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Provident Financial Services, Inc. Announces Record Fourth Quarter and Full Year Earnings, Declares Increased Quarterly Cash Dividend and Special Cash Dividend

ISELIN, N.J., Feb. 01, 2019 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (PFS) (the “Company”) reported net income of $35.8 million, or $0.55 per basic and diluted share for the quarter ended December 31, 2018, compared to net income of $19.5 million, or $0.30 per basic and diluted share for the quarter ended December 31, 2017.  For the year ended December 31, 2018, the Company reported net income of $118.4 million, or $1.82 per basic and diluted share, compared to net income of $93.9 million, or $1.46 per basic share and $1.45 per diluted share for 2017.

For the quarter and the year ended December 31, 2018, the Company’s earnings were positively impacted by lower Federal income tax rates, period over period growth in average loans outstanding, growth in both average non-interest and interest bearing deposits and the continued expansion of the net interest margin.  The improvement in the net interest margin during these periods was driven by an increase in the yield on earning assets, growth in average non-interest bearing deposits and a less sensitive and lagging cost of funds.  Included in both periods was a non-recurring $1.9 million tax benefit stemming from the Company's completion of a cost segregation study that assigned shorter taxable lives to certain fixed assets.  This benefit contributed $0.03 per basic and diluted share for both the quarter and year ended December 31, 2018.  In addition, the Company realized a $1.6 million, or $0.02 per share, net of tax gain on the sale of Visa Class B common shares in the fourth quarter of 2018.

Chairman, President and Chief Executive Officer Christopher Martin commented:  “We achieved record earnings for the quarter, as our net interest margin expanded six basis points, contributing to growth in our net interest income.  Expenses reflect investments in data analytics, customer experience and regulatory compliance, yet remain well controlled.  Credit quality was strong, and capital levels increased despite $13.0 million of common stock repurchases in the quarter, executed during periods of stock market volatility.” Martin continued, “Our wealth management subsidiary, Beacon Trust Company recently announced its planned acquisition of Tirschwell & Loewy, Inc., a Manhattan-based registered investment adviser with approximately $750 million in assets under management.  I am pleased to announce that our Board of Directors has approved an increase in our regular quarterly cash dividend as well as a special cash dividend.  These dividend declarations reflect their confidence in our ability to generate strong earnings and profitability metrics, maintain our practice of sensible and measured growth, and our commitment to enhancing stockholder value.”

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.23 per common share payable on February 28, 2019 to stockholders of record as of the close of business on February 15, 2019.  This dividend is an increase of 9.5% from the prior quarter's regular cash dividend of $0.21 per common share.

Declaration of Special Cash Dividend

The Company's Board of Directors also declared a special cash dividend of $0.20 per common share payable on February 28, 2019 to stockholders of record as of the close of business on February 15, 2019.

Annual Meeting Date Set

The Annual Meeting of Stockholders will be held on April 25, 2019 at the Renaissance Woodbridge Hotel, Iselin, New Jersey at 10:00 a.m. Eastern Time.  March 1, 2019 has been established as the record date for the determination of stockholders entitled to vote at the Annual Meeting.

Balance Sheet Summary

Total assets at December 31, 2018 were $9.73 billion, a $119.5 million decrease from December 31, 2017.  The decrease in total assets was primarily due to a $75.1 million decrease in total loans and a $48.2 million decrease in total cash and cash equivalents, partially offset by a $15.3 million increase in total investments.

The Company’s loan portfolio decreased $75.1 million to $7.25 billion at December 31, 2018, from $7.33 billion at December 31, 2017.  For the year ended December 31, 2018, loan originations, including advances on lines of credit, totaled $3.16 billion, compared with $3.70 billion for 2017.  The loan portfolio had net decreases of $64.2 million in multi-family mortgage loans, $50.2 million in commercial loans, $42.9 million in residential mortgage loans and $3.6 million in construction loans, partially offset by a net increase of $128.2 million in commercial mortgage loans.  Commercial real estate, commercial and construction loans represented 78.9% of the total loan portfolio at December 31, 2018, compared to 77.9% at December 31, 2017.

At December 31, 2018, the Company’s unfunded loan commitments totaled $1.49 billion, including commitments of $683.0 million in commercial loans, $425.2 million in construction loans and $144.0 million in commercial mortgage loans.  Unfunded loan commitments at September 30, 2018 and December 31, 2017 were $1.60 billion and $1.98 billion, respectively.

The loan pipeline, consisting of work-in-process and loans approved pending closing, totaled $973.4 million at December 31, 2018, compared to $1.13 billion and $1.12 billion at September 30, 2018 and December 31, 2017, respectively.

Total investments were $1.61 billion at December 31, 2018, a $15.3 million increase from the balance at December 31, 2017.  This increase was largely due to purchases of mortgage-backed and municipal securities, partially offset by repayments on mortgage-backed securities, maturities of municipal and agency bonds.

Total deposits increased $116.0 million during the year ended December 31, 2018 to $6.83 billion.  Total time deposits increased $115.7 million to $750.5 million at December 31, 2018, while total core deposits, consisting of savings and demand deposit accounts, increased $273,000 to $6.08 billion at December 31, 2018.  The increase in time deposits was primarily the result of a 13-month certificate of deposit promotional campaign which provided the Company a lower-cost funding alternative to wholesale borrowings.  The increase in core deposits for the year ended December 31, 2018 was largely attributable to a $38.3 million increase in interest bearing demand deposits and a $28.8 million increase in non-interest bearing demand deposits, partially offset by a $35.7 million decrease in money market deposits and a $31.1 million decrease in savings deposits.  Core deposits represented 89.0% of total deposits at December 31, 2018, compared to 90.5% at December 31, 2017.

Borrowed funds decreased $300.2 million during the year ended December 31, 2018, to $1.44 billion.  The decrease in borrowings for the period was primarily a function of the inflow of lower-cost deposits and lower asset funding requirements.  Borrowed funds represented 14.8% of total assets at December 31, 2018, a decrease from 17.7% at December 31, 2017.

Stockholders’ equity increased $60.3 million during the year ended December 31, 2018, to $1.36 billion, primarily due to net income earned during the year, partially offset by cash dividends paid to stockholders, common stock repurchases and an increase in unrealized losses on available for sale debt securities.  Common stock repurchases for the year ended December 31, 2018, totaled 635,436 shares at an average cost of $23.69 per share.  At December 31, 2018, 2.5 million shares remained eligible for repurchase under the current authorization.  Book value per share and tangible book value per share(1) at December 31, 2018 were $20.49 and $14.18, respectively, compared with $19.52 and $13.20, respectively, at December 31, 2017. 

Results of Operations

Net Interest Income and Net Interest Margin

For the quarter ended December 31, 2018, net interest income increased $5.4 million to $77.3 million, from $71.9 million for the same period in 2017.  Net interest income for the year ended December 31, 2018 increased $22.5 million, to $300.7 million, from $278.2 million for 2017.  The improvement in net interest income for the comparative periods was largely due to growth in average loans outstanding resulting from organic originations and increases in both average interest bearing core deposits and average non-interest bearing demand deposits, combined with period-over-period expansion of the net interest margin.

The Company’s net interest margin for the quarter ended December 31, 2018 increased six basis points to 3.44%, compared with 3.38% for the trailing quarter ended September 30, 2018.  The weighted average yield on interest-earning assets increased 12 basis points to 4.19% for the quarter ended December 31, 2018, compared with 4.07% for the trailing quarter.  The weighted average cost of interest-bearing liabilities for the quarter ended December 31, 2018 increased seven basis points to 0.97%, compared to the trailing quarter.  The average cost of interest-bearing deposits for the quarter ended December 31, 2018 increased 10 basis points to 0.70%, compared with 0.60% for the trailing quarter.  The average cost of borrowed funds for the quarter ended December 31, 2018 was 1.99%, compared with 1.93% for the quarter ended September 30, 2018.

The net interest margin increased 19 basis points to 3.44% for the quarter ended December 31, 2018, compared with 3.25% for the quarter ended December 31, 2017.  The weighted average yield on interest-earning assets increased 41 basis points to 4.19% for the quarter ended December 31, 2018, compared with 3.78% for the quarter ended December 31, 2017, while the weighted average cost of interest-bearing liabilities increased 29 basis points to 0.97% for the quarter ended December 31, 2018, compared with 0.68% for the fourth quarter of 2017.  The average cost of interest-bearing deposits for the quarter ended December 31, 2018 was 0.70%, compared with 0.40% for the same period last year.  Average non-interest bearing demand deposits totaled $1.48 billion for the quarter ended December 31, 2018, compared with $1.45 billion for the quarter ended December 31, 2017.  The average cost of borrowed funds for the quarter ended December 31, 2018 was 1.99%, compared with 1.63% for the same period last year.  

For the year ended December 31, 2018, the net interest margin increased 18 basis points to 3.39%, compared with 3.21% for the year ended December 31, 2017.  The weighted average yield on interest-earning assets increased 32 basis points to 4.06% for the year ended December 31, 2018, compared with 3.74% for the year ended December 31, 2017, while the weighted average cost of interest-bearing liabilities increased 19 basis points to 0.86% for the year ended December 31, 2018, compared with 0.67% for the same period in 2017.  The average cost of interest-bearing deposits for the year ended December 31, 2018 was 0.58%, compared with 0.37% for the same period last year.  Average non-interest bearing demand deposits increased $97.3 million to $1.46 billion for the year ended December 31, 2018, compared with $1.37 billion for the year ended December 31, 2017.  The average cost of borrowings for the year ended December 31, 2018 was 1.85%, compared with 1.66% for the same period last year.

Non-Interest Income

Non-interest income totaled $15.6 million for the quarter ended December 31, 2018, an increase of $2.3 million, compared to the quarter ended December 31, 2017.  The increase for the quarter was primarily due to a $2.2 million increase in net gains on securities transactions resulting from the Company's sale of Visa Class B common shares, and a $1.1 million increase in fee income, which was largely due to an increase in prepayment fees on commercial loans.  These increases were partially offset by a $560,000 and a $528,000 decrease in other income and income from Bank-owned life insurance ("BOLI"), respectively.  The decrease in other income was due to a $468,000 decrease in net gains recognized on loan sales and a $125,000 decrease in net fees on loan-level interest rate swap transactions.  The decrease in income from BOLI for the quarter ended December 31, 2018, was attributable to lower equity valuations compared to the same period in 2017.

For the year ended December 31, 2018, non-interest income totaled $58.7 million, an increase of $3.0 million, compared to the same period in 2017.  Net gains on securities transactions increased $2.2 million for the year ended December 31, 2018, due to the sale of Visa Class B common shares.  Fee income increased $866,000 to $28.1 million, compared to the same period in 2017, largely due to a $287,000 increase in income from non-deposit investment products, a $248,000 increase in loan related fee income and a $238,000 increase in debit card revenue, partially offset by a $126,000 decrease in prepayment fees on commercial loans.  Other income increased $775,000 to $4.9 million for the year ended December 31, 2018, primarily due to a $764,000 increase in net fees on loan-level interest rate swap transactions. Also, wealth management income increased $353,000 to $18.0 million for the year ended December 31, 2018, compared to $17.6 million for the same period in 2017, due to increased revenue from investment advisory fees, including revenue from two mutual funds that were established in October 2017.  Partially offsetting these increases, income from BOLI decreased $1.2 million to $5.5 million for the year ended December 31, 2018, compared to the same period in 2017, due to a decrease in benefit claims and lower equity valuations. 

Non-Interest Expense

For the three months ended December 31, 2018, non-interest expense increased $1.3 million to $49.4 million, compared to $48.1 million for the quarter ended December 31, 2017.  Other operating expenses increased $1.8 million to $9.3 million for the three months ended December 31, 2018, compared to $7.5 million for the same period in 2017.  This increase was largely due to increases in consulting, legal and examination fees, partially offset by a decrease in loan collection expense.  Additionally, data processing expense increased $182,000 to $3.8 million for the three months ended December 31, 2018, compared to $3.6 million for the same period in 2017, principally due to an increase in online and mobile banking expenses.  Partially offsetting these increases in non-interest expense, compensation and benefits expense decreased $169,000 to $28.1 million for the three months ended December 31, 2018, compared to $28.3 million for the three months ended December 31, 2017.  This decrease was primarily due to a decrease in the accrual for incentive compensation and a decrease in stock-based compensation, partially offset by an increase in salary expense related to annual merit increases.  FDIC insurance expense decreased $260,000 to $562,000 for three months ended December 31, 2018, compared to $822,000 for the same period in 2017, primarily due to a reduction in the insurance assessment rate.  Amortization of intangibles decreased $89,000 for the three months ended December 31, 2018, compared with the same period in 2017, as a result of scheduled reductions in amortization. 

The Company’s annualized non-interest expense as a percentage of average assets (1) was 2.01% for the quarter ended December 31, 2018, compared with 1.98% for the same period in 2017.  The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income) (1) was 53.10% for the quarter ended December 31, 2018, compared with 56.43% for the same period in 2017. 

Non-interest expense for the year ended December 31, 2018 was $191.7 million, an increase of $3.9 million from 2017.  Other operating expenses increased $2.3 million to $31.1 million for the year ended December 31, 2018, compared to $28.8 million for the same period in 2017, largely due to increases in consulting, examination and debit card maintenance expenses, partially offset by decreases in loan collection expense and foreclosed real estate expense.  Compensation and benefits expense increased $2.1 million to $111.5 million for the year ended December 31, 2018, compared to $109.4 million for the year ended December 31, 2017.  This increase was primarily due to additional salary expense related to annual merit increases, combined with increases in severance, stock-based compensation and employee medical expenses, partially offset by a decrease in the accrual for incentive compensation.  Data processing costs increased $742,000 to $14.7 million for the year ended December 31, 2018, compared with 2017, due to increases in software maintenance, online and mobile banking expenses.  Partially offsetting these increases in non-interest expense, amortization of intangibles decreased $543,000 for the year ended December 31, 2018, compared with 2017, as a result of scheduled reductions in amortization.  FDIC insurance expense decreased $405,000 to $3.5 million for year ended December 31, 2018, compared to $3.9 million for the same period in 2017, primarily due to a reduction in the insurance assessment rate.  Additionally, net occupancy costs decreased $234,000, to $25.1 million for the year ended December 31, 2018, compared to 2017, primarily due to a decrease in building depreciation.    

Asset Quality

The Company’s total non-performing loans at December 31, 2018 were $25.7 million, or 0.35% of total loans, compared with $29.1 million, or 0.40% of total loans at September 30, 2018, and $34.9 million, or 0.48% of total loans at December 31, 2017.  The $3.4 million decrease in non-performing loans at December 31, 2018, compared with the trailing quarter, was due to a $2.4 million decrease in non-performing commercial loans, a $610,000 decrease in non-performing residential mortgage loans and a $578,000 decrease in non-performing commercial mortgage loans, partially offset by a $201,000 increase in non-performing consumer loans.  At December 31, 2018, impaired loans totaled $52.5 million with related specific reserves of $1.4 million, compared with impaired loans totaling $50.2 million with related specific reserves of $2.9 million at September 30, 2018.  At December 31, 2017, impaired loans totaled $52.0 million with related specific reserves of $2.7 million.

At December 31, 2018, the Company’s allowance for loan losses was 0.77% of total loans, compared to 0.75% at September 30, 2018, and 0.82% of total loans at December 31, 2017.  The allowance for loan losses decreased $4.6 million to $55.6 million at December 31, 2018, from $60.2 million at December 31, 2017.  The Company recorded provisions for loan losses of $1.8 million and $23.7 million for the quarter and year ended December 31, 2018, respectively, compared with provisions of $1.9 million and $5.6 million for the quarter and year ended December 31, 2017, respectively.  For the quarter and year ended December 31, 2018, the Company had net charge-offs of $147,000 and $28.3 million, respectively, compared with net charge-offs of $2.0 million and $7.3 million, respectively, for the same periods in 2017.  Net charge-offs for year ended December 31, 2018 included a $14.9 million loss related to a commercial borrower that filed a Chapter 7 petition in bankruptcy on March 27, 2018 for a liquidation of assets.

At December 31, 2018, the Company held $1.6 million of foreclosed residential real estate assets, compared with $6.9 million at December 31, 2017.  During the year ended December 31, 2018, there were nine additions to foreclosed assets with an aggregate carrying value of $2.0 million and 20 properties sold with an aggregate carrying value of $7.1 million.  Total non-performing assets at December 31, 2018 declined $14.5 million, or 34.8%, to $27.3 million, or 0.28% of total assets, from $41.8 million, or 0.42% of total assets at December 31, 2017. 

Income Tax Expense

For the quarter and year ended December 31, 2018, the Company’s income tax expense was $6.0 million and $25.5 million, respectively, compared with $15.7 million and $46.5 million, for the quarter and year ended December 31, 2017, respectively.  The Company’s effective tax rates were 14.4% and 17.7% for the quarter and year ended December 31, 2018, respectively, compared with 44.7% and 33.1% for the quarter and year ended December 31, 2017, respectively.  The decrease in tax expense and the lower effective tax rates for both the quarter and year ended December 31, 2018, were favorably impacted by the Tax Cuts and Jobs Act (the "Tax Act"), which, effective January 1, 2018, reduced the statutory federal income tax rate from 35% to 21%; and the recognition of a non-recurring $1.9 million tax benefit related to the Company's completion of a cost segregation study that assigned shorter taxable lives to select fixed assets.  The tax rates for 2017 included an additional tax expense of $4.0 million related to the enactment of the Tax Act.  

About the Company

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

Post Earnings Conference Call

Representatives of the Company will hold a conference call for investors on Friday, February 1, 2019 at 10:00 a.m. Eastern Time to discuss the Company’s financial results for the quarter and year ended December 31, 2018.  The call may be accessed by dialing 1-888-336-7149 (Domestic), 1-412-902-4175 (International) or 1-855-669-9657 (Canada).  Internet access to the call is also available (listen only) at www.Provident.Bank by going to Investor Relations and clicking on "Webcast."

Forward Looking Statements

Certain statements contained herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” "project," "intend," “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms.  Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those set forth in Item 1A of the Company's Annual Report on Form 10-K, as supplemented by its Quarterly Reports on Form 10-Q, and those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made.  The Company advises readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.  The Company does not have any obligation to update any forward-looking statements to reflect events or circumstances after the date of this statement.

Footnotes

(1) Tangible book value per share, annualized return on average tangible equity, annualized non-interest expense as a percentage of average assets and the efficiency ratio are non-GAAP financial measures.  Please refer to the Notes following the Consolidated Financial Highlights which contain the reconciliation of GAAP to non-GAAP financial measures and the associated calculations.


   
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY  
Consolidated Statements of Financial Condition  
December 31, 2018 (Unaudited) and December 31, 2017  
(Dollars in Thousands)  
         
Assets December 31, 2018   December 31, 2017  
Cash and due from banks $ 86,195     $ 139,557    
Short-term investments 56,466     51,277    
Total cash and cash equivalents 142,661     190,834    
Available for sale debt securities, at fair value 1,063,079     1,037,154    
Held to maturity debt securities (fair value of $479,740 and $485,039 at December 31, 2018 and December 31, 2017, respectively) 479,425     477,652    
Equity securities, at fair value 635     658    
Federal Home Loan Bank Stock 68,813     81,184    
Loans 7,250,588     7,325,718    
Less allowance for loan losses 55,562     60,195    
Net loans 7,195,026     7,265,523    
Foreclosed assets, net 1,565     6,864    
Banking premises and equipment, net 58,124     63,185    
Accrued interest receivable 31,475     29,646    
Intangible assets 418,178     420,290    
Bank-owned life insurance 193,085     189,525    
Other assets 73,703     82,759    
Total assets $ 9,725,769     $ 9,845,274    
         
Liabilities and Stockholders' Equity        
Deposits:        
Demand deposits $ 5,027,708     $ 4,996,345    
Savings deposits 1,051,922     1,083,012    
Certificates of deposit of $100,000 or more 414,848     316,074    
Other time deposits 335,644     318,735    
Total deposits 6,830,122     6,714,166    
Mortgage escrow deposits 25,568     25,933    
Borrowed funds 1,442,282     1,742,514    
Other liabilities 68,817     64,000    
Total liabilities 8,366,789     8,546,613    
         
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 66,325,458 shares outstanding at December 31, 2018, and 83,209,293 shares issued and 66,535,017 shares outstanding at December 31, 2017, respectively   832     832    
Additional paid-in capital   1,021,533     1,012,908    
Retained earnings   651,099     586,132    
Accumulated other comprehensive loss   (12,336 )   (7,465 )  
Treasury stock   (272,470 )   (259,907 )  
Unallocated common stock held by the Employee Stock Ownership Plan   (29,678 )   (33,839 )  
Common stock acquired by the Directors’ Deferred Fee Plan   (4,504 )   (5,175 )  
Deferred compensation—Directors’ Deferred Fee Plan   4,504     5,175    
Total stockholders’ equity 1,358,980     1,298,661    
Total liabilities and stockholders’ equity $ 9,725,769     $ 9,845,274    



                 
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY  
Consolidated Statements of Income  
Three Months (Unaudited) and Year Ended December 31, 2018 (Unaudited) and 2017  
(Dollars in Thousands, except per share data)  
                 
  Three Months Ended   Year Ended  
  December 31,   December 31,  
  2018   2017   2018   2017  
Interest income:                
Real estate secured loans $ 56,433   $ 49,184   $ 215,231   $ 189,896  
Commercial loans 20,665   19,023   79,371   72,907  
Consumer loans 4,961   5,008   19,906   20,301  
Available for sale debt securities and Federal Home Loan Bank stock 8,243   6,794   30,981   26,445  
Held to maturity debt securities 3,159   3,215   12,606   13,027  
Deposits, Federal funds sold and other short-term investments 461   372   1,734   1,270  
Total interest income 93,922   83,596   359,829   323,846  
                 
Interest expense:                
Deposits 9,606   5,348   30,693   19,441  
Borrowed funds 6,983   6,348   28,460   26,203  
Total interest expense 16,589   11,696   59,153   45,644  
Net interest income 77,333   71,900   300,676   278,202  
Provision for loan losses 1,800   1,900   23,700   5,600  
Net interest income after provision for loan losses 75,533   70,000   276,976   272,602  
                 
Non-interest income:                
Fees 7,378   6,278   28,084   27,218  
Bank-owned life insurance 874   1,402   5,514   6,693  
Wealth management income 4,385   4,290   17,957   17,604  
Net gain on securities transactions 2,218   10   2,221   57  
Other income 761   1,321   4,900   4,125  
Total non-interest income 15,616   13,301   58,676   55,697  
                 
Non-interest expense:                
Compensation and employee benefits 28,098   28,267   111,496   109,353  
Net occupancy expense 6,004   6,035   25,056   25,290  
Data processing expense 3,802   3,620   14,664   13,922  
FDIC Insurance 562   822   3,482   3,887  
Amortization of intangibles 502   591   2,127   2,670  
Advertising and promotion expense 1,073   1,195   3,836   3,904  
Other operating expenses 9,319   7,548   31,074   28,796  
Total non-interest expense 49,360   48,078   191,735   187,822  
Income before income tax expense 41,789   35,223   143,917   140,477  
Income tax expense 6,026   15,740   25,530   46,528  
Net income $ 35,763   $ 19,483   $ 118,387   $ 93,949  
                 
Basic earnings per share $ 0.55   $ 0.30   $ 1.82   $ 1.46  
Average basic shares outstanding 65,048,753   64,554,617   64,942,886   64,384,851  
                 
Diluted earnings per share $ 0.55   $ 0.30   $ 1.82   $ 1.45  
Average diluted shares outstanding 65,175,345   64,749,297   65,103,097   64,579,222  




   
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY    
Consolidated Financial Highlights    
(Dollars in Thousands, except share data) (Unaudited)    
           
  At or for the     At or for the  
  Three Months Ended     Year Ended  
  December 31,     December 31,  
  2018     2017   2018   2017  
STATEMENTS OF INCOME:                  
Net interest income $ 77,333     $ 71,900     $ 300,676     $ 278,202    
Provision for loan losses 1,800     1,900     23,700     5,600    
Non-interest income 15,616     13,301     58,676     55,697    
Non-interest expense 49,360     48,078     191,735     187,822    
Income before income tax expense 41,789     35,223     143,917     140,477    
Net income 35,763     19,483     118,387     93,949    
Diluted earnings per share $ 0.55     $ 0.30     $ 1.82     $ 1.45    
Interest rate spread 3.22 %   3.10 %   3.20 %   3.07 %  
Net interest margin 3.44 %   3.25 %   3.39 %   3.21 %  
                   
PROFITABILITY:                  
Annualized return on average assets 1.46 %   0.80 %   1.22 %   0.99 %  
Annualized return on average equity
10.53 %   5.90 %   8.93 %   7.28 %  
Annualized return on average tangible equity (1)  15.27 %   8.69 %   13.07 %   10.82 %  
Annualized core non-interest expense to average assets (1)  2.01 %   1.98 %   1.97 %   1.97 %  
Efficiency ratio (1)  53.10 %   56.43 %   53.36 %   56.25 %  
                   
ASSET QUALITY:                      
Non-accrual loans           $ 25,690     $ 34,929    
90+ and still accruing                  
Non-performing loans           25,690     34,929    
Foreclosed assets           1,565     6,864    
Non-performing assets           27,255     41,793    
Non-performing loans to total loans           0.35 %   0.48 %  
Non-performing assets to total assets           0.28 %   0.42 %  
Allowance for loan losses           $ 55,562     $ 60,195    
Allowance for loan losses to total non-performing loans           216.28 %   172.34 %  
Allowance for loan losses to total loans           0.77 %   0.82 %  
                   
AVERAGE BALANCE SHEET DATA:                  
Assets $ 9,729,008     $ 9,618,177     $ 9,736,449     $ 9,534,785    
Loans, net 7,204,254     7,075,373     7,208,420     6,971,512    
Earning assets 8,859,139     8,739,182     8,865,076     8,649,286    
Core deposits 6,138,343     6,071,705     6,109,836     5,944,870    
Borrowings 1,393,965     1,545,665     1,535,906     1,581,964    
Interest-bearing liabilities 6,804,187     6,793,648     6,853,751     6,809,675    
Stockholders'  equity 1,347,630     1,310,193     1,325,211     1,289,973    
Average yield on interest-earning assets 4.19 %   3.78 %   4.06 %   3.74 %  
Average cost of interest-bearing liabilities 0.97 %   0.68 %   0.86 %   0.67 %  
                   
LOAN DATA:                  
Mortgage loans:                    
Residential           $ 1,100,009     $ 1,142,914    
Commercial           2,299,417     2,171,174    
Multi-family           1,339,800     1,404,005    
Construction           388,999     392,580    
Total mortgage loans           5,128,225     5,110,673    
Commercial loans           1,695,148     1,745,301    
Consumer loans           431,428     473,958    
Total gross loans           7,254,801     7,329,932    
Premium on purchased loans           3,243     4,029    
Unearned discounts           (33 )   (36 )  
Net deferred           (7,423 )   (8,207 )  
Total loans           $ 7,250,588     $ 7,325,718    

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

                     
Notes - Reconciliation of GAAP to Non-GAAP Financial Measures - (Dollars in Thousands, except share data)
                     
(1) Book and Tangible Book Value per Share                    
              At December 31,
              2018     2017
Total stockholders' equity             $ 1,358,980     $ 1,298,661
Less: total intangible assets             418,178     420,290
Total tangible stockholders' equity             $ 940,802     $ 878,371
                     
Shares outstanding             66,325,458     66,535,017
                     
Book value per share (total stockholders' equity/shares outstanding)             $ 20.49     $ 19.52
Tangible book value per share (total tangible stockholders' equity/shares outstanding)             $ 14.18     $ 13.20
                     
(2) Annualized Return on Average Tangible Equity                    
  Three Months Ended     Year Ended
  December 31,     December 31,
  2018     2017     2018     2017
Total average stockholders' equity $ 1,347,630     $ 1,310,193     $ 1,325,211     $ 1,289,973  
Less: total average intangible assets 418,501     420,667     419,271     421,628  
Total average tangible stockholders' equity $ 929,129     $ 889,526     $ 905,940     $ 868,345  
                       
Net income $ 35,763     $ 19,483     $ 118,387     $ 93,949  
Annualized return on average tangible equity (net income/total average stockholders' equity) 15.27 %   8.69 %   13.07 %   10.82 %
                     
(3) Annualized Non-Interest Expense to Average Assets                    
  Three Months Ended     Year Ended
  December 31,     December 31,
  2018     2017     2018     2017
Total annualized non-interest expense $ 195,830     $ 190,744     $ 191,735     $ 187,822  
Average assets 9,729,008     9,618,177     9,736,449     9,534,785  
                       
Annualized non-interest expense/average assets 2.01 %   1.98 %   1.97 %   1.97 %
                     
(4) Efficiency Ratio                    
  Three Months Ended     Year Ended
  December 31,     December 31,
  2018     2017     2018     2017
Net interest income $ 77,333     $ 71,900     $ 300,676     $ 278,202  
Non-interest income 15,616     13,301     58,676     55,697  
Total income $ 92,949     $ 85,201     $ 359,352     $ 333,899  
                       
Non-interest expense $ 49,360     $ 48,078     $ 191,735     $ 187,822  
                     
Efficiency ratio (non-interest expense/total income) 53.10 %   56.43 %   53.36 %   56.25 %


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY  
Net Interest Margin Analysis  
Quarterly Average Balances  
(Unaudited) (Dollars in Thousands)  
   
                         
  December 31, 2018   September 30, 2018  
  Average       Average   Average       Average  
  Balance   Interest   Yield/Cost   Balance   Interest   Yield/Cost  
Interest-Earning Assets:
                       
Deposits $ 14,253   $ 81   2.28 %   $ 13,552   $ 69   2.04 %  
Federal funds sold and other short-term investments 48,787   380   3.09 %   50,600   381   2.97 %  
Held to maturity debt securities  (1)
475,815   3,159   2.66 %   473,291   3,149   2.66 %  
Available for sale debt securities, at fair value 1,049,645   6,962   2.65 %   1,049,933   6,577   2.51 %  
Equity securities, at fair value 700       — %   706       — %  
Federal Home Loan Bank stock 65,685   1,281   7.80 %   73,787   1,228   6.66 %  
Net loans:  (2)
                       
Total mortgage loans 5,160,375   56,433   4.31 %   5,098,281   54,532   4.22 %  
Total commercial loans 1,607,528   20,665   5.06 %   1,650,039   20,230   4.82 %  
Total consumer loans 436,351   4,961   4.51 %   446,986   5,095   4.52 %  
Total net loans 7,204,254   82,059   4.49 %   7,195,306   79,857   4.38 %  
Total Interest Earning Assets
$ 8,859,139   $ 93,922   4.19 %   $ 8,857,175   $ 91,261   4.07 %  
                         
Non-Interest Earning Assets:                        
Cash and due from banks 92,040           93,082          
Other assets 777,829           777,348          
Total Assets $ 9,729,008           $ 9,727,605          
                         
Interest-Bearing Liabilities:                        
Demand deposits $ 3,608,524   $ 6,262   0.69 %   $ 3,515,583   5,319   0.60 %  
Savings deposits 1,050,832   473   0.18 %   1,056,382   460   0.17 %  
Time deposits 750,866   2,871   1.52 %   653,641   2,077   1.26 %  
Total Deposits 5,410,222   9,606   0.70 %   5,225,606   7,856   0.60 %  
Borrowed funds 1,393,965   6,983   1.99 %   1,569,176   7,619   1.93 %  
Total Interest Bearing Liabilities
6,804,187   16,589   0.97 %   6,794,782   15,475   0.90 %  
                         
Non-Interest Bearing Liabilities:
                       
Non-interest bearing deposits 1,478,987           1,495,138          
Other non-interest bearing liabilities 98,204           109,340          
Total Non-interest Bearing Liabilities 1,577,191           1,604,478          
Total Liabilities 8,381,378           8,399,260          
Stockholders' equity 1,347,630           1,328,345          
Total Liabilities and Stockholders' Equity $ 9,729,008           $ 9,727,605          
                             
Net interest income     $ 77,333           $ 75,786      
Net interest rate spread         3.22 %           3.17 %  
Net interest-earning assets $ 2,054,952           $ 2,062,393          
Net interest margin  (3)
        3.44 %           3.38 %  
Ratio of interest-earning assets to total interest-bearing liabilities
1.30x           1.30x          
                         
(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 rate spread and net interest margin for the previous five quarters.    
                   
  12/31/18   9/30/18   6/30/18   03/31/18   12/31/17
  4th Qtr.   3rd Qtr.   2nd Qtr.   1st Qtr.   4th Qtr.
Interest-Earning Assets:                  
Securities 2.87 %   2.75 %   2.72 %   2.62 %   2.49 %
Net loans 4.49 %   4.38 %   4.26 %   4.18 %   4.08 %
Total interest-earning assets 4.19 %   4.07 %   3.97 %   3.89 %   3.78 %
                   
Interest-Bearing Liabilities:                  
Total deposits 0.70 %   0.60 %   0.53 %   0.47 %   0.40 %
Total borrowings 1.99 %   1.93 %   1.82 %   1.70 %   1.63 %
Total interest-bearing liabilities 0.97 %   0.90 %   0.82 %   0.76 %   0.68 %
                   
Interest rate spread 3.22 %   3.17 %   3.15 %   3.13 %   3.10 %
Net interest margin 3.44 %   3.38 %   3.33 %   3.30 %   3.25 %
                   
Ratio of interest-earning assets to interest-bearing liabilities 1.30x   1.30x   1.29x   1.28x   1.29x


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY  
Net Interest Margin Analysis  
Average Year to Date Balances  
(Unaudited) (Dollars in Thousands)  
                         
  December 31, 2018   December 31, 2017  
  Average       Average   Average       Average  
  Balance   Interest   Yield/Cost   Balance   Interest   Yield/Cost  
Interest-Earning Assets:                        
Deposits $ 13,867   $ 269   1.91 %   $ 19,670   $ 199   1.00 %  
Federal funds sold and other short term investments 50,351   1,465   2.92 %   51,790   1,071   2.07 %  
Held to maturity debt securities  (1)
472,690   12,606   2.67 %   487,616   13,027   2.67 %  
Available for sale debt securities, at fair value 1,046,701   26,074   2.49 %   1,044,116   22,384   2.14 %  
Equity securities, at fair value 683       — %   587       — %  
Federal Home Loan Bank stock 72,364   4,907   6.78 %   73,995   4,061   5.49 %  
Net loans:  (2)
                       
Total mortgage loans 5,108,289   215,231   4.21 %   4,838,342   189,896   3.92 %  
Total commercial loans 1,648,537   79,371   4.81 %   1,640,198   72,907   4.44 %  
Total consumer loans 451,594   19,906   4.41 %   492,972   20,301   4.12 %  
Total net loans 7,208,420   314,508   4.36 %   6,971,512   283,104   4.06 %  
Total Interest Earning Assets $ 8,865,076   $ 359,829   4.06 %   $ 8,649,286   $ 323,846   3.74 %  
                         
Non-Interest Earning Assets:
                       
Cash and due from banks 93,601           93,894          
Other assets 777,772           791,605          
Total Assets $ 9,736,449           $ 9,534,785          
                         
Interest-Bearing Liabilities:
                       
Demand deposits $ 3,575,306   $ 20,450   0.57 %   $ 3,477,413   $ 12,205   0.35 %  
Savings deposits 1,070,868   1,923   0.18 %   1,101,103   2,092   0.19 %  
Time deposits 671,671   8,320   1.24 %   649,195   5,144   0.79 %  
Total Deposits 5,317,845   30,693   0.58 %   5,227,711   19,441   0.37 %  
Borrowed funds 1,535,906   28,460   1.85 %   1,581,964   26,203   1.66 %  
Total Interest Bearing Liabilities $ 6,853,751   59,153   0.86 %   $ 6,809,675   45,644   0.67 %  
                         
Non-Interest Bearing Liabilities:                        
Non-interest bearing deposits 1,463,662           1,366,354          
Other non-interest bearing liabilities 93,825           68,783          
Total Non-interest Bearing Liabilities 1,557,487           1,435,137          
Total Liabilities 8,411,238           8,244,812          
Stockholders' equity 1,325,211           1,289,973          
Total Liabilities and Stockholders' Equity $ 9,736,449           $ 9,534,785          
                         
Net interest income     $ 300,676           $ 278,202      
Net interest rate spread         3.20 %           3.07 %  
Net interest-earning assets $ 2,011,325           $ 1,839,611          
Net interest margin  (3)
        3.39 %           3.21 %  
Ratio of interest-earning assets to total interest-bearing liabilities
1.29x           1.27 x          
                         
(1)  Average outstanding balance amounts shown are amortized cost.  
                         
(2)  Average outstanding balance are net of the allowance for loan losses, deferred loan fees and expenses, loan premium and discounts and include non-accrual loans.  
                         
(3)  Annualized net interest income divided by average interest-earning assets.  


The following table summarizes the year-to-date net interest rate spread and net interest margin for the previous three years.
           
  Years Ended
  12/31/18   12/31/17   12/31/16
Interest-Earning Assets:          
Securities 2.74 %   2.43 %   2.24 %
Net loans 4.36 %   4.06 %   3.98 %
Total interest-earning assets 4.06 %   3.74 %   3.64 %
           
Interest-Bearing Liabilities:          
Total deposits 0.58 %   0.37 %   0.33 %
Total borrowings 1.85 %   1.66 %   1.70 %
Total interest-bearing liabilities 0.86 %   0.67 %   0.66 %
           
Interest rate spread 3.20 %   3.07 %   2.98 %
Net interest margin 3.39 %   3.21 %   3.11 %
           
Ratio of interest-earning assets to interest-bearing liabilities 1.29x   1.27x   1.25x


SOURCE:  Provident Financial Services, Inc.

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

Web Site:  http://www.Provident.Bank