UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2003
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to ______________________
Commission File Number: 001-31566
PROVIDENT FINANCIAL SERVICES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 42-1547151
- --------------------------------------------- ----------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
830 Bergen Avenue, Jersey City, New Jersey 07306-4599
------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(201) 333-1000
---------------------------------------------------
(Registrant's telephone number including area code)
__________________________________________________________________________
(Former name, former address and former fiscal year if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such requirements for
the past 90 days.
YES X NO ____
-----
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).
YES ____ NO X
-----
As of May 15, 2003, there were issued and outstanding 61,538,300 shares of the
Registrant's Common Stock, par value $0.01 per share.
PROVIDENT FINANCIAL SERVICES, INC.
INDEX TO FORM 10-Q
Item Number Page Number
- ----------- -----------
PART I--FINANCIAL INFORMATION
1. Financial Statements:
Consolidated Statements of Financial Condition
as of March 31, 2003 (unaudited) and December 31, 2002.................................. 3
Consolidated Statements of Operations for
the three months ended March 31, 2003 and 2002 (unaudited).............................. 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 2003 and 2002 (unaudited).................................. 5
Notes to Consolidated Financial Statements (unaudited)................................... 7
2. Management's Discussion and Analysis
of Financial Condition and Results of Operations........................................ 10
3. Quantitative and Qualitative Disclosures About Market Risk............................... 13
4. Controls and Procedures.................................................................. 15
PART II--OTHER INFORMATION
1. Legal Proceedings........................................................................ 15
2. Changes in Securities and Use of Proceeds................................................ 15
3. Defaults Upon Senior Securities.......................................................... 16
4. Submission of Matters to a Vote of Security Holders...................................... 16
5. Other Information........................................................................ 16
6. Exhibits and Reports on Form 8-K......................................................... 17
Signatures............................................................................................. 18
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002..... 19
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002..... 20
2
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Condition
March 31, 2003 (Unaudited) and December 31, 2002
(Dollars in Thousands, except per share data)
ASSETS March 31, 2003 December 31, 2002
------ ----------------- -----------------
Cash and due from banks $ 93,598 $ 101,352
Federal funds sold 70,000 73,000
Short-term investments 25,541 90,503
----------------- -----------------
Total cash and cash equivalents 189,139 264,855
----------------- -----------------
Investment securities (market value of $444,432 (unaudited) and $221,435 at
March 31, 2003 and December 31, 2002, respectively) 435,466 216,119
Securities available for sale, at fair value 1,287,473 1,242,118
Federal Home Loan Bank Stock 23,295 13,356
Loans 1,993,550 2,052,855
Less allowance for loan losses 21,016 20,986
----------------- -----------------
Net loans 1,972,534 2,031,869
----------------- -----------------
Banking premises and equipment, net 43,948 44,005
Accrued interest receivable 16,946 15,842
Intangible assets 24,463 25,405
Bank owned life insurance 68,461 47,659
Other assets 25,650 17,980
----------------- -----------------
Total assets $ 4,087,375 $ 3,919,208
================= =================
LIABILITIES AND EQUITY
----------------------
Deposits:
Demand deposits $ 681,683 $ 1,269,421
Savings deposits 926,593 922,404
Certificates of deposit of $100,000 or more 161,458 160,867
Other time deposits 862,869 890,642
----------------- -----------------
Total deposits 2,632,603 3,243,334
Mortgage escrow deposits 9,971 9,582
Borrowed funds 514,209 323,081
Other liabilities 26,311 17,202
----------------- -----------------
Total liabilities 3,183,094 3,593,199
----------------- -----------------
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;
61,538,300 shares issued; 61,538,300 and 0 shares outstanding at
March 31, 2003 and December 31, 2002, respectively 615 --
Additional paid-in capital 604,999 --
Retained earnings 307,668 314,111
Accumulated other comprehensive income 11,497 11,898
Less: Unallocated common stock held by Employee Stock Ownership Plan (20,498) --
----------------- -----------------
Total stockholders' equity 904,281 326,009
----------------- -----------------
Total Liabilities and Stockholders' Equity $ 4,087,375 $ 3,919,208
================= =================
See accompanying notes to unaudited consolidated financial statements.
3
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three Months ended March 31, 2003 and 2002 (Unaudited)
(Dollars in Thousands, except per share data)
Three months ended
March 31,
-------------------------------------
2003 2002
------------ ------------
Interest income:
Real estate secured loans $ 21,377 $ 24,929
Commercial loans 5,554 3,964
Consumer loans 4,812 5,515
Investment securities 3,688 1,368
Securities available for sale 11,753 7,553
Other short-term investments 68 28
Federal funds 314 336
------------ ------------
Total interest income 47,566 43,693
------------ ------------
Interest expense:
Deposits 12,151 14,164
Borrowed funds 2,768 2,088
------------ ------------
Total interest expense 14,919 16,252
------------ ------------
Net interest income 32,647 27,441
Provision for loan losses 600 600
------------ ------------
Net interest income after provision for loan losses 32,047 26,841
------------ ------------
Non-interest income:
Fees 4,053 3,666
Net gain (loss) on securities transactions (392) 981
Commissions 71 274
Bank owned life insurance 802 697
Other income 555 417
------------ ------------
Total non-interest income 5,089 6,035
------------ ------------
Non-interest expense:
Salaries and employee benefits 12,025 11,527
Net occupancy expense 3,410 3,299
Federal deposit insurance 108 104
Data processing expense 1,618 1,550
Advertising and promotion expense 657 718
Amortization of intangibles 1,195 903
Other operating expenses 4,516 3,950
Contribution to The Provident Bank Foundation 24,000 --
------------ ------------
Total non-interest expenses 47,529 22,051
------------ ------------
Income (loss) before income tax (benefit) expense
and the cumulative effect of a change in
accounting principle $ (10,393) $ 10,825
Income tax (benefit) expense (3,950) 3,382
------------ ------------
Income (loss) before the cumulative effect of a
change in accounting principle (6,443) 7,443
Cumulative effect of a change in accounting principle, net of tax of $0 -- (519)
------------ ------------
Net income (loss) $ (6,443) $ 6,924
============ ============
Basic (loss) per share $ (0.12)
Average basic shares outstanding (from date of conversion) 60,130,912
See accompanying notes to unaudited consolidated financial statements.
4
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three Months ended March 31, 2003 and 2002 (Unaudited)
(Dollars in Thousands)
Three months ended March 31
-------------------------------
2003 2002
------------ ------------
Cash flows from operating activities:
Net income (loss) $ (6,443) $ 6,924
Adjustments to reconcile net income to
net cash provided by operating activities:
Cash contributed to The Provident Bank Foundation 4,800 --
Depreciation and amortization of intangibles 2,628 2,775
Provision for loan losses 600 600
Deferred tax benefit (8,455) (4,345)
Increase in cash surrender value of bank owned life insurance (802) (697)
Net amortization of premiums and discount on securities (71) (90)
Accretion of net deferred loan fees (281) (301)
Amortization of premiums on purchased loans 182 248
Net (gain) loss on investment securities transactions 20 --
Net (gain) on sale of loans (288) (234)
Proceeds from sale of loans 1,618 --
Net loss (gain) on securities available for sale 372 (981)
(Increase) decrease in accrued interest receivable (1,104) 474
Decrease in other assets 5,659 2,903
Increase in mortgage escrow deposits 388 188
Increase (decrease) in other liabilities 9,108 (4,101)
------------ ------------
Net cash provided by operating activities 7,927 3,363
------------ ------------
Cash flows from investing activities:
Proceeds from maturities, calls and
Paydowns of investment securities 10,246 5,668
Purchases of investment securities (229,915) (9,825)
Proceeds from sales of securities
Available for sale 24,987 --
Proceeds from maturities and paydowns of securities available for sale 521,420 37,222
Purchases of securities available for sale (593,203) (166,920)
Purchase of Bank Owned Life Insurance (20,000) --
Net decrease in loans 57,877 59,780
Purchases of premises and equipment, net (1,368) (1,426)
------------ ------------
Net cash used in investing activities (229,956) (75,501)
------------ ------------
Continued
5
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows, continued
Three Months ended March 31, 2003 and 2002 (Unaudited)
(Dollars in Thousands)
Three months ended March 31
------------------------------
2003 2002
-------------- --------------
Cash flows from financing activities:
Net (decrease) increase in deposits $ (610,731) $ 110,182
Proceeds from sale of stock, net 586,414 --
Purchase of ESOP shares, net (20,498) --
Proceeds from FHLB Advances 207,350 10,000
Payments on FHLB Advances (9,315) (16,348)
Net (decrease) in Retail
Repurchase Agreements (6,907) (5,049)
----------- -----------
Net cash provided by
financing activities 146,313 98,785
----------- -----------
Net (decrease) increase in
cash and cash equivalent (75,716) 26,647
Cash and cash equivalents at beginning of period 264,855 107,403
----------- -----------
Cash and cash equivalents at end of period $ 189,139 $ 134,050
=========== ===========
Cash paid during the period for:
Interest on deposits and borrowings $ 14,933 $ 16,212
=========== ===========
Income taxes $ 773 $ 1,800
=========== ===========
Noncash investing activities:
Transfer of loans receivable to
other real estate owned $ -- $ 191
=========== ===========
Transfer of conversion proceeds held in
escrow deposits to stockholder's equity $ 525,989 $ --
=========== ===========
Common stock contributed to The
Provident Bank Foundation $ 19,200 $ --
=========== ===========
See accompanying notes to unaudited consolidated financial statements.
6
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of Provident Financial Services, Inc. (the "Company") and its
wholly-owned subsidiary, The Provident Bank (the "Bank"). Financial Statements
as of December 31, 2002 and earlier are for the Bank.
The interim consolidated financial statements reflect all normal and recurring
adjustments which are, in the opinion of management, considered necessary for a
fair presentation of the financial condition and results of operations for the
periods presented. The results of operations for the three months ended March
31, 2003 are not necessarily indicative of the results of operations that may be
expected for all of 2003.
Certain information and note disclosures normally included in financial
statements and prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted,
pursuant to the rules and regulations of the Securities and Exchange Commission.
These unaudited consolidated financial statements should be read in conjunction
with the December 31, 2002 Annual Report to Stockholders on Form 10-K.
Note 2. Plan of Conversion
On April 26, 2002, the Board of Managers of the Bank approved a Plan of
Conversion which provided for the conversion of the Bank from a New
Jersey-chartered mutual savings bank to a New Jersey-chartered stock savings
bank, pursuant to the rules and regulations of the New Jersey Department of
Banking and Insurance and the Federal Deposit Insurance Corporation. The Plan
provided for the formation of the Company, which now owns 100% of the common
stock of the Bank.
On January 15, 2003, Provident Financial Services, Inc. became the holding
company for the Bank in connection with the completion of the conversion of the
Bank to a stock-chartered savings bank. The Company issued 59,618,300 shares of
its common stock in a subscription offering to the Bank's eligible depositors
and the Bank's Employee Stock Ownership Plan ("ESOP"). The ESOP acquired 576,634
shares of common stock in the conversion and purchased an additional 995,300
shares of common stock at an average price of $15.22 per share between January
16, 2003 and March 31, 2003.
The Company acquired 100% of the stock of the Bank in exchange for 50% of the
net conversion proceeds ($586.2 million) and retained the remaining net proceeds
($293.1 million) at the holding company level. Concurrent with the completion of
the conversion, $4.8 million in cash and 1.92 million shares of common stock
were contributed by the Company to The Provident Bank Foundation. This stock and
cash contribution was recorded as a one time $24.0 million expense in the first
quarter operating results and an increase to capital stock and paid in capital
was recorded for $19.2 million. The Company recorded a tax benefit of $8.4
million related to the contribution expense and a corresponding increase to its
deferred tax assets.
The contribution of cash and common stock to The Provident Bank Foundation is
tax deductible, subject to a limitation based on 10% of the Company's annual
taxable income. The Company is able to carry forward any unused portion of the
deduction for five years following the year in which the contribution is made.
Note 3. Impact of Recent Accounting Pronouncements
In October 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 147, "Acquisitions of
Certain Financial Institutions - an amendment to FASB Statements No. 72 and 144
and FASB Interpretation No. 9."
7
Note 3. Impact of Recent Accounting Pronouncements (continued)
This statement removes acquisitions of financial institutions from the scope of
both Statement 72 and Interpretation 9 and requires that those transactions be
accounted for in accordance with FASB Statements No. 141, "Business
Combinations," and No. 142, "Goodwill and Other Intangible Assets." The
provisions of SFAS No. 147 that relate to the application of the purchase method
of accounting apply to all acquisitions of financial institutions, except
transactions between two or more mutual enterprises. SFAS No. 147 clarifies that
a branch acquisition that meets the definition of a business should be accounted
for as a business combination, otherwise the transaction should be accounted for
as an acquisition of net assets that does not result in the recognition of
goodwill. The provisions of SFAS No. 147 are effective October 1, 2002. The Bank
has previously purchased deposits of other financial institutions and recorded a
core deposit intangible. This Statement will have no effect on the accounting or
amortization of the recorded intangible asset.
On July 20, 2001, the FASB issued Statement No. 142, "Goodwill and Other
Intangible Assets." Statement No. 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized but instead be tested
for impairment at least annually in accordance with the provisions of Statement
No. 142. Statement No. 142 also requires that intangible assets with definite
useful lives be amortized over their respective estimated useful lives to their
estimated residual values and reviewed for impairment in accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The
Bank adopted Statement No. 142 effective January 1, 2002. In 2002, the Bank
determined that the carrying amount of $519,000 of goodwill related to the
acquisition of a mortgage banking company was impaired, and recognized the
impairment charge as a cumulative effect of a change in accounting principle in
accordance with Statement No. 142.
On October 3, 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets," which addresses the financial accounting and
reporting for the impairment or disposal of long-lived assets. While SFAS No.
144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," it retains many of the fundamental
provisions of the Statement. The Statement is effective for fiscal years
beginning after December 15, 2001. The initial adoption of this standard did not
have a significant impact on the Company's financial statements.
Note 4. Comprehensive Income
For the three month periods ended March 31, 2003 and 2002, total comprehensive
income (loss), representing net income (loss) plus or minus other items recorded
directly in equity, such as the change in unrealized gains or losses on
securities available for sale amounted to ($6,844,000) and $3,119,000,
respectively.
Note 5. Loss per Share
The basic (loss) per share is calculated by dividing the results of operations
of ($7,423,000) by the weighted average shares outstanding from January 15,
2003, the date the Bank completed its Plan of Conversion, through March 31,
2003.
8
Note 6. Loans and Allowance for Loan Loss
Loans receivable at March 31, 2003, (unaudited) and December 31, 2002, are
summarized as follows (in thousands):
March 31, December 31,
2003 2002
----------- -----------
Mortgage loans:
Residential $ 702,307 $ 699,469
Commercial 423,727 437,676
Multifamily 77,546 77,006
Commercial construction 92,668 96,028
----------- -----------
Total mortgage loans 1,296,248 1,310,179
----------- -----------
Mortgage warehouse loans 231,574 276,383
Commercial loans 190,586 189,983
Consumer loans 274,577 275,812
----------- -----------
Total loans 696,737 742,178
----------- -----------
Premium on purchased loans 2,130 2,123
Less net deferred fees 1,565 1,625
----------- -----------
$ 1,993,550 $ 2,052,855
=========== ===========
The activity in the allowance for loan losses for the three months ended March
31, 2003 and 2002 (in thousands):
Three months ended
March 31,
----------------------
2003 2002
--------- ----------
(Unaudited)
Balance at beginning of period $ 20,986 $ 21,909
Provision charged to operations 600 600
Recoveries of loans previously
charged off 161 232
Loans charged off 731 1,059
--------- ----------
Balance at end of period $ 21,016 $ 21,682
========= ==========
Note 7. Deposits
Deposits at March 31, 2003, (unaudited) and December 31, 2002, are summarized as
follows (in thousands):
March 31, December 31,
2003 2002
------------- -----------
Savings deposits $ 926,593 $ 922,404
Money market accounts 100,165 101,489
NOW accounts 293,670 309,281
Non-interest bearing deposits 287,848 332,662
Conversion escrow account - 525,989
Certificates of deposits 1,024,327 1,051,509
------------- -----------
$ 2,632,603 $ 3,243,334
============= ===========
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Certain statements contained herein are not based on historical facts and 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 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.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2003 AND DECEMBER 31, 2002
Total assets at March 31, 2003 increased $168.2 million or 4.29% to $4.1 billion
compared to $3.9 billion at December 31, 2002. This change in assets is
primarily attributable to increases in securities held to maturity and available
for sale and other assets, that were partially offset by decreases in cash and
cash equivalents and net loans.
Net loans at March 31, 2003 decreased $59.3 million or 2.92% to $1.97 billion
compared to $2.03 billion at December 31, 2002. Residential mortgage loans
increased $2.8 million or 0.41% to $702.3 million for the three months ended
March 31, 2003 compared to $699.5 million at December 31, 2002. Residential
mortgage loan originations totaled $97.8 million, repayments (excluding
scheduled amortization) totaled $83.5 million and residential loans sales
totaled $1.6 million for the quarter ended March 31, 2003, compared to
originations of $118.0 million, repayments (excluding scheduled amortization) of
$118.8 million and residential loan sales of $15.2 million in the fourth quarter
of 2002. Commercial real estate loans decreased $13.9 million or 3.19% to $423.7
million at March 31, 2003 compared to $437.7 million at December 31, 2002.
Multi-family loans increased $540,000 to $77.5 million at March 31, 2003
compared to $77.0 million at December 31, 2002. Construction loans decreased
$3.4 million or 3.5% to $92.7 million at March 31, 2003 compared to $96.0
million at December 31, 2002. Long-term interest rates, which have remained at
historically low levels, have contributed to the continued high volume of
refinance activity in all real estate secured loans. Commercial loans increased
$603,000 or 0.32% to $190.6 million at March 31, 2003 compared to $190.0 million
at December 31, 2002. Mortgage warehouse loans decreased $44.8 million or 16.22%
to $231.6 million at March 31, 2003 compared to $276.4 million at December 31,
2002. The decrease in mortgage warehouse loans was the result of lower fixed
rate loan origination volume and line usage by mortgage bankers. Consumer loans
decreased $1.2 million or 0.45% to $274.6 million at March 31, 2003 compared to
$275.8 million at December 31, 2002. Retail loans, which consist of 1 - 4 family
residential mortgages and consumer loans, such as fixed rate home equity loans
and lines of credit, totaled $976.9 million and accounted for 49.03% of the loan
portfolio at March 31, 2003 compared to $975.3 million or 47.53% of the
portfolio at December 31, 2002. Commercial loans, consisting of commercial real
estate, multi-family, construction, mortgage warehouse and commercial loans,
totaled $1.016 billion, accounting for 50.97% of the loan portfolio at March 31,
2003 compared to $1.077 billion or 52.47% at December 31, 2002.
Total non-performing loans totaled $6.5 million at March 31, 2003 compared to
$8.5 million at December 31, 2002 and $5.5 million at March 31, 2002.
Non-performing assets were $6.5 million and $8.5 million at March 31, 2003 and
December 31, 2002, respectively, compared to $5.7 million at March 31, 2002.
Total non-performing loans as a percentage of total loans were 0.33% at March
31, 2003 compared to 0.41% at December 31, 2002 and 0.29% at March 31, 2002. The
allowance for loan losses as a percentage of non-performing loans was 323.37% at
March 31, 2003 compared to 246.55% at December 31, 2002
10
and 392.93% at March 31, 2002. The allowance for loan losses as a percentage of
total loans increased 3 basis points to 1.05% at March 31, 2003 compared to
1.02% at December 31, 2002 and decreased 6 basis points from 1.11% at March 31,
2002.
The calculation of the allowance for loan losses is a critical accounting policy
of the Bank. Provisions for loan losses will continue to be based upon the
assessment of the overall loan portfolio and the underlying collateral, trends
in non-performing loans, current economic conditions and other relevant factors
in order to maintain the allowance for loan losses at adequate levels to provide
for estimated losses. Although management uses the best information available,
the level of the allowance for loan losses remains an estimate that is subject
to significant judgment and short-term change.
Investment securities held to maturity increased $219.3 million or 101.49% to
$435.5 million at March 31, 2003, compared to $216.1 million at December 31,
2002. The increase in the held to maturity portfolio was attributable to the
purchase of $200 million in mortgage backed securities with funds borrowed from
the Federal Home Loan Bank during the quarter ended March 31, 2003, as part of a
leverage strategy. Securities available for sale increased $45.4 million or
3.65% to $1.29 billion at March 31, 2003 compared to $1.24 billion at December
31, 2002. The increase in the available for sale portfolio can be attributed
primarily to the re-investment of principal prepayments on loans.
Cash and cash equivalents decreased $75.7 million or 28.59% to $189.1 million at
March 31, 2003 from $264.9 million at December 31, 2002. Short-term investments
decreased $65.0 million or 71.78% to $25.5 million at March 31, 2003 from $90.5
million at December 31, 2002. This decrease is primarily attributable to the
purchase of $20.0 million in Bank Owned Life Insurance and the purchase of stock
for the ESOP totaling $20.5 million.
Bank Owned Life Insurance increased $20.8 million or 43.65% to $68.5 million at
March 31, 2003, compared to $47.7 million at December 31, 2002, as a result of
an additional $20.0 million purchase. Other assets increased $7.7 million or
42.66% to $26.7 million at March 31, 2003 compared to $18.0 million at December
31, 2002. This increase was primarily attributable to an increase of $8.5
million in deferred tax assets as a result of the tax benefit associated with
the contribution to The Provident Bank Foundation.
Total deposits decreased $610.7 million or 18.83% to $2.6 billion at March 31,
2003 from $3.2 billion at December 31, 2002. Total core deposit accounts,
consisting of all savings and demand deposit accounts, decreased $583.5 million
or 26.62% to $1.61 billion at March 31, 2003 from $2.19 billion at December 31,
2002. The largest decrease was in demand deposit accounts, which decreased
$587.7 million or 46.30% to $681.7 million at March 31, 2003 from $1.27 billion
at December 31, 2002. This decrease is primarily attributable to the funds held
in the conversion escrow account totaling $526 million that were held for the
purchase of Provident Financial Services, Inc. common stock. Savings deposits
increased $4.2 million or 0.45% to $926.6 million at March 31, 2003 compared to
$922.4 million at December 31, 2002. Total certificates of deposit decreased
$27.2 million or 2.59% to $1.02 billion at March 31, 2003 compared to $1.05
billion at December 31, 2002.
Total borrowed funds increased $191.1 million or 59.16% to $514.2 million at
March 31, 2003 from $323.1 million at December 31, 2002. Federal Home Loan Bank
borrowings increased $198.0 million or 74.13% to $465.1 million at March 31,
2003 compared to $267.1 million at December 31, 2002. During the first quarter,
the Company continued implementing a leverage strategy, borrowing $200 million
from the Federal Home Loan Bank and investing the proceeds in mortgage backed
securities.
Total stockholders' equity increased $578.3 million or 177.38% to $904.3 million
at March 31, 2003 compared to $326.0 million at December 31, 2002. This increase
was primarily due to an increase in additional paid in capital in the amount of
$605.6 million as a result of the sale of stock in the conversion. This was
partially offset by a reduction in equity of $20.5 million for the purchase of
stock for the ESOP and a reduction of $6.4 million in retained earnings.
Liquidity and Capital Resources. The Bank's sources of funds are primarily from
deposits, scheduled amortization of loans, loan repayments, scheduled maturities
of investments and cash flows from mortgage-backed securities. Scheduled loan
amortizations are fairly predictable sources of funds while loan and
mortgage-backed securities prepayments and deposit flows are influenced by
interest rates, local economic conditions and the competitive marketplace. An
additional source of liquidity that is available to the Bank, should the need
arise, is a $100.0 million overnight line of credit from the Federal Home Loan
Bank of New York. As of March 31, 2003 and December 31, 2002, the Bank did not
have any outstanding borrowings against its overnight line of credit.
11
Cash needs for the three months ended March 31, 2003 were provided primarily
from proceeds from Federal Home Loan Bank borrowings and principal payments on
loans and mortgage-backed securities. The cash was used primarily to purchase
securities for the investment portfolio and bank-owned life insurance.
As of March 31, 2003, the Bank exceeded all regulatory capital requirements as
follows:
As of March 31, 2003
--------------------------------------------------------------------
Capital
--------------------------------------------------------------------
Required Actual
---------------------------------- ------------------------------
Percent of Percent of
Amount Assets (1) Amount Assets (1)
-------- -------------- ----------- -------------
(Dollars in Thousands)
Regulatory Tier 1 leverage capital............. $ 157,257 4.0% $ 870,231 22.14%
Tier 1 risk-based capital...................... 94,653 4.0 870,231 36.78
Total risk-based capital....................... 189,307 8.0 891,328 37.67
_____________
(1) For purposes of calculating Regulatory Tier 1 leverage capital, assets are
based on adjusted total leverage assets. In calculating Tier 1 risk-based
capital and total risk-based capital, assets are based on total
risk-weighted assets.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND
2002
General. For the three months ended March 31, 2003, the Company reported a net
loss of $6.4 million compared to net income of $6.9 million for the three months
ended March 31, 2002. The net loss for the first quarter of 2003 was due to the
one time expense associated with the $15.6 million, net of tax, contribution to
The Provident Bank Foundation. For the quarter ended March 31, 2003 basic (loss)
per share was $(0.12), which includes the results of operations from January 15,
2003, the date the Bank's conversion to a stock savings bank was completed,
through March 31, 2003.
Net Interest Income. Total net interest income increased $5.2 million or 18.98%
to $32.6 million for the quarter ended March 31, 2003 compared to $27.4 million
for the quarter ended March 31, 2002. Interest income for the first quarter of
2003 increased $3.9 million or 8.86% to $47.6 million compared to $43.7 million
for the comparable quarter in 2002. Interest expense decreased $1.3 million or
8.20% to $14.9 million for the quarter ended March 31, 2003 compared to $16.3
million for the quarter ended March 31, 2002. Net interest margin decreased 52
basis points to 3.50% for the quarter ended March 31, 2003 compared to 4.02% for
the quarter ended March 31, 2002 and the net interest margin decreased 48 basis
points compared to 3.98% for the year ended December 31, 2002. The interest rate
spread decreased 68 basis points to 2.93% at March 31, 2003, compared to 3.61%
for the comparable quarter in 2002 and the interest rate spread decreased 82
basis points from 3.75% for the year ended December 31, 2002. The decrease in
the net interest margin and net interest spread is attributable to the temporary
investment of conversion proceeds in short-term U.S. Treasury Bills and the
re-investment of cash flows from higher yielding loans and mortgage backed
securities in loans and securities that have lower current rates.
The increase in interest income was primarily attributable to increases in
income on investment securities held to maturity and securities available for
sale. Income on investment securities held to maturity increased $2.3 million or
169.59% to $3.7 million at March 31 2003 compared to $1.4 million at March 31,
2002. This increase is attributable to leverage transactions totaling $300.0
million that were completed in December 2002 and January and February 2003.
Securities that were purchased with the proceeds from Federal Home Loan Bank
borrowings were designated as held to maturity. Income on securities available
for sale increased $4.2 million or 55.61% to $11.8 million for the three months
ended March 31, 2003 compared to $7.6 million for the three months ended March
31, 2002. The increase in income on securities available for sale was primarily
attributable to the growth in the investment portfolio from cash flows from the
lending portfolios, deposit inflows and the investment of conversion proceeds.
Interest paid on deposit accounts decreased $2.0 million or 14.21% to $12.2
million for the quarter ended March 31, 2003 compared to $14.2 million for the
quarter ended March 31, 2002. Reductions in interest rates on all deposit
products contributed to the decline in interest expense. Interest rates on
maturing certificates of deposits are renewing at lower current interest rates.
The average cost of interest bearing liabilities decreased 62 basis points to
2.17% at March 31, 2003 compared to
12
2.79% at March 31, 2002. Interest expense on borrowed funds increased $680,000
or 32.57% to $2.8 million for the three months ended March 31, 2003 compared to
$2.1 million at March 31, 2002. This increase in expense on borrowed funds is
attributable to the increase in borrowings from the Federal Home Loan Bank as
part of a leverage strategy.
Provision for Loan Losses. The Bank establishes provisions for loan losses,
which are charged to operations, in order to maintain the allowance for loan
losses at a level management considers necessary to absorb probable incurred
credit losses in the loan portfolio. In determining the level of the allowance
for loan losses, management considers past and current loss experiences,
evaluation of real estate collateral, current economic conditions, volume and
type of lending, adverse situations that may affect a borrower's ability to
repay the loan and the levels of non-performing and other classified loans. The
amount of the allowance is based on estimates and the ultimate losses may vary
from such estimates as more information becomes available or events change.
Management assesses the allowance for loan losses on a quarterly basis and makes
provision for loan losses in order to maintain the adequacy of the allowance.
For the three months ended March 31, 2003 and March 31, 2002 the provision for
loan losses was $600,000. Net charge offs for the three months ended March 31,
2003 were $569,000 compared to net charge offs of $827,000 for the three months
ended March 31, 2002. The allowance for loan losses was $21.0 million or 1.05%
of total loans at March 31, 2003 compared to $21.7 million or 1.11% of total
loans at March 31, 2002 and $21.0 million or 1.02% of total loans at December
31, 2002. At March 31, 2003, the allowance for loan losses as a percentage of
non-performing loans decreased to 323.37% from 392.93% at March 31, 2002 and
increased from 246.55% at December 31, 2002.
Non-Interest Income. Non-interest income decreased $946,000 to $5.1 million for
the quarter ended March 31, 2003 compared to $6.0 million for the comparable
period in 2002. For the three months ended March 31, 2003, the Company recorded
a net loss of $392,000 on available for sale securities compared to a net gain
of $981,000 for the comparable period in 2002, due primarily to a gain of
$959,000 in the 2002 quarter related to the receipt of stock as the result of an
insurance company demutualization. The net (loss) on available for sale
securities is attributable to the net gain or (loss) recorded monthly on
paydowns on mortgage backed securities. Fees on retail and business accounts
increased $387,000 or 10.56% to $4.1 million for the three months ended March
31, 2003 compared to $3.7 million for the three months ended March 31, 2002.
Other retail fees, such as wire transfer fees and safe deposit box rental fees,
increased $138,000 or 33.10% to $555,000 at March 31, 2003 compared to $417,000
for the comparable period in 2002.
Non-Interest Expense. Non-interest expense increased $25.5 million or 115.54% to
$47.5 million for the quarter ended March 31, 2003 compared to $22.1 million for
the comparable quarter in 2002. On January 15, 2003, the Company contributed $24
million in cash and stock to The Provident Bank Foundation, accounting for the
increase in non-interest expense. Excluding this charge, the efficiency ratio
decreased to 61.71% at March 31, 2003 compared to 67.86% at March 31, 2002.
Salary and benefit expense increased $498,000 or 4.32% to $12.0 million for the
three months ended March 31, 2003 compared to $11.5 million for the three months
ended March 31, 2002. Amortization of intangibles increased $292,000 or 32.34%
to $1.2 million for the three months ended March 31, 2003 compared to $903,000
at March 31, 2002. This increase was attributable to the amortization of the
core deposit intangible associated with the acquisition of two branch offices
from another financial institution in September 2002. Net occupancy expenses
increased $111,000 or 3.36% to $3.4 million at March 31, 2003, compared to $3.3
million at March 31, 2002. Other operating expenses increased $566,000 or 14.33%
to $4.5 million at March 31, 2003, compared to $4.0 million at March 31, 2002.
This increase was attributable to a $466,000 increase in corporate insurance,
primarily due to increases in Directors and Officers liability insurance
premiums and $332,000 in miscellaneous charges. This was partially offset by a
$109,000 or 21.25% decrease in consultant expense.
Income Tax Expense (Benefit). Income tax benefit for the three months ended
March 31, 2003 was $4.0 million compared to income tax expense of $3.4 million
for the three months ended March 31, 2002. The tax benefit was due to the pretax
loss that was recorded as a result of the contribution to the charitable
foundation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Qualitative Analysis. Interest rate risk is the exposure of a bank's current and
future earnings and capital arising from adverse movements in interest rates.
The Bank's most significant risk exposure is interest rate risk. The guidelines
of the Bank's interest rate risk policy seek to limit the exposure to changes in
interest rates that affect the underlying economic value of assets and
liabilities, earnings and capital. To minimize interest rate risk, twenty and
thirty year fixed-rate mortgage loans may be sold at origination. Commercial
real estate loans generally have interest rates that reset in five years and
other commercial loans such as construction loans, commercial lines of credit
and mortgage warehouse loans reset with changes in the prime rate, the
13
federal funds rate or LIBOR. Investment securities purchases generally have
maturities of five years or less and mortgage-backed securities have weighted
average lives between three and five years.
The Asset/Liability Committee meets on a monthly basis to review the impact of
interest rate changes on net interest income, net interest margin, net income
and economic value of equity. The Asset/Liability Committee reviews a variety of
strategies that project changes in asset or liability mix, various interest rate
scenarios and the impact of those changes on projected net interest income and
net income.
The Bank's strategy for liabilities has been to maintain a stable core-funding
base by focusing on core deposit account acquisition and increasing products and
services per household. A consistent focus on core deposit accounts has led to a
shift in the funding base to less interest rate sensitive liabilities. The
Bank's ability to retain maturing certificate of deposit accounts is the result
of our strategy to remain competitively priced within our marketplace, typically
within the upper quartile of rates offered by our competitors. Pricing strategy
may vary depending upon current funding needs and the ability of the Bank to
fund operations through alternative sources, primarily by accessing short-term
lines of credit with the Federal Home Loan Bank during periods of pricing
dislocation.
Quantitative Analysis. Current and future sensitivity to changes in interest
rates are measured through the use of balance sheet and income simulation
models. The analyses capture changes in net interest income using flat rates as
a base, a most likely rate forecast and rising and declining interest rate
forecasts. Changes in net interest income and net income for the forecast
period, generally twelve to twenty-four months, are measured and compared to
limits for acceptable change.
The following sets forth the result of the net interest income model as of March
31, 2003.
Change in Interest Net Interest Income
Rates in Basis Points Amount ($) Change ($) Change (%)
---------- ---------- ----------
(Rate Shock) (Dollars in thousands)
------------ ----------------------
-100 $ 161,961 $ 5,695 3.64%
Static 156,266 -- --
+100 147,793 (8,473) (5.42)%
+200 138,769 (17,497) (11.20)%
+300 129,423 (26,843) (17.18)%
The above table indicates that as of March 31, 2003, in the event of an
immediate and sustained 200 basis point increase in interest rates, based on a
twelve month forward projection, net interest income would decrease 11.20% or
$17.5 million. In the event of a 100 basis point decrease in interest rates, net
interest income is projected to increase 3.64% or $5.7 million.
Another measure of interest rate sensitivity is to model changes in economic
value of equity through the use of immediate and sustained interest rate shocks.
The following table illustrates the result of the economic value of equity model
as of March 31, 2003.
Present Value of Equity
as Percent of Present
Present Value of Equity Value of Assets
----------------------- ---------------
Percent
Change in Dollar Dollar Percent Value Present
Interest Rates Amount Change Change Ratio Change
------ ------ ------ ----- ------
(Basis Points) (Dollars in thousands)
-------------- ----------------------
-100 $1,134,028 $ 26,797 2.42% 26.06% 1.34%
Flat 1,107,231 -- -- 25.72% --
+100 1,042,502 (64,729) (5.85)% 24.69% (3.99)%
+200 977,473 (129,758) (11.72)% 23.62% (8.17)%
+300 913,407 (193,824) (17.51)% 22.51% (12.46)%
14
The above table indicates that as of March 31, 2003, in the event of an
immediate and sustained 200 basis point increase in interest rates, the present
value of equity is projected to decrease 11.72% or $129.8 million. If rates were
to decrease 100 basis points, the model forecasts a 2.42% or $26.8 million
increase in the present value of equity.
Certain shortcomings are inherent in the methodologies used in the above
interest rate risk measurement. Modeling changes in net interest income requires
the making of certain assumptions regarding prepayment and deposit decay rates,
which may or may not reflect the manner in which actual yields and costs respond
to changes in market interest rates. While we believe such assumptions to be
reasonable, there can be no assurance that assumed prepayment rates and decay
rates will approximate actual future loan prepayment and deposit withdrawal
activity. Moreover, the net interest income table presented assumes that the
composition of our interest sensitive assets and liabilities existing at the
beginning of a period remains constant over the period being measured and also
assumes that a particular change in interest rates is reflected uniformly across
the yield curve regardless of the duration to maturity or repricing of specific
assets and liabilities. Accordingly, although the net interest income table
provides an indication of our interest rate risk exposure at a particular point
in time, such measurement is not intended to and does not provide a precise
forecast of the effect of changes in market interest rates on our net interest
income and will differ from actual results.
Item 4. Controls and Procedures.
Under the supervision and with the participation of management, including our
Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934) as of a date (the "Evaluation Date") within 90 days prior
to the filing date of this report. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of the
Evaluation Date, our disclosure controls and procedures are effective to ensure
that information required to be disclosed in the reports that the Company files
or submits under the Securities Exchange Act of 1934, is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms. There have been no significant changes in Provident Financial
Services, Inc.'s internal controls or in other factors that could significantly
affect these controls subsequent to the Evaluation Date.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities and Use of Proceeds.
On April 26, 2002, the Board of Managers of the Bank approved the Plan of
Conversion, which provided for the conversion of the Bank from a New
Jersey-chartered mutual savings bank to a New Jersey-chartered stock savings
bank, pursuant to the rules and regulations of the New Jersey Department of
Banking and Insurance and the Federal Deposit Insurance Corporation. The Plan of
Conversion provided for the formation of Provident Financial Services, Inc.,
which would own 100% of the common stock of the Bank following the conversion.
The Company's Registration Statement on Form S-1, as amended (Registration No.
333-98241), which registered 61.5 million shares of common stock (par value
$0.01 per share) at $10.00 per share for an aggregate price of $615 million, was
declared effective by the Securities and Exchange Commission on November 12,
2002. The Bank received approval of the Plan of Conversion from the New Jersey
Commissioner of Banking and Insurance. The Federal Deposit Insurance
Corporation, the New Jersey Commissioner of Banking and Insurance and the
Federal Reserve Board approved the establishment of Provident Financial
Services, Inc. The Plan of Conversion was approved at a Special Meeting of
Depositors on January 7, 2003.
On January 15, 2003, the Bank completed the conversion, and the Bank became a
wholly owned subsidiary of Provident Financial Services, Inc. In the
subscription stock offering to eligible depositors of the Bank and the ESOP, the
Company sold 59.6 million shares of its common stock at $10.00 per share for
gross proceeds totaling $596.2 million and net proceeds
15
of $586.2 million after deducting $10.0 million of expenses related to the stock
offering. Sandler O'Neill and Partners, L.P. advised the Company in the stock
offering. Provident Financial Services, Inc.'s common stock commenced trading on
January 16, 2003, on the New York Stock Exchange under the symbol "PFS". At
December 31, 2002, Provident Financial Services, Inc. had no assets or
liabilities and had no business operations. Currently, the Company's activities
consist solely of managing the Bank and investing its portion of the net
proceeds received in the subscription offering.
In connection with the Bank's commitment to its community, the Plan of
Conversion provided for the establishment of a charitable foundation as part of
the conversion. The Company contributed to the foundation cash of $4.8 million
and 1.92 million of authorized but unissued shares of common stock which
amounted to $24 million in aggregate. The Company recognized an expense, net of
income tax benefit, equal to the cash and fair value of the stock in the first
quarter of 2003 of $15.6 million.
Upon completion of the Plan of Conversion, a "liquidation account" was
established in an amount equal to the total equity of the Bank as of the latest
practicable date prior to the conversion. The liquidation account was
established to provide a limited priority claim to the assets of the Bank to
"eligible account holders" and "supplemental eligible account holders," as
defined in the Plan of Conversion, who continue to maintain deposits in the Bank
after the conversion.
In the unlikely event of a complete liquidation of the Bank, and only in such
event, each eligible account holder and supplemental eligible account holder
would receive a liquidation distribution, prior to any payment to the holder of
the Bank's common stock. This distribution would be based upon each eligible
account holder's and supplemental eligible account holder's proportionate share
of the then total remaining qualifying deposits. At the time of the conversion,
the liquidation account, which is an off-balance sheet memorandum account,
amounted to $302.6 million.
The proceeds from the conversion have been initially invested in liquid
short-term government securities and mortgage-backed securities.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Depositors of the Bank approved the Plan of Conversion at a Special Meeting of
Depositors on January 7, 2003.
Item 5. Other Information.
As previously reported in the Company's Annual Report on Form 10-K, the Federal
Deposit Insurance Corporation recently completed an examination relating to the
Bank's compliance with various federal banking regulations, which examination
was unrelated to safety and soundness. In response to the report of examination
relating to the Bank's compliance with various federal banking regulations, the
Bank's Board of Directors has adopted resolutions delivered to the Federal
Deposit Insurance Corporation that direct management to take corrective action
to address the findings of the Federal Deposit Insurance Corporation and that
confirm the oversight obligations of the Board of Directors. The resolutions
adopted by the Board of Directors provide for the Bank to make quarterly reports
to the Federal Deposit Insurance Corporation regarding corrective actions taken,
including the development and implementation of procedures to verify the
accuracy of the Bank's reporting of Home Mortgage Disclosure Act data.
Management believes that significant corrective actions have been taken to date
to improve the Bank's overall regulatory compliance program and further
corrective actions will be implemented. The Federal Deposit Insurance
Corporation will monitor the Bank's ongoing efforts to take corrective actions
and to improve the Bank's overall compliance program. Assuming compliance with
the corrective actions outlined in the resolutions, further regulatory action
regarding the Bank's ongoing regulatory compliance program is not anticipated.
16
Item 6. Exhibits and Reports on Form 8-K.
The following exhibits are filed herewith:
3.1 Certificate of Incorporation of Provident Financial Services, Inc.*
3.2 Bylaws of Provident Financial Services, Inc.*
4.1 Form of Common Stock Certificate of Provident Financial Services, Inc.*
10.1 Form of Employment Agreement between Provident Financial Services, Inc.
and certain executive officers*
10.2 Form of Change in Control Agreement between Provident Financial
Services, Inc. and certain executive officers*
10.3 Employee Savings Incentive Plan*
10.4 Employee Stock Ownership Plan*
10.5 Supplemental Executive Retirement Plan, as amended*
10.6 Supplemental Executive Savings Plan, as amended*
10.7 Retirement Plan for the Board of Directors of The Provident Bank, as
amended*
10.8 The Provident Bank Amended and Restated Board of Directors Voluntary
Fee Deferral Plan*
10.9 Voluntary Bonus Deferral Plan for the Chairman, as amended*
10.10 Voluntary Bonus Deferral Plan, as amended*
99.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
_____________
* Filed as exhibits to Provident Financial Services, Inc.'s Registration
Statement on Form S-1, and any amendments thereto, with the Securities and
Exchange Commission. (Registration No. 333-98241).
(b) Reports on Form 8-K
On January 28, 2003, Provident Financial Services, Inc. filed a Current Report
on Form 8-K that included a press release relating to December 31, 2002 quarter-
and year-end earnings of Provident Financial Services, Inc. and The Provident
Bank.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PROVIDENT FINANCIAL SERVICES, INC.
Date: May 9, 2003 By: /s/ Paul M. Pantozzi
---------------------------
Paul M. Pantozzi
Chairman, Chief Executive
Officer and President
Date: May 9, 2003 By: /s/ Linda A. Niro
---------------------------
Linda A. Niro
Senior Vice President and Chief
Financial Officer
18
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Paul M. Pantozzi, Chairman, Chief Executive Officer and President, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Provident Financial
Services, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
May 9, 2003 /s/ Paul M. Pantozzi
- ------------------------- ---------------------------------
Date Paul M. Pantozzi
Chairman, Chief Executive Officer
and President
19
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Linda A. Niro, Senior Vice President and Chief Financial Officer, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of Provident Financial
Services, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
May 9, 2003 /s/ Linda A. Niro
- ------------------------- --------------------------------
Date Linda A. Niro
Senior Vice President and Chief
Financial Officer
20