PROVIDENT FINANCIAL SERVICES INC Q1 FY2025 earnings call

• Merger integration is complete with no remaining legacy issues, and culture is coming together under unified guiding principles.
• Core financial results improved, including net earnings of $64 million, adjusted ROA of 1.11%, and adjusted ROE of 16.15%.
• Capital position improved, tangible book value per share grew to $14.15, and a quarterly cash dividend of $0.24 per share was approved.
• Deposits declined seasonally, but average cost of deposits and cost of funds decreased. Net interest margin increased due to improved margins.
• Commercial lending saw ~$600 million in new loans, commercial loan portfolio up 3.8%, and loan pipeline at ~$2.8 billion.
• Credit quality remained strong with low net charge-offs, and fee-based businesses showed mixed performance with Provident Protection Plus growing and Beacon Trust affected by market conditions.

Provident Financial Services reported net earnings of $64 million or $0.49 per share for the first quarter. Annualized adjusted return on average assets was 1.11% and adjusted return on average tangible equity was 16.15%. Deposits declined $175 million (0.94%) due to seasonal outflow of municipal deposits, but average cost of total deposits decreased 14 basis points to 2.11%. Net interest margin increased 6 basis points to 3.34%, with core net interest margin growing 9 basis points. Commercial lending closed ~$600 million in new loans, commercial loan portfolio increased 3.8%, and total loan pipeline was ~$2.8 billion. Credit quality remained strong despite nonperforming loan ratio at 0.54%, with net charge-offs at $2 million. Fee-based businesses: Provident Protection Plus had 19% organic growth in new business, while Beacon Trust assets under management and fee income decreased 4%.

• Projected net interest margin for remainder of 2025: 3.35% to 3.45%.
• Projected quarterly core operating expenses: ~$112 million to $115 million.
• Projected 2025 financial performance: Return on average assets ~1.15%, return on tangible equity ~16%, operating expense ratio ~1.85%, and efficiency ratio ~52%.

• Uncertainty from macro outlook and tariffs, with potential impact on customers' investment spending.
• Exposure to sectors affected by tariffs, though no significant concerns identified yet.
• Two large loans on nonaccrual, with ongoing efforts to work with borrowers for resolution, but low LTVs provide some comfort.

Q: Updates on wealth management hires and when to see impact?

A: Merger integration complete, hiring in Pennsylvania and Westchester markets, pipeline growth from these areas is boosting activity.

Q: Customer conversations on macro outlook and tariffs?

A: Uncertainty exists, no outright effects seen yet, portfolio evaluated for supply chain issues from tariffs with no significant concerns identified.

Q: Updates on large nonaccrual loans?

A: Working with borrowers for resolution, low loan-to-values provide comfort, and Provident has a history of outperforming in loss content.

Q: CRE concentration target?

A: Targeting ~5% growth in CRE, not a specific target, comfortable with current levels, and diversification in commercial portfolio helps.

Q: Expense guidance and insurance commissions?

A: Expense guidance $112-115M, insurance commissions are seasonal with ~20% year-over-year growth expected.

Q: Buybacks?

A: Evaluating, flexibility to do opportunistically, with pipeline growth being the first option for capital allocation.