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Provident Financial Services, Inc. Announces Fourth Quarter and Full Year Earnings, Declares Quarterly Cash Dividend and Sets Annual Meeting Date

ISELIN, N.J., Jan. 26, 2018 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $19.5 million, or $0.30 per basic and diluted share for the quarter ended December 31, 2017, compared to net income of $22.6 million, or $0.35 per basic and diluted share for the quarter ended December 31, 2016. For the year ended December 31, 2017, the Company reported net income of $93.9 million, or $1.46 per basic share and $1.45 per diluted share, compared to net income of $87.8 million, or $1.38 per basic and diluted share for the same period last year.

As a result of the enactment of the Tax Cuts and Jobs Act (the "Tax Act") on December 22, 2017, the Company recognized additional tax expense of $4.0 million for the quarter and year ended December 31, 2017. Excluding the impact of the Tax Act, for the quarter and year ended December 31, 2017, net income was $23.4 million, or $0.36 per diluted share and $97.9 million, or $1.52 per diluted share, respectively.

Partially offsetting the effect of the Tax Act, earnings for the quarter and year ended December 31, 2017 were favorably impacted by year-over-year growth in average loans outstanding, growth in both average non-interest bearing and interest bearing core deposits, and expansion of the net interest margin. The improvement in the net interest margin was driven by the upward repricing of adjustable rate assets and a relatively stable cost of funds.

Chairman, President and Chief Executive Officer Christopher Martin commented: “Provident’s fourth quarter financial results were marked by impressive loan and core deposit growth, stable funding costs and strong asset quality. Our net interest margin expanded three basis points, contributing to another quarterly record in net interest income for the Company. Our core business remains strong and our balance sheet and loan pipeline are well-positioned as we enter the new year.” Martin added: “We continue our preparations for meeting the current regulatory requirements associated with crossing the $10 billion asset threshold, while working with our trade groups to effect regulatory relief for community banks like Provident.”

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.20 per common share payable on February 28, 2018, to stockholders of record as of the close of business on February 15, 2018.

Annual Meeting Date Set

The Annual Meeting of Stockholders will be held on April 26, 2018 at the Renaissance Woodbridge Hotel, Iselin, New Jersey at 10:00 a.m. March 1, 2018 has been established as the record date for the determination of stockholders entitled to vote at the Annual Meeting.

Balance Sheet Summary

Total assets increased $344.8 million, or 3.6%, to $9.85 billion at December 31, 2017, from $9.50 billion at December 31, 2016. The increase in total assets was primarily due to a $322.2 million increase in total loans and a $46.5 million increase in total cash and cash equivalents, partially offset by a $20.9 million decrease in premises and equipment and a $7.6 million decrease in total investments.

The Company’s loan portfolio increased $322.2 million, or 4.6%, to $7.33 billion at December 31, 2017, from $7.00 billion at December 31, 2016. For the year ended December 31, 2017, loan originations, including advances on lines of credit, totaled $3.70 billion, compared with $3.09 billion for 2016. The loan portfolio had net increases of $192.5 million in commercial mortgage loans, $127.8 million in construction loans, $114.4 million in commercial loans and $1.8 million in multi-family mortgage loans, partially offset by net decreases of $69.3 million in residential mortgage loans and $42.8 million in consumer loans. Commercial real estate, commercial and construction loans represented 77.9% of the total loan portfolio at December 31, 2017, compared to 75.3% at December 31, 2016.

At December 31, 2017, the Company’s unfunded loan commitments totaled $1.98 billion, including commitments of $1.05 billion in commercial loans, $440.9 million in construction loans and $208.0 million in commercial mortgage loans. Unfunded loan commitments at September 30, 2017 and December 31, 2016 were $2.11 billion and $1.83 billion, respectively.

Total investments decreased $7.6 million, or 0.5%, to $1.60 billion at December 31, 2017, largely due to principal repayments on mortgage-backed securities, maturities of municipal and agency bonds, and sales of certain mortgage-backed securities, partially offset by purchases of mortgage-backed and municipal securities.

The Company’s premises and equipment decreased $20.9 million, or 24.9%, to $63.2 million at December 31, 2017, from $84.1 million at December 31, 2016. The decrease was primarily the result of the Company’s December 13, 2017 sale and leaseback of 12 of its New Jersey banking offices.

Total deposits increased $160.5 million, or 2.4%, during the year ended December 31, 2017 to $6.71 billion. Total core deposits, which consist of savings and demand deposit accounts, increased $176.9 million, or 3.0%, to $6.08 billion at December 31, 2017, while time deposits decreased $16.4 million to $634.8 million at December 31, 2017. The increase in core deposits for the year ended December 31, 2017 was largely attributable to a $140.0 million increase in interest bearing demand deposits and a $103.6 million increase in non-interest bearing demand deposits, partially offset by a $50.7 million decrease in money market deposits and a $16.0 million decrease in savings deposits. Core deposits represented 90.5% of total deposits at December 31, 2017, compared to 90.1% at December 31, 2016.

Borrowed funds increased $129.8 million, or 8.0%, during the year ended December 31, 2017, to $1.74 billion, as wholesale funds, combined with net deposit inflows, were used to fund the Company's asset growth. Borrowed funds represented 17.7% of total assets at December 31, 2017, an increase from 17.0% at December 31, 2016.

Stockholders’ equity increased $46.9 million, or 3.7%, during the year ended December 31, 2017, to $1.30 billion, primarily due to net income earned during the year, partially offset by cash dividends paid to stockholders and an increase in unrealized losses on securities available for sale. Common stock repurchases for the year ended December 31, 2017, which were made in connection with withholding to cover income taxes on stock-based compensation, totaled 45,123 shares at an average cost of $27.08 per share. At December 31, 2017, 3.1 million shares remained eligible for repurchase under the current authorization. Book value per share and tangible book value per share(1) at December 31, 2017 were $19.52 and $13.20, 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 quarter ended December 31, 2017, net interest income increased $5.3 million to $71.9 million, from $66.6 million for the same period in 2016. Net interest income for the year ended December 31, 2017 increased $19.6 million, to $278.2 million, from $258.6 million for the same period in 2016. The improvement in net interest income for the comparative periods was largely 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 Company’s net interest margin for the quarter ended December 31, 2017 increased three basis points to 3.25%, compared with 3.22% for the trailing quarter ended September 30, 2017. The weighted average yield on interest-earning assets increased three basis points to 3.78% for the quarter ended December 31, 2017, compared with 3.75% for the trailing quarter. The weighted average cost of interest-bearing liabilities for the quarter ended December 31, 2017 remained unchanged at 0.68%, compared to the trailing quarter. The average cost of interest-bearing deposits for the quarter ended December 31, 2017 increased two basis points to 0.40%, compared with 0.38% for the trailing quarter. Average non-interest bearing demand deposits totaled $1.45 billion for the quarter ended December 31, 2017, compared with $1.36 billion for the trailing quarter. The average cost of borrowed funds for the quarter ended December 31, 2017 was 1.63%, compared with 1.71% for the quarter ended September 30, 2017.

The net interest margin increased 18 basis points to 3.25% for the quarter ended December 31, 2017, compared with 3.07% for the quarter ended December 31, 2016. The weighted average yield on interest-earning assets increased 20 basis points to 3.78% for the quarter ended December 31, 2017, compared with 3.58% for the quarter ended December 31, 2016, while the weighted average cost of interest-bearing liabilities increased four basis points to 0.68% for the quarter ended December 31, 2017, compared with 0.64% for the fourth quarter of 2016. The average cost of interest-bearing deposits for the quarter ended December 31, 2017 was 0.40%, compared with 0.34% for the same period last year. Average non-interest bearing demand deposits totaled $1.45 billion for the quarter ended December 31, 2017, compared with $1.32 billion for the quarter ended December 31, 2016. The average cost of borrowed funds for the quarter ended December 31, 2017 was 1.63%, compared with 1.67% for the same period last year.

For the year ended December 31, 2017, the net interest margin increased ten basis points to 3.21%, compared with 3.11% for the year ended December 31, 2016. The weighted average yield on interest-earning assets increased ten basis points to 3.74% for the year ended December 31, 2017, compared with 3.64% for the year ended December 31, 2016, while the weighted average cost of interest-bearing liabilities increased one basis point to 0.67% for the year ended December 31, 2017, compared with 0.66% for the same period in 2016. The average cost of interest-bearing deposits for the year ended December 31, 2017 was 0.37%, compared with 0.33% for the same period last year. Average non-interest bearing demand deposits totaled $1.37 billion for the year ended December 31, 2017, compared with $1.24 billion for the year ended December 31, 2016. The average cost of borrowings for the year ended December 31, 2017 was 1.66%, compared with 1.70% for the same period last year.

Non-Interest Income

Non-interest income totaled $13.3 million for the quarter ended December 31, 2017, a decrease of $1.2 million, or 8.2%, compared to the quarter ended December 31, 2016. Other income decreased $557,000 for the quarter ended December 31, 2017, compared to the same period in 2016, primarily due to a $1.2 million decrease in net fees on loan-level interest rate swap transactions, partially offset by increases in net gains recognized on loan sales and net gains recognized on the sale of foreclosed real estate of $629,000 and $111,000, respectively. Also contributing to the decrease in non-interest income, fee income decreased $460,000 to $6.3 million for the quarter ended December 31, 2017, from $6.7 million for the quarter ended December 31, 2016, largely due to a $603,000 decrease in prepayment fees on commercial loans, partially offset by increases in deposit related fee income and merchant fee income of $137,000 and $90,000, respectively.

For the year ended December 31, 2017, non-interest income totaled $55.7 million, an increase of $304,000, compared to the same period in 2016. Income from Bank-owned life insurance increased $1.2 million to $6.7 million for the year ended December 31, 2017, compared to the same period in 2016, primarily due to the recognition of death benefit claims. Fee income also increased $1.2 million to $27.2 million, compared to the same period in 2016, largely due to a $657,000 increase in commercial loan prepayment fee income, a $397,000 increase in deposit related fee income and a $229,000 increase in merchant fee income, partially offset by a $218,000 decrease in income from non-deposit investment products and a $43,000 decrease in debit card revenue. Partially offsetting these increases in non-interest income, other income decreased $2.1 million for the year ended December 31, 2017, compared with the same period in 2016, mainly due to a $910,000 decrease in net fees on loan-level interest rate swap transactions, a $583,000 decrease in net gains recognized on loan sales and a $335,000 non-recurring 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 December 31, 2017, non-interest expense increased $926,000 to $48.1 million, compared to $47.2 million for the quarter ended December 31, 2016. Compensation and benefits expense increased $622,000 to $28.3 million for the three months ended December 31, 2017, compared to $27.6 million for the three months ended December 31, 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 $584,000 to $7.5 million for the three months ended December 31, 2017, compared to $7.0 million for the same period in 2016. This increase was largely due to an increase in consulting fees, partially offset by decreases in legal fees and non-performing asset related expenses. Additionally, data processing expense increased $237,000 to $3.6 million for the three months ended December 31, 2017, compared to $3.4 million for the same period in 2016, principally due to an increase in software maintenance expense and telecommunication costs. Partially offsetting these increases in non-interest expense, FDIC insurance expense decreased $333,000 to $822,000 for three months ended December 31, 2017, compared to $1.2 million for the same period in 2016, due to a reduction in the insurance assessment rate. Amortization of intangibles decreased $172,000 for the three months ended December 31, 2017, compared with the same period in 2016, as a result of scheduled reductions in amortization.

The Company’s annualized non-interest expense as a percentage of average assets (1) was 1.98% for the quarter ended December 31, 2017, compared with 1.99% 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 56.43% for the quarter ended December 31, 2017, compared with 58.14% for the same period in 2016.

Non-interest expense for the year ended December 31, 2017 was $187.8 million, an increase of $4.0 million from the year ended December 31, 2016. Compensation and benefits expense increased $3.2 million to $109.4 million for the year ended December 31, 2017, compared to $106.1 million for the year ended December 31, 2016. This increase was 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. Other operating expenses increased $1.2 million to $28.8 million for the year ended December 31, 2017, compared to $27.6 million for the same period in 2016, largely due to increases in consulting and debit card maintenance expenses, partially offset by a decrease in loan collection expense. Data processing costs increased $694,000 to $13.9 million for the year ended December 31, 2017, compared with the same period in 2016, due to increased software maintenance and telecommunication costs. Net occupancy costs increased $437,000, to $25.3 million for the year ended December 31, 2017, compared to the same period in 2016, resulting from an increase in snow removal costs, combined with an increase in facilities maintenance costs. Partially offsetting these increases in non-interest expense, FDIC insurance expense decreased $1.0 million to $3.9 million for year ended December 31, 2017, compared to $4.9 million for the same period in 2016. This decrease was primarily due to the FDIC's reduction of assessment rates for depository institutions with less than $10.0 billion in assets, which became effective in the quarter ended September 30, 2016. Additionally, amortization of intangibles decreased $721,000 for the year ended December 31, 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 December 31, 2017 were $34.9 million, or 0.48% of total loans, compared with $36.4 million, or 0.52% of total loans at September 30, 2017, and $42.4 million, or 0.61% of total loans at December 31, 2016. The $1.5 million decrease in non-performing loans at December 31, 2017, compared with the trailing quarter, was due to a $980,000 decrease in non-performing commercial mortgage loans, a $715,000 decrease in non-performing residential mortgage loans and a $280,000 decrease in non-performing commercial loans, partially offset by a $456,000 increase in non-performing consumer loans. At December 31, 2017, impaired loans totaled $52.0 million with related specific reserves of $2.7 million, compared with impaired loans totaling $50.2 million with related specific reserves of $2.9 million at September 30, 2017. At December 31, 2016, impaired loans totaled $52.0 million with related specific reserves of $2.3 million.

At December 31, 2017, the Company’s allowance for loan losses was 0.82% of total loans, compared to 0.86% at September 30, 2017, and 0.88% of total loans at December 31, 2016. The decline in the loan coverage ratio from December 31, 2016 resulted from an overall improvement in asset quality. The allowance for loan losses decreased $1.7 million to $60.2 million at December 31, 2017, from $61.9 million at December 31, 2016. The Company recorded provisions for loan losses of $1.9 million and $5.6 million for the quarter and year ended December 31, 2017, respectively, compared with provisions of $1.2 million and $5.4 million for the quarter and year ended December 31, 2016, respectively. For the quarter and year ended December 31, 2017, the Company had net charge-offs of $2.0 million and $7.3 million, respectively, compared with net charge-offs of $405,000 and $4.9 million, respectively, for the same periods in 2016.

At December 31, 2017, the Company held $6.9 million of foreclosed assets, compared with $8.0 million at December 31, 2016. During the year ended December 31, 2017, there were 16 additions to foreclosed assets with an aggregate carrying value of $3.8 million and 26 properties sold with an aggregate carrying value of $4.3 million. Foreclosed assets at December 31, 2017 consisted of $3.9 million of commercial real estate and $3.0 million of residential real estate. Total non-performing assets at December 31, 2017 declined $8.6 million, or 17.1%, to $41.8 million, or 0.42% of total assets, from $50.4 million, or 0.53% of total assets at December 31, 2016.

Income Tax Expense

For the quarter and year ended December 31, 2017, the Company’s income tax expense was $15.7 million and $46.5 million, respectively, compared with $10.2 million and $37.0 million, for the quarter and year ended December 31, 2016, respectively. The Company’s effective tax rates were 44.7% and 33.1% for the quarter and year ended December 31, 2017, respectively, compared with 31.1% and 29.6% for the quarter and year ended December 31, 2016, respectively. Tax expense and the effective tax rate for the quarter and year ended December 31, 2017, were impacted by an additional tax expense of $4.0 million related to the recently enacted Tax Act.

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, January 26, 2018 at 10:00 a.m. Eastern Time to discuss highlights of the Company’s financial results for the quarter and year ended December 31, 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 www.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
December 31, 2017 (Unaudited) and December 31, 2016
(Dollars in Thousands)
AssetsDecember 31, 2017 December 31, 2016
Cash and due from banks$139,557 $92,508
Short-term investments51,277 51,789
Total cash and cash equivalents190,834 144,297
Securities available for sale, at fair value1,037,812 1,040,386
Investment securities held to maturity (fair value of $485,039 and $489,287 at December 31, 2017 and December 31, 2016, respectively)477,652 488,183
Federal Home Loan Bank Stock81,184 75,726
Loans7,325,718 7,003,486
Less allowance for loan losses60,195 61,883
Net loans7,265,523 6,941,603
Foreclosed assets, net6,864 7,991
Banking premises and equipment, net63,185 84,092
Accrued interest receivable29,646 27,082
Intangible assets420,290 422,937
Bank-owned life insurance189,525 188,527
Other assets82,759 79,641
Total assets$9,845,274 $9,500,465
Liabilities and Stockholders' Equity
Deposits:
Demand deposits$4,996,345 $4,803,426
Savings deposits1,083,012 1,099,020
Certificates of deposit of $100,000 or more316,074 290,295
Other time deposits318,735 360,888
Total deposits6,714,166 6,553,629
Mortgage escrow deposits25,933 24,452
Borrowed funds1,742,514 1,612,745
Other liabilities64,000 57,858
Total liabilities8,546,613 8,248,684
Total stockholders' equity1,298,661 1,251,781
Total liabilities and stockholders' equity$9,845,274 $9,500,465


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three Months (Unaudited) and Year Ended December 31, 2017 (Unaudited) and 2016
(Dollars in Thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
Interest income:
Real estate secured loans$49,184 $46,457 $189,896 $180,868
Commercial loans19,023 16,603 72,907 63,022
Consumer loans5,008 5,171 20,301 21,829
Securities available for sale and Federal Home Loan Bank stock6,794 5,817 26,445 22,890
Investment securities held to maturity3,215 3,198 13,027 13,208
Deposits, Federal funds sold and other short-term investments372 245 1,270 498
Total interest income83,596 77,491 323,846 302,315
Interest expense:
Deposits5,348 4,551 19,441 16,947
Borrowed funds6,348 6,323 26,203 26,801
Total interest expense11,696 10,874 45,644 43,748
Net interest income71,900 66,617 278,202 258,567
Provision for loan losses1,900 1,200 5,600 5,400
Net interest income after provision for loan losses70,000 65,417 272,602 253,167
Non-interest income:
Fees6,278 6,738 27,218 26,047
Bank-owned life insurance1,402 1,387 6,693 5,470
Wealth management income4,290 4,472 17,604 17,556
Net gain on securities transactions10 10 57 64
Other income1,321 1,878 4,125 6,256
Total non-interest income13,301 14,485 55,697 55,393
Non-interest expense:
Compensation and employee benefits28,267 27,645 109,353 106,141
Net occupancy expense6,035 6,123 25,290 24,853
Data processing expense3,620 3,383 13,922 13,228
FDIC Insurance822 1,155 3,887 4,887
Amortization of intangibles591 763 2,670 3,391
Advertising and promotion expense1,195 1,119 3,904 3,685
Other operating expenses7,548 6,964 28,796 27,593
Total non-interest expense48,078 47,152 187,822 183,778
Income before income tax expense35,223 32,750 140,477 124,782
Income tax expense15,740 10,182 46,528 36,980
Net income$19,483 $22,568 $93,949 $87,802
Basic earnings per share$0.30 $0.35 $1.46 $1.38
Average basic shares outstanding64,554,617 63,937,151 64,384,851 63,643,622
Diluted earnings per share$0.30 $0.35 $1.45 $1.38
Average diluted shares outstanding64,749,297 64,222,633 64,579,222 63,851,986


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 Year Ended
December 31, December 31,
2017 2016 2017 2016
STATEMENTS OF INCOME:
Net interest income$71,900 $66,617 $278,202 $258,567
Provision for loan losses 1,900 1,200 5,600 5,400
Non-interest income 13,301 14,485 55,697 55,393
Non-interest expense 48,078 47,152 187,822 183,778
Income before income tax expense 35,223 32,750 140,477 124,782
Net income 19,483 22,568 93,949 87,802
Diluted earnings per share$0.30 $0.35 $1.45 $1.38
Interest rate spread 3.10% 2.94% 3.07% 2.98%
Net interest margin 3.25% 3.07% 3.21% 3.11%
PROFITABILITY:
Annualized return on average assets 0.80% 0.95% 0.99% 0.95%
Annualized return on average equity 5.90% 7.16% 7.28% 7.12%
Annualized return on average tangible equity (1) 8.69% 10.82% 10.82% 10.86%
Annualized core non-interest expense to average assets (1) 1.98% 1.99% 1.97% 1.99%
Efficiency ratio (1) 56.43% 58.14% 56.25% 58.54%
ASSET QUALITY:
Non-accrual loans $34,929 $42,401
90+ and still accruing
Non-performing loans 34,929 42,401
Foreclosed assets 6,864 7,991
Non-performing assets 41,793 50,392
Non-performing loans to total loans 0.48% 0.61%
Non-performing assets to total assets 0.42% 0.53%
Allowance for loan losses $60,195 $61,883
Allowance for loan losses to total non-performing loans 172.34% 145.95%
Allowance for loan losses to total loans 0.82% 0.88%
AVERAGE BALANCE SHEET DATA:
Assets$9,618,177 $9,449,483 $9,534,785 $9,212,553
Loans, net 7,075,373 6,853,878 6,971,512 6,669,778
Earning assets 8,739,182 8,549,966 8,649,286 8,306,221
Core deposits 6,071,705 5,939,340 5,944,870 5,595,554
Borrowings 1,545,665 1,509,654 1,581,964 1,577,307
Interest-bearing liabilities 6,793,648 6,789,480 6,809,675 6,655,439
Stockholders' equity 1,310,193 1,253,202 1,289,973 1,232,846
Average yield on interest-earning assets 3.78% 3.58% 3.74% 3.64%
Average cost of interest-bearing liabilities 0.68% 0.64% 0.67% 0.66%
LOAN DATA:
Mortgage loans:
Residential $1,142,914 $1,212,255
Commercial 2,171,174 1,978,700
Multi-family 1,404,005 1,402,169
Construction 392,580 264,814
Total mortgage loans 5,110,673 4,857,938
Commercial loans 1,745,301 1,630,887
Consumer loans 473,958 516,755
Total gross loans 7,329,932 7,005,580
Premium on purchased loans 4,029 4,968
Unearned discounts (36) (38)
Net deferred (8,207) (7,024)
Total loans $7,325,718 $7,003,486

(1) Refer to: Notes - Reconciliation of GAAP to Non-GAAP Measures.

Notes - Reconciliation of GAAP to Non-GAAP Financial Measures - (Dollars in Thousands, except share data)
(1) Book and Tangible Book Value per Share
At December 31,
2017 2016
Total stockholders' equity $1,298,661 $1,251,781
Less: total intangible assets 420,290 422,937
Total tangible stockholders' equity $878,371 $828,844
Shares outstanding 66,535,017 66,082,283
Book value per share (total stockholders' equity/shares outstanding) $19.52 $18.94
Tangible book value per share (total tangible stockholders' equity/shares outstanding) $13.20 $12.54
(2) Annualized Return on Average Tangible Equity
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
Total average stockholders' equity$1,310,193 $1,253,202 $1,289,973 $1,232,846
Less: total average intangible assets420,667 423,413 421,628 424,595
Total average tangible stockholders' equity$889,526 $829,789 $868,345 $808,251
Net income$19,483 $22,568 $93,949 $87,802
Annualized return on average tangible equity (net income/total average stockholders' equity)8.69% 10.82% 10.82% 10.86%
(3) Annualized Non-Interest Expense to Average Assets
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
Total annualized non-interest expense$190,744 $187,583 $187,822 $183,778
Average assets9,618,177 9,449,483 9,534,785 9,212,553
Annualized non-interest expense/average assets1.98% 1.99% 1.97% 1.99%
(4) Efficiency Ratio
Three Months Ended Year Ended
December 31, December 31,
2017 2016 2017 2016
Net interest income$71,900 $66,617 $278,202 $258,567
Non-interest income13,301 14,485 55,697 55,393
Total income$85,201 $81,102 $333,899 $313,960
Non-interest expense48,078 47,152 187,822 183,778
Efficiency ratio (non-interest expense/total income)56.43% 58.14% 56.25% 58.54%


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Quarterly Average Balances
December 31, 2017 September 30, 2017
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:
Deposits$24,142 $73 1.20% $22,383 $54 0.95%
Federal funds sold and other short-term investments51,186 299 2.32% 52,102 289 2.22%
Investment securities (1)480,518 3,215 2.68% 490,121 3,272 2.67%
Securities available for sale1,036,341 5,703 2.20% 1,043,123 5,488 2.10%
Federal Home Loan Bank stock71,622 1,091 6.04% 72,532 1,052 5.76%
Net loans: (2)
Total mortgage loans4,918,552 49,184 3.95% 4,805,991 47,692 3.92%
Total commercial loans1,679,544 19,023 4.45% 1,644,437 18,964 4.54%
Total consumer loans477,277 5,008 4.16% 487,039 5,083 4.14%
Total net loans7,075,373 73,215 4.08% 6,937,467 71,739 4.08%
Total Interest Earning Assets$8,739,182 $83,596 3.78% $8,617,728 $81,894 3.75%
Non-Interest Earning Assets:
Cash and due from banks96,062 89,304
Other assets782,933 789,701
Total Assets$9,618,177 $9,496,733
Interest-Bearing Liabilities:
Demand deposits$3,542,341 $3,481 0.39% $3,476,330 $3,124 0.36%
Savings deposits1,083,179 508 0.19% 1,096,626 534 0.19%
Time deposits622,463 1,359 0.87% 639,861 1,330 0.82%
Total Deposits5,247,983 5,348 0.40% 5,212,817 4,988 0.38%
Borrowed funds1,545,665 6,348 1.63% 1,553,365 6,694 1.71%
Total Interest Bearing Liabilities6,793,648 11,696 0.68% 6,766,182 11,682 0.68%
Non-Interest Bearing Liabilities:
Non-interest bearing deposits1,446,185 1,360,343
Other non-interest bearing liabilities68,151 70,398
Total Non-interest Bearing Liabilities1,514,336 1,430,741
Total Liabilities8,307,984 8,196,923
Stockholders' equity1,310,193 1,299,810
Total Liabilities and Stockholders' Equity$9,618,177 $9,496,733
Net interest income $71,900 $70,212
Net interest rate spread 3.10% 3.07%
Net interest-earning assets$1,945,534 $1,851,546
Net interest margin (3) 3.25% 3.22%
Ratio of interest-earning assets to
total interest-bearing liabilities1.29x 1.27x
(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.
12/31/17 9/30/17 6/30/17 03/31/17 12/31/16
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr.
Interest-Earning Assets:
Securities2.49% 2.41% 2.40% 2.40% 2.18%
Net loans4.08% 4.08% 4.02% 3.93% 3.93%
Total interest-earning assets3.78% 3.75% 3.70% 3.63% 3.58%
Interest-Bearing Liabilities:
Total deposits0.40% 0.38% 0.36% 0.35% 0.34%
Total borrowings1.63% 1.71% 1.66% 1.63% 1.67%
Total interest-bearing liabilities0.68% 0.68% 0.67% 0.65% 0.64%
Interest rate spread3.10% 3.07% 3.03% 2.98% 2.94%
Net interest margin3.25% 3.22% 3.17% 3.11% 3.07%
Ratio of interest-earning assets to interest-bearing liabilities1.29x 1.27x 1.26x 1.26x 1.26x



PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Average Year to Date Balances
(Unaudited) (Dollars in Thousands)
December 31, 2017 December 31, 2016
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:
Deposits$19,670 $199 1.00% $62,704 $314 0.50%
Federal funds sold and other short term investments51,790 1,071 2.07% 13,010 184 1.42%
Investment securities (1)487,616 13,027 2.67% 478,901 13,208 2.76%
Securities available for sale1,044,703 22,384 2.14% 1,008,900 19,377 1.92%
Federal Home Loan Bank stock73,995 4,061 5.49% 72,928 3,513 4.82%
Net loans: (2)
Total mortgage loans4,838,342 189,896 3.92% 4,661,378 180,868 3.88%
Total commercial loans1,640,198 72,907 4.44% 1,461,997 63,022 4.31%
Total consumer loans492,972 20,301 4.12% 546,403 21,829 3.99%
Total net loans6,971,512 283,104 4.06% 6,669,778 265,719 3.98%
Total Interest Earning Assets$8,649,286 $323,846 3.74% $8,306,221 $302,315 3.64%
Non-Interest Earning Assets:
Cash and due from banks93,894 99,441
Other assets791,605 806,891
Total Assets$9,534,785 $9,212,553
Interest-Bearing Liabilities:
Demand deposits$3,477,413 $12,205 0.35% $3,305,269 $10,106 0.31%
Savings deposits1,101,103 2,092 0.19% 1,047,061 1,709 0.16%
Time deposits649,195 5,144 0.79% 725,802 5,132 0.71%
Total Deposits5,227,711 19,441 0.37% 5,078,132 16,947 0.33%
Borrowed funds1,581,964 26,203 1.66% 1,577,307 26,801 1.70%
Total Interest Bearing Liabilities$6,809,675 $45,644 0.67% $6,655,439 $43,748 0.66%
Non-Interest Bearing Liabilities:
Non-interest bearing deposits1,366,354 1,243,224
Other non-interest bearing liabilities68,783 81,044
Total Non-interest Bearing Liabilities1,435,137 1,324,268
Total Liabilities8,244,812 7,979,707
Stockholders' equity1,289,973 1,232,846
Total Liabilities and Stockholders' Equity$9,534,785 $9,212,553
Net interest income 278,202 258,567
Net interest rate spread 3.07% 2.98%
Net interest-earning assets$1,839,611 $1,650,782
Net interest margin (3) 3.21% 3.11%
Ratio of interest-earning assets to
total interest-bearing liabilities1.27 x 1.25 x
(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.
Years Ended
12/31/17 12/31/16 12/31/15
Interest-Earning Assets:
Securities2.43% 2.24% 2.31%
Net loans4.06% 3.98% 4.10%
Total interest-earning assets3.74% 3.64% 3.73%
Interest-Bearing Liabilities:
Total deposits0.37% 0.33% 0.31%
Total borrowings1.66% 1.70% 1.71%
Total interest-bearing liabilities0.67% 0.66% 0.66%
Interest rate spread3.07% 2.98% 3.07%
Net interest margin3.21% 3.11% 3.20%
Ratio of interest-earning assets to interest-bearing liabilities1.27x 1.25x 1.24x


SOURCE: Provident Financial Services, Inc.

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

Web Site: http://www.Provident.Bank

Source:Provident Financial Services, Inc.