PFS - Earnings call 3 2023 | Provident Financial Services, Inc.

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Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Provident Financial Services, Inc.

Third Quarter 2023 Earnings Conference Call.

[Operator Instructions] Adriano Duarte, Investor Relations Officer.

conference. your begin may You

Adriano Duarte

Executive Thank you, joining Today's thank for and everyone, are Officer, Chief Tom Lyons. Good for our morning, Senior Labozzetta us Tony call. and and President third and President Financial you CEO, Rob. Vice quarter presenters earnings

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

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

to Tony on pleasure my it's his Tony? offer who perspective Now third quarter. introduce Labozzetta, will our

Anthony Labozzetta

Good Financial everyone, call. Thank welcome to morning, Services you, earnings the Provident Adriano. and

pressures. the delivering have responsible many point Provident These challenges underlying to quarter report sector. pleased resilience banking to substantial and conditions agility, results and our interest third The marked inflationary by presented in was that demonstrated commitment its growth. that rising strength to operation that backdrop, Against has of I'm our the persistent rates towards and

economic the management financial which quarter, team. this and the produced the again Provident demonstrates Despite results once strength talented good of environment, difficult franchise

reported of tangible annualized share, $X.XX of on average on return assets As per equity we X.XX% such, return earnings a X.XX%. and an average of

our and $XX.XX equity strong exceeded was X.XX%. well-capitalized and -- charges, on average book quarter was capital per was assets common pre-provision share ratio merger-related core Excluding return at tangible At levels. pretax our was X.XX%. solid end, our value common Tangible

are on uninsured cash share Directors our approximately Board of our quarterly November and $X.X $X.XX Presently, XX% or payable of deposits. of such, XX. As billion total our dividend uncollateralized deposits a per approved

deposits. or is liquidity plus sheet on insured on-balance capacity $X.X Our billion borrowing XXX%

core deposits franchise. component are our Our of valuable a

decreased customers environment. or activities deposits alternatives million During which higher-yielding to attribute business seeking core this $XX X.X%, and normal we our investment average the quarter, in

among is we base. the group was deposit the the and approximately peer XX.X%, of Our is deposit believe cycle data date to our rate reflective best rising which in of quality

of total cost of and total our large interest X.XX%. to X.XX%, our basis increased points compressing part, cost net in basis Consequently, deposits margin funds XX to XX points up drove our

$XXX loans third commercial decreased million new as lending million to during to of quarter. the approximately about quarter. XX% commercial closed team compared Payoffs the trailing Our $XX

quarter, Our continue are maintaining third credit in excellent underwriting lending. the prudent standards, and metrics in be to CRE particularly we

evaluations despite have to As we concentration the performed and part portfolio not of any our meaningful indicated deterioration normal enhanced analysis have evaluate of our pre-monitoring loan segments wider processes, in-depth portfolio risk. market. These targeted in level difficulties

credit remaining of below third decreased line average of the XX%. XX%, X.X% to Our quarter approximately in historical our percentage utilization

improved of grew our credit $XXX for production or As loans the quarter. X.XX% the line offset million a commercial and by decreased utilization, of reduced a result prepayments, approximately

quarter closing, pending strong loans gross XX our adjusted increased For commercial the pipeline approximately billion, projected an X pipeline of to is the is rate during $XXX rate third at months, pipeline our X.X%, approximately in loan points The billion. grew about at pipeline, pacing annualized The remained we pull-through million pull-through and $X.X X.X%. was the X.XX%. which or $X.X including and good growth basis

of We our are the and strength by quality encouraged pipeline.

remainder In lending of commercial result, addition, targets slowed achieve payoffs growth have our a to as expect we and XXXX. the for

performed fee-based business well. Our has

in the investment XX.X% stable strong volatile. market, was year. compared which despite had Protection income management, insurance quarter a in revenue applicable due and Beacon part to growth Beacon's the market operating XX.X% quarter third markets XX% continue Trust a remained financial Plus benchmarks. Provident increase the Fee compares Despite remain in which organic to conditions in same in as to profit favorably increase assets in a conditions. as expectations last with reduction an line the hardening in resulted to under performance with performed

announced merger final The all of we our outstanding initiatives significant banks. now to Bancorp, team requested, the companies our we With with are in integration information respect merger. Lakeland approval regulators previously and have the works through from have and await continuing various engagement made progress complied with with both

While regulatory progress companies with within for our our continues not approval await merger is to Lakeland eagerly both preparations approval. control, as

As on the our focused growing strengthening fundamentals forward, and business. we we remain of look

is our to responsible during However, and times. being disciplined principles challenging these critical risk remaining committed management

While all will expect and believe near to stakeholders. close the Lakeland future, value the in we await which we our approval, for of for create Bank we regulatory integrate merger with

Now I'll turn Tom? comments the performance. financial our on call his over to Tom for

Thomas M. Lyons

morning, everyone. Good

As Tony $X.XX per the million approximately to share third million the $X.XX related quarter pending for trailing totaled noted, and or current or or trailing share $XX.X our charges per the $XX for of Transaction with share $X.XX million was quarter $XX.X quarter the compared for $X.XX per $X.X net or in million and share Lakeland quarter. the per our XXXX. $X quarter merger million in with Bancorp income

the average $XXX charges, were XXXX the quarter note, for of property. million year of or Revenue third on earnings gain trailing the $XXX an an $XX.X for quarter with quarter compared assets. million quarter current the foreclosed merger-related million million annualized totaled for these pre-provision Excluding million Please earnings of $XXX pretax the third and quarter included for X.XX% $X.X sale prior the XXXX. for of

favorably the reflected higher offset in an funding a was current which Our basis conditions, on XX interest-bearing X.XX%. quarter loan funding earning points Increased than market by adjustable margin improved trailing asset costs. from and market assets increase XX more basis resulted however, costs new The quarter net in by loans improvement increase accompanied borrowings as to in reflected floating deposits. yields, versus yield by a points rates. originations interest trailing decreased repriced an in and rate in This decrease

deposit Certain increased noninterest-bearing balances insured order moved cash interest-bearing insurance. also to in to our product obtain sweep

XX.X%. of basis points quarter beta balance and cycle to trailing deposits. average the savings demand to costing deposits lower total time XX has costing to our X.XX%. higher addition, rate rising increased shifted to in This brought In cost date The

basis of yield liabilities cost in alternatives funding points the ongoing increased X.XX%. of impact XX quarter to interest-bearing average prolonged the continue trailing increase to curve, an total attractiveness costs. The and deposit investment inverted competition The in

As stabilize a some multifamily loan to see around Period-end grew expect result, currently we balance driven loans margin originations. million continued QX total interest the the by and mortgage will $XXX net X.XX%. at XXXX of for margin compression project in

adjusted of portfolio of pull-through loan to yield $X.X from last weighted a million versus pipeline our $XX billion, X.XX% current rate Our quarter average increased with X.XX%.

our bringing a to year-to-date $X.X impacted current were -- to of basis weakened CECL percentage a low within early both loans strategic delinquencies by this basis loans net nonperforming points falling and annualized loans provision with charge-offs and and charge-offs at single a to quarter driven due primary quality C&I to million still average model. classified implemented points points. customer. a million, to on $X.X this did XX business was Asset economic loans. sorry of basis quarter The XX total of remains total by loan quarter strong million were $XX for an primarily as stage total X.X% slightly Net The Criticized loans loss quarter shift or increase but for forecast X loans improving. increased the losses by a credit

of loans points losses credit September XX from June decreasing loans the on to total increased only basis result, income a XXX allowance at As XX. trailing XX remained at $XX,XXX versus for Noninterest the steady, points basis quarter.

in XXXX of quarter was noninterest compared trailing the with XX.XX% XXXX. consistent of expense assets quarter to with current average credit quarter on quarter XX.XX% the extend merger-related Excluding credit with of quarter representing trailing compared efficiency and commitments third ratio provisions of quarter XX.XX% the trailing in charges, and losses million, annualized X.XX% for the was third and for the X.X% at X.XX% for quarter XXXX. for third for $XX.X an the The the

Our effective to decrease projected income. tax as result XX.X% rate a taxable this in of a quarter declined

remarks. expect our of effective rate quarter That approximately tax the concludes XX.X%. fourth We prepared

We'd be to happy to questions. respond

Operator

Sandler. Mark first Fitzgibbon question from Instructions] Piper [Operator the from line today comes of Your

Mark Fitzgibbon

Happy the think it to said expect around ] [ clarify you X.XX% margin, on Friday. to stabilize in quarter. fourth Tom, just I you the

bottomed? at the have think you that point, do margin will So .

Thomas M. Lyons

what model stable over at months, ] the pretty It next the is around stays level course XX the showing. [ X.XX% of That's Mark. our

Mark Fitzgibbon

triggering And of goodwill testing then you explain about event secondly, you would goodwill consideration mentioned test?. impairment Can impairment. an bit events in interim the sort and press be, the a would would release a cause what little triggering be that what for exactly

Thomas M. Lyons

lot a to group. the think Mark, relative performance of I the is it,

company. to but and is or very you multiples, that of a impairment If permanent multiples book indicate word, kind price of would tangible the valuation the to price near-term see impairment permanent -- any stronger materially

Mark Fitzgibbon

that you're of there obvious paying nature? you're or areas loans, guys aside I a about. you of quarter watching that that areas sequential I is pairing to sort carefully of which credit, from guess Any great. office loans or things that on in decline attention then And that one everybody particular curious, banks the any few Provident the exposures are showed were was talks

Anthony Labozzetta

in X -- the doing We've dives spent we're Tony. all I that present it's categories. could Mark, there's of right any to now that would any X deep not part I that state done months us. comfortably concern seeing better to segments probably say we've

with in that comfortable any pressure. of show don't we our have we that of we're results in a classified this are fact, familiar with way the at I segments. exposure the In the office systemic you're but noted, there's as assets lot Obviously, time. mean, no

know concern take to observing portfolio. place, do caveat. have not a don't that always now put sectors within we We that any what recessions. what I the But bankruptcies to point things if our right have don't Obviously, We of know we're nature.

Thomas M. Lyons

one loan The and formation was only this I'm it's technical really issue. $X.X million nonperforming quarter the asset small. maturity content, I'd Mark, million offer, there's attributable a about confident thing no $X It's loss is to it's very additional very and that that

Mark Fitzgibbon

insurance last at whether share then of banks their other on Tony, if like possibility seen your fairly not. doing recently probably could I question. And wondered have you or sold that would that, gains. thoughts the us make it something large businesses you've agency sense with several

Anthony Labozzetta

links of Well, annual an at add all integral largest value at we that provides of our the that business it our growing to rate time, insurance, consideration, our the commercial one it way the growth, look comes such of it's say when to segments. with an of in I it's this probably frequency. businesses our with part customers our it's and it not platform, our would

So a percentage the a it the transaction, know, be to those spoken of the a we've combination the rate it to noninterest experience into as takeaway client income. By past, objective will total from as net of I I financial in growth and as of turn our things, think way, increase our just think noninterest our percentage in is many revenue. income the it of

So that piece now. has taught right not is sale business us of for an that important considered

Thomas M. Lyons

business to I us, think pretty for is the of the some sales seen. Mark, strong profitability compared that that I've on

I think of get net margin we XX%. a about

So further. to that's really invest in to want grow we and business continue a

Anthony Labozzetta

prospects. high-growth With

Operator

comes question Bill the Markets. RBC from of next Our line from Young Capital

Bill Young

quickly year-end. If think correctly, the for recall be might I might Just -- Lakeland original I on around the deal. deal the deadline be

any extending Lakeland been discussions that merger there has So deadline? possibly about with

Anthony Labozzetta

and is but are have to I with go everything in we're point, we're consideration. need is at merger, we yes, provided points mind, decision. we've everybody's we an we we the mentioned have their to that where as decision. that them there hoping your hope we be question the their answer in for The to is, in this have for which to relative finalize that's that. talking regulators to we December my yes, But are to state on And waiting don't because know final it, under And talking don't about consider I

Bill Young

speak just Understood. recent It's seeing growth to Can on growth. quarters. to you're trends for touch in source a been loan you in good multifamily. just of you And the

of of spreads How sense for any that kind are Just you're putting business? . yields that? attractive the what up on

Anthony Labozzetta

us here. let look Relative --

would I I over probably ] $XXX to to to now. [ in that back on what's still mind to That's the coming you get think on that. have spreads. we're right million

Thomas M. Lyons

At ] range least million $XXX [ sense, right? $XXX to million

Anthony Labozzetta

does just insight correct. That's a lending. things of bit how little will more I tell thinking one give about that But you of the into we're kind

the but favor. acute we're of it's deposit high in always oriented been today at transactions it's -- as and dollars bit Our this, dollars. elements are it that insurance more relational capital components not A other is where the lot business become little availability a those components, of looking more model,

put we the million the say, ] at total when between is would say, run -- there in the else we looking million general, that that with [ guess. and So good But a profitability goes in we're would spread , is, I model it. deposits we think again, and $XXX I in I drop everything $XXX pretty

Bill Young

a more Do next year, of of incentive the maybe lastly, too aggressive bankers a And in core kind right on see of of the touch funding. perspective, a changes to structures do I wholesale guess to deposit maybe it priority? in being to any for for grow as for on interested see activity need you from kind to budgeting know you bit price you've on little kind the need into make deposits gathering? on you Understood. and any I sense kind make in change you're now sources of not past, to terms but just said look or make you of core particularly lean in promotional kind

Anthony Labozzetta

Well, that which number a right, of direction terms still things thinking. of our I we're as still defensive -- how it characterize is today, in is all nature, paying. a of in viewing you would think funding it's general as touched within But and on I we're

look amongst and our X.XX% of our group. in total funds of at of best cost at at the deposits our X.XX%. It's peer If you cost some

very value. that So cognizant damage we're to not

why versus now that's having disintermediated aggressive that. being we maintain approach cost defensive That incremental right to of said, trying and in the damaging use and and terms being deposits

that still into do we're year think new campaigns the we're not that. we yes, have have is, to we we the And some That way targeted grow being approaching business. our said, that going to

the of platform we be the a going go going commercial targeted focus and 'XX, is one sector and have of We compensating and in producing balances C&I some is with results. on some doing loans we're now, us business our But that that as which some big some decent to small into also for of things that we on have.

push because a insurance group, plan the say wealth as face the move we driver #X mean, challenge massive there's our group, commercial we everybody's these Now when our retail into I deposits. the organization that's entire all I the greatest organization, entire XXXX in that our on from we from bank, days. That's incentive from know

Operator

from Your [Operator Instructions] question comes of Perito next KBW. from line the Michael

Michael Perito

. from our guess, perspective, stabilizing about? we of NIM the a board. color incremental across what of And are feel able apologize today? to be you clients guys I I'm thinking you receptive new for the guess Tony, I where commercial appetite missed future I loan do if originating but guys here. you're I just this, broadly, raises, loans like guys you the kind both the give what's on I growth sure putting more to little on of mean, merger intermediate the are in kind your with And in kind the that sides pricing growth kind of pending, just loan of should

Anthony Labozzetta

target Mike, a say be that can If given seeing. our at and modeling. environment. you that X% good grow characterize X% very today, all in we're volume activity to thinking, a for untethered I would it's the about loans probably I interesting your our consider would we would XX%, to we

Relational -- we're acute. However, banking amount for underwriting tightened. construction more put that has The to out of our commitments metrics there willing tightened. we're become have has

filler the transactional So that might a not have bold in volume been today. is past

relationships have we're focus company focusing to our in have the loans past said, it that's some But on we a lending our things been that of calories approaching we're think appetite, your looking a And declined from from calculating And some at to acceptable because and I more how important. if holistic deposits. that the the today, So might X% perspective our way the we're just it today. given when to the X% answer question, it, that approach. we're that's is being

Michael Perito

any where are do guys the already, you provided -- then are it of color And I yields loan it on commercial again, guys the any getting if incremental have on but today? just you that books sorry if you it. Got missed and kind

Thomas M. Lyons

Last sorry, quarter, average average about X.XX%. rate I'm loan quarter last -- the I the is think

X.XX%. I think we're seeing like more like

Anthony Labozzetta

you the little to reality. to bit then have down of is bring a pipeline, X.XX% kind but that

to is would say I good So range. probably X.XX% a X% target

Michael Perito

have the investment on specific, whether like kind on then I if update appreciate will expense you the of looks we what there of just of guys kind I'm should the people we we update map the of are it's -- should an I goes And kind any just sure transaction to post-merger just can as wondering too the forward, technology give of kind that If maybe mean, don't merger. And how you be of kind just close, think . but we growth post assume that get if Provident? us mindful the or for about side? areas road you be we

Anthony Labozzetta

billion, I commercial now. expectation to already synergies on for component we more a a would to for in works future planning steps I platform probably that's I we'll I even the able be for as new the see that's $XX synergies. don't is greatest size. get on a to on going that. post-merger That's billion, investment deliver which going and manage be going be But and start, us, lot to expense and on our we're a the is largely that bank forward, move higher data. us as next $XX the that into huge our those technology in investment, say Provident don't get is monumental, anything think would say going But growth, to for

in some it, in As declines we areas. areas. other some There's there's be characterize going rises some to

we the at it so allocate more spend incremental will we the So spend look than internally. the way how is

Operator

of Davidson. the comes line from next Navas Your from Manuel question D.A.

Manuel Navas

In XXXX. NIM, on rates deposit the model your you and across betas roughly . commentary assume of terms in to What stable do is said of the stability? kind you that pointing with

Thomas M. Lyons

decreases XXX-point if the half September, I in later there's and for part. remember of think there, I July Yes, back in 'XX correct,

Manuel Navas

You increases? said

Thomas M. Lyons

any modeling more rate decreases not We're the of X Decreases. 'XX. in hikes, half back

Manuel Navas

deposit at still total XX% range? betas . And like

Thomas M. Lyons

Yes.

maybe we expectation, XX% this the little is lag were is I to little think, what a I given that fair, projecting expectation more cycle, will performance behind through quarter. a bit think the XX% the the we bumped bit like

Manuel Navas

about little focus You deposit of there and trend at the loan-to-deposit this Or talked about bit kind a Should going is kind at forward? comfort of peak be the the of of company. the kind of the Just initiatives this ratio and talk loan-to-deposit its ratio level? XXX%?

Thomas M. Lyons

level the bank. faster comfortable this the overall given We're at of liquidity

We deposits funding throughout of on a just the assets we a you of have result low stimulus. of Overall, time on the the a saw us more when average to pre-pandemic, as back reliance point. assets, base earning industry in back of reliance in this percentage funding traditional the go the percentage surge is if terms at getting wholesale really deposits

not mentioned, are we comfortable is obviously, funding, have we the always grow and the preferred. but Tony lower to And alternative commercial as deposit with So base. cost try wholesale significant plans

Manuel Navas

do the any have one that net charge-offs. commercial just loan on you And drove color extra

you it could just think very briefly, I described anything you've there? add but

Thomas M. Lyons

to customer and just read which a border that made fairly need that across that could was it My There stream, you revenue a recover shifts had heavy in intention I that there think portfolio. show strategic to Nothing much the services, impacted some was reliance primary very circumstances it on unique the challenging from. was for to their to borrower. was

on we right took current the based performance, path. So

Operator

from the Young Capital Markets. follow-up a from RBC have We of Billy question line

Bill Young

-- the I for missed Just where and sense Do might this. in follow-up, . one you your have fourth quick trend quarter? if what's expenses apologies

Thomas M. Lyons

in million to $XX Think million $XX Bill. range, the

Operator

no are the this there closing further I back And you Labozzetta. some Tony at for call over questions time. Mr. turn to remarks.

Anthony Labozzetta

day. with for on back and everyone, throughout you, call nice getting chatting quarter. look Thank forward We you the this Have our quarter next attending Thank a time. you. to

Operator

concludes This your participation. you for Thank call. today's conference

may You now disconnect.

Provident Financial Services (PFS) 27 Oct 232023 Q3 Earnings call transcript