DALLAS, TX -- May 4th 2026 -- Provident Financial Services, Inc. (NYSE: PFS): Stonegate Capital Partners Updates Coverage on Provident Financial Services, Inc. (NYSE: PFS). Provident Financial Services delivered a steady 1Q26, with the post-Lakeland profitability profile holding despite lower q/q EPS and a more visible credit watch item. Net income was $79.4M, or $0.61 diluted EPS, versus $83.4M, or $0.64, in 4Q25, while ROAA was 1.29%, Pre-provision net-revenue ROAA was 1.75%, and ROATCE was 16.58%. Revenue remained above $225M for the second consecutive quarter, as lower net interest income was offset by record noninterest income of $31.5M. In our view, the quarter supports the case that PFS can sustain a higher post-Lakeland profitability profile through core margin improvement, fee income contribution, and tangible book value growth, though the senior housing-related NPL increase is now the key item to monitor.
Loans and Deposits: Balance sheet trends were better than the sequential deposit decline suggests. Commercial production totaled $649.2M, driving 3.9% annualized net commercial loan growth, while payoffs fell to $191.1M from $499.9M last quarter. The commercial pipeline increased to a record $3.11B from $2.74B, with a 6.24% weighted average rate that remains accretive to the current loan portfolio yield. Deposits were seasonally softer, down $178M q/q, driven by municipal outflows and a deliberate reduction in brokered deposits; however, non-maturity business and consumer deposits increased $66.5M, and brokered deposits remained modest at 3.4% of total deposits. Management noted deposit competition has become more pronounced, making continued core deposit gathering the main funding.
Financial Ratios and Capital: Credit is the main debate following 1Q26. Nonperforming loans increased to 0.73% of loans from 0.40% last quarter, driven by four senior housing commercial loans totaling ~$82M that are subject to related bankruptcy filings. Net charge-offs remained contained at $3.1M, or 0.06% annualized, and management indicated no specific reserves were required given collateral support, intact property cash flows, and updated LTVs ranging from 32.9% to 81.9%. Allowance coverage declined to 0.90% of loans from 0.95%, which bears monitoring if migration broadens. Tangible book value increased 2.1% q/q to $16.03, the TCE ratio improved to 8.55%.
Outlook / Our View: Management maintained 2026 guidance for 4%-6% loan and deposit growth, 10-15bps of charge-offs, ~$28.5M of quarterly noninterest income, and $117M-$119M of quarterly opex, excluding ~$5M of 2H26 core conversion costs. We view 1Q26 as a solid operating quarter as long as the senior housing migration stays contained.
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 9.5x to 10.0x with a mid-point of 9.8x on FY26 estimates results in a valuation range of $24.27 to $25.55 with a mid-point of $24.91. Using a P/TBV range of 1.5x to 1.7x with a mid-point of 1.6x results in a valuation range of $24.05 to $26.45 with a mid-point of $25.25.
SOURCE: Stonegate, Inc.
