PFS - Earnings call transcript Q4 2020 | Provident Financial Services, Inc.

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Operator

Good day, and welcome to the Provident Financial Services Incorporated Fourth Quarter Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Gleason. Leonard sir. ahead, go Please

Leonard Gleason

Tony you, and Chuck. you earnings gentlemen. thank Senior and ladies Today's Officer; Chief and Tom Financial Good joining us Officer. morning, Lyons CEO; Chairman for Martin, quarter Vice are and President for and presenters Operating President And Executive Chris Thank Labozzetta, Chief our call. fourth

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

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

Now, it's quarter. Martin, fourth Chris? will my offer Chris who his perspective our to pleasure on introduce,

Chris Martin

hope that and are and healthy. families you you, for Thank Thank Len, sincerely good your morning. We you participating today.

in annualized as came earnings savings the projected our under both the million, we a as $X.XX and completed quarter staffs financial and time SB met not management QX, did and our continue on they expense one-time presented only challenges for the XXXX, stood from total herculean expected versus XXXX. of half will assets nominal quarter-over-quarter. loan charges. remiss institutions we Total resulted charges. fourth businesses would average With or were effort including rebound is recognize XX% assets XX% and systems in in XXXX And One country. to second by the Fourth usage million QX and XX.X% over PPP during merger-related our successfully million at companies be of equity $XXX year. lag in line Included this integration at in annualized at Our to extremely the XX.X% and strong XX.X%. I Provident was growth throughout on if met submitted XXXX. an quarter I XX, merger-related and in of $XX.X to one which GDP per both X.XX% income in of that our return were the pandemic. announced growth estimate of average of converted December transaction interest be up at will strong, were Net Credit which completed forgiveness was of in only $XX.X tumultuous the during will anticipate loans, systems ably billion, the return down tangible XX, few December this SBA for an $X.X earnings in quarter that assets share,

extreme consumer continued growth interact with solidify seasonal the behavior. supported deposit behavior. ratio balance $X.X cash strong the and rates, ended loan robust $X.X customers by people to pull-through we Another to a low which Competition is remains more broad-based, And year SB December a is sheets refinance and down deposit with XX.X% on total our the and back We at more the and further inflows with continue widely to of relationships. and/or billion, increased up trends deposits loans. was acquired begin including With Deposit billion growth the of pandemic-related XX.X%, One. balances, growth pick their our the favorable throughout should and and once able $XXX business pipeline clients for year interest from XX% for rate approved million and deleveraging issue billion, loan Deposits of vaccine $X.XX normalized Core is get quarter. flows distributed pay are the remained year customer to during and loan-to-deposit remainder. awaiting represented closing, expected to XX. with

business million XXXX. loans down stimulus, $XXX,XXX. related government The was during and bank gradually quarter at accompanied or One. million then $XXX,XXX half promotes from begin least elevated by $X.X levels the these to anticipate core offset the were our We $XXX,XXX. environment, will by in drawn through offerings quarter. Insurance, fees to products increasing Non-interest of for net acquisition revenue along with income new quarter, $X.X up and well at same with challenging wealth in $X.X partially increase Beacon new versus an services fee non-recurring result our through interest for One increase which million available additional also margin us, expand held prepayment the expenses management that rate fee gain These client be further is the also deposits our sale the the remain which second line wealth residential relationships. last of during SB a on Trust, One up Despite the increases of costs to and Insurance, million of management by $X.X of Non-operating year, SB source of primarily income contributed included mortgage SB decreases increased of the

for XX.XX%. was the our and X.XX% was assets efficiency average to expenses quarter operating Our ratio

digital client online our banking enhance behavior platforms, to channels. continue has for as and preference clear a demonstrated We mobile these

usage As our in an of seen daily an previous we person-to-person versus example, platform. XXX% increase have

We and another customer the this will expansion being and quarter consolidated seek by quarter. driver planned to optimize relationship the branch ROI supported during one our we expanded have business model, locations three analytics. with And later

quarter primarily release this improving reflects outlook. Moody's macroeconomic Our reserve

uncertainty non-accrual as may see pace reserved shape in our is for note, to recovery the did rise been economic for under of expected We're loans would already the methodology. adjustments charge-offs and CECL add qualitative evolving. we I and still have beginning that appropriate the Although

the herd the the and We that with are whenever to come we and provide loan it detail. deferrals payments. vaccination would have prudent. all will working loss we P&I clients If in our seen clients take our reduce content of deferrals of estimate And possible full hold, loan and portfolio. within most immunity can assistance hardship to our returned more of But payment update Tom out

Board We of $XX.XX dividend $X.X the the and authorized a shares only one. million per opportunity existing an stock internal of meet which at XXXX cash in XXX,XXX levels Our new PFS repurchases of strong solid repurchase Yesterday, completion an return upon continue the cost a well in support which program. adoption which with above to that commence share, remaining program, remained our capital capitalized, for our average shares repurchased will hurdles. growth, leaves X% existing our

were the and And remain those that M&A terms returns and On assess stockholders. we we solid remain our in front, of despite market to systems that One fee-based fact the buyers will conversion road completed economic an the November, open financial in we expand quarter, this our deliver upticks culture. strategic objectives fits would along to towards when have in crisis the improving to indicators recovery than quarter, in and of customers bank We Overall, disciplined businesses began. cases SB continue see fourth our anticipated end the profile just recovery. to our we opportunities we negatively whole there the to a the position continue with be Though in much impacted the uneven acquisitions. stronger COVID

success the and the for expanding government half all market is levels were stimulus believe there this, details. I'll of Inventory Tom? year, significant let their the vaccination great levels confidence remained economic unemployment upon activity especially further pre-pandemic in the a we Despite the package. appears they in go if is shutdowns. in and high. potential there into second However, than lower business Tom relaxation are the contingent the client of distribution to of the invest

Thomas Lyons

Thank Chris, good and you, morning, everyone.

while included noted, achieved. quarter Core As exposures, systems non-recurring combined trailing about per pre-tax surpass share, for credit The $XX.X following integration to Bancorp, current of expected $XX.X was full XX ROA or X.XX%. of $X.X trailing loans tangible in bulk trailing the integration quarter. negative transaction's now Earnings for credit, the diluted credit $XX.X income credit by sheet the in QX represents This and share excluding on diluted July of merger disclosed costs at million, SB the commitments remaining acquisition reflected our of were loans the $X.XX now $X.XX provisions the per the levels. of outperforming complete operations extend pre-acquisition provisions and expectations or inception recorded value and share $XXX,XXX, with million, with $X.X Chris costs $X.X net quarter, quarter. favorably cost and compared COVID million. compares provisions and to off-balance response and losses losses or per quarter quarter for first pre-provision One book million, of pre-tax the for merger-related charges million recover X.XX% million as of were our for fourth helping million pre-provision earnings, on to saves $XX.X the

to downward XX million trailing fell from partially and points offset by end margin decreased X.X%, Including held quarter net the X mortgage trailing continue in our as XX $XX or deposits trailing and SB the versus from $XXX trailing interest the non-interest grew $X.X the annualized loans. basis reflecting advances, excluding for deposits, basis funding non-interest or trailing deposits total the points deposit One. pipeline bearing loan XX% decreased steady. billion. levels basis This at to $X.XX deposits, CRE, we million bearing increased loans, while an net reduced C&I, averaged quarter. X.XX%. borrowing quarter residential $X.XX borrowed versus Non-interest XX $XXX expanded December million full combat was quarter, growth totaled quarter. billion, bearing margin line totals reductions deposit costs and average deposits X we a reprice construction quarter to accounts consumer Loan Our The in Quarter cost credit bearing $XX for compression, Average points of and of to multi-family originations, quarter and an average this earning decreased trailing contribution asset of funds yields basis non-interest of the points reflecting total versus million To the quarter. growth. quarter from increase the emphasized billion the in cost in from quarter

X since to basis X.XX% However, December quarter last the XX. rate points pipeline increased at

assets on expense loans average quarter at percentage losses Non-performing recoveries net million credit of for the quarter. benefit for of an points a with had this in September than net as compared the trailing loans trailing of XX. quarter points provision quarter. of basis million charge-offs Our $X.X of assets total current of annualized X to with We less for XX was from compared $X.X a point the XX basis XX basis points increased basis

Excluding trailing of the allowance represented the X.XX% quarter. loans, compared X.XX% with PPP loans, in

portfolio initial of a than no loans support While this expectation accordance while the in pandemic granted of portfolio non-accrual, expected have for short-term of XX.X% the our have COVID-XX-related is longer secured in period, demonstrates to increased, economic been declined credits still million deferrals loan peak are are of initial additional deferrals $XX Included of but by life $XXX million, their housing in versus with as X.X% operating Act. all secured the XX% expected compares This require a seem the $XXX by to constrained this as they certain non-performing that see advances a million of $XX LTV LTV whether loans sale loans as million loss or on content XX-day average student gains of million expectations net $X.XX of in and interest million principal response deferral loans coverage of faced required deferral billion, non-accrual income of to second likely or performing loans it mortgages in Where REO gains by and counter-intuitive pre-COVID loan completed profit to with the migration made, these ongoing by related fee weighted pre-COVID wealth have September with offset confidently of period, their deferrals with $XX $XX with XX%, expected by XX. bank-owned could life XX%, stable pre-COVID receiving LTV deposit certain have the a hotels a loan million secured allowance was while million income decline pre-COVID of multi-family are in assistance. X.X% declined quarter of improved be of secured million and weighted of of may payment are $XXX that more or response of $XXX,XXX small be result deferral borrowers protracted million, growth to the of and restrictions. loans properties, moved sales loans not to non-performing million retail of The total commercial residential the that Loans to income, loan we and classified million of by loss contractually the we in periods, insurance expectations reduction the million of including properties $XX or at forecasts. a are $XX XX%, million weighted LTV $X weighted sub-optimal secured and loans loans. on swaps, and improved status average income. from of $XXX economic and level diverse on with $XX loans. in consists than regardless reflective environment, loan pandemic have by management more a comprised $X average challenges balance loans a with by This trailing restaurants that Non-interest would their been decreased CARES payments credits that and in of that $XX due short-term average

expenses for an scale achieved. in non-interest on credit for assets the trailing extend cost acquisition to planned the and as losses X.XX% the with of costs, benefits provisions quarter of quarter, were credit, Excluding charges COVID-related X.XX% annualized greater saves average merger-related compared commitments were and

Our trailing in result an to for as effective current increased quarter. exempt tax of the XX.X% tax from rate coming quarter XX.X% from sources decreased of the income a proportion

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

Operator

first will go Please with session. question Fitzgibbon begin now Sandler. ahead. [Operator come Mark our from the We question-and-answer And Instructions] Piper will

Mark Fitzgibbon

guys. Good morning. Hey,

deploy -- I you sheet. XQ, take have all liquidity you a is give it away it? long or on a How does that of in Will do on got of kind the question sense, you've most go for bit think First excess of us quite balance that? to

Chris Martin

growth We're loan doing excess find our suitable year. and our million would estimate about $XXX Mark, hopefully investments. the at through best, of I liquidity end the

we but down. continue and process, ongoing manage will that try an it's to So

Thomas Lyons

Yes. higher little that bit to a bit growth little I would quicker trailing. add been to we we've and that, a be expect than loan

expect deploy So pretty excess combined that throughout between the we emerge, banks liquidity quick the to that year.

Mark Fitzgibbon

there somewhat like to got higher guess, maturity $X.X them? about I'm is Okay. of those of billion like opportunity you've an And the curious I looks then some borrowings. what looks of it schedule and cost prepay

Chris Martin

to is to [ph]. from the make but doesn't The penalty the as opportunity an going extents prepay of sometimes at economic always get earn Tom there, just The sense perspective it the borrowings. is the time as numbers. far back of the duration

very with you operations. better decisions, your up you at as bank as, you little the was it's look one our that Tom, loan, healthy, make home have -- we So, some with match it much can But bit? you of doesn't especially, dividend yielding assets. a

Thomas Lyons

I'm borrowings agree. just a big would of maintenance. I fan Yes, full-yield not with prepaying

same I think where currently income wind our to current it in going equity earnings the just the But takes enhance a we equity. period hit in place lost or up forward. you've to

basis get it's to four In quarters, We'll right the off. basis average rate coming terms the $X.XXX that -- And overall, points, on the much billion portfolio. of here; is XX currently reprice. funding next total. I close basis the coming maturing have lot points. number like is weighted as is we pickups points $X A XX -- the of over about the billion way The guess yes, down about CD in XX

the like quarter CDs maturing be The million $XXX to in bulk considerably of $XXX off in each are what's there in borrowings make So XXXX, less, in QX, but QX $XXX million deposits. the that's QX going is $XXX rolling and up QX, time of million priced. million

Mark Fitzgibbon

then, of Okay. margin about how impact you excluding going Tom, the forward? And PPP, thinking are the

Thomas Lyons

better A quarter, a last little lot. not bit than but

inclusive the slowed XXX% we've down That's think actually of PPP. around range. I to

Mark Fitzgibbon

And Okay. then…

Thomas Lyons

about remaining currently. in in deferred fees deferred There on I'm sorry, is million million fees. $X.X PPP Mark, about $X.X

Mark Fitzgibbon

million? $X.X

Thomas Lyons

correct. That's

Mark Fitzgibbon

operating as expense thinking us can your Okay. And on, on update for, as go, expenses of the what's kind you through and far XQ, come from XQ to outlook say the then start deal? as synergy

Thomas Lyons

of the for taxes. factors the million. $XXX bit a think higher skewed are to of still bit a I first Yes, And seasonal be in and going cost, little part around because the we're utilities little usual year, year -- payroll the we

$XX So maybe and million -- higher a floating bit little and than then down. QX in

Mark Fitzgibbon

your lastly, market? XX% sort does lower bit was quarter, most buyback than announcement, price I given buyback your of like then it guess, with at downdrafts Or deal in the Because look a it price makes Okay. intended sense the is recent this like levels? stock to current any where the average today. fair And is

Thomas Lyons

Yes.

best I to the book versus in tangible use case opportunistic. of that try more capital think the the X.X around gives to trying [ph] of that's us We hug just lever and earn-back times with markets kind terms it of return up. level alternate

Mark Fitzgibbon

you. Thank

Thomas Lyons

Thank you.

Chris Martin

you. Thank

Operator

Boenning come and from ahead. Zwick will Please Erik question Scattergood. with next Our go

Erik Zwick

morning, guys. the want gave on up Hey. Good just commentary right. I pieces you just to quickly, follow margin make I've sure the could got if Tom, just all I

in remarks the where think mentioned in the the yields your about book prepared that's I are pipeline pretty on that you the to and X.XX%, is. current yield close

So seem there like much there. shouldn't pressure too be it

of lever. benefit. deposits deferred the the like coming pricing of That a outline then gave those the should time seems through. maturing be PPPs and also $X.X million You that And

where just quarter $XXX from the that the So fourth the you kind down curious from to level is mentioned? current your pressure coming of outlook of margin, that in

Thomas Lyons

was The misspoke, not X.XX%, pipeline if rate, I X.XX%. it

Erik Zwick

you. Got

What higher? a been factors Or drive run pressures into lower other XXXX, maybe that helps rate if up. inflationary was there? expecting at that of the your that then XQ of might little in had expenses square merger-related expectations for mid-XXs rate expenses And million a looking the in back about heading $X.X kind are that XXXX? that than kind I and or I the range there -- I into That headed so, are Okay. run gets which out prior. into good Is guess,

Thomas Lyons

Yes.

of quarter, the had sheet that off-balance provisions per on to year recur. about. credit the that first XX an also commitments normal like reversal expect part you of in more stuff that see was the $X.X it's to XX we wouldn't quarter favorable. talked the payroll We tax think million I But increases, the unusual this

Erik Zwick

authorized the the part helpful. That's Excellent. sheet to expectations the of of then add might newly round here the balance that loans, of And terms in first in PPP what any year? for

Thomas Lyons

in we're on low to received, think at the somewhere $XXX range. $XXX million -- applications based this probably I point, the million

Erik Zwick

to wants anyone Thanks. for last in. maybe Chris And Great. and one who or weigh

consider XXXX, they You fee-based whole is mentioned, you'll in there good fit. a and opportunities if bank arise as and

if remind your that you of on, could kind appropriate if you look and curious itself? for Just expand size geographic us opportunity markets into, target to any the would presented

Chris Martin

it I well. doing a, very, very always doesn't this we Well, go York, New destroy out exposure of scale it's bunch Chris. And I little with expedition. will smaller County, scale or think contiguous. mean because into to some that up not really size, do is we're looking we company, that opportunity. a and really Sussex Orange our meet there. in gives $X.X of know would don't of bit But million more going can the Queens Pennsylvania I value the are contiguous, our an at and mean, It's They Westchester, matter. But out hurdles has would bad. if above look that the part of that a have aren't maybe at And One, be maybe. that we companies company, at them. we look think, especially markets billion, surrounding always And always if into they that you're and I franchise Rockland, And just SB I fact maybe point, don't would things expand say start good a economies is of anything County, the on a which to that culture $XXX be just in us a have

at just sometimes that We have organic look opportunities to could buying businesses. be and versus

we are. bit side, at And On horizon that our clients the we look what a wealth can expand more. definitely also little

looking there, that little pricing that at people of hate that say as bit down opportunity certainly a has gotten are I there that's skewed. but because to institutions by bedded well a has the So, an Florida and opportunity been are lot

Erik Zwick

Great. Thanks all there. for guys questions. appreciate you the I taking color my

Chris Martin

Thank you.

Thomas Lyons

you. Thank

Operator

question The Markets. Please come go Duong will next RBC from Capital ahead. Steven with

Steven Duong

guys. morning, Good

commercial -- in loans the on is and first, on Can going portfolios? the those side. with loan tell you just just Just what commercial mortgage and changes on us the the just sequential

Thomas Lyons

distorted There happened conversion sequential that the unfortunately. that were some place reclassification The Yes. bit from in took is the during little change entries systems November, period.

challenging. bit yields Easier at So it's a the look little to overall.

Steven Duong

it. Got

what Is for range I And guess, I looking back about, is more are that you're a there just general expecting know -- Okay. at generally the guys PPP? you weighted. do you're thinking excluding year?

Chris Martin

that, a us. we high we're competitive for pretty cetera, circumstances on could get just and a pipeline, little of I Steven, from -- beyond and outrageous. think activity. our that if are in a et hyper the lot activity, seeing seeing X%, we be what the people is think From with the unusual X.X% rate, unless Again, we're of good think the marketplace we competition a busy. structure, But and in a healthy growth getting that Yes. robust pricing COVID, the end, could target we there's don't given And and pressures in we terms things between as little X% be see

Steven Duong

geared Got given right your it. thinking are it's be kind now second would the towards of more you And are? really that pipelines half, where even or

Chris Martin

we would pull we I quickly those than the a second half. seeing half better will that can pipeline. are strong venture the loans how be guess But the through first

Steven Duong

All right. one from just me. Got it. one And last then

this, Just where will think -- through towards? once you do gravitate we your eventually reserves get

Thomas Lyons

coverage to activity. high-XX about typical X% low kind guess think would when of range, charge-off what's I just I

life. average Our four-year loan about has a portfolio weighted

life own way, losses taking to at a as points in of XX trying guess I'm simple my charge-offs. basis estimate So, loan normal

last average credit our basis it five points. benign long-term about years. was I XX the Again, environment, think very over

for of is basis more of the gives kind kind with banks composition. than of that So to points kind think the range basis the lower industry point you our XX I boundary. XX But

Steven Duong

Thank right. Got you. color. Appreciate it, the all

Chris Martin

you. Thank

Operator

go The will ahead. with D.A. Davidson. Russell from Please come next question Gunther

Russell Gunther

thoughts guys. a commentary. Within concentrations geographic guys Good morning, outsized shared. the you or expect driving talk that about that you that you on could any the the quick would loan A to contribution? follow-up Appreciate be bit guys growth and that mix target,

Chris Martin

the Sure. we markets. our mean, from geographic tend like I serve, I markets primary to a point concentration, to

In we're terms activity to small the lend from that lot. medical mix, lot owner-occupied office, some and space a a of seeing pre-perspective, seeing of And it's industrial, targeting a retail in the we're and amount multifamily of into.

While we don't basically attract office, red line real any the categories, we're has of to be there.. that a spaces to very enhanced There go component us careful strong our underwriting in to hospitality. to

Thomas Lyons

strong a C&I Still as well. emphasis on

Chris Martin

the Yes. year. very in C&I, as strong emphasis occupied owner And on well a we have XXXX

Russell Gunther

That's there? great. XXXX, comments additional I'm overall could as about particularly insurance businesses the into talk about there. curious you on And you think then fee wealth the your projections front. revenue I appreciate and

Chris Martin

I'm going to take insurance.

go? You

Thomas Lyons

SB really Well, Tony I'd to he ran XX%. year, done last well. yield business it's we at insurance, of definitely had Sure. And increase because an One. the the

is little familiar level. more he So, a this are at than we

Tony? So,

TonyLabozzetta

Yes. I I It with insurance, to it's XX% just mean, could box and check point. much them anecdotal year-over-year always growth. pretty an use -- give XX% the

and What sell to, company is has be to insurance positively going obviously, means that broader products those basically much that now base is year this unusual. the However, services. a

the with good the teams we're a So, activity Provident is we I And side. engage the rest on know the pretty George of lot enthusiastic seeing momentum. as about of

let's historically. than just he has could his for year-over-year, But think of much think faster I better. financial say, can XX% business just grow he do so, he purposes to XX% I projections, but And

Thomas Lyons

to we the market wealth in at levels close year side up $X.X on On record conditions, of But lot billion. obviously. the things, depends AUM did

XX-month rate last fee is or points. basis average our fee rate typical Our XX

just with as same So, those we are to business, to $XX that relationships. as well we and revenue broaden lot to deepen try synergies of A insurance in the are million under transferable we did XXXX. the business achieve hoping for wealth the

positive. are So the expectations pretty

Chris Martin

Agreed.

Russell Gunther

for rate. last there. I And mentioned just That's Could I me you just is apologize follow-up. if that one it. to thoughts expect the I that great, what the you you appreciate item a then Tom, run clarify was? expense the missed wouldn't guys.

Thomas Lyons

losses decrease coming for on to favorable a if But had improve. commitments additional decrease the the the see anything fairly conditions that That's continue of wouldn't with We Again, forecast out credit. that. sheet I provision credit extend that to magnitude. could off-balance significant we expect Sure. see exposure, saw economic credit in to Moody's, we some of so

Russell Gunther

And the magnitude was $X.X million.

Thomas Lyons

million. the broken as item. $X.X separate Yes, It's line P&L a on out

Russell Gunther

Okay, perfect. All right, Thanks much. me. very guys, that's for it

Thomas Lyons

Thanks, Russell.

Chris Martin

you, Thank Russell.

Operator

concludes would conference Martin Chris closing ahead. like Mr. turn over I Please back the to question-and-answer This any remarks. our session. to go for

Chris Martin

franchise benefits Well, as strength about expect for opportunity, please excited we providing SB carefully. Thank And the mask. the monitor are your One benefits subsides. the our path we of positions slowdown accelerate of are landscape back the enter about continue us XXXX, merger we our when And a that rollout of wear time pandemic-related in and tremendous we as and you to we year. confident well. to recovery are to with continue today, our vaccines the economic will near-term, the of increasingly half optimistic see the to the But we

Operator

now conference attending concluded. The has today's for Thank presentation. you

disconnect. now may You

Provident Financial Services (PFS) 29 Jan 212020 Q4 Earnings call transcript