Stonegate Capital Partners Initiates Coverage on Provident Financial Services with Strong Q2 Performance

Stonegate Capital Partners has initiated coverage on Provident Financial Services Inc (NYSE: PFS), following the company's robust second-quarter 2025 financial performance. The coverage initiation comes as Provident Financial Services reported net income of $72.0 million for the second quarter, representing a significant improvement from $64.0 million in the first quarter and a substantial recovery from a net loss of $11.5 million in the second quarter of 2024.

The company achieved basic and diluted earnings per share of $0.55, compared to $0.49 in the previous quarter. This sequential improvement was primarily driven by higher net interest income resulting from new loan originations at favorable market rates and improved repricing on adjustable-rate loans. Management reported record revenue of $214.2 million for the quarter, supported by both volume growth and margin expansion while maintaining strong credit quality.

Net interest income increased to $187.1 million in the second quarter from $181.7 million in the first quarter, while net interest margin expanded slightly to 3.36% from 3.34%. The weighted average yield on interest-earning assets rose 5 basis points to 5.68%, while the cost of interest-bearing liabilities increased 4 basis points to 2.94%. The average cost of total deposits declined marginally to 2.10% from 2.11% in the prior quarter.

Loan portfolio growth was substantial, with period-end loans increasing by $318.0 million to $19.1 billion. This growth was led by commercial and industrial loans, multifamily properties, and commercial real estate, partially offset by declines in construction and residential mortgages. Total commercial loans rose $319.3 million to $16.5 billion. Deposit growth was also strong, with period-end deposits increasing $260 million to $18.7 billion, primarily driven by interest-bearing core deposits and wholesale funding.

Credit quality metrics showed improvement, with nonperforming assets declining to 0.44% of total assets. Net charge-offs decreased to $1.2 million from $2.0 million in the first quarter, while the allowance for credit losses decreased to 0.98% of loans from 1.02% last quarter. The company maintained a robust loan pipeline of $2.6 billion with a weighted average rate of 6.3%.

Financial ratios demonstrated strong performance, with adjusted return on average assets reaching 1.19%, adjusted return on average equity at 10.76%, and adjusted return on average tangible equity at 16.79%. These metrics showed improvement from 1.11%, 10.13%, and 16.15% respectively in the first quarter. The efficiency ratio improved to 53.5% from 55.4%, while tangible book value per share grew 3.2% quarter-over-quarter to $14.60.

Looking forward, management expects to maintain a net interest margin between 3.35% and 3.45% for the remainder of 2025 and has guided for core operating expenses of approximately $112-115 million per quarter. The company anticipates continued momentum in loan growth, margin stability, and book value accretion through year-end, supported by strong commercial loan production which reached $764 million in the second quarter and $1.4 billion year-to-date.