PROVIDENT FINANCIAL SERVICES INC Q4 FY2024 earnings call

• Financial results: Net earnings of $48.5 million, $0.37 per share; annualized adjusted return on average assets 1.05%, adjusted return on average tangible equity 15.39%.
• Deposits: Grew $248 million, average cost of total deposits decreased 11 basis points.
• Lending: Closed ~$713 million of new commercial loans, loan portfolio modestly grew; nonperforming loan ratio decreased 8 basis points to 39 basis points; net charge-offs decreased to $5.5 million.
• Leadership: Bill Fink joined as Chief Lending Officer; added resources to lending teams and expanded presence in Pennsylvania and Westchester.
• Fee-based businesses: Provident Protection Plus and Beacon Trust showed strong performance.
• Post-merger: Merger behind us, fundamentals strong, optimistic about 2025.

For the fourth quarter of 2024, Provident reported net earnings of $48.5 million, or $0.37 per share. Deposits grew $248 million or 5.4% annualized, with the average cost of total deposits decreasing 11 basis points to 2.25%. The core net interest margin expanded 4 basis points, but reported margin compressed 3 basis points to 3.28% due to a decrease in purchase accounting accretion. Provident Protection Plus had 19% organic growth in Q4 2024 and 16% over 12 months with a 100% retention rate. Beacon Trust assets under management grew to $4.2 billion, a 7.5% growth relative to the previous year, with income improving 12% from the last quarter of 2023.

• NIM projection: 3.35% to 3.45% for 2025, including two 25 basis point rate cuts in September and December 2025.
• Expenses: Projected quarterly core operating expenses of approximately $112 million to $115 million for 2025.
• Returns: Projected return on average assets of approximately 1.15% and return on tangible equity of approximately 16% for 2025 with an operating expense ratio of approximately 1.80% and an efficiency ratio of approximately 52%.

• Macroeconomic variables: Deterioration in macroeconomic variables driving CECL estimate may impact provision for loan losses.
• Volatility in purchase accounting accretion: Unpredictable due to cash flow volatilities, e.g., fewer prepayments of loans with acquisition discounts and some with premiums.
• Operating environment: Impact on loan growth, as seen with payoff activity and refinancing headwinds.

Q: How did Provident hit the $26 million fee projection despite seasonal insurance revenue decline?

A: Seasonal improvement in first half of 2025, volatile items like gains on loan sales, swap fee income, SBA loan sales, and insurance contingency in first quarter contribute. BOLI death benefit claims have an actuarial component.

Q: What drives the expense guide for 2025?

A: Core operating expenses projected at $112 million to $115 million, considering seasonal factors like employer payroll tax thresholds and utility maintenance costs, and working through full cost savings from the Lakeland deal.

Q: Update on upcoming CD maturities and repricing CDs?

A: CDs repricing over next 12 months total about $3 billion, $1.2 billion in first quarter with 57 basis points pickup; floating rate loans ~$4.8 billion, maturing CDs and borrowings ~$4.3 billion over next 12 months.

Q: Opportunities to resolve nonperforming loans in 2025?

A: Continue working with customers, look at loan sales, work through REO resolutions; expect some nonperforming assets to move with good exit strategies in place.