Provident Financial Services, Inc

Good morning and welcome to the Provident Financial Services Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may do so by pressing star then one on your telephone keypad. Please note, this event is being recorded. I would now like to turn the conference over to John Koontz, Chief Administrative Officer. Please go ahead, sir.

Thank you, Chad. Good morning, ladies and gentlemen, and thank you for joining us for our second quarter earnings call. Today's presenters are Chairman and CEO Chris Martin, President and Chief Operating Officer Tony Lavezetta, and Senior Executive Vice President and Chief Financial Officer Tom Lyons. Before beginning their review of our financial results, we ask that you please take note of our standard caution as to any forward-looking statements which 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. Now, it's my pleasure to introduce Chris Martin, who will offer his perspective on our second quarter. Chris?

Thank you, John, and good morning, everybody. We hope that you and your families are healthy. Our second quarter results were solid and the trends remain generally positive. Operating earnings were strong with net interest income the highest it has ever been for Provident. And in spite of strong loan revisions, loan portfolio growth was challenged in the quarter as payoffs continued to exceed our forecasts. The loan pipeline, however, is the largest we have ever had and we anticipate stronger originations in the second half of the year. The economic outlook is promising, assuming continued success against COVID-19, and our business clients are optimistic for the future. Long-term, loan growth is highly correlated to economic growth, and we believe economic conditions in our markets continue to improve and support an expansionary trajectory. Also, a positive is the consumer and their personal savings position, which will continue to support solid consumer spending in the future. As businesses see demand increasing, it is anticipated that credit line usage, which is currently on the low side, will increase. However, risks remain as interest rates have been volatile, and the recent downward shift in rates is putting pressure on net interest income and margin. Deposit growth continued to be strong with substantial increases in non-interest bearing deposits. The growth in deposits improves our capacity to fund loan growth in the second half of 2021. We are executing a disciplined approach to leveraging the excess liquidity on our balance sheet, initially in the investment portfolio to produce better returns and augment our margin. The net interest margin reflected lower earning asset yields given the low rate environment and spread pressures from lending competition, although improved funding mix and better deposit pricing are helping to mitigate these factors. Asset quality continued to improve during the quarter, and loan payment deferrals are negligible. All of our credit ratios and indicators are positive this quarter. Our primary non-interest revenue sources, namely Beacon Trust and SB1 Insurance, will continue to provide meaningful impact to lessen the pressure being experienced in our spread business. We expect most fee revenue categories to grow modestly for the remainder of 2021. And we will continue our methodical approach to managing operating costs. Our focus will be holding the line on expenses and creating operating efficiencies without sacrificing our commitment to technology enhancements to improve the customer experience and our competitive position. We believe we can further improve our returns to stockholders through a combination of balance sheet growth, active management of our margin, continuing to rationalize our branch network, and further leveraging operational efficiencies gained with the SV1 acquisition, accompanied by continued execution on our regulatory risk and control framework. With that, I will ask Tony to add some more color.