Regional bank Provident Financial Services (NYSE: PFS) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 82.4% year on year to $208.8 million. Its non-GAAP profit of $0.51 per share was 7.1% above analysts’ consensus estimates.

Is now the time to buy PFS? Find out in our full research report (it’s free).

StockStory’s Take

Provident Financial Services delivered first quarter results that matched Wall Street’s revenue expectations, but the market responded negatively, reflecting investor concerns about deposit outflows and the broader banking environment. Management pointed to expanded net interest margins, strong loan growth, and tangible book value improvement, driven in part by the full integration of last year’s merger. CEO Anthony Labozzetta noted that commercial lending was robust, with a record loan pipeline and improved underwriting standards, while acknowledging that deposit declines were largely due to seasonal municipal outflows. Labozzetta emphasized, “We have used our solid foundation to excel in our core businesses and create value for stockholders and customers despite the uncertainties in the market and the economy.”

Looking ahead, Provident Financial Services’ guidance is shaped by both optimism in its commercial loan pipeline and caution regarding macroeconomic uncertainties such as potential tariff impacts and customer sentiment shifts. Management indicated that the company is not observing material deterioration in its loan portfolio but remains vigilant, actively surveying clients for early signs of stress. CFO Thomas Lyons stated, “Sentiment is certainly up in the area a little bit from uncertainty, but we're not really seeing any outright effects yet.” The company expects continued margin stability, modest loan growth, and expense discipline as it navigates the year, with strategic flexibility to pursue share repurchases if conditions warrant.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to expanded lending activity, disciplined deposit cost management, and progress in integrating its recent merger, while noting that deposit outflows and economic uncertainty remain areas of focus.

• Commercial lending momentum: The company’s commercial loan portfolio grew, with about 70% of new production in commercial and industrial loans and 30% in commercial real estate, reducing reliance on property lending. Management highlighted a record $2.8 billion loan pipeline, suggesting continued strong demand.

• Deposit cost improvement: Provident achieved a 14-basis-point reduction in the average cost of total deposits and a 17-basis-point reduction in interest-bearing deposit costs. This contributed to a 6-basis-point increase in reported net interest margin, helping offset deposit outflows.

• Integration progress completed: The integration of Lakeland Bank is now fully behind the company, with executive leadership emphasizing that the combined operation is culturally unified and operationally streamlined. Management is focused on leveraging the broader footprint and diversified client base.

• Fee-based business resilience: The insurance arm, Provident Protection Plus, delivered 19% organic new business growth and a 23% rise in income versus last year, while wealth management income decreased due to market conditions. Management noted that insurance results are seasonally strongest in the first quarter.

• Credit quality steady, but watched: Nonperforming loans increased, driven by two well-secured loans, but management reported no prior charge-off history for these credits and a low net charge-off rate overall. Risk management practices remain a key focus, especially as economic uncertainty persists.

Drivers of Future Performance

Provident’s outlook is driven by a strong commercial loan pipeline, expense control, and cautious monitoring of economic headwinds, including deposit trends and regulatory developments.

• Loan pipeline strength: Management expects the robust $2.8 billion commercial loan pipeline to drive portfolio growth, particularly in the commercial and industrial segment. They see diversification beyond commercial real estate as reducing risk and supporting longer-term earnings stability.

• Expense discipline and margin management: Core operating expenses are projected to remain steady, with management guiding for quarterly expenses between $112 million and $115 million. Continued reductions in deposit costs and stable net interest margins are expected to offset revenue headwinds from deposit declines.

• External uncertainties monitored: The company is closely following macroeconomic risks such as tariffs and customer investment sentiment, using customer surveys and portfolio reviews to identify early signs of stress. While management is not yet seeing significant impacts, they have adjusted growth targets to reflect potential downside scenarios, especially for deposit and loan growth.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) whether the commercial loan pipeline translates into sustained portfolio growth, (2) how effectively deposit costs are managed in the face of ongoing outflows, and (3) progress in expanding fee-based businesses like insurance and wealth management. Monitoring credit quality trends and management’s response to regulatory or macroeconomic changes will also be key indicators of execution.

Provident Financial Services currently trades at $16.47, down from $16.87 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

High Quality Stocks for All Market Conditions

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.