Provident Financial Services, Inc. Announces Quarterly Earnings and Declares Quarterly...

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

JERSEY CITY, N.J., Oct. 23 /PRNewswire-FirstCall/ -- Provident Financial
Services, Inc. (NYSE: PFS) (the "Company") reported basic and diluted earnings
per share of $0.23 for the quarter ended September 30, 2008, compared to basic
and diluted earnings per share of $0.14 for the quarter ended September 30,
2007. Basic and diluted earnings per share were $0.61 for the nine months
ended September 30, 2008, compared to basic and diluted earnings per share of
$0.55 for the nine months ended September 30, 2007. Net income for the three
months ended September 30, 2008 totaled $13.2 million, compared to $8.3
million reported for the same period in 2007. Net income was $34.2 million
for the nine months ended September 30, 2008, compared to $32.7 million for
the same period in 2007.

Earnings and per share data for the nine months ended September 30, 2008
reflect severance costs totaling $503,000, net of tax, recognized during the
second quarter of 2008. In addition, the Company recorded
other-than-temporary impairment charges on investments in a debt security
issued by Lehman Brothers Holdings, Inc. and the common stock of two
publicly-traded financial institutions totaling $869,000, net of tax, during
the quarter ended September 30, 2008. Results for the nine months ended
September 30, 2008, were also impacted by a $180,000 net after-tax gain
recorded in connection with the ownership and mandatory redemption of a
portion of the Company's Class B Visa, Inc. shares as part of Visa's initial
public offering in the first quarter of 2008, and a $175,000 net after-tax
gain resulting from the sale of a branch office in the first quarter of 2008.

Earnings and per share data for the three and nine months ended September 30,
2007 were impacted by severance charges totaling $1.9 million, net of tax.
Earnings and per share data for the nine months ended September 30, 2007 were
further impacted by the settlement of an insurance claim which resulted in a
recovery of $3.5 million, net of tax, related to a fraud loss that occurred
and was recognized in 2002, and one-time expenses of $246,000, net of tax,
related to the April 1, 2007 acquisition of First Morris Bank & Trust ("First
Morris").

Paul M. Pantozzi, Chairman and Chief Executive Officer, commented, "Our third
quarter operating results reflect the basic strategies of our business:
expanding net interest margin, managing overhead expenses, adhering to
conservative lending standards and maintaining our well-capitalized status, as
defined by our regulators. We neither originate nor hold any sub-prime
mortgages, trust preferred securities, or common or preferred stock issued by
Fannie Mae or Freddie Mac. In comparison to the trailing quarter, our results
also reflect growth in total loans outstanding, growth in total core deposits
and improvement in our efficiency ratio. We remain mindful of the unsettled
economic environment, and, in response, have made prudent and appropriate
additions to our loan loss allowance. At the same time, we have maintained
our ability and willingness to lend to quality borrowers, as well as our
commitment to enhancing core customer relationships. We believe these are the
appropriate strategies for achieving earnings momentum and returning long-term
stockholder value."

Declaration of Quarterly Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.11
per common share payable on November 28, 2008, to stockholders of record as of
the close of business on November 14, 2008.

Balance Sheet Summary

Total assets increased to $6.45 billion at September 30, 2008, compared to
$6.36 billion at December 31, 2007, due primarily to increases in loans and
securities available for sale.

Total investments increased $62.1 million, or 5.3%, during the nine months
ended September 30, 2008. The increase included $55.2 million of residential
mortgage loan pools that were securitized by the Company in the first quarter
of 2008 and are held as securities available for sale.

The Company's net loans increased $79.3 million, or 1.9%, to $4.33 billion at
September 30, 2008, from $4.26 billion at December 31, 2007, as year-to-date
loan originations and purchases more than offset the securitization of $55.2
million of conforming one- to four-family 30-year fixed-rate residential
mortgage loans during the first quarter of 2008. Loan originations totaled
$952.6 million and loan purchases totaled $228.4 million for the nine months
ended September 30, 2008. Compared with December 31, 2007, commercial
mortgage and multi-family loans increased $136.9 million, and residential
mortgage loans increased $81.9 million, while construction loans decreased
$80.1 million, commercial loans decreased $40.4 million, and consumer loans
decreased $17.5 million. Commercial real estate, construction and commercial
loans represented 44.7% of the loan portfolio at September 30, 2008, compared
to 45.2% at December 31, 2007.

At September 30, 2008, the Company's unfunded loan pipeline totaled $728.9
million, including $238.0 million in commercial loan commitments, $119.6
million in construction loan commitments and $93.2 million in commercial
mortgage commitments. The unfunded loan pipeline at June 30, 2008 was $763.4
million.

Total deposits decreased $88.9 million, or 2.1%, during the nine months ended
September 30, 2008, however core deposits increased $51.8 million, or 2.0%, to
$2.64 billion at September 30, 2008. Total deposits were $4.14 billion at
September 30, 2008, with core deposits, consisting of savings and demand
deposit accounts, representing 63.8% of total deposits. Borrowed funds
increased $169.7 million, or 15.8%, during the nine months ended September 30,
2008.

Common stock repurchases for the nine months ended September 30, 2008 totaled
101,000 shares at an average cost of $14.30 per share. At September 30, 2008,
book value per share and tangible book value per share were $17.04 and $8.38,
respectively, compared with $16.78 and $8.05, respectively, at December 31,
2007.

Results of Operations

Net Interest Margin

The net interest margin increased 17 basis points to 3.27% for the quarter
ended September 30, 2008, from 3.10% for the quarter ended June 30, 2008. The
net interest margin for the quarter ended September 30, 2008 increased 30
basis points compared with the net interest margin of 2.97% for the quarter
ended September 30, 2007. The weighted average yield on interest-earning
assets was 5.51% for the three months ended September 30, 2008, compared with
5.50% for the trailing quarter and 5.87% for the three months ended September
30, 2007. The weighted average cost of interest-bearing liabilities was 2.55%
for the quarter ended September 30, 2008, compared with 2.74% for the trailing
quarter and 3.34% for the third quarter of 2007.

For the nine months ended September 30, 2008, the net interest margin was
3.08%. This was an increase of 8 basis points compared with the net interest
margin of 3.00% for the nine months ended September 30, 2007. The weighted
average yield on interest-earning assets was 5.54% for the nine months ended
September 30, 2008, compared with 5.80% for the nine months ended September
30, 2007. The weighted average cost of interest-bearing liabilities was 2.80%
for the nine months ended September 30, 2008, compared with 3.25% for the same
period in 2007.

The average cost of interest-bearing deposits for the three months ended
September 30, 2008 was 2.19%, compared with 2.41% for the trailing quarter and
3.17% for the same period last year. The average cost of borrowings for the
three months ended September 30, 2008 was 3.62%, compared with 3.84% for the
trailing quarter and 4.16% for the same period last year.

The average cost of interest-bearing deposits for the nine months ended
September 30, 2008 was 2.49%, compared with 3.06% for the same period last
year. The average cost of borrowings for the nine months ended September 30,
2008 was 3.83%, compared with 4.17% for the same period last year.

Non-Interest Income

Non-interest income totaled $7.8 million for the quarter ended September 30,
2008, a decrease of $298,000 compared to the same period in 2007. Net losses
on securities transactions totaled $966,000 for the quarter ended September
30, 2008, compared with net gains of $2,000 for the same period last year.
The net securities losses for the current quarter included $1.4 million of
other-than-temporary impairment charges recognized on investments in a debt
security issued by Lehman Brothers Holdings, Inc. and the common stock of two
publicly-traded financial institutions. Partially offsetting the net
securities losses, fee income for the quarter ended September 30, 2008
increased $846,000, or 13.1%, compared to the same period in 2007, primarily
as a result of increases in the value of equity fund holdings. In addition,
other income declined $157,000 for the quarter ended September 30, 2008,
compared with the same period in 2007, as a result of a non-recurring gain on
the sale of real estate recognized in 2007.

For the nine months ended September 30, 2008, non-interest income totaled
$23.2 million, a decrease of $6.8 million, or 22.6%, compared to the same
period in 2007. In 2007, the Company recorded a one-time gain on an insurance
settlement of $5.9 million, before taxes, related to the resolution of
previously disclosed litigation. In addition, net losses on securities
transactions totaled $565,000 for the nine months ended September 30, 2008,
compared with net losses of $61,000 for the same period in 2007.

Non-Interest Expense

For the three months ended September 30, 2008, non-interest expense decreased
$3.7 million, or 10.5%, to $32.0 million, compared to $35.7 million for the
three months ended September 30, 2007. For the three months ended September
30, 2008, compensation and benefits expense decreased $4.3 million, compared
with the same period in 2007. Compensation and benefits expense decreased as
a result of previous staff reductions and lower stock-based compensation
costs. The Company recorded $3.2 million in severance charges during the
quarter ended September 30, 2007. Amortization of intangibles decreased
$304,000 for the three months ended September 30, 2008, compared with the same
period in 2007, as a result of scheduled reductions in the amortization of
core deposit intangibles. Partially offsetting these decreases, other
operating expenses increased $427,000 for the quarter ended September 30,
2008, compared with the same period in 2007, due primarily to expenses related
to foreclosed assets.

For the nine months ended September 30, 2008, non-interest expense decreased
$2.0 million, or 2.0%, to $97.2 million, compared to $99.2 million for the
nine months ended September 30, 2007. Compensation and benefits expense
decreased $4.0 million, as a result of previous staff reductions and lower
stock-based compensation costs. The Company incurred $773,000 in pre-tax
severance costs during the second quarter of 2008, compared with $3.2 million
in severance charges recognized during the quarter ended September 30, 2007.
Advertising costs decreased $352,000 for the nine months ended September 30,
2008, compared with the same period in 2007, as prior year costs included
charges related to the First Morris acquisition. Amortization of intangibles
decreased $209,000 for the nine months ended September 30, 2008, compared with
the same period in 2007, as a result of scheduled reductions in the
amortization of core deposit intangibles. Partially offsetting these
decreases, other operating expenses increased $1.4 million for the nine months
ended September 30, 2008, compared with the same period in 2007, due to
increases in several categories, including an expense of $356,000 associated
with the Company's proportionate share of a litigation reserve established by
Visa, as well as increases in attorney fees and costs associated with
foreclosed assets. Net occupancy expense increased $1.2 million for the nine
months ended September 30, 2008, compared with the same period in 2007, due
primarily to the addition of nine branch locations in connection with the
acquisition of First Morris.

The Company's annualized non-interest expense as a percentage of average
assets improved to 1.98% for the quarter ended September 30, 2008, compared
with 2.30% for the same period in 2007. For the nine months ended September
30, 2008, non-interest expense as a percentage of average assets was 2.04%,
compared with 2.21% for the same period in 2007. The efficiency ratio
(non-interest expense divided by the sum of net interest income and
non-interest income) improved to 60.16% for the quarter ended September 30,
2008, compared with 75.41% for the same period in 2007. For the nine months
ended September 30, 2008, the efficiency ratio was 64.66%, compared with
67.65% for the same period in 2007.

Asset Quality

Total non-performing loans at September 30, 2008 were $35.3 million, or 0.81%
of total loans, compared with $34.6 million, or 0.81% of total loans at
December 31, 2007, and $11.0 million, or 0.26% of total loans at September 30,
2007. At September 30, 2008, the Company's allowance for loan losses was
0.99% of total loans, compared with 0.95% of total loans at December 31, 2007,
and 0.89% of total loans at September 30, 2007. The Company recorded
provisions for loan losses of $3.8 million and $6.6 million for the three and
nine months ended September 30, 2008, respectively, compared with provisions
of $1.3 million and $2.8 million for the three and nine months ended September
30, 2007, respectively. For the three and nine months ended September 30,
2008, the Company had net charge-offs of $1.6 million and $4.1 million,
respectively, compared with net charge-offs of $473,000 and $468,000 for the
same periods in 2007. The allowance for loan losses increased $2.5 million,
to $43.3 million at September 30, 2008, from $40.8 million at December 31,
2007. The increase in the loan loss provision for the three and nine months
ended September 30, 2008, compared with the same periods in 2007, was
attributable to an increase in non-performing loans, growth in the loan
portfolio, and an increase in commercial loans as a percentage of the loan
portfolio to 44.7% at September 30, 2008, from 44.0% at September 30, 2007, as
well as ongoing uncertainty with respect to general economic conditions. At
September 30, 2008, the Company held $3.6 million of foreclosed assets,
compared with $1.0 million at December 31, 2007, and $5.9 million at June 30,
2008. The increase in foreclosed assets at September 30, 2008, compared with
December 31, 2007, was primarily attributable to one commercial real estate
line of credit secured by a number of properties that was previously
classified as impaired.

Income Tax Expense

For the three months ended September 30, 2008, the Company's income tax
expense was $4.2 million, compared with $2.1 million for the same period in
2007. For the nine months ended September 30, 2008, the Company's income tax
expense was $12.3 million, compared with $11.9 million for the same period in
2007. The increase in income tax expense was primarily attributable to
increased income before income taxes. For the three and nine months ended
September 30, 2008, the Company's effective tax rates were 24.2% and 26.5%,
respectively, compared with 20.2% and 26.7% for the three and nine months
ended September 30, 2007, respectively. The effective tax rates for the three
and nine months ended September 30, 2008 were favorably impacted by the
utilization of capital losses on securities transactions. The effective tax
rates for the three and nine months ended September 30, 2007 reflected a
larger proportion of the Company's income being derived from tax-exempt
sources, primarily as a result of lower pre-tax income in 2007 due to $3.2
million in severance charges recorded during the quarter ended September 30,
2007.

About the Company

Provident Financial Services, Inc. is the holding company for The Provident
Bank, a community-oriented bank offering a full range of retail and commercial
loan and deposit products. The Bank currently operates 83 full service
branches throughout northern and central New Jersey.

Post Earnings Conference Call

Representatives of the Company will hold a conference call for investors at
10:00 a.m. Eastern Time on October 23, 2008 regarding highlights of the
Company's third quarter 2008 financial results. The call may be accessed by
dialing 1-800-860-2442 (Domestic) or 1-412-858-4600 (International). Internet
access to the call is also available (listen only) at www.providentnj.com 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," "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 wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company
wishes to advise 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 undertake and specifically declines any obligation to
publicly release the result of any revisions, which may be made to any
forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or
unanticipated events.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Condition
September 30, 2008 (Unaudited) and December 31, 2007
(Dollars in Thousands)

Assets September 30, December 31,
2008 2007

Cash and due from banks $84,970 $83,737
Federal funds sold - 18,000
Short-term investments 3,664 38,892
Total cash and cash equivalents 88,634 140,629

Investment securities held to
maturity (market value of
$347,193 at September 30, 2008
(unaudited) and
$359,666 at December 31, 2007) 354,112 358,491
Securities available for sale, at fair value 832,659 769,615
Federal Home Loan Bank stock 43,149 39,764

Loans 4,378,148 4,296,291
Less allowance for loan losses 43,329 40,782
Net loans 4,334,819 4,255,509

Foreclosed assets, net 3,556 1,041
Banking premises and equipment, net 77,078 79,138
Accrued interest receivable 23,587 24,665
Intangible assets 516,031 520,722
Bank-owned life insurance 125,654 121,674
Other assets 51,826 48,143
Total assets $6,451,105 $6,359,391

Liabilities and Stockholders' Equity
Deposits:
Demand deposits $1,732,534 $1,553,625
Savings deposits 904,596 1,031,725
Certificates of deposit
of $100,000 or more 431,744 480,362
Other time deposits 1,067,003 1,159,108
Total deposits 4,135,877 4,224,820

Mortgage escrow deposits 19,648 18,075
Borrowed funds 1,244,794 1,075,104
Other liabilities 35,218 40,598
Total liabilities 5,435,537 5,358,597

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 59,609,837
shares outstanding at
September 30, 2008, and 59,646,936
shares outstanding at
December 31, 2007 832 832
Additional paid-in capital 1,013,080 1,009,120
Retained earnings 451,856 437,503
Accumulated other comprehensive income 186 4,335
Treasury stock at cost (384,852) (383,407)
Unallocated common stock
held by Employee Stock
Ownership Plan (65,534) (67,589)
Common Stock acquired by the
Directors' Deferred Fee Plan (7,690) (7,759)
Deferred compensation - Directors'
Deferred Fee Plan 7,690 7,759
Total stockholders' equity 1,015,568 1,000,794
Total liabilities and
stockholders' equity $6,451,105 $6,359,391

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and Nine Months Ended September 30, 2008 and 2007 (Unaudited)
(Dollars in Thousands, Except Per Share Data)

Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(Unaudited) (Unaudited)
Interest income:
Real estate
secured loans $42,465 $42,791 $124,406 $125,315
Commercial loans 10,665 11,547 32,568 29,880
Consumer loans 9,106 10,227 27,932 29,061
Investment
securities 3,606 3,802 10,860 11,664
Securities
available
for sale 10,770 9,418 32,372 28,614
Other short-term
investments 26 37 329 115
Federal funds - 5 164 110
Total interest
income 76,638 77,827 228,631 224,759

Interest expense:
Deposits 20,133 30,307 68,945 83,663
Borrowed funds 11,154 8,237 32,577 24,501
Total interest
expense 31,287 38,544 101,522 108,164
Net interest
income 45,351 39,283 127,109 116,595

Provision for
loan losses 3,800 1,300 6,600 2,800

Net interest
income after
provision for
loan losses 41,551 37,983 120,509 113,795

Non-interest income:
Fees 7,281 6,435 18,287 18,599
Gain on insurance
settlement - - - 5,947
Bank-owned life
insurance 1,320 1,339 3,980 4,026
Net (loss) gain on
securities
transactions (966) 2 (565) (61)
Other income 140 297 1,525 1,490
Total
non-interest
income 7,775 8,073 23,227 30,001

Non-interest expense:
Compensation and
employee benefits 16,591 20,842 50,768 54,784
Net occupancy expense 5,195 4,938 15,626 14,451
Data processing
expense 2,296 2,249 6,903 6,913
Amortization of
intangibles 1,373 1,677 4,706 4,915
Advertising and
promotion 1,160 1,089 2,989 3,341
Other operating
expenses 5,343 4,916 16,210 14,775
Total
non-interest
expense 31,958 35,711 97,202 99,179
Income
before
income tax
expense 17,368 10,345 46,534 44,617
Income tax expense 4,205 2,085 12,325 11,932
Net income $13,163 $8,260 $34,209 $32,685

Basic earnings
per share $0.23 $0.14 $0.61 $0.55
Average basic
shares outstanding 56,078,691 58,968,076 56,006,174 59,787,076

Diluted earnings
per share $0.23 $0.14 $0.61 $0.55
Average diluted
shares outstanding 56,078,870 58,968,076 56,006,234 59,787,076

PROVIDENT FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except share data) (Unaudited)

At or for the Three At or for the Nine
Months Ended Months Ended
September 30, September 30,
2008 2007 2008 2007
INCOME STATEMENT:
Net interest income $45,351 $39,283 $127,109 $116,595
Provision for
loan losses 3,800 1,300 6,600 2,800
Non-interest income 7,775 8,073 23,227 30,001
Non-interest expense 31,958 35,711 97,202 99,179
Income before
income tax expense 17,368 10,345 46,534 44,617
Net income 13,163 8,260 34,209 32,685
Basic earnings
per share $0.23 $0.14 $0.61 $0.55
Diluted earnings
per share $0.23 $0.14 $0.61 $0.55
Interest rate spread 2.96% 2.53% 2.74% 2.55%
Net interest margin 3.27% 2.97% 3.08% 3.00%

PROFITABILITY:
Annualized return
on average assets 0.82% 0.53% 0.72% 0.73%
Annualized return
on average equity 5.17% 3.18% 4.53% 4.22%
Annualized non-interest
expense to
average assets 1.98% 2.30% 2.04% 2.21%
Efficiency ratio (1) 60.16% 75.41% 64.66% 67.65%

ASSET QUALITY:
Non-accrual loans $35,281 $11,023
Non-performing loans 35,281 11,023
Foreclosed assets 3,556 600
Non-performing
loans to
total loans 0.81% 0.26%
Non-performing
assets to
total assets 0.60% 0.19%
Allowance for
loan losses $43,329 $37,591
Allowance for
loan losses to
non-performing loans 122.81% 341.02%
Allowance for
loan losses to
total loans 0.99% 0.89%

AVERAGE BALANCE
SHEET DATA:
Assets $6,419,753 $6,159,799 $6,365,479 $6,008,416
Loans, net 4,293,132 4,117,244 4,244,900 3,975,486
Earning assets 5,548,275 5,283,844 5,501,514 5,174,565
Core deposits 2,636,521 2,580,743 2,611,346 2,469,072
Borrowings 1,227,084 785,760 1,136,553 785,636
Interest-bearing
liabilities 4,889,180 4,580,544 4,837,484 4,443,964
Stockholders'
equity 1,012,422 1,029,610 1,009,190 1,036,157
Average yield on
interest-earning
assets 5.51% 5.87% 5.54% 5.80%
Average cost of
interest-bearing
liabilities 2.55% 3.34% 2.80% 3.25%

Notes
(1) Efficiency Ratio Calculation
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Net interest income $45,351 $39,283 $127,109 $116,595
Non-interest income 7,775 8,073 23,227 30,001
Total income $53,126 $47,356 $150,336 $146,596

Non-interest expense $31,958 $35,711 $97,202 $99,179

Expense/Income: 60.16% 75.41% 64.66% 67.65%

Average Quarterly Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands)

September 30, June 30,
2008 2008
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning
Assets:
Federal Funds
Sold and
Other
Short-Term
Investments $4,651 $26 2.28% $12,227 $93 3.05%
Investment
Securities (1) 354,603 3,606 4.07 354,012 3,601 4.07
Securities
Available
for Sale 854,981 10,212 4.78 887,401 10,557 4.76
Federal Home
Loan Bank
Stock 40,908 558 5.43 34,537 758 8.83
Net Loans (2)
Total
Mortgage
Loans 3,001,010 42,465 5.65 2,901,165 40,554 5.60
Total
Commercial
Loans 670,535 10,665 6.33 679,636 10,621 6.29
Total
Consumer
Loans 621,587 9,106 5.83 623,037 9,147 5.90
Total
Interest-
Earning
Assets 5,548,275 76,638 5.51 5,492,015 75,331 5.50

Non-Interest
Earning Assets:
Cash and Due
from Banks 84,333 74,823
Other Assets 787,145 784,470
Total Assets $6,419,753 $6,351,308

Interest-Bearing
Liabilities:
Demand
Deposits $1,249,566 5,725 1.82% $1,178,700 5,110 1.74%
Savings
Deposits 920,365 2,273 0.98 965,877 2,446 1.02
Time
Deposits 1,492,165 12,135 3.24 1,570,383 14,666 3.76
Total
Deposits 3,662,096 20,133 2.19 3,714,960 22,222 2.41

Total
Borrowings 1,227,084 11,154 3.62 1,102,742 10,540 3.84
Total
Interest-
Bearing
Liabilities 4,889,180 31,287 2.55 4,817,702 32,762 2.74

Non-Interest
Bearing
Liabilities 518,151 524,333
Total
Liabilities 5,407,330 5,342,035
Stockholders'
Equity 1,012,422 1,009,273
Total
Liabilities
& Stockholders'
Equity $6,419,753 $6,351,308

Net interest
income $45,351 $42,569

Net interest
rate spread 2.96% 2.76%
Net interest-
earning
assets $659,095 $674,313

Net interest
margin (3) 3.27% 3.10%
Ratio of interest-
earning assets to
interest-bearing
liabilities 1.13x 1.14x

(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.

The following table summarizes the net interest margin for the previous
year, inclusive.

9/30/08 6/30/08 3/31/08 12/31/07 9/30/07
3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr.
Interest-Earning
Assets:
Securities 4.59% 4.66% 4.67% 4.55% 4.55%
Net Loans 5.78% 5.76% 5.90% 6.09% 6.24%
Total Interest-
Earning Assets 5.51% 5.50% 5.63% 5.76% 5.87%

Interest-Bearing
Liabilities
Total Deposits 2.19% 2.41% 2.87% 3.11% 3.17%
Total Borrowings 3.62% 3.84% 4.06% 4.19% 4.16%
Total Interest-
Bearing
Liabilities 2.55% 2.74% 3.14% 3.33% 3.34%

Interest Rate
Spread 2.96% 2.76% 2.49% 2.43% 2.53%
Net Interest
Margin 3.27% 3.10% 2.87% 2.84% 2.97%
Ratio of Interest-
Earning Assets to
Interest-Bearing
Liabilities 1.13x 1.14x 1.14x 1.14x 1.15x

Average YTD Balance
NET INTEREST MARGIN ANALYSIS
(Unaudited) (Dollars in thousands)

September 30, September 30,
2008 2007
Average Average Average Average
Balance Interest Yield Balance Interest Yield
Interest-
Earning
Assets:
Federal Funds
Sold and
Other Short-Term
Investments $20,182 $493 3.27% $5,561 $225 5.40%
Investment
Securities (1) 354,656 10,860 4.08 377,502 11,664 4.12
Securities
Available
for Sale 843,576 30,300 4.79 785,987 26,876 4.56
Federal Home
Loan Bank
Stock 38,200 2,072 7.25 30,029 1,738 7.74
Net Loans (2)
Total Mortgage
Loans 2,933,316 124,406 5.66 2,795,469 125,315 5.98
Total
Commercial
Loans 683,942 32,568 6.36 554,718 29,880 7.20
Total Consumer
Loans 627,642 27,932 5.93 625,299 29,061 6.21
Total Interest-
Earning
Assets 5,501,514 228,631 5.54 5,174,565 224,759 5.80

Non-Interest
Earning Assets:
Cash and Due
from Banks 80,175 89,151
Other Assets 783,790 774,700
Total Assets $6,365,479 $6,008,416

Interest-Bearing
Liabilities:
Demand
Deposits $1,181,644 17,315 1.96% $787,590 14,152 2.40%
Savings
Deposits 961,161 7,830 1.09 1,207,087 14,757 1.63
Time Deposits 1,558,126 43,800 3.75 1,663,651 54,754 4.40
Total Deposits 3,700,931 68,945 2.49 3,658,328 83,663 3.06

Total
Borrowings 1,136,553 32,577 3.83 785,636 24,501 4.17
Total Interest-
Bearing
Liabilities 4,837,484 101,522 2.80 4,443,964 108,164 3.25

Non-Interest
Bearing
Liabilities 518,805 528,295
Total
Liabilities 5,356,289 4,972,259
Stockholders'
Equity 1,009,190 1,036,157
Total
Liabilities
& Stockholders'
Equity $6,365,479 $6,008,416

Net interest
income $127,109 $116,595

Net interest
rate spread 2.74% 2.55%
Net interest-
earning assets $664,030 $730,601

Net interest
margin (3) 3.08% 3.00%
Ratio of
interest-earning
assets to
interest-bearing
liabilities 1.14X 1.16x

(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.

The following table summarizes the YTD net interest margin for the
previous three years, inclusive.

Nine Months Ended
9/30/08 9/30/07 9/30/06
Interest-Earning Assets:
Securities 4.64% 4.50% 4.26%
Net Loans 5.81% 6.19% 5.98%
Total Interest-
Earning Assets 5.54% 5.80% 5.51%

Interest-Bearing
Liabilities:
Total Deposits 2.49% 3.06% 2.34%
Total Borrowings 3.83% 4.17% 3.78%
Total Interest
-Bearing
Liabilities 2.80% 3.25% 2.64%

Interest Rate Spread 2.74% 2.55% 2.87%
Net Interest Margin 3.08% 3.00% 3.28%
Ratio of Interest-
Earning Assets to
Total Interest-
Bearing Liabilities 1.14x 1.16x 1.19x

SOURCE Provident Financial Services Inc.

Kenneth J. Wagner, SVP Investor Relations, Provident Financial Services, Inc.,
+1-201-915-5344