Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Provident Financial Services Inc (PFS, Financial) successfully completed the conversion of Lakeland Bancorp's core system, achieving a smooth integration and retaining virtually all legacy customers.
- The company reported solid core profitability with net earnings of $46.4 million, or 36¢ per share, and a return on average tangible equity of 14.53%.
- Provident Financial Services Inc (PFS) experienced growth in its loan pipeline, reaching approximately $2 billion, indicating strong future growth potential.
- Fee-based businesses performed well, with Provident Protection Plus achieving 13% organic growth in the third quarter and a 99% retention rate.
- The company's tangible book value per share increased by 4.5% to $13.66, and the tangible common equity ratio improved to 7.68%.
Negative Points
- Provident Financial Services Inc (PFS) faced weak loan demand and higher deposit costs, impacting overall financial performance.
- The average cost of total deposits increased by nine basis points to 2.36%, contributing to higher funding costs.
- Nonperforming loans saw a slight deterioration, primarily due to one commercial real estate credit, although no loss is expected.
- The provision for loan losses increased to $9.6 million, reflecting specific reserve requirements and some macroeconomic deterioration.
- Noninterest expenses, excluding merger-related charges, were higher than expected at $120 million, impacting the efficiency ratio.
Q & A Highlights
Q: One of your competitors announced selling a large pool of commercial real estate loans. Is this something Provident Financial Services would consider?
A: No, we are not considering selling our commercial real estate loans. We are a relationship-oriented institution, and our portfolio is within our concentration risk levels. There is no strategic reason to sell at this time. - Anthony J. Labozzetta, President and CEO
Q: What are your thoughts on restructuring the securities portfolio?
A: We do not anticipate any restructuring of the securities portfolio at this time. We are satisfied with its quality, content, and performance. - Thomas M. Lyons, CFO
Q: Can you comment on the margin guidance for next year and the impact of Fed rate actions?
A: The margin expansion is expected to be in the 3 to 5 basis points range per quarter. The Fed's actions are less impactful as we are neutral in terms of interest rate risk. Our focus is on managing deposit funding costs effectively. - Thomas M. Lyons, CFO
Q: Your updated expense guide is higher than previously guided. Can you elaborate on the expense pressure and targets for next year?
A: The increase is due to the timing of realizing merger cost savings. For next year, we expect expenses to be slightly higher in the first quarters due to seasonal factors, with a range of $112 to $115 million. - Thomas M. Lyons, CFO
Q: Are you seeing an inflection point in loan demand and client activity?
A: Yes, we are seeing increased activity and optimism from clients, partly due to the merger integration completion and the recent rate cut. We expect continued momentum and potentially exceeding projected loan growth. - Anthony J. Labozzetta, President and CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
