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PF

PROVIDENT FINANCIAL SERVICES INC (PFS)·Q1 2025 Earnings Summary

Executive Summary

  • Solid start to 2025: GAAP diluted EPS $0.49 on total income of $208.7M; net interest margin expanded 6 bps to 3.34% and the efficiency ratio improved to 54.43% as deposit costs fell 14 bps to 2.11% .
  • Beat vs S&P Global consensus: Q1 2025 Primary EPS $0.51* vs $0.47* est; revenue $208.1M* vs $207.0M* est; contrasted with Q4 2024 when EPS was roughly in line and revenue missed* (see Estimates Context) (Values retrieved from S&P Global).
  • Credit quality mixed: NPLs rose to 0.54% of loans driven by two well-secured credits (LTVs 53% and 62%); provision for loan losses fell to $0.3M and net charge-offs declined to $2.0M .
  • Outlook constructive: management guided 2025 NIM to ~3.35–3.45%, quarterly core opex ~$112–$115M, tax rate ~29.5%, and full‑year ROA ~1.15% and ROTCE ~16%; deposit growth guidance narrowed to 1–3% and loan growth to 3–5% amid macro uncertainty .

What Went Well and What Went Wrong

What Went Well

  • Core profitability improved: core NIM +9 bps q/q to 2.94% and reported NIM +6 bps to 3.34%; efficiency ratio improved to 54.43% .
  • Fee engines contributed: insurance agency income up 17.9% y/y; management noted “Provident Protection Plus continues its strong performance… income was up 23% y/y” .
  • Pipeline strength: record $2.77B loan pipeline (WAL 6.31%); CEO: “we have the highest pipeline in our history, $2.8 billion… pull‑through percentage is looking strong” .

What Went Wrong

  • Nonperformers rose: NPLs increased to 0.54% due to two credits; while well‑secured, they lifted NPAs to 0.45% of assets .
  • Funding mix: total deposits declined $175M (municipal seasonality); borrowings increased $316M to fund assets, lifting borrowings to 9.6% of assets .
  • OREO write-down: a $2.7M foreclosed property write‑down offset operating progress, though sale expected to close in Q2 2025 .

Financial Results

P&L Snapshot vs Prior Periods (USD Millions unless noted)

MetricQ3 2024Q4 2024Q1 2025
Net Interest Income$183.7 $181.7 $181.7
Non-Interest Income$26.9 $24.2 $27.0
Total Income (NII + NIR)$210.6 $205.9 $208.7
GAAP Diluted EPS ($)$0.36 $0.37 $0.49
Net Interest Margin (%)3.31% 3.28% 3.34%
Efficiency Ratio (%)57.20% 55.43% 54.43%

Consensus vs Actual (S&P Global; Primary EPS and Revenue)

(Values retrieved from S&P Global)

MetricQ4 2024 EstimateQ4 2024 ActualQ1 2025 EstimateQ1 2025 Actual
Primary EPS ($)0.498*0.493*0.472*0.506*
Revenue ($M)210.4*197.0*207.0*208.1*

Key KPIs and Credit Metrics

KPIQ3 2024Q4 2024Q1 2025
Avg Cost of Total Deposits2.36% 2.25% 2.11%
Provision for Loan Losses ($M)9.6 7.8 0.325
Net Charge-Offs ($M)6.8 5.5 2.0
NPLs / Total Loans0.47% 0.39% 0.54%
Allowance / Loans1.02% 1.04% 1.02%
ROAA (Annualized)0.76% 0.81% 1.08%
ROTCE (Annualized)12.06% 12.21% 15.73%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginFY 2025 (remainder)N/A3.35%–3.45% New
Quarterly Core Operating Expenses2025 quarterly run-rate$113–$115M (Q4 view) ~$112–$115M; bias to low end Slightly lower floor
Effective Tax RateRemainder 2025N/A~29.5% New
Deposit GrowthFY 2025~3% previously 1%–3% (range) Narrowed/lowered low-end
Loan GrowthFY 2025~5% previously 3%–5% (range) Range introduced
ROA (annualized)FY 2025N/A~1.15% New
ROTCE (annualized)FY 2025N/A~16% New
OpEx Ratio (to avg assets)FY 2025N/A~1.85% New
Efficiency RatioFY 2025N/A~52% New
DividendQuarterly$0.24 (Q4) $0.24 (payable 5/30/25) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 = Q3’24; Q-1 = Q4’24)Current Period (Q1’25)Trend
Merger integration & synergiesCore conversion completed; synergy ramp; adj. PTPP 1.48% “Integration behind us… very pleased with results” Integration completed; operating focus
NIM trajectoryNIM 3.31% with ~53 bps purchase accounting (PA) accretion NIM 3.34%; core NIM +9 bps; 2025 NIM guide 3.35–3.45% Core expansion; modest PA fade
Deposit costs & mixAvg cost total deposits 2.36% Fell to 2.11%; deposits down $175M (municipal seasonality) Funding cost tailwind; seasonal volumes
Credit qualityNPLs rose q/q to 0.47% (one CRE credit) NPLs to 0.54% (two well-secured loans), NCOs fell to $2M Isolated credits; loss content viewed manageable
CRE concentrationOffice CRE commentary, limited CBD exposure Target not a hard reduction; aim to diversify via C&I; “CRE ratio down to 450%,” longer-term ~420% area Mix shift toward C&I
Capital returnNo explicit prior buyback action beyond tax withholding Buybacks “best M&A” at current valuation; flexible, pipeline growth prioritized Opportunistic stance
Fee businessesWealth/insurance growth y/y Insurance up ~20% y/y trend; noted seasonality Sustained growth; seasonal cadence
Macro/tariffs—Customer uncertainty; moved growth targets to ranges; no notable concentration risks found Cautious stance; soft-data driven

Management Commentary

  • CEO: “We are proud of the excellent performance… expanded margins, increased top line revenue, solid earnings and tangible book value growth as we've begun to fully realize the benefits of last year's merger.”
  • CEO on pipeline: “We have the highest pipeline in our history, $2.8 billion… pull‑through percentage is looking strong.”
  • CFO on NIM and guidance: “Core NIM increased 9 bps… we project NIM in the 3.35% to 3.45% range for the remainder of 2025” with three 25 bps cuts assumed; expenses ~$112–$115M/quarter; ETR ~29.5% .
  • CFO on 2025 targets: “We currently estimate ROA ~1.15%, ROTCE ~16%, operating expense ratio ~1.85%, efficiency ratio ~52%.”

Q&A Highlights

  • Macro/tariffs and outlook: Management sees customer uncertainty but no material portfolio concentrations at risk; deposit and loan growth moved to ranges (deposits 1–3%, loans 3–5%) reflecting soft-data uncertainty rather than pipeline weakness .
  • Credit specifics: Two NPL additions (mixed-use CRE and nearly complete warehouse; LTVs 53% and 62%); no specific reserves; working toward resolution and comfort in low leverage .
  • CRE concentration: Not targeting a sharp reduction; plan to grow other sectors (C&I) so CRE moderates over time toward ~420% range alongside capital formation .
  • Expenses: Expect lower run-rate as year progresses; guide maintained with bias to low end [$112–$115M/quarter] .
  • Capital return: Open to buybacks opportunistically but prioritize high-return organic growth given strong pipeline .

Estimates Context

  • Q1 2025 beat: Primary EPS $0.51* vs $0.47* est; revenue $208.1M* vs $207.0M* est (modest top-line beat)* (Values retrieved from S&P Global).
  • Q4 2024 mixed: Primary EPS ~$0.49* vs ~$0.50* est; revenue $197.0M* vs $210.4M* est (miss)* (Values retrieved from S&P Global).
  • Implications: With core NIM improving and expense guidance disciplined, Street EPS revisions may drift higher, contingent on NPL resolution timing and deposit trajectory .

Key Takeaways for Investors

  • Core spread momentum: Deposit cost relief (2.11%) and core NIM expansion (+9 bps) support earnings durability even as purchase accounting accretion fades .
  • Operating leverage: Efficiency improved to 54.4%; management targets ~52% for 2025 with opex ~$112–$115M/quarter .
  • Credit watchlist manageable: NPL uptick tied to two well-secured loans; low NCOs (4 bps annualized) and stable allowance (1.02% of loans) temper loss risk .
  • Growth pipeline robust: Record $2.77B pipeline (WAL 6.31%); C&I growing at 6.5% annualized; positions for 3–5% loan growth despite macro uncertainty .
  • 2025 guide constructive: NIM 3.35–3.45%, ROA ~1.15%, ROTCE ~16%; if realized, supports valuation re‑rating and potential buyback flexibility .
  • Funding dynamics: Seasonal deposit outflows and higher borrowings in Q1 are transitory; monitor municipal deposit seasonality and brokered mix .
  • Dividend intact: $0.24/share declared; tangible book value per share rose to $14.15; capital above “well‑capitalized” levels .

Notes:

  • Earnings Press Release and 8-K (Q1 2025): Net income, EPS, NIM, deposit costs, efficiency, credit and balance sheet .
  • Q1 2025 Earnings Call Transcript: Guidance, pipeline, macro/tariffs, expense and tax outlook, capital return commentary .
  • Prior Quarters: Q4 2024 and Q3 2024 8-Ks for trend and comps – –.

S&P Global estimates and actuals marked with an asterisk (*) in the Estimates table and statements above. Values retrieved from S&P Global.