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

Provident Financial Services, Inc.

ISELIN, N.J., April 29, 2022 (GLOBE NEWSWIRE) — Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $44.0 million, or $0.58 per basic and diluted share, for the three months ended March 31, 2022, as compared to $37.3 million, or $0.49 per basic and diluted share, for the three months ended December 31, 2021 and $48.6 million, or $0.63 per basic and diluted share, for the three months ended March 31, 2021.

Anthony J. Labozzetta, President and Chief Executive Officer commented, “We are proud of our strong first quarter results, marked by solid annualized commercial loan growth of 8.3% and a robust loan pipeline leading into the second quarter. The net interest margin expanded 7 basis points from the trailing quarter reflecting loan growth, deployment of some of our excess liquidity, a rise in rates on new loan production and further improvement in our funding costs. Continued credit quality improvement and a favorable economic forecast supported a negative provision in the quarter.” Labozzetta continued, “Our strong first quarter performance was due in large part to our colleagues’ dedication to our core principles and their continued pursuit of a high-performing and innovative culture. We look forward to further growth of our business lines and financial success built on our commitment to our customers, employees, communities and stockholders.”

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.24 per common share payable on May 27, 2022 to stockholders of record as of the close of business on May 13, 2022.

Performance Highlights for the First Quarter of 2022

  • The Company’s total commercial loan portfolio, excluding Paycheck Protection Program (“PPP”) loans, increased $164.9 million, or 8.3% annualized, to $8.13 billion at March 31, 2022, from $7.97 billion at December 31, 2021.

  • The net interest margin increased seven basis points to 3.02% for the quarter ended March 31, 2022, from 2.95% for the trailing quarter.

  • The average cost of deposits, including non-interest bearing deposits, declined to 0.19% for the quarter ended March 31, 2022, compared with 0.21% for the trailing quarter.

  • Total average interest bearing savings and demand deposits increased $114.5 million, or 6.1% annualized, to $7.77 billion for the three months ended March 31, 2022, from $7.65 billion for the three months ended December 31, 2021. In addition, total average non-interest bearing demand deposits increased $26.1 million, or 3.8% annualized, to $2.79 billion for the first quarter of 2022, from $2.76 billion for the trailing quarter.

  • Non-performing loans at March 31, 2022 declined to $44.3 million, or 0.46% of total loans, from $48.0 million, or 0.50% of total loans, at December 31, 2021.

  • The Company recorded negative provisions for credit losses and off-balance sheet credit exposures of $6.4 million and $2.4 million, respectively, for the three months ended March 31, 2022, compared to a provision of $397,000 for credit losses and a negative provision of $640,000 for off-balance sheet credit exposures for the trailing quarter. These provision benefits were largely a function of an improved economic forecast and an overall improvement in the Company’s asset quality.

  • Annualized returns on average assets and average tangible equity were 1.30% and 14.58%, respectively, for the three months ended March 31, 2022, compared with 1.08% and 12.04%, respectively for the trailing quarter.

  • The Company repurchased 1.3 million shares of its common stock at an average cost of $23.36 per share, for a total of $29.9 million during the quarter.

Results of Operations

Three months ended March 31, 2022 compared to the three months ended December 31, 2021

For the three months ended March 31, 2022, net income was $44.0 million, or $0.58 per basic and diluted share, compared to net income of $37.3 million, or $0.49 per basic and diluted share, for the three months ended December 31, 2021.

Net Interest Income and Net Interest Margin

Net interest income increased $637,000 to $94.5 million for the three months ended March 31, 2022, from $93.9 million for the trailing quarter. The increase in net interest income was largely attributable to an increase in lower-costing deposits, a reduction in borrowings and favorable repricing of both deposits and borrowings, along with the investment of excess liquidity into higher-yielding available for sale debt securities. This was partially offset by a reduction in the fees related to the forgiveness of PPP loans. For the three months ended March 31, 2022, fees related to the forgiveness of PPP loans totaled $1.1 million, which are recognized in interest income, compared to $1.8 million for the trailing quarter.

The Company’s net interest margin increased seven basis points to 3.02% for the quarter ended March 31, 2022, from 2.95% for the trailing quarter. The weighted average yield on interest-earning assets for the quarter ended March 31, 2022 increased four basis points to 3.23%, compared to the trailing quarter. The weighted average cost of interest-bearing liabilities for the quarter ended March 31, 2022 decreased five basis points to 0.29%, compared to the trailing quarter. The average cost of interest-bearing deposits for the quarter ended March 31, 2022 decreased three basis points to 0.25%, compared to 0.28% for the trailing quarter. Average non-interest bearing demand deposits increased $26.0 million to $2.79 billion for the quarter ended March 31, 2022, compared to the trailing quarter. The average cost of deposits, including non-interest bearing deposits, was 0.19% for the quarter ended March 31, 2022, compared to 0.21% for the trailing quarter. The average cost of borrowed funds for the quarter ended March 31, 2022 was 0.86%, compared to 0.94% for the quarter ended December 31, 2021.

Provision for Credit Losses

For the quarter ended March 31, 2022, the Company recorded a $6.4 million negative provision for credit losses related to loans, compared with a provision for credit losses of $400,000 for the quarter ended December 31, 2021. The provision benefit was largely a function of an improved economic forecast and an overall improvement in the Company’s asset quality. Net recoveries totaling $1.9 million for the quarter ended March 31, 2022 further contributed to the negative provision for credit losses in the period.

Non-Interest Income and Expense

For the three months ended March 31, 2022, non-interest income totaled $20.1 million, a decrease of $506,000, compared to the trailing quarter. BOLI income decreased $781,000 to $1.2 million for the three months ended March 31, 2022, compared to the trailing quarter primarily due to a benefit claim recognized in the prior quarter and lower equity valuations. Fee income decreased $456,000 to $6.9 million for the three months ended March 31, 2022, compared to the trailing quarter, primarily due to a decrease in commercial loan prepayment fees, partially offset by an increase in debit card revenue. Wealth management income decreased $376,000 to $7.5 million for the three months ended March 31, 2022, compared to the trailing quarter, primarily due to a decrease in the market value of assets under management and a decrease in the level of managed mutual funds. Partially offsetting these decreases in non-interest income, insurance agency income increased $1.2 million to $3.4 million, for the three months ended March 31, 2022, compared to the trailing quarter, mainly due to the receipt of contingent commissions in the current quarter.

Non-interest expense totaled $61.9 million for the three months ended March 31, 2022, a decrease of $177,000, compared to $62.1 million for the trailing quarter. For the three months ended March 31, 2022, the Company recorded a $2.4 million negative provision for credit losses for off-balance sheet credit exposures, compared to a $640,000 negative provision for the trailing quarter. The increased negative provision was primarily a function of an improved economic forecast resulting in a decline in projected loss factors. Other operating expenses decreased $1.2 million to $9.4 million for the three months ended March 31, 2022, compared to the trailing quarter. The decrease in other operating expenses was primarily due to decreases in consulting, attorney and loan-related expenses, partially offset by a valuation charge on foreclosed real estate. Partially offsetting these decreases in non-interest expense, net occupancy expense increased $1.6 million to $9.3 million for the three months ended March 31, 2022, compared to the trailing quarter, mainly due to increases in snow removal costs and rent expense. Compensation and benefits expense increased $1.4 million to $37.1 million for the three months ended March 31, 2022, compared to $35.6 million for the trailing quarter, primarily due to increases in employee medical benefits, payroll taxes and stock-based compensation, partially offset by a decrease in the accrual for incentive compensation.

The Company’s annualized adjusted non-interest expense as a percentage of average assets (1) was 1.90% for the quarter ended March 31, 2022, compared to 1.81% for the trailing quarter. The efficiency ratio (adjusted non-interest expense divided by the sum of net interest income and non-interest income) (1) was 56.05% for the three months ended March 31, 2022, compared to 54.74% for the trailing quarter.

Income Tax Expense

For the three months ended March 31, 2022, the Company’s income tax expense was $15.2 million with an effective tax rate of 25.7%, compared with $14.8 million with an effective tax rate of 28.4% for the trailing quarter. The increase in tax expense for the three months ended March 31, 2022, compared with the trailing quarter was largely due to an increase in taxable income, while the decrease in the effective tax rate for the three months ended March 31, 2022, compared with the trailing quarter was primarily due to a discrete item recorded in the trailing quarter resulting in additional tax expense related to the apportionment of income subject to state income taxes.

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

For the three months ended March 31, 2022, net income was $44.0 million, or $0.58 per basic and diluted share, compared to net income of $48.6 million, or $0.63 per basic and diluted share, for the three months ended March 31, 2021.

Net Interest Income and Net Interest Margin

Net interest income increased $4.5 million to $94.5 million for the three months ended March 31, 2022, from $90.0 million for same period in 2021. The increase in net interest income for the three months ended March 31, 2022, was primarily driven by an increase in available for sale debt securities funded by growth in lower-costing core deposits and the reinvestment of PPP loan satisfactions. The increase in net interest income attributable to growth in average earning assets was partially offset by modest compression in the net interest margin. Additionally, fees related to the forgiveness of PPP loans, which are recognized in interest income, decreased $2.9 million to $1.1 million for the three months ended March 31, 2022, compared to $4.0 million for the three months ended March 31, 2021.

The Company’s net interest margin decreased three basis points to 3.02% for the quarter ended March 31, 2022, from 3.05% for the same period last year. The weighted average yield on interest-earning assets for the quarter ended March 31, 2022 decreased 18 basis points to 3.23%, compared to the quarter ended March 31, 2021. The weighted average cost of interest-bearing liabilities for the quarter ended March 31, 2022 decreased 20 basis points to 0.29%, compared to the same period last year. The average cost of interest-bearing deposits for the quarter ended March 31, 2022 decreased 14 basis points to 0.25%, compared to 0.39% for the quarter ended March 31, 2021. Average non-interest bearing demand deposits increased $407.7 million to $2.79 billion for the quarter ended March 31, 2022, compared to $2.38 billion for the quarter ended March 31, 2021. The average cost of deposits, including non-interest bearing deposits, was 0.19% for the quarter ended March 31, 2022, compared to 0.30% for the same period last year. The average cost of borrowed funds for the quarter ended March 31, 2022 was 0.86%, compared to 1.12% for the quarter ended March 31, 2021.

Provision for Credit Losses

For the quarter ended March 31, 2022, the Company recorded a $6.4 million negative provision for credit losses related to loans, compared with a negative provision for credit losses of $15.0 million for the quarter ended March 31, 2021. The decrease in the period-over-period provision benefit was largely a function of the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period.

Non-Interest Income and Expense

For the three months ended March 31, 2022, non-interest income totaled $20.1 million, a decrease of $1.5 million, compared to the same period in 2021. BOLI income decreased $1.4 million to $1.2 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to a benefit claim recognized in the prior year and lower equity valuations. Other income decreased $642,000 to $1.2 million for the three months ended March 31, 2022, compared to $1.8 million for the same period in 2021, mainly due to decreases in net gains on sales of loans and net fees on loan-level interest rate swap transactions. Additionally, fee income decreased $303,000 to $6.9 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to a decrease in debit card revenue, partially offset by an increase in commercial loan prepayment fees. The decrease in debit card revenue was largely attributable to the interchange transaction fee limitation imposed by the Durbin amendment, which became effective for the Company in the third quarter of 2021. Partially offsetting these decreases in non-interest income, insurance agency income increased $693,000 to $3.4 million, for the three months ended March 31, 2022, compared to the same period in 2021, resulting from an increase in contingent commissions. Additionally, wealth management income increased $332,000 to $7.5 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to an increase in the market value of assets under management and new business generation.

Non-interest expense totaled $61.9 million for the three months ended March 31, 2022, an increase of $33,000 from the three months ended March 31, 2021. For the three months ended March 31, 2022, the Company recorded a $2.4 million negative provision for credit losses for off-balance sheet credit exposures, compared to an $875,000 negative provision for the same period in 2021. The increased negative provision was primarily due to an increase in line of credit utilization. Other operating expenses decreased $736,000 to $9.4 million for the three months ended March 31, 2022, compared to the same period in 2021, largely due to decreases in debit card maintenance, attorney and consulting expenses. In addition, FDIC insurance decreased $565,000 to $1.2 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to a decrease in the insurance assessment rate. Partially offsetting these decreases in non-interest expense, compensation and benefits expense increased $1.8 million to $37.1 million for the three months ended March 31, 2022, compared to $35.3 million for the three months ended March 31, 2021, primarily due to an increase in stock-based compensation and an increase in salary expense associated with Company-wide annual merit increases. Data processing expense increased $1.0 million to $5.3 million for the three months ended March 31, 2022, largely due to increases in software subscription expense and online banking costs.

The Company’s annualized adjusted non-interest expense as a percentage of average assets (1) was 1.90% for the quarter ended March 31, 2022, compared to 1.95% for the same period in 2021. The efficiency ratio (adjusted non-interest expense divided by the sum of net interest income and non-interest income) (1) was 56.05% for the three months ended March 31, 2022, compared to 56.19% for the same respective period in 2021.

Income Tax Expense

For the three months ended March 31, 2022, the Company’s income tax expense was $15.2 million with an effective tax rate of 25.7%, compared with $16.2 million with an effective tax rate of 25.0% for the three months ended March 31, 2021. The decrease in tax expense for the three months ended March 31, 2022, compared with the same period last year was largely the result of a decrease in taxable income.

Asset Quality

The Company’s total non-performing loans at March 31, 2022 were $44.3 million, or 0.46% of total loans, compared to $48.0 million, or 0.50% of total loans at December 31, 2021 and $82.1 million, or 0.84% of total loans at March 31, 2021. The $3.7 million decrease in non-performing loans at March 31, 2022, compared to the trailing quarter, consisted of a $6.8 million decrease in non-performing commercial loans, a $676,000 decrease in non-performing residential mortgage loans and a $511,000 decrease in non-performing consumer loans, partially offset by a $2.6 million increase in non-performing commercial mortgage loans and a $1.6 million increase in non-performing multi-family loans. At March 31, 2022, impaired loans totaled $48.3 million with related specific reserves of $2.0 million, compared with impaired loans totaling $52.3 million with related specific reserves of $4.3 million at December 31, 2021 and impaired loans totaling $79.5 million with related specific reserves of $4.8 million at March 31, 2021.

At March 31, 2022, the Company’s allowance for credit losses related to the loan portfolio was 0.79% of total loans, compared to 0.84% and 0.87% at December 31, 2021 and March 31, 2021, respectively. The allowance for credit losses decreased $4.5 million to $76.3 million at March 31, 2022 from $80.7 million at December 31, 2021. The decrease in the allowance for credit losses on loans in the first quarter of 2022 was due to a $6.4 million negative provision for credit losses and net recoveries of $1.9 million. The reduction in the allowance for credit losses on loans was primarily the result of improved asset quality and an improved economic forecast.

The following table sets forth accruing past due loans and non-accrual loans on the dates indicated, as well as certain asset quality ratios.

March 31, 2022

December 31, 2021

March 31, 2021

Number
of
Loans

Principal
Balance
of Loans

Number
of
Loans

Principal
Balance
of Loans

Number
of
Loans

Principal
Balance
of Loans

(Dollars in thousands)

Accruing past due loans:

30 to 59 days past due:

Residential mortgage loans

18

$

2,385

26

$

7,229

33

$

6,862

Commercial mortgage loans

2

282

4

720

7

2,183

Multi-family mortgage loans

1

816

2

1,327

Construction loans

3

1,659

3

1,123

Total mortgage loans

24

5,142

30

7,949

45

11,495

Commercial loans

9

4,019

11

7,229

10

393

Consumer loans

15

571

24

649

18

1,356

Total 30 to 59 days past due

48

$

9,732

65

$

15,827

73

$

13,244

60 to 89 days past due:

Residential mortgage loans

7

$

1,354

7

$

1,131

20

$

6,161

Commercial mortgage loans

2

3,960

2

520

Multi-family mortgage loans

Construction loans

1

1,656

Total mortgage loans

7

1,354

9

5,091

23

8,337

Commercial loans

3

318

5

1,289

2

235

Consumer loans

3

90

7

228

10

277

Total 60 to 89 days past due

13

$

1,762

21

$

6,608

35

$

8,849

Total accruing past due loans

61

$

11,494

86

$

22,435

108

$

22,093

Non-accrual:

Residential mortgage loans

29

$

5,396

28

$

6,072

41

$

7,797

Commercial mortgage loans

14

19,533

14

16,887

22

33,742

Multi-family mortgage loans

2

2,053

1

439

1

101

Construction loans

2

2,366

2

2,365

2

1,392

Total mortgage loans

47

29,348

45

25,763

66

43,032

Commercial loans

39

13,793

51

20,582

68

36,042

Consumer loans

19

1,171

17

1,682

27

3,010

Total non-accrual loans

105

$

44,312

113

$

48,027

161

$

82,084

Non-performing loans to total loans

0.46

%

0.50

%

0.84

%

Allowance for loan losses to total non-performing loans

172.13

%

168.11

%

104.27

%

Allowance for loan losses to total loans

0.79

%

0.84

%

0.87

%

At March 31, 2022, December 31, 2021 and March 31, 2021, the Company held foreclosed assets of $8.6 million, $8.7 million and $3.6 million, respectively. During the three months ended March 31, 2022, there was one addition to foreclosed assets with an aggregate carrying value of $47,000 and a valuation charge of $200,000. Foreclosed assets at March 31, 2022 consisted primarily of commercial real estate. Total non-performing assets at March 31, 2022 decreased $3.9 million to $52.9 million, or 0.39% of total assets, from $56.8 million, or 0.41% of total assets at December 31, 2021 and $85.6 million, or 0.65% of total assets at March 31, 2021.

Balance Sheet Summary

Total assets at March 31, 2022 were $13.62 billion, a $164.2 million decrease from December 31, 2021. The decrease in total assets was primarily due to a $279.3 million decrease in cash and cash equivalents and a $10.1 million decrease in total investments, partially offset by an $81.3 million increase in total loans.

The Company’s loan portfolio increased $81.3 million to $9.66 billion at March 31, 2022, from $9.58 billion at December 31, 2021. The loan portfolio consists of the following:

March 31,
2022

December 31,
2021

Mortgage loans:

Residential

$

1,194,613

$

1,202,638

Commercial

3,937,216

3,827,370

Multi-family

1,394,761

1,364,397

Construction

699,415

683,166

Total mortgage loans

7,226,005

7,077,571

Commercial loans

2,131,326

2,188,866

Consumer loans

316,589

327,442

Total gross loans

9,673,920

9,593,879

Premiums on purchased loans

1,482

1,451

Net deferred fees and unearned discounts

(12,520

)

(13,706

)

Total loans

$

9,662,882

$

9,581,624

Total Paycheck Protection Program (“PPP”) loans outstanding, which are included in total commercial loans, decreased $66.0 million to $28.9 million at March 31, 2022, from $94.9 million at December 31, 2021. During the three months ended March 31, 2022, excluding the net decrease in PPP loans, the loan portfolio had net increases of $109.8 million in commercial mortgage loans, $30.4 million in multi-family mortgage loans, $16.2 million in construction loans and $8.5 million in commercial loans, partially offset by net decreases of $10.9 million in consumer loans and $8.0 million in residential mortgage loans. Commercial real estate, commercial and construction loans represented 84.4% of the total loan portfolio at March 31, 2022, compared to 84.1% at December 31, 2021.

For the three months ended March 31, 2022, loan funding, including advances on lines of credit, totaled $959.4 million, compared with $770.5 million for the same period in 2021.

At March 31, 2022, the Company’s unfunded loan commitments totaled $1.96 billion, including commitments of $958.0 million in commercial loans, $505.9 million in construction loans and $198.2 million in commercial mortgage loans. Unfunded loan commitments at December 31, 2021 and March 31, 2021 were $2.05 billion and $1.98 billion, respectively.

The loan pipeline, consisting of work-in-process and loans approved pending closing, totaled $1.48 billion at March 31, 2022, compared to $1.09 billion and $1.30 billion at December 31, 2021 and March 31, 2021, respectively.

Cash and cash equivalents were $433.1 million at March 31, 2022, a $279.3 million decrease from December 31, 2021, which was attributable to the deployment of excess liquidity into commercial loans and available for sale debt securities combined with the repayment of certain wholesale borrowings.

Total investments were $2.52 billion at March 31, 2022, a $10.1 million decrease from December 31, 2021. This decrease was largely due to an increase in unrealized losses on available for sale debt securities, repayments of mortgage-backed securities and maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities.

Total deposits increased $132.1 million during the three months ended March 31, 2022, to $11.37 billion. Total savings and demand deposit accounts increased $132.9 million to $10.67 billion at March 31, 2022, while total time deposits decreased $860,000 to $691.7 million at March 31, 2022. The increase in savings and demand deposits was largely attributable to a $59.5 million increase in non-interest bearing demand deposits, a $59.6 million increase in money market deposits and a $30.1 million increase in savings deposits, partially offset by a $16.2 million decrease in interest bearing demand deposits. The decrease in time deposits was primarily due to maturities of longer-term retail time deposits, partially offset by an increase in brokered time deposits.

Borrowed funds decreased $227.2 million during the three months ended March 31, 2022, to $399.6 million. The decrease in borrowings for the period was largely due to the maturity and replacement of FHLB borrowings with lower-costing brokered deposits and retail deposits. Borrowed funds represented 2.9% of total assets at March 31, 2022, a decrease from 4.5% at December 31, 2021.

Stockholders’ equity decreased $76.0 million during the three months ended March 31, 2022, to $1.62 billion, primarily due to dividends paid to stockholders, common stock repurchases and an increase in unrealized losses on available for sale debt securities, partially offset by net income earned for the period. For the three months ended March 31, 2022, common stock repurchases totaled 1,282,075 shares at an average cost of $23.36 per share, of which 40,463 shares, at an average cost of $23.56 per share, were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. At March 31, 2022, approximately 1.9 million shares remained eligible for repurchase under the current stock repurchase authorization. Book value per share and tangible book value per share(1) at March 31, 2022 were $21.36 and $15.26, respectively, compared with $22.05 and $16.02, respectively, at December 31, 2021.

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 and Queens County, New York. The Bank also provides fiduciary and wealth management services through its wholly owned subsidiary, Beacon Trust Company and insurance services through its wholly owned subsidiary, SB One Insurance Agency, Inc.

Post Earnings Conference Call

Representatives of the Company will hold a conference call for investors on Friday, April 29, 2022 at 10:00 a.m. Eastern Time to discuss the Company’s financial results for the quarter ended March 31, 2022. The call may be accessed by dialing 1-844-200-6205 (United States), 1-833-950-0062 (Canada Toll Free) or 1-929-526-1599 (All other locations). Speakers will need to enter speaker access code (146826) before being met by a live operator. 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.

In addition, the COVID-19 pandemic continues to have an uncertain impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, including potential variants, it is difficult to predict the continuing impact of the pandemic on the Company’s business, financial condition or results of operations. The extent of such impact will depend on future developments, which remain highly uncertain, including when the pandemic will be controlled and abated, and the extent to which the economy can remain open. As the result of the pandemic and the related adverse local and national economic consequences, the Company could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to remain substantially open, and higher levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; our wealth management revenues may decline with continuing market turmoil; we may face the risk of a goodwill write-down due to stock price decline; and our cyber security risks are increased as the result of an increased number of employees working remotely.

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 adjusted 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 Financial Highlights

(Dollars in Thousands, except share data) (Unaudited)

At or for the Three Months Ended

March 31,

December 31,

March

2022

2021

2021

Statements of Income

Net interest income

$

94,526

$

93,889

$

90,000

Provision for credit losses

(6,405

)

397

(15,001

)

Non-interest income

20,148

20,654

21,637

Non-interest expense

61,886

62,063

61,853

Income before income tax expense

59,193

52,083

64,785

Net income

43,962

37,303

48,559

Diluted earnings per share

$

0.58

$

0.49

$

0.63

Interest rate spread

2.94

%

2.85

%

2.98

%

Net interest margin

3.02

%

2.95

%

3.10

%

Profitability

Annualized return on average assets

1.30

%

1.08

%

1.51

%

Annualized return on average equity

10.57

%

8.74

%

12.02

%

Annualized return on average tangible equity (2)

14.58

%

12.04

%

16.80

%

Annualized adjusted non-interest expense to average assets (3)

1.90

%

1.81

%

1.95

%

Efficiency ratio (4)

56.05

%

54.74

%

56.19

%

Asset Quality

Non-accrual loans

$

44,312

$

48,027

$

82,084

90+ and still accruing

Non-performing loans

44,312

48,027

82,084

Foreclosed assets

8,578

8,731

3,554

Non-performing assets

52,890

56,758

85,638

Non-performing loans to total loans

0.46

%

0.50

%

0.84

%

Non-performing assets to total assets

0.39

%

0.41

%

0.65

%

Allowance for loan losses

$

76,275

$

80,740

$

85,591

Allowance for loan losses to total non-performing loans

172.13

%

168.11

%

104.27

%

Allowance for loan losses to total loans

0.79

%

0.84

%

0.87

%

Net loan (recoveries) charge-offs

$

(1,935

)

$

(3,574

)

$

875

Annualized net loan (recoveries) charge offs to average total loans

(0.08)

%

(0.04)

%

0.04

%

Average Balance Sheet Data

Assets

$

13,693,429

$

13,715,235

$

13,034,155

Loans, net

9,481,831

9,479,369

9,723,783

Earning assets

12,527,409

12,577,181

11,810,639

Savings and demand deposits

10,551,229

10,410,706

9,064,202

Borrowings

549,679

628,404

1,015,230

Interest-bearing liabilities

9,005,985

9,034,078

8,769,268

Stockholders’ equity

1,686,324

1,693,567

1,638,194

Average yield on interest-earning assets

3.23

%

3.19

%

3.41

%

Average cost of interest-bearing liabilities

0.29

%

0.34

%

0.49

%

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 March 31,

At December 31,

At March 31,

2022

2021

2021

Total stockholders’ equity

$

1,621,131

$

1,697,096

$

1,647,231

Less: total intangible assets

463,325

464,183

465,335

Total tangible stockholders’ equity

$

1,157,806

$

1,232,913

$

1,181,896

Shares outstanding

75,881,889

76,969,999

77,798,624

Book value per share (total stockholders’ equity/shares outstanding)

$

21.36

$

22.05

$

21.17

Tangible book value per share (total tangible stockholders’ equity/shares outstanding)

$

15.26

$

16.02

$

15.19

(2) Annualized Return on Average Tangible Equity

Three Months Ended

March 31,

December 31,

March 31,

2022

2021

2021

Total average stockholders’ equity

$

1,686,324

$

1,693,567

$

1,638,194

Less: total average intangible assets

463,890

464,740

465,902

Total average tangible stockholders’ equity

$

1,222,434

$

1,228,827

$

1,172,292

Net income

$

43,962

$

37,303

$

48,559

Annualized return on average tangible equity (net income/total average tangible stockholders’ equity)

14.58

%

12.04

%

16.80

%

(3) Annualized Adjusted Non-Interest Expense to Average Assets

Three Months Ended

March 31,

December 31,

March 31,

2022

2021

2021

Reported non-interest expense

$

61,886

$

62,063

$

61,853

Adjustments to non-interest expense:

Credit loss benefit for off-balance sheet credit exposures

(2,390

)

(640

)

(875

)

Adjusted non-interest expense

$

64,276

$

62,703

$

62,728

Annualized adjusted non-interest expense

$

260,675

$

248,767

$

254,397

Average assets

$

13,693,429

$

13,715,235

$

13,034,155

Annualized adjusted non-interest expense/average assets

1.90

%

1.81

%

1.95

%

(4) Efficiency Ratio Calculation

Three Months Ended

March 31,

December 31,

March 31,

2022

2021

2021

Net interest income

$

94,526

$

93,889

$

90,000

Non-interest income

20,148

20,654

21,637

Total income

$

114,674

114,543

111,637

Adjusted non-interest expense

$

64,276

$

62,703

$

62,728

Efficiency ratio (adjusted non-interest expense/income)

56.05

%

54.74

%

56.19

%

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Financial Condition

March 31, 2022 (Unaudited) and December 31, 2021

(Dollars in Thousands)

Assets

March 31, 2022

December 31, 2021

Cash and due from banks

$

330,814

$

506,270

Short-term investments

102,332

206,193

Total cash and cash equivalents

433,146

712,463

Available for sale debt securities, at fair value

2,072,337

2,057,851

Held to maturity debt securities, net (fair value of $417,664 at March 31, 2022 (unaudited)
and $449,709 at December 31, 2021)

421,958

436,150

Equity securities, at fair value

1,256

1,325

Federal Home Loan Bank stock

23,973

34,290

Loans

9,662,882

9,581,624

Less allowance for credit losses

76,275

80,740

Net loans

9,586,607

9,500,884

Foreclosed assets, net

8,578

8,731

Banking premises and equipment, net

82,987

80,559

Accrued interest receivable

41,033

41,990

Intangible assets

463,325

464,183

Bank-owned life insurance

237,808

236,630

Other assets

244,006

206,146

Total assets

$

13,617,014

$

13,781,202

Liabilities and Stockholders’ Equity

Deposits:

Demand deposits

$

9,183,808

$

9,080,956

Savings deposits

1,490,624

1,460,541

Certificates of deposit of $100,000 or more

391,321

368,277

Other time deposits

300,334

324,238

Total deposits

11,366,087

11,234,012

Mortgage escrow deposits

40,184

34,440

Borrowed funds

399,606

626,774

Subordinated debentures

10,336

10,283

Other liabilities

179,670

178,597

Total liabilities

11,995,883

12,084,106

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, 83,209,012 shares issued
and 75,881,889 shares outstanding at March 31, 2022 and 76,969,999 outstanding at December 31, 2021.

832

832

Additional paid-in capital

972,552

969,815

Retained earnings

839,807

814,533

Accumulated other comprehensive (loss) income

(67,946

)

6,863

Treasury stock

(109,581

)

(79,603

)

Unallocated common stock held by the Employee Stock Ownership Plan

(14,533

)

(15,344

)

Common Stock acquired by the Directors’ Deferred Fee Plan

(3,844

)

(3,984

)

Deferred Compensation – Directors’ Deferred Fee Plan

3,844

3,984

Total stockholders’ equity

1,621,131

1,697,096

Total liabilities and stockholders’ equity

$

13,617,014

$

13,781,202

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Income

Three Months Ended March 31, 2022, December 31, 2021 and March 31, 2021 (Unaudited)

(Dollars in Thousands, except per share data)

Three Months Ended

March 31,
2022

December 31,
2021

March 31,
2021

Interest income:

Real estate secured loans

$

63,835

$

64,972

$

62,016

Commercial loans

22,821

23,393

26,143

Consumer loans

3,139

3,325

3,492

Available for sale debt securities, equity securities and Federal
Home Loan Bank stock

7,951

6,587

5,612

Held to maturity debt securities

2,596

2,621

2,784

Deposits, federal funds sold and other short-term investments

647

770

484

Total interest income

100,989

101,668

100,531

Interest expense:

Deposits

5,187

6,018

7,417

Borrowed funds

1,168

1,485

2,809

Subordinated debt

108

276

305

Total interest expense

6,463

7,779

10,531

Net interest income

94,526

93,889

90,000

Provision (benefit) charge for credit losses

(6,405

)

397

(15,001

)

Net interest income after provision for credit losses

100,931

93,492

105,001

Non-interest income:

Fees

6,889

7,345

7,192

Wealth management income

7,466

7,842

7,134

Insurance agency income

3,420

2,207

2,727

Bank-owned life insurance

1,179

1,960

2,567

Net gain (loss) on securities transactions

16

(3

)

197

Other income

1,178

1,303

1,820

Total non-interest income

20,148

20,654

21,637

Non-interest expense:

Compensation and employee benefits

37,067

35,628

35,312

Net occupancy expense

9,330

7,774

9,301

Data processing expense

5,344

5,126

4,393

FDIC Insurance

1,205

1,345

1,770

Amortization of intangibles

859

890

972

Advertising and promotion expense

1,104

1,365

877

Credit loss benefit for off-balance sheet credit exposures

(2,390

)

(640

)

(875

)

Other operating expenses

9,367

10,575

10,103

Total non-interest expense

61,886

62,063

61,853

Income before income tax expense

59,193

52,083

64,785

Income tax expense

15,231

14,780

16,226

Net income

$

43,962

$

37,303

$

48,559

Basic earnings per share

$

0.58

$

0.49

$

0.63

Average basic shares outstanding

75,817,971

76,125,889

76,516,543

Diluted earnings per share

$

0.58

$

0.49

$

0.63

Average diluted shares outstanding

75,914,079

76,226,747

76,580,862

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Net Interest Margin Analysis

Quarterly Average Balances

(Dollars in Thousands) (Unaudited)

March 31, 2022

December 31, 2021

March 31, 2021

Average
Balance

Interest

Average
Yield/Cost

Average
Balance

Interest

Average
Yield/Cost

Average
Balance

Interest

Average
Yield/Cost

Interest Earning Assets:

Deposits

$

274,004

$

107

0.16

%

$

455,454

$

162

0.14

%

$

319,119

$

85

0.11

%

Federal funds sold and other short-term
investments

195,598

540

1.12

%

207,311

608

1.16

%

127,989

399

1.26

%

Available for sale debt securities

2,115,852

2,596

1.43

%

1,968,628

2,621

1.26

%

1,136,885

2,784

1.71

%

Held to maturity debt securities, net (1)

428,125

7,577

2.43

%

431,295

6,192

2.43

%

450,396

4,849

2.47

%

Equity securities, at fair value

1,092

%

1,106

%

979

%

Federal Home Loan Bank stock

30,907

374

4.85

%

34,018

395

4.64

%

51,437

763

5.93

%

Net loans: (2)

Total mortgage loans

7,061,657

63,835

3.62

%

7,035,981

64,972

3.64

%

6,808,066

62,016

3.64

%

Total commercial loans

2,099,145

22,821

4.38

%

2,108,915

23,393

4.37

%

2,512,563

26,143

4.20

%

Total consumer loans

321,029

3,139

3.97

%

334,473

3,325

3.94

%

403,154

3,492

3.51

%

Total net loans

9,481,831

89,795

3.80

%

9,479,369

91,690

3.81

%

9,723,783

91,651

3.78

%

Total interest earning assets

$

12,527,409

$

100,989

3.23

%

$

12,577,181

$

101,668

3.19

%

$

11,810,588

$

100,531

3.41

%

Non-Interest Earning Assets:

Cash and due from banks

122,856

125,539

183,476

Other assets

1,043,164

1,012,515

1,040,091

Total assets

$

13,693,429

$

13,715,235

$

13,034,155

Interest Bearing Liabilities:

Demand deposits

$

6,288,544

$

4,195

0.27

%

$

6,208,858

$

4,747

0.30

%

$

5,314,461

$

5,512

0.42

%

Savings deposits

1,476,643

291

0.08

%

1,441,867

428

0.12

%

1,371,376

407

0.12

%

Time deposits

680,818

701

0.42

%

731,318

843

0.46

%

1,043,052

1,498

0.58

%

Total deposits

8,446,005

5,187

0.25

%

8,382,043

6,018

0.28

%

7,728,889

7,417

0.39

%

Borrowed funds

549,679

1,168

0.86

%

628,404

1,485

0.94

%

1,015,230

2,809

1.12

%

Subordinated debentures

10,301

108

4.27

%

23,631

276

4.64

%

25,149

305

4.91

%

Total interest bearing liabilities

$

9,005,985

6,463

0.29

%

$

9,034,078

7,779

0.34

%

$

8,769,268

10,531

0.49

%

Non-Interest Bearing Liabilities:

Non-interest bearing deposits

$

2,786,042

$

2,759,981

$

2,378,365

Other non-interest bearing liabilities

215,078

227,609

248,328

Total non-interest bearing liabilities

3,001,120

2,987,590

2,626,693

Total liabilities

12,007,105

12,021,668

11,395,961

Stockholders’ equity

1,686,324

1,693,567

1,638,194

Total liabilities and stockholders’ equity

$

13,693,429

$

13,715,235

$

13,034,155

Net interest income

$

94,526

$

93,889

$

90,000

Net interest rate spread

2.94

%

2.85

%

2.92

%

Net interest-earning assets

$

3,521,424

$

3,543,103

$

3,041,320

Net interest margin (3) (4)

3.02

%

2.95

%

3.05

%

Ratio of interest-earning assets to total
interest-bearing liabilities

1.39x

1.39x

1.35x

(1) Average outstanding balance amounts shown are amortized cost, net of allowance for credit losses.

(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.

(4) The previously reported average balances of the interest bearing cash and non-interest bearing cash for the three month period ended March 31, 2021 were recalculated. These recalculations resulted in the previously reported net interest margin changing from 3.10% to 3.05%.

The following table summarizes the quarterly net interest margin for the previous five quarters.

3/31/22

12/31/21

9/30/21

6/30/21

3/31/21

1st Qtr.

4th Qtr.

3rd Qtr.

2nd Qtr.

1st Qtr.

Interest-Earning Assets:

Securities

1.47

%

1.29

%

1.32

%

1.46

%

1.70

%

Net loans

3.80

%

3.81

%

3.77

%

3.79

%

3.78

%

Total interest-earning assets

3.23

%

3.19

%

3.21

%

3.31

%

3.41

%

Interest-Bearing Liabilities:

Total deposits

0.25

%

0.28

%

0.30

%

0.34

%

0.39

%

Total borrowings

0.86

%

0.94

%

1.08

%

1.18

%

1.12

%

Total interest-bearing liabilities

0.29

%

0.34

%

0.37

%

0.44

%

0.49

%

Interest rate spread

2.94

%

2.85

%

2.84

%

2.87

%

2.92

%

Net interest margin

3.02

%

2.95

%

2.94

%

2.99

%

3.05

%

Ratio of interest-earning assets to interest-bearing liabilities

1.39

x

1.39

x

1.38

x

1.36

x

1.35

x

Note: The previously reported average balances of interest bearing and non-interest bearing cash for the prior period ended March 31, 2021 in the preceding table were recalculated. This recalculation resulted in the previously reported net interest margin changing from 3.10% to 3.05% for the quarter ended March 31, 2021.

SOURCE: Provident Financial Services, Inc.

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

Web Site: http://www.Provident.Bank