• Net Earnings: $48.5 million or $0.37 per share.
• Adjusted Return on Average Assets: 1.05%.
• Adjusted Return on Average Tangible Equity: 15.39%.
• Revenue: $205.9 million for the quarter.
• Core Net Interest Margin: Increased four basis points to 2.85%.
• Reported Net Interest Margin: 3.28% for the fourth quarter.
• Deposit Growth: $248 million or 5.4% annualized.
• Average Cost of Total Deposits: Decreased 11 basis points to 2.25%.
• Commercial Loans Closed: Approximately $713 million.
• Nonperforming Loan Ratio: Decreased 8 basis points to 39 basis points.
• Net Charge Offs: Decreased to $5.5 million from $6.8 million.
• Provision for Loan Losses: Decreased to $7.8 million.
• Noninterest Income: Decreased to $24 million.
• Noninterest Expenses: $114 million excluding merger-related charges.
• Efficiency Ratio: Improved to 55.4% for the quarter.
• Effective Tax Rate: Fell to 22.6% for the quarter.

• Warning! GuruFocus has detected 8 Warning Signs with PFS.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Provident Financial Services Inc (NYSE:PFS) reported net earnings of $48.5 million or $0.37 per share, with strong core performance and profitability.
• The company experienced a 5.4% annualized growth in deposits, with a decrease in the average cost of total deposits by 11 basis points to 2.25%.
• Provident Financial Services Inc (NYSE:PFS) maintained excellent asset quality, with a decrease in the nonperforming loan ratio by 8 basis points to 39 basis points.
• The company's fee-based businesses showed significant growth, with Provident Protection Plus experiencing 19% organic growth in the fourth quarter.
• Beacon Trust assets under management grew to $4.2 billion, representing a 7.5% growth relative to last year, with income improving by 12% compared to the last quarter of 2023.

Negative Points

• The reported net interest margin compressed by three basis points to 3.28% due to a decrease in purchase accounting accretion.
• Provident Financial Services Inc (NYSE:PFS) experienced approximately $328 million in loan payoffs, resulting in only modest growth in its loan portfolio.
• Noninterest income decreased to $24 million this quarter, mainly due to fewer BOLI benefit claims and a seasonal reduction in insurance agency income.
• The provision for loan losses increased to $7.8 million, reflecting specific reserve requirements and some deterioration in macroeconomic variables.
• The company saw a modest decrease in its total loan pipeline to approximately $1.8 billion from $2 billion in the preceding quarter.

Q & A Highlights

Q: How do you plan to achieve the $26 million fee projection in the third and fourth quarters, considering seasonal declines in insurance revenues? A: Thomas Lyons, CFO, explained that the $26 million is an average over the year. Seasonal improvements are expected in the first half of 2025, with gains from loan sales, swap fee income, and SBA loan sales contributing. Insurance contingencies in the first quarter will also boost revenues.

Q: What are the top priorities for Provident Financial Services in 2025? A: Anthony Labozzetta, CEO, emphasized focusing on growth across all sectors, nurturing team dynamics post-merger, and enhancing operational efficiency. Key areas include commercial banking, treasury management, and fee-based businesses.

Q: How do you view the company's adjusted returns for the quarter against long-term franchise goals? A: Thomas Lyons, CFO, believes there is room for efficiency gains and scale improvements, which should enhance return metrics. Anthony Labozzetta, CEO, added that the foundation for growth is strong, and they aim to grow without significantly increasing operating expenses.

Q: Can you provide more clarity on the expense outlook for 2025? A: Thomas Lyons, CFO, noted that expenses are expected to be between $112 million to $115 million quarterly. Seasonal factors like employer payroll taxes and utility costs will affect the first quarter, with potential reductions in the latter half of the year.

Q: What opportunities exist for resolving non-performing loans in 2025? A: Thomas Lyons, CFO, stated that they continue to work with customers and explore note sales where appropriate. They aim to resolve real estate owned assets and maintain a short retention period for non-performing assets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.