Leonard Gleason – SVP & IR Chris Martin – Chairman, President and CEO Tom Lyons – EVP & CFO.

Mark Fitzgibbon - Sandler O'Neill Rick Weiss - Boenning Chris Jackson - Sterne Agee Travis Lan - KBW.

Good morning, and welcome to the Provident Financial Second Quarter 2014 Earnings Conference Call. All participants will be in listen-only mode. (Operator instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Leonard Gleason. Mr. Gleason, please go ahead..

Thanks Jessica. Good morning, ladies and gentlemen. Thank you for taking the time to join us this morning. The presenters for our second 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, which may be obtained by accessing the Investor Relations page on our website, www.providentnj.com. Now it's my pleasure to introduce our Chief Executive Officer, Chris Martin, who will offer his perspective on our second quarter financial results.

Chris?.

Thanks, Len, good morning everyone. Core earnings of $0.31 per share this quarter reflect our May 30 acquisition Team Capital Bank, which increased assets by almost $1 billion, loans by $631 million and deposits by $802 million. More importantly, it brings us active to new markets and dedicated individuals that have hit the ground running.

We expect strong returns from the Team Capital acquisition and are extremely excited about the progress and energy surrounding our efforts to integrate the operations of both banks. The lending and retail teams are on Board and we expect further synergies once we convert the operating system in September.

Revenues have strengthened to historic highs and we continue to carefully manage our cost without compromising on risk assessment and monitoring. Our net organic loan growth decreased during the quarter as payoffs of several large credits offset new loan originations.

While the New Jersey economic recovery remains uneven, signs of improvement and employment accompanied by stronger balance sheets of our commercial clients signal that better things are ahead.

Looking forward to the second half of 2014, we envision continuing opportunities for loan portfolio growth while we remain disciplined as to our risk adjusted returns on loans and investments as the fed end is tapering.

The loan pipeline is strong, but we remain somewhat cautious [walking in front] (ph) with very aggressive rates and terms in the marketplace. We continue to see pricing pressure across the Board and the net interest margin compressed slightly as we held excess liquidity pending the completion of the Team Capital acquisition.

Asset quality was stable during the quarter. Delinquencies were down and charge-offs were reduced from the trailing quarter and prior year levels. We had anticipated the resolution of two large non-performing credits that did not take place during the quarter, but we're optimistic that they will be completed by the end of Q3.

Organic deposit levels were down primarily due to the continued [run-up] (ph) of CDs accompanied by cyclical outflows of municipal funds.

However, non-interest bearing deposits now aggregate over $1 billion with the addition of Team Capital's deposits and core levels are stronger than ever at almost 85% of the total deposits as our weighted average cost declined to just 27 basis points for the quarter.

We are confident that customers in our new markets will benefit from our broader product base and service offerings including our premium rate Smart Checking product and expanded escrow account and corporate cash management services.

We have a stable retail deposit base and have stress-tested it under various rising rate scenarios with acceptable results. Borrowing levels increased primarily due to the Team Capital combination as we repaid acquired borrowings and repositioned them to longer term fixed rates, recognizing a gain of $486,000 in the process.

And while Tom will detail our non-interest activity, we're pleased with the growth in our wealth management fees from Beacon Trust, which has augmented increases in ATM, debit card and deposit fees. Operating expenses, excluding non-recurring items were in line with our expectations.

We have met our projections for revenues and transaction related expenses related to Team Capital through the second quarter and we believe we are on track to exceed our pro forma estimates by yearend.

We did take advantage of an opportunity to reduce future expenses for our frozen pension plan as we allowed lump-sum distributions to retirees to reduce future obligations and the volatility and costs.

Based upon our business and operational model, we expect to maintain our efficiency ratio in the mid to high 50s, growing revenue and investing in profitable business lines. We consistently review our operations and franchise to meet our internal hurdles and get the best from our committed staff.

Subsequent to quarter end we've consolidated two New Jersey branch locations of Team Capital, which will create additional customer synergies and have opened a Bergen County loan production office. We also hired a small but extremely experienced asset-based lending team in July and look forward to growing this line of business.

We continuously assess the impact of eventually exceeding $10 billion in assets and we continue to build out our risk and compliance areas to take advantage -- take on the additional regulatory burden and revenue challenges that come with crossing our threshold and we always evaluate other opportunities to increase stockholder value in both whole bank and the wealth management space, while maintaining our well-capitalized status.

I'll turn it over to Tom to detail the quarter's numbers, Tom?.

Thank you, Chris and good morning, everyone. Our net income for the second quarter was $16.4 million compared with $17 million for the trailing quarter. Earnings per share were $0.28 compared with $0.30 for the trailing quarter.

Earnings for the quarter were impacted by earnings related to the Team Capital acquisition totaling $1.2 million or $0.02 per share net of tax. In addition, we recognized the charge related to lump-sum distributions made from the company's frozen pension plan that totaled $790,000 or $0.01 per share net of tax.

Net interest income increased by $2.2 million, compared with the trailing quarter to $57 million, as average loans outstanding increased by $262 million. Growth was driven by the acquisition of commercial mortgage and C&I loans as well as originations of commercial, construction and CRE loans.

Average securities also increased by $30 million; however, yields declined by 11 basis points for rest of the trailing quarter as a result of an increase in premium amortization on mortgage-backed securities, a reduction in the FHLB dividend rate and the mark-to-market yields of the acquired Team Capital portfolio as of the May 30th merger date.

Combined with excess liquidity maintained during the quarter to fund acquisition cost, this resulted in a four basis point decrease in our net interest margin to 3.24%. We provided $1.5 million for loan losses for the quarter, compared to $400,000 in the trailing quarter.

Non-performing loans were essentially unchanged from the trailing quarter at $65 million or 1.1% of total loans. Net charge-offs for the quarter declined slightly to $1 million on an annualized eight basis points of average loans.

The allowance for loan losses to total loans decreased to 1.08% from 1.21% at March 31 as a result of loans added through the acquisition at fair value. Excluding acquired loans, the allowance for total loans remained at 1.21% at June 30. The allowance coverage of non-performing loans also was essentially unchanged at 98%.

Non-interest income increased $2.2 million compared to the trailing quarter, primarily as a result of a $492,000 increase in wealth management income, a $486,000 gain realized on the prepayment of borrowings, $410,000 gain realized on security sales versus a $350,000 loss in the trailing quarter and a $300,000 event that recorded on a bully claim.

Non-interest expense increased by $0.5 million versus the trailing quarter to $43.7 million, compensation and benefits cost included $1.4 million related to lump-sum distributions from our frozen pension plan and $380,000 in severance cost and [balances] (ph) for Team Capital transitional employees.

Additional transaction costs totaling $1.7 million were included in other interest expense. Further, the stock-based portion of annual director's fee added another $1 million to other non-interest expenses for the quarter.

Income tax expense was $6.2 million compared with $7.7 million for the first quarter and our effective tax rate declined to 27.5% from 31.1% as a result of increases in [taxable] (ph) income from acquired municipal securities and bank-owned life insurance. We're projecting effective tax rate of approximately 29.5% for the remainder of the year.

That concludes our prepared remarks. We’ll be happy to respond to questions..

(Operator Instructions) The first question comes from Mark Fitzgibbon with Sandler O'Neill..

Hey guys. Good morning..

Good morning..

I wondered if you could help us think through what the margin is likely to look like in the third quarter as well as operating expenses maybe what are some of the key variables we ought to be thinking about..

As far as margin goes Mark, I think we stayed fairly stable perhaps one to two basis points of compression is what we’re seeing for our modeling.

On the expense side of things, the run rate -- I kind of get to the core for this quarter about 38.5, 38.6, I think that’s where we are on a core basis but we have some additional transaction related cost to company the systems conversion in Q3 probably about $3.2 million there.

So I think you’ll see about close to $42 million in expense next quarter but on a core basis about 38.5..

So a lot of the cost synergies won't really start to come out you think until the fourth quarter close to the systems convergence?.

The remainder of the, yes – the remainder of the cost is with regard to employee cost. However, we’ll see we’re ahead of or pretty much close to what we had modeled in, in reviewing the deal through the end of July..

Okay.

And then I was a little bit surprised with the pipeline for construction loans was as strong as it was, what’s driving that and is it happening in any particular part of your footprint?.

No it's in all areas. Certainly we've seen multifamily, couple of deals in the Jersey City area. But we have people that are taking on smaller projects, it certainly is an adjustable return, which we like and adjustable rate with very well-healed customers and we're confident in that level.

I think it’s an area that as far it hasn’t seen that kind of volume in the past, but certainly people we dealt with in the past..

Okay. And Chris I was wondering is the flood of capital that recently came into your marketplace, is it affecting loan pricing..

Absolutely. And it's not just those that have the new capital by any stretch. I think everybody has their models and what they are trying to do. I think we’re just seeing things a little differently. We have return on equity hurdles internally.

We don’t withdraw from the market, but we are seeing some very aggressive terms, some very long interest-only portions of these deals and certainly a lot of lack of guarantees, a lot of pre-leasing requirements we wouldn’t have expected that some people are forgoing. And it’s just a risk area that we look at a little differently.

But it's making pricing very sensitive but also structure that we have to pick and choose the deals. We do a great job with our clients. They love the speed of the market that we get quick decisions. But that doesn’t offset the rates 50 or 60 basis points lower..

And lastly, I wondered if you could just share with us when you think Provident would be ready to do another deal, how long before you had contemplated doing something post team?.

Well, as you know, it's been a while since we did a bank deal going back to 2007. It’s not that we would be anti -- anything if it makes long-term shareholder value sense. That being said, we want to get this one completed by the end of September. It doesn’t mean that we couldn’t handle another one.

But as you know, capital levels are strong, but we can't just go ahead and buy a huge company. The other side of that would definitely be not just bank, but also wealth management deals that we would look at. And the other thing is growing at the $10 billion.

The closer we get, the more cost that will bring in and we know that we’re doing that now, but that doesn’t stop us from doing anything..

Thank you..

The next question comes from Rick Weiss with Boenning..

Good morning..

Good morning..

Was there anything in the Team Capital acquisition that surprised you either positive or negative, either in terms of the bag itself or possibly the lending areas?.

I would say not really surprising. I felt that during our diligence and certainly our lending theme and credit group felt that they were just a smaller version of what we do. Again very pretty conservative while structured and I would say that I’ve been surprised with the professionality and the energy that the Group has brought.

I would say it’s like one sixth of what we are and just happens to be in Western New Jersey and Eastern Pennsylvania. Same methodology, same dedication, same commitment, so I’m actually very happy with what’s gone-to-date in the way of the -- the way that everybody has been able to meet with clients.

We’re out there talking to them and they are very big fans of the people from Team and we get the same from the people at Provident. So, it’s really more of the same. I don’t know that actually anything as a detraction from the deal at this stage..

I would echo that from a back office side of things too. The folks have been tremendous in terms of professionalism in helping us to integrate back office there..

Okay.

And then in terms of your lending area in Pennsylvania, could you define that for us?.

Well, certainly would be -- we’re not going to just say okay, we’re only going to be dealing with the Lehigh Valley and in Bucks County. I think Montgomery County is a very strong area. We would go a little further west. We follow our clients and I think Team would do the same.

The capacity with our balance sheet and our capital levels will allow the Team Capital Group to be able to really expand the relationships and maybe reach people that they didn’t get to in the past because of the size constraints. And so, we’re not anti -- anything going up north into the [discrete] (ph) or anything else.

We just follow our clients and the opportunity. So, we’re not really bound by just geography and counties..

Okay.

And do you -- it might be too early to tell but are there any kind of pricing differences between your current markets in Jersey and what you’re finding in Pennsylvania?.

Although we really haven’t seen a lot of that pull-through, we have in the past seen about 25 basis points difference between New Jersey and Pennsylvania, and it’s not that Pennsylvania isn’t and Western New Jersey isn’t competitive, it’s just a few less players, a few less money center banks that you are having to compete with whereas in New Jersey, there’s a lot more.

But I think the same quality of loan is what we look for. .

Okay. And I guess my last question, with respect to the loan loss reserve ratio where it dipped to 1.08% I think the press release said it’s pretty much all because of Team Capital.

So then, I guess you would have said that reserve would have been about 1.20% then without that?.

I calculated 1.21%…..

Okay. Got it. Okay, thank you..

Thank you..

The next question comes from Chris Jackson with Sterne Agee.

Hi, good morning everybody..

Good morning..

I just had one quick question on your C&I portfolio, as far as loan utilization in the second quarter, how does that shake out compared to the first quarter in the year ago period?.

About 42% I think we’re pretty much falt..

Same thing for the year ago period?.

Yes, I think that’s about where we were. Perhaps a little bit less last year..

Okay. Great. That’s all I had, thank you..

You too. .

The next question comes from Travis Lan with KBW..

Hey guys, just one quick follow up. Tom, just wanted to make sure that I understood your expense commentary, you thought you were at about 38.5 core this quarter and you expected maybe stability to little bit higher next quarter excluding the $3.2 million conversion charge.

So you really only had one month of Team Capital and the numbers this quarter, those numbers are kind of right, what I was thinking about?.

I think I was actually looking for stability to a little bit lower next quarter. So we do get some benefit from some additional reductions and compensation, some of the transitional folks were leaving throughout the transition period as well as fulfilling some of those the FICO requirements as move people during the course of the year.

So I am looking at 38 to 38.5 kind of run rate for the next quarter, 38..

Got it. All right thank you..

And I have an additional $3.2 million roughly in transaction charges we expect to see next quarter too..

Right, and those are just non-core similar to the merger charges this quarter?.

Exactly. I think it’s primarily around the systems conversion..

Perfect. All right, thanks guys. .

Thank you..

With no have further questions, this concludes our question-and-answer-session. I would like to turn the conference back over to Christopher Martin for any closing remarks..

Well, we appreciate your time and we look forward to an extremely busy and productive quarter coming up once we finish up this conversion that gets everybody to get back to the real business banking customers and we are looking forward to getting that behind us. Thank you very much and have a good summer..

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