Provident Financial Services, Inc. Announces Increased Fourth Quarter and Full-Year Earnings for 2011 and Declares Quarterly Cash Dividend

Jan 27, 2012, 08:00 ET from Provident Financial Services, Inc.

JERSEY CITY, N.J., Jan. 27, 2012 /PRNewswire/ -- Provident Financial Services, Inc. (NYSE: PFS) (the "Company") reported net income of $14.9 million, or $0.26 per basic and diluted share for the quarter ended December 31, 2011, compared to net income of $12.1 million, or $0.21 per basic and diluted share for the quarter ended December 31, 2010.  

For the year ended December 31, 2011, the Company reported net income of $57.3 million, or $1.01 per basic and diluted share, compared to net income of $49.7 million, or $0.88 per basic and diluted share for the same period last year.  

The fourth quarter and full year results for the period ended December 31, 2011 reflect actions taken to reduce funding costs, with net interest income increasing $890,000 and $7.0 million, respectively, compared with the same periods in 2010.  In addition, the provision for loan losses decreased $2.9 million and $6.6 million for the quarter and the year ended December 31, 2011, respectively, compared with the same periods in 2010.  These improvements were partially offset by increases in non-interest expense of $235,000 and $3.7 million for the three months and year ended December 31, 2011, respectively, compared with the same periods in 2010.

Christopher Martin, Chairman, President and Chief Executive Officer, commented: "Our record earnings for 2011 were attributable to improved asset generation, lower funding costs and an intense commitment from our officers and staff to attain new levels of efficiency, all while maintaining our already strong capital position.  This was accomplished against the backdrop of a struggling economy, historically low interest rates pressuring our margin, and a challenging regulatory environment."  Martin continued:  "Improved revenues resulted from loan growth of 5.5% for the year, and continued expansion of our core deposits which now represent 78% of deposits.  While asset quality stabilized over the last quarter, the resolution of troubled assets through the protracted New Jersey foreclosure process remains time-consuming."  

Declaration of Quarterly Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.12 per common share payable on February 29, 2012, to stockholders of record as of the close of business on February 15, 2012.

Balance Sheet Summary

Total assets increased $272.9 million, or 4.0%, to $7.10 billion at December 31, 2011, from $6.82 billion at December 31, 2010, primarily due to an increase in net loans outstanding.  

Cash and cash equivalents increased $17.4 million to $69.6 million at December 31, 2011, from $52.2 million at December 31, 2010.  The Company expects to deploy these cash balances to fund loan originations and investment purchases and repay maturing borrowings.

The Company's net loans increased $238.1 million, or 5.5%, to $4.58 billion at December 31, 2011, from $4.34 billion at December 31, 2010.  Loan originations totaled $1.5 billion and loan purchases totaled $79.5 million for the year ended December 31, 2011.  The loan portfolio had net increases of $177.0 million in multi-family mortgage loans, $93.5 million in commercial loans and $73.4 million in commercial mortgage loans, partially offset by net decreases of $77.7 million in residential mortgage loans, $10.4 million in construction loans and $8.6 million in consumer loans.  Commercial real estate, commercial and construction loans represented 59.8% of the loan portfolio at December 31, 2011, compared to 55.6% at December 31, 2010.

At December 31, 2011, the Company's unfunded loan commitments totaled $770.4 million, including $288.5 million in commercial loan commitments, $112.2 million in construction loan commitments and $69.3 million in commercial mortgage commitments.  Unfunded loan commitments at September 30, 2011 were $793.7 million.

Foreclosed assets increased $9.9 million, to $12.8 million at December 31, 2011, from $2.9 million at December 31, 2010.  Foreclosed assets consisted of $5.5 million of residential real estate, $6.6 million of commercial real estate and $712,000 of marine vessels at December 31, 2011.

Total deposits increased $278.9 million, or 5.7%, during the year ended December 31, 2011 to $5.16 billion.  Core deposits, consisting of savings and demand deposit accounts, increased $428.4 million, or 11.9%, to $4.03 billion at December 31, 2011.  The majority of the core deposit increase was in commercial checking deposits, retail checking deposits and money market deposits, partially offset by a decline in savings deposits.  Time deposits decreased $149.5 million, or 11.7%, to $1.13 billion at December 31, 2011, with the majority of the decrease occurring in the 15-month and shorter maturity categories.  The Company remains focused on developing core deposit relationships, while strategically permitting the run-off of higher-cost time deposits.  Core deposits represented 78.1% of total deposits at December 31, 2011, compared to 73.8% at December 31, 2010.    

Borrowed funds were reduced $49.5 million, or 5.1% during the year ended December 31, 2011, to $920.2 million, as wholesale funding was replaced with core deposit growth.  Borrowed funds represented 13.0% of total assets at December 31, 2011, a reduction from 14.2% at December 31, 2010.

Stockholders' equity increased $30.8 million, or 3.3% during the year ended December 31, 2011, to $952.5 million, primarily due to net income earned for the period, partially offset by dividends paid to stockholders and common stock repurchases.  Common stock repurchases for the year ended December 31, 2011 totaled 348,000 shares at an average cost of $11.90 per share.  At December 31, 2011, 1.8 million shares remained eligible for repurchase under the current authorization.  At December 31, 2011, book value per share and tangible book value per share were $15.88 and $9.87, respectively, compared with $15.38 and $9.47, respectively, at December 31, 2010.  

Results of Operations

Net Interest Income and Net Interest Margin

For the three months ended December 31, 2011, net interest income increased $890,000, to $53.9 million, from $53.0 million for the same period in 2010.  For the year ended December 31, 2011, net interest income increased $7.0 million, to $216.0 million, from $209.0 million for 2010.  For both periods, the favorable effects of an increase in average loans outstanding and reductions in funding costs outpaced the impact of the downward repricing of earning assets and accelerated premium amortization on mortgage-backed securities.  

The Company's net interest margin for the quarter ended December 31, 2011 was 3.39%, a decrease of 11 basis points from 3.50% for the quarter ended September 30, 2011, and a 5 basis point decrease from 3.44% for the same period last year.  The weighted average yield on interest-earning assets was 4.24% for the three months ended December 31, 2011, compared with 4.45% for the trailing quarter, and 4.56% for the three months ended December 31, 2010.  The weighted average cost of interest-bearing liabilities was 0.99% for the quarter ended December 31, 2011, compared with 1.10% for the trailing quarter and 1.29% for the fourth quarter of 2010.  The average cost of interest-bearing deposits for the three months ended December 31, 2011 was 0.72%, compared with 0.81% for the trailing quarter and 0.94% for the same period last year.  Average non-interest bearing deposits totaled $680.1 million for the three months ended December 31, 2011, compared with $605.8 million for the trailing quarter and $555.3 million for the same period last year.  The average cost of borrowings for the three months ended December 31, 2011 was 2.34%, compared with 2.50% for the trailing quarter, and 2.92% for the same period last year.  

For the year ended December 31, 2011, the net interest margin increased 4 basis points to 3.49%, compared with 3.45% for the year ended December 31, 2010.  The weighted average yield on interest-earning assets declined 27 basis points to 4.46% for the year ended December 31, 2011, compared with 4.73% for the year ended December 31, 2010, however, the weighted average cost of interest bearing liabilities declined 33 basis points to 1.13% for the year ended December 31, 2011, compared with 1.46% for the same period in 2010.  The average cost of interest-bearing deposits for the year ended December 31, 2011 was 0.83%, compared with 1.09% for the same period last year.  Average non-interest bearing deposits totaled $605.8 million for the year ended December 31, 2011, compared with $528.1 million for the same period last year.  The average cost of borrowings for the year ended December 31, 2011 was 2.55%, compared with 3.18% for the same period last year.

Non-Interest Income

Non-interest income totaled $8.7 million for the quarter ended December 31, 2011, an increase of $910,000 compared to the same period in 2010.  Fee income for the quarter ended December 31, 2011 totaled $7.4 million, an increase of $1.3 million compared to the same period in 2010, largely due to an increase in wealth management fees attributable to the August 11, 2011 acquisition of Beacon Trust Company and Beacon Global Asset Management, Inc. ("Beacon").  This increase was offset by a $190,000 decrease in income related to Bank-owned life insurance for the three month period ended December 31, 2011, compared to the same period last year, due to a decline in investment yields.  In addition, other income declined $194,000 for the three months ended December 31, 2011, compared to the same period in 2010, primarily as a result of losses incurred on the November 2011 sales of the Company's previously occupied administrative facilities, partially offset by net gains on the sale of foreclosed real estate.  

For the year ended December 31, 2011, non-interest income totaled $32.5 million, an increase of $990,000, or 3.1%, compared to the same period in 2010.  Fee income totaled $25.4 million for the year ended December 31, 2011, an increase of $1.7 million compared with the same period in 2010, largely due to increased wealth management fees related to the Beacon acquisition, an increase in revenue from loan related activity and increased revenue associated with annuity sales. These increases were partially offset by a reduction in overdraft fees.  Other income increased $266,000 for the year ended December 31, 2011, compared with the same period in 2010, primarily as a result of net gains recognized on the sale of foreclosed real estate and an increase in gains resulting from a larger number of loan sales, partially offset by the losses incurred on the sales of the Company's previously occupied administrative facilities.  Offsetting these increases, income related to Bank-owned life insurance decreased $706,000 for the year ended December 31, 2011, compared to the same period last year, primarily due to the receipt of policy claim proceeds in the second quarter of 2010.  Additionally, net gains on securities transactions declined $177,000 for the year ended December 31, 2011, compared with the same period in 2010.  These net gains on securities transactions totaled $708,000 for the year ended December 31, 2011, compared with net gains of $885,000 for the same period in 2010.  The Company recognized net other-than-temporary impairment charges of $302,000 and $170,000 for the years ended December 31, 2011 and December 31, 2010, respectively, related to an investment in a non-Agency mortgage-backed security.  

Non-Interest Expense

For the three months ended December 31, 2011, non-interest expense increased $235,000, or 0.7%, to $36.2 million, compared to $36.0 million for the three months ended December 31, 2010.  Compensation and benefits expense increased $1.2 million for the three months ended December 31, 2011, compared with the same period in 2010, as a result of higher salary expense and personnel added as a result of the Beacon acquisition, increased employee health and medical costs and increased incentive compensation.  Net occupancy expense increased $485,000, to $5.3 million for the three months ended December 31, 2011, compared to $4.8 million for the same period in 2010, primarily due to expenses associated with the Company's consolidation of facilities into its newly leased administrative offices in April of this year and expenses related to the Beacon acquisition.  Other operating expenses increased $398,000, to $6.5 million for the three months ended December 31, 2011, compared to same period in the prior year, due to increased loan collection and workout expenses and costs associated with the Beacon acquisition.  Additionally, data processing expense increased $221,000, to $2.5 million for the three months ended December 31, 2011, compared with the same period in 2010, because of increased software maintenance and core processing fees.  Partially offsetting these increases, impairment of premises and equipment declined $1.5 million for the three months ended December 31, 2011, compared to the same period last year, due to the impairment charge incurred in the prior year quarter related to the then planned disposition of the Company's former administrative office.  Additionally, FDIC insurance expense decreased $564,000, to $1.4 million for the three months ended December 31, 2011, compared with $2.0 million for the same period in 2010, due to the change in assessment methodology from deposit-based to one which is based upon assets.  Amortization of intangibles decreased $149,000 for the three months ended December 31, 2011, compared with the same period in 2010, as a result of scheduled reductions in core deposit intangible amortization, partially offset by the amortization of the customer relationship intangible arising from the Beacon acquisition.  

Non-interest expense for the year ended December 31, 2011 was $142.4 million.  Non-interest expense increased $3.7 million, or 2.7%, from $138.7 million for the year ended December 31, 2010.  Compensation and benefits expense increased $5.0 million, to $74.9 million for the year ended December 31, 2011 compared to $69.9 million for the year ended December 31, 2010, due to higher salary expense related to annual merit increases and personnel added as a result of the Beacon acquisition, increased employee health and medical costs, and increased stock-based compensation expense resulting from shares granted in connection with the Company's incentive compensation and Employee Stock Ownership plans and the higher average share price of the Company's common stock in 2011 compared with 2010.  In addition, net occupancy expense increased $1.4 million, to $21.1 million, compared to $19.8 million for the same period in 2010, due to expenses associated with the relocation of the Company's administrative offices and carrying costs on previously occupied facilities owned by the Company, which were sold in November 2011.  In addition, approximately $227,000 in damages attributable to Hurricane Irene were also included in occupancy expense for the year ended December 31, 2011.  Data processing expense totaled $9.5 million for the year ended December 31, 2011, compared to $9.0 million for the same period in 2010.  The $516,000 increase was primarily due to higher software maintenance and core processing fees.  Other operating expenses increased $157,000 for the year ended December 31, 2011, compared with the same period last year, due to increased loan collection expense and costs associated with the Beacon acquisition.  Partially offsetting these increases, FDIC insurance expense decreased $1.7 million to $5.9 million for the year ended December 31, 2011, compared with $7.6 million for the same period in 2010.  The decrease was primarily due to a lower assessment rate charged on deposits in the first quarter of 2011 and a change in assessment methodology from a deposit-based to an asset-based assessment, effective in the second quarter of 2011.  Additionally, amortization of intangibles decreased $801,000 for the year ended December 31, 2011, compared with the same period of 2010, as a result of scheduled reductions in core deposit intangible amortization, partially offset by the amortization of the customer relationship intangible arising from the Beacon acquisition.  Impairment of premises and equipment declined $721,000, for the year ended December 31, 2011, compared to the same period last year, as the Company recognized a $1.5 million impairment charge in the fourth quarter of 2010 related to the then anticipated sale and relocation of its administrative office, compared to an $807,000 impairment charge in the first quarter of 2011 related to the then anticipated sale and relocation of its former loan administration center.  Advertising and promotions expense decreased $98,000 for the year ended December 31, 2011, compared with the same period last year.

Asset Quality

Total non-performing loans at December 31, 2011 were $122.5 million, or 2.63% of total loans, compared with $125.3 million, or 2.74% of total loans at September 30, 2011, and $97.3 million, or 2.21% of total loans at December 31, 2010.  The $2.8 million decrease in non-performing loans at December 31, 2011, compared with the trailing quarter, consisted of a $6.4 million decrease in commercial mortgages and a $130,000 decrease in construction loans, partially offset by a $2.4 million increase in commercial loans, a $997,000 increase in multi-family mortgages, a $338,000 increase in residential loans and a $95,000 increase in consumer loans.  At December 31, 2011, impaired loans totaled $103.2 million with related specific reserves of $9.3 million, compared with impaired loans totaling $105.1 million with related specific reserves of $6.6 million at September 30, 2011.  At December 31, 2010, impaired loans totaled $47.7 million with related specific reserves of $2.3 million.  At December 31, 2011, the Company's allowance for loan losses was 1.60% of total loans, compared with 1.61% of total loans at September 30, 2011 and 1.56% of total loans at December 31, 2010.  

The Company recorded provisions for loan losses of $6.0 million and $28.9 million for the three months and year ended December 31, 2011, respectively, compared with provisions of $8.9 million and $35.5 million for the three months and year ended December 31, 2010, respectively.  For the three months and year ended December 31, 2011, the Company had net charge-offs of $5.3 million and $23.3 million, respectively, compared with net charge-offs of $8.9 million and $27.5 million, respectively, for the same periods in 2010.  The allowance for loan losses increased $5.6 million to $74.4 million at December 31, 2011, from $68.7 million at December 31, 2010.  At December 31, 2011, the Company held $12.8 million of foreclosed assets, compared with $2.9 million at December 31, 2010.      

Income Tax Expense

For the three months ended December 31, 2011, the Company's income tax expense was $5.5 million, compared with $3.8 million for the same period in 2010.  For the year ended December 31, 2011, the Company's income tax expense was $19.8 million, compared with $16.6 million for the same period in 2010.  The increase in income tax expense was primarily attributable to an increase in pre-tax income. The Company's effective tax rates were 27.0% and 25.7%, respectively, for the three months and year ended December 31, 2011, compared with 23.9% and 25.0% for the three months and year ended December 31, 2010, respectively.  The effective tax rates for the 2011 periods were affected by an increase in the effective rate attributable to an increase in taxable income for the full year of 2011, partially offset by the reduction of a valuation allowance against subsidiary company New Jersey state net operating losses.

About the Company

Provident Financial Services, Inc. is the holding company for The Provident Bank, a community-oriented bank offering a full range of retail and commercial loan and deposit products.  The Bank currently operates 82 full service branches throughout northern and central New Jersey.

Post Earnings Conference Call

Representatives of the Company will hold a conference call for investors at 10:00 a.m. Eastern Time on Friday, January 27, 2012 regarding highlights of the Company's quarter and year ended December 31, 2011 financial results.  The call may be accessed by dialing 1-877-317-6789 (Domestic) or 1-412-317-6789 (International).  Internet access to the call is also available (listen only) at www.providentnj.com 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 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 undertake and specifically declines any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Condition

December 31, 2011 (Unaudited) and December 31, 2010

(Dollars in Thousands)

Assets

December 31, 2011

December 31, 2010

Cash and due from banks

$

68,553

$

51,345

Short-term investments

1,079

884

Total cash and cash equivalents

69,632

52,229

Securities available for sale, at fair value

1,376,119

1,378,927

Investment securities held to maturity (fair value of $366,296 at

December 31, 2011 (unaudited) and $351,680 at December 31, 2010)

348,318

346,022

Federal Home Loan Bank of New York ("FHLB-NY") stock

38,927

38,283

Loans

4,653,509

4,409,813

Less allowance for loan losses

74,351

68,722

Net loans

4,579,158

4,341,091

Foreclosed assets, net

12,802

2,858

Banking premises and equipment, net

66,260

74,257

Accrued interest receivable

24,653

25,257

Intangible assets

360,714

354,220

Bank-owned life insurance

142,010

136,768

Other assets

78,810

74,616

Total assets

$

7,097,403

$

6,824,528

Liabilities and Stockholders' Equity

Deposits:

Demand deposits

$

3,136,129

$

2,706,204

Savings deposits

891,742

893,268

Certificates of deposit of $100,000 or more

383,174

412,155

Other time deposits

745,552

866,107

Total deposits

5,156,597

4,877,734

Mortgage escrow deposits

20,955

19,558

Borrowed funds

920,180

969,683

Other liabilities

47,194

35,866

Total liabilities

6,144,926

5,902,841

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 59,968,195 outstanding at December 31, 2011, and 59,921,065

outstanding at December 31, 2010

832

832

Additional paid-in capital

1,019,253

1,017,315

Retained earnings

363,011

332,472

Accumulated other comprehensive income

9,571

14,754

Treasury stock

(384,725)

(385,094)

Unallocated common stock held by the Employee Stock Ownership Plan ("ESOP")

(55,465)

(58,592)

Common Stock acquired by the Directors' Deferred Fee Plan ("DDFP")

(7,390)

(7,482)

Deferred Compensation - DDFP

7,390

7,482

Total stockholders' equity

952,477

921,687

Total liabilities and stockholders' equity

$

7,097,403

$

6,824,528

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Income

Three Months and Year Ended December 31, 2011 and 2010

(Dollars in Thousands, except per share data)

Three Months Ended

Year Ended

December 31,

December 31,

2011

2010

2011

2010

Interest income:

Real estate secured loans

$

39,306

$

40,100

$

158,731

$

160,460

Commercial loans

10,892

10,463

42,759

41,427

Consumer loans

6,348

6,992

25,793

28,479

Securities available for sale and FHLB-NY stock

7,689

9,494

36,157

43,143

Investment securities

2,991

3,145

12,160

12,778

Deposits, Federal funds sold and other short-term investments

38

25

119

247

Total interest income

67,264

70,219

275,719

286,534

Interest expense:

Deposits

8,113

10,364

36,552

47,705

Borrowed funds

5,240

6,834

23,177

29,864

Total interest expense

13,353

17,198

59,729

77,569

Net interest income

53,911

53,021

215,990

208,965

Provision for loan losses

6,000

8,900

28,900

35,500

Net interest income after provision for loan losses

47,911

44,121

187,090

173,465

Non-interest income:

Fees

7,366

6,042

25,418

23,679

Other-than-temporary impairment losses on securities

(1,661)

(3,116)

Portion of loss recognized in OCI (before taxes)

1,359

2,946

Net impairment losses recognized in earnings

(302)

(170)

Bank owned life insurance

1,244

1,434

5,242

5,948

Net gain on securities transactions

22

52

708

885

Other income

45

239

1,476

1,210

Total non-interest income

8,677

7,767

32,542

31,552

Non-interest expense:

Compensation and employee benefits

18,428

17,276

74,904

69,865

Net occupancy expense

5,320

4,835

21,131

19,777

Data processing expense

2,506

2,285

9,500

8,984

FDIC Insurance

1,400

1,964

5,883

7,631

Amortization of intangibles

716

865

3,030

3,831

Impairment of premises and equipment

1,528

807

1,528

Advertising and promotion expense

1,346

1,126

3,951

4,049

Other operating expenses

6,493

6,095

23,240

23,083

Total non-interest expenses

36,209

35,974

142,446

138,748

Income before income tax expense

20,379

15,914

77,186

66,269

Income tax expense

5,509

3,799

19,842

16,564

Net income

$

14,870

$

12,115

$

57,344

$

49,705

Basic earnings per share

$

0.26

$

0.21

$

1.01

$

0.88

Average basic shares outstanding

56,898,336

56,687,652

56,856,083

56,572,040

Diluted earnings per share

$

0.26

$

0.21

$

$1.01

$

0.88

Average diluted shares outstanding

56,910,915

56,687,652

56,868,524

56,572,040

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,

2011

2010

2011

2010

STATEMENTS OF INCOME:

Net interest income

$

53,911

$

53,021

$

215,990

$

208,965

Provision for loan losses

6,000

8,900

28,900

35,500

Non-interest income

8,677

7,767

32,542

31,552

Non-interest expense

36,209

35,974

142,446

138,748

Income before income tax expense

20,379

15,914

77,186

66,269

Net income

$

14,870

$

12,115

$

57,344

$

49,705

Basic and diluted earnings per share

$0.26

$0.21

$1.01

$0.88

Interest rate spread

3.25%

3.27%

3.33%

3.27%

Net interest margin

3.39%

3.44%

3.49%

3.45%

PROFITABILITY:

Annualized return on average assets

0.84%

0.70%

0.83%

0.73%

Annualized return on average equity

6.18%

5.19%

6.09%

5.46%

Annualized non-interest expense to average assets

2.04%

2.09%

2.07%

2.05%

Efficiency ratio (1)

57.85%

59.18%

57.31%

57.69%

ASSET QUALITY:

Non-accrual loans

$

122,549

$

97,264

90+ and still accruing

Non-performing loans

122,549

97,264

Foreclosed assets

12,802

2,858

Non-performing assets

135,351

100,122

Non-performing loans to total loans

2.63%

2.21%

Non-performing assets to total assets

1.91%

1.47%

Allowance for loan losses

$

74,351

$

68,722

Allowance for loan losses to total non-performing loans

60.67%

70.66%

Allowance for loan losses to total loans

1.60%

1.56%

AVERAGE BALANCE SHEET DATA:

Assets

$

7,041,992

$

6,825,936

$

6,893,107

$

6,783,472

Loans, net

4,528,380

4,298,726

4,423,125

4,274,549

Earnings assets

6,289,331

6,107,423

6,158,329

6,057,358

Core deposits

3,992,536

3,638,660

3,777,647

3,511,324

Borrowings

888,027

927,209

909,531

939,311

Interest-bearing liabilities

5,352,132

5,301,793

5,294,623

5,299,718

Stockholders'  equity

954,563

926,439

941,428

910,516

Average yield on interest-earning assets

4.24%

4.56%

4.46%

4.73%

Average cost on interest-bearing liabilities

0.99%

1.29%

1.13%

1.46%

LOAN DATA:

Mortgage loans:

Residential

$

1,308,635

$

1,386,326

Commercial

1,253,542

1,180,147

Multi-family

564,147

387,189

Construction

114,817

125,191

Total mortgage loans

3,241,141

3,078,853

Commercial loans

849,009

755,487

Consumer loans

560,970

569,597

Total gross loans

$

4,651,120

$

4,403,937

Premium on purchased loans

5,823

6,771

Unearned discounts

(100)

(104)

Net deferred

(3,334)

(791)

Total loans

$

4,653,509

$

4,409,813

Notes

(1) Efficiency Ratio Calculation

Three Months Ended

Year Ended

December 31,

December 31,

2011

2010

2011

2010

Net interest income

$

53,911

$

53,021

215,990

208,965

Non-interest income

8,677

7,767

32,542

31,552

Total income:

$

62,588

$

60,788

248,532

240,517

Non-interest expense:

$

36,209

$

35,974

142,446

138,748

Expense/income:

$

57.85%

$

59.18%

57.31%

57.69%

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Net Interest Margin Analysis

Quarterly Average Balances

(Unaudited) (Dollars in Thousands)

December 31, 2011

September 30, 2011

Average

Average

Average

Average

Balance

Interest

Yield

Balance

Interest

Yield

Interest-Earning Assets:

Deposits

$

60,052

$

38

0.25%

$

42,620

$

26

0.25%

Federal funds sold and

    other short-term investments      

1,423

0.01%

1,243

0.01%

Investment securities  (1)

348,128

2,991

3.45%

348,802

3,045

3.47%

Securities available for sale

1,313,249

7,295

2.22%

1,305,115

8,739

2.67%

Federal Home Loan Bank stock

38,099

394

4.11%

39,147

435

4.41%

Net loans (2)

.

    Total mortgage loans

3,175,644

39,306

4.90%

3,088,464

39,466

5.06%

    Total commercial loans

798,981

10,892

5.37%

773,807

11,010

5.60%

    Total consumer loans

553,755

6,348

4.55%

552,061

6,436

4.63%

 Total Net loans

4,528,380

56,546

4.94%

4,414,332

56,912

5.10%

 Total Interest-Earning Assets

$

6,289,331

$

67,264

4.24%

$

6,151,259

$

69,157

4.45%

Non-Interest Earning Assets:

Cash and due from banks      

89,835

85,021

Other assets

662,826

660,250

Total Assets

$

7,041,992

$

6,896,530

Interest-Bearing Liabilities:

Demand deposits

$

2,430,323

$

3,341

0.55%

$

2,277,126

$

3,788

0.66%

Savings deposits

882,074

543

0.24%

906,601

687

0.30%

Time deposits

1,151,708

4,229

1.46%

1,199,128

4,509

1.49%

Total Deposits

4,464,105

8,113

0.72%

4,382,855

8,984

0.81%

Borrowed funds

888,027

5,240

2.34%

907,055

5,717

2.50%

Total Interest-Bearing Liabilities

$

5,352,132

$

13,353

0.99%

$

5,289,910

$

14,701

1.10%

Non-Interest Bearing Liabilities

735,297

659,226

Total Liabilities

6,087,429

5,949,136

Stockholders' equity

954,563

947,394

Total Liabilities and Stockholders' Equity

7,041,992

$

6,896,530

Net interest income

$

53,911

$

54,456

Net interest rate spread

3.25%

3.35%

Net interest-earning assets

$

937,199

$

861,349

Net interest margin (3)

3.39%

3.50%

Ratio of interest-earning assets to

     total interest-bearing liabilities

1.18

x

1.16

x

(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.

12/31/11

9/30/11

6/30/11

3/31/11

12/31/10

4th Qtr.

3rd Qtr.

2nd Qtr.

1st Qtr.

4th Qtr.

Interest-Earning Assets:

Securities

2.44%

2.81%

3.01%

2.91%

2.80%

Net Loans

4.94%

5.10%

5.16%

5.24%

5.30%

   Total Interest-Earning Assets

4.24%

4.45%

4.56%

4.58%

4.56%

Interest-Bearing Liabilities:

Total Deposits

0.72%

0.81%

0.89%

0.92%

0.94%

Total Borrowings

2.34%

2.50%

2.65%

2.70%

2.92%

   Total Interest-Bearing Liabilities

0.99%

1.10%

1.19%

1.23%

1.29%

Interest Rate Spread

3.25%

3.35%

3.37%

3.35%

3.27%

Net Interest Margin

3.39%

3.50%

3.53%

3.51%

3.44%

Ratio of Interest-Earning Assets to Interest-Bearing Liabilities

1.18x

1.16x

1.15x

1.15x

1.15x

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Net Interest Margin Analysis

Average Year to Date Balances

(Unaudited) (Dollars in Thousands)

December 31, 2011

December 31, 2010

Average

Average

Average

Average

Balance

Interest

Yield

Balance

Interest

Yield

Interest-Earning Assets:

Deposits

$

47,727

$

119

0.25%

$

98,940

$

247

0.25%

Federal funds sold and

    other short-term investments      

1,457

0

0.01%

1,951

0.01%

Investment securities  (1)

345,528

12,160

3.52%

335,080

12,778

3.81%

Securities available for sale

1,302,233

34,393

2.64%

1,311,859

41,322

3.15%

Federal Home Loan Bank stock

38,259

1,764

4.61%

34,979

1,821

5.21%

Net loans (2)

.

.

    Total mortgage loans

3,102,662

158,731

5.08%

2,984,736

160,460

5.38%

    Total commercial loans

765,228

42,759

5.56%

719,722

41,427

5.76%

    Total consumer loans

555,235

25,793

4.64%

570,091

28,479

5.00%

 Total Net loans

4,423,125

227,283

5.11%

4,274,549

230,366

5.39%

 Total Interest-Earning Assets

$

6,158,329

$

275,719

4.46%

$

6,057,358

$

286,534

4.73%

Non-Interest Earning Assets:

Cash and due from banks      

77,823

79,024

Other assets

656,955

647,090

Total Assets

$

6,893,107

$

6,783,472

Interest-Bearing Liabilities:

Demand deposits

$

2,272,780

$

15,168

0.67%

$

2,096,259

$

18,369

0.88%

Savings deposits

899,020

2,971

0.33%

886,963

4,061

0.46%

Time deposits

1,213,292

18,413

1.52%

1,377,185

25,275

1.84%

Total Deposits

4,385,092

36,552

0.83%

4,360,407

47,705

1.09%

Borrowed funds

909,531

23,177

2.55%

939,311

29,864

3.18%

Total Interest-Bearing Liabilities

$

5,294,623

$

59,729

1.13%

$

5,299,718

$

77,569

1.46%

Non-Interest Bearing Liabilities

657,056

573,238

Total Liabilities

5,951,679

5,872,956

Stockholders' equity

941,428

910,516

Total Liabilities and Stockholders' Equity

6,893,107

$

6,783,472

Net interest income

$

215,990

$

208,965

Net interest rate spread

3.33%

3.27%

Net interest-earning assets

$

863,706

$

757,640

Net interest margin (3)

3.49%

3.45%

Ratio of interest-earning assets to

     total interest-bearing liabilities

1.16

x

1.14

x

(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 year ended net interest margin for the previous three years.

Year Ended

12/31/11

12/31/10

12/31/09

Interest-Earning Assets:

Securities

2.79%

3.15%

3.66%

Net Loans

5.11%

5.39%

5.43%

  Total Interest-Earning Assets

4.46%

4.73%

4.95%

Interest-Bearing Liabilities:

Total Deposits

0.83%

1.09%

1.79%

Total Borrowings

2.55%

3.18%

3.50%

  Total Interest-Bearing Liabilities

1.13%

1.46%

2.13%

Interest Rate Spread

3.33%

3.27%

2.82%

Net Interest Margin

3.49%

3.45%

3.06%

Ratio of Interest-Earning Assets to Interest-Bearing Liabilities

1.16x

1.14x

1.13x

SOURCE Provident Financial Services, Inc.



RELATED LINKS

http://www.providentnj.com