Provident Financial Services(PFS) - 2025 Q2 - Quarterly Results

Earnings Summary and Performance Highlights Provident Financial Services reported strong earnings for Q2 and H1 2025, significantly improving from 2024 due to the absence of merger-related costs Earnings Summary Provident Financial Services reported strong earnings for the second quarter and first half of 2025, showing significant improvement compared to the same periods in 2024, largely due to the absence of prior year merger-related costs Quarterly Earnings Comparison | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income | $72.0 million | $64.0 million | ($11.5 million) | | Basic EPS | $0.55 | $0.49 | ($0.11) | | Diluted EPS | $0.55 | $0.49 | ($0.11) | Six-Month Earnings Comparison | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Income | $136.0 million | $20.6 million | | Basic EPS | $1.04 | $0.23 | | Diluted EPS | $1.04 | $0.23 | - The significant year-over-year improvement is attributed to the absence of transaction costs related to the merger with Lakeland Bancorp, which totaled $79.0 million for Q2 2024 and $81.2 million for H1 2024[1] CEO Commentary and Performance Highlights The CEO highlighted the company's impressive performance, citing record revenues, expanded margins, and strong asset quality, with key achievements including record revenue of $214.2 million and a 3.36% net interest margin - CEO Anthony J. Labozzetta commented on achieving record revenues by growing earning assets and expanding margins, while improving operational efficiency and maintaining strong asset quality[2] Q2 2025 Performance Metrics | Metric | Q2 2025 Value | Change vs. Q1 2025 | | :--- | :--- | :--- | | Record Revenue | $214.2 million | - | | Net Interest Income | $187.1 million | - | | Net Interest Margin | 3.36% | +2 bps | | Core Net Interest Margin | 2.93% | -1 bp | | C&I Loan Portfolio Growth (annualized) | 16.26% | - | | Total Commercial Loan Growth (annualized) | 7.98% | - | | Tangible Book Value Per Share | $14.60 | +3.2% | - The company recorded a $2.7 million benefit to the provision for credit losses, compared to a $325,000 provision in the prior quarter, reflecting improved asset quality[2] Results of Operations This section details the company's financial performance through quarter-over-quarter, year-over-year, and year-to-date comparisons, highlighting key drivers of income and expense changes Quarter-over-Quarter Comparison (Q2 2025 vs. Q1 2025) Net income increased to $72.0 million from $64.0 million in the prior quarter, driven by a $5.4 million increase in net interest income, a $1.7 million decrease in non-interest expense, and a significant positive swing in the provision for credit losses Q2 2025 vs Q1 2025 Key Metrics | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net Income | $72.0 million | $64.0 million | | Diluted EPS | $0.55 | $0.49 | | Net Interest Income | $187.1 million | $181.7 million | | Provision for Credit Losses | ($2.7 million) benefit | $325,000 provision | | Non-Interest Expense | $114.6 million | $116.3 million | | Efficiency Ratio | 53.52% | 54.43% | Net Interest Income and Net Interest Margin Net interest income rose by $5.4 million to $187.1 million, and the net interest margin (NIM) expanded by 2 basis points to 3.36%, fueled by new loan originations at higher rates and favorable repricing of adjustable-rate loans - The increase in net interest income was primarily due to originations of new loans at current market rates and the favorable repricing of adjustable rate loans[5] Net Interest Margin Components (QoQ) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net Interest Margin | 3.36% | 3.34% | | Avg. Yield on Interest-Earning Assets | 5.68% | 5.63% | | Avg. Cost of Interest-Bearing Liabilities | 2.94% | 2.90% | Provision for Credit Losses on Loans The company recorded a $2.7 million benefit to the provision for credit losses, a significant improvement from the $325,000 provision in the previous quarter, mainly due to an improved economic forecast and better overall asset quality - The benefit to the provision was primarily attributable to an improved economic forecast and an overall improvement in the Company's asset quality[7] Net Charge-Offs (QoQ) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net Charge-Offs | $1.2 million | $2.0 million | | Annualized Net Charge-Offs to Avg. Loans | 0.03% | 0.04% | Non-Interest Income and Expense Non-interest income remained stable at $27.1 million, while non-interest expense fell by $1.7 million to $114.6 million, primarily due to a prior quarter write-down on a foreclosed property, leading to an improved efficiency ratio of 53.52% - Key changes in non-interest income included a $1.1 million increase in fee income, offset by a $709,000 decrease in insurance agency income and a $380,000 decrease in wealth management income[8] - The decrease in non-interest expense was mainly due to a prior quarter $2.7 million write-down on a foreclosed property and a $916,000 decrease in net occupancy expense[9] Efficiency Ratio (QoQ) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Efficiency Ratio | 53.52% | 54.43% | Income Tax Expense Income tax expense increased to $30.5 million from $27.8 million due to higher taxable income, though the effective tax rate decreased slightly from 30.3% to 29.7% primarily due to a discrete item related to stock-based compensation Income Tax (QoQ) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Income Tax Expense | $30.5 million | $27.8 million | | Effective Tax Rate | 29.7% | 30.3% | Year-over-Year Comparison (Q2 2025 vs. Q2 2024) The company reported net income of $72.0 million, a dramatic turnaround from a net loss of $11.5 million in Q2 2024, primarily due to the absence of $79.0 million in merger-related costs and strong core operations Q2 2025 vs Q2 2024 Key Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $72.0 million | ($11.5 million) | | Diluted EPS | $0.55 | ($0.11) | | Merger-Related Costs | $0 | $79.0 million | | Net Interest Income | $187.1 million | $141.5 million | | Provision for Credit Losses | ($2.7 million) benefit | $66.1 million provision | Net Interest Income and Net Interest Margin Net interest income surged by $45.6 million to $187.1 million, and the net interest margin expanded by 15 basis points to 3.36%, largely driven by the Lakeland acquisition which added earning assets and purchase accounting accretion - The increase in net interest income was largely driven by growth in average earning assets and net assets added in the May 16, 2024 acquisition of Lakeland[12] Net Interest Margin Components (YoY) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Margin | 3.36% | 3.21% | | Avg. Cost of Interest-Bearing Liabilities | 2.94% | 3.09% | | Avg. Cost of Total Deposits | 2.10% | 2.24% | Provision for Credit Losses on Loans A $2.7 million benefit to the provision was recorded, compared to a substantial $66.1 million provision in Q2 2024, with the prior year's provision heavily impacted by a $60.1 million initial CECL provision for the Lakeland merger - The provision for credit losses for the prior year quarter was primarily attributable to an initial CECL provision for credit losses of $60.1 million, recorded as part of the Lakeland merger[14] Non-Interest Income and Expense Non-interest income grew by $4.8 million, while non-interest expense decreased by $780,000, driven by the absence of $18.9 million in merger-related expenses which offset increased operating costs from the larger, post-merger entity - Non-interest income increased due to a $3.0 million net gain on securities transactions (vs. a prior year loss) and a $2.0 million increase in fee income resulting from the Lakeland merger[15] - Merger-related expenses decreased by $18.9 million, partially offset by increases in compensation ($8.4 million), other operating expenses ($3.2 million), and amortization of intangibles ($3.0 million) due to the addition of Lakeland[16] Efficiency Ratio (YoY) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Efficiency Ratio | 53.52% | 57.86% | Income Tax Expense The company recorded a $30.5 million income tax expense compared to a $9.8 million tax benefit in the prior-year quarter, due to significantly higher taxable income and a prior-year tax benefit related to deferred tax assets - The prior year included a $5.3 million tax benefit related to the revaluation of deferred tax assets to reflect a new 2.5% Corporate Transit Fee imposed by the state of New Jersey[17][18] Year-to-Date Comparison (H1 2025 vs. H1 2024) For the first six months of 2025, net income surged to $136.0 million from $20.6 million in the same period of 2024, reflecting a full six months of combined operations post-merger and the absence of $81.2 million in prior-year merger-related costs H1 2025 vs H1 2024 Key Metrics | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Income | $136.0 million | $20.6 million | | Diluted EPS | $1.04 | $0.23 | | Merger-Related Costs | $0 | $81.2 million | | Net Interest Income | $368.8 million | $235.2 million | | Provision for Credit Losses | ($2.3 million) benefit | $66.3 million provision | Net Interest Income and Net Interest Margin Net interest income for the six-month period increased by $133.6 million to $368.8 million, with the net interest margin expanding by 27 basis points to 3.35%, primarily driven by the full period impact of the Lakeland acquisition Net Interest Margin Components (YTD) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Interest Margin | 3.35% | 3.08% | | Avg. Yield on Interest-Earning Assets | 5.65% | 5.43% | | Avg. Cost of Interest-Bearing Liabilities | 2.92% | 2.97% | Provision for Credit Losses on Loans A $2.3 million benefit to the provision was recorded for H1 2025, compared to a $66.3 million provision in H1 2024, with the prior year's large provision mainly due to the initial $60.1 million CECL provision for the Lakeland merger - The benefit to the provision in H1 2025 was attributed to an improved economic forecast and better asset quality. The prior year's provision was primarily due to the initial CECL provision for the Lakeland merger[22] Non-Interest Income and Expense Non-interest income rose by $11.0 million to $54.1 million, driven by higher fee income and gains on securities, while non-interest expense increased by $43.7 million to $230.9 million, reflecting full operational costs of the combined company - Non-interest income growth was driven by a $5.8 million increase in fee income and a $3.1 million increase in net gains on securities transactions[23] - The increase in non-interest expense was primarily due to a $30.7 million rise in compensation and benefits from added Lakeland personnel and an $11.8 million increase in amortization of intangibles[25] Income Tax Expense Income tax expense for the six-month period was $58.3 million, a significant increase from $1.1 million in the prior year, due to higher taxable income and a prior-year tax benefit related to a new state corporate fee - The increase in tax expense was largely due to higher taxable income, combined with a prior year $5.3 million tax benefit related to the revaluation of deferred tax assets[26] Asset Quality This section assesses the company's credit risk profile, including trends in non-performing loans, non-performing assets, and the allowance for credit losses Credit Quality Metrics Asset quality remained generally stable, with total non-performing loans increasing slightly to $107.2 million or 0.56% of total loans, while the allowance for credit losses decreased to 0.98% of loans, reflecting an improved economic outlook Asset Quality Ratios | Metric | June 30, 2025 | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | :--- | | Non-Performing Loans to Total Loans | 0.56% | 0.54% | 0.37% | | Non-Performing Assets to Total Assets | 0.44% | 0.45% | 0.34% | | Allowance for Credit Losses to Total Loans | 0.98% | 1.02% | 1.04% | - The increase in non-performing loans from the trailing quarter was driven by increases in commercial, residential mortgage, and consumer loans, partially offset by decreases in multi-family and commercial mortgage loans[27] - The allowance for credit losses decreased by $5.6 million since year-end 2024, due to a $2.3 million benefit to the provision and $3.2 million in net charge-offs[28] Balance Sheet Summary This section provides an overview of the company's financial position, detailing changes in assets, liabilities, and equity, and key drivers of balance sheet growth Assets, Liabilities, and Equity Total assets grew by $495.5 million since year-end 2024 to $24.55 billion, primarily funded by increased borrowings and a modest rise in deposits, with stockholders' equity increasing by $106.3 million, boosting tangible book value per share to $14.60 Balance Sheet Changes (since Dec 31, 2024) | Account | Change | Balance as of June 30, 2025 | | :--- | :--- | :--- | | Total Assets | +$495.5 million | $24.55 billion | | Loans Held for Investment | +$445.5 million | $19.10 billion | | Total Deposits | +$84.7 million | $18.71 billion | | Borrowed Funds | +$354.2 million | $2.37 billion | | Stockholders' Equity | +$106.3 million | $2.71 billion | - The loan portfolio growth was led by commercial loans (+$182.7 million) and mortgage warehouse lines (+$63.4 million) during the second quarter[34] - The increase in deposits was driven by a $99.3 million increase in time deposits (primarily brokered), while savings and demand deposit accounts saw a net decrease of $14.6 million[38][39] Per Share Metrics | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Book Value Per Share | $20.73 | $19.93 | | Tangible Book Value Per Share | $14.60 | $13.66 | Corporate Information and Forward-Looking Statements This section provides an overview of Provident Financial Services, its banking operations, investor conference call details, and standard disclaimers regarding future projections Company Overview and Investor Information This section provides a brief description of Provident Financial Services, Inc. and its primary subsidiary, Provident Bank, along with details for the upcoming post-earnings conference call and standard legal disclaimers regarding forward-looking statements - Provident Financial Services, Inc. is the holding company for Provident Bank, a community-oriented bank established in 1839 with a network of branches across New Jersey, Pennsylvania, and New York[42] - A conference call for investors was scheduled for July 24, 2025, at 2:00 p.m. Eastern Time to discuss the financial results[43] - The report includes a standard "Forward-Looking Statements" safe harbor provision, cautioning readers about numerous risks and uncertainties that could cause actual results to differ from those projected[44] Financial Statements and Supplementary Data This section provides comprehensive financial statements and detailed supplementary data, including reconciliations of GAAP and non-GAAP measures, for a complete financial overview Consolidated Financial Highlights This section presents a comprehensive, one-page summary table of the company's key financial data, including condensed income statement figures, profitability ratios, asset quality metrics, and average balance sheet data for current and comparative periods - The Consolidated Financial Highlights table provides a detailed, unaudited summary of key performance indicators, including net interest income, net income, EPS, profitability ratios (ROA, ROE), asset quality metrics (NPLs, allowance), and average balance sheet data[49][50] Reconciliation of GAAP and Non-GAAP Financial Measures This section provides detailed reconciliations of non-GAAP financial measures to their most directly comparable GAAP counterparts, offering transparency on adjustments for items like merger-related costs and intangible asset amortization - The company presents non-GAAP measures to provide useful comparative information on operational trends, which are used internally and by analysts[51] - Key non-GAAP reconciliations provided include: Annualized Adjusted Return on Average Assets, Equity, and Tangible Equity; Annualized adjusted pre-tax, pre-provision (PTPP) returns; Tangible Common Equity Ratio and Tangible Book Value per Share; Efficiency Ratio Calculation[52][53][57] Consolidated Financial Statements This section contains the primary unaudited financial statements, including the Consolidated Statements of Financial Condition as of June 30, 2025, and December 31, 2024, and the Consolidated Statements of Income for the three and six-month periods ending June 30, 2025 and 2024 - The Consolidated Statements of Financial Condition provide a detailed balance sheet, itemizing assets (e.g., cash, securities, loans) and liabilities & equity (e.g., deposits, borrowings, retained earnings)[58][59] - The Consolidated Statements of Income present a detailed breakdown of revenues and expenses, including interest income/expense, provision for credit losses, non-interest income/expense, and net income[60] Net Interest Margin Analysis This section provides a detailed analysis of the company's net interest margin (NIM), including tables breaking down average balances, interest income/expense, and average yields/costs for all categories of interest-earning assets and interest-bearing liabilities for quarterly and year-to-date periods - Provides a detailed quarterly breakdown of average balances, interest, and yields/costs for assets like loans and securities, and liabilities like deposits and borrowings, to analyze the components of the net interest margin[61][62] - Includes a summary table tracking the net interest margin and its key components over the previous five quarters, highlighting trends in asset yields and liability costs[64][65] - Presents a year-to-date analysis comparing the current six-month period to the prior year, along with a summary table comparing year-to-date NIM for the last three years[66][68][69]