Provident Financial Services (PFS)
We aren’t fans of Provident Financial Services. Its weak returns on capital suggest it doesn’t generate sufficient profits, a sign of value destruction.― StockStory Analyst Team
1. News
2. Summary
Why We Think Provident Financial Services Will Underperform
Founded in 1839 and serving communities across New Jersey, Pennsylvania, and New York, Provident Financial Services (NYSE:PFS) operates a regional bank providing commercial, residential, and consumer lending alongside wealth management and insurance services.
- Tangible book value per share was flat over the last five years, indicating it’s failed to build equity value this cycle
- Inferior net interest margin of 3.3% means it must compensate for lower profitability through increased loan originations
- A consolation is that its annual net interest income growth of 20.2% over the past five years was outstanding, reflecting market share gains this cycle
Provident Financial Services doesn’t pass our quality test. We’re hunting for superior stocks elsewhere.
Why There Are Better Opportunities Than Provident Financial Services
At $19.96 per share, Provident Financial Services trades at 0.9x forward P/B. This multiple is cheaper than most banking peers, but we think this is justified.
It’s better to pay up for high-quality businesses with higher long-term earnings potential rather than to buy lower-quality stocks because they appear cheap. These challenged businesses often don’t re-rate, a phenomenon known as a “value trap”.
3. Provident Financial Services (PFS) Research Report: Q3 CY2025 Update
Regional bank Provident Financial Services (NYSE:PFS) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 5.3% year on year to $221.8 million. Its GAAP profit of $0.55 per share was in line with analysts’ consensus estimates.
Provident Financial Services (PFS) Q3 CY2025 Highlights:
- Net Interest Income: $194.3 million vs analyst estimates of $193.8 million (5.8% year-on-year growth, in line)
- Net Interest Margin: 3.4% vs analyst estimates of 3.4% (3 basis point beat)
- Revenue: $221.8 million vs analyst estimates of $220.3 million (5.3% year-on-year growth, 0.7% beat)
- Efficiency Ratio: 51% vs analyst estimates of 51.6% (57.7 basis point beat)
- EPS (GAAP): $0.55 vs analyst estimates of $0.54 (in line)
- Tangible Book Value per Share: $15.13 vs analyst estimates of $14.96 (10.8% year-on-year growth, 1.1% beat)
- Market Capitalization: $2.42 billion
Company Overview
Founded in 1839 and serving communities across New Jersey, Pennsylvania, and New York, Provident Financial Services (NYSE:PFS) operates a regional bank providing commercial, residential, and consumer lending alongside wealth management and insurance services.
Provident operates through a network of full-service branches across fourteen counties in northern and central New Jersey, as well as in parts of Pennsylvania and New York. The bank's lending portfolio is diversified, with a strategic emphasis on commercial real estate, multi-family properties, construction projects, and business loans, which collectively represent over 85% of its loan portfolio.
For commercial clients, Provident offers various financing options including equipment purchases, working capital lines of credit, and real estate loans, along with cash management services and Small Business Administration (SBA) guaranteed loans. The bank maintains Preferred Lender status with the SBA, streamlining the application process for small business borrowers.
On the consumer side, Provident provides residential mortgages, home equity loans and lines of credit, personal loans, and deposit products including checking, savings, and money market accounts. A typical customer might use Provident for their primary checking account, obtain a mortgage for their home, and later secure a home equity line of credit for renovations.
Beyond traditional banking, Provident generates fee income through its wholly owned subsidiaries. Beacon Trust Company offers wealth management services including investment management, trust administration, and financial planning, while Provident Protection Plus operates as a retail insurance broker placing property, casualty, life, and health coverage with various carriers.
The bank's revenue model combines interest income from loans and investments with fee income from wealth management, insurance brokerage, and various banking services. This diversified approach helps Provident maintain stability through different economic cycles.
4. Regional Banks
Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.
Provident Financial Services competes with other regional banks operating in the Northeast, including Valley National Bank (NASDAQ:VLY), M&T Bank (NYSE:MTB), and New York Community Bancorp (NYSE:NYCB), as well as larger national institutions like JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) that have significant presence in its markets.
5. Sales Growth
In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Luckily, Provident Financial Services’s revenue grew at an incredible 18.3% compounded annual growth rate over the last five years. Its growth beat the average banking company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Provident Financial Services’s annualized revenue growth of 30.8% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
This quarter, Provident Financial Services reported year-on-year revenue growth of 5.3%, and its $221.8 million of revenue exceeded Wall Street’s estimates by 0.7%.
Net interest income made up 83.7% of the company’s total revenue during the last five years, meaning Provident Financial Services barely relies on non-interest income to drive its overall growth.
Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.
6. Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Provident Financial Services’s EPS grew at a spectacular 9.8% compounded annual growth rate over the last five years. However, this performance was lower than its 18.3% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Provident Financial Services, its two-year annual EPS declines of 1.1% mark a reversal from its (seemingly) healthy five-year trend. We hope Provident Financial Services can return to earnings growth in the future.
In Q3, Provident Financial Services reported EPS of $0.55, up from $0.36 in the same quarter last year. This print beat analysts’ estimates by 1.5%. Over the next 12 months, Wall Street expects Provident Financial Services’s full-year EPS of $1.97 to grow 17.4%.
7. Tangible Book Value Per Share (TBVPS)
Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.
When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.
Provident Financial Services’s TBVPS was flat over the last five years. A turnaround doesn’t seem to be in sight as its TBVPS also dropped by 1.3% annually over the last two years ($15.54 to $15.13 per share).
Over the next 12 months, Consensus estimates call for Provident Financial Services’s TBVPS to grow by 9.2% to $16.52, decent growth rate.
8. Balance Sheet Assessment
Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.
Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.
This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.
New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.
Over the last two years, Provident Financial Services has averaged a Tier 1 capital ratio of 10.3%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.
9. Return on Equity
Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.
Over the last five years, Provident Financial Services has averaged an ROE of 8.8%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.
10. Key Takeaways from Provident Financial Services’s Q3 Results
Net interest income, revenue, EPS, and tangible book value per share were all more or less in line with Wall Street’s estimates. Overall, this was a quarter without many surprises. The stock remained flat at $18.56 immediately following the results.
11. Is Now The Time To Buy Provident Financial Services?
Updated: December 3, 2025 at 11:42 PM EST
The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Provident Financial Services.
Provident Financial Services isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its TBVPS growth was weak over the last five years. And while the company’s net interest income growth was exceptional over the last five years, the downside is its net interest margin indicates a disadvantaged starting point for the overall profitability of the business.
Provident Financial Services’s P/B ratio based on the next 12 months is 0.9x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now.
Wall Street analysts have a consensus one-year price target of $22.63 on the company (compared to the current share price of $19.96).