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

JERSEY CITY, N.J., Oct. 28, 2011 /PRNewswire/ -- Provident Financial Services, Inc. (NYSE: PFS) (the "Company") reported net income of $15.6 million, or $0.27 per basic and diluted share for the quarter ended September 30, 2011, compared to net income of $13.5 million, or $0.24 per basic and diluted share for the quarter ended September 30, 2010.  

For the nine months ended September 30, 2011, the Company reported net income of $42.5 million, or $0.75 per basic and diluted share, compared to net income of $37.6 million, or $0.66 per basic and diluted share for the same period last year.  

The third quarter and year-to-date results for the period ended September 30, 2011 continued to benefit from lower funding costs, with net interest income increasing $1.4 million and $6.1 million, respectively, compared with the same periods in 2010.  The provision for loan losses decreased $1.1 million and $3.7 million for the three and nine months ended September 30, 2011, respectively, compared with the same periods in 2010.  These improvements were partially offset by increases in non-interest expense of $872,000 and $3.5 million for the three and nine month period ended September 30, 2011, respectively, compared with the same periods in 2010.

Christopher Martin, Chairman, President and Chief Executive Officer, commented:  "We are pleased with our third quarter and year-to-date results, as we were able to achieve these record earnings in an uncertain and challenging environment.  Our net interest income hit a historic high, while costs remained relatively contained.  In August, we closed on the Beacon Trust acquisition which added new wealth management clients and strong relationships with $1.3 billion in assets under management, and contributed to a related improvement in our non-interest income.  

Organic growth in our loan portfolio and core deposits also helped drive our operating results.  Loan originations of $1.0 billion contributed to an increase in loans outstanding of 3.6% year to date, and the pipeline remains consistent as we garner new relationships from larger financial institutions.  Core deposits grew 8.2% for the year and represented 76.8% of total deposits at September 30, 2011."  

Martin noted: "Despite these successes, with consumer sentiment hitting its lowest level since 1980, an anemic job market and a protracted foreclosure process in New Jersey, we remain cautious in the near term.  As a result, we continued to commensurately provide for possible loan losses during the quarter."

Declaration of Quarterly Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.12 per common share payable on November 30, 2011, to stockholders of record as of the close of business on November 15, 2011.

Balance Sheet Summary

Total assets increased $172.3 million, or 2.5%, to $7.00 billion at September 30, 2011, from $6.82 billion at December 31, 2010, due primarily to increases in net loans and cash and cash equivalents, partially offset by a decline in securities available for sale.  

Cash and cash equivalents increased $71.8 million to $124.0 million at September 30, 2011, from $52.2 million at December 31, 2010.  These cash balances are expected to be deployed to fund loan originations and investment purchases and repay maturing borrowings.

Total investments decreased $67.9 million, or 3.9%, during the nine months ended September 30, 2011.  The decrease was primarily due to principal repayments on mortgage-backed securities and maturities and calls of Agency and municipal securities.  

The Company's net loans increased $153.5 million, or 3.5%, to $4.49 billion at September 30, 2011, from $4.34 billion at December 31, 2010.  Loan originations totaled $1.0 billion and loan purchases totaled $69.0 million for the nine months ended September 30, 2011.  The loan portfolio had net increases of $109.8 million in multi-family mortgage loans, $58.6 million in commercial loans and $56.2 million in commercial mortgage loans, partially offset by net decreases of $38.4 million in residential mortgage loans, $15.9 million in consumer loans and $9.9 million in construction loans.  Commercial real estate, commercial and construction loans represented 58.3% of the loan portfolio at September 30, 2011, compared to 55.6% at December 31, 2010.

At September 30, 2011, the Company's unfunded loan commitments totaled $793.7 million, including $299.9 million in commercial loan commitments, $114.6 million in commercial mortgage commitments and $84.4 million in construction loan commitments.  Unfunded loan commitments at June 30, 2011 were $804.1 million.

Foreclosed assets increased $4.0 million, to $6.9 million at September 30, 2011, from $2.9 million at December 31, 2010. Foreclosed assets consisted of $5.3 million of residential properties, $798,000 of commercial real estate and $794,000 of marine vessels at September 30, 2011.

Total deposits increased $196.6 million, or 4.0%, during the nine months ended September 30, 2011 to $5.07 billion.  Core deposits, consisting of savings and demand deposit accounts, increased $296.0 million, or 8.2%, to $3.90 billion at September 30, 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 $99.4 million, or 7.8%, to $1.18 billion at September 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 76.8% of total deposits at September 30, 2011, compared to 73.8% at December 31, 2010.    

Borrowed funds were reduced $57.1 million, or 5.9% during the nine months ended September 30, 2011, to $912.6 million, as wholesale funding was replaced with core deposit growth.  Borrowed funds represented 13.0% of total assets at September 30, 2011, a reduction from 14.2% at December 31, 2010.

Stockholders' equity increased $27.7 million, or 3.0% during the nine months ended September 30, 2011, to $949.4 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 nine months ended September 30, 2011 totaled 242,000 shares at an average cost of $11.89 per share.  At September 30, 2011, 2.0 million shares remained eligible for repurchase under the current authorization.  At September 30, 2011, book value per share and tangible book value per share were $15.81 and $9.79, 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 September 30, 2011 was 3.50%, a decrease of 3 basis points from 3.53% for the quarter ended June 30, 2011, and unchanged from the same period last year.  Reductions in funding costs attributable to continued growth in lower-costing core and non-interest bearing deposits, favorable liability re-pricing and deployment of excess liquidity largely offset the impact of reductions in earning asset yields.  The weighted average yield on interest-earning assets was 4.45% for the three months ended September 30, 2011, compared with 4.56% for the trailing quarter, and 4.74% for the three months ended September 30, 2010.  The weighted average cost of interest-bearing liabilities was 1.10% for the quarter ended September 30, 2011, compared with 1.19% for the trailing quarter and 1.42% for the third quarter of 2010.  The average cost of interest-bearing deposits for the three months ended September 30, 2011 was 0.81%, compared with 0.89% for the trailing quarter and 1.05% for the same period last year.  Average non-interest-bearing deposits totaled $605.8 million for the three months ended September 30, 2011, compared with $580.5 million for the trailing quarter and $529.6 million for the same period last year.  The average cost of borrowings for the three months ended September 30, 2011 was 2.50%, compared with 2.65% for the trailing quarter, and 3.15% for the same period last year.  

For the nine months ended September 30, 2011, the net interest margin increased 6 basis points to 3.51%, compared with 3.45% for the nine months ended September 30, 2010.  The weighted average yield on interest-earning assets declined 25 basis points to 4.53% for the nine months ended September 30, 2011, compared with 4.78% for the nine months ended September 30, 2010, however the weighted average cost of interest-bearing liabilities declined 34 basis points to 1.18% for the nine months ended September 30, 2011, compared with 1.52% for the same period in 2010.  The average cost of interest-bearing deposits for the nine months ended September 30, 2011 was 0.87%, compared with 1.15% for the same period last year.  Average non-interest-bearing deposits totaled $580.8 million for the nine months ended September 30, 2011, compared with $518.9 million for the same period last year.  The average cost of borrowings for the nine months ended September 30, 2011 was 2.62%, compared with 3.26% for the same period last year.

Non-Interest Income

Non-interest income totaled $8.7 million for the quarter ended September 30, 2011, an increase of $847,000 compared to the same period in 2010.  Fee income for the quarter ended September 30, 2011 totaled $6.6 million, an increase of $614,000 compared to the same period in 2010, primarily due to increased revenue from annuity sales, and an increase in wealth management fees attributable to the August 11, 2011 acquisition of Beacon Trust Company and Beacon Global Asset Management ("Beacon").  Additionally, net gains on securities transactions for the quarter ended September 30, 2011 totaled $658,000, an increase of $642,000 compared to the same period in 2010.  These increases were offset by a decrease in other income of $395,000 for the three month period ended September 30, 2011, compared to the same period last year, as lower loan sales activity resulted in a reduction in realized gains on sale.

For the nine months ended September 30, 2011, non-interest income totaled $23.9 million, an increase of $80,000, or 0.3%, compared to the same period in 2010.  Other income increased $460,000 for the nine months ended September 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.  Also, fee income totaled $18.1 million for the nine months ended September 30, 2011, an increase of $415,000 compared with the same period in 2010, largely due to increased revenue from annuity sales, along with an increase in wealth management fees related to the Beacon acquisition.  Partially offsetting these increases, income related to Bank-owned life insurance decreased $516,000 for the nine month period ended September 30, 2011, compared to the same period last year, due to the receipt of policy claim proceeds in the second quarter of 2010.  Additionally, net gains on securities transactions declined $147,000 for the nine months ended September 30, 2011, compared with the same period in 2010.  These net gains on securities transactions totaled $686,000 for the nine months ended September 30, 2011, compared with net gains of $833,000 for the same period in 2010.  The Company recognized net other-than-temporary impairment charges of $302,000 and $170,000 during the nine months ended September 30, 2011 and September 30, 2010, respectively, related to an investment in a non-Agency mortgage-backed security.  

Non-Interest Expense

For the three months ended September 30, 2011, non-interest expense increased $872,000, or 2.6%, to $35.0 million, compared to $34.1 million for the three months ended September 30, 2010.  Compensation and benefits expense increased $1.5 million for the three months ended September 30, 2011, compared with the same period in 2010, as a result of higher salary expense due 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.  Net occupancy expense increased $402,000, to $5.3 million for the three months ended September 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.  Approximately $125,000 in damages attributable to Hurricane Irene were also included in occupancy expense for the third quarter of 2011.  In addition, data processing expense increased $207,000 for the three months ended September 30, 2011, compared to same period in 2010.  Partially offsetting these increases, FDIC insurance expense decreased $514,000, to $1.3 million for the three months ended September 30, 2011, compared with $1.8 million for the same period in 2010, due to the change in assessment methodology from deposit-based to one which is based upon assets.  Other operating expenses also decreased $337,000 for the quarter ended September 30, 2011, compared with the same period last year and advertising and promotions expense declined $214,000.  Amortization of intangibles decreased $134,000 for the three months ended September 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 nine months ended September 30, 2011 was $106.2 million.  Non-interest expense increased $3.5 million, or 3.4%, from $102.8 million for the nine months ended September 30, 2010.  Compensation and benefits expense increased $3.9 million, to $56.5 million for the nine months ended September 30, 2011 compared to $52.6 million for the nine month period ended September 30, 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 $869,000, to $15.8 million, compared to $14.9 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.  Approximately $125,000 in damages attributable to Hurricane Irene were also included in occupancy expense for the nine months ended September 30, 2011.  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.  Data processing expense totaled $7.0 million for the nine months ended September 30, 2011, compared to $6.7 million for the same period in 2010.  The $295,000 increase is primarily due to higher software maintenance and core processing fees.  Partially offsetting these increases, FDIC insurance expense decreased $1.2 million to $4.5 million for the nine months ended September 30, 2011, compared with $5.7 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 $652,000 for the nine months ended September 30, 2011, compared with the same period of 2010, as a result of scheduled reductions in core deposit intangible amortization.  Advertising and promotions expense decreased $318,000 for the nine months ended September 30, 2011, compared with the same period last year and other operating expenses decreased $241,000 for the nine months ended September 30, 2011, compared with the same period last year.

Asset Quality

Total non-performing loans at September 30, 2011 were $125.3 million, or 2.74% of total loans, compared with $121.3 million, or 2.72% of total loans at June 30, 2011, $97.3 million, or 2.21% of total loans at December 31, 2010, and $103.5 million, or 2.38% of total loans at September 30, 2010.  The $4.0 million increase in non-performing loans at September 30, 2011, compared with the trailing quarter, consisted of a $3.6 million increase in commercial mortgages, a $1.4 million increase in residential loans and a $1.1 million increase in consumer loans, partially offset by a $1.8 million decrease in commercial loans, a $204,000 decrease in multi-family mortgages, and a $131,000 decrease in construction loans.  At September 30, 2011, impaired loans totaled $105.1 million with related specific reserves of $6.6 million, compared with impaired loans totaling $82.3 million with related specific reserves of $3.0 million at June 30, 2011.  At September 30, 2011, the Company's allowance for loan losses was 1.61% of total loans, compared with 1.62% of total loans at June 30, 2011, 1.56% of total loans at December 31, 2010 and 1.58% of total loans at September 30, 2010.  

The Company recorded provisions for loan losses of $7.5 million and $22.9 million for the three and nine months ended September 30, 2011, respectively, compared with provisions of $8.6 million and $26.6 million for the three and nine months ended September 30, 2010, respectively.  For the three and nine months ended September 30, 2011, the Company had net charge-offs of $6.1 million and $18.0 million, respectively, compared with net charge-offs of $1.3 million and $18.6 million, respectively, for the same periods in 2010.  The allowance for loan losses increased $4.9 million to $73.7 million at September 30, 2011, from $68.7 million at December 31, 2010.  At September 30, 2011, the Company held $6.9 million of foreclosed assets, compared with $2.9 million at December 31, 2010.      

Income Tax Expense

For the three months ended September 30, 2011, the Company's income tax expense was $5.1 million, compared with $4.7 million for the same period in 2010.  For the nine months ended September 30, 2011, the Company's income tax expense was $14.3 million, compared with $12.8 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 24.6% and 25.2%, respectively, for the three and nine months ended September 30, 2011, compared with 25.9% and 25.4% for the three and nine months ended September 30, 2010, respectively.  The effective tax rates for the 2011 periods were favorably affected by the reduction of a valuation allowance against subsidiary company New Jersey state net operating losses, partially offset by an increase in the projected effective rate attributable to an increase in estimated taxable income for the full year of 2011.

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, October 28, 2011 regarding highlights of the Company's third 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

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

(Dollars in Thousands)










Assets



September 30,

2011


December 31,

2010







Cash and due from banks


$

122,666

$

51,345

Short-term investments



1,350


884




Total cash and cash equivalents



124,016


52,229










Securities available for sale, at fair value



1,305,160


1,378,927

Investment securities held to maturity (fair value of $366,310 at







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



351,385


346,022

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



38,827


38,283







Loans



4,568,220


4,409,813


Less allowance for loan losses



73,655


68,722




Net loans



4,494,565


4,341,091










Foreclosed assets, net



6,889


2,858

Banking premises and equipment held for sale



9,940


Banking premises and equipment, net



65,363


74,257

Accrued interest receivable



23,061


25,257

Intangible assets



361,524


354,220

Bank-owned life insurance



140,766


136,768

Other assets



75,863


74,616




Total assets


$

6,997,359

$

6,824,528







Liabilities and Stockholders' Equity















Deposits:







Demand deposits


$

3,012,151

$

2,706,204


Savings deposits



883,318


893,268


Certificates of deposit of $100,000 or more



399,988


412,155


Other time deposits



778,836


866,107




Total deposits



5,074,293


4,877,734







Mortgage escrow deposits



20,346


19,558

Borrowed funds



912,567


969,683

Other liabilities



40,756


35,866




Total liabilities



6,047,962


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







shares issued and 60,032,698 outstanding at September 30, 2011, and 59,921,065 outstanding at December 31, 2010



832


832

Additional paid-in capital



1,019,462


1,017,315

Retained earnings



353,787


332,472

Accumulated other comprehensive income



17,984


14,754

Treasury stock



(386,163)


(385,094)

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



(56,505)


(58,592)

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



(7,413)


(7,482)

Deferred Compensation - DDFP



7,413


7,482




Total stockholders' equity



949,397


921,687




Total liabilities and stockholders' equity


$

6,997,359

$

6,824,528





PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Income

Three and Nine months ended September 30, 2011 and 2010 (Unaudited)

(Dollars in Thousands, except per share data)







Three Months Ended


Nine Months Ended






September 30,


September 30,






2011


2010


2011


2010

Interest income:










Real estate secured loans

$

39,466

$

40,426

$

119,425

$

120,360


Commercial loans


11,010


10,457


31,867


30,964


Consumer loans


6,436


7,085


19,445


21,487


Securities available for sale and FHLB-NY stock


9,174


10,683


28,468


33,649


Investment securities


3,045


3,166


9,169


9,633


Deposits, Federal funds sold and other short-term investments


26


80


81


222



Total interest income


69,157


71,897


208,455


216,315










Interest expense:











Deposits


8,984


11,571


28,439


37,341


Borrowed funds


5,717


7,291


17,937


23,030



Total interest expense


14,701


18,862


46,376


60,371



Net interest income


54,456


53,035


162,079


155,944










Provision for loan losses


7,500


8,600


22,900


26,600



Net interest income after provision for loan losses


46,956


44,435


139,179


129,344










Non-interest income:










Fees


6,631


6,017


18,052


17,637


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


1,274


1,288


3,998


4,514


Net gain on securities transactions


658


16


686


833


Other income


87


482


1,431


971



Total non-interest income


8,650


7,803


23,865


23,785










Non-interest expense:










Compensation and employee benefits


19,226


17,764


56,476


52,589


Net occupancy expense


5,286


4,884


15,811


14,942


Data processing expense


2,381


2,174


6,994


6,699


FDIC Insurance


1,319


1,833


4,483


5,667


Amortization of intangibles


708


842


2,314


2,966


Impairment of premises and equipment




807



Advertising and promotion expense


823


1,037


2,605


2,923


Other operating expenses


5,210


5,547


16,747


16,988



Total non-interest expenses


34,953


34,081


106,237


102,774












Income before income tax expense


20,653


18,157


56,807


50,355

Income tax expense


5,087


4,694


14,333


12,765



Net income

$

15,566

$

13,463

$

42,474

$

37,590










Basic earnings per share

$

0.27

$

0.24

$

0.75

$

0.66

Average basic shares outstanding


56,926,131


56,610,647


56,847,975


56,533,545










Diluted earnings per share

$

0.27

$

0.24

$

$0.75

$

0.66

Average diluted shares outstanding


56,941,715


56,610,647


56,860,371


56,533,545





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



Nine Months Ended






September 30,



September 30,






2011



2010



2011



2010

STATEMENTS OF INCOME:












Net interest income

$

54,456


$

53,035


$

162,079


$

155,944

Provision for loan losses


7,500



8,600



22,900



26,600

Non-interest income


8,650



7,803



23,865



23,785

Non-interest expense


34,953



34,081



106,237



102,774

Income before income tax expense


20,653



18,157



56,807



50,355

Net income

$

15,566


$

13,463


$

42,474


$

37,590

Basic and diluted earnings per share


$0.27



$0.24



$0.75



$0.66

Interest rate spread


3.35%



3.32%



3.35%



3.26%

Net interest margin


3.50%



3.50%



3.51%



3.45%
















PROFITABILITY:












Annualized return on average assets


0.90%



0.79%



0.83%



0.74%

Annualized return on average equity


6.52%



5.81%



6.06%



5.55%

Annualized non-interest expense to average assets


2.01%



2.00%



2.08%



2.03%

Efficiency ratio (1)


55.39%



56.02%



57.13%



57.18%
















ASSET QUALITY:












Non-accrual loans







$

125,333


$

103,510

90+ and still accruing










Non-performing loans








125,333



103,510

Foreclosed assets








6,889



5,682

Non-performing assets








132,222



109,192

Non-performing loans to total loans








2.74%



2.38%

Non-performing assets to total assets








1.89%



1.61%

Allowance for loan losses







$

73,655


$

68,764

Allowance for loan losses to total non-performing loans








58.77%



66.43%

Allowance for loan losses to total loans








1.61%



1.58%
















AVERAGE BALANCE SHEET DATA:












Assets

$

6,896,530


$

6,768,690


$

6,842,934


$

6,769,162

Loans, net


4,414,332



4,252,198



4,387,655



4,266,402

Earnings assets


6,151,259



6,044,710



6,114,182



6,040,489

Core deposits


3,789,544



3,520,564



3,705,231



3,468,413

Borrowings


907,055



917,076



916,777



943,390

Interest-bearing liabilities


5,289,910



5,271,933



5,275,243



5,299,019

Stockholders' equity


947,394



919,077



937,002



905,150

Average yield on interest-earning assets


4.45%



4.74%



4.53%



4.78%

Average cost on interest-bearing liabilities


1.10%



1.42%



1.18%



1.52%
















LOAN DATA:












Mortgage loans:













Residential







$

1,347,973


$

1,413,877


Commercial








1,236,370



1,174,222


Multi-family








497,025



305,861


Construction








115,251



133,988

Total mortgage loans








3,196,619



3,027,948


Commercial loans








814,112



741,367


Consumer loans








553,670



568,533

Total gross loans







$

4,564,401


$

4,337,848


Premium on purchased loans








6,320



7,163


Unearned discounts








(107)



(126)


Net deferred








(2,394)



(228)

Total loans







$

4,568,220


$

4,344,657






PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY


Net Interest Margin Analysis


Quarterly Average Balances


(Unaudited) (Dollars in Thousands)






















September 30, 2011




June 30, 2011





Average




Average




Average




Average





Balance


Interest


Yield




Balance


Interest


Yield


Interest-Earning Assets:

















Deposits

$

42,620

$

26


0.25%



$

73,158

$

46


0.25%



Federal funds sold and

















    other short-term investments      


1,243



0.01%




1,822



0.01%



Investment securities  (1)


348,802


3,045


3.47%




342,397


3,031


3.54%



Securities available for sale


1,305,115


8,739


2.67%




1,256,565


9,390


2.99%



Federal Home Loan Bank stock


39,147


435


4.41%




38,796


410


4.24%



Net loans   (2)

















    Total mortgage loans


3,088,464


39,466


5.06%




3,069,062


39,669


5.14%



    Total commercial loans


773,807


11,010


5.60%




770,523


10,775


5.57%



    Total consumer loans


552,061


6,436


4.63%




554,861


6,490


4.69%



 Total net loans


4,414,332


56,912


5.10%




4,394,446


56,934


5.16%



 Total Interest-Earning Assets

$

6,151,259

$

69,157


4.45%



$

6,107,184

$

69,811


4.56%



















Non-Interest Earning Assets:

















Cash and due from banks      


85,021








70,737







Other assets


660,250








654,156







Total Assets

$

6,896,530







$

6,832,077























Interest-Bearing Liabilities:

















Demand deposits

$

2,277,126

$

3,788


0.66%



$

2,212,531

$

4,041


0.73%



Savings deposits


906,601


687


0.30%




911,340


870


0.38%



Time deposits


1,199,128


4,509


1.49%




1,233,622


4,714


1.53%



Total Deposits


4,382,855


8,984


0.81%




4,357,493


9,625


0.89%




















Borrowed funds


907,055


5,717


2.50%




909,916


6,010


2.65%



Total Interest-Bearing Liabilities

$

5,289,910

$

14,701


1.10%



$

5,267,409

$

15,635


1.19%



















Non-Interest Bearing Liabilities


659,226








629,547







Total Liabilities


5,949,136








5,896,956







Stockholders' equity


947,394








935,121







Total Liabilities and Stockholders'   Equity


6,896,530







$

6,832,077























Net interest income



$

54,456







$

54,176






















Net interest rate spread






3.35%








3.37%


Net interest-earning assets

$

861,349







$

839,775
























Net interest margin   (3)






3.50%








3.53%


Ratio of interest-earning assets to
















     total interest-bearing liabilities


1.16

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.

















9/30/11


6/30/11


3/31/11


12/31/10


9/30/10




3rd Qtr.


2nd Qtr.


1st Qtr.


4th Qtr.


3rd Qtr.

Interest-Earning Assets:












Securities



2.81%


3.01%


2.91%


2.80%


3.11%

Net Loans



5.10%


5.16%


5.24%


5.30%


5.42%

   Total Interest-Earning Assets



4.45%


4.56%


4.58%


4.56%


4.74%













Interest-Bearing Liabilities:












Total Deposits



0.81%


0.89%


0.92%


0.94%


1.05%

Total Borrowings



2.50%


2.65%


2.70%


2.92%


3.15%

   Total Interest-Bearing Liabilities



1.10%


1.19%


1.23%


1.29%


1.42%













Interest Rate Spread



3.35%


3.37%


3.35%


3.27%


3.32%

Net Interest Margin



3.50%


3.53%


3.51%


3.44%


3.50%













Ratio of Interest-Earning Assets to Interest-Bearing Liabilities

1.16x


1.15x


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)




















September 30, 2011




September 30, 2010





Average



Average




Average



Average





Balance


Interest

Yield




Balance


Interest

Yield

Interest-Earning Assets:














Deposits

$

43,573

$

81

0.25%



$

118,380

$

222

0.25%


Federal funds sold and














    other short-term investments      


1,468


0

0.01%




2,384


0.01%


Investment securities  (1)


344,651


9,169

3.55%




333,367


9,633

3.85%


Securities available for sale


1,298,521


27,098

2.78%




1,285,272


32,405

3.36%


Federal Home Loan Bank stock


38,314


1,370

4.78%




34,684


1,244

4.80%


Net loans   (2)














    Total mortgage loans


3,078,068


119,425

5.15%




2,978,981


120,360

5.39%


    Total commercial loans


753,854


31,867

5.61%




716,370


30,964

5.78%


    Total consumer loans


555,733


19,445

4.68%




571,051


21,487

5.03%


 Total net loans


4,387,655


170,737

5.17%




4,266,402


172,811

5.41%


 Total Interest-Earning Assets

$

6,114,182

$

208,455

4.53%



$

6,040,489

$

216,315

4.78%
















Non-Interest Earning Assets:














Cash and due from banks      


73,775







78,556





Other assets


654,977







650,117





Total Assets

$

6,842,934






$

6,769,162



















Interest-Bearing Liabilities:














Demand deposits

$

2,219,689

$

11,827

0.71%



$

2,063,915

$

14,172

0.92%


Savings deposits


904,731


2,423

0.36%




885,575


3,172

0.48%


Time deposits


1,234,046


14,189

1.54%




1,406,139


19,997

1.90%


Total Deposits


4,358,466


28,439

0.87%




4,355,629


37,341

1.15%

















Borrowed funds


916,777


17,937

2.62%




943,390


23,030

3.26%


  Total Interest-Bearing Liabilities

$

5,275,243

$

46,376

1.18%



$

5,299,019

$

60,371

1.52%
















Non-Interest Bearing Liabilities


630,689







564,993





Total Liabilities


5,905,932







5,864,012





Stockholders' equity


937,002







905,150





Total Liabilities and Stockholders' Equity

6,842,934






$

6,769,162



















Net interest income



$

162,079






$

155,944

















Net interest rate spread





3.35%







3.26%

Net interest-earning assets

$

838,939






$

741,470



















Net interest margin   (3)





3.51%







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
















Nine Months Ended








9/30/11


9/30/10


9/30/09





Interest-Earning Assets:












Securities



2.91%


3.27%


3.76%





Net Loans



5.17%


5.41%


5.44%





   Total Interest-Earning Assets



4.53%


4.78%


5.00%

















Interest-Bearing Liabilities:












Total Deposits



0.87%


1.15%


1.90%





Total Borrowings



2.62%


3.26%


3.52%





   Total Interest-Bearing Liabilities



1.18%


1.52%


2.24%

















Interest Rate Spread



3.35%


3.26%


2.76%





Net Interest Margin



3.51%


3.45%


3.02%

















Ratio of Interest-Earning Assets to Interest-Bearing Liabilities

1.16x


1.14x


1.13x




















SOURCE Provident Financial Services, Inc.



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