Commitment You Can Count On. 2016 Annual Report CORPORATE PROFILE Provident Financial Services, Inc. is the holding company for Provident Bank. Established in 1839, Provident Bank emphasizes “Commitment You Can Count On” in attending to the financial needs of businesses, individuals and families throughout northern and central New Jersey and Bucks County FINANCIAL HIGHLIGHTS (In thousands, except branch data, per share data and percent data) At December 31, Total assets Net loans outstanding Investment securities held to maturity Securities available for sale Deposits Borrowed funds Stockholders’ equity At or for the year ended December 31, Net income Diluted earnings per share Net interest margin Average net interest rate spread Non-performing loans to total loans Allowance for loan losses to total loans Number of branches and the Lehigh Valley in Pennsylvania. The Bank offers a broad array of deposit, loan and investment products, as well as wealth management, trust and fiduciary services through its wholly owned subsidiary, Beacon Trust Company. 2016 2015 2014 $9,500,465 $8,911,657 $8,523,377 6,941,603 6,476,250 6,023,771 488,183 1,040,386 6,553,629 1,612,745 1,251,781 473,684 964,534 469,528 1,074,395 5,923,987 5,792,523 1,707,632 1,509,851 1,196,065 1,144,099 $87,802 $83,722 $ 73,631 $1.38 3.11% 2.98% 0.61% 0.88% 86 $1.33 3.20% 3.07% 0.68% 0.94% 87 $1.22 3.30% 3.18% 0.88% 1.01% 86 A YEAR IN REVIEW Commitment in the face of significant change and conflict produces character. Few could have predicted the wholesale political and economic changes we witnessed during 2016 which began with the Brexit vote that created uncertainty and turmoil in the financial markets, and ended with a Presidential election in our country that surprised many, and was greeted by record performance in our equity markets. Adapting to these changes and their impact on the business climate is a challenge that we readily accept, consistent with our 178-year history of commitment to our customers. At Provident, we have navigated these unpredictable, ever changing waters to produce superior results in the past year: 33 Record Net Income of $87.8 million and Earnings per Share of $1.38 33 Return on Average Assets of 95 basis points 33 Return on Average Tangible Equity of 10.86% 33 Continued increase in our quarterly cash dividend of 11.8%, after giving consideration to the increase we announced in January of 2017 33 Record loan originations totaling $3.09 billion 33 Loan portfolio growth of over 7% 33 Strong deposit growth of $629.6 million, or 10.6% 33 Continued improvement in asset quality Christopher Martin Chairman, President and Chief Executive Officer At Provident, we have navigated these unpredictable, ever changing waters to produce superior results in the past year. ANNUAL REPORT 2016 | 3 PROVIDENT FINANCIAL SERVICES, INC. Our performance continues to be consistent and predictable, as we understand the community banking business and our team conducts our business professionally and efficiently. Our bankers focus on the customer experience and effectively adapt to changing technologies and market demographics, as well as regulatory mandates. We remain well positioned to meet the market’s needs, continuing our focus on eastern Pennsylvania with the opening of a loan production office in Wayne, Pennsylvania in 2016 to meet the growing prospects of the Bucks and Montgomery counties and into Philadelphia. We continue to research and invest in digital technologies and improvements in our mobile, on-line banking, ATMs and branch distribution channels. As our business continues to grow, another challenge arises as we approach the $10 billion asset threshold, a line in the sand established by the Dodd-Frank Act. What does this mean to our business and to you, our stockholders? Under Dodd-Frank, at or around the time we cross $10 billion in assets we will experience: 33 A reduction in debit card interchange fees; 33 Enhanced regulatory stress testing; 33 Increased FDIC Large-Bank insurance assessment; 33 Additional cost of mandatory central clearing of swap activity; and 33 An additional regulator, the Consumer Financial Protection Bureau. In preparing for these changes, we have already begun incurring costs to meet the regulatory burdens of being a $10 billion bank, and we will continue our dialogue with regulators, elected officials and professional trade associations to work toward positive change in the narrative and spirit of Dodd-Frank and its impact on community banking institutions like Provident. The data-dependent Federal Reserve appears poised to raise interest rates in 2017 and our balance sheet is well positioned for this change. Our loan portfolio is over 75% commercial and 60% of loans have variable or adjustable interest rates. Furthermore, our deposit base is over 90% core and we believe that we have minimized the impact of increases in rates by reducing the level of time deposits. Our assessment of our customers’ experiences and preferences is ongoing, enabling us to make the necessary adjustments and additions to our products and services to meet their needs and financial goals. We continue to research an invest in digital technologies and improvements in our mobile, on-line banking, ATMs and branch distribution channels. Our electronic channels handled over 1.3 million transactions in 2016 alone. Innovation is ongoing, and investing in protecting our customers from cyber risk, and assurance of their data integrity and privacy are paramount, both now and in the future. Provident and its employees are committed to serving our customers with honesty, integrity and trust. 4 | ANNUAL REPORT 2016 PROVIDENT FINANCIAL SERVICES, INC. It is so rewarding to see the results of the good work that The Provident Bank Foundation performs, including commitments of more than $1 million in donations in 2016 alone. Beacon Trust, our wealth management business, continued to achieve strong results, driven by listening to our clients and providing engaged and multi-threaded relationships, accompanied by solid investment performance, access to wealth strategists, trust and estate services, and tax planning and preparation. We will continue to invest in new technologies, people and processes to provide our wealth management clients with a level of personal service not available from the large investment and brokerage houses. And within the markets we serve, we are actively seeking out ways to demonstrate an ongoing commitment to our communities. It is so rewarding to see the results of the good work that The Provident Bank Foundation performs, including commitments of more than $1 million in donations in 2016 alone, not to mention the hours of public service by our employees who are personally engaged in many aspects of philanthropy and community volunteerism. As I commented in last year’s stockholder letter, we were “hopeful that the 2016 Presidential election will begin the changes needed to promote growth and stability in the U.S.” At this moment, we have to that opportunity with proposed reduce corporate and individual taxes, remove unnecessary regulations and restrictions, and provide sorely needed infrastructure funding. The economy is producing positive results and the equity markets are reaching record highs every day… we are encouraged by the prospects of growth and strength for our clients. initiatives Many thanks go out to our board of directors, our employees and members of management for their dedication to making Provident Bank the best community bank in the region, as evidenced by being named by Forbes as one of the Top Banks in the U.S. for the second year in a row. And we thank you, our stockholders, for your continued support. Sincerely, Christopher Martin Chairman, President and Chief Executive Officer ANNUAL REPORT 2016 | 5 PROVIDENT FINANCIAL SERVICES, INC. BOARD OF DIRECTORS AND CORPORATE MANAGEMENT D I R E C T O R S Christopher Martin Chairman, President and Chief Executive Officer Laura L. Brooks Former Vice President–Risk Management and Chief Risk Officer, PSEG Matthew K. Harding President and Chief Operating Officer, Levin Management Corporation John Pugliese President, Motors Management Corporation Robert Adamo Former Partner, Deloitte & Touche Frank L. Fekete Managing Partner, Mandel, Fekete & Bloom, CPAs Carlos Hernandez* Former President, New Jersey City University Thomas W. Berry Former Partner, Goldman Sachs & Co. Terence Gallagher President, Battalia Winston Edward O’Donnell Former President, Tradelinks Transport, Inc. MANAGEMENT P R O V I D E N T F I N A N C I A L S E R V I C E S , I N C . Christopher Martin Chairman, President and Chief Executive Officer John Kuntz Executive Vice President, General Counsel and Corporate Secretary P R O V I D E N T B A N K Thomas M. Lyons Executive Vice President and Chief Financial Officer Leonard G. Gleason Senior Vice President and Investor Relations Officer Christopher Martin Chairman, President and Chief Executive Officer Brian Giovinazzi Executive Vice President and Chief Credit Officer Thomas M. Lyons Executive Vice President and Chief Financial Officer Michael A. Raimonde Executive Vice President and Director of Retail Banking Donald W. Blum Executive Vice President and Chief Lending Officer Janet D. Krasowski Executive Vice President and Chief Human Resources Officer Valerie O. Murray Senior Vice President and Chief Wealth Management Officer James A. Christy Senior Vice President and Chief Risk Officer John Kuntz Executive Vice President and Chief Administrative Officer Frank S. Muzio Senior Vice President and Chief Accounting Officer CORPORATE INFORMATION ANNUAL MEETING The annual meeting of stockholders will be held on April 27, 2017 at 10:00 a.m. at the DoubleTree by Hilton Newark Airport Hotel, 128 Frontage Road, Newark, New Jersey. STOCK LISTING The common stock of Provident Financial Services, Inc. is listed on the New York Stock Exchange and trades under the ticker symbol PFS. TRANSFER AGENT Stockholders wishing to update their address, transfer ownership of stock certificates, report lost certificates or inquire regarding other stock registration matters should contact: Broadridge Corporate Issuer Solutions, Inc. P.O. Box 1342 Brentwood, New York 11717 1-888-235-9148 shareholder@broadridge.com CONTACT INFORMATION Information regarding Provident Financial Services, Inc. and Provident Bank is available on our web site: provident.bank For additional information contact: Investor Relations 100 Wood Avenue South Iselin, New Jersey 08830 1 (732) 590-9300 investorrelations@provident.bank INDEPENDENT PUBLIC ACCOUNTANTS KPMG LLP 51 JFK Parkway Short Hills, New Jersey 07078 239 Washington Street Jersey City, NJ 07302 www.Provident.Bank