Provident Financial Services, Inc. Announces Third Quarter Earnings and Declares Quarterly Cash Dividend
October 26, 2023 at 05:01 pm EDT
Share
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
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)
Assets
September 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 liabilities
1.30x
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:
Securities
2.67
%
2.53
%
2.52
%
2.32
%
2.36
%
Net loans
5.37
%
5.24
%
5.12
%
4.82
%
4.38
%
Total interest-earning assets
4.89
%
4.73
%
4.63
%
4.36
%
3.90
%
Interest-Bearing Liabilities:
Total deposits
2.22
%
1.85
%
1.39
%
0.90
%
0.47
%
Total borrowings
3.74
%
3.41
%
2.48
%
1.74
%
1.11
%
Total interest-bearing liabilities
2.50
%
2.13
%
1.54
%
1.00
%
0.54
%
Interest rate spread
2.39
%
2.60
%
3.09
%
3.36
%
3.36
%
Net interest margin
2.96
%
3.11
%
3.48
%
3.62
%
3.51
%
Ratio of interest-earning assets to interest-bearing liabilities
1.30
x
1.31
x
1.34
x
1.35
x
1.37
x
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 liabilities
1.32x
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:
Securities
2.57
%
1.72
%
1.47
%
Net loans
5.25
%
4.01
%
3.78
%
Total interest-earning assets
4.76
%
3.51
%
3.31
%
Interest-Bearing Liabilities:
Total deposits
1.82
%
0.33
%
0.34
%
Total borrowings
3.29
%
0.97
%
1.13
%
Total interest-bearing liabilities
2.07
%
0.38
%
0.43
%
Interest rate spread
2.69
%
3.13
%
2.88
%
Net interest margin
3.19
%
3.24
%
2.99
%
Ratio of interest-earning assets to interest-bearing liabilities
Provident Financial Services, Inc. is a holding company for The Provident Bank (the Bank). The Bank is a New Jersey-chartered capital stock savings bank operating full-service branch offices 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 provides a range of financial products and services through its network of branches. The Bank originates commercial real estate loans, commercial business loans, fixed-rate and adjustable-rate mortgage loans collateralized by one-to four-family residential real estate and other consumer loans, for borrowers generally located within its primary market area. The Bank invests in mortgage-backed securities and other permissible investments. It provides fiduciary and wealth management services through its wholly owned subsidiary, Beacon Trust Company, and insurance brokerage services through its subsidiary, Provident Protection Plus, Inc.