Provident Financial Services, Inc. operates as a holding company for The Provident Bank that provides banking services to individuals, families and businesses residing primary in the United States.
The company operates full-service branch offices throughout northern and central New Jersey, Bucks, Lehigh and Northampton counties in Pennsylvania, as well as Queens and Nassau Counties in New York. As a community- and customer-oriented institution, the bank emphasizes personal service and customer...
Provident Financial Services, Inc. operates as a holding company for The Provident Bank that provides banking services to individuals, families and businesses residing primary in the United States.
The company operates full-service branch offices throughout northern and central New Jersey, Bucks, Lehigh and Northampton counties in Pennsylvania, as well as Queens and Nassau Counties in New York. As a community- and customer-oriented institution, the bank emphasizes personal service and customer convenience in serving the financial needs of the individuals, families and businesses residing in its primary market areas. The bank attracts deposits from the general public and businesses primarily in the areas surrounding its banking offices and uses those funds, together with funds generated from operations and borrowings, to originate commercial real estate loans, commercial business loans, residential mortgage loans, and consumer loans. The bank invests in mortgage-backed securities and other permissible investments. The bank also provides fiduciary and wealth management services through its wholly owned subsidiary, Beacon Trust Company and insurance brokerage services through its wholly owned subsidiary, Provident Protection Plus, Inc.
Market Area
As of December 31, 2023, the bank operated a network of full-service banking offices throughout fourteen counties in northern and central New Jersey, as well as three counties in Pennsylvania and two counties in New York. The bank maintains satellite loan production offices in Convent Station, Flemington, Paramus and Sea Girt, New Jersey, as well as in Bethlehem, Newtown and Plymouth Meeting, Pennsylvania and Nassau and Queens County, New York. The bank’s lending activities, though concentrated in the communities surrounding its offices, extend predominantly throughout New Jersey, eastern Pennsylvania and Nassau and Queens County, New York. The bank’s primary market area includes a mix of urban and suburban communities, and has a diversified mix of industries including pharmaceutical, manufacturing, network communications, insurance and financial services, healthcare, and retail.
Lending Activities
The bank originates commercial real estate loans, commercial business loans, fixed-rate and adjustable-rate mortgage loans collateralized by one- to four-family residential real estate and other consumer loans, for borrowers generally located within its primary market area.
The bank originates commercial real estate loans that are secured by income-producing properties, such as multi-family apartment buildings, industrial and retail properties and office buildings. Generally, these loans have maturities of either 5 or 10 years.
The bank has historically provided construction loans for commercial projects, including residential rental and industrial projects, that will be retained as investments by the borrowers and to a lesser extent single family and condominium projects intended for sale. The bank underwrites most construction loans for a term of three years or less. The majority of these loans are underwritten on a floating rate basis. The bank recognizes that there is higher risk in construction lending than permanent lending.
Commercial loans are made to businesses of varying size and type within the bank’s market. The bank lends to established businesses, and the loans are generally secured by business assets, such as equipment, receivables, inventory, real estate or marketable securities. On a limited basis, the bank makes unsecured commercial loans. Most commercial lines of credit are made on a floating interest rate basis and most term loans are made on a fixed interest rate basis, usually with terms of five years or less.
Residential mortgage loans are primarily underwritten to standards that allow the sale of the loans to the secondary markets, primarily to the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac). To manage interest rate risk, the bank has the option to sell fixed-rate residential mortgages that it originates with terms greater than 15 years. However, the bank commonly retains biweekly payment fixed-rate residential mortgage loans with a maturity of 30 years or less and most of the originated adjustable-rate mortgages for its portfolio.
The bank originates consumer loans that are secured, in most cases, by a borrower’s assets. Home equity loans and home equity lines of credit that are secured by a first or second mortgage lien on the borrower’s residence comprise the largest category of the bank’s consumer loan portfolio.
Commercial Real Estate Loans: The bank originates loans secured by mortgages on various commercial income producing properties, including industrial and retail properties and office buildings. Commercial real estate loans were 41.9% of the total loan portfolio as of December 31, 2023. A substantial majority of the bank’s commercial real estate loans are secured by properties located in New Jersey, New York and Pennsylvania.
The bank originates commercial real estate loans with adjustable rates and with fixed interest rates for a period that is generally five to ten years or less, which may adjust after the initial period. Typically these loans are written for maturities of ten years or less and generally have an amortization schedule of 25 or 30 years. As a result, the typical amortization schedule will result in a substantial principal payment upon maturity. The bank generally underwrites commercial real estate loans to a maximum 75% advance against either the appraised value of the property, or its purchase price (for loans to fund the acquisition of real estate), whichever is less. The bank generally requires minimum debt service coverage of 1.20 times. There is a potential risk that the borrower may be unable to pay off or refinance the outstanding balance at the loan maturity date. The bank typically lends to experienced owners or developers who have knowledge and expertise in the commercial real estate market.
Among the reasons for the bank’s continued emphasis on commercial real estate lending is the desire to invest in assets bearing interest rates that are generally higher than interest rates on residential mortgage loans and more sensitive to changes in market interest rates. Commercial real estate loans, however, entail significant additional credit risk as compared to one- to four-family residential mortgage loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience on commercial real estate loans secured by income-producing properties is typically dependent on the successful operation of the related real estate project, and thus may be more significantly impacted by adverse conditions in the real estate market or in the economy generally.
The bank performs extensive due diligence in underwriting commercial real estate loans due to the larger loan amounts and the riskier nature of such loans. The bank assesses and mitigates the risk in several ways, including inspection of all such properties and the review of the overall financial condition of the borrower and guarantors, which may include, for example, the review of the rent rolls and the verification of income. If applicable, a tenant analysis and market analysis are part of the underwriting. Generally, for commercial real estate secured loans in excess of $1.0 million and for all other commercial real estate loans where it is deemed appropriate, the Bank requires environmental professionals to inspect the property and ascertain any potential environmental risks.
In accordance with regulatory guidelines, the bank requires a full independent appraisal for commercial real estate properties. This refinance was for an existing sponsor client that is a large real estate investment group based in New York City that specializes in the purchase of warehouse distribution facilities located in the Northeast and Midwest. The loan has a risk rating of 3 or of acceptable quality and was performing in accordance with its terms and conditions as of December 31, 2023.
Multi-family Loans: The bank underwrites loans secured by multi-family properties that have five or more units. The bank considers multi-family lending a component of the commercial real estate lending portfolio. Multi-family loans were 16.8% of the total loan portfolio as of December 31, 2023. The underwriting standards and procedures that are used to underwrite commercial real estate loans are used to underwrite multi-family loans, except the loan-to-value ratio generally should not exceed 80% of the appraised value of the property, the debt-service coverage should be a minimum of 1.15 times and an amortization period of up to 30 years may be used.
Construction Loans: The bank originates commercial construction loans. Commercial construction lending includes both new construction of residential and commercial real estate projects and the rehabilitation of existing structures.
The bank’s commercial construction financing includes projects constructed for investment purposes (rental property), owner-occupied business properties and to a lesser extent, projects for sale (single family/condominiums). To mitigate the speculative nature of construction loans, the bank may require significant pre-leasing on rental properties; requires that a percentage of the for-sale single-family residences or condominiums be under contract to support construction loan advances; requires other covenants on residential for rental projects depending on whether the project is vertical or horizontal construction; and requires meaningful guarantees from financially strong sponsors. In most cases, for the single family and condominium projects, the bank limits its exposure against houses or units that are not under contract. Similarly, commercial construction loans usually have commitments for significant pre-leasing, or funds are held back until the leases are finalized.
The bank generally underwrites construction loans for a term of three years or less. The majority of the bank’s construction loans are floating-rate loans with a maximum 75% loan-to-value ratio for the completed project.
For all construction loans, the bank requires an independent appraisal, which includes information on market rents and/or comparable sales for competing projects. The bank also obtains personal guarantees, where appropriate, and conducts environmental due diligence as appropriate.
The bank also employs other means to mitigate the risk of the construction lending process. On commercial construction projects that the developer maintains for rental, the bank typically holds back funds for tenant improvements until a lease is executed. For single family and condominium financing, the bank generally requires payment for the release of a unit that exceeds the amount of the loan advance attributable to such unit.
Residential Mortgage Loans: The bank originates residential mortgage loans secured by first mortgages on one- to four-family residences, generally located in the states of New Jersey, New York and the eastern part of Pennsylvania. The bank originates residential mortgages primarily through commissioned mortgage representatives. The bank originates both fixed-rate and adjustable-rate mortgages.
The bank originates fixed-rate fully amortizing residential mortgage loans with principal and interest payments due each month, that typically have maturities ranging from 10 to 30 years. The bank also originates fixed-rate residential mortgage loans with maturities of 10, 15, 20 and 30 years that require the payment of principal and interest on a biweekly basis. Fixed-rate jumbo residential mortgage loans (loans over the maximum that one of the government-sponsored agencies will purchase) are originated with maturities of up to 30 years. The bank offers adjustable-rate mortgage loans with a fixed-rate period of 5, 7 or 10 years prior to the first annual interest rate adjustment. The standard adjustment formula is the one-year constant maturity Treasury rate plus 2.75%, adjusting annually after its first re-set period, with a 2% maximum annual adjustment and a 6% maximum adjustment over the life of the loan.
Commercial Loans: The bank underwrites commercial loans to corporations, partnerships and other businesses. The bank primarily offers commercial loans for equipment purchases, lines of credit for working capital purposes, letters of credit and real estate loans where the borrower is the primary occupant of the property. Most commercial loans are originated on a floating-rate basis and the majority of fixed-rate commercial term loans are fully amortized over a five-year period.
The bank also underwrites Small Business Administration (SBA) guaranteed loans and guaranteed or assisted loans through various state, county and municipal programs. These governmental guarantees are typically used in cases where the borrower requires additional credit support. The bank has Preferred Lender status with the SBA, allowing a more streamlined application and approval process.
The company participated in the Paycheck Protection Program (PPP) through the United States Department of the Treasury and Small Business Administration. In most cases, the bank obtains a general lien on accounts receivable and inventory, along with the specific collateral, such as real estate or equipment, as appropriate.
Consumer Loans: The bank offers a variety of consumer loans on a direct basis to individuals. Consumer loans represented 2.8% of the total loan portfolio as of December 31, 2023. Home equity loans and home equity lines of credit constituted 94.65% of the consumer loan portfolio and secured personal lines of credit originated through Beacon Trust constitute 4.71% of the consumer loan portfolio as of December 31, 2023. The remaining 0.64% of the consumer loan portfolio includes personal loans and unsecured lines of credit, direct auto loans and recreational and marine vehicle loans.
Interest rates on home equity loans are fixed for a term not to exceed 20 years, with the maximum loan amount being $1.0 million, which is dependent on lien position and credit score. A portion of the home equity loan portfolio includes first-lien product loans, under which the bank has offered special rates to borrowers who refinance first mortgage loans on a home equity (first-lien) basis. The bank’s home equity lines of credit are made at floating interest rates and the bank provides lines of credit of up to $1.0 million, dependent on lien position and credit score.
Consumer loans generally entail greater credit risk than residential mortgage loans, particularly in the case of home equity loans and lines of credit secured by second lien positions, consumer loans that are unsecured or that are secured by assets that tend to depreciate, such as automobiles, boats and recreational vehicles.
The bank continues to maintain a diversified loan portfolio with an emphasis on commercial mortgage, multi-family, construction, and commercial loans in its efforts to reduce interest rate risk. These types of loans generally have adjustable rates that initially are higher than residential mortgage loans and generally have a higher rate of credit risk. The bank’s lending policy focuses on quality underwriting standards and close monitoring of the loan portfolio. As of December 31, 2023, these commercial loan types accounted for 86.5% of the loan portfolio and retail loans accounted for 13.5%. The Company intends to continue to focus on commercial mortgage, multi-family, construction, and commercial lending relationships.
The company’s relationship banking strategy focuses on increasing core accounts and expanding relationships through its branch network, mobile banking, online banking and other digital services. The company continues to evaluate opportunities to increase market share by expanding within existing and contiguous markets. Savings and demand deposit accounts are generally a stable, relatively inexpensive source of funds. As of December 31, 2023, savings and demand deposits were 89.4% of total deposits.
Investment Portfolio
As of December 31, 2023, the company’s investment portfolio included U.S. Treasury obligations; mortgage-backed securities; asset-backed securities; state and municipal obligations; and corporate obligations.
Deposits
The bank offers a variety of deposits for retail and business accounts. Deposit products include savings accounts, checking accounts, interest-bearing checking accounts, money market deposit accounts and certificate of deposit accounts at varying interest rates and terms. The bank also offers investment, insurance and IRA products. Business customers are offered several checking account and savings plans, cash management services, remote deposit capture services, payroll origination services, escrow account management and business credit cards. The bank focuses on relationship banking for retail and business customers to enhance the customer experience. Deposit activity is influenced by state and local economic conditions, changes in interest rates, internal pricing decisions and competition. Deposits are primarily obtained from the areas surrounding the bank’s branch locations. To attract and retain deposits, the bank offers competitive rates, quality customer service and a wide variety of products and services that meet customers’ needs, including online and mobile banking.
Wealth Management Services
As part of the company’s strategy to increase fee related income, the bank’s wholly owned subsidiary, Beacon Trust Company, and its registered investment advisor subsidiary, Beacon Investment Advisory Services, Inc., (Beacon) are engaged in providing wealth management services. These services include investment management, trust and estate administration, financial planning and tax compliance and planning. In addition to sourcing clients through Beacon's existing clients and other referrals, services are offered to existing customers through the bank’s extensive branch, lending and insurance networks.
Beacon focuses on delivering personalized solutions based on the needs and objectives for each client. The majority of the fee income generated by Beacon is based on total assets under management.
Insurance Agency Operations
Provident Protection Plus, Inc. is a retail insurance broker operating in the State of New Jersey. The insurance agency’s primary source of revenue is commission income, which is earned by placing insurance coverage for its customers with various insurance underwriters. The insurance agency places property and casualty, life and health coverage with about twenty different insurance carriers.
Subsidiary Activities
PFS Insurance Services, Inc. is a wholly owned subsidiary of the bank, and a New Jersey licensed insurance producer that sells insurance and investment products, including annuities to customers through a third-party networking arrangement.
Dudley Investment Corporation is a wholly owned subsidiary of the Bank which operates as a New Jersey Investment Company. Dudley Investment Corporation owns all of the outstanding common stock of Gregory Investment Corporation.
Gregory Investment Corporation is a wholly owned subsidiary of Dudley Investment Corporation. Gregory Investment Corporation operates as a Delaware Investment Company. Gregory Investment Corporation owns all of the outstanding common stock of PSB Funding Corporation.
PSB Funding Corporation is a majority owned subsidiary of Gregory Investment Corporation. It was established as a New Jersey corporation to engage in the business of a real estate investment trust for the purpose of acquiring mortgage loans and other real estate related assets from the bank.
Beacon Trust Company, a New Jersey limited purpose trust company, is a wholly owned subsidiary of the bank.
Beacon Investment Advisory Services, Inc. is a wholly owned subsidiary of Beacon Trust Company, incorporated under Delaware law and is a registered investment advisor.
Provident Protection Plus, Inc., a full service insurance agency, offering both commercial and personal lines of insurance, is a wholly owned subsidiary of the bank.
Sussex Capital Trust II is a Delaware statutory business trust and a non-consolidated subsidiary of the company.
The bank has the following active subsidiaries formed to manage and sell real estate acquired through foreclosure:
Bergen Avenue Realty, LLC, a New Jersey limited liability company;
Bergen Avenue Realty II, LLC, a New Jersey limited liability company;
Bergen Avenue Realty PA, LLC, a Pennsylvania limited liability company; and
490 Boulevard Realty Corp, a New Jersey corporation.
Strategy
The bank’s strategy is to grow profitably through a commitment to credit quality and expanding market share by acquiring, retaining, and expanding customer relationships, while carefully managing interest rate risk.
Regulations
As a bank holding company controlling the bank, the company is subject to the Bank Holding Company Act of 1956, as amended (BHCA), and the rules and regulations of the Federal Reserve Board under the BHCA. The company is also subject to the provisions of the New Jersey Banking Act of 1948 (the New Jersey Banking Act) and the accompanying regulations of the Commissioner of the New Jersey Department of Banking and Insurance (Commissioner) applicable to bank holding companies. The company and the bank are required to file reports with, and otherwise comply with, the rules and regulations of the Federal Reserve Board and the Commissioner. The Federal Reserve Board and the Commissioner conduct periodic examinations to assess the company’s compliance with various regulatory requirements. Additionally, the company files certain reports with, and otherwise complies with, the rules and regulations of the Securities and Exchange Commission (SEC) under the federal securities laws and the listing requirements of the New York Stock Exchange.
The bank is a New Jersey chartered savings bank, and its deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation (FDIC). The bank is subject to regulation, examination and supervision by the Commissioner as the issuer of its charter, and by the FDIC as its deposit insurer primary federal prudential regulator. The bank files reports with the Commissioner and the FDIC concerning its activities and financial condition, and it must obtain regulatory approval prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions and opening or acquiring branch offices. The Commissioner and the FDIC conduct periodic examinations to assess the bank’s compliance with various regulatory requirements. This regulation and supervision establish a comprehensive framework of activities in which a savings bank can engage and is intended primarily for the protection of the Deposit Insurance Fund (DIF) and depositors. The company is a bank holding company subject to regulation by the Federal Reserve Board.
The bank received a ‘Satisfactory’ Community Reinvestment Act rating in its recently completed federal examination, dated June 21, 2021.
The company’s common stock is registered with the SEC under the Securities Exchange Act of 1934, as amended. It is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.
Beacon Investment Advisory Services, Inc. is an investment adviser registered with the SEC. As such, it is required to make certain filings with and is subject to periodic examination by, the SEC.
History
Provident Financial Services, Inc. was founded in 1839.
