PFS - Earnings call transcript Q2 2019 | Provident Financial Services, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and welcome to the Provident Financial Services, Inc.

Second Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note today's event is being recorded.

turn over to Corporate John like Secretary. now the to conference Kuntz, I'd ahead. please Sir, go

John Kuntz

are Andrew. Chief you, joining for earnings Executive and The for everyone Lyons, Tom us presenters Chairman, Senior call CEO; quarter and second President Thank our morning, Officer. today. Good and and Vice Martin, President Financial Chris thank you

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

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

I'm Now introduce offer who'll his Martin, part pleased our Chris? to on quarter. Chris

Christopher Martin

contained. tangible were average which Revenue Provident's return for the and morning quarter, average everyone. resulted on results X.XX%. in well John, half elevated credits operating good operating was annualized the assets And exceeded and credit our all costs the positive the trailing on of despite categories equity quarter. XX.XX%. were Thanks, for in was return deterioration year, our C&I to costs first And

expanded that during the Without will accretion due contracted have that points. interest But the basis of as a the quarter later, during this Our margin was to detail to on income would margin of paid acceleration the off loan X.XX%. Tom noise, quarter. by X

floating margin as the fairly we certain, and some variable yields is on cut Fed the prospect for our by rate As will experience rate pressure compress. and asset

costs. exceptions pricing be this and to and overnight expect borrowing partially deposit offset relief by We

greater than experiencing competitors at as deposit profit. many Market contraction to our pace begun much and compression increasing subside pressure on a margin are rates has of

pricing reduces we begin are quickly if concessions the reprice rates. relationship taken as can, market rates down to exception the off decrease and Money table. And should wherever we will Fed

over Our remains still deposit core. mix XX% at

have making QX growth, portfolio strong which activity loan for growth difficult. we As prepayment contains during

especially structuring in space. on and underwriting, the see credit pricing, market structure to continue competition We middle

Our are utilized them loan disciplined structure model in our to and opportunities to And adequate with pricing our we ensure of seeing markets teams lending an return. approaching approach our lending share are a risk adjusted returns. in

during Noninterest loan a income result level fees Tirschwell swap and & management accompanied the from increased quarter acquisition of wealth income Loewy improved prepayment fees. as the by loan

Noninterest expense increased intangibles $XX.X with of acquisition costs memorization from and for million increases the the T&L additional and technology quarter the to in processing and expenses. data compensation

the and percentage remain ratio Our analyze all of X.XX% stable respectively. a of efficiency as noninterest assets XX.XX% and expense at

demand to the enhance in capabilities be to continue or whether deliver it person experience meet technology build ever-growing invest and We the to type in improvements customer to same mobile. self-serve of

offer capital lending invest upon. The small to achieve robotics traction customers build greater to operational provide and AI in them prospects to to as our solution portal continue throughout a with has gained working our the organization. we And and business we of efficiencies use

any see that about related not of Types we trends to despite C&I cautiously second industry of quarter be level have any cause quality continue or higher near-term. the in outlook particular two We adverse credits. optimistic overall provisioning us a geographies to credit, credit negative to a did

been on focus on have M&A to continue but front. actively engaged growth the We organic

strategically. must the of has we so in opportunities EPS pricing against both backdrop be this While involved be accretive metrics. value. be the All have increased and deal improving shareholder and deal Any would must and financially

of all Provident enterprise million to draw magic that the our We assets meet of number personnel to and in and invested the in risk, continue compliance has to entails. information closer requirements ever regulators. XX security

trade news business at we unemployment economic that the Geopolitical on at do now any will low over XX-year healthy, and future strength. and and a competence and anticipate growth remains decade, in negative impact aside, economy consumer its concerns the U.S. the horizon. As best

continue constructive. to tone their positive and and our with clients remains meet We

the details will Tom more Tom. quarter, that, over go With on

Thomas Lyons

and Thank good Chris, morning, you, everyone.

Net million or the share XXXX or per for quarter for million second the income the in $X.XX quarter XX.X million compared diluted quarter. with was and XX.X share per or $X.XX $XX.X $X.XX per trailing share,

Third as revenue income second interest was [ph] prior exceeded and all income, income quarter $XX trailing net quarter million interest noninterest year and quarter levels.

aided not two period and quarter expanded the accruing versus last prepayment margin quarter's same year. the margin interest trailing recognition net restructured versus $X.X The being to income upon of million prior the of basis XXXX. in which had in points was Our been basis by nine the current interest points loans,

to not remaining principal interest the life quarterly was reflect were loans commence of then amounts these those secretion accruing, accruing to our adding to to net payments the This interest upon loans. income the the XX loans of over return While status, an when basis prepayment they accelerated points create margin.

while Compared cost basis X increased the XXXX, points. with liabilities interest-bearing first earning the quarter asset X our of points, increased yields basis also of

While we quarter competitive rate the of rate the the funding for hikes pressures. quarter in The in deposit the as relief costs lagging did some increase cost reflected of effect and see increase Fed's in progressed. the

total were XXX better the XXXX than commercial just betters end than loan growth from by $XX increased strong quarter. million second March Loan Quarter in and mortgages, the particularly commercial driven construction quarter originations trailing and million loans. million XXst, XXX under

payoffs million more year however, the trailing last XX elevated XX in paying more quarter. and remain off Payoffs current in than the than in million with quarter

to since X.X June pipeline strong XXX last decreased from XXth activity. has X.XX%. in origination trailing to at The basis Pipeline rate reflecting million quarter, quarter decreased billion XX points

reflects rate decline The and mix. market pipeline rates in slower a treasury shift in conditions, a pipeline current

to interest exceed exclude previously to this recognition rate the portfolio X.XX%, adjusted the continues of loan nonaccrual it of However, quarter.

a $X.X result employee of been to the provision debarkation. pending bar loan the on Our from slow $X.X has a the our for was a larger contractor C&I this million be relationship investigation customers largely reserved two to extent credits, with driven credit of quarter, determine in The projects, elevated in losses commercial million fully deterioration additional this loss. taking parent and appears payments by

with charged share also X.X $XX.X was of in that with experienced profits interest certain national operator these million restaurant our million connection in franchise credit provided X.X in properties. a in revenues owner has declining to off million

This relationship on moved to bars nonaccrual expressed the has the but as payments intent based current is exit the business. to

of As two a relationships, end. result credit these our nonperforming with evidenced assets quarter impaired deterioration lending XX of assets at basis total to modest increasing metrics points

XX basis points income to of to XX increased due in Annualized Wealth to loans and basis the on versus million, management Loewy million completion for the points largely increased acquisition quarter loan April increased net quarter. income trailing loans average X.X to $XX.X from by million. charge-off $X.X XX the trailing the basis total losses of & allowance the Xst. points to Noninterest Tirschwell

income In increased. addition, car swap income Loan owned debt claims level a and million trailing fees in mutual increased life fees, offsetting versus loan fund, prepayment insurance. decrease sales for all than bank quarter the on ATM X.X positive annuity the also benefit and more

the of benefits, an and data expenses processing quarter, versus amortization X.XX% quarter. Noninterest the of established average million to compensation Expenses and XX.X expenses. acquisition, other a annualized as X.X were of trailing Tirschwell increased result increased to assets primarily the by intangibles, million Loewy & for

the to Our estate in is bill combined tax from a trailing that Jersey publication rate trust specifies of New to reporting increased connection investment technical treatment purposes. XX% effective XX.X% the of for from Corporate quarter. tax real attributable business with The increase

of tax in As a rate we’re required is an the an XXXX. for effective months increase result, projecting provision six the first of for the approximately and tax remainder XXXX of XX%

response questions. That concludes our to happy prepared be remarks. We’ll

Operator

now question and O’Neill. We Sandler begin comes Mark answer session. will the Please [Operator Instructions] Fitzgibbon The question from of ahead go first

Mark Fitzgibbon

for color those there’s I us any on two credits syndicated any deals and credits between you Hey of and can into much maybe how total have also the in additional that more give wondered syndicated guys, the potential on portfolio what split sort whether sort you good a in morning. mix? club us today credit loss is give if of sense

Thomas Lyons

about first, commitments million exposure, I’ll total Sure, there. $XXX about the unused million in $XXX take against the so million $XXX it's outstanding

Christopher Martin

Mark had has so that the fairly a We us going we then and to we’ve the at process grew finding loans don’t to reserve the really support get we at -- try then taking doing cash challenge it’s going would least amount getting stands XXXX, couldn’t always with lead well the a the where this out we that either that business and back from on the had credit. he completely information on point fully knowing to stand he can other went where which or early. it, charge-off write-off, he these his information that places of into loan been are the attack to know

Mark Fitzgibbon

of the did this, missed the I if of year? the apologize I outlook for give Tom half your margins for then And Okay. you sort back

Thomas Lyons

to Yeah, over I I X are probably think we're half. didn’t X say we but Mark basis from now. of at where stable points the Pretty looking second compression

Mark Fitzgibbon

X to X points? basis

Thomas Lyons

cut modeled just taking great over we've one at year. to for course July of the balance we’re the X XXst Yeah, X and the

Mark Fitzgibbon

you curious given the I range on comments end the contemplate? M&A And deals so bank the of your bottom that what of Okay. guess I'm size and top Chris, sort

Thomas Lyons

would But team it at metrics and I worth, be not a think $X.X batches go be anything not anything and to their and financials up company. $X.X billion depends brings obviously impact on its math on management or the now worth again normal wouldn't probably with and billion would under the it the market our we because point. culture be with

Mark Fitzgibbon

In the top end?

Thomas Lyons

the we situation, ... MOE that to top to guess wouldn't that's end of type be not I say would so

Mark Fitzgibbon

you. Thank

Operator

question go comes next from Davidson. ahead. of D.A. The Russell Gunther Please

Russell Gunther

fits. Pennsylvania? drivers loan your half morning be the where Jersey good expectations are you this and just say pipeline year of kind might growth guys loan for and of wanted you could on what's if New Appreciated back to I for what your mix geographic in Hey versus see the comments guys. growth the

Christopher Martin

the This pretty solid. is pipeline is still Chris;

in through market. the going in pipe. in a continuing see prepayments think aggressive I and would PA about that the we both being we by the that Eastern tempered being talking there C&I still that certainly that the Jersey well on are still in And single-digits little level to is of growth down are low pull is I commercial lower and less bit be think certainly coming little It a doing be real it estate New still a we space. things on lot

Russell Gunther

And pretty That’s for then expense it better year result one of controlled. last well looking be it the bit for, a of half a the remains the was was I back Okay. would your outlook I helpful. guess than

prepared also mentioned You XX remarks. the billion marketing

expenses would that be XX preparation So, here. incremental a anything And where billion Thank just of to trend to from expect spend? get sense want you'd to you. related

Thomas Lyons

year. That's growth the $XX of $XX I looking about crossing. around the billion million the any costs, for we're additional back inclusive of at quarter think a half initiative

Russell Gunther

Thanks, Tom. Thanks, guys.

Operator

Gilbert comes next The ahead. question from Collyn Please go of KBW.

Collyn Gilbert

guys. Thanks, morning,

Christopher Martin

Good morning.

Collyn Gilbert

about Maybe what growth just you first a overall and bit trends quarter question saw Tom, sort talk you Can on some that the of in going just of the deposit. to deposit outflows forward? thinking you're deposit little

Thomas Lyons

saw noninterest growth good. nice in is We Growth the of side Sure. things. bearing

are to to that expectations able the be continue move going So, to forward.

far as basis, goes, month-to-month a cost some we I deposit at relief interest-bearing saw As look actually when to of on and have pricing plateaued. the seems margin the

that Xst. to some we back And look the margin. exceptional those on as of try half will August at to the some we manage we'll opportunities of continue And our be pricing, to have manage year effective which through

that. good So, about feel pretty

Christopher Martin

pricing certainly, that the we for And runs Chris. Other done everybody's that, clamoring coming of up, some is see down. more Certainly, exception it past. than the this was when analysis. Collyn, in ratings

the much. as to not You're going ringing hear phone

for these being of much on of half and structure better that with aggressive out from accounts. cost going be And there, to way a repricing of than higher back we're could rates these borrow the perspective offering the looking On you downward. longer at some

become it relationship. decision So, more just a so the funding than does

Collyn Gilbert

Okay.

automatically percentage are, at Okay, specifically that's Fed that that maybe like would we helpful. when to or deposits, primarily money then assume rate I amount going looking you to can indexed And cuts? dollar the drop do have Tom, the markets guess a of

Thomas Lyons

if I have anything think that's rate. index very don't much we

Christopher Martin

Yeah, we all index have not rate. much at

So, I we don't think have any.

So.

Collyn Gilbert

Okay.

compression just on back you'd Tom, then the this of to And Okay. of indicated margin, so the points year. basis X half in X

quarter we backing points Just -- starting going to margin we at that level? basis out this to a XXX reported like also confirm at should is be XX the or

Thomas Lyons

That's correct.

income. to need You up nonrecurring that out back and pick

XX, to off starting So, yes.

Collyn Gilbert

Okay, want regulated in confirm, York okay. of exposure to New to just at all there? terms And then the multifamily. you City I have guys Do much rent you

Christopher Martin

and one, one. Very, maybe of not very little, a big think I it's can

really not do in so space And we traffic no, that at all.

and we in of in the borough's not rest the of operate nature, really any things control Manhattan. or So, things that do

Collyn Gilbert

Okay.

wanted about go finally, off which M&A, just interesting I'm had, that comments, I at in the hear we've your premium fact and last Chris, opening no to guess check. say up, the that have then fact deals to in Just that you And of market a this low gone given premium, deals? prices just couple surprised

guess kind the going of Can I of where of be forward. little that trend just my what's I'm kind sort Or it comment? of pricing And would that increases? that sort is you in as head, bit more color driving to just give you're seeing a thinking

Christopher Martin

levels a we when we in, the is, we're third involved, we are we fourth at that the when the Sure. and there's come that think or pretty and of course, as I see the some aggressive. challenge know that fact that people way, call of get phone look pretty being some in of that pretty -- a it's assumptions the are measurements aggressive. in being We putting

make And can't work. we it

So, again, just telling it's deals. smaller us that, these are --

we're other And that deals a if we're disciplined. were type were So, you're why premium at reasons -- I was probably okay, certainly it zero-premium there trying but bigger missing and deal. stay of referring other know some tiny to to situation, deals. of that or the zero is that's

Collyn Gilbert

New understanding can of you Okay, And for good in the qualification it, it's that or only that's then question, guidance tax could the if tax that status understanding, terms you And charter the this our that occur within right, you final right on in dynamics some typically Tom, tax of you one give of talk to helpful. move us will holding I if benefit Jersey. guidance? just company terms change, guess, just is the but you about the you

Thomas Lyons

two planning strategies approach ways tax to There's on that.

professionals. are Jersey we it's New receive that you the the directly investment to of continue have parent Jersey companies, Or from not company. can New with with You are division, which discussions investment understanding the treatment preferred it

if distributed apportionment of part a the parent gross the case, being apportionment our subject those dividend an Delaware in to receipts to as you the denominator company the from Or have company is calculation. investment with that's in

best entity we whatever works get. would what So, for an is

Collyn Gilbert

Okay, okay.

no, That's intended your stand. of where that I change no, of with obviously, you're So mean, to guidance offset that. XX%, to indicating that kind there's going

Thomas Lyons

going guidance So, forward is XX%.

Collyn Gilbert

it. got Right, sorry. Yeah,

Okay. Thanks ahead. that's all I

Operator

Jeffrey. question The Please comes from Matthew of go ahead. Piper next Breese

Matthew Breese

morning. Good

Just stood taxes, the one clarification you on Does the know of well? as I XXXX the year. hold said had XX% for the for rest that

Thomas Lyons

It does.

Matthew Breese

to Okay. Durban going remind so, end exposure you And us growth loan the the $XX of what billion crossing And the commentary? just by just anticipate could if then back your Do year? is? you of

Christopher Martin

over close of we that which our is for first, $X.X models we're the million. in cross and approximately go would Well, we've do if stage, quarter, at $X.X and run impact, not something say not this would the fourth I probably through end what million to year. would we And the Durban

Matthew Breese

see securities keep sell total strategy? assets That Okay, the some to just might tenant you the off XX. balance below we

Christopher Martin

That's Matt. right,

Matthew Breese

Okay.

like the Okay, It pieces and portfolio? there. restaurant into then there some were just diving sounds moving

industry what of of kind perhaps characterization happened of change just Or utilizing revenues poor operator kind financing scenes. curious, a was the an deterioration? taking the to the was issue lead Just operator an was business Just that in better issue? there It and some strategies? a behind or

Thomas Lyons

impact point, York. think multiple I a minimum little less favorite, of one in bit operator, which franchises, of also experienced wages the than than New the second increasing terms more it's the adverse from of in is this operates

Matthew Breese

but dining? a or of specific fast name, or, You and type institution? kind pure don't Okay, it more food casual have to of was give what

Thomas Lyons

different Some over of of multiple our all three lines.

Matthew Breese

Okay. And looking then just at income. fee

fees. driven management quarter acquisition, prepayment the also by This wealth but elevated and swap

If could you of think do guidance on the were in look what portions the term? that income for you had last quarters to near the us where give the What out year? of two sustainable And those? shake some

Thomas Lyons

fees Yeah, weren't so prepayment huge.

projected that. we're based wealth stable that mean net the back to remain at very of the indicated, expect likely, completed. on half of payoffs levels in of the management, it's looking could I at So, some I Chris acquisition Again, year, we see T&L is higher as the

the down. really volatility was swap of some first got second to it. piece the compared the rates $XXX,XXX that's quarter it's with XXX That some a So, in coming with the to Again, for that's been negative market quarter. mark

$X.X adjustment. piece, made look absent the compared volume I the like to if $XXX,XXX So, the we CDA just in at first the million, quarter

that to I So less. guess that's, risk, that's X.X could the something drop

Matthew Breese

opening Chris, then credit. to in continues and And Understood. terms your you'd just on competition mentioned remarks, stretch Okay. a

Just they are the or what where most competition non-banks? banks being the sort is the curious, of aggressive? Are

And being you sheets. profitability in on now this terms much, as risk? taken Do you at taking credit lending extending too of out see less point, taking at on are borrowers where consider, legitimate this competitors your and just point, simply

Christopher Martin

certainly, all the aggressive Well, do. insurance certainly the still that equity, above, on are wouldn't companies being the private pretty it's we firms

other The say, is covenants somebody and covenants out that at and sheet term we and well, don't a would they're any put the come need back basically all. we side then

just of the LIBOR, the kind pricing about not gives something you can't plan they is comes good business together their are anything offer over to really into at and for portfolio. protecting do model turf, put them which incumbent or you that When try they're is back when see you I in a good their risk. XXX doing mean, doesn't especially taking undue that a pause. space. market saying end certainly, I'm print, anything it So, it they're middle in And up bad. you on It's

on on look now Right give we're you it the think we will structures was back putting deals just used a it wanted. us down way culture credits know but a that and that is a that we on be to are we we play some issues fact XX% than XX not to of our do stronger getting really problem. of people So, be used we come to think of the just XX% in say to but and we're will some to want we C&I what credit that when be see the lot we looks pause, so always the lot taking

Matthew Breese

the see just governed you share us could Okay, are just of one. sense sheet anticipate XX one for last My give to more. capital would billion. in to to build, continues your kind we If balance a regard I appetite repurchases. under

Thomas Lyons

As we have and the do to that right price disclosed, we we have the authorization points. at willingness the

capital options. the So,

Matthew Breese

questions. that’s my I had. Okay all taking for Thanks

Thomas Lyons

Thank you.

Operator

This And presentation. call Services, for question-and-answer both the today's attending you concludes Provident conference Thank Financial the session. for Inc.

now may You disconnect.

Provident Financial Services (PFS) 26 Jul 192019 Q2 Earnings call transcript