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

Stonegate Capital Partners has initiated coverage on Provident Financial Services Inc (NYSE: PFS), following the company's strong second quarter 2025 financial results. For 2Q25, Provident Financial Services reported net income of $72.0 million, up from $64.0 million in 1Q25, with basic and diluted EPS of $0.55 compared to $0.49 in the previous quarter. The sequential improvement 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.

The company delivered record revenue of $214.2 million this quarter, supported by both volume growth and margin expansion while maintaining strong credit quality. Net interest income increased to $187.1 million in 2Q25 from $181.7 million in 1Q25, 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 rose 4 basis points to 2.94%.

Period-end loans rose by $318.0 million to $19.1 billion, with growth led by commercial and industrial loans, multifamily, and commercial real estate. Total commercial loans increased $319.3 million to $16.5 billion. Period-end deposits grew $260 million to $18.7 billion, led by interest-bearing core deposits and wholesale funding. Nonperforming assets improved to 0.44% of total assets, while net charge-offs fell to $1.2 million from $2.0 million in 1Q25.

Financial ratios showed significant improvement, with 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. The efficiency ratio improved to 53.5% from 55.4% in the prior quarter. Tangible book value per share grew 3.2% quarter-over-quarter to $14.60, while the tangible common equity ratio rose to 8.03% from 7.90%.

Management highlighted balanced contributions from core banking, wealth, and insurance businesses, with Provident Protection Plus revenue rising 11.3% year-over-year and insurance income up 10.1% year-over-year. Beacon Trust ended the quarter with $4.1 billion in assets under management. Executives expect to maintain a 3.35%–3.45% net interest margin for the remainder of 2025 and guided for core operating expenses of approximately $112–$115 million per quarter.

The company demonstrated strong capital formation and sustained commercial loan production, reaching $764 million in 2Q25 and $1.4 billion year-to-date. Management anticipates continued momentum in loan growth, margin stability, and book value accretion through year-end. Stonegate Capital Partners' valuation analysis using forward P/E and price-to-tangible book value metrics suggests a valuation range of $20.44 to $23.29, reflecting the company's improved financial performance and growth prospects.