OREANDA-NEWS. Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $21.4 million, or $0.34 per basic and diluted share for the three months ended June 30, 2016, compared to net income of $21.8 million, or $0.35 per basic and diluted share for the three months ended June 30, 2015.  For the six months ended June 30, 2016, the Company reported net income of $42.3 million, or $0.67 per basic and diluted share, compared to net income of $41.6 million, or $0.66 per basic and diluted share for the same period last year. 

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

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

Christopher Martin, Chairman, President and Chief Executive Officer commented: “Commercial loan growth exceeded our expectations, which contributed nicely to record quarterly net interest income for the Company.  We continue to grow the loan portfolio while preserving our conservative credit standards.  Core deposit growth was strong during the quarter, improving our liquidity measures and serving as a better funding source for loan growth.  Asset quality metrics continued to improve and now stand at levels existing prior to the Great Recession.  All in, this was a solid quarter marked by consistent performance.” Martin continued:  “In pursuing further expansion of our eastern Pennsylvania franchise, we recently opened a loan production office in Montgomery County and the early reports are encouraging.”

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.18 per common share payable on August 31, 2016, to stockholders of record as of the close of business on August 15, 2016.

Balance Sheet Summary

Total assets increased $315.1 million to $9.23 billion at June 30, 2016, from $8.91 billion at December 31, 2015, primarily due to a $243.3 million increase in total loans and a $52.3 million increase in total investments.

The Company’s loan portfolio increased $243.3 million, or 3.7%, to $6.78 billion at June 30, 2016, from $6.54 billion at December 31, 2015.  Loan originations totaled $1.5 billion and loan purchases totaled $28.6 million for the six months ended June 30, 2016.  The loan portfolio had net increases of $147.9 million in multi-family mortgage loans, $81.2 million in commercial mortgage loans and $75.2 million in commercial loans, partially offset by net decreases of $32.7 million in construction loans, $16.0 million in consumer loans and $11.1 million in residential mortgage loans.  Commercial real estate, commercial and construction loans represented 73.5% of the loan portfolio at June 30, 2016, compared to 72.1% at December 31, 2015. 

At June 30, 2016, the Company’s unfunded loan commitments totaled $1.23 billion, including commitments of $536.1 million in commercial loans, $291.0 million in construction loans and $114.5 million in commercial mortgage loans.  Unfunded loan commitments at December 31, 2015 and June 30, 2015 were $1.15 billion and $1.22 billion, respectively.

Total investments increased $52.3 million, or 3.4%, to $1.57 billion at June 30, 2016, from $1.52 billion at December 31, 2015, largely due to purchases of mortgage-backed and municipal securities and an increase in unrealized gains on securities available for sale, partially offset by principal repayments on mortgage-backed securities, maturities of municipal and agency bonds and sales of certain mortgage-backed securities.

Total deposits increased $305.9 million, or 5.2%, during the six months ended June 30, 2016, to $6.23 billion, from $5.92 billion at December 31, 2015.  Total core deposits, which consist of savings and demand deposit accounts, increased $311.2 million to $5.50 billion at June 30, 2016, from $5.18 billion at December 31, 2015, while time deposits decreased $5.3 million to $734.4 million at June 30, 2016, from $739.7 million at December 31, 2015.  The increase in core deposits was largely attributable to a $111.1 million increase in interest bearing demand deposits, a $79.5 million increase in money market deposits, a $70.0 million increase in savings deposits and a $50.6 million increase in non-interest bearing demand deposits.  Core deposits represented 88.2% of total deposits at June 30, 2016, compared to 87.5% at December 31, 2015.

Borrowed funds decreased $42.4 million, or 2.5% during the six months ended June 30, 2016, to $1.67 billion, as shorter-term wholesale funding was replaced by net inflows of deposits for the period.  Borrowed funds represented 18.0% of total assets at June 30, 2016, a decrease from 19.2% at December 31, 2015.

Stockholders’ equity increased $33.5 million, or 2.8% for the six months ended June 30, 2016, to $1.23 billion, due to net income earned for the period and an increase in unrealized gains on securities available for sale, partially offset by dividends paid to stockholders.  Common stock repurchases made in connection with withholding to cover income taxes on the vesting of stock-based compensation for the six months ended June 30, 2016 totaled 146,469 shares at an average cost of $18.45.  At June 30, 2016, 3.2 million shares remained eligible for repurchase under the current authorization.  Book value per share and tangible book value per share(1) at June 30, 2016 were $18.68 and $12.23, respectively, compared with $18.26 and $11.75, respectively, at December 31, 2015.

Results of Operations

Net Interest Income and Net Interest Margin

For the three months ended June 30, 2016, net interest income increased $2.2 million to $63.9 million, from $61.7 million for the same period in 2015.  Net interest income for the six months ended June 30, 2016 increased $3.4 million, to $127.0 million, from $123.6 million for the same period in 2015.  The improvement in net interest income for the comparative periods was due to growth in average loans outstanding resulting from organic originations and increases in both average non-interest bearing demand deposits and average interest bearing core deposits, partially offset by period-over-period compression in the net interest margin.  The growth in average core deposits mitigated the Company's need to utilize higher-cost sources to fund loan growth.

The Company’s net interest margin remained unchanged at 3.11% for the quarter ended June 30, 2016, compared to the trailing quarter.  The weighted average yield on interest-earning assets decreased 2 basis points to 3.64% for the quarter ended June 30, 2016, compared with 3.66% for the quarter ended March 31, 2016.  The weighted average cost of interest-bearing liabilities for the quarter ended June 30, 2016 decreased 2 basis points to 0.66%, compared with 0.68% for the trailing quarter.  The average cost of interest bearing deposits for the quarter ended June 30, 2016 increased 1 basis point to 0.33%, from 0.32% at the quarter ended March 31, 2016.  Average non-interest bearing demand deposits totaled $1.21 billion for the quarter ended June 30, 2016, compared with $1.19 billion for the quarter ended March 31, 2016.  The average cost of borrowed funds for the quarter ended June 30, 2016 was 1.72%, compared with 1.71% for the trailing quarter.

The net interest margin decreased 6 basis points to 3.11% for the quarter ended June 30, 2016, compared with 3.17% for the quarter ended June 30, 2015.  The weighted average yield on interest-earning assets decreased 7 basis points to 3.64% for the quarter ended June 30, 2016, compared with 3.71% for the quarter ended June 30, 2015, while the weighted average cost of interest bearing liabilities decreased 1 basis point to 0.66% for the quarter ended June 30, 2016, compared with 0.67% for the second quarter of 2015.  The average cost of interest bearing deposits for the quarter ended June 30, 2016 was 0.33%, compared with 0.31% for the same period last year.  Average non-interest bearing demand deposits totaled $1.21 billion for the quarter ended June 30, 2016, compared with $1.10 billion for the quarter ended June 30, 2015.  The average cost of borrowed funds for the quarter ended June 30, 2016 was 1.72%, compared with 1.77% for the same period last year.  

For the six months ended June 30, 2016, the net interest margin decreased 9 basis points to 3.11%, compared with 3.20% for the six months ended June 30, 2015.  The weighted average yield on interest earning assets declined 9 basis points to 3.65% for the six months ended June 30, 2016, compared with 3.74% for the six months ended June 30, 2015, while the weighted average cost of interest bearing liabilities remained unchanged at 0.67% for the six months ended June 30, 2016, compared to the six months ended June 30, 2015.  The average cost of interest bearing deposits for the six months ended June 30, 2016 was 0.33%, compared with 0.31% for the same period last year.  Average non-interest bearing demand deposits totaled $1.20 billion for the six months ended June 30, 2016, compared with $1.08 billion for the six months ended June 30, 2015.  The average cost of borrowings for the six months ended June 30, 2016 was 1.71%, compared with 1.80% for the same period last year. 

Non-Interest Income

Non-interest income totaled $13.8 million for the quarter ended June 30, 2016, a decrease of $3.1 million, or 18.4%, compared to the same period in 2015.  Other income decreased $1.5 million for the three months ended June 30, 2016, compared to the same period in 2015, largely due to a $1.9 million decrease in net fees on loan-level interest rate swap transactions, partially offset by an additional $131,000 gain recognized on the sale of deposits resulting from a strategic branch divestiture in the first quarter of 2016.  Wealth management income decreased $586,000 to $4.5 million for the three months ended June 30, 2016, compared to $5.1 million for the same period in 2015.  The decrease in wealth management income was primarily attributable to weakened market conditions which negatively impacted fees earned from assets under management, along with a reduction in income associated with the licensing of indices to ETF providers.  Also contributing to the decrease in non-interest income, fee income decreased $470,000 to $6.7 million for the three months ended June 30, 2016, compared to $7.2 million for the same period in 2015.  This decrease was largely due to a $325,000 decrease in commercial loan prepayment fee income and a $227,000 decrease in debit card revenue, partially offset by a $140,000 increase in loan related fee income.  Net gains on securities transactions decreased $642,000 for the three months ended June 30, 2016, compared to the same period in 2015.

For the six months ended June 30, 2016, non-interest income totaled $26.8 million, a decrease of $403,000, or 1.5%, compared to the same period in 2015.  Other income decreased $1.0 million to $2.1 million for the six months ended June 30, 2016, compared with the same period in 2015, largely due to a $2.3 million decrease in net fees on loan-level interest rate swap transactions, partially offset by a $335,000 gain recognized on the sale of deposits resulting from a strategic branch divestiture and a $206,000 increase in net gains recognized on loan sales.  Also contributing to the decrease in non-interest income, net gains on securities transactions for the six months ended June 30, 2016 decreased $548,000 compared to the same period in 2015.  Partially offsetting these decreases, wealth management income increased $1.2 million to $8.8 million for the six months ended June 30, 2016, largely due to fees from assets under management acquired in the MDE acquisition, which closed April 1, 2015, partially offset by the negative impact of a reduction in income associated with the licensing of indices to ETF providers.

Non-Interest Expense

For the three months ended June 30, 2016, non-interest expense decreased $222,000 to $45.9 million, compared to the three months ended June 30, 2015.  Net occupancy expense decreased $509,000 to $6.1 million for the three months ended June 30, 2016, compared to $6.6 million for the same period in 2015.  This decrease was primarily due to decreases in facilities and equipment maintenance expenses, as well as a decrease in net rent expense.  Advertising and promotion expenses decreased $480,000 to $901,000 for the three months ended June 30, 2016, compared to the same period in 2015, largely due to the timing of the Company's advertising campaigns.  Other operating expenses decreased $426,000 to $7.8 million for the three months ended June 30, 2016, compared to the same period in 2015, largely due to $413,000 of non-recurring professional services costs related to the MDE transaction in the quarter ended June 30, 2015, partially offset by an increase in non-performing asset related expenses.  Additionally, the amortization of intangibles decreased $268,000 for the the three months ended June 30, 2016, compared with the same period in 2015, as a result of scheduled reductions in amortization.  Partially offsetting these decreases in non-interest expense, compensation and benefits expense increased $1.3 million to $25.7 million for the three months ended June 30, 2016, compared to $24.4 million for the same period in 2015.  This increase was principally due to additional salary expense related to annual merit increases, an increase in the accrual for incentive compensation and an increase in employee medical and retirement benefit costs.  Also, data processing expense increased $113,000 to $3.3 million for the three months ended June 30, 2016, compared to $3.2 million for the same period in 2015, primarily due to an increase in software maintenance costs.

The Company’s annualized non-interest expense as a percentage of average assets was 2.03% for the quarter ended June 30, 2016, compared with 2.14%, or 2.12% annualized core non-interest expense as a percentage of average assets(1), for the same period in 2015.  The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income) was 59.04% for the quarter ended June 30, 2016, compared with 58.66%, or a 58.14% core efficiency ratio(1), for the same period in 2015. 

Non-interest expense for the six months ended June 30, 2016 was $90.8 million, an increase of $1.2 million from $89.6 million for the six months ended June 30, 2015.  Compensation and benefits expense increased $3.2 million to $51.8 million for the six months ended June 30, 2016, compared to $48.6 million for the six months ended June 30, 2015, due to increased salary expense associated with new employees from MDE, additional salary expense associated with annual merit increases and an increase in employee medical and retirement benefit costs.  In addition, data processing expense increased $331,000 to $6.5 million for the six months ended June 30, 2016, compared to $6.2 million for the same period in 2015, principally due to an increase in software maintenance costs. Net occupancy costs decreased $1.2 million, to $12.5 million for the six months ended June 30, 2016, compared to same period in 2015, principally due to a decrease in seasonal expenses resulting from a milder winter, combined with decreases in facilities and equipment maintenance expenses.  Other operating expenses decreased $594,000 to $13.7 million for the six months ended June 30, 2016, compared to the same period in 2015, largely due to $413,000 of non-recurring professional services costs associated with the MDE transaction for the six months ended June 30, 2015, partially offset by an increase in non-performing asset related expenses.  In addition, advertising and promotion expenses decreased $362,000 to $1.8 million for the six months ended June 30, 2016, compared to the same period in 2015, largely due to the timing of the Company's advertising campaigns, while the amortization of intangibles decreased $190,000 for the six months ended June 30, 2016, compared with the same period in 2015, as a result of scheduled reductions in amortization. 

Asset Quality

The Company’s total non-performing loans at June 30, 2016 were $43.0 million, or 0.63% of total loans, compared with $50.6 million, or 0.76% of total loans at March 31, 2016 and $46.1 million, or 0.73% of total loans at June 30, 2015.  The $7.6 million decrease in non-performing loans at June 30, 2016, compared with the trailing quarter, was due to a $10.5 million decrease in non-performing commercial loans and a $917,000 decrease in non-performing residential mortgage loans, partially offset by a $3.0 million increase in non-performing commercial mortgage loans, a $649,000 increase in non-performing multi-family loans and a $206,000 increase in non-performing consumer loans.  At June 30, 2016, impaired loans totaled $45.3 million with related specific reserves of $2.3 million, compared with impaired loans totaling $54.2 million with related specific reserves of $5.1 million at March 31, 2016.  At June 30, 2015, impaired loans totaled $83.0 million with related specific reserves of $2.7 million.

At June 30, 2016, the Company’s allowance for loan losses was 0.90% of total loans, a decrease from 0.94% at March 31, 2016, and a decrease from 0.95% of total loans at June 30, 2015.  The decline in this loan coverage ratio from the quarter ended June 30, 2015, was largely the result of an overall improvement in asset quality, including  continued declines in non-performing and delinquent loans.  The Company recorded provisions for loan losses of $1.7 million and $3.2 million for the three and six months ended June 30, 2016, respectively, compared with provisions of $1.1 million and $1.7 million for the three and six months ended June 30, 2015, respectively.  For the three and six months ended June 30, 2016, the Company had net charge-offs of $3.0 million and $3.7 million, respectively, compared with net charge-offs of $2.6 million and $3.8 million, respectively, for the same periods in 2015.  The allowance for loan losses decreased $491,000 to $60.9 million at June 30, 2016, from $61.4 million at December 31, 2015.

At June 30, 2016 and December 31, 2015, the Company held $10.5 million of foreclosed assets.  During the six months ended June 30, 2016, there were 14 additions to foreclosed assets with a carrying value of $2.5 million and 15 properties sold with a carrying value of $2.1 million.  Foreclosed assets at June 30, 2016 consisted of $5.5 million of residential real estate, $4.8 million of commercial real estate and $135,000 of marine vessels.  Total non-performing assets at June 30, 2016 decreased $1.6 million, or 2.8%, to $53.5 million, or 0.58% of total assets, from $55.1 million, or 0.62% of total assets at December 31, 2015.

Income Tax Expense

For the three and six months ended June 30, 2016, the Company’s income tax expense was $8.8 million and $17.5 million, respectively, compared with $9.6 million and $18.0 million, for the three and six months ended June 30, 2015, respectively.  The Company’s effective tax rates were 29.1% and 29.3% for the three and six months ended June 30, 2016, respectively, compared with 30.6% and 30.2% for the three and six months ended June 30, 2015, respectively, as a greater proportion of income was derived from non-taxable sources in the current year periods. 

About the Company

Provident Financial Services, Inc. is the holding company for The Provident Bank, a community-oriented bank offering "commitment you can count on" since 1839.  The Provident Bank provides a comprehensive array of financial products and services through its network of branches throughout northern and central New Jersey, as well as Bucks, Lehigh and Northampton counties in Pennsylvania.  The Bank also provides fiduciary and wealth management services through its wholly owned subsidiary, Beacon Trust Company.

Post Earnings Conference Call

Representatives of the Company will hold a conference call for investors on Friday, July 29, 2016 at 10:00 a.m. Eastern Time to discuss highlights of the Company’s financial results for the quarter ended June 30, 2016.

       
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
June 30, 2016 (Unaudited) and December 31, 2015
(Dollars in Thousands)
       
Assets June 30, 2016   December 31, 2015
       
Cash and due from banks $ 116,319     $ 100,899  
Short-term investments 1,208     1,327  
Total cash and cash equivalents 117,527     102,226  
       
Securities available for sale, at fair value 1,013,539     964,534  
Investment securities held to maturity (fair value of $501,435 at
  June 30, 2016 (unaudited) and $488,331 at December 31, 2015)		 478,846     473,684  
Federal Home Loan Bank Stock 76,310     78,181  
Loans 6,780,966     6,537,674  
Less allowance for loan losses 60,933     61,424  
Net loans 6,720,033     6,476,250  
Foreclosed assets, net 10,508     10,546  
Banking premises and equipment, net 86,574     88,987  
Accrued interest receivable 26,055     25,766  
Intangible assets 424,413     426,277  
Bank-owned life insurance 185,758     183,057  
Other assets 87,191     82,149  
Total assets $ 9,226,754     $ 8,911,657  
       
Liabilities and Stockholders' Equity      
       
Deposits:      
Demand deposits $ 4,439,943     $ 4,198,788  
Savings deposits 1,055,503     985,478  
Certificates of deposit of $100,000 or more 344,291     324,215  
Other time deposits 390,149     415,506  
Total deposits 6,229,886     5,923,987  
Mortgage escrow deposits 28,238     23,345  
Borrowed funds 1,665,277     1,707,632  
Other liabilities 73,790     60,628  
Total liabilities 7,997,191     7,715,592  
       
Stockholders' equity:      
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued —     —  
Common stock, $0.01 par value, 200,000,000 shares authorized, 83,209,293
  shares issued and 65,813,618 outstanding at June 30, 2016 and 65,489,354  
  outstanding at December 31, 2015  		 832     832  
Additional paid-in capital 1,003,646     1,000,810  
Retained earnings 526,820     507,713  
Accumulated other comprehensive income (loss) 7,118     (2,546 )
Treasury stock (268,467 )   (269,014 )
Unallocated common stock held by the Employee Stock Ownership Plan (40,386 )   (41,730 )
Common Stock acquired by the Directors' Deferred Fee Plan (6,182 )   (6,517 )
Deferred Compensation - Directors' Deferred Fee Plan 6,182     6,517  
Total stockholders' equity 1,229,563     1,196,065  
Total liabilities and stockholders' equity $ 9,226,754     $ 8,911,657  
               
 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Six Months Ended June 30, 2016 and 2015 (Unaudited)
(Dollars in Thousands, except per share data)
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2016   2015   2016   2015
Interest income:              
Real estate secured loans $ 44,916     $ 43,594     $ 89,149     $ 86,883  
Commercial loans 15,374     13,669     30,326     27,108  
Consumer loans 5,394     5,794     11,030     11,588  
Securities available for sale and Federal Home Loan Bank stock   5,718     5,735     11,498     12,036  
Investment securities held to maturity 3,331     3,386     6,662     6,782  
Deposits, federal funds sold and other short-term investments 72     10     114     22  
Total interest income 74,805     72,188     148,779     144,419  
               
Interest expense:              
Deposits 4,135     3,624     7,956     7,212  
Borrowed funds 6,760     6,890     13,844     13,605  
Total interest expense 10,895     10,514     21,800     20,817  
Net interest income 63,910     61,674     126,979     123,602  
Provision for loan losses 1,700     1,100     3,200     1,700  
Net interest income after provision for loan losses 62,210     60,574     123,779     121,902  
               
Non-interest income:              
Fees 6,711     7,181     13,172     13,235  
Wealth management income 4,511     5,097     8,822     7,655  
Bank-owned life insurance 1,369     1,317     2,701     2,665  
Net gain on securities transactions 1     643     97     645  
Other income 1,232     2,704     2,050     3,045  
Total non-interest income 13,824     16,942     26,842     27,245  
               
Non-interest expense:              
Compensation and employee benefits 25,741     24,414     51,771     48,615  
Net occupancy expense 6,068     6,577     12,502     13,749  
Data processing expense 3,272     3,159     6,517     6,186  
FDIC Insurance 1,293     1,272     2,615     2,490  
Amortization of intangibles 856     1,124     1,861     2,051  
Advertising and promotion expense 901     1,381     1,780     2,142  
Other operating expenses 7,766     8,192     13,729     14,323  
Total non-interest expense 45,897     46,119     90,775     89,556  
Income before income tax expense 30,137     31,397     59,846     59,591  
Income tax expense 8,781     9,601     17,517     17,993  
Net income $ 21,356     $ 21,796     $ 42,329     $ 41,598  
               
Basic earnings per share $ 0.34     $ 0.35     $ 0.67     $ 0.66  
Average basic shares outstanding   63,553,694       62,894,213       63,452,393       62,784,655  
               
Diluted earnings per share $ 0.34     $ 0.35     $ 0.67     $ 0.66  
Average diluted shares outstanding   63,726,513       63,044,965       63,623,134       62,943,563  
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 June 30,     Six Months Ended June 30,
  2016   2015   2016   2015
STATEMENTS OF INCOME:              
Net interest income $   63,910     $   61,674     $   126,979     $   123,602  
Provision for loan losses   1,700       1,100       3,200       1,700  
Non-interest income   13,824       16,942       26,842       27,245  
Non-interest expense   45,897       46,119       90,775       89,556  
Income before income tax expense   30,137       31,397       59,846       59,591  
Net income   21,356       21,796       42,329       41,598  
Diluted earnings per share $ 0.34     $ 0.35     $ 0.67     $ 0.66  
Interest rate spread   2.98 %     3.04 %     2.98 %     3.07 %
Net interest margin   3.11 %     3.17 %     3.11 %     3.20 %
               
PROFITABILITY:              
Annualized return on average assets   0.94 %     1.01 %     0.94 %     0.98 %
Annualized return on average equity   7.01 %     7.47 %     6.99 %     7.21 %
Annualized return on average tangible equity (2)   10.74 %     11.78 %     10.75 %     11.22 %
Annualized non-interest expense to average assets (3)   2.03 %     2.14 %     2.02 %     2.11 %
Annualized core non-interest expense to average assets (3)     2.03 %     2.12 %     2.02 %     2.10 %
Efficiency ratio (4)   59.04 %     58.66 %     59.01 %     59.37 %
Core efficiency ratio (4)   59.04 %     58.14 %     59.01 %     59.09 %
               
ASSET QUALITY:              
Non-accrual loans         $   43,008     $   43,008  
90+ and still accruing         —     —  
Non-performing loans           43,008       46,075  
Foreclosed assets           10,508       10,508  
Non-performing assets           53,516       54,163  
Non-performing loans to total loans           0.63 %     0.73 %
Non-performing assets to total assets           0.58 %     0.62 %
Allowance for loan losses         $   60,933     $   59,624  
Allowance for loan losses to total non-performing loans           141.68 %     129.41 %
Allowance for loan losses to total loans           0.90 %     0.95 %
               
AVERAGE BALANCE SHEET DATA:              
Assets $   9,107,296     $   8,630,079     $   9,033,951     $   8,570,533  
Loans, net   6,588,407       6,149,613       6,545,841       6,089,275  
Earning assets   8,195,959       7,752,727       8,125,033       7,707,908  
Core deposits   5,461,044       5,038,088       5,345,694       5,010,010  
Borrowings   1,581,576       1,560,757       1,625,234       1,526,923  
Interest-bearing liabilities   6,595,890       6,297,067       6,540,833       6,263,485  
Stockholders' equity   1,224,928       1,169,641       1,217,569       1,163,394  
Average yield on interest-earning assets   3.64 %     3.71 %     3.65 %     3.74 %
Average cost of interest-bearing liabilities   0.66 %     0.67 %     0.67 %     0.67 %
               
LOAN DATA:              
Mortgage loans:              
Residential         $   1,244,083     $   1,255,159  
Commercial           1,797,325       1,716,117  
Multi-family           1,381,925       1,234,066  
Construction           298,974       331,649  
Total mortgage loans           4,722,307       4,536,991  
Commercial loans           1,509,498       1,434,291  
Consumer loans           550,171       566,175  
Total gross loans           6,781,976       6,537,457  
Premium on purchased loans           5,729       5,740  
Unearned discounts           (39 )     (41 )
Net deferred           (6,700 )     (5,482 )
Total loans         $   6,780,966     $   6,537,674  
Notes and Reconciliation of GAAP to Non-GAAP
Financial Measures - (Dollars in Thousands, except share data)		                
                 
(1) Book and Tangible Book Value per Share                
          At June 30,  
          2016   2015  
Total stockholders' equity         $   1,229,563     $   1,167,124    
Less: total intangible assets           424,413       432,879    
Total tangible stockholders' equity         $   805,150     $   734,245    
                 
Shares outstanding           65,813,618       65,287,831    
                 
Book value per share (total stockholders' equity/shares outstanding)         $ 18.68     $ 17.88    
Tangible book value per share (total tangible stockholders' equity/shares outstanding)         $ 12.23     $ 11.25    
                 
(2) Annualized Return on Average Tangible Equity                
  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
  2016   2015   2016   2015  
Total average stockholders' equity $ 1,224,928     $ 1,169,641     $   1,217,569     $   1,163,394    
Less: total average intangible assets 424,938     427,378       425,418       415,799    
Total average tangible stockholders' equity $ 799,990     $ 742,263     $   792,151     $   747,595    
                 
Net income $ 21,356     $ 21,796     $   42,329     $   41,598    
                 
Annualized return on average tangible equity (net income/total average stockholders' equity)   10.74 %   11.78 %     10.75 %     11.22 %  
                 
(3) Annualized Non-Interest Expense/Average Assets Calculation                
  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
  2016   2015   2016   2015  
Annualized non-interest expense 184,597     184,983       182,548       180,596    
Less: annualized non-recurring MDE acquisition expense —     1,657     —       833    
Annualized core non-interest expense $ 184,597     $ 183,326       $   182,548     $   179,763    
                 
Average assets $ 9,107,296     $ 8,630,079     $   9,033,951     $   8,570,533    
                 
Annualized non-interest expense/average assets 2.03 %   2.14 %     2.02 %     2.11 %  
Annualized core non-interest expense/average assets 2.03 %   2.12 %     2.02 %     2.10 %  
                 
(4) Efficiency Ratio Calculation                
  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
  2016   2015   2016   2015  
Net interest income $ 63,910     $ 61,674     $   126,979     $   123,602    
Non-interest income 13,824     16,942       26,842       27,245    
Total income $ 77,734     $ 78,616     $   153,821     $   150,847    
                 
Non-interest expense 45,897     46,119       90,775       89,556    
Less: non-recurring MDE acquisition expense —     413     —       413    
Core non-interest expense $ 45,897     $ 45,706     $   90,775     $   89,143    
                 
Efficiency ratio (non-interest expense/income) 59.04 %   58.66 %     59.01 %     59.37 %  
Core efficiency ratio (core non-interest expense/income) 59.04 %   58.14 %     59.01 %     59.09 %  
                             
 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Quarterly Average Balances
(Unaudited) (Dollars in Thousands)
                       
  June 30, 2016   March 31, 2016
  Average       Average   Average       Average
  Balance   Interest   Yield/Cost   Balance   Interest   Yield/Cost
Interest-Earning Assets:                      
Deposits $ 57,045   $ 72     0.51 %   $ 33,239   $ 42     0.50 %
Federal funds sold and other short-term investments   1,582   —     0.06 %   1,437   —     0.06 %
Investment securities  (1) 476,492   3,331     2.80 %   474,130   3,331     2.81 %
Securities available for sale 999,750   4,861     1.95 %   965,490   4,886     2.02 %
Federal Home Loan Bank stock 72,683   857     4.73 %   76,536   894     4.70 %
Net loans:  (2)                      
Total mortgage loans 4,596,722   44,916     3.89 %   4,543,468   44,233     3.87 %
Total commercial loans 1,437,994   15,374     4.25 %   1,399,478   14,952     4.25 %
Total consumer loans 553,691   5,394     3.92 %   560,329   5,636     4.04 %
Total net loans 6,588,407   65,684     3.97 %   6,503,275   64,821     3.97 %
Total Interest-Earning Assets $ 8,195,959   $ 74,805     3.64 %   $ 8,054,107   $ 73,974     3.66 %
                       
Non-Interest Earning Assets:                      
Cash and due from banks 104,823           98,510        
Other assets 806,514           807,988        
Total Assets $ 9,107,296           $ 8,960,605        
                       
Interest-Bearing Liabilities:                      
Demand deposits $ 3,219,568   $ 2,404     0.30 %   $ 3,051,598   $ 2,191     0.29 %
Savings deposits 1,033,385   390     0.15 %   991,038   285     0.12 %
Time deposits 761,361   1,341     0.71 %   774,249   1,345     0.70 %
Total Deposits 5,014,314   4,135     0.33 %   4,816,885   3,821     0.32 %
                       
Borrowed funds 1,581,576   6,760     1.72 %   1,668,892   7,084     1.71 %
Total Interest-Bearing Liabilities 6,595,890   10,895     0.66 %   6,485,777   10,905     0.68 %
                       
Non-Interest Bearing Liabilities:                      
Non-interest bearing deposits 1,208,091           1,187,709        
Other non-interest bearing liabilities 78,387           76,909        
Total non-interest bearing liabilities 1,286,478           1,264,618        
Total Liabilities 7,882,368           7,750,395        
Stockholders' equity 1,224,928           1,210,210        
Total Liabilities and Stockholders' Equity $ 9,107,296           $ 8,960,605        
                       
Net interest income     $ 63,910           $ 63,069    
                       
Net interest rate spread           2.98 %             2.98 %
Net interest-earning assets $ 1,600,069           $ 1,568,330        
                       
Net interest margin   (3)           3.11 %             3.11 %
Ratio of interest-earning assets to                      
total interest-bearing liabilities 1.24x           1.24x        
   
  (1 ) Average outstanding balance amounts shown are amortized cost.
  (2 ) Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans.
  (3 ) Annualized net interest income divided by average interest-earning assets.
       
     
The following table summarizes the quarterly net interest margin for the previous five quarters. 
                   
  6/30/16   3/31/16   12/31/15   09/30/15   6/30/15
  2nd Qtr.   1st Qtr.   4th Qtr.   3rd Qtr.   2nd Qtr.
Interest-Earning Assets:                  
Securities 2.27 %   2.36 %   2.33 %   2.26 %   2.28 %
Net loans 3.97 %   3.97 %   4.03 %   4.02 %   4.08 %
Total interest-earning assets 3.64 %   3.66 %   3.70 %   3.66 %   3.71 %
                   
Interest-Bearing Liabilities:                  
Total deposits 0.33 %   0.32 %   0.31 %   0.31 %   0.31 %
Total borrowings 1.72 %   1.71 %   1.65 %   1.61 %   1.77 %
Total interest-bearing liabilities 0.66 %   0.68 %   0.66 %   0.65 %   0.67 %
                   
Interest rate spread 2.98 %   2.98 %   3.04 %   3.01 %   3.04 %
Net interest margin   3.11 %    3.11 %      3.17 %      3.13 %     3.17 %
                   
Ratio of interest-earning assets to interest-bearing liabilities   1.24x   1.24x   1.24x   1.24x   1.23x
                   
 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Average Year to Date Balances
(Unaudited) (Dollars in Thousands)
                       
  June 30, 2016   June 30, 2015
  Average       Average   Average       Average
  Balance   Interest   Yield/Cost   Balance   Interest   Yield/Cost
Interest-Earning Assets:                      
Deposits $ 45,142     $ 114       0.50 %   $ 18,103     $ 22       0.25 %
Federal funds sold and other short term investments 1,509     —       0.06 %   1,331     —       0.03 %
Investment securities  (1) 475,311     6,662       2.80 %   473,665     6,782       2.86 %
Securities available for sale 982,620     9,747       1.99 %   1,054,590     10,474       1.99 %
Federal Home Loan Bank stock 74,610     1,751       4.72 %   70,944     1,562       4.44 %
Net loans:  (2)                      
Total mortgage loans 4,570,095     89,149       3.88 %   4,268,820     86,883       4.06 %
Total commercial loans 1,418,736     30,326       4.25 %   1,220,353     27,108       4.45 %
Total consumer loans 557,010     11,030       3.98 %   600,102     11,588       3.89 %
Total net loans 6,545,841     130,505       3.97 %   6,089,275     125,579       4.12 %
Total Interest-Earning Assets $ 8,125,033     $ 148,779       3.65 %   $ 7,707,908     $ 144,419       3.74 %
                       
Non-Interest Earning Assets:                      
Cash and due from banks 101,666             77,454          
Other assets 807,252             785,171          
Total Assets $ 9,033,951             $ 8,570,533          
                       
Interest-Bearing Liabilities:                      
Demand deposits $ 3,135,583     $ 4,593       0.29 %   $ 2,949,258     $ 3,904       0.27 %
Savings deposits 1,012,211     676       0.13 %   985,520     504       0.10 %
Time deposits 767,805     2,687       0.70 %   801,784     2,804       0.70 %
Total Deposits 4,915,599     7,956       0.33 %   4,736,562     7,212       0.31 %
Borrowed funds 1,625,234     13,844       1.71 %   1,526,923     13,605       1.80 %
Total Interest-Bearing Liabilities $ 6,540,833     $ 21,800       0.67 %   $ 6,263,485     $ 20,817       0.67 %
                       
Non-Interest Bearing Liabilities:                      
Non-interest bearing deposits 1,197,900             1,075,232          
Other non-interest bearing liabilities 77,649             68,422          
Total non-interest bearing liabilities 1,275,549             1,143,654          
Total Liabilities 7,816,382             7,407,139          
Stockholders' equity 1,217,569             1,163,394          
Total Liabilities and Stockholders' Equity $ 9,033,951             $ 8,570,533          
                       
Net interest income     $ 126,979             $ 123,602      
                       
Net interest rate spread           2.98 %             3.07 %
Net interest-earning assets $ 1,584,200             $ 1,444,423          
                       
Net interest margin   (3)           3.11 %             3.20 %
Ratio of interest-earning assets to                      
total interest-bearing liabilities 1.24x           1.23x        
                       
(1)  Average outstanding balance amounts shown are amortized cost.
                       
(2)  Average outstanding balance are net of the allowance for loan losses, deferred loan fees and expenses, loan premium and discounts and include non-accrual loans.
                       
(3)  Annualized net interest income divided by average interest-earning assets.
 
 
The following table summarizes the year-to-date net interest margin for the previous three years.
             
  Six Months Ended  
  6/30/2016   6/30/2015   6/30/2014  
Interest-Earning Assets:            
Securities       2.32 %         2.33 %         2.41 %  
Net loans 3.97 %   4.12 %   4.25 %  
Total interest-earning assets 3.65 %   3.74 %   3.82 %  
                   
Interest-Bearing Liabilities:                  
Total deposits 0.33 %   0.31 %   0.34 %  
Total borrowings 1.71 %   1.80 %   1.92 %  
Total interest-bearing liabilities 0.67 %   0.67 %   0.69 %  
                   
Interest rate spread 2.98 %   3.07 %   3.13 %  
Net interest margin 3.11 %   3.20 %   3.25 %  
             
Ratio of interest-earning assets to interest-bearing liabilities 1.24x   1.23x   1.22x