11-K 1 form11k_june2007.txt FORM 11-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2006 --------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ______________________ Commission File Number 001-31566 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: The Provident Bank 401(k) Plan B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Provident Financial Services, Inc. 830 Bergen Avenue Jersey City, New Jersey 07306-4599 REQUIRED INFORMATION FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm 3 Statements of Net Assets Available for Plan Benefits ---December 31, 2006 and 2005 4 Statements of Changes in Net Assets Available for Plan Benefits Years ended December 31, 2006 and 2005 5 Notes to Financial Statements 6 Schedule H, Line 4a---Schedule of Delinquent Participant Contributions Year Ended December 31, 2006 12 Schedule H, Line 4i---Schedule of Assets Held at End of Year December 31, 2006 13 SIGNATURE OF PLAN ADMINISTRATOR 14 EXHIBIT INDEX 15 Consent of Independent Registered Public Accounting Firm 16 EX-23.1: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Report of Independent Registered Public Accounting Firm The Board of Directors Provident Financial Services, Inc. : We have audited the accompanying statements of net assets available for plan benefits of The Provident Bank 401(k) Plan (the "Plan") as of December 31, 2006 and 2005, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of The Provident Bank 401(k) Plan as of December 31, 2006 and 2005, and the changes in net assets available for plan benefits for the years then ended, in conformity with U.S. generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule H, Line 4a- Schedule of Delinquent Participant Contributions for the year ended December 31, 2006 and Schedule H, Line 4i- Schedule of Assets (Held at End of Year) as of December 31, 3006, are presented for additional analysis and are not a required part of the 2006 basic financial statements, but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the 2006 basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the 2006 basic financial statements taken as a whole. /s/ KPMG LLP Short Hills, New Jersey June 27, 2007 3 THE PROVIDENT BANK 401(k) PLAN Statements of Net Assets Available for Plan Benefits December 31, 2006 and 2005
2006 2005 ------------------- ------------------- Assets: Investments at fair value $ 37,619,294 32,291,618 Participant loans receivable 715,878 617,080 Contributions receivable 16,932 48,369 ------------------- ------------------- Net assets available for plan benefits at fair value 38,352,104 32,957,067 Adjustment from fair value to contract value for fully benefit-responsive investment contracts 331,083 339,020 ------------------- ------------------- Net assets available for plan benefits $ 38,683,187 33,296,087 =================== ===================
See accompanying notes to financial statements. 4 THE PROVIDENT BANK 401(k) PLAN Statements of Changes in Net Assets Available for Plan Benefits Years ended December 31, 2006 and 2005
2006 2005 ------------------ ---------------- Additions: Interest income $ 271,271 87,703 Dividend income 260,225 53,857 Net realized gains (losses) on sales of investments 137,932 3,814,116 Net appreciation (depreciation) of investments 1,770,717 (3,694,682) Employee contributions 2,191,613 505,177 Employer contributions 361,098 69,688 Rollover contributions 3,906,165 103,571 Transfers from predecessor plan -- 23,566,066 ---------------- -------------- Total additions 8,899,021 24,505,496 ---------------- -------------- Deductions: Distributions 3,507,752 3,365,265 Administrative expenses 4,169 1,358 ---------------- -------------- Total deductions 3,511,921 3,366,623 ---------------- -------------- Increase in net assets available for plan benefits 5,387,100 21,138,873 Net assets available for plan benefits at beginning of year 33,296,087 12,157,214 ---------------- -------------- Net assets available for plan benefits at end of year $ 38,683,187 33,296,087 ================ ==============
See accompanying notes to financial statements. 5 THE PROVIDENT BANK 401(k) PLAN Notes to Financial Statements December 31, 2006 and 2005 (1) Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting. The Provident Bank 401(k) Plan (the "Plan") is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). (b) Plan Changes Effective September 30, 2005, The Provident Bank Employee Savings Incentive Plan was merged into the Incentive Savings Plan for the Employees of First Savings Bank. The merged plan was re-named The Provident Bank 401(k) Plan. (c) Funds and Accounts Managed by Principal Trust Company Under the terms of a trust agreement between the Principal Trust Company (the "Custodian") and The Provident Bank (the "Bank"), the Custodian managed funds on behalf of the Plan. The Custodian held the Plan's investment assets and executed transactions relating to such assets. The investments in the funds were reported to the Bank by the Custodian as having been determined through the use of current values for all assets. (d) Use of Estimates The plan administrator has made estimates and assumptions relating to the preparation of the financial statements under U.S. generally accepted accounting principals. Actual results could differ from those estimates. (e) Concentration of Risk The assets of the Plan are primarily financial instruments, which are monetary in nature. As a result, interest rates have a more significant impact on the Plan's financial performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services as measured by the consumer price index. Investments in investment funds are subject to risk conditions of the individual fund objectives, stock market fluctuations, interest rates, economic conditions and world affairs. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in values of investment securities will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statement of net assets available for plan benefits. (f) Investment Valuation Securities are recorded on the trade date and are stated at fair value. Securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the plan year. Securities for which no sale was reported on that date are valued at the average of the last reported bid and asked prices. Investments not traded on a national securities exchange are valued at fair value determined by the Plan's investment managers. Investments and changes therein are reported at fair value for all assets of the Plan. Loans receivable from participants are valued at their outstanding balance, which approximates fair value. 6 THE PROVIDENT BANK 401(k) PLAN Notes to Financial Statements December 31, 2006 and 2005 As of December 31, 2006, the Plan adopted Financial Accounting Standards Board ("FASB") Staff Position FSP AAG INV-1 and Statement of Position No. 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the "FSP"). The FSP requires the Statement of Net Assets Available for Plan Benefits to present the fair value of the Plan's investments as well as the adjustment from fair value to contract value for the fully benefit-responsive investment contracts. The Statement of Changes in Net Assets Available for Plan Benefits is prepared on a contract value basis for the fully benefit-responsive investment contracts. The FSP was applied retroactively to the prior period presented on the Statement of Net Assets Available for Benefits as of December 31, 2005. The investment contracts are presented at fair value on the statement of net assets available for plan benefits. The investments in the fully benefit-responsive investment contracts are also stated at contract value, which is equal to principal balance plus accrued interest. As provided in the FSP, an investment contract is generally valued at contract value, rather than fair value, to the extent it is fully benefit-responsive. The fair value of fully benefit-responsive investment contracts is calculated using a discounted cash flow model, which considers recent fee bids as determined by recognized dealers, discount rate and the duration of the underlying portfolio securities. (g) Income Recognition Interest income is recorded as earned on the accrual basis. Dividend income is recorded on the ex-dividend date. (h) Reclassifications Certain prior period amounts have been reclassified to conform to the current year presentation. (2) Plan Description The Plan is a voluntary, participant-directed defined contribution plan sponsored by the Bank and covers all employees, as defined, with the Bank. The following description of the Plan provides only general information. Eligible employees who participated in the Plan should refer to the Plan documents for a more complete description of the Plan's provisions. (a) Employee Contributions Participants may elect to make tax-deferred contributions up to the maximum amount allowed by the Internal Revenue Service. 7 THE PROVIDENT BANK 401(k) PLAN Notes to Financial Statements December 31, 2006 and 2005 Catch-Up Contributions A participant may make "catch-up" contributions if the maximum annual amount of regular contributions is made and the participant is age 50 or older. The maximum allowable catch-up contribution limit is $5,000 (for 2006). Catch-up contributions are not eligible for the employer's matching contributions. Tax law requires that a participant's catch-up contributions be reclassified as regular contributions if the participant elects catch-up contributions and fails to make the maximum allowable regular 401(k) contribution. Reclassified catch-up contributions are also not eligible for the employer's matching contribution. (b) Employer Contributions In 2006 and 2005, contributions were made by the Bank in an amount equal to 25% of the first 6% of a participant's eligible contributions. The Bank's Board of Directors sets the Bank's matching contribution rate in its sole discretion. (c) Vesting Participants are always fully vested in their contributions and income or losses thereon. Prior to October 1, 2005, employer contributions and income or losses thereon were also fully vested. Effective October 1, 2005, employer contributions and income or losses thereon were vested as follows: 33% vested at the end of the first year of service, 67% vested at the end of the second year of service, and 100% vested at the end of the third year of service. Additionally, a participant shall become 100% vested if he or she terminates employment on or after he or she attains age 65, or as a result of his or her death or disability. Effective January 1, 2006, the Plan was amended to provide that all contributions to a participant's account are fully vested. (d) Forfeitures For the year ended December 31, 2005, forfeitures of non-vested contributions used to reduce subsequent employer contributions amounted to $15,506. (e) Participant Loans Upon written application by a participant, the plan administrator may have directed that a loan be made from the participant's account. The maximum permissible loan available was limited to the lesser of (i) $50,000 with certain restrictions or (ii) 50% of his or her account. Any loan made must generally be repaid within a period not to exceed the earlier of termination of employment or five years. The term of the loan may exceed 5 years for the purchase of a primary residence. Loans bear a reasonable rate of interest and, once fixed, the rate of interest remains in effect for the duration of the loan. Principal and interest was paid ratably through bi-weekly payroll deductions or directly by the participants to the trustee. 8 THE PROVIDENT BANK 401(k) PLAN Notes to Financial Statements December 31, 2006 and 2005 (f) Benefit Payments/Withdrawals Upon retirement or termination of employment, participants may, under certain conditions, elect to receive vested amounts in (i) a cash lump sum, or (ii) equal monthly, quarterly, semi-annual or annual installments over a period not to exceed the life expectancy of the participant or the combined life expectancy of the participant and his or her designated beneficiary. During employment, participants may make cash withdrawals of post-tax participant contributions and related vested employer matching contributions and earnings thereon once per year without penalty. Hardship withdrawals of pre-tax participant contributions are also permitted once per year, but with a penalty. Such benefits are recorded when paid. (g) Participant Accounts Separate accounts for each participant were maintained and credited with the participant's contributions, the Bank's contributions made on behalf of that participant and the participant's proportionate share, as defined, of plan earnings or losses. The benefit to which a participant is entitled is the benefit that can be provided from his or her account. (h) Investment Valuation Investments were valued at fair market value. Investment transactions were recorded on a trade date basis. (3) Plan Expenses Certain costs of administrative services rendered on behalf of the Plan were borne by the Bank. (4) Plan Termination Although it has not expressed an intention to do so, the Bank has the right to terminate the Plan subject to the provisions of ERISA. Upon termination of the Plan, the amounts credited to participant accounts would become fully vested. (5) Federal Income Taxes The Internal Revenue Service issued its latest determination letter on February 25, 2005, which stated that the Plan and its underlying trust qualify under the applicable provisions of the Internal Revenue Code and therefore are exempt from federal income taxes. The Plan has been amended since receiving the determination letter. However, in the opinion of the Plan administrator and the Plan's tax counsel, the Plan and its underlying trust have operated within the terms of the Plan and remain qualified under the applicable provisions of the Internal Revenue Code. 9 THE PROVIDENT BANK 401(k) PLAN Notes to Financial Statements December 31, 2006 and 2005 (6) Investments Investments at December 31, 2006 and 2005 consisted of mutual funds, loans to participants and common stock issued by Provident Financial Services, Inc. At December 31, 2006 and 2005, individual investments in excess of 5% of the fair value of the net assets available for plan benefits were as follows:
2006 2005 ------------------ ------------------ Provident Financial Services, Inc., investment in common stock $ 11,872,386 11,093,771 Principal Life Insurance Company: Investors Large Company Growth 3,625,308 3,531,200 Principal Investors Lifetime Strategic Income Separate Account 2,915,235 2,691,318 Principal Diversified International Separate Account 3,200,646 2,218,024 Principal Fixed Income 401(a)/(k) 6,290,589 6,441,374 Principal Large Cap Value II Separate Account 3,471,417 2,800,621
For the years ended December 31, 2006 and 2005, the Plan's net appreciation/(depreciation) of investments was as follows:
2006 2005 --------------- ----------------- Investments in mutual funds $ 2,026,207 $ 503,129 Investment in Provident Financial Services, Inc. common stock (255,490) (4,179,811) -------------- -------------- $ 1,770,717 $ (3,694,682) ============== ==============
(7) Changes in the Plan There were no significant amendments to the Plan during the years ended December 31, 2006 and 2005. (8) Related Party Transactions Certain Plan investments are shares of mutual funds managed by The Principal Financial Group ("Principal"). Principal is also the trustee and record keeper as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. 10 THE PROVIDENT BANK 401(k) PLAN Notes to Financial Statements December 31, 2006 and 2005 (9) Prohibited Transactions The Bank discovered an error in the operation of the Plan for the 2006 Plan Year. During October 2006, the Bank learned that it had inadvertently transmitted to the Plan's trustee duplicate information on participant elective deferral contributions and loan repayments in consecutive payrolls in September 2006. Specifically, elective deferral contributions and loan payments with respect to the payroll ended September 15, 2006 were correctly transmitted to the Plan's trustee on September 13, 2006, but were subsequently retransmitted to the Plan's trustee with respect to the payroll ended September 29, 2006. As a result of this error, some Plan participants received larger or smaller elective deferral contributions than they were entitled to receive for the payroll ended September 29, 2006, and several incorrect participant loan payments were credited to certain participant loans. The net shortfall to the Plan was approximately $537, consisting of excess allocations of approximately $5,058, and under allocations of approximately $5,595. The Bank corrected the error by contributing an additional $537 to the Plan in November 2006, and reallocating elective deferral contributions and loan payments among participant accounts. The Bank is currently preparing a submission under the Department of Labor's Voluntary Fiduciary Correction Program ("VFCP") to correct any outstanding issues concerning the duplicate payroll contribution. (10) Reconciliation of Financial Statements to Form 5500 The following is a reconciliation of the employee contributions per the financial statements for the year ended December 31, 2006 to the Form 5500: 2006 ---------------- Employee Contributions per the Financial Statements $ 2,191,613 Corrective Distributions 20,695 ---------------- Total Employee Contributions per the Form 5500 $ 2,212,308 ================ (11) Subsequent Events Effective January 1, 2007, the Plan was amended to clarify automatic enrollment procedures, to allow participants to have two loans outstanding at one time and to reduce the minimum loan amount from $3,000 to $2,000. Effective April 1, 2007, First Morris Bank & Trust ("First Morris") merged with and into the Bank. As a result, the Plan was amended to give former First Morris employees who continued to be employed by the Bank ("Continuing Employees") credit for service with First Morris to determine eligibility to enroll in the Plan. The Plan was further amended to allow eligible Continuing Employees to commence participation in the Plan effective April 30, 2007. 11 THE PROVIDENT BANK 401(k) PLAN Schedule H, line 4a- Schedule of Delinquent Participant Contributions Year ended December 31, 2006
( a ) ( b ) ( c ) ( d ) (e) Relationship to plan, Description of Identity of Party employer, or other transaction, including Amount on line Lost Involved party in interest rate of interest 4(a) interest -------------------------- ------------------------- ----------------------- ----------------- ---------------- The Provident Bank Employer Employee contributions $5,595 $52 not deposited to Plan in timely manner.
During 2006, The Provident Bank delayed in submitting employee contributions in the amount of $5,595 to the Plan unintentionally. As soon as administratively possible, The Provident Bank will reimburse the Plan for lost interest in the amount of $52. See accompanying report of independent registered public accounting firm. 12 THE PROVIDENT BANK 401(k) PLAN Schedule H, line 4i- Schedule of Assets (Held at End of Year) December 31, 2006
Identity of Issuer Description of Investment Cost Current value ----------------------------------------------------------------------------------------------------------------------------------- Principal Life Insurance Company * Insurance Company General Principal Fixed Income 401(A)/(K) 6,376,469 6,290,589 Principal Life Insurance Company * Pooled Separate Accounts Principal Bind and Mtg Acc 1,186,244 1,240,812 MFS Investment Manager Registered Investment Company MFS High-Yield Opp A Fund 249,817 255,038 Principal Life Insurance Company * Pooled Separate Accounts Principal Lg Cp Stk Idx Sep Acct 177,114 202,073 Principal Life Insurance Company * Pooled Separate Accounts Principal Lifetm Str Inc Sep Acct 2,667,001 2,915,235 Principal Life Insurance Company * Pooled Separate Accounts Principal Lifetm 2010 Sep Acct 146,814 161,129 Principal Life Insurance Company * Pooled Separate Accounts Principal Lifetm 2020 Sep Acct 394,310 437,029 Principal Life Insurance Company * Pooled Separate Accounts Principal Lifetm 2030 Sep Acct 276,078 302,143 Principal Life Insurance Company * Pooled Separate Accounts Principal Lifetm 2040 Sep Acct 93,554 101,430 Principal Life Insurance Company * Pooled Separate Accounts Principal Lifetm 2050 Sep Acct 49,559 54,008 Principal Life Insurance Company * Pooled Separate Accounts Prin Ptr Lg-Cap Blend Sep Acct 160,227 178,829 Principal Life Insurance Company * Pooled Separate Accounts Prin Ptnrs Lg-Cap Value II Sa 2,920,387 3,471,417 Principal Life Insurance Company * Pooled Separate Accounts Prin Ptr Md-Cp Val I Sep Acct 344,300 381,058 Principal Life Insurance Company * Pooled Separate Accounts Principal U.S. Property Sep Acct 135,328 143,334 The American Funds Registered Investment Company Am Fds Grwth Fd of Am R4 Fund 315,196 327,659 Columbia Funds Registered Investment Company Columbia Acorn A Fund 355,252 360,108 Principal Life Insurance Company * Pooled Separate Accounts Principal Lg Co Grwth Sep Acct 3,292,921 3,625,308 Principal Life Insurance Company * Pooled Separate Accounts Principal Med Co Blnd Sep Acct 172,584 194,447 Principal Life Insurance Company * Pooled Separate Accounts Prin Ptnr Md-Cp Gr II Sep Acct 1,349,892 1,469,952 Principal Life Insurance Company * Pooled Separate Accounts Prin Ptr Sm-Cp Val I Sep Acct 222,690 233,872 Principal Life Insurance Company * Pooled Separate Accounts Prin Sm Cap Stk Idx Sep Acct 181,012 200,792 Principal Life Insurance Company * Pooled Separate Accounts Principal Divers Intl Sep Acct 2,476,152 3,200,646 -------------- Total investment in mutual funds 25,746,908 *Provident Financial Services, Inc., investment in common stock 11,510,301 11,872,386 *Participant loans receivable (a) 715,878 -------------- Total other investments 12,588,264 Total investments $ 38,335,172 ==============
* A party-in-interest as defined by ERISA (a) As of December 31, 2006, the interest rates on these loans ranged from 5.00% to 9.25% See accompanying report of independent registered public accounting firm. 13 SIGNATURE OF PLAN ADMINSTRATOR The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. THE PROVIDENT BANK 401(k) PLAN Date: June 25, 2007 By: /s/ Joanne Hynes ---------------------------- Name: Joanne Hynes Title: Plan Administrator First Vice President-Benefits The Provident Bank 14 EXHIBIT INDEX Exhibit Number Exhibit Location -------------- -------------------------------- ----------------- 23.1 Consent of Independent Registered Page 16 Public Accounting Firm 15 Consent of Independent Registered Public Accounting Firm The Board of Directors Provident Financial Services, Inc.: We consent to the incorporation by reference in registration statement no. 333-103041 on Form S-8 of Provident Financial Services, Inc. of our report dated June 27, 2007, relating to the statements of net assets available for plan benefits of The Provident Bank 401(k) Plan as of December 31, 2006 and 2005, and the related statements of changes in net assets available for plan benefits for the years then ended, and the supplemental schedule of delinquent participant contributions for the year ended December 31, 2006 and schedule of assets (held at end of year) as of December 31, 2006, which report appears in the December 31, 2006 Annual Report on Form 11-K of The Provident Bank 401(k) Plan. /s/ KPMG LLP Short Hills, New Jersey June 27, 2007 16