DALLAS, TX -- September 12th, 2025 -- Provident Financial Services Inc (NYSE: PFS): Stonegate Capital Partners initiates their coverage on Provident Financial Services Inc (NYSE: PFS). For 2Q25, Provident Financial Services reported net income of $72.0M, up from $64.0M in 1Q25. This equates to basic and diluted EPS of $0.55, compared to $0.49 in 1Q25 and a net loss of $11.5M in 2Q24. The sequential increase was driven by higher net interest income from new loan originations at favorable market rates and improved repricing on adjustable-rate loans, combined with lower non-interest expenses. This was partly offset by higher compensation expenses and lower average low-cost deposits. Management highlighted that this quarter delivered record revenue of $214.2M, supported by both volume growth and margin expansion, while maintaining strong credit quality.
Company Updates:
Net Interest Income and Margin: Net interest income increased to $187.1M in 2Q25 from $181.7M in 1Q25, while net interest margin expanded slightly to 3.36% from 3.34%. The weighted average yield on interest-earning assets rose 5bps to 5.68%, while the cost of interest-bearing liabilities rose 4bps to 2.94%. The average cost of total deposits declined to 2.10% from 2.11% in the prior quarter.
Loans and Deposits: Period-end loans rose by $318.0M to $19.1B, with growth led by commercial and industrial loans, multifamily, and commercial real estate, partially offset by declines in construction and residential mortgages. Total commercial loans rose $319.3M to $16.5B. Period-end deposits increased $260M to $18.7B, led by interest-bearing core deposits and wholesale funding, while municipal deposits declined. Nonperforming assets improved to 0.44% of total assets, while net charge-offs fell to $1.2M from $2.0M in 1Q25. The allowance for credit losses decreased to 0.98% of loans from 1.02% last quarter. The loan pipeline remained robust at $2.6B with a weighted average rate of 6.3%.
Financial Ratios and Capital: PFS reported an adjusted ROAA of 1.19%, adjusted ROAE of 10.76%, and adjusted ROATE of 16.79%, up from 1.11%, 10.13%, and 16.15% in 1Q25, respectively. Pre-tax, pre-provision ROAA increased to 1.64% from 1.61%. The efficiency ratio improved to 53.5% from 55.4% in 1Q25, as annualized adjusted non-interest expense declined to 1.89% of average assets. Tangible book value per share grew 3.2% q/q to $14.60, while the tangible common equity ratio rose to 8.03% from 7.90%.
Outlook: Management highlighted balanced contributions from core banking, wealth, and insurance businesses, with Provident Protection Plus revenue rising 11.3% y/y and insurance income up 10.1% y/y, while Beacon Trust ended the quarter with $4.1B in AUM. Executives expect to maintain a 3.35%–3.45% NIM for the remainder of 2025 and guided for core operating expenses of ~$112–$115M per quarter. They emphasized strong capital formation and sustained commercial loan production, which reached $764M in 2Q25 and $1.4B YTD, and anticipate continued momentum in loan growth, margin stability, and book value accretion through year-end.
Valuation: We use a comp analysis on P/E and P/TBV to frame our valuation of PFS Using a forward P/E range of 9.0x to 10.0x with a mid-point of 9.5x on FY26 estimates results in a valuation range of $20.96 to $23.29 with a mid-point of $22.13. Using a P/TBV range of 1.4x to 1.5x with a mid-point of 1.5x results in a valuation range of $20.44 to $21.90 with a mid-point of $21.17.
Stonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking services for public and private companies.
