2014

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

JERSEY CITY, N.J., July 29, 2011 /PRNewswire/ -- Provident Financial Services, Inc. (NYSE: PFS) (the "Company") reported net income of $14.0 million, or $0.25 per basic and diluted share for the quarter ended June 30, 2011, compared to net income of $12.9 million, or $0.23 per basic and diluted share for the quarter ended June 30, 2010.  

For the six months ended June 30, 2011, the Company reported net income of $26.9 million, or $0.47 per basic and diluted share, compared to net income of $24.1 million, or $0.43 per basic and diluted share for the same period last year.  

The second quarter and year-to-date results for the period ended June 30, 2011 continued to benefit from lower funding costs, with net interest income increasing $2.0 million and $4.7 million, respectively, compared with the same periods in 2010.  The provision for loan losses decreased $1.5 million and $2.6 million for the three and six months ended June 30, 2011, respectively, compared with the same periods in 2010.  These improvements were partially offset by increases in non-interest expense of $2.0 million and $2.6 million for the three and six month period ended June 30, 2011, respectively, compared with the same periods in 2010.

Christopher Martin, Chairman, President and Chief Executive Officer, commented: "The improvement in our current quarter's earnings of more than 8% reaffirms our belief that we can produce solid, consistent results in a challenging environment.  The increase in our earnings was driven primarily by lower funding costs and reduced loan loss provisions, as early stage delinquencies have declined."  Martin continued: "With unemployment in New Jersey hovering near 9.5%, any potential growth for small businesses will be constrained, and economic uncertainty will continue to pressure consumers.  One year after the passage of the Dodd-Frank legislation, the outlook for the banking industry remains clouded and complex, affecting customers and competitors alike.  On a more positive note, we look forward to completing the acquisition of Beacon Trust Company in the coming quarter to further expand our customer base, while continuing to diversify our earnings sources."

Declaration of Quarterly Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.12 per common share payable on August 31, 2011, to stockholders of record as of the close of business on August 15, 2011.

Balance Sheet Summary

Total assets increased $55.0 million, or 0.8%, to $6.88 billion at June 30, 2011, from $6.82 billion at December 31, 2010, due primarily to increases in cash and cash equivalents and net loans, partially offset by a decline in securities available for sale.  

Cash and cash equivalents increased $135.1 million to $187.3 million at June 30, 2011, from $52.2 million at December 31, 2010.  These cash balances will be deployed to fund loan originations and investment purchases.

Total investments decreased $125.5 million, or 7.1%, during the six months ended June 30, 2011.  The decrease was primarily due to principal repayments on mortgage-backed securities and maturities.  

The Company's net loans increased $40.5 million, or 0.9%, to $4.38 billion at June 30, 2011, from $4.34 billion at December 31, 2010.  Loan originations totaled $602.4 million and loan purchases totaled $59.0 million for the six months ended June 30, 2011.  The loan portfolio had net increases of $39.9 million in multi-family mortgage loans, $22.3 million in commercial mortgage loans and $42.2 million in commercial loans, partially offset by decreases of $34.4 million in construction loans, $14.0 million in consumer loans and $11.1 million in residential mortgage loans.  Commercial real estate, commercial and construction loans represented 56.6% of the loan portfolio at June 30, 2011, compared to 55.6% at December 31, 2010.

At June 30, 2011, the Company's unfunded loan commitments totaled $804.1 million, including $279.0 million in commercial loan commitments, $116.3 million in construction loan commitments and $97.0 million in commercial mortgage commitments.  Unfunded loan commitments at March 31, 2011 were $723.0 million.

Foreclosed assets increased $3.9 million, to $6.8 million at June 30, 2011, from $2.9 million at December 31, 2010. Foreclosed assets consisted of $4.4 million of residential properties, $1.2 million of commercial real estate and $1.2 million of marine vessels at June 30, 2011.

Total deposits increased $115.2 million, or 2.4%, during the six months ended June 30, 2011 to $4.99 billion.  Core deposits, consisting of savings and demand deposit accounts, increased $170.8 million, or 4.7%, to $3.77 billion at June 30, 2011.  The majority of the core deposit increase was in commercial and retail checking deposits, money market and savings deposits.  Time deposits decreased $55.6 million, or 4.3%, to $1.22 billion at June 30, 2011, with the majority of the decrease occurring in the 15-month and shorter maturity categories.  The Company remains focused on cultivating core deposit relationships, while strategically permitting the run-off of certain higher-cost time deposits.  Core deposits represented 75.5% of total deposits at June 30, 2011, compared to 73.8% at December 31, 2010.    

Borrowed funds were reduced $78.6 million, or 8.1% during the six months ended June 30, 2011, to $891.1 million, as wholesale funding was replaced with core deposit growth.  Borrowed funds represented 13.0% of total assets at June 30, 2011, a reduction from 14.2% at December 31, 2010.

Stockholders' equity increased $16.8 million, or 1.8% during the six months ended June 30, 2011 to $938.5 million, primarily due to net income earned for the period, offset by dividends paid to stockholders.   At June 30, 2011, book value per share and tangible book value per share were $15.63 and $9.76, respectively, compared with $15.38 and $9.47, respectively, at December 31, 2010.  

Results of Operations

Net Interest Margin

The Company's net interest margin for the quarter ended June 30, 2011 was 3.53%, which reflects increases of 2 basis points from 3.51% for the quarter ended March 31, 2011, and 5 basis points from 3.48% for the quarter ended June 30, 2010.  The increase in the net interest margin for the three months ended June 30, 2011, compared to the trailing quarter and the quarter ended June 30, 2010, was primarily attributable to decreases in the cost of interest-bearing liabilities.  The weighted average yield on interest-earning assets was 4.56% for the three months ended June 30, 2011, compared with 4.58% for the trailing quarter, and 4.81% for the three months ended June 30, 2010.  The weighted average cost of interest-bearing liabilities was 1.19% for the quarter ended June 30, 2011, compared with 1.23% for the trailing quarter and 1.51% for the second quarter of 2010.  The average cost of deposits for the three months ended June 30, 2011 was 0.89%, compared with 0.92% for the trailing quarter and 1.13% for the same period last year.  The average cost of borrowings for the three months ended June 30, 2011 was 2.65%, compared with 2.70% for the trailing quarter, and 3.27% for the same period last year.  

For the six months ended June 30, 2011, the net interest margin increased 10 basis points to 3.52%, compared with 3.42% for the six months ended June 30, 2010.  The weighted average yield on interest-earning assets declined 23 basis points to 4.57% for the six months ended June 30, 2011, compared with 4.80% for the six months ended June 30, 2010, however the weighted average cost of interest-bearing liabilities declined 37 basis points to 1.21% for the six months ended June 30, 2011, compared with 1.58% for the same period in 2010.  The average cost of deposits for the six months ended June 30, 2011 was 0.90%, compared with 1.19% for the same period last year.  The average cost of borrowings for the six months ended June 30, 2011 was 2.67%, compared with 3.32% for the same period last year.

Non-Interest Income

Non-interest income totaled $8.0 million for the quarter ended June 30, 2011, an increase of $70,000 compared to the same period in 2010.  Other income for the quarter ended June 30, 2011 totaled $1.2 million, an increase of $759,000 compared to the same period in 2010, primarily due to gains realized from increased loan sales.  This increase was offset by a decrease in income related to Bank-owned life insurance of $512,000 for the three month period ended June 30, 2011, compared to the same period last year, as a result of policy claim proceeds received in 2010.  Additionally, the Company recognized net other-than-temporary impairment charges on investment securities of $302,000 and $170,000 in the second quarter of 2011 and 2010, respectively, related to an investment in a non-Agency mortgage-backed security.  

For the six months ended June 30, 2011, non-interest income totaled $15.2 million, a decrease of $767,000, or 4.8%, compared to the same period in 2010.  Net gains on securities transactions declined $789,000 for the six months ended June 30, 2011, compared with the same period in 2010.  These net gains on securities transactions totaled $28,000 for the six months ended June 30, 2011, compared with net gains of $817,000 for the same period in 2010.  Current period activity was comprised of gains realized on the calls of securities, while the prior year period included gains realized on the sale of securities undertaken as part of the Company's interest rate risk management process.  Also, income related to Bank-owned life insurance decreased $502,000 for the six month period ended June 30, 2011, compared to the same period last year, due to the receipt of policy claim proceeds in the second quarter of 2010.  The Company recognized net other-than-temporary impairment charges of $302,000 and $170,000 during the six months ended June 30, 2011 and June 30, 2010, respectively.  Offsetting these declines, other income increased $855,000 for the six months ended June 30, 2011, compared with the same period in 2010, primarily as a result of an increase in gains resulting from a larger number of loan sales.

Non-Interest Expense

For the three months ended June 30, 2011, non-interest expense increased $2.0 million, or 5.9%, to $35.9 million, compared to $33.9 million for the three months ended June 30, 2010.  Compensation and benefits expense increased $1.5 million for the three months ended June 30, 2011, compared with the same period in 2010, as result of higher salary expense due to annual merit increases, an increased incentive compensation accrual, increased stock-based compensation expense resulting from the higher share price of the Company's common stock and increased employee health and medical costs.  In addition, other operating expenses increased $818,000 for the quarter ended June 30, 2011, compared with the same period last year, due to expenses associated with the resolution of non-performing assets.  Net occupancy expense increased $333,000, or 6.8%, to $5.3 million for the three months ended June 30, 2011, compared to $4.9 million for the same period in 2010, primarily due to expenses associated with the Company's consolidation of three facilities into its new administrative offices in April of this year.  Pending the sale of two of those facilities, certain carrying costs, including taxes and utilities, will continue to be incurred.  Partially offsetting these increases, FDIC insurance expense decreased $451,000, or 26.0% to $1.3 million for the three months ended June 30, 2011, compared with $1.7 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 $255,000 for the three months ended June 30, 2011, compared with the same period in 2010, as a result of scheduled reductions in core deposit intangible amortization.

Non-interest expense for the six months ended June 30, 2011 was $71.3 million.  Non-interest expense increased $2.6 million, or 3.8%, from $68.7 million for the six months ended June 30, 2010.  Compensation and benefits expense increased $2.4 million, or 7.0% to $37.3 million for the six months ended June 30, 2011 compared to $34.8 million for the six month period ended June 30, 2010, due to higher salary expense related to annual merit increases, increased stock-based compensation expense resulting from the higher share price of the Company's common stock and increased employee health and medical costs.  In addition, net occupancy expense increased $467,000, or 4.6% to $10.5 million, compared to $10.1 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 are pending sale.  The Company also recognized an $807,000 impairment charge in the first quarter of 2011, related to the anticipated sale and relocation of its former loan center.  Partially offsetting these increases, FDIC insurance expense decreased $670,000 to $3.2 million for the six months ended June 30, 2011, compared with $3.8 million for the same period in 2010.  The decrease was primarily due to a lower assessment rate charged on deposits 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 $518,000 for the six months ended June 30, 2011, compared with the same period of 2010, as a result of scheduled reductions in core deposit intangible amortization.

Asset Quality

Total non-performing loans at June 30, 2011 were $121.3 million, or 2.72% of total loans, compared with $114.6 million, or 2.57% of total loans at March 31, 2011, $97.3 million, or 2.21% of total loans at December 31, 2010, and $93.2 million, or 2.15% of total loans at June 30, 2010.  The $6.8 million increase in non-performing loans at June 30, 2011, compared with the trailing quarter, consisted of a $16.4 million increase in commercial mortgages and a $4.3 million increase in commercial loans, offset by decreases of $9.1 million and $3.9 million in non-performing commercial construction loans and residential mortgage loans, respectively.  At June 30, 2011, impaired loans totaled $82.3 million with related specific reserves of $3.0 million, compared with impaired loans totaling $67.8 million with related specific reserves of $5.2 million at March 31, 2011.  At June 30, 2011, the Company's allowance for loan losses was 1.62% of total loans, compared with 1.63% of total loans at March 31, 2011, 1.56% of total loans at December 31, 2010 and 1.42% of total loans at June 30, 2010.  

The Company recorded provisions for loan losses of $7.5 million and $15.4 million for the three and six months ended June 30, 2011, respectively, compared with provisions of $9.0 million and $18.0 million for the three and six months ended June 30, 2010, respectively.  For the three and six months ended June 30, 2011, the Company had net charge-offs of $7.9 million and $11.8 million, respectively, compared with net charge-offs of $6.5 million and $17.3 million, respectively, for the same periods in 2010.  The allowance for loan losses increased $3.6 million to $72.3 million at June 30, 2011, from $68.7 million at December 31, 2010.  At June 30, 2011, the Company held $6.8 million of foreclosed assets, compared with $2.9 million at December 31, 2010.      

Income Tax Expense

For the three months ended June 30, 2011, the Company's income tax expense was $4.8 million, compared with $4.2 million for the same period in 2010.  For the six months ended June 30, 2011, the Company's income tax expense was $9.2 million, compared with $8.1 million for the same period in 2010.  The increase in income tax expense was primarily attributable to higher pre-tax income. The Company's effective tax rates were 25.6% for both the three and six months ended June 30, 2011, compared with 24.7% and 25.1% for the three and six months ended June 30, 2010, respectively.  

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, July 29, 2011 regarding highlights of the Company's second quarter 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

June 30, 2011 (Unaudited) and December 31, 2010

(Dollars in Thousands)










Assets



June 30,

2011


December 31,

2010










Cash and due from banks


$

185,550


51,345

Short-term investments



1,739


884




Total cash and cash equivalents



187,289


52,229










Securities available for sale, at fair value



1,250,346


1,378,927

Investment securities held to maturity (fair value of $359,547) at







June 30, 2011 (unaudited) and $351,680 at December 31, 2010)



348,794


346,022

Federal Home Loan Bank stock



38,575


38,283










Loans





4,453,892


4,409,813


Less allowance for loan losses



72,294


68,722




Net loans



4,381,598


4,341,091










Foreclosed assets, net



6,803


2,858

Banking premises and equipment held for sale



9,940


Banking premises and equipment, net



66,058


74,257

Accrued interest receivable



24,008


25,257

Intangible assets




352,666


354,220

Bank-owned life insurance



139,492


136,768

Other assets





73,976


74,616




Total assets


$

6,879,545


6,824,528










Liabilities and Stockholders' Equity















Deposits:









Demand deposits


$

2,835,453


2,706,204


Savings deposits



934,815


893,268


Certificates of deposit of $100,000 or more



411,620


412,155


Other time deposits



811,075


866,107




Total deposits



4,992,963


4,877,734










Mortgage escrow deposits



22,554


19,558

Borrowed funds



891,128


969,683

Other liabilities



34,445


35,866




Total liabilities



5,941,090


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 60,034,454 outstanding at June 30, 2011, and 59,921,065 outstanding at December 31, 2010



832


832

Additional paid-in capital



1,019,135


1,017,315

Retained earnings



345,475


332,472

Accumulated other comprehensive income



15,608


14,754

Treasury stock





(385,394)


(385,094)

Unallocated common stock held by the Employee Stock Ownership Plan



(57,201)


(58,592)

Common Stock acquired by the Directors' Deferred Fee Plan



(7,436)


(7,482)

Deferred Compensation - Directors' Deferred Fee Plan



7,436


7,482




Total stockholders' equity



938,455


921,687




Total liabilities and stockholders' equity


$

6,879,545


6,824,528














PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Income

Three and six months ended June 30, 2011 and 2010 (Unaudited)

(Dollars in Thousands, except per share data)


















Three Months Ended


Six Months Ended






June 30,


June 30,






2011


2010


2011


2010

Interest income:










Real estate secured loans

$

39,669

$

40,220

$

79,959

$

79,934


Commercial loans


10,775


10,170


20,857


20,507


Consumer loans


6,490


7,126


13,009


14,402


Securities available for sale and Federal Home Loan Bank stock


9,800


11,205


19,294


22,966


Investment securities


3,031


3,218


6,124


6,467


Deposits, Federal funds sold and other short-term investments


46


72


55


142



Total interest income


69,811


72,011


139,298


144,418













Interest expense:











Deposits




9,625


12,264


19,455


25,770


Borrowed funds


6,010


7,606


12,220


15,739



Total interest expense


15,635


19,870


31,675


41,509



Net interest income


54,176


52,141


107,623


102,909













Provision for loan losses


7,500


9,000


15,400


18,000



Net interest income after provision for loan losses


46,676


43,141


92,223


84,909













Non-interest income:










Fees




5,859


5,918


11,421


11,620


Other-than-temporary impairment losses on securities


(1,661)


(3,116)


(1,661)


(3,116)


Portion of loss recognized in OCI (before taxes)


1,359


2,946


1,359


2,946


Net impairment losses recognized in earnings


(302)


(170)


(302)


(170)














Bank owned life insurance


1,316


1,828


2,724


3,226


Net gain on securities transactions


14



28


817


Other income


1,156


397


1,344


489



Total non-interest income


8,043


7,973


15,215


15,982













Non-interest expense:










Compensation and employee benefits


18,767


17,286


37,250


34,825


Net occupancy expense


5,251


4,918


10,525


10,058


Data processing expense


2,349


2,241


4,613


4,525


FDIC Insurance


1,284


1,735


3,164


3,834


Amortization of intangibles


766


1,021


1,606


2,124


Impairment of premises and equipment




807



Advertising and promotion expense


1,184


1,216


1,782


1,886


Other operating expenses


6,332


5,514


11,537


11,441



Total non-interest expenses


35,933


33,931


71,284


68,693



Income before income tax expense


18,786


17,183


36,154


32,198

Income tax expense


4,809


4,243


9,246


8,071



Net income

$

13,977

$

12,940

$

26,908

$

24,127













Basic earnings per share

$

0.25

$

0.23

$

0.47

$

0.43

Average basic shares outstanding


56,846,186


56,531,596


56,808,747


56,494,570













Diluted earnings per share

$

0.25

$

0.23

$

$0.47

$

0.43

Average diluted shares outstanding


56,867,788


56,531,596


56,819,547


56,494,570





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

Six Months Ended






June 30,



June 30,






2011



2010



2011



2010

STATEMENTS OF INCOME:












Net interest income


$

54,176


$

52,141


$

107,623


$

102,909

Provision for loan losses



7,500



9,000



15,400



18,000

Non-interest income



8,043



7,973



15,215



15,982

Non-interest expense



35,933



33,931



71,284



68,693

Income before income tax expense


18,786



17,183



36,154



32,198

Net income



$

13,977


$

12,940


$

26,908


$

24,127

Basic and diluted earnings per share


$0.25



$0.23



$0.47



$0.43

Interest rate spread



3.37%



3.30%



3.36%



3.22%

Net interest margin



3.53%



3.48%



3.52%



3.42%
















PROFITABILITY:













Annualized return on average assets


0.82%



0.77%



0.80%



0.72%

Annualized return on average equity


6.00%



5.75%



5.82%



5.42%

Annualized non-interest expense to average assets


2.11%



2.02%



2.11%



2.05%

Efficiency ratio (1)



57.75%



56.44%



58.03%



57.78%
















ASSET QUALITY:













Non-accrual loans








$

121,347


$

93,188

90+ and still accruing











Non-performing loans









121,347



93,188

Foreclosed assets









6,803



4,725

Non-performing assets









128,150



97,913

Non-performing loans to total loans








2.72%



2.15%

Non-performing assets to total assets








1.86%



1.43%

Allowance for loan losses








$

72,294


$

61,490

Allowance for loan losses to total non-performing loans








59.58%



65.98%

Allowance for loan losses to total loans








1.62%



1.42%
















AVERAGE BALANCE SHEET DATA:












Assets



$

6,832,077


$

6,744,427


$

6,815,692


$

6,769,403

Loans, net




4,394,446



4,261,290



4,374,096



4,273,621

Earnings assets



6,107,184



5,997,711



6,095,336



6,038,343

Core deposits



3,691,972



3,472,784



3,662,376



3,441,904

Borrowings




909,916



931,795



921,719



956,765

Interest-bearing liabilities



5,267,409



5,279,672



5,267,789



5,312,788

Stockholders'  equity



935,121



902,223



931,719



898,071

Average yield on interest-earning assets


4.56%



4.81%



4.57%



4.80%

Average cost on interest-bearing liabilities


1.19%



1.51%



1.21%



1.58%



































(1) Efficiency Ratio Calculation

















Three Months Ended



Six Months Ended






June 30,



June 30,






2011



2010



2011



2010


Net interest income


$

54,176


$

52,141


$

107,623


$

102,909


Non-interest income



8,043



7,973



15,215



15,982


Total income:


$

62,219


$

60,114


$

122,838


$

118,891

















Non-interest expense:


$

35,933


$

33,931


$

71,284


$

68,693

















Expense/income:



57.75%



56.44%



58.03%



57.78%





PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Net Interest Margin Analysis

Quarterly Average Balances

(Unaudited) (Dollars in Thousands)





















June 30, 2011



March 31, 2011





Average




Average



Average




Average





Balance


Interest


Yield



Balance


Interest


Yield

Interest-Earning Assets:















Deposits


$

73,158

$

46


0.25%


$

14,633

$

9


0.25%


Federal funds sold and















  other short-term investments


1,822



0.01%



1,341



0.01%


Investment securities (1)


342,397


3,031


3.54%



342,689


3,093


3.61%


Securities available for sale


1,256,565


9,390


2.99%



1,334,201


8,970


2.69%


Federal Home Loan Bank stock


38,796


410


4.24%



36,973


524


5.75%


Net loans (2)















Total mortgage loans


3,069,062


39,669


5.14%



3,076,548


40,290


5.24%


Total commercial loans


770,523


10,775


5.57%



716,603


10,082


5.66%


Total consumer loans


554,861


6,490


4.69%



560,369


6,519


4.72%


Total net loans


4,394,446


56,934


5.16 %



4,353,520


56,891


5.24%


Total Interest-Earning Assets

$

6,107,184

$

69,811


4.56%


$

6,083,357

$

69,487


4.58%

















Non-Interest Earning Assets:















Cash and due from banks


70,737







65,351






Other assets


654,156







650,416






Total Assets

$

6,832,077






$

6,799,124





















Interest-Bearing Liabilities:















Demand deposits

$

2,212,531

$

4,041


0.73%


$

2,168,211

$

3,998


0.75%


Savings deposits


911,340


870


0.38%



896,138


866


0.39%


Time deposits


1,233,622


4,714


1.53%



1,270,169


4,966


1.59%


Total Deposits


4,357,493


9,625


0.89%



4,334,518


9,830


0.92%


















Borrowed funds


909,916


6,010


2.65%



933,654


6,210


2.70%


Total Interest-Bearing Liabilities

$

5,267,409

$

15,635


1.19%


$

5,268,172

$

16,040


1.23%

















Non-Interest Bearing Liabilities


629,547







602,673






Total Liabilities


5,896,956







5,870,845






Stockholders' equity


935,121







928,279






Total Liabilities and Stockholders'

  Equity

6,832,077






$

6,799,124





















Net interest income



$

54,176






$

53,447



















Net interest rate spread






3.37%







3.35%

Net interest-earning assets

$

839,775






$

815,185





















Net interest margin (3)






3.53%







3.51%

Ratio of interest-earning assets to














  total interest-bearing liabilities


1.16

x






1.15

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.

















6/30/11


3/31/11


12/31/10


9/30/10


6/30/10




2nd Qtr.


1st Qtr.


4th Qtr.


3rd Qtr.


2nd Qtr.

Interest-Earning Assets:












Securities



3.01%


2.91%


2.80%


3.11%


3.34%

Net Loans



5.16%


5.24%


5.30%


5.42%


5.41%

Total Interest-Earning Assets



4.56%


4.58%


4.56%


4.74%


4.81%













Interest-Bearing Liabilities:












Total Deposits



0.89%


0.92%


0.94%


1.05%


1.13%

Total Borrowings



2.65%


2.70%


2.92%


3.15%


3.27%

Total Interest-Bearing Liabilities



1.19%


1.23%


1.29%


1.42%


1.51%













Interest Rate Spread



3.37%


3.35%


3.27%


3.32%


3.30%

Net Interest Margin



3.53%


3.51%


3.44%


3.50%


3.48%













Ratio of Interest-Earning Assets to  

  Interest-Bearing Liabilities

1.16x


1.15x


1.15x


1.15x


1.14x





PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Net Interest Margin Analysis

Average Year to Date Balances

(Unaudited) (Dollars in Thousands)



















June 30, 2011



June 30, 2010





Average



Average



Average



Average





Balance


Interest

Yield



Balance


Interest

Yield

Interest-Earning Assets:













Deposits

$

44,057

$

55

0.25%


$

114,171

$

142

0.25%


Federal funds sold and













  other short-term investments


1,582


0

0.01%



2,696


0.01%


Investment securities(1)


342,542


6,124

3.58%



333,610


6,467

3.88 %


Securities available for sale


1,295,169


18,359

2.83%



1,279,827


22,115

3.46%


Federal Home Loan Bank stock


37,890


935

4.97%



34,418


851

4.98%


Net loans (2)


.






.





Total mortgage loans


3,072,784


79,959

5.19%



2,977,167


79,934

5.39%


Total commercial loans


743,712


20,857

5.61%



722,080


20,507

5.73%


Total consumer loans


557,600


13,009

4.70%



574,374


14,402

5.06%


Total net loans


4,374,096


113,825

5.20 %



4,273,621


114,843

5.40%


Total Interest-Earning Assets

$

6,095,336

$

139,298

4.57%


$

6,038,343

$

144,418

4.80%















Non-Interest Earning Assets:













Cash and due from banks


68,059






74,016





Other assets


652,297






657,044





Total Assets

$

6,815,692





$

6,769,403


















Interest-Bearing Liabilities:













Demand deposits

$

2,190,494

$

8,039

0.74%


$

2,047,472

$

9,696

0.95%


Savings deposits


903,781


1,736

0.39%



880,925


2,159

0.49%


Time deposits


1,251,795


9,680

1.56%



1,427,626


13,915

1.97%


Total Deposits


4,346,070


19,455

0.90%



4,356,023


25,770

1.19%
















Borrowed funds


921,719


12,220

2.67%



956,765


15,739

3.32%


Total Interest-Bearing Liabilities

$

5,267,789

$

31,675

1.21%


$

5,312,788

$

41,509

1.58%















Non-Interest Bearing Liabilities


616,184






558,544





Total Liabilities


5,883,973






5,871,332





Stockholders' equity


931,719






898,071





Total Liabilities and Stockholders'

  Equity

6,815,692





$

6,769,403


















Net interest income



$

107,623





$

102,909
















Net interest rate spread





3.36%






3.22%

Net interest-earning assets

$

827,547





$

725,555


















Net interest margin(3)





3.52%






3.42%

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-to-date net interest margin for the previous three years.












Six Months Ended




6/30/11


6/30/10


6/30/09

Interest-Earning Assets:








Securities



2.96%


3.35%


3.95%

Net Loans



5.20%


5.40%


5.46%

Total Interest-Earning Assets



4.57%


4.80%


5.08%









Interest-Bearing Liabilities:








Total Deposits



0.90%


1.19%


1.99%

Total Borrowings



2.67%


3.32%


3.53%

Total Interest-Bearing Liabilities



1.21%


1.58%


2.33%









Interest Rate Spread



3.36%


3.22%


2.75%

Net Interest Margin



3.52%


3.42%


3.03%









Ratio of Interest-Earning Assets to

  Interest-Bearing Liabilities

1.16x


1.14x


1.13x



















SOURCE Provident Financial Services, Inc.



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