Stonegate Capital Partners has initiated coverage on Provident Financial Services Inc (NYSE: PFS), highlighting the company's strong second-quarter 2025 financial performance. Provident reported net income of $72.0 million, up from $64.0 million in the first quarter, representing basic and diluted earnings per share of $0.55 compared to $0.49 in the previous quarter. This performance marks a significant improvement from the net loss of $11.5 million reported in the second quarter of 2024.
The sequential earnings increase 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 quarterly revenue of $214.2 million, supported by both volume growth and margin expansion while maintaining strong credit quality. Net interest income increased to $187.1 million from $181.7 million in the first quarter, with net interest margin expanding slightly to 3.36% from 3.34%.
Loan portfolio growth was substantial, with period-end loans increasing by $318.0 million to $19.1 billion. Commercial and industrial loans, multifamily, and commercial real estate led this growth, while construction and residential mortgages declined. Total commercial loans rose $319.3 million to $16.5 billion. Deposit performance also improved, 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 and net charge-offs falling to $1.2 million from $2.0 million in the previous quarter. 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%.
Profitability ratios demonstrated significant improvement, with adjusted return on average assets reaching 1.19%, adjusted return on average equity at 10.76%, and adjusted return on average tangible equity climbing to 16.79%. The efficiency ratio improved to 53.5% from 55.4% in the first quarter, reflecting better cost management. Tangible book value per share grew 3.2% quarter-over-quarter to $14.60, while the tangible common equity ratio increased to 8.03% from 7.90%.
Management provided optimistic guidance for the remainder of 2025, expecting to maintain a net interest margin between 3.35% and 3.45% and projecting 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 that reached $764 million in the second quarter and $1.4 billion year-to-date.
