Provident Financial Services, Inc

Thank you for standing by. At this time, I would like to welcome everyone to the Provident Financial Services, Inc. Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one Thank you. Adriano Duarte, Investor Relations Officer, you may begin your conference.

Thank you, Cheryl. Good morning, everyone, and thank you for joining us for our second quarter earnings call. Today's presenters are President and CEO Tony Labazzetta 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 questions to any forward looking statements that may be made during the course of today's call. Our full disclaimer is contained in last evening's earnings release, which has been posted to the investor relations page on our website, providence.bank. Now, it's my pleasure to introduce Tony Labazzetta, who will offer his perspective on our second quarter. Tony?

Thank you, Adriano. Good morning, everyone, and welcome to the Providence Financial Services earnings call. The disruption to the banking system and resultant volatility that we all experienced in the first quarter has abated, and Providence Bank fared well through the instability. These events, however, combined with more rate hikes by the Federal Reserve gave rise to new headwinds for the banking industry in the form of funding challenges as we headed into the second quarter. These funding challenges included more demands by customers for higher rates, needs for more insurance, a disintermediation from low-cost deposits to higher-yielding time deposits, and certain deposits shifting to Treasury securities. Consequently, we experienced higher deposit betas for the quarter, which increased our funding costs and compressed our net interest margin. Despite these unfavorable market conditions, Provident produced good financial results this quarter, which once again demonstrates the strength of our franchise and talented management team. As a result, we've reported earnings of 43 cents per share, an annualized return on average assets of 0.93%, and a return on average tangible equity of 10.75%. Excluding merger-related charges and normalizing the CECL provision for stabilized economic forecasts, we estimate our core return on average assets was approximately 1.07% for the second quarter. Our capital is strong and comfortably exceeds well-capitalized levels. Tangible book value per share expanded 3.6% during the first six months to $15.66 on the strength of our earnings. Our tangible common equity ratio on June 30th was 8.72%. As such, our board of directors approved a quarterly cash dividend of 24 cents per share, payable on August 25th. Presently, Our uninsured and uncollateralized deposits are 2.7 billion or approximately 26% of our total deposits. Our unbalanced sheet liquidity plus borrowing capacity is 3.8 billion or 140% of uninsured deposits. Our core deposits are a valuable component of our franchise. During the quarter, our core deposits decreased 55 million or 0.7%. which we attribute to normal business activity and customers seeking higher yields on their deposits. For the second quarter, our deposit beta was 148% with the rising rate cycle to date deposit beta was about 25%. Consequently, our total cost of deposits increased and in large part drove our total cost of funds of 50 basis points to 1.71%. and compressed our net interest margin 37 basis points. Our commercial lending team closed approximately $516 million of new commercial loans during the second quarter. Pre-payments decreased 56% to $125 million as compared to the trailing quarter. Our credit metrics remain strong in the second quarter, and we continue to maintain prudent underwriting standards, particularly in Cree lending. As part of our normal CRE monitoring processes, we have performed targeted, in-depth analysis to evaluate portfolio and loan level risks. Our line of credit utilization percentage increased 4% in the second quarter to 35%, which is approaching our historical average of approximately 40%. As a result of the improved production, reduced prepayments, and increased line utilization, our commercial loans grew $315 million, or 3.6% for the quarter. For the six months, we grew $296 million, or 3.4%, which is pacing at an annualized growth rate of about 6.7%. The pull-through in our commercial loan pipeline during the second quarter was good, and the gross pipeline remained strong at approximately $1.7 billion. The pull-through adjusted pipeline, including loans pending closing, is approximately $1 billion. and our projected pipeline rate increased 47 basis points to 7.24%. We are encouraged by the strength and quality of our pipeline. In addition, payoffs have slowed. As a result, we expect to achieve our commercial loan lending growth targets for the remainder of 2023. Our fee-based businesses performed well this quarter. Provident Protection Plus had an outstanding second quarter. 82% organic growth, which resulted in a 34% increase in revenue and an 87% increase in operating profit as compared to the same quarter last year. The conditions in the financial markets were more stable in the second quarter, and as a result, Beacon Trust experienced growth in market value of assets under management and related fee income. Beacon's fee income remained stable compared to the trailing quarter, as the increase in advisory fees was mostly offset by a reduction in trust revenue. With respect to our previously announced merger with Lakeland Bancorp, we continue our engagement with the regulators and have provided additional information in order to further support our application for approval of the merger. The companies have made significant progress in various integration initiatives through outstanding teamwork from both banks. We look forward to receiving regulatory approval and combining our two great franchises into the best bank in New Jersey. As we look forward, we remain focused on growing our business. However, staying disciplined and committed to our risk management principles is critical during these challenging times. In addition, we expect to close and integrate the merger with Lakeland Bank in the near future, which we believe will create value for all of our stakeholders. Now, I'll turn the call over to Tom for his comments on our financial performance. Tom?