PROVIDENT FINANCIAL SERVICES INC (Form: 10-Q, Received: 11/09/2009 16:20:20)

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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 September 30, 2009

¨	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 or Organization)

(I.R.S. Employer

Identification No.)


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)

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 filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding twelve months (or for such shorter period that the Registrant was required to submit and post such files). YES ¨ NO ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

As of November 1, 2009 there were 83,209,293 shares issued and 60,259,313 shares outstanding of the Registrant’s Common Stock, par value $0.01 per share, including 433,283 shares held by the First Savings Bank Directors’ Deferred Fee Plan not otherwise considered outstanding under U.S. generally accepted accounting principles.

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 September 30, 2009 (unaudited) and December 31, 2008	3

	Consolidated Statements of Operations for the three and nine months ended September 30, 2009 and 2008 (unaudited)	4

	Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2009 and 2008 (unaudited)	5

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008 (unaudited)	7

	Notes to Unaudited Consolidated Financial Statements	9

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

3.	Quantitative and Qualitative Disclosures About Market Risk	33

4.	Controls and Procedures	34

PART II—OTHER INFORMATION

1.	Legal Proceedings	35

1A.	Risk Factors	35

2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

3.	Defaults Upon Senior Securities	36

4.	Submission of Matters to a Vote of Security Holders	36

5.	Other Information	36

6.	Exhibits	36

Signatures		39

PART I—FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Financial Condition

September 30, 2009 (Unaudited) and December 31, 2008

(Dollars in thousands, except share data)


	September 30, 2009			December 31, 2008
ASSETS

Cash and due from banks	$	196,001		$	66,315
Short-term investments		3,527			2,231

Total cash and cash equivalents		199,528			68,546


Investment securities held to maturity (market value of $354,424 and $351,623 at September 30, 2009 and December 31, 2008, respectively)		338,940			347,484
Securities available for sale, at fair value		1,333,042			820,329
Federal Home Loan Bank (“FHLB”) stock		34,675			42,833

Loans		4,321,364			4,526,748
Less allowance for loan losses		55,731			47,712

Net loans		4,265,633			4,479,036


Foreclosed assets, net		7,044			3,439
Banking premises and equipment, net		76,611			75,750
Accrued interest receivable		24,864			23,866
Intangible assets		359,129			514,684
Bank-owned life insurance (“BOLI”)		130,913			126,956
Other assets		45,930			45,825


Total assets	$	6,816,309		$	6,548,748


LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand deposits	$	2,385,809		$	1,821,437
Savings deposits		870,375			872,388
Certificates of deposit of $100,000 or more		511,008			445,466
Other time deposits		1,108,019			1,087,045

Total deposits		4,875,211			4,226,336

Mortgage escrow deposits		17,928			20,074
Borrowed funds		1,004,623			1,247,681
Other liabilities		35,927			36,067


Total liabilities		5,933,689			5,530,158


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, 83,209,293 shares issued and 59,824,710 shares outstanding at September 30, 2009, and 59,610,623 shares outstanding at December 31, 2008		832			832
Additional paid-in capital		1,014,556			1,013,293
Retained earnings		305,940			454,444
Accumulated other comprehensive income (loss)		8,840			(485	)
Treasury stock, at cost		(384,972	)		(384,854	)
Unallocated common stock held by Employee Stock Ownership Plan (“ESOP”)		(62,576	)		(64,640	)
Common stock acquired by the Directors’ Deferred Fee Plan (“DDFP”)		(7,598	)		(7,667	)
Deferred compensation – DDFP		7,598			7,667

Total stockholders’ equity		882,620			1,018,590


Total liabilities and stockholders’ equity	$	6,816,309		$	6,548,748

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Operations

Three and nine months ended September 30, 2009 and 2008 (Unaudited)

(Dollars in thousands, except per share data)


	Three months ended September 30,						Nine months ended September 30,
	2009			2008			2009			2008
Interest income:
Real estate secured loans	$	39,286		$	42,465		$	119,566		$	124,406
Commercial loans		11,108			10,665			32,176			32,568
Consumer loans		7,722			9,106			23,819			27,932
Investment securities		3,327			3,606			10,119			10,860
Securities available for sale		11,497			10,770			32,876			32,372
Other short-term investments		1			26			13			329
Deposits		98			—			215			—
Federal funds sold		—			—			24			164

Total interest income		73,039			76,638			218,808			228,631


Interest expense:
Deposits		18,807			20,133			58,136			68,945
Borrowed funds		8,922			11,154			28,266			32,577

Total interest expense		27,729			31,287			86,402			101,522

Net interest income		45,310			45,351			132,406			127,109

Provision for loan losses		6,500			3,800			18,100			6,600

Net interest income after provision for loan losses		38,810			41,551			114,306			120,509


Non-interest income:
Fees		6,652			7,281			18,347			18,287
BOLI		1,438			1,320			3,957			3,980
Net gain (loss) on loan sales		877			56			1,724			(6	)
Net gain on securities transactions		195			444			1,374			845

Other-than-temporary impairment losses on securities		(701	)		(1,410	)		(6,167	)		(1,410	)
Portion of loss recognized in other comprehensive income (before taxes)		—			—			4,665			—

Net impairment losses on securities recognized in earnings		(701	)		(1,410	)		(1,502	)		(1,410	)

Other income		127			84			519			1,531

Total non-interest income		8,588			7,775			24,419			23,227


Non-interest expense:
Goodwill impairment		—			—			152,502			—
Compensation and employee benefits		18,257			16,591			52,518			50,768
Net occupancy expense		4,966			5,195			15,270			15,626
FDIC Insurance		2,450			173			7,810			458
Data processing expense		2,354			2,296			7,010			6,903
Advertising and promotion expense		1,117			1,160			3,147			2,989
Amortization of intangibles		1,115			1,373			4,020			4,706
Other operating expenses		5,713			5,170			17,644			15,752

Total non-interest expense		35,972			31,958			259,921			97,202

Income (loss) before income tax expense		11,426			17,368			(121,196	)		46,534

Income tax expense		2,750			4,205			7,402			12,325


Net income (loss)	$	8,676		$	13,163		$	(128,598	)	$	34,209


Basic earnings (loss) per share	$	0.15		$	0.23		$	(2.29	)	$	0.61
Average basic shares outstanding		56,311,141			56,078,691			56,240,746			56,006,174

Diluted earnings (loss) per share	$	0.15		$	0.23		$	(2.29	)	$	0.61
Average diluted shares outstanding		56,311,141			56,078,870			56,240,746			56,006,234

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2009 and 2008 (Unaudited)

(Dollars in thousands)


	COMMON STOCK		ADDITIONAL PAID-IN CAPITAL			RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE INCOME			TREASURY STOCK			UNALLOCATED ESOP SHARES			COMMON STOCK ACQUIRED BY DDFP			DEFERRED COMPENSATION DDFP			TOTAL STOCKHOLDERS’ EQUITY
Balance at December 31, 2007	$	832	$	1,009,120		$	437,503		$	4,335		$	(383,407	)	$	(67,589	)	$	(7,759	)	$	7,759		$	1,000,794
Comprehensive income:
Net income		—		—			34,209			—			—			—			—			—			34,209
Other comprehensive income:
Unrealized holding losses on securities arising during the period (net of tax of ($3,057))		—		—			—			(4,784	)		—			—			—			—			(4,784	)
Reclassification adjustment for losses included in net income (net of tax of ($226))		—		—			—			339			—			—			—			—			339
Amortization related to post- retirement obligations (net of tax of $204)		—		—			—			296			—			—			—			—			296

Total comprehensive income																								$	30,060


Cash dividends declared		—		—			(19,856	)		—			—			—			—			—			(19,856	)
Distributions from DDFP		—		(3	)		—			—			—			—			69			(69	)		(3	)
Purchase of treasury stock		—		—			—			—			(1,445	)		—			—			—			(1,445	)
Allocation of ESOP shares		—		(324	)		—			—			—			2,055			—			—			1,731
Allocation of SAP shares		—		2,513			—			—			—			—			—			—			2,513
Allocation of stock options		—		1,774			—			—			—			—			—			—			1,774


Balance at September 30, 2008	$	832	$	1,013,080		$	451,856		$	186		$	(384,852	)	$	(65,534	)	$	(7,690	)	$	7,690		$	1,015,568

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2009 and 2008 (Unaudited) (Continued)

(Dollars in thousands)


	COMMON STOCK		ADDITIONAL PAID-IN CAPITAL			RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME			TREASURY STOCK			UNALLOCATED ESOP SHARES			COMMON STOCK ACQUIRED BY DDFP			DEFERRED COMPENSATION DDFP			TOTAL STOCKHOLDERS’ EQUITY

Balance at December 31, 2008	$	832	$	1,013,293		$	454,444		$	(485	)	$	(384,854	)	$	(64,640	)	$	(7,667	)	$	7,667		$	1,018,590
Comprehensive income:
Net loss		—		—			(128,598	)		—			—			—			—			—			(128,598	)
Other comprehensive loss:
Other-than-temporary impairment on debt securities available for sale (net of tax of ($1,906))										(2,759	)														(2,759	)
Unrealized holding gains on securities arising during the period (net of tax of $8,797)		—		—			—			11,297			—			—			—			—			11,297
Reclassification adjustment for losses included in net income (net of tax of ($11))		—		—			—			117			—			—			—			—			117
Amortization related to post- retirement obligations (net of tax of $463)		—		—			—			670			—			—			—			—			670


Total comprehensive loss																								$	(119,273	)

Cash dividends declared		—		—			(19,906	)		—			—			—			—			—			(19,906	)
Distributions from DDFP		—		(5	)		—			—			—			—			69			(69	)		(5	)
Purchases of treasury stock		—		—			—			—			(118	)		—			—			—			(118	)
Allocation of ESOP shares		—		(761	)		—			—			—			2,064			—			—			1,303
Allocation of SAP shares		—		1,430			—			—			—			—			—			—			1,430
Allocation of stock options		—		599			—			—			—			—			—			—			599


Balance at September 30, 2009	$	832	$	1,014,556		$	305,940		$	8,840		$	(384,972	)	$	(62,576	)	$	(7,598	)	$	7,598		$	882,620

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

Nine months ended September 30, 2009 and 2008 (Unaudited)

(Dollars in thousands)


	Nine months ended September 30,
	2009			2008
Cash flows from operating activities
Net (loss) income	$	(128,598	)	$	34,209
Adjustments to reconcile net income to net cash provided by operating activities:
Goodwill impairment		152,502			—
Depreciation and amortization of intangibles		9,516			10,531
Provision for loan losses		18,100			6,600
Deferred tax benefit		(5,602	)		(4,495	)
Increase in cash surrender value of BOLI		(3,957	)		(3,980	)
Net amortization of premiums and discounts on securities		1,907			229
Accretion of net deferred loan fees		(1,570	)		(1,608	)
Amortization of premiums on purchased loans, net		2,286			1,966
Net increase in loans originated for sale		(96,639	)		(13,281	)
Proceeds from sales of loans originated for sale		98,363			13,275
Proceeds from sales of foreclosed assets, net		2,851			4,953
Allocation of ESOP shares		1,303			1,731
Allocation of SAP shares		1,430			2,513
Allocation of stock options		599			1,774
Net (gain) loss on sale of loans		(1,724	)		6
Net gain on securities available for sale		(1,374	)		(844	)
Impairment charge on securities		1,502			1,409
Net gain on sale of premises and equipment		(172	)		(87	)
Net gain on sale of foreclosed assets		(71	)		(1	)
(Increase) decrease in accrued interest receivable		(998	)		1,078
Increase in other assets		(5,076	)		(3,587	)
Decrease in other liabilities		(140	)		(5,380	)

Net cash provided by operating activities		44,438			47,011


Proceeds from maturities, calls and paydowns of investment securities		40,225			35,855
Purchases of investment securities		(32,006	)		(31,774	)
Proceeds from sales of securities available for sale		51,105			7,731
Proceeds from maturities and paydowns of securities available for sale		211,227			159,087
Purchases of securities available for sale		(675,002	)		(181,918	)
Purchases of loans		(39,999	)		(228,426	)
Net decrease in loans		153,532			83,098
Proceeds from sales of premises and equipment		1,404			818
Purchases of premises and equipment, net		(7,589	)		(4,496	)

Net cash used in investing activities		(297,103	)		(160,025	)


Net increase (decrease) in deposits		648,875			(88,943	)
(Decrease) increase in mortgage escrow deposits		(2,146	)		1,573
Purchases of treasury stock		(118	)		(1,445	)
Cash dividends paid to stockholders		(19,906	)		(19,856	)
Proceeds from long-term borrowings		67,000			390,600
Payments on long-term borrowings		(156,210	)		(327,601	)
Net (decrease) increase in short-term borrowings		(153,848	)		106,691

Net cash provided by financing activities		383,647			61,019

Net increase (decrease) in cash and cash equivalents		130,982			(51,995	)
Cash and cash equivalents at beginning of period		68,546			140,629

Cash and cash equivalents at end of period	$	199,528		$	88,634

Cash paid during the period for
Interest on deposits and borrowings	$	87,726		$	102,063

Income taxes	$	12,372		$	10,371

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

Nine months ended September 30, 2009 and 2008 (Unaudited) (Continued)

(Dollars in thousands)


	Nine months ended September 30,
	2009		2008
Non cash investing activities:
Transfer of loans receivable to foreclosed assets	$	6,280	$	7,896

Loan securitizations	$	84,855	$	55,217

See accompanying notes to unaudited consolidated financial statements

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

A. Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Provident Financial Services, Inc. and its wholly-owned subsidiary, The Provident Bank (the “Bank”, together with Provident Financial Services, Inc., the “Company”).

In preparing the interim unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and the results of operations for the period. Actual results could differ from these estimates. The allowance for loan losses is a material estimate that is particularly susceptible to near-term change. The current economic environment has increased the degree of uncertainty inherent in this material estimate.

The interim unaudited 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 and nine months ended September 30, 2009 are not necessarily indicative of the results of operations that may be expected for all of 2009.

Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission.

Certain reclassifications have been made to 2008 data to conform to current year presentation.

These unaudited consolidated financial statements should be read in conjunction with the December 31, 2008 Annual Report to Stockholders on Form 10-K.

B. Earnings (Loss) Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations:


	For the three months ended September 30,										For the nine months ended September 30,
	2009					2008					2009							2008
	Net Income		Shares	Per Share Amount		Net Income		Shares	Per Share Amount		Net Loss			Shares	Per Share Amount			Net Income		Shares	Per Share Amount

Net income (loss)	$	8,676				$	13,163				$	(128,598	)					$	34,209

Basic earnings (loss) per share:
Income (loss) available to common stockholders	$	8,676	56,311,141	$	0.15	$	13,163	56,078,691	$	0.23	$	(128,598	)	56,240,746	$	(2.29	)	$	34,209	56,006,174	$	0.61

Dilutive shares			—					179						—						60

Diluted earnings (loss) per share:
Income (loss) available to common stockholders	$	8,676	56,311,141	$	0.15	$	13,163	56,078,870	$	0.23	$	(128,598	)	56,240,746	$	(2.29	)	$	34,209	56,006,234	$	0.61

Anti-dilutive stock options and awards totaling 4,367,498 shares at September 30, 2009, were excluded from the earnings per share calculations.

Note 2. Loans and Allowance for Loan Losses

Loans receivable at September 30, 2009 and December 31, 2008 are summarized as follows (in thousands):


	September 30, 2009			December 31, 2008
Mortgage loans:
Residential	$	1,523,916		$	1,793,123
Commercial		1,002,491			923,044
Multi-family		205,503			189.462
Construction		217,275			233,727

Total mortgage loans		2,949,185			3,139,356


Commercial loans		770,899			753,173
Consumer loans		593,732			624,282

Total other loans		1,364,631			1,377,455


Premium on purchased loans		8,443			10,980
Unearned discounts		(323	)		(492	)
Net deferred (fees) costs		(572	)		(551	)

	$	4,321,364		$	4,526,748

The activity in the allowance for loan losses for the three and nine months ended September 30, 2009 and 2008 is summarized as follows (in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2009			2008			2009			2008

Balance at beginning of period	$	51,994		$	41,118		$	47,712		$	40,782
Provision charged to operations		6,500			3,800			18,100			6,600
Recoveries of loans previously charged off		307			700			2,198			1,903
Loans charged off		(3,070	)		(2,289	)		(12,279	)		(5,956	)

Balance at end of period	$	55,731		$	43,329		$	55,731		$	43,329

At September 30, 2009, the Company identified $46.0 million of loans as impaired, compared with $37.8 million of impaired loans at December 31, 2008. The Company maintained an allowance for loan losses totaling $6.8 million related to $34.8 million of impaired loans at September 30, 2009. In addition, at September 30, 2009, the Company identified one $11.2 million construction loan as impaired with a loan to value ratio of 77% for which no allowance for loan losses was required in accordance with GAAP. The Company maintained an allowance for loan losses on impaired loans of $6.0 million at December 31, 2008. At September 30, 2009, $42.1 million of impaired loans were deemed collateral dependent and the related allowance for loan losses was determined based on estimates of the fair value of the collateral, giving consideration to recent appraised values and valuation estimates. Impaired loans at September 30, 2009 also included $3.9 million in commercial loans to a distributor of consumer products for which terms were modified under a troubled debt restructuring in the second quarter of 2009. The loans were brought current as to principal and interest as a condition to the restructuring and have continued to perform in accordance with the modified terms. A specific reserve of $26,000 is maintained in relation to these loans based on an evaluation of the net present value of projected future cash flows.

Note 3. Deposits

Deposits at September 30, 2009 and December 31, 2008 are summarized as follows (in thousands):


	September 30, 2009		December 31, 2008
Savings	$	870,375	$	872,388
Money market		1,113,489		756,793
NOW		784,673		602,280
Non-interest bearing		487,647		462,364
Certificates of deposit		1,619,027		1,532,511

	$	4,875,211	$	4,226,336

Note 4. Components of Net Periodic Benefit Cost

The Bank has a noncontributory defined benefit pension plan (the “Plan”) covering its full-time employees who had attained age 21 with at least one year of service as of April 1, 2003. The Plan was frozen on April 1, 2003. All participants in the Plan are 100% vested. The Plan’s assets are invested in investment funds and group annuity contracts currently managed by the Principal Financial Group and Allmerica Financial.

In addition to pension benefits, certain health care and life insurance benefits are currently made available to certain of the Bank’s retired employees. The costs of such benefits are accrued based on actuarial assumptions from the date of hire to the date the employee is fully eligible to receive the benefits. Effective January 1, 2003, eligibility for retiree health care benefits was frozen as to new entrants and benefits were eliminated for employees with less than ten years of service as of December 31, 2002. Effective January 1, 2007, eligibility for retiree life insurance benefits was frozen to new entrants and retiree life insurance benefits were eliminated for employees with less than ten years of service as of December 31, 2006.

Net periodic benefit costs for the three and nine months ended September 30, 2009 and 2008 include the following components (in thousands):


	Three months ended September 30,									Nine months ended September 30,
	Pension benefits					Other post- retirement benefits				Pension benefits					Other post- retirement benefits
	2009			2008		2009		2008		2009			2008		2009		2008
Service cost	$	—		—		34		41		$	—		—		116		140
Interest cost		271		267		224		252			814		761		710		764
Expected return on plan assets		(262	)	(389	)	—		—			(786	)	(1,168	)	—		—
Amortization of prior service cost		—		—		(1	)	(1	)		—		—		(3	)	(3	)
Amortization of the net (gain) loss		179		—		(222	)	(174	)		537		—		(593	)	(496	)

Net periodic benefit cost (increase)	$	188		(122	)	35		118		$	565		(407	)	230		405

The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2008 that it does not expect to contribute to the Plan in 2009. As of September 30, 2009, no contributions to the Plan have been made.

The net periodic benefit cost (increase) for pension benefits and other post-retirement benefits for the three and nine months ended September 30, 2009 were calculated using the results of the January 1, 2009 valuations.

Note 5. Impact of Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued a standard that establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative GAAP for nongovernmental entities. The Codification supersedes all existing non-SEC accounting and reporting standards. Rules and interpretative releases of the SEC under the authority of Federal securities laws remain authoritative GAAP for SEC registrants. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of the Codification did not have any impact on the Company’s financial condition, results of operations or amounts reported in financial statement disclosures.

In June 2009, the FASB issued a standard that requires reporting entities to evaluate former qualifying special purpose entities for consolidation, changes the approach to determining a variable interest entity’s (“VIE”) primary beneficiary, increases the frequency of required assessments to determine whether a company is the primary beneficiary of a VIE, clarifies the characteristics that identify a VIE, and requires additional annual and interim disclosures. This standard is effective for fiscal years beginning after November 15, 2009. The adoption of this standard is not expected to have a material impact on the Company’s financial condition, results of operations or financial statement disclosures.

In June 2009, the FASB issued a standard that eliminates the concept of a qualifying special purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies the derecognition criteria, revises how retained interests are initially measured, removes the guaranteed mortgage securitization recharacterization provisions, and requires additional annual and interim disclosures. This standard is effective for fiscal years beginning after November 15, 2009. The adoption of this standard is not expected to have a material impact on the Company’s financial condition, results of operations or financial statement disclosures.

In June 2009, the FASB issued a standard that requires management to evaluate subsequent events through the date financial statements are issued and to disclose the date through which such evaluation occurred. The Company has evaluated subsequent events through the November 9, 2009 issuance date of the unaudited consolidated financial statements included in this Form 10-Q.

In April 2009, the FASB issued guidance regarding the estimation of fair value when the volume and level of activity for the asset or liability have significantly decreased, including guidance on identifying circumstances that indicate a transaction is not orderly. Under this guidance, if the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, transactions or quoted prices may not be determinative of fair value. Further analysis is required and significant adjustments to the transactions or quoted prices may be necessary. This guidance is effective for interim and annual reporting periods ending after June 15, 2009. The Company considered this guidance in estimating the fair value of assets and liabilities at September 30, 2009.

In April 2009, the FASB issued guidance that changes the amount of an other-than-temporary impairment that is recognized in earnings when there are non-credit losses on a debt security which management does not intend to sell, and for which it is more-likely-than-not that the entity will not be required to sell the security prior to the recovery of the non-credit impairment. In those situations, the portion of the total impairment that is attributable to the credit loss would be recognized in earnings, and the remaining difference between the debt security’s amortized cost basis and its fair value would be included in other comprehensive income. This guidance also requires additional disclosures about investments in an unrealized loss position and the methodology and significant inputs used in determining the recognition of other-than-temporary impairment. This guidance is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this guidance is reflected in the unaudited consolidated financial statements and in Note 6 thereto.

In April 2009, the FASB issued guidance requiring disclosures about fair value of financial instruments for interim reporting periods of a publicly traded company, as well as in annual financial statements. The disclosure requirements are effective for interim reporting periods ending after June 15, 2009, and are included in Note 7 to the unaudited consolidated financial statements.

In June 2008, the FASB ratified guidance that requires that all nonrefundable maintenance deposits be accounted for as a deposit, with the deposit expensed or capitalized in accordance with the lessee’s maintenance accounting policy when the

underlying maintenance is performed. Once it is determined that an amount on deposit is not probable of being used to fund future maintenance expense, it is to be recognized as additional expense at the time such determination is made. This guidance is effective for fiscal years beginning after July 1, 2009. The adoption of this guidance is not expected to have a material impact on the Company’s financial condition, results of operations or financial statement disclosures.

In June 2008, the FASB issued guidance that requires unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents to be treated as participating securities and, therefore, included in the earnings allocation in computing earnings per share under the two-class method. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Upon adoption, all previously reported earnings per share data must be retroactively adjusted to conform with the requirements of the this guidance. The adoption of this guidance did not have a material impact on the Company’s calculation of earnings per share for the periods presented.

In March 2008, the FASB issued a standard that establishes enhanced disclosure requirements about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of this standard did not have a material impact on the Company’s financial condition, results of operations or financial statement disclosures.

In February 2008, the FASB issued guidance that delayed the application of a fair value standard for non-financial assets and non-financial liabilities until January 1, 2009. The adoption of this guidance is reflected in the Company’s fair value disclosures appearing in Note 6 to the unaudited consolidated financial statements.

In December 2007, the FASB issued a standard that establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This standard clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, this standard requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. This standard became effective on January 1, 2009. The adoption of this standard did not have a significant impact on the Company’s financial condition, results of operations or financial statement disclosures.

Note 6. Fair Value Measurement of Assets and Liabilities

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of fair value hierarchy are as follows:


Level 1:		Unadjusted quoted market prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2:		Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3:		Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The following tables present the assets and liabilities reported on the consolidated statements of financial condition, measured on a recurring and non-recurring basis, at their fair values as of September 30, 2009 and December 31, 2008 by level within the fair value hierarchy.


	September 30, 2009
(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

Measured on a recurring basis:
Securities available for sale
U.S. Agency obligations	$	227,043	$	—	$	—	$	227,043
Mortgage-backed securities		—		1,069,944		—		1,069,944
State and municipal obligations		—		17,660		—		17,660
Corporate obligations		—		9,920		—		9,920
Equity securities		8,475		—		—		8,475

	$	235,518	$	1,097,524	$	—	$	1,333,042

Measured on a non-recurring basis:
Loans measured for impairment based on the fair value of the underlying collateral		—		—		35,359		35,359
Foreclosed assets		—		—		7,044		7,044
Goodwill		—		—		346,289		346,289

	$	—	$	—	$	388,692	$	388,692


	December 31, 2008
(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Measured on a recurring basis:
Securities available for sale
U.S. Treasury obligations	$	1,013	$	—	$	—	$	1,013
U.S. Agency obligations		94,474		—		—		94,474
Mortgage-backed securities		—		689,461		—		689,461
State and municipal obligations		—		18,107		—		18,107
Corporate obligations		—		3,345		—		3,345
Equity securities		13,929		—		—		13,929

		109,416		710,913		—		820,329

Measured on a non-recurring basis:
Loans measured for impairment based on the fair value of the underlying collateral	$	—	$	—	$	18,642	$	18,642

The following valuation techniques are based upon the unpaid principal balance only, and exclude any accrued interest or dividends at the measurement date. Interest income and expense and dividend income are recorded within the consolidated statements of income depending on the nature of the instrument using the effective interest method based on acquired discount or premium.

The valuation techniques described below were used to measure fair value of financial instruments in the preceding table on a recurring basis during the three and nine months ended September 30, 2009, and the year ended December 31, 2008.

For securities available for sale, fair value was estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third party data service providers or dealer market participants with which the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to benchmark or comparable securities. The Company also holds equity securities and debt instruments issued by the U.S. government and U.S. government agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs.

The valuation techniques described below were used to measure fair value of financial instruments in the preceding table on a non-recurring basis during the three and nine months ended September 30, 2009, and the year ended December 31, 2008.

For loans measured for impairment based on the fair value of the underlying collateral, fair value was estimated using a market approach. The Company measures the fair value of collateral underlying impaired loans primarily through obtaining independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience, and are considered Level 3 inputs.

Assets acquired through foreclosure or deed in lieu of foreclosure included in the preceding table are carried at fair value, less estimated costs to sell. Fair value is generally based on independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments to comparable assets based on the appraisers’ market knowledge and experience, and are considered Level 3 inputs. When an asset is acquired, the excess of the loan balance over fair value, less estimated costs to sell, is charged to the allowance for loan losses. A reserve for foreclosed assets may be established to provide for possible write-downs and selling costs that occur subsequent to foreclosure. Foreclosed assets are carried net of the related reserve. Operating results from real estate owned, including rental income, operating expenses, and gains and losses realized from the sales of real estate owned, are recorded as incurred.

The fair value of goodwill is determined in the same manner as goodwill recognized in a business combination and uses standard valuation methodologies. Fair value may be determined using market prices, comparison to similar assets, market multiples, discounted cash flow analysis and other factors. Estimated cash flows may extend far into the future and by their nature are difficult to determine over an extended time frame. Factors that may significantly affect the estimates include specific industry or market sector conditions, changes in revenue growth trends, customer behavior, competitive forces, cost structures and changes in discount rates. The Company recognized a goodwill impairment charge of $152.5 million during the three months ended March 31, 2009.

There were no changes to the valuation techniques for fair value measurement during the three and nine months ended September 30, 2009.

Note 7. Fair Value of Financial Instruments

Fair value estimates, methods and assumptions are set forth below for the Company’s financial instruments.

Cash and Cash Equivalents

For cash and due from banks, federal funds sold and short-term investments, the carrying amount approximates fair value.

Investment Securities and Securities Available for Sale

The fair value of investment securities and securities available for sale is estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third party data service providers or dealer market participants with which the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. The Company also holds equity securities and debt instruments issued by the U.S. government and U.S. government-sponsored agencies that are traded in active markets with readily accessible quoted market prices.

Federal Home Loan Bank of New York Stock

The carrying cost and the fair value of the investment in the common stock of the Federal Home Loan Bank of New York (“FHLB-NY”) is based on its par value. There is no market for FHLB-NY stock.

Loans

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential mortgage, construction and consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and into performing and non-performing categories.

The fair value of performing loans is estimated using a combination of techniques, including discounting estimated future cash flows and quoted market prices of similar instruments, where available.

The fair value for significant non-performing loans is based on recent external appraisals of collateral securing such loans, adjusted for the timing of anticipated cash flows.

Deposits

The fair value of deposits with no stated maturity, such as non-interest bearing demand deposits and savings deposits, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits with similar remaining maturities.

Borrowed Funds

The fair value of borrowed funds is estimated by discounting future cash flows using rates available for debt with similar terms and maturities.

Commitments to Extend Credit and Letters of Credit

The fair value of commitments to extend credit and letters of credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value estimates of commitments to extend credit and standby letters of credit are deemed immaterial.

The estimated fair values of the Company’s financial instruments as of September 30, 2009 and December 31, 2008 are presented in the following table (in thousands):


	September 30, 2009			December 31, 2008
	Carrying value		Fair value	Carrying value	Fair value

Financial assets:
Cash and cash equivalents	$	199,528	199,528	68,546	68,546
Securities available for sale		1,333,042	1,333,042	820,329	820,329
Investment securities held to maturity		338,940	354,424	347,484	351,623
FHLB stock		34,675	34,675	42,833	42,833
Loans		4,265,633	4,388,531	4,479,036	4,620,925

Financial liabilities:
Deposits		4,875,211	4,895,111	4,226,336	4,233,141
Borrowed funds		1,004,623	1,032,178	1,247,681	1,271,763

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in

nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

Significant assets and liabilities that are not considered financial assets or liabilities include deferred tax assets and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

Note 8. Investment Securities

At September 30, 2009, the Company had $1.33 billion and $338.9 million in available for sale and held to maturity investment securities, respectively. Many factors, including a lack of liquidity in the secondary market for certain securities, a lack of reliable pricing information, adverse regulatory actions, adverse changes in the business environment or any unexpected changes in the competitive marketplace could have an adverse effect on the Company’s investment portfolio which could result in other-than-temporary impairment on certain investment securities in future periods. Included in the Company’s investment portfolio are private label mortgage-backed securities and common stock holdings of publicly traded financial institutions. These investments may pose a higher risk of future impairment charges as a result of the current economic downturn and the potential negative effect on future performance of these private label mortgage-backed securities and equity securities. At September 30, 2009, approximately $22.6 million and $111.0 million of the mortgage-backed securities classified as held to maturity and available for sale, respectively, were private label mortgage-backed securities, while the remainder of the mortgage-backed securities were issued by U.S. government sponsored agencies. The private label mortgage-backed securities classified as held to maturity and available for sale had gross unrealized losses of $447,000 and $11.2 million, respectively, at September 30, 2009.

Investment Securities Held to Maturity

The following table presents the amortized cost, gross unrealized gains, gross unrealized losses and the estimated fair value for investment securities held to maturity at September 30, 2009 and December 31, 2008 (in thousands):


	September 30, 2009
	Amortized cost		Gross unrealized gains	Gross unrealized losses		Fair value
Mortgage-backed securities	$	69,565	2,186	(453	)	71,298
State and municipal obligations		259,916	13,607	—		273,523
Corporate obligations		9,459	159	(15	)	9,603

	$	338,940	15,952	(468	)	354,424


	December 31, 2008
	Amortized cost		Gross unrealized gains	Gross unrealized losses		Fair value
Mortgage-backed securities	$	91,435	910	(1,236	)	91,109
State and municipal obligations		256,049	5,485	(1,020	)	260,514

	$	347,484	6,395	(2,256	)	351,623

The Bank generally purchases securities for long-term investment purposes, and differences between amortized cost and fair values may fluctuate during the investment period.

The amortized cost and fair value of investment securities at September 30, 2009 by contractual maturity are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.


	September 30, 2009
	Amortized cost		Fair value
Due in one year or less	$	15,277	15,397
Due after one year through five years		85,708	89,655
Due after five years through ten years		106,111	111,765
Due after ten years		62,279	66,309
Mortgage-backed securities		69,565	71,298

	$	338,940	354,424

The following table represents the Company’s disclosure on investment securities with temporary impairment at September 30, 2009 and December 31, 2008 (in thousands):


	September 30, 2009 Unrealized Losses
	Less than 12 months				12 months or longer			Total
	Fair value		Gross unrealized losses		Fair value	Gross unrealized losses		Fair value	Gross unrealized losses
Mortgage-backed securities	$	8,032	(61	)	7,095	(392	)	15,127	(453	)
Corporate obligations		1,724	(15	)	—	—		1,724	(15	)

	$	9,756	(76	)	7,095	(392	)	16,851	(468	)


	December 31, 2008 Unrealized Losses
	Less than 12 months				12 months or longer			Total
	Fair value		Gross unrealized losses		Fair value	Gross unrealized losses		Fair value	Gross unrealized losses
Mortgage-backed securities	$	20,294	(994	)	8,395	(242	)	28,689	(1,236	)
State and municipal obligations		31,548	(716	)	10,915	(304	)	42,463	(1,020	)

	$	51,842	(1,710	)	19,310	(546	)	71,152	(2,256	)

Based on its detailed review of the securities portfolio, the Company believes that as of September 30, 2009, securities with unrealized loss positions shown above do not represent impairments that are other-than-temporary. The review of the portfolio for other-than-temporary impairment considers the percentage and length of time the market value of an investment is below book value as well as general market conditions, changes in interest rates, credit risk and whether the Company has the intent to sell the securities and whether it is not more likely than not that the Company would be required to sell the securities before the anticipated recovery.

Securities Available for Sale

The following table presents the amortized cost, gross unrealized gains, gross unrealized losses and the estimated fair value for securities available for sale at September 30, 2009 and December 31, 2008 (in thousands):


	September 30, 2009
	Amortized cost		Gross unrealized gains	Gross unrealized losses		Fair value
Agency obligations	$	224,618	2,425	—		227,043
Mortgage-backed securities		1,055,757	25,900	(11,713	)	1,069,944
State and municipal obligations		16,938	760	(38	)	17,660
Corporate obligations		9,573	418	(71	)	9,920
Equity securities		9,144	11	(680	)	8,475

	$	1,316,030	29,514	(12,502	)	1,333,042


	December 31, 2008
	Amortized cost		Gross unrealized gains	Gross unrealized losses		Fair value
U.S. Treasury obligations	$	997	16	—		1,013
Agency obligations		91,360	3,114	—		94,474
Mortgage-backed securities		692,020	9,578	(12,137	)	689,461
State and municipal obligations		17,664	490	(47	)	18,107
Corporate obligations		3,558	—	(213	)	3,345
Equity securities		14,617	93	(781	)	13,929

	$	820,216	13,291	(13,178	)	820,329

The amortized cost and fair value of securities available for sale at September 30, 2009, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.


	September 30, 2009
	Amortized cost		Fair value
Due in one year or less	$	162,163	162,949
Due after one year through five years		82,833	85,217
Due after five years through ten years		6,133	6,457
Mortgage-backed securities		1,055,757	1,069,944
Equity securities		9,144	8,475

	$	1,316,030	1,333,042

Proceeds from the sale of securities available for sale for the three months ended September 30, 2009 were $2,533,000, resulting in gross gains of $208,000 and gross losses of $13,000. Proceeds from the sale of securities available for sale for the nine months ended September 30, 2009 were $51,105,000, resulting in gross gains of $1,498,000 and gross losses of $124,000.

The following table represents the Company’s disclosure on securities available for sale with temporary impairment at September 30, 2009 and December 31, 2008 (in thousands):


	September 30, 2009 Unrealized Losses
	Less than 12 months				12 months or longer			Total
	Fair value		Gross unrealized losses		Fair value	Gross unrealized losses		Fair value	Gross unrealized losses
Mortgage-backed securities	$	77,902	(1,172	)	55,183	(10,541	)	133,085	(11,713	)
State and municipal obligations		—	—		1,141	(38	)	1,141	(38	)
Corporate obligations		—	—		923	(71	)	923	(71	)
Equity securities		1,024	(364	)	734	(316	)	1,758	(680	)

	$	78,926	(1,536	)	57,981	(10,966	)	136,907	(12,502	)


	December 31, 2008 Unrealized Losses
	Less than 12 months				12 months or longer			Total
	Fair value		Gross unrealized losses		Fair value	Gross unrealized losses		Fair value	Gross unrealized losses
Mortgage-backed securities	$	98,334	(8,283	)	19,718	(3,854	)	118,052	(12,137	)
State and municipal obligations		1,133	(47	)	—	—		1,133	(47	)
Corporate obligations		1,863	(195	)	482	(18	)	2,345	(213	)
Equity securities		3,905	(780	)	298	(1	)	4,203	(781	)

	$	105,235	(9,305	)	20,498	(3,873	)	125,733	(13,178	)

For the three months ended September 30, 2009, the Company recorded other-than-temporary impairment charges of $701,000 related to reductions in the market value of investments in the common stock of publicly traded financial institutions. For the nine months ended September 30, 2009, the Company recorded other-than-temporary impairment charges of $238,000 in connection with the credit-related impairment of a non-investment grade private label mortgage-backed security and an other-than-temporary impairment charge of $1.3 million, related to reductions in the market value of investments in the common stock of publicly traded financial institutions.

The temporary loss position associated with debt securities is the result of changes in interest rates relative to the coupon of the individual security and changes in credit spreads. In addition, the current turmoil in the credit markets has resulted in a lack of liquidity in the mortgage-backed securities market. Increases in delinquencies and foreclosures have resulted in limited trading activity and significant price declines, regardless of favorable movements in interest rates. Equity securities with unrealized losses consist primarily of common stocks of local financial institutions that the Company believes have no direct exposure to sub-prime lending and that are subject to short-term cyclical market price fluctuations as a result of a number of factors including the current and projected interest rate environment and negative perceptions about the health of the financial sector in general. The Company does not have the intent to sell these securities and it is not more likely than not that the Company will be required to sell the securities before the anticipated recovery.

The number of securities in an unrealized loss position as of September 30, 2009 totaled 41, compared with 137 at December 31, 2008. There were 27 private label mortgage-backed securities at September 30, 2009, with an amortized cost of $144.2 million and unrealized losses totaling $11.6 million. Of these securities, 25 securities were investment grade and two securities were below investment grade at September 30, 2009. Of the investment grade securities, 23 were rated AAA. At September 30, 2009, the non-investment grade securities were analyzed for impairment and were not considered to be other-than-temporarily impaired.

The Company estimates the loss projections for each security by stressing the individual loans collateralizing the security and applying a range of expected default rates, loss severities, and prepayment speeds in conjunction with the underlying credit enhancement for each security. Based on specific assumptions about collateral and vintage, a range of possible cash flows was identified to determine whether other-than-temporary impairment existed during the nine months ended September 30, 2009. One private label mortgage-backed security, classified as available for sale, with an

amortized cost basis of $14.0 million, was deemed to have other-than-temporary impairment totaling $4.9 million at June 30, 2009. Of the total amount of the impairment, $238,000 was due to estimated credit losses and charged to earnings and $4.7 million was recognized in other comprehensive income for the quarter ended June 30, 2009. The evaluation of this security included a range of likely future cash flows and management-applied, security-specific assumptions as well as market assumptions based on the credit characteristics of this security. The assumptions used to determine the cash flows were based on prepayment, delinquency, loss severity and credit support information. Multiple present value cash flow analyses were used to determine the future expected cash flows. The average borrower credit score measured as a FICO for the loans underlying this security was 733, and the average loan-to-value ratio was 68%. The additional cash flow assumptions that were incorporated into this analysis used credit default rates between 2% and 4% and loss severity expectations ranging between 35% and 60%, discounted at the security’s effective interest rate.

Although the Company recognized an other-than-temporary impairment on this security during the second quarter of 2009, it is currently performing in accordance with contractual obligations.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

Certain statements contained herein 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 cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company also advises 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.

Critical Accounting Policies

The calculation of the allowance for loan losses is a critical accounting policy of the Company. The allowance for loan losses is a valuation account that reflects management’s evaluation of the probable losses in the loan portfolio. The Company maintains the allowance for loan losses through provisions for loan losses that are charged to income. Charge-offs against the allowance for loan losses are taken on loans where management determines that the collection of loan principal is unlikely. Recoveries made on loans that have been charged-off are credited to the allowance for loan losses.

The Company’s evaluation of the adequacy of the allowance for loan losses includes a review of all loans on which the collectibility of principal may not be reasonably assured. For residential mortgage and consumer loans, this is determined primarily by delinquency and collateral values. For commercial real estate and commercial loans, an extensive review of financial performance, payment history and collateral values is conducted on a quarterly basis.

As part of the evaluation of the adequacy of the allowance for loan losses, each quarter management prepares a worksheet. This worksheet categorizes the entire loan portfolio by certain risk characteristics such as loan type (residential mortgage, commercial mortgage, construction, commercial, etc.) and loan risk rating.

When assigning a risk rating to a loan, management utilizes a nine point internal risk rating system. Loans deemed to be “acceptable quality” are rated 1 through 4, with a rating of 1 established for loans with minimal risk. Loans deemed to be of “questionable quality” are rated 5 (watch) or 6 (special mention). Loans with adverse classifications (substandard, doubtful or loss) are rated 7, 8 or 9, respectively. Commercial mortgage, commercial and construction loans are rated individually and each lending officer is responsible for risk rating loans in their portfolio. These risk ratings are then reviewed by the department manager and/or the Chief Lending Officer and the Credit Administration Department. Risk ratings are then confirmed by the Loan Review Department. Loans requiring Credit Committee approval are periodically reviewed by the Credit Committee in the credit renewal or approval process.

Management assigns general valuation allowance (“GVA”) percentages to each risk rating category for use in allocating the allowance for loan losses, giving consideration to historical loss experience by loan type. The appropriateness of these percentages is evaluated by management at least annually. In the second quarter of 2009, management completed its most recent evaluation of the GVA percentages. In that evaluation, the historical “look-back” period for assessing the magnitude of potential losses was shortened from five years to two years in recognition of recent macroeconomic and real estate market conditions, resulting in increases to GVA allocation percentages.

Management believes the primary risks inherent in the portfolio are a continued decline in the economy, generally, a continued decline in real estate market values, rising unemployment, increasing vacancy rates in commercial investment properties and possible increases in interest rates. Any one or a combination of these events may adversely affect borrowers’ ability to repay the loans, resulting in increased delinquencies, loan losses and future levels of provisions. Accordingly, the Company has provided for loan losses at the current level to address the current risk in its loan portfolio. Management considers it important to maintain the ratio of the allowance for loan losses to total loans at an acceptable level given current economic conditions, interest rates and the composition of the portfolio.

Although management believes that the Company has established and maintained the allowance for loan losses at appropriate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment. Management evaluates its estimates and assumptions on an ongoing basis giving consideration to historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. Illiquid credit markets, volatile securities markets, and declines in the housing market and the economy generally have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for loan losses as an integral part of their examination process. Such agencies may require the Company to recognize additions to the allowance or additional write-downs based on their judgments about information available to them at the time of their examination. 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.

Additional critical accounting policies relate to judgments about other asset impairments, including goodwill, investment securities and deferred tax assets. Goodwill is evaluated for impairment on an annual basis, or more frequently if events or changes in circumstances indicate potential impairment between annual measurement dates. The Company engages an independent third party to perform an annual analysis during the fourth quarter as of September 30 to test the aggregate balance of goodwill for impairment. The fair value of goodwill is determined in the same manner as goodwill recognized in a business combination and uses standard valuation methodologies. Fair value may be determined using market prices, comparison to similar assets, market multiples, discounted cash flow analysis and other factors. Estimated cash flows may extend far into the future and by their nature are difficult to determine over an extended time frame. Factors that may significantly affect the estimates include specific industry or market sector conditions, changes in revenue growth trends, customer behavior, competitive forces, cost structures and changes in discount rates.

The goodwill impairment analysis is a two-step process, to evaluate the potential impairment of the goodwill on the financial statements of the Bank. For this analysis, the Reporting Unit is defined as the Bank, which includes all core and retail banking operations of the Company but excludes the assets, liabilities, equity, earnings and operations held exclusively at the Company level. Four standard valuation methodologies common to valuation in business combination transactions involving financial institutions were used: (1) the Public Market Peers approach based on the trading prices of similar publicly traded companies as measured by standard valuation ratios; (2) the Comparable Transactions approach based on pricing ratios recently paid in the sale or merger of comparable banking franchises; (3) the Control Premium approach based on the Company’s trading price (a proxy for the Bank’s market pricing ratios were it publicly traded) followed by the application of an industry based control premium; and (4) the Discounted Cash Flow (“DCF”) approach where value is estimated based on the present value of projected dividends and a terminal value. These valuation techniques take into account the Bank’s recent operating history, current operating environment and future prospects.

The Public Market Peers approach and the Comparable Transactions approach are based on Level 2 inputs. The Control Premium approach is based on a combination of Level 1 inputs (the quoted price for the Company’s common stock) and Level 2 inputs (an estimated control premium based on comparable transactions). The DCF approach is based on Level 3 inputs including projections of future operations based on assumptions derived from management, the experience of the independent valuation firm that conducted the analysis and information from publicly available sources. All approaches were considered in the final estimate of fair value, with the approaches weighted based upon their applicability based upon the fair value hierarchy. These approaches and the resulting fair value conclusions are consistent with standard valuation techniques used by other market participants in evaluating business combinations for financial institutions.

If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. However, if the carrying amount of the reporting unit exceeds its fair value, an additional test must be performed. The second step test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. An impairment loss would be recorded to the extent that the carrying amount of goodwill exceeds its implied fair value.

As reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, the Company performed an annual goodwill impairment test as of September 30, 2008, and a subsequent test as of December 31, 2008. The results of both analyses indicated that goodwill was not impaired. As a result of the continued decline in the first quarter of 2009 in stock prices in the financial services sector and in the Company’s common stock price, the Company initiated a goodwill impairment test as of March 31, 2009. The step one analysis as of March 31, 2009, indicated potential impairment. Upon completion of the second step test, it was determined that the carrying amount of the goodwill exceeded its implied fair value and an impairment charge in the amount of $152.5 million was recognized as of March 31, 2009. The Company has determined that no triggering events have occurred during the quarter ended September 30, 2009 that would require the Company to perform an impairment test prior to the annual test. The annual goodwill impairment test as of September 30, 2009 was completed in the fourth quarter of 2009, with no impairment indicated. No goodwill impairment loss was required to be recognized for the three months ended September 30, 2009 or 2008, or the nine months ended September 30, 2008.

The Company’s available for sale securities portfolio is carried at estimated fair value, with any unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders’ equity. Estimated fair values are based on market quotations or matrix pricing as discussed in Note 6 to the unaudited consolidated financial statements. Securities which the Company has the positive intent and ability to hold to maturity are classified as held to maturity and carried at amortized cost. The Company conducts a periodic review and evaluation of the securities portfolio to determine if any declines in the fair values of securities are other-than-temporary. If such a decline were deemed other-than-temporary, the Company would measure the total credit-related component of the unrealized loss, and recognize that portion of the loss as a charge to current period earnings. The remaining portion of the unrealized loss would be recognized as an adjustment to accumulated other comprehensive income. The market value of the securities portfolio is significantly affected by changes in interest rates. In general, as interest rates rise, the market value of fixed-rate securities decreases and as interest rates fall, the market value of fixed-rate securities increases. The current turmoil in the credit markets, primarily as a result of the continued fallout from sub-prime lending, resulted in a lack of liquidity in the mortgage-backed securities market. Increases in delinquencies and foreclosures, primarily in securities that are backed by sub-prime loans, have resulted in limited trading activity and significant price declines, regardless of favorable movements in interest rates. The Company evaluates if it has the intent to sell these

securities and if it is not more likely than not that the Company would be required to sell the securities before the anticipated recovery. The Company also has investments in common stock issued by several publicly traded financial institutions, the valuation of which is affected by the institutions’ performance, economic and stock market conditions. The Company recognized other-than-temporary securities impairment losses totaling $701,000 and $1.5 million for the three and nine months ended September 30, 2009, respectively. The Company recognized other-than-temporary securities impairment losses totaling $1.4 million for the three and nine months ended September 30, 2008.

The determination of whether deferred tax assets will be realizable is predicated on estimates of future taxable income. Such estimates are subject to management’s judgment. A valuation allowance is established when management is unable to conclude that it is more likely than not that it will realize deferred tax assets based on the nature and timing of these items.

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

Total assets at September 30, 2009 increased $267.6 million, or 4.1%, to $6.82 billion, compared to $6.55 billion at December 31, 2008, primarily as a result of increases in securities available for sale and cash and cash equivalents, partially offset by decreases in loans and intangible assets.

Cash and cash equivalents increased $131.0 million to $199.5 million at September 30, 2009, from $68.5 million at December 31, 2008, as a result of deposit inflows and proceeds from repayments and sales of loans. The Company will continue to deploy these balances to fund loan originations, investment purchases and the repayment of maturing borrowings.

Securities available for sale, at fair value, increased $512.7 million, or 62.5%, to $1.33 billion at September 30, 2009, compared to $820.3 million at December 31, 2008. The increase in the securities available for sale portfolio included $84.9 million of residential mortgage loan pools that were securitized by the Company in the first quarter of 2009 and are now held as securities available for sale. The loan securitization was undertaken to enhance the liquidity and risk-based capital treatment of the underlying loans. Securities purchases for the nine months ended September 30, 2009 consisted primarily of U.S. Government Agency guaranteed mortgage-backed securities and obligations. The weighted average life of the Company’s available for sale securities portfolio was 3.1 years at September 30, 2009 compared to 3.0 years at December 31, 2008.

Federal Home Loan Bank stock decreased $8.2 million, or 19.0%, to $34.7 million at September 30, 2009, from $42.8 million at December 31, 2008. The Company invests in stock of the Federal Home Loan Bank of New York (“FHLB-NY”) as required under the terms of membership. The level of required stock holdings is dependent, in part, on outstanding borrowings by the Company from the FHLB-NY.

Total net loans at September 30, 2009, decreased $213.4 million, or 4.8%, to $4.27 billion, compared to $4.48 billion at December 31, 2008. Loan originations totaled $843.0 million and loan purchases totaled $40.0 million for the nine months ended September 30, 2009. Compared with December 31, 2008, residential mortgage loans decreased $269.2 million, consumer loans decreased $30.5 million, and construction loans decreased $16.5 million, while commercial mortgage and multi-family loans increased $95.5 million and commercial loans increased $17.7 million. In addition to amortization, pay-offs, and the securitization of $84.9 million of loans in the first quarter of 2009, total residential mortgage loans decreased as a result of the sale of $96.6 million of newly originated, primarily 30-year fixed-rate loans as part of the Company’s interest rate risk management process. Commercial real estate, construction and commercial loans totaled $2.20 billion, representing 50.9% of the loan portfolio at September 30, 2009, compared to $2.10 billion, or 46.5% of the loan portfolio at December 31, 2008. The Company intends to continue to focus on the origination of commercially oriented loans. Retail loans, which consist of residential mortgage loans and consumer loans, such as fixed-rate home equity loans and lines of credit, totaled $2.12 billion and accounted for 49.1% of the loan portfolio at September 30, 2009, compared to $2.42 billion, or 53.5% of the portfolio at December 31, 2008.

The Company does not originate or purchase sub-prime or option ARM loans. On a limited basis, the Company has originated “Alt-A” mortgages in the form of stated income loans with a maximum loan-to-value ratio of 50%. The balance of these “Alt-A” loans at September 30, 2009 was $19.8 million. Of this total, 10 loans totaling $4.4 million were 90 days or more delinquent. General valuation reserves of 10%, or $444,000, were allocated to these loans at September 30, 2009.

The Company participates in loans originated by other banks, including participations designated as Shared National Credits (“SNC”). The Company’s gross commitments and outstanding balances as a participant in SNCs were $149.3 million and $113.2 million, respectively, at September 30, 2009. The Company’s participations in SNCs included three loans classified as substandard (rated 7) under the Company’s loan risk rating system with gross commitments of $36.9 million and outstanding balances of $34.6 million, respectively, at September 30, 2009. These adversely classified SNCs are all commercial construction loans on projects located in New York City. All of the Company’s SNC participations were current as to the payment of principal and interest as of September 30, 2009.

The Company had outstanding junior lien mortgages totaling $310.9 million at September 30, 2009. Of this total, 40 loans totaling $3.2 million were 90 days or more delinquent. General valuation reserves of 10%, or $323,000, were allocated to these loans at September 30, 2009.

The Company had outstanding indirect marine loans totaling $93.4 million at September 30, 2009. Of this total, 21 loans totaling $3.1 million were 90 days or more delinquent. General valuation reserves of 20%, or $605,000, were allocated to these loans at September 30, 2009.

The following table sets forth information regarding the Company’s non-performing assets as of September 30, 2009 and December 31, 2008 (in thousands):


	September 30, 2009		December 31, 2008
Mortgage loans:
Residential	$	22,627	$	14,503
Commercial		34,815		24,830
Construction		7,072		9,403

Total mortgage loans		64,514		48,736

Commercial loans		5,885		4,456
Consumer loans		7,833		5,926

Total non-performing loans		78,232		59,118

Foreclosed assets		7,044		3,439


Total non-performing assets	$	85,276	$	62,557

The following table sets forth information regarding the Company’s 60-89 day delinquent loans as of September 30, 2009 and December 31, 2008 (in thousands):


	September 30, 2009		December 31, 2008
Mortgage loans:
Residential	$	6,260	$	5,786
Commercial		—		—
Construction		—		—

Total mortgage loans		6,260		5,786

Commercial loans		3,847		1,482
Consumer loans		1,976		1,356

Total 60-89 day delinquent loans		12,083		8,624

At September 30, 2009, the allowance for loan losses totaled $55.7 million, or 1.29% of total loans, compared with $47.7 million, or 1.05% of total loans at December 31, 2008. Total non-performing loans increased $19.1 million to $78.2 million, or 1.81% of total loans at September 30, 2009, from $59.1 million, or 1.31% of total loans at December 31, 2008.

Non-performing commercial mortgage loans increased $10.0 million, to $34.8 million at September 30, 2009, from $24.8 million at December 31, 2008. The increase in non-performing commercial mortgage loans was largely attributable to the addition, in the third quarter of 2009, of an $11.2 million senior participation interest in a $283.0 million Shared National Credit. Proceeds from this construction loan facility are being used to convert an existing 35-story, 631,000 square foot office building in New York City into a mixed-use 349-unit residential condominium and 251-room hotel. The project has been impacted by additional costs and a decline in sales activity. While this loan has been classified as non-accrual, the hotel construction is nearing completion and the loan was current as to principal and interest at September 30, 2009. The Company estimates a loan-to-value ratio of approximately 77% at September 30, 2009, and therefore, in accordance with GAAP, no specific reserve has been allocated to this loan. The Company had an unfunded commitment on this loan of an additional $527,000 at September 30, 2009.

The remaining balance of non-performing commercial mortgage loans at September 30, 2009 was primarily attributable to two loans to a single real estate developer. The first is an $11.4 million loan secured by a planned unit development of 203 single family detached townhouse and age restricted units; and the second is a $9.1 million commercial mortgage loan secured by a 184-unit, age restricted townhouse project. At September 30, 2009, these loans were deemed impaired and were allocated $5.1 million of the allowance for loan losses. Management believes that the allowance for loan losses allocated to this credit relationship is appropriate and adequate based on recent appraisals and projections of net realizable value. There is no contractual commitment to advance additional funds to this borrower.

Non-performing residential mortgage loans increased $8.1 million, to $22.6 million at September 30, 2009, from $14.5 million at December 31, 2008. Furthermore, non-performing consumer loans increased $2.0 million, to $7.8 million at September 30, 2009, from $5.9 million at December 31, 2008. The Company attributes the increase in non-performing residential mortgage and consumer loans to rising unemployment, declining property values and increased personal debt levels.

Non-performing commercial loans increased $1.4 million, to $5.9 million at September 30, 2009, from $4.4 million at December 31, 2009. Non-performing commercial loans consisted of 34 loans. The largest non-performing commercial loan had an outstanding balance of $880,000 at September 30, 2009.

Non-performing construction mortgage loans decreased $2.3 million, to $7.1 million at September 30, 2009, from $9.4 million at December 31, 2008, as a result of repayments due to unit sales. Non-performing construction mortgage loans at September 30, 2009 consisted of one $7.1 million loan to a real estate developer secured by a 5-story, 66-unit, 2 bedroom condominium project. At September 30, 2009, this loan was deemed impaired and was allocated $1.1 million of the allowance for loan losses. Management believes that the allowance for loan losses allocated to this relationship is appropriate and adequate based on recent appraisals and projections of net realizable value. There is no contractual commitment to advance additional funds to this borrower.

At September 30, 2009, the Company held $7.0 million of foreclosed assets, compared with $3.4 million at December 31, 2008. Foreclosed assets at September 30, 2009 are carried at fair value based on recent appraisals and valuation estimates, less estimated selling costs. Foreclosed assets consisted of $3.5 million of commercial real estate, $2.0 million of residential properties, $1.5 million of boats, and $21,000 of automobiles at September 30, 2009.

Non-performing assets totaled $85.3 million, or 1.25% of total assets at September 30, 2009, compared to $62.6 million, or 0.96% of total assets at December 31, 2008.

Intangible assets decreased $155.6 million to $359.1 million at September 30, 2009, from $514.7 million at December 31, 2008. At September 30, 2009, the Company had goodwill totaling $346.3 million, compared to $498.8 million at December 31, 2008, resulting primarily from acquisitions completed in 2004 and 2007. U.S. GAAP requires companies to perform an annual test for goodwill impairment. As reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, the Company performed an annual goodwill impairment test as of September 30, 2008, and a subsequent test as of December 31, 2008. The results of both analyses indicated that goodwill was not impaired. As a result of the continued decline in the first quarter of 2009 in stock prices in the financial services sector and in the Company’s common stock price, the Company initiated a goodwill impairment test as of March 31, 2009, indicating that goodwill resulting from these acquisitions was impaired. The Company recognized a $152.5 million goodwill impairment charge for the quarter ended March 31, 2009.

Total deposits increased $648.9 million, or 15.4%, to $4.88 billion at September 30, 2009, from $4.23 billion at December 31, 2008, with core deposits increasing $562.4 million and time deposits increasing $86.5 million. Core deposits, consisting of all demand and savings deposits, represented 66.8% of total deposits at September 30, 2009, compared to 63.7% of total deposits at December 31, 2008. Within core deposits, money market account balances increased $356.7 million, to $1.11 billion at September 30, 2009, NOW checking account balances increased $182.4 million, to $784.7 million at September 30, 2009, non-interest bearing demand deposit accounts increased $25.3 million, to $487.6 million at September 30, 2009, and savings account balances decreased $2.0 million, to $870.4 million at September 30, 2009. These increases are primarily due to increases in municipal money market and checking account balances, SmartChecking and Platinum relationship checking and money market account balances, and business checking account balances. Time deposit increases were primarily in the 18-month and shorter maturity categories.

Borrowed funds were reduced $243.1 million, or 19.5%, to $1.00 billion at September 30, 2009, from $1.25 billion at December 31, 2008, as the Company used excess liquidity arising from the increase in core deposit funding to repay maturing advances. Borrowings as a percentage of total assets decreased to 14.7% at September 30, 2009, from 19.1% at December 31, 2008.

Total stockholders’ equity decreased $136.0 million, or 13.3%, to $882.6 million at September 30, 2009, from $1.02 billion at December 31, 2008. This decrease was primarily due to the year-to-date net loss of $128.6 million and $19.9 million in cash dividends, partially offset by $9.3 million in other comprehensive income and the allocation of shares to stock-based compensation plans of $3.3 million. At September 30, 2009, book value per share and tangible book value per share were $14.75 and $8.75, respectively, compared with $17.09 and $8.45, respectively, at December 31, 2008. The net loss for the nine months ended September 30, 2009, and the resulting decrease in stockholders’ equity and book value per share were attributable to the $152.2 million non-cash goodwill impairment charge recognized in the first quarter of 2009. Tangible equity as a percentage of tangible assets was 8.11% at September 30, 2009, compared with 8.35% at December 31, 2008. Common stock repurchases during the nine months ended September 30, 2009, totaled 11,000 shares at an average cost of $10.67 per share. At September 30, 2009, 2.1 million shares remained eligible for repurchase under the current stock repurchase program authorized by the Company’s Board of Directors.

Liquidity and Capital Resources. The Company’s primary sources of funds are deposits, FHLB-NY advances, repurchase agreements, loan repayments, maturities of investments and cash flows from mortgage-backed securities. Scheduled loan amortization is a fairly predictable source of funds, while loan and mortgage-backed securities prepayments and deposit flows are influenced by interest rates, local economic conditions and the competitive marketplace. Additional sources of liquidity that are available to the Company, should the need arise, are a $100.0 million overnight line of credit and a $100.0 million one-month overnight re-pricing line of credit, each with the FHLB-NY. As of September 30, 2009, the Company did not have any outstanding borrowings against these lines of credit.

Cash needs for the nine months ended September 30, 2009, were provided for primarily from deposit inflows; income and principal payments on loans, investments and mortgage-backed securities; and sales of loans and securities. The cash was used primarily to fund interest and operating expenses, current loan originations, investment and loan purchases and the repayment of borrowings.

As of September 30, 2009, the Bank and the Company exceeded all regulatory capital requirements as follows:


	At September 30, 2009
	Required				Actual
	Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
Bank:
Regulatory Tier 1 leverage capital	$	254,380	4.00	%	$	412,329	6.48	%
Tier 1 risk-based capital		167,158	4.00			412,329	9.87
Total risk-based capital		334,316	8.00			464,609	11.12

Company:
Regulatory Tier 1 leverage capital	$	254,812	4.00	%	$	515,898	8.10	%
Tier 1 risk-based capital		167,565	4.00			515,898	12.32
Total risk-based capital		335,131	8.00			568,304	13.57

COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

General. The Company reported net income of $8.7 million, or $0.15 per basic and diluted share for the three months ended September 30, 2009, compared to net income of $13.2 million, or $0.23 per basic and diluted share for the three months ended September 30, 2008. For the nine months ended September 30, 2009, the Company reported a net loss of $128.6 million, or $2.29 per basic and diluted share, compared with net income of $34.2 million, or $0.61 per basic and diluted share for the nine months ended September 30, 2008.

Compared with the three and nine months ended September 30, 2008, earnings and per share data for the three and nine months ended September 30, 2009 reflect an increase in the provision for loan losses due to the following: an increase in non-performing loans; downgrades in risk ratings; an increase in commercial loans as a percentage of the loan portfolio; and the impact of current macroeconomic conditions. The provision for loan losses was $6.5 million and $18.1 million for the three and nine months ended September 30, 2009, respectively, compared with $3.8 million and $6.6 million, respectively, for the same periods in 2008. In addition, earnings and per share data for the nine months ended September 30, 2009 were impacted by a special assessment imposed on the banking industry by the FDIC as part of a plan to restore the deposit insurance fund. The cost of this special assessment to the Company was $3.1 million, which resulted in a charge of $1.9 million, or $0.03 per basic and diluted share, net of tax, recognized during the second quarter of 2009.

Due to the decline in the first quarter of 2009 in stock prices in the financial services sector and in the Company’s common stock price, the Company recognized a $152.5 million, or $2.71 per share goodwill impairment charge during the quarter ended March 31, 2009. The goodwill impairment charge was a non-cash accounting adjustment to the Company’s financial statements which did not affect cash flows, liquidity, or tangible capital. As goodwill is excluded from regulatory capital, the impairment charge did not impact the regulatory capital ratios of the Company or its wholly owned subsidiary, The Provident Bank, both of which remain “well-capitalized” under regulatory requirements.

Net Interest Income . Total net interest income decreased $41,000, or 0.1%, to $45.3 million for the quarter ended September 30, 2009, from $45.4 million for the quarter ended September 30, 2008. For the nine months ended September 30, 2009, total net interest income increased $5.3 million, or 4.2%, to $132.4 million, from $127.1 million for the same period in 2008. Interest income for the third quarter of 2009 decreased $3.6 million, or 4.7%, to $73.0 million, from $76.6 million for the same period in 2008. For the nine months ended September 30, 2009, interest income decreased $9.8 million, or 4.3%, to $218.8 million, from $228.6 million for the nine months ended September 30, 2008. Interest expense decreased $3.6 million, or 11.4%, to $27.7 million for the quarter ended September 30, 2009, from $31.3 million for the quarter ended September 30, 2008. For the nine months ended September 30, 2009, interest expense decreased $15.1 million, or 14.9%, to $86.4 million, from $101.5 million for the nine months ended September 30, 2008. The changes in interest income and expense for the three and nine months ended September 30, 2009, versus the comparable 2008 periods reflected continued downward re-pricing of interest-earning assets and interest-bearing liabilities as short-term interest rates remained at historically low levels.

The Company’s net interest margin decreased 26 basis points to 3.01% for the quarter ended September 30, 2009, from 3.27% for the quarter ended September 30, 2008. Compared to the trailing quarter, the net interest margin increased 5 basis points from 2.96%. The decrease in the net interest margin for the three months ended September 30, 2009 versus the quarter ended September 30, 2008, was primarily attributable to reductions in earning asset yields, an increase in the average balance of lower-yielding interest-bearing deposits and short-term investments and an increase in the average balance of non-accrual loans. Average non-accrual loans for the quarter ended September 30, 2009 were $69.3 million, with related lost income of $725,000, compared with average non-accrual loans of $28.2 million, with related lost income of $377,000 for the quarter ended September 30, 2008.

The increase in the net interest margin for the three months ended September 30, 2009, versus the trailing quarter was primarily attributable to an increase in average securities available for sale, an increase in the average balance of lower-cost demand deposit accounts, and a decrease in the average rates paid on interest-bearing liabilities. The net interest spread was 2.77% for the quarter ended

September 30, 2009, compared with 2.96% for the same period in 2008 and 2.69% for the trailing quarter. The average yield on interest-earning assets decreased 67 basis points to 4.84% for the quarter ended September 30, 2009, from 5.51% for the comparable quarter in 2008. Compared to the trailing quarter, the yield on interest-earning assets decreased 12 basis points from 4.96%. The average cost of interest-bearing liabilities decreased 48 basis points to 2.07% for the quarter ended September 30, 2009, from 2.55% for the quarter ended September 30, 2008. Compared to the trailing quarter, the average cost of interest-bearing liabilities decreased 20 basis points from 2.27%.

The net interest margin decreased 6 basis points to 3.02% for the nine months ended September 30, 2009, from 3.08% for the same period in 2008. The decrease in the net interest margin for the nine months ended September 30, 2009 versus the nine months ended September 30, 2008, was primarily attributable to reductions in earning asset yields, an increase in the average balance of lower-yielding interest-bearing deposits and short-term investments, and an increase in the average balance of non-accrual loans. Average non-accrual loans for the nine months ended September 30, 2009 were $66.4 million, with related lost income of $1.8 million, compared with average non-accrual loans of $24.6 million, with related lost income of $878,000 for the nine months ended September 30, 2008. For the nine months ended September 30, 2009, the net interest spread was 2.76%, compared with 2.74% for the same period in 2008. For the nine months ended September 30, 2009, the yield on interest-earning assets decreased 54 basis points to 5.00%, from 5.54% for the same period in 2008. For the nine months ended September 30, 2009, the average cost of interest-bearing liabilities decreased 56 basis points to 2.24%, from 2.80% for the same period in 2008.

The average balance of net loans decreased $8.1 million, or 0.2%, to $4.29 billion for the quarter ended September 30, 2009, from the same period in 2008. Income on loans secured by real estate decreased $3.2 million, or 7.5%, to $39.3 million for the three months ended September 30, 2009, from $42.5 million for the three months ended September 30, 2008. Interest income on commercial loans increased $443,000, or 4.2%, to $11.1 million for the quarter ended September 30, 2009, compared to $10.7 million for the quarter ended September 30, 2008. Consumer loan interest income decreased $1.4 million, or 15.2%, to $7.7 million for the quarter ended September 30, 2009, from $9.1 million for the quarter ended September 30, 2008. The average loan yield for the three months ended September 30, 2009 decreased 38 basis points to 5.40%, from 5.78% for the same period in 2008.

For the nine months ended September 30, 2009, the average balance of net loans increased $64.1 million, or 1.5%, to $4.31 billion, from $4.24 billion for the same period in 2008. Income on loans secured by real estate decreased $4.8 million, or 3.9%, to $119.6 million for the nine months ended September 30, 2009, from $124.4 million for the nine months ended September 30, 2008. Interest income on commercial loans decreased $392,000, or 1.2%, to $32.2 million for the nine months ended September 30, 2009, from $32.6 million for the nine months ended September 30, 2008. Consumer loan interest income decreased $4.1 million, or 14.7%, to $23.8 million for the nine months ended September 30, 2009, from $27.9 million for the nine months ended September 30, 2008. The average loan yield for the nine months ended September 30, 2009, decreased 37 basis points to 5.44%, from 5.81% for the same period in 2008.

Interest income on investment securities held to maturity decreased $279,000, or 7.7%, to $3.3 million for the quarter ended September 30, 2009, from $3.6 million for the quarter ended September 30, 2008. Average investment securities held to maturity decreased $16.2 million, or 4.6% to $338.4 million for the quarter ended September 30, 2009, from $354.6 million for the same period last year. For the nine months ended September 30, 2009, interest income on investment securities held to maturity decreased $741,000, or 6.8%, to $10.1 million, from $10.9 million for the same period in 2008. Average investment securities held to maturity decreased $14.6 million, or 4.1%, to $340.0 million for the nine months ended September 30, 2009, from $354.7 million for the same period last year.

Interest income on securities available for sale increased $727,000, or 6.8%, to $11.5 million for the quarter ended September 30, 2009, from $10.8 million for the quarter ended September 30, 2008. Average securities available for sale increased $331.4 million, or 38.8%, to $1.19 billion for the three months ended September 30, 2009, from $855.0 million for the same period in 2008. For the nine months ended September 30, 2009, interest income on securities available for sale increased $504,000, or 1.6%, to $32.9 million, from $32.4 million for the nine months ended September 30, 2008. Average securities available for sale increased $163.9 million, or 19.4%, to $1.01 billion for the nine months ended September 30, 2009, from $843.6 million for the same period in 2008.

Interest income on deposits, Federal funds sold and other short-term investments increased $73,000, to $99,000 for the quarter ended September 30, 2009, from $26,000 for the quarter ended September 30, 2008. Average interest-earning deposits, Federal funds sold and other short-term investments increased $158.1 million, to $162.8 million for the three months ended September 30,

2009, from $4.7 million for the same period in 2008. For the nine months ended September 30, 2009, interest income on deposits, Federal funds sold and other short-term investments decreased $241,000 to $252,000, from $493,000 for the nine months ended September 30, 2008. Average interest-earning deposits, Federal funds sold and other short-term investments increased $128.1 million, to $148.3 million for the nine months ended September 30, 2009, from $20.2 million for the same period in 2008.

The average yield on all securities, including interest-earning deposits, Federal funds sold and other short-term investments decreased to 3.47% and 3.76% for the three and nine months ended September 30, 2009, respectively, compared with 4.59% and 4.64% for the same respective periods in 2008.

The average balance of interest-bearing core deposit accounts increased $473.3 million, or 21.8%, to $2.64 billion for the quarter ended September 30, 2009, from $2.17 billion for the quarter ended September 30, 2008. For the nine months ended September 30, 2009, average interest-bearing core deposits increased $294.9 million, or 13.8%, to $2.44 billion, from $2.14 billion for the same period in 2008. Average time deposit account balances increased $170.4 million, or 11.4%, to $1.66 billion for the quarter ended September 30, 2009, from $1.49 billion for the same period in 2008. For the nine months ended September 30, 2009, average time deposits increased $94.2 million, or 6.0%, to $1.65 billion, from $1.56 billion for the same period in 2008. Interest paid on deposit accounts decreased $1.3 million, or 6.6%, to $18.8 million for the quarter ended September 30, 2009, from $20.1 million for the quarter ended September 30, 2008. For the nine months ended September 30, 2009, interest paid on deposit accounts decreased $10.8 million, or 15.7%, to $58.1 million, from $68.9 million for the nine months ended September 30, 2008. The average cost of interest-bearing deposits decreased to 1.73% and 1.90% for the three and nine months ended September 30, 2009, respectively, from 2.19% and 2.49% for the three and nine months ended September 30, 2008, respectively.

Average borrowings decreased $214.9 million, or 17.5%, to $1.01 billion for the quarter ended September 30, 2009, from $1.23 billion for the quarter ended September 30, 2008. For the nine months ended September 30, 2009, average borrowings decreased $63.7 million, or 5.6%, to $1.07 billion, from $1.14 billion for the nine months ended September 30, 2008. Interest paid on borrowed funds decreased $2.2 million, or 20.0%, to $8.9 million for the quarter ended September 30, 2009, from $11.2 million for the quarter ended September 30, 2008. For the nine months ended September 30, 2009, interest paid on borrowed funds decreased $4.3 million, or 13.2%, to $28.3 million, from $32.6 million for the nine months ended September 30, 2008. The average cost of borrowings decreased to 3.50% and 3.52% for the three and nine months ended September 30, 2009, respectively, from 3.62% and 3.83% for the three and nine months ended September 30, 2008, respectively.

Provision for Loan Losses . Provisions for loan losses are charged to operations in order to maintain the allowance for loan losses at a level management considers adequate to absorb probable credit losses in the loan portfolio. In determining the level of the allowance for loan losses, management considers past and current loss experience, evaluations 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 later events change. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses in order to maintain the adequacy of the allowance. The Company’s emphasis on continued diversification of the loan portfolio through the origination of commercial mortgage loans, commercial loans and construction loans has been one of the factors management has considered in evaluating the allowance for loan losses and provision for loan losses. In the event the Company further increases the amount of such types of loans in the portfolio, management may determine that additional or increased provisions for loan losses are necessary, which could adversely affect earnings.

In evaluating the allowance for loan losses at September 30, 2009, management prepared an estimate of current loan-to-value ratios for the residential mortgage portfolio using publicly available data for collateral values in the New York metropolitan area. This analysis indicated that due to market declines in real estate values, $102.8 million of residential mortgage loans had current estimated loan-to-value ratios in excess of 100%. Of this total, 16 loans totaling $4.4 million with an estimated collateral value of $4.1 million were 90 days or more delinquent. General valuation reserves of 10%, or $440,000, were allocated to these loans at September 30, 2009.

The Company recorded provisions for loan losses of $6.5 million and $18.1 million for the three and nine months ended September 30, 2009, respectively. This compared with provisions for loan losses of $3.8 million and $6.6 million recorded for the three and nine months ended September 30, 2008, respectively. The increase in the provision for loan losses for the three and nine months ended September 30, 2009, compared with the same periods in 2008, was attributable to an increase in non-performing loans, downgrades in risk ratings, and an increase in commercial loans as a percentage of the loan portfolio to 50.9% at September 30, 2009, from 44.7% at September 30, 2008. Total non-performing loans as a percentage of total loans were 1.81% at September 30, 2009, compared with 1.31% at December 31, 2008, and 0.81% at September 30, 2008. See “Comparison of Financial Condition at September 30, 2009 and December 31, 2008” for a discussion of non-performing loans. The Company had net charge-offs of $2.8 million and $10.1 million for the three and nine months ended September 30, 2009, respectively, compared to net charge-offs of $1.6 million and $4.1 million for the same respective periods in 2008. Net charge-offs for the nine months ended September 30, 2009, included $3.0 million related to an equipment lease financing company. The allowance for loan losses was $55.7 million, or 1.29% of total loans at September 30, 2009, compared to $47.7 million, or 1.05% of total loans at December 31, 2008, and $43.3 million, or 0.99% of total loans at September 30, 2008.

Non-Interest Income . Non-interest income totaled $8.6 million for the quarter ended September 30, 2009, an increase of $813,000 compared to the same period in 2008. Gains on loan sales increased $821,000 for the quarter ended September 30, 2009, compared with the same period in 2008. The Company experienced an increase in the origination and sale of primarily 30-year fixed-rate residential mortgage loans during the third quarter of 2009, compared with the same period in 2008, as a result of lower prevailing market interest rates that promoted increased refinancing activity. The Company recognized other-than-temporary impairment charges of $701,000 in the third quarter of 2009 related to investments in the common stock of three publicly traded financial institutions, compared with other-than-temporary impairment charges of $1.4 million recognized during the third quarter of 2008. In addition, income from the appreciation in the cash surrender value of Bank-owned life insurance increased $118,000, or 8.9% for the quarter ended September 30, 2009, compared with the same period in 2008. Partially offsetting these improvements, fee income for the quarter ended September 30, 2009 decreased $629,000, or 8.6%, compared to the same period in 2008, primarily as a result of fewer overdraft occurrences and lower income recorded from increases in the value of equity fund holdings. In addition, net gains on securities transactions totaled $195,000 for the quarter ended September 30, 2009, compared with net gains of $444,000 for the same quarter in 2008.

For the nine months ended September 30, 2009, non-interest income totaled $24.4 million, an increase of $1.2 million, or 5.1%, compared to the same period in 2008. Gains on loan sales increased $1.7 million for the nine months ended September 30, 2009, compared with the same period in 2008. The Company experienced an increase in the origination and sale of primarily 30-year fixed-rate residential mortgage loans during the year-to-date 2009, compared with the same period in 2008, as a result of lower prevailing market interest rates that promoted increased refinancing activity. In addition, net gains on securities transactions totaled $1.4 million for the nine months ended September 30, 2009, compared with net gains of $845,000 for the same period in 2008. Partially offsetting these improvements, the Company recognized other-than-temporary impairment charges on securities of $1.5 million during the nine months ended September 30, 2009, compared with other-than-temporary impairment charges of $1.4 million recognized during the same period in 2008. In addition, other income decreased $1.0 million for the nine months ended September 30, 2009, compared with the same period in 2008, as a result of non-recurring earnings of $660,000 associated with the ownership and mandatory redemption of a portion of the Company’s Class B Visa, Inc. shares as part of Visa’s initial public offering, and a $400,000 gain recognized on the sale of deposits in 2008.

Non-Interest Expense . For the three months ended September 30, 2009, non-interest expense increased $4.0 million, or 12.6%, to $36.0 million, compared to $32.0 million for the three months ended September 30, 2008. FDIC insurance expense increased $2.3 million for the three months ended September 30, 2009, compared with the same period in 2008, as a result of deposit growth and increased premium rates. Compensation and benefits expense increased $1.7 million for the three months ended September 30, 2009, compared with the same period in 2008, primarily due to the recognition of $1.2 million in severance costs during the third quarter of 2009. Severance included previously disclosed costs associated with the retirements of two senior executives. In addition, other operating expenses increased $543,000 for the quarter ended September 30, 2009, compared with the same period last year, with increases occurring in a number of categories, including legal and consulting costs. These increases were partially offset by a $258,000 decrease in the amortization of intangibles as a result of scheduled reductions in core deposit intangible amortization, and reductions in net occupancy expense totaling $229,000.

Excluding the $152.5 million non-cash goodwill impairment charge recorded in the first quarter of 2009, non-interest expense increased $10.2 million, or 10.5%, to $107.4 million for the nine months ended September 30, 2009, compared to $97.2 million for the nine months ended September 30, 2008. FDIC insurance expense increased $7.4 million for the nine months ended September 30, 2009, compared with the same period in 2008, as a result of deposit growth, increased premium rates and the FDIC special assessment imposed on the industry as part of a plan to restore the deposit insurance fund. The cost of the FDIC special assessment was $3.1 million, which was accrued during the quarter ended June 30, 2009 and paid on September 30, 2009. Other operating expenses increased $1.9 million for the nine months ended September 30, 2009, compared with the same period in 2008, due primarily to $997,000 of costs associated with the dissolution of a real estate development joint venture. Additional increases in other operating expenses occurred in a number of categories, including legal and consulting costs. Compensation and benefits expense increased $1.8 million for the nine months ended September 30, 2009, compared with the same period in 2008, primarily due to the recognition of $1.8 million in severance costs during the nine months ended September 30, 2009. Severance included previously disclosed costs associated with the retirements of two senior executives in the third quarter of 2009. These increases were partially offset by a $686,000 decrease in the amortization of intangibles as a result of scheduled reductions in core deposit intangible amortization, and reductions in net occupancy expense totaling $356,000.

Income Tax Expense . For the three months ended September 30, 2009, the Company’s income tax expense was $2.8 million, compared with $4.2 million for the same period in 2008. For the nine months ended September 30, 2009, the Company’s income tax expense was $7.4 million, compared with $12.3 million for the same period in 2008. The decrease in income tax expense was attributable to lower pre-tax income and a lower effective tax rate. Excluding the impact of the goodwill impairment charge recognized in the first quarter of 2009, which is not tax deductible, the Company’s effective tax rates were 24.1% and 23.6%, respectively, for the three and nine months ended September 30, 2009, compared with 24.2% and 26.5% for the three and nine months ended September 30, 2008, respectively. The reduction in the effective tax rate was attributable to reduced projections of taxable income and a larger proportion of the Company’s income being derived from tax-exempt sources.

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 guidelines of the Company’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, the Company generally sells all 20- and 30-year fixed-rate mortgage loans at origination. Commercial real estate loans typically have interest rates that reset in five years, and other commercial loans such as construction loans and commercial lines of credit reset with changes in the Prime rate, the Federal Funds rate or LIBOR. Investment securities 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 the 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 Company endeavors to acquire and retain core deposit accounts and expand customer relationships in order to maintain a less interest rate sensitive funding base. The Company’s ability to retain maturing certificate of deposit accounts is the result of its strategy to remain competitively priced within its marketplace, typically within the upper quartile of rates offered by its competitors. The Company’s pricing strategy may vary depending upon current funding needs and the ability of the Company to fund operations through alternative sources, primarily by accessing short-term lines of credit with the FHLB-NY during periods of pricing dislocation.

Quantitative Analysis . Current and future sensitivity to changes in interest rates is 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 policy limits for acceptable change. The Company periodically reviews historical deposit re-pricing activity and makes modifications to certain assumptions used in its income simulation model regarding the interest rate sensitivity of deposits without maturity dates. These modifications are made to more precisely reflect most likely results under the various interest rate change scenarios. Since it is inherently difficult to predict the sensitivity of interest-bearing deposits to changes in interest rates, the changes in net interest income due to changes in interest rates cannot be precisely predicted. There are a variety of reasons that may cause actual results to vary considerably from the predictions presented below which include, but are not limited to, the timing, magnitude, and frequency of changes in interest rates, interest rate spreads, prepayments, and actions taken in response to such changes. Specific assumptions used in the simulation model include:

•

Parallel yield curve shifts for market rates;

•

Current asset and liability spreads to market interest rates are fixed;

•

Traditional savings and interest-bearing demand accounts move at 10% of the rate ramp in either direction;

•

Retail Money Market accounts move at 5% of the rate ramp in either direction; and

•

Higher-balance demand deposit tiers and promotional demand accounts move at 50% of the rate ramp in either direction.

The following table sets forth the results of a twelve-month net interest income projection model as of September 30, 2009 (dollars in thousands):


Change in Interest Rates in Basis Points (Rate Ramp)	Net Interest Income
	Dollar Amount		Dollar Change			Percent Change
-100	$	191,474	$	(4,177	)	(2.1	)
Static		195,651		—		—
+100		195,183		(468	)	(0.2	)
+200		193,352		(2,299	)	(1.2	)

The preceding table indicates that as of September 30, 2009, in the event of a 200 basis point increase in interest rates whereby rates ramp up evenly over a twelve-month period, net interest income would decrease 1.2%, or $2.3 million. In the event of a 100 basis point decrease in interest rates, net interest income is projected to decrease 2.1%, or $4.2 million. Due to the current Federal Reserve Bank targets for the Federal Funds rate between 0.25% and 0.00%, a forecast of rates declining 200 basis points is not meaningful.

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 September 30, 2009 (dollars in thousands):


	Present Value of Equity					Present Value of Equity as Percent of Present Value of Assets
Change in Interest Rates (Basis Points)	Dollar Amount	Dollar Change		Percent Change		Present Value Ratio	Percent Change
-100	1,183,525	37,002		3.2		16.5	2.4
Flat	1,146,523	—		—		16.1	—
+100	1,064,223	(82,300	)	(7.2	)	15.2	(5.7	)
+200	971,118	(175,405	)	(15.3	)	14.1	(12.5	)

The above table indicates that as of September 30, 2009, in the event of an immediate and sustained 200 basis point increase in interest rates, the present value of equity is projected to decrease 12.5%, or $175.4 million. If rates were to decrease 100 basis points, the model forecasts a 2.4%, or $37.0 million increase in the present value of equity. Due to the current Federal Reserve Bank targets for the Federal Funds rate between 0.25% and 0.00%, a forecast of rates declining 200 basis points is not meaningful.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes in net interest income requires the use 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 management believes such assumptions are 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 a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or re-pricing of specific assets and liabilities. Accordingly, although the net interest income table provides an indication of the Company’s 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 the Company’s net interest income and will differ from actual results.

Item 4.

CONTROLS AND PROCEDURES .

Under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) were evaluated at the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s 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 has been no change in the Company’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

The Company is involved in various legal actions and claims arising in the normal course of business. In the opinion of management, these legal actions and claims are not expected to have a material adverse impact on the Company’s financial condition and results of operations.

Item 1A.

RISK FACTORS

In addition to the other information contained in this Quarterly Report on Form 10-Q, the following represents a material update and addition to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as filed with the Securities and Exchange Commission. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. Further, to the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factor set forth below also is a cautionary statement identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

Any Future FDIC Insurance Premiums and Assessments Will Adversely Impact Our Earnings

On May 22, 2009, the FDIC adopted a final rule levying a five basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. The special assessment was payable on September 30, 2009. We recorded an expense of $3.1 million during the quarter ended June 30, 2009, to reflect the special assessment. The final rule permits the FDIC’s Board of Directors to levy up to two additional special assessments of up to five basis points each during 2009 if the FDIC estimates that the Deposit Insurance Fund reserve ratio will fall to a level that the FDIC’s Board of Directors believes would adversely affect public confidence or to a level that will be close to or below zero. In addition, the FDIC materially increased the general assessment rate and, therefore, our FDIC general insurance premium expense will increase substantially as compared to prior periods.

On October 2, 2009, the FDIC issued a Notice of Proposed Rulemaking, wherein it proposed to amend its assessment regulations to require insured institutions to pay, on December 30, 2009, their estimated quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012. If the Proposed Rule is adopted, we would expect to pay $29.3 million to the FDIC on December 30, 2009, of which $27.4 million would initially be accounted for as a prepaid expense for those periods beyond December 31, 2009.

There can be no assurance that the FDIC will not be required to take further action that may have a negative affect on our earnings or financial condition.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS .

ISSUER PURCHASES OF EQUITY SECURITIES


Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1)	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased under the Plans or Programs (1)

July 1, 2009 through July 31, 2009	3,734	$	9.39	3,734	2,140,076

August 1, 2009 through August 31, 2009	—		—	—	2,140,076

September 1, 2009 through September 30, 2009	1,105		11.42	1,105	2,138,971

Total	4,839	$	9.85	4,839

(1)	On October 24, 2007, the Company’s Board of Directors approved the purchase of up to 3,107,077 shares of its common stock under a seventh general repurchase program which commenced upon completion of the previous program. The repurchase program has no expiration date.

Item 3.

DEFAULTS UPON SENIOR SECURITIES .

Not Applicable

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .

None

Item 5.

OTHER INFORMATION .

None

Item 6.

EXHIBITS .

The following exhibits are filed herewith:


3.1		Certificate of Incorporation of Provident Financial Services, Inc. ¹

3.2		Second Amended and Restated Bylaws of Provident Financial Services, Inc. ⁵

4.1		Form of Common Stock Certificate of Provident Financial Services, Inc. ¹

10.1		Form of Amended and Restated Employment Agreement between Provident Financial Services, Inc. and certain executive officers. ⁷

10.2		Form of Amended and Restated Change in Control Agreement between Provident Financial Services, Inc. and certain executive officers. ⁷



10.3		Amended and Restated Employee Savings Incentive Plan, as amended. ²

10.4		Employee Stock Ownership Plan ¹ and Amendment No. 1 to the Employee Stock Ownership Plan. ²

10.5		Supplemental Executive Retirement Plan of the Provident Bank. ⁷

10.6		Amended and Restated Supplemental Executive Savings Plan. ⁷

10.7		Retirement Plan for the Board of Managers of The Provident Bank. ⁷

10.8		The Provident Bank Amended and Restated Voluntary Bonus Deferral Plan. ⁷

10.9		Provident Financial Services, Inc. Board of Directors Voluntary Fee Deferral Plan. ⁷

10.10		First Savings Bank Directors’ Deferred Fee Plan, as amended. ³

10.11		The Provident Bank Amended and Restated Non-Qualified Supplemental Employee Stock Ownership Plan. ⁷

10.12		Provident Financial Services, Inc. 2003 Stock Option Plan. ⁴

10.13		Provident Financial Services, Inc. 2003 Stock Award Plan. ⁴

10.14		Provident Financial Services, Inc. 2008 Long-Term Equity Incentive Plan. ⁵

10.15		Voluntary Separation Agreement and General Release by and between The Provident Bank and Linda A. Niro dated as of July 8, 2009. ⁸

10.16		Consulting Services Agreement by and between The Provident Bank and Paul M. Pantozzi made as of September 22, 2009

10.17		Employment Agreement by and between Provident Financial Services, Inc. and Christopher Martin dated September 23, 2009.

10.18		Change in Control Agreement by and between Provident Financial Services, Inc. and Christopher Martin dated September 23, 2009.

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

¹	Filed as an exhibit to the Company’s Registration Statement on Form S-1, and any amendments thereto, with the Securities and Exchange Commission (Registration No. 333-98241).

²	Filed as an exhibit to the Company’s June 30, 2004 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (File No. 001-31566).

³	Filed as an exhibit to the Company’s September 30, 2004 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (File No. 001-31566).

⁴	Filed as an exhibit to the Company’s Proxy Statement for the 2003 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on June 4, 2003 (File No. 001-31566).

⁵	Filed as an exhibit to the Company’s December 31, 2007 Annual Report to Stockholders on Form 10-K filed with the Securities and Exchange Commission on February 29, 2008 (File No. 001-31566).

⁶	Filed as an exhibit to the Company’s Proxy Statement for the 2008 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on March 14, 2008 (File No. 001-31566).

⁷	Filed as an exhibit to the Company’s December 31, 2008 Annual Report to Stockholders on Form 10-K filed with the Securities and Exchange Commission on March 2, 2009 (File No. 001-31566).

⁸	Filed as an exhibit to the Company’s June 30, 2009 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (File No. 001-31566).

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:	November 9, 2009	By:	/s/ Christopher Martin
			Christopher Martin
			President and Chief Executive Officer
			(Principal Executive Officer)

Date:	November 9, 2009	By:	/s/ Thomas M. Lyons
			Thomas M. Lyons
			Senior Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)

Exhibit 10.16

CONSULTING SERVICES AGREEMENT

THIS CONSULTING SERVICES AGREEMENT (this “Agreement”) is made as of September 22, 2009 by and between The Provident Bank, a New Jersey chartered savings bank (“Bank”), and Paul M. Pantozzi (“Consultant”).

WHEREAS , Consultant has retired from Bank and from Provident Financial Services, Inc., a Delaware corporation and the holding company of Bank (“Company”) and therefore resigned as an officer and employee of Company, Bank and their affiliates, effective as of the close of business on August 31, 2009;

WHEREAS , in order to provide for continuity, and to assure that Consultant’s knowledge and business expertise remain available to Company and Bank, and are not provided to other banks and financial services companies competing with Company and Bank, Bank desires to engage Consultant as a consultant on the terms set forth in this Agreement; and

WHEREAS , Consultant desires to provide such consulting services to Bank on the terms set forth in this Agreement.

NOW, THEREFORE , in consideration of the foregoing premises and the mutual agreements hereinafter set forth and the mutual benefits to be derived herefrom, Bank and Consultant, intending to be legally bound hereby, agree as follows:

1. Retirement and Resignation From Positions With Company, Bank, Subsidiaries and Affiliates . Effective as of the close of business on August 31, 2009 (the “Separation Date”), and as a result of his retirement, Consultant’s status as an officer and employee of Company, Bank and all subsidiaries and affiliates of Company and Bank terminated, and Consultant resigned from any and all positions held as an officer and employee at Company, Bank, and any subsidiaries and/or affiliates of Company and Bank, including without limitation, Consultant’s position as Chief Executive Officer of Company and Bank (“Retirement”). In addition, Consultant resigned as Chair and member of the Credit Risk Committee of Bank’s Board of Directors (“Board”) and as President of The Provident Bank Foundation (“Foundation”), effective as of the close of business on the Separation Date. Consultant shall remain as Chairman of the Board of Foundation through December 31, 2009, and will resign as Chairman and as a member of the board of Foundation, effective December 31, 2009.

2. Expiration of Employment Agreement . Consultant acknowledges and agrees that as of the Separation Date, and as a result of his Retirement, the Amended and Restated Employment Agreement made effective as of December 31, 2008 by and between Consultant and Company (the “Employment Agreement”) terminated and is of no further force or effect (except for restrictions as to confidentiality, non-competition and non-solicitation, which upon execution of this Agreement, are included herein). Consultant further agrees that as a result of his Retirement, Consultant shall not be entitled to, and hereby waives any claim to, any payments or other benefit under the Employment Agreement.

3. Benefits Available to Consultant as Former Employee . Consultant is entitled to certain benefits as a former employee of Company and Bank pursuant to the plans and agreements maintained by Company and Bank for his benefit (other than the Employment Agreement), including but not limited to tax-qualified plans and nonqualified plans, equity plans and such other plans and arrangements that may provide post-retirement benefits to Consultant.

4. Board Service . The parties agree that Consultant shall continue as a Chairman of the Board and as a director of Company and Bank through the annual meeting of stockholders of Company following the year ending December 31, 2009 (the “Annual Meeting”), at which time, unless he has been re-nominated by the Board of Directors of Company (“Company Board”) to the Company Board and elected by Company’s stockholders as a director of the Company and also elected as a director of the Bank, his term of office as a director of Company and Bank shall expire. If Consultant is re-nominated by the Company Board and elected by the stockholders as a director of the Company and elected as a director of the Bank, and in each case, has agreed to serve in such capacity, this Agreement shall terminate as of the Annual Meeting. Except as provided in the foregoing as to the Company and the Bank, Executive’s service on the Board of Directors of all subsidiaries and affiliates of the Company and the Bank, as well as his service as Chair and member of the Credit Risk Committee of the Board and Chairman of the Board and President of The Provident Bank Foundation, terminated as of the Separation Date.

5. Consulting Term . Bank hereby agrees to engage Consultant as a consultant during the period commencing on January 1, 2010 and, unless terminated earlier pursuant to Sections 4 or 8, continuing through February 10, 2013 (the “Consulting Termination Date”). The period from the January 1, 2010 to the Consulting Termination Date shall be referred to as the “Consulting Term.”

6. Consulting Services .

(a) During the Consulting Term, Consultant shall make himself available to provide such advisory services as are reasonably requested by Bank’s Board and/or its Chief Executive Officer and President, including, without limitation, advising with respect to: (i) existing and new customer relationships, (ii) expansion strategies for existing and new market areas, (iii) strategies for developing and implementing new banking products and services, and (iv) such other banking-related services or advice as the Board may reasonably request (the “Consulting Services”). In no event shall Consultant be required to render more than eight hours of service a week under this Agreement. Consultant agrees to provide the Consulting Services at such times and locations as Company reasonably requires. Consultant agrees to use his best efforts to perform the Consulting Services in a professional and competent manner. Consultant is not hereby being granted nor will he have any authority, apparent or otherwise, to bind or commit Company, Bank or any subsidiary or affiliate of Company or Bank in any manner after the Separation Date.

(b) Bank and Consultant acknowledge and agree that because the Consulting Services required hereunder shall be no more than 20 percent of the average level of bona fide services performed by Consultant as Chief Executive Officer of Company and Bank and their affiliates, in the aggregate, over the immediately preceding 36-month period during which Consultant was an employee of Company and Bank and their affiliates, Consultant has had a “Separation from Service” from Company and Bank for purposes of Section 409A of the Internal Revenue Code (“Code”) and Treasury Regulation section 1.409A-1(h)(ii).

7. Consulting Compensation and Expense .

(a) In consideration for the services agreed to be performed during the Consulting Term, Consultant shall receive a monthly fee (the “Fee”) of $20,000 (i.e., an aggregate annual Fee of $240,000), which shall be paid monthly in arrears by Bank through December 31, 2012, after which time, no further Fee or other amounts shall be payable hereunder. During any period that Consultant receives the monthly Fee set forth herein, Consultant shall not receive fees (retainer, meeting or otherwise) for his services as a member of the board of directors or any board committee of Company or Bank. In addition to the monthly Fee, Consultant shall be eligible for the annual medical examination benefit available to Bank’s senior executives, but only for so long as the Bank continues to provide this benefit to senior executives.

(b) Consultant shall pay and be responsible for all of his home office expenses, including postage, printing, and cell phone expenses. Bank shall reimburse Consultant for other reasonable expenses incurred in connection with rendering the Consulting Services hereunder in accordance with policies adopted by Bank from time to time and subject to the approval of Bank’s Chief Executive Officer and President. The expense reimbursements described herein are intended to satisfy the requirements for a “reimbursement plan” described in Treasury Regulation Section 1.409A-3(i)(1)(iv)(A) and shall be administered to satisfy such requirements.

8. Termination of the Consulting Term .

(a) Death . Consultant’s engagement hereunder and this Agreement shall terminate upon his death.

(b) Disability . If Consultant becomes physically or mentally disabled during the Consulting Term such that he is unable to provide the Consulting Services for a period of six (6) consecutive months in any twelve (12) month period (a “Disability”), Company, at its option, may suspend the compensation described in Section 7 above until such time as Consultant is able to provide the Consulting Services, at which time, said payments would be reinstated for the remainder of the Consulting Term, if any.

(c) Termination by Company For Cause . Bank may terminate this Agreement and Consultant’s engagement hereunder as a consultant for Cause. For purposes of this Agreement, “Cause” shall mean personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, material breach of Company’s or Bank’s Code of Business Conduct and Ethics, willfully engaging in actions that in the reasonable opinion of the Board will likely cause substantial financial harm or substantial injury to the business reputation of Company or Bank, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist or regulatory order, or material breach of any provision of the Agreement. If Company terminates this Agreement for Cause, Consultant shall not receive any further payments of the Fee.

(d) Termination Upon Re-election to Board of Directors . This Agreement shall terminate in the event that Consultant is re-elected to the Board of Directors of Company and the Bank at the Annual Meeting, Consultant agrees in each case to serve, and therefore continues as a director of Company and Bank. In the event of a termination in accordance with this sub-section (d), there shall be no further obligation to pay the Fee, other than payment for services rendered before such termination.

(e) Termination Without Cause . In the event Bank terminates this Agreement without Cause, the remaining monthly Fee due to Consultant for the remainder of the Consulting Term shall be accelerated and shall be paid by Bank in a lump sum payment within ten (10) business days of such termination.

(f) Termination by Consultant . This Agreement may be terminated by Consultant upon thirty (30) days prior written notice to the Bank. Upon such termination, Consultant shall be entitled to a pro-rated Fee for the period prior to such termination, and thereafter, no further fee shall be due to Consultant under this Agreement.

9. Confidential Information . Consultant recognizes and acknowledges that the knowledge of the business activities, plans for business activities, and all other proprietary information of Company and Bank, as it may exist from time to time, are valuable, special and unique assets of the business of Company and Bank. Consultant will not, during or after his Separation Date or his Consulting Termination Date, whichever is later, disclose any knowledge of the past, present, planned or considered business activities or any other similar proprietary information of Company and Bank, to any person, firm, corporation, or other entity for any reason or purpose whatsoever unless expressly authorized, in writing, by the Board or required by law. Notwithstanding the foregoing, Consultant may disclose any general knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of Company and Bank. Further, Consultant may disclose information regarding the business activities of Company and Bank, to any bank regulator having regulatory jurisdiction over the activities of Company and Bank pursuant to a formal regulatory request, provided, Consultant gives written notice to Company and Bank no later than five (5) business days prior to doing so. In the event of a breach or threatened breach by Consultant of the provisions of this Section, Company and Bank, after written notice to Consultant of its or their intention to pursue such action given at least five (5) business days prior to doing so, will be entitled to seek injunctive relief restraining Consultant from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of Company and Bank, or any other similar proprietary information, or from rendering any services to any person, firm, corporation, or other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting Company and Bank, from pursuing any other remedies available to Company and Bank for such breach or threatened breach, including the recovery of damages from Consultant, provided that Company and/or Bank give written notice to Consultant of its or their intention to pursue any such action at least five business days before doing so.

10. Non-Competition and Non-Solicitation . Consultant hereby covenants and agrees that, for a period equal to the longer of: (i) six months following any termination or expiration of this Agreement; or (ii) one year following his Separation Date, he shall not, without the prior written consent of Bank, either directly or indirectly:

(a) solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of Company or Bank, or any of their respective subsidiaries or affiliates, to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to any other business;

(b) solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of Company or Bank, or any subsidiary or affiliate of Company or Bank to terminate an existing business or commercial relationship with Company, Bank or any subsidiary or affiliate of Company or Bank; or

(c) become an officer, employee, consultant, director, independent contractor, agent, joint venturer, partner, shareholder or trustee of any savings bank, savings and loan association, savings and loan or savings bank holding company, credit union, bank or bank holding company (including any affiliate of any of the foregoing). Notwithstanding the foregoing, after January 1, 2011, this restriction shall only apply with respect to a savings bank, savings and loan association, savings and loan or savings bank holding company, credit union, bank or bank holding company (including any affiliate of any of the foregoing) that: (i) has a headquarters or a branch office within any county in which Company or Bank has business operations or has filed an application for regulatory approval to establish an office (the “Restricted Territory”) or (ii) otherwise competes with Company or Bank. Notwithstanding anything to the contrary herein, Consultant shall not be prohibited from owning or controlling up to one percent of the outstanding equity securities of a corporation that is publicly traded on a national securities exchange or in the over-the-counter market so long as Consultant, other than with respect to such ownership, shall not engage in any activity with such person that otherwise would violate this Section 10(c). Notwithstanding anything to the contrary in this Agreement, at least five business days prior to commencing any legal or equitable action under Section 9 or this Section 10, Company and/or Bank shall provide written notice to Consultant of its or their intention to bring such action.

The parties hereto agree that money damages would not be an adequate remedy for any breach of Section 9 or this Section 10, and any breach of the terms of Section 9 or this Section 10 would result in irreparable injury and damage to the Bank for which Bank would not have an adequate remedy at law. Therefore, in the event of a breach or a threatened breach of Section 9 or in this Section 10, the Bank, in addition to any other rights and remedies existing in its favor at law or in equity, shall be entitled to specific performance or immediate injunctive or other equitable relief from a Court in order to enforce, or prevent any violations of, the provisions of Section 9 or this Section 10 (without posting a bond or other security), without having to prove damages. The terms of this Section 10 shall not prevent the Bank from pursuing any other available remedies for any breach or threatened breach of this Agreement.

11. Status . Consultant and Bank agree that Consultant shall perform the Consulting Services as an independent contractor and shall have no power or authority to bind Company,

Bank or any subsidiary or affiliate thereof. Company will report all fees paid to Consultant by filing a Form 1099-MISC with the Internal Revenue Service as required by law. Because the Consulting Services will be performed by Consultant as an independent contractor and not an employee, unless otherwise required by the law, Bank will not make any withholdings from any payments hereunder. Consultant agrees to accept exclusive liability for complying with all applicable local, state and federal laws governing self-employed individuals, including obligations such as payment of taxes, social security, disability and other contributions based on the Fee. Except for benefits to which Consultant became entitled as an officer or employee of Company and Bank prior to the Separation Date, or as specifically set forth in this Agreement, Consultant will not receive any employee benefits under any Bank-sponsored benefit plans or participate in Bank-sponsored health insurance for the period that Consultant serves as a consultant. Consultant further agrees to indemnify and hold harmless Bank against any and all liabilities to any taxing authority for any taxes (except Company’s share of Social Security, if any), interest or penalties with regard to or arising from the payment of fees.

12. Release of Claims . In consideration of Bank’s obligations hereunder, Consultant, Consultant’s heirs, successors, and assigns, hereby knowingly and voluntarily release and forever discharge Bank and its subsidiaries and affiliates, together with all of their respective current and former officers, directors, consultants, agents, representatives and employees, and each of their predecessors, successors and assigns (collectively, the “ Releasees ”), from any and all debts, demands, actions, causes of actions, accounts, covenants, contracts, agreements, claims, damages, omissions, promises, and any and all claims and liabilities whatsoever, of every name and nature, known or unknown, suspected or unsuspected, both in law and equity (“Claims”), which Consultant ever had, now has, or may hereafter claim to have against the Releasees by reason of any matter, cause or thing whatsoever arising from the beginning of time to the time Consultant executes this Agreement (the “General Release”). This General Release of Claims shall apply to any Claim of any type, including, without limitation, any and all Claims of any type that Consultant may have arising under the common law, under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act (“ADEA”), the Older Workers Benefit Protection Act, the Americans With Disabilities Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act (“ERISA”), the Sarbanes-Oxley Act of 2002 or the New Jersey Law Against Discrimination (“NJLAD”), N.J.S.A. 19:5-1 et. seq., the Conscientious Employee Protection Act, N.J.S.A. 34:19-1 et. seq. (“CEPA”), each as amended, and any other Federal, state or local statutes, regulations, ordinances or common law, or under any policy, agreement, contract, understanding or promise, written or oral, formal or informal, between any of the Releasees and Consultant, and shall further apply, without limitation, to any and all Claims in connection with, related to or arising out of Consultant’s employment, or the termination of Consultant’s employment with Company; provided , however , that this General Release shall not apply to or impair (i) claims for vested benefits (excluding any severance or termination benefits, which are specifically waived hereunder) pursuant to any other Company employee benefit plan, as defined in ERISA, in which Consultant was a participant before the Separation Date; (ii) any rights to indemnification Consultant may have under the by-laws of Company or applicable law; or (iii) any claims that may arise from any violation of this Agreement. For the purpose of implementing a full and complete release, Consultant understands and agrees that this Agreement is intended to include all claims, if any, which Consultant may have and which Consultant does not now know or suspect to exist in Consultant’s favor against Company or any of the Releasees and that this Agreement extinguishes those claims.

13. Notices . Any notice, report or payment required or permitted to be given or made under this Agreement by one party to the other shall be deemed to have been duly given or made if personally delivered or, if mailed, when mailed by registered or certified mail, postage prepaid, to the other party at the following addresses (or at such other address as shall be given in writing by one party to the other):

If to Consultant:

Paul M. Pantozzi

17 Rivergate Way

Long Branch, New Jersey 07740

If to Bank:

The Provident Bank

830 Bergen Avenue

Jersey City, New Jersey 07306

Attn: General Counsel

with a copy to:

John J. Gorman, Esq.

Luse Gorman Pomerenk & Schick, P.C.

5335 Wisconsin Ave., N.W., Suite 780

Washington, D.C. 20015

14. Entire Agreement . This Agreement (a) contains the complete and entire understanding and agreement of Consultant and Company with respect to the subject matter hereof; and (b) supersedes all prior and contemporaneous understandings, conditions and agreements, oral or written, express or implied, respecting the engagement of Consultant in connection with the subject matter hereof.

15. Modification or Waiver . The provisions of this Agreement may be amended and waived only with the prior written consent of Bank and Consultant. No course of dealing between the parties to this Agreement shall be deemed to affect or to modify, amend or discharge any provision or term of this Agreement. No delay on the part of Bank or Consultant in the exercise of any of their respective rights or remedies shall operate as a waiver thereof, and no single or partial exercise by Bank or Consultant of any such right or remedy shall preclude other or further exercises thereof. A waiver of right or remedy on any one occasion shall not be construed as a bar to or waiver of any such right or remedy on any other occasion.

16. Severability . Whenever possible each provision and term of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or term of this Agreement shall be held to be prohibited by or invalid under such

applicable law, then such provision or term shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provision or term or the remaining provisions or terms of this Agreement.

17. No Strict Construction . The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

18. Consultant’s Representations . Consultant represents and warrants to Bank that (i) his execution, delivery and performance of this Agreement does not and shall not conflict with, or result in the breach of or violation of, any other agreement, instrument, order, judgment or decree to which he is a party or by which he is bound, (ii) he is not a party to or bound by any employment agreement, non-competition agreement or confidentiality agreement with any other person or entity that would prevent his from performing under this Agreement and (iii) upon the execution and delivery of this Agreement by Bank, this Agreement shall be the valid and binding obligation of the parties hereto, enforceable in accordance with its terms.

19. Counterparts . This Agreement may be executed and delivered by each party hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original and both of which taken together shall constitute one and the same agreement.

20. Successors and Assigns . This Agreement will be binding upon and inure to the benefit of Bank and any successor to Bank, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of Bank, whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Bank” for purposes of this Agreement) and such successor shall deliver a written affirmation of its obligations hereunder to Consultant. This Agreement will inure to the benefit of and be enforceable by Consultant’s personal or legal representatives, executors, administrators, successors, heirs, and legatees, but otherwise will not be assignable, transferable or delegable by Consultant. This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as otherwise expressly provided in this Section 20.

21. Governing Law . The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New Jersey.

22. Arbitration . Any dispute or controversy arising under or in connection with this Agreement, other than a dispute or controversy arising under Sections 9 or 10, shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by Consultant within Jersey City, New Jersey, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Consultant shall be entitled to seek specific performance of his right to be paid the Fee during the pendency of any dispute or controversy arising under or in connection with this Agreement.

23. Delivery by Facsimile . This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and

delivered by means of facsimile or other electronic means, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.

24. Survivorship . Any provision of this Agreement that by its terms is intended to continue to apply after any termination or expiration of the Consulting Term or the Agreement shall survive such termination or expiration and continue to apply in accordance with its terms.

[Signature Page Follows]

IN WITNESS WHEREOF, Consultant and Bank have caused this Agreement to be duly executed and delivered on the date and year first above written.


Attest:	The Provident Bank

/s/ John F. Kuntz	By:	/s/ Thomas W. Berry
		Thomas W. Berry Chair, Compensation Committee

Witness:	Consultant

/s/ Mary Louise Festa	/s/ Paul M. Pantozzi
	Paul M. Pantozzi

Exhibit 10.17

EMPLOYMENT AGREEMENT

This Agreement is dated this 23 ^rd day of September to be effective as of September 1, 2009 (the “Effective Date”), by and between Provident Financial Services, Inc. (the “Company”), a Delaware corporation, and Christopher Martin (“Executive”). References to the “Bank” mean The Provident Bank, a New Jersey chartered savings bank and wholly owned subsidiary of the Company. The Company and the Bank are sometimes collectively referred to as “Employers.”

WHEREAS , the Company and Executive entered into an Employment Agreement effective as of December 31, 2008 (such agreement, the “Prior Agreement”); and

WHEREAS , Executive has been appointed as the Chief Executive Officer and President of the Company and the Company believe it is appropriate and desirable to enter into this new employment agreement to reflect his new title and increased responsibilities; and

WHEREAS , this Agreement shall supersede and replace the Prior Agreement.

NOW, THEREFORE , in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

1.	POSITION AND RESPONSIBILITIES

During the period of his employment hereunder, Executive agrees to serve as Chief Executive Officer and President of the Company and the Bank and will perform all duties and will have powers associated with such position, as directed by the Board of Directors and as may be set forth in the Bylaws of the Company and the Bank. In addition, Executive shall be responsible for establishing the business objectives, policies and strategic plans of the Company and the Bank. During said period, Executive also agrees to serve, if elected, as an officer and director of any subsidiary or affiliate of the Bank or the Company without additional compensation.

TERM

The period of Executive’s employment under this Agreement shall begin as of the Effective Date and shall continue for a period of thirty-six (36) full calendar months thereafter (“Term”). Commencing on August 31, 2012, and continuing at each August 31 thereafter, the Agreement shall renew for an additional year such that the remaining term shall be twelve (12) full calendar months.

3.	PERFORMANCE OF DUTIES

During the period of his employment hereunder, except for periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of absence approved by the Board of the Company or the Bank (each a “Board,” as appropriate, however, unless

otherwise noted, “Board” shall refer to the Company’s Board), Executive shall devote substantially all his business time, attention, skill, and efforts to the faithful performance of his duties hereunder, including activities and services related to the organization, operation and management of the Company and the Bank; provided, however, that, with the approval of the Board of the Company or the Bank, as evidenced by a resolution of such Board, from time to time, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, business companies or business organizations, which, in such Board’s judgment, will not present any conflict of interest with the Bank, or materially affect the performance of Executive’s duties pursuant to this Agreement.

4.	COMPENSATION, BENEFITS AND REIMBURSEMENT

(a) Base Salary . The compensation specified under this Agreement shall constitute the salary and benefits paid for the duties described in Section 3. The Company or the Bank shall pay Executive as compensation a salary at an annual rate not less than $500,000 per year (“Base Salary”). Such Base Salary shall be payable biweekly, or with such other frequency as officers and employees are generally paid. During the period of this Agreement, Executive’s Base Salary shall be reviewed at least annually, commencing in January 2011. Such review may be conducted by a committee designated by the Board (the “Committee”), and the Board may increase, but not decrease (except a decrease that is generally applicable to all employees), Executive’s Base Salary (any increased Base Salary shall become the “Base Salary” for purposes of this Agreement). In addition to the Base Salary provided in this Section 3(a), the Company or the Bank shall provide Executive at no cost to Executive with all such other benefits as are provided uniformly to permanent full-time employees of the Bank. Base Salary shall include any amounts of compensation deferred by Executive under qualified and nonqualified plans maintained by the Company or the Bank.

(b) Bonus and Incentive Compensation . Executive will be entitled to participate in any incentive compensation and bonus plans or arrangements of Employers. Such incentive compensation will be paid in cash or stock in accordance with the terms of such plans or arrangements, or on a discretionary basis by the Committee. Nothing paid to Executive under any such plans or arrangements will be deemed to be in lieu of other compensation to which Executive is entitled under this Agreement.

(c) Benefit Plans . Executive will be entitled to participate in or receive benefits under any employee benefit plans including, but not limited to, retirement plans, supplemental retirement plans, pension plans, profit-sharing plans, or any other employee benefit plan or arrangement made available by the Bank or the Company in the future to its senior executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements.

(d) Health, Dental, Life and Disability Coverage . Employers shall provide Executive with life, medical, dental and disability coverage made available by Employers to its senior executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such coverage.

(e) Vacation and Leave . Executive will be entitled to paid vacation time each year during the term of this Agreement measured on a fiscal or calendar year basis, in accordance with the Bank’s customary practices, as well as sick leave, holidays and other paid absences in accordance with the Bank’s policies and procedures for senior executives. Any unused paid time off during an annual period will be treated in accordance with the Bank’s personnel policies as in effect from time to time.

(f) Expense Reimbursement . The Company or the Bank shall provide Executive with an automobile suitable to the position of Chief Executive Officer and President, and such automobile may be used by Executive in carrying out his duties under this Agreement, including commuting between his residence and his principal place of employment, and other personal use. The Bank or the Company shall reimburse Executive for the cost of maintenance and servicing such automobile and, for instance, gasoline and oil for such automobile, and will also reimburse Executive for his ordinary and necessary business expenses incurred in the performance of his duties under this Agreement (including but not limited to travel and entertainment expenses) that are excludible from Executive’s gross income for federal income tax purposes and for fees for memberships in a country club, a health club, and such other clubs and organizations and such other expenses as Executive and the Board shall mutually agree are necessary and appropriate for business purposes. Any such reimbursement shall be made only after presentation to the Company or the Bank of an itemized account of such expenses in such form as the Company or the Bank may reasonably require, each such reimbursement payment to be made promptly following receipt of the itemized account and in any event not later than the last day of the calendar year following the calendar year in which the expense was incurred. Executive shall be responsible for the payment of any taxes on account of his personal use of the automobile, if any, provided by the Bank or the Company and on account of any other benefit provided herein. The foregoing provisions for use of an automobile provided by the Bank or the Company and reimbursement of related expenses shall apply on a calendar year basis; prior to the beginning of each calendar year, the Bank or the Company may determine to substitute a cash allowance or other arrangement which it determines to be of equivalent value for one or more succeeding calendar years or any portion thereof during the term of this Agreement.

5.	TERMINATION AND TERMINATION PAY

Executive’s employment under this Agreement may be terminated in the following circumstances:

(a) Death . Executive’s employment under this Agreement will terminate upon his death during the term of this Agreement, in which event Executive’s estate or beneficiary will receive the compensation due to Executive through the last day of the calendar month in which his death occurred.

(b) Retirement . Executive’s employment under this Agreement will terminate upon his “Retirement.” Termination of Executive’s employment based on “Retirement” shall mean termination of Executive’s employment (a) at age 65 or in accordance with any retirement policy established with Executive’s consent with respect to him or (b) at such later time as the Company’s Board of Directors or an authorized committee thereof may determine. Upon termination of Executive upon Retirement, no amounts or benefits shall be due Executive under this Agreement, and Executive shall be entitled to all benefits under any retirement plan of the Bank or the Company and other plans to which Executive is a party.

(c) Disability .

(i)

Termination of Executive’s employment based on “Disability” shall mean termination because of any permanent and total physical or mental impairment which qualifies Executive for disability benefits under the applicable long-term disability plan maintained by the Company, the Bank or any subsidiary or, if no such plan applies, which would qualify Executive for disability benefits under the Federal Social Security System. A determination as to whether Executive has suffered a Disability shall be made by the Board with objective medical input. In the event of termination due to Disability, Executive will be entitled to disability benefits, if any, provided under a long-term disability plan sponsored by the Bank, if any.

(ii)

In the event the Board determines that Executive is Disabled, Executive will be entitled to, as disability pay, a bi-weekly payment equal to seventy-five percent of Executive’s bi-weekly rate of Base Salary on the effective date of such termination. These disability payments shall commence on the effective date of Executive’s termination and will end on the earlier of (i) the date Executive returns to the full-time employment with the Bank and the Company in the same capacity as he was employed prior to his termination for Disability and pursuant to an employment agreement between Executive and the Bank or the Company; (ii) Executive’s full-time employment by another employer; (iii) Executive attaining the age of 65; or (iv) Executive’s death. The disability pay shall be reduced by the amount, if any, paid to Executive under any plan of the Bank or the Company providing disability benefits to Executive. In lieu of the foregoing, in the sole discretion of the Company and the Bank, the Company or Bank may assist Executive in purchasing a supplemental disability policy owned by Executive which would provide a disability benefit, when aggregated with the any benefit payable under any plan of the Bank or Company, that would provide after tax-income equal to fifty percent of Executive’s bi-weekly rate of Base Salary. In such case, the premiums for the supplemental disability policy would be fully paid by the Company or the Bank.

(iii)

The Bank or the Company will cause to be continued life, medical, dental and disability coverage substantially comparable, as reasonably or customarily available, to the coverage maintained by the Bank and the Company for Executive prior to his termination for Disability, except to the extent such coverage may be changed in its application to all Bank employees or not available on an individual basis to an employee terminated for Disability. This coverage shall cease upon the earlier of (i) the date Executive returns to the full-time employment with the Bank and

the Company in the same capacity as he was employed prior to his termination for Disability and pursuant to an employment agreement between Executive and the Bank or the Company; (ii) Executive’s full-time employment by another employer; (iii) Executive attaining the age of 65; or (iv) Executive’s death.

(d) Termination for Cause .

(i)

The Board may by written notice to Executive in the form and manner specified in this paragraph, immediately terminate his employment at any time for “Cause.” Executive shall have no right to receive compensation or other benefits for any period after termination for Cause, except for any benefits that are already vested as of the date of termination and that are not otherwise subject to forfeiture under the terms of the applicable plan or program. Termination for Cause shall mean termination because of, in the good faith determination of the Board, Executive’s:

(1)

personal dishonesty;

(2)

willful misconduct;

(3)

breach of fiduciary duty involving personal profit;

(4)

intentional failure to perform stated duties;

(5)

material breach of the Company’s or the Bank’s Code of Business Conduct and Ethics;

(6)

willful violation of any law, rule or regulation (other than traffic violations or similar offenses), or any violation of a final cease-and-desist order;

(7)

willfully engaging in actions that in the reasonable opinion of the Board will likely cause substantial financial harm or substantial injury to the business reputation of the Company or the Bank; or

(8)

material breach of any provision of this Agreement.

(ii)

For purposes of this Section 5(d), in evaluating Executive’s performance, Executive’s acts or omissions shall be measured against standards generally prevailing in the savings institution and commercial banking industry. For purposes of this paragraph, no act or failure to act on the part of Executive shall be considered “willful” unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that Executive’s action or omission was in the best interest of the Bank and the Company. Executive’s employment shall not be terminated in accordance with this paragraph for any act or action or failure to act which is undertaken or omitted in accordance with a resolution of the Board or upon advice of the Company’s counsel.

(iii)

Notwithstanding the foregoing, Executive’s termination for Cause will not become effective unless the Company has delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the independent Directors of the Board, at a meeting of the Board called and held for the purpose of finding that, in the good faith opinion of the Board (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board), Executive was guilty of the conduct described above and specifying the particulars of such conduct. Any non-vested stock options granted to Executive under any stock option plan of the Bank, the Company or any subsidiary or affiliate thereof, shall become null and void effective upon Executive’s receipt of Notice of Termination for Cause pursuant to Section 7 hereof, and shall not be exercisable by Executive at any time subsequent to such Termination for Cause (unless it is determined in arbitration that grounds for termination of Executive for Cause did not exist, in which event all terms of the options as of the date of termination shall apply, and any time periods for exercising such options shall commence from the date of resolution in arbitration (but only with respect to options awarded on or after the date of Executive’s initial employment with the Company.

(e) Voluntary Termination by Executive . Executive may voluntarily terminate his employment during the term of this Agreement upon at least ninety (90) days prior written notice to the Board. In its discretion, the Board may accelerate Executive’s termination date. Upon Executive’s voluntary termination, he will receive only his compensation and vested rights and benefits to the date of his termination. Following his voluntary termination of employment under this Section 5(e), Executive will be subject to the requirements and restrictions set forth in Sections 8(a), 8(b) and 8(c) of this Agreement.

(f) Termination Without Cause or With Good Reason .

(i)

The Board may, by written notice to Executive, immediately terminate his employment at any time for a reason other than Cause (a termination “Without Cause”), and Executive may, by written notice to the Board, terminate this Agreement by resignation upon not less than thirty (30) days prior written notice given within a reasonable period of time (not to exceed, except in the case of a continuing breach, four calendar months) following an event constituting “Good Reason, as defined in sub-section 5(f)(v) below. Any termination of Executive’s employment shall have no effect on or prejudice the vested rights of Executive under the Employers’ qualified or non-qualified retirement, pension, savings, thrift, profit-sharing or stock bonus plans, group life, health (including hospitalization, medical and major medical), dental, accident and long-term disability insurance plans or other employee benefit plans or programs, or compensation plans or programs in which Executive was a participant as of the date of termination, unless the terms of any particular plan or program expressly provide otherwise.

(ii)

In the event of termination under this Section 5(f), Employer shall pay Executive, or in the event of Executive’s subsequent death, Executive’s beneficiary or estate, as the case may be:

(1)

his earned but unpaid Base Salary through the date of termination, to be paid no later than the date on which such Base Salary would ordinarily have been paid,

(2)

the annual bonus (if any) to which he is entitled under any cash-based annual bonus or performance compensation plan in effect for the year in which his termination occurs, to be paid at the same time and on the same terms and conditions (including but not limited to achievement of performance goals) applicable under the relevant plan,

(3)

the benefits (if any) due to Executive as a former employee other than pursuant to this Agreement under the Company’s or the Bank’s compensation and benefit plans (the items described in Sections 5(f)(ii)(1) through (3) shall be referred to as the “Standard Termination Entitlements”), and

(4)

as severance pay or liquidated damages, or both, a cash amount equal to the Base Salary and bonuses due for longer of: (i) the remaining term of the Agreement; or (ii) twelve (12) months following Executive’s date of termination. For these purposes, the “bonuses due for the remaining term of the Agreement” shall be determined as the greater of one-twelfth of: (x) the average annual cash bonus paid to Executive with respect to the three completed fiscal years prior to Executive’s date of termination, or (y) the cash bonus paid to Executive with respect to the last fiscal year ended prior to Executive’s date of termination, multiplied by the number of full calendar months in the longer of the two periods set forth immediately above in this sub-section. The payments set forth under this Section 5(f)(ii)(4) shall be referred to as the “Additional Severance Payments.”

(iii)

At the election of Executive, which election was made, if made at all, in writing under the Prior Agreement on or before December 31, 2008, and is irrevocable after December 31, 2008, the Additional Severance Payments that are due after December 31, 2008 shall be made in a lump sum on, or paid quarterly during the remaining term of the Agreement beginning on, Executive’s termination. Any such election made under the Prior Agreement shall continue in full force and effect. In the event that no election was made or applicable, the Additional Severance Payment to

Executive will be made in a lump sum without reduction for present value. Such payments shall not be reduced in the event Executive obtains other employment following termination of employment.

(iv)

Upon the occurrence of a termination Without Cause or for Good Reason, the Company or the Bank will cause to be continued life, medical, dental and disability coverage substantially comparable, as reasonably or customarily available, to the coverage maintained by the Company and the Bank for Executive prior to his termination, except to the extent such coverage may be changed in its application to all Bank and Company employees. Such coverage shall cease at the end of the longer of: (i) the remaining term of this Agreement; or (ii) twelve (12) months following Executive’s date of termination. To the extent the Company or the Bank determines in good faith it is not practicable to provide in-kind coverage, it shall pay directly to the insurance carrier the premium, or reimburse Executive for his direct out-of-pocket cost, for comparable coverage obtained by Executive on his own. Each such reimbursement payment shall be made promptly on submission of an itemized account of Executive’s reimbursable expense in such form as the Bank or the Company may reasonably require and in any event not later than the last day of the calendar year following the calendar year in which the expense was incurred. Each reimbursement payment shall include an additional amount calculated by the Bank or the Company in its reasonable discretion to reflect the aggregate amount of federal, state and local income and payroll taxes incurred by Executive with respect to the reimbursement payment.

(v)

“Good Reason” exists if, without Executive’s express written consent, any of the following occurs:

(1)

a failure to elect or reelect or to appoint or reappoint Executive as Chief Executive Officer and President of the Company and the Bank, or to nominate (and as to the Bank, elect) Executive to the Board of the Company and the Bank, unless consented to by Executive or resulting from Executive’s refusal to stand for election;

(2)

a material change in Executive’s functions, duties, or responsibilities, which change would cause Executive’s position to become one of lesser responsibility, importance, or scope from the position and attributes thereof described in Section 1 above, to which Executive has not agreed in writing (and any such material change not agreed to in writing shall be deemed a continuing breach of this Agreement);

(3)

a relocation of Executive’s principal place of employment by more than twenty-five (25) miles from its location as of the date of this Agreement (unless such change is closer to Executive’s principal residence at the time of such relocation);

(4)

a material reduction in Executive’s benefits and perquisites, including Base Salary (except for any reduction that is part of an employer-wide reduction in pay or benefits by Employer as part of a good faith, overall reduction or elimination applicable to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with applicable law));

(5)

a liquidation or dissolution of the Company or the Bank other than liquidations or dissolutions that are caused by reorganizations that do not affect the status of Executive;

(6)

a material breach of this Agreement.

(vi)

Notwithstanding the foregoing, Executive shall not be entitled to any payments or benefits under this Section 5 unless and until Executive executes a release of his claims against Employer, its officers, directors, successors and assigns, in the form attached to this Agreement.

(g) Termination and Board Membership . To the extent Executive is a member of the Board of the Company, the Bank or of any of their subsidiaries or affiliates (including The Provident Bank Charitable Foundation) on the date of termination of employment with Employer, then immediately upon such termination, Executive’s service on such board shall terminate and this Agreement shall constitute any required notice of resignation.

6.	CHANGE IN CONTROL

(a) If any of the events described in Section 6(b) hereof constituting a Change in Control shall have occurred or the Board has determined that a Change in Control has occurred, Executive shall not be entitled to the benefits provided under Section 5 of this Agreement upon any termination of employment, but shall be entitled only to the benefit under a separate Change in Control Agreement, if any, to which Executive may be a party.

(b) “Change in Control” shall mean the occurrence of any of the following events:

(i) consummation of a transaction that results in the reorganization, merger or consolidation of the Company, with one or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding equity ownership interests in the Company; and

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51 % of the securities entitled to vote generally in the election of directors of the Company;

(ii) the acquisition of all or substantially all of the assets of the Company or beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the outstanding securities of the Company entitled to vote generally in the election of directors by any person or by any persons acting in concert, or approval by the shareholders of the Company of any transaction which would result in such an acquisition;

(iii) a complete liquidation or dissolution of the Company or the Bank, or approval by the shareholders of the Company of a plan for such liquidation or dissolution;

(iv) the occurrence of any event if, immediately following such event, members of the Company’s Board who belong to any of the following groups do not constitute at least a majority of the Company’s Board:

(A) individuals who were members of the Company’s Board on the Effective Date; or

(B) individuals who first became members of the Company’s Board after the Effective Date either:

(I) upon election to serve as a member of the Company’s Board by the affirmative vote of three-quarters of the members of such Board, or of a nominating committee thereof, in office at the time of such first election; or

(II) upon election by the shareholders of the Company to serve as a member of the Company’s Board, but only if nominated for election by the affirmative vote of three-quarters of the members of such Board, or of a nominating committee thereof, in office at the time of such first nomination; provided that such individual’s election or nomination did not result from an actual or threatened election contest or other actual or threatened solicitation of proxies or consents other than by or on behalf of the Company’s Board; or

(v) any event which would be described in Section 6(b)(i), (ii), (iii), (iv), or (v), if the term “Bank” were substituted for the term “Company” therein and the term “Bank’s Board” were substituted for the term “Company’s Board” therein. In no event, however, shall a Change in Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank or a subsidiary of either of them, by the Company, the Bank, any subsidiary of either of them, or by any employee benefit plan maintained by any of them. For purposes of this Section 6, the term “person” shall include the meaning assigned to it under Sections 13(d)(3) or 14(d) of the Exchange Act.

7.	NOTICE

(a) Any purported termination by the Bank or the Company for Cause shall be communicated by Notice of Termination to Executive. For purposes of this Agreement, a “Notice of Termination” shall mean a written and dated notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated. If, within thirty (30) days after any Notice of Termination for Cause is given, Executive notifies the Bank or the Company that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration. Notwithstanding the pendency of any such dispute, the Bank and the Company may discontinue to pay Executive compensation until the dispute is finally resolved in accordance with this Agreement. If it is determined that Executive is entitled to compensation and benefits under Section 5 of this Agreement, the payment of such compensation and benefits by the Bank and Company shall commence immediately following the date of resolution by arbitration, with interest due Executive on the cash amount that would have been paid, pending arbitration (at the prime rate as published in The Wall Street Journal from time to time).

(b) Any other purported termination by the Bank and/or the Company or by Executive shall be communicated by a Notice of Termination to the other party. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated. The Notice of Termination shall specify the “Date of Termination,” which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employers’ termination of Executive’s employment for Cause, which shall be effective immediately. If within thirty (30) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration as provided in Section 17 of this Agreement. Notwithstanding the pendency of any such dispute, the Bank or the Company shall continue to pay Executive his Base Salary and other compensation and benefits in effect when the notice giving rise to the dispute was given (except as to termination of Executive for Cause). In the event of the voluntary termination by Executive of his employment, which is disputed by the Bank or the Company, and if it is determined in arbitration that Executive is not entitled to termination benefits pursuant to this Agreement, he shall return all cash payments made to him pending resolution by arbitration, with interest thereon at the prime rate as published in The Wall Street Journal from time to time if it is determined in arbitration that Executive’s voluntary termination of employment was not taken in good faith and not in the reasonable belief that grounds existed for his voluntary termination.

8.	NON-COMPETITION AND POST-TERMINATION OBLIGATIONS

All payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with paragraph (a), (b) and (c) of this Section 8.

(a) Information and Assistance . Executive shall, upon reasonable notice, furnish such information and assistance to the Bank and the Company as may reasonably be required by the Bank or the Company in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party.

(b) Confidentialit y . Executive recognizes and acknowledges that the knowledge of the business activities and plans for business activities of the Employers and affiliates thereof, as it may exist from time to time, is a valuable, special and unique asset of the business of the Employers. Executive will not, during or after the term of his employment, disclose any knowledge of the past, present, planned or considered business activities of the Employers or affiliates thereof to any person, firm, corporation, or other entity for any reason or purpose whatsoever (except for such disclosure as may be required to be provided to the New Jersey Department of Banking and Insurance, the Federal Deposit Insurance Corporation, or other bank regulatory agency with jurisdiction over the Bank or Executive). Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Bank, and Executive may disclose any information regarding the Bank or the Company which is otherwise publicly available or which Executive is otherwise legally required to disclose. In the event of a breach or threatened breach by Executive of the provisions of this Section 8, the Employers will be entitled to an injunction restraining Executive from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of the Employers or affiliates thereof, or from rendering any services to any person, firm, corporation, other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting the Employers from pursuing any other remedies available to the Employers for such breach or threatened breach, including the recovery of damages from Executive.

(c) Non-Solicitation/Non-Compete . Upon any termination of Executive’s employment hereunder pursuant to Section 5(e) or 5(f) of this Agreement (other than following a Change in Control), Executive agrees that he shall not, either directly or indirectly, take any of the following actions, absent the written consent of the Company, for a period of one (1) year following such termination, provided, however, that effective September 1, 2011, the restrictions set forth in Section 8(c)(iii) below, shall apply for a six (6) month period following such termination:

(i) solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of the Company or the Bank, or any of their respective subsidiaries or affiliates, to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any business whatsoever;

(ii) solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Company or the Bank, or any subsidiary or affiliate of the Company or the Bank to terminate an existing business or commercial relationship with the Company, the Bank or any subsidiary or affiliate of the Company or the Bank; or

(iii) become an officer, employee, consultant, director, independent contractor, agent, joint venturer, partner, shareholder or trustee of any savings bank, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker or any other entity that competes with the business of the Company or the Bank, or any of their direct or indirect subsidiaries or affiliates that has a headquarters or offices in any county in which the Company or the Bank has an office or has filed an application for regulatory approval to establish an office (the “Restricted Territory”). Notwithstanding anything to the contrary herein, Executive shall not be prohibited from owning up to one percent of the outstanding equity securities of a corporation that is publicly traded on a national securities exchange or in the over-the-counter market so long as Executive, other than with respect to such ownership, shall not engage in any activity with such person that otherwise would violate this Section 8(c).

(d) Remedy on Breach . The parties hereto agree that money damages would not be an adequate remedy for any breach of Section 8, and any breach of the terms of this Section would result in irreparable injury and damage to the Company for which the Company would not have an adequate remedy at law. Therefore, in the event of a breach or a threatened breach of this Section 8, the Company, in addition to any other rights and remedies existing in its favor at law or in equity, shall be entitled to specific performance or immediate injunctive or other equitable relief from a Court in order to enforce, or prevent any violations of, the provisions of Section 8 (without posting a bond or other security), without having to prove damages. The terms of this Section 8 shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach of this Agreement.

9.	SOURCE AND ALLOCATION OF PAYMENTS

All monetary payments and non-monetary benefits provided in this Agreement shall be timely paid in cash or check, or otherwise provided for, from the general funds of (a) the Company or (b) to the extent provided under an agreement between the Company and the Bank governing the allocation of expenses, the Bank, it being the intent of this Agreement to provide for the aggregate compensation due to Executive for all services provided by him to the Bank and/or the Company.

10.

EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Company and/or the Bank or any predecessor of the Bank and/or the Company and Executive, provided, however, that this Agreement shall operate contemporaneously with and shall not supersede that Change in Control Agreement entered into between the Company and Executive dated as of the same date as this Agreement, or any successor to such Change in Control Agreement. In addition, this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.

11.

NO ATTACHMENT; BINDING ON SUCCESSORS

(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.

(b) This Agreement shall be binding upon, and inure to the benefit of, Executive and the Bank, the Company and their respective successors and assigns.

12.

MODIFICATION AND WAIVER

(a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto; provided, however, that this Agreement shall be subject to amendment in the future in such manner as the Company shall reasonably deem necessary or appropriate to effect compliance with Section 409A and the regulations thereunder and to avoid the imposition of penalties and additional taxes under Section 409A, it being the express intent of the parties that any such amendment shall not diminish the economic benefit of the Agreement to Executive on a present value basis.

(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

13.

MISCELLANEOUS PROVISIONS

(a) The Company’s Board may terminate Executive’s employment at any time, but any termination, other than Termination for Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after Termination for Cause as defined in Section 5(d) hereinabove.

(b) Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 USC Section 1828(k) and any regulations promulgated thereunder.

14.

SEVERABILITY

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

15.

HEADINGS FOR REFERENCE ONLY

The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

16.

GOVERNING LAW

This Agreement shall be governed by the laws of the State of Delaware but only to the extent not superseded by federal law.

17.

ARBITRATION

Any dispute or controversy arising under or in connection with this Agreement, other than a dispute or controversy arising under Section 8 hereof, shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by the employee within twenty-five miles of Jersey City, New Jersey, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

18.

PAYMENT OF LEGAL FEES

All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company or the Bank, provided that the dispute or interpretation has been settled by Executive and the Company and/or the Bank or resolved in Executive’s favor. Such payment or reimbursement shall be made no later than the last day of the calendar year following the calendar year in which Executive incurs the expense or, if later, within sixty (60) days after the settlement or resolution that gives rise to Executive’s right to reimbursement; provided, however, that Executive shall have submitted to the Company or the Bank documentation supporting such expenses at such time and in such manner as the Company or the Bank may reasonably require.

19.

INDEMNIFICATION

The Company shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense, and shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under Delaware law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Bank or the Company (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys’ fees and the cost of reasonable settlements (such settlements must be approved by the Board of the Company, as appropriate), provided, however, neither the Bank nor Company shall be required to indemnify or reimburse Executive for legal expenses or liabilities incurred in connection with an action, suit or proceeding arising from any illegal or fraudulent act committed by Executive.

20.

NOTICE

For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:

To the Company:

830 Bergen Avenue

Jersey City, New Jersey 07306

Attention: General Counsel

To the Bank:

830 Bergen Avenue

Jersey City, New Jersey 07306

Attention: General Counsel

To Executive:

Christopher Martin

1578 Horseshoe Drive

Manasquan, New Jersey 08736

21.

INTERNAL REVENUE CODE SECTION 409A

The Employers and Executive acknowledge that each of the payments and benefits to Executive under this Agreement must either comply with the requirements of Section 409A and the regulations thereunder or qualify for an exception from compliance. To that end, the Employers and Executive agree that:

(a) the expense reimbursements described in Section 4(f) and legal fee reimbursements described in Section 18 are intended to satisfy the requirements for a “reimbursement plan” described in Treasury Regulation Section 1.409A-3(i)(l)(iv)(A) and shall be administered to satisfy such requirements;

(b) the life, medical, dental and disability coverage described in Sections 5(c)(iii) and 5(f)(iv) are intended (A) if furnished in-kind, to be exempt from compliance with Section 409A as a welfare benefit plan described in Treasury Regulation Section 1.409A-l(b)(5) and (B) if furnished by reimbursement, to satisfy the requirements for a “reimbursement or in-kind benefit plan” described in Treasury Regulation section 1.409A-3(i)(l)(iv)(A) and shall be administered to satisfy such requirements;

(c) the payments following termination of employment based on “Disability” described in Section 5(c) are intended to constitute “disability pay” within the meaning of Treasury Regulation Section 31.3121(v)(2)-l(b)(4)(iv)(C) that is exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-l(a)(5) and shall be administered to satisfy the requirements for “disability pay”;

(d) the liability insurance and indemnification provisions of Section 19 are intended to qualify for exemption from the requirements of Section 409A as an “indemnification and liability insurance plan” described in Treasury Regulation Section 1.409A- l(b)(10) and shall be administered to qualify for such exemption;

(e) the Standard Termination Entitlements payable upon termination of employment described in Sections 5(f)(ii)(1) through 5(f)(ii)(3) are intended to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-l(b)(3) as payments made pursuant to the Employers’ customary payment timing arrangements;

(f) the welfare benefits provided in kind under this Agreement are intended to be exempt from Section 409A as welfare benefits pursuant to Treasury Regulation Section 1.409A-l(b)(5) and/or as benefits not includible in gross income.

All other payments and benefits due to Executive under this Agreement on account his termination of employment that are not exempt from Section 409A shall not be paid prior to, and shall, if necessary, be deferred to and paid on the later of the earliest date on which Executive experiences a separation from service (within the meaning of Treasury Regulation Section 1.409A-l(h)) and, if Executive is a specified employee (within the meaning of Treasury Regulation Section 1.409A-l(i)) on the date of his separation from service, the first day of the seventh month following his separation from service. All such deferred amounts shall be deposited in a grantor trust which meets the requirements of Revenue Procedure 92-65 (as amended or superseded from time to time), the trustee of which shall be a financial institution selected by the Employers with the approval of Executive (which approval shall not be unreasonably withheld or delayed), pursuant to a trust agreement, the terms of which are approved by Executive (which approval shall not be unreasonably withheld or delayed) (the “Rabbi Trust”), and payments made shall include earnings on the investments made with the assets of the Rabbi Trust, which investments shall consist of short-term investment grade fixed income securities or units of interest in mutual funds or other pooled investment vehicles designed to invest primarily in such securities.

[Signature Page Follows]

SIGNATURES

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its seal to be affixed hereunto by its duly authorized officers, and Executive has signed this Agreement, on the day and date first above written.


ATTEST:	PROVIDENT FINANCIAL SERVICES, INC.

/s/ John F. Kuntz	By:	/s/ Thomas W. Berry
John F. Kuntz, Corporate Secretary		Thomas W. Berry
		Chair of the Compensation Committee

WITNESS:	EXECUTIVE

/s/ Mary Louise Festa	By:	/s/ Christopher Martin
		Christopher Martin

Exhibit 10.18

CHANGE IN CONTROL AGREEMENT

THIS CHANGE IN CONTROL AGREEMENT is dated this 23rd day of September 2009 (the “Initial Effective Date”), between Provident Financial Services, Inc. (the “Company”), a Delaware corporation, and the holding company of The Provident Bank (the “Bank”), and Christopher Martin (the “Executive”). The Company and the Bank are sometimes collectively referred to as the “Employers”.

WITNESSETH

WHEREAS , the Executive is presently an officer of the Bank;

WHEREAS , the Company desires to be ensured of the Executive’s continued active participation in the business of the Bank and the Company; and

WHEREAS , Executive was a party to an employment agreement entered into as of December 31, 2008 (“Prior Employment Agreement”), which Prior Employment Agreement has been amended and restated to reflect Executive’s new position as President and Chief Executive Officer of the Company and the Bank; and

WHEREAS, the amended and restated employment agreement (“Employment Agreement”) has been modified to limit its term and to eliminate any benefit payable upon a Change in Control; and

WHEREAS , in order to induce the Executive to remain in the employ of the Company and the Bank and to provide further incentive to achieve the financial and performance objectives of the Company and the Bank, the parties have specified the severance benefits which shall be due the Executive in the event that his employment with the Bank or the Company is terminated under specified circumstances.

NOW THEREFORE , in consideration of the mutual agreements herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

1.	DEFINITIONS

The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

(a) Annual Compensation . The Executive’s “Annual Compensation” for purposes of this Agreement shall be deemed to mean the highest level of aggregate base salary and other cash compensation paid to the Executive (including cash compensation deferred at the election of the Executive) by the Employers or any subsidiary thereof (i) during the calendar year in which the Date of Termination occurs (determined on an annualized basis), or (ii) either of the two calendar years immediately preceding the calendar year in which the Date of Termination occurs, whichever is greater. For purposes of this definition, payments of deferred compensation shall be disregarded when paid and deferral of compensation at the Executive’s election shall be included as compensation exclusively in the year of deferral.

(b) Cause . Termination of the Executive’s employment for “Cause” shall mean termination because of personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, material breach of the Company’s or the Bank’s Code of Business Conduct and Ethics, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or willfully engaging in actions that in the reasonable opinion of the Company’s Board of Directors (“Board of Directors”) will likely cause substantial financial harm or substantial injury to the business reputation of the Company or the Bank. For purposes of this paragraph, no act or failure to act on the Executive’s part shall be considered “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interests of the Employers. Executive’s employment shall not be terminated for “Cause” in accordance with this paragraph for any act or action or failure to act which is undertaken or omitted in accordance with a resolution of the Company’s Board of Directors or upon advice of the Company’s counsel.

(c) Change in Control . “Change in Control” shall mean the occurrence of any of the following events:

(i) consummation of a transaction that results in the reorganization, merger or consolidation of the Company, with one or more other persons, other than a transaction following which:

(B) at least 51% of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities entitled to vote generally in the election of directors of the Company;

(iii) a complete liquidation or dissolution of the Company or the Bank, or approval by the shareholders of the Company of a plan for such liquidation or dissolution;

(iv) the occurrence of any event if, immediately following such event, members of the Company’s Board of Directors who belong to any of the following groups do not aggregate at least a majority of the Company’s Board of Directors:

(A) individuals who were members of the Company’s Board of Directors on the Initial Effective Date; or

(B) individuals who first became members of the Company’s Board of Directors after the Initial Effective Date either:

(1) upon election to serve as a member of the Company’s Board of Directors by the affirmative vote of three-quarters of the members of such Board, or of a nominating committee thereof, in office at the time of such first election; or

(2) upon election by the shareholders of the Company to serve as a member of the Company’s Board of Directors, but only if nominated for election by the affirmative vote of three-quarters of the members of such Board, or of a nominating committee thereof, in office at the time of such first nomination; provided that such individual’s election or nomination did not result from an actual or threatened election contest or other actual or threatened solicitation of proxies or consents other than by or on behalf of the Company’s Board of Directors; or

(v) any event which would be described in Section 1(c)(i), (ii), (iii) or (iv) if the term “Bank” were substituted for the term “Company” therein and the term “Bank’s Board of Directors” were substituted for the term “Company’s Board of Directors” therein. In no event, however, shall a Change in Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, the Bank or a subsidiary of either of them, by the Company, the Bank, any subsidiary of either of them, or by any employee benefit plan maintained by any of them. For purposes of this Section 1(c), the term “person” shall include the meaning assigned to it under Sections 13(d)(3) or 14(d)(2) of the Exchange Act.

(d) Code . “Code” shall mean the Internal Revenue Code of 1986.

(e) Date of Termination . “Date of Termination” shall mean (i) if the Executive’s employment is terminated for Cause, the date on which the Notice of Termination is given, and (ii) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination.

(f) Disability . Termination by the Employers of the Executive’s employment based on “Disability” shall mean termination because of any physical or mental impairment which qualifies the Executive for disability benefits under the applicable long-term disability plan maintained by the Employers or any subsidiary or, if no such plan applies, which would qualify the Executive for disability benefits under the Federal Social Security System.

(g) Good Reason . Termination by the Executive of the Executive’s employment for “Good Reason” shall mean termination by the Executive following a Change in Control based on:

(i) Without the Executive’s express written consent, the assignment by the Company or the Bank to the Executive of any duties which are materially inconsistent with the Executive’s positions, duties, responsibilities and status with the Employers immediately prior to a Change in Control, or a material change in the Executive’s reporting responsibilities, titles or offices as an officer and employee and as in effect immediately prior to such a Change in Control, or any removal of the Executive from or any failure to re-elect the Executive to any of such responsibilities, titles or offices, except in connection with the termination of the Executive’s employment for Cause, Disability or Retirement or as a result of the Executive’s death or by the Executive other than for Good Reason;

(ii) Without the Executive’s express written consent, a reduction in the Executive’s base salary as in effect immediately prior to the date of the Change in Control or as the same may be increased from time to time thereafter or a reduction in the package of fringe benefits provided to the Executive as in effect immediately prior to the date of the Change in Control;

(iii) A change in the Executive’s principal place of employment by a distance in excess of 25 miles from its location immediately prior to the Change in Control;

(iv) Any purported termination of the Executive’s employment for Disability or Retirement which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph (i) below; or

(v) The failure by the Company to obtain the assumption of and agreement to perform this Agreement by any successor as contemplated in Section 9 hereof.

(h) IRS . IRS shall mean the Internal Revenue Service.

(i) Notice of Termination . Any purported termination of the Executive’s employment by the Employers for any reason, including without limitation for Cause, Disability or Retirement, or by the Executive for any reason, including without limitation for Good Reason, shall be communicated by written “Notice of Termination” to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) specifies a Date of Termination, which shall be not less than thirty (30) nor more than ninety (90) days after such Notice of Termination is given, except in the case of the Employers’ termination of the Executive’s employment for Cause, which shall be effective immediately; and (iv) is given in the manner specified in Section 10 hereof.

(j) Retirement . “Retirement” shall mean termination of Executive’s employment (a) at age 65 or in accordance with any retirement policy established with Executive’s consent with respect to him or (b) at such later time as the Company’s Board of Directors or an authorized committee thereof may determine. Upon termination of Executive upon Retirement, no amounts or benefits shall be due Executive under this Agreement, and the Executive shall be entitled to all benefits under any retirement plan of the Bank and other plans to which Executive is a party.

2.	TERM OF AGREEMENT

The term of this Agreement shall be for thirty-six (36) months, commencing on the Initial Effective Date. On April 1 ^st of each calendar year that begins on or after the Initial Effective Date, the Agreement shall renew for an additional year such that the remaining term shall be thirty-six (36) full calendar months beginning on such April 1 ^st . References herein to the term of this Agreement shall refer both to the initial term and successive terms. A Notice of Termination shall also be presumed to constitute a notice of termination of this Agreement.

3.	BENEFITS UPON TERMINATION

If the Executive’s employment by the Company or the Bank is terminated subsequent to a Change in Control and during the term of this Agreement by (i) the Company or Bank for other than Cause, Disability, Retirement or the Executive’s death or (ii) the Executive for Good Reason, then the Company or the Bank shall:

(a) pay the Executive his earned but unpaid base salary through the Date of Termination, to be paid not later than the date on which such base salary would ordinarily have been paid;

(b) pay to the Executive the annual bonus (if any) to which he is entitled under any cash-based annual bonus or performance compensation plan in effect for the year in which his termination occurs, to be paid at the same time and on the terms and conditions (including but not limited to achievement of performance goals) applicable under the relevant plan;

(c) provide the benefits (if any) due to the Executive as a former employee other than pursuant to this Agreement under the Bank’s and the Company’s compensation and benefits plans (the items described in Sections 3(a), (b) and (c), the “Standard Termination Entitlements”);

(d) pay to the Executive, in a lump sum on the Date of Termination, a cash severance amount equal to three (3) times the Executive’s Annual Compensation (the “Additional Severance Payment”), and

(e) provide, for a period of three years following the Date of Termination, at no cost to the Executive, coverage of Executive (and family, if applicable) under all group insurance, life insurance, health and accident insurance and disability insurance and other insurance programs or arrangements offered by the Bank and the Company in which the Executive was entitled to participate immediately prior to the Date of Termination. To the extent the Bank or the Company determines in good faith it is not practicable to provide in-kind coverage, it shall pay directly to the insurance carrier the premium, or reimburse the Executive for his direct out-of-pocket cost, for comparable coverage obtained by the Executive on his own. Each such reimbursement payment shall be made promptly on submission of an itemized account of the Executive’s reimbursable expense in such form as the Bank or the Company may

reasonably require and in any event not later than the last day of the calendar year following the calendar year in which the expense was incurred. Each reimbursement payment shall include an additional amount calculated by the Bank or the Company, in its reasonable discretion, to reflect the aggregate amount of federal, state and local income and payroll taxes, if any, incurred by the Executive with respect to the reimbursement payment.

4.	NO MITIGATION, EXCLUSIVITY OF BENEFITS

(a) The Executive shall not be required to mitigate the amount of any benefits hereunder by seeking other employment or otherwise. The amount of severance to be provided pursuant to Section 3(a) hereof shall not be reduced by any compensation earned by the Executive as a result of employment by another employer after the Date of Termination or otherwise.

(b) The specific arrangements referred to herein are not intended to exclude any other benefits which may be available to the Executive upon a termination of employment with the Employers pursuant to employee benefit plans of the Employers or otherwise.

5.	WITHHOLDING.

All payments required to be made by the Employers hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Employers may reasonably determine should be withheld pursuant to any applicable law or regulation.

6.	NATURE OF EMPLOYMENT AND OBLIGATIONS

(a) Nothing contained herein shall be deemed to create other than a terminable at will employment relationship between the Employers and the Executive, and the Employers may terminate the Executive’s employment at any time, subject to providing: (i) any payments specified herein in accordance with the terms hereof, or (ii) any payments and benefits required under any other agreement to which Executive is a party.

(b) Nothing contained herein shall create or require the Employers to create a trust of any kind to fund any benefits which may be payable hereunder, and to the extent that the Executive acquires a right to receive benefits from the Employers hereunder, such right shall be no greater than the right of any unsecured general creditor of the Employers.

7.	SOURCE AND ALLOCATION OF PAYMENTS

All monetary payments and non-monetary benefits provided in this Agreement shall be timely paid in cash or check, or otherwise provided for, from the general funds of (a) the Company or (b) to the extent provided under an agreement between the Company and the Bank governing the allocation of expenses, the Bank, it being the intent of this Agreement to provide for the aggregate compensation due to the Executive for all services provided by him to the Bank and/or the Company.

8.	NO ATTACHMENT

(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.

(b) This Agreement shall be binding upon, and inure to the benefit of, the Executive, the Bank, the Company and their respective successors and assigns.

9.	ASSIGNABILITY

The Company may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation, bank or other entity with or into which either of the Employers may hereafter merge or consolidate or to which either of the Employers may transfer all or substantially all of its respective assets, if, in any such case, said corporation, bank or other entity shall assume all obligations of the Company hereunder in writing as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or their rights and obligations hereunder. The Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

10.

NOTICE

To the Company:

830 Bergen Avenue

Jersey City, New Jersey 07306

Attention: General Counsel

To the Bank:

830 Bergen Avenue

Jersey City, New Jersey 07306

Attention: General Counsel

To the Executive:

Christopher Martin

1578 Horseshoe Drive

Manasquan, New Jersey 08736

11.

AMENDMENT; WAIVER

No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or officers as may be specifically designated by the Board of Directors of the Company to sign on their behalf; provided, however, that this Agreement shall be subject to amendment in the future in such manner as the Company shall reasonably deem necessary or appropriate to effect compliance with Section 409A and the regulations thereunder and to avoid the imposition of penalties and additional taxes under Section 409A, it being the express intent of the parties that any such amendment shall not diminish the economic benefit of the Agreement to the Executive on a present value basis. No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

12.

GOVERNING LAW

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware.

13.

HEADINGS

The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

14.

VALIDITY

The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect.

15.

COUNTERPARTS

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

16.

MISCELLANEOUS PROVISIONS

(a) This Agreement does not create any obligation on the part of the Bank or the Company to make payments to (or to employ) Executive unless a Change in Control of the Bank or the Company shall have occurred. Following a Change in Control, Executive’s employment may be terminated at any time, but any termination, other than a termination for Cause, shall not prejudice the Executive’s right to compensation or other benefits under this Agreement. The Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause as defined in Section 1(b) hereof.

(b) Notwithstanding any other provision of this Agreement to the contrary, any payments made to the Executive pursuant to this Agreement or otherwise are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C.(S)1828(k)) and the regulations promulgated thereunder, including 12 C.F.R. Part 359.

17.

REINSTATEMENT OF BENEFITS AFTER REGULATORY ACTION

In the event the Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by an action of a regulatory agency having jurisdiction over the Bank during the term of this Agreement and a Change in Control, as defined herein, occurs, the Employers will assume their obligation to pay and the Executive will be entitled to receive all of the termination benefits provided for under Section 3 of this Agreement only upon the Bank’s (or its successors) receipt of a dismissal of the charges by the regulatory agency.

18.

ARBITRATION

Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by the Company within fifty (50) miles from the location of the Company’s main office, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that the Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement, other than in the case of a termination for Cause.

19.

PAYMENT OF COSTS AND LEGAL FEES

All reasonable costs and legal fees paid or incurred by the Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company or the Bank (in accordance with Section 7 hereof) if the Executive is successful on the merits pursuant to a legal judgment, arbitration or settlement in the Executive’s favor. Such payment or reimbursement shall be made no later than the last day of the calendar year following the calendar year in which the Executive incurs the expense or, if later, within sixty (60) days after the settlement or resolution that gives rise to the Executive’s right to reimbursement; provided, however, that the Executive shall have submitted to the Company documentation supporting such expenses at such time and in such manner as the Company may reasonably require.

20.

CONFIDENTIALITY

Executive recognizes and acknowledges that the knowledge of the business activities and plans for business activities of the Company and affiliates thereof, as it may exist from time to time, is a valuable, special and unique asset of the business of the Company. Executive will not, during or after the term of his employment, disclose any knowledge of the past, present, planned or considered business activities of the Company or affiliates thereof to any person, firm, corporation, or other entity for any reason or purpose whatsoever (except for such disclosure as may be required to be provided to the New Jersey Department of Banking and Insurance, the Federal Deposit Insurance Corporation, or other bank regulatory agency with jurisdiction over the Bank or Executive). Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and

exclusively derived from the business plans and activities of the Company, and Executive may disclose any information regarding the Company or the Bank which is otherwise publicly available or which exercise is otherwise legally required to disclose. In the event of a breach or threatened breach by the Executive of the provisions of this Section 20, the Company will be entitled to an injunction restraining Executive from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of the Company or affiliates thereof, or from rendering any services to any person, firm, corporation, other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from Executive.

21.

ENTIRE AGREEMENT

This Agreement embodies the entire agreement between the Company and the Executive with respect to the matters agreed to herein. All prior agreements between the Company and the Executive with respect to the matters agreed to herein are hereby superseded and shall have no force or effect, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.

22.

INTERNAL REVENUE CODE SECTION 409A

The Employers and the Executive acknowledge that each of the payments and benefits to the Executive under this Agreement must either comply with the requirements of Section 409A of the Code and the regulations thereunder or qualify for an exception from compliance. To that end, the Employers and the Executive agree that:

(a) the legal fee reimbursements described in Section 19 are intended to satisfy the requirements for a “reimbursement plan” described in Treasury Regulation Section 1.409A-3(i)(1)(iv)(A) and shall be administered to satisfy such requirements;

(b) the life, medical, dental and disability coverage described in Section 3 are intended (A) if furnished in-kind, to be exempt from compliance with Section 409A of the Code as a welfare benefit plan described in Treasury Regulation Section 1.409A-1(b)(5) and (B) if furnished by reimbursement, to satisfy the requirements for a “reimbursement or in-kind benefit plan” described in Treasury Regulation section 1.409A-3(i)(1)(iv)(A) and shall be administered to satisfy such requirements;

(c) the Standard Termination Entitlements payable upon termination of employment described in Section 3 are intended to be exempt from Section 409A of the Code pursuant to Treasury Regulation Section 1.409A-1(b)(3) as payments made pursuant to the Employers’ customary payment timing arrangements.

All other payments and benefits due to the Executive under this Agreement on account his termination of employment that are not exempt from Section 409A of the Code shall not be paid prior to, and shall, if necessary, be deferred to and paid on the later of the earliest date on

which the Executive experiences a separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)) and, if the Executive is a specified employee (within the meaning of Treasury Regulation Section 1.409A-1(i)) on the date of his separation from service, the first day of the seventh month following his separation from service. All such deferred amounts shall be deposited in a grantor trust which meets the requirements of Revenue Procedure 92-65 (as amended or superseded from time to time), the trustee of which shall be a financial institution selected by the Employers with the approval of the Executive (which approval shall not be unreasonably withheld or delayed), pursuant to a trust agreement, the terms of which are approved by the Executive (which approval shall not be unreasonably withheld or delayed) (the “Rabbi Trust”), and payments made shall include earnings on the investments made with the assets of the Rabbi Trust, which investments shall consist of short-term investment grade fixed income securities or units of interest in mutual funds or other pooled investment vehicles designed to invest primarily in such securities.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.


ATTEST:	PROVIDENT FINANCIAL SERVICES, INC.

/s/ John F. Kuntz	By:	/s/ Thomas W. Berry
John F. Kuntz, Esq.		Thomas W. Berry
Corporate Secretary		Chairman, Compensation Committee

Witness:	EXECUTIVE:

/s/ Mary Louise Festa	/s/ Christopher Martin
Print Name: Mary Louise Festa	Christopher Martin

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Christopher Martin, certify that:

1.	I have reviewed this report on Form 10-Q of Provident Financial Services, Inc;

2.	Based on my knowledge, this 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 report;

3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;

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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 9, 2009		/s/ Christopher Martin
		Christopher Martin
		President and Chief Executive Officer

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas M. Lyons, certify that:

1.	I have reviewed this report on Form 10-Q of Provident Financial Services, Inc;

2.	Based on my knowledge, this 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 report;

3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;

5	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 9, 2009		/s/ Thomas M. Lyons
		Thomas M. Lyons
		Senior Vice President and Chief Financial Officer

Exhibit 32

Certification pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Christopher Martin, President and Chief Executive Officer, and Thomas M. Lyons, Senior Vice President and Chief Financial Officer of Provident Financial Services, Inc. (the “Company”), each certify in his capacity as an officer of the Company that he has reviewed the quarterly report of the Company on Form 10-Q for the quarter ended September 30, 2009 and that to the best of his knowledge:

(1) the report fully complies with the requirements of Sections 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the report fairly presents, in all material respects, the financial condition and results of operations.

The purpose of this statement is solely to comply with Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002.


November 9, 2009				/s/ Christopher Martin
Date				President and Chief Executive Officer

November 9, 2009				/s/ Thomas M. Lyons
Date				Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Provident Financial Services, Inc. and will be retained by Provident Financial Services, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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