PROVIDENT FINANCIAL SERVICES, INC. (PFS): what the price assumes

In the published model solve dated 2026-Q2, anchored at $25.11, PROVIDENT FINANCIAL SERVICES, INC. (PFS) is priced for 10.7% return on equity. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/PFS

Headline

FieldValue
TickerPFS
CompanyPROVIDENT FINANCIAL SERVICES, INC.
Current price$25.11/sh

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Return on equity needed10.7%
Return on equity now10.3%
ROE gap+0.4pp
Price-to-book1.14x

Solve inputs: computed at a 9.8% cost of equity with 4% terminal growth over a 10-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~1.1pp.

How unusual the bet is: within-range

ReferenceValue
vs own history+2.06σ
cohort percentile (of 166 peers)26
sustained it ~10 years at this level74%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset0.92x3justifies
Earnings0.99x1justifies
Relative—0—
Growth0.74x1justifies

Families that justify the price: Asset, Earnings, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 4.7%); the inversion above states its own rate.

Per-Model Detail (n=5)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
Bank Fair Value (P/TBV)—$26.870.93xyesTBVPS $21.92 × 1.23x (ROE (TTM) 10.7% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption), credit 0.91% allowance/loans → ×0.91)
Relative ValuationRelative——noP/E 10x (static sector reference · 2026-04), scenarios: 8.3x / 10.0x / 11.7x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDMGrowth——no—
Two-Stage DDMGrowth$34.070.74xyesStage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$25.380.99xyesBV/sh $21.92, ROE (TTM) 10.7%, ke 9.3%
Two-Stage Excess ReturnAsset$27.230.92xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth——noRev $0.8B, growth 13% (input: historical growth; tapered), Terminal P/S: 3.5x / 4.2x / 5.0x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative——noEPS $2.35, growth 2% (input: historical EPS growth), PEG=5.70 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset$34.050.74xyes√(22.5 × EPS $2.35 × BVPS $21.92) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings——noEPS $2.35 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative——no—
PEG Fair ValueRelative——noEPS $2.35 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$25.410.99xyesEPS $2.35 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Economic-Unit Decomposition (Sum Of The Parts)

The issuer is a funded financial business. Debt, interest, and cash flows are operating inputs, so industrial EV, net-debt, WACC, and free-cash-flow lenses do not apply; value the common-equity claim with book, earnings, capital, and payout economics.

UnitRoleValuation basisRevenueReported profitValue evidenceStatus
Banking (single reportable segment)financialequity$1.4b—withheldunresolved standalone equity facts required

No unit-level total common-equity value is stated. Each financial unit requires supported standalone common equity, normalized earnings, capital adequacy, and payout capacity. Consolidated debt, interest, and cash are operating balances, not an enterprise-to-equity bridge; company-level book, earnings, capital, and payout lenses remain the coherent cross-checks.

Solvency

FieldValue
Share count CAGR (dilution)14.5%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

The moat for a community bank is the deposit base, and Provident has built a real one. After absorbing Lakeland Bancorp, the combined bank holds roughly a 4.71% share of bank deposits in New Jersey, a meaningful position in a dense, affluent market, according to the 10-K. Deposit share is the closest thing a regional bank has to a structural advantage: local relationships, branch density, and the inertia of customers who rarely move their checking accounts give the bank a low-cost, sticky funding base. A bank that funds its loans with cheap, loyal local deposits earns a wider spread than one chasing hot money, and that spread is the engine of the whole business.

That engine is currently running well. Provident posted a return on average tangible common equity around 16.6% in the first quarter of 2026 and a return on average assets near 1.3%, both strong marks for a regional bank, on the back of a third consecutive quarter of record revenue and record net interest income of about $197.4 million. A double-digit return on tangible capital well above the bank's cost of equity is the test of value creation, and Provident is clearing it. The Lakeland merger is the reason: the deal added scale and the cost synergies have now been realized, lifting profitability as the integration overhang faded.

The valuation is where the bull case is most concrete, because for once the price is below where the methods land. The stock trades below its tangible book value of about $21.92 per share, while the bank-specific valuation, which marks the bank at a premium to tangible book justified by its return on equity, lands above the price. The asset, earnings, relative, and growth methods all sit at or above where the stock trades. For a bank earning a mid-teens return on tangible equity, paying a dividend yielding over 4%, trading below tangible book, the bull case is straightforward value: a profitable, well-funded regional bank bought for less than the accounting net worth of its franchise, with the merger synergies now flowing to the bottom line.

Bear Case

The competitive pressure on a regional bank like Provident comes from two directions at once, and the 10-K acknowledges it plainly, stating the bank faces significant competition for both deposits and loans. On the deposit side, the bank competes against the national money-center banks with their digital scale and marketing budgets, against the direct online banks that pay higher rates with no branch costs, and against other regional players in the same New Jersey, New York, and Pennsylvania markets. On the lending side, it competes for the same commercial borrowers as every other bank in the Northeast. A 4.71% deposit share, while real, is a small slice in a fragmented, intensely contested market, and holding it requires paying up for deposits when rates rise, which compresses the spread the whole business depends on.

The concentration risk is the structural fragility. Provident is heavily a commercial real estate lender; the 10-K describes a book of loans "secured by mortgages on various commercial income producing properties, including industrial and retail properties and office buildings." Commercial real estate, and office in particular, is the sector under the most stress in the current cycle, with elevated vacancies and refinancing pressure as loans mature into higher rates. A regional bank concentrated in CRE carries credit risk that does not show up in good times and arrives all at once in bad ones. The allowance for credit losses reflects, in the filing's words, "management's best estimate of projected losses over the remaining life of the loans," and an estimate is exactly what it is; a sharper-than-expected downturn in commercial property values would test it.

The capital story carries a caveat the bull case glosses over. The share count grew about 14.5% to fund the Lakeland acquisition, which is dilution existing holders absorbed in exchange for scale. The price embeds a return on equity around 10%, slightly below the roughly 10.7% the bank earns on its full book, so the market is pricing modest profitability fade rather than expansion. The stock is cheap on tangible book, but tangible book itself was diluted by the all-stock deal, and the goodwill from the merger sits between book value and tangible book value. The bear case is not distress; it is that a CRE-concentrated regional bank in a competitive Northeast market, having paid in stock for its scale, is cheap for reasons, namely credit risk and rate sensitivity, that the discount to book partly reflects.

Valuation

Provident is a bank, so the valuation reads on tangible book value and return on equity, not on operating-company multiples. The most useful number is the bank-specific fair value, which marks the bank at a premium to its tangible book value of about $21.92 per share, justified by the return on equity it earns above its cost of equity. The price embeds a return on equity around 10%, modestly below the roughly 10.7% the bank currently earns, which means the market is pricing a slight fade in profitability rather than crediting the mid-teens return on tangible equity the recent quarter showed.

This is a value-supported name where the methods cluster above the price, the opposite of the typical premium stock. The bank fair value, anchored on tangible book and the return on equity, lands above the current price. The relative lens, at roughly a 10x sector earnings multiple, also sits above it, and the asset-based excess-return methods land at or above the price as well. No family reads the stock as expensive. The stock trades below tangible book value, which for a profitable bank is the value signal: you are buying the franchise for less than the accounting worth of its net assets, with the return on equity above the cost of capital saying that worth is real, not impaired.

For a bank, the right balance-sheet frame is capital strength and credit quality, not net cash or coverage. Provident's capital return runs through a dividend yielding over 4%, well supported by earnings, while the share count rose to fund the Lakeland deal rather than falling through buybacks. What the buyer is underwriting is the durability of the return on tangible equity against the bank's commercial-real-estate credit exposure: if credit holds and the merger synergies sustain the mid-teens return on tangible capital, a sub-tangible-book price is genuinely cheap; if a CRE downturn tests the loan book, the discount to book is the market pricing that risk in advance. The dividend and the tangible-book floor bound the downside; the credit cycle is the variable.

Catalysts

Provident's Q1 2026 results showed the post-merger franchise performing well. Diluted EPS came in at $0.61, with a return on average tangible common equity around 16.6% and a return on average assets near 1.3%, on a third consecutive quarter of record revenue of about $225.7 million and record net interest income of about $197.4 million. The Lakeland merger cost synergies have been realized, which is the main driver of the improved profitability, and the board declared a quarterly dividend of $0.24 per share. The next quarterly prints are the read on whether net interest income keeps setting records as the merged balance sheet stabilizes and whether deposit costs stay contained.

The developments that move the thesis are credit and rates. As a commercial-real-estate-concentrated lender, Provident's earnings hinge on credit quality holding through the current property cycle, so the trend in non-performing loans and the allowance for credit losses is the key signal to watch each quarter. On the spread side, the bank's strategy centers on net interest margin expansion and earning-asset growth, which makes the rate environment and deposit competition the swing factors for revenue. Analyst sentiment is constructive, with an average rating of Buy and a 12-month price target near $25 against a price below $23. The catalysts are mundane and bank-specific: stable credit, a holding or expanding margin, and continued realization of the merger's earning power.

Peer Cohorts (Per Segment, With Filing Citations)

Banking (single reportable segment) (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Provident Q1 2026 results, 2026 · Provident company disclosures, 2026 · analyst consensus, 2026

View the full interactive PFS report on boothcheck