Filed by Provident Financial Services, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Provident Financial Services, Inc.
Commission File No. 1-31566
SANDLER O’NEILL WEST COAST
INVESTOR CONFERENCE
March 10, 2004
Forward Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about (i) the benefits of the merger between Provident Financial Services (“Provident” or “PFS”) and First Sentinel Bancorp, Inc. (“First Sentinel” or “FSLA”), including future financial and operating results, cost savings and accretion to reported earnings that may be realized from the merger; (ii) Provident’s and First Sentinel’s plans, objectives, expectations and intentions and other statements contained in this presentation that are not historical facts; and (iii) other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” or words of similar meaning. These forward-looking statements are based upon the current beliefs and expectations of Provident’s and First Sentinel’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the businesses of Provident and First Sentinel may not be combined successfully, or such combination may take longer to accomplish than expected; (2) the cost savings from the merger may not be fully realized or may take longer to realize than expected; (3) operating costs, customer loss and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected; (4) governmental approvals of the merger may not be obtained, or adverse regulatory conditions may be imposed in connection with governmental approvals of the merger; (5) the stockholders of First Sentinel or Provident may fail to approve the merger; (6) adverse governmental or regulatory policies may be enacted; (7) the interest rate environment may further compress margins and adversely affect net interest income; (8) the risks associated with continued diversification of assets and adverse changes to credit quality; (9) difficulties associated with achieving expected future financial results; (10) competition from other financial services companies in Provident’s and First Sentinel’s markets; (11) the risk of an economic slowdown that would adversely affect credit quality and loan originations. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Provident’s and First Sentinel’s reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC’s Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to Provident or First Sentinel or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Except as required by law, Provident and First Sentinel do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.
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Provident Financial Services, Inc. is the Holding Company for The Provident Bank
On January 15, 2003:
• Provident Financial Services, Inc. issued an aggregate of 59.62 million shares and contributed cash and 1.92 million shares of its common stock to The Provident Bank Foundation.
•$ 586.2 million in net proceeds raised
•$ 293.1 million distributed to The Provident Bank
•$ 293.1 million retained by Holding Company
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Our Company Profile
(as of December 31, 2003)
•$ 4.3 billion in Assets
•$ 2.7 billion in Deposits
•$ 2.2 billion in Loans
• 54 branches in 10 counties in northern and central New Jersey
• A full-service bank:
– Full Range of Retail and Commercial Deposit Products
– Retail and Commercial Lending
– Trust Services and Investment Services
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Our Current Market
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OUR STRENGTHS: Tradition, Commitment, Focus
• Tradition of Safe & Sound Management
– New Jersey’s Oldest Bank; Established 1839
• Commitment to Profitable Growth
• Commitment to Prudently Deploy Capital
• Commitment to Maintain Asset Quality
• Unwavering Customer Focus
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Our Strategic Initiatives
• Grow the Balance Sheet and Market Share
– M&A Activity, De Novo Branching, and Organic Growth
• Sustain and Increase Brand Awareness
• Customer Relationship Management
• Maximize Net Interest Income without Compromising Asset Quality
• Focus on Accelerating Revenue Growth and Slowing Operating Expense Growth
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Our Business Drivers
• Reinforce Pay-for-Performance Sales Culture
• Maintain Diversified Loan Portfolio Composition
• Continue to Increase proportion of Core Deposits to Total Deposits
• Customer Relationship Management Process:
– Maximize Product Penetration among Current Households
– Continually Reduce Attrition
– Increase New Customer Acquisition
– Integrate Consistent Sales Process and Customer Treatment across all Delivery Channels
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Our Financial Performance
($ in millions) 2003 2002 2001
Assets $ 4,284.9 $ 3,919.2 $ 2,869.7
Loans, net $ 2,216.7 $ 2,031.9 $ 1,994.6
Deposits $ 2,696.0 $ 3,243.3 $ 2,341.7
Capital $ 817.1 $ 326.0 $ 292.1
Net Income $ 18.7* $ 26.6 $ 24.1
Net Interest Margin 3.35% 3.98% 3.79%
* includes $15.6 million net of tax one-time contribution to The Provident Bank Foundation
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Loan Diversification Strategy
• Long-term Strategy—Maintain even balance between Retail Loan Portfolio and Commercial Loan Portfolio.
• Substantially all Warehouse Lines of Credit have been sold. Assets re-deployed into 1-4 family residential loans.
• Near-term Strategy will favor Retail Loans.
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Loan Portfolio Diversification
to improve asset yields to reduce exposure to interest rate risk
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Building the Commercial Loan Portfolio
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Our Deposit Market Share
• As of June 30, 2003:
• 13th of 135 FDIC-Insured Institutions in Provident’s 10-County Market Area
• Increase for 12 Months ended June 30, 2003:
– Core Deposits—Provident = 16.72%
• Core Deposits are Provident’s ongoing Strategic Focus
– Total Deposits—Provident = 5.74%
– Total Deposits all New Jersey Institutions = 8.48%
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Core Deposit Emphasis
to expand customer relationships to effectively manage interest rate expense
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Building Core Customer Deposit Balances
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Dual Strategy of Loan Diversification and Core Deposit Emphasis has resulted in Net Interest Income Growth
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Commitment to Asset Quality
0.48%
0.40%
0.41%
0.27%
% of Non-performing Loans to Total Loans
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Capital Management Strategies for Earnings per Share Growth
• Declaration of Cash Dividend after first quarter of operation as a public company. Second increase recently announced.
• Stock buy-backs commenced in 2003 to fund stockholder-approved benefit plans
• Corporate stock buy-backs approved for 2004
– Opportunities limited by merger announcement
• Continuing assessment of merger opportunities
• Leverage strategies where warranted
• EPS for the period from January 15, 2003 thru December 31, 2003 = $0.31
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Our Vision
Investors seek Financial Performance
Which will be Driven by
Customers seek Customer-Centricity
Which will be Driven by
Focused & Rewarded Employees seek Workforce
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Strategic Growth in New Jersey’s Most Attractive Markets
December 22, 2003
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Additional Information
The proposed transaction will be submitted to First Sentinel’s and Provident’s stockholders for their consideration. Provident and First Sentinel will file with the SEC a registration statement, a proxy statement/prospectus and other relevant documents concerning the proposed transaction with the SEC. Stockholders of First Sentinel are urged to read the registration statement and the proxy statement/prospectus when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about Provident and First Sentinel, at the SEC’s Internet site (http://www.sec.gov). Copies of the proxy statement/prospectus and the SEC filings that will be incorporated by reference in the proxy statement/prospectus can be obtained, without charge, by directing a request to John Kuntz, General Counsel, Provident Financial Services, 830 Bergen Avenue, Jersey City, NJ 07306 (201) 915-7701 or to Ann Clancy, Corporate Secretary, First Sentinel Bancorp, Inc., 1000 Woodbridge Center Drive, Woodbridge, NJ 07095 (732) 726-5514.
First Sentinel and Provident, and their respective executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of First Sentinel or Provident in connection with the merger. Information about the directors and executive officers of First Sentinel and their ownership of First Sentinel common stock is set forth in the proxy statement, dated March 28, 2003, for First Sentinel’s 2003 annual meeting of stockholders, as filed with the SEC. Information about the directors and executive officers of Provident Financial and their ownership of Provident Financial common stock is set forth in the proxy statement, dated June 5, 2003, for Provident Financial’s 2003 annual meeting of stockholders, as filed with the SEC. Additional information regarding the interests of such participants may be obtained by reading the proxy statement/prospectus when it becomes available.
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A Compelling Combination
• The combination of Provident and First Sentinel creates:
– 8th largest bank in New Jersey, $6.4 billion in assets(1) and a 76-branch retail footprint with $4.1 billion in deposits
– #4 ranked bank by deposit market share (10.0% deposit market share) in highly attractive Middlesex county
–$ 1.6 billion in market capitalization(2)
– Full retail and commercial banking product offering
• Transaction is consistent with articulated expansion strategy
1. Combined at September 30, 2003. Excludes impact of purchase accounting adjustments.
2. Market data as of December 19, 2003.
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Summary of Significant Terms
$22.25 per share
Value per First Sentinel Share:
$642 million(1)
Transaction Value:
60% stock / 40% cash
Consideration:
Fixed at 1.092 Provident shares for each First Sentinel share(2)
Exchange Ratio:
Tax-free exchange with election mechanism
Transaction Structure:
Approximately 20% of First Sentinel’s expenses
Estimated Cost Savings:
$30 million pre-tax
Estimated One-Time Merger Charge:
Revenue Enhancements: Identified but not assumed
1. Includes cash out of options.
2. Based on PFS average closing share price for 20 consecutive trading days ended December 18, 2003.
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Summary of Significant Terms
Due Diligence: Completed
Management Representation: Chris Martin, current President and CEO of First Sentinel, to
become President of the combined company
Other key First Sentinel managers to join Provident team
Board Representation: 2 board seats initially, with additional seat in 2005
Walk-Away: Limited price-based walk-away, subject to top-up right(1)
Termination Fee: $24 million (3.7% of transaction value)
Required Approvals: Provident and First Sentinel shareholders
Customary regulatory approvals
Expected Closing: Second quarter of 2004
1. First Sentinel has the right of termination if the value of Provident stock declines by 20% and underperforms a peer index by 17.5%, unless Provident determines to adjust consideration.
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Transaction Pricing and Comparables
Mid-Atlantic bank and thrift transactions with deal value between $200 million and $1 billion from January 2002 to present
Mid-Atlantic
PFS/FSLA (3) High Median Low
Price / LTM Earnings 28.5 x 52.3 x 23.6 x 19.7 x
Price / Forward Earnings (1) 21.4 25.5 22.2 18.5
Price / Book Value 2.76 3.15 2.74 2.12
Price / Tangible Book Value 2.81 3.83 3.36 2.58
Premium / Deposits (2) 30.3 % 74.0 % 26.5 % 17.3 %
Premium to Market (One-Day) 18.5 65.4 26.8 6.1
Source: SNL Financial.
1. Forward earnings represent the target’s earnings estimate for the full calendar year in which the transaction is announced. 2004 EPS estimate for First Sentinel.
2. Excludes all CDs greater than $100,000.
3. First Sentinel data pro forma for impact of recent financial restatement in accordance with EITF Issue No. 97-14 and related amendment of First Sentinel’s Directors Deferred Fee Plan.
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Transaction Rationale
• In-market transaction
Franchise Enhancing • Provides #4 deposit market share in one of New Jersey’s best banking markets
• Enhances Provident’s organic growth profile
• 22% accretion to GAAP EPS in 2005
Compelling Transaction • 23% accretion to cash EPS in 2005
Economics
• Double-digit internal rate of return
• Limited branch overlap will facilitate integration and minimize customer and
Manageable Execution
employee disruption
Risk
• Conservative cost savings assumption
• Chris Martin to become President of the combined company
Management Additive
• Other key First Sentinel officers to join Provident management team
• Cash portion of consideration to be funded from cash and low-yielding short-
Effective Deployment of term securities
Conversion Proceeds
• Strong pro forma tangible common equity ratio of 12%+ will support continued
share repurchases, de novo expansion and franchise-enhancing acquisitions
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Solidifying Provident’s Franchise in Central NJ
Provident Pro Forma
Deposits (9/30/03) $4,076 mm
Branches 76
Avg. Dep./Branch $53.6 mm
Source: SNL Financial. Deposit data as of June 30, 2003.
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GAAP and Cash EPS Impact
Projections for Fiscal Year
2004(1) 2005
Current GAAP EPS Estimate $0.75 $0.83(2)
Pro Forma GAAP EPS 0.84 1.01
GAAP Accretion to Provident ($) $0.09 $0.18
GAAP Accretion to Provident (%) 11.4% 21.8%
Stand-Alone Cash EPS Estimate $0.77 $0.85
Pro Forma Cash EPS 0.87 1.04
Cash Accretion to Provident ($) $0.09 $0.20
Cash Accretion to Provident (%) 12.3% 23.3%
Note: EPS estimates based on IBES median estimates.
1. Assumes merger consummation at June 30, 2004. First Sentinel earnings and adjustments are for the six months ending December 31, 2004.
2. Based on 2004 IBES median EPS estimate grown at 10%.
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Manageable Execution Risk
• Straight-forward, transparent operations
• No immediate branch closures anticipated
– Minimizes customer disruption
– Substantially all employees with customer interaction remain in place
• Conservative cost saving assumptions
• Revenue opportunities identified but not assumed
– Retail banking
– Commercial lending
– Wealth management / Trust
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Summary
• Adds highly attractive franchise in one of New Jersey’s best banking markets
• Highly accretive to EPS with solid internal rate of return
• In-market transaction with conservative cost savings assumptions
• First Sentinel possesses strong fundamentals
• Management additive
• Effective deployment of conversion proceeds
• Consistent with Provident’s expansion strategy
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