• Net Earnings: $64 million or $0.49 per share.
• Adjusted Return on Average Assets: 1.11%.
• Adjusted Return on Average Tangible Equity: 16.15%.
• Tangible Book Value per Share: Increased by $0.69 to $14.15.
• Tangible Common Equity Ratio: Expanded to 7.9%.
• Quarterly Cash Dividend: $0.24 per share.
• Deposits: Declined by $175 million or 0.94%.
• Average Cost of Total Deposits: Decreased 14 basis points to 2.11%.
• Net Interest Margin: Increased 6 basis points to 3.34%.
• Commercial Loan Portfolio Growth: Increased by 3.8%.
• Total Loan Pipeline: Approximately $2.8 billion.
• Nonperforming Loan Ratio: Increased to 0.54%.
• Net Charge-Offs: Decreased to $2 million from $5.5 million.
• Provident Protection Plus Growth: 19% organic growth in new business.
• Beacon Trust Assets Under Management: Decreased by approximately 4%.
• Revenue: Increased to $208.8 million.
• Core Net Interest Margin: Increased 9 basis points to 2.94%.
• Noninterest Income: Increased to $27 million.
• Noninterest Expenses: $113.6 million, with an efficiency ratio of 54.4%.
• Effective Tax Rate: Increased to 30.3%.

• Warning! GuruFocus has detected 4 Warning Signs with PFS.

Release Date: April 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Provident Financial Services Inc (NYSE:PFS) reported strong net earnings of $64 million or $0.49 per share for the first quarter.
• The company's tangible book value per share grew by $0.69 to $14.15, indicating solid financial health.
• Provident Financial Services Inc (NYSE:PFS) achieved a significant increase in its commercial loan portfolio, which grew by 3.8% during the quarter.
• The company's net interest margin improved by 6 basis points to 3.34%, reflecting effective management of interest expenses.
• Provident Financial Services Inc (NYSE:PFS) experienced a 19% organic growth in new business for its Provident Protection Plus segment, showcasing strong performance in fee-based businesses.

Negative Points

• Deposits declined by $175 million or 0.94% during the quarter, primarily due to seasonal outflows of municipal deposits.
• Nonperforming loans increased to 0.54%, attributed to two well-secured loans, indicating some challenges in credit quality.
• Beacon Trust assets under management and fee income decreased by approximately 4% due to market conditions.
• The company faced a $2.7 million write-down associated with the pending sale of a foreclosed commercial property.
• Provident Financial Services Inc (NYSE:PFS) experienced a $31.2 million increase in nonperforming loans, impacting overall asset quality.

Q & A Highlights

Q: Can you provide updates on the integration and new hires in wealth management and other areas? A: (Anthony Labozzetta, President, CEO) The integration is complete, and the company is moving forward as Provident Bank. We've hired teams in Pennsylvania and Westchester, contributing to pipeline growth. No significant hires in wealth management or insurance were noted.

Q: How are customer conversations regarding the macro outlook and tariffs affecting investment spending? A: (Anthony Labozzetta, President, CEO) Customers express uncertainty, but no significant pullback in investment spending is observed. The loan pipeline remains strong, and no specific industries within the portfolio are notably impacted by tariffs.

Q: Can you provide details on the two large loans that went on nonaccrual? A: (Thomas Lyons, CFO) The loans are under process with borrowers for resolution. Recent appraisals show favorable loan-to-value ratios, providing some comfort despite the uncertainty.

Q: What are your targets for CRE concentration, and how long will it take to reach them? A: (Anthony Labozzetta, President, CEO) We are not targeting a specific number but expect CRE growth of about 5%. The goal is to reach a concentration in the 420% range, driven by capital formation and diversified commercial lending.

Q: With recent M&A activity in the banking sector, what characteristics would you look for in potential acquisition candidates? A: (Anthony Labozzetta, President, CEO) Currently, buying back our stock is a priority due to undervaluation. Future acquisitions would focus on cultural fit and additive elements like deposits or new business lines, contingent on favorable stock valuations.

Q: How do you see expenses playing out over the course of 2025? A: (Thomas Lyons, CFO) Expenses are expected to be lower in the latter part of the year, with guidance set at $113 million to $115 million. The lower end of this range is more likely, barring unexpected developments.

Q: What growth can be expected in insurance commissions, and is there any seasonality? A: (Anthony Labozzetta, President, CEO) Insurance commissions are seasonal, with the first quarter being the strongest. Growth is expected to continue at around 20% year-over-year, consistent with past performance.

Q: Are share repurchases a possibility given the current capital build mode? A: (Thomas Lyons, CFO) Share repurchases are considered opportunistically, but the focus remains on profitable growth opportunities. The strength of the loan pipeline supports this strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.