ISELIN, N.J., Oct. 25, 2019 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $31.4 million, or $0.49 per basic and diluted share, for the three months ended September 30, 2019, compared to net income of $35.5 million, or $0.55 per basic share and $0.54 per diluted share, for the three months ended September 30, 2018.  For the nine months ended September 30, 2019, the Company reported net income of $86.7 million, or $1.34 per basic and diluted share, compared to net income of $82.6 million, or $1.27 per basic share and diluted share, for the same period last year. 

Christopher Martin, Chairman, President and Chief Executive Officer commented: “The lower interest rate environment stemming from the Federal Reserve’s accommodative interest rate policy put pressure on our net interest margin, consistent with much of the industry this quarter.  We have taken steps to reduce negotiated deposit rates and will continue our emphasis on non-interest bearing deposit growth which was strong this quarter.” Martin continued: “We remain focused on managing expenses, while still addressing technology investment and compliance requirements.”

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.23 per common share payable on November 29, 2019, to stockholders of record as of the close of business on November 15, 2019.

Balance Sheet Summary

Total assets at September 30, 2019 were $9.92 billion, a $192.6 million increase from December 31, 2018.  The increase in total assets was primarily due to a $118.2 million increase in cash and cash equivalents, a $71.2 million increase in other assets, a $19.4 million increase in intangible assets and a $16.4 million increase in total loans, partially offset by a $27.8 million decrease in total investments.

The increase in other assets was largely due to the Company's January 1, 2019 adoption of a new lease accounting standard.  The Company recorded a right of use asset of $44.9 million, which was based on the present value of the expected remaining lease payments at January 1, 2019.

The Company’s loan portfolio increased $16.4 million to $7.27 billion at September 30, 2019, from $7.25 billion at December 31, 2018.  For the nine months ended September 30, 2019, loan originations, including advances on lines of credit, totaled $2.04 billion, compared with $2.34 billion for the same period in 2018.  During the nine months ended September 30, 2019, the loan portfolio had net increases of $137.8 million in commercial mortgage loans and $10.5 million in construction loans, partially offset by net decreases of $41.0 million in multi-family mortgage loans, $35.2 million in commercial loans, $27.9 million in consumer loans and $27.3 million in residential mortgage loans.  Commercial real estate, commercial and construction loans represented 79.7% of the loan portfolio at September 30, 2019, compared to 78.9% at December 31, 2018. 

At September 30, 2019, the Company’s unfunded loan commitments totaled $1.65 billion, including commitments of $649.5 million in commercial loans, $541.8 million in construction loans and $224.7 million in commercial mortgage loans.  Unfunded loan commitments at December 31, 2018 and September 30, 2018 were $1.49 billion and $1.60 billion, respectively.

The loan pipeline, consisting of work-in-process and loans approved pending closing, totaled $1.09 billion at September 30, 2019, compared to $973.4 million and $1.13 billion at December 31, 2018 and September 30, 2018, respectively.

Total investments were $1.58 billion at September 30, 2019, a $27.8 million decrease from December 31, 2018.  This decrease was largely due to repayments of mortgage-backed securities, maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities and an increase in unrealized gains on available for sale debt securities.

Intangible assets increased $19.4 million to $437.6 million at September 30, 2019.  The increase in intangible assets was primarily related to the Company's April 1, 2019 acquisition of Tirschwell & Loewy, Inc. (“T&L”), a New York City-based independent registered investment adviser, partially offset by scheduled amortization.

Total deposits increased $131.2 million during the nine months ended September 30, 2019 to $6.96 billion.  Total time deposits increased $94.2 million to $844.7 million at September 30, 2019, while total core deposits, consisting of savings and demand deposit accounts, increased $37.0 million to $6.12 billion at September 30, 2019.  The increase in time deposits was primarily the result of a $159.9 million increase in brokered deposits, partially offset by a $65.7 million decrease in retail time deposits.  The increase in core deposits was largely attributable to a $202.0 million increase in non-interest bearing demand deposits and a $97.4 million increase in money market deposits, partially offset by a $196.0 million decrease in interest bearing demand deposits and a $66.3 million decrease in savings deposits.  Core deposits represented 87.9% of total deposits at September 30, 2019, compared to 89.0% at December 31, 2018.

Borrowed funds decreased $62.2 million during the nine months ended September 30, 2019, to $1.38 billion.  The decrease in borrowings for the period was primarily the result of wholesale funding being partially replaced by the net inflows of deposits.  Borrowed funds represented 13.9% of total assets at September 30, 2019, a decrease from 14.8% at December 31, 2018.

Stockholders’ equity increased $38.9 million during the nine months ended September 30, 2019, to $1.40 billion, primarily due to net income earned for the period and an increase in unrealized gains on available for sale debt securities, partially offset by dividends paid to stockholders and common stock repurchases.  For the nine months ended September 30, 2019, common stock repurchases totaled 916,326 shares at an average cost of $23.81, of which 73,311 shares, at an average cost of $27.08, were made in connection with withholding to cover income taxes on the vesting of stock-based compensation.  At September 30, 2019, 1.6 million shares remained eligible for repurchase under the current stock repurchase authorization.  Book value per share and tangible book value per share(1) at September 30, 2019 were $21.26 and $14.60, respectively, compared with $20.49 and $14.18, respectively, at December 31, 2018.

Results of Operations

Net Interest Income and Net Interest Margin

For the three months ended September 30, 2019, net interest income decreased $2.3 million to $73.5 million, from $75.8 million for the same period in 2018.  Net interest income for the nine months ended September 30, 2019 increased $1.7 million to $225.1 million, from $223.3 million for the same period in 2018.  The decline in net interest income for the three months ended September 30, 2019, compared with three months ended September 30, 2018, was primarily due to the period-over-period compression in the net interest margin as the increase in the cost of the Company’s average interest-bearing deposits and borrowings outpaced the improvement in the yield on average total loans.  This was tempered by the net inflow of deposits and growth in average non-interest bearing deposits, which mitigated the Company’s need to utilize higher-cost sources to fund average interest earning assets.  The improvement in net interest income for the nine months ended September 30, 2019, compared to the same period in 2018, was driven by an increase in the net interest margin. The improvement in net interest margin for the nine months ended September 30, 2019 was aided by the recognition of $2.2 million in interest income, in the second quarter of 2019, upon the prepayment of loans which had previously been non-accruing.

The Company’s net interest margin decreased 19 basis points to 3.23% for the quarter ended September 30, 2019, from 3.42% for the trailing quarter.  The yield on interest-earning assets and net interest margin for the three months ended June 30, 2019 were enhanced by 10 basis points as a result of the recognition of $2.2 million in interest income upon the prepayment of loans which had previously been non-accruing.  Excluding the impact of the receipt of this non-accrual loan interest in the prior quarter, the net interest margin compressed nine basis points for the quarter ended September 30, 2019, compared with the trailing quarter.  The weighted average yield on interest-earning assets decreased 19 basis points to 4.09% for the quarter ended September 30, 2019, compared to 4.28% for the quarter ended June 30, 2019.  The weighted average cost of interest-bearing liabilities for the quarter ended September 30, 2019 increased one basis point to 1.13%, compared to 1.12% for the trailing quarter.  The average cost of interest bearing deposits for the quarter ended September 30, 2019 was 0.87%, compared to 0.86% for the trailing quarter ended June 30, 2019.  Average non-interest bearing demand deposits totaled $1.51 billion for the quarter ended September 30, 2019, compared with $1.46 billion for the trailing quarter ended June 30, 2019.  The average cost of borrowed funds for the quarter ended September 30, 2019 was 2.13%, compared to 2.18% for the trailing quarter.

The net interest margin decreased 15 basis points to 3.23% for the quarter ended September 30, 2019, compared to 3.38% for the quarter ended September 30, 2018.  The weighted average yield on interest-earning assets increased two basis points to 4.09% for the quarter ended September 30, 2019, compared to 4.07% for the quarter ended September 30, 2018, while the weighted average cost of interest bearing liabilities increased 23 basis points for the quarter ended September 30, 2019 to 1.13%, compared to the third quarter of 2018.  The average cost of interest bearing deposits for the quarter ended September 30, 2019 was 0.87%, compared to 0.60% for the same period last year.  Average non-interest bearing demand deposits totaled $1.51 billion for the quarter ended September 30, 2019, compared to $1.50 billion at September 30, 2018.  The average cost of borrowed funds for the quarter ended September 30, 2019 was 2.13%, compared to 1.93% for the same period last year.  

For the nine months ended September 30, 2019, the net interest margin increased two basis points to 3.35%, compared to 3.33% for the nine months ended September 30, 2018.  The yield on interest-earning assets and net interest margin for the nine months ended September 30, 2019 were enhanced by three basis points as a result of the recognition in the second quarter of $2.2 million in interest income upon the prepayment of loans which had previously been non-accruing.  Excluding the impact of the receipt of this non-accrual loan interest in the prior quarter, the net interest margin compressed one basis point for the nine months ended September 30, 2019, compared with the prior year period. The weighted average yield on interest earning assets increased 21 basis points to 4.19% for the nine months ended September 30, 2019, compared to 3.98% for the nine months ended September 30, 2018, while the weighted average cost of interest bearing liabilities increased 27 basis points to 1.10% for the nine months ended September 30, 2019, compared to 0.83% the same period last year.  The average cost of interest bearing deposits increased 31 basis points to 0.84% for the nine months ended September 30, 2019, compared to 0.53% for the same period last year.  Average non-interest bearing demand deposits totaled $1.47 billion for the nine months ended September 30, 2019, compared with $1.46 billion for the nine months ended September 30, 2018.  The average cost of borrowings for the nine months ended September 30, 2019 was 2.13%, compared to 1.81% for the same period last year.

Non-Interest Income

Non-interest income totaled $18.0 million for the quarter ended September 30, 2019, an increase of $2.1 million, compared to the same period in 2018.  Wealth management income increased $1.5 million to $6.1 million for the three months ended September 30, 2019, primarily due to fees earned from assets under management acquired in the T&L transaction.  Other income increased $1.3 million to $3.1 million for the three months ended September 30, 2019, compared to the quarter ended September 30, 2018, primarily due to a $1.8 million increase in customer swap fee income, partially offset by a $383,000 decrease in net gains on the sale of loans.  Fee income increased $179,000 to $7.6 million for the three months ended September 30, 2019, compared to the same period in 2018, largely due to a $264,000 increase in commercial loan prepayment fees, partially offset by a $124,000 decrease in income from the sale of non-deposit investment products.  Partially offsetting these increases, income from Bank-owned life insurance ("BOLI") decreased $811,000 to $1.3 million for the three months ended September 30, 2019, compared to the same period in 2018, primarily due to a decrease in benefit claims and lower equity valuations.

For the nine months ended September 30, 2019, non-interest income totaled $46.1 million, an increase of $3.0 million, compared to the same period in 2018.  Wealth management income increased $2.8 million to $16.4 million for the nine months ended September 30, 2019, primarily due to fees of $3.5 million earned from approximately $822 million of assets under management acquired in the T&L transaction, partially offset by a decrease in managed mutual fund fees.  Other income increased $625,000 to $4.8 million for the nine months ended September 30, 2019, compared to $4.1 million for the same period in 2018, due to a $1.5 million increase in customer swap fee income, partially offset by a $573,000 decrease in net gains on the sale of foreclosed real estate and a $304,000 decrease in net gains on the sale of loans.  BOLI income decreased $387,000 to $4.3 million for the nine months ended September 30, 2019, compared to the same period in 2018, primarily due to a decrease in benefit claims, partially offset by an increase in equity valuations.

Non-Interest Expense

For the three months ended September 30, 2019, non-interest expense totaled $49.7 million, an increase of $3.1 million, compared to the three months ended September 30, 2018.  Compensation and benefits expense increased $1.8 million to $29.4 million for the three months ended September 30, 2019, compared to $27.5 million for the same period in 2018.  This increase was principally due to additional compensation expense associated with the T&L acquisition, an increase in salary expense related to annual merit increases and an increase in severance costs.  Other operating expenses increased $776,000 to $7.9 million for the three months ended September 30, 2019, compared to the same period in 2018, largely due to increases in attorney fees and a change in the vesting schedule of stock-based director fees.  Data processing expense increased $484,000 to $4.1 million for the three months ended September 30, 2019, primarily due to increases in software subscription service expense and implementation costs, while the amortization of intangibles increased $318,000 for the three months ended September 30, 2019, compared with the same period in 2018, mainly due to an increase in the customer relationship intangible amortization attributable to the acquisition of T&L.  Partially offsetting these increases, FDIC insurance decreased $967,000 largely due to the receipt of the small bank assessment credit for the second quarter of 2019 and the discontinuance of the FICO assessment.  The FICO assessment was used to pay interest on the Financing Corporation bonds issued in the late 1980's to recapitalize the former Federal Savings and Loan Insurance Corporation. 

The Company’s annualized non-interest expense as a percentage of average assets(1) was 1.99% for the quarter ended September 30, 2019, compared to 1.90% for the same period in 2018.  The efficiency ratio (non-interest expense divided by the sum of net interest income and non-interest income)(1) was 54.31% for the quarter ended September 30, 2019, compared to 50.88% for the same period in 2018. 

Non-interest expense totaled $147.8 million for the nine months ended September 30, 2019, an increase of $5.5 million, compared to $142.4 million for the nine months ended September 30, 2018.  Compensation and benefits expense increased $3.3 million to $86.7 million for the nine months ended September 30, 2019, compared to $83.4 million for the nine months ended September 30, 2018, primarily due to additional compensation expense associated with the T&L acquisition, an increase in the accrual for incentive compensation and an increase in stock-based compensation.  Data processing expense increased $1.6 million to $12.4 million for the nine months ended September 30, 2019, compared to $10.9 million for the same period in 2018, principally due to increases in software subscription service expense and software implementation costs, partially offset by a decrease in software maintenance expense.  Other operating expenses increased $895,000 to $22.7 million for the nine months ended September 30, 2019, compared to the same period in 2018, largely due to an increase in attorney fees and consulting expenses, partially offset by the impact of the change in the vesting schedule of stock-based director fees.  In addition, amortization of intangibles increased $536,000 for the nine months ended September 30, 2019, compared with the same period in 2018, due to an increase in the customer relationship intangible amortization attributable to the T&L acquisition.  Partially offsetting these increases, FDIC insurance decreased $1.8 million due to the receipt of the small bank assessment credit for the second quarter of 2019, the discontinuance of the FICO assessment and an overall reduction in the insurance assessment rate. 

Asset Quality

The Company’s total non-performing loans at September 30, 2019 were $40.0 million, or 0.55% of total loans, compared to $38.6 million, or 0.53% of total loans at June 30, 2019, and $25.7 million, or 0.35% of total loans at December 31, 2018.  The $1.4 million increase in non-performing loans at September 30, 2019, compared to the trailing quarter, was due to a $1.6 million increase in non-performing commercial loans, partially offset by a $155,000 decrease in non-performing consumer loans, a $34,000 decrease in non-performing residential loans and a $25,000 decrease in non-performing commercial mortgage loans.  At September 30, 2019, impaired loans totaled $71.3 million with related specific reserves of $5.3 million, compared with impaired loans totaling $70.6 million with related specific reserves of $9.4 million at June 30, 2019.  At December 31, 2018, impaired loans totaled $50.7 million with related specific reserves of $1.2 million.

At September 30, 2019, the Company’s allowance for loan losses was 0.79% of total loans, compared to 0.86% and 0.77% at June 30, 2019 and December 31, 2018, respectively.  The Company recorded provisions for loan losses of $500,000 and $10.2 million for the three and nine months ended September 30, 2019, respectively, compared with provisions of $1.0 million and $21.9 million for the three and nine months ended September 30, 2018, respectively.  For the nine months ended September 30, 2019, the provision for loan losses was largely driven by deterioration in several commercial credit relationships.  This included fully providing for a $5.7 million relationship with a commercial contractor, $3.3 million in connection with a $14.1 million interest in a syndicated impaired credit to a franchise restaurant owner/operator and $1.2 million related to a $3.7 million commercial relationship with a charter bus company.  The $5.7 million related to the commercial contractor was charged-off in the current quarter.  For the three and nine months ended September 30, 2019, the Company had net charge-offs of $6.0 million and $8.4 million, respectively, compared to net charge-offs of $5.9 million and $28.2 million, respectively, for the same periods in 2018.  The allowance for loan losses increased $1.8 million to $57.3 million at September 30, 2019 from $55.6 million at December 31, 2018. 

At September 30, 2019 and December 31, 2018, the Company held foreclosed assets of $1.5 million and $1.6 million, respectively.  During the nine months ended September 30, 2019, there were five additions to foreclosed assets with a carrying value of $850,000, and five properties sold with a carrying value of $881,000.  Foreclosed assets at September 30, 2019 consisted of $1.4 million of residential real estate, $130,000 of marine assets and $48,000 of commercial real estate.  Total non-performing assets at September 30, 2019 increased $14.3 million to $41.5 million, or 0.42% of total assets, from $27.3 million, or 0.28% of total assets at December 31, 2018.

Income Tax Expense

For the three and nine months ended September 30, 2019, the Company’s income tax expense was $9.9 million and $26.4 million, respectively, compared with $8.6 million and $19.5 million, for the three and nine months ended September 30, 2018, respectively.  The Company’s effective tax rates were 24.0% and 23.4% for the three and nine months ended September 30, 2019, respectively, compared to 19.5% and 19.1% for the three and nine months ended September 30, 2018, respectively.  The increase in the Company's effective tax rate for both the three and nine months ended September 30, 2019 was attributable to the publication of a technical bulletin by the New Jersey Division of Taxation in the second quarter of 2019 that specifies treatment of real estate investment trusts in connection with combined reporting for NJ corporate business tax purposes.

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, October 25, 2019 at 10:00 a.m. Eastern Time to discuss the Company’s financial results for the quarter ended September 30, 2019.  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 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 accounting policies and practices that may be adopted by the regulatory agencies and the accounting standards setters, 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
September 30, 2019 (Unaudited) and December 31, 2018
(Dollars in Thousands)
    
AssetsSeptember 30, 2019 December 31, 2018
    
Cash and due from banks$178,573  $86,195 
Short-term investments82,287  56,466 
Total cash and cash equivalents260,860  142,661 
    
Available for sale debt securities, at fair value1,052,995  1,063,079 
Held to maturity debt securities (fair value of $476,698 at September 30, 2019 (unaudited) and $479,740 at December 31, 2018)461,738  479,425 
Equity securities, at fair value728  635 
Federal Home Loan Bank Stock68,721  68,813 
Loans7,266,994  7,250,588 
Less allowance for loan losses57,344  55,562 
Net loans7,209,650  7,195,026 
Foreclosed assets, net1,534  1,565 
Banking premises and equipment, net55,119  58,124 
Accrued interest receivable29,091  31,475 
Intangible assets437,585  418,178 
Bank-owned life insurance195,451  193,085 
Other assets144,925  73,703 
Total assets$9,918,397  $9,725,769 
    
Liabilities and Stockholders' Equity   
    
Deposits:   
Demand deposits$5,131,103  $5,027,708 
Savings deposits985,575  1,051,922 
Certificates of deposit of $100,000 or more534,745  414,848 
Other time deposits309,948  335,644 
Total deposits6,961,371  6,830,122 
Mortgage escrow deposits25,972  25,568 
Borrowed funds1,380,063  1,442,282 
Other liabilities153,158  68,817 
Total liabilities8,520,564  8,366,789 
    
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 65,760,468 shares outstanding at September 30, 2019 and 66,325,458 outstanding at December 31, 2018
832  832 
Additional paid-in capital1,028,131  1,021,533 
Retained earnings682,540  651,099 
Accumulated other comprehensive income (loss)6,762  (12,336)
Treasury stock(292,868) (272,470)
Unallocated common stock held by the Employee Stock Ownership Plan(27,564) (29,678)
Common Stock acquired by the Directors' Deferred Fee Plan(4,001) (4,504)
Deferred Compensation - Directors' Deferred Fee Plan4,001  4,504 
Total stockholders' equity1,397,833  1,358,980 
Total liabilities and stockholders' equity$9,918,397  $9,725,769 


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)
(Dollars in Thousands, except per share data)
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Interest income:       
Real estate secured loans$56,402 $54,532 $167,051 $158,798
Commercial loans20,104 20,230 63,788 58,706
Consumer loans4,648 5,095 14,216 14,945
Available for sale debt securities, equity securities and Federal Home Loan Bank stock7,918 7,805 24,584 22,738
Held to maturity debt securities3,075 3,149 9,408 9,447
Deposits, federal funds sold and other short-term investments879 450 2,038 1,273
Total interest income93,026 91,261 281,085 265,907
        
Interest expense:       
Deposits11,730 7,856 33,940 21,087
Borrowed funds7,768 7,619 22,055 21,477
Total interest expense19,498 15,475 55,995 42,564
Net interest income73,528 75,786 225,090 223,343
Provision for loan losses500 1,000 10,200 21,900
Net interest income after provision for loan losses73,028 74,786 214,890 201,443
        
Non-interest income:       
Fees7,634 7,455 20,617 20,706
Wealth management income6,084 4,570 16,406 13,572
Bank-owned life insurance1,272 2,083 4,253 4,640
Net gain on securities transactions 2 29 3
Other income3,057 1,806 4,764 4,139
Total non-interest income18,047 15,916 46,069 43,060
        
Non-interest expense:       
Compensation and employee benefits29,376 27,546 86,735 83,398
Net occupancy expense6,413 5,924 19,629 19,052
Data processing expense4,114 3,630 12,447 10,862
FDIC Insurance 967 1,167 2,920
Amortization of intangibles827 509 2,161 1,625
Advertising and promotion expense1,098 949 3,059 2,763
Other operating expenses7,910 7,134 22,650 21,755
Total non-interest expense49,738 46,659 147,848 142,375
Income before income tax expense41,337 44,043 113,111 102,128
Income tax expense9,938 8,575 26,429 19,504
Net income$31,399 $35,468 $86,682 $82,624
        
Basic earnings per share$0.49 $0.55 $1.34 $1.27
Average basic shares outstanding64,511,956 65,037,779 64,720,642 64,907,210
        
Diluted earnings per share$0.49 $0.54 $1.34 $1.27
Average diluted shares outstanding64,632,285 65,183,881 64,852,983 65,078,627


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 September 30, Nine months ended September 30,
 2019 2018 2019 2018
Statement of Income       
Net interest income$73,528 $75,786 $225,090 $223,343
Provision for loan losses500 1,000 10,200 21,900
Non-interest income18,047 15,916 46,069 43,060
Non-interest expense49,738 46,659 147,848 142,375
Income before income tax expense41,337 44,043 113,111 102,128
Net income31,399 35,468 86,682 82,624
Diluted earnings per share$0.49 $0.54 $1.34 $1.27
Interest rate spread2.96% 3.17% 3.09% 3.15%
Net interest margin3.23% 3.38% 3.35% 3.33%
        
Profitability       
Annualized return on average assets1.26% 1.45% 1.18% 1.13%
Annualized return on average equity8.90% 10.59% 8.34% 8.38%
Annualized return on average tangible equity (2)12.97% 15.47% 12.11% 12.30%
Annualized non-interest expense to average assets (3)1.99% 1.90% 2.01% 1.95%
Efficiency ratio (4)54.31% 50.88% 54.52% 53.44%
        
Asset Quality       
Non-accrual loans    $39,981 $29,066
90+ and still accruing     
Non-performing loans    39,981 29,066
Foreclosed assets    1,534 5,932
Non-performing assets    41,515 34,998
Non-performing loans to total loans     0.55%  0.40%
Non-performing assets to total assets     0.42%  0.36%
Allowance for loan losses    $57,344 $53,910
Allowance for loan losses to total non-performing loans     143.43%  185.47%
Allowance for loan losses to total loans     0.79% 0.75%
        
Average Balance Sheet Data        
Assets$9,899,693 $9,727,605 $9,811,371 $9,738,958
Loans, net7,199,945 7,195,306 7,169,099 7,209,823
Earning assets8,955,859 8,857,175 8,889,786 8,867,081
Core deposits6,067,107 6,067,103 6,095,784 6,100,229
Borrowings1,445,112 1,569,176 1,386,349 1,583,740
Interest-bearing liabilities6,825,203 6,794,782 6,812,752 6,870,454
Stockholders' equity1,399,583 1,328,345 1,388,838 1,317,656
Average yield on interest-earning assets 4.09%  4.07%  4.19%  3.98%
Average cost of interest-bearing liabilities 1.13%  0.90%  1.10%  0.83%
        
Loan Data       
Mortgage loans:       
Residential    $1,072,701 $1,108,396
Commercial    2,437,210 2,274,059
Multi-family    1,298,754 1,344,066
Construction    399,501 429,248
Total mortgage loans    5,208,166 5,155,769
Commercial loans    1,659,965 1,633,894
Consumer loans    403,576 443,340
Total gross loans    7,271,707 7,233,003
Premium on purchased loans    2,716 3,433
Unearned discounts    (26) (34)
Net deferred    (7,403) (8,029)
Total loans    $7,266,994 $7,228,373

Notes and Reconciliation of GAAP and Non-GAAP Financial Measures

(Dollars in Thousands, except share data)

The Company has presented the following non-GAAP (U.S. Generally Accepted Accounting Principles) financial measures because it believes that these measures provide useful and comparative information to assess trends in the Company’s results of operations and financial condition.  Presentation of these non-GAAP financial measures is consistent with how the Company evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Company’s industry.  Investors should recognize that the Company’s presentation of these non-GAAP financial measures might not be comparable to similarly-titled measures of other companies.  These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and the Company strongly encourages a review of its condensed consolidated financial statements in their entirety.

(1) Book and Tangible Book Value per Share  At September 30, At December 31, 
   2019 2018 2018 
Total stockholders' equity  $1,397,833 $1,331,589 $1,358,980 
Less: total intangible assets  437,585 418,674 418,178 
Total tangible stockholders' equity  $960,248 $912,915 $940,802 
         
Shares outstanding  65,760,468 66,857,212 66,325,458 
         
Book value per share (total stockholders' equity/shares outstanding)  $21.26 $19.92 $20.49 
Tangible book value per share (total tangible stockholders' equity/shares outstanding)  $14.60 $13.65 $14.18 
         
(2) Annualized Return on Average Tangible EquityThree Months Ended Nine Months Ended 
 September 30, September 30, 
 2019 2018 2019 2018 
Total average stockholders' equity$1,399,583 $1,328,345 $1,388,838 $1,317,656 
Less: total average intangible assets438,906 418,997 431,802 419,530 
Total average tangible stockholders' equity$960,677 $909,348 $957,036 $898,126 
         
Net income$31,399 $35,468 $86,682 $82,624 
         
Annualized return on average tangible equity (net income/total average stockholders' equity)12.97% 15.47% 12.11% 12.30% 
         
(3) Annualized Non-Interest Expense to Average AssetsThree Months Ended Nine Months Ended 
 September 30, September 30, 
 2019 2018 2019 2018 
Total annualized non-interest expense$197,330 $185,115 $197,672 $190,355 
Average assets9,899,693 9,727,605 9,811,371 9,738,958 
         
Annualized non-interest expense/average assets1.99% 1.90% 2.01% 1.95% 
         
(4) Efficiency Ratio CalculationThree Months Ended Nine Months Ended 
 September 30, September 30, 
 2019 2018 2019 2018 
Net interest income$73,528 $75,786 $225,090 $223,343 
Non-interest income18,047 15,916 46,069 43,060 
Total income$91,575 $91,702 $271,159 $266,403 
         
Non-interest expense$49,738 $46,659 $147,848 $142,375 
         
Efficiency ratio (non-interest expense/income)54.31% 50.88% 54.52% 53.44% 


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Quarterly Average Balances
(Unaudited) (Dollars in Thousands)
            
 September 30, 2019 June 30, 2019
 Average   Average Average   Average
 Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:           
Deposits$53,597 $305 2.25% $21,772 $136 2.50%
Federal funds sold and other short-term investments76,382 574 2.98% 59,370 482 3.26%
Held to maturity debt securities (1)464,561 3,075 2.65% 474,206 3,171 2.67%
Available for sale debt securities1,089,421 6,851 2.52% 1,095,919 7,219 2.63%
Equity Securities, at fair value747  % 724  %
Federal Home Loan Bank stock71,206 1,067 5.99% 67,278 1,038 6.17%
Net loans:  (2)           
Total mortgage loans5,149,119 56,402 4.32% 5,082,203 55,643 4.35%
Total commercial loans1,643,816 20,104 4.81% 1,673,123 23,174 5.51%
Total consumer loans407,010 4,648 4.53% 417,618 4,785 4.60%
Total net loans7,199,945 81,154 4.44% 7,172,944 83,602 4.63%
Total Interest-Earning Assets$8,955,859 $93,026 4.09% $8,892,213 $95,648 4.28%
            
Non-Interest Earning Assets:           
Cash and due from banks103,963     90,867    
Other assets839,871     828,901    
Total Assets$9,899,693     $9,811,981    
            
Interest-Bearing Liabilities:           
Demand deposits$3,558,809 $7,460 0.83% $3,640,018 7,653 0.84%
Savings deposits994,178 387 0.15% 1,028,585 420 0.16%
Time deposits827,104 3,883 1.86% 802,011 3,643 1.82%
Total Deposits5,380,091 11,730 0.87% 5,470,614 11,716 0.86%
            
Borrowed funds1,445,112 7,768 2.13% 1,360,235 7,377 2.18%
Total Interest-Bearing Liabilities6,825,203 19,498 1.13% 6,830,849 19,093 1.12%
            
Non-Interest Bearing Liabilities:           
Non-interest bearing deposits1,514,120     1,458,430    
Other non-interest bearing liabilities160,787     131,426    
Total non-interest bearing liabilities1,674,907     1,589,856    
Total Liabilities8,500,110     8,420,705    
Stockholders' equity1,399,583     1,391,276    
Total Liabilities and Stockholders' Equity$9,899,693     $9,811,981    
            
Net interest income  $73,528     $76,555  
            
Net interest rate spread    2.96%     3.16%
Net interest-earning assets$2,130,656     $2,061,364    
            
Net interest margin  (3)    3.23%     3.42%
            
Ratio of interest-earning assets to total interest-bearing liabilities1.31x     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 margin for the previous five quarters.  
          
 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18
 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
Interest-Earning Assets:         
Securities2.71% 2.80% 2.87% 2.87% 2.75%
Net loans4.44% 4.63% 4.51% 4.49% 4.38%
Total interest-earning assets4.09% 4.28% 4.20% 4.19% 4.07%
          
Interest-Bearing Liabilities:         
Total deposits0.87% 0.86% 0.78% 0.70% 0.60%
Total borrowings2.13% 2.18% 2.07% 1.99% 1.93%
Total interest-bearing liabilities1.13% 1.12% 1.04% 0.97% 0.90%
          
Interest rate spread2.96% 3.16% 3.16% 3.22% 3.17%
Net interest margin3.23% 3.42% 3.40% 3.44% 3.38%
          
Ratio of interest-earning assets to interest-bearing liabilities1.31x 1.30x 1.30x 1.30x 1.30x


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Average Year to Date Balances
(Unaudited) (Dollars in Thousands)
            
 September 30, 2019 September 30, 2018
 Average   Average Average   Average
 Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:           
Deposits$29,089 $527 2.42% $13,742 $183 1.78%
Federal funds sold and other short term investments64,086 1,511 3.15% 50,878 1,090 2.86%
Held to maturity debt securities  (1)470,814 9,408 2.66% 471,637 9,447 2.67%
Available for sale debt securities1,087,683 21,337 2.62% 1,045,709 19,113 2.44%
Equity securities, at fair value717  % 677  %
Federal Home Loan Bank stock68,298 3,247 6.34% 74,615 3,625 6.48%
Net loans:  (2)           
Total mortgage loans5,094,641 167,051 4.34% 5,090,736 158,798 4.13%
Total commercial loans1,657,138 63,788 5.10% 1,662,356 58,706 4.68%
Total consumer loans417,320 14,216 4.55% 456,731 14,945 4.37%
Total net loans7,169,099 245,055 4.53% 7,209,823 232,449 4.27%
Total Interest-Earning Assets$8,889,786 $281,085 4.19% $8,867,081 $265,907 3.98%
            
Non-Interest Earning Assets:           
Cash and due from banks96,914     94,122    
Other assets824,671     777,755    
Total Assets$9,811,371     $9,738,958    
            
Interest-Bearing Liabilities:           
Demand deposits$3,599,349 $21,944 0.82% $3,564,111 $14,188 0.53%
Savings deposits1,024,693 1,287 0.17% 1,077,620 1,450 0.18%
Time deposits802,361 10,709 1.78% 644,983 5,449 1.13%
Total Deposits5,426,403 33,940 0.84% 5,286,714 21,087 0.53%
Borrowed funds1,386,349 22,055 2.13% 1,583,740 21,477 1.81%
Total Interest-Bearing Liabilities$6,812,752 $55,995 1.10% $6,870,454 $42,564 0.83%
            
Non-Interest Bearing Liabilities:           
Non-interest bearing deposits1,471,742     1,458,498    
Other non-interest bearing liabilities138,039     92,350    
Total non-interest bearing liabilities1,609,781     1,550,848    
Total Liabilities8,422,533     8,421,302    
Stockholders' equity1,388,838     1,317,656    
Total Liabilities and Stockholders' Equity$9,811,371     $9,738,958    
            
Net interest income  $225,090     $223,343  
            
Net interest rate spread    3.09%     3.15%
Net interest-earning assets$2,077,034     $1,996,627    
            
Net interest margin  (3)    3.35%     3.33%
            
Ratio of interest-earning assets to total interest-bearing liabilities1.30x     1.29x    
            
            
(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.
       
 Nine Months Ended 
 September 30, 2019 September 30, 2018 September 30, 2017 
Interest-Earning Assets:      
Securities2.80% 2.69% 2.53% 
Net loans4.53% 4.27% 4.01% 
Total interest-earning assets4.19% 3.98% 3.72% 
       
Interest-Bearing Liabilities:      
Total deposits0.84% 0.53% 0.36% 
Total borrowings2.13% 1.81% 1.67% 
Total interest-bearing liabilities1.10% 0.83% 0.67% 
       
Interest rate spread3.09% 3.15% 3.05% 
Net interest margin3.35% 3.33% 3.19% 
       
Ratio of interest-earning assets to interest-bearing liabilities1.30x 1.29x 1.26x 

SOURCE:  Provident Financial Services, Inc.

Investor Relations, 1-732-590-9300

Web Site:  http://www.Provident.Bank