Good day and welcome to the Provident Financial Services, Inc. First Quarter 2014 Earnings Conference Call and Webcast. [Operator instructions.] Please note this event is being recorded. I would now like to turn the conference over to Mr. Leonard Gleason, Senior Vice President and Investor Relations Officer. Please go ahead.

Thank you, Andrew. Good morning, ladies and gentlemen, and thank you for taking the time to join us on this lovely April morning. The presenters for our first quarter earnings call are Chris Martin, Chairman, President and CEO; and Tom Lyons, Executive Vice President and CFO. Before beginning their review of our financial results, we ask that you please take note of our standard caution as to any forward-looking statements that may be made during the course of today’s call. Our full disclaimer can be found in the text of this morning’s earnings release. A copy of that release may be obtained by accessing the Investor Relations page on our website, www.providentNJ.com. Now it is my pleasure to introduce our Chief Executive Officer Chris Martin, who will offer his perspective on our first quarter 2014 financial results. Chris?

Thanks, Len, and good morning, everyone. Our earnings of $0.30 per share this quarter demonstrate that conservative organic growth and an improving economy continues to generate positive results. Our annualized return on average assets was a respectable 92 basis points and return on average tangible equity was double digits. We achieved these results in spite of the elevated expenses we incurred as a result of the difficult winter we experienced. Our margin remains stable for the quarter at 3.28%, up 2 basis points from the trailing quarter. And our expectations are for the margin to remain steady over the next several quarters. Noninterest income declined as loan prepayments slowed for the quarter, which we viewed as a positive for loan and customer attention. Wealth management and deposit fees increased during the quarter but were partially offset by a loss on the sale of a private label mortgage-backed security that had been evaluated and stressed extensively. This security had suffered a previous impairment and we felt the best value was obtained via a sale at this time. Net loan growth of $63 million was above our normal first quarter activity and we believe our volume is indicative of an improving economic outlook for our clients. We experienced growth in multi-family, multi-family construction and commercial loans, but the market for residential mortgages and home equity loans declined as interest rates increased. With a decreased opportunity in mortgage lending, we are seeing new entrants into the multi-family and commercial real estate lending space with very aggressive pricing and terms. We will continue to evaluate terms on a loan-by-loan and customer-by-customer basis to ensure that our return of equity hurdles are met. Core deposits continue to increase and now represent over 85% of total deposits. We continue to see runoff in CDs that have…

Thank you, Chris, and good morning everyone. Our net income for Q1 was $17 million compared with $17.4 million for the trailing quarter. Earnings per share matched the trailing quarter at $0.30. Net interest income increased $494,000 compared to the trailing quarter to $55 million, as average loans outstanding grew at an annualized rate of 8.5% or $108 million. Growth was driven by commercial construction and multi-family mortgage loans. In addition our average securities yield improved by 5 basis points due to an increase in the Federal Home Loan Bank of New York dividend rate, reduced premium amortization, and the reinvestment of cash flows at more attractive market rates. Combined with stable loan yields and funding costs, this resulted in a 2 basis point improvement in our net interest margin to 3.28%. We continue to add longer-term borrowings to manage interest rate risk with average borrowings increasing by $174 million for the quarter. As you may recall we report our core margin - we record loan prepayment fees and noninterest income and do not consider them in the margin calculation. We provided $400,000 for loan losses this quarter compared with $1.8 million in the trailing quarter. Nonperforming loans decreased $13 million compared with December 31 to $64 million or 1.22% of total loans. Net charge-offs for the quarter declined to $1.6 million or 13 basis points of average loans. The allowance for loan losses to total loans decreased to 1.21% from 1.24% at December 31; however the allowance coverage of nonperforming loans increased to 99% from 84%. Our total nonperforming assets, consisting of nonperforming loans and foreclosed assets decreased $12 million versus the trailing quarter to $71 million. Subsequent to quarter-end we’ve thus far sold 6 residential properties with a $1 million book value and have another 3 residential properties with a booked value of $314,000 under contract. Noninterest income decreased $1.7 million compared to the trailing quarter, primarily as a result of a $561,000 reduction in loan prepayment fees, a $387,000 reduction in gains on loan sales, and a $350,000 loss recognized on the sale of a previously impaired security; also a $287,000 reduction in gains on sales of REO versus the trailing quarter. Noninterest expense increased $650,000 versus the trailing quarter to $38.2 million, primarily as a result of the impact of severe winter weather on snow removal and utilities costs. Income tax expense was $7.7 million for the first quarter and our effective tax rate was 31.1%. That concludes our prepared remarks. We’d be happy to respond to questions.

We will now begin the question-and-answer session. [Operator instructions.] The first question comes from Jason O’Donnell of Merion Capital Group. Jason O’Donnell: Good morning. It seems like the loan growth outcome this quarter was pretty good just considering the winter we had and your comments in the release regarding aggressive loan pricing. I’m wondering if you could talk a little bit about or share with us the blended rate at which you’re currently generating new loan production and whether or not we should expect that 4.26% loan yield to remain stable going forward.

Sure. The blended rate of originations for the current quarter it was actually picked up a little bit versus the trailing, about 4.09%. Pipeline at this point is a little bit lower than that, part of that being that the mix of loans, there’s more floating rate product in the pipeline. All-in rate there is about 3.81%. Jason O’Donnell: Okay, and then in terms of the trajectory of the overall loan yield and when it might stabilize, it looked like it was stable this quarter. What are your thoughts around that going into the back half of the year and so on?

I don’t see a lot of movement in the near term. I think we’re going to be fairly stable for the next couple of quarters at least. A lot of it depends on how aggressive we're -- how competitive we’re willing to be on some of the pricing that’s out there, which is pretty challenging. Jason O’Donnell: Okay, that’s helpful. And then on the provision expense this quarter coming in lower than expected, obviously you saw a big decline in the nonperformers. How should we think about the run rate going forward for quarterly loan loss provision expense? Should we expect that to bounce back a bit in the second quarter as maybe loan growth accelerates but you also have kind of an offsetting reserve release component? So if you could talk a little bit about that it’d be helpful.

I think that’s a reasonable expectation, Jason. We do hope to continue to see loan growth. I think our blended rate kind of coverage on new loans is about 90 basis points on past credits. We do have some continuing improvements in credit quality and some resolutions we hope that come to fruition in the second quarter, also some recoveries that we expect to see, so I think that’ll help to temper the amount we need to bump that up by. In terms of coverage ratios I think we can get down to the low one-teens and still be comfortable on total loans. Jason O’Donnell: Okay, that’s helpful. And then one housekeeping and I’ll hop out. On the, and I apologize if I missed it but on the M&A expense and related expenses, did you guys have a number there for the first quarter?

It’s about $142,000 in the first quarter.

The next question comes from Mark Fitzgibbon of Sandler O’Neill & Partners.

Hey guys, good morning. I know that the NIM tends to blip up a bit in the first quarter of each year for you guys, but in the release you alluded to the fact that we’re seeing some stabilization in the margin. Do you expect some additional compression in coming quarters excluding the impact of Team, or do you think we’ve actually hit bottom here and should start to move north?

I’ll take it first and then Tom can elaborate. I think we’re kind of hitting not a floor - I don’t think it’s going to move materially either way. I think we can maintain it for a couple of quarters. I think Team is being certainly additive because of the levels that we’re able to do loans out in Pennsylvania; they’re a little bit different than in New Jersey. But I think we’re going to be maintaining where we are. I don’t see any trajectory that’s going to get that much better especially because deposit rates have bottomed out.

Yeah, I agree with what Chris said. I think that the governor on the margin expansion probably is the fact that we’ve been trying to minimize interest rate risk and extending liabilities. We saw the average go up by about $173 million I think it was. We put about $182 million of borrowings on with a 5-year weighted average life at about a 2.04% rate. We think that’s good insurance, where we think rates are headed to as we start to see the recovery hopefully accelerate a bit.

Okay. And then secondly I wonder if you could update us on the timing of the closing of the Team deal and also how their first quarter numbers looked.

We have nothing on the first quarter numbers from Team but we hope to close this deal hopefully at the end of May.

Okay. And then lastly I know you guys are quite frugal but I wondered if you could share with us your thoughts on operating expense trends excluding the impact of the Team deal - what kind of growth we might see in operating expenses?

Maybe it would be helpful if I kind of just went through the non-core kind of items or the unusual items for the quarter. As I mentioned to Jason earlier the transaction expenses were about $142,000. We had about $450,000 in charges related to the branding exercise and the change of signage - there’ll be some continued expense in that in the next quarter, probably another $300,000 or so. Snow removal expense was about $620,000 greater in 2014 than it was in 2013, so you kind of add that up and you’re a little bit over $1 million. I think actually the Team charges were probably in the $36 million to $37 million noninterest expense range for the quarter.

The next question comes from Collyn Gilbert of KBW.

Good morning guys. Tom, just back to the comment that you had made on extending on the borrowing, so you did some this quarter. What should we think about in terms of your appetite for that going forward - I mean a similar tranche for the next few quarters or does this satisfy you at least through -- I guess just quantify that a little bit.

I think it’s going to continue to move to a more neutral to asset-sensitive position over time as we go through the recovery cycle. So it’s a little bit opportunistic in terms of when pricing looks favorable to us and when we want to throw down those funds.

Okay.

This is Chris, just to add to some of that - we certainly look at the aggressive nature of some of our competitors. There’s definitely good loans to do out there but some of the pricing is at a level that we don’t know that we can get to. On the other hand we’re trying to cinch up and lock up some of these, so for going out on the curve, maybe on a 7-year multi-family deal we want to lock up a bit of that so we’re not exposed to rates that are rising and then be sitting here with a funding issue. So we’re still looking at that as the opportunity to lock, spread, and still be more prudent as Tom said we get to a more neutral position in our balance sheet.

That was a good point Chris made there, that some of the timing on the originations is driven by the loan growth as we match funds for that loan product.

Okay, so the NIM guidance that you guys are giving in that stable range, is it including a little bit more borrowing extension going forward or does that not reflect that?

I think it’s consistent.

Okay. And then just what was the dollar amount of prepays this quarter, and then can you remind us what it was for the full year last year in ’13?

The fee income was $252,000 for the quarter; it was $813,000 in the trailing quarter; and it was $1.5 million last year for the first quarter.

Okay, any thoughts on where you think that’s going to go this year?

I expect it would continue to slow. We’re not seeing the kind of… I mean the good news is that the loan book held up better - I think that’s one of the reasons we had the growth. The originations actually weren’t that different in ’14 than they were in ’13; we just didn’t see that same level of churn in terms of prepayments.

Okay. And any chance, Tom, you have handy what the reserve will look like post-Team, the reserve to total loans? I know obviously you have to account for the marked portfolio, but just wondering if you might have that number.

I do not. We’re still analyzing that and developing the mark.

The next question comes from Matthew Kelley of Sterne Agee.

Yeah, hi guys. On the substantive multi-family, commercial real estate competition being pretty intense. Maybe if you could talk about just beyond pricing what about structure, what about covenants and debt service coverage, LTVs? How has that changed over the last 3, 6, 9 months?

This is Chris. We don’t see anything really in the way of terms. I know there are some that are 10 on a 30; we try to sink that down to a 7 and a 3, or even a 5 and 5. So I don’t think anybody’s making any kind of real, real stretch in the way of terms, in the way of structure. You know, it might be a little bit on the loan-to-value, maybe they go from a 75% towards an 80% on the multi-family deals. But as just a reference point we lost a deal on somebody who’s been a client of ours, really solid, and another company did something on a multi-family deal - 100 over treasuries. And that’s an area that you say um, not to say that it’s right, wrong or indifferent, we're just in an area that we don’t see the returns that are applicable. So we just have to move away and wish them well. That’s telling you that there’s a little bit of people reaching and we’re just going to stay where we are and chew our gum. So I don’t think there’s any structure issues that people are doing anything that’s really out of bounds.

Got it. And then when you look at the deposit rates sheets for your markets, have you noticed some changes? I mean it seems like there’s a bunch of institutions that are more in need of funding than you folks are with your loan or deposit ratio. What have you noticed of the change in the competitive landscape for deposit pricing for say 18- to 36-month type CDs or money market rates? What’s changed there?

I haven’t noted any particularly concerning increases there. I think mostly it’s more promotional type items where you see a bump in rate and then things still reverting back to fairly low cost. I guess everybody still faces the same pressure on asset yields and it’s constraining the willingness to bid up deposit pricing.

This is Chris. The other thing is you start hearing the conversation where everybody says “We’re going to keep our line in the sand,” and you know there’s a little bit like, when you start with specials and some little product pushes you know what’s coming. So we’re always cognizant of that but we want to model it correctly and make sure what our core is is really core as opposed to you know, just money that’s parked.

The next question comes from Rich Weiss of Boenning.

Good morning. Are there any kind of initiatives that you’re doing to try to increase the noninterest income, fee income that you can talk about today?

Well we certainly are happy about the performance of Beacon Trust to date and we always look at opportunities in the way of acquisitions. But we’ve also been moving that revenue line up almost quarter-to-quarter, not material enough to make it a huge impact but it definitely has offset some of the prepayments that have not come in in the way of fees. That’s an area that we think we can increase. I don’t think you’re going to get any increase in retail fees; in fact I would be concerned that as more regulatory changes are going on in Washington and the microscope is on banks, how many times then they may come back and hurt our fees in the way of retail. So I think that’s a challenge that we’re always going to be dealing with.

Just to quantify that wealth benefit a little bit, the income is up 16% versus last year, about $282,000 - $2.1 million compared to $1.8 million last year from wealth management.

Now is wealth management up because asset values are higher or have you gotten more customers?

Both. Also the indices that we manage, SPIN [ph] has done particularly well. So there’s indices that we manage that are marketed by Guggenheim and we receive benefit as a result of that. That’s performed quite well this quarter.

And we’ve also been able to increase the fees for clients as performance is there and we right-size the amount of the relationship and price it accordingly.

Okay. And in terms of interest rate risk, I guess we’ll get more detail when the 10-Q comes out but has it changed much on your 1-year gap or your parallel shifts since December 31?

Yes, it’s improved and moved further towards neutral. With I think what we believe are fairly conservative assumptions we’re down to a minus 3.8% I think it is, up 200 ramp. I know that was around 4.0% and change at the year-end - I don’t quite remember the number but it’s definitely come down.

Okay, and that’s because of adding on the longer-term borrowings?

Correct, yes.

And with those borrowings are there any puts or calls associated with those or are they pretty much straightforward advances?

Straightforward advances.

The next question comes from David Bishop of Drexel and Hamilton.

Hey, good morning gentlemen. Most of my questions have been answered, but alluding to some of the new markets Team is going to get you in. What’s sort of the pricing dynamics on the loan side there versus some of your core markets or legacy markets? And maybe is there a deposit funding advantage too, any sort of differential there on the funding side?

This is Chris. Certainly on the loan side we have seen about 25 basis points, a little bit higher out there in the Pennsylvania markets. We’ve also, in deposits we have several products that we think will do very well in the markets that they’re in that they’re not able to provide their clients. We also have corporate cash management products that’ll help some of their business clients also. So we’re looking forward to letting them have a lot more in their arsenal to give them to the customers, to make sure that we can expand that. We have a product, a Smart Checking product that we think will do very well in Pennsylvania.

Got it, and then more of a housekeeping question: I don’t know if you have the end-of-period balance of non-interest bearing deposits.

$875 million.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Christopher Martin, Chairman, President and CEO for any closing remarks.

Well, we thank you for getting on our call. We hope that on our next call we’ll be able to talk about the Team Capital being concluded and working on the integration, and we appreciate your time and support. Thank you.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.