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

    Source: Nasdaq GlobeNewswire / 26 Oct 2023 16:00:01   America/Chicago

    ISELIN, N.J., Oct. 26, 2023 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $28.5 million, or $0.38 per basic and diluted share for the three months ended September 30, 2023, compared to $32.0 million, or $0.43 per basic and diluted share, for the three months ended June 30, 2023 and $43.4 million, or $0.58 per basic and diluted share, for the three months ended September 30, 2022. For the nine months ended September 30, 2023, net income totaled $101.1 million, or $1.35 per basic and diluted share, compared to $126.6 million, or $1.69 per basic and diluted share, for the nine months ended September 30, 2022. Compared with the prior year period, net income for the three months ended September 30, 2023 was negatively impacted by a decrease in net interest income attributable to a decrease in lower-costing deposits, as well as increased funding costs and resulting net interest spread compression. Net income for the three and nine months ended September 30, 2023 was further impacted by increased provisions for credit losses due to a worsened economic forecast. Transaction costs related to our pending merger with Lakeland Bancorp, Inc. (“Lakeland”) totaled $2.3 million and $5.3 million for the three and nine months ended September 30, 2023, respectively, compared with transaction costs totaling $2.9 million for the respective 2022 periods. In addition, prior year earnings for the three and nine months ended September 30, 2022, included an $8.6 million gain on the sale of a foreclosed property.

    Performance Highlights for the Third Quarter of 2023

    • The Company’s total loan portfolio increased $137.1 million, or 5.2% annualized, to $10.67 billion at September 30, 2023, from $10.53 billion at June 30, 2023.
    • At September 30, 2023, the Company's loan pipeline, consisting of work-in-process and loans approved pending closing, totaled $1.70 billion, with a weighted average interest rate of 7.62%, compared to $1.74 billion, with a weighted average interest rate of 7.23% at June 30, 2023.
    • The average yield on total loans increased 13 basis points compared to the trailing quarter, to 5.37% for the quarter ended September 30, 2023, while the average cost of deposits, including non-interest bearing deposits, increased 32 basis points from the trailing quarter, to 1.74% for the quarter ended September 30, 2023.
    • Net interest income decreased $2.9 million to $96.2 million for the three months ended September 30, 2023, from $99.1 million for the trailing quarter as a result of higher funding costs, which more than offset the benefits of favorable loan repricing and loan growth.
    • The net interest margin decreased 15 basis points to 2.96% for the quarter ended September 30, 2023, from 3.11% for the trailing quarter. The weighted average yield on interest-earning assets for the quarter ended September 30, 2023 increased 16 basis points to 4.89%, compared to the trailing quarter, while the weighted average cost of interest-bearing liabilities for the quarter ended September 30, 2023 increased 37 basis points to 2.50%, compared to the trailing quarter. The increase in funding costs reflected a decrease in lower-costing deposits, an increase in borrowings and unfavorable repricing in both deposits and borrowings.
    • During the three months ended September 30, 2023, additional balances from traditional non-interest and interest bearing demand deposits transitioned into our insured cash sweep ("ICS") product, as a method to increase the level of customers' deposit insurance in light of recent banking turmoil. As of September 30, 2023 our ICS deposits totaled $500.7 million, compared to $382.9 million at June 30, 2023. Our estimated uninsured and uncollateralized deposits at September 30, 2023 totaled $2.49 billion, or 25% of deposits. At September 30, 2023, our total on-balance sheet liquidity and borrowing capacity was $3.59 billion, representing 144% of estimated uninsured and uncollateralized deposits. All borrowing capacity is immediately available.
    • At September 30, 2023, CRE loans related to office properties totaled $483.3 million, compared to $487.9 million at June 30, 2023. This portfolio constitutes 4.5% of total loans. Approximately 35% of our office loans are to medical offices and we do not have significant central business district exposure. Delinquencies in the office portfolio at September 30, 2023 were limited to one loan totaling $250,000. The portfolio is granular, with an average size of $1.8 million and just three relationships greater than $10.0 million.
    • Asset quality improved in the quarter, as non-performing loans at September 30, 2023 declined to $39.5 million, or 0.37% of total loans, compared to $45.9 million, or 0.44% of total loans at June 30, 2023.
    • The Company recorded an $11.0 million provision for credit losses for the quarter ended September 30, 2023, compared to a $10.4 million provision for the trailing quarter. The provision for credit losses in the quarter was primarily attributable to a weakened economic forecast within our CECL model. The allowance for credit losses as a percentage of loans increased to 1.01% at September 30, 2023, from 0.97% at June 30, 2023.
    • Tangible book value per share(1) decreased $0.25 to $15.41 at September 30, 2023, compared to the trailing quarter, as unrealized losses on available for sale debt securities increased $31.2 million for the quarter.
    • Annualized returns on average assets, average equity and average tangible equity were 0.81%, 6.84% and 9.47%, respectively for the three months ended September 30, 2023, compared with 0.93%, 7.76% and 10.75%, respectively for the trailing quarter.
    • The Company's annualized adjusted pre-tax, pre-provision ("PTPP") return on average assets(1) was 1.48% for the quarter ended September 30, 2023, compared to 1.60% for the quarter ended June 30, 2023.

    Anthony J. Labozzetta, President and Chief Executive Officer commented, “Provident produced good financial results this quarter, despite challenging market conditions. We had another strong quarter of growth in our loan portfolio, our loan pipeline remains robust and we saw solid performance from our fee businesses. Expenses were well managed and, while increases in interest rates and a shift in the funding mix continued to impact our net interest margin, our interest rate risk management remains sound. While our asset quality remained strong and stable, we built loan loss reserves largely due to changes in our CECL forecast.”

    Regarding the Company's pending merger with Lakeland, Mr. Labozzetta added, “Provident continues to engage in productive discussions with our regulators and we look forward to closing our transaction as soon as we receive the required regulatory approvals.”

    Declaration of Quarterly Dividend

    The Company’s Board of Directors declared a quarterly cash dividend of $0.24 per common share payable on November 24, 2023 to stockholders of record as of the close of business on November 10, 2023.

    Results of Operations

    Three months ended September 30, 2023 compared to the three months ended June 30, 2023

    For the three months ended September 30, 2023, net income was $28.5 million, or $0.38 per basic and diluted share, compared to net income of $32.0 million, or $0.43 per basic and diluted share, for the three months ended June 30, 2023. Transaction costs related to our pending merger with Lakeland totaled $2.3 million and $2.0 million for the three months ended September 30, 2023 and June 30, 2023, respectively.

    Net Interest Income and Net Interest Margin

    Net interest income decreased $2.9 million to $96.2 million for the three months ended September 30, 2023, from $99.1 million for the trailing quarter. The decrease in net interest income was primarily due to a decrease in lower-costing deposits and an increase in borrowings, combined with unfavorable repricing of both deposits and borrowings, partially offset by originations of new loans at current market rates and the favorable repricing of adjustable-rate loans.

    The Company’s net interest margin decreased 15 basis points to 2.96% for the quarter ended September 30, 2023, from 3.11% for the trailing quarter. The weighted average yield on interest-earning assets for the quarter ended September 30, 2023 increased 16 basis points to 4.89%, compared to the trailing quarter. The weighted average cost of interest-bearing liabilities for the quarter ended September 30, 2023 increased 37 basis points from the trailing quarter, to 2.50%. The average cost of interest-bearing deposits for the quarter ended September 30, 2023 increased 37 basis points to 2.22%, compared to 1.85% for the trailing quarter. The average cost of total deposits, including non-interest-bearing deposits, was 1.74% for the quarter ended September 30, 2023, compared to 1.42% for the trailing quarter. The average cost of borrowed funds for the quarter ended September 30, 2023 was 3.74%, compared to 3.41% for the quarter ended June 30, 2023.

    Provision for Credit Losses

    For the quarter ended September 30, 2023, the Company recorded an $11.0 million provision for credit losses, compared with a provision for credit losses of $10.4 million for the quarter ended June 30, 2023. The provision for credit losses in the quarter was primarily attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices used in our CECL model. For the three months ended September 30, 2023, net charge-offs totaled $5.5 million, or an annualized 21 basis points of average loans, which was primarily attributable to one commercial loan.

    Non-Interest Income and Expense

    For the three months ended September 30, 2023, non-interest income totaled $19.3 million, a decrease of $67,000, compared to the trailing quarter. Insurance agency income decreased $623,000 to $3.2 million for the three months ended September 30, 2023, compared to the trailing quarter, mainly due to additional new business activity in the prior quarter. Other income decreased $144,000 to $1.1 million for the three months ended September 30, 2023, compared to the trailing quarter, primarily due to a reduction in gains on the sale of SBA loans. Partially offsetting these decreases to non-interest income, fee income increased $357,000 to $6.1 million for the three months ended September 30, 2023, compared to the trailing quarter, primarily due to increases in commercial loan prepayment fees and deposit fee income, partially offset by a decrease in non-deposit investment fee income. Additionally, BOLI income increased $286,000 for the three months ended September 30, 2023, compared to the trailing quarter, primarily due to an increase in benefit claims recognized, partially offset by lower equity valuations.

    Non-interest expense totaled $67.2 million for the three months ended September 30, 2023, an increase of $2.7 million, compared to $64.5 million for the trailing quarter. For the three months ended September 30, 2023, the Company recorded a $1.5 million provision for credit losses for off-balance sheet credit exposures, compared to a $647,000 provision benefit for the trailing quarter. The $2.2 million increase in the provision for credit losses for off-balance sheet exposures for the quarter was primarily due to an increase in loans approved and awaiting closing, combined with a decrease in line of credit utilization. Compensation and benefits expense increased $419,000 to $35.7 million for the three months ended September 30, 2023, compared to $35.3 million for the trailing quarter. The increase in compensation and benefit expense was primarily attributable to increases in the accrual for incentive compensation and salary expense, partially offset by a decrease in stock-based compensation. Additionally, merger expenses related to our pending combination with Lakeland increased $329,000 to $2.3 million for the three months ended September 30, 2023, compared to the trailing quarter. Partially offsetting these increases in non-interest expense, FDIC insurance decreased $497,000 to $1.6 million for the three months ended September 30, 2023, compared to the trailing quarter, primarily due to a quarterly adjustment related to a decrease in the assessment rate.

    The Company’s annualized adjusted non-interest expense as a percentage of average assets(1) was 1.80% for the quarter ended September 30, 2023, compared to 1.83% 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 54.81% for the three months ended September 30, 2023, compared to 53.29% for the trailing quarter.

    Income Tax Expense

    For the three months ended September 30, 2023, the Company's income tax expense was $8.8 million with an effective tax rate of 23.7%, compared with income tax expense of $11.6 million with an effective tax rate of 26.7% for the trailing quarter. The decrease in tax expense for the three months ended September 30, 2023, compared with the trailing quarter was largely due to a decrease in taxable income, while the decrease in the effective tax rate was due to a decrease in the proportion of income derived from taxable sources.

    Three months ended September 30, 2023 compared to the three months ended September 30, 2022

    For the three months ended September 30, 2023, net income was $28.5 million, or $0.38 per basic and diluted share, compared to net income of $43.4 million, or $0.58 per basic and diluted share, for the three months ended September 30, 2022. Transaction costs related to our pending merger with Lakeland totaled $2.3 million and $2.9 million for the three months ended September 30, 2023 and September 30, 2022, respectively.

    Net Interest Income and Net Interest Margin

    Net interest income decreased $13.3 million to $96.2 million for the three months ended September 30, 2023, from $109.5 million for same period in 2022. The decrease in net interest income was primarily due to a decrease in lower-costing deposits and an increase in borrowings, combined with unfavorable repricing of both deposits and borrowings, partially offset by originations of new loans and the favorable repricing of adjustable-rate loans.

    The Company’s net interest margin decreased 55 basis points to 2.96% for the quarter ended September 30, 2023, from 3.51% for the same period last year. The weighted average yield on interest-earning assets for the quarter ended September 30, 2023 increased 99 basis points to 4.89%, compared to 3.90% for the quarter ended September 30, 2022. The weighted average cost of interest-bearing liabilities increased 196 basis points for the quarter ended September 30, 2023 to 2.50%, compared to 0.54% for the third quarter of 2022. The average cost of interest-bearing deposits for the quarter ended September 30, 2023 was 2.22%, compared to 0.47% for the same period last year. Average non-interest-bearing demand deposits decreased $520.5 million to $2.23 billion for the quarter ended September 30, 2023, compared to $2.75 billion for the quarter ended September 30, 2022. The average cost of total deposits, including non-interest-bearing deposits, was 1.74% for the quarter ended September 30, 2023, compared with 0.35% for the quarter ended September 30, 2022. The average cost of borrowed funds for the quarter ended September 30, 2023 was 3.74%, compared to 1.11% for the same period last year.

    Provision for Credit Losses

    For the quarter ended September 30, 2023, the Company recorded an $11.0 million provision for credit losses, compared with an $8.4 million provision for credit losses for the quarter ended September 30, 2022. The increase in the allowance for credit losses on loans was primarily attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices used in our CECL model. For the three months ended September 30, 2023, net charge-offs totaled $5.5 million, or an annualized 21 basis points of average loans, which was primarily attributable to one commercial loan.

    Non-Interest Income and Expense

    Non-interest income totaled $19.3 million for the quarter ended September 30, 2023, a decrease of $9.1 million, compared to the same period in 2022. Other income decreased $9.2 million to $1.1 million for the three months ended September 30, 2023, compared to the quarter ended September 30, 2022, primarily due to an $8.6 million gain realized in the prior year on the sale of a foreclosed commercial office property, combined with a decrease in the gains on sales of SBA loans. Fee income decreased $1.1 million to $6.1 million for the three months ended September 30, 2023, compared to the prior year quarter, primarily due to decreases in commercial loan prepayment fees and deposit fee income. Partially offsetting these decreases in non-interest income, BOLI income increased $583,000 to $1.8 million three months ended September 30, 2023, compared to the prior year quarter, primarily due to an increase in benefit claims recognized. Additionally, insurance agency income increased $359,000 to $3.2 million for the three months ended September 30, 2023, compared to the quarter ended September 30, 2022, largely due to strong retention revenue and new business activity.

    For the three months ended September 30, 2023, non-interest expense totaled $67.2 million, a decrease of $2.3 million, compared to the three months ended September 30, 2022. Compensation and benefits expense decreased $2.4 million to $35.7 million for three months ended September 30, 2023, compared to $38.1 million for the same period in 2022. The decrease was principally due to decreases in the accrual for incentive compensation, employee medical expense and stock-based compensation, partially offset by an increase in salary expense. Additionally, merger-related expenses related to our pending combination with Lakeland decreased $597,000 to $2.3 million for the three months ended September 30, 2023, compared to the same period in 2022. Partially offsetting these decreases in non-interest expense, FDIC insurance expense increased $228,000 to $1.6 million for the three months ended September 30, 2023, compared to the same period in 2022, primarily due to an increase in the assessment rate.

    The Company’s annualized adjusted non-interest expense as a percentage of average assets(1) was 1.80% for the quarter ended September 30, 2023, compared to 1.89% for the same period in 2022. The efficiency ratio (adjusted non-interest expense divided by the sum of net interest income and non-interest income)(1) was 54.81% for the three months ended September 30, 2023 compared to 47.11% for the same respective period in 2022.

    Income Tax Expense

    For the three months ended September 30, 2023, the Company's income tax expense was $8.8 million with an effective tax rate of 23.7%, compared with $16.7 million with an effective tax rate of 27.7% for the three months ended September 30, 2022. The decrease in tax expense for the three months ended September 30, 2023, compared with the same period last year was largely the result of a decrease in taxable income, while the decrease in the effective tax rate for the three months ended September 30, 2023, compared with the three months ended September 30, 2022, was largely due to a decrease in the proportion of income derived from taxable sources.

    Nine Months Ended September 30, 2023 compared to the nine months ended September 30, 2022

    For the nine months ended September 30, 2023, net income totaled $101.1 million, or $1.35 per basic and diluted share, compared to net income of $126.6 million, or $1.69 per basic and diluted share, for the nine months ended September 30, 2022. Transaction costs related to our pending merger with Lakeland totaled $5.3 million and $2.9 million for the nine months ended September 30, 2023 and 2022, respectively.

    Net Interest Income and Net Interest Margin

    Net interest income increased $175,000 to $303.7 million for the nine months ended September 30, 2023, from $303.5 million for same period in 2022. The increase in net interest income for the nine months ended September 30, 2023 was primarily driven by the favorable repricing of adjustable rate loans, higher market rates on new loan originations and the originations of higher-yielding loans, partially offset by the unfavorable repricing of both deposits and borrowings, a decrease in lower-costing deposits and an increase in borrowings. Additionally, fees related to the forgiveness of PPP loans, which are recognized in interest income, were approximately $77,000 for the nine months ended September 30, 2023, compared to $1.4 million for the nine months ended September 30, 2022.

    For the nine months ended September 30, 2023, the net interest margin decreased five basis points to 3.19%, compared to 3.24% for the nine months ended September 30, 2022. The weighted average yield on interest earning assets increased 125 basis points to 4.76% for the nine months ended September 30, 2023, compared to 3.51% for the nine months ended September 30, 2022, while the weighted average cost of interest-bearing liabilities increased 169 basis points to 2.07% for the nine months ended September 30, 2023, compared to 0.38% for the same period last year. The average cost of interest-bearing deposits increased 149 basis points to 1.82% for the nine months ended September 30, 2023, compared to 0.33% for the same period last year. Average non-interest-bearing demand deposits decreased $388.8 million to $2.38 billion for the nine months ended September 30, 2023, compared with $2.77 billion for the nine months ended September 30, 2022. The average cost of total deposits, including non-interest-bearing deposits, was 1.40% for the nine months ended September 30, 2023, compared with 0.25% for the nine months ended September 30, 2022. The average cost of borrowings for the nine months ended September 30, 2023 was 3.29%, compared to 0.97% for the same period last year.

    Provision for Credit Losses

    For the nine months ended September 30, 2023, the Company recorded a $27.4 million provision for credit losses related to loans, compared with a provision for credit losses of $5.0 million for the nine months ended September 30, 2022. The increase in the allowance for credit losses on loans was primarily attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices used in our CECL model. For the nine months ended September 30, 2023, net charge-offs totaled $7.3 million, or an annualized 9 basis points of average loans, which was primarily attributable to two commercial loans.

    Non-Interest Income and Expense

    For the nine months ended September 30, 2023, non-interest income totaled $60.9 million, a decrease of $8.7 million, compared to the same period in 2022. Other income decreased $7.8 million to $5.7 million for the nine months ended September 30, 2023, compared to $13.5 million for the same period in 2022, primarily due to an $8.6 million gain realized in the prior year on the sale of a foreclosed commercial office property, a decrease in net fees on loan-level interest rate swap transactions and a decrease in the gains on sales of SBA loans, partially offset by a $2.0 million gain related to the resolution of certain post-closing conditions following the September 2022 sale of a foreclosed commercial property. Fee income decreased $3.2 million to $18.3 million for the nine months ended September 30, 2023, compared to the same period in 2022, primarily due to a decrease in commercial loan prepayment fees, while wealth management income decreased $448,000 to $20.8 million for the nine months ended September 30, 2023, compared to the same period in 2022, primarily due to a decrease in the market value of assets under management. Partially offsetting these decreases to non-interest income, insurance agency income increased $2.0 million to $11.2 million for the nine months ended September 30, 2023, compared to $9.1 million for the same period in 2022, largely due to increases in contingent commissions, retention revenue and new business activity. Additionally, BOLI income increased $860,000 to $4.8 million for the nine months ended September 30, 2023, compared to the same period in 2022, primarily due to greater equity valuations.

    Non-interest expense totaled $201.1 million for the nine months ended September 30, 2023, an increase of $5.9 million, compared to $195.2 million for the nine months ended September 30, 2022. The Company recorded a $1.6 million provision for credit losses for off-balance sheet credit exposures for the nine months ended September 30, 2023, compared to a $1.8 million provision benefit for the same period in 2022. The $3.4 million increase in the provision for credit losses for off-balance sheet credit exposures was primarily the result of the period-over-period relative change in line of credit utilization and an increase in projected loss factors as a result of a worsened economic forecast. Other operating expense increased $3.2 million to $31.8 million for the nine months ended September 30, 2023, compared to $28.5 million for the nine months ended September 30, 2022, largely due to increases in professional fees, combined with an increase in debit card expense. Merger-related expenses increased $2.4 million to $5.3 million for the nine months ended September 30, 2023, compared to $2.9 million for the nine months ended September 30, 2022. FDIC insurance expense increased $1.7 million to $5.7 million for the nine months ended September 30, 2023, compared to the same period in 2022, primarily due to an increase in the assessment rate. Partially offsetting these increases, compensation and benefits expense decreased $2.9 million to $109.7 million for the nine months ended September 30, 2023, compared to $112.6 million for the nine months ended September 30, 2022, primarily due to decreases in the accrual for incentive compensation, employee medical expenses and stock-based compensation, partially offset by an increase in salary expense. Additionally, net occupancy expense decreased $1.8 million to $24.5 million for the nine months ended September 30, 2023, compared to the same period in 2022, mainly due to decreases in maintenance and depreciation expenses.

    Income Tax Expense

    For the nine months ended September 30, 2023, the Company's income tax expense was $34.9 million with an effective tax rate of 25.7%, compared with $46.2 million with an effective tax rate of 26.7% for the nine months ended September 30, 2022. The decrease in tax expense for the nine months ended September 30, 2023, compared with the same period last year was largely the result of a decrease in taxable income, while the decrease in the effective tax rate for the nine months ended September 30, 2023, compared with the prior year period was largely due to a decrease in the proportion of income derived from taxable sources.

    Asset Quality

    The Company’s total non-performing loans at September 30, 2023 were $39.5 million, or 0.37% of total loans, compared to $45.9 million, or 0.44% of total loans at June 30, 2023 and $58.5 million, or 0.57% of total loans at December 31, 2022. The $6.4 million decrease in non-performing loans at September 30, 2023, compared to the trailing quarter, consisted of a $10.0 million decrease in non-performing commercial loans, a $383,000 decrease in non-performing consumer loans, a $369,000 decrease in non-performing residential mortgage loans and a $56,000 decrease in non-performing multi-family loans, partially offset by a $4.4 million increase in non-performing commercial mortgage loans. At September 30, 2023, impaired loans totaled $30.4 million with related specific reserves of $3.4 million, compared with impaired loans totaling $37.1 million with related specific reserves of $4.5 million at June 30, 2023. At December 31, 2022, impaired loans totaled $42.8 million with related specific reserves of $2.4 million.

    At September 30, 2023, the Company’s allowance for credit losses related to the loan portfolio was 1.01% of total loans, compared to 0.97% and 0.86% at June 30, 2023 and December 31, 2022, respectively. The allowance for credit losses increased $19.5 million to $107.6 million at September 30, 2023, from $88.0 million at December 31, 2022. The increase in the allowance for credit losses on loans at September 30, 2023 compared to December 31, 2022 was due to a $27.4 million provision for credit losses, partially offset by net charge-offs of $7.3 million and a gross reduction of the allowance for credit losses of $594,000 which was recorded against equity upon the January 1, 2023 adoption of ASU 2022-02, related to troubled debt restructurings. The increase in the allowance for credit losses on loans was primarily attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices used in our CECL model, combined with an increase in total loans outstanding.

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

      September 30, 2023 June 30, 2023 December 31, 2022
      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:            
    Commercial mortgage loans — $—  2 $1,445  2 $2,300 
    Multi-family mortgage loans 2  5,473  1  3,853  1  790 
    Construction loans —  —  —  —  1  905 
    Residential mortgage loans 9  1,588  11  1,427  10  1,411 
    Total mortgage loans 11  7,061  14  6,725  14  5,406 
    Commercial loans 6  1,959  10  3,021  5  964 
    Consumer loans 27  1,207  15  957  18  885 
    Total 30 to 59 days past due 44 $10,227  39 $10,703  37 $7,255 
                 
    60 to 89 days past due:            
    Commercial mortgage loans 2 $587  2 $1,137  2 $412 
    Multi-family mortgage loans —  —  —  —  —  — 
    Construction loans —  —  —  —  1  1,097 
    Residential mortgage loans 7  936  6  1,171  9  1,114 
    Total mortgage loans 9  1,523  8  2,308  12  2,623 
    Commercial loans 4  228  2  90  5  1,014 
    Consumer loans 4  168  3  147  4  147 
    Total 60 to 89 days past due 17  1,919  13  2,545  21  3,784 
    Total accruing past due loans 61 $12,146  52 $13,248  58 $11,039 
                 
    Non-accrual:            
    Commercial mortgage loans 9 $11,667  7 $7,279  10 $28,212 
    Multi-family mortgage loans 2  2,258  2  2,314  1  1,565 
    Construction loans 2  1,868  2  1,874  2  1,878 
    Residential mortgage loans 11  1,329  12  1,698  14  1,928 
    Total mortgage loans 24  17,122  23  13,165  27  33,583 
    Commercial loans 27  21,912  30  31,885  34  24,188 
    Consumer loans 7  495  8  878  10  738 
    Total non-accrual loans 58 $39,529  61 $45,928  71 $58,509 
                 
    Non-performing loans to total loans    0.37%    0.44%    0.57%
    Allowance for loan losses to total non-performing loans    272.11%    222.25%    150.44%
    Allowance for loan losses to total loans    1.01%    0.97%    0.86%
                       

    At September 30, 2023 and December 31, 2022, the Company held foreclosed assets of $16.5 million and $2.1 million, respectively. During the nine months ended September 30, 2023, there were four additions to foreclosed assets with an aggregate carrying value of $15.1 million, and three properties sold with an aggregate carrying value of $768,000. Foreclosed assets at September 30, 2023 consisted primarily of commercial real estate. Total non-performing assets at September 30, 2023 decreased $4.6 million to $56.0 million, or 0.40% of total assets, from $60.6 million, or 0.44% of total assets at December 31, 2022.

    Balance Sheet Summary

    Total assets at September 30, 2023 were $14.09 billion, a $303.4 million increase from December 31, 2022. The increase in total assets was primarily due to a $418.7 million increase in total loans, partially offset by a $132.0 million decrease in total investments.

    The Company’s loan portfolio totaled $10.67 billion at September 30, 2023 and $10.25 billion at December 31, 2022. The loan portfolio consisted of the following:

     September 30, 2023 June 30, 2023 December 31, 2022
     (Dollars in thousands)
    Mortgage loans:     
    Commercial$4,411,099  $4,373,436  $4,316,185 
    Multi-family 1,790,039   1,645,770   1,513,818 
    Construction 667,462   707,234   715,494 
    Residential 1,167,570   1,166,159   1,177,698 
        Total mortgage loans 8,036,170   7,892,599   7,723,195 
    Commercial loans 2,340,080   2,348,447   2,233,670 
    Consumer loans 302,769   301,306   304,780 
        Total gross loans 10,679,019   10,542,352   10,261,645 
    Premiums on purchased loans 1,413   1,374   1,380 
    Net deferred fees and unearned discounts (12,820)  (13,195)  (14,142)
        Total loans$10,667,612  $10,530,531  $10,248,883 

    During the nine months ended September 30, 2023, the loan portfolio had net increases of $276.2 million in multi-family loans, $106.4 million in commercial loans and $94.9 million in commercial mortgage loans, partially offset by net decreases in construction, residential mortgage and consumer loans of $48.0 million, $10.1 million and $2.0 million, respectively. Commercial loans, consisting of commercial real estate, multi-family, commercial and construction loans, represented 86.2% of the loan portfolio at September 30, 2023, compared to 85.6% at December 31, 2022.

    For the nine months ended September 30, 2023, loan funding, including advances on lines of credit, totaled $2.53 billion, compared with $3.05 billion for the same period in 2022.

    At September 30, 2023, the Company’s unfunded loan commitments totaled $2.18 billion, including commitments of $1.21 billion in commercial loans, $533.9 million in construction loans and $105.7 million in commercial mortgage loans. Unfunded loan commitments at December 31, 2022 and September 30, 2022 were $2.06 billion and $2.17 billion, respectively.

    The loan pipeline, consisting of work-in-process and loans approved pending closing, totaled $1.70 billion at September 30, 2023, compared to $1.29 billion and $1.46 billion at December 31, 2022 and September 30, 2022, respectively.

    Total investment securities were $2.13 billion at September 30, 2023, a $132.0 million decrease from December 31, 2022. This decrease was primarily due to repayments of mortgage-backed securities, an increase in unrealized losses on available for sale debt securities and maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities.

    Total deposits decreased $421.6 million during the nine months ended September 30, 2023, to $10.14 billion. Total savings and demand deposit accounts decreased $738.3 million to $9.07 billion at September 30, 2023, while total time deposits increased $316.7 million to $1.07 billion at September 30, 2023. The decrease in savings and demand deposits was largely attributable to a $456.2 million decrease in non-interest bearing demand deposits, a $324.7 million decrease in money market deposits and a $238.2 million decrease in savings deposits, partially offset by a $280.8 million increase in interest bearing demand deposits. During the nine months ended September 30, 2023, deposit balances from traditional non-interest and interest bearing demand deposits transitioned into our ICS product, as a method to increase the level of customers' deposit insurance in light of recent bank deposit turmoil. The Bank's ICS deposits increased $441.8 million to $500.7 million at September 30, 2023, from $58.9 million at December 31, 2022. The increase in time deposits consisted of a $322.4 million increase in retail time deposits, partially offset by a $5.7 million decrease in brokered time deposits.

    Borrowed funds increased $684.9 million during the nine months ended September 30, 2023, to $2.02 billion. The increase in borrowings was largely due to asset funding requirements. Borrowed funds represented 14.4% of total assets at September 30, 2023, an increase from 9.7% at December 31, 2022.

    Stockholders’ equity increased $25.3 million during the nine months ended September 30, 2023, to $1.62 billion, primarily due to net income earned for the period, partially offset by an increase in unrealized losses on available for sale debt securities and cash dividends paid to stockholders. For the three months ended September 30, 2023, the Company did not repurchase shares under its stock repurchase program. For the nine months ended September 30, 2023, common stock repurchases totaled 71,357 shares at an average cost of $23.32 per share, all of which were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. At September 30, 2023, approximately 1.1 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, 2023 were $21.49 and $15.41, respectively, compared with $21.25 and $15.12, respectively, at December 31, 2022. The Company completed its most recent annual goodwill impairment test as of July 1, 2023. At September 30, 2023, the Company performed an interim goodwill impairment analysis and concluded that no triggering considerations were met and therefore a test for impairment between annual tests was not required.

    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, Bucks, Lehigh and Northampton counties in Pennsylvania, as well as Queens and Nassau Counties in 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, Provident Protection Plus, Inc.

    Post Earnings Conference Call

    Representatives of the Company will hold a conference call for investors on Friday, October 27, 2023 at 10:00 a.m. Eastern Time to discuss the Company’s financial results for the quarter ended September 30, 2023. The call may be accessed by dialing 1-888-412-4131 (United States Toll Free) and 1-646-960-0134 (United States Local). Speakers will need to enter conference ID code (3610756) 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 the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, the effects of the recent turmoil in the banking industry (including the closing of three financial institutions), 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, potential goodwill impairment, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets, the availability of and costs associated with sources of liquidity, the ability to complete, or any delays in completing, the pending merger between the Company and Lakeland; any failure to realize the anticipated benefits of the transaction when expected or at all; certain restrictions during the pendency of the transaction that may impact the Company’s ability to pursue certain business opportunities or strategic transactions; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, diversion of management’s attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the merger and integration of the companies; and the impact of a potential shutdown of the federal government.

    The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date they are 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 assume any duty, and does not undertake, to update any forward-looking statements to reflect events or circumstances after the date of this statement.

    Footnotes

    (1) Annualized adjusted pre-tax, pre-provision return on average assets, annualized return on average tangible equity, tangible book value per share, 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     		 At or for the
    Nine Months Ended
     September 30, June 30, September 30, September 30, September 30,
      2023   2023   2022   2023   2022 
    Statement of Income         
    Net interest income$96,236  $99,106  $109,489  $303,666  $303,491 
    Provision for credit losses 11,009   10,397   8,413   27,407   5,004 
    Non-interest income 19,320   19,387   28,445   60,861   69,523 
    Non-interest expense 67,157   64,463   69,443   201,109   195,173 
    Income before income tax expense 37,390   43,633   60,078   136,011   172,837 
    Net income 28,547   32,003   43,421   101,086   126,613 
    Diluted earnings per share$0.38  $0.43  $0.58  $1.35  $1.69 
    Interest rate spread 2.39%  2.60%  3.36%  2.69%  3.13%
    Net interest margin 2.96%  3.11%  3.51%  3.19%  3.24%
              
    Profitability         
    Annualized return on average assets 0.81%  0.93%  1.26%  0.98%  1.24%
    Annualized return on average equity 6.84%  7.76%  10.68%  8.22%  10.36%
    Annualized return on average tangible equity(1) 9.47%  10.75%  14.96%  11.40%  14.46%
    Annualized adjusted non-interest expense to average assets(3) 1.80%  1.83%  1.89%  1.87%  1.91%
    Efficiency ratio(4) 54.81%  53.29%  47.11%  53.26%  52.03%
              
    Asset Quality         
    Non-accrual loans  $45,928    $39,529  $59,501 
    90+ and still accruing   —     —   — 
    Non-performing loans   45,928     39,529   59,501 
    Foreclosed assets   13,697     16,487   2,053 
    Non-performing assets   59,625     56,016   61,554 
    Non-performing loans to total loans   0.44%    0.37%  0.59%
    Non-performing assets to total assets   0.42%    0.40%  0.45%
    Allowance for loan losses  $102,073    $107,563  $88,633 
    Allowance for loan losses to total non-performing loans   222.25%    272.11%  148.96%
    Allowance for loan losses to total loans   0.97%    1.01%  0.88%
    Net loan charge-offs (recoveries)$5,510  $1,085  $(1,216) $7,266  $(2,893)
    Annualized net loan charge-offs (recoveries) to average total loans 0.21%  0.04% (0.05)%  0.09% (0.04)%
              
    Average Balance Sheet Data         
    Assets$13,976,610  $13,833,055  $13,622,554  $13,848,351  $13,618,804 
    Loans, net 10,470,843   10,238,224   9,914,831   10,269,022   9,694,816 
    Earning assets 12,735,938   12,575,967   12,390,107   12,574,437   12,414,917 
    Core deposits 9,212,202   9,297,058   10,173,351   9,408,156   10,394,240 
    Borrowings 1,780,655   1,658,809   908,841   1,556,619   663,366 
    Interest-bearing liabilities 9,826,064   9,565,814   9,011,492   9,554,204   8,978,775 
    Stockholders' equity 1,654,920   1,653,677   1,613,522   1,645,093   1,633,430 
    Average yield on interest-earning assets 4.89%  4.73%  3.90%  4.76%  3.51%
    Average cost of interest-bearing liabilities 2.50%  2.13%  0.54%  2.07%  0.38%
              

    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    
            September 30, At December 31,
             2023   2022 
    Total stockholders' equity       $1,622,970  $1,597,703 
    Less: total intangible assets        458,663   460,892 
    Total tangible stockholders' equity       $1,164,307  $1,136,811 
               
    Shares outstanding        75,531,884   75,169,196 
               
    Book value per share (total stockholders' equity/shares outstanding)       $21.49  $21.25 
    Tangible book value per share (total tangible stockholders' equity/shares outstanding)       $15.41  $15.12 
               
    (2) Annualized Return on Average Tangible Equity          
      Three Months Ended Nine Months Ended
      September 30, June 30, September 30, September 30, September 30,
       2023   2023   2022   2023   2022 
    Total average stockholders' equity $1,654,920  $1,653,677  $1,613,522  $1,645,093  $1,633,430 
    Less: total average intangible assets  459,133   459,865   462,180   459,871   463,030 
    Total average tangible stockholders' equity $1,195,787  $1,193,812  $1,151,342  $1,185,222  $1,170,400 
               
    Net income $28,547  $32,003  $43,421  $101,086  $126,613 
               
    Annualized return on average tangible equity (net income/total average tangible stockholders' equity)  9.47%  10.75%  14.96%  11.40%  14.46%
               
    (3) Annualized Pre-Tax, Pre-Provision ("PTPP") Return on Average Assets           
      Three Months Ended Nine Months Ended
      September 30, June 30, September 30, September 30, September 30,
       2023   2023   2022   2023   2022 
    Net income $28,547  $32,003  $43,421  $101,086  $126,613 
    Adjustments to net income:          
    Provision for credit losses  11,009   10,397   8,413   27,407   5,004 
    Credit loss (benefit) expense for off-balance sheet credit exposure  1,532   (647)  1,575   1,624   (1,788)
    Merger-related transaction costs  2,289   1,961   2,886   5,349   2,886 
    Income tax expense  8,843   11,630   16,657   34,925   46,224 
    PTPP income $52,220  $55,344  $72,952  $170,391  $178,939 
               
    Annualized PTPP income $207,177  $221,984  $289,429  $227,812  $239,241 
    Average assets $13,976,610  $13,833,055  $13,622,554  $13,848,351  $13,618,804 
               
    Annualized PTPP return on average assets  1.48%  1.60%  2.12%  1.65%  1.76%
               
               
               
    (4) Annualized Adjusted Non-Interest Expense to Average Assets          
      Three Months Ended Nine Months Ended
      September 30, June 30, September 30, September 30, September 30,
       2023   2023   2022   2023   2022 
    Reported non-interest expense $67,157  $64,463  $69,443  $201,109  $195,173 
    Adjustments to non-interest expense:          
    Credit loss (benefit) expense for off-balance sheet credit exposures  1,532   (647)  1,575   1,624   (1,788)
    Merger-related transaction costs  2,289   1,961   2,886   5,349   2,886 
    Adjusted non-interest expense $63,336  $63,149  $64,982  $194,136  $194,075 
               
    Annualized adjusted non-interest expense $251,279  $253,290  $257,809  $259,559  $259,478 
               
    Average assets $13,976,610  $13,833,055  $13,622,554  $13,848,351  $13,618,804 
               
    Annualized adjusted non-interest expense/average assets  1.80%  1.83%  1.89%  1.87%  1.91%
               
    (5) Efficiency Ratio Calculation          
      Three Months Ended Nine Months Ended
      September 30, June 30, September 30, September 30, September 30,
       2023   2023   2022   2023   2022 
    Net interest income $96,236  $99,106  $109,489  $303,666  $303,491 
    Non-interest income  19,320   19,387   28,445   60,861   69,523 
    Total income $115,556  $118,493  $137,934  $364,527  $373,014 
               
    Adjusted non-interest expense $63,336  $63,149  $64,982  $194,136  $194,075 
               
    Efficiency ratio (adjusted non-interest expense/income)  54.81%  53.29%  47.11%  53.26%  52.03%
               


    PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
    Consolidated Statements of Financial Condition
    September 30, 2023 (Unaudited) and December 31, 2022
    (Dollars in Thousands)
        
    AssetsSeptember 30, 2023 December 31, 2022
    Cash and due from banks$188,573  $186,490 
    Short-term investments 696   18 
    Total cash and cash equivalents 189,269   186,508 
    Available for sale debt securities, at fair value 1,656,305   1,803,548 
    Held to maturity debt securities, net (fair value of $343,082 at September 30, 2023 (unaudited) and $373,468 at December 31, 2022) 370,416   387,923 
    Equity securities, at fair value 1,210   1,147 
    Federal Home Loan Bank stock 101,250   68,554 
    Loans 10,667,612   10,248,883 
    Less allowance for credit losses 107,563   88,023 
    Net loans 10,560,049   10,160,860 
    Foreclosed assets, net 16,487   2,124 
    Banking premises and equipment, net 71,453   79,794 
    Accrued interest receivable 55,741   51,903 
    Intangible assets 458,663   460,892 
    Bank-owned life insurance 241,406   239,040 
    Other assets 364,576   341,143 
    Total assets$14,086,825  $13,783,436 
        
    Liabilities and Stockholders' Equity   
    Deposits:   
    Demand deposits$7,872,901  $8,373,005 
    Savings deposits 1,200,377   1,438,583 
    Certificates of deposit of $100,000 or more 699,880   504,627 
    Other time deposits 368,241   246,809 
    Total deposits 10,141,399   10,563,024 
    Mortgage escrow deposits 41,319   35,705 
    Borrowed funds 2,022,249   1,337,370 
    Subordinated debentures 10,646   10,493 
    Other liabilities 248,242   239,141 
    Total liabilities 12,463,855   12,185,733 
        
    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 75,531,884 shares outstanding at September 30, 2023 and 76,169,196 outstanding at December 31, 2022. 832   832 
    Additional paid-in capital 988,001   981,138 
    Retained earnings 964,802   918,158 
    Accumulated other comprehensive loss (195,056)  (165,045)
    Treasury stock (127,818)  (127,154)
    Unallocated common stock held by the Employee Stock Ownership Plan (7,791)  (10,226)
    Common Stock acquired by the Directors' Deferred Fee Plan (3,013)  (3,427)
    Deferred Compensation - Directors' Deferred Fee Plan 3,013   3,427 
    Total stockholders' equity 1,622,970   1,597,703 
    Total liabilities and stockholders' equity$14,086,825  $13,783,436 
            


    PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
    Consolidated Statements of Income
    Three months ended September 30, 2023, June 30, 2023 and September 30, 2022, and nine months ended September 30, 2023 and 2022 (Unaudited)
    (Dollars in Thousands, except per share data)
              
     Three Months Ended Nine Months Ended
     September 30, June 30, September 30, September 30, September 30,
      2023  2023   2022   2023  2022 
    Interest income:         
    Real estate secured loans$104,540 $99,302  $80,273  $299,830 $213,181 
    Commercial loans 33,806  31,426   25,201   93,915  70,385 
    Consumer loans 4,746  4,431   3,785   13,419  10,268 
    Available for sale debt securities, equity securities and Federal Home Loan Bank stock 11,886  11,432   9,560   34,748  25,966 
    Held to maturity debt securities 2,334  2,357   2,416   7,059  7,501 
    Deposits, federal funds sold and other short-term investments 885  948   496   2,678  1,705 
    Total interest income 158,197  149,896   121,731   451,649  329,006 
              
    Interest expense:         
    Deposits 44,923  36,447   9,560   108,880  20,322 
    Borrowed funds 16,765  14,088   2,518   38,329  4,790 
    Subordinated debt 273  255   164   774  403 
    Total interest expense 61,961  50,790   12,242   147,983  25,515 
    Net interest income 96,236  99,106   109,489   303,666  303,491 
    Provision charge for credit losses 11,009  10,397   8,413   27,407  5,004 
    Net interest income after provision for credit losses 85,227  88,709   101,076   276,259  298,487 
              
    Non-interest income:         
    Fees 6,132  5,775   7,203   18,294  21,516 
    Wealth management income 6,992  6,919   6,785   20,826  21,274 
    Insurance agency income 3,224  3,847   2,865   11,175  9,135 
    Bank-owned life insurance 1,820  1,534   1,237   4,838  3,978 
    Net gain on securities transactions 13  29   (3)  37  154 
    Other income 1,139  1,283   10,358   5,691  13,466 
    Total non-interest income 19,320  19,387   28,445   60,861  69,523 
              
    Non-interest expense:         
    Compensation and employee benefits 35,702  35,283   38,079   109,724  112,582 
    Net occupancy expense 8,113  7,949   8,452   24,474  26,262 
    Data processing expense 5,312  5,716   5,575   16,536  16,551 
    FDIC Insurance 1,628  2,125   1,400   5,688  3,955 
    Amortization of intangibles 720  749   779   2,231  2,511 
    Advertising and promotion expense 1,133  1,379   1,366   3,722  3,692 
    Credit loss expense (benefit) for off-balance sheet exposures 1,532  (647)  1,575   1,624  (1,788)
    Merger-related expenses 2,289  1,960   2,886   5,349  2,886 
    Other operating expenses 10,728  9,949   9,331   31,761  28,522 
    Total non-interest expense 67,157  64,463   69,443   201,109  195,173 
    Income before income tax expense 37,390  43,633   60,078   136,011  172,837 
    Income tax expense 8,843  11,630   16,657   34,925  46,224 
    Net income$28,547 $32,003  $43,421  $101,086 $126,613 
              
    Basic earnings per share$0.38 $0.43  $0.58  $1.35 $1.69 
    Average basic shares outstanding 74,909,083  74,823,272   74,297,237   74,793,530  74,808,358 
              
    Diluted earnings per share$0.38 $0.43  $0.58  $1.35 $1.69 
    Average diluted shares outstanding 74,914,205  74,830,187   74,393,380   74,816,606  74,896,493 
                      


    PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
    Net Interest Margin Analysis
    Quarterly Average Balances
    (Dollars in Thousands) (Unaudited)
     September 30, 2023 June 30, 2023 September 30, 2022
     Average Balance Interest Average
    Yield/Cost    		 Average Balance Interest Average
    Yield/Cost    		 Average Balance Interest Average
    Yield/Cost
    Interest-Earning Assets:                 
    Deposits$74,183 $884 4.73% $73,470 $947 5.17% $30,231 $201 2.67%
    Federal funds sold and other short-term investments 57  1 4.00%  88  1 6.75%  46,707  295 2.54%
    Available for sale debt securities 1,724,833  10,127 2.35%  1,801,050  10,290 2.29%  1,948,721  9,115 2.42%
    Held to maturity debt securities, net (1) 373,681  2,334 2.50%  379,958  2,357 2.48%  399,370  2,416 1.87%
    Equity securities, at fair value 1,068  — —%  1,006  — —%  949  — —%
    Federal Home Loan Bank stock 91,273  1,759 7.71%  82,171  1,142 5.56%  49,298  445 3.61%
    Net loans: (2)                 
    Total mortgage loans 7,881,193  104,540 5.21%  7,701,072  99,302 5.11%  7,443,268  80,273 4.28%
    Total commercial loans 2,289,267  33,806 5.81%  2,234,043  31,426 5.59%  2,151,512  25,201 4.66%
    Total consumer loans 300,383  4,746 6.27%  303,109  4,431 5.86%  320,051  3,785 4.74%
    Total net loans 10,470,843  143,092 5.37%  10,238,224  135,159 5.24%  9,914,831  109,259 4.38%
    Total interest-earning assets$12,735,938 $158,197 4.89% $12,575,967 $149,896 4.73% $12,390,107 $121,731 3.90%
                      
    Non-Interest Earning Assets:                 
    Cash and due from banks 82,522      129,979      126,330    
    Other assets 1,158,150      1,127,109      1,106,117    
    Total assets$13,976,610     $13,833,055     $13,622,554    
                      
    Interest-Bearing Liabilities:                 
    Demand deposits$5,741,052 $35,290 2.44% $5,620,268 $28,613 2.04% $5,906,679 $7,990 0.54%
    Savings deposits 1,240,951  592 0.19%  1,307,830  537 0.16%  1,515,926  296 0.08%
    Time deposits 1,052,793  9,041 3.41%  968,344  7,297 3.02%  669,639  1,274 0.76%
    Total Deposits 8,034,796  44,923 2.22%  7,896,442  36,447 1.85%  8,092,244  9,560 0.47%
                      
    Borrowed funds 1,780,655  16,765 3.74%  1,658,809  14,088 3.41%  908,841  2,518 1.11%
    Subordinated debentures 10,613  273 10.24%  10,563  255 9.66%  10,407  164 6.35%
    Total interest-bearing liabilities 9,826,064  61,961 2.50%  9,565,814  50,790 2.13%  9,011,492  12,242 0.54%
                      
    Non-Interest Bearing Liabilities:                 
    Non-interest bearing deposits 2,230,199      2,368,960      2,750,746    
    Other non-interest bearing liabilities 265,427      244,604      246,794    
    Total non-interest bearing liabilities 2,495,626      2,613,564      2,997,540    
    Total liabilities 12,321,690      12,179,378      12,009,032    
    Stockholders' equity 1,654,920      1,653,677      1,613,522    
    Total liabilities and stockholders' equity$13,976,610     $13,833,055     $13,622,554    
                      
    Net interest income  $96,236     $99,106     $109,489  
                      
    Net interest rate spread    2.39%     2.60%     3.36%
    Net interest-earning assets$2,909,874     $3,010,153     $3,378,615    
                      
    Net interest margin (3)     2.96%     3.11%     3.51%
                      
    Ratio of interest-earning assets to total interest-bearing liabilities1.30x     1.31x     1.37x    


      
    (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.


    The following table summarizes the quarterly net interest margin for the previous five quarters.   
     9/30/23 6/30/23 3/31/23 12/31/22 9/30/22
     3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
    Interest-Earning Assets:         
    Securities2.67% 2.53% 2.52% 2.32% 2.36%
    Net loans5.37% 5.24% 5.12% 4.82% 4.38%
    Total interest-earning assets4.89% 4.73% 4.63% 4.36% 3.90%
              
    Interest-Bearing Liabilities:         
    Total deposits2.22% 1.85% 1.39% 0.90% 0.47%
    Total borrowings3.74% 3.41% 2.48% 1.74% 1.11%
    Total interest-bearing liabilities2.50% 2.13% 1.54% 1.00% 0.54%
              
    Interest rate spread2.39% 2.60% 3.09% 3.36% 3.36%
    Net interest margin2.96% 3.11% 3.48% 3.62% 3.51%
              
    Ratio of interest-earning assets to interest-bearing liabilities1.30x 1.31x 1.34x 1.35x 1.37x
                   


    PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
    Net Interest Margin Analysis
    Average Year to Date Balances
    (Dollars in Thousands) (Unaudited)
                
     September 30, 2023 September 30, 2022
     Average   Average Average   Average
     Balance Interest Yield/Cost Balance Interest Yield/Cost
    Interest-Earning Assets:           
    Deposits$69,696 $2,676 5.13% $126,439 $499 0.53%
    Federal funds sold and other short term investments 58  2 5.34%  113,498  1,206 1.42%
    Available for sale debt securities 1,777,861  30,819 2.31%  2,028,645  24,786 1.63%
    Held to maturity debt securities, net (1) 379,144  7,059 2.48%  413,136  7,501 2.42%
    Equity securities, at fair value 1,022  — —%  1,020  — —%
    Federal Home Loan Bank stock 77,634  3,929 6.75%  37,363  1,180 4.21%
    Net loans: (2)           
    Total mortgage loans 7,740,591  299,830 5.12%  7,253,822  213,181 3.89%
    Total commercial loans 2,225,725  93,915 5.60%  2,119,637  70,385 4.40%
    Total consumer loans 302,706  13,419 5.93%  321,357  10,268 4.27%
    Total net loans 10,269,022  407,164 5.25%  9,694,816  293,834 4.01%
    Total interest-earning assets$12,574,437 $451,649 4.76% $12,414,917 $329,006 3.51%
                
    Non-Interest Earning Assets:           
    Cash and due from banks 121,801      126,392    
    Other assets 1,152,113      1,077,495    
    Total assets$13,848,351     $13,618,804    
                
    Interest-Bearing Liabilities:           
    Demand deposits$5,710,855 $85,822 2.01% $6,126,916 $16,643 0.36%
    Savings deposits 1,315,157  1,582 0.16%  1,496,355  871 0.08%
    Time deposits 961,010  21,476 2.99%  681,783  2,808 0.55%
    Total deposits 7,987,022  108,880 1.82%  8,305,054  20,322 0.33%
    Borrowed funds 1,556,619  38,329 3.29%  663,366  4,790 0.97%
    Subordinated debentures 10,563  774 9.80%  10,355  403 5.21%
    Total interest-bearing liabilities$9,554,204 $147,983 2.07% $8,978,775 $25,515 0.38%
                
    Non-Interest Bearing Liabilities:           
    Non-interest bearing deposits 2,382,144      2,770,969    
    Other non-interest bearing liabilities 266,910      235,630    
    Total non-interest bearing liabilities 2,649,054      3,006,599    
    Total liabilities 12,203,258      11,985,374    
    Stockholders' equity 1,645,093      1,633,430    
    Total liabilities and stockholders' equity$13,848,351     $13,618,804    
                
    Net interest income  $303,666     $303,491  
                
    Net interest rate spread    2.69%     3.13%
    Net interest-earning assets$3,020,233     $3,436,142    
                
    Net interest margin (3)     3.19%     3.24%
                
    Ratio of interest-earning assets to total interest-bearing liabilities1.32x     1.38x    
                
                
    (1) Average outstanding balance amounts shown are amortized cost, net of allowance for credit losses.
    (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, 2023 September 30, 2022 September 30, 2021
    Interest-Earning Assets:     
    Securities2.57% 1.72% 1.47%
    Net loans5.25% 4.01% 3.78%
    Total interest-earning assets4.76% 3.51% 3.31%
          
    Interest-Bearing Liabilities:     
    Total deposits1.82% 0.33% 0.34%
    Total borrowings3.29% 0.97% 1.13%
    Total interest-bearing liabilities2.07% 0.38% 0.43%
          
    Interest rate spread2.69% 3.13% 2.88%
    Net interest margin3.19% 3.24% 2.99%
          
    Ratio of interest-earning assets to interest-bearing liabilities1.32x 1.38x 1.36x

     


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