Provident Financial Services, Inc. (NYSE:PFS) Q2 2020 Earnings Conference Call - Final Transcript

Jul 30, 2020 • 10:00 am ET


Provident Financial Services, Inc. (NYSE:PFS) Q2 2020 Earnings Conference Call - Final Transcript


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Good morning, and welcome to the Provident Financial Services, Inc. Second Quarter Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Mr. Leonard Gleason, Investor Relations Officer. Please go ahead.

Leonard G. Gleason

Thank you, Carrie. Good morning, ladies and gentlemen. Thank you for joining us for our Second Quarter Earnings Call. Today's presenters are Chris Martin, Chairman, President and CEO; and Tom Lyons, Senior Executive Vice President and Chief Financial Officer. 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 that 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,

Now I'm pleased to introduce Chris Martin, who will offer his perspective on our second quarter. Chris?

Christopher Martin

Thanks, Len, and good morning, everyone. As we begin the summary of our second quarter, it is our sincere hope that you and yours are safe and healthy. Second quarter earnings were impacted by COVID and CECL as the provision for loan losses and expenditures related to providing a safe environment for our customers, employees took priority as we phased our staff-back-to-office process and afforded our customers full branch access. On a positive yet related note, we had expenses for the planned acquisition of SB One of $683,000 during the quarter and look to complete the closing tomorrow. We remain comfortable with our capital structure and balance sheet strength. Our capital ratios continue to be strong, given our business mix and risk management processes. In view of our capital and pretax pre-provision earnings expectations, the Board approved a $0.23 cash dividend. Net income for the quarter was $14.3 million or $0.22 per share. Net interest margin decreased 23 basis points linked quarter to 2.97% as the impact of lower rates and higher cash balances was partially offset by lower deposit costs and above-average growth in noninterest-bearing deposits. The impact of PPP loans on our margin was two basis points. And we continue to experience a reduction in our all-in cost of deposits to 41 basis points for the quarter ended June 30, 2020, versus 62 basis points from the trailing quarter. Borrowing costs also improved to 1.31% from 1.80% in the trailing quarter.

The decrease in earning asset yields of 45 basis points linked quarter reflects falling benchmark interest rates on adjustable rate loans, accompanied by modest growth in new originations at lower rates and the $403 million in PPP loans. And of the PPP loans, we are assuming that approximately 75% to 80% will be forgiven once the government provides the vehicle and forms to complete this. The impact on our net interest margin from the short end of the curve is now largely behind us, but historically low long-term rates will continue to put pressure on asset yields as our loan and investment portfolio is repriced at lower coupons. The