Provident Financial Services (PFS) Q2 2024 earnings summary

Executive summary

• Completed merger with Lakeland Bancorp on May 16, adding $10.91B in assets, $7.91B in loans, $8.62B in deposits, and 68 branches; expects to close 22 branches in Q3 2024 due to overlap.

• Financial statements reflect combined results from May 16 and include one-time merger-related costs and credit loss provisions.

• Reported Q2 2024 net loss of $11.5M ($0.11/share) vs. net income of $32.0M in Q2 2023, driven by $86.9M in merger-related charges and $65.2M initial CECL provision.

• Six-month 2024 net income was $20.6M ($0.23/share), down from $72.5M ($0.97/share) in the prior year period.

• Focus remains on completing merger integration, achieving synergies, and leveraging expanded platforms in banking, insurance, and wealth management.

Financial highlights

• Total assets rose to $24.07B at June 30, 2024, up $9.86B from December 31, 2023, mainly from the Lakeland acquisition.

• Loans increased to $18.76B from $10.87B at year-end; deposits grew to $18.35B from $10.29B.

• Net interest income for Q2 2024 was $141.5M, up $42.4M year-over-year; net interest margin rose to 3.21% from 3.11% year-over-year.

• Non-interest income for Q2 2024 was $22.3M, up $2.9M year-over-year, driven by fee, BOLI, and wealth management income.

• Non-interest expense for Q2 2024 was $115.4M, up $50.3M year-over-year, mainly due to merger costs and higher compensation.

• Tangible book value per share was $13.09; tangible common equity ratio at 7.34%.

• Quarterly cash dividend of $0.24 per share approved, payable August 30, 2024.

Outlook and guidance

• Projected net interest margin of 3.35%-3.4% for Q3 2024, rising to 3.45% in 2025.

• Expects to close 13 acquired Lakeland branches and 9 legacy branches in Q3 2024.

• Non-interest expenses projected at $120M for Q3, declining to $107M in Q4 post-systems conversion.

• Effective tax rate projected at 29.5% for the remainder of 2024.

• 2025 targets: ROAA ~1.1%, ROTCE ~15%, operating expense ratio ~1.75%, efficiency ratio ~52%.

• Expect to achieve projected loan growth of 4%-5% in the second half of 2024.