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PF

PROVIDENT FINANCIAL SERVICES INC (PFS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered record total income of $214.2M, diluted EPS of $0.55, NIM of 3.36%, ROA of 1.19%, and an improved efficiency ratio of 53.52% versus Q1, reflecting earning-asset growth, modest margin expansion, and lower adjusted expense intensity .
  • EPS and revenue beat S&P Global consensus; EPS $0.55 vs $0.497*, revenue $214.2M vs $213.6M*, driven by record net interest income, accretive loan production, and a $2.7M reserve release on improved macro inputs and asset quality; prior-year comparisons benefit from absence of Lakeland merger charges this quarter .
  • CFO guided full-year NIM to 3.35–3.45 (now with a higher high-end), reaffirmed quarterly core OpEx of $112–$115M, and set an effective tax rate of ~29.5% for the remainder of 2025; Board declared a $0.24 dividend payable Aug 29, 2025 .
  • Near-term catalysts: sustained NII growth via asset repricing and accretive loan yields (pipeline rate 6.3% vs portfolio yield ~6.05%), stable deposit cost (2.10%), and benign credit with reserve release; watch competitive deposit dynamics and municipal inflow seasonality into Q3 .

What Went Well and What Went Wrong

What Went Well

  • Record revenue $214.2M, led by net interest income $187.1M; average earning assets +$383.8M QoQ, NIM +2bps to 3.36% .
  • Reserve release ($2.7M benefit) with NPAs at 0.44% of assets, NCOs at 3bps, ACL/loans down to 0.98% on improved economic forecast (commercial property price index) and better watch list/criticized trends .
  • Management confidence and shareholder returns: tangible book up to $14.60; TCE ratio to 8.03%; dividend declared $0.24; CEO: “record revenues… expanding margins” .

What Went Wrong

  • Average deposits decreased $278M QoQ despite period-end deposits rising $260M; deposit competition remains elevated on the consumer side, partially filled by brokered time deposits .
  • Non-performing loans ticked up to 0.56% of loans, driven by specific credits (management noted minimal loss content), and ACL/loans trended lower as reserves released .
  • Wealth management income declined QoQ on lower average AUM earlier in the quarter, though valuations recovered into quarter-end .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Total Income ($USD Millions)$166.8 $205.9 $208.7 $214.2
Diluted EPS ($USD)$(0.11) $0.37 $0.49 $0.55
Net Interest Margin (%)3.21% 3.28% 3.34% 3.36%
Annualized ROA (%)(0.24%) 0.81% 1.08% 1.19%
Efficiency Ratio (%)57.86% 55.43% 54.43% 53.52%

Actual vs S&P Global consensus:

MetricQ4 2024Q1 2025Q2 2025
EPS (Actual vs Est)$0.4928 vs $0.498*$0.5055 vs $0.472*$0.55 vs $0.4967*
Revenue ($M, Actual vs Est)$197.0 vs $210.4*$208.1 vs $207.0*$217.1 vs $213.6*
Note: Values retrieved from S&P Global. An asterisk denotes SPGI values.*

Loan portfolio composition ($USD Millions):

CategoryDec 31, 2024Mar 31, 2025Jun 30, 2025
Commercial Mortgage$7,228.1 $7,295.7 $7,313.9
Multi-family$3,382.9 $3,458.2 $3,517.5
Construction$823.5 $756.4 $751.9
Residential Mortgage$2,010.6 $1,994.4 $1,985.4
Commercial (C&I)$4,447.7 $4,682.9 $4,688.9
Mortgage Warehouse$160.9 $176.7 $240.1
Consumer$613.8 $613.5 $617.2
Total Gross Loans$18,667.6 $18,801.0 $19,114.9

KPIs and asset quality:

KPIQ2 2024Q4 2024Q1 2025Q2 2025
Avg Yield on Interest-Earning Assets (%)5.67% 5.66% 5.63% 5.68%
Avg Cost of Total Deposits (%)2.24% 2.25% 2.11% 2.10%
Avg Cost of Interest-Bearing Liabilities (%)3.09% 3.03% 2.90% 2.94%
NPAs / Total Assets (%)0.33% 0.34% 0.45% 0.44%
NPLs / Total Loans (%)0.36% 0.39% 0.54% 0.56%
ACL / Total Loans (%)1.00% 1.04% 1.02% 0.98%
Annualized Net Charge-offs (%)0.07% 0.12% 0.04% 0.03%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (%)2H 2025Prior range with lower high-end (unspecified) 3.35–3.45 Raised high-end
Core Operating Expenses ($M/quarter)2025$112–$115 $112–$115 Maintained
Effective Tax Rate (%)Remainder of 2025~29.5% ~29.5% Maintained
Dividend per Share ($)Q2 2025$0.24 (Q1 2025) $0.24 payable Aug 29, 2025 Maintained
CET1 Target (%)Medium-termNot previously disclosed~11.25 New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
NIM trajectoryNIM rose from 3.28% (Q4) to 3.34% (Q1) Guidance 3.35–3.45 with two 25bp cuts assumed Improving, high-end raised
Deposit dynamicsQ1 average deposit cost fell to 2.11%; municipal outflows seasonal Avg cost 2.10%; consumer deposit competition elevated; municipal inflows expected in Q3 Competitive pressure; seasonal recovery
Loan growth mixQ1: multi-family and CRE growth; CRE office/NYC exposures detailed C&I annualized +21%; total commercial +8%; pipeline rate 6.3% accretive to 6.05% portfolio yield Shift toward diversified C&I growth
Credit qualityQ4/Q1: NPLs 0.39%→0.54%; ACL ~1.04%→1.02% Reserve release; NPLs 0.56% with minimal loss content; NCOs 3bps Stable-to-improving watchlist; benign losses
Fee businessesQ4 insurance/wealth up YoY ; Q1 insurance contingent commissions Insurance revenue +11.3% YoY; Beacon AUM recovered late in quarter Insurance strong; wealth mgmt stabilizing
Technology/AINot highlighted previouslySVP Enterprise Architecture appointed; focus on AI/ML adoption and modernization Increasing investment posture

Management Commentary

  • CEO: “We achieved record revenues by growing earning assets and expanding margins, while improving operational efficiency and maintaining strong asset quality.”
  • CEO: Commercial production: ~$764M closed in Q2; first-half production $1.4B; CRE ratio down to 444% (408% adjusted) .
  • CFO: “We currently project the NIM in the 3.35% to 3.45% range for the remainder of 2025… projections include 25 basis point rate reductions in September and November.”
  • CFO: Pipeline “pull-through adjusted” ~$1.6B; pipeline rate 6.3% accretive vs portfolio yield ~6.05%; average deposits decreased, period-end increased $260M; effective tax ~29.5% for rest of 2025 .
  • CFO: Reserve release driven “primarily… commercial property price index” in Moody’s baseline; watch list improved; minimal loss content in NPL increase .

Q&A Highlights

  • Provisioning outlook: Management expects modest provisioning in 2H given improving criticized/classified and watch list trends; reserve release driven by macro (Moody’s CPPI) .
  • NIM path: Balance sheet broadly neutral; model implies ~3.40% in Q3 and potentially 3.45–3.47% exit with two 25bp cuts; management willing to trade 1–2bps of NIM to maximize NII .
  • Loan growth drivers: Strong C&I origination across ABL, healthcare, mortgage warehousing, SBA; line utilization normalized to ~45% .
  • Deposits: Consumer side competition elevated; brokered CDs offset municipal seasonal trough; municipal inflows expected in Q3 .
  • Capital and M&A: CET1 “around 11¼%” preferred; focus on organic growth but open to M&A if strategically compelling; improved stock price strengthens currency .

Estimates Context

  • Q2 2025: EPS beat (+$0.05 vs consensus)* and revenue beat (~$3.5M vs consensus)*, underpinned by record NII, slight NIM expansion, and reserve release; fee lines stable overall with insurance strong and wealth management offset by lower average AUM early in quarter .
  • Q1 2025: EPS and revenue modestly above consensus*, aided by deposit cost relief and higher core NIM .
  • Q4 2024: Revenue missed consensus*, reflecting reduced Lakeland purchase accounting accretion and lower NII; NIM dipped to 3.28% .
    Note: Values retrieved from S&P Global. An asterisk denotes SPGI values.*

Key Takeaways for Investors

  • Margin trajectory improving with guidance high-end raised; asset repricing (~$6B over 12 months, ~$5.1B floating) and accretive production (6.3% pipeline rate) support NII growth .
  • Credit benign: NPAs 0.44%, NCOs 3bps, reserve release; watch for NPL mix shifts but management indicates minimal loss content .
  • Deposit costs stabilized at 2.10% with municipal inflow seasonality into Q3; monitor consumer deposit competition and brokered mix .
  • Operating discipline: Efficiency ratio improved to 53.52%; core OpEx held at $112–$115M, indicating continued operating leverage .
  • Capital formation continues (TBVPS $14.60; TCE 8.03%); dividend maintained at $0.24—supports defensive yield while NII grows .
  • Near-term trade: Lean long bias on continued NII momentum and margin resilience; hedge for competitive deposit pressures and potential macro volatility.
  • Medium-term thesis: Diversified commercial growth (incl. ABL, healthcare, SBA), technology investments (AI/ML), and disciplined expense/tax profile underpin ROA/ROE improvement .