Provident Financial Services, Inc. Q4 FY2025 earnings call

• Financial Results: The Provident team delivered a strong quarter with record revenues, favorable credit metrics, and expanding core profitability. Net earnings were $83 million, and pre-provision net revenue was a record $111 million.
• Balance Sheet: Commercial loan production was $3.2 billion in 2025, net commercial loan growth was 5.5%. Core deposits grew $260 million. Nonperforming assets improved to 0.32%.
• Noninterest Income: Record fee revenue, with Provident Protection Plus, Beacon Trust, and SBA activities contributing to growth.
• Capital and Systems: Tangible book value per share increased $0.57. Planning core system conversion in Q3 2026 with ~$5 million nonrecurring charges.

In the fourth quarter, Provident Financial Services reported net earnings of $83 million or $0.64 per share. Annualized return on average assets was 1.34%, and adjusted return on average tangible common equity was 17.6%. Pre-provision net revenue was a record $111 million or an ROA of 1.78%. The commercial loan team generated total new loan production of $3.2 billion in 2025, with net commercial loan growth of 5.5% for the year. Core deposits grew $260 million or 6.6% annualized. Nonperforming assets improved 9 basis points to 0.32%. Record fee revenue of $28.3 million was generated, with Provident Protection Plus seeing pretax income up 13% year-over-year, Beacon Trust revenue at $7.6 million on ~$4.2 billion AUM, and SBA gains on sale totaling $2.8 million for the year.

For 2026, loans and deposits are expected to grow in the 4%-6% range. Noninterest income is projected to average $28.5 million per quarter. Core return on average assets is targeted in the 120%-130% range with a mid-teens return on average tangible common equity. Projected quarterly core operating expenses are ~$118 million to $120 million, with the second half of the year having a slightly higher run rate. A core system conversion in Q3 2026 is planned with ~$5 million nonrecurring charges.

• Deposit Competition: Heightening competition for deposits, particularly for noninterest-bearing and low-cost money.
• Core System Conversion: Potential disruptions during the Q3 2026 core system conversion, though management is confident.
• Macroeconomic Variables: Provision requirements are driven by macroeconomic variables, though credit metrics are strong.

Q: Mark Fitzgibbon asked about tax credits and capital deployment.

A: Thomas M. Lyons explained that 2025 tax credit benefits were reflected in the income tax expense reduction, and Anthony Labozzetta stated organic growth is the primary focus with considerations for dividend and buybacks.

Q: Tim Switzer asked about deposit competition and CRE trends.

A: Anthony Labozzetta noted competition is universal, and Thomas M. Lyons discussed ~$5.7 billion in adjustable rate loan repricing over next 4 quarters and Anthony Labozzetta mentioned no desire to acquire CRE portfolios organically.

Q: Feddie Strickland asked about loan yields and wealth AUM.

A: Thomas M. Lyons talked about loan yield impact and Anthony Labozzetta discussed Beacon Trust's growth prospects and organic expansion plans.

Q: Steve Moss asked about purchase accounting accretion and core systems.

A: Thomas M. Lyons mentioned ~$60 million purchase accounting accretion for loan book in 2026 and Anthony Labozzetta discussed core system conversion timeline and benefits.

Q: David Storms asked about deposit costs and core system conversion.

A: Thomas M. Lyons discussed deposit cost reduction room and Anthony Labozzetta provided details on core system conversion scheduled for Labor Day weekend 2026.