Stonegate Capital Partners has initiated coverage on Provident Financial Services Inc (NYSE: PFS), following the company's strong second quarter 2025 financial results. The banking institution 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.
The sequential improvement was primarily driven by higher net interest income from new loan originations at favorable market rates and improved repricing on adjustable-rate loans. Management highlighted that the quarter delivered record revenue of $214.2 million, supported by both volume growth and margin expansion while maintaining strong credit quality. This performance marks a significant turnaround from the net loss of $11.5 million reported in the second quarter of 2024.
Net interest income increased to $187.1 million in the second quarter from $181.7 million in the first quarter, while net interest margin expanded slightly to 3.36% from 3.34%. The weighted average yield on interest-earning assets rose 5 basis points to 5.68%, while the cost of interest-bearing liabilities increased 4 basis points to 2.94%. The average cost of total deposits declined marginally to 2.10% from 2.11% in the prior quarter.
Period-end loans grew by $318.0 million to $19.1 billion, with growth led by commercial and industrial loans, multifamily, and commercial real estate. Total commercial loans increased $319.3 million to $16.5 billion. Period-end deposits rose $260 million to $18.7 billion, driven by interest-bearing core deposits and wholesale funding. Credit quality metrics improved, 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 company reported strong financial ratios, with adjusted return on average assets of 1.19%, adjusted return on average equity of 10.76%, and adjusted return on average tangible equity of 16.79%. The efficiency ratio improved to 53.5% from 55.4% in the first quarter. 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 guidance for maintaining a net interest margin between 3.35% and 3.45% for the remainder of 2025 and expects 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. Stonegate Capital Partners' valuation analysis, available at https://www.stonegatecp.com, suggests a target price range of $20.44 to $23.29 based on forward price-to-earnings and price-to-tangible-book-value multiples.
