33% 6.93% 7.11% 7.11%
Annualized return on average tangible equity (2) 11.13% 10.93% 10.88% 11.12%
Annualized non-interest expense to average assets (3) 1.96% 1.97% 2.00% 2.06%
Annualized core non-interest expense to average assets (3) 1.96% 1.97% 2.00% 2.05%
Efficiency ratio (4) 58.01% 58.42% 58.67% 59.05%
Core efficiency ratio (4) 58.01% 58.42% 58.67% 58.87%
ASSET QUALITY:
Non-accrual loans $40,016 $39,634
90+ and still accruing
Non-performing loans 40,016 39,634
Foreclosed assets 10,087 10,128
Non-performing assets 50,103 49,762
Non-performing loans to total loans 0.58% 0.62%
Non-performing assets to total assets 0.53% 0.56%
Allowance for loan losses $61,088 $60,464
Allowance for loan losses to total non-performing loans 152.66% 152.56%
Allowance for loan losses to total loans 0.89% 0.94%
AVERAGE BALANCE SHEET DATA:
Assets$9,328,946 $8,776,667 $9,133,000 $8,640,000
Loans, net 6,730,854 6,282,018 6,607,963 6,154,229
Earning assets 8,420,908 7,890,101 8,224,380 7,769,306
Core deposits 5,746,057 5,067,217 5,480,122 5,029,289
Borrowings 1,550,148 1,684,659 1,600,023 1,580,080
Interest-bearing liabilities 6,748,118 6,377,944 6,610,432 6,302,058
Stockholders' equity 1,242,710 1,180,426 1,226,011 1,169,134
Average yield on interest-earning assets 3.57% 3.66% 3.63% 3.72%
Average cost of interest-bearing liabilities 0.65% 0.65% 0.66% 0.66%
LOAN DATA:
Mortgage loans:
Residential $1,214,095 $1,258,009
Commercial 1,884,699
1,777,193
Multi-family 1,384,541
1,193,730
Construction 316,803
302,302
Total mortgage loans 4,800,138
4,531,234
Commercial loans 1,554,052
1,325,077
Consumer loans 538,061
575,715
Total gross loans 6,892,251
6,432,026
Premium on purchased loans 5,330
5,711
Unearned discounts (39
) (44
)
Net deferred (6,956
) (6,749
)
Total loans $6,890,586 $6,430,944


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,
2016 2015
Total stockholders' equity $1,244,280 $1,183,973
Less: total intangible assets 423,678
429,001
Total tangible stockholders' equity $820,602 $754,972
Shares outstanding 66,028,442
65,378,205
Book value per share (total stockholders' equity/shares outstanding) $18.84
$18.11
Tangible book value per share (total tangible stockholders' equity/shares outstanding) $12.43
$11.55
(2) Annualized Return on Average Tangible Equity
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Total average stockholders' equity$1,242,710 $1,180,426 $1,226,011 $1,169,134
Less: total average intangible assets424,151 432,472 424,993
421,418
Total average tangible stockholders' equity$818,559 $747,954 $801,018 $747,716
Net income$22,906 $20,609 $65,235 $62,207
Annualized return on average tangible equity (net income/total average stockholders' equity)11.13% 10.93% 10.88
% 11.12
%
(3) Annualized Non-Interest Expense/Average Assets Calculation
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Total non-interest expense45,850 43,614 136,625
133,170
Less: non-recurring MDE acquisition expense 413
Core non-interest expense$45,850 $43,614 $136,625 $132,757
Average assets$9,328,946 $8,776,667 $9,133,000 $8,640,000
Annualized non-interest expense/average assets1.96% 1.97% 2.00
% 2.06
%
Annualized core non-interest expense/average assets1.96% 1.97% 2.00
% 2.05
%
(4) Efficiency Ratio Calculation
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Net interest income$64,971 $62,547 $191,950 $186,149
Non-interest income14,066 12,110 40,908
39,355
Total income$79,037 $74,657 $232,858 $225,504
Non-interest expense45,850 43,614 136,625
133,170
Less: non-recurring MDE acquisition expense 413
Core non-interest expense$45,850 $43,614 $136,625 $132,757
Efficiency ratio (non-interest expense/income)58.01% 58.42% 58.67
% 59.05
%
Core efficiency ratio (core non-interest expense/income)58.01% 58.42% 58.67
% 58.87
%


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Quarterly Average Balances
(Unaudited) (Dollars in Thousands)
September 30, 2016 June 30, 2016
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:
Deposits$109,260
$136
0.48% $57,045
$72
0.51%
Federal funds sold and other short-term investments1,834 2
0.44% 1,582
0.06%
Investment securities (1)482,020 3,349 2.78% 476,492 3,331 2.80%
Securities available for sale1,024,821 4,717 1.84% 999,750 4,861 1.95%
Federal Home Loan Bank stock72,119 859 4.73% 72,683 857 4.73%
Net loans: (2)
Total mortgage loans4,711,610 45,262 3.80% 4,596,722 44,916 3.89%
Total commercial loans1,475,262 16,093 4.29% 1,437,994 15,374 4.25%
Total consumer loans543,982 5,627 4.12% 553,691 5,394 3.92%
Total net loans6,730,854 66,982 3.93% 6,588,407 65,684 3.97%
Total Interest-Earning Assets$8,420,908
$76,045
3.57% $8,195,959
$74,805
3.64%
Non-Interest Earning Assets:
Cash and due from banks99,185 104,823
Other assets808,853
806,514
Total Assets$9,328,946
$9,107,296
Interest-Bearing Liabilities:
Demand deposits$3,419,978
$2,691
0.31% $3,219,568
$2,404
0.30%
Savings deposits1,074,963 508
0.19% 1,033,385 390
0.15%
Time deposits703,029 1,242
0.70% 761,361 1,341
0.71%
Total Deposits5,197,970 4,441
0.34% 5,014,314 4,135
0.33%
Borrowed funds1,550,148 6,633
1.70% 1,581,576 6,760
1.72%
Total Interest-Bearing Liabilities6,748,118 11,074
0.65% 6,595,890 10,895
0.66%
Non-Interest Bearing Liabilities:
Non-interest bearing deposits1,251,116 1,208,091
Other non-interest bearing liabilities87,002 78,387
Total non-interest bearing liabilities1,338,118 1,286,478
Total Liabilities8,086,236 7,882,368
Stockholders' equity1,242,710 1,224,928
Total Liabilities and Stockholders' Equity$9,328,946
$9,107,296
Net interest income $64,971
$63,910
Net interest rate spread 2.92% 2.98%
Net interest-earning assets$1,672,790
$1,600,069
Net interest margin (3) 3.05% 3.11%
Ratio of interest-earning assets to
total interest-bearing liabilities1.25x 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.
9/30/16 6/30/16 3/31/16 12/31/15 09/30/15
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
Interest-Earning Assets:
Securities 2.14% 2.27% 2.36% 2.33% 2.26%
Net loans 3.93% 3.97% 3.97% 4.03% 4.02%
Total interest-earning assets 3.57% 3.64% 3.66% 3.70% 3.66%
Interest-Bearing Liabilities:
Total deposits 0.34% 0.33% 0.32% 0.31% 0.31%
Total borrowings 1.70% 1.72% 1.71% 1.65% 1.61%
Total interest-bearing liabilities 0.65% 0.66% 0.68% 0.66% 0.65%
Interest rate spread 2.92% 2.98% 2.98% 3.04% 3.01%
Net interest margin 3.05% 3.11% 3.11% 3.17% 3.13%
Ratio of interest-earning assets to interest-bearing liabilities 1.25x 1.24x 1.24x 1.24x 1.24x


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Average Year to Date Balances
(Unaudited) (Dollars in Thousands)
September 30, 2016 September 30, 2015
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:
Deposits$66,671
$248
0.50% $22,114
$41
0.25%
Federal funds sold and other short term investments1,619
4
0.20% 1,399

0.04%
Investment securities (1)477,564
10,011
2.79% 473,566
10,150
2.86%
Securities available for sale996,790
14,464
1.94% 1,045,938
15,401
1.96%
Federal Home Loan Bank stock73,773
2,610
5.31% 72,060
2,307
4.28%
Net loans: (2)
Total mortgage loans4,617,611
134,411
3.85% 4,330,326
131,424
4.02%
Total commercial loans1,437,716
46,419
4.27% 1,230,402
40,875
4.41%
Total consumer loans552,636
16,657
4.02% 593,501
17,234
3.88%
Total net loans6,607,963
197,487
3.96% 6,154,229
189,533
4.09%
Total Interest-Earning Assets$8,224,380
$224,824
3.63% $7,769,306
$217,432
3.72%
Non-Interest Earning Assets:
Cash and due from banks100,833
79,853
Other assets807,787
790,841
Total Assets$9,133,000
$8,640,000
Interest-Bearing Liabilities:
Demand deposits$3,231,073
$7,284
0.30% $2,942,981
$5,937
0.27%
Savings deposits1,033,281
1,184
0.15% 986,756
768
0.10%
Time deposits746,055
3,929
0.70% 792,241
4,146
0.70%
Total Deposits5,010,409
12,397
0.33% 4,721,978
10,851
0.31%
Borrowed funds1,600,023
20,477
1.71% 1,580,080
20,432
1.73%
Total Interest-Bearing Liabilities$6,610,432
$32,874
0.66% $6,302,058
$31,283
0.66%
Non-Interest Bearing Liabilities:
Non-interest bearing deposits1,215,768 1,099,552
Other non-interest bearing liabilities80,789 69,256
Total non-interest bearing liabilities1,296,557 1,168,808
Total Liabilities7,906,989 7,470,866
Stockholders' equity1,226,011 1,169,134
Total Liabilities and Stockholders' Equity$9,133,000 $8,640,000
Net interest income $191,950 $186,149
Net interest rate spread 2.97% 3.06%
Net interest-earning assets$1,613,948 $1,467,248
Net interest margin (3) 3.10% 3.18%
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.
Nine Months Ended
9/30/2016 9/30/2015 9/30/2014
Interest-Earning Assets:
Securities2.28% 2.33% 2.37%
Net loans3.96% 4.09% 4.27%
Total interest-earning assets3.63% 3.72% 3.84%
Interest-Bearing Liabilities:
Total deposits0.33% 0.31% 0.34%
Total borrowings1.71% 1.73% 1.90%
Total interest-bearing liabilities0.66% 0.66% 0.69%
Interest rate spread2.97% 3.06% 3.15%
Net interest margin3.10% 3.18% 3.27%
Ratio of interest-earning assets to interest-bearing liabilities1.24x 1.23x 1.22x

CONTACT: Leonard G. Gleason, Senior Vice President and Investor Relations Officer, +1-732-590-9300

Source:Provident Financial Services, Inc.