Provident Financial Services Q2 2025 Earnings Report

Provident Financial Services EPS Results

• Actual EPS: $0.55
• Consensus EPS: $0.50
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: -$0.11

Provident Financial Services Revenue Results

• Actual Revenue: $214.17 million
• Expected Revenue: $213.39 million
• Beat/Miss: Beat by +$778.00 thousand
• YoY Revenue Growth: N/A

Provident Financial Services Announcement Details

• Quarter: Q2 2025
• Date: 7/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 24, 2025
• Conference Call Time: 2:00PM ET

Provident Financial Services (NYSE:PFS). operates as the bank holding company for Provident Bank that provides various banking products and services to individuals, families, and businesses in the United States. Its deposit products include savings, checking, interest-bearing checking, money market deposit, and certificate of deposit accounts, as well as IRA products. The company's loan portfolio comprises commercial real estate loans that are secured by properties, such as multi-family apartment buildings, office buildings, retail and industrial properties, and office buildings; commercial business loans; fixed-rate and adjustable-rate mortgage loans collateralized by one- to four-family residential real estate properties; commercial construction loans; and consumer loans consisting of home equity loans, home equity lines of credit, personal loans and unsecured lines of credit, and auto and recreational vehicle loans. It also offers cash management, remote deposit capture, payroll origination, escrow account management, and online and mobile banking services; and business credit cards. In addition, the company provides wealth management services comprising investment management, trust and estate administration, financial planning, and tax compliance and planning. Further, it sells insurance and investment products, including annuities; operates as a real estate investment trust for acquiring mortgage loans and other real estate related assets; and manages and sells real estate properties acquired through foreclosure. The company was founded in 1839 and is headquartered in Jersey City, New Jersey.

Provident Financial Services Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 results featured $72 million in net earnings ($0.55/share), an annualized ROA of 1.19%, adjusted ROAE of 16.79%, and tangible book value per share rose $0.45 to $14.60; the board declared a $0.24 quarterly dividend.
• Positive Sentiment: Commercial lending closed $764 million in new loans (H1 total of $1.4 billion for 8% annualized growth), deposits grew $260 million with costs down to 2.1%, and the robust pipeline stands at $2.6 billion at a 6.3% yield.
• Positive Sentiment: Asset quality strengthened as nonperforming assets declined, net charge-offs fell to $1.2 million (3 bps of loans), and a $2.9 million CECL reserve release lifted allowance coverage to 98 bps of loans.
• Negative Sentiment: Wealth management revenue at Beacon Trust dipped 5.2% in Q2 due to lower market valuations, though AUM rebounded to $4.1 billion by quarter end and a new Chief Growth Officer is joining to drive future growth.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Provident Financial Services Second Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

[Operator]

Thank you. And I would now like to turn the conference over to Adriano Duarte, Investor Relations Officer. You may begin.

[Adriano Duarte, Executive VP, Chief Accounting Officer & Investor Relations Officer at Provident Financial Services]

Thank you, Abby. Good afternoon, everyone, and thank you for joining us for our second quarter earnings call. Today's presenters are President and CEO, Tony Lavazetta and Senior Executive Vice President and Chief Financial Officer, Tom Lyons. Before beginning the review of our financial results, we ask that you please take note of our standard caution as to any forward looking statements that may be made during the course of today's call. Our full disclaimer is contained in this morning's earnings release, which has been posted to the Investor Relations page on our website, provident.bank.

[Adriano Duarte, Executive VP, Chief Accounting Officer & Investor Relations Officer at Provident Financial Services]

Now it's my pleasure to introduce Tony Lobazetta, who will offer his perspective on our second quarter. Tony?

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Thank you, Adriano, and welcome, everyone, to the Provident Financial Services earnings call. The Provident team delivered an impressive performance this quarter. Our team gained momentum with solid earning asset growth, improved margins and asset quality, record earnings and expansion of tangible book value. During the quarter, we reported net earnings of $72,000,000 or $0.55 per share. Our annualized return on average assets was 1.19%, and our adjusted return on average tangible equity was 16.79%.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

For the second quarter, pretax pre provision return on average assets was 1.64. These core financial results improved from the trailing quarter and the same quarter last year, and we are confident in our ability to sustain this momentum throughout the remainder of 2025. We continue to build our capital position, which comfortably exceeds levels deemed to be well capitalized. For the quarter, our tangible book value per share grew $0.45 to $14.6 and our tangible common equity ratio expanded to 8.03%. As such, this morning, our Board of Directors approved a quarterly cash dividend, 0.24 per share, payable on August 29.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

During the quarter, our deposits increased $260,000,000 on an annualized growth rate of 5.6%. We continue to improve our average cost of total deposits, which decreased to 2.1%. During the second quarter, our commercial lending team closed approximately $764,000,000 in new loans, bringing our production to a record $1,400,000,000 for the first half of the year. As a result, our commercial loan portfolio grew at an annualized rate of 8%. This quarter's production consisted of 20% commercial real estate and 80% commercial and industrial loans.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Our strong capital formation, combined with our production mix, has reduced our CRE ratio to 444%. Adjusting for merger related purchase accounting marks, the CRE ratio is actually 408%. Notwithstanding the high level of loan closings this quarter, our loan pipeline remains robust at approximately $2,600,000,000 and the weighted average interest rate is stable at 6.3%. The pull through adjusted pipeline, including loans pending closing, is approximately $1,600,000,000 We remain confident about the strength of our pipeline and our ability to achieve our commercial loan growth expectations for the rest of the year. Our credit quality is strong relative to our peer group with a modest improvement in our nonperforming assets and a decline in delinquencies and classified loans.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Our net charge offs decreased this quarter to just $1,200,000 or three basis points of average loans. These numbers demonstrate our commitment to prudent underwriting and portfolio management standards. Overall, Providence fee based businesses performed well this quarter. Provident Protection Plus maintained its strong performance with an 11.3 increase in revenue for the second quarter, and its income was up 10.1% compared to the same period in 2024. Given market conditions early in the quarter, Beacon Trust revenue declined 5.2% due to a decrease in average market value of assets under management.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

However, asset valuations have recovered, and Beacon closed the quarter with $4,100,000,000 in AUM, which is consistent with the trailing quarter. The Beacon team is focused on building AUM, and I am pleased to report that Beacon has hired a new Chief Growth Officer to further this objective with a projected start date late in the third quarter. Overall, we are proud of our performance this quarter. We have a dynamic team and a solid foundation to grow our core businesses, expand profitability and create even more value for our stockholders and customers. Building on our strong results, we believe we will continue this momentum and achieve our desired goals for the remainder of 2025.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Now I will turn the call over to Tom for his comments on our financial performance. Tom?

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Thank you, Tony, and good afternoon, everyone. As Tony noted, we reported net income of $72,000,000 or $0.55 per share for the quarter with an ROA of 1.19%. Adjusting for the amortization of intangibles, our return on average tangible equity was 16.79% for the quarter. Pretax pre provision earnings for the current quarter were $99,600,000 or an annualized 1.64% of average assets. Revenue increased to a record $214,000,000 for the quarter, driven by record net interest income of $187,000,000 and noninterest income of 27,000,000 Average earning assets increased by $383,000,000 or an annualized 7% versus the trailing quarter, with the average yield on assets increasing five basis points to 5.68%.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Our reported net interest margin increased two basis points versus the trailing quarter to 3.36%, while our core net interest margin remained stable. We currently project the NIM in the 3.35% to 3.45% range for the remainder of 2025. Our projections include 25 basis point rate reductions in September and November. Period end loans held for investment increased $318,000,000 or an annualized 6.8% for the quarter, driven by growth in commercial, multifamily and commercial real estate loans, partially offset by reductions in construction and residential mortgage loans. C and I loans grew at an annualized 21% pace, while total commercial loans grew by an annualized 8% for the quarter.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Our pull through adjusted loan pipeline at quarter end was $1,600,000,000 The pipeline rate of 6.3 is accretive relative to our current portfolio yield of 6.05%. Period end deposits increased $260,000,000 for the quarter. However, average deposits decreased $278,000,000 versus the trailing quarter. The average cost of total deposits decreased to 2.1 percent this quarter. Asset quality remained strong with nonperforming assets declining to 44 basis points of total assets.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Net charge offs were just $1,200,000 or an annualized three basis points of average loans this quarter. In addition, total delinquencies declined to 65 basis points of loans and criticized and classified loans fell to 2.97% of loans. This strong and stable asset quality coupled with an improved economic forecast used in our CECL model drove a $2,900,000 reserve release this quarter. This brought our allowance coverage ratio to 98 basis points of loans at June 30. Non interest income was steady at $27,000,000 this quarter with solid performance realized from core banking fees, insurance and wealth management as well as gains on SBA loan sales.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Non interest expenses were $114,600,000 with annualized expenses to average assets totaling 1.89% and the efficiency ratio improving to 53.5% for the quarter. We reaffirm our previous guidance of quarterly core operating expenses of approximately 112,000,000 to $115,000,000 for 2025. Our effective tax rate for the quarter was 29.7%, and we currently expect our effective tax rate to approximate 29.5% for the remainder of 2025. Our sound financial performance supported asset growth and drove strong capital formation. Tangible book value per share increased $0.45 or 3.2% to $14.6 and our tangible common equity ratio improved to 8.03% from 7.9% last quarter.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

That concludes our prepared remarks. We would be happy to respond to questions.

[Operator]

If you would like to withdraw your question, simply press star one again. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And our first question comes from the line of Mark Fitzgibbon with Piper Sandler. Your line is open.

[Mark Fitzgibbon, MD & Head - FSG Research at Piper Sandler Companies]

Hey, guys. Good afternoon.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Hey, Mark. How are you?

[Mark Fitzgibbon, MD & Head - FSG Research at Piper Sandler Companies]

Good. First question I had for you, Tony, is on the the Beacon business. I heard your comments about, you know, growth starting to ramp with some new people. I I guess I was curious, is there any change in strategy? Or is it just simply you brought in some new people that will go out aggressively and grow the business?

[Mark Fitzgibbon, MD & Head - FSG Research at Piper Sandler Companies]

Or are you trying to to to kind of market to a different audience?

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Great question. I I do I really don't think I would call it much of a strategy change. I think our focus has been growing the AUM. Beacon is a is a really strong platform. I think one of the things that we're looking to enhance is the sales and service more the sales side.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Right? I think we're trying to build a bigger force that could that could easily work with our business line partners on the other commercial, retail, treasury, insurance so that we can penetrate not only our existing business, but we can also get new to bank or new to Beacon clients as well. So it's a it's a forward strategy with with and also a focus on retention. So integrating it better into our businesses is what we're trying to do, and I think the individual we hire for this for this role is going to be key to to that initiative.

[Mark Fitzgibbon, MD & Head - FSG Research at Piper Sandler Companies]

Okay. And then a couple questions around provisioning. You mentioned in the release that, you know, part of the reason for the reserve release was, improved sort of the economic forecast. I assume is that Moody's, their assumptions changed?

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

That's correct, Mark. Moody's baseline and and primarily in our case, the the main driver in terms of macroeconomic variables is the commercial property price index that drove most of the release.

[Mark Fitzgibbon, MD & Head - FSG Research at Piper Sandler Companies]

Okay. And then it's kinda related. I guess I was curious, your your bottom line ROA and ROE estimates kind of imply that provisioning will be pretty modest in the back half of the year. Am I thinking about it the right way? Because you've given really good guidance on most of other items, and that's the one that kinda sticks out.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

I think that's the case, Mark. If you look at if you look at asset quality, we saw some nice improvement in terms of criticized and classified, and you don't see it in the release, but the watch list credits have have improved as well. And for good economic reasons, we saw improved lease up in both the retail, commercial real estate space as well as the multifamily space. So feeling pretty good about credit quality overall. Yeah.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Bar barring any shift in market conditions or some global event, I think that's a

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

a good outlook.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Yeah. And I don't know, Mark, even though you saw a small increase in dollars of NPLs, there's no virtually no loss content in the driver of the increase. There was one loan in excess of $10,000,000 that was really almost, I guess, a technical non maturity in the sense that there's some ownership concerns among the owners of that business as to put the disposition of the property, but really strong valuation. So we're not concerned about losses there.

[Mark Fitzgibbon, MD & Head - FSG Research at Piper Sandler Companies]

Okay. And then last question, Tony. Last quarter, I had asked you about sort of m and a, and you you said you're focused on organic growth but open to m and a. However, your stock price wasn't, you know, didn't fully reflect the strength of the company, etcetera. Your your stock is up maybe 12% since then.

[Mark Fitzgibbon, MD & Head - FSG Research at Piper Sandler Companies]

Do do you feel like the currency gives you capacity to be able to seriously consider m and a at this point?

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Well, I you know, you just say, you know, I wasn't clear last time. I think I think we're always in in a place where we have to evaluate our strategic options, and we continue to do that. I think right now, our main focus is on organic growth, but we're not we're not closing the door to M and A at all. In fact, if if there was a right opportunity to met the strategic things that I talked about last quarter came came up, we would have to entertain, observe it, and and evaluate it to what it means for our shareholders as we go forward. But I think the the the price is is starting to, you know, reflect a little bit more of what we think Provident is, and I think there's still some more room that we can move there.

[Mark Fitzgibbon, MD & Head - FSG Research at Piper Sandler Companies]

Great. Thank you.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Yep.

[Operator]

And our next question comes from the line of Steve Moss with Raymond James. Your line is open.

[Thomas Bernard Reid, Financial Advisor at Raymond James]

Hey, guys. This is Thomas on for Steve. Thanks for taking my question. Just wanna start it off, with loans here. C and I growth was really strong.

[Thomas Bernard Reid, Financial Advisor at Raymond James]

You know, what what's driving that right now? Is it more line utilization or is it new originations? And maybe what additional hiring opportunities are you seeing for CA and I lenders these days?

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Well, I would characterize our organizational capacity as where we want it right now. And additional hirings will come from the standpoint of expansion and what we're thinking about. I think that growth is because of the book. I think that growth, not only the book, but also Bill Fink being here, the team's focus on C and I. We have a very diverse set of products today that we didn't have three years ago.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

We have, the ABL, health care lending, mortgage warehousing, SBAs ramping up. So we have all these businesses. They've all contributed nicely to our production this year's this quarter, and and our pipeline shows that they'll continue to contribute nicely. But our focus is not away from CRE. I just want to be careful not to express that.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

We're growing our CRE book. We're doing it. It's just that those other lines are moving at a much faster pace. So we're pleased with that. They're bringing in some great deposits with it.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

We do have the capacity, but we'll just keep going when we need to. And we have a good plan on expansion both from a capacity numbers and geography. So, I think I'm pretty pleased with the general direction of where we are with the commercial bank.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

And I would agree with Tony that it was primarily driven by origination, but we did see increased line usage over the last number of months. We're we call it normalization. We were we're traveling in a low territory for a long time as I guess was much of the industry. We're back up around 45% line utilization. Also And I'd I'd add also in terms of the pipeline, Tony talked a little bit about the mix going forward.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

About 40% of the pull through adjusted pipeline is in CRE, about 55% is in the commercial categories and about 5% consumer.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

I just would like to round out that comment by saying it's not accidental. I think part of our strategic objective was to kind of diversify our commercial book so we're not CRE heavy. And as you can see by the reported number that if you adjust for the merger related charge, we're at four zero eight. That's a pretty solid number, and and and it'll continue to improve as we continue to build our our other lines of business.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Especially when you consider we were at $4.75 a year ago. Correct.

[Thomas Bernard Reid, Financial Advisor at Raymond James]

That's that's all great color. Really appreciate that. And if I can get one more in, you know, wealth management fee fees did feel a little light at, you know, 68 basis points of EOP AUM. Was that driven by maybe lower average AUM from market volatility or maybe something else?

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Yes. That is the case for the quarter. As Tony noted, I think in his opening comments, the average balance was down. It impacted revenue for the quarter, but we did see a market recovery, and we're back up actually a little bit ahead of where we were at the end of period, at the first quarter. So client count has remained constant.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

We're actually at plus three on the client count. The AUM per client has gone up a little bit, So nice recovery by the end of the period.

[Thomas Bernard Reid, Financial Advisor at Raymond James]

Okay, great. That makes sense. All right. That's all for me. Thanks, guys.

[Operator]

Thanks, And our next question comes from the line of Fetty Strickland with Hovde Group.

[Feddie Strickland, Director at Hovde Group]

Just wanted to start on the expense guide. Last quarter, I think you mentioned you might be able to come in potentially at the lower end of the range. Do you still feel like maybe that's achievable and we could see the quarterly expense line even come down a little bit in the back half of the year?

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

I do, Fedi. So there was a little bit of unanticipated, what I would consider nonrecurring costs in terms of some severance charges, about $750,000 to $1,000,000, let's say, in nonrecurring there. That said, the back half of the year is usually when we take a closer look at some of our incentive accruals for the current period as we get greater visibility into where we might end the year. So the various incentive programs throughout the different disciplines in the bank, we try to, get a a finer point, a little more precise, and that can affect the accruals either positively or negatively. So that's why we're giving a range of one twelve to one fifteen.

[Feddie Strickland, Director at Hovde Group]

Got it. Appreciate that. And just wanted to talk through the municipal deposit flow seasonality, kind of what your expectations are there? And am I thinking about that correctly that maybe the increase in brokered deposits is really to replace some of that outflow and then we could maybe see those brokered deposits come back down as you maybe have some seasonal inflows in municipal deposits?

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Yes. I think that's a fair statement. I would kind of expand on that to say we also allowed some high yielding CDs that we had on our books from pre merger during the liquidity times. And that was just a trade off between the broker deposits or, you know, the the consumer CDs, which were high yield, and we thought that was a good trade. And it also made up the delta in funding needs because of the municipal outflows.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

So it was a combination of those two things. If you look at our municipal pipeline now, not only do we expect the flows which are strong in the third quarter, particularly this month, and we're starting to see that, But you also are now seeing the pipeline of municipal, potential new municipal business is also there. So that should come along nicely if we achieve

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

those You are correct, though, that the municipal deposits, the trough is the deepest in the second quarter historically.

[Feddie Strickland, Director at Hovde Group]

All right. Great. Thanks for the color.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Thanks. You're welcome.

[Operator]

And our next question comes from the line of Tim Switzer with KBW. Your line is open.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Hey, Tim.

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

Hey. Good afternoon. Thanks for taking my questions.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

With with you guys a

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

little bit less interested in m and a right now, do you have, like, a target capital level you're trying to get to? And, how does that play into your appetite for more share repurchases?

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

I don't think it's a significant strength. I kinda like around 11 and a quarter for the CET one.

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

Okay. Okay. And sorry if this has already been asked, but for the NIM trajectory, you guys took up the high end of the guide a little bit. Can you talk about what's helping drive that and, you know, how would fed rate cuts impact your your margin?

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

The balance sheet's fairly neutral. So, I mean, the two cuts of 25 basis points are built into that margin expectation. You know, there's we've run a a whole number of models and working off the most likely, though, but it looks like around a three forty in q three, maybe exiting as high as three forty five, three forty seven even at the end of the year. But, you know, again, to exercise a little question in that and, again, that's two rate cuts in September and November.

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

Great. Okay. That's good to hear. And and the last one for me, the the loan pipeline moved down just slightly lower, but you obviously pretty good growth in q two. Is there any, like, slowdown or uncertainty causing borrowers to be more cautious at all?

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

Or, you know, everything still looks pretty pretty good. People aren't too concerned about tariffs or anything like that.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Yeah. Actually, I that that's one of the real bright spots. You know, while the pipeline went down, it did go down because of some, what I would call, very strong loan closings in the quarter. Right? And I think the key is we scrub our pipeline incredibly well.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

So the stuff that's in there, we feel pretty good about it. And so we also, in all the conversations with our verticals, don't see any signs of anything slowing down immediately. The the replenishment appears to be happening. We do expect to have a nice pull through in the third quarter and continue to replenish it. And so again, I don't see anything right now that I'm concerned.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

I think it's a bright spot for us moving forward.

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

Okay, great. Thank you, guys.

[Operator]

And our final question comes from the line of Manuel Navas with D. A. Davidson. Your line is open.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

Hey, I appreciate that commentary on the NIM in the back half of the year. Is the main drivers there the accretive new loan production with deposits kind of being more flat? Or could you see some deposit costs declines as well? I guess you do include two cuts, that that's part of it as well.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

Yeah. I would put more emphasis on on the the asset repricing, though. You got about 6,000,000,000 of the existing back book repricing over the next twelve months. You know, about $5,100,000,000 is floating. So, you know, as the rates move, we should see that benefit.

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

And then the new loan production coming on at accretive levels as well. I would be cautious about taking too much credit even with the rate cuts on the funding side just because the competitive environment, I think, is a little bit more challenged now. Deposits are a high commodity.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Yeah. I I I would I would characterize I would add one dimension to that. I think, certainly, there's a lot of accretive loan production. I think whether we're in the high end of the range or low end of the range is gonna be dictated by the plumbing side. But I also wanna preface us that while we make managerial decision, we're focusing a lot of our energy around the NII.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

So we'll be we'll be willing to give away one or two basis points if our NII can grow. So I just wanna you guys to remember that for the next earnings call. That will be management decisions that we'll make to drive better earnings, and and that's part of the management game. Right?

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

So That's a really good point, and you saw some of that even on the investment portfolio side. I I think I mentioned last quarter, I'd be very comfortable taking the investments back up to about 15% of of assets. We're still a little bit under that now, But the leverage growth obviously gives you a little bit less spread but good income with very little credit losses because we're buying high quality treasuries and agency securities.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Right. But we're feeling pretty good because some of the funding growth that we're seeing and if that manifests along with the loan production, it should be well in the range of what Tom is saying.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

I definitely sense the optimism on NII growth. Could you speak a little bit more to that competition you're seeing in just some of that commentary? I mean, that's also because there's more demand out there, but just could you just speak to that for a moment?

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Yeah. I think a lot of the competition we're seeing now, and Tom can jump in at any moment, we're on on the consumer deposit side, we're seeing more of of the stress, right, whether they're the the deposit accounts moving into money markets or other banks are starting to get a little bit more competitive for the space, particularly with CD products. Our our business deposits are stable and growing. Just a back point for for for everybody on this call. We're probably funding about 30% of our of our commercial production commercial funding is being done with business deposits, and that that's a pretty good ratio.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

And so the like I said, if we can have the municipals come back, we're not seeing a lot of stress there in terms of competition. We're seeing the competition more on the consumer side. Not that the municipals don't have it, but the biggest level competition is happening on the consumer deposits. Tom, would you like to add on that?

[Thomas M. Lyons, Senior EVP, CFO & Director at Provident Financial Services]

I think you covered it just to accentuate that it's not just banks, it's the availability of viable investment alternatives for folks as well, and they can get a decent return.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

I really appreciate the commentary. Thank you.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

You're welcome.

[Operator]

And that concludes our question and answer session. I will now turn the conference back over to Mr. Tony Labazetta for closing remarks.

[Anthony Labozzetta, President, CEO & Director at Provident Financial Services]

Well, thank you, everyone, for your questions and joining the call. We hope everyone has an enjoyable summer and a great rest of the year. We look forward to speaking with you soon. Thank you very much.

[Operator]

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Participants

Executives

• Adriano Duarte, Executive VP, Chief Accounting Officer & Investor Relations Officer
• Anthony Labozzetta, President, CEO & Director
• Thomas M. Lyons, Senior EVP, CFO & Director

Analysts

• Mark Fitzgibbon, MD & Head - FSG Research at Piper Sandler Companies
• Thomas Bernard Reid, Financial Advisor at Raymond James
• Feddie Strickland, Director at Hovde Group
• Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)
• Manuel Navas, MD & Senior Research Analyst at D.A. Davidson