Provident Financial Services(US:PFS)2022-10-28 17:19Financial Data and Key Metrics Changes - The company reported net income of $43.4 million, or $0.58 per diluted share, compared to $39.2 million or $0.53 per share in the previous quarter and $37.3 million or $0.49 per share in the same quarter last year [18] - Record revenue of $138 million was achieved, driven by record net interest income of $109 million and an $8.6 million gain on the sale of a foreclosed property [20] - The net interest margin increased by 30 basis points from the previous quarter to 3.51% [21] Business Line Data and Key Metrics Changes - Commercial lending remains a primary focus, with approximately $533 million in new loans closed during the quarter, leading to a 3.9% annualized growth in the commercial loan portfolio [7][8] - The fee-based business line, Provident Protection Plus, saw a 19% increase in revenue and a 31% increase in operating profit compared to the same quarter last year [13] - Beacon Trust experienced a decline in fee income by $239,000 or 3.4% due to unfavorable market conditions [14] Market Data and Key Metrics Changes - The average balance of core deposits increased by $89 million or 3.6% annualized during the quarter [11] - The total cost of deposits increased by 15 basis points to 35 basis points, with a deposit beta of 10% for the quarter [22] - The average cost of total interest-bearing liabilities increased by 23 basis points to 2.54% [23] Company Strategy and Development Direction - The company announced a merger with Lakeland Bancorp, aiming to create a significant community banking organization in the Tristate region [15] - The management emphasized the importance of maintaining a strong customer experience and integrating cultures post-merger to minimize disruption [64] Management Comments on Operating Environment and Future Outlook - Management expressed optimism for loan growth in the fourth quarter, citing a strong pipeline and expected normal pull-through [36] - Concerns were raised about rising interest rates and their potential impact on the industry, particularly regarding pipeline pull-through [10] - The company remains committed to strong risk management practices amid deteriorating market conditions [14] Other Important Information - Non-accrual loans increased by $19.1 million, primarily due to one significant loan, but overall asset quality metrics remain strong compared to the previous year [26] - The efficiency ratio improved to 47.11% for the third quarter, down from 53.83% in the previous quarter [28] Q&A Session Summary Question: Loan growth expectations for the fourth quarter - Management expects loan growth to pick up in the fourth quarter, noting that the third quarter is typically the lowest production quarter of the year [36] Question: Deposit betas and strategy - Management believes a deposit beta of 23% is conservative and anticipates some acceleration in the industry as liquidity decreases [39] Question: Non-accruals in the commercial real estate book - The increase in non-accruals is attributed to a single credit, which management considers a one-off situation [50][51] Question: Assets under management and net flows - Assets under management fell to approximately $3.2 million due to market conditions, with a net loss of 10 clients [53] Question: Provision outlook for the next quarters - Management expects provisions to moderate, estimating $3 million to $5 million based on the economic outlook [56]