PFS - Earnings call transcript Q2 2024 | Provident Financial Services, Inc.

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Operator

Thank you for standing by. At this time, I would like to welcome everyone to the Provident Financial Services, Inc.

Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Adriano Duarte, Head of Investor Relations. Adriano, please go ahead.

Adriano Duarte

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

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

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

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

Anthony Labozzetta

morning, and Earnings Good Adriano. you, Financial Provident to Services Thank everyone, welcome the Call.

Before XXth welcome team have into we the to the of happy May, congratulate am Provident. We'd we merger. complete the Lakeland like Provident-Lakeland quarterly thank who discuss officially members, results, to our closed team I and worked of note that and to as the diligently our merger,

banks our we base, and management offer insurance, and to our our are wealth our treasury the those opportunities we cultures, valuable of services, products expanded businesses. our As especially combine and excited customer management to access by

We bear statements for and mind September. build in systems our well Please costs related on onetime continue include transaction. is combined prepared integration momentum, merger and our financial results reflect this to XX, quarter that beginning in team May the to

results. Moving on our quarterly to

maintain we by quality. build efforts mixed by former was core economic continued rates continue Bank, of growth, characterized reinforced team, quarter steady the credit Thanks and Provident our now from in talented results of The banking to the businesses to an the second environment Lakeland strong high interest members sector. and the

for track well our and we on savings, positioned cost projected are merger future. achieve are to the We

pretax earnings the reported a expenses, transaction of our merger-related to diluted reflecting strong, the quarter. If impact average was net our trailing million share As see quarter pre-provision share, X.XX% underlying assets exclude performance second for for have expected, we for loss these as were per would $X.XX that the quarter. We X.XX% can $X.XX costs. $XX.X the per return or been of remains on we to compared

conditions quarter and end, subordinated to is and projected of the the our year a our our be $XXX the the growth healthy in of well first expect levels second strong, exceeded especially capital notes we fundamentals to growth, which X, year. At in market deemed on issuance remain achieve half While for constrained capitalized, the half of May well subscribed. million was following loan

tangible we a Tier committed a of we X risk-based X.X% quarter of end, ratio with exceeded of ratio capital ratio requirements, XX.XX%. part X capital of maintain to equity X.XX%. our and share X.XX% XX.XX%. Tangible was these the common At per $XX.XX risk-based minimum a and value have merger, a was leverage of and ratio book As of Tier minimum total ratio leverage total

Board our XX. of such, quarterly of share, Directors cash As approved on August $X.XX dividend payable per a

at the of relatively During our X.XX%. low remained total quarter, deposits cost

Overall, our In margin Our net to was impacted was increased full interest debt, our of points X.XX%. month combined net a issuance subordinated further cost interest the total X.XX%, X.XX%. our exceeded which was margin first our funds, as basis XX expectations. which company, by of our

X.X% optimistic quarter. are to it we forward, and between and interest be Moving upcoming our expect in about margin, the stability improvement and to the net X.XX%

business. C&I commercial closed note, of $XXX team during new part of Of new loans second our million approximately lending commercial quarter. of originations were lending these Our XX% the

ratio XXX%. estate ratio total commercial end will approximately the Our XXX%. of project the We was of loans that capital this to real by year, be

standards. We lending second improved loans to $X on second of would again, quarter see that pipeline, very adjusted regarding the interest compared activity in loans loans our basis portfolio to conservative for during optimistic the underwriting like ratio the by points. of in The The approximately weighted $X.XX nonperforming Once quarter. remain only the billion. XX commercial of closing, rate X.XX% quality strong as losses increased allowance combined trailing end total I the quarter reflect compared our in was and which at express culture evidenced X.XX% to We metrics our The including trailing billion. for pending is X.XX% the strong credit quality pipeline, credit our quality to and is pipeline. X.XX% 'XX. of management average approximately pull-through Our quarter represents the loan X% credit

year, fee-based Despite insurance commercial XX% of Protection retention insurance market, to which compared with as great Plus quarter, organic second assets at same XXX%. Favorable growth the performed which billion quarter. improved Our to X.X% persistence compared end $X.X year management very rate income a of conditions a market over last quarter quarter rates higher, Provident grow driven fee hard the Beacon same the to as last helped about Trust a to $X.X and billion quarter the under trailing businesses in well. has had compared

first of to for $XXX new produced same million X Beacon months compared the the XXXX, period last business For in $XXX year. million

of by growth expanded customer are pleased our We are and fee-based enthusiastic of from success about prospects base. businesses enhanced the the our

our preeminent into previously all move market. of will be on mentioned, the aspects our and of bank smoothly completing community second integrating merger, the as becoming in we our system XXXX, half As attention the

and customers, synergies achieve employees value stockholders. more and even to to deliver our expect We

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

Thomas M. Lyons

Thank everyone. you, morning, good Tony, and

million Total or non-PCD share Lakeland Bancorp commitments related merger acquired also somewhat the Lakeland and provision quarter of our million models on loans from asset for million, loan with As current Tony per $XX.X for strong to charges the was merger-related million was were stable loans losses development bank, a sale in $XX.X noted, the organic we $XX.X million $X.X credit provisions loss due resulted extend to segments. loss despite costs consisting quantitative $X.X to debt a of the at to for forecast. which on initial the in to for of and quarter, million remaining CECL all credit quarter commitments activity. subordinated This elevated of factors reported transaction realized investment a portfolio loss merger. The new provision Provident's $X.XX to due prior $XX.X for net economic losses and for extend in the loan credit quality on increase projected the combined of in changes and the of

ranges coverage X% total ratio our connection of the of the new In models. recalibrated bank addition, qualitative adjustment brought allowance to with were in This development merged loans.

our an quarter interest Revenue assets. million million combined XX earnings of or quarter, pre-provision to average margin merger-related net reflecting current days annualized Excluding to X.XX% X.XX%. were charges, $XX.X company, pretax the increased $XXX.X increased a the for as and for

remainder the X.XX% For the included the range in for basis to X.XX% over NIM XXXX, quarter, the XXXX. around points XX of margin the of X.XX% the to accounting increasing project purchase We of accretion. course

X include X reductions XXXX. projections in and XXXX cuts rate rate another in Our

Regarding combined balance remains risk, largely interest our rate neutral. sheet newly

X% completed However, we raise first issuance expect the the quarter, which funding little costs. successful million cuts. We benefit increased $XXX the on of through deposit debt the in subordinated of costs X capital regulatory from rate

acquired Lakeland deposits. offset and partially was securities a margin by amount repayment of of of overnight the the $XXX and brokered the to impact similar the from sale million of However, borrowings

flat the for acquired billion $X.XX quarter. period-end of essentially loans total were the loans, Excluding

increased million CRE million. $XX decreased Within the portfolio, and $XX C&I loans loans by by

$X.XX Our at including to X.X% a at yield billion, XX, end weighted pull-through Lakeland. billion June billion quarter was of portfolio average increased adjusted of our loan from pipeline $XX.X $X rate current with versus X.XX%. Deposits acquired

which deposits, to loan-to-deposit sales, Excluding the XXX%. and the decreased paid the organic that with of are and our $XXX municipal subject deposits broker proceeds cyclical increased million were for to down deposits ratio outflows security quarter,

loans by loans or $X.X and loans remained loan loans. points total strong, did economic annualized of primarily at average strong low quality the basis loans remains nonperforming basis we total declining quality be quarter. loans. driven at ratio points and charge-offs XX and declining and asset growth, of basis to increase to provisions with just modestly, but Criticized expect With approximately stable future a Net were X.X% an outlook, coverage of remain just to relatively total Asset this delinquencies X%. to XX expect points classified million of X

on loss this to quarter, subsidiaries the the increase an and sales, BOLI noninterest combination, our $XX million Lakeland from performance security wealth in income insurance agency strong income. Excluding reflecting increased and management

$XXX As track for million project our Tony $XXX approximately are and QX, in to XXXX, conversion. core cost noted, on we achieve targeted systems saves following approximately Day our Labor noninterest to QX declining of of merger million expenses

effective tax X.X% of XXXX and assets. was this of unusual for Our quarter to remainder the tax the by Jersey imposition charges, approximately impacted effective revaluation merger-related XX.X%. project New items, the We currently our including tax be deferred a fee surcharge transit several related of rate rate

performance, charges of financial remain we deal merger XXXX meet or $XX projected of and on to cost saves combined announcement. million exceed projected from XX%, targeted unchanged track total Regarding our

be of Our the deposits. We including XX%. That municipal a an of million, of an With X.XX% of facing respond of currently $XXX interest to happy of fully prepared of project totaled on intangible net XX excluding estimate to to concludes approximately on operating approximately X.XX% points interest XXXX X.XX% we accounting purchase and remarks. approximately for ratio basis core deposits, XXXX, tangible cost and our acquisition expense X.X% and accretion. X.XX% average approximately assets with core We'd approximately saves, return our [indiscernible] ratio XX%, deposit return equity net full was questions. margin approximately year approximately efficiency

Operator

it Piper from And from question first Mark Instructions] Sandler. line looks comes today [Operator of like Fitzgibbon our the

Mark Fitzgibbon

deal. the on Congratulations

million end -- if synergies. third million this timing wondered you all little you a cost quarter. of I detail, $XX cost could be of or on year? synergies in, about Will First, fourth see from the $XX got yes, a the do think Tom, the by us give you to the I difference more

Thomas M. Lyons

We do.

Mark Fitzgibbon

then And see with Lakeland? on surprises And any you potential Great. deal? in early synergies there are of the areas revenue do sort Okay. what

Anthony Labozzetta

Areas our management obviously, customer between which that in functions Lakeland revenue, the that business base, more but we Lakeland notes, overlaid within to not only wealth, broader. the insurance, enhance activity to mentioned more get integrated I things ABL try are are treasury has, my see more our

I roughly think -- back try achieve are revenue to some we that could XX% bearing. on the to also -- that all changing get can of And to those that noninterest of funding mix we enhancements. elements

those to business. are I going to our grow we're do, activities think as looking as be well normal that

Mark Fitzgibbon

all there's of some you maybe to that if Okay. Great. reduce of And office or more? guess CRE concentration Lakeland's was I I sort to marked loans, any loans try to CRE plan curious since sell

Anthony Labozzetta

levels to plan will merger ratio come because CRE are Mark, assets satisfactory down for our and not this as it will the mark, I to get accrete ratio, sell off active think naturally that at the time, an there's we more us. for CRE

think question, the we're I is what good which doing, from segue a book. actively think, managing I we're your is

was this say managed loans. $XXX-plus the And -- have because you the loan there, flat I quarter there's didn't out so characteristics fact want year, where of would if been the growth that year, very they see bit for little that we a also roughly some why had management to in those loans a this of million politely some renew

take active the call, very an require says say, on that purpose it's would concentrations that have or book, to the our any for to concentrations we in high reduce but would there's super comfortable that. sell no So we action that you to everyone subsector. us further individual nothing we're because management, I subsegment office of some have when there's actually

Thomas M. Lyons

mean So on standards very our comfortable we're that, rest. I to underwriting lending with the practices, follow CRE up and

being in those growth ratio does CRE projections we for down of in have it a still the managed a the approximately that level, X% year. consider lower CRE to portfolio So

Anthony Labozzetta

said. Well

Mark Fitzgibbon

you wondered Okay. and buybacks? if some next you target And mind point, capital at a share how year, lastly, us maybe about how could ratio with feel think then I you had in if it's stock early you maybe

Thomas M. Lyons

XX.XX%. ratio a to and nonstandard of risk-based conditions of X to capital total in leverage X.X% The keep the bank level the us Tier merger a excess at required mark ratio

those now of above so slightly be targets kind limits. trigger The in in will goalpost of event that terms obviously as those the warnings use we have threshold So approach for levels. we appropriate that that

Anthony Labozzetta

That's well said. Yes.

think would the little a with buffer You on that upside.

Thomas M. Lyons

Yes.

based kind buyback strong. expectations on play the into would Mark, that, of our just formation capital of thoughts So are around kind

broad-based that's plans said, ratio coming consider current CRE why environment. see no opportunistically, to Tony the something naturally, the As but down we in

Operator

And line Tim our next from KBW. Switzer question of comes from the

Timothy Switzer

any upside impact very changes drive all slower to then some guidance guys enter here, the appreciate the or economic We that discuss of maybe can how some your environment, you forward earnings? cycle you areas could if that helpful. potentially And provided, little the downside? if we of Could bit a macro

Anthony Labozzetta

the of a portfolio, our from objectives modeling. the penetration in business think and loans, can in start growth and it things upside I for drive would does environment I'll then it us I good But a Lakeland year growth insurance it -- insurance of with space. rest will side, jump legacy complementary the Beacon well be the what on the as that the source. Penetrating the upside of some rate good let funding Tom from super has our business really and meeting revenue give some and as some growth to into impact our obviously for in for a

some me growth. for I for gives think treasury of management balances because us it that from -- the a required big thing is

to So ABL obviously, of SBA business. a didn't little do I on going in try I well surprise enhance to and the that a be And mention, terms the deeper what think as could our side... we're rate but things as

Thomas M. Lyons

Yes.

be as far probably assumes that I I going move to rates down. As go, the correctly think everybody next is mean,

point. balance about, enhancement of sheet that at we do XX first getting neutral benefit from beyond the tremendous see talked the us margin some see we don't the quite points but We As basis is cuts, level. to rate this

course activity In We growth. to business matter terms even efficiencies. slower, We'd of at that overall that closely would more as impede a look of do have being obviously, anyway.

Anthony Labozzetta

some of benefit CDs us we give a those, bit off and can a as the mix could some of at And well. is our look around what run funding strategy pricing that Exactly. little as

going expectations. number of one factors be not that's There's going to it's So our to item. be overachieving one not management play a into bullet that silver us

Timothy Switzer

some now what has able and the that them deal both That been the customers has to response of about? guys overall? side, been services and have Okay. was products been are closed to able helpful. that Great. offer you're And they've excited the the there new any consumer on And you talk commercial or to more

Anthony Labozzetta

indication Early negative. a anything heard level, macro I on haven't

of So a has response. been most positive it

things, side, if our the from we to the John XX to Some roughly have, commercial -- banking referrals our we when at you wealth of the XX insurance roughly a at -- quoting Chief who's commercial into date, few already bank Rath the look I'm have Officer, XX the and correctly, already referrals group. Lending into group,

trying as activity customer treasury now that products we're the up, and has big So play side, the a they're picked SBA. sound on gathering only for had those from as to management which that into the function. the base business deposit are relationships Small deepen not expressed as a the to that, Lakeland expanding on, obviously them factor, will to new enhancements. And available well Lakeland but the platform

the business. going a for merger, And as think is excitement in delay experience, as malaise think deliver to the the there, done we're great generally, internally and we I the exciting Customers long I externally. it's with be So are of now us. and talking

Operator

next line of Markets. And Capital comes with Young question from our Billy the RBC

Bill Young

just the want thanks on It's deck I this echo the helpful. and First, outlook morning. extremely to

core to follow trajectory kind the your the from thread the thoughts of on moving just question, Just expand of a forward. kind previous to margin maybe of on

for -- the kind big kind to up below tracking funding repricing core opportunity for margin stabilizes an CD we're to today? Does opportunity of you've still back but loan be kind the expansion? do X.XX%. a of hold improving mix, kind see of that mentioned you that as and to the in book think the you little past, of I said at And X.XX% a

Thomas M. Lyons

guess bit core to X.XX% to a the was reset Provident X.XX% the expectation I have I stand-alone because little legacy bank.

If March, margin was back Lakeland's you versus X.XX% in remember, Provident's X.XX%.

basis, blended prepurchase in, the works on has a margin ]. accounting come So core [

purchase year of about range that if in accounting view adjustments we through X.XX% piece quarter. the it X.XX% where to X.XX%, get of So over -- to of this XX through the about say That's you XXXX. that rest I'd would way, basis course points core to next X.XX% the XX a be

Bill Young

Got helpful. end of And basis Is from it. that points accretion. through all accretion here scheduled XX of the That's that's correct? the XXXX,

Thomas M. Lyons

Yes, I yields. lot level mean, a it's of

move could cash our a the with but little expectation. bit it that's So flows,

Bill Young

Understood.

Can mentioned flows? typically this Just When moving quarter. you in? to of kind flows just a on those separate -- back of impact flow had this of [indiscernible] you the topic. muni deposit timing us Can you does reported remind

Thomas M. Lyons

goes tax It the with real Yes. revenue estate largely.

beginning So it, fund with or when valuation considered we short-term of typical we're funding. to part that It's funding the consider all back profitability That's as the to starting price weekly August. money come relationship. the overnight have see of the we the in we the trough of of

Anthony Labozzetta

right We're of they'll seeing start into the now, and that August. Yes. beginning flow inflow

Bill Young

my Kind of of of Great. I Can -- just feeling kind a activity to see weeks? what kind similar the see X% how they sentiment? back maybe of about? you're have the materially kind they Or seems It on year. that lot moving more of And are just you back comment half in then feeling, kind seeing your a X% of you up kind are last of half? customer recent about of the in they're of growth question, sentiment commented how in just broadly, and concerned kind peers

Anthony Labozzetta

pull-through mentioned, in -- colleagues getting same I of as was we pipeline We're that pipeline. is CRE we an it's down, is of of -- excuse, the overhang reduction active folks were done, the $X growth are into out distracted, of think, getting our management seeing side lot making sure understanding things the A a about some As had the But are certainly, an seeing that obviously, -- I the folks it right? the we have an our that portfolio lot -- marketplace. industry. of, billion. our Well, because was we're the and in us, CRE contained by not application merger some

expect we distractions, in I get team, of from mentioned. But the X% have So for of first in our let if the make can and some certainly did through activity to the achieve on we And with the up X%-ish going what can half as took we're those we pipeline to which to the X% conversations work, pulled I the the strong. quality lot but we we of some runoff, year, X% remains our enhanced pipeline. not what's and a these things of of

So some the us amount getting run that achieve It's can not second growth. There quarter. just it in I'm we that right the that. the half of expecting X% a possibility the of that volume to half first to the available closed is But year. the teams into in year. a of of the that is expecting can get this now, we're second of matter

Operator

And line our comes Navas the of question from from today final Manuel D.A. Davidson.

Sharanjit Cheema

for on the across talent Sharanjit I look like current was the is combined Manuel. retention wondering, is This what company?

Thomas M. Lyons

retention? Talent

Anthony Labozzetta

question. Great

the across exceptional. I the think company is retention talent

hasn't surprises. -- any we there think been I major

byproduct that, fusing together here. there have nicely. to the cultures well And is very or and characterize for enjoy people I working environment management that one-offs this being something. But and would going are people are toxic. or way the that's -- always senior You're what teams executive an advancing teams the I their of career, as moving is no subterfuge And collaboratively, a

or more high. attraction talent really is And I retention robust. of our pretty not rates more as think importantly, our importantly, importantly, are new continued

ability and the really and So I -- strong attract retain I'm feeling our talent. about would to culture

Operator

And session. our concludes Q&A that

to Labozzetta call I is would Tony Tony, to comments. turn over floor for with closing yours. that, the So like the back

Anthony Labozzetta

call. you you. Have look questions Thank you, and the a joining for to time. summer. speaking next for We your all your forward again great weekend enjoy everyone, to and Thank

Operator

may gentlemen, and that now you ladies all you Thank today's call. And concludes joining, for and disconnect.

Provident Financial Services (PFS) 26 Jul 242024 Q2 Earnings call transcript