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

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Provident Financial Services, Inc. as of June 30, 2025, and for the three and six-month periods then ended. It includes the statements of financial condition, income, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation and significant accounting policies Consolidated Statements of Financial Condition As of June 30, 2025, total assets were $24.55 billion, an increase from $24.05 billion at December 31, 2024. The growth was driven by increases in net loans and available-for-sale debt securities. Total liabilities rose to $21.84 billion from $21.45 billion, primarily due to an increase in borrowed funds. Total stockholders' equity increased to $2.71 billion from $2.60 billion | (Dollars in Thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $24,547,286 | $24,051,825 | | Net Loans | $18,923,881 | $18,628,391 | | Total Deposits | $18,708,524 | $18,623,813 | | Borrowed Funds | $2,374,660 | $2,020,435 | | Total Liabilities | $21,839,731 | $21,450,618 | | Total Stockholders' Equity | $2,707,555 | $2,601,207 | Consolidated Statements of Income For the three months ended June 30, 2025, the company reported net income of $72.0 million, a significant turnaround from a net loss of $11.5 million in the same period of 2024. For the six-month period, net income was $136.0 million in 2025, compared to $20.6 million in 2024. The improvement was driven by higher net interest income and a benefit from the provision for credit losses, compared to a large provision and merger-related expenses in the prior year | (Dollars in Thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $187,094 | $141,506 | $368,822 | $235,176 | | Provision (benefit) for credit losses | $(2,888) | $69,705 | $(2,250) | $69,385 | | Total Non-interest Income | $27,075 | $22,275 | $54,105 | $43,081 | | Total Non-interest Expense | $114,614 | $115,394 | $230,881 | $187,221 | | Net Income (Loss) | $71,981 | $(11,485) | $136,009 | $20,596 | | Diluted Earnings Per Share | $0.55 | $(0.11) | $1.04 | $0.23 | Consolidated Statements of Comprehensive Income Total comprehensive income for the three months ended June 30, 2025, was $78.5 million, compared to $0.1 million in the prior-year period. For the six-month period, total comprehensive income was $167.6 million in 2025 versus $21.7 million in 2024. The increase was primarily due to higher net income and larger unrealized gains on available-for-sale debt securities | (Dollars in Thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $71,981 | $(11,485) | $136,009 | $20,596 | | Total Other Comprehensive Income | $6,476 | $11,621 | $31,585 | $1,151 | | Total Comprehensive Income | $78,457 | $136 | $167,594 | $21,747 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased from $2.60 billion at December 31, 2024, to $2.71 billion at June 30, 2025. The growth was primarily driven by net income of $136.0 million and other comprehensive income of $31.6 million, partially offset by cash dividends paid of $63.2 million - For the six months ended June 30, 2025, total stockholders' equity increased by $106.3 million, from $2.601 billion to $2.708 billion[17] - Key drivers for the equity change in the first half of 2025 were net income of $136.0 million and other comprehensive income of $31.6 million, which were partially offset by $63.2 million in cash dividends[17] Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $275.3 million. Net cash used in investing activities was $603.2 million, primarily due to a net increase in loans and purchases of securities. Net cash provided by financing activities was $380.9 million, driven by a net increase in borrowings and deposits. This resulted in a net increase in cash and cash equivalents of $53.0 million | (Dollars in Thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $275,282 | $117,911 | | Net cash (used in) provided by investing activities | $(603,211) | $817,373 | | Net cash provided by (used in) financing activities | $380,915 | $(824,978) | | Net increase in cash and cash equivalents | $52,986 | $110,306 | Notes to Unaudited Consolidated Financial Statements This section provides detailed disclosures supporting the consolidated financial statements. Key topics include the basis of presentation, the impact of the Lakeland Bancorp merger, details on investment securities, an in-depth analysis of the loan portfolio and allowance for credit losses, deposit and borrowing composition, derivative activities, and fair value measurements - On May 16, 2024, the Company completed its merger with Lakeland Bancorp, Inc., paying total consideration of $876.8 million and recording goodwill of $180.4 million[35][36] - As of June 30, 2025, the allowance for credit losses on loans was $187.9 million, down from $193.4 million at year-end 2024. The decrease was primarily due to an improved economic forecast and better asset quality[59] - The company utilizes interest rate swaps for both non-designated hedging (customer facilitation) and designated cash flow hedging to manage interest rate risk, with notional amounts of $4.39 billion and $650.0 million, respectively, as of June 30, 2025[139][143] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results of operations, comparing the period ended June 30, 2025, with prior periods. The analysis covers the impact of the Lakeland merger, critical accounting policies like the allowance for credit losses, and detailed breakdowns of changes in the balance sheet and income statement, including net interest income, provisions, non-interest income/expense, and liquidity and capital resources Comparison of Financial Condition (June 30, 2025 vs. Dec 31, 2024) Total assets grew by $495.5 million to $24.55 billion, driven by a $445.5 million increase in loans held for investment and a $246.5 million increase in investments. Total deposits increased by $84.7 million, while borrowed funds rose by $354.2 million. Stockholders' equity increased by $106.3 million, primarily due to net income and a decrease in unrealized losses on securities - Total assets increased by $495.5 million to $24.55 billion from December 31, 2024[188] - Loans held for investment grew by $445.5 million to $19.10 billion[188][189] - Non-performing loans increased to $107.2 million (0.56% of total loans) from $72.1 million (0.39% of total loans) at year-end[199] - Book value per share increased to $20.73 from $19.93, and tangible book value per share increased to $14.60 from $13.66[205] Comparison of Operating Results (For Three and Six Months Ended June 30, 2025 and 2024) Net income for Q2 2025 was $72.0 million, compared to a net loss of $11.5 million in Q2 2024. The prior year's results were heavily impacted by $79.0 million in costs related to the Lakeland merger, including a significant CECL provision. For the first six months of 2025, net income was $136.0 million versus $20.6 million in 2024. The improvement reflects higher net interest income, a provision benefit for credit losses, and the absence of merger costs - Net income for Q2 2025 was $72.0 million ($0.55 per share) compared to a net loss of $11.5 million ($(0.11) per share) in Q2 2024[215][216] - Net interest income for Q2 2025 increased by $45.6 million to $187.1 million, with the net interest margin expanding by 15 basis points to 3.36%[224][225] - A benefit to the provision for credit losses of $2.7 million was recorded in Q2 2025, compared to a provision expense of $66.1 million in Q2 2024, which included a $60.1 million initial CECL provision for the Lakeland merger[237] - Non-interest expense in Q2 2025 decreased slightly to $114.6 million, as the absence of $18.9 million in merger-related expenses was mostly offset by higher compensation and operating costs from the acquired Lakeland operations[241] Quantitative and Qualitative Disclosures About Market Risk The company manages interest rate risk through its Asset/Liability Committee, focusing on maintaining a stable core-funding base and managing the duration of its assets and liabilities. Simulation models are used to measure sensitivity to interest rate changes. As of June 30, 2025, the company's interest rate risk position is relatively neutral. A +/- 200 basis point gradual rate change over 12 months is projected to decrease net interest income by 0.7% and 0.4%, respectively. An immediate +/- 200 basis point shock is projected to change the economic value of equity by +1.5% and -6.5%, respectively | Change in Interest Rates (bps) | Net Interest Income % Change (12-Month Ramp) | | :--- | :--- | | +200 | (0.7)% | | +100 | (0.3)% | | -100 | (0.2)% | | -200 | (0.4)% | | Change in Interest Rates (bps) | Economic Value of Equity % Change (Immediate Shock) | | :--- | :--- | | +200 | +1.5% | | +100 | +0.9% | | -100 | (2.7)% | | -200 | (6.5)% | Controls and Procedures Management, including the Principal Executive Officer and Principal Financial Officer, evaluated the company's disclosure controls and procedures. They concluded that as of the end of the period covered by this report, these controls and procedures were effective - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures are effective as of the end of the quarter[253] PART II—OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 9 to the Consolidated Financial Statements, which states that the company is involved in various legal actions in the normal course of business and had recorded $2.3 million in contingent litigation reserves as of June 30, 2025 - As of June 30, 2025, the company had recorded $2.3 million in total contingent litigation reserves[94] Risk Factors There were no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No changes were made to the risk factors from the last Annual Report on Form 10-K[256] Issuer Purchases of Equity Securities During the second quarter of 2025, the company repurchased 55,826 shares of its common stock at an average price of $17.83 per share. As of June 30, 2025, 815,970 shares remained available for repurchase under the current program | Period | Total Shares Purchased | Average Price Paid per Share | Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | April 2025 | — | $— | 871,796 | | May 2025 | 55,826 | $17.83 | 815,970 | | June 2025 | — | $— | 815,970 | | Total Q2 2025 | 55,826 | $17.83 | 815,970 | Exhibits This section lists the exhibits filed with the Form 10-Q, including merger agreements, corporate governance documents, certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[260] - Financial statements and notes are formatted in iXBRL (Inline Extensible Business Reporting Language)[259][260]