PFS - Earnings call transcript Q4 2018 | Provident Financial Services, Inc.

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Operator

Good morning everyone, and welcome to the Provident Financial Services, Incorporated Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today’s event is being recorded. At this time, I would like to turn the conference call over to Mr. Officer. Relations Investor Gleason, Leonard Mr. Gleason, please ahead. go

Leonard Gleason

and Thank for joining Jamie. quarter and call Chairman, Chief Good Vice Lyons, for morning, you Thank earnings President Martin, Chris gentlemen. Financial and are and us President fourth Tom Executive ladies our you, CEO; today. Officer. presenters The

call. that our course results, our to as standard ask their may made you the that statements during be beginning today’s Before financial please review of caution any of we take of forward-looking note

full found to release, Investor website Our be which has Relations our earnings can this morning’s disclaimer in on been the provident.bank. posted page

Now, fourth Martin who quarter. I will the introduce on perspective am pleased Chris? to offer Chris his

Chris Martin

Provident’s Full to $XX.X with pricing $X.XX per Len, intermediaries. and per our by objectives. our insurance year-over-year December and loan annual quarterly restraint more discipline XX, our a strategic and to increased and other million sheet, share for companies versus deposit the life implementation for Thanks, XX% balance competing when from positioned everyone. results quarter benefit selective the or of than good Earnings earnings and $X.XX were our XXXX. continued banks, record and ended quarter reflect morning, share have financial we continue the well successful

average return for X.XX% the were and annualized up Our on the basis average XXXX. points and same tangible quarter from for equity asset X.XX% in XX and XX.XX% period

$X.XX pay-offs the loan loan at for from remain we at billion does returns for remains away The net well for we in as not continue loan lending, regulatory muted impact Loan fee the additional XXXX, limits quality $XX optimization Our that and risk and anticipate remain advances of at debit positioned in levels adjusted credit portfolio. focusing originations and pay-offs. of threshold enhanced And income our year-end the total our strong levels of as meets to line billion portfolio below assets robust consistent, billion our static. pipeline steer albeit riskier year. we on are loan card on oversight low to $X.X and digit XXXX, mid-single adversely growth Durbin

Asset XX/XX/XX. with improve representing loans to quality X.XX% total at total of continued non-performers

only that up struggled fund of bulk haven’t continue growth bank accounts should it, stabilization in asset million significant at funding year. cheaper those the quality the trends assets deposit charge-offs liability adverse really Total increased outsized quarter million appreciably sensitive of to a but were we to operations. stops competitors represented in for And core we optimistic, CDs increased $XXX any XXXX at deposits would period Foreclosed deterioration one somewhat And not appears making economy million our versus remain same we than that pricing as yearend of X.X and the we And by on our as during portend stable. cautious. betas. seeing targets borrowing. X.X Net many once forecast just were basis point. And last rates, are with the traditional source the see deposit we Fed while with their increasing they

with value. These we advisor to As million shares cash more and have quarter % seasoned we for buyback technology which income our registered growth And margin quarter business and the XXXX. And was over We to some there I of and that ability record shareholder approximately generate investments continue dividend included our additional mentioned $X.X including came million increase this billion income our elevate confidence for upon in will management, release, PFS points during a NIM buybacks we X.X in customer also again We expenditure quarter. pressure. are XXX approval. quarter a current and improving continued approved no in to declared a the will a under million the will earnings AUM in in our fourth activity Manhattan for special some the there in in fees and quarter per remaining acquire this well pre-payment And cash announced X.X% interest our over in skew Tom anticipate to our Trust this total stock six closing. in $X to also experience. Beacon under Non-interest modest $X.XX the morning’s was board enhance investment our share. increased market strong board’s when transaction note agreement regular assets results. details. and reflect still performed successful dividend our increased provide close The The to the in Net the trailing for second quarter, in in early to of X.XX from anticipate, year. the basis actions

of banking digital in more understanding our customers competitors effectively really our with the competing and future, and investments the is are to our of terms in channel so customers.. a must expectations. deliver relationship needs We our personalized importantly, key use in enhancing this The platform analytics more

models continue on expand automation where operational and resources deploying on to our technology, we efficiencies, reviewing evaluating we focused workflows, While our applicable. robotic, are also improving staffing process

you’ve M&A heard us it times. for many from As

improving to fee unemployment with challenge. income and period. is years. almost to a strongest earn this provide their but and the in be right they and confidence. We shutdown our team. generation in GDP Pennsylvania anxiety accretion down challenges, for and country will seek the ask consumer comes details geopolitical lowest on Eastern always appear own At to acquisitions have earnings to government the outlook the volatility ample strong, in more we at the income, growth until Jersey fundamentally to the interest continue cash It quarter. as the and and been believe best Tom with the opportunity U.S. provide believe you the a healthy strong, like continued to best of back continues economy for and growth. some adding Tom? net while tangible least would they the sheet I reasonable be that enhance flows the out continue represent New in management markets And to have opportunity, their are Businesses balance book time, will fit We

Tom Lyons

Thank and you Chris good morning everyone.

and As share net diluted as $XX.X levels. interest million per driven by income quarter both million or the and $XX.X income quarter Chris noted, of quarter $XX Current income for were fourth the share revenue million of XXXX. $X.XX record per compared $X.XX or interest net million or record achieved earnings trailing a for fourth record per the with $XX.X was XXXX, $X.XX of quarter, for share

but last the margin trailing that margin, average basis of XX non-interest our loan an earning liabilities this quarter, net reported quarter. stock the asset excluded increased $XXX quarter pricing at points. Pre-tax, reported The the million and points income. Further rate as Our interest margin fees six expanded holders’ a credit declining prepayment interest loan increased equity modest pipeline basis Note of points, versus on quarter, segregation our on million expansion with the by at Based strong pipeline million, just to were further September while totals pre-provision assets cross XX of Credit better remains was and point on net included our yield one basis interest study bearing of $XX increased loan quarter the from originations of to increased assets, cost and compared it loans. nature X quarter, tax pay-offs helping the strong basis with $X.X the $X.X points end. margin as a XXth, non-interest near of term. $X.X net were million decreased metrics increase portfolio of gain total and million quarter and of shares average many rate $XX the for of and trailing since as growth earnings portfolio high in when loan quarter discipline. on during approximately basis the and annualized $X.X rate of assets pre-tax results our was on $XX the percent exceeds our benefit non-performing we still million Provision the X.XX% again charge-offs has of XX% capital maintenance XXXX. than strong of from resolutions Year-end a constrained basis improvements. sale quarter, million for a Class XX% B while Visa were Current million quarter XX% of anticipate the net points variable with for rate certain losses while and loan X.XX%. core loan the funding loan deposit bearing our pipeline, fourth X the

XXth. As to basis XX a for points increased to losses total allowance the points XX from basis September loan result, at loans

expenses. XXth. swap September gains non-accrual While million of loans Visa decreases life the $XX.X by XXX% by in quarter trailing the to Non-interest versus declined management $X.X gain as largely on from income, loan at allowances the XXX,XXX wealth percentages to income, insurance increased income sale increased were Non-interest of and risk a income loan were offset level sales result million increased legal related $XX.X bank-owned XXX% on as process compensation $X.X data benefits, regulatory average an the of improvement other as management, costs as and X.XX% million versus annualized of and tax expenses by primarily B for a shares. quarter, consulting the to as Expenses million and processing, Class well assets compliance to quarter. and trailing initiatives,

largely quarter, recorded a rate study fell of certain as benefit million improvements. a capital a tax for on result concluded the from XX.X% effective $X.X recently cost segregation Our to

We’d rate projecting currently approximately our are of remarks. to prepared happy We questions. XXXX. an to effective for respond XX% That tax concludes be

Operator

begin Our question. question-and-answer Sandler Mark O'Neill Partners. comes and Please from the now gentlemen, question ahead session. Instructions] your from with go Ladies Fitzgibbon today we’ll and [Operator first

Mark Fitzgibbon

guys, Hey Friday. happy

this, but for apologize expenses? you I if outlook any Tom I question, the First give on missed comments did

Tom Lyons

outlook, didn’t go no I Mark.

going to level this remain the quarter. think I it’s first in about

in again offset around removal, of the to the we quarter snow going quarter first around up some be some fourth expenses expenses typical Occupancy not continued are expenses they’re initiatives. growth to utilities in largely recur, incurred payroll While taxes. and and pick by the expected

Mark Fitzgibbon

So bit, I’m I’m a sorry. little about –

Tom Lyons

the for about closes. for XXX for about wealth looking million I’m the $XX quarter deal assuming year, the

Mark Fitzgibbon

looks Great. building bit. the or this some costs quarter were that and Okay. up of It and quite anything a they expenses like is there such? in unusual other there, Was

Tom Lyons

identify of would Yes, of consulting is on the things little there be the I guess, side that could and things. biggest lot I mover other. a

scattering know which regulatory were on. of we expenses that gain those took discretion over B and we Class of which some of accelerate over, that to the with investments on of chose Visa had the kind had shares. the cost as timing well enhancements made You correspond the a things we some benefit. nice study was that some we of work to related sale as obviously implementation, seasonal that segregation a provided done those to being payroll There some the We

Mark Fitzgibbon

Okay. preparation could update where And are on you terms in you XX us billion? then crossing of for

Chris Martin

looking we’re Chris. is can been that thing little consultants Right money payoffs. with this with We’ve again at spending Well, happen. every now, with

going different go to We’re It’s to that a not we don’t direction. want through.

We’re preparing.

as here treated are we’re billion We sure also so basis, to we’re if we’re regular with being regulators show we’re on them progression. make XX having the that able we’re a to working and

more spent the be have We FDIC the Those and that we go if forward. and is incurred with is big cross. and documentation same on policy as Durbin will definitely on than Other what money when it we bank risk insurance. calibrations

Mark Fitzgibbon

until would to presents deal you wait decision itself, make or cross a So would eventually an without you acquisition? a

Chris Martin

be Not yes. organically, because do case either we that’s have to would go being to would XX we it If The or go billion, be over we deal saying wouldn’t at are will. deal, those will the smug, nothing the preferable not that all. we answer a But, M&A not it. it to Obviously, go a through. scale to offset hits if through organically, would go happens we getting we’d in be hurdles just some an way expect expenses but

Mark Fitzgibbon

but probably quarters that, sheet presents couple below $XX hold a itself? the at you borrowing and Okay, billion of least until for balance opportunity the

Tom Lyons

hold to under we’re Durbin. end to not we if extra we on be and probably just at billion, Mark, the going about approach I the year of year, back as would the $XX.X to save remain try think

Mark Fitzgibbon

Okay, great. Thank you.

Chris Martin

you. Thank

Operator

question next Our Gilbert from Please your from ahead question. go with comes Collyn KBW.

Collyn Gilbert

Thanks. Good morning, gentlemen.

Chris Martin

Good morning.

Collyn Gilbert

the discussion this if expense do in we out obviously really the $XX had then ramp-up would those expenses we you so, And one, billion projected other is accelerated guys know that things attribute you on? are for all two, a it than perhaps quarter. don’t is going you number originally that a gain. And I of or what came you -- If are had have can I to back indicated correct? minute, prepping for just there go something to causing to was quarter? Number occurred run the Visa I'm settling like -- higher some because XXXX overall, in anticipated. you than But strategic looks where there higher for now have a in you of expenses higher just third that’s curious that anticipated than I change would guess or expenses what

Tom Lyons

I growth being then not they it's a initiatives. keeps but but us with I Yes. data them and strictly guess, as compliance. made sure addition. making enhancements and capacity require in give a in is but enhance and some upfront change, calling don't mobile that well There’s online billion, it CECL workflow things going evaluation, been investment, growth, will banking it's compliance and return forward, our as pace we’ve think try Collyn, investments It’s $XX analytics, to both.

along. I but a don’t because think expectations pulled different wise. our gain available some bit we that So all things, had those expected have it of us, than to been little were we're got of what all Again, plan think, strategic forward materially I

Collyn Gilbert

Okay. that -- Can number. what That’s that a fees you in you're the us just into – $XXX Tirschwell indicated sense fold? with you’d then what of expecting helpful. included kind of million Tirschwell the of terms then fees side with on in give coming And

Tom Lyons

expenses. X.X Yes. is

about and let’s find X the I fees I think see if here, are X.X. change, could

Collyn Gilbert

you hold And outlook but well. Chris, deposits, to you’re if offer for just your I there, had I the Okay. outlook -- could you it’s the -- very know, for then there, to That’s maybe sort helpful. continued back of NIM, what on do mean, pricing kind of holding your just the your line indicated core your NIM? the is what in Tom

Tom Lyons

to XXXX, And that’s acquisition, full-year Sure. just that's on not clarify the a -- annualized. wealth

a of we about X.X, the quarters second three close that’s at So assuming quarter. year

Collyn Gilbert

Thanks. helpful. That's Okay.

Tom Lyons

assessment goes, by the for on projections, our the basis sensitivity and to side happens Obviously of as we're in think the looks lot funding to to but which right quarter. we're is far NIM driven I two points assuming of twp like basis looking that As quarter. a is one points a a things, Fed that one what competitors,

Collyn Gilbert

Of expansion?

Tom Lyons

Yes.

Collyn Gilbert

okay. expansion, Continue

Okay. That's helpful.

rate. Okay. And just then, finally tax on the

lower a that's from XX%. you your delta, there that? So assumptions XX% Can able going about what’s talk into just huge be to to

Tom Lyons

the The around estate changes XX they real was state the the definitively concluded always do be rate, another we whether combined part REIT max currently is structure number state in state still the tariff, haven't the on of group. XX% issued the tax the has XX% Sure. call it, what The the effective. stays benefits of same therefore from on They way based and law the rate taxable about particularly still REITs written, treatment will believe investment trust. at [Indiscernible] January Xrd.

Collyn Gilbert

leave it guys. perfect. right. Okay, All will I there. Thanks,

Chris Martin

Thank you.

Tom Lyons

Thank you.

Operator

from Gunther from ahead next D.A. go comes Davidson. question. question your with Russell Our Please

Russell Gunther

guys. good Hey, morning,

Tom Lyons

Russ. Good morning,

Russell Gunther

conversation. got XQ growth single-digits to bit little mid lower to on pipelines a just coming loan XXXX. comments you the I to in up low follow want around

sort you of to could be high for hit ability would the guide? us So with delta of what end share the that your

Chris Martin

institutions. Well, portfolio has which The very this the the [ph] keep It’s decent quality good refiable The been Chris. shows problem getting by challenge is other payoffs. of not is a that in, of for that loans. flow coming through they're payoffs biggest

think more and/or seeing some aggressive. pricing taking are of and We fairly space of in us is the structures late out bank I those

go a them of of we month higher little So loans anticipated. away. couple the the is bit in year We’ve do, coming takes can that of much work than in backdrop the as seen it a as that first

we little behind as just go in. starts it you a So off

to that, don't to of so. I We we’d we’re some that high end to can say try. – we're definitely we’re love get going know the to So the of but going payoffs, down slow

Russell Gunther

Got you.

there. decent Okay. more Kind And earnings the No, forward? some acquisition on I your those accretion looks the close, set do thoughts to then of like there. opportunity it what's to going appreciate of scheduled RIA that's

Chris Martin

and certainly mold, kind the – to not the to we’re of fit speak. metric it’s so trying, we Well, fit have opportunities. not there's They

We have platform a very Beacon. with good

think continue We look at in that are we there more be -- there'll contiguous and coming to space.

match You accomplish trying mirror time. the just are up they what we’re trying to to at to accomplish to have what same and

want a get We just that transition stay and not help are We cash-out. people to to involved want and customers over. the

the any that get at So continue might we space M&A more, capacity under up. always have show to to we’ll we but do the tent, that absent to bank but look like everything

Tom Lyons

Yes.

I revenue think continue that to to we diversify would stream. like

certainly to the being several the that. been something at and We have of desire for pretty last much flexibility that more looked do the I think years. there’s capital to do continuously

Russell Gunther

it. Got

thanks, round Okay, and in you? heard look deployment like deals. target just great. us And guys a depository I an there out -- at clear then that for for just loud of Chris, -- would terms look ideal conversation, you continue you’d to what to capital Maybe reminder

Chris Martin

contiguous. Well, market be that’s smaller, It can be and I certainly in somebody or have think in to doesn’t size. substance

we a we I think solid sure And well. fundamentals that management get we’d just little organization space more at New on want We another when love good and to can we really -- and to think has fairly build the in make do I look cover Jersey there. that. Pennsylvania

the in So I to we about. think think don't area that anything seem

completely We’re are to of our leapfrogging that sphere. out other markets

Russell Gunther

from Thanks, it that's Well, guys. great. Okay, me.

Chris Martin

you. Thank

Operator

comes ahead with Our Please question. Breese next from go from question Matthew your Piper Jaffray.

Matthew Breese

Good morning.

Chris Martin

Good morning.

Tom Lyons

Good morning.

Matthew Breese

January not if definitive was REIT protected. said the or you tax unclear and the in was if On still another [Indiscernible] there -- rate, it was

against and point or interpretation that is and curious, back protected -- to it’s tax you’re is that, the is could read back swing the this this they politically at come done speaking, your stuff you? that just pendulum So rate the

Tom Lyons

could in and law time position the guess, with current that I change, compliance REIT as the right law We now the still always, but benefits at endure. any is are

Matthew Breese

it. Got

commentary, expense going a think that back investments, line about long legal line, catch-up through Okay. expense do you as or remaining the I And more that we well? the other consulting expect XXXX last? expense about then thinking through of there’s that Is to some should there. just in elevated to know How XXXX

Tom Lyons

I bit think recovery of little a as we QX. down less legal the will asset in way probably expenses. were Those in see elevated come

what benefits the think to The during end just work the we well. devote over an The percentage Technology, trying other you here. never want course is going improvement investments, of have and almost of compliance it will regulatory on through, course we’re initiatives and revenue that, market of to as analytics, have that this in year to down, goes what customer else the offsetting to that year the to accrued think I the you establish should process demands. your what revenues data that’s continue experience to see

Matthew Breese

could -- some on you the revenue and And give other side the investments of Right. that what us what benefit examples that would be? the areas needed would

Tom Lyons

improvement of of branches, evaluation terms model most the do. and up things, some I saves new something staffing evaluated process for always physical revenue we through in of from location cost side the personnel think comes the freeing capacity excess being over On attrition time,

you pick So up places those are where capacity.

information analytics data should revenue should the making, better which decision better and growth, we're give there. spending greater money side, some drive you On

Matthew Breese

Okay.

Chris Martin

way figure end out a run spending money because know, always we're business. that’s to we've we’re -- on how save Yes, the Provident, try the you to to of the Chris. of you when of Matt, if money, At the is backside day, this kind that going

Matthew Breese

Understood, understood.

Okay.

any stall Fed competition ease opening latest that to expect you Is with in noted Chris, the message I that think and at has -- little comments, your indication with to all? would a bit. started the there pausing, betas deposit you

Chris Martin

comments, reviewing Little other kind it think of slows hoping though in I everybody early, is people’s down.

unless higher and/or is are loan it non-interest-bearing only or there through you’re still the tough accounts lot can of levels. a a some deposits commercial normally generating though, fund on Jersey people to whether get core It’s trying rates and pipelines CD on be the to their generate and their place relationships. lot C&I New it they their of growth

continue So a will I albeit think pace. at it slower

Matthew Breese

Understood.

Thanks Okay. my That's had. I all taking for questions.

Chris Martin

you. Thank

Tom Lyons

Thank you.

Operator

Our question. Erik go Scattergood. from with next ahead comes question from Please your Zwick Boenning &

Erik Zwick

Good morning, guys.

Chris Martin

morning. Good

Erik Zwick

in I XX%. just just I’m press and previously, down were on release, First especially what’s -- at loan looking the appreciate comments as they maybe thinking growth made regards about to year-over-year the with volumes, you in But about paydowns. the origination

one, kind in at So of, reflection comfortable versus market demand or And pricing for XXXX? were your of deals if curious then XXXX that structure and maybe origination with. I expectation a is was what offering guess, you volume that competitors

Tom Lyons

on Yes. to in want but I’ll let fourth year last point do extraordinary. jump was the the competitive forward-look, of Chris quarter and environment the out I

If can of that ever level recall you’re the here. looking year-over-year I seeing I was QX, highest originations, think,

of XX% we origination QX but so true terms So QX XX% modifications. exclusive renewals are up money about XXXX advances, including on of versus activity down in of credit line new versus meaning XXXX, and of originations,

Chris Martin

on is lot see -- XX-year structure, I have things Chris. We see probably We’ve we of a that lot that think loans From standpoint with seen should four-year we swaps a no-guarantees going partial guarantees. our do. Yes, on interest-only. of this not the of would a

people deals -- kind we stick others, really we have then, done are that very are are some structure being and and would back good LIBOR be place in we the and to are we could we they're would the not probably only that XXX. plus going is we and regard. with compelling us that unless are where plus and LIBOR of that holding quote seeing it know we allowing play The even in So to at pricing, at XXX reputations

are that perfect business, the aren't book very basis and our we returns return and you on aggressive, see risk. everything saying I is think stockholders. think from discerning sometimes in look your Not an how worth chin really are the in their of So of so with equity very are credit we the that is defensive that some for lead them that the portfolio, on we think we and we very at the -- but how they people we keeping incumbent those

Erik Zwick

And the the buyback, That’s about helpful. then authorization. repurchased million I current X.X it’s Thank shares XQ. on remaining $XX million in you. you think And mentioned in

we did quarter Just for in potentially going fourth sensitivity price would your be sell-off forward. about additional pullback a need appetite see curious like or the to and buyback a look you we potentially involved like without significant that? Would to

Tom Lyons

pricing than reasonable think in basis, We're on to a I you a but multiples longer a on earnings so of an No, plays role and creation deal, what would we obviously that. relative for look risk-free looking earn-back the -- tangible value in earnings, book an accretion external and at brings. forward

Erik Zwick

Got for Thanks my questions. it. taking

Chris Martin

Thank you.

Operator

questions. this and additional ladies the And We’ll floor question-and-answer for today’s at no any am remarks. Chris session. closing to I’d to Martin I turn time, over end like back gentlemen, showing

Chris Martin

Thank joining Well, you. thank we good very temperatures. look have day. you us Certainly today a and positive for our to warmer and forward on call we a XXXX to

Operator

call. that and do conference conclude does attending. today’s gentlemen, thank Ladies We for you

your disconnect lines. You now may

Provident Financial Services (PFS) 1 Feb 192018 Q4 Earnings call transcript