GlobeNewswire Inc | Oct 30, 2020 08:00AM EDT

October 30, 2020

ISELIN, N.J., Oct. 30, 2020 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE:PFS) (the Company) reported net income of $27.1 million, or $0.37 per basic and diluted share, for the three months ended September 30, 2020, compared to net income of $31.4 million, or $0.49 per basic and diluted share, for the three months ended September 30, 2019. For the nine months ended September 30, 2020, the Company reported net income of $56.4 million, or $0.84 per basic and diluted share, compared to net income of $86.7 million, or $1.34 per basic and diluted share, for the same period last year.

On July 31, 2020, the Company completed its acquisition of SB One Bancorp ("SB One"), which added $2.19 billion to total assets, $1.77 billion to loans, and $1.76 billion to deposits. The results of operations for the three and nine months ended September 30, 2020 included pre-tax non-recurring charges related to the acquisition of SB One totaling $2.0 million and $3.1 million, respectively.

The Companys earnings for the three and nine months ended September 30, 2020 were also impacted by the January 1, 2020 adoption of a new accounting standard that requires the current recognition of allowances for losses expected to be incurred over the life of covered assets (CECL). The acquisition of SB One and changing economic forecasts attributable to the COVID-19 pandemic and projected economic recovery drove provisions for credit losses and off-balance sheet credit exposures totaling $6.7 million and $38.6 million for the three and nine months ended September 30, 2020, respectively. The Company's earnings were further impacted by COVID-19 related costs which totaled $200,000 and $1.2 million for the three and nine months ended September 30, 2020, respectively.

Christopher Martin, Chairman and Chief Executive Officer commented: We look forward to the opportunities that our merger with SB One Bancorp provides our combined company, and we welcome our new colleagues who joined us in the transaction. Our team did a great job getting the acquisition completed on a timely basis in a challenging operating environment. Martin added, We continue to work with our borrowers who have been impacted by this stressed economic environment and we are heartened by the number of customers who have rebounded and resumed making their full loan payments. In addition, our investments in enhancing digital delivery channels have provided our customers with a widely accepted and convenient platform for remote access to their accounts and other services.

Declaration of Quarterly Dividend

The Companys Board of Directors declared a quarterly cash dividend of $0.23 per common share payable on November 27, 2020, to stockholders of record as of the close of business on November 13, 2020.

Balance Sheet Summary

Total assets at September30, 2020 were $12.87 billion, a $3.06 billion increase from December31, 2019. The increase in total assets was primarily due to $2.19 billion of assets acquired from SB One, which includes $22.4 million of goodwill and $10.0 million of other intangible assets, as well as an increase of $474.8 million related to commercial loans made under the Paycheck Protection Program ("PPP").

The Companys loan portfolio increased $2.42 billion to $9.76 billion at September30, 2020, from $7.33 billion at December31, 2019, which included $1.77 billion of loans acquired from SB One and $474.8 million of commercial PPP loans. For the nine months ended September 30, 2020, loan originations, including advances on lines of credit, totaled $2.63 billion, compared with $2.04 billion for the same period in 2019. During the nine months ended September 30, 2020, the loan portfolio had net increases of $1.17 billion in commercial mortgage loans, $655.4 million in commercial loans, $319.2 million in multi-family mortgage loans, $242.0 million in residential mortgage loans, $32.3 million in construction loans and $15.1 million in consumer loans. Commercial real estate, commercial and construction loans represented 82.3% of the loan portfolio at September30, 2020, compared to 80.0% at December31, 2019.

At September30, 2020, the Companys unfunded loan commitments totaled $2.26 billion, including commitments of $967.3 million in commercial loans, $697.4 million in construction loans and $307.9 million in commercial mortgage loans. Unfunded loan commitments at December31, 2019 and September30, 2019 were $1.47 billion and $1.65 billion, respectively.

The loan pipeline, consisting of work-in-process and loans approved pending closing, totaled $1.37 billion at September30, 2020, compared to $905.9 million and $1.09 billion at December31, 2019 and September30, 2019, respectively.

Cash and cash equivalents were $510.1 million at September30, 2020, a $323.4 million increase from December31, 2019, largely due to increases in cash collateral pledged to counterparties to secure loan-level swaps and short-term investments and $78.1 million of cash and cash equivalents acquired from SB One.

Total investments were $1.62 billion at September30, 2020, a $129.2 million increase from December31, 2019. This increase was mainly attributable to investment securities acquired from SB One, partially offset by repayments of mortgage-backed securities, maturities and calls of certain municipal and agency bonds.

Banking premises and equipment increased $17.7 million for the nine months ended September 30, 2020, to $72.9 million, primarily due to assets acquired from SB One at a fair value of $16.6 million.

Total deposits increased $2.46 billion during the nine months ended September 30, 2020 to $9.56 billion. The increase in total deposits consisted of $1.76 billion of deposits acquired from SB One and additional net deposit growth of $698.9 million. Total core deposits, consisting of savings and demand deposit accounts, increased $2.05 billion to $8.41 billion at September30, 2020, while total time deposits increased $410.7 million to $1.14 billion at September30, 2020. The increase in core deposits was largely attributable to an $821.6 million increase in non-interest bearing demand deposits, which partially benefited from deposits retained from activity associated with PPP loans and stimulus funding, a $511.1 million increase in interest bearing demand deposits, a $386.7 million increase in money market deposits and a $326.5 million increase in savings deposits. The increase in time deposits was largely the result of $577.3 million acquired from SB One, partially offset by the outflow of time deposits totaling $166.6 million. Core deposits represented 88.0% of total deposits at September30, 2020, compared to 89.7% at December31, 2019.

Borrowed funds increased $287.9 million during the nine months ended September 30, 2020, to $1.41 billion. The increase in borrowings for the period was primarily due to $201.6 million acquired from SB One and asset funding requirements. Borrowed funds represented 11.0% of total assets at September30, 2020, a decrease from 11.5% at December31, 2019.

Stockholders equity increased $187.7 million during the nine months ended September 30, 2020, to $1.60 billion, primarily due to common stock issued for the purchase of SB One, net income earned for the period and an increase in unrealized gains on available for sale debt securities, partially offset by dividends paid to stockholders, the adoption of CECL on January 1, 2020 and the related charge to equity of $8.3 million, net of tax, to establish initial allowances against credit losses and off-balance sheet credit exposures, and common stock repurchases. The Company issued 12,788,370 shares of common stock from treasury stock in the acquisition of SB One. For the three months ended September 30, 2020, common stock repurchases totaled 69,549 shares at an average cost of $13.90, of which 1,045 shares, at an average cost of $12.86, were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. For the nine months ended September 30, 2020, common stock repurchases totaled 455,343 shares at an average cost of $18.04, of which 49,461 shares, at an average cost of $19.69, were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. At September30, 2020, 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 September30, 2020 were $20.41 and $14.45, respectively, compared with $21.49 and $14.85, respectively, at December31, 2019.

Results of Operations

Net Interest Income and Net Interest Margin

For the three months ended September 30, 2020, net interest income increased $8.5 million to $82.0 million, from $73.5 million for the same period in 2019. Net interest income for the nine months ended September 30, 2020 decreased $1.3 million to $223.8 million, from $225.1 million for the same period in 2019. Both comparative periods were favorably impacted by the net assets acquired from SB One, partially offset by period-over-period compression in the net interest margin as the decrease in the yield on interest-earning assets outpaced the decline in the Company's cost of interest-bearing liabilities. This decline was tempered by growth in both average loans outstanding and lower-costing average interest-bearing and non-interest bearing core deposits. For the nine months ended September 30, 2019, the Company recognized the acceleration of accretion of $2.2 million in interest income upon the prepayment of loans which had been non-accruing.

The Companys net interest margin increased four basis points to 3.01% for the quarter ended September30, 2020, from 2.97% for the trailing quarter, primarily due to decreases in funding costs and growth in non-interest bearing deposits. The weighted average yield on interest-earning assets decreased three basis points to 3.44% for the quarter ended September30, 2020, compared to 3.47% for the quarter ended June30, 2020. The weighted average cost of interest-bearing liabilities for the quarter ended September30, 2020 decreased 11 basis points to 0.57%, compared to 0.68% for the trailing quarter. The average cost of interest bearing deposits for the quarter ended September30, 2020 was 0.44%, compared to 0.54% for the trailing quarter ended June30, 2020. Average non-interest bearing demand deposits totaled $2.21 billion for the quarter ended September30, 2020, compared with $1.85 billion for the trailing quarter ended June30, 2020. The average cost of all deposits, including non-interest bearing deposits, was 33 basis points for the quarter ended September30, 2020, compared with 41 basis points for the trailing quarter. The average cost of borrowed funds for the quarter ended September30, 2020 was 1.19%, compared to 1.31% for the trailing quarter.

The net interest margin decreased 22 basis points to 3.01% for the quarter ended September30, 2020, compared to 3.23% for the quarter ended September30, 2019. The weighted average yield on interest-earning assets decreased 65 basis points to 3.44% for the quarter ended September30, 2020, compared to 4.09% for the quarter ended September30, 2019, while the weighted average cost of interest bearing liabilities decreased 56 basis points for the quarter ended September30, 2020 to 0.57%, compared to the third quarter of 2019. The average cost of interest bearing deposits for the quarter ended September30, 2020 was 0.44%, compared to 0.87% for the same period last year. Average non-interest bearing demand deposits totaled $2.21 billion for the quarter ended September30, 2020, compared to $1.51 billion for the quarter ended September30, 2019. The average cost of all deposits, including non-interest bearing deposits, was 33 basis points for the quarter ended September30, 2020, compared with 68 basis points for the quarter ended September30, 2019. The average cost of borrowed funds for the quarter ended September30, 2020 was 1.19%, compared to 2.13% for the same period last year.

For the nine months ended September 30, 2020, the net interest margin decreased 29 basis points to 3.06%, compared to 3.35% for the nine months ended September 30, 2019. The weighted average yield on interest earning assets declined 59 basis points to 3.60% for the nine months ended September 30, 2020, compared to 4.19% for the nine months ended September 30, 2019, while the weighted average cost of interest bearing liabilities decreased 38 basis points to 0.72% for the nine months ended September 30, 2020, compared to 1.10% for the same period last year. The average cost of interest bearing deposits decreased 26 basis points to 0.58% for the nine months ended September 30, 2020, compared to 0.84% for the same period last year. Average non-interest bearing demand deposits totaled $1.85 billion for the nine months ended September 30, 2020, compared with $1.47 billion for the nine months ended September 30, 2019. The average cost of all deposits, including non-interest bearing deposits, was 44 basis points for the nine months ended September 30, 2020, compared with 61 basis points for the nine months ended September 30, 2019. The average cost of borrowings for the nine months ended September 30, 2020 was 1.42%, compared to 2.13% for the same period last year.

Non-Interest Income

Non-interest income totaled $20.6 million for the quarter ended September30, 2020, an increase of $2.6 million, compared to the same period in 2019. Insurance agency income, a new revenue opportunity for the Company resulting from the SB One acquisition, totaled $1.7 million for the three months ended September 30, 2020. Other income increased $1.6 million to $4.7 million for the three months ended September 30, 2020, compared to the quarter ended September30, 2019, primarily due to a $1.2 million increase in net fees on loan-level interest rate swap transactions, a $171,000 increase in net gains on the sale of foreclosed real estate and a $159,000 increase in net gains on the sale of fixed assets. Wealth management income increased $763,000 to $6.8 million for the three months ended September 30, 2020. The increase was largely a function of market improvements in the value of assets under management and an increase in managed mutual fund fees. Also, income from Bank-owned life insurance ("BOLI") increased $372,000 to $1.6 million for the three months ended September 30, 2020, compared to the same period in 2019, primarily due to an increase in benefit claims, partially offset by lower equity valuations. Partially offsetting these increases, fee income decreased $1.9 million to $5.7 million for the three months ended September 30, 2020, compared to the same period in 2019, largely due to a $1.0 million decrease in commercial loan prepayment fees and an $850,000 decrease in deposit related fees. The decrease in fee income is largely due to the effects of COVID-19 on consumer and business activities.

For the nine months ended September 30, 2020, non-interest income totaled $52.0 million, an increase of $5.9 million, compared to the same period in 2019. Other income increased $4.9 million to $9.7 million for the nine months ended September 30, 2020, compared to $4.8 million for the same period in 2019, due to a $3.9 million increase in net fees on loan-level interest rate swap transactions, an $800,000 increase in net gains on the sale of fixed assets and a $684,000 increase in net gains on the sale of foreclosed real estate, partially offset by a $300,000 decrease in net gains from the sale of loans. Wealth management income increased $2.7 million to $19.1 million for the nine months ended September 30, 2020, compared to the same period in 2019, primarily due to fees earned on assets under management acquired in the April 1, 2019 Tirschwell & Loewy ("T&L") acquisition, partially offset by a decrease in managed mutual fund fees. Also, insurance agency income totaled $1.7 million derived from the July 31, 2020 acquisition of SB One. Partially offsetting these increases, fee income decreased $3.4 million, primarily due to a $2.1 million decrease in deposit related fees, an $838,000 decrease in commercial loan prepayment fees and a $100,000 decrease in non-deposit investment fee income, all largely due to the effects of COVID-19 on consumer and business activities.

Non-Interest Expense

For the three months ended September 30, 2020, non-interest expense totaled $59.8 million, an increase of $10.0 million, compared to the three months ended September 30, 2019. Non-interest expense for the three months ended September 30, 2020, included non-recurring costs related to the acquisition of SB One and two months of expenses associated with the operation of the former SB One franchise. Compensation and benefits expense increased $6.3 million to $35.7 million for the three months ended September 30, 2020, compared to $29.4 million for the same period in 2019. This increase was principally due to an increase in salary expense associated with the addition of former SB One employees, COVID-19 supplemental pay for branch employees and an increase in severance expense, partially offset by a decrease in stock-based compensation. Other operating expenses increased $1.9 million to $9.8 million for the three months ended September 30, 2020, compared to the same period in 2019, largely due to increases in legal and consulting expenses, which included $1.8 million related to the acquisition of SB One. FDIC insurance increased $1.2 million due to the addition of SB One, along with increases in both the insurance assessment rate and total assets subject to assessment. Data processing expense increased $912,000 to $5.0 million for the three months ended September 30, 2020, compared with the same period in 2019, primarily due to increases in software subscription service expense and on-line banking costs. Partially offsetting these increases, credit loss expense for off-balance sheet credit exposures under the CECL standard was reduced $575,000 in the quarter, due to a decrease in loss factors associated with the current economic forecast, partially offset by an increase in the pipeline of loans approved awaiting closing, largely due to the addition of the SB One loan pipeline.

Non-interest expense totaled $169.2 million for the nine months ended September 30, 2020, an increase of $21.3 million, compared to $147.8 million for the nine months ended September 30, 2019. Compensation and benefits expense increased $9.4 million to $96.1 million for the nine months ended September 30, 2020, compared to $86.7 million for the nine months ended September 30, 2019, primarily due to an increase in salary expense associated with the addition of former SB One and T&L employees, an increase in severance expense and COVID 19 supplemental pay for branch employees, partially offset by the increased deferral of salary expense related to PPP loan originations. For the nine months ended September 30, 2020, credit loss expense for off-balance sheet credit exposures was $5.7 million related to the January 1, 2020 adoption of CECL, and the subsequent increase in loss factors due to the current economic forecast, increase in the pipeline of loans approved awaiting closing and an increase in availability on committed lines of credit due to below average utilization. Other operating expenses increased $3.8 million to $26.4 million for the nine months ended September 30, 2020, compared to the same period in 2019, largely due to an increase in legal and consulting expenses related to the SB One transaction and a market valuation adjustment on foreclosed real estate. Data processing expense increased $2.0 million to $14.4 million for the nine months ended September 30, 2020, compared to $12.4 million for the same period in 2019, principally due to increases in software subscription service expense and on-line banking costs. FDIC insurance increased $786,000 for the nine months ended September 30, 2020, primarily due to the addition of SB One and increases in both the insurance assessment rate and total assets subject to assessment. Partially offsetting these increases, net occupancy expense decreased $267,000 to $19.4 million for the nine months ended September 30, 2020, compared to the same period in 2019, due to reductions in snow removal, depreciation expenses and branch closures, partially offset by additional occupancy expense related to SB One.

The Companys annualized adjusted non-interest expense as a percentage of average assets(1) was 1.92% for the quarter ended September30, 2020, compared to 1.99% for the same period in 2019, with the 2020 improvement driven by the significant increase in average assets largely attributable to assets acquired from SB One and PPP loans. For the nine months ended September 30, 2020, the Companys annualized adjusted non-interest expense as a percentage of average assets(1) was 1.97%, compared to 2.01% for the same period in 2019. The efficiency ratio (adjusted non-interest expense divided by the sum of net interest income and non-interest income)(1) was 56.72% and 57.69% for the quarter and nine months ended September 30, 2020, respectively, compared to 54.31% and 54.52% for the same respective periods in 2019.

Asset Quality

The Companys total non-performing loans at September30, 2020 were $49.0 million, or 0.50% of total loans, compared to $35.5 million, or 0.46% of total loans at June30, 2020, and $40.2 million, or 0.55% of total loans at December31, 2019. The $13.5 million increase in non-performing loans at September30, 2020, compared to the trailing quarter, included $11.5 million of non-performing loans acquired from SB One and consisted of an $11.5 million increase in non-performing commercial mortgage loans, a $2.6 million increase in non-performing residential loans and a $347,000 increase in non-performing consumer loans, partially offset by a $1.2 million decrease in non-performing commercial loans. At September30, 2020, impaired loans totaled $65.8 million with related specific reserves of $3.3 million, compared with impaired loans totaling $63.1 million with related specific reserves of $3.6 million at June30, 2020. At December31, 2019, impaired loans totaled $70.6 million with related specific reserves of $5.1 million.

Loans that have been or are expected to be granted COVID-19 related deferrals or modifications have decreased from a peak level of $1.31 billion, or 16.8% of loans, to $310.8 million, or 3.2% of loans as of October 16, 2020. This $310.8 million of loans includes $47.5 million acquired from SB One and consists of $27.0 million in a first 90-day deferral period, $84.9 million in a second 90-day deferral period, and $198.9 million that have completed their initial deferral periods, but are expected to require ongoing assistance. Included in the $310.8 million of loans, $92.4 million are secured by hotels, $43.7 million are secured by retail properties, $31.4 million are secured by restaurants, $15.1 million are secured by suburban office space, and $42.7 million are secured by residential mortgages, with the balance comprised of diverse commercial loans.

At September30, 2020, the Companys allowance for credit losses related to the loan portfolio was 1.09% of total loans, compared to 1.11% and 0.76% at June30, 2020 and December31, 2019, respectively. The Company recorded provisions for credit losses of $6.4 million and $32.0 million for the three and nine months ended September 30, 2020, respectively, compared with provisions of $500,000 and $10.2 million for the three and nine months ended September 30, 2019, respectively. For the three and nine months ended September 30, 2020, the Company had net recoveries of $59,000 and net charge-offs of $2.7 million, respectively, compared to net charge-offs of $6.0 million and $8.4 million, respectively, for the same periods in 2019. The allowance for loan losses increased $50.8 million to $106.3 million at September30, 2020 from $55.5 million at December31, 2019. The increase in the allowance for credit losses was attributable to elevated provisions for credit losses primarily due to the current weak economic forecast attributable to the COVID-19 pandemic and the adoption of CECL, along with $15.5 million and $13.6 million additions to the allowance for credit losses for loans and purchased credit deteriorated ("PCD") loans, respectively, related to the acquisition of the SB One loan portfolio. In addition, a gross allowance for credit losses of $7.9 million and a related deferred tax asset were recorded against equity upon the January 1, 2020 adoption of CECL. Future credit loss provisions are subject to significant uncertainty given the undetermined nature of prospective changes in economic conditions, as the impact of the COVID-19 pandemic continues to unfold. The effectiveness of medical advances, government programs, and the resulting impact on consumer behavior and employment conditions will have a material bearing on future credit conditions and reserve requirements.

At September30, 2020 and December31, 2019, the Company held foreclosed assets of $4.7 million and $2.7 million, respectively. During the nine months ended September 30, 2020, there were three additions to foreclosed assets with a carrying value of $2.6 million and 11 properties sold with a carrying value of $2.5 million and valuation charges of $556,000. Foreclosed assets acquired from SB One totaled $2.4 million. Foreclosed assets at September30, 2020 consisted of $2.8 million of commercial real estate, $1.5 million of commercial vehicles and $400,000 of residential real estate. Total non-performing assets at September30, 2020 increased $10.8 million to $53.7 million, or 0.42% of total assets, from $42.9 million, or 0.44% of total assets at December31, 2019.

Income Tax Expense

For the three months ended September 30, 2020, the Companys income tax expense was $9.3 million with an effective tax rate of 25.5%, compared with income tax expense of $9.9 million with an effective tax rate of 24.0% for the three months ended September 30, 2019. For the nine months ended September 30, 2020, the Company's income tax expense was $18.3 million with an effective tax rate of 24.5%, compared with $26.4 million with an effective tax rate of 23.4% for the nine months ended September 30, 2019. The decreases in tax expense for the three and nine months ended September 30, 2020 compared with the same periods in 2019 were largely the result of decreases in taxable income, while the increases in the effective tax rates for the three and nine months ended September 30, 2020 compared with the same periods in 2019 were primarily due to increased projections of taxable income for the remainder of the year and decreases in the proportion of income derived from tax exempt sources to total pre-tax income.

About the Company

Provident Financial Services, Inc. is the holding company for Provident Bank, a community-oriented bank offering "commitment you can count on" since 1839. Provident Bank provides a comprehensive array of financial products and services through its network of branches throughout northern and central New Jersey, as well as Bucks, Lehigh and Northampton counties in Pennsylvania and Queens County, New York. The Bank also provides fiduciary and wealth management services through its wholly owned subsidiary, Beacon Trust Company and insurance brokerage services through its wholly owned subsidiary, SB One Insurance Agency, Inc.

Post Earnings Conference Call

Representatives of the Company will hold a conference call for investors on Friday, October30, 2020 at 10:00 a.m. Eastern Time to discuss the Companys financial results for the quarter ended September30, 2020. The call may be accessed by dialing 1-888-336-7149 (Domestic), 1-412-902-4175 (International) or 1-855-669-9657 (Canada). Internet access to the call is also available (listen only) at 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 is having an adverse impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the Company's business, financial condition or results of operations. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated, and the extent to which the economy can remain open. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to remain substantially open, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Boards target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; our wealth management revenues may decline with continuing market turmoil; we may face the risk of a goodwill write-down due to stock price decline; and our cyber security risks are increased as the result of an increase in the number of employees working remotely.

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

Footnotes

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

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARYConsolidated Statements of Financial ConditionSeptember30, 2020 (Unaudited) and December31, 2019(Dollars in Thousands) Assets September 30, December 31, 2020 2019 Cash and due from banks $ 382,014 $ 131,555 Short-term investments 128,124 55,193 Total cash and cash equivalents 510,138 186,748 Available for sale debt securities, at fair 1,100,391 976,919 valueHeld to maturity debt securities, net (fairvalue of $467,769 at September 30, 2020 446,591 453,629 (unaudited) and $467,966 at December 31, 2019)Equity securities, at fair value 869 825 Federal Home Loan Bank stock 69,975 57,298 Loans 9,756,809 7,332,885 Less allowance for credit losses 106,314 55,525 Net loans 9,650,495 7,277,360 Foreclosed assets, net 4,720 2,715 Banking premises and equipment, net 72,909 55,210 Accrued interest receivable 43,967 29,031 Intangible assets 467,128 437,019 Bank-owned life insurance 234,410 195,533 Other assets 269,729 136,291 Total assets $ 12,871,322 $ 9,808,578 Liabilities and Stockholders' Equity Deposits: Demand deposits $ 7,104,322 $ 5,384,868 Savings deposits 1,310,231 983,714 Certificates of deposit of $100,000 or more 627,041 438,551 Other time deposits 517,647 295,476 Total deposits 9,559,241 7,102,609 Mortgage escrow deposits 27,510 26,804 Borrowed funds 1,413,029 1,125,146 Subordinated debentures 25,099 ? Other liabilities 244,874 140,179 Total liabilities 11,269,753 8,394,738 Stockholders' equity: Preferred stock, $0.01 par value, 50,000,000 ? ? shares authorized, none issuedCommon stock, $0.01 par value, 200,000,000shares authorized, 83,209,293 shares issued and78,481,159 shares outstanding at September 30, 832 832 2020 and 65,787,900 outstanding at December 31,2019Additional paid-in capital 960,863 1,007,303 Retained earnings 694,240 695,273 Accumulated other comprehensive income 13,331 3,821 Treasury stock (45,118 ) (268,504 )Unallocated common stock held by the Employee (22,579 ) (24,885 )Stock Ownership PlanCommon Stock acquired by the Directors' Deferred (3,330 ) (3,833 )Fee PlanDeferred Compensation - Directors' Deferred Fee 3,330 3,833 PlanTotal stockholders' equity 1,601,569 1,413,840 Total liabilities and stockholders' equity $ 12,871,322 $ 9,808,578

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARYConsolidated Statements of IncomeThree and Nine Months Ended September30, 2020 and 2019 (Unaudited)(Dollars in Thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Interest income: Real estate secured $ 58,897 $ 56,402 $ 162,635 $ 167,051 loansCommercial loans 20,622 20,104 58,238 63,788 Consumer loans 4,305 4,648 12,024 14,216 Available for saledebt securities,equity securities and 6,321 7,918 19,669 24,584 Federal Home LoanBank stockHeld to maturity debt 2,836 3,075 8,661 9,408 securitiesDeposits, federalfunds sold and other 472 879 1,932 2,038 short-terminvestmentsTotal interest income 93,453 93,026 263,159 281,085 Interest expense: Deposits 7,400 11,730 26,000 33,940 Borrowed funds 3,862 7,768 13,120 22,055 Subordinated debt 206 ? 206 ? Total interest 11,468 19,498 39,326 55,995 expenseNet interest income 81,985 73,528 223,833 225,090 Provision for credit 6,400 500 32,017 10,200 lossesNet interest incomeafter provision for 75,585 73,028 191,816 214,890 credit losses Non-interest income: Fees 5,736 7,634 17,179 20,617 Wealth management 6,847 6,084 19,075 16,406 incomeInsurance agency 1,711 ? 1,711 ? incomeBank-owned life 1,644 1,272 4,290 4,253 insuranceNet gain onsecurities ? ? 55 29 transactionsOther income 4,688 3,057 9,672 4,764 Total non-interest 20,626 18,047 51,982 46,069 income Non-interest expense: Compensation and 35,700 29,376 96,095 86,735 employee benefitsNet occupancy expense 6,993 6,413 19,362 19,629 Data processing 5,026 4,114 14,439 12,447 expenseFDIC Insurance 1,185 ? 1,953 1,167 Amortization of 918 827 2,373 2,161 intangiblesAdvertising and 773 1,098 2,774 3,059 promotion expenseCredit loss (benefit)expense for (575 ) ? 5,714 ? off-balance sheetcredit exposuresOther operating 9,763 7,910 26,447 22,650 expensesTotal non-interest 59,783 $ 49,738 169,157 147,848 expenseIncome before income 36,428 $ 41,337 74,641 113,111 tax expenseIncome tax expense 9,285 9,938 18,257 26,429 Net income $ 27,143 $ 31,399 $ 56,384 $ 86,682 Basic earnings per $ 0.37 $ 0.49 $ 0.84 $ 1.34 shareAverage basic shares 72,519,123 64,511,956 67,093,442 64,720,642 outstanding Diluted earnings per $ 0.37 $ 0.49 $ 0.84 $ 1.34 shareAverage diluted 72,604,298 64,632,285 67,173,876 64,852,983 shares outstanding

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 September 30, Nine months ended September 30, 2020 2019 2020 2019Statement of IncomeNet interest $ 81,985 $ 73,528 $ 223,833 $ 225,090 incomeProvision for 6,400 500 32,017 10,200 credit lossesNon-interest 20,626 18,047 51,982 46,069 incomeNon-interest 59,783 49,738 169,157 147,848 expenseIncome beforeincome tax 36,428 41,337 74,641 113,111 expenseNet income 27,143 31,399 56,384 86,682 Diluted earnings $ 0.37 $ 0.49 $ 0.84 $ 1.34 per shareInterest rate 2.87 % 2.96 % 2.88 % 3.09 %spreadNet interest 3.01 % 3.23 % 3.06 % 3.35 %margin Profitability Annualizedreturn on 0.90 % 1.26 % 0.70 % 1.18 %average assetsAnnualizedreturn on 7.04 % 8.90 % 5.18 % 8.34 %average equityAnnualizedreturn on 10.05 % 12.97 % 7.45 % 12.11 %average tangibleequity ^(2)Annualizednon-interestexpense to 1.92 % 1.99 % 1.97 % 2.01 %average assets^(3)Efficiency ratio 56.72 % 54.31 % 57.69 % 54.52 %^ (4) Asset Quality Non-accrual $ 48,953 $ 39,981 loans90+ and still ? ? accruingNon-performing 48,953 39,981 loansForeclosed 4,720 1,534 assetsNon-performing 53,673 41,515 assetsNon-performingloans to total 0.50 % 0.55 %loansNon-performingassets to total 0.42 % 0.42 %assetsAllowance for $ 106,314 $ 57,344 loan lossesAllowance forloan losses tototal 217.18 % 143.43 %non-performingloansAllowance forloan losses to 1.09 % 0.79 %total loansNet loan(recoveries) $ (59 ) 5,966 $ 2,727 8,418 charge-offsAnnualized netloan(recoveries) ? % 0.33 % 0.05 % 0.16 %charge offs toaverage totalloans Average Balance Sheet DataAssets $ 12,063,681 $ 9,899,693 $ 10,811,585 $ 9,811,371 Loans, net 8,931,927 7,199,945 7,929,687 7,169,099 Earning assets 10,749,395 8,955,859 9,672,290 8,889,786 Core deposits 7,988,166 6,067,107 7,103,221 6,095,784 Borrowings 1,292,646 1,445,112 1,233,580 1,386,349 Interest-bearing 8,046,751 6,825,203 7,269,066 6,812,752 liabilitiesStockholders' 1,533,771 1,399,583 1,455,235 1,388,838 equityAverage yield oninterest-earning 3.44 % 4.09 % 3.60 % 4.19 %assetsAverage cost ofinterest-bearing 0.57 % 1.13 % 0.72 % 1.10 %liabilities Loan Data Mortgage loans: Residential $ 1,320,222 $ 1,072,701 Commercial 3,750,639 2,437,210 Multi-family 1,544,924 1,298,754 Construction 462,161 399,501 Total mortgage 7,077,947 5,208,166 loansCommercial loans 2,290,196 1,659,965 Consumer loans 406,451 403,576 Total gross 9,774,593 7,271,707 loansPremium on 1,514 2,716 purchased loansUnearned (26 ) (26 ) discountsNet deferred (19,272 ) (7,403 ) Total loans $ 9,756,809 $ 7,266,994

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 Companys 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 Companys industry. Investors should recognize that the Companys 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 andTangible Book Value perShare At September 30, At December 31, 2020 2019 2019 Totalstockholders' $ 1,601,569 $ 1,397,833 $ 1,413,840 equityLess: totalintangible 467,128 437,585 437,019 assetsTotal tangiblestockholders' $ 1,134,441 $ 960,248 $ 976,821 equity Shares 78,481,159 65,760,468 65,787,900 outstanding Book value pershare (totalstockholders' $ 20.41 $ 21.26 $ 21.49 equity/sharesoutstanding)Tangible bookvalue pershare (totaltangible $ 14.45 $ 14.60 $ 14.85 stockholders'equity/sharesoutstanding) (2) AnnualizedReturn onAverage TangibleEquity Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Total averagestockholders' $ 1,533,771 $ 1,399,583 $ 1,455,235 $ 1,388,838 equityLess: totalaverage 459,002 438,906 443,975 431,802 intangibleassetsTotal averagetangible $ 1,074,769 $ 960,677 $ 1,011,260 $ 957,036 stockholders'equity Net income $ 27,143 $ 31,399 $ 56,384 $ 86,682 Annualizedreturn onaveragetangibleequity (net 10.05 % 12.97 % 7.45 % 12.11 % income/totalaveragestockholders'equity) (3) AnnualizedAdjustedNon-Interest Expense toAverage Assets Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Reportednon-interest $ 59,783 $ 49,738 $ 169,157 $ 147,848 expenseAdjustments tonon-interest expense:Credit lossexpense foroff-balance (575 ) ? 5,714 ? sheet creditexposuresMerger-relatedtransactioncosts and 2,157 ? 4,318 ? COVID-19expensesAdjustednon-interest $ 58,201 $ 49,738 $ 159,125 $ 147,848 expenseAnnualizedadjusted $ 231,539 $ 197,330 $ 212,554 $ 197,672 non-interestexpense Average assets $ 12,063,681 $ 9,899,693 $ 10,811,585 9,811,371 Annualizedadjustednon-interest 1.92 % 1.99 % 1.97 % 2.01 % expense/average assets (4) EfficiencyRatio Calculation Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net interest $ 81,985 $ 73,528 $ 223,833 $ 225,090 incomeNon-interest 20,626 18,047 51,982 46,069 incomeTotal income $ 102,611 $ 91,575 $ 275,815 $ 271,159 Adjustednon-interest $ 58,201 $ 49,738 $ 159,125 $ 147,848 expense Efficiencyratio(adjusted 56.72 % 54.31 % 57.69 % 54.52 % non-interestexpense/income)

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARYNet Interest Margin AnalysisQuarterly Average Balances(Dollars in Thousands) (Unaudited) September 30, 2020 June 30, 2020 Average Average Average Average Balance Interest Yield/ Balance Interest Yield/ Cost CostInterest-Earning Assets:Deposits $ 80,120 $ 50 0.25 % $ 157,980 $ 98 0.25 % Federal fundssold and other 134,319 421 1.25 % 134,362 487 1.46 % short-terminvestmentsAvailable forsale debt 1,091,524 5,299 1.94 % 970,639 5,417 2.23 % securitiesHeld to maturitydebt securities, 444,240 2,836 2.55 % 444,317 2,885 2.60 % net ^(1)Equitysecurities, at 845 ? ? % 746 ? ? % fair valueFederal Home 66,420 1,023 6.16 % 61,461 862 5.61 % Loan Bank stockNet loans: ^ (2)Total mortgage 6,392,105 58,897 3.64 % 5,261,323 49,297 3.72 % loansTotal commercial 2,150,787 20,622 3.78 % 1,960,322 18,944 3.85 % loansTotal consumer 389,035 4,305 4.40 % 366,370 3,547 3.89 % loansTotal net loans 8,931,927 83,824 3.71 % 7,588,015 71,788 3.76 % Totalinterest-earning $ 10,749,395 $ 93,453 3.44 % $ 9,357,520 $ 81,537 3.47 % assets Non-Interest Earning Assets:Cash and due 301,500 164,086 from banksOther assets 1,012,786 912,252 Total assets $ 12,063,681 $ 10,433,858 Interest-Bearing Liabilities:Demand deposits $ 4,557,172 $ 5,065 0.44 % $ 4,047,493 5,156 0.51 % Savings deposits 1,223,004 439 0.14 % 1,026,325 391 0.15 % Time deposits 957,512 1,896 0.79 % 605,764 2,095 1.39 % Total Deposits 6,737,688 7,400 0.44 % 5,679,582 7,642 0.54 % Borrowed funds 1,292,646 3,862 1.19 % 1,249,741 4,069 1.31 % Subordinated 16,417 206 4.99 % ? ? ? % debenturesTotalinterest-bearing 8,046,751 11,468 0.57 % 6,929,323 11,711 0.68 % liabilities Non-InterestBearing Liabilities:Non-interest 2,207,990 1,847,087 bearing depositsOthernon-interest 275,169 248,124 bearingliabilitiesTotalnon-interest 2,483,159 2,095,211 bearingliabilitiesTotal 10,529,910 9,024,534 liabilitiesStockholders' 1,533,771 1,409,324 equityTotalliabilities and $ 12,063,681 $ 10,433,858 stockholders'equity Net interest $ 81,985 $ 69,826 income Net interest 2.87 % 2.79 % rate spreadNetinterest-earning $ 2,702,644 $ 2,428,197 assets Net interest 3.01 % 2.97 % margin ^(3) Ratio ofinterest-earningassets to total 1.34x 1.35x interest-bearingliabilities (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. 9/30/20 6/31/20 3/31/20 12/31/19 9/30/19 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.Interest-Earning Assets:Securities 2.12 % 2.21 % 2.57 % 2.62 % 2.71 %Net loans 3.71 % 3.76 % 4.23 % 4.32 % 4.44 %Total interest-earning 3.44 % 3.47 % 3.92 % 3.99 % 4.09 %assets Interest-Bearing Liabilities:Total deposits 0.44 % 0.54 % 0.78 % 0.83 % 0.87 %Total borrowings 1.19 % 1.31 % 1.80 % 1.98 % 2.13 %Total interest-bearing 0.57 % 0.68 % 0.95 % 1.04 % 1.13 %liabilities Interest rate spread 2.87 % 2.79 % 2.97 % 2.95 % 2.96 %Net interest margin 3.01 % 2.97 % 3.20 % 3.21 % 3.23 % Ratio ofinterest-earningassets to 1.34x 1.35x 1.31x 1.34x 1.31x interest-bearingliabilities

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARYNet Interest Margin AnalysisAverage Year to Date Balances(Dollars in Thousands) (Unaudited) September 30, 2020 September 30, 2019 Average Average Average Average Balance Interest Yield/ Balance Interest Yield/ Cost CostInterest-Earning Assets:Deposits $ 87,111 $ 418 0.64 % $ 29,089 $ 527 2.42 %Federal fundssold and other 124,280 1,514 1.63 % 64,086 1,511 3.15 %short terminvestmentsAvailable forsale debt 1,022,402 16,821 2.19 % 1,087,683 21,337 2.62 %securitiesHeld to maturitydebt securities, 445,882 8,661 2.59 % 470,814 9,408 2.66 %net ^(1)Equitysecurities, at 800 ? ? % 717 ? ? %fair valueFederal Home 62,128 2,848 6.11 % 68,298 3,247 6.34 %Loan Bank stockNet loans: ^ (2)Total mortgage 5,641,574 162,635 3.81 % 5,094,641 167,051 4.34 %loansTotal commercial 1,908,588 58,238 4.04 % 1,657,138 63,788 5.10 %loansTotal consumer 379,525 12,024 4.23 % 417,320 14,216 4.55 %loansTotal net loans 7,929,687 232,897 3.88 % 7,169,099 245,055 4.53 %Totalinterest-earning $ 9,672,290 $ 263,159 3.60 % $ 8,889,786 $ 281,085 4.19 %assets Non-Interest Earning Assets:Cash and due 209,423 96,914 from banksOther assets 929,872 824,671 Total assets $ 10,811,585 $ 9,811,371 Interest-Bearing Liabilities:Demand deposits $ 4,170,286 $ 17,621 0.56 % $ 3,599,349 $ 21,944 0.82 %Savings deposits 1,080,880 1,197 0.15 % 1,024,693 1,287 0.17 %Time deposits 778,808 7,182 1.23 % 802,361 10,709 1.78 %Total Deposits 6,029,974 26,000 0.58 % 5,426,403 33,940 0.84 %Borrowed funds 1,233,580 13,120 1.42 % 1,386,349 22,055 2.13 %Subordinated $ 5,512 $ 206 4.99 % $ ? $ ? ? %debenturesTotalinterest-bearing $ 7,269,066 $ 39,326 0.72 % $ 6,812,752 $ 55,995 1.10 %liabilities Non-InterestBearing Liabilities:Non-interest 1,852,055 1,471,742 bearing depositsOthernon-interest 235,229 138,039 bearingliabilitiesTotalnon-interest 2,087,284 1,609,781 bearingliabilitiesTotal 9,356,350 8,422,533 liabilitiesStockholders' 1,455,235 1,388,838 equityTotalliabilities and $ 10,811,585 $ 9,811,371 stockholders'equity Net interest $ 223,833 $ 225,090 income Net interest 2.88 % 3.09 %rate spreadNetinterest-earning $ 2,403,224 $ 2,077,034 assets Net interest 3.06 % 3.35 %margin ^(3) Ratio ofinterest-earningassets to total 1.33x 1.30x interest-bearingliabilities (1) Average outstanding balance amounts shown are amortized cost, net ofallowance 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 includenon-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 theprevious three years. Nine Months Ended September September September 30, 2020 30, 2019 30, 2018Interest-Earning Assets: Securities 2.31 % 2.80 % 2.69 % Net loans 3.88 % 4.53 % 4.27 % Total interest-earning assets 3.60 % 4.19 % 3.98 % Interest-Bearing Liabilities: Total deposits 0.58 % 0.84 % 0.53 % Total borrowings 1.42 % 2.13 % 1.81 % Total interest-bearing liabilities 0.72 % 1.10 % 0.83 % Interest rate spread 2.88 % 3.09 % 3.15 % Net interest margin 3.06 % 3.35 % 3.33 % Ratio of interest-earning assets to 1.33x 1.30x 1.29x interest-bearing liabilities

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