063014 earnings release (1)

ISELIN, NJ, July 25, 2014 - Provident Financial Services, Inc. (NYSE:PFS) (the “Company”) reported net income of $16.4 million, or $0.28 per basic and diluted share for the three months ended June 30, 2014, compared to net income of $19.2 million, or $0.34 per basic and diluted share for the three months ended June 30, 2013. For the six months ended June 30, 2014, the Company reported net income of $33.4 million, or $0.57 per basic and diluted share, compared to net income of $37.1 million, or $0.65 per basic and diluted share for the same period last year.

Christopher Martin, Chairman, President and Chief Executive Officer, commented, “We are pleased with our core earnings of $0.31 per share⁽¹⁾ which reflect non-recurring items this quarter associated with the closing of the Team Capital acquisition, and a non-cash pension expense.” Martin continued: “We are energized by the progress to date in combining Team Capital’s business with ours. With the addition of their dedicated branch employees and loan officers, we look forward to expanding our commitment to meeting the financial needs of both existing and new customers in western New Jersey and eastern Pennsylvania.”

The Company’s loan portfolio increased $715.3 million, or 13.8%, to $5.91 billion at June 30, 2014, from $5.19 billion at December 31, 2013, which included $631.4 million of loans acquired from Team Capital. Loan originations totaled $741.5 million and loan purchases totaled $31.0 million for the six months ended June 30, 2014. The loan portfolio had net increases of $271.7 million in commercial mortgage loans, $271.0 million in commercial loans, $50.1 million in residential mortgage loans, $44.1 million in construction loans, $39.9 million in consumer loans and $39.3 million in multi-family mortgage loans. Commercial real estate, commercial and construction loans represented 68.9% of the loan portfolio at June 30, 2014, compared to 66.3% at December 31, 2013.

Total deposits increased $635.6 million during the six months ended June 30, 2014 to $5.84 billion. The increase in total deposits was primarily due to $769.9 million acquired from Team Capital, partially offset by the cyclical outflow of municipal deposits and a decrease in time deposits. At June 30, 2014, core deposits, which consist of savings and demand deposit accounts, totaled $4.96 billion, compared to $4.40 billion at December 31, 2013. Within the core deposit category, non-interest bearing demand deposits increased $163.6 million to $1.03 billion at June 30, 2014. Core deposits represented 84.9% of total deposits at June 30, 2014, compared to 84.5% at December 31, 2013.

Stockholders’ equity increased $110.6 million, or 10.9% for the six months ended June 30, 2014, to $1.12 billion, due to total common stock issued for the purchase of Team Capital, net income earned for the period and an increase in unrealized gains on securities available for sale, partially offset by dividends paid to stockholders. The Company issued 4,933,064 shares of common stock in the Team Capital acquisition. Common stock repurchases for the six months ended June 30, 2014 totaled 231,575 shares at an average cost of $16.75 per share. At June 30, 2014, 3.5 million shares remained eligible for repurchase under the current authorization. Book value per share and tangible book value per share⁽²⁾ at June 30, 2014 were $17.28 and $11.03, respectively, compared with $16.87 and $10.92, respectively, at December 31, 2013.

For the three months ended June 30, 2014, net interest income increased $4.0 million, to $57.4 million, from $53.4 million for the same period in 2013. Net interest income for the six months ended June 30, 2014, increased $5.3 million, to $112.6 million, from $107.3 million for the same period in 2013. Both comparative periods were favorably impacted by the net assets acquired from Team Capital, partially offset by compression in the net interest margin. Current quarter and, to a lesser extent, year-to-date 2014 yields and costs were impacted by fair value adjustments to assets and liabilities acquired from Team Capital as of the May 30, 2014 merger date. The earning asset yield was further impacted by the retention of lower-yielding excess liquidity, pending the closing of the Team Capital acquisition.

The Company’s net interest margin decreased 4 basis points to 3.24% for the quarter ended June 30, 2014, from 3.28% for the trailing quarter. The weighted average yield on interest-earning assets declined 3 basis points to 3.81% for the quarter ended June 30, 2014, compared with 3.84% for the quarter ended March 31, 2014. The weighted average cost of interest-bearing liabilities for the quarter ended June 30, 2014 increased 1 basis point to 0.69%, versus the trailing quarter at 0.68%. The average cost of interest bearing deposits for the quarter ended June 30, 2014 was 0.33%, compared with 0.35% for the trailing quarter. The average cost of borrowed funds for the quarter ended June 30, 2014 was 1.97%, compared with 1.87% for the trailing quarter.

The net interest margin for the quarter ended June 30, 2014 decreased 5 basis points to 3.24%, compared with 3.29% for the quarter ended June 30, 2013. The weighted average yield on interest-earning assets declined 3 basis points to 3.81% for the quarter ended June 30, 2014, compared with 3.84% for the quarter ended June 30, 2013, while the weighted average cost of interest bearing liabilities increased 2 basis points to 0.69% for the quarter ended June 30, 2014, compared with 0.67% for the second quarter of 2013. The average cost of interest bearing deposits for the quarter ended June 30, 2014 was 0.33%, compared with 0.41% for the same period last year. Average non-interest bearing demand deposits totaled $913.9 million for the quarter ended June 30, 2014, compared with $807.2 million for the quarter ended June 30, 2013. The average cost of borrowed funds for the quarter ended June 30, 2014 was 1.97%, compared with 2.03% for the same period last year.

For the six months ended June 30, 2014, the net interest margin decreased 7 basis points to 3.25%, compared with 3.32% for the six months ended June 30, 2013. The weighted average yield on interest earning assets declined 7 basis points to 3.82% for the six months ended June 30, 2014, compared with 3.89% for the six months ended June 30, 2013, while the weighted average cost of interest bearing liabilities remained unchanged at 0.69% for the six months ended June 30, 2014 and June 30, 2013. The average cost of interest bearing deposits for the six months ended June 30, 2014 was 0.34%, compared with 0.43% for the same period last year. Average non-interest bearing demand deposits totaled $888.0 million for the six months ended June 30, 2014, compared with $813.3 million for the six months ended June 30, 2013. The average cost of borrowings for the six months ended June 30, 2014 was 1.92%, compared with 2.13% for the same period last year.

Non-interest income totaled $10.3 million for the quarter ended June 30, 2014, a decrease of $2.3 million, or 18.3%, compared to the same period in 2013. Income related to BOLI decreased $1.4 million for the three months ended June 30, 2014, compared to the same period in 2013, primarily due to lower death benefit claims recognized. Fee income decreased $699,000 to $7.6 million, from $8.3 million for the three months ended June 30, 2013, due to an $807,000 decrease in commercial loan prepayment fee income, partially offset by a $446,000 increase in wealth management fees. In addition, net gains on securities transactions declined $313,000 for the three months ended June 30, 2014, compared to the same period in 2013. Other income increased $69,000 for the three months ended June 30, 2014, compared to same period in 2013, due to a $486,000 gain recognized in the current period on the prepayment of FHLB borrowings acquired from Team Capital, increased net gains on sales of foreclosed real estate, and a reduction in gains on loan sales.

For the six months ended June 30, 2014, non-interest income totaled $18.4 million, a decrease of $4.1 million, or 18.3%, compared to the same period in 2013. Fee income decreased $1.8 million, to $14.5 million for the six months ended June 30, 2014, compared with the same period in 2013, largely due to a $2.0 million decrease in prepayment fees on commercial loans, partially offset by a $728,000 increase in wealth management fees. BOLI income decreased $1.3 million for the six months ended June 30, 2014, principally due to lower death benefit claims recognized in the six months ended June 30, 2014, compared to the same period in 2013. Also contributing to the decline in non-interest income, net gains on securities transactions for the six months ended June 30, 2014 declined $1.2 million compared to the same period in 2013. These decreases were partially offset by a $114,000 increase in other income for the six months ended June 30, 2014, compared with the same period in 2013, primarily due to increased net gains on the sale of foreclosed real estate, the gain recognized on the prepayment of FHLB borrowings acquired from Team Capital, and a reduction in gains on loan sales.

For the three months ended June 30, 2014, non-interest expense increased $5.9 million, to $43.7 million, compared to the three months ended June 30, 2013. Compensation and benefits expense increased $3.4 million to $23.6 million for the three months ended June 30, 2014, compared to the three months ended June 30, 2013, due to increased salary expense and $383,000 of severance and retention expense associated with the Team Capital acquisition, and a $1.3 million charge related to lump-sum pension distributions made to vested terminated employees as the Company seeks to lower and reduce the volatility of its future pension costs. This non-contributory pension plan was frozen as to new participants on April 1, 2003. Other operating expenses increased $2.0 million

Non-interest expense for the six months ended June 30, 2014 was $81.9 million, an increase of $7.1 million from the six months ended June 30, 2013. Compensation and benefits expense increased $4.0 million to $45.0 million for the six months ended June 30, 2014, compared to the six months ended June 30, 2013, due to increased salary expense, severance and retention expense associated with Team Capital, increased pension costs associated with lump-sum pension distributions made to vested terminated employees and increased stock-based compensation. Other operating expenses increased $1.7 million to $14.4 million for the six months ended June 30, 2014, compared to $12.7 million for the same period in 2013, primarily due to non-recurring costs related to Team Capital. In addition, net occupancy costs increased $1.5 million, to $11.7 million for the six months ended June 30, 2014, compared to same period in 2013, principally due to increased seasonal expense in the first quarter of 2014 related to the harsh winter conditions, increased equipment maintenance costs and the addition of facilities costs related to Team Capital. Partially offsetting these increases in non-interest expense, the amortization of intangibles decreased $225,000 for the six months ended June 30, 2014, compared with the same period in 2013, as a result of scheduled reductions in core deposit intangible amortization, and FDIC insurance costs declined $194,000 as a result of a lower assessment rate.

The Company’s total non-performing loans at June 30, 2014 were $65.4 million, or 1.11% of total loans, compared with $64.1 million, or 1.22% of total loans at March 31, 2014, and $88.8 million, or 1.78% of total loans at June 30, 2013. The $1.3 million increase in non-performing loans at June 30, 2014, compared with the trailing quarter, was due to a $1.6 million increase in non-performing commercial loans and a $521,000 increase in non-performing commercial mortgage loans, offset by $662,000 and $115,000 decreases in non-performing residential loans and non-performing consumer loans, respectively. At June 30, 2014, impaired loans totaled $93.8 million with related specific reserves of $8.5 million, compared with impaired loans totaling $94.6 million with related specific reserves of $7.1 million at March 31, 2014. At June 30, 2013, impaired loans totaled $115.8 million with related specific reserves of $6.8 million. Non-performing loans do not include $9.4 million of purchased credit impaired ("PCI") loans acquired from Team Capital.

At June 30, 2014, the Company’s allowance for loan losses was 1.08% of total loans, a decrease from 1.21% at March 31, 2014, and a decrease from 1.34% of total loans at June 30, 2013. The decline in the loan coverage ratio from both the trailing quarter and the quarter ended June 30, 2013, was largely a result of Team Capital loans acquired at fair value, with no corresponding allowance. The Company recorded provisions for loan losses of $1.5 million and $1.9 million for the three and six months ended June 30, 2014, respectively, compared with provisions of $1.0 million and $2.5 million for the three and six months ended June 30, 2013, respectively. For the three and six months ended June 30, 2014, the Company had net charge-offs of $1.0 million and $2.7 million, respectively, compared with net charge-offs of $4.0 million and $5.8 million, respectively, for the same periods in 2013. The allowance for loan losses decreased $789,000 to $63.9 million at June 30, 2014, from $64.7 million at December 31, 2013.

For the three and six months ended June 30, 2014, the Company’s income tax expense was $6.2 million and $13.9 million, respectively, compared with $8.0 million and $15.6 million, for the three and six months ended June 30, 2013, respectively. The decrease in income tax expense was primarily a function of lower proportional pre-tax income from taxable sources, as tax exempt municipal securities and BOLI were added through the Team Capital acquisition. The Company’s effective tax rates were 27.5% and 29.4% for the three and six months ended June 30, 2014, respectively, compared with 29.4% and 29.6% for the three and six months ended June 30, 2013, respectively.

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,” “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 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 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.

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.



PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
June 30, 2014 (Unaudited) and December 31, 2013
(Dollars in Thousands)

Assets	June 30, 2014			December 31, 2013

Cash and due from banks	$	131,064		$	100,053
Short-term investments	1,375			1,171
Total cash and cash equivalents	132,439			101,224

Securities available for sale, at fair value	1,156,986			1,157,594
Investment securities held to maturity (fair value of $463,277 at June 30,2014 (unaudited) and $355,913 at December 31, 2013)	454,648			357,500
Federal Home Loan Bank Stock	70,574			58,070
Loans	5,910,069			5,194,813
Less allowance for loan losses	63,875			64,664
Net loans	5,846,194			5,130,149
Foreclosed assets, net	6,983			5,486
Banking premises and equipment, net	96,135			66,448
Accrued interest receivable	25,611			22,956
Intangible assets	405,685			356,432
Bank-owned life insurance	174,958			150,511
Other assets	79,144			80,958
Total assets	$	8,449,357		$	7,487,328

Liabilities and Stockholders' Equity

Deposits:
Demand deposits	$	3,952,738		$	3,473,724
Savings deposits	1,005,886			921,993
Certificates of deposit of $100,000 or more	360,653			270,631
Other time deposits	518,753			536,123
Total deposits	5,838,030			5,202,471
Mortgage escrow deposits	22,985			20,376
Borrowed funds	1,418,843			1,203,879
Other liabilities	48,108			49,849
Total liabilities	7,327,966			6,476,575

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, 83,209,293 shares issued and 64,888,489 outstanding at June 30, 2014 and 59,917,649 outstanding at December 31,2013	832			832
Additional paid-in capital	1,025,797			1,026,144
Retained earnings	442,909			427,763
Accumulated other comprehensive (loss) income	3,920			(4,851		)
Treasury stock	(304,741		)	(390,380		)
Unallocated common stock held by the Employee Stock Ownership Plan	(47,326		)	(48,755		)
Common Stock acquired by the Directors' Deferred Fee Plan	(7,159		)	(7,205		)
Deferred Compensation - Directors' Deferred Fee Plan	7,159			7,205
Total stockholders' equity	1,121,391			1,010,753
Total liabilities and stockholders' equity	$	8,449,357		$	7,487,328



PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Six Months Ended June 30, 2014 and 2013 (Unaudited)
(Dollars in Thousands, except per share data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014			2013
Interest income:
Real estate secured loans	$	40,381	$	37,585	$	78,933		$	75,920
Commercial loans	11,548		10,055		22,095			20,026
Consumer loans	5,869		5,875		11,531			11,832
Securities available for sale and Federal Home Loan Bank stock	6,663		6,120		13,745			12,312
Investment securities held to maturity	2,906		2,767		5,576			5,606
Deposits, Federal funds sold and other short-term investments	19		11		29			21
Total interest income	67,386		62,413		131,909			125,717

Interest expense:
Deposits	3,687		4,607		7,425			9,563
Borrowed funds	6,298		4,395		11,882			8,848
Total interest expense	9,985		9,002		19,307			18,411
Net interest income	57,401		53,411		112,602			107,306
Provision for loan losses	1,500		1,000		1,900			2,500
Net interest income after provision for loan losses	55,901		52,411		110,702			104,806

Non-interest income:
Fees	7,619		8,318		14,474			16,278
Bank-owned life insurance	1,577		2,944		2,879			4,154
Net gain (loss) on securities transactions	110		423		(240		)	934
Other income	1,021		952		1,330			1,216
Total non-interest income	10,327		12,637		18,443			22,582

Non-interest expense:
Compensation and employee benefits	23,581		20,154		44,974			40,997
Net occupancy expense	5,623		5,044		11,712			10,250
Data processing expense	2,761		2,647		5,558			5,269
FDIC Insurance	1,144		1,224		2,280			2,474
Amortization of intangibles	519		516		802			1,027
Advertising and promotion expense	1,081		1,277		2,146			2,023
Other operating expenses	8,962		6,951		14,389			12,719
Total non-interest expense	43,671		37,813		81,861			74,759
Income before income tax expense	22,557		27,235		47,284			52,629
Income tax expense	6,206		8,007		13,904			15,573
Net income	$	16,351	$	19,228	$	33,380		$	37,056

Basic earnings per share	$	0.28	$	0.34	$	0.57		$	0.65
Average basic shares outstanding	59,147,241		57,206,242		58,263,052			57,186,828

Diluted earnings per share	$	0.28	$	0.34	$	0.57		$	0.65
Average diluted shares outstanding	59,269,262		57,283,646		58,403,753			57,240,932



PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated 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,						June 30,
	2014			2013			2014			2013
STATEMENTS OF INCOME:
Net interest income	$	57,401		$	53,411		$	112,602		$	107,306
Provision for loan losses	1,500			1,000			1,900			2,500
Non-interest income	10,327			12,637			18,443			22,582
Non-interest expense	43,671			37,813			81,861			74,759
Income before income tax expense	22,557			27,235			47,284			52,629
Net income	16,351			19,228			33,380			37,056
Diluted earnings per share		$0.28			$0.34			$0.57			$0.65
Interest rate spread	3.12		%	3.17		%	3.13		%	3.20		%
Net interest margin	3.24		%	3.29		%	3.25		%	3.32		%

PROFITABILITY:
Annualized return on average assets	0.84		%	1.07		%	0.88		%	1.04		%
Annualized return on average equity	6.16		%	7.75		%	6.44		%	7.53		%
Annualized return on average tangible equity	9.49		%	12.08		%	9.90		%	11.78		%
Annualized core non-interest expense to average assets ⁽⁴⁾	2.06		%	2.10		%	2.06		%	2.09		%
Efficiency ratio ⁽⁵⁾	59.84		%	57.25		%	60.00		%	57.56		%

ASSET QUALITY:
Non-accrual loans							$	65,363		$	88,835
90+ and still accruing							—			—
Non-performing loans							65,363			88,835
Foreclosed assets							6,983			13,740
Non-performing assets							72,346			102,575
Non-performing loans to total loans							1.11		%	1.78		%
Non-performing assets to total assets							0.86		%	1.41		%
Allowance for loan losses							$	63,875		$	67,005
Allowance for loan losses to total non-performing loans							97.72		%	75.43		%
Allowance for loan losses to total loans							1.08		%	1.34		%

AVERAGE BALANCE SHEET DATA:
Assets	$	7,829,645		$	7,216,401		$	7,652,783		$	7,218,296
Loans, net	5,416,760			4,858,148			5,285,948			4,844,051
Earning assets	7,048,411			6,474,853			6,895,100			6,477,364
Core deposits	4,618,256			4,394,745			4,504,857			4,414,452
Borrowings	1,283,433			870,421			1,248,220			837,851
Interest-bearing liabilities	5,793,152			5,354,783			5,661,502			5,352,799
Stockholders' equity	1,064,966			995,729			1,044,646			991,878
Average yield on interest-earning assets	3.81		%	3.84		%	3.82		%	3.89		%
Average cost of interest-bearing liabilities	0.69		%	0.67		%	0.69		%	0.69		%

LOAN DATA:
Mortgage loans:
Residential							$	1,224,192		$	1,206,368
Commercial							1,672,319			1,386,606
Multi-family							968,242			799,840
Construction							227,433			162,332
Total mortgage loans							4,092,186			3,555,146
Commercial loans							1,203,199			876,782
Consumer loans							617,489			568,139
Total gross loans							5,912,874			5,000,067
Premium on purchased loans							4,380			4,269
Unearned discounts							(55		)	(66		)
Net deferred							(7,130		)	(5,923		)
Total loans							$	5,910,069		$	4,998,347



Notes - Reconciliation of GAAP to Non-GAAP Financial Measures (Dollars in Thousands, except share data)

(1) Core Earnings
							Three Months Ended			Six Months Ended
							June 30,			June 30,
							2014			2014

Net interest income							$	57,401		$	112,602
Provision for loan losses							1,500			1,900
Net interest income after provision for loan losses							55,901			110,702

Non-interest income							10,327			18,443
Less: Gain on prepayment of borrowings acquired from Team Capital							486			486
Core non-interest income							9,841			17,957

Non-interest expense							43,671			81,861
Less: Team Capital acquisition expense							2,097			2,195
Less: Lump sum pension distribution costs							1,336			1,336
Core non-interest expense							40,238			78,330

Income taxes							6,206			13,904
Income tax effect of non core items							959			999
Core earnings							$	18,339		$	35,426
Core diluted earnings per share							$	0.31		$	0.61

(2) Book and Tangible Book Value per Share
							At June 30,
							2014			2013
Total stockholders' equity							$	1,121,391		$	986,594
Less: total intangible assets							405,685			357,015
Total tangible stockholders' equity							$	715,706		$	629,579

Shares outstanding							64,888,489			59,863,653

Book value per share (total stockholders' equity/shares outstanding)								$17.28			$16.48
Tangible book value per share (total tangible stockholders' equity/shares outstanding)								$11.03			$10.52

(3) Return on Average Tangible Equity
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Total average stockholders' equity	$	1,064,966		$	995,729		$	1,044,640		$	991,878
Less: total average intangible assets	373,644			357,314			365,036			357,534
Total average tangible stockholders' equity	$	691,322		$	638,415		$	679,604		$	634,344

Net income	$	16,351		$	19,228		$	33,380		$	37,056
Annualized return on average tangible equity (net income/total average stockholders' equity)	9.49		%	12.08		%	9.90		%	11.78		%



Notes - Reconciliation of GAAP to Non-GAAP Financial Measures - Continued (Dollars in Thousands, except share data)

(4) Annualized Core Non-Interest Expense/Average Assets Calculation
	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2014			2013				2014			2013

Annualized core non-interest expense (1)	$	161,394		$	151,668		150,757	$	157,958		$	150,757
Average assets	7,829,645			7,216,401			7,218,296	7,652,783			7,218,296
Core non-interest expense/average assets	2.06		%	2.10		%		2.06		%	2.09		%

(5) Efficiency Ratio Calculation
	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2014			2013				2014			2013
Net interest income	$	57,401		$	53,411			$	112,602		$	107,306
Core non-interest income (1)	9,841			12,637				17,957			22,582
Total core income	67,242			66,048				130,559			129,888

Core non-interest expense (1)	40,238			37,813				78,330			74,759
Core expense/core income	59.84		%	57.25		%		60.00		%	57.56		%



PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Quarterly Average Balances
(Unaudited) (Dollars in Thousands)

	June 30, 2014					March 31, 2014
	Average				Average	Average				Average
	Balance		Interest		Yield	Balance		Interest		Yield
Interest-Earning Assets:
Deposits	$	31,044	$	19	0.25%	$	16,589	$	10	0.25%
Federal funds sold and other short-term investments	1,449		—		0.02%	1,189		—		0.03%
Investment securities (1)	396,409		2,906		2.93%	357,852		2,670		2.98%
Securities available for sale	1,139,994		6,097		2.14%	1,151,959		6,478		2.25%
Federal Home Loan Bank stock	62,755		566		3.62%	58,812		604		4.16%
Net loans: (2)
Total mortgage loans	3,814,789		40,381		4.21%	3,665,286		38,552		4.21%
Total commercial loans	1,014,610		11,548		4.53%	915,105		10,547		4.64%
Total consumer loans	587,361		5,869		4.01%	573,294		5,662		4.01%
Total net loans	5,416,760		57,798		4.25%	5,153,685		54,761		4.26%
Total Interest-Earning Assets	$	7,048,411	$	67,386	3.81%	$	6,740,086	$	64,523	3.84%

Non-Interest Earning Assets:
Cash and due from banks	70,849					63,167
Other assets	710,385					670,703
Total Assets	$	7,829,645				$	7,473,956

Interest-Bearing Liabilities:
Demand deposits	$	2,751,265	$	1,866	0.27%	$	2,609,846	$	1,716	0.27%
Savings deposits	953,132		228		0.10%	918,452		211		0.09%
Time deposits	805,322		1,593		0.79%	787,475		1,811		0.93%
Total Deposits	4,509,719		3,687		0.33%	4,315,773		3,738		0.35%

Borrowed funds	1,283,433		6,298		1.97%	1,212,617		5,584		1.87%
Total Interest-Bearing Liabilities	5,793,152		9,985		0.69%	5,528,390		9,322		0.68%

Non-Interest Bearing Liabilities	971,527					921,466
Total Liabilities	6,764,679					6,449,856
Stockholders' equity	1,064,966					1,024,100
Total Liabilities and Stockholders' Equity	$	7,829,645				$	7,473,956

Net interest income			$	57,401				$	55,201

Net interest rate spread					3.12%					3.16%
Net interest-earning assets	$	1,255,259				$	1,211,696

Net interest margin (3)					3.24%					3.28%
Ratio of interest-earning assets to
total interest-bearing liabilities	1.22x					1.22x



The following table summarizes the quarterly net interest margin for the previous five quarters.

	6/30/14		3/31/14		12/31/13		09/30/13		6/30/13
	2nd Qtr.		1st Qtr.		4th Qtr.		3rd Qtr.		2nd Qtr.
Interest-Earning Assets:
Securities	2.35	%	2.46	%	2.41	%	2.25	%	2.20	%
Net loans	4.25	%	4.26	%	4.27	%	4.33	%	4.39	%
Total interest-earning assets	3.81	%	3.84	%	3.82	%	3.83	%	3.84	%

Interest-Bearing Liabilities:
Total deposits	0.33	%	0.35	%	0.37	%	0.39	%	0.41	%
Total borrowings	1.97	%	1.87	%	2.01	%	2.00	%	2.03	%
Total interest-bearing liabilities	0.69	%	0.68	%	0.69	%	0.67	%	0.67	%

Interest rate spread	3.12	%	3.16	%	3.13	%	3.16	%	3.17	%
Net interest margin	3.24	%	3.28	%	3.26	%	3.28	%	3.29	%

Ratio of interest-earning assets to interest-bearing liabilities	1.22x		1.22x		1.23x		1.22x		1.21x



PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Net Interest Margin Analysis
Average Year to Date Balances
(Unaudited) (Dollars in Thousands)

	June 30, 2014					June 30, 2013
	Average				Average	Average				Average
	Balance		Interest		Yield	Balance		Interest		Yield
Interest-Earning Assets:
Deposits	$	23,857	$	29	0.25%	$	15,470	$	21	0.28%
Federal funds sold and other short term investments	1,320		—		0.02%	1,408		—		0.04%
Investment securities (1)	377,237		5,576		2.96%	351,012		5,606		3.19%
Securities available for sale	1,145,943		12,576		2.20%	1,225,034		11,508		1.88%
Federal Home Loan Bank stock	60,795		1,169		3.88%	40,389		804		4.01%
Net loans: (2)
Total mortgage loans	3,740,450		78,933		4.21%	3,432,966		75,920		4.41%
Total commercial loans	965,132		22,095		4.58%	840,112		20,026		4.77%
Total consumer loans	580,366		11,531		4.01%	570,973		11,832		4.18%
Total net loans	5,285,948		112,559		4.25%	4,844,051		107,778		4.45%
Total Interest-Earning Assets	$	6,895,100	$	131,909	3.82%	$	6,477,364	$	125,717	3.89%

Non-Interest Earning Assets:
Cash and due from banks	67,029					71,465
Other assets	690,654					669,467
Total Assets	$	7,652,783				$	7,218,296

Interest-Bearing Liabilities:
Demand deposits	$	2,680,946	$	3,581	0.27%	$	2,672,770	$	3,819	0.29%
Savings deposits	935,888		439		0.09%	928,377		485		0.11%
Time deposits	796,448		3,405		0.86%	913,801		5,259		1.16%
Total Deposits	4,413,282		7,425		0.34%	4,514,948		9,563		0.43%
Borrowed funds	1,248,220		11,882		1.92%	837,851		8,848		2.13%
Total Interest-Bearing Liabilities	$	5,661,502	$	19,307	0.69%	$	5,352,799	$	18,411	0.69%

Non-Interest Bearing Liabilities	946,635					873,619
Total Liabilities	6,608,137					6,226,418
Stockholders' equity	1,044,646					991,878
Total Liabilities and Stockholders' Equity	$	7,652,783				$	7,218,296

Net interest income			112,602					107,306

Net interest rate spread					3.13%					3.20%
Net interest-earning assets	$	1,233,598				$	1,124,565

Net interest margin (3)					3.25%					3.32%
Ratio of interest-earning assets to
total interest-bearing liabilities	1.22x					1.21x


(1) Average outstanding balance amounts shown are amortized cost.

(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.



The following table summarizes the year-to-date net interest margin for the previous three years.

	Six Months Ended
	6/30/14		6/30/13		6/30/12
Interest-Earning Assets:
Securities	2.41	%	2.20	%	2.48	%
Net loans	4.25	%	4.45	%	4.80	%
Total interest-earning assets	3.82	%	3.89	%	4.15	%

Interest-Bearing Liabilities:
Total deposits	0.34	%	0.43	%	0.60	%
Total borrowings	1.92	%	2.13	%	2.22	%
Total interest-bearing liabilities	0.69	%	0.69	%	0.87	%

Interest rate spread	3.13	%	3.20	%	3.28	%
Net interest margin	3.25	%	3.32	%	3.41	%

Ratio of interest-earning assets to interest-bearing liabilities	1.21x		1.21x		1.18x




(1)	Average outstanding balance amounts shown are amortized cost.
(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.