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. (NYSE: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) 
     
AssetsDecember 31, 2018 December 31, 2017 
Cash and due from banks$86,195  $139,557  
Short-term investments56,466  51,277  
Total cash and cash equivalents142,661  190,834  
Available for sale debt securities, at fair value1,063,079  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 value635  658  
Federal Home Loan Bank Stock68,813  81,184  
Loans7,250,588  7,325,718  
Less allowance for loan losses55,562  60,195  
Net loans7,195,026  7,265,523  
Foreclosed assets, net1,565  6,864  
Banking premises and equipment, net58,124  63,185  
Accrued interest receivable31,475  29,646  
Intangible assets418,178  420,290  
Bank-owned life insurance193,085  189,525  
Other assets73,703  82,759  
Total assets$9,725,769  $9,845,274  
     
Liabilities and Stockholders' Equity    
Deposits:    
Demand deposits$5,027,708  $4,996,345  
Savings deposits1,051,922  1,083,012  
Certificates of deposit of $100,000 or more414,848  316,074  
Other time deposits335,644  318,735  
Total deposits6,830,122  6,714,166  
Mortgage escrow deposits25,568  25,933  
Borrowed funds1,442,282  1,742,514  
Other liabilities68,817  64,000  
Total liabilities8,366,789  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’ equity1,358,980  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 loans20,665 19,023 79,371 72,907 
Consumer loans4,961 5,008 19,906 20,301 
Available for sale debt securities and Federal Home Loan Bank stock8,243 6,794 30,981 26,445 
Held to maturity debt securities3,159 3,215 12,606 13,027 
Deposits, Federal funds sold and other short-term investments461 372 1,734 1,270 
Total interest income93,922 83,596 359,829 323,846 
         
Interest expense:        
Deposits9,606 5,348 30,693 19,441 
Borrowed funds6,983 6,348 28,460 26,203 
Total interest expense16,589 11,696 59,153 45,644 
Net interest income77,333 71,900 300,676 278,202 
Provision for loan losses1,800 1,900 23,700 5,600 
Net interest income after provision for loan losses75,533 70,000 276,976 272,602 
         
Non-interest income:        
Fees7,378 6,278 28,084 27,218 
Bank-owned life insurance874 1,402 5,514 6,693 
Wealth management income4,385 4,290 17,957 17,604 
Net gain on securities transactions2,218 10 2,221 57 
Other income761 1,321 4,900 4,125 
Total non-interest income15,616 13,301 58,676 55,697 
         
Non-interest expense:        
Compensation and employee benefits28,098 28,267 111,496 109,353 
Net occupancy expense6,004 6,035 25,056 25,290 
Data processing expense3,802 3,620 14,664 13,922 
FDIC Insurance562 822 3,482 3,887 
Amortization of intangibles502 591 2,127 2,670 
Advertising and promotion expense1,073 1,195 3,836 3,904 
Other operating expenses9,319 7,548 31,074 28,796 
Total non-interest expense49,360 48,078 191,735 187,822 
Income before income tax expense41,789 35,223 143,917 140,477 
Income tax expense6,026 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 outstanding65,048,753 64,554,617 64,942,886 64,384,851 
         
Diluted earnings per share$0.55 $0.30 $1.82 $1.45 
Average diluted shares outstanding65,175,345 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 losses1,800  1,900  23,700  5,600  
Non-interest income15,616  13,301  58,676  55,697  
Non-interest expense49,360  48,078  191,735  187,822  
Income before income tax expense41,789  35,223  143,917  140,477  
Net income35,763  19,483  118,387  93,949  
Diluted earnings per share$0.55  $0.30  $1.82  $1.45  
Interest rate spread3.22% 3.10% 3.20% 3.07% 
Net interest margin3.44% 3.25% 3.39% 3.21% 
          
PROFITABILITY:         
Annualized return on average assets1.46% 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, net7,204,254  7,075,373  7,208,420  6,971,512  
Earning assets8,859,139  8,739,182  8,865,076  8,649,286  
Core deposits6,138,343  6,071,705  6,109,836  5,944,870  
Borrowings1,393,965  1,545,665  1,535,906  1,581,964  
Interest-bearing liabilities6,804,187  6,793,648  6,853,751  6,809,675  
Stockholders'  equity1,347,630  1,310,193  1,325,211  1,289,973  
Average yield on interest-earning assets4.19% 3.78% 4.06% 3.74% 
Average cost of interest-bearing liabilities0.97% 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 assets418,501  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 assets9,729,008  9,618,177  9,736,449  9,534,785 
            
Annualized non-interest expense/average assets2.01% 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 income15,616  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 investments48,787 380 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 value1,049,645 6,962 2.65% 1,049,933 6,577 2.51% 
Equity securities, at fair value700    —% 706    —% 
Federal Home Loan Bank stock65,685 1,281 7.80% 73,787 1,228 6.66% 
Net loans:  (2)
            
Total mortgage loans5,160,375 56,433 4.31% 5,098,281 54,532 4.22% 
Total commercial loans1,607,528 20,665 5.06% 1,650,039 20,230 4.82% 
Total consumer loans436,351 4,961 4.51% 446,986 5,095 4.52% 
Total net loans7,204,254 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 banks92,040     93,082     
Other assets777,829     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 deposits1,050,832 473 0.18% 1,056,382 460 0.17% 
Time deposits750,866 2,871 1.52% 653,641 2,077 1.26% 
Total Deposits5,410,222 9,606 0.70% 5,225,606 7,856 0.60% 
Borrowed funds1,393,965 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 deposits1,478,987     1,495,138     
Other non-interest bearing liabilities98,204     109,340     
Total Non-interest Bearing Liabilities1,577,191     1,604,478     
Total Liabilities8,381,378     8,399,260     
Stockholders' equity1,347,630     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:         
Securities2.87% 2.75% 2.72% 2.62% 2.49%
Net loans4.49% 4.38% 4.26% 4.18% 4.08%
Total interest-earning assets4.19% 4.07% 3.97% 3.89% 3.78%
          
Interest-Bearing Liabilities:         
Total deposits0.70% 0.60% 0.53% 0.47% 0.40%
Total borrowings1.99% 1.93% 1.82% 1.70% 1.63%
Total interest-bearing liabilities0.97% 0.90% 0.82% 0.76% 0.68%
          
Interest rate spread3.22% 3.17% 3.15% 3.13% 3.10%
Net interest margin3.44% 3.38% 3.33% 3.30% 3.25%
          
Ratio of interest-earning assets to interest-bearing liabilities1.30x 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 investments50,351 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 value1,046,701 26,074 2.49% 1,044,116 22,384 2.14% 
Equity securities, at fair value683    —% 587    —% 
Federal Home Loan Bank stock72,364 4,907 6.78% 73,995 4,061 5.49% 
Net loans:  (2)
            
Total mortgage loans5,108,289 215,231 4.21% 4,838,342 189,896 3.92% 
Total commercial loans1,648,537 79,371 4.81% 1,640,198 72,907 4.44% 
Total consumer loans451,594 19,906 4.41% 492,972 20,301 4.12% 
Total net loans7,208,420 314,508 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 banks93,601     93,894     
Other assets777,772     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 deposits1,070,868 1,923 0.18% 1,101,103 2,092 0.19% 
Time deposits671,671 8,320 1.24% 649,195 5,144 0.79% 
Total Deposits5,317,845 30,693 0.58% 5,227,711 19,441 0.37% 
Borrowed funds1,535,906 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 deposits1,463,662     1,366,354     
Other non-interest bearing liabilities93,825     68,783     
Total Non-interest Bearing Liabilities1,557,487     1,435,137     
Total Liabilities8,411,238     8,244,812     
Stockholders' equity1,325,211     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:     
Securities2.74% 2.43% 2.24%
Net loans4.36% 4.06% 3.98%
Total interest-earning assets4.06% 3.74% 3.64%
      
Interest-Bearing Liabilities:     
Total deposits0.58% 0.37% 0.33%
Total borrowings1.85% 1.66% 1.70%
Total interest-bearing liabilities0.86% 0.67% 0.66%
      
Interest rate spread3.20% 3.07% 2.98%
Net interest margin3.39% 3.21% 3.11%
      
Ratio of interest-earning assets to interest-bearing liabilities1.29x 1.27x 1.25x


SOURCE:  Provident Financial Services, Inc.

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

Web Site:  http://www.Provident.Bank