- Net Loss: $11.5 million, or $0.11 per share, due to merger-related transaction costs.
- Adjusted Earnings per Share: $0.44 per share, excluding merger-related expenses.
- Pre-tax Pre-provision Return on Average Assets: 1.47% for the second quarter.
- Tier 1 Leverage Ratio: 9.36%.
- Total Risk-based Capital Ratio: 11.66%.
- Tangible Book Value per Share: $13.09.
- Tangible Common Equity Ratio: 7.34%.
- Quarterly Cash Dividend: $0.24 per share, payable on August 30.
- Total Cost of Deposits: 2.27%.
- Total Cost of Funds: 2.56%.
- Net Interest Margin: 3.21%, with a first full month as a combined company at 3.38%.
- Commercial Loans Closed: $307 million in new commercial loans during the second quarter.
- Non-performing Loan Ratio: 36 basis points.
- Allowance for Credit Losses on Loans: 1% of total loans.
- Commercial Lending Pipeline: $1.67 billion, with a weighted average interest rate of 7.53%.
- Beacon Trust Assets Under Management: $4.1 billion at quarter end.
- Revenue: $163.8 million for the quarter.
- Net Interest Margin Projection: 3.35% to 3.40% for the upcoming quarter.
- Deposits: $18.4 billion at June 30, including $8.62 billion acquired from Lakeland.
- Non-interest Income: $25 million for the quarter.
- Non-interest Expenses Projection: Approximately $120 million for Q3 2024, declining to $107 million in Q4 2024.
- Effective Tax Rate Projection: Approximately 29.5% for the remainder of 2024.
- 2025 Financial Projections: Net interest margin of 3.35% to 3.45%, return on average assets of approximately 1.1%, and return on tangible equity of approximately 15%.
Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Successful completion of the Provident Lakeland merger, expanding customer base and product offerings.
- Strong credit quality with a non-performing loan ratio of only 36 basis points.
- Increased net interest margin to 3.21%, with expectations to improve further in the upcoming quarter.
- Healthy capital levels, exceeding regulatory requirements with a Tier 1 leverage ratio of 9.36% and a total risk-based capital ratio of 11.66%.
- Fee-based businesses performed well, with Provident Protection Plus achieving 19% organic growth and Beacon Trust assets under management growing to $4.1 billion.
Negative Points
- Reported a net loss of $11.5 million for the quarter due to merger-related transaction costs.
- Total charges related to the merger were $86.9 million, impacting overall financial performance.
- Loan growth was constrained in the first half of the year due to market conditions and internal management decisions.
- Increased provision for credit losses on loans and commitments to extend credit, despite strong asset quality.
- Higher funding costs due to the issuance of $225 million in subordinated debt, impacting the overall cost of funds.
Q & A Highlights
Q: Can you give more detail on the timing of cost synergies? Will all the cost synergies be in by the end of this year?
A: Yes, we expect all the cost synergies to be realized by the end of this year. (Thomas Lyons, CFO)
Q: What areas do you see potential revenue synergies with Lakeland? Any early surprises on the deal?
A: We see revenue synergies in insurance, wealth management, ABL business, and treasury management. No major surprises so far. (Anthony Labozzetta, CEO)
Q: Is there any plan to sell CRE or office loans to reduce the CRE concentration?
A: No active plan to sell off assets for CRE ratio reduction. We are actively managing the book and are comfortable with our current concentrations. (Anthony Labozzetta, CEO)
Q: Do you have a target capital ratio in mind, and how do you feel about stock buybacks?
A: We aim to maintain a Tier 1 leverage ratio above 8.5% and a total risk-based capital ratio above 11.25%. Stock buybacks will be considered opportunistically. (Thomas Lyons, CFO)
Q: What areas can drive upside or downside, and how could a slower economic cycle impact earnings?
A: Upside could come from loan growth, insurance penetration, and treasury management. A slower economic cycle could impede growth, but we would focus on efficiencies. (Anthony Labozzetta, CEO; Thomas Lyons, CFO)
Q: What has been the customer response post-merger, and are there any new products or services they are excited about?
A: The response has been positive. Customers are excited about new offerings in insurance, wealth management, and treasury management. (Anthony Labozzetta, CEO)
Q: Can you expand on the trajectory of the core margin moving forward?
A: The core margin expectation has been reset to 2.70% to 2.75%, with purchase accounting adjustments adding 65 to 75 basis points. (Thomas Lyons, CFO)
Q: When do municipal deposits typically flow back in?
A: Municipal deposits start flowing back in the beginning of August, aligned with real estate tax revenue. (Thomas Lyons, CFO)
Q: How do you feel about customer activity and sentiment in recent weeks?
A: Customer activity and sentiment are strong. We have an active pipeline and expect to achieve 4% to 5% growth in the second half of the year. (Anthony Labozzetta, CEO)
Q: What is the current talent retention like across the combined company?
A: Talent retention is exceptional, with high retention rates and robust attraction of new talent. (Anthony Labozzetta, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
