Provident Financial Services, Inc. Q3 FY2025 earnings call

• Strategic focus on deposits: Deposits grew, with core deposits driving the increase. • Loans: Strong commercial loan production, pipeline at record high of $2.9 billion, CRE concentration ratio improved. • Financial metrics: Net income consistent, return on average assets 1.16%, pre-tax pre-provision earnings at record $109 million. • Dividend: Board approved $0.24 per share quarterly cash dividend. • Credit quality: Nonperforming assets improved, net charge-offs low. • Noninterest income: Provident Protection Plus grew 6.1% Y/Y, Beacon Trust revenue $7.3 million, SBA gains on sale YTD $1.8 million.

Net earnings for the quarter were approximately $72 million or $0.55 per share. Deposits increased $388 million (8% annualized), with core deposits up $291 million (7.5% annualized). Commercial loan production in the third quarter was $742 million, bringing YTD production to $2.1 billion, and the commercial portfolio grew at an annualized 5%. Loan pipeline was nearly $2.9 billion with a weighted average interest rate of ~6.15%. Revenue was a record $222 million, driven by net interest income of $194 million and noninterest income of $27.4 million. Net interest margin was 3.43%, up 7 basis points from the prior quarter. Nonperforming assets were 0.41%, and net charge-offs were $5.4 million.

• Projected NIM for Q4: 3.38% to 3.45%. • Anticipate 25 basis point rate reduction in December 2025. • Noninterest income expected to have a ~$1 million step down linked quarter due to prepayment fees and seasonality. • Core margin expansion projected at 3-5 basis points per quarter over the next several quarters.

• Interest rate risk: Neutral position, but future impacts depend on yield curve steepening. • Competition risk: Increased lending competition, especially in CRE. • Credit risk: Exposure to rent-stabilized multifamily properties ($174 million, <1% of total loans) and non-depository financial institutions ($292 million mortgage warehouse loans), but comfortable with credit structure.

Q: On the margin, update on loan repricing over next 12 months and blended yield?

A: Total repricing ~$5.9 billion, floating book ~$4.950 billion; margin projection reflects all, but specific blended yield on fixed/adjustable not available at fingertips.

Q: Discussion on loan competition in markets, C&I vs CRE?

A: Increased competition in CRE, with some payoffs due to competition; C&I not seeing same level, pipeline at record $2.9 billion with 65% pull-through.

Q: Color on new specialty verticals (ABL, healthcare) contributing to loan growth?

A: C&I growth includes healthcare, warehouse lending; CRE relatively stable due to prepayments, pipeline in these verticals expected to grow high single/double-digit.

Q: Noninterest income step down linked quarter?

A: Due to prepayment fees volatility, seasonality in insurance (Q4 not strongest), and some conservatism; prepayment fees ~$1.7 million this quarter.

Q: Capital deployment thoughts (dividends, buybacks, organic growth)?

A: First preference is organic growth; comfortable with capital levels, aiming for 40%-ish payout ratio, will evaluate opportunities as budget season progresses.

Q: Deposit costs and competitive landscape?

A: Deposit costs up slightly, overall cost of funds up 1 basis point; Fed rate cuts in Sept and Nov will benefit, beta modeled at 30%-35% for deposits.

Q: Efficiency ratio and investment plans?

A: Efficiency ratio around 50%, driven by investments in business; revenue growth opportunities expected to lower ratio further, with operating leverage and future investments factored in.

Q: Frequency of bumping into private credit firms?

A: Not a significant factor, most business is relational, pipeline and deal closings not impacted by private credit firms.

Q: Purchase accounting and prepays going forward?

A: Prepays expected to normalize to $150-200 million range; purchase accounting normal runs ~40-45 basis points of NIM, expected to persist.

Q: Hiring and organic growth for 2026?

A: Expect to continue investing, with hires in insurance, Beacon, middle market; clarity on investments and returns to be provided in first quarter.