Provident Financial Services(PFS) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net earnings of $64 million or$ 0.49 per share, with an annualized adjusted return on average assets of 1.11% and an adjusted return on average tangible equity of 16.15% [6][15] - The tangible book value per share grew by $0.69 to$ 14.15, and the tangible common equity ratio expanded to 7.9% [7] - The average cost of total deposits decreased by 14 basis points to 2.11%, while the total cost of funds decreased by 9 basis points to 2.39% [8] - The reported net interest margin increased by 6 basis points to 3.34%, with core net interest margin growing by 9 basis points [8][16] Business Line Data and Key Metrics Changes - The commercial lending team closed approximately $600 million in new loans, with the commercial loan portfolio increasing by 3.8% [9] - Provident Protection Plus saw a 19% organic growth in new business compared to the same period last year, with income up 23% [12] - Beacon Trust assets under management and fee income decreased by approximately 4% due to market conditions [13] Market Data and Key Metrics Changes - The total loan pipeline increased to approximately$ 2.8 billion, with a weighted average interest rate of 6.31% [10] - Nonperforming loans increased to 0.54%, primarily due to two well-secured loans [11][20] - Net charge-offs decreased to $2 million from$ 5.5 million in the trailing quarter [11] Company Strategy and Development Direction - The company aims to maintain momentum throughout 2025, focusing on core businesses and creating value for stockholders and customers [13] - There is a focus on diversifying the commercial portfolio post-merger, with a target of approximately 5% growth in the commercial real estate (CRE) space [50] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is uncertainty in the macroeconomic environment, the current loan pipeline is strong, and no significant negative impacts have been observed in the portfolio [34][40] - The effective tax rate for the quarter increased to 30.3%, with expectations of approximately 29.5% for the remainder of 2025 [23] Other Important Information - The Board of Directors approved a quarterly cash dividend of $0.24 per share payable on May 30 [7] - The company is currently projecting a net interest margin in the range of 3.35% to 3.45% for the remainder of 2025 [17] Q&A Session Summary Question: Update on integration and hiring in wealth management - Management confirmed that integration is complete and there have been new hires in Pennsylvania and Westchester markets, contributing to pipeline growth [27][29] Question: Customer conversations regarding macro outlook and tariffs - Management indicated that there is uncertainty but no significant pullback from clients; the pipeline remains strong [34][36] Question: Details on nonaccrual loans - Management is working with borrowers on two nonaccrual loans, with favorable loan-to-value ratios providing some comfort [45][47] Question: Target for CRE concentration - Management is not targeting a specific number but aims for a range around 420%, with a focus on growing other sectors [50][54] Question: Thoughts on M&A activity in the banking space - Management expressed that buying back stock is a priority over acquisitions, emphasizing the importance of culture in any future mergers [57][59] Question: Expense guidance for 2025 - Management expects expenses to be in the range of$ 112 million to $115 million, forecasting on the lower end of that range [62]