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

Jul 29th, 2022 12:00 EST

ISELIN, N.J., July 29, 2022 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $39.2 million, or $0.53 per basic and diluted share for the three months ended June 30, 2022, as compared to $44.0 million, or $0.58 per basic and diluted share, for the three months ended March 31, 2022 and $44.8 million, or $0.58 per basic and diluted share, for the three months ended June 30, 2021. For the six months ended June 30, 2022, net income totaled $83.2 million, or $1.11 per basic and diluted share, compared to $93.3 million, or $1.22 per basic and diluted share, for the six months ended June 30, 2021.

Anthony J. Labozzetta, President and Chief Executive Officer, commented, “Our solid second quarter results were marked by record quarterly top-line revenue and reflected strong commercial loan growth, net interest margin expansion, and continued stable funding costs. Excluding Paycheck Protection Program loans which continue to pay down through the forgiveness process, our commercial loan portfolio grew at an annualized rate of 17.3%. Our net interest margin expanded 19 basis points from the trailing quarter as new loans were booked at higher market rates and our existing adjustable rate loan portfolio repriced favorably.” Labozzetta continued, “While our asset quality metrics continued to improve during the quarter, we did record a $3.0 million provision for credit losses, primarily due to loan growth. Our loan origination pipeline remains robust, and we continue to leverage our solid core deposit funding base to support organic asset growth, while mindful of macroeconomic headwinds posed by high inflation levels.”

Declaration of Quarterly Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.24 per common share payable on August 26, 2022, to stockholders of record as of the close of business on August 12, 2022.

Performance Highlights for the Second Quarter of 2022

  • The Company’s total commercial loan portfolio, excluding Paycheck Protection Program ("PPP") loans, increased $350.9 million, or 17.3% annualized, to $8.48 billion at June 30, 2022, from $8.13 billion at March 31, 2022.
  • Net interest income increased $4.9 million to $99.5 million for the three months ended June 30, 2022, from $94.5 million for the trailing quarter as a result of strong loan growth, favorable loan repricing and stable funding costs.
  • The net interest margin increased 19 basis points to 3.21% for the quarter ended June 30, 2022, from 3.02% for the trailing quarter.
  • The average cost of deposits, including non-interest bearing deposits, increased one basis point to 0.20% for the quarter ended June 30, 2022, compared with 0.19% for the trailing quarter.
  • At June 30, 2022, the Company's loan pipeline, which consists of work-in-process and loans approved pending closing, totaled $1.43 billion, with a weighted average interest rate of 4.98%.
  • The Company recorded a $3.0 million provision for credit losses for the quarter ended June 30, 2022, compared to a $6.4 million negative provision for the trailing quarter. The provision for credit losses in the quarter was largely a function of an increase in total loans outstanding and the relative change in the economic outlook, partially offset by a continued improvement in the Company's asset quality.
  • Asset quality improved as non-performing loans at June 30, 2022 declined $3.9 million to $40.4 million, or 0.40% of total loans, from $44.3 million, or 0.46% of total loans, at March 31, 2022.
  • Annualized returns on average assets, average equity and average tangible equity were 1.16%, 9.83% and 13.82%, respectively for the three months ended June 30, 2022, compared with 1.30%, 10.57% and 14.58%, respectively for the trailing quarter.
  • The Company's annualized pre-tax, pre-provision ("PTPP") return on average assets(1) was 1.65% for the quarter ended June 30, 2022, compared to 1.49% for the quarter ended March 31, 2022.

Results of Operations

Three months ended June 30, 2022 compared to the three months ended March 31, 2022

For the three months ended June 30, 2022, net income was $39.2 million, or $0.53 per basic and diluted share, compared to net income of $44.0 million, or $0.58 per basic and diluted share, for the three months ended March 31, 2022.

Net Interest Income and Net Interest Margin

Net interest income increased $4.9 million to $99.5 million for the three months ended June 30, 2022, from $94.5 million for the trailing quarter. The improvement in net interest income was largely due to the period-over-period increase in the net interest margin as excess liquidity and cash flow from investment securities were invested in higher-yielding loans, combined with the upward repricing of certain adjustable rate loans. This was partially offset by a reduction in the fees related to the forgiveness of PPP loans. For the three months ended June 30, 2022, fees related to the forgiveness of PPP loans, which are recognized in interest income, decreased $912,000 to $192,000, compared to $1.1 million for the trailing quarter.

The Company’s net interest margin increased 19 basis points to 3.21% for the quarter ended June 30, 2022, from 3.02% for the trailing quarter. The weighted average yield on interest-earning assets for the quarter ended June 30, 2022 increased 20 basis points to 3.43%, compared to the trailing quarter. The weighted average cost of interest-bearing liabilities for the quarter ended June 30, 2022 increased two basis points to 0.31%, compared to the trailing quarter. The average cost of interest-bearing deposits for the quarter ended June 30, 2022 increased two basis points to 0.27%, compared to 0.25% for the trailing quarter. The average cost of total deposits, including non-interest bearing deposits, was 0.20% for the quarter ended June 30, 2022, compared to 0.19% for the trailing quarter. The average cost of borrowed funds for the quarter ended June 30, 2022 was 0.84%, compared to 0.86% for the quarter ended March 31, 2022.

Provision for Credit Losses

For the quarter ended June 30, 2022, the Company recorded a $3.0 million provision for credit losses, compared with a negative provision for credit losses of $6.4 million for the quarter ended March 31, 2022. The provision for credit losses for the quarter ended June 30, 2022 was largely a function of an increase in total loans outstanding and the relative change in the economic outlook, partially offset by an overall improvement in the Company's asset quality.

Non-Interest Income and Expense

For the three months ended June 30, 2022, non-interest income totaled $20.9 million, an increase of $784,000, compared to the trailing quarter. Other income increased $752,000 to $1.9 million for the three months ended June 30, 2022, compared to the trailing quarter, primarily due to an increase in net gains on the sale of loans. Fee income increased $535,000 to $7.4 million for the three months ended June 30, 2022, compared to the trailing quarter, primarily due to increases in commercial loan prepayment fees and non-deposit investment fee income, partially offset by a decrease in debit card revenue. BOLI income increased $384,000 compared to the trailing quarter, to $1.6 million for the three months ended June 30, 2022, primarily due to a benefit claim recognized in the quarter, partially offset by lower equity valuations. Partially offsetting these increases in non-interest income, insurance agency income decreased $570,000 compared to the trailing quarter, to $2.9 million for the three months ended June 30, 2022, mainly due to the receipt of contingent commissions in the trailing quarter. Additionally, wealth management income decreased $442,000 compared to the trailing quarter, to $7.0 million for the three months ended June 30, 2022, primarily due to a decrease in the market value of assets under management.

Non-interest expense totaled $63.8 million for the three months ended June 30, 2022, an increase of $2.0 million, compared to $61.9 million for the trailing quarter. For the three months ended June 30, 2022, the Company recorded a $1.0 million negative provision for credit losses for off-balance sheet credit exposures, compared to a $2.4 million negative provision for the trailing quarter. The decreased negative provision was primarily due to a decrease in line of credit utilization. Other operating expenses increased $459,000 to $9.8 million for the three months ended June 30, 2022, compared to the trailing quarter. The increase in other operating expenses was primarily due to increases in attorney fees and debit card expense. Compensation and benefits expense increased $370,000 to $37.4 million for the three months ended June 30, 2022, compared to $37.1 million for the trailing quarter. The increase in compensation and benefit expense was primarily attributable to increases in stock-based compensation, the accrual for incentive compensation and salary expense, partially offset by a decrease in payroll taxes. These increases in non-interest expense were partially offset by an $851,000 decrease in net occupancy expense to $8.5 million for the three months ended June 30, 2022, compared to the trailing quarter, mainly due to seasonal decreases and reduced rent expense.

The Company’s annualized adjusted non-interest expense as a percentage of average assets(1) was 1.92% for the quarter ended June 30, 2022, compared to 1.90% 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 53.83% for the three months ended June 30, 2022, compared to 56.05% for the trailing quarter.

Income Tax Expense

For the three months ended June 30, 2022, the Company's income tax expense was $14.3 million with an effective tax rate of 26.8%, compared with income tax expense of $15.2 million with an effective tax rate of 25.7% for the trailing quarter. The decrease in tax expense for the three months ended June 30, 2022, compared with the trailing quarter was largely due to a decrease in taxable income, while the increase in the effective tax rate for the three months ended June 30, 2022, compared with the trailing quarter was largely due to an increase in the proportion of income derived from taxable sources.

Three months ended June 30, 2022 compared to the three months ended June 30, 2021

For the three months ended June 30, 2022, net income was $39.2 million, or $0.53 per basic and diluted share, compared to net income of $44.8 million, or $0.58 per basic and diluted share, for the three months ended June 30, 2021.

Net Interest Income and Net Interest Margin

Net interest income increased $8.6 million to $99.5 million for the three months ended June 30, 2022, from $90.9 million for same period in 2021. The increase in net interest income for the three months ended June 30, 2022, was primarily driven by growth in average earning assets, largely due to increases in available for sale debt securities and average loans outstanding, funded by growth in lower-costing core deposits and the reinvestment of cash proceeds from PPP loan satisfactions. This was partially offset by a reduction in the fees related to the forgiveness of PPP loans. For three months ended June 30, 2022, fees related to the forgiveness of PPP loans decreased $2.7 million to $192,000, compared to $2.9 million for the three months ended June 30, 2021.

The Company’s net interest margin increased 22 basis points to 3.21% for the quarter ended June 30, 2022, from 2.99% for the same period last year. The weighted average yield on interest-earning assets for the quarter ended June 30, 2022 increased 12 basis points to 3.43%, compared to 3.31% for the quarter ended June 30, 2021. The weighted average cost of interest bearing liabilities decreased 13 basis points for the quarter ended June 30, 2022 to 0.31%, compared to 0.44% for the second quarter of 2021. The average cost of interest bearing deposits for the quarter ended June 30, 2022 was 0.27%, compared to 0.34% for the same period last year. Average non-interest bearing demand deposits increased $298.1 million to $2.78 billion for the quarter ended June 30, 2022, compared to $2.48 billion for the quarter ended June 30, 2021. The average cost of total deposits, including non-interest bearing deposits, was 0.20% for the quarter ended June 30, 2022, compared with 0.26% for the quarter ended June 30, 2021. The average cost of borrowed funds for the quarter ended June 30, 2022 was 0.84%, compared to 1.18% for the same period last year.

Provision for Credit Losses

For the quarter ended June 30, 2022, the Company recorded a $3.0 million provision for credit losses, compared with a negative provision for credit losses of $10.7 million for the quarter ended June 30, 2021. The increase in the provision was largely a function of the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period, partially offset by an overall improvement in the Company's asset quality.

Non-Interest Income and Expense

Non-interest income totaled $20.9 million for the quarter ended June 30, 2022, a decrease of $224,000, compared to the same period in 2021. Fee income decreased $1.0 million to $7.4 million for the three months ended June 30, 2022, compared to the same period in 2021, primarily due to decreases in debit card revenue and commercial loan prepayment fees, partially offset by an increase in deposit related fees. The decrease in debit card revenue was largely attributable to the interchange transaction fee limitation imposed by the Durbin amendment, which became effective for the Company in the third quarter of 2021. Wealth management income decreased $835,000 to $7.0 million for the three months ended June 30, 2022, compared to the same period in 2021, primarily due to a decrease in the market value of assets under management. Partially offsetting these decreases in non-interest income, other income increased $1.5 million to $1.9 million for the three months ended June 30, 2022, compared to the quarter ended June 30, 2021, primarily due to increases in fees on loan-level interest rate swap transactions and net gains on the sale of loans.

For the three months ended June 30, 2022, non-interest expense totaled $63.8 million, an increase of $1.1 million, compared to the three months ended June 30, 2021. Compensation and benefits expense increased $2.6 million to $37.4 million for three months ended June 30, 2022, compared to $34.9 million for the same period in 2021. The increase was principally due to increases in stock-based compensation, salary expense and the accrual for incentive compensation, partially offset by a decline in employee medical expenses. Other operating expenses increased $780,000 to $9.8 million for the three months ended June 30, 2022, compared to the same period in 2021, principally due to an increase in business development expenses. Net occupancy expenses increased $572,000 to $8.5 million for the three months ended June 30, 2022, compared to the same period in 2021, largely due to increases in rent, depreciation and maintenance expenses, while FDIC insurance decreased $220,000 due to a decrease in the insurance assessment rate, partially offset by an increase in total assets subject to assessment. Partially offsetting these increases in non-interest expense, credit loss expense for off-balance sheet credit exposures decreased $3.0 million to a negative provision of $1.0 million for the three months ended June 30, 2022, compared to a $2.1 million provision for the same period in 2021. The decrease was primarily the result of a decrease in the pipeline of loans approved and awaiting closing, combined with an increase in line of credit utilization, partially offset by an increase in loss factors.

The Company’s annualized adjusted non-interest expense as a percentage of average assets(1) was 1.92% for the quarter ended June 30, 2022, compared to 1.84% for the same period in 2021. The efficiency ratio (adjusted non-interest expense divided by the sum of net interest income and non-interest income)(1) was 53.83% for the three months ended June 30, 2022 compared to 54.12% for the same respective period in 2021.

Income Tax Expense

For the three months ended June 30, 2022, the Company's income tax expense was $14.3 million with an effective tax rate of 26.8%, compared with $15.3 million with an effective tax rate of 25.4% for the three months ended June 30, 2021. The decrease in tax expense for the three months ended June 30, 2022, compared with the same period last year was largely the result of a decrease in taxable income, while the increase in the effective tax rate for the three months ended June 30, 2022, compared with the three months ended June 30, 2021, was largely due to an increase in the proportion of income derived from taxable sources.

Six Months Ended June 30, 2022 compared to the six months ended June 30, 2021

For the six months ended June 30, 2022, net income totaled $83.2 million, or $1.11 per basic and diluted share, compared to net income of $93.3 million, or $1.22 per basic and diluted share, for the six months ended June 30, 2021.

Net Interest Income and Net Interest Margin

Net interest income increased $13.1 million to $194.0 million for the six months ended June 30, 2022, from $180.9 million for same period in 2021. The increase in net interest income for the six months ended June 30, 2022, was primarily driven by a reduction in funding costs, growth in lower-costing core and non-interest bearing deposits and an increase in available for sale debt securities. Net interest income was further enhanced by the favorable repricing of adjustable rate loans and an increase in rates on new loan originations. This was partially offset by a reduction in fees related to the forgiveness of PPP loans. For the six months ended June 30, 2022, fees related to the forgiveness of PPP loans decreased $3.1 million to $1.3 million, compared to $4.4 million for the six months ended June 30, 2021.

For the six months ended June 30, 2022, the net interest margin increased nine basis points to 3.11%, compared to 3.02% for the six months ended June 30, 2021. The weighted average yield on interest earning assets declined three basis points to 3.33% for the six months ended June 30, 2022, compared to 3.36% for the six months ended June 30, 2021, while the weighted average cost of interest bearing liabilities decreased 16 basis points to 0.30% for the six months ended June 30, 2022, compared to 0.46% for the same period last year. The average cost of interest bearing deposits decreased 10 basis points to 0.26% for the six months ended June 30, 2022, compared to 0.36% for the same period last year. Average non-interest bearing demand deposits increased $352.6 million to $2.78 billion for the six months ended June 30, 2022, compared with $2.43 billion for the six months ended June 30, 2021. The average cost of total deposits, including non-interest bearing deposits, was 0.19% for the six months ended June 30, 2022, compared with 0.28% for the six months ended June 30, 2021. The average cost of borrowings for the six months ended June 30, 2022 was 0.85%, compared to 1.15% for the same period last year.

Provision for Credit Losses

For the six months ended June 30, 2022, the Company recorded a $3.4 million negative provision for credit losses related to loans, compared with a negative provision for credit losses of $25.7 million for the six months ended June 30, 2021. The decrease in the period-over-period provision benefit was largely a function of the significant favorable impact of the post-pandemic recovery resulting in a larger negative provision taken in the prior year period, combined with growth in the loan portfolio and the satisfaction of PPP loans.

Non-Interest Income and Expense

For the six months ended June 30, 2022, non-interest income totaled $41.1 million, a decrease of $1.7 million, compared to the same period in 2021. Fee income decreased $1.3 million to $14.3 million for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to a decrease in debit card revenue, which was curtailed by the Durbin amendment, partially offset by an increase in deposit related fees. BOLI income decreased $1.3 million to $2.7 million for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to lower equity valuations and a decrease in benefit claims recognized. Wealth management income decreased $504,000 to $14.5 million for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to a decrease in the market value of assets under management and a decrease in tax preparation fees, partially offset with new business generation. Partially offsetting these decreases in non-interest income, other income increased $864,000 to $3.1 million for the six months ended June 30, 2022, compared to $2.2 million for the same period in 2021, mainly due to an increase in fees on loan-level interest rate swap transactions. Also, insurance agency income totaled $6.3 million, an increase of $694,000 for the six months ended June 30, 2022, compared to the same period in 2021, largely due to an increase in contingent commissions.

Non-interest expense totaled $125.7 million for the six months ended June 30, 2022, an increase of $1.2 million, compared to $124.6 million for the six months ended June 30, 2021. Compensation and benefits expense increased $4.3 million to $74.5 million for the six months ended June 30, 2022, compared to $70.2 million for the six months ended June 30, 2021, primarily due to increases in stock-based compensation, salary expense and the accrual for incentive compensation, partially offset by a decrease in employee benefit expenses. Data processing expense increased $1.2 million to $11.0 million for the six months ended June 30, 2022, mainly due to increases in software subscription expense and online banking costs. Additionally, net occupancy expense increased $602,000 to $17.8 million for the six months ended June 30, 2022, compared to the same period in 2021, mainly due to increases in rent, depreciation and maintenance expenses, a portion of which were attributable to the Company's new administrative offices. Partially offsetting these increases, credit loss expense for off-balance sheet credit exposures decreased $4.5 million to a negative provision of $3.4 million for the six months ended June 30, 2022, compared to a $1.2 million provision for the same period last year. The decrease was primarily the result of a decrease in the pipeline of loans approved and awaiting closing, combined with an increase in line of credit utilization, partially offset by an increase in loss factors. FDIC insurance decreased $785,000 for the six months ended June 30, 2022, primarily due to a decrease in the insurance assessment rate, partially offset by an increase in total assets subject to assessment.

Income Tax Expense

For the six months ended June 30, 2022, the Company's income tax expense was $29.6 million with an effective tax rate of 26.2%, compared with $31.5 million with an effective tax rate of 25.2% for the six months ended June 30, 2021. The decrease in tax expense for the six months ended June 30, 2022, compared with the same period last year was largely the result of a decrease in taxable income, while the increase in the effective tax rate for the six months ended June 30, 2021, compared with the with the prior year was largely due to an increase in the proportion of income derived from taxable sources.

Asset Quality

The Company’s total non-performing loans at June 30, 2022 were $40.4 million, or 0.40% of total loans, compared to $44.3 million, or 0.46% of total loans at March 31, 2022 and $48.0 million, or 0.50% of total loans at December 31, 2021. The $3.9 million decrease in non-performing loans at June 30, 2022, compared to the trailing quarter, consisted of a $2.0 million decrease in non-performing residential mortgage loans, a $1.8 million decrease in non-performing commercial loans, a $906,000 decrease in non-performing commercial mortgage loans, a $207,000 decrease in non-performing consumer loans and a $1.1 million increase in non-performing construction loans. At June 30, 2022, impaired loans totaled $45.1 million with related specific reserves of $1.5 million, compared with impaired loans totaling $48.3 million with related specific reserves of $2.0 million at March 31, 2022. At December 31, 2021, impaired loans totaled $52.3 million with related specific reserves of $4.3 million.

At June 30, 2022, the Company’s allowance for credit losses related to the loan portfolio was 0.79% of total loans, compared to 0.79% and 0.84% at March 31, 2022 and December 31, 2021, respectively. The allowance for credit losses decreased $1.7 million to $79.0 million at June 30, 2022 from $80.7 million at December 31, 2021. The decrease in the allowance for credit losses on loans at June 30, 2022 compared to December 31, 2021 was due to a $3.4 million negative provision for credit losses, partially offset by net recoveries of $1.7 million. The reduction in the allowance for credit losses on loans was primarily the result of an overall improvement in asset quality and an improved economic forecast.

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

 June 30, 2022 March 31, 2022 December 31, 2021
 NumberofLoans PrincipalBalanceof Loans NumberofLoans PrincipalBalanceof Loans NumberofLoans PrincipalBalanceof Loans
 (Dollars in thousands)
Accruing past due loans:              
30 to 59 days past due:              
Residential mortgage loans9  $853  18  $2,385  26  $7,229 
Commercial mortgage loans2   276  2   282  4   720 
Multi-family mortgage loans     1   816      
Construction loans     3   1,659      
Total mortgage loans11   1,129  24   5,142  30   7,949 
Commercial loans5   1,040  9   4,019  11   7,229 
Consumer loans11   343  15   571  24   649 
Total 30 to 59 days past due27  $2,512  48  $9,732  65  $15,827 
               
60 to 89 days past due:              
Residential mortgage loans9  $1,752  7  $1,354  7  $1,131 
Commercial mortgage loans          2   3,960 
Multi-family mortgage loans              
Construction loans              
Total mortgage loans9   1,752  7   1,354  9   5,091 
Commercial loans3   41  3   318  5   1,289 
Consumer loans5   169  3   90  7   228 
Total 60 to 89 days past due17   1,962  13   1,762  21   6,608 
Total accruing past due loans44  $4,474  61  $11,494  86  $22,435 
               
Non-accrual:              
Residential mortgage loans21  $3,401  29  $5,396  28  $6,072 
Commercial mortgage loans15   18,627  14   19,533  14   16,887 
Multi-family mortgage loans2   2,040  2   2,053  1   439 
Construction loans3   3,466  2   2,366  2   2,365 
Total mortgage loans41   27,534  47   29,348  45   25,763 
Commercial loans32   11,950  39   13,793  51   20,582 
Consumer loans16   964  19   1,171  17   1,682 
Total non-accrual loans89  $40,448  105  $44,312  113  $48,027 
               
Non-performing loans to total loans    0.40%     0.46%     0.50%
Allowance for loan losses to total non-performing loans    195.35%     172.13%     168.11%
Allowance for loan losses to total loans    0.79%     0.79%     0.84%

 

At June 30, 2022 and December 31, 2021, the Company held foreclosed assets of $9.1 million and $8.7 million, respectively. During the six months ended June 30, 2022, there were two additions to foreclosed assets with an aggregate carrying value of $625,000, one property sold with an aggregate carrying value of $80,000 and a valuation charge of $200,000. Foreclosed assets at June 30, 2022 consisted primarily of commercial real estate. Total non-performing assets at June 30, 2022 decreased $7.2 million to $49.5 million, or 0.36% of total assets, from $56.8 million, or 0.41% of total assets at December 31, 2021.

Balance Sheet Summary

Total assets at June 30, 2022 were $13.72 billion, a $65.3 million decrease from December 31, 2021. The decrease in total assets was primarily due to a $434.9 million decrease in cash and cash equivalents and a $115.8 million decrease in total investments, partially offset by a $410.8 million increase in total loans.

The Company’s loan portfolio totaled $9.99 billion at June 30, 2022 and $9.58 billion at December 31, 2021. The loan portfolio consists of the following:

 June 30, 2022 March 31, 2022 December 31, 2021
 (Dollars in thousands)
Mortgage loans:     
Residential$1,180,967  $1,194,613  $1,202,638 
Commercial 4,136,344   3,937,216   3,827,370 
Multi-family 1,445,099   1,394,761   1,364,397 
Construction 728,024   699,415   683,166 
Total mortgage loans 7,490,434   7,226,005   7,077,571 
Commercial loans 2,192,009   2,131,326   2,188,866 
Consumer loans 322,711   316,589   327,442 
Total gross loans 10,005,154   9,673,920   9,593,879 
Premiums on purchased loans 1,405   1,482   1,451 
Net deferred fees and unearned discounts (14,114)  (12,520)  (13,706)
Total loans$9,992,445  $9,662,882  $9,581,624 

Total PPP loans outstanding, which are included in total commercial loans, decreased $78.2 million to $16.7 million at June 30, 2022, from $94.9 million at December 31, 2021 due to the forgiveness of such loans as the program winds down. Excluding the decrease in PPP loans, during the six months ended June 30, 2022, the Company experienced net increases of $309.0 million in commercial mortgage loans, $81.3 million in commercial loans, $80.7 million in multi-family loans and $44.9 million in construction loans, partially offset by net decreases in residential mortgage and consumer loans of $21.7 million and $4.7 million, respectively. Commercial loans, consisting of commercial real estate, multi-family, commercial and construction loans, represented 85.0% of the loan portfolio at June 30, 2022, compared to 84.1% at December 31, 2021.

For the six months ended June 30, 2022, loan funding, including advances on lines of credit, totaled $2.15 billion, compared with $1.67 billion for the same period in 2021.

At June 30, 2022, the Company’s unfunded loan commitments totaled $2.06 billion, including commitments of $980.3 million in commercial loans, $647.4 million in construction loans and $138.4 million in commercial mortgage loans. Unfunded loan commitments at December 31, 2021 and June 30, 2021 were $2.05 billion and $2.16 billion, respectively.

The loan pipeline, consisting of work-in-process and loans approved pending closing, totaled $1.43 billion at June 30, 2022, compared to $1.09 billion and $1.70 billion at December 31, 2021 and June 30, 2021, respectively.

Cash and cash equivalents were $277.5 million at June 30, 2022, a $434.9 million decrease from December 31, 2021, primarily as a result of decreases in short term investments.

Total investments were $2.41 billion at June 30, 2022, a $115.8 million decrease from December 31, 2021. This decrease was primarily due to an increase in unrealized losses on available for sale debt securities, repayments of mortgage-backed securities and maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities.

Total deposits decreased $359.8 million during the six months ended June 30, 2022, to $10.87 billion. Total savings and demand deposit accounts decreased $333.9 million to $10.21 billion at June 30, 2022, while total time deposits decreased $25.9 million to $666.6 million at June 30, 2022. The decrease in savings and demand deposits was largely attributable to a $463.6 million decrease in interest bearing demand deposits, as the Company shifted $360.0 million of brokered demand deposits into lower-costing Federal Home Loan Bank of New York ("FHLB") borrowings, partially offset by a $52.3 million increase in non-interest bearing demand deposits, a $51.8 million increase in savings deposits and a $25.5 million increase in money market deposits. The decrease in time deposits was primarily due to maturities of longer-term retail time deposits, partially offset by the inflow of brokered time deposits.

Borrowed funds increased $375.7 million during the six months ended June 30, 2022, to $1.00 billion. The increase in borrowings for the period was largely due to the maturity and replacement of brokered deposits into lower-costing FHLB borrowings. Borrowed funds represented 7.3% of total assets at June 30, 2022, an increase from 4.5% at December 31, 2021.

Stockholders’ equity decreased $111.8 million during the six months ended June 30, 2022, to $1.59 billion, primarily due to an increase in unrealized losses on available for sale debt securities, dividends paid to stockholders and common stock repurchases, partially offset by net income earned for the period. For the three months ended June 30, 2022, common stock repurchases totaled 760,466 shares at an average cost of $23.00 per share. For the six months ended June 30, 2022, common stock repurchases totaled 2,042,541 shares at an average cost of $23.23 per share, of which 15,457 shares, at an average cost of $23.48 per share, were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. At June 30, 2022, 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 June 30, 2022 were $21.09 and $14.94, respectively, compared with $22.05 and $16.02, respectively, at December 31, 2021.

About the Company

Provident Financial Services, Inc. is the holding company for Provident Bank, a community-oriented bank offering "commitment you can count on" since 1839. Provident Bank provides a comprehensive array of financial products and services through its network of branches throughout northern and central New Jersey, 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, July 29, 2022 at 10:00 a.m. Eastern Time to discuss the Company’s financial results for the quarter ended June 30, 2022. The call may be accessed by dialing 1-844-200-6205 (United States), 1-646-904-5544 (United States Local), 1-833-950-0062 (Canada Toll Free), 1-226-828-7575 (Canada Local), or 1-929-526-1599 (All other locations). Speakers will need to enter speaker access code (293159) before being met by a live operator. Internet access to the call is also available (listen only) at provident.bank by going to Investor Relations and clicking on "Webcast."

Forward Looking Statements

Certain statements contained herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” "project," "intend," “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those set forth in Item 1A of the Company's Annual Report on Form 10-K, as supplemented by its Quarterly Reports on Form 10-Q, and those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in accounting policies and practices that may be adopted by the regulatory agencies and the accounting standards setters, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

In addition, the COVID-19 pandemic continues to have an uncertain impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, including potential variants, it is difficult to predict the continuing impact of the pandemic on the Company's business, financial condition or results of operations. The extent of such impact will depend on future developments, which remain highly uncertain, including when the pandemic will be controlled and abated, and the extent to which the economy can remain open.

The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made. The Company advises readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not have any obligation to update any forward-looking statements to reflect events or circumstances after the date of this statement.

Footnotes

(1) Annualized pre-tax, pre-provision return on average assets, tangible book value per share, annualized return on average tangible equity, annualized adjusted non-interest expense as a percentage of average assets and the efficiency ratio are non-GAAP financial measures. Please refer to the Notes following the Consolidated Financial Highlights which contain the reconciliation of GAAP to non-GAAP financial measures and the associated calculations.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARYConsolidated Financial Highlights(Dollars in Thousands, except share data) (Unaudited)

 At or for the  At or for the
Three months ended Six Months Ended
 June 30, March 31, June 30, June 30, June 30,
  2022  2022  2021  2022  2021
Statement of Income         
Net interest income$99,475  $94,526  $90,905  $194,001  $180,905 
Provision for credit losses 2,996   (6,405)  (10,704)  (3,409)  (25,705)
Non-interest income 20,932   20,148   21,156   41,078   42,793 
Non-interest expense 63,846   61,886   62,698   125,730   124,551 
Income before income tax expense 53,565   59,193   60,067   112,758   124,852 
Net income 39,228   43,962   44,789   83,191   93,348 
Diluted earnings per share$0.53  $0.58  $0.58  $1.11  $1.22 
Interest rate spread 3.12%  2.94%  2.87%  3.03%  2.90%
Net interest margin 3.21%  3.02%  2.99%  3.11%  3.02%
          
Profitability         
Annualized return on average assets 1.16%  1.30%  1.36%  1.23%  1.43%
Annualized return on average equity 9.83%  10.57%  10.77%  10.21%  11.38%
Annualized return on average tangible equity (1) 13.82%  14.58%  14.92%  14.22%  15.85%
Annualized adjusted non-interest expense to average assets (3) 1.92%  1.90%  1.84%  1.91%  1.89%
Efficiency ratio (4) 53.83%  56.05%  54.12%  54.91%  55.15%
          
Asset Quality         
Non-accrual loans  $44,312    $40,448  $80,060 
90+ and still accruing            
Non-performing loans   44,312     40,448   80,060 
Foreclosed assets   8,578     9,076   2,350 
Non-performing assets   52,890     49,524   82,410 
Non-performing loans to total loans   0.46%    0.40%  0.84%
Non-performing assets to total assets   0.39%    0.36%  0.62%
Allowance for loan losses  $76,275    $79,016  $80,959 
Allowance for loan losses to total non-performing loans   172.13%    195.35%  101.12%
Allowance for loan losses to total loans   0.79%    0.79%  0.85%
Net loan charge-offs (recoveries)$259  $(1,935) $(6,068) $(1,676) $(5,193)
Annualized net loan charge offs (recoveries) to average total loans 0.01%  (0.08)%  (0.25)%  (0.02)%  (0.11)%
          
Average Balance Sheet Data          
Assets$13,541,209  $13,693,429  $13,227,853  $13,616,899  $13,131,545 
Loans, net 9,683,027   9,481,831   9,588,619   9,582,986   9,655,828 
Earning assets 12,328,742   12,527,409   12,080,463   12,427,528   11,946,272 
Core deposits 10,462,293   10,551,229   9,555,664   10,506,515   9,311,291 
Borrowings 527,630   549,679   869,036   538,593   941,729 
Interest-bearing liabilities 8,918,786   9,005,985   8,869,079   8,962,144   8,819,449 
Stockholders' equity 1,601,245   1,686,324   1,668,525   1,643,549   1,653,449 
Average yield on interest-earning assets 3.43%  3.23%  3.31%  3.33%  3.36%
Average cost of interest-bearing liabilities 0.31%  0.29%  0.44%  0.30%  0.46%

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) Annualized Return on Average Tangible Equity         
 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30, June 30,
  2022  2022  2021  2022  2021
Total average stockholders' equity$1,601,245  $1,686,324  $1,668,525  $1,643,549  $1,653,449 
Less: total average intangible assets 463,039   463,890   464,201   463,462   465,473 
Total average tangible stockholders' equity$1,138,206  $1,222,434  $1,204,324  $1,180,087  $1,187,976 
          
Net income$39,228  $43,962  $44,789  $83,191  $93,348 
          
Annualized return on average tangible equity (net income/total average tangible stockholders' equity) 13.82%  14.58%  14.92%  14.22%  15.85%
          
(2) Annualized Pre-Tax, Pre-Provision Return on Average Assets         
 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30, June 30,
  2022  2022   2021  2022  2021
Net income$39,228  $43,962  $44,789  $83,191  $93,348 
Add: provision for credit losses 2,996   (6,405)  (10,704)  (3,409)  (25,705)
Add: provision for credit losses for off-balance sheet credit exposure (973)  (2,390)  2,050   (3,363)  1,175 
Add: income tax expense 14,337   15,231   15,278   29,567   31,504 
PTPP income$55,588  $50,398  $51,413  $105,986  $100,322 
          
Annualized PTPP income$222,963  $204,392  $206,217  $213,729  $202,307 
Average assets$13,541,209  $13,693,429  $13,227,853  $13,616,899  $13,131,545 
          
Annualized PTPP return on average assets 1.65%  1.49%  1.56%  1.57%  1.54%
          
(3) Annualized Adjusted Non-Interest Expense to Average Assets         
 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30, June 30,
  2022  2022  2021  2022  2021
Reported non-interest expense$63,846  $61,886  $62,698  $125,730  $124,551 
Adjustments to non-interest expense:         
Credit loss (benefit) expense for off-balance sheet credit exposures (973)  (2,390)  2,050   (3,363)  1,175 
Adjusted non-interest expense$64,819  $64,276  $60,648  $129,093  $123,376 
          
Annualized adjusted non-interest expense$259,988  $260,675  $243,258  $260,326  $248,797 
          
Average assets$13,541,209  $13,693,429  $13,227,853  $13,616,899   13,131,545 
          
Annualized adjusted non-interest expense/average assets 1.92%  1.90%  1.84%  1.91%  1.89%
          
(4) Efficiency Ratio Calculation         
 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30, June 30,
  2022  2022  2021  2022  2021
Net interest income$99,475  $94,526  $90,905  $194,001  $180,905 
Non-interest income 20,932   20,148   21,156   41,078   42,793 
Total income$120,407  $114,674  $112,061  $235,079  $223,698 
          
Adjusted non-interest expense$64,819  $64,276  $60,648  $129,093  $123,376 
          
Efficiency ratio (adjusted non-interest expense/income) 53.83%  56.05%  54.12%  54.91%  55.15%
          
(5) Book and Tangible Book Value per Share   
       At June 30, At December 31,
        2022  2021
Total stockholders' equity      $1,585,265  $1,697,096 
Less: total intangible assets       462,451   464,183 
Total tangible stockholders' equity      $1,122,814  $1,232,913 
          
Shares outstanding       75,163,718   76,969,999 
          
Book value per share (total stockholders' equity/shares outstanding)       $21.09   $22.05 
Tangible book value per share (total tangible stockholders' equity/shares outstanding)       $14.94   $16.02 

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARYConsolidated Statements of Financial ConditionJune 30, 2022 (Unaudited) and December 31, 2021(Dollars in Thousands)

AssetsJune 30, 2022 December 31, 2021
Cash and due from banks$176,461  $506,270 
Short-term investments 101,071   206,193 
Total cash and cash equivalents 277,532   712,463 
Available for sale debt securities, at fair value 1,947,120   2,057,851 
Held to maturity debt securities, net (fair value of $399,140 at June 30, 2022 (unaudited) and $449,709 at December 31, 2021) 410,745   436,150 
Equity securities, at fair value 1,102   1,325 
Federal Home Loan Bank stock 54,836   34,290 
Loans 9,992,445   9,581,624 
Less allowance for credit losses 79,016   80,740 
Net loans 9,913,429   9,500,884 
Foreclosed assets, net 9,076   8,731 
Banking premises and equipment, net 81,655   80,559 
Accrued interest receivable 42,858   41,990 
Intangible assets 462,451   464,183 
Bank-owned life insurance 236,352   236,630 
Other assets 278,745   206,146 
Total assets$13,715,901  $13,781,202 
    
Liabilities and Stockholders' Equity   
Deposits:   
Demand deposits$8,695,223  $9,080,956 
Savings deposits 1,512,356   1,460,541 
Certificates of deposit of $100,000 or more 392,725   368,277 
Other time deposits 273,920   324,238 
Total deposits 10,874,224   11,234,012 
Mortgage escrow deposits 42,346   34,440 
Borrowed funds 1,002,502   626,774 
Subordinated debentures 10,389   10,283 
Other liabilities 201,175   178,597 
Total liabilities 12,130,636   12,084,106 
    
Stockholders' equity:   
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued     
Common stock, $0.01 par value, 200,000,000 shares authorized, 83,209,012 shares issued and 75,163,718 shares outstanding at June 30, 2022 and 76,969,999 outstanding at December 31, 2021. 832   832 
Additional paid-in capital 976,067   969,815 
Retained earnings 860,977   814,533 
Accumulated other comprehensive income (111,799)  6,863 
Treasury stock (127,091)  (79,603)
Unallocated common stock held by the Employee Stock Ownership Plan (13,721)  (15,344)
Common Stock acquired by the Directors' Deferred Fee Plan (3,705)  (3,984)
Deferred Compensation - Directors' Deferred Fee Plan 3,705   3,984 
Total stockholders' equity 1,585,265   1,697,096 
Total liabilities and stockholders' equity$13,715,901  $13,781,202 

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARYConsolidated Statements of IncomeThree months ended June 30, 2022, March 31, 2022 and June 30, 2021, and six months ended June 30, 2022 and 2021 (Unaudited)(Dollars in Thousands, except per share data)

 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30, June 30,
  2022  2022  2021  2022  2021
Interest income:         
Real estate secured loans$69,073  $63,835  $62,877  $132,908  $124,893 
Commercial loans 22,363   22,821   25,173   45,184   51,316 
Consumer loans 3,344   3,139   3,412   6,483   6,904 
Available for sale debt securities, equity securities and Federal Home Loan Bank stock 8,454   7,951   5,722   16,406   11,334 
Held to maturity debt securities 2,489   2,596   2,700   5,085   5,484 
Deposits, federal funds sold and other short-term investments 562   647   660   1,209   1,144 
Total interest income 106,285   100,989   100,544   207,275   201,075 
          
Interest expense:         
Deposits 5,576   5,187   6,782   10,763   14,199 
Borrowed funds 1,104   1,168   2,553   2,272   5,362 
Subordinated debt 130   108   304   239   609 
Total interest expense 6,810   6,463   9,639   13,274   20,170 
Net interest income 99,475   94,526   90,905   194,001   180,905 
Provision charge (benefit) for credit losses 2,996   (6,405)  (10,704)  (3,409)  (25,705)
Net interest income after provision for credit losses 96,479   100,931   101,609   197,410   206,610 
          
Non-interest income:         
Fees 7,424   6,889   8,467   14,313   15,659 
Wealth management income 7,024   7,466   7,859   14,489   14,993 
Insurance agency income 2,850   3,420   2,849   6,270   5,576 
Bank-owned life insurance 1,563   1,179   1,523   2,741   4,090 
Net gain on securities transactions 141   16   34   157   231 
Other income 1,930   1,178   424   3,108   2,244 
Total non-interest income 20,932   20,148   21,156   41,078   42,793 
          
Non-interest expense:         
Compensation and employee benefits 37,437   37,067   34,871   74,503   70,183 
Net occupancy expense 8,479   9,330   7,907   17,810   17,208 
Data processing expense 5,632   5,344   5,409   10,976   9,802 
FDIC Insurance 1,350   1,205   1,570   2,555   3,340 
Amortization of intangibles 873   859   918   1,732   1,890 
Advertising and promotion expense 1,222   1,104   927   2,326   1,804 
Credit loss (benefit) expense for off-balance sheet credit exposures (973)  (2,390)  2,050   (3,363)  1,175 
Other operating expenses 9,826   9,367   9,046   19,191   19,149 
Total non-interest expense 63,846   61,886   62,698   125,730   124,551 
Income before income tax expense 53,565   59,193   60,067   112,758   124,852 
Income tax expense 14,337   15,231   15,278   29,567   31,504 
Net income$39,228  $43,962   44,789  $83,191  $93,348 
          
Basic earnings per share$0.53  $0.58  $0.58  $1.11  $1.22 
Average basic shares outstanding 74,328,632   75,817,971   76,643,546   75,068,154   76,580,364 
          
Diluted earnings per share$0.53  $0.58  $0.58  $1.11  $1.22 
Average diluted shares outstanding 74,400,788   75,914,079   76,753,442   75,152,286   76,667,471 

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARYNet Interest Margin AnalysisQuarterly Average Balances(Dollars in Thousands) (Unaudited)

 June 30, 2022 March 31, 2022 June 30, 2021
 AverageBalance Interest Average Yield/Cost AverageBalance Interest Average Yield/Cost AverageBalance Interest Average Yield/Cost
Interest-Earning Assets:                                
Deposits$77,761  $191  0.98% $274,004  $107  0.16% $431,857  $114  0.11%
Federal funds sold and other short-term investments 99,825   371  1.49%  195,598   540  1.12%  173,701   546  1.26%
Available for sale debt securities 2,023,199   8,093  1.60%  2,115,852   7,577  1.43%  1,401,284   5,122  1.46%
Held to maturity debt securities, net (1) 412,229   2,489  2.41%  428,125   2,596  2.43%  438,079   2,700  2.47%
Equity securities, at fair value 1,019     %  1,092     %  1,056     %
Federal Home Loan Bank stock 31,682   361  4.55%  30,907   374  4.85%  45,867   600  5.24%
Net loans: (2)                 
Total mortgage loans 7,252,665   69,073  3.78%  7,061,657   63,835  3.62%  6,816,999   62,877  3.66%
Total commercial loans 2,107,681   22,363  4.22%  2,099,145   22,821  4.38%  2,415,548   25,173  4.15%
Total consumer loans 322,681   3,344  4.16%  321,029   3,139  3.97%  356,072   3,412  3.84%
Total net loans 9,683,027   94,780  3.89%  9,481,831   89,795  3.80%  9,588,619   91,462  3.79%
Total interest-earning assets$12,328,742  $106,285  3.43% $12,527,409  $100,989  3.23% $12,080,463  $100,544  3.31%
                  
Non-Interest Earning Assets:                 
Cash and due from banks 129,953       122,856       145,082     
Other assets 1,082,514       1,043,164       1,002,308     
Total assets$13,541,209      $13,693,429      $13,227,853     
                  
Interest-Bearing Liabilities:                 
Demand deposits$6,189,722  $4,458  0.29% $6,288,544  $4,195  0.27% $5,658,084  $5,103  0.36%
Savings deposits 1,496,064   285  0.08%  1,476,643   291  0.08%  1,419,176   396  0.11%
Time deposits 695,015   833  0.48%  680,818   701  0.42%  897,597   1,283  0.57%
Total Deposits 8,380,801   5,576  0.27%  8,446,005   5,187  0.25%  7,974,857   6,782  0.34%
                  
Borrowed funds 527,630   1,104  0.84%  549,679   1,168  0.86%  869,036   2,553  1.18%
Subordinated debentures 10,355   130  5.05%  10,301   108  4.27%  25,186   304  4.85%
Total interest-bearing liabilities 8,918,786   6,810  0.31%  9,005,985   6,463  0.29%  8,869,079   9,639  0.44%
                  
Non-Interest Bearing Liabilities:                 
Non-interest bearing deposits 2,776,507       2,786,042       2,478,404     
Other non-interest bearing liabilities 244,671       215,078       211,845     
Total non-interest bearing liabilities 3,021,178       3,001,120       2,690,249     
Total liabilities 11,939,964       12,007,105       11,559,328     
Stockholders' equity 1,601,245       1,686,324       1,668,525     
Total liabilities and stockholders' equity$13,541,209      $13,693,429      $13,227,853     
                  
Net interest income  $99,475      $94,526      $90,905   
                  
Net interest rate spread    3.12%     2.94%     2.87%
Net interest-earning assets$3,409,956      $3,521,424      $3,211,384     
                  
Net interest margin (3)     3.21%     3.02%     2.99%
                  
Ratio of interest-earning assets to total interest-bearing liabilities1.38x     1.39x     1.36x    

(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.

 6/30/22 3/31/22 12/31/21 9/30/21 6/30/21
 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr.
Interest-Earning Assets:              
Securities1.74% 1.47% 1.29% 1.32% 1.46%
Net loans3.89% 3.80% 3.81% 3.77% 3.79%
Total interest-earning assets3.43% 3.23% 3.19% 3.21% 3.31%
               
Interest-Bearing Liabilities:              
Total deposits0.27% 0.25% 0.28% 0.30% 0.34%
Total borrowings0.84% 0.86% 0.94% 1.08% 1.18%
Total interest-bearing liabilities0.31% 0.29% 0.34% 0.37% 0.44%
               
Interest rate spread3.12% 2.94% 2.85% 2.84% 2.87%
Net interest margin3.21% 3.02% 2.95% 2.94% 2.99%
               
Ratio of interest-earning assets to interest-bearing liabilities1.38x 1.39x 1.39x 1.38x 1.36x

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARYNet Interest Margin AnalysisAverage Year to Date Balances(Dollars in Thousands) (Unaudited)

 June 30, 2022 June 30, 2021
 AverageBalance Interest AverageYield/Cost AverageBalance Interest AverageYield/Cost
Interest-Earning Assets:           
Deposits$175,341  $298  0.34% $375,799  $198  0.11%
Federal funds sold and other short term investments 147,447   911  1.25%  150,971   946  1.26%
Available for sale debt securities 2,069,270   15,671  1.51%  1,269,815   9,970  1.57%
Held to maturity debt securities, net (1) 420,133   5,085  2.42%  444,204   5,484  2.47%
Equity securities, at fair value 1,055     %  1,018     %
Federal Home Loan Bank stock 31,296   735  4.70%  48,637   1,364  5.61%
Net loans: (2)           
Total mortgage loans 7,156,189   132,908  3.70%  6,812,557   124,893  3.65%
Total commercial loans 2,105,001   45,184  4.30%  2,463,788   51,316  4.17%
Total consumer loans 321,796   6,483  4.06%  379,483   6,904  3.67%
Total net loans 9,582,986   184,575  3.84%  9,655,828   183,113  3.79%
Total interest-earning assets$12,427,528  $207,275  3.33% $11,946,272  $201,075  3.36%
            
Non-Interest Earning Assets:           
Cash and due from banks 126,423       164,174     
Other assets 1,062,948       1,021,099     
Total assets$13,616,899      $13,131,545     
            
Interest-Bearing Liabilities:           
Demand deposits$6,238,860  $8,653  0.28% $5,487,222  $10,614  0.39%
Savings deposits 1,486,407   576  0.08%  1,395,408   803  0.12%
Time deposits 687,956   1,534  0.45%  969,922   2,782  0.58%
Total deposits 8,413,223   10,763  0.26%  7,852,552   14,199  0.36%
Borrowed funds 538,593   2,272  0.85%  941,729   5,362  1.15%
Subordinated debentures 10,328   239  4.66%  25,168   609  4.88%
Total interest-bearing liabilities$8,962,144  $13,274  0.30% $8,819,449  $20,170  0.46%
            
Non-Interest Bearing Liabilities:           
Non-interest bearing deposits 2,781,248       2,428,661     
Other non-interest bearing liabilities 229,958       229,986     
Total non-interest bearing liabilities 3,011,206       2,658,647     
Total liabilities 11,973,350       11,478,096     
Stockholders' equity 1,643,549       1,653,449     
Total liabilities and stockholders' equity$13,616,899      $13,131,545     
            
Net interest income  $194,001      $180,905   
            
Net interest rate spread    3.03%     2.90%
Net interest-earning assets$3,465,384      $3,126,823     
            
Net interest margin (3)    3.11%     3.02%
            
Ratio of interest-earning assets to total interest-bearing liabilities1.39x     1.35x    

(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.

 Six Months Ended
 June 30, 2022 June 30, 2021 June 30, 2020
Interest-Earning Assets:        
Securities1.59% 1.57% 2.42%
Net loans3.84% 3.79% 3.99%
Total interest-earning assets3.33% 3.36% 3.67%
         
Interest-Bearing Liabilities:        
Total deposits0.26% 0.36% 0.66%
Total borrowings0.85% 1.15% 1.55%
Total interest-bearing liabilities0.30% 0.46% 0.81%
         
Interest rate spread3.03% 2.90% 2.86%
Net interest margin3.11% 3.02% 3.06%
         
Ratio of interest-earning assets to interest-bearing liabilities1.39x 1.35x 1.34x

SOURCE: Provident Financial Services, Inc.CONTACT: Investor Relations, 1-732-590-9300Web Site: http://www.Provident.Bank

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